10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2009

OR

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  000-21531

UNITED NATURAL FOODS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	05-0376157
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

313 Iron Horse Way, Providence, RI	02908
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code:  (401) 528-8634

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý	Accelerated filer o
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yeso No ý

As of December 5, 2009 there were 43,079,008 shares of the Registrant’s Common Stock, $0.01 par value per share, outstanding.

TABLE OF CONTENTS

Part I.	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Income (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
Part II.	Other Information
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signatures	28

2

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share amounts)

	October 31,			August 1,
ASSETS	2009			2009
Current assets:
Cash and cash equivalents	$	14,854		$	10,269
Accounts receivable, net of allowance of $7,353 and $6,984, respectively		198,052			179,455
Notes receivable, trade, net of allowance of $366 and $380, respectively		1,872			1,799
Inventories		412,600			366,611
Prepaid expenses and other current assets		11,647			16,423
Deferred income taxes		18,074			18,074
Total current assets		657,099			592,631
Property & equipment, net		245,797			242,051
Other assets:
Goodwill		164,333			164,333
Intangible assets, net of accumulated amortization of $4,333 and $3,806, respectively		37,825			38,358
Notes receivable, trade, net of allowance of $1,499 and $1,512, respectively		2,377			2,176
Other assets		18,510			19,001
Total assets	$	1,125,941		$	1,058,550
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable	$	185,000		$	200,000
Accounts payable		205,756			155,211
Accrued expenses and other current liabilities		78,886			63,347
Current portion of long-term debt		5,023			5,020
Total current liabilities		474,665			423,578
Long-term debt, excluding current portion		52,601			53,858
Deferred income taxes		12,261			12,297
Other long-term liabilities		24,792			24,345
Total liabilities		564,319			514,078
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, authorized 5,000 shares; none issued or outstanding		-			-
Common stock, $0.01 par value, authorized 100,000 shares; 43,303 issued and 43,074 outstanding shares at October 31, 2009; 43,237 issued and 43,008 outstanding shares at August 1, 2009		433			432
Additional paid-in capital		176,760			175,182
Treasury stock		(6,092	)		(6,092	)
Unallocated shares of Employee Stock Ownership Plan		(836	)		(877	)
Accumulated other comprehensive loss		(1,626	)		(1,623	)
Retained earnings		392,983			377,450
Total stockholders' equity		561,622			544,472
Total liabilities and stockholders' equity	$	1,125,941		$	1,058,550

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data amounts)

	Three months ended
	October 31,			November 1,
	2009			2008
Net sales	$	884,768		$	864,236
Cost of sales		720,167			696,648
Gross profit		164,601			167,588
Operating expenses		137,409			142,543
Total operating expenses		137,409			142,543
Operating income		27,192			25,045
Other expense (income):
Interest expense		1,381			3,410
Interest income		(69	)		(252	)
Other, net		(8	)		(48	)
Total other expense		1,304			3,110
Income before income taxes		25,888			21,935
Provision for income taxes		10,355			8,686
Net income	$	15,533		$	13,249
Basic per share data:
Net income	$	0.36		$	0.31
Weighted average of basic shares of common stock outstanding		42,982			42,764
Diluted per share data:
Net income	$	0.36		$	0.31
Weighted average of diluted shares of common stock outstanding		43,211			42,919

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Three months ended
	October 31,			November 1,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,533		$	13,249
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		6,650			6,369
(Gain) loss on disposals of property and equipment		(13	)		53
Provision for doubtful accounts		496			842
Share-based compensation		2,120			1,686
Changes in assets and liabilities, net of acquired companies:
Accounts receivable		(19,066	)		(13,350	)
Inventories		(45,989	)		(73,646	)
Prepaid expenses and other assets		5,144			3,536
Notes receivable, trade		(301	)		228
Accounts payable		36,962			20,527
Accrued expenses and other current liabilities		15,947			9,307
Net cash provided by (used in) operating activities		17,483			(31,199	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(9,700	)		(11,415	)
Purchases of acquired businesses, net of cash acquired		-			(190	)
Proceeds from disposals of property and equipment		21			-
Net cash used in investing activities		(9,679	)		(11,605	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under note payable		(15,000	)		11,148
Repayments of long-term debt		(1,254	)		(818	)
Increase in bank overdraft		13,583			16,989
Payments on life insurance policy loans		-			(3,072	)
Proceeds from exercise of stock options		14			565
Payment of employee restricted stock tax withholdings		(558	)		-
Tax effect of equity awards		3			133
Capitalized debt issuance costs		(7	)		-
Net cash (used in) provided by financing activities		(3,219	)		24,945
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,585			(17,859	)
Cash and cash equivalents at beginning of period		10,269			25,333
Cash and cash equivalents at end of period	$	14,854		$	7,474
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	1,200		$	3,271
Federal and state income taxes, net of refunds	$	1,525		$	1,169

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

UNITED NATURAL FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2009 (Unaudited)

1.           BASIS OF PRESENTATION

United Natural Foods, Inc. (the “Company”) is a leading national distributor and retailer of natural, organic and specialty products. The Company sells its products primarily throughout the United States.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. In the Company’s opinion, these financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods, however, may not be indicative of the results that may be expected for a full year. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.

Net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also includes amounts charged by the Company to customers for shipping and handling and fuel surcharges. The principal components of cost of sales include amounts paid to manufacturers and growers for products sold, plus the cost of transportation necessary to bring the products to the Company's distribution facilities. Cost of sales also includes amounts incurred by the Company's manufacturing subsidiary, United Natural Trading Co., which does business as Woodstock Farms, for inbound transportation costs, depreciation for manufacturing equipment and consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Operating expenses include salaries and wages, employee benefits (including payments under the Company's Employee Stock Ownership Plan), warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also includes depreciation expense related to the wholesale and retail divisions. Other expense (income) includes interest on outstanding indebtedness, interest income and miscellaneous income and expenses.

The Company evaluated events occurring between the end of the fiscal quarter ended October 31, 2009 and December 10, 2009, the date the financial statements were issued.

2.           ACQUISITIONS

During the three months ended October 31, 2009, the Company did not make any acquisitions. During the three months ended November 1, 2008, the Company acquired substantially all of the assets and liabilities of one branded product company, which the Company classifies in the “other” category. See Note 6 “Business Segments” for a description of the Company’s one reportable segment and the “other” category. The total cash consideration paid for this product line was approximately $0.5 million. No goodwill was recorded in connection with the acquisition. The cash paid was financed by borrowings under the Company’s existing revolving credit facility.

3.           EARNINGS PER SHARE

Following is a reconciliation of the basic and diluted number of shares used in computing earnings per share:

	Three months ended
(In thousands)	October 31, 2009	November 1, 2008
Basic weighted average shares outstanding	42,982	42,764
Net effect of dilutive stock awards based upon the treasury stock method	229	155
Diluted weighted average shares outstanding	43,211	42,919

6

There were 1,049,029 and 1,350,610 anti-dilutive share-based payment awards outstanding for the three months ended October 31, 2009 and November 1, 2008, respectively. These anti-dilutive share-based payment awards were excluded from the calculation of diluted earnings per share.

4.           FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

As of August 3, 2008, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurements and Disclosures ("ASC 820"), for financial assets and liabilities and for non-financial assets and liabilities that we recognize or disclose at fair value on at least an annual basis. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:

· Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities.

· Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

· Level 3 Inputs - One or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation.

Interest Rate Swap Agreement

On August 1, 2005, the Company entered into an interest rate swap agreement effective July 29, 2005. The agreement provides for the Company to pay interest for a seven-year period at a fixed rate of 4.70% on an initial amortizing notional principal amount of $50.0 million while receiving interest for the same period at the one-month London Interbank Offered Rate ("LIBOR") on the same notional principal amount. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness at one-month LIBOR plus 1.00%, thereby fixing its effective rate on the notional amount at 5.70%. The swap agreement qualified as an "effective" hedge under FASB Accounting Standards Codification 815, Derivatives and Hedging ("ASC 815"). LIBOR was 0.24% and 2.58% as of October 31, 2009 and November 1, 2008, respectively.

Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company's interest rate swap agreement is designated as a cash flow hedge at October 31, 2009 and is reflected at fair value in the Company's consolidated balance sheet as a component of other long-term liabilities, and the related gains or losses on this contract are deferred in stockholders' equity as a component of other comprehensive income. However, to the extent that the swap agreement is not considered to be effective in offsetting the change in the value of the item being hedged, any change in fair value relating to the ineffective portion of the swap agreement is immediately recognized in income. For the periods presented, the Company did not have any ineffectiveness requiring current income recognition.

Commodity Swap Agreements

The Company has from time to time entered into commodity swap agreements to reduce price risk associated with anticipated purchases of diesel fuel. These swap agreements hedge a portion of the Company's expected fuel usage for the periods set forth in the agreements. The Company was not a party to any commodity swap agreements during the three months ended October 31, 2009 and November 1, 2008, respectively.

7

In addition to the previously discussed interest rate and commodity swap agreements, from time-to-time we enter into fixed price fuel supply agreements. There has been no change to the agreements we entered into during fiscal 2009 which require us to purchase a portion of our monthly diesel fuel usage at fixed prices through July 2010. During the three months ended November 1, 2008, we did not have any fixed price fuel supply agreements in effect. These fixed price fuel agreements qualified for the "normal purchase" exception under ASC 815, therefore the fuel purchases under these contracts are expensed as incurred and included within operating expenses.

The following table provides the fair values hierarchy for financial assets and liabilities measured on a recurring basis:

	Fair Value at October 31, 2009
	Level 1	Level 2	Level 3
Description	(In thousands)
Liabilities
Interest Rate Swap	-	$2,757	-
Total	-	$2,757	-

The Company’s determination of the fair value of its interest rate swap is calculated using a discounted cash flow analysis based on the terms of the swap contract and the observable interest rate curve. The Company does not enter into derivative agreements for trading purposes.

The fair value of the Company's other financial instruments including cash, accounts receivable, notes receivable, accounts payable and accrued expenses approximate carrying amounts due to the short-term nature of these instruments. The fair value of notes payable approximate carrying amounts as they are variable rate instruments.

The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

(In thousands)	October 31, 2009
	Carrying Value	Fair Value
Liabilities:
Long term debt, including current portion	57,624	57,764

5.           COMPREHENSIVE INCOME

Total comprehensive income for the three months ended October 31, 2009 and November 1, 2008 amounted to approximately $15.5 million and $13.0 million, respectively. Comprehensive income is comprised of net income plus the change in the fair value of the interest rate swap agreement.For the three months ended October 31, 2009 and November 1, 2008, the change in fair value of this financial instrument was a pre-tax (and after-tax) loss of less than $0.1 million and a $0.5 million pre-tax loss ($0.3 million after-tax loss), respectively.

6.           BUSINESS SEGMENTS

The Company has several operating divisions aggregated under the wholesale segment, which is the Company's only reportable segment. These operating divisions have similar products and services, customer channels, distribution methods and historical margins. The wholesale segment is engaged in national distribution of natural, organic and specialty foods, produce and related products in the United States. The Company has additional operating divisions that do not meet the quantitative thresholds for reportable segments. Therefore, these operating divisions are aggregated under the caption of "Other" with corporate operating expenses that are not allocated to operating divisions. Non-operating expenses that are not allocated to the operating divisions are under the caption of "Unallocated Expenses." "Other" includes a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coast of the United States, a manufacturing division, which engages in importing, roasting and packaging of nuts, seeds, dried fruit and snack items, and the Company's branded product lines. "Other" also includes corporate expenses, which consist of salaries, retainers, and other related expenses of officers, directors, corporate finance (including professional services), governance, human resources and internal audit that are necessary to operate the Company's headquarters located in Providence, Rhode Island, and formerly, in Dayville, Connecticut.

8

Following reflects business segment information for the periods indicated (in thousands):

	Wholesale		Other			Eliminations			Unallocated Expenses			Consolidated
Three months ended October 31, 2009:
Net sales	$	869,020	$	40,068		$	(24,320	)				$	884,768
Operating income (loss)		35,198		(8,130	)		124						27,192
Interest expense									$	1,381			1,381
Interest income										(69	)		(69	)
Other, net										(8	)		(8	)
Income before income taxes													25,888
Depreciation and amortization		5,571		1,079									6,650
Capital expenditures		7,119		2,581									9,700
Goodwill		146,970		17,363									164,333
Total assets		1,012,784		123,302			(10,145	)					1,125,941
Three months ended November 1, 2008:
Net sales	$	849,725	$	36,019		$	(21,508	)				$	864,236
Operating income (loss)		29,419		(3,386	)		(988	)					25,045
Interest expense									$	3,410			3,410
Interest income										(252	)		(252	)
Other, net										(48	)		(48	)
Income before income taxes													21,935
Depreciation and amortization		6,023		346									6,369
Capital expenditures		10,009		1,406									11,415
Goodwill		149,976		16,489									166,465
Total assets		1,063,484		108,103			(10,038	)					1,161,549

7.           RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements under other accounting pronouncements, but does not change the existing guidance as to whether or not an instrument is carried at fair value. The statement is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued ASC 820-10-65-1, Effective Date of ASC 820 ("ASC 820-65-1") which delayed the effective date of ASC 820 by one year for nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis. In October 2008, the FASB issued ASC 820-10-65-2, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active ("ASC 820-65-2"), which clarifies the application of ASC 820 in an inactive market and illustrates how an entity would determine fair value when the market for a financial asset is not active. In April 2009, the FASB issued ASC 820-10-65-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“ASC 820-65-4”), which provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. ASC 820-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. ASC 820-65-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is to be applied prospectively. The Company adopted ASC 820 and Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active effective August 3, 2008, and adopted Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly effective August 1, 2009. These adoptions did not have a material effect on its consolidated financial statements. The Company fully adopted ASC 820, including the provisions related to the fair value of goodwill, other intangible assets, and non-financial long-lived assets effective August 2, 2009, which did not have a material effect on the disclosures that accompany the Company’s consolidated financial statements. Refer to Note 4 for further discussion regarding the adoption of ASC 820.

In February 2007, the FASB issued ASC 825, Financial Instruments (“ASC 825”). ASC 825 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The statement is effective for fiscal years beginning after November 15, 2007. As of October 31, 2009, the Company has not elected to adopt the fair value option under ASC 825 for any financial instruments or other items.

9

In December 2007, the FASB issued ASC 805, Business Combinations (“ASC 805”). ASC 805 continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. ASC 805 requires, among other things, the buyer to: (1) account for the fair value of assets and liabilities acquired as of the acquisition date (i.e., a “fair value” model rather than a “cost allocation” model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at the acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. ASC 805 also defines a “bargain” purchase as a business combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as “negative goodwill”) in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, ASC 805 requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. ASC 805 is effective for fiscal years beginning on or after December 15, 2008. The Company will apply ASC 805 to any acquisitions that are made after August 1, 2009.

In December 2007, the FASB issued ASC 810, Consolidation (“ASC 810”). This statement establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of ASC 810 did not have a material effect on the Company’s consolidated financial statements.

In April 2008, the FASB issued ASC 350-30, Determination of the Useful Life of Intangible Assets ("ASC 350-30"). ASC 350-30 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350, Intangibles – Goodwill and Other. The intent of ASC 350-30 is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. ASC 350-30 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of ASC 350-30 did not have a material effect on the Company’s consolidated financial statements.

In June 2008, the FASB issued ASC 260-10, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“ASC 260-10”). ASC 260-10 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. ASC 260-10 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. ASC 260-10 requires that all earnings per share data presented for prior periods be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform. The adoption of ASC 260-10 did not have a material effect on the Company’s consolidated financial statements in the periods presented.

In April 2009, the FASB issued ASC 825-10-65, Interim Disclosures about Fair Value of Financial Instruments (“ASC 825-10-65”). ASC 825-10-65 requires disclosure about the fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to ASC 825-10-65, fair values for these assets and liabilities were only disclosed annually. ASC 825-10-65 applies to all financial instruments within the scope of ASC 825 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. ASC 825 is effective for interim periods ending after June 15, 2009. The adoption of ASC 825-10-65 did not have a material effect on the Company’s consolidated financial statements.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plans," "seek," "should," "will," and "would," or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or of financial position or state other "forward-looking" information. The important factors listed under "Part II. Item 1A. Risk Factors," as well as any cautionary language in this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in these forward-looking statements. You should be aware that the occurrence of the events described under "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q could have an adverse effect on our business, results of operations and financial position.

Any forward-looking statements in this Quarterly Report on Form 10-Q are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements, possibly materially. We do not undertake to update any information in the foregoing reports until the effective date of our future reports required by applicable laws. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. We may from time to time update these publicly announced projections, but we are not obligated to do so.

Overview

We are a leading national distributor of natural, organic and specialty foods and non-food products in the United States. We carry more than 60,000 high-quality natural, organic and specialty foods and non-food products, consisting of national brand, regional brand, private label and master distribution products, in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements, bulk and food service products and personal care items. We serve more than 17,000 customer locations primarily located across the United States, the majority of which can be classified into one of the following categories: independently owned natural products retailers; supernatural chains, which are comprised of large chains of natural foods supermarkets; and conventional supermarkets. Our other distribution channels include food service, international, mass market chains and buying clubs.

Our operations are comprised of three principal operating divisions. These operating divisions are:

· our wholesale division, which includes our broadline natural and organic distribution business, UNFI Specialty, which is our specialty distribution business, Albert's Organics, Inc., ("Albert's") which is a leading distributor of organically grown produce and perishable items, and Select Nutrition, which distributes vitamins, minerals and supplements;

· our retail division, consisting of the Natural Retail Group, which operates our 13 natural products retail stores; and

· our manufacturing division, consisting of Woodstock Farms, which specializes in the importation, roasting, packaging and distribution of nuts, dried fruit, seeds, trail mixes, natural and organic products, and confections, and our Blue Marble Brands product lines.

In recent years, our sales to existing and new customers have increased through the continued growth of the natural and organic products industry in general; increased market share through our high quality service and a broader product selection, and the acquisition of, or merger with, natural and specialty products distributors; the expansion of our existing distribution centers; the construction of new distribution centers; and the development of our own line of natural and organic branded products. Through these efforts, we believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections and increase our market share.

We have been the primary distributor to Whole Foods Market, our largest customer, for more than 11 years. In August 2007, Whole Foods Market and Wild Oats Markets completed their merger, as a result of which, Wild Oats Markets became a wholly-owned subsidiary of Whole Foods Market. Excluding sales to Wild Oats Markets' former Henry's and Sun Harvest store locations (which were sold by Whole Foods Market to a subsidiary of Smart & Final Inc. on September 30, 2007, and are now included in the conventional supermarket channel), Whole Foods Market accounted for approximately 33% and 32% of our net sales for the three months ended October 31, 2009 and November 1, 2008, respectively.

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On November 2, 2007, we acquired Distribution Holdings, Inc. and its wholly-owned subsidiary Millbrook Distribution Services, Inc. (“DHI”), which we now refer to as UNFI Specialty Distribution Services (“UNFI Specialty”). Through UNFI Specialty's two distribution centers located in Massachusetts and Arkansas, as well as our broadline distribution centers where we have integrated specialty products, we distribute specialty food items (including ethnic, kosher, gourmet, organic and natural foods), health and beauty care items and other non-food items to customers throughout the United States.

We believe that the acquisition of DHI accomplishes several of our strategic objectives, including accelerating our expansion into a number of historically high-growth business segments and establishing immediate market share in the fast-growing specialty foods market. We believe that DHI's customer base enhances our conventional supermarket business channel and that our complementary product lines present opportunities for cross-selling.

In order to maintain our market leadership and improve our operating efficiencies, we seek to continually:

· expand our marketing and customer service programs across regions;

· expand our national purchasing opportunities;

· offer a broader product selection;

· consolidate systems applications among physical locations and regions;

· increase our investment in people, facilities, equipment and technology;

· integrate administrative and accounting functions; and

· reduce geographic overlap between regions.

Our continued growth has created the need for expansion of existing facilities to achieve maximum operating efficiencies and to assure adequate space for future needs. We have made significant capital expenditures and incurred considerable expenses in connection with the opening and expansion of our facilities. Our 613,000 square foot distribution center in Moreno Valley, California commenced operations in September 2008 and serves our customers in Southern California, Arizona, Southern Nevada, Southern Utah, and Hawaii. Our newly leased, 675,000 square foot distribution center in York, Pennsylvania commenced operations in January 2009, and replaces our New Oxford, Pennsylvania facility serving customers in New York, New Jersey, Pennsylvania, Delaware, Maryland, Ohio, Virginia, and West Virginia. In April 2009, we successfully relocated our UNFI Specialty distribution facility in East Brunswick, New Jersey to the York, Pennsylvania distribution center, creating our first fully integrated facility offering a full assortment of natural, organic, and specialty foods. Finally, in September 2009 we announced plans to open a distribution center in Texas, with operations scheduled to commence in the first quarter of fiscal year 2011.

Our net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also consist of amounts charged by us to customers for shipping and handling and fuel surcharges. The principal components of our cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to our distribution facilities. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Woodstock Farms, for inbound transportation costs and depreciation for manufacturing equipment and consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Our gross margin may not be comparable to other similar companies within our industry that may include all costs related to their distribution network in their costs of sales rather than as operating expenses. We include purchasing and outbound transportation expenses within our operating expenses rather than in our cost of sales. Total operating expenses include salaries and wages, employee benefits (including payments under our Employee Stock Ownership Plan), warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation, depreciation and amortization expense. Other expenses (income) include interest on our outstanding indebtedness, interest income and miscellaneous income and expenses.

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Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Securities and Exchange Commission (“SEC”) has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results of operations and require our most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies include the following: (i) determining our allowance for doubtful accounts, (ii) determining our reserves for the self-insured portions of our workers’ compensation and automobile liabilities and (iii) valuing goodwill and intangible assets. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies.

Allowance for doubtful accounts

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are conducted using cash-on-delivery terms or the account is closely monitored so that as agreed upon payments are received, orders are released; a failure to pay results in held or cancelled orders.Our accounts receivable balance was $198.1 million and $179.5 million, net of the allowance for doubtful accounts of $7.4 million and $7.0 million, as of October 31, 2009 and August 1, 2009, respectively.Our notes receivable balances were $4.2 million and $4.0 million, net of the allowance for doubtful accounts of $1.9 million and$1.9 million, as of October 31, 2009 and August 1, 2009, respectively.

Insurance reserves

We record the self-insured portions of our workers’ compensation and automobile liabilities based upon actuarial methods of estimating the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning workers’ compensation and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns. If actual claims incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. Accruals for workers’ compensation and automobile liabilities totaled $14.6 million and $14.7 million as of October 31, 2009 and August 1, 2009, respectively.

Valuation of goodwill and intangible assets

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other, requires that companies test goodwill for impairment at least annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have elected to perform our annual tests for indications of goodwill impairment during the fourth quarter of each year. Impairment losses are determined based upon the excess of carrying amounts over discounted expected future cash flows of the underlying business. The assessment of the recoverability of goodwill will be impacted if estimated future cash flows are not achieved. For reporting units that indicate potential impairment, we determine the implied fair value of that reporting unit using a discounted cash flow analysis and compare such values to the respective reporting units’ carrying amounts. Total goodwill as of October 31, 2009 and August 1, 2009 was $164.3 million.

Intangible assets with indefinite lives are tested for impairment at least annually and between annual tests if events occur or circumstances change that would indicate that the value of the asset may be impaired. Impairment is measured as the difference between the fair value of the asset and its carrying value. Total indefinite-lived intangible assets as of October 31, 2009 and August 1, 2009 were $27.4 million.

Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model. Total finite-lived intangible assets as of October 31, 2009 and August 1, 2009 were $10.4 million and $10.9 million, respectively.

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Results of Operations

The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of net sales:

	Three months ended
	October  1,	November 1,
	2009	2009
Net sales	100.0%	100.0%
Cost of sales	81.4%	80.6%
Gross profit	18.6%	19.4%
Operating expenses	15.5%	16.5%
Amortization of intangible assets	0.1%	0.0%
Total operating expenses	15.5%*	16.5%
Operating income	3.1%	2.9%
Other expense (income):
Interest expense	0.2%	0.4%
Interest income	0.0%	0.0%
Other, net	0.0%	0.0%
Total other expense	0.1%*	0.4%
Income before income taxes	2.9%*	2.5%
Provision for income taxes	1.2%	1.0%
Net income	1.8%*	1.5%

* Total reflects rounding

Three Months Ended October 31, 2009 Compared To Three Months Ended November 1, 2008

Net Sales

Our net sales increased approximately 2.4%, or $20.5 million, to $884.8 million for the three months ended October 31, 2009, from $864.2 million for the three months ended November 1, 2008. This increase was primarily due to sales growth in our wholesale segment of $19.3 million, reflecting the continued growth of the natural products industry in general, increased market share as a result of our focus on service and value-added services, and the opening of new, and expansion of existing, distribution centers, which allow us to carry a broader selection of products.

Whole Foods Market accounted for approximately 33% and 32% of our net sales for the three months ended October 31, 2009 and November 1, 2008, respectively. Whole Foods Market is our only supernatural chain customer following its acquisition of Wild Oats Markets in August 2007.

The following table lists the percentage of sales by customer type for the three months ended October 31, 2009 and November 1, 2008:

Customer type	Percentage of Net Sales
	2009	2008
Independently owned natural products retailers	42%	43%
Supernatural chains	33%	32%
Conventional supermarkets	20%	20%
Other	5%	5%

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Gross Profit

Our gross profit decreased approximately 1.8%, or $3.0 million, to $164.6 million for the three months ended October 31, 2009, from $167.6 million for the three months ended November 1, 2008.Our gross profit as a percentage of net sales was 18.6% and 19.4% for the three months ended October 31, 2009 and November 1, 2008, respectively.Gross profit as a percentage of net sales during the three months ended October 31, 2009 was negatively impacted by reduced fuel surcharge revenues and the change in mix of sales by channel.

Operating Expenses

Our total operating expenses decreased approximately 3.6%, or $5.1 million, to $137.4 million for the three months ended October 31, 2009, from $142.5 million for the three months ended November 1, 2008.The decrease in total operating expenses for the three months ended October 31, 2009 was primarily due to lower diesel fuel costs as well as operational improvements and expense control programs across all of our divisions. During the quarter ended November 1, 2008, we incurred $2.5 million of labor and other duplicate expenses associated with the September 2008 relocation of our Fontana, California facility to a new facility in Moreno Valley, California and preparations for the relocation of our New Oxford, Pennsylvania facility to a new facility in York, Pennsylvania, which occurred in January 2009. Total operating expenses for the three months ended October 31, 2009 and November 1, 2008 includes share-based compensation expense of $2.1 million and $1.7 million, respectively.

As a percentage of net sales, total operating expenses decreased 1.0% to approximately 15.5% for the three months ended October 31, 2009,from approximately 16.5% for the three months ended November 1, 2008.The decrease in total operating expenses as a percentage of net sales was primarily attributable to lower diesel fuel expenses and expense control programs across all of our divisions.

Operating Income

Operating income increased approximately 8.8%, or $2.2 million, to $27.2 million for the three months ended October 31, 2009 from $25.0 million for the three months ended November 1, 2008. As a percentage of net sales, operating income was 3.1% for the three months ended October 31, 2009, compared to 2.9% for the three months ended November 1, 2008. The increase in operating income as a percentage of net sales is attributable to the decrease in total operating expenses as a percentage of net sales and the smaller operating loss within UNFI Specialty for the three months ended October 31, 2009, compared to the three months ended November 1, 2008, offset in part by the decrease in gross margin as a percentage of sales.

Other Expense (Income)

Other expense (income) decreased $1.8 million to $1.3 million for the three months ended October 31, 2009, from $3.1 million for the three months ended November 1, 2008.Interest expense of $1.4 million for the three months ended October 31, 2009 represented a decrease of 59.5% from the three months ended November 1, 2008 due primarily to lower average debt levels, as well as lower interest rates during the three months ended October 31, 2009.

Provision for Income Taxes

Our effective income tax rate was 40.0% and 39.6% for the three months ended October 31, 2009 and November 1, 2008, respectively. The increase in the effective income tax rate is primarily due to current fiscal year increases in state tax rates due to changes in apportionment factors. Our effective income tax rate was also affected by share-based compensation for incentive stock options and the timing of disqualifying dispositions of certain share-based compensation awards. FASB ASC 718, Stock Compensationprovides that the tax effect of the book share-based compensation cost previously recognized for an incentive stock option that an employee does not retain for the minimum holding period required by the Internal Revenue Code (a “disqualified disposition”) is recognized as a tax benefit in the period the disqualifying disposition occurs. Our effective income tax rate will continue to be effected by the tax impact related to incentive stock options and the timing of tax benefits related to disqualifying dispositions. Effective with our fiscal 2010 equity awards approved in September 2009, we are granting non-qualified stock options in place of incentive stock options.

Net Income

Net income increased $2.3 million to $15.5 million, or $0.36 per diluted share, for the three months ended October 31, 2009, compared to $13.2 million, or $0.31 per diluted share, for the three months ended November 1, 2008.

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Liquidity and Capital Resources

We finance our operations and growth primarily with cash flows from operations, borrowings under our credit facility, operating leases, trade payables and bank indebtedness. In addition, from time to time, we may issue equity and debt securities to finance our operations and growth.

On November 2, 2007, we amended our $250 million secured revolving credit facility with a bank group led by Bank of America Business Capital as the administrative agent, to temporarily increase the maximum borrowing base under the credit facility from $250 million to $270 million. We used the funds available to us as a result of this amendment to fund a portion of the purchase price for our acquisition of UNFI Specialty. On November 27, 2007, we further amended this facility to increase the maximum borrowing base under the credit facility from $270 million to $400 million and provide us with a one-time option, subject to approval by the lenders under the credit facility, to increase the borrowing base by up to an additional $50 million. Interest accrues on borrowings under the credit facility, at our option, at either the base rate (the applicable prime lending rate of Bank of America Business Capital, as announced from time to time) or at the one-month London Interbank Offered Rate (“LIBOR”) plus 0.75%. The $400 million credit facility matures on November 27, 2012. The amended and restated credit facility supports our working capital requirements in the ordinary course of business and provides capital to grow our business organically or through acquisitions. As of October 31, 2009, our borrowing base, based on accounts receivable and inventory levels, was $393.5 million, with remaining availability of $186.8 million.

In April 2003, we executed a term loan agreement in the principal amount of $30 million, secured by certain real property that was released from the lien under our amended and restated credit facility in accordance with an amendment to the loan and security agreement related to that facility. The term loan is repayable over seven years based on a fifteen-year amortization schedule. Interest on the term loan initially accrued at one-month LIBOR plus 1.50%. On July 29, 2005, we entered into an amended term loan agreement which increased the principal amount of this term loan to up to $75 million and decreased the rate at which interest accrues to one-month LIBOR plus 1.00%. In connection with the amendments to our amended and restated revolving credit facility described above, effective November 2, 2007 and November 27, 2007, we amended the term loan agreement to conform certain terms and conditions to the corresponding terms and conditions in the credit agreement that establishes our amended and restated revolving credit facility. As of October 31, 2009, approximately $55.7 million was outstanding under the term loan agreement.

We believe that our capital expenditure requirements for fiscal 2010 will be between $35 and $39 million. We expect to finance these requirements with cash generated from operations and borrowings under our existing credit facilities. These projects will provide both expanded facilities and enhanced technology that we believe will provide us with the capacity to continue to support the growth of our customer base. We believe that our future capital expenditure requirements will be lower than our anticipated fiscal 2010 requirements, both in dollars and as a percentage of net sales. Future investments in acquisitions that we may pursue will be financed through our existing credit facilities, equity or long-term debt negotiated at the time of the potential acquisition.

Net cash provided by operations was $17.5 million for the three months ended October 31, 2009, and was the result of net income of $15.5 million, the change in cash collected from customers net of cash paid to vendors and a $46.0 million investment in inventory.The increase in inventory levels primarily related to our sales growth, increases in anticipation of the holiday season, and realization of incentivized forward-buy opportunities. Net cash used in operations was $31.2 million for the three months ended November 1, 2008, and was the result of net income of $13.2 million, the change in cash collected from customers net of cash paid to vendors and a $73.6 million investment in inventory.Days in inventory was 49 days at October 31, 2009 and 56 days at November 1, 2008. Days sales outstanding remained consistent at approximately 20 days at October 31, 2009 and November 1, 2008. Working capital increased by $13.3 million, or 8%, to $182.4 million at October 31, 2009, compared to working capital of $169.1 million at August 1, 2009.

Net cash used in investing activities decreased $1.9 million to $9.7 million for the three months ended October 31, 2009, compared to $11.6 million for the three months ended November 1, 2008. This decrease was primarily due to lower capital expenditures during the three months ended October 31, 2009.

Net cash used in financing activities was $3.2 million for the three months ended October 31, 2009, compared to net cash provided by financing activities of $24.9 million for the three months ended November 1, 2008. This change in cash used in financing activities was primarily due to the repayments of borrowings under our credit facility during the three months ended October 31, 2009.

In August 2005, we entered into an interest rate swap agreement effective July 29, 2005. This agreement provides for us to pay interest for a seven-year period at a fixed rate of 4.70% on an initial amortizing notional principal amount of $50 million while receiving interest for the same period at one-month LIBOR on the same notional principal amount. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness at one-month LIBOR plus 1.00%, thereby fixing our effective rate on the notional amount at 5.70%. One-month LIBOR was 0.24% as of October 31, 2009. The swap agreement qualifies as an “effective” hedge under ASC 815.

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Contractual Obligations

There have been no material changes to our commitments and contingencies from those disclosed in our Annual Report on Form 10-K for the year ended August 1, 2009, except for an operating lease signed with respect to a new distribution center planned for Lancaster, Texas. Commitments related to the lease agreement amount to approximately $1.1 million in fiscal year 2011, $1.2 million in each of fiscal 2012, 2013, and 2014, and $7.5 million in the aggregate thereafter.

Seasonality

Generally, we do not experience any material seasonality. However, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, personnel changes, demand for natural products, supply shortages and general economic conditions.

Recently Issued Financial Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements under other accounting pronouncements, but does not change the existing guidance as to whether or not an instrument is carried at fair value. The statement is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued ASC 820-10-65-1, Effective Date of ASC 820 ("ASC 820-65-1") which delayed the effective date of ASC 820 by one year for nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis. In October 2008, the FASB issued ASC 820-10-65-2, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active ("ASC 820-65-2"), which clarifies the application of ASC 820 in an inactive market and illustrates how an entity would determine fair value when the market for a financial asset is not active. In April 2009, the FASB issued ASC 820-10-65-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“ASC 820-65-4”), which provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. ASC 820-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. ASC 820-65-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is to be applied prospectively. The Company adopted ASC 820 and Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active effective August 3, 2008, and adopted ASC Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly effective August 1, 2009. These adoptions did not have a material effect on our consolidated financial statements. The Company fully adopted ASC 820, including the provisions related to the fair value of goodwill, other intangible assets, and non-financial long-lived assets effective August 2, 2009, which did not have a material effect on the disclosures that accompany our consolidated financial statements.

In February 2007, the FASB issued ASC 825, Financial Instruments (“ASC 825”). ASC 825 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The statement is effective for fiscal years beginning after November 15, 2007. As of October 31, 2009, we have not elected to adopt the fair value option under ASC 825 for any financial instruments or other items.

In December 2007, the FASB issued ASC 805, Business Combinations (“ASC 805”). ASC 805 continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. ASC 805 requires, among other things, the buyer to: (1) account for the fair value of assets and liabilities acquired as of the acquisition date (i.e., a “fair value” model rather than a “cost allocation” model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at the acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the

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consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. ASC 805 also defines a “bargain” purchase as a business combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as “negative goodwill”) in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, ASC 805 requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. ASC 805 is effective for fiscal years beginning on or after December 15, 2008. We will apply ASC 805 to any acquisitions that are made after August 1, 2009.

In December 2007, the FASB issued ASC 810, Consolidation (“ASC 810”). This statement establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of ASC 810 did not have a material effect on our consolidated financial statements.

In April 2008, the FASB issued ASC 350-30, Determination of the Useful Life of Intangible Assets ("ASC 350-30"). ASC 350-30 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350, Intangibles – Goodwill and Other. The intent of ASC 350-30 is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. ASC 350-30 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of ASC 350-30 did not have a material effect on our consolidated financial statements.

In June 2008, the FASB issued ASC 260-10, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“ASC 260-10”). ASC 260-10 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. ASC 260-10 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. ASC 260-10 requires that all earnings per share data presented for prior periods be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform. The adoption of ASC 260-10 did not have a material effect on our consolidated financial statements in the periods presented.

In April 2009, the FASB issued ASC 825-10-65, Interim Disclosures about Fair Value of Financial Instruments (“ASC 825-10-65”). ASC 825-10-65 requires disclosure about the fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to ASC 825-10-65, fair values for these assets and liabilities were only disclosed annually. ASC 825-10-65 applies to all financial instruments within the scope of ASC 825 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. ASC 825 is effective for interim periods ending after June 15, 2009. The adoption of ASC 825-10-65 did not have a material effect on our consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk results primarily from fluctuations in interest rates on our borrowings and price increases in diesel fuel. As more fully described in Note 4 to the condensed consolidated financial statements, we use an interest rate swap agreement to modify variable rate obligations to fixed rate obligations for a portion of our debt. In addition, from time to time we use commodity swap agreements to hedge a portion of our expected diesel fuel usage, or fixed price purchase contracts. There have been no material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the year ended August 1, 2009.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

(b) Changes in internal controls. There has been no change in our internal control over financial reporting that occurred during the first fiscal quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved in routine litigation that arises in the ordinary course of our business. In the opinion of management, the outcome of pending litigation is not expected to have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

There have been no material changes to our risk factors contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended August 1, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

On September 30, 2009, United Natural Foods, Inc. (the “Company”) entered into a Lease Agreement (the “Lease Agreement”) with ProLogis under which the Company will lease space for use as a distribution center in Lancaster, Texas. The Lease Agreement provides that the commencement date shall be March 1, 2010 and that the lease term shall run for 125 months from that date, unless sooner terminated according to its terms. The Company also has options to extend the term for two additional five year terms following the expiration of the initial term. The Company must provide Prologis with written notice of its intent to exercise each renewal option not less than six months prior to the expiration of the initial lease term or the first renewal term, as applicable. The Lease Agreement also provides the Company with a right of first refusal to purchase the building if ProLogis intends to sell the building during the initial term of the lease.

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Under the Lease Agreement, the Company is required to pay no base rent for the first five months of the lease. For months six through ten, the monthly base rent is $73,733.75. After month ten, the monthly base rent is $98,300.00 for months eleven through sixty-five and $106,164.00 for months sixty-six through one hundred and twenty-five, each assuming the Company exercises its right to surrender "Premises 1", as defined in the Lease Agreement. In the event that the Company exercises its first five-year renewal option, the Company will be required to pay monthly base rent of $3.15 per rentable square foot. In the event that the Company exercises its second five-year renewal option, the Company will be required to pay monthly base rent of $3.60 per rentable square foot. In addition to base rent, the Company is obligated to pay certain building operating costs, taxes and other expenses allocable to the leased premises.

The Lease Agreement contains customary representations, warranties, covenants, indemnities and events of default. The Lease Agreement grants ProLogis the right to terminate the Lease Agreement upon the occurrence of an event of default.

The foregoing is a summary of the material provisions of the Lease Agreement and is qualified in its entirety by reference to the full text of the Lease Agreement, which is filed herewith as Exhibit 10.66.

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Item 6. Exhibits

Exhibits

Exhibit No.	Description
10.65	Addendum to Offer Letter, Severance Agreement, and Performance Unit Agreement between Steven L. Spinner, President and CEO, and the Registrant, dated May 28, 2009.
10.66	Lease between ProLogis, and the Registrant, dated September 30, 2009.
31.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – CEO
31.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – CFO
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – CEO
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – CFO

*                 *                 *

We would be pleased to furnish a copy of this Form 10-Q to any stockholder who requests it by writing to:

United Natural Foods, Inc.

Investor Relations

313 Iron Horse Way

Providence, RI  02908

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED NATURAL FOODS, INC.

/s/ Mark E. Shamber

Mark E. Shamber

Chief Financial Officer

(Principal Financial and Accounting Officer)

Dated:  December 10, 2009

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven L. Spinner, certify that:

1. I have reviewed this report on Form 10-Q of United Natural Foods, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  /s/ Steven L. Spinner

Steven L. Spinner

Chief Executive Officer

December 10, 2009

Note: A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark E. Shamber, certify that:

1. I have reviewed this report on Form 10-Q of United Natural Foods, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Mark E. Shamber

Mark E. Shamber

Chief Financial Officer

December 10, 2009

Note: A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, in his capacity as the Chief Executive Officer of United Natural Foods, Inc., a Delaware corporation (the “Company”), hereby certifies that the Quarterly Report of the Company on Form 10-Q for the quarterly period ended October 31, 2009, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.

/s/ Steven L. Spinner

Steven L. Spinner

Chief Executive Officer

December 10, 2009

Note: A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, in his capacity as the Chief Financial Officer of United Natural Foods, Inc., a Delaware corporation (the “Company”), hereby certifies that the Quarterly Report of the Company on Form 10-Q for the quarterly period ended October 31, 2009, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.

/s/ Mark E. Shamber

Mark E. Shamber

Chief Financial Officer

December 10, 2009

Note: A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-10.65

Exhibit 10.65

May 28, 2009

Steven L. Spinner

313 Randolph Square Parkway

Richmond, VA 23238

Re: Incentive Compensation Recoupment Policy

Dear Steve:

Reference is hereby made to (i) the Offer Letter dated August 27, 2008 (the "Offer Letter") between you and United Natural Foods, Inc. ("UNFI"); (ii) the Severance Agreement effective as of September 6, 2008 (the "Severance Agreement") between you and UNFI; and (iii) the Performance Unit Agreement effective as of November 5, 2008 (the "Performance Unit Agreement") between you and UNFI.

In consideration of your continued employment by UNFI, you and we have agreed that the payment or grant of any bonus or other incentive compensation to you in any form under any of the above-referenced agreements which is paid or granted after May 28, 2009, shall be subject to the terms and conditions of the Incentive Compensation Recoupment Policy of UNFI, attached as Exhibit A hereto and as it may be amended from time to time (the "Policy"). You understand that UNFI may amend the Policy in the future and acknowledge the above-mentioned agreements will be subject to such amended Policy without further action by you or UNFI. Notwithstanding anything to the contrary in the Offer Letter, Severance Agreement or Performance Unit Agreement, each of such agreements is hereby amended, effective Map 28, 2009, in accordance with the preceding sentences of this paragraph.

If the foregoing sets forth your understanding of our agreement to amend the above-referenced agreements, please execute and return to the undersigned a copy of this letter no later than June 1, 2009.

Sincerely,

/s/ Michael S. Funk

Michael S. Funk

Chair of the Board

Accepted and agreed to:

/s/ Steven L. Spinner

Steven L. Spinner

Dated: 5-28-09

Incentive Compensation Recoupment Policy

In the event that the Corporation restates all or a portion of its financial statements within two years of the filing of such financial statements with the Securities and Exchange Commission, the Board or the committee to which the full Board has delegated the authority to enforce this policy will, to the extent permitted by applicable law and as it deems appropriate in its sole discretion, in whole or in part, (i) require reimbursement of any bonus or incentive compensation paid or granted after May 28, 2009 to any executive officer or any other officer designated by the Board as being subject to this policy (and who is so notified of such designation) (collectively, the "Subject Officers"), (ii) cause the cancellation of the Subject Officers' restricted or deferred stock awards, restricted stock units, performance share units, outstanding stock options and other equity awards that formed all or a portion of such bonus or incentive compensation, and (iii) seek reimbursement from the Subject Officers of (A) any gains realized on the exercise of stock options or sale of shares of stock or (B) payments received in respect of restricted stock units, performance share units or other awards payable in cash, in either case attributable to any awards that formed all or a portion of such bonus or incentive compensation, if and to the extent that (a) the amount of bonus or incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement, and (b) the amount of the bonus or incentive compensation that would have been awarded to the Subject Officers had the financial results been properly reported would have been lower than the amount actually awarded. Each Subject Officer's bonus and incentive compensation shall be subject to recoupment in accordance with this policy regardless of the fault, misconduct or responsibility of such Subject Officer in connection with the restatement.

Subject to applicable law, in addition to cancelling equity awards, the Corporation may seek such reimbursement by requiring the Subject Officer to pay any such amounts to the Corporation, by set-off, by reducing future compensation, or by such other means or combination of means as the Board or such committee determines to be appropriate.

In addition, the policy shall not limit the Corporation's ability to pursue any and all available legal rights and remedies under law as it may deem appropriate in view, of all the facts surrounding the particular case.

This policy shall not apply to any restatements due to mandated or voluntarily adopted changes in generally accepted accounting principles (or international financial reporting standards, from and after the time the Corporation is subject to such standards) or the Corporation's adoption of newly issued financial accounting standards promulgated by the Financial Accounting Standards Board or any successor organization.

EX-10.66

Exhibit 10.66

[Net Lease]

LEASE AGREEMENT

THIS LEASE AGREEMENT is made this 30th day of September, 2009, between ProLogis (“Landlord”), and the Tenant named below.

Tenant:	United Natural Foods, Inc.
Tenant’s Representative,
Address, and Telephone:
	313 Iron Horse Way
	Providence, RI 02908
	(401) 528-8634
Premises:	That portion of the Building, containing approximately 589,870 rentable square feet, as determined by Landlord, as shown on Exhibit A.
Project:	ProLogis Park 20/35 - Building #2
Building:	ProLogis Park 20/35 - Building #2
	2100 Danieldale Road
	Lancaster, TX 75 134
Tenant’s Proportionate Share of Project:	100.000%
Tenant’s Proportionate Share of Building:	100.000%
Lease Term:	Beginning on the Commencement Date and ending on the last day of the 125th full calendar month thereafter.
Commencement Date:	March 1, 2010
Initial Monthly Base Rent:	See Addendum 1
Initial Estimated Monthly	1. Utilities:
Operating Expense Payments:
(estimates only and subject to	2. Common Area Charges:	$5,407.14
adjustment to actual costs and
expenses according to the	3. Taxes:	$42,274.02
provisions of this Lease)
	4. Insurance:	$2,949.35
	5. Prop. Mgmt.:	$6,390.26
Initial Estimated Monthly
Operating Expense Payments:	$57,020.77
Initial Monthly Base Rent and
Operating Expense Payments:	$57,020.77
Security Deposit:	$0.00

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Broker:	NAI Huff Partners (Jerry Alexander)
Addenda:	1. Base Rent Adjustments 2. HVAC Maintenance Contract 3. Move Out Conditions 4. Right of First Refusal to Purchase 5. Option to Surrender 6. Two Renewal Options at Fixed Rate 7. Storage and Use of Permitted Hazardous Materials
Exhibits:	A. Site Plan and Scope of Work B. Rules and Regulations C. Parking Plan

1.           Granting Clause. In consideration of the obligation of Tenant to pay rent as herein provided and in consideration of the other terms, covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord, the Premises, to have and to hold for the Lease Term, subject to the terms, covenants and conditions of this Lease. Anything in this Lease to the contrary notwithstanding, in the event Tenant fails to obtain tax and other incentives from the City of Lancaster, Texas with a minimum value over the Lease Term in an amount equaling at least $1,705,925 8:00 A.M.local time in Lancaster, Texas, that Tenant shall have the right to terminate this Lease, provided written notice of such termination is faxed to Landlord at 972-488-9848 no later than 11:00 AM local time in Lancaster, Texas on October 20, 2009, Such termination shall be effective upon Landlord’s receipt of Tenant’s notice to terminate (“Tax Termination Effective Moment”), Time is of the essence with regards to Tenant’s delivery of such termination notice with regard to failure to obtain such tax incentives. In the event Tenant elects to terminate this Lease as provided above, Landlord and Tenant shall each be relieved of all obligations under this Lease effective on the Tax Termination Effective Moment. Furthermore, anything in this Lease to the contrary notwithstanding, in the event Tenant completes a core sampling of the floor of the Premises and Tenant, in Tenant’s reasonable judgment, determines that the floor slab is not sufficient for Tenant’s operations in the Premises, Tenant shall have the right to terminate this Lease by faxing notice of such termination to Landlord at 972-488-9848 no later than 5:00 PM Eastern time on October 12, 2009 (“Floor Termination Effective Moment”). Time is of the essence with regards to the delivery of such notice to terminate as provided in the foregoing with regard to the floor slab. In the event Tenant elects to terminate this Lease as provided above, Landlord and Tenant shall each be relieved of all obligations under this Lease effective on the Floor Termination Effective Moment.

2.           Landlord’s Representations and Warranties and Acceptance of Premises. Landlord hereby warrants to Tenant that as of the date of this Lease that it has title to the Building in fee simple and that it has full right and authority to enter into this Lease. Landlord further warrants to Tenant that, as of the date of this Lease, (i) no written notice has been received by Landlord of non-compliance with any Legal Requirements in connection with the Project, (ii) the Project, including all structures thereon, systems therein and components thereof, is in good condition and repair, and watertight, (iii) the Building is zoned Light Industrial which to the best of Landlord’s current actual knowledge allows for the distribution of food products, (iv) no CC&R’s are in effect with regards to the Project, and (v) the Premises is accessible by trucks via public roads. The phrase “Landlord’s current, actual knowledge” shall mean and refer only to the best of the current, actual knowledge of the officers of Landlord having direct, operational responsibility for the Project, with the express limitations and qualifications that the knowledge of any contractor or consultant shall not be imputed to Landlord, and none of such officers has made any special investigation or inquiry, and none of such officers has any duty or obligation of diligent investigation or inquiry, or any other duty or obligation, to acquire or to attempt to acquire information beyond or in addition to the current, actual knowledge of such persons. Subject to the foregoing representations and warranties, Tenant shall accept the Premises in its condition as of the Commencement Date, subject to all applicable laws, ordinances, regulations, covenants and restrictions. Except as expressly provided herein, Landlord has made no representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises are suitable for Tenant’s intended purposes. Except as provided in Paragraph 10, in no event shall Landlord have any obligation for any defects in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken except for items that are Landlord’s responsibility under Paragraph 10 and any punchlist items agreed to in writing by Landlord and Tenant. Landlord shall complete any such punchlist items agreed to in writing by Landlord and Tenant no later than thirty (30) days following the completion of such punchlist; provided, however, that in the event Landlord cannot reasonably complete such punchlist items within the thirty (30) day period Landlord shall have such time as is reasonably necessary provided Landlord thereafter proceeds continuously and diligently to complete such punchlist items.

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3.           Use. The Premises shall be used only for the purpose of receiving, storing, shipping and selling (but limited to wholesale sales) products, materials and merchandise made and/or distributed by Tenant (including any licensee, subtenants and/or assignee), light manufacturing/assembly, and for such other lawful purposes as may be incidental thereto. Tenant shall not conduct or give notice of any auction, liquidation, or going out of business sale on the Premises. Tenant will not commit waste, overload the floor or structure of the Premises or subject the Premises to use that would damage the Premises, excluding from damage, however normal wear and tear. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise, or vibrations, as deemed objectionable by a person acting in a reasonable manner, to emanate from the Premises, or take any other action that would constitute a nuisance or would disturb, unreasonably interfere with, or endanger Landlord or any tenants of the Project, in the event Tenant’s use of the Premises constitute a nuisance as provided above Landlord shall notify Tenant in writing and Landlord and Tenant shall work in good faith to mitigate such factors constituting a nuisance or disturbance of other tenants of the Project. Notwithstanding anything contained herein to the contrary, for the purpose of determining if any odor generated by Tenant in the ordinary course of business is a nuisance, any odor generated by Tenant in the ordinary course of business which is consistent with odors created by food service and distribution services operated at the highest standards of the industry shall not be deemed a nuisance. Furthermore, Tenant’s use of trucks in the ordinary course of Tenant’s business at the Project shall not be deemed a nuisance under this Lease. Outside storage is prohibited without Landlord’s prior written consent; provided Tenant shall have the right to park vehicles, which may contain inventory, overnight at the truck loading docks and parking areas for the Premises provided such vehicles are in operable condition. In the event any trucks stored at the Premises are inoperable, such vehicles shall be removed within 48 hours following receipt of Landlord’s notice. Notwithstanding anything to the contrary set forth elsewhere in this Lease, Tenant shall have the right to place and maintain at all times, at Tenant’s sole cost and expense and in compliance with Legal Requirements, during the Lease Term a picnic area outside of the Premises at a location to be approved by Landlord, which approval shall not be unreasonably withheld. Landlord shall have no liability whatsoever in connection with such picnic area, and Tenant shall indemnify Landlord for any and all claims arising from the presence and maintenance of such picnic area. Notwithstanding anything to the contrary set forth elsewhere in this Lease, Tenant shall have the right to place and maintain at all times, at Tenant’s sole cost and expense, during the Lease Term in the “truck court” adjoining the building in which the Premises is located a dumpsters that shall be utilized by Tenant in connection with its business operations. Landlord shall have no liability whatsoever in connection with such dumpster, and Tenant shall indemnify Landlord for any and all claims arising from the presence and maintenance of such dumpster. Tenant, at its sole expense, shall use and occupy the Premises in compliance with all laws, including, without limitation, the Americans With Disabilities Act, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises (collectively, “Legal Requirements”). The Premises shall not be used as a place of public accommodation under the Americans with Disabilities Act or similar state statutes or local ordinances or any regulations promulgated thereunder, all as may be amended from time to time. In the event that Landlord receives notice that the Premises is not in compliance with applicable Legal Requirements (as hereinafter defined) existing as of the Commencement Date and such non-compliance is not related to Tenant’s specific use of the Premises or Tenant-Made Alterations to the Premises performed by Tenant, Landlord shall make such modifications as may be required by order or directive of applicable governmental authority in order to bring the Premises into compliance with applicable Legal Requirements (as hereinafter defined) as of the Commencement Date without cost or expense to Tenant and without including such cost or expense as an Operating Expense. Furthermore, in the event Landlord receives notice that the Premises is not in compliance with applicable Legal Requirements which come into effect after the Commencement Date and such non-compliance is not related to Tenant’s specific use of the Premises or Tenant-Made Alterations to the Premises performed by Tenant, Landlord shall make such modifications as may be required by order or directive of applicable governmental authority in order to bring the Premises into compliance with applicable Legal Requirements which shall be chargeable to Tenant as an Operating Expense. Tenant shall, at its expense, make any alterations or modifications, within or without the Premises, that are required by Legal Requirements related to Tenant’s use or occupation of the Premises. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s or Landlord’s insurance or cause the disallowance of any sprinkler credits. If any increase in the cost of any insurance on the Premises or the Project is caused by Tenant’s use or occupation of the Premises, or because Tenant vacates the Premises, then Tenant shall pay the amount of such increase to Landlord. Subject to applicable ordinances and building codes governing Tenant’s right to occupy or perform in the Premises, Tenant shall be

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allowed to install its tenant improvements, machinery, equipment, fixtures, or other property in the Premises commencing on the date which is ten (10) calendar days following the date of full execution of this Lease provided any such occupancy or performance in the Premises shall be in accordance with the provisions governing Tenant-Made Alterations and Trade Fixtures in the Lease, shall be subject to Tenant providing to Landlord satisfactory evidence of insurance for personal injury and property damage related to such installations and satisfactory payment arrangements with respect to installations permitted hereunder, and such occupation of the Premises by Tenant prior to the Commencement Date shall be subject to all obligations of Tenant under this Lease except for the payment of Base Rent or Operating Expenses.

4.           Base Rent. Tenant shall pay Base Rent in the amount set forth in Addendum 1. The first month’s Base Rent and the first monthly installment of estimated Operating Expenses (as hereafter defined) shall be due and payable on the date hereof, and Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent by Tenant’s corporate check on or before the first day of each calendar month succeeding the Commencement Date. Payments of Base Rent for any fractional calendar month shall be prorated. All payments required to be made by Tenant to Landlord hereunder (or to such other party as Landlord may from time to time specify in writing) shall be made at such place, within the continental United States, as Landlord may from time to time designate to Tenant in, writing. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Except as expressly provided in this Lease, Tenant shall have no right at any time to abate, reduce, or set-off any rent due hereunder except as may be expressly provided in this Lease. If Tenant is delinquent in any monthly installment of Base Rent or of Operating Expenses beyond 5 days after the due date thereof, and after notice as provided below, Tenant shall pay to Landlord on demand a late charge equal to 5 percent of such delinquent sum. Tenant shall not be obligated to pay the late charge until Landlord has given Tenant 5 days written notice of the delinquent payment (which may be given at any time during the delinquency); provided, however, that such notice shall not be required more than twice in any 12-month period. The provision for such late charge shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as a penalty or as limiting Landlord’s remedies in any manner.

5.           Security Deposit. [Intentionally Omitted]

6.           Operating Expense Payments. During each month of the Lease Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of the annual cost, as estimated by Landlord from time to time, of Tenant’s Proportionate Share (hereinafter defined) of Operating Expenses for the Project. Payments thereof for any fractional calendar month shall be prorated. The term “Operating Expenses” means all costs and expenses incurred by Landlord with respect to the ownership, maintenance, and operation of the Project including, but not limited to costs of: Taxes (hereinafter defined); an annual consulting fee for determining whether or not to contest Taxes for the Project not to exceed $500.00 per year; reasonable fees payable to tax consultants and attorneys for contesting taxes provided such fees are payable on a contingency fee basis except for standard expenses such as filing fees, postage/courier fees, and other standard administrative expenses; utilities; maintenance, repair and replacement of all portions of the Project, including without limitation, paving and parking areas, roads, non-structural components of roofs (including the roof membrane), alleys, and driveways, mowing, landscaping, snow removal, exterior painting, utility lines, heating, ventilation and air conditioning systems, lighting, electrical systems and other mechanical and building systems; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; charges or assessments of any association to which the Project is subject; property management fees payable to a property manager, including any affiliate of Landlord, which fees at this time shall not exceed three (3%) of gross receipts due and payable under this Lease (excluding Taxes), or if there is no properly manager, an administration fee of 10 percent of Operating Expenses payable to Landlord; security services, if any; trash collection, sweeping and removal; and additions or alterations made by Landlord to the Project or the Building in order to comply with Legal Requirements (other than those expressly required herein to be made by Tenant or by Landlord as provided in Paragraph 3) or that are necessary for the continued use and operation of the Project or the Building as a bulk warehouse facility in the market area, provided that the cost of additions or alterations that are required to be capitalized for federal income tax purposes shall be amortized on a straight line basis over a period equal to the lesser of the useful life thereof for federal income tax purposes or 10 years. Operating Expenses do not include costs, expenses, depreciation or amortization for capital repairs and capital replacements required to be made by Landlord under Paragraph 10 of this Lease, debt service under mortgages or ground rent under ground leases, costs of restoration to the extent of net insurance proceeds received by Landlord with respect thereto, leasing commissions, or the costs of renovating space for tenants.

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If Tenant’s total payments of Operating Expenses for any year are less than Tenant’s Proportionate Share of actual Operating Expenses for such year, then Tenant shall pay the difference to Landlord within 30 days after demand, and if more, then Landlord shall retain such excess and credit it against Tenant’s next payments. For purposes of calculating Tenant’s Proportionate Share of Operating Expenses, a year shall mean a calendar year except the first year, which shall begin on the Commencement Date, and the last year, which shall end on the expiration of this Lease. With respect to Operating Expenses which Landlord allocates to the entire Project, Tenant’s “Proportionate Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Proportionate Share of the Project as reasonably adjusted by Landlord in the future for changes in the physical size of the Premises or the Project; and, with respect to Operating Expenses which Landlord allocates only to the Building, Tenant’s “Proportionate Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Proportionate Share of the Building as reasonably adjusted by Landlord in the future for changes in the physical size of the Premises or the Building. Landlord may equitably increase or decrease Tenant’s Proportionate Share, as applicable, for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project or Building that includes the Premises, or that is completely unrelated to the Premises, or that varies with occupancy or use. With respect to the foregoing sentence, Landlord must provide reasonable supporting documentation for any increase or decrease. The estimated Operating Expenses for the Premises set forth on the first page of this Lease are only estimates, and Landlord makes no guaranty or warranty that such estimates will be accurate.

Notwithstanding anything contained in this Lease to the contrary, for the purpose of calculating Tenant’s reimbursement of Operating Expenses from the period commencing on the Commencement Date and ending on December 31, 2010, Tenant’s Proportionate Share of the Building shall be 59.98% and Tenant’s Proportionate Share of the Project shall be 59.98%.

Tenant shall not be obligated to pay for Controllable Operating Expenses in any year to the extent they have increased by more than six percent (6%) per annum, compounded annually on a cumulative basis from actual Controllable Operating Expenses applicable to the Premises during the 2011 calendar year. For purposes of this Paragraph, Controllable Operating Expenses shall mean all Operating Expenses as set forth in this Paragraph 6 of the Lease, except for Taxes, insurance premiums, costs in connection with adverse weather conditions, and utility costs. Controllable Operating Expenses shall be determined on an aggregate basis and not on an individual basis, and the cap on Controllable Operating Expenses shall be determined on Operating Expenses as they have been adjusted for vacancy or usage pursuant to the terms of the Lease.

7.            Utilities. Tenant shall pay for all water, gas, electricity, heat, light, power, telephone, sewer, sprinkler services, refuse and trash collection, and other utilities and services used on the Premises, all maintenance charges for utilities, and any storm sewer charges or other similar charges for utilities imposed by any governmental entity or utility provider, together with any taxes, penalties, surcharges or the like pertaining to Tenant’s use of the Premises. Landlord may cause at Tenant’s expense any utilities to be separately metered or charged directly to Tenant by the provider. Tenant shall pay its share of all charges for jointly metered utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of utilities shall result in the termination of this Lease or the abatement of rent.

Notwithstanding anything contained herein to the contrary, in the event that such interruption or cessation of utilities results from Landlord’s negligent or willful act or omission continues beyond two (2) business days from the date of such interruption or cessation, then, provided Tenant has delivered Landlord with prompt notice of such interruption, the rent under this Lease will abate, commencing on the second (2nd) business day the Premises remain untenantable, and continuing until the dare on which the utilities are restored and the Premises are again tenantable. No abatement of rentals as hereinabove described will apply in the event such interruption of utilities is the result of Tenant’s alterations to the Premises, or any negligent act or omission of Tenant, its agents, employees or contractors, or any cause other than the negligent or willful act or omission of Landlord or its employees, agents or contractors.

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Landlord represents that as of the Commencement Date the Premises is services by municipal water service and furthermore, Landlord represents to Tenant that to the best of Landlord’s current, actual knowledge that there are no restrictions on the use of such water service. The phrase “current, actual knowledge of Landlord” shall mean and refer only to the best of the current, actual knowledge of the officers of Landlord having direct, operational responsibility for the Project, with the express limitations and qualifications that the knowledge of any contractor or consultant shall not be imputed to Landlord, and none of such officers has made any special investigation or inquiry, and none of such officers has any duty or obligation of diligent investigation or inquiry, or any other duty or obligation, to acquire or to attempt to acquire information beyond or in addition to the current, actual knowledge of such persons.

8.           Taxes. Landlord shall pay all taxes, assessments and governmental charges (collectively referred to as “Taxes”) that accrue against the Project during the Lease Term, which shall be included as part of the Operating Expenses charged to Tenant. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens thereof. All capital levies or other taxes assessed or imposed on Landlord upon the rents payable to Landlord under this Lease and any franchise tax, any excise, transaction, sales or privilege tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents from the Premises (including the Texas Margins Tax) and/or the Project or any portion thereof shall be paid by Tenant to Landlord as an Operating Expenses; provided, however, in no event shall Tenant be liable for any net income taxes imposed on Landlord unless such net income taxes are in substitution for any Taxes payable hereunder. lf any such tax or excise is levied or assessed directly against Tenant, upon Tenant’s receipt of notice of such tax then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall be liable for all taxes levied or assessed against any personal property or fixtures placed in the Premises, whether levied or assessed against Landlord or Tenant.

9.           Insurance. Landlord shall maintain all risk property insurance covering the full replacement cost of the Building. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, commercial liability insurance and rent loss insurance, provided such other insurance is customary in the market where the Premises is located for similarly situated landlords of similar properties. All such insurance shall be included as part of the Operating Expenses charged to Tenant. The Project or Building may be included in a blanket policy (in which case the cost of such insurance allocable to the Project or Building will be determined by Landlord based upon the insurer’s cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.

Tenant, at its expense, shall maintain during the Lease Term: all risk property insurance covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; worker’s compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with such limits as required by law; and commercial liability insurance, with a minimum limit of $1,000,000 per occurrence and a minimum umbrella limit of $1,000,000, for a total minimum combined general liability and umbrella limit of $2,000,000 (together with such additional umbrella coverage as Landlord may reasonably require) for property damage, personal injuries, or deaths of persons occurring in or about the Premises. Landlord may from time to time require reasonable increases in any such limits, The commercial liability policies shall name Landlord as an additional insured, insure on an occurrence and not a claims-made basis, be issued by insurance companies which are reasonably acceptable to Landlord, not be cancelable unless 30 days’ prior written notice shall have been given to Landlord, contain a hostile fire endorsement and a contractual liability endorsement and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant’s policies). Such policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Lease Term and upon each renewal of said insurance.

The all risk property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, their officers, directors, employees, managers, agents, invitees and contractors, in connection with any loss or damage thereby insured against. Neither party nor its officers, directors, employees, managers, agents, invitees or contractors shall be liable to the other for loss or damage caused by any risk coverable by all risk property insurance, and each party waives any claims against the other party, and its officers, directors, employees, managers, agents, invitees and contractors for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its agents, employees and

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contractors shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption losses sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Landlord or its agents, employees or contractors. Tenant and its agents, employees and contractors shall not be liable for, and Landlord hereby waives all claims against such parties for, rental losses sustained by Landlord or any person claiming through Landlord resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Tenant or its agents, employees or contractors.

Landlord represents and warrants that as of the date hereof it has not received any notice from any insurer of coverage maintained by Landlord requiring modifications or work to be performed on the Premises as a condition to the maintenance or renewal of any such policies of insurance with respect to the Premises.

10.           Landlord’s Repairs. Landlord shall maintain, at its expense, the structural soundness of the roof, foundation, and exterior walls of the Building in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant, its agents and contractors excluded. The term “walls” as used in this Paragraph 10 shall not include windows, glass or plate glass, doors or overhead doors, special store fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Paragraph 10, after which Landlord shall have a reasonable opportunity to repair.

In the event of an emergency (being defined as an imminent threat of personal injury to Tenant’s employees, material damage to Tenant’s equipment or other property at the Premises, or a material impact on Tenant’s operations at the Premises), Tenant shall have the right to make such temporary, emergency repairs to the roof, foundation, floors and exterior walls of the building of which the Premises are a part, or the roof membrane, skylights, roof vents, drains and downspouts of the Project, and the exterior and under slab utility systems for the Project, as may be reasonably necessary to prevent such material damage to the equipment or property of Tenant situated in the Premises, or such personal injury to Tenant’s employees, provided Tenant has no reasonable alternative and has notified or attempted in good faith to notify Landlord’s representative of such emergency by telephone (with subsequent written notice as soon as practicable). The provisions of this paragraph do not constitute an authorization by Landlord for Tenant to enter the premises of any other tenant of the Project, and Tenant has not been designated as Landlord’s agent for the purposes of any such entry. Landlord shall reimburse Tenant for the reasonable, out-of-pocket costs incurred by Tenant in making such emergency repairs to the roof, foundation or exterior walls, as applicable within thirty (30) days after submission by Tenant to Landlord of an invoice therefore, accompanied by reasonable supporting documentation for the costs so incurred. In the event Landlord fails or refuses to reimburse Tenant for such costs within such thirty (30) day period and Tenant brings an action for recovery of such amounts from Landlord as provided for in this Lease, then Tenant shall be entitled to recover, in addition to the amount of such costs, interest on such amounts from the date incurred by Tenant until recovered from Landlord, at the rate provided in Paragraph 37(j) of this Lease, and the reasonable attorneys’ fees and other costs of court incurred by Tenant in pursuing such action.

11.           Tenant’s Repairs. Landlord, at Tenant’s expense to be passed through as an Operating Expenses as provided in Paragraph 6, shall maintain in good repair and condition the parking areas and other common areas of the Building, including, but not limited to driveways, alleys, landscape and grounds surrounding the Premises, as well as all systems which are located outside of the Premises except as provided below. Subject to Landlord’s obligations above in this Paragraph 11, in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises and all areas, improvements and systems exclusively serving the Premises which are located in the Premises (except for the heating, ventilation, and air conditioning systems which may be located outside of the Premises), including, without limitation, dock and loading areas, truck doors, plumbing, water and sewer lines located in the Premises, fire sprinklers and fire protection systems, entries, doors, ceilings, windows, interior walls, and the interior side of demising walls, and heating, ventilation and air conditioning systems. Such repair and replacements include capital expenditures and repairs whose benefit may extend beyond the Term, provided in all events Landlord shall complete such capital repairs and such capital expenditures shall be fully amortized in accordance with the Formula (defined hereafter) and reimbursed to Landlord over the remainder of the Lease Term, without regard to any extension or renewal option not then exercised. The “Formula” shall mean that number, the numerator of which

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shall be the number of months of the Lease Term remaining after such capital expenditures, and the denominator of which shall be the amortization period (in months) equal to the useful life of such repair or replacement multiplied by the cost of such capital expenditure or repair. Landlord shall pay for such capital expenditures and repairs and Tenant shall reimburse Landlord for its amortized share of same (determined as hereinabove set forth) in equal monthly installments in the same manner as the payment by Tenant to Landlord of the Operating Expenses. In the event Tenant extends the Lease Term either by way of an option or negotiated extension, such reimbursement by Tenant shall continue as provided above until such amortization period has expired. Heating, ventilation and air conditioning systems and other mechanical and building systems serving the Premises shall be maintained at Tenant’s expense pursuant to maintenance service contracts entered into by Tenant or, in the event Tenant fails to maintain as provided herein by Landlord upon thirty (30) days prior written notice to Tenant. The scope of services and contractors under such maintenance contracts shall be reasonably approved by Landlord. If Tenant fails to perform any repair or replacement for which it is responsible, Landlord may perform such work and be reimbursed by Tenant within 10 days after demand therefor. Subject to Paragraphs 9 and 15, Tenant shall bear the full cost of any repair or replacement to any part of the Building or Project that results from damage caused by Tenant, its agents, contractors, or invitees and any repair that benefits only the Premises.

Landlord agrees to enforce to Tenant’s benefits any guarantees an warranties, if any, which relate to any maintenance or repair to be completed by Tenant above or which are to be completed by Landlord at Tenant’s expense as an Operating Expense as provided above. Notwithstanding anything contained in this Lease, Tenant shall have no responsibility for latent defects in the initial construction of the Building or Project and costs to correct such latent defects shall not be passed through to Tenant as an Operating Expense.

12.           Tenant-Made Alterations and Trade Fixtures. Any alterations, additions, or improvements made by or on behalf of Tenant to the Premises (“Tenant-Made Alterations”) shall be subject to Landlord’s prior written consent, Tenant shall cause, at its expense, all Tenant-Made Alterations to comply with insurance requirements and with Legal Requirements and shall construct at its expense any alteration or modification required by Legal Requirements as a result of any Tenant-Made Alterations. All Tenant-Made Alterations shall be constructed in a good and workmanlike manner by contractors reasonably acceptable lo Landlord and only good grades of materials shall be used. All plans and specifications for any Tenant-Made Alterations shall be submitted to Landlord for its approval, which shall not be unreasonably withheld or delayed. Notwithstanding anything contained herein to the contrary, Landlord shall either approve or disapprove, as the case may be, Tenant’s request for approval to complete Tenant-Made Alterations to the Premises within 10 business days after receipt of Tenant’s plans and specifications for such Tenant-Made Alterations, provided that such plans and specifications, in Landlord’s commercially reasonable judgment, contain sufficient and complete information to effectuate Landlord’s approval hereunder. If Landlord rejects such plans and specifications Landlord must do so with specificity and Tenant shall have an opportunity to resubmit such plans and specifications and each resubmission shall be subject to the foregoing procedures. Landlord may monitor construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for its costs in reviewing plans and specifications and in monitoring construction, not to exceed $1,000 for each project. Landlord’s right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to see that such plans and specifications or construction comply with applicable laws, codes, rules and regulations. Tenant shall provide Landlord with the identities and mailing addresses of all persons performing work or supplying materials, prior to beginning such construction, and Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall provide to Landlord certificates of insurance from all contractors and subcontractors who work on the Tenant-Made Alterations for worker’s compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Tenant-Made Alterations, Tenant shall deliver to Landlord final lien waivers from all such contractors and subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and any leasehold improvements constructed by Landlord or Tenant shall remain on the Premises as Landlord’s property, except to the extent Landlord requires removal at Tenant’s expense of any such items or Landlord and Tenant have otherwise agreed in writing in connection with Landlord’s consent to any Tenant-Made Alterations. Upon Tenant’s written request, Landlord shall provide Tenant, at the time of Tenant’s request for approval of Tenant-Made Alterations, a list of which Tenant-Made Alterations Landlord will require Tenant to remove upon surrender of the Premises. Tenant shall repair any damage caused by such removal.

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Tenant, at its own cost and expense and without Landlord’s prior approval, may erect such shelves, bins, machinery and trade fixtures (collectively “Trade Fixtures”) in the ordinary course of its business provided that such items do not alter the basic character of the Premises, do not overload or damage the Premises, and may be removed without injury to the Premises, and the construction, erection, and installation thereof complies with all Legal Requirements and with Landlord’s requirements set forth above. Tenant shall remove its Trade Fixtures and shall repair any damage caused by such removal.

Notwithstanding anything contained herein to the contrary, Landlord shall contribute up to a maximum amount of $1,900,000.00 (the “TI Allowance”), toward the initial Tenant-Made Alterations to the Premises, which such payment shall be made by Landlord to Tenant within 30 days following Landlord’s receipt of Tenant’s invoice substantiating the costs related to Tenant-Made Alterations which costs equal at least $1,900,000.00 (which may include an invoice from the general contractor). Notwithstanding anything contained herein, Tenant shall have an obligation to deliver to Landlord final lien waivers from all contractors and sub-contractors who work on the initial Tenant-Made Alterations upon the completion of the initial Tenant-Made Alterations. Landlord shall be under no obligation to pay for any Tenant-Made Alterations to the Premises in excess of the TI Allowance. Further, such TI Allowance shall only be available for Tenant’s use through August 31, 2010, and Tenant hereby waives any and all rights to any unused portion of the TI Allowance remaining as of September 1, 2010. Notwithstanding anything contained herein to the contrary, in the event Landlord sells the Building, or assigns this Lease (including a collateral assignment) prior to August 31, 2010, Landlord shall escrow any amount of the TI Allowance remaining as of the date of such sale of the Building or assignment of this Lease, which escrow shall provide that Tenant may draw down on such escrow amount upon delivery of invoices substantiating the costs related to the Tenant-Made Alterations as provided above.

Subject to Landlord’s review and approval of the plans and specifications related thereto, Landlord hereby agrees to permit Tenant to install a photovoltaic system, including solar roof panels, on the roof of the Premises; provided such system does not adversely impact the structural integrity of the Building. The installation, maintenance, and repair of such systems shall be at Tenant’s sole cost and expense. Tenant agrees and understands that Landlord may require conditions to such installation, including, but not limited to, no penetrations of the roof membrane, system shall be architecturally screened and secured and not visible from the street, Landlord shall have the right to oversee such installation, and all electricity generated by the systems shall be used by Tenant and not sold to other tenant’s in the Project or to utility companies.

13.           Signs. Tenant shall not make any changes to the exterior of the Premises, install any exterior lights, decorations, balloons, flags, pennants, banners, or painting, or erect or install any signs, windows or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises, without Landlord’s prior written consent. Upon surrender or vacation of the Premises, Tenant shall have removed all signs and repair, paint, and/or replace the building facia surface to which its signs are attached. Tenant shall obtain all applicable governmental permits and approvals for sign and exterior treatments. All signs, decorations, advertising media, blinds, draperies and other window treatment or bars or other security installations visible from outside the Premises shall be subject to Landlord’s approval and conform in all respects to Landlord’s requirements. Notwithstanding the foregoing, Tenant shall have the right to install signage on the exterior wall of the Building at its sole cost and expense and subject to Landlord’s approval of the design, size and location of such signage, which consent shall not be unreasonably withheld provided such signage is consistent with approved signage of other tenants of the Project.

14.           Parking. Tenant shall be entitled to the exclusive use of all parking areas serving the Premises. Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties. Notwithstanding the foregoing to the contrary, in the event Tenant exercises its right to surrender the Surrender Premises 1 as provided in Addendum 5 then the foregoing shall automatically be amended such that Tenant’s parking rights shall a be as provided in Exhibit C (Phase I Parking) and in the event Tenant exercises its right to surrender the Surrender Premises 2,as provided in Addendum 5 then the foregoing shall automatically be amended such that Tenant’s parking rights shall be as provided in Exhibit C (Phase II Parking).

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15.           Restoration. If at any time during the Lease Term the Premises are damaged by a fire or other casualty, Landlord shall notify Tenant within 60 days after such damage as to the amount of time Landlord reasonably estimates it will take to restore the Premises. If the restoration time is estimated to exceed 6 months, either Landlord or Tenant may elect to terminate this Lease upon notice to the other party given no later than 30 days after Landlord’s notice. If neither party elects to terminate this Lease or if Landlord estimates that restoration will take 6 months or less, then, subject to receipt of sufficient insurance proceeds, Landlord shall promptly restore the Premises excluding the improvements installed by Tenant or by Landlord and paid by Tenant, subject to delays arising from the collection of insurance proceeds or from Force Majeure events. Tenant at Tenant’s expense shall promptly perform, subject to delays arising from the collection of insurance proceeds, or from Force Majeure events, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease, Notwithstanding the foregoing, either party may terminate this Lease if the Premises are damaged during the last nine months of the Lease Term and Landlord reasonably estimates that it will take more than one month to repair such damage. Base Rent and Operating Expenses shall be abated for the period of repair and restoration in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.

16.           Condemnation. If Landlord shall receive written notice from any third party with condemning authority of such party’s intent to condemn any part of the Premises or the Project for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would prevent or materially interfere with Tenant’s use of the Premises or in Landlord’s judgment would materially interfere with or impair its operation of the Project, then upon written notice by Landlord this Lease shall terminate and Base Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, the Base Rent payable hereunder during the unexpired Lease Term shall be reduced to such extent as may be fair and reasonable under the circumstances, In the event of any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant’s Trade Fixtures, if a separate award for such items is made to Tenant.

17.           Assignment and Subletting. Without Landlord’s prior written consent, Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises and any attempt to do any of the foregoing shall be void and of no effect. For purposes of this paragraph, a transfer of the ownership interests controlling Tenant shall be deemed an assignment of this Lease unless such ownership interests are publicly traded. Notwithstanding the above, Tenant may assign or sublet the Premises, or any part thereof, to any entity controlling Tenant, controlled by Tenant or under common control with Tenant (a “Tenant Affiliate”), without the prior written consent of Landlord. Tenant shall reimburse Landlord for all of Landlord’s reasonable out-of-pocket expenses in connection with any assignment or sublease. Upon Landlord’s receipt of Tenant’s written notice of a desire to assign the Lease or sublet the entire Premises (other than to a Tenant Affiliate), Landlord may, by giving written notice to Tenant within 30 days after receipt of Tenant’s notice, terminate this Lease, as of the date specified in Tenant’s notice for the commencement of the proposed assignment or sublease. Landlord and Tenant shall be relieved of all obligations accruing under this Lease after the effective date of such termination but not any obligations accruing under the Lease prior to the effective date of such termination.

Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at all times remain fully responsible and liable for the payment of the rent and for compliance with all of Tenant’s other obligations under this Lease (regardless of whether Landlord’s approval has been obtained for any such assignments or sublettings). In the event that the rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this Lease, then Tenant shall be bound and obligated to pay Landlord as additional rent hereunder one half of all such excess rental and other excess consideration (after deducting standard tenant improvements, reasonable brokerage fees, and reasonable attorney’s fees) within 10 days following receipt thereof by Tenant.

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If this Lease be assigned or if the Premises be subleased (whether in whole or in part) or in the event of the mortgage, pledge, or hypothecation of Tenant’s leasehold interest or grant of any concession or license within the Premises or if the Premises be occupied in whole or in part by anyone other than Tenant, then upon a default by Tenant hereunder Landlord may seek to collect rent from the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest was hypothecated, concessionee or licensee or other occupant and, except to the extent set forth in the preceding paragraph, apply the amount collected to the next rent payable hereunder; and all such rentals collected by Tenant shall be held in trust for Landlord and immediately forwarded to Landlord. No such transaction or collection of rent or application thereof by Landlord, however, shall be deemed a waiver of these provisions or a release of Tenant from the further performance by Tenant of its covenants, duties, or obligations hereunder.

18.           Indemnification. Except for the negligence or willful misconduct of Landlord, its agents, employees or contractors, and to the extent permitted by law, Tenant agrees to indemnify, defend and hold harmless Landlord, and Landlord’s agents, employees and contractors, from and against any and all losses, liabilities, damages, costs and expenses (including attorneys’ fees) resulting from claims by third parties for injuries to any person and damage to or theft or misappropriation or loss of property occurring in or about the Project and arising from the use and occupancy of the Premises or from any activity, work, or thing done, permitted or suffered by Tenant in or about the Premises or due to any other act or omission of Tenant, its subtenants, assignees, invitees, employees, contractors and agents. The furnishing of insurance required hereunder shall not be deemed to limit Tenant’s obligations under this Paragraph 18.

Except for the negligence or willful misconduct of Tenant, its agents, employees or contractors, and to the extent permitted by law, Landlord agrees to indemnify, defend and hold harmless Tenant, and Tenant’s agents, employees and contractors, from and against any and all losses, liabilities, damages, costs and expenses (including attorneys’ fees) resulting from claims by third parties for injuries to any person and damage to or theft or misappropriation or loss of property occurring in or about the Project or arising from any activity, work, or thing done, permitted or suffered by Landlord in or about the Project or due to any other act or omission of Landlord, its assignees, invitees, employees, contractors and agents. The furnishing of insurance required hereunder shall not be deemed to limit Landlord’s obligations under this Paragraph 18.

If a claim under the foregoing indemnity is made against the indemnitee which the indemnitee believes to be covered by an indemnitor’s indemnification obligations hereunder, the indemnitee shall promptly notify the indemnitor of the claim and, in such notice shall offer to the indemnitor the opportunity to assume the defense of the claim within 10 business days after receipt of the notice (with counsel reasonably acceptable to the indemnitee). If the indemnitor timely elects to assume the defense of the claim, the indemnitor shall have the right to settle the claim on any terms it considers reasonable and without the indemnitee’s prior written consent, as long as the settlement shall not require the indemnitee to render any performance or pay any consideration, and the indemnitee shall not have the right to settle any such claim. If the indemnitor fails timely to elect to assume the defense of the claim or fails to defend the claim with diligence, then the indemnitee shall have the right to take over the defense of the claim and to settle the claim on any terms the indemnitee considers reasonable. Any such settlement shall be valid as against the indemnitor. If the indemnitor assumes the defense of a claim, the indemnitee may employ its own counsel but such employment shall be at the sole expense of the indemnitee. If any such claim arises out of the negligence of both Landlord and Tenant, responsibility for such claim shall be allocated between Landlord and Tenant based on their respective degrees of negligence.

This indemnity does not cover claims arising from the presence or release of Hazardous Materials.

19.           Inspection and Access. Upon reasonable prior notice, except in the event of an emergency in which case no notice shall be required, Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Upon reasonable prior notice, Landlord and Landlord’s representatives may enter the Premises during business hours for the purpose of showing the Premises to prospective purchasers and, during the last year of the Lease Term, to prospective tenants. Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale. Landlord may grant easements, make public dedications, designate common areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction reduces the Premises or interferes in any way with Tenant’s use or occupancy of the Premises. At Landlord’s request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions; provided such instrument meets the foregoing conditions.

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20.           Quiet Enjoyment. If Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all times during the Lease Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

21.           Surrender. Upon termination of the Lease Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlord in the same condition as received, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Paragraphs 15 and 16 excepted. Any Trade Fixtures which Tenant has not removed, or any Tenant-Made Alterations which Tenant was required to remove pursuant to the provisions of Paragraph 12 but has not removed, shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Lease Term shall survive the termination of the Lease Term, including without limitation, indemnity obligations, payment obligations with respect to Operating Expenses and obligations concerning the condition and repair of the Premises.

22.           Holding Over. If Tenant retains possession of the Premises after the termination of the Lease Term, unless otherwise agreed in writing, such possession shall be subject to immediate termination by Landlord at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Tenant shall pay Landlord from time to time, upon demand, as Base Rent for the holdover period, an amount equal to one and one half times the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Tenant shall be liable for all damages incurred by Landlord as a result of such holding over. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Paragraph 22 shall not be construed as consent for Tenant to retain possession of the Premises. For purposes of this Paragraph 22, “possession of the Premises” shall continue until, among other things, Tenant has delivered all keys to the Premises to Landlord, Landlord has complete and total dominion and control over the Premises, and Tenant has completely fulfilled all obligations required of it upon termination of the Lease as set forth in this Lease, including, without limitation, those concerning the condition and repair of the Premises.

23.           Events of Default. Each of the following events shall be an event of default (“Event of Default”) by Tenant under this Lease:

(i)           Tenant shall fail to pay any installment of Base Rent or any other payment required herein when due, and such failure shall continue for a period of 5 days from the date such payment was due.

(ii)          Tenant or any guarantor or surety of Tenant’s obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “proceeding for relief”); (C) become the subject of any proceeding for relief which is not dismissed within 60 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

(iii) Any insurance required to be maintained by Tenant pursuant to this Lease shall be cancelled or terminated or shall expire or shall be reduced or materially changed, except, in each case, as permitted in this Lease.

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(iv)           Tenant shall abandon the Premises, whether or not Tenant is in monetary or other default under this Lease, Tenant’s vacating of the Premises shall not constitute an Event of Default if, prior to vacating the Premises, Tenant has made arrangements reasonably acceptable to Landlord to (a) ensure that Tenant’s insurance for the Premises will not be voided or cancelled with respect to the Premises as a result of such vacancy, (b) ensure that the Premises are secured and not subject to vandalism, and (c) ensure that the Premises will be properly maintained after such vacation. Tenant shall inspect the Premises at least once each month and report monthly in writing to Landlord on the condition of the Premises.

(v)           Tenant shall attempt or there shall occur any assignment, subleasing or other transfer of Tenant’s interest in or with respect to this Lease except as otherwise permitted in this Lease.

(vi)           Tenant shall fail to discharge, or bond over, any lien placed upon the Premises in violation of this Lease within 30 days after any such lien or encumbrance is filed against the Premises.

(vii)           Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Paragraph 23, and except as otherwise expressly provided herein, such default shall continue for more than 30 days after Landlord shall have given Tenant written notice of such default; provided, however, that Tenant shall not be in default. under the circumstances described in this subparagraph 23 (vii) if Tenant has made diligent efforts to cure such default within the thirty (30) day period described therein, and thereafter proceeds continuously and diligently to cure such default within a commercially reasonable time.

24.           Landlord’s Remedies. Upon each occurrence of an Event of Default and so long as such Event of Default shall be continuing, Landlord may at any time thereafter at its election: terminate this Lease or Tenant’s right of possession, (but Tenant shall remain liable as hereinafter provided) and/or pursue any other remedies at law or in equity. Upon the termination of this Lease or termination of Tenant’s right of possession, it shall be lawful for Landlord, without formal demand or notice of any kind, to re-enter the Premises by summary dispossession proceedings or any other action or proceeding authorized by law and to remove Tenant and all persons and property therefrom. If Landlord re-enters the Premises, Landlord shall have the right to keep in place and use, or remove and store, all of the furniture, fixtures and equipment at the Premises.

If Landlord terminates this Lease, Landlord may recover from Tenant the sum of: all Base Rent and all other amounts accrued hereunder to the date of such termination; the reasonable cost of reletting the whole or any part of the Premises, including without limitation reasonable brokerage fees and/or reasonable leasing commissions incurred by Landlord, and costs of removing and storing Tenant’s or any other occupant’s property, repairing, altering, remodeling, or otherwise putting the Premises into the condition required by Tenant under this Lease, and all reasonable expenses incurred by Landlord in pursuing its remedies, including reasonable attorneys’ fees and court costs; and the excess of the then present value of the Base Rent and other amounts payable by Tenant under this Lease as would otherwise have been required to be paid by Tenant to Landlord during the period following the termination of this Lease measured from the date of such termination to the expiration date stated in this Lease, over the present value of any net amounts which Landlord can reasonably expect to recover by reletting the Premises for such period based on comparable lease transactions in the market which the Project is located which involve space which is comparable to the Premises in buildings which are comparable to the Building taking into consideration the availability of acceptable tenants and other market conditions affecting leasing. Such present values shall be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at the date of such termination.

If Landlord terminates Tenant’s right to possession (but not this Lease) without terminating the Lease after an Event of Default, Landlord shall use commercially reasonable efforts to relet the Premises without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant; provided, however, (a) Landlord shall not be obligated to accept any tenant proposed by Tenant, (b) Landlord shall have the right to lease any other space controlled by Landlord first, and (c) any proposed tenant shall meet all of Landlord’s leasing criteria. For the purpose of such reletting Landlord is authorized to make any repairs, changes, alterations, or additions in or to the Premises to put the Premises in the condition required by Tenant under this Lease. If the Premises are not relet, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rental reserved in this Lease for such period or periods as such becomes due, plus the cost of recovering possession of the Premises (including attorneys’ fees and costs

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of suit), the unpaid Base Rent and other amounts accrued hereunder at the time of repossession, and the reasonable costs incurred in any attempt by Landlord to relet the Premises. If the Premises are relet and a sufficient sum shall not be realized from such reletting [after first deducting therefrom, for retention by Landlord, the unpaid Base Rent and other amounts accrued hereunder at the time of reletting, the cost of recovering possession (including attorneys’ fees and costs of suit), all of the costs and expense of repairs, changes, alterations, and additions, the expense of such reletting (including without limitation brokerage fees and leasing commissions) and the cost of collection of the rent accruing therefrom] to satisfy the rent provided for in this Lease to be paid, then Tenant shall pay any such deficiency as it comes due. Tenant agrees that Landlord may file suit to recover any sums falling due from time to time. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect in writing to terminate this Lease for such previous breach.

Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Landlord and Tenant, Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Tenant and Landlord further agree that forbearance or waiver by Landlord to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Landlord’s right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord’s intention to re-enter as provided for in any statute, or to institute legal proceedings to that end, and also waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. The terms “enter,” “re-enter,” “entry” or “re-entry,” as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Landlord in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Promises). Landlord shall not be liable, nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s failure to relet the Premises, provided Landlord uses reasonable efforts as provided above, or collect rent due in respect of such reletting.

25.           Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder unless any representation or warranty of Landlord proves false in any material respect or Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). All obligations of Landlord hereunder shall be construed as covenants not conditions; and except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for Landlord’s default. Notwithstanding anything to the contrary contained herein, if a default by Landlord shall occur, Tenant may pursue any legal or equitable remedies, including without limitation termination of this Lease. All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term “Landlord” in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Lease Term upon each new owner for the duration of such owner’s ownership. Any liability of Landlord under this Lease shall be limited solely to its interest in the Project, and in no event shall any personal liability be asserted against Landlord in connection with this Lease nor shall any recourse be had to any other property or assets of Landlord.

26.           Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

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27.           Subordination. This Lease and Tenant’s interest and rights hereunder are and shall be subject and subordinate at all times to the lien of any first mortgage, now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant. Tenant agrees, at the election of the holder of any such mortgage, to attorn to any such holder. Tenant agrees upon demand to execute, acknowledge and deliver such instruments, confirming such subordination and such instruments of attornment as shall be requested by any such holder. Notwithstanding the foregoing, any such holder may at any time subordinate its mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution, delivery or recording and in that event such holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such mortgage and had been assigned to such holder. The term “mortgage” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the “holder” of a mortgage shall be deemed to include the beneficiary under a deed of trust. Landlord represents to Tenant that as of the date hereof the Building is not subject to or encumbered by a mortgage.

Notwithstanding the preceding provisions of this Paragraph 27, this Lease and Tenant’s interest in the Premises shall not be subordinate to any future mortgage or deed of trust on the Project, and Tenant shall not be obligated to execute an instrument subordinating this Lease or Tenant’s interest in the Premises to any future mortgage or deed of trust on the Project, unless concurrently with such subordination the holder of such mortgage or deed of trust agrees in such instrument of subordination not to disturb Tenant’s possession of the Premises (so long as no default exists under the Lease) in the event such holder acquires title to the Premises through foreclosure, deed in lieu of foreclosure or otherwise.

28.           Mechanic’s Liens. Tenant has no express or implied authority to create or place any lien or encumbrance of any kind upon, or in any manner to bind the interest of Landlord or Tenant in, the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises at the request of Tenant and that it will save and hold Landlord harmless from all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the interest of Landlord in the Premises or under this Lease. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises and cause such lien or encumbrance to be discharged within 30 days of the filing or recording thereof; provided, however, Tenant may contest such liens or encumbrances as long as such contest prevents foreclosure of the lien or encumbrance and Tenant causes such lien or encumbrance to be bonded or insured over in a manner satisfactory to Landlord within such 30 day period.

29.           Estoppel Certificates. Tenant agrees, from time to time, within 10 days after request of Landlord, to execute and deliver to Landlord, or Landlord’s designee, any estoppel certificate requested by Landlord, stating that this Lease is in full force and effect, the date to which rent has been paid, that Landlord is not in default hereunder (or specifying in detail the nature of Landlord’s default), the termination date of this Lease and such other matters pertaining to this Lease as may be requested by Landlord. Tenant’s obligation to furnish each estoppel certificate in a timely fashion is a material inducement for Landlord’s execution of this Lease. No cure or grace period provided in this Lease shall apply to Tenant’s obligations to timely deliver an estoppel certificate.

30.           Environmental Requirements. Except for Hazardous Material contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes, and as provided in Addendum 8, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises or transport, store, use, generate, manufacture or release any Hazardous Material in or about the Premises without Landlord’s prior written consent. Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements and shall remediate in a manner satisfactory to Landlord, but in no event to a condition which exceeds the condition prior to such release, any Hazardous Materials released on or from the Project by Tenant, its agents, employees, contractors, subtenants or invitees. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant’s transportation, storage, use, generation,

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manufacture or release of Hazardous Materials on the Premises. The term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any governmental authority or agency regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. The term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Project and loss of rental income from the Project), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys’ fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the property or disturbed in breach of the requirements of this Paragraph 30, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of hazardous Materials for which Tenant is obligated to remediate as provided above or any other breach of the requirements under this Paragraph 30 by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such noncompliance. The obligations of Tenant under this Paragraph 30 shall survive any termination of this Lease.

Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant’s compliance with Environmental Requirements, its obligations under this Paragraph 30, or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord’s prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant’s operations. Such inspections and tests shall be conducted at Landlord’s expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant.

Landlord represents to Tenant that to the best of Landlord’s current, actual knowledge that there are no Hazardous Materials in reportable quantities on the Project and that there have not been any Hazardous Materials in reportable quantities on the Project, and Landlord has not violated any Environmental Requirements pertaining to the Project. The phrase “current, actual knowledge of Landlord” shall mean and refer only to the best of the current, actual knowledge of the officers of Landlord having direct, operational responsibility for the Project, with the express limitations and qualifications that the knowledge of any contractor or consultant shall not be imputed to Landlord, and none of such officers has made any special investigation or inquiry, and none of such officers has any duty or obligation of diligent investigation or inquiry, or any other duty or obligation, to acquire or to attempt to acquire information beyond or in addition to the current, actual knowledge of such persons.

Notwithstanding anything to the contrary in this Paragraph 30, Tenant shall have no liability of any kind to Landlord as to Hazardous Materials on the Premises caused or permitted by (i) Landlord, its agents, employees, contractors or invitees; or (ii) any other tenants in the Project or their agents, employees, contractors, subtenants, assignees or invitees; or (iii) any other person or entity located outside of the Premises or the Project.

If Hazardous Materials are hereafter discovered on the Premises, and the presence of such Hazardous Materials is not the result of Tenant’s use of the Premises or any act or omission of Tenant or its agents, employees, contractors, subtenants or invitees, and the presence of such Hazardous Materials results in any contamination, damages, or injury to the Premises that materially and adversely affects Tenant’s occupancy or use of the Premises or human health, Landlord shall promptly take all actions at its sole expense as are necessary to

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remediate such Hazardous Materials and as may be required by the Environmental Requirements. Actual or threatened action or litigation by any governmental authority is not a condition prerequisite to Landlord’s obligations under this paragraph. Within thirty (30) days after notification from Tenant supported by reasonable documentation setting forth such presence or release of Hazardous Materials, and after Landlord has been given a reasonable period of time after such thirty (30) day period to conduct its own investigation to confirm such presence or release of Hazardous Materials, Landlord shall commence to remediate such Hazardous Materials within one hundred eighty (180) days after the completion of Landlord’s investigation and thereafter diligently prosecute such remediation to completion. If Landlord commences remediation pursuant to this paragraph, the Base Rent and Operating Expenses shall be equitably adjusted if and to the extent and during the period the Premises are unsuitable for Tenant’s business. Notwithstanding anything herein to the contrary, if Landlord obtains a letter from the appropriate governmental authority that no further remediation is required Landlord’s obligation to remediate as provided in this paragraph shall be null and void.

31.           Rules and Regulations. Tenant shall, at all times during the Lease Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project, provided such rules and regulations do not contradict Tenant’s rights under this Lease and do not interfere with Tenant’s use of the Premises as provided in this Lease. The current rules and regulations are attached hereto as Exhibit B. In the event of any conflict between said rules and regulations and other provisions of this Lease, the other terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project.

32.           Security Service. Tenant acknowledges and agrees that, while Landlord may patrol the Project, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.

33.           Force Majeure. Except for monetary obligations, neither Landlord nor Tenant shall be held responsible for delays in the performance of its obligations hereunder when caused by strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of Landlord or Tenant, as the case may be (“Force Majeure”).

34.           Entire Agreement. This Lease (including all addenda and exhibits) constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof. No representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior agreements, promises, negotiations, or representations are superseded by this Lease. This Lease may not be amended except by an instrument in writing signed by both parties hereto.

35.           Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.

36.           Brokers. Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction and that no broker, agent or other person brought about this transaction, other than the broker, if any, set forth on the first page of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction. Landlord hereby acknowledges and agrees that the broker referenced on first page of this Lease shall be entitled to a leasing commission from Landlord by virtue of this Lease, which leasing commission shall be deemed earned and shall be paid by Landlord to said broker in accordance with, and subject to the terms of, a separate written agreement.

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37.           Miscellaneous.(a) Any payments or charges due from Tenant to Landlord hereunder shall be considered rent for all purposes of this Lease.

(b)           If and when included within the term “Tenant,” as used in this instrument, there is more than one person, firm or corporation, each shall be jointly and severally liable for the obligations of Tenant,

(c)           All notices required or permitted to be given under this Lease shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by a reputable national overnight courier service, postage prepaid, or by hand delivery addressed to the parties at their addresses below, and with a copy sent to Landlord at 4545 Airport Way, Denver, Colorado 80239. Either party may by notice given aforesaid change its address for all subsequent notices. Except where otherwise expressly provided to the contrary, notice shall be deemed given upon delivery.

(d)           Except as otherwise expressly provided in this Lease, whenever the Lease requires an approval, consent, designation, determination, selection or judgment by either Landlord or Tenant, such approval, consent, designation, determination, selection or judgment and any conditions imposed thereby shall be reasonable and shall not be unreasonably withheld or delayed and, in exercising any right to remedy hereunder, each party shall at all times act reasonably and in good faith.

(e)           At Landlord’s request from time to time Tenant shall furnish Landlord with true and complete copies of its most recent annual financial statements prepared by Tenant or Tenant’s accountants. Such requirement shall be met provided Tenant’s financials are available via public record.

(f)           Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.

(g)           The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto.

(h)           The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

(i)           Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

(i)           Any amount not paid by Tenant within 30 days after its due date in accordance with the terms of this Lease shall bear interest from such due date until paid in full at the lesser of the highest rate permitted by applicable law or 12 percent per year. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.

(k)           Construction and interpretation of this Lease shall be governed by the laws of the state in which the Project is located, excluding any principles of conflicts of laws.

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(l)           Time is of the essence as to the performance of the parties’ obligations under this Lease.

(m)           All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. In the event of any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.

(n)           In the event either party hereto initiates litigation to enforce the terms and provisions of this Lease, the non-prevailing party in such action shall reimburse the prevailing party for its reasonable attorney’s fees, filing fees, and court costs.

38.           Counterparts. This Lease may be executed simultaneously in two or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same Lease. Landlord and Tenant agree that the delivery of an executed copy of this Lease by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Lease had been delivered; provided Landlord and Tenant agree to promptly send original copies of this Lease following any delivery by facsimile.

39.           Limitation of Liability of Trustees, Shareholders, and Officers of ProLogis. Any obligation or liability whatsoever of ProLogis, a Maryland real estate investment trust, which may arise at any time under this Lease or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the enforcement thereof be had to the property of, its trustees, directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

TENANT:	LANDLORD:
United Natural Foods, Inc.	PROLOGIS, a Maryland real estate investment trust
By:      /s/ Mark E. Shamber	By:      /s/ Jeremy D. Giles
Name: Mark E. Shamber	Name: Jeremy D. Giles
Title:   SVP, CFO	Title:   Senior Vice President
Address:	Address:
2100 Danieldale Road	2310 LBJ Freeway
-	Suite 200
Lancaster, TX 75134	Dallas, TX 75234

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ADDENDUM 1

BASE RENT ADJUSTMENTS

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED  9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc.

Base Rent shall equal the following amounts for the respective periods set forth below:

	Period		Monthly Base Rent
Month 1	through	Month 5	$0.00*
Month 6	through	Month 10	$73,733.75*
Month 11	through	Month 65	$122,889.58
Month 66	through	Month 125	$132,720.25
*During Months 1 – 10, Tenant to pay 59.98 % of the Operating Expenses.

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ADDENDUM 2

HVAC MAINTENANCE CONTRACT

ATTACHED TO AND A PART OFTHE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc.

Paragraph 11, captioned “TENANT REPAIRS,” is supplemented by the following:

Tenant agrees to enter into and maintain through the term of the Lease, a regularly scheduled preventative maintenance/service contract for servicing all hot water, heating and air conditioning systems and equipment within the Premises. Landlord requires a qualified HVAC contractor perform this work. A certificate must be provided to the Landlord upon occupancy of the leased Premises,

The service contract must become effective within one hundred twenty (120) days of occupancy, and service visits should be performed on a quarterly basis. Landlord suggests that Tenant send the following list to a qualified HVAC contractor to be assured that these items are included in the maintenance contract:

1.           Adjust belt tension;

2.           Lubricate all moving parts, as necessary;

3.           Inspect and adjust all temperature and safety controls;

4.           Check refrigeration system for leaks and operation;

5.           Check refrigeration system for moisture;

6.           Inspect compressor oil level and crank case heaters;

7.           Check head pressure, suction pressure and oil pressure;

8.           Inspect air filters and replace when necessary;

9.           Check space conditions;

10.         Check condensate drains and drain pans and clean, if necessary;

11.         Inspect and adjust all valves;

12.         Check and adjust dampers;

13.         Run machine through complete cycle.

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ADDENDUM 3

MOVE-OUT CONDITIONS

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc.

Per Paragraph 21, Tenant is obligated to check and address prior to move-out of the Premises the following items. Landlord expects to receive the Premises in the condition received by Tenant and maintained in accordance with the Lease, except for normal wear and tear. Nothing contained herein shall be interpreted to require Tenant to surrender the Premises in a condition which exceeds the condition existing as of the date Tenant first took possession of the Premises. The following list is designed to assist Tenant in the move-out procedures but is not intended to be all inclusive.

1. All lighting is to be placed into good working order. This includes replacement of bulbs, ballasts, and lenses as needed.

2. All truck doors and dock levelers should be serviced and placed in good operating order. This would include the necessary replacement of any dented truck door panels and adjustment of door tension to insure proper operation. All door panels which are replaced need to be painted to match the Building standard.

3. All structural steel columns in the warehouse and office should be inspected for damage. Repairs of this nature should be pre-approved by the Landlord prior to implementation.

4. Heating/air-conditioning systems should be placed in good working order, including the necessary replacement of any parts to return the unit to a well maintained condition. This includes warehouse heaters and exhaust fans. Upon move-out, Landlord will have an exit inspection performed by a certified mechanical contractor to determine the condition.

5. All holes in the sheet rock walls should be repaired prior to move-out.

6. The carpets and vinyl tiles should be in a clean condition and should not have any holes or chips in them. Landlord will accept normal wear on these items provided they appear to be in a maintained condition.

7. Facilities should be returned in a clean condition which would include cleaning of the coffee bar, restroom areas, windows, and other portions of the space.

8. The warehouse should be in broom clean condition with all inventory and racking removed. There should be no protrusion of anchors from the warehouse floor and all holes should be appropriately patched. If machinery/equipment is removed, the electrical lines should be properly terminated at the nearest junction box.

9. All exterior windows with cracks or breakage should be replaced.

10. The Tenant shall provide keys for all locks on the Premises, including front doors, rear doors, and interior doors.

11. Intentionally Omitted.

12. All electrical systems should be left in a safe condition that conforms to code. Bare wires and dangerous installations should be corrected prior to move-out.

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13. All plumbing fixtures should be in good working order, including the water heater. Faucets and toilets should not leak.

14. All dock bumpers must be left in place and well secured.

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ADDENDUM 4

RIGHT OF FIRST REFUSAL TO PURCHASE

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc,

Provided that as of the date of the giving of Landlord’s Notice, (x) Tenant is the Tenant originally named herein, (y) Tenant occupies all of the Premises originally demised under this Lease and any premises added to the Premises, and (z)no Event of Default or event which but for the passage of time or the giving of notice, or both, would constitute an Event of Default has occurred and is continuing, then subject to and in accordance with the terms of this Addendum, if at any time during the initial Lease Term Landlord intends to enter into a purchase agreement (the “Proposed Sale”) for the Building with anyone (a “Proposed Purchaser”) (subject to the Excluded Transaction or Foreclosure Transfer as described below), Landlord shall first offer to Tenant in writing (“Landlord’s Notice”) the right to purchase the Building upon all monetary terms of the Proposed Sale. Tenant shall exercise this Right of First Refusal to Purchase by delivering written notice (“Purchase Notice”) to Landlord no later than ten (10) business days after receipt of Landlord’s notice. Time is of the essence with respect to the giving of Tenant’s Purchase Notice. If Tenant declines to purchase the Building in accordance with the terms of this Addendum, except as provided for below, Tenant shall be deemed to have irrevocably waived all further rights under this Addendum, and Landlord shall be free to sell the Building to any other party(s), including on terms which may be less favorable to Landlord than those set forth in Landlord’s Notice.

(b)           The Purchase Price shall be set forth in Landlord’s Notice to Tenant, payable in immediately available funds at closing. The intent of the parties is that the Purchase Price shall be absolutely net of commissions to Landlord, with the sole exception being that Landlord shall pay its attorneys’ fees.

(c)           The Closing shall be conducted through an escrow established at a title company acceptable to both Landlord and Tenant. All deliveries shall be deposited in escrow and all closing deliveries and disbursements shall be made through the escrow. The Closing shall occur no later than 120 days following the exercise of the Right of First Refusal to Purchase.

(d)           For a period of 30 days after the date of Tenant’s Purchase Notice to Landlord (“Inspection Period”), Tenant shall be entitled to inspect the Building, conduct title examination and review leases, operating agreements and other materials relating to the Building (“Inspections”). Tenant shall indemnify and defend Landlord for any claim, damage or liability arising out of Tenant’s and its agent’s and contractor’s inspection. Tenant may revoke its election to exercise the Right of First Refusal to Purchase by notice at the expiration of the Inspection Period if Tenant is not satisfied with any aspect of the Building or the title, in which case this Lease shall continue in full force and effect.

(e)           Landlord shall convey to Tenant fee simple title to the Building by special warranty deed (warranting title by, through, or under Landlord, but not otherwise) subject only to all matters of record and those matters which a correct survey would show but free and clear of any liens or any other exceptions created by, under, or through Landlord. Landlord shall remove any liens or any other exceptions created by, under, or through Landlord. Tenant shall have the absolute right to approve title to the Building, and if title is not satisfactory, Tenant may revoke its election to exercise the Right of First Refusal to Purchase by giving notice to Landlord (x) within the Inspection Period in Paragraph (d) above and, (y) with respect to any title exceptions of which Tenant is notified after such Inspection Period but before the Closing, at any time before the Closing. Landlord shall assign to Tenant all its right, title and interest in and to all contracts, warranties, permits, approvals, and other intangible property related to the Building except for any trade name or other similar rights related to the Building, which Landlord shall retain.

(f)           Pursuant to this Lease, there should be no proration of taxes or other expenses.

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(g)           The Lease shall be terminated as of the Closing. All rent and other payments due by Tenant to Landlord under the Lease shall be prorated to the date of Closing and shall be deposited into the escrow and disbursed to Landlord at Closing. Any warranties associated with the Premises or the Building and any claims in connection therewith shall be assigned to Tenant at Closing.

(h)           Landlord makes no, and at closing Tenant shall waive in writing satisfactory to Landlord any, warranty or representation with respect to the Building (other than title to the Building as provided above) and shall release Landlord from any right or claims, known or unknown, with respect to the physical or environmental condition of the Building or the compliance of the Building with applicable law. Tenant is relying on its own inspection and review of the Building. Landlord agrees to assign to Tenant any building warranties which Landlord holds pertaining to the Building upon Closing.

(i)           Risk of loss shall remain with Landlord, subject to Tenant’s obligations under the Lease, until the Closing. If any condemnation is instituted or threatened against the Building or the Building is damaged, either party may terminate the purchase transaction, and the Lease shall remain in full force and effect.

(j)           Landlord may conduct the sale as a tax-free exchange pursuant to Section 1031 of the Internal Revenue Code. Such exchange shall be conducted through a qualified intermediary, at no cost to Tenant, and without affecting Landlord’s obligations to Tenant. Tenant shall not be required to take title to any other property in connection with a Section 1031 exchange.

(k)           Tenant’s exercise of the Right of First Refusal to Purchase is irrevocable except as provided herein. Time is of the essence.

(1)           Only the Tenant originally named herein, a Tenant Affiliate, or entity resulting from a Permitted Transfer may exercise this Right of First Refusal to Purchase. The Right of First Refusal to Purchase is not assignable and shall terminate automatically upon any termination of the Lease other than as a result of default by Landlord. Further, no such right is exercisable if as of the date of exercised of the right or the Closing, the Lease has terminated or an Event of Default or event (“Potential Default”) which but for the passage of time or the giving of notice, or both, would constitute an Event of Default has occurred and is continuing.

(m)           Notwithstanding anything contained herein to the contrary, Tenant agrees and understands that Tenant’s Right of First Refusal shall not be effective and shall not be enforceable with respect to any of the following transactions (each an “Excluded Transaction”) and that this Right of First Refusal to Purchase shall only be effective as to the sale of the Building alone, as a single asset sale, and shall not be in effect for any sale of the Building which includes other assets of Landlord or its affiliates: (a) sales of the Building or Project to a related entity, (b) a sale which includes assets beyond the Building only or a sale of all or substantially all of Landlord’s assets or its shares; (c) encumbrances of the Building; (d) any sale after Tenant has failed to timely deliver Tenant’s Purchase Notice following Tenant’s receipt of Landlord’s Notice; (e) sales of the Building to governmental entities as a result of condemnation, eminent domain, or a sale in lieu of condemnation; (f) sales in connection with a lease back of the Building by Landlord; and (g) sale to a real estate investment fund or a property fund which Landlord retains a minimal interest in. Furthermore, notwithstanding anything contained herein to the contrary, the Right of First Refusal to Purchase as provided herein shall not be effective or enforceable with respect to any transfer of the Building to “holder” as a result of a foreclosure or deed-in-lieu of foreclosure (“Foreclosure Transfer”). Tenant agrees and understands that in the event of an Excluded Transaction or a Foreclosure Transfer, this Right of First Refusal to Purchase shall be automatically deemed null and void and of no further force or effect upon such transaction.

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ADDENDUM 5

OPTION TO SURRENDER

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods. Inc.

(a)           The following terms shall have the following meanings:

(i)           The “Surrender Premises 1” shall mean the 118,030 rentable square feet of the Building as shown on Exhibit A as ‘‘Surrender Premises 1”.

(ii)           The “Surrender Premises 2” shall mean the 236,060 rentable square feet of the Building as shown on Exhibit A as “Surrender Premises 2”.

(iii)          The “Surrender Effective Date” shall mean December 31, 2010.

(b)           Provided that as of the date Tenant exercises its rights hereunder, (x) Tenant is the Tenant originally named herein, and (y) no Event of Default or event which but for the passage of time or the giving of notice, or both, would constitute an Event of Default has occurred and is continuing, Tenant shall have the option to surrender either Surrender Premises 1 or Surrender Premises 2 commencing on the Surrender Effective Date in accordance with this Addendum.

(c)           If Tenant desires to exercise its option to surrender either the Surrender Premises 1 or the Surrender Premises 2 as provided above, Tenant must deliver written notice (“Surrender Notice”) of such exercise to Landlord no later than sixty (60) days prior to the Surrender Effective Date, which notice shall identify whether Tenant is electing to surrender either the Surrender Premises 1 or the Surrender Premises 2. For the purpose of this Addendum, the term “Surrender Premises”, as hereinafter used, shall mean either Surrender Premises 1 or Surrender Premises 2 as such is elected by Tenant in the Surrender Notice. Time shall be of the essence with respect to the giving of the Surrender Notice. IfTenant does not deliver the Surrender Notice by such date, Tenant’s rights under this Addendum shall be null and void

(d)           If Tenant exercises its right to surrender the Surrender Premises as provided herein, effective on the Surrender Effective Date the term with respect to the Surrendered Space shall be reduced so that it will expire on the Surrender Effective Date, and the Tenant hereby agrees that it shall surrender and deliver up vacant possession of the Surrender Premises to the Landlord on the Surrender Effective Date in accordance with the terms of the Lease, and shall indemnify Landlord against any claim by any other party except Landlord, to be entitled to possession of any part of the Surrender Premises. The respective rights and obligations of Landlord and Tenant under the Lease in respect of the Surrender Premises shall be preserved and shall survive the surrender of the Surrender Premises as to matters arising or occurring prior to the Surrender Effective Date, but no such rights or obligations will arise or accrue to either of them under such lease after the Surrender Effective Date.

(e)           In the event Tenant timely delivers the Surrender Notice and elects to surrender the Surrender Premises 1 then effective on the Surrender Effective Date Tenant’s Proportionate Share of the Building shall be amended to 79.99% and Tenant’s Proportionate Share of the Project shall be amended to 79.99%, and in the event Tenant elects to surrender the Surrender Premises 2 then effective on the Surrender Effective Date Tenant’s Proportionate Share of the Building shall be amended to 59.98% and Tenant’s Proportionate Share of the Project shall be amended to 59.98%.

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In the event Tenant timely delivers the Surrender Notice and elects to surrender the Surrender Premises 1 then effective on the Surrender Effective Date the Base Rent due and payable under this Lease for the remainder of the initial Lease Term shall be as follows during the applicable periods:

Month 11	through	Month 65	$98,300.00
Month 66	through	Month 125	$ 106,164.00

In the event Tenant timely delivers the Surrender Notice and elects to surrender the Surrender Premises 2 then effective on the Surrender Effective Date the Base Rent due and payable under this Lease for the remainder of the initial Lease Term shall be as follows during the applicable periods:

Month 11	through	Month 65	$73,733.75
Month 66	through	Month 125	$79,607.25

(f)           In the event Tenant exercises its option to surrender as provided in this Addendum 5, Landlord, at Landlord’s expense, shall have the obligation to construct a demising wall between the Premises and the surrendered portion of the Premises and separate the utilities for such areas of the Building prior to Landlord delivering possession of the Surrender Premises 1 or the Surrender Premises 2 (as applicable) to a third-party tenant. Provided, notwithstanding the foregoing to the contrary, Tenant agrees and understands that Landlord shall have no obligation to construct such demising wall or separate the utilities until such time that is immediately prior to the time Landlord delivers possession of such space to a third-party tenant. From the Surrender Effective Date until the date Landlord separates the utilities as provided above, Tenant shall be responsible for Tenant’s share of such jointly metered utilities, as reasonably determined by Landlord until such utilities services are separated, which amounts shall be payable by Tenant no later than thirty (30) days following Tenant’s receipt of an invoice for such amount.

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ADDENDUM 6

TWO RENEWAL OPTIONS AT FIXED RATE

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc.

(a)           Provided that as of the time of the giving of the First Extension Notice and the Commencement Date of the First Extension Term, (x) Tenant is the Tenant originally named herein, (y) Tenant actually occupies all of the Premises initially demised under this Lease and any space added to the Premises, and (z) no Event of Default exists or  would exist but for the passage of time or the giving of notice, or both; then Tenant shall have the right to extend the Lease Term for an additional term of five (5) years (such additional term is hereinafter called the “First Extension  Term”) commencing on the day following the expiration of the Lease Term (hereinafter referred to as the “Commencement Date of the First Extension Term”). Tenant shall give Landlord notice (hereinafter called the “First Extension Notice”) of its election to extend the term of the Lease Term at least 6 months prior to the scheduled expiration date of the Lease Term.

(b)           Provided that as of the time of the giving of the Second Extension Notice and the Commencement Date of the Second Extension Term, (x) Tenant is the Tenant originally named herein, (y) Tenant actually occupies all of the Premises initially demised under this Lease and any space added to the Premises, and (z) no Event of Default exists or would exist but for the passage of time or the giving of notice, or both and provided Tenant has exercised its option for the First Extension Term; then Tenant shall have the right to extend the Lease Term for an additional term of five (5) years (such additional tern is hereinafter called the “Second Extension Term”) commencing on the day following the expiration of the First Extension Term (hereinafter referred to as the “Commencement Date of the Second Extension Term”). Tenant shall give Landlord notice (hereinafter called the “Second Extension Notice”) of its election to extend the term of the Lease Term at least 6 months.

(c)           The Base Rent payable by Tenant to Landlord during the First Extension Term shall be $3.15 per rentable square foot of the Premises.

(d)           The Base Rent payable by Tenant to Landlord during the Second Extension Term shall be $3.60 per rentable square foot of the Premises.

(e)           The determination of Base Rent does not reduce the Tenant’s obligation to pay or reimburse Landlord for operating expenses and other reimbursable items as set Forth in the Lease, and Tenant shall reimburse and pay Landlord as set forth in the Lease with respect to such Operating Expenses and other items with respect to the Premises during the First Extension Term and Second Extension Term without regard to any cap on such expenses set forth in the Lease.

(f)           Except for the Base Rent as determined above, Tenant’s occupancy of the Premises during the First Extension Term and the Second Extension Term shall be on the same terms and conditions as are in effect immediately prior to the expiration of the initial Lease Term or the First Extension Term; provided, however, Tenant shall have no further right to any allowances, credits or abatements or any options to expand, contract, renew or extend the Lease.

(g)           If Tenant does not give the First Extension Notice within the period set forth in paragraph (a) above, Tenant’s right to extend the Lease Term for the First Extension Term and the Second Extension Term shall automatically terminate. If Tenant does not give the Second Extension Notice within the period set forth in paragraph (b) above, Tenant’s right to extend the Lease Term for the Second Extension Term shall automatically terminate. Time is of the essence as to the giving of the First Extension Notice and Second Extension Notice.

(h)           Landlord shall have no obligation to refurbish or otherwise improve the Premises for the First Extension Term or the Second Extension Term. The Premises shall be tendered on the Commencement Date of the First Extension Term and Second Extension Term in “as-is” condition.

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(i)           If the Lease is extended for either the First Extension Term or Second Extension Term, then Landlord shall prepare and Tenant shall execute an amendment to the Lease confirming the extension of the Lease Term and the other provisions applicable thereto (the “Amendment”).

(j)           If Tenant exercises its right to extend the term of the Lease for the First Extension Term or Second Extension Term pursuant to this Addendum, the term “Lease Term” as used in the Lease, shall be construed to include, when practicable, the First Extension Term or Second Extension Term, as applicable, except as provided in (f) above.

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ADDENDUM 7

STORAGE AND USE OF PERMITTED HAZARDOUS MATERIALS

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED 9-30-09, BETWEEN

ProLogis

and

United Natural Foods, Inc.

Tenant has requested Landlord’s consent to use the Hazardous Materials listed below in its business at the Premises (the “Permitted Hazardous Materials”). Subject to the conditions set forth herein, Landlord hereby consents  to the Use (hereinafter defined) of the Permitted Hazardous Materials. Any Permitted Hazardous Materials on the Premises will be generated, used, received, maintained, treated, stored, or disposed in a manner consistent with good engineering practice and in compliance with all Environmental Requirements.

Permitted Hazardous Materials (with approximate daily amounts):
Lead Antimony	250,000 lbs.
Anhydrous Ammonia	7,000 lbs.
Carbon Dioxide (solid)	6,000 lbs.
Diesel Fuel	12,000 gals.
Sulfuric Acid (electrolyte solution)	12,500 gals.
Petroleum Distillate (gear oil)	5 gals.
Petroleum Distillate (power steering fluid)	1 gal.
Petroleum Distillate (transmission fluid)	2 gals.
Petroleum Distillate (motor oil)	5 gals.
Ethelyne Glycol	5 gals.

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EXHIBIT A

SITE PLAN AND SCOPE OF WORK

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EXHIBIT B

RULES AND REGULATIONS

1. The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or its agents, or used by them for any purpose other than ingress and egress to and from the Premises.

2. Except as expressly provided in the Lease or otherwise approved in writing by Landlord, Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the Project.

3. Except for seeing-eye dogs, no animals shall be allowed in the offices, halls, or corridors in the Project.

4. Intentionally Omitted,

5. If Tenant desires telegraphic, telephonic or other electric connections in the Premises, Landlord or its agent will direct the electrician as to where and how the wires may be introduced; and, without such direction, no boring or cutting of wires will be permitted. Any such installation or connection shall be made at Tenant’s expense.

6. Tenant shall not install or operate any steam engine or boiler in the Premises, except as specifically approved in the Lease or otherwise approved by Landlord in writing..

7. Parking any type of recreational vehicles is specifically prohibited on or about the Project. In the event that a vehicle is disabled, it shall be removed within 48 hours. There shall be no “For Sale” or other advertising signs on or about any parked vehicle.

8. Tenant shall maintain the Premises free from rodents, insects and other pests.

9. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of the Rules and Regulations of the Project.

10. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitors or any other employee or person.

11. Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service equipment affecting the Premises,

12. Tenant shall not permit dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Premises except for normal human waste.

13. All moveable trash receptacles provided by the trash disposal firm for the Premises must be kept in the trash enclosure areas, if any, provided for that purpose.

14. No auction, public or private, will be permitted on the Premises or the Project.

15. No awnings shall be placed over the windows in the Premises except with the prior written consent of Landlord.

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16. The Premises shall not be used for lodging, sleeping or cooking (except for normal break room cooking) or for any immoral or illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall be operated in the Premises.

17. Tenant shall ascertain from Landlord the maximum amount of electrical current which can safely be used in the Premises, taking into account the capacity of the electrical wiring in the Project and the Premises and the needs of other tenants, and shall not use more than such safe capacity. Landlord’s consent to the installation of electric equipment shall not relieve Tenant from the obligation not to use more electricity than such safe capacity.

18. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.

19. Tenant shall not install or operate on the Premises any machinery or mechanical devices of a nature not directly related to Tenant’s ordinary use of the Premises and shall keep all such machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.

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EXHIBIT C

PARKING PLAN

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