UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period from _________________ to ______________________.
Commission file number 1-09100
Gottschalks Inc.
(Exact name of Registrant as specified in its charter)
Delaware
77-0159791
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) (NO.)
7 River Park Place East, Fresno, California
93720
(Address of principal executive offices) (Zip
code)
Registrant's telephone number, including area code (209) 434-8000
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 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 X No
The number of shares of the Registrant's common stock outstanding as of October
28, 1995 was 10,416,520.
<PAGE>
INDEX
GOTTSCHALKS INC. AND SUBSIDIARIES
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed consolidated balance sheets -
October 28, 1995 and January 28, 1995 2
Consolidated statements of operations -
thirteen weeks and thirty-nine weeks ended
October 28, 1995 and October 29, 1994 3
Condensed consolidated statements of cash flows -
thirty-nine weeks ended October 28, 1995 and
October 29, 1994 4
Notes to condensed consolidated financial
statements - thirteen weeks and thirty-nine
weeks ended October 28, 1995 and October 29, 1994 5 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item I. GOTTSCHALKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 1)
(In thousands of dollars)
October 28, 1995 January 28,1995
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,529 $ 3,156
Cash held by GCC Trust 1,191 2,365
Receivables - net (Note 2) 19,861 30,436
Merchandise inventories (Note 3) 123,601 80,678
Other 18,302 10,066
Total current assets 167,484 126,701
PROPERTY AND EQUIPMENT (Note 6) 126,432 129,626
Less accumulated depreciation
and amortization 38,656 35,817
87,776 93,809
OTHER LONG-TERM ASSETS 11,412 12,843
$266,672 $233,353
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving lines of credit
(Note 4) $ 53,118 $ 17,844
Bank overdraft 12,691 9,853
Trade accounts payable 34,349 25,179
Accrued expenses 14,082 23,904
Accrued payroll and related
liabilities 4,887 5,267
Short-term obligation
(paid March 1995) 0 1,600
Current portion of long-term
obligations (Note 4) 4,895 5,154
Total current liabilities 124,022 88,801
LONG-TERM OBLIGATIONS (less current portion):
Notes and bonds payable (Note 4) 25,960 23,721
Capitalized lease obligations 9,401 9,951
35,361 33,672
DEFERRED INCOME (Notes 5 and 6) 20,381 16,366
DEFERRED LEASE PAYMENTS AND OTHER 11,623 10,937
CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Common stock 104 104
Additional paid-in capital 55,953 55,964
Retained earnings 19,228 27,509
75,285 83,577
$266,672 $233,353
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
GOTTSCHALKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED - Note 1)
(In thousands of dollars, except share data)
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $86,066 $78,835 $255,884 $229,571
Service charges
& other income 2,616 2,265 8,383 6,979
88,682 81,100 264,267 236,550
COSTS & EXPENSES:
Cost of sales 58,634 52,148 178,409 155,770
Selling, general
& administrative
expenses 30,061 26,133 85,237 76,053
Depreciation &
amortization 2,156 1,368 5,962 4,126
Interest expense 2,932 2,310 8,015 7,212
Provision for unusual
items (Note 7) 3,833
93,783 81,959 277,623 246,994
LOSS BEFORE INCOME
TAX BENEFIT (5,101) (859) (13,356) (10,444)
Income tax benefit (1,937) (291) (5,075) (3,550)
NET LOSS $(3,164) $ (568) $ (8,281) $ (6,894)
Net loss per common
share $ (.30) $ (.05) $ (.80) $ (.66)
Weighted average
number of common
shares outstanding 10,416 10,417 10,416 10,415
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
GOTTSCHALKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - NOTE 1)
(In thousands of dollars)
Thirty-Nine Weeks
Ended
October 28, October 29,
1995 1994
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (8,281) $ (6,894)
Adjustments to reconcile net
loss to net cash used in
operating activities (26,844) (16,211)
Net cash used in operating
activities (35,125) (23,105)
INVESTING ACTIVITIES:
Purchases of property and
equipment (27,970) (2,429)
Reimbursements received for
purchases of property and
equipment 14,976
Proceeds from sale/leaseback
arrangements (Note 6) 11,600 1,469
Other 65
Net cash used in investing
activities (1,329) (960)
FINANCING ACTIVITIES:
Proceeds from issuance of Fixed
Base Certificates (Note 2) 40,000
Proceeds from revolving lines
of credit and other financings
(Note 4) 390,297 231,882
Principal payments on revolving lines
of credit and other financings
(Notes 4 & 6) (355,193) (259,202)
Bank overdraft and other 2,723 12,067
Net cash provided by financing
activities 37,827 24,747
INCREASE IN CASH 1,373 682
CASH AT BEGINNING OF YEAR 3,156 1,213
CASH AT END OF PERIOD $ 4,529 $ 1,895
</TABLE>
See notes to condensed consolidated financial statements.
GOTTSCHALKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Thirteen Weeks and Thirty-Nine Weeks Ended October 28, 1995 and October 29,
1994
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the thirteen and
thirty-nine week periods ended October 28, 1995 are not necessarily indicative
of the results that may be expected for the year ending February 3, 1996, due
to the seasonal nature of the Company's business and its LIFO inventory
valuation adjustment ("LIFO adjustment"), currently recorded only at the end
of each fiscal year (Note 3). It is suggested that these financial statements
be read in conjunction with the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended January
28, 1995.
The condensed consolidated balance sheet at January 28, 1995 has been derived
from the audited consolidated financial statements at that date. Certain
reclassifications have been made to 1994 amounts to conform with 1995
presentation.
2. RECEIVABLES SECURITIZATION PROGRAM
As described more fully in the Company's 1994 Annual Report on Form 10-K, the
Company entered into a five-and-a-half-year asset-backed securitization program
in March 1994. Under the program, the Company automatically sells, without
recourse, all of its accounts receivable arising under its private label
customer credit cards, together with rights to all collections and recoveries
on such receivables, to a wholly-owned subsidiary, Gottschalks Credit
Receivables Corporation ("GCRC") and certain of those receivables are
subsequently conveyed to a trust, Gottschalks Credit Card Master Trust ("GCC
Trust"), to be used as collateral for securities previously issued to
investors. The Company services and administers the receivables in return for
a monthly servicing fee.
In March 1994, fractional undivided ownership interests in certain of the
receivables were sold through the issuance of $40.0 million principal amount
7.35% Fixed Base Class A-1 Credit Card Certificates ("Fixed Base Certificates")
to third-party investors. Interest on the Fixed Base Certificates is earned by
the certificateholders on a monthly basis and the outstanding principal balance
is to be repaid in equal monthly installments commencing September 1998 through
September 1999, through the application of credit card receivable principal
collections during that period. The issuance of the Fixed Base Certificates was
accounted for as a sale for financial reporting purposes. Accordingly, the
$40.0 million of receivables underlying those certificates and the
corresponding obligations are excluded from the accompanying financial
statements.
In 1994, a Variable Base Class A-2 Credit Card Certificate ("Variable Base
Certificate") in the principal amount of up to $15.0 million was also issued
to Bank Hapoalim as collateral for a revolving line of credit financing
arrangement with that bank (Note 4). The issuance of the Variable Base
Certificate was accounted for as a financing transaction and, accordingly,
receivables underlying the Variable Base Certificate, totalling $7.7 million
at October 28, 1995, are included in receivables reported in the accompanying
financial statements. As of October 28, 1995, such receivables also included
$6.7 million of receivables representing GCRC's retained interest in
receivables sold in connection with the issuance of the Fixed Base Certificates
and $5.5 million of receivables and vendor claims that did not meet certain
eligibility requirements of the program.
3. MERCHANDISE INVENTORIES
Inventories, which consist of merchandise held for resale, are valued by the
retail method and are stated at last-in, first-out (LIFO) cost, which is not
in excess of market value. The Company includes in its valuation of
inventories certain indirect merchandise purchasing, handling and storage costs
in conformity with uniform capitalization ("UNICAP") rules. Current cost, which
approximates replacement cost, under the first-in, first-out (FIFO) method was
equal to the LIFO value of inventories at January 28, 1995. A valuation of
inventory under the LIFO method is presently made only at the end of each year
based on actual inventory levels and costs at that time. Since these factors
are subject to variability beyond the control of management, interim results
of operations are subject to the final year-end LIFO inventory valuation
adjustment.
4. DEBT
The Company has a revolving line of credit arrangement with Fleet Capital
Corporation ("Fleet" - formerly Shawmut Capital Corporation) which provides for
borrowings of up to $66.0 million through March 1997. Borrowings under the
line of credit are limited to 60% of eligible merchandise inventories during
the months of August 1995 through January 1996 and May 1996 through September
1996 (50% during all other months). Interest on outstanding borrowings is
charged at a rate equal to LIBOR, as determined by Fleet, plus 2.8% through
August 9, 1995 and LIBOR plus 3.4% thereafter (9.38% at October 28, 1995). The
maximum amount available for borrowings under the line of credit was $66.0
million as of October 28, 1995, of which $46.6 million was outstanding as of
that date.
The Company's revolving line of credit arrangement with Bank Hapoalim (Note 2)
provides for borrowings of up to $15.0 million through March 1997. Borrowings
under the line of credit are limited to a percentage of the outstanding
principal balance of receivables underlying the Variable Base Certificate and
therefore, the Company's borrowing capacity under the line of credit is subject
to seasonal variations that may affect the outstanding principal balance of
such receivables. Interest on outstanding borrowings on the line of credit is
charged at a rate of LIBOR, as determined by the bank, plus 1.0% (6.88% at
October 28, 1995). At October 28, 1995, $6.5 million, which was the maximum
amount available for borrowings as of that date was outstanding under the line
of credit with Bank Hapoalim.
On October 4, 1995, the Company finalized three fifteen-year mortgage loans
with Midland Commercial Funding ("Midland"), and on October 10, 1995, finalized
a fourth such mortgage loan. The mortgage loans, collectively the "Midland
loans", are collateralized by the land, buildings and leasehold improvements
of four of the Company's department stores. The $20.0 million total proceeds
from the arrangements were used to repay the $9.8 million outstanding balance
of a pre-existing long-term loan with Wells Fargo Bank, N. A., ("Wells Fargo"),
with the remaining $10.2 million used to reduce outstanding borrowings under
the Fleet line of credit and pay certain costs associated with the transaction.
Monthly principal payments on the mortgage loans are based on twenty-five year
amortization schedules and interest is charged at fixed rates ranging from
9.23% to 9.39%.
The Company also has a long-term loan facility with Heller Financial, Inc.
("Heller"), due January 1, 2002, which bears interest at a rate of 10.45% and
had an outstanding loan balance of $5.9 million at October 28, 1995 and 8.55%
Commercial Revenue Bonds, due December 1, 1995, with outstanding balances
totalling $2.7 million at October 28, 1995. The Company repaid the Commercial
Revenue Bonds upon their maturity with proceeds from a 90-day note payable to
Wells Fargo Bank in the amount of $2.7 million. The note payable, due on
March 5, 1996, is collateralized by the Company's department store in San Luis
Obispo, California and bears interest at a rate of 1/4% above the prime rate
of interest.
The Company received a total of $1.3 million during the first three quarters
of 1995 in connection with two of its fiscal 1995 store openings for the
purpose of financing fixture and equipment expenditures at those locations. The
$1.3 million is to be repaid over ten-year maturity periods at interest rates
ranging from 5.0% to 10.0%.
As described more fully in the Company's 1994 Annual Report of Form 10-K,
certain of the Company's debt agreements contain various restrictive covenants.
The Company was in compliance with all such restrictive covenants as of October
28, 1995. Management expects, however, to be in violation of certain of the
covenants applicable to the Fleet facility as of the end
of fiscal 1995. Fleet has agreed to forebear such expected violations as of
the end of fiscal 1995.
5. DEFERRED INCOME
The Company received $4.0 million in April 1995 as an incentive to enter into
a lease in connection with one of the fiscal 1995 new store openings. The
arrangement provides that in the event gross sales at that location are below
a minimum specified amount as of the end of the fifth year of the lease, the
lessor may elect to terminate the lease at that time. In such an event, the
Company would be required to repay the $4.0 million to the lessor. Management
believes the likelihood the lease will be terminated by the lessor after the
fifth year of the lease is remote. The $4.0 million received has been
recorded as
deferred income for financial reporting purposes in the accompanying financial
statements.
6. SALE AND LEASEBACK ARRANGEMENT
On June 27, 1995, the Company sold the land, building and leasehold
improvements comprising its department store in Capitola, California and
subsequently leased the department store back under a twenty-year lease with
four five-year renewal options. The lease has been accounted for as an
operating lease for financial reporting purposes. The $11.6 million proceeds
received from the sale were used to reduce the outstanding balance of the
Company's long-term loan payable to Wells Fargo by $8.0 million (Note 4), with
the remaining $3.6 million used to reduce outstanding borrowings under the
Company's line of credit arrangement with Fleet and pay certain costs
associated with the transaction. The gain associated with the sale, totalling
$416,000, has been deferred for financial reporting purposes and is being
amortized on a straight-line basis over the twenty-year lease term.
7. CONTINGENCIES AND PROVISION FOR UNUSUAL ITEMS
As described more fully in the Company's 1994 Annual Report on Form 10-K, the
provision for unusual items in the Company's Consolidated Statements of
Operations for the first three quarters of 1994 includes a provision of $3.5
million representing costs incurred in connection with an agreement to settle
the stockholder litigation previously pending against the Company and related
legal fees and other costs. The Company funded $3.0 million into an irrevocable
trust in February 1995 in accordance with the terms of the final settlement
agreement. No costs in excess of such amounts previously accrued have been
incurred.
The Company is also party to a lawsuit filed in 1992 by F&N Acquisition
Corporation ("F&N") under which F&N seeks damages arising out of the Company's
alleged breach of an oral agreement to purchase an assignment of a lease of a
former Frederick and Nelson store location in Spokane, Washington. In addition,
F&N is seeking an unspecified sum for its rejection of the next best offer to
purchase the assignment of the lease. In 1992, F&N received a partial summary
judgement against the Company under which the Company was ordered to pay F&N
damages of $3.0 million plus accrued interest from the date of the judgement.
The judgement was reversed in 1994, however, and remanded to the United States
District Court for the Western District of Washington for further proceedings.
Management's estimate of amounts that may ultimately be payable to F&N were
previously accrued in fiscal 1993 and 1992. In connection with the F&N lawsuit,
an additional complaint was filed against the Company by Sabey Corporation
("Sabey"), the owner of the mall in which the Frederick and Nelson store was
located. The F&N and Sabey lawsuits were combined in May 1995 and the lawsuits
are scheduled for trial in April 1996. Management does not believe that any
additional costs that may be incurred in connection with the previously
described lawsuits, as combined, will be material to the operating results of
the Company.
GOTTSCHALKS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Following is management's discussion and analysis of significant factors which
have affected the Company's financial position and its results of operations
for the periods presented in the accompanying condensed consolidated financial
statements.
Thirteen Weeks Ended October 28, 1995 Compared To Thirteen Weeks Ended
October 29, 1994
Results of Operations
The Company recorded a net loss of $3.2 million in the third quarter of 1995
as compared to a net loss of $568,000 in the third quarter of 1994. The
Company's results of operations in the third quarter of 1995 were negatively
impacted by lower than expected comparable store sales, a lower gross margin,
increased promotional costs and higher selling, general and administrative,
pre-opening and interest costs associated with the opening of two new stores
in the fourth quarter of 1994 and six new stores (including one replacement
store) in the first three quarters of 1995. These factors were partially offset
by increased service charge income as a percent of net sales during the period.
The following table sets forth for the periods indicated certain items from the
Company's Consolidated Statements of Operations as a percent of net sales:
<TABLE>
<CAPTION>
Third Quarter Third Quarter
1995 1994
<S> <C> <C>
Net sales 100.0% 100.0%
Service charges & other income 3.0 2.8
103.0 102.8
Costs and Expenses:
Cost of sales 68.1 66.1
Selling, general &
administrative expenses 34.9 33.1
Depreciation & amortization 2.5 1.8
Interest expense 3.4 2.9
108.9 103.9
LOSS BEFORE INCOME TAX BENEFIT (5.9) (1.1)
Income tax benefit (2.2) (0.4)
NET LOSS (3.7)% (0.7)%
</TABLE>
Net Sales
Net sales increased $7.3 million to $86.1 million in the third quarter of 1995
as compared to $78.8 million the third quarter of 1994, a 9.3% increase. This
increase reflects additional sales volume generated from the opening of eight
new Gottschalks stores (including one new larger replacement store for a pre-
existing store) since the same period of the prior year. New stores opened in
California during that period include: Oakhurst (October 1994), Sacramento
(November 1994), Auburn (February 1995), San Bernardino (April 1995), a
replacement for the Company's store in Visalia (August 1995), Watsonville
(August 1995) and Tracy (October 1995). The Company also opened its first store
in Nevada in March 1995 in Carson City.
Comparable store sales decreased by 6.7% in the third quarter of 1995. This
decrease is due, in part, to sluggish fall and winter apparel and certain
seasonal home merchandise sales resulting from unseasonably warm weather
conditions in many of the Company's market areas during the period. In
addition, intense pricing competition, including competition from two
financially troubled retailers operating in certain of the Company's market
areas, negatively impacted sales at the Company's stores in those areas.
Service Charges and Other Income
Service charges and other income increased approximately $300,000 to $2.6
million in the third quarter of 1995 as compared to $2.3 million the third
quarter of 1994, an increase of 13.0%. As a percent of net sales, service
charges and other income increased to 3.0% in the third quarter of 1995 as
compared to 2.8% in the third quarter of 1994.
Service charges associated with the Company's customer credit cards increased
approximately $500,000 to $2.5 million in the third quarter of 1995 as compared
to $2.0 million the third quarter of 1994, an increase of 25.0%. This increase
is primarily attributable to an increase to the late charge fee assessed on
delinquent customer credit accounts, effective January 1995, which resulted in
increasing late charge fees by $336,000 in the third quarter of 1995 as
compared to the third quarter of 1994. Credit sales as a percent of total sales
have also continued to improve, increasing to 44.9% in the third quarter of
1995 as compared to 42.6% in the third quarter of 1994, primarily due to
aggressive credit solicitation activities associated with new store openings.
Other income, which includes the amortization of deferred income and other
miscellaneous income and expense items, was approximately $100,000 in the third
quarter of 1995 as compared to approximately $300,000 in the third quarter of
1994, a decrease of $200,000. This decrease is primarily related to a $175,000
reserve for a general business claim.
Cost of Sales
Cost of sales increased $6.5 million to $58.6 million in the third quarter of
1995 as compared to $52.1 million the third quarter of 1994, an increase of
12.5%. The Company's gross margin percent decreased to 31.9% in the third
quarter of 1995 as compared to 33.9% in the third quarter of 1994.
This decrease in gross margin percent is primarily due higher levels of
markdowns reflecting (i) the earlier discounting of men's, womens' and junior
fall and winter apparel necessitated by the unusually warm weather conditions
as compared to the same period of the prior year; (ii) competitive pressures
in certain of the Company's market areas during the period, including pricing
policies of two financially troubled retailers; and (iii) promotional activity
related to new store openings during the period.
The Company's interim gross margin percent may not be indicative of its gross
margin percent for a full year, due to the seasonal nature of the Company's
business and its LIFO inventory valuation adjustment ("LIFO adjustment"),
currently recorded only at the end of each fiscal year. Management believes the
Company's fiscal 1995 LIFO adjustment will not materially affect its fiscal
1995 results of operations. Although the Company realized a benefit from its
fiscal 1994 LIFO adjustment, no such similar benefit can be realized in fiscal
1995 because the Company's LIFO reserve for financial reporting purposes was
eliminated as a result of its 1994 LIFO adjustment.
Management believes the Company's gross margin will continue to be pressured
both by intense competition and pricing pressures from other department and
specialty stores, discount retailers and outlet malls, and as a result of
changing consumer spending patterns. Management is continuing efforts to
implement a variety of strategies designed to counteract these pressures,
including tight controls over inventory levels, shifting inventories into more
profitable lines of business based on current trends and the implementation of
enhanced information systems and new technology as a means to reduce inventory
related costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $4.0 million to $30.1
million in the third quarter of 1995 as compared to $26.1 million in the third
quarter of 1994, an increase of 15.3%. As a percent of net sales, selling,
general and administrative expenses increased to 34.9% in the third quarter of
1995 as compared to 33.1% in the third quarter of 1994. This increase is
primarily due to lower than expected sales volume, in addition to higher
payroll and advertising costs associated with certain new stores opened since
the same period of the prior year. The Company has also experienced an
increase in building and equipment rental expense as a result of the sale and
leaseback financing of the Capitola store in June 1995 and enhanced POS
terminal and information systems equipment leased during the year.
Although the Company generally incurs higher payroll and advertising costs as
a percent of net sales in connection with its new stores, such costs generally
decline as the stores mature over a two to three year period. The Company is
continuing to implement programs on an ongoing basis designed to reduce or
control expenses associated with each operating expense category of the Company
in order to reduce the impact these higher short-term costs have on the
Company's operating results.
Depreciation and Amortization
Depreciation and amortization expense, which includes the amortization of new
store pre-opening costs, increased approximately $800,000 to $2.2 million in
the third quarter of 1995 as compared to $1.4 million in the third quarter of
1994. This increase resulted from the amortization of new store pre-opening
costs, which increased by $800,000 in the third quarter of 1995 as a result of
completing and opening eight new stores (including one replacement store) since
the same period of the prior year. Excluding the amortization of new store pre-
opening costs, depreciation and amortization expense as a percent of net sales
decreased to 1.6% in the third quarter of 1995 as compared to 1.7% in the third
quarter of 1994. This decrease was due to lower depreciation expense resulting
from the sale and leaseback of the Company's department store in Capitola,
California, in June 1995 and its mainframe computer in September 1994.
Store pre-opening costs represent certain costs associated with the opening of
new stores. Such costs are deferred and amortized generally on a straight-line
basis not to exceed a twelve month period. Management expects the amortization
of new store pre-opening costs as a percent of net sales to continue to
increase during the remainder of fiscal 1995 and during the first half of
fiscal 1996 as a result of the new stores completed and opened during the year.
Interest Expense
Interest expense, which includes the amortization of deferred financing costs,
increased approximately $600,000 to $2.9 million in the third quarter of 1995
as compared to $2.3 million in the third quarter of 1994, or 26.1%. As a
percent of net sales, interest expense increased to 3.4% in the third quarter
of 1995 as compared to 2.9% in the third quarter of 1994. The dollar increase
in interest expense resulted from an increase in the weighted-average interest
rate charged on outstanding borrowings under the Company's various lines of
credit, (9.2% in the third quarter of 1995 as compared to 7.9% in the third
quarter of 1994), increased borrowings under those lines of credit to fund
increased inventory requirements associated with new stores and additional
interest expense associated with the Midland mortgage loan (October 1995) and
Heller note payable (December 1994). These increases were partially offset by
lower interest on long-term borrowings as a result of the application of
proceeds from the Midland mortgage financing and the Capitola sale and
leaseback arrangement. ("See Liquidity and Capital Resources.")
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The
interim effective tax credit of (38.0%) for the third quarter of 1995 and
(34.0%) for the third quarter of 1994 relates to net losses incurred during
those periods and represents the Company's best estimate of the annual
effective tax rate for those fiscal years.
Thirty-Nine Weeks Ended October 28,1995 Compared To Thirty-Nine Weeks Ended
October 29, 1994
Results of Operations
The Company recorded a net loss of $8.3 million in the first three quarters of
1995 as compared to a net loss of $6.9 million in the first three quarters of
1994. The Company's operating results in the first three quarters of 1995 were
negatively impacted by lower than expected comparable store sales, a lower
gross margin, higher promotional costs and higher selling, general and
administrative, pre-opening and interest costs associated with opening two new
stores in the fourth quarter of 1994 and six new stores (including one
replacement store) in the first three quarters of 1995. These factors were
partially offset by increased service charge income.
The following table sets forth for the periods indicated certain items from the
Company's Consolidated Statements of Operations, expressed as a percent of net
sales:
<TABLE>
<CAPTION>
Three Quarters Three Quarters
1995 1994
<S> <C> <C>
Net sales 100.0% 100.0%
Service charges & other income 3.3 3.0
103.3 103.0
Costs and expenses:
Cost of sales 69.7 67.8
Selling, general & administrative
expenses 33.3 33.1
Depreciation & amortization 2.3 1.8
Interest expense 3.2 3.1
Provision for unusual items 1.7
108.5 107.5
LOSS BEFORE INCOME TAX BENEFIT (5.2) (4.5)
Income tax benefit (2.0) (1.5)
NET LOSS (3.2)% (3.0)%
</TABLE>
Net Sales
Net sales increased $26.3 million to $255.9 million in the first three quarters
of 1995 as compared to $229.6 million the first three quarters of 1994, an
increase of 11.5%. This increase reflects additional sales volume generated
from eight new Gottschalks stores (including one larger replacement store)
since the same period of the prior year.
Comparable store sales decreased by 3.7% during the first three quarters of
1995 due, in part, to unusual variances in weather conditions in many of the
Company's market areas during the period. Spring and summer apparel sales were
weak due to unusually cold and rainy weather conditions early in the spring
season, and unseasonably warm weather in the fall and winter seasons resulting
in sluggish fall and winter apparel and certain seasonal home merchandise
sales. In addition, intense pricing competition, including competition from
two financially troubled retailers operating in certain of the Company's market
areas, negatively impacted sales at the Company's stores in those areas.
Service Charges and Other Income
Service charges and other income increased $1.4 million to $8.4 million in the
first three quarters of 1995 as compared to $7.0 million the first three
quarters of 1994, an increase of 20.0%. As a percent of net sales, service
charges and other income increased to 3.3% in the first three quarters of 1995
as compared to 3.0% in the first three quarters of 1994.
Service charges associated with the Company's customer credit cards increased
approximately $1.5 million to $7.9 million in the first three quarters of 1995
as compared to $6.4 million the first three quarters of 1994, an increase of
23.4%. This increase is primarily attributable to an increase in the late
charge fee assessed on delinquent customer credit accounts, effective January
1995, which resulted in increasing late charge fees by $1.0 million in the
first three quarters of 1995 as compared to the first three quarters of 1994.
Credit sales as a percent of total sales have also continued to improve,
increasing to 45.3% in the first three quarters of 1995 as compared to 42.1%
in the first three quarters of 1994, as a result of aggressive credit
solicitation activities associated with new store openings.
Other income, which includes the amortization of deferred income and other
miscellaneous and expense items, was approximately $500,000 in the first three
quarters of 1995 as compared to approximately $600,000 in the first three
quarters of 1994, a decrease of $100,000.
Cost of Sales
Cost of sales increased $22.6 million to $178.4 million in the first three
quarters of 1995 as compared to $155.8 million the first three quarters of
1994, an increase of 14.5%. The Company's gross margin percent decreased to
30.3% in the first three quarters of 1995 as compared to 32.2% in the first
three quarters of 1994.
This decrease in gross margin percent relates primarily to an increase in
markdowns as a percent of net sales due to (i) heavy discounting of men's,
womens' and junior spring and summer apparel necessitated by unusually cold and
rainy weather conditions in the spring and unseasonably warm weather conditions
during the fall and winter selling seasons; (ii) competitive pressures in
certain of the Company's market areas during the period, including pricing
policies of two financially troubled retailers; (iii) the clearance of certain
spring and summer merchandise in connection with a modification of the
Company's merchandising strategy; and (iv) promotional activity related to new
store openings during the period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $9.1 million to $85.2
million in the first three quarters of 1995 as compared to $76.1 million in the
first three quarters of 1994, an increase of 12.0%. As a percent of net sales,
selling, general and administrative expenses increased to 33.3% in the first
three quarters of 1995 as compared to 33.1% in the first three quarters of
1994. This increase is primarily due to lower than expected sales volume, in
addition to higher payroll and advertising costs as a percent of net sales
associated with certain new stores opened since the same period of the prior
year. The Company has also experienced an increase in building and equipment
rental expense as a result of the sale and leaseback financing of the Capitola
store in June 1995 and enhanced POS terminal and information system equipment
leased during the year.
Depreciation and Amortization
Depreciation and amortization expense increased $1.9 million to $6.0 million
in the first three quarters of 1995 as compared to $4.1 million in the first
three quarters of 1994, an increase of 46.3%. This increase resulted from the
amortization of new store pre-opening costs, which increased by $1.9 million
during the first three quarters of 1995 as a result of completing and opening
eight new stores (including one replacement store) since the same period of the
prior year. This increase was partially offset by lower depreciation expense
resulting from the sale and leaseback of the Company's department store in
Capitola, California, in June 1995 and its mainframe computer in September
1994. Excluding the amortization of store pre-opening costs, depreciation and
amortization expense as a percent of net sales decreased to 1.6% in the first
three quarters of 1995 as compared to 1.8% in the first three quarters of
1994.
Interest Expense
Interest expense increased $800,000 to $8.0 million in the first three quarters
of 1995 as compared to $7.2 million in the first three quarters of 1994, an
increase of 11.1%. Because of the increase in sales volume, interest expense
as a percent of net sales increased to 3.2% of net sales in the first three
quarters of 1995 as compared to 3.1% in the first three quarters of 1994. The
dollar increase in interest expense resulted from an increase in the weighted-
average interest rate charged on outstanding borrowings under the Company's
various lines of credit, (8.77% in the first three quarters of 1995 as compared
to 7.40% in the first three quarters of 1994), increased borrowings under those
lines of credit to fund increased inventory requirements associated with new
stores and additional interest expense associated with the Midland mortgage
loan (October 1995), Heller note payable (December 1994) and Fixed Base
Certificates (March 1994). These increases were partially offset by lower
interest on long-term borrowings as a result of the application of proceeds
from the Midland mortgage financing and the Capitola sale and leaseback
arrangement. (See "Liquidity and Capital Resources.")
Provision for Unusual Items
The provision for unusual items, totalling $3.8 million in the first three
quarters of 1994, includes a provision of $3.5 million representing costs
incurred in connection with an agreement reached to settle the stockholder
litigation previously pending against the Company and related legal fees and
other costs. The Company paid all amounts due in connection with the settlement
agreement in February 1995. No additional costs in excess of such amounts
previously accrued have been incurred by the Company.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The
interim effective tax credit of (38.0%) for the first three quarters of 1995
as compared to (34.0%) for the first three quarters of 1994 relates to net
losses incurred during those periods and represents the Company's best estimate
of the annual effective tax rate for those fiscal years.
Liquidity and Capital Resources
As described more fully in the Company's 1994 Annual Report on Form 10-K and
Notes 2 and 4 to these financial statements, the Company's working capital
financing is provided for primarily under a five-and-a-half year receivables
securitization program and with borrowings under its various long-term
revolving lines of credit, which currently provide a total borrowing capacity
of up to $81.0 million. As described more fully below, in fiscal 1995, a
portion of the Company's working capital was also provided for through a $20.0
million mortgage financing effected in October 1995 and an $11.6 million sale
and leaseback arrangement finalized in June 1995. As a result of these
arrangements, the Company has no additional significant long-term assets
available as potential financing sources to the Company.
Based on current projections, management believes the Company has adequate cash
and availability under its various revolving lines of credit to meet its
liquidity needs through the end of fiscal 1995. However, under its present line
of credit arrangement, the Company's borrowing capacity under its primary line
of credit with Fleet Capital Corporation ("Fleet" - formerly Shawmut Capital
Corporation) will be reduced from 60% to 50% of eligible inventories during
certain months in fiscal 1996. Management has requested an amendment to the
Fleet facility by which the borrowing capacity under the line of credit would
be increased to 60% for three additional months during fiscal 1996. In the
event such an increase is received, management believes the Company will have
adequate availability under its lines of credit to meet its liquidity needs
throughout fiscal 1996. However, there can be no assurance that such an
amendment will occur.
The Company's various debt agreements also contain restrictive covenants. The
Company was in compliance with all such restrictive covenants as of October 28,
1995. Management expects, however, to be in violation of certain of the
restrictive covenants applicable to the Fleet facility as of the
end of fiscal 1995. Fleet has agreed to forebear such expected violations as
the end of fiscal 1995.
In addition to seeking amendments to its present line of credit, management has
implemented a variety of other strategies to enhance the Company's working
capital in the near term, including the reduction of inventory levels and
reducing the Company's operating expenses, commensurate with the trend in lower
comparable store sales. Certain inventory can be returned to vendors if not
sold during the Christmas selling season pursuant to original purchase order
terms.
The Company's primary revolving line of credit arrangement with Fleet
provides for borrowings of up to $66.0 million through March 1997. Such
borrowings are limited to a restrictive borrowing base equal to 60% of eligible
merchandise inventories during the months of August 1995 through January 1995
and May 1996 through September 1996 (50% during all other months). Interest
under the Fleet line of credit is charged at a rate equal to LIBOR, as
determined by the bank, plus 2.8% through August 9, 1995 and LIBOR plus 3.4%
thereafter (9.38% at October 28, 1995). The maximum amount available for
borrowings under the line of credit was $66.0 million at October 28, 1995, of
which $46.6 million was outstanding as of that date.
The Company's revolving line of credit with Bank Hapoalim provides for
borrowings of up to $15.0 million, limited to a restrictive borrowing base,
through March 1997. Interest on outstanding borrowings under the line of credit
is charged at a rate equal to LIBOR, as determined by the bank, plus 1.0%,
(6.88% at October 28, 1995). At October 28, 1995, the maximum amount available
for borrowings of $6.5 million was outstanding under the line of credit with
Bank Hapoalim. The Company expects to be able to advance the entire $15.0
million under the Bank Hapoalim line of credit by mid-December based on
projected increases to the underlying borrowing base. Such amounts advanced
are expected to be utilized for working capital purposes.
On October 4, 1995, the Company finalized three fifteen-year mortgage loans
with Midland Commercial Funding ("Midland"), and on October 10, 1995, finalized
a fourth such mortgage loan. The mortgage loans, collectively the "Midland
loans" are collateralized by the land, buildings and leasehold improvements of
four of the Company's department stores. The $20.0 million total proceeds from
the arrangements were used to repay the $9.8 million outstanding balance of a
pre-existing long-term loan with Wells Fargo Bank, N. A. ("Wells Fargo"), with
the remaining $10.2 million used to reduce outstanding borrowings under the
Fleet line of credit and pay certain costs associated with the transaction.
Monthly principal payments on the mortgage loans are based on twenty-five
year amortization schedules. Interest is payable at fixed rates ranging from
9.23% to 9.39%.
On June 27, 1995, the Company finalized the sale and leaseback of the land,
building and leasehold improvements comprising its department store located in
Capitola, California. Proceeds from the arrangement, totalling $11.6 million,
were used to reduce the outstanding balance of the previously described Wells
Fargo long-term loan by $8.0 million , with the remaining $3.6 million used to
reduce outstanding borrowings under the Fleet line of credit.
The Company also has a long-term financing arrangement with Heller Financial,
Inc. ("Heller"), due January 1, 2002, which bears interest at a rate of 10.45%
and had an outstanding loan balance of $5.9 million at October 28, 1995 and has
8.55% Commercial Revenue Bonds, due December 1, 1995, with outstanding balances
totalling $2.7 million at October 28, 1995. The Company repaid the Commercial
Revenue Bonds upon their maturity with proceeds from a 90-day note payable to
Wells Fargo in the amount of $2.7 million. The note payable, due March 5, 1996,
is collateralized by the Company's department store in San Luis Obispo,
California and bears interest at a rate of 1/4% above the prime rate of
interest.
During the first three quarters of 1995, the Company also received a total of
$1.3 million in connection with two of its fiscal 1995 store openings for the
purpose of financing fixture and equipment expenditures at those locations. The
$1.3 million is to be repaid over ten-year maturity periods at interest rates
ranging from 5.0% to 10.0%.
Net cash used in operating activities was $35.1 million in the first three
quarters of 1995 as compared to $23.1 million in the first three quarters of
1994, an increase of $12.0 million. This increase is primarily attributable to
increased inventory requirements associated with new stores opened since the
same period of last year, less $4.0 million received during the first quarter
of 1995 as incentive to open one of those new stores (see Note 5 to the
Condensed Consolidated Financial Statements), higher costs associated with the
opening of those new stores, an increase in amounts due from mall owners and
developers in connection with new store openings and an increase in
prepayments for certain seasonal merchandise.These increases were partially
offset by a decrease in
customer credit card receivables during the period. The decrease in credit card
receivables is primarily seasonal in nature, in that receivables are typically
at their highest level following the Christmas selling season and decline
thereafter as customers repay their account balances. Net cash used in
operating activities in the first three quarters of 1995 also includes the
payment of $3.0 million into an irrevocable trust in accordance with the terms
of the settlement of the previously described stockholder litigation.
Net cash used in investing activities was $1.3 million in the first three
quarters of 1995 as compared to $1.0 million in the first three quarters of
1994, an increase of $300,000. Net cash used in investing activities in the
first three quarters of 1995 consisted primarily of capital expenditures for
tenant improvements, construction costs and furniture, fixtures and equipment
associated with new and certain existing store locations, less amounts received
as reimbursement for certain of those expenditures. Cash used to open such new
stores was fully offset by proceeds received from the previously described
Capitola store sale and leaseback arrangement. Net cash used in investing
activities in the first three quarters of 1994 consisted primarily of
expenditures for two new store locations opened in the third and fourth
quarters of 1994. Such amounts used were partially offset by proceeds received
from the sale and leaseback of the Company's mainframe computer during the
period.
Net cash provided by financing activities was $37.8 million in the first three
quarters of 1995 as compared to $24.7 million in the first three quarters of
1994, an increase of $13.1 million. Net cash provided by financing activities
in the first three quarters of 1995 consisted primarily of proceeds from the
Company's revolving lines of credit, net of repayments made on its various
credit facilities during the period. Net cash provided by the Midland financing
was fully applied against previously outstanding obligations. Net cash provided
by financing activities in the first three quarters of 1994 included borrowings
on the Company's lines of credit and was partially offset by the application
of the $40.0 million proceeds received through the issuance of the Fixed Base
Certificates, which was used to repay all outstanding borrowings under a pre-
existing line of credit and long-term borrowing arrangement and to pay certain
costs associated with the transaction.
Working capital increased $5.6 million to $43.5 million at October 28, 1995 as
compared to $37.9 million at January 28, 1995. The Company's current ratio
decreased to 1.35:1 at October 28, 1995 as compared to 1.43:1 at January 28,
1995. The increase in working capital reflects the application of proceeds from
the Midland financing and Capitola store sale and leaseback arrangement. The
decrease in current ratio reflects a seasonal increase in trade payables and
outstanding borrowings under the Company's lines of credit.
The Company's 1995 expansion program included the opening of the following new
department stores: Auburn, California (40,000 square feet - February 1995);
Carson City, Nevada (58,000 square feet - March 1995); San Bernardino,
California (204,000 square feet - April 1995); a replacement for an existing
store in Visalia, California (150,000 square feet - August 1995); Watsonville,
California (75,000 square feet - September 1995); and a new 113,000 square foot
department store in Tracy, California in October 1995. As of October 28, 1995,
the estimated remaining cost to complete such projects, net of amounts to be
contributed by mall owners or developers of certain of the projects, is
$900,000. The Company's 1996 expansion plans currently include the opening of
one new store in Reno, Nevada (125,000 square feet - March 1996). The Company
continually investigates potential sites for new stores, and capital
expenditure plans may change as opportunities for new stores develop. The
opening of new stores is subject to a variety of conditions precedent and other
factors. As a result, there can be no assurance that such stores will in fact
be opened or that their opening will not be delayed.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to the requirements of Item
601 of Regulation S-K:
Exhibit No. Description
27 Financial Data Schedule
10.46 Eighth Amendment to Loan and Security Agreement dated
October 11, 1995 by and between Gottschalks Inc. and
Fleet Capital Corporation (formerly Shawmut Capital Corporation).
10.47 Promissory Notes and Security Agreements dated October
4, 1995 and October 10, 1995 by and between Gottschalks
Inc. and Midland Commercial Funding.
10.48 Forebearance Agreement dated December 11, 1995, by and
between Gottschalks Inc. and Fleet Capital Corporation
(formerly Shawmut Capital Corporation).
(b) The Company did not file Current Reports on Form 8-K during the
thirteen week period ended October 28, 1995.
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.
Gottschalks Inc.
(Registrant)
December 12, 1995
s/Joseph W. Levy
(Joseph W. Levy, Chairman
and Chief Executive Officer)
December 12, 1995
s/Alan A. Weinstein
(Alan A. Weinstein,
Senior Vice President and
Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SELECTED UNAUDITED FINANCIAL INFORMATION
CONTAINED IN THE ACCOMPANYING FORM 10-Q FOR THE PERIOD ENDED OCTOBER 28, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 4,529
<SECURITIES> 0
<RECEIVABLES> 21,138
<ALLOWANCES> 1,168
<INVENTORY> 123,601
<CURRENT-ASSETS> 167,484
<PP&E> 126,432
<DEPRECIATION> 38,656
<TOTAL-ASSETS> 266,672
<CURRENT-LIABILITIES> 104,021
<BONDS> 55,361
<COMMON> 104
0
0
<OTHER-SE> 75,181
<TOTAL-LIABILITY-AND-EQUITY> 266,672
<SALES> 255,884
<TOTAL-REVENUES> 264,267
<CGS> 178,409
<TOTAL-COSTS> 178,409
<OTHER-EXPENSES> 5,962
<LOSS-PROVISION> 1,806
<INTEREST-EXPENSE> 8,015
<INCOME-PRETAX> (13,356)
<INCOME-TAX> (5,075)
<INCOME-CONTINUING> (8,281)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,281)
<EPS-PRIMARY> (.80)
<EPS-DILUTED> (.80)
</TABLE>
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Eighth Amendment")
is entered into as of October 11, 1995 by and between Shawmut Capital
Corporation, a Connecticut corporation, as successor-in-interest to Barclays
Business Credit, Inc., a Connecticut corporation ("Lender"), and Gottschalks,
Inc., a Delaware corporation ("Borrower"), with reference to the following
facts:
RECITALS
A. Lender and Borrower entered into that certain Loan and Security
Agreement, dated as of March 30, 1994, as amended by (i) that certain First
Amendment to Loan and Security Agreement dated as of May 12, 1994, (ii) that
certain Second Amendment to Loan and Security Agreement dated as of October 12,
1994, (iii) that certain Third Amendment dated as of October 12, 1994, dated
as of December 30, 1994, (iv) that certain Fourth Amendment to Loan and
Security Agreement dated as of March 22, 1995, (v) that certain Fifth Amendment
to Loan and Security Agreement dated as of March 31, 1995, (vi) that certain
Sixth Amendment to Loan and Security Agreement dated as of July 31, 1995, and
(vii) that certain Seventh Amendment to Loan and Security Agreement dated as
of August 9, 1995, pursuant to which Lender agreed to provide certain financial
accommodations to Borrower on the terms and conditions set forth therein (said
Loan and Security Agreement, as from time to time in effect, together with all
exhibits and schedules thereto, is hereinafter referred to as the "Loan
Agreement").
B. Lender and Borrower desire to amend certain aspects of their
financing arrangements under the Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, Lender and Borrower hereby agree as follows:
1. Use of Terms Defined in the Loan Agreement. All capitalized
terms that are defined in the Loan Agreement and that are used without
definition herein shall have the respective meanings given to them in the Loan
Agreement.
2. Amendment to the Loan Agreement.
2.1 Section 8.3(D) of the Loan Agreement is hereby deleted
in its entirety and the following is substituted therefor:
(D) Minimum Earnings.
(i) Maintain at all times not less that the following
Consolidated Adjusted Net Earnings from Operations for the
corresponding periods set forth below.
Fiscal Period Amount
September 1995 <$1,500,000>
October 1995 <$1,500,000>
November 1995 <$1,500,000>
December 1995 <$1,500,000>
Each Fiscal <$2,500,000>
(ii) Maintain at all times, on a fiscal quarter-to-date
basis, not less than the following Consolidated Adjusted
Net Earnings from Operations during the corresponding fiscal
quarters set forth below:
Fiscal Period Amount
Each fiscal quarter <$3,500,000>
From the third fiscal
quarter of Fiscal Year
ending January 1996
through and including
the third fiscal quarter
Of Fiscal Year ending
January 1997
Each fiscal quarter <$2,000,000>
thereafter
(iii) Maintain at all times not less than the following
Consolidated Adjusted Net Earnings from Operations for the period
of twelve (12) consecutive Fiscal Periods including and ending with
the corresponding Fiscal Periods set forth below:
Fiscal Period Amount
August 1995 $1,500,000
September 1995 through <$2,500,000>
November 1996
Each Fiscal Period $0.00
thereafter
2.2 Section 8.3(G) of the Loan Agreement is hereby deleted
in its entirety and the following is substituted therefor.
(G) Times Interest Earned Ratio. Maintain at all
times (i) from the September 1995 Fiscal Period through and
including the October 1995 Fiscal Period a Times Interest Earned
Ratio of not less than 1 to 1, (ii) from the November 1995 Fiscal
period through and including the October 1996 Fiscal Period a Times
Interest Earned Ratio of not less than .70 to 1, and (iii) after
the October 1996 Fiscal Period a Times Interest Earned Ratio of not
less than 1 to 1.
3. Continuing Representations of Borrower. Borrower
hereby represents and warrants to Lender that as of the date hereof all
representations and warranties contained in the Loan Agreement are true,
complete and correct, and no Default or Event of Default has occurred and is
continuing.
4. Incorporation into the Loan Agreement. The terms and
conditions of this Eight Amendment shall be incorporated by reference in the
Loan Agreement as though set forth in full therein. In the event of any
inconsistency between the provisions of this Eighth Amendment and any other
provision of the Loan Agreement, the terms and provisions of this Eighth
Amendment shall govern and control. Except to the extent specifically amended
or superseded by the terms of this Eighth Amendment, all of the provisions of
the Loan Agreement shall remain in full force and effect to the extent in
effect on the date hereof. Except to the extent, if any, specifically dealt
with herein, this Eighth Amendment does not constitute an amendment or waiver
by Lender of any provision of the Loan Agreement, or of any Default, Event of
Default, or other default by Borrower thereunder. The Loan Agreement, as
modified by this Eighth Amendment, together with the other Loan Documents,
constitutes the complete agreement among the parties and supersedes any prior
written or oral agreements, writings, communications, or understandings of the
parties with respect to the subject matter thereof.
5. Section Headings. The headings of the Sections hereof
are for convenience only, are without substantive meaning, and shall not be
used in interpreting any provision of this Eighth Amendment or the Loan
Agreement.
6. Counterparts. This Eight Amendment may be executed in
counterparts, each of which shall be deemed to be an or original but all of
which shall be one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Eighth Amendment to Loan and Security Agreement as of the day and year first
written above.
("Lender")
SHAWMUT CAPITAL CORPORATION
By s/Melvin L. Robbins
Melvin L. Robbins
Senior Vice President
("Borrower")
GOTTSCHALKS INC.
By s/Alan A. Weinstein
Alan A. Weinstein
Senior Vice President and
Chief Financial Officer
THE FOLLOWING DOCUMENTS CONTAINED HEREIN REPRESENT A COMPLETE SET OF
LOAN DOCUMENTATION APPLICABLE TO ONE OF THE FOUR MORTGAGE LOANS WITH
MIDLAND COMMERICAL FUNDING. WITH THE EXCEPTION OF INDIVIDUAL LOAN
AMOUNTS, THERE ARE NO MATERIAL DIFFERENCES IN LOAN DOCUMENTATION
APPLICABLE TO THE THREE OTHER MORTGAGE LOANS AND SUCH ADDITIONAL
DOCUMENTATION HAS NOT BEEN INCLUDED IN THIS FILING. INDIVIDUAL LOAN
AMOUNTS AND A DESCRIPTION OF THE PROPERTY COLLATERALIZING THE LOANS
ARE AS FOLLOWS:
ANTIOCH, CALIFORNIA $5,100,000
YUBA CITY, CALIFORNIA $4,470,000
EUREKA, CALIFORNIA $4,355,000
PALMDALE, CALIFORNIA $6,075,000
Loan No.: 94-0902451
PROMISSORY
NOTE
$5,100,000.00
Madera, California
September 29, 1995
FOR VALUE RECEIVED, GOTTSCHALKS, INC., a Delaware
corporation
("Borrower"), having its principal place of business at 7
River Park Place
East, Fresno, California 93720, promises to pay to the order
of Midland
Loan Services, L.P., a Missouri limited partnership
("Lender"), at the
following address: 210 West 10th Street, 6th Floor, Kansas
City,
Missouri 64105; or such other place as the holder hereof may
from time to
time designate in writing, the principal sum of Five Million
One Hundred
Thousand and No/100 Dollars ($5,100,000.00) in lawful money of
the United
States of America, with interest thereon to be computed from
the date of
disbursement under this Promissory Note (the "Note") at the
Applicable
Interest Rate (hereinafter defined), and to be paid in
installments as
follows:
A. A payment, on the date hereof, in the amount of
$2,660.50
representing interest from the date of disbursement
through the
last day of the calendar month in which such
disbursement is
made;
B. A constant payment of $44,169.18 on the first day of
November,
1995 and on the first day of each calendar month
thereafter up
to and including the first day of September, 2010,
each of such
payments to be applied: (a) to the payment of
interest computed
at the Applicable Interest Rate; and (b) the
balance applied
toward the reduction of the principal sum;
C. The balance of said principal sum, all unpaid
interest thereon
and all other amounts owed pursuant to this Note,
the Mortgage
(hereinafter defined), the Other Security Documents
(hereinafter
defined), or otherwise in connection with the loan
evidenced by
this Note shall be due and payable on the first day
of
October, 2010 (the "Maturity Date"); and
D. All Additional Interest Payments (hereinafter
defined) as set
forth in Paragraph 2 of this Note.
All payments to be made by Borrower to Lender shall be deemed
received by
Lender only upon Lender's actual receipt of same.
1. Applicable Interest Rate. Interest on the
principal sum
of this Note shall be calculated on the basis of a three
hundred sixty
(360) day year composed of twelve (12) months of thirty (30)
days each
except that interest due and payable for a period less than a
full month
shall be calculated by multiplying the actual number of days
elapsed in
such period by a daily rate based on said 360 day year. The
term
"Applicable Interest Rate" as used in this Note shall mean,
from the date
of this Note through and including the Maturity Date, a rate
of nine and
thirty nine hundredths percent (9.39%) per annum.
2. Additional Interest; Rebate of Interest. In
addition to
and concurrently with each monthly installment of principal
and interest
required hereunder, Borrower shall also pay to Lender, as
additional
interest, a constant monthly amount equal to: None ($0)
(collectively the
"Additional Interest Payments"). On the first day of the
fourteenth
(14th) month following the date of the initial disbursement of
funds under
this Note (the "Disbursement Date"), and on an annual basis
thereafter
during the term of this Note, Lender shall remit to Borrower a
portion of
the Additional Interest Payments then held by Lender in an
amount equal to
the aggregate amount of the Additional Interest Payments
actually received
by Lender during the twelve (12) month period ending upon the
immediately
prior annual anniversary of the Disbursement Date (the "Annual
Compliance
Period"); subject, however, to the following conditions
precedent:
(a) Borrower has fully satisfied, in a timely manner, the
annual financial
reporting requirements set forth in the Mortgage for the
Annual Compliance
Period; (b) Borrower has timely delivered the last due Lease
Report (as
defined in the Mortgage); and (c) no Event of Default
(hereinafter
defined) is currently existing, or has occurred in the Annual
Compliance
Period.
3. Late Charge. If any sum payable under this Note
is not
received by Lender by close of business on the tenth (10th)
day after the
date on which it was due, Borrower shall pay to Lender an
amount (the
"Late Charge") equal to the lesser of five percent (5%) of the
full amount
of such sum, or the maximum amount permitted by applicable
law, to defray
the expenses incurred by Lender in handling and processing
such delinquent
payment and to compensate Lender for the loss of the use of
such
delinquent payment and any such Late Charges shall be secured
by the
Mortgage and Other Security Documents.
4. Security; Defined Terms; Incorporation by
Reference. This
Note is secured by the Mortgage and the Other Security
Documents. The
term "Mortgage" as used in this Note shall mean either the
Mortgage,
Security Agreement and Assignment of Leases and Rents, or the
Deed of
Trust, Security Agreement, Assignment of Leases and Rents, and
Fixture
Filing executed and delivered by Borrower contemporaneously
with this Note
and which secures the Debt (hereinafter defined). The term
"Other
Security Documents" means all documents other than this Note
or the
Mortgage now or hereafter executed and/or delivered by
Borrower and/or
others and to or in favor of Lender, which wholly or partially
secure,
evidence or guarantee payment of the Debt, provide for any
indemnity in
favor of or payment to Lender related to the Debt, the Note or
the
Mortgaged Property, provide for any escrow/holdback
arrangements or for
any actions to be completed by Borrower subsequent to the date
hereof, or
are otherwise related to the loan evidenced by this Note. All
amounts due
and payable under the Note, together with all sums due under
the Mortgage
and the Other Security Documents, including any applicable
Prepayment
Consideration (hereinafter defined) and all applicable
attorney fees and
costs, are collectively referred to herein as the "Debt."
Where
appropriate, the singular number shall include the plural, the
plural
shall include the singular, and the words "Lender" and
"Borrower" shall
include their respective successors, assigns, heirs, personal
representatives, executors and administrators. The terms,
covenants, and
conditions of the Mortgage and Other Security Documents are
hereby
incorporated herein by reference and are made a part of this
Note to the
same extent as if they were fully set forth herein.
5. Prepayment.
(a) When Permitted. Except as set forth in
this Section,
Borrower shall not have the right to prepay all or any
portion of the
Debt at any time during the term of this Note. Borrower
may prepay
the Debt in whole, but not in part (except for any
prepayment
permitted under the Mortgage in the event of a casualty
or
condemnation) if: (i) no Event of Default (hereinafter
defined) then
exists; (ii) any applicable Prepayment Consideration
(hereinafter
defined) is tendered with such prepayment; and (iii) the
required
notice of prepayment required hereby is timely received
by Lender.
Notwithstanding anything to the contrary contained
herein, no
prepayments will be allowed during the period from the
fifteenth (15th) day through and including the last day
of any
calendar month.
(b) Notice. Borrower shall give written notice
to Lender
specifying the date on which prepayment is to be made
(the "Prepayment
Date"). The designated Prepayment Date must fall within
the first
fifteen (15) calendar days of a month during the term of
this Note.
Lender shall receive this notice not more than sixty
(60) days and not
less than (30) days prior to the Prepayment Date. If
any such notice
of prepayment is given, the entire Debt, including any
applicable
Prepayment Consideration, shall be due and payable on
the Prepayment
Date.
(c) Prepayment Consideration. Lender shall not
be
obligated to accept any prepayment of the principal
balance of this
Note unless it is accompanied by all Prepayment
Consideration due in
connection therewith. Except as otherwise set forth in
the Mortgage,
no Prepayment Consideration will be due for involuntary
prepayments
resulting from any Casualty (as defined in the Mortgage)
or
Condemnation (as defined in the Mortgage). The
"Prepayment
Consideration" shall be computed as follows:
Years 1 through 10: The greater of: (i) five percent
(5%) of
the outstanding principal
balance of the
Note at the time of prepayment;
or
(ii) the Yield Maintenance
Amount
(hereinafter defined).
Year 11 through
maturity: No Prepayment Consideration.
Borrower acknowledges that the Prepayment
Consideration is a
bargained for consideration and not a penalty, and Borrower
recognizes
that Lender would incur substantial additional costs and
expenses in the
event of a prepayment of the Debt and that the Prepayment
Consideration
compensates Lender for such costs and expenses (including
without
limitation, the loss of Lender's investment opportunity during
the period
from the Prepayment Date until the Maturity Date). Borrower
agrees that
Lender shall not, as a condition to receiving the Prepayment
Consideration, be obligated to actually reinvest the amount
prepaid in any
treasury obligation or in any other manner whatsoever.
(d) Yield Maintenance Amount. The "Yield
Maintenance
Amount" shall mean the present value, as of the
Prepayment Date, of
the remaining scheduled payments of principal and
interest from the
Prepayment Date through the Maturity Date (including any
balloon
payment) determined by discounting such payments at the
Discount Rate
(hereinafter defined), less the amount of principal
being prepaid.
The term "Discount Rate" shall mean the rate which, when
compounded
monthly, is equivalent to the Treasury Rate (hereinafter
defined) when
compounded semi-annually. The term "Treasury Rate"
shall mean the
yield calculated by the linear interpolation of the
yields, as
reported in Federal Reserve Statistical Release
H.15-Selected Interest
Rates under the heading U.S. Government
Securities/Treasury Constant
Maturities for the week ending prior to the Prepayment
Date, of U.S.
Treasury constant maturities with maturity dates (one
longer and one
shorter) most nearly approximating the Maturity Date.
(In the event
Release H.15 is no longer published, Lender shall select
a comparable
publication to determine the Treasury Rate.) Lender
shall notify
Borrower of the amount and the basis of determination of
the required
Prepayment Consideration.
(e) Prepayment After Event of Default. If
following the
occurrence of any Event of Default, Borrower shall
tender payment of
an amount sufficient to satisfy the Debt at any time
prior to a sale
of the "Mortgaged Property" (as defined in the
Mortgage), either
through foreclosure or the exercise of the other
remedies available to
Lender under the Mortgage or the Other Security
Documents, such tender
by Borrower shall be deemed to be a voluntary prepayment
under this
Note in the amount tendered and in such case Borrower
shall also pay
to Lender, with respect to the amount tendered, the
applicable
Prepayment Consideration set forth in this Note, if any,
which
Prepayment Consideration shall be immediately due and
payable.
Furthermore, Borrower expressly waives the
provisions of
Section 2954.10 of the California Civil Code. By
initialling this
provision where indicated below, Borrower confirms that
Lender's
agreement to make the loan evidenced by the Note at the
interest rates
and on the other terms set forth herein and in the other
loan
documents constitutes adequate and valuable
consideration, given
individual weight by Borrower, for this wavier and
agreement.
___________________
Borrower's
initials
6. Default. An "Event of Default" shall occur if:
(a) the Borrower fails to make the full and
punctual
payment of any amount payable hereunder or under the
Mortgage on a
monthly basis, which failure is not cured on or before
the fifth (5th)
day after the date of written notice from Lender to
Borrower of such
failure;
(b) the Borrower fails to pay the entire
outstanding
principal balance hereunder, together with all accrued
and unpaid
interest, on the date when due, whether on the Maturity
Date, upon
acceleration or prepayment or otherwise;
(c) the Borrower fails to make the full and
punctual
payment of any Late Charges, costs and expenses due
hereunder or any
other sum of money required to be paid hereunder (other
than any
payment described in subclauses (a) and (b) immediately
above) or
under the Mortgage or Other Security Documents which
failure is not
cured on or before the twentieth (20th) day after
Lender's written
notice to Borrower that such payment is required; or
(d) an Event of Default (as defined in the
Mortgage or
any of the Other Security Documents) shall have occurred
under the
Mortgage and/or Other Security Documents.
7. Acceleration. The whole of the Debt, including
without
limitation, the principal sum of this Note, all accrued
interest and all
other sums due under this Note, the Mortgage and the Other
Security
Documents, together with any applicable Prepayment
Consideration, shall
become immediately due and payable at the option of Lender,
without
notice, at any time following the occurrence of an Event of
Default.
8. Default Interest. Upon the occurrence of an
Event of
Default (including without limitation, the failure of Borrower
to pay the
Debt in full on the Maturity Date), Lender shall be entitled
to receive
and Borrower shall pay interest on the entire unpaid principal
balance at
the rate (the "Default Rate") equal to the greater of (a) four
percent
(4%) above the Applicable Interest Rate; or (b) four percent
(4%) above
the Prime Rate (hereinafter defined) in effect at the time of
the
occurrence of the Event of Default; provided, however, that
notwith-
standing the foregoing, in no event shall the Default Rate
exceed the
Maximum Rate (hereinafter defined). The term "Prime Rate"
shall mean the
prime rate reported in the Money Rates section of The Wall
Street Journal
for the date (the "Default Rate Calculation Date") upon which
the Event of
Default occurred, or if no publication occurs upon such date,
then the
date of publication immediately preceding the date of the
Event of
Default. In the event that The Wall Street Journal should
cease or
temporarily interrupt publication, the term "Prime Rate" shall
mean the
daily average prime rate published upon the Default Rate
Calculation Date
in another business newspaper, or business section of a
newspaper, of
national standing chosen by Lender. In the event that a prime
rate is no
longer generally published or is limited, regulated or
administered by a
governmental or quasi-governmental body, then Lender shall
select a
comparable interest rate index which is readily available and
verifiable
to Borrower but is beyond Lender's control. The Default Rate
shall be
computed from the occurrence of the Event of Default until the
actual
payment in full of the Debt. This charge shall be added to
the Debt, and
shall be deemed secured by the Mortgage. This clause,
however, shall not
be construed as an agreement or privilege to extend the
Maturity Date, nor
as a waiver of any other right or remedy accruing to Lender by
reason of
the occurrence of any Event of Default.
9. Attorney Fees. In the event that Lender employs
attorney(s) to collect the Debt, to enforce the provisions of
this Note,
or to protect or foreclose the security herefor, Borrower
agrees to pay
Lender's attorney fees and disbursements, whether or not suit
be brought.
Such fees shall be immediately due and payable.
10. Limit of Validity. This Note is subject to the
express
condition that at no time shall Borrower be obligated or
required to pay
interest or other charges on the Debt at a rate which may
subject Lender
to civil or criminal liability as a result of such rate
exceeding the
maximum interest rate which Borrower is permitted to pay by
applicable law
(the "Maximum Rate"). If by the terms of this Note, Borrower
is at any
time required or obligated to pay interest or other charges on
the Debt at
a rate in excess of the Maximum Rate, the rate of interest due
under this
Note shall be deemed to be immediately reduced to the Maximum
Rate and any
previous payments in excess of the Maximum Rate shall be
deemed to have
been payments in reduction of principal and not on account of
the interest
due hereunder.
11. No Oral Amendments. This Note may not be
modified,
amended, waived, extended, changed, discharged or terminated
orally or by
any act or failure to act on the part of Borrower or Lender,
but only by
an agreement in writing signed by the party against whom
enforcement of
any modification, amendment, waiver, extension, change,
discharge or
termination is sought.
12. Assignment. This Note may be freely transferred
and
assigned by Lender. Borrower's right to transfer its rights
and
obligations with respect to the Debt, and to be released from
liability
under this Note, shall be governed by the Mortgage.
13. Applicable Law; Jurisdiction. This Note shall
be governed
and construed in accordance with the laws of the state in
which the real
property encumbered by the Mortgage is located, without regard
to conflict
of law provisions thereof. Borrower hereby submits to
personal
jurisdiction in the state courts located in said state and the
federal
courts of the United States of America (and any appellate
courts taking
appeals thereof) located in said state for the enforcement of
Borrower's
obligations hereunder and waives any and all personal rights
under the law
of any other state to object to jurisdiction within such state
for the
purposes of any action, suit, proceeding or litigation to
enforce such
obligations of Borrower. Borrower hereby waives and agrees
not to assert,
as a defense in any action, suit, proceeding or litigation
arising out of
or relating to this Note, the Mortgage and/or any of the Other
Security
Documents: (a) that it is not subject to such jurisdiction or
that such
action, suit, proceeding or litigation may not be brought or
is not
maintainable in those courts or that this Note, the Mortgage
and/or any of
the Other Security Documents may not be enforced in or by
those courts or
that it is exempt or immune from execution; (b) that the
action, suit,
proceeding or litigation is brought in an inconvenient forum;
or (c) that
the venue of the action, suit, proceeding or litigation is
improper.
14. Joint and Several Liability. If Borrower
consists of more
than one person or entity, the obligations and liabilities of
each such
person or entity shall be joint and several.
15. Waiver of Presentment, Etc.. Borrower and all
others who
may become liable for the payment of all or any part of the
Debt do hereby
severally waive presentment and demand for payment, notice of
dishonor,
protest, notice of protest, and notice of intent to accelerate
the
maturity hereof (and of such acceleration), except to the
extent that
specific notices are required by this Note, the Mortgage or
the Other
Security Documents.
16. Full Authority. Borrower (and the undersigned
representative of Borrower, if any) represents that Borrower
has full
power, authority and legal right to execute, deliver and
perform its
obligations pursuant to this Note, the Mortgage and the Other
Security
Documents and that this Note, the Mortgage and the Other
Security
Documents constitute valid and binding obligations of
Borrower.
17. No Waiver. Any failure by Lender to insist upon
strict
performance by Borrower or any of the provisions of this Note,
the
Mortgage or the Other Security Documents shall not be deemed
to be a
waiver of any of the terms or provisions of this Note, the
Mortgage or the
Other Security Documents, and Lender shall have the right
thereafter to
insist upon strict performance by Borrower of any and all of
the terms and
provisions of this Note, the Mortgage or the Other Security
Documents.
18. Notices. Except as otherwise specified herein,
any
notice, consent, request or other communication required or
permitted to
be given hereunder shall be in writing, addressed to the other
party as
set forth below (or to such other address or person as either
party or
person entitled to notice may by notice to the other party
specify), and
shall be: (a) personally delivered; (b) delivered by Federal
Express or
other comparable overnight delivery service; or (c)
transmitted by United
States certified mail, return receipt requested with postage
prepaid;
To Lender:
MIDLAND LOAN SERVICES, L.P.
210 West 10th Street
6th Floor
Kansas City, Missouri 64105<PAGE>
To Borrower:
GOTTSCHALKS, INC.
7 River Park Place East
Fresno, California 93720
Attention: Alan A. Weinstein<PAGE>
Unless otherwise specified, all notices and other
communications
shall be deemed to have been duly given on the first to occur
of actual
receipt of the same or: (i) the date of delivery if personally
delivered;
(ii) one (1) business day after depositing the same with the
delivery
service if by overnight delivery service; and (iii) three (3)
days
following posting if transmitted by mail.
19. Counterparts. This Note may be executed in
counterparts.
20. BORROWER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT
OF ANY LITIGATION BASED ON THE LOAN EVIDENCED BY THIS NOTE OR
ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE MORTGAGE OR ANY
OF THE
OTHER SECURITY DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING,
STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF BORROWER OR
LENDER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER'S MAKING OF
THE LOAN
SECURED BY THE MORTGAGE AND THE OTHER SECURITY DOCUMENTS.
IN WITNESS WHEREOF, Borrower has duly executed this
Promissory
Note to be effective the day and year first above written.
"Borrower"
GOTTSCHALKS, INC., a Delaware
corporation
By: __s/ALAN A. WEINSTEIN________
Alan A. Weinstein,
Senior Vice President
By: _S/CLARENCE A. KRANTZ_______________
SENIOR VICE PRESIDENT____________
[Printed Name and
Title]
ADDENDUM TO PROMISSORY NOTE
This Addendum to Promissory Note ("Addendum")
contains certain additional and supplemental terms and
provisions of the Promissory Note (the "Note") dated September
29, 1995, executed by GOTTSCHALKS, INC., a Delaware
corporation,
as Borrower, to the order of MIDLAND LOAN SERVICES, L.P., as
Lender. The terms and provisions of this Addendum control and
supersede any conflicting terms and provisions contained in
the
body of this Note.
1. Additional Interest. Notwithstanding the provisions
of Paragraph 2 of this Note, if Borrower ceases providing
financial reporting to, and/or is not in good standing with,
the
Security and Exchange Commission, Borrower shall be required
to
make Additional Interest Payments to Lender in an amount which
Lender, in its sole discretion, requires. Such Additional
Interest Payments, or the applicable portions thereof, shall
be
remitted to Borrower in accordance with Paragraph 2 of this
Note.
Pay to the order of KC Funding Corp., without
recourse.
Midland Loan Services, L.P., a
Missouri limited partnership
By: Midland Data Systems, Inc.,
a
Missouri corporation, its
sole
general partner
By:S/CLARANCE A. KRANTZ
___SENIOR VICE PRESIDENT____
_____________________________
[Printed Name &
Title]
Pay to the order of
________________________________, without recourse.
KC Funding Corp., a Missouri
corporation
By: __S/CLARANCE A. KRANTZ____
SENIOR VICE PRESIDENT
_________________________________
[Printed Name & Title]
09-28-95/KBP-55812/MYC
RECORDING REQUESTED BY AND )
WHEN RECORD AND RETURN TO: )
)
MIDLAND LOAN SERVICES, L.P. )
210 West 10th Street, 6th Fl. )
Kansas City, MO 64105 )
Attn: MCF Closing Department )
Loan No.: 94-0902451 )
___________________________________________________________________________
[SPACE ABOVE LINE FOR RECORDER'S USE]
GOTTSCHALKS,
INC.
(Borrower)
to
FIRST AMERICAN TITLE
INSURANCE COMPANY
(Trustee)
in favor
of
MIDLAND LOAN
SERVICES, L.P.
(Lender)
DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF LEASES
AND RENTS,
AND FIXTURE
FILING
Dated: September
29, 1995
Location: Antioch,
California
<PAGE>
DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF LEASES
AND RENTS,
AND FIXTURE
FILING
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS, AND FIXTURE FILING (the "Deed of Trust") is
made as of
the 29th day of September, 1995, by GOTTSCHALKS, INC., a
Delaware corporation ("Borrower"), having its principal place of
business (or
residing) at 7 River Park Place East, Fresno, California
93720, to FIRST AMERICAN TITLE INSURANCE COMPANY ("Trustee"),
having an address at
2000 North Schnoor, Suite 101, Madera, California 93637, for
the benefit of MIDLAND LOAN SERVICES, L.P., a Missouri limited
partnership
("Lender"), having its principal place of business at 210 West
10th Street, 6th Floor, Kansas City, Missouri 64105.
WITNESSETH:
To secure the payment of an indebtedness in the
principal sum of Five Million One Hundred Thousand and No/100
Dollars
($5,100,000.00), lawful money of the United States of America,
to be paid with interest according to a certain
contemporaneously executed
Promissory Note made by Borrower to the order of Lender (said
Promissory Note, together with all extensions, renewals or
modifications
thereof, is referred to as the "Note", and said indebtedness,
interest and all other sums due hereunder, and under the Note
and the Other
Security Documents (hereinafter defined), including applicable
attorney fees and costs, is collectively referred to as the
"Debt") and to
secure the additional obligations described in the Addendum
attached hereto and made a part hereof, Borrower hereby
irrevocably deeds,
mortgages, gives, grants, bargains, sells, aliens, enfeoffs,
conveys, confirms, pledges, assigns, grants a security interest
in, and hypo-
thecates to Trustee, its successors and assigns, in trust,
with power of sale, and right to entry and possession, all of
its estate, right,
title and interest in, to, and under any and all of the
following described property (collectively the "Mortgaged
Property"), whether now
owned or held or hereafter acquired:
(a) The real property described in Exhibit A attached
hereto (the "Premises") and the buildings, structures, fixtures
additions,
enlargements, extensions, modifications, repairs, replacements
and improvements now or hereafter located thereon (the
"Improvements");
(b) all easements, rights-of-way, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water,
water courses,
water rights and powers, air rights and development rights,
and all estates, rights, titles, interests, privileges,
liberties, tenements,
hereditaments and appurtenances of any nature whatsoever, in
any way belonging, relating or pertaining to the Premises and
the Improvements
and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue,
opened or proposed,
in front of or adjoining the Premises, to the center line
thereof and all the estates, rights, titles, interests, dower
and rights of dower,
curtesy and rights of curtesy, property, possession, claim and
demand whatsoever, both at law and in equity, of Borrower of, in
and to the
Premises and the Improvements and every part and parcel
thereof, with the appurtenances thereto;
(c) all machinery, equipment, fixtures (including but not
limited to all heating, air conditioning, plumbing, lighting,
communications and elevator fixtures), building equipment,
materials and supplies, and other property of every kind and
nature, whether
tangible or intangible, owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located
upon the Premises and
the Improvements, or appurtenant thereto, and usable in
connection with the present or future operation and occupancy of
the Premises and the
Improvements (hereinafter collectively called the
"Equipment"), including the proceeds of any sale or transfer of
the foregoing, and, without
limiting the generality of the foregoing, if any such
Equipment is subject to any prior security interest or prior
security agreement (as
such terms are defined in the Uniform Commercial Code, as
adopted and enacted in the State or States in which any of the
Mortgaged Property
is located), then the Mortgaged Property shall include all of
the right, title and interest of Borrower in and to any such
Equipment,
together with all deposits and payments now or hereafter made
by Borrower with respect to such Equipment;
(d) all awards, payments or compensation, including
interest thereon, heretofore or hereafter made with respect to
the Mortgaged
Property for any injury to or decrease in the value of the
Mortgaged Property related to any exercise of the right of
eminent domain or
condemnation (including without limitation, any transfer made
in lieu of or in anticipation of the exercise of said rights or
for a change of
grade);
(e) all leases, reciprocal easement agreements, and other
agreements and arrangements affecting the use, enjoyment or
occupancy of,
or the conduct of any activity upon or at the Premises and the
Improvements heretofore or hereafter entered into (the
"Leases"), all income,
rents (including, without limitation, all percentage rents),
issues, profits and revenues (including all oil and gas or other
mineral
royalties and bonuses) from the Mortgaged Property (the
"Rents") and all proceeds from the sale or other disposition of
the Leases and the
right to receive and apply the Rents to the payment of the
Debt;
(f) all proceeds of, and any unearned premiums on, any
insurance policies covering the Mortgaged Property, including,
without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for
damage to the
Mortgaged Property; and
(g) the right, in the name and on behalf of Borrower, to
appear in and defend any action or proceeding brought with
respect to the
Mortgaged Property and to commence any action or proceeding to
protect the interest of Lender in the Mortgaged Property;
TO HAVE AND TO HOLD the Mortgaged Property unto and to the
use and benefit of Trustee, and the successors and assigns of
Trustee,
forever;
IN TRUST, WITH POWER OF SALE, to secure the payment to
Lender of the Debt at the time and in the manner provided for
its payment in the
Note, in this Deed of Trust or in the Other Security
Documents;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Borrower shall pay to Lender the Debt at the
time and in the
manner provided in the Note, in this Deed of Trust or in the
Other Security Documents, and shall abide by and comply with
each and every
covenant and condition set forth herein and in the Note in a
timely manner, these presents and the estate hereby granted
shall cease,
terminate and be void, and Trustee shall reconvey, without
warranty, the Mortgaged Property then held hereunder.
Borrower hereby represents and warrants to and covenants
and agrees with Lender as follows:
1. Payment of Debt and Incorporation of Covenants,
Conditions and Agreements. Borrower will pay the Debt at the
time and in
the manner provided in the Note, this Deed of Trust and the
Other Security Documents. All the covenants, conditions and
agreements contained
in: (a) the Note; and (b) all and any documents (other than
the Note or this Deed of Trust) (collectively the "Other
Security Documents") now
or hereafter executed by Borrower and/or others in favor of
Lender, which wholly or partially secure or guaranty payment of
the Note, provide
for any indemnity in favor of or payment to Lender related to
the Debt, the Note or the Mortgaged Property, provide for any
escrow/holdback
arrangements or for any actions to be completed by Borrower
subsequent to the date hereof, or are otherwise related to the
loan secured by
this Deed of Trust (the "Loan"); are hereby made a part of
this Deed of Trust to the same extent and with the same force as
if fully set
forth herein. Notwithstanding anything herein to the
contrary, neither this Deed of Trust nor any of the Other
Security Documents shall
secure (i) any obligation under any guaranty(ies) executed in
favor of Lender in connection with the Loan or (ii) the payment
of any Post-Foreclosure Transfer Environmental Losses (as
defined in that certain Unsecured Environmental Indemnity
Agreement executed by Borrower in
favor of Lender contemporaneously herewith).
2. Warranty of Title. Borrower warrants that
Borrower has good title to the Mortgaged Property and has the
right to deed,
mortgage, give, grant a security interest in, bargain, sell,
alien, enfeoff, convey, confirm, pledge, assign and hypothecate
the same and
that Borrower possesses an unencumbered fee estate in the
Premises and the Improvements and that it owns the Mortgaged
Property free and
clear of all liens, encumbrances and charges whatsoever except
for those exceptions shown in the title insurance policy in
favor of Lender
insuring the lien of this Deed of Trust. Borrower shall
forever warrant, defend and preserve such title and the validity
and priority of the
lien of this Deed of Trust to Lender against the claims of all
persons whomsoever.
3. Insurance Requirements.
(a) Borrower, at its sole cost and expense,
will keep the Mortgaged Property insured during the entire term
of this Deed
of Trust for the mutual benefit of Borrower and Lender
against loss or damage by fire and against loss or damage by
other risks and
hazards covered by a standard extended coverage
insurance policy including, but not limited to, fire, lightning,
windstorm, hail,
explosion, riot attending a strike, riot, civil
commotion, aircraft, vehicles, smoke, vandalism, malicious
mischief, burglary and
theft, and to the extent required by Lender, earthquake
or any other risks insured against by persons operating like
properties in the
locality of the Mortgaged Property. Such insurance
shall be in an amount not less than the lesser of (i) the then
full replacement
cost of the Mortgaged Property, without deduction for
physical depreciation, or (ii) the outstanding principal balance
of the Debt; but
in any event an amount sufficient to ensure that the
insurer issuing said policies would not deem Borrower a
co-insurer under said
policies. The policies of insurance carried in
accordance with this paragraph shall be paid annually in advance
and shall contain the
"Replacement Cost Endorsement" with a waiver of
depreciation.
(b) Borrower, at its sole cost and expense, for
the mutual benefit of Borrower and Lender, shall also obtain and
maintain
during the entire term of this Deed of Trust the
following policies of insurance:
(i) Flood insurance (meeting the
current requirement of the Federal Insurance Administration) if
any part of
the Mortgaged Property is located in an area
identified by the Federal Emergency Management Agency as an area
having special
flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968
(and any
successor act thereto) in an amount at least equal
to the lesser of (A) the stated principal amount of the Note; or
(B) the
maximum amount of coverage available to Borrower
under the Flood Disaster Protection Act of 1973 (and any
successor act thereto).
(ii) Comprehensive public
liability insurance on an "occurrence basis", in the amount of
at least
$3,000,000.00 per occurrence, including broad form
property damage, blanket contractual and personal injuries
(including death
resulting therefrom) coverages.
(iii) Business interruption
and/or rental loss insurance (for all losses regardless of
cause, and with no
exclusions) in an amount equal to the aggregate
annual amount of all rents, additional rents (including, without
limitation,
percentage rents) payable by all of the tenants
under the Leases (whether or not such Leases are terminable in
the event of a
fire or casualty) and profits or other income from
the Mortgaged Property, which business interruption insurance
and/or rental
loss insurance shall cover such losses for a period
of at least twelve (12) months after the date of the fire or
other casualty
in question. The amount of such insurance shall be
increased from time to time during the term of this Deed of
Trust as and when
Lender requires, to reflect all rent, additional
rent, increased rent and increased additional rent payable by
all new or renewal
tenants, and all increased profits or other income
from the Mortgaged Property.
(iv) Insurance against loss
or damage from explosion of steam boilers, air conditioning
equipment, high
pressure piping, machinery and equipment, pressure
vessels or similar apparatus now or hereafter installed in the
Improvements
(excepting any such apparatus located within and
serving individual residential units of the Improvements, if
any).
(v) Such other insurance as
may from time to time be reasonably required by Lender in order
to protect its
interests.
(c) All policies of insurance (individually, a
"Policy", and collectively the "Policies") required pursuant to
this Deed
of Trust: (i) shall be issued by an insurer satisfactory
to Lender, in its sole discretion; (ii) shall contain a
mortgagee
non-contribution clause satisfactory to Lender, in its
sole discretion, naming Lender as the person to which all
payments made by such
insurance company shall be paid; (iii) shall be
maintained throughout the term of this Deed of Trust without
cost to Lender; (iv) shall
be assigned and delivered to Lender; (v) shall contain
such provisions as Lender deems necessary or desirable to
protect its interest
including, without limitation, endorsements providing
that neither Borrower, Lender nor any other party shall be a
co-insurer under
said Policies and that Lender shall receive at least
thirty (30) days prior written notice of any modification,
termination or
cancellation of the applicable Policy; and (vi) shall be
satisfactory in form and substance to Lender and shall be
approved by Lender
as to amounts, form, risk coverage, deductibles, loss
payees and insureds. Borrower shall pay the premiums for such
Policies (the
"Insurance Premiums") as the same become due and
payable. Not later than thirty (30) days prior to the
expiration date of each of the
Policies, Borrower will deliver to Lender satisfactory
evidence of the renewal of each expiring Policy.
4. Casualty Loss.
(a) If the Mortgaged Property is damaged or
destroyed, in whole or in part, by fire or other casualty (a
"Casualty"),
Borrower shall give prompt notice thereof to Lender.
Borrower hereby authorizes and empowers Lender to settle, adjust
or compromise
any claims for any insurance proceeds arising from any
Casualty (the "Insurance Proceeds"), to receive such Insurance
Proceeds and to
retain and apply such Insurance Proceeds as set forth
herein. If no Event of Default (hereinafter defined), or event
which with the
giving of notice or passage of time, or both, would give
rise to an Event of Default, has occurred as of the date of the
Casualty,
then:
(i) If the aggregate amount of any Insurance
Proceeds resulting from a Casualty is equal to $15,000.00 or
less,
such Insurance Proceeds shall be paid directly to
Borrower and shall be applied by Borrower to the prompt repair
and replacement
of the Mortgaged Property;
(ii) If the aggregate amount
of any Insurance Proceeds resulting from a Casualty (or series
of related
Casualties) exceeds $15,000.00 and the value of the
Mortgaged Property immediately following such Casualty remains
greater than
fifty percent (50%) of its value immediately prior
to such Casualty, then all Insurance Proceeds from such Casualty
shall be paid
to Lender; provided, however, that so long as no
Event of Default exists and subject to the requirements set
forth herein, Lender
shall disburse such amounts of the Insurance
Proceeds (after deduction for Lender's costs and expenses of
collection) as Lender
reasonably deems necessary for the repair or
replacement of the Mortgaged Property, with any balance
remaining after such
disbursement being applied by Lender to the Debt in
such priority and proportions as Lender deems proper;
(iii) If the value of the
Mortgaged Property immediately following any Casualty (or series
of related
Casualties) does not exceed fifty percent (50%) of
its value immediately prior to such Casualties, then all
Insurance Proceeds
from such Casualties shall be paid directly to
Lender and Lender, at its discretion: (A) may declare the
entire Debt to be
immediately due and payable and apply all such
Insurance Proceeds, after deduction for Lender's costs and
expenses of collection,
to the Debt in such priority and proportions as
Lender deems proper; or (B) subject to the requirements set
forth herein, may
disburse such amounts of the Insurance Proceeds as
Lender reasonably deems necessary for the repair or replacement
of the
Mortgaged Property, with any balance remaining after
such disbursement being applied by Lender to the Debt in such
priority and
proportions as Lender deems proper; and
(iv) If no Event of Default
(as hereinafter defined) has occurred, and no event has occurred
that with notice
and/or the passage of time, or both, would
constitute an Event of Default, then no Prepayment Consideration
(as defined in the
Note) will be due with respect to any Insurance
Proceeds paid to Lender pursuant to subclauses (ii) or (iii)
above. If an Event
of Default has occurred, or an event has occurred
that with notice and/or the passage of time, or both, would
constitute an Event
of Default, then Prepayment Consideration will be
due with respect to any Insurance Proceeds paid to Lender
pursuant to
subclauses (ii) and (iii) above. An Event of
Default which existed but which was completely cured prior to
the date of Casualty
shall not in itself give rise to any Prepayment
Consideration under this subsection.
(b) All disbursements of any portion of any
Insurance Proceeds held by Lender shall be subject to all terms
and
conditions deemed necessary by Lender, including: (i)
Lender's receipt of satisfactory requests for disbursements,
paid bills and lien
waivers, architect certificates or other certificates,
and certificates or endorsements from title insurance companies;
(ii) Borrower's
deposit with Lender of any additional funds necessary to
supplement the Insurance Proceeds, so as to cover, in advance,
the entire cost
of the necessary repairs or replacements to the
Mortgaged Property as established by the certificate of an
architect or engineer
(employed by Lender at Borrower's expense); (iii) such
architect's or engineer's determination that such repairs or
replacements may be
effected within a period of six (6) months or less; and
(iv) Borrower's prompt and diligent completion of such repairs
or replacements
in accordance with plans and specifications submitted to
and approved by Lender. Lender, whether in possession of the
Premises or not,
shall not have any obligation to advance or make funds
other than the Insurance Proceeds available for the repair or
replacement of the
Mortgaged Property.
5. Payment of Taxes and Other Charges.
(a) Borrower shall pay or cause to be paid and
discharged all taxes, assessments, water rates and sewer rents
now or
hereafter levied or assessed or imposed against the
Mortgaged Property or any part thereof (collectively the
"Taxes"), and all ground
rents, utility charges, maintenance charges, other
governmental impositions, and all other liens or charges
whatsoever which may be or
become a lien or charge against the Mortgaged Property
(including without limitation, mechanics and materialmen's
liens, vault charges
and license fees for the use of vaults, chutes and
similar areas adjoining the Premises), now or hereafter related
to, or levied,
assessed or imposed against, the Mortgaged Property or
any part thereof (collectively the "Other Charges") as the same
become due and
payable. Borrower will deliver to Lender, promptly upon
Lender's request, evidence satisfactory to Lender that the Taxes
and Other
Charges have been paid prior to the same becoming
delinquent.
(b) After prior written notice to Lender,
Borrower, at its own expense, may contest by appropriate legal
proceeding,
promptly initiated and conducted in good faith and with
due diligence, the amount or validity or application in whole or
in part of any
of the Taxes or Other Charges, provided that: (i) no
Event of Default has occurred and shall be continuing; (ii)
Borrower is permitted
to do so under the provisions of any mortgage, deed of
trust, ground lease, or other instrument which creates a
superior or junior lien
to this Deed of Trust (it being understood that no such
superior or junior liens will be permitted unless specifically
allowed, in
writing, by Lender); (iii) such proceeding shall be
permitted under and be conducted in accordance with the
provisions of any other
instrument to which Borrower is subject and shall not
constitute a default thereunder; (iv) neither the Mortgaged
Property nor any part
thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost; (v) Borrower
shall have set
aside adequate reserves (which Lender may at its option
require to be placed in escrow with Lender) for the payment of
the Taxes or
Other Charges, together with all interest and penalties;
and (vi) Borrower shall have furnished such security as may be
required in the
proceeding, or as may be requested by Lender to insure
the payment of any such Taxes or Other Charges, together with
all interest and
penalties thereon.
6. Escrowed Funds. Borrower shall, at the option
of Lender or its designee, pay to Lender or its designee on the
first day of
each calendar month one-twelfth of an amount which would be
sufficient to pay all Insurance Premiums, Taxes and Other
Charges payable, or
estimated by Lender to be payable, during the next ensuing
twelve (12) months. (The aggregate of said amounts so held by
Lender is
hereinafter called the "Escrowed Funds"). Borrower hereby
pledges to Lender any and all Escrowed Funds now or hereafter
held by Lender as
additional security for the payment of the Debt. Lender will
apply the Escrowed Funds to payments of Taxes, Other Charges and
Insurance
Premiums required to be made by Borrower pursuant hereto. If
the amount of the Escrowed Funds held by Lender shall exceed the
amounts
required for the payment of the Taxes, Other Charges and
Insurance Premiums described above, Lender shall, in its
discretion, return any
excess to Borrower or credit such excess against future
payments to be made to the Escrowed Funds. In allocating such
excess, Lender may
deal with the person shown on the records of Lender to be the
owner of the Mortgaged Property. If, at any time, the Escrowed
Funds are not
sufficient to pay the Taxes, Other Charges and Insurance
Premiums described above, Borrower shall promptly pay to Lender,
upon demand, an
amount which Lender shall estimate as sufficient to make up
the deficiency. Upon the occurrence of an Event of Default,
Lender may apply any
Escrowed Funds held by it to the payment of the following
items in any order in its sole discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
(iii) Interest on the unpaid
principal balance of the Note;
(iv) Amortization of the
unpaid principal balance of the Note; and
(v) All other sums payable
pursuant to the Note, this Deed of Trust and the Other Security
Documents,
including without limitation advances made by Lender
pursuant to the terms of this Deed of Trust and any applicable
Prepayment
Consideration.
Until expended or applied as above provided, the Escrowed
Funds shall constitute additional security for the Debt. The
Escrowed Funds shall
not constitute a trust fund and may be commingled with other
monies held by Lender. No earnings or interest on the Escrowed
Funds shall be
payable to Borrower.
To the extent Borrower timely deposits all required
Escrowed Funds with Lender, Borrower shall be relieved of any
further
obligation to directly pay, or to deliver to Lender any
evidence of the payment of (prior to their expiration or
delinquency), any Insurance
Premiums, Taxes or Other Charges.
7. Condemnation. Borrower shall promptly give
Lender written notice of the actual or threatened commencement
of any exercise
of a right of condemnation or eminent domain affecting all or
any part of the Mortgaged Property (each such event being
hereinafter referred
to as a "Condemnation"), and shall deliver to Lender copies of
any and all papers served in connection with any such
Condemnation.
Notwithstanding any taking (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of
such taking) of
all or any part of the Mortgaged Property through a
Condemnation, Borrower shall continue to pay the Debt at the
time and in the manner
provided for its payment in the Note, this Deed of Trust and
the Other Security Documents, and the Debt shall not be reduced
until any award
or payment therefor shall have been actually received and
applied by Lender (after deducting any expenses of collection)
to the Debt. Lender
shall not be limited to the rate of interest paid on any such
award or payment from a Condemnation but shall be entitled to
receive out of
such award or payment interest at the rate then applicable
under the Note. Borrower shall cause any award or payment
payable to Borrower in
any Condemnation to be paid directly to Lender. Lender shall
apply any such award or payment (after deducting any expenses of
collection) to
the reduction or discharge of the Debt (whether or not then
due and payable). No Prepayment Consideration shall be payable
solely in
connection with such application; provided, however, that
notwithstanding the foregoing, if an Event of Default is
existing as of the date of
the Condemnation, or an event has occurred as of the date of
the Condemnation that with notice and/or the passage of time, or
both, would
constitute an Event of Default hereunder, then any
Condemnation awards or proceeds applied to the Debt pursuant to
this section shall be
subject to the Prepayment Consideration computed in accordance
with the terms of the Note. If the Mortgaged Property is sold,
through
foreclosure or otherwise, prior to the receipt by Lender of
any such award or payment, Lender shall have the right, whether
or not a
deficiency judgment on the Note shall have been sought,
recovered or denied, to receive said award or payment in an
amount sufficient to
fully satisfy the Debt.
8. Leases and Rents. Borrower does hereby
absolutely and unconditionally assign to Lender all current and
future Leases and
Rents, it being intended by Borrower that this assignment
constitutes a present, absolute assignment and not an assignment
for additional
security only. The terms and conditions of this assignment
shall be governed by the Assignment of Leases and Rents (the
"Assignment of
Leases") executed by Borrower in favor of Lender
contemporaneously with this Deed of Trust. Except as permitted
pursuant to the Assignment
of Leases, Borrower shall not enter into any future Leases of
all or any part of the Mortgaged Property.
9. Maintenance, Use and Management of Mortgaged
Property.
(a) Borrower shall cause the Mortgaged Property
to be maintained in a good and safe condition and repair. The
Improvements and the Equipment shall not be removed,
demolished or materially altered (except for normal replacement
of the Equipment)
without the consent of Lender, not to be unreasonably
withheld. Borrower shall promptly comply with all laws, orders
and ordinances
affecting the Mortgaged Property, or the use thereof,
except that Borrower shall be permitted to contest any change or
proposed change
thereto under the same terms and conditions as permitted
in paragraph 5(b), above. Borrower shall promptly repair,
replace or rebuild
any part of the Mortgaged Property which may be
destroyed by any Casualty, become damaged, worn or dilapidated
or which may be affected
by any Condemnation, and shall also complete and pay for
any structure at any time in the process of construction or
repair on the
Premises. Unless Lender otherwise consents in writing,
Borrower shall not initiate, join in, acquiesce in or consent to
any change in
any private restrictive covenant, replat, easement,
zoning law or other public or private restriction, limiting or
defining the uses
which may be made of the Mortgaged Property or any part
thereof. If under applicable zoning provisions the use of all
or any portion
of the Mortgaged Property is or shall become a
nonconforming use, Borrower will not cause or permit such
nonconforming use to be
discontinued or abandoned without the express written
consent of Lender.
(b) Borrower shall use and continuously operate
and permit the use and continuous operation of the Premises and
the
Improvements as provided for in Borrower's original loan
application to Lender.
(c) Unless Lender otherwise consents in
writing, Borrower shall not initiate, join in, acquiesce in or
consent to the
removal or resignation of the managing agent for the
Mortgaged Property or the transfer of ownership, management or
control of such
managing agent to a person or entity other than Borrower
or the general partner or managing partner of Borrower.
10. Sale of Mortgaged Property or Change in
Borrower.
(a) Borrower acknowledges that Lender has
examined and relied on the creditworthiness and experience of
Borrower in
agreeing to make the loan secured hereby, and that
Lender has a valid interest in maintaining the value of the
Mortgaged Property so as
to ensure that should Borrower default in the repayment
of the Debt, Lender can recover the Debt by a sale of the
Mortgaged Property.
(b) Borrower may not Transfer (hereinafter
defined) the Mortgaged Property, nor allow any Change in
Ownership
(hereinafter defined), unless all of the following
conditions shall have been satisfied: (i) Lender has received
Borrower's written
request for a Transfer, or for a Change in Ownership (or
any other request resulting in a new obligor under the Loan) and
Lender shall
have expressly approved such request in writing, subject
to the satisfaction of all requirements hereunder; (ii) no Event
of Default
has occurred and is continuing; (iii) the proposed new
owner/assignee of the Mortgaged Property (the "New Borrower")
meets all of
Lender's Underwriting Standards (hereinafter defined);
(iv) the Mortgaged Property meets all of Lender's Underwriting
Standards related
to its financial condition, cash flow, operating income,
physical condition, management and operation; (v) Borrower
reimburses Lender
for all underwriting costs incurred by Lender in
connection with such Transfer or Change in Ownership (including
without limitation,
engineering and/or architect's fees, environmental
studies, title searches, credit checks, attorney fees
(collectively, "Underwriting
Costs")); (vi) Borrower remits to Lender an assumption
fee in the amount of one percent (1%) of the outstanding balance
of the Debt as
of the date of such Transfer or Change in Ownership, not
as a penalty, but as compensation to Lender for administrative
costs and loss
of Prepayment Consideration. Borrower shall reimburse
Lender for any and all Underwriting Costs incurred by Lender in
connection with
Borrower's written request for a Transfer, or for a
Change in Ownership (or any other request resulting in a new
obligor under the
Loan) whether or not any requested Transfer or Change in
Ownership is approved or consummated. A failure to comply with
any of the
terms of this paragraph 10 shall constitute an Event of
Default, and Lender may then declare the entire Debt immediately
due and
payable upon any such Transfer or Change in Ownership.
(c) "Lender's Underwriting Standards" shall
mean the actual commercial loan underwriting standards of
Midland Loan
Services, L.P. (or any successor entity that is then
servicing the Loan) in effect at the time of the proposed
Transfer or Change in
Ownership, or, if no such standards exist, such
standards which are then customary for a commercial lender in
connection with a
mortgage loan of the size and type of Borrower's loan
from Lender secured hereby.
(d) A "Transfer" is defined as any sale,
conveyance, alienation, mortgage, encumbrance, pledge or other
transfer of the
Mortgaged Property or any part thereof or interest
therein, whether voluntary or involuntary or otherwise. Without
limiting the
generality of the foregoing, a Transfer is deemed to
include: (i) an installment sales agreement wherein Borrower
agrees to sell the
Mortgaged Property or any part thereof for a price to be
paid in installments; (ii) an agreement by Borrower leasing all
or a
substantial part of the Mortgaged Property for other
than actual occupancy by a space tenant thereunder; or (iii) a
sale, assignment or
other transfer of, or the grant of a security interest
in, Borrower's right, title and interest in and to any Leases or
any Rents.
(e) A "Change in Ownership" is defined as
follows: (i) if Borrower, any Guarantor (hereinafter defined),
or any general
partner in Borrower or any Guarantor is a corporation,
the voluntary or involuntary sale, conveyance or transfer of any
of such
corporation's stock (or any of the stock of any
corporation directly or indirectly controlling such corporation
by operation of law or
otherwise), or the creation or issuance of any new stock
in one or a series of transactions, by which an aggregate of
more than forty
percent (40%) of any of such corporation's stock shall
be vested in a party or parties who are not now stockholders
(where appropriate,
a corporation shall be deemed to include a limited
liability company, co-op, business trust, joint venture or other
entity, and the
rules applicable to shares of stock will apply with
equal force to membership shares or similar indicia of
ownership, or actual
ownership interest in these other entities); and (ii) if
Borrower, any Guarantor or any general partner of Borrower or
any Guarantor is
a limited or general partnership or joint venture, the
change, removal or resignation of a general partner or managing
partner. Except
as set forth above, involuntary changes in ownership
resulting from a death or physical or mental disability shall
not be considered a
Change in Ownership.
(f) Borrower shall be released from liability
for the Debt only after: (i) all conditions for a Transfer or
Change in
Ownership have been satisfied; (ii) all security
documents deemed necessary by Lender have been executed,
delivered, recorded and
perfected; (iii) Lender has received a policy of title
insurance (or similar assurance) reflecting the new ownership
and the priority
and perfection of Lender's security; (iv) the New
Borrower has assumed all required personal liability; and (v)
all other reasonable
requirements of Lender are satisfied.
11. No Other Encumbrances Permitted. Except for
financing liens placed against Borrower's inventory in the
normal course of
business, Borrower shall not, directly or indirectly,
mortgage, pledge, hypothecate, encumber, assign or otherwise
place a lien or security
interest against the Mortgaged Property without in each
instance obtaining the prior written consent of Lender, which
consent may be given or
withheld by Lender in each instance in its sole discretion.
If Lender does consent to any additional mortgages or liens, it
may require the
modification of this Deed of Trust, payment of an
administrative fee in an amount determined by Lender and such
other conditions as Lender
shall determine in its sole discretion. Lender shall not be
required to demonstrate any actual impairment of its security or
any increased
risk of default hereunder in order to declare the Debt
immediately due and payable upon such encumbrance. This
provision shall apply to
every sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Mortgaged Property regardless of
whether voluntary or
not, or whether or not Lender has consented to any previous
sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the
Mortgaged Property.
12. Estoppel Certificates and No Default Affidavits.
(a) After request by Lender, Borrower shall
within ten (10) business days furnish Lender with a statement,
duly
acknowledged and certified by Borrower, setting forth:
(i) the amount of the original principal amount of the Note;
(ii) the unpaid
principal amount of the Note; (iii) the rate of interest
of the Note; (iv) the date installments of interest and/or
principal were last
paid; (v) any offsets or defenses to the payment of the
Debt, if any; and (vi) that the Note, this Deed of Trust and the
Other Security
Documents are valid, legal and binding obligations and
have not been modified, or if modified, giving particulars of
such modification.
(b) Within ten (10) business days after request
by Lender, Borrower will furnish Lender with estoppel
certificates, in
form and content satisfactory to Lender, from all
tenants specified by Lender (other than tenants under Leases for
residential
purposes, congregate care services or mini-warehouse
storage rentals (unless such storage rental exceeds ten percent
(10%) of the
rentable square footage of such storage facility)
(collectively "Residential Leases")), or, if any tenant fails to
provide such
estoppel certificate, Borrower shall provide a
certificate with respect to the tenancy of such tenant, in form
and substance
satisfactory to Lender.
13. Cooperation. Borrower acknowledges that Lender
and its successors and assigns may: (a) sell or assign this Deed
of Trust,
the Note and any of the Other Security Documents to one or
more investors as a whole loan; (b) sell or assign a
participation interest in the
Debt to one or more investors; (c) deposit this Deed of Trust,
the Note and any of the Other Security Documents with a trust,
which trust may
sell certificates to investors evidencing an ownership
interest in the trust assets; or (d) otherwise sell or assign
the Debt, the Note, this
Deed of Trust and any of the Other Security Documents, or any
interest therein to investors (the transactions referred to in
subparagraphs (a) through (d) above are hereinafter referred
to as "Secondary Market Transactions"). Borrower shall
cooperate in good faith
with Lender in effecting any such Secondary Market Transaction
and in addressing such matters as any party involved in a
Secondary Market
Transaction may require, including the provision of such
information and documents relating to Borrower, any Guarantors,
the Mortgaged
Property and any tenants of the Improvements as Lender may
reasonably request in connection with a Secondary Market
Transaction. Lender
shall have the right to provide to prospective investors any
information in its possession, including, without limitation,
financial
statements relating to Borrower, any Guarantors, the Mortgaged
Property and any tenant of the Improvements. Borrower
acknowledges that
certain information regarding the Loan and the parties thereto
and the Mortgaged Property may be included in a private
placement memorandum,
prospectus or other disclosure documents.
14. Books and Records; Reporting Requirements.
(a) Borrower and Guarantor(s), if any, shall
keep complete and accurate books and records of account in
accordance with
generally accepted accounting principles consistently
applied. Borrower shall deliver, or cause to be delivered, the
reports and
financial statements described below, all in form
acceptable to Lender (collectively the "Reports"), within the
time period required.
(i) Within ninety (90) days after the
close of each fiscal year of Borrower, Borrower shall deliver,
or cause
to be delivered to Lender: (A) an annual rent roll
(if any), certified by Borrower's chief financial officer (or
other person
acceptable to Lender); (B) an annual operating
statement of the Mortgaged Property, certified by Borrower's
chief financial
officer (or other person acceptable to Lender); and
(C) an annual balance sheet and profit and loss statement of
Borrower
certified by Borrower's chief financial officer (or
other person acceptable to Lender).
(ii) Within ninety (90) days
after the close of the separate individual fiscal years of any
Guarantor,
Borrower shall deliver, or cause to be delivered to
Lender, an annual balance sheet and profit and loss statement of
each
Guarantor, if any, certified by such Guarantor's
chief financial officer (or other person acceptable to Lender).
(iii) Within thirty (30) days
after the close of each calendar quarter, Borrower shall
deliver, or cause to be
delivered the following, all to be certified by
Borrower's chief financial officer (or other person acceptable
to Lender): (A) a
quarterly rent roll (if any); (B) a quarterly
operating statement of the Mortgaged Property; (C) a quarterly
balance sheet and
profit and loss statement of Borrower.
(b) Annually, no later than each February 1
during the term of the Note, Borrower shall deliver to Lender,
for Lender's
approval in its sole discretion, a report (the "Leasing
Report") setting forth the minimum economic terms which Borrower
proposes for
use in connection with the standard lease form for
Leases of portions of the Mortgaged Property during the twelve
month period
beginning upon such anniversary date (if Borrower
intends to lease any such space). The terms set forth in the
Leasing Report (if any)
shall reflect the prevailing market conditions for like
properties in the locality of the Mortgaged Property.
(c) Borrower shall supplement the required
Reports and Leasing Reports and provide such other financial
information in
respect of Borrower, any Guarantor and the Mortgaged
Property as Lender, from time to time, may request. Borrower
acknowledges that,
without timely delivery of complete and accurate Reports
and Leasing Reports, Lender may not be able to execute a
Secondary Market
Transaction. Borrower agrees that failure to timely
deliver any of the Reports or the Leasing Reports shall be an
Event of Default
hereunder.
15. Performance of Other Agreements. Borrower shall
observe and perform each and every term to be observed or
performed by
Borrower pursuant to the terms of any agreement or recorded
instrument affecting or pertaining to the Mortgaged Property.
16. Further Acts, etc. Borrower will, at the cost
of Borrower, and without expense to Lender, do, execute,
acknowledge and
deliver all and every such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment, transfers and
assurances as
Lender shall, from time to time, require for the better
assuring, conveying, assigning, transferring and confirming unto
Lender the property
and rights hereby mortgaged, given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated
or intended now or hereafter so to be, or which Borrower may
be or may hereafter become bound to convey or assign to Lender,
or for carrying
out the intent of or facilitating the performance of the terms
of this Deed of Trust or for filing, registering or recording
this Deed of
Trust. Borrower, on demand, will execute and deliver and
hereby authorizes Lender to execute in the name of Borrower or
without the
signature of Borrower to the extent Lender may lawfully do so,
one or more financing statements, chattel mortgages or other
instruments, to
evidence or perfect more effectively the security interest of
Lender in the Mortgaged Property. Borrower grants to Lender an
irrevocable
power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies
available to Lender
under the Note, this Deed of Trust, the Other Security
Documents, at law or in equity, including without limitation the
rights and remedies
described in this paragraph.
17. Recording of Deed of Trust, etc. Upon the
execution and delivery of this Deed of Trust and thereafter,
from time to time,
Borrower shall cause this Deed of Trust, the Assignment of
Leases and any other instrument creating or evidencing a lien or
security interest
in Lender's favor upon the Mortgaged Property, and each
instrument of further assurance to be filed, registered or
recorded in such manner
and in such places as may be required by any present or future
law in order to publish notice of and fully to protect Lender's
interest in
and lien or security interest upon the Mortgaged Property.
Except where otherwise prohibited by law, Borrower will pay all
filing,
registration or recording fees, and all expenses incident to
the preparation, execution, acknowledgment, and subsequent
release or
reconveyance of this Deed of Trust and the Note, any deed of
trust or mortgage supplemental hereto, any security instrument
with respect to
the Mortgaged Property, any instrument of further assurance
and all federal, state, county and municipal taxes, duties,
imposts, assessments
and charges arising out of or in connection with the same.
Borrower shall hold harmless and indemnify Lender, its
successors and assigns,
against any liability incurred by reason of the imposition of
any tax on the making and recording of this Deed of Trust.
18. Prepayment. The Debt may only be prepaid in
accordance with the terms of the Note.
19. Events of Default. The Debt shall become
immediately due and payable at the option of Lender, without
notice or demand,
upon the occurrence of any one or more of the following events
(each an "Event of Default"):
(a) if Borrower fails to make the full and
punctual payment of any amount payable pursuant to the Note or
hereunder on a
monthly basis, which failure is not cured on or before
the fifth (5th) day after written notice from Lender to Borrower
of such
failure;
(b) if Borrower fails to pay the entire
outstanding principal balance of the Note, together with all
accrued and unpaid
interest, on the date when due, whether on the Maturity
Date (as defined in the Note), or upon acceleration, or on the
Prepayment Date
(as defined in the Note);
(c) if Borrower fails to make the full and
punctual payment of any portion of the Debt (other than payments
described in
subparagraphs (a) and (b) immediately above) which
failure is not cured on or before the twentieth (20th) day after
written notice from
Lender to Borrower of such failure;
(d) if Borrower fails to make the full and
punctual payment of Taxes or Other Charges as required hereby;
(e) if Borrower fails to keep the Policies of
insurance required hereby in full force and effect, or fails to
promptly
deliver copies thereof to Lender upon request;
(f) if a Transfer or a Change in Ownership
occurs in violation of the provisions of this Deed of Trust, or
if Borrower
violates or does not comply with the provisions of the
Assignment of Leases, or paragraphs 36 or 38 of this Deed of
Trust;
(g) if any representation or warranty of
Borrower, or of any person guaranteeing payment of the Debt or
any portion
thereof or performance by Borrower of any of the terms
of this Deed of Trust, the Note or the Other Security Documents
(a "Guarantor"),
made herein, in any guaranty, or in any certificate,
report, financial statement or other instrument or document
furnished to Lender
shall have been false or misleading in any material
respect when made;
(h) if Borrower shall make an assignment for
the benefit of creditors or if Borrower is not paying debts as
and when the
same become due;
(i) if a receiver, liquidator or trustee of
Borrower shall be appointed or if Borrower is adjudicated
bankrupt or
insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy
law, or any similar federal
or state law, shall be filed by or against, consented
to, or acquiesced in by, Borrower or if any proceeding for the
dissolution or
liquidation of Borrower shall be instituted; however, if
such appointment, adjudication, petition or proceeding was
involuntary and not
consented to by Borrower, then upon the same not being
discharged, stayed or dismissed within sixty (60) days;
(j) if Borrower shall be in default under any
other deed of trust, mortgage or security agreement covering any
part of
the Mortgaged Property whether it be superior or junior
in priority to this Deed of Trust (it not being implied by this
clause that any
such encumbrance will be permitted);
(k) if the Mortgaged Property becomes subject
to any mechanic's, materialman's or other lien (other than a
lien for local
real estate taxes and assessments not then due and
payable, or any lien being contested by Borrower pursuant to its
rights hereunder)
and such lien shall remain undischarged of record (by
payment, bonding or otherwise) for a period of thirty (30)
calendar days;
(l) if Borrower fails to promptly and
diligently cure any material violations of laws or ordinances
affecting the
Mortgaged Property; or
(m) if for more than thirty (30) days after
written notice from Lender, Borrower shall fail to perform any
other term,
covenant or condition of the Note, this Deed of Trust or
any of the Other Security Documents; provided, however, that if
such failure
to perform is of a type which cannot be cured within
such thirty (30) day period and Borrower diligently commences
and prosecutes such
cure, Lender shall allow a reasonable additional time
period (not to exceed sixty (60) additional days) to complete
such cure.
20. Default Interest. Upon the occurrence of any
Event of Default (including, without limitation, the failure of
Borrower to
pay the Debt in full on the Maturity Date), Borrower shall pay
interest on the unpaid principal balance of the Note at the
Default Rate (as
defined in the Note).
21. Right to Cure Defaults. Upon the occurrence of
any Event of Default, or if Borrower fails to make any payment
or to do any
act as herein required, Lender may do such acts or make such
payments in Borrower's stead, in such manner and to the extent
that Lender may
deem necessary to protect the security hereof. Any such acts
or payments by Lender shall be at Lender's sole discretion, may
be taken
without notice to or demand on Borrower, and will not release
Borrower from any obligation hereunder. Lender is authorized to
enter upon the
Mortgaged Property for such purposes, or appear in, defend or
bring any action or proceeding to protect its interest in the
Mortgaged
Property, to cause this Deed of Trust to be foreclosed or to
collect the Debt. All such costs and expenses (including
attorney fees)
incurred by Lender in remedying any such Event of Default, in
acting or making payments in Borrower's stead, or in appearing
in, defending or
bringing any of the foregoing actions or proceedings, shall
bear interest at the Default Rate from the date incurred by
Lender until the date
of payment to Lender. All such costs and expenses incurred by
Lender together with interest thereon calculated at the above
rate shall be
deemed to constitute a portion of the Debt and be secured by
this Deed of Trust and the Other Security Documents and shall be
immediately due
and payable upon demand by Lender therefor.
22. Prepayment After Event of Default. If following
the occurrence of any Event of Default, Borrower shall tender
payment of
an amount sufficient to satisfy the Debt at any time prior to
a sale of the Mortgaged Property, either through foreclosure or
the exercise of
other remedies available to Lender under this Deed of Trust or
the Other Security Documents, such tender by Borrower shall be
deemed to be a
voluntary prepayment under the Note and all applicable
Prepayment Consideration shall be immediately due and payable.
23. Lender's Remedies.
(a) Upon the occurrence of any Event of
Default, Lender may take such action, without notice or demand,
as it deems
advisable to protect and enforce its rights against
Borrower and in and to the Mortgaged Property, including,
without limitation, the
following actions:
(i) declare the entire Debt to be
immediately due and payable;
(ii) institute proceedings
to foreclose this Deed of Trust, in which case the Mortgaged
Property or any
interest therein may be sold for cash or upon credit
in one or more parcels or in several interests or portions and
in any order
or manner;
(iii) with or without entry,
to the extent permitted and pursuant to the procedures provided
by applicable law,
institute proceedings for the partial foreclosure of
this Deed of Trust for the portion of the Debt then due and
payable, subject
to the continuing lien of this Deed of Trust for the
balance of the Debt not then due;
(iv) enforce the power of
sale herein granted;
(v) institute an action,
suit or proceeding in equity for the specific performance of any
covenant, condition
or agreement contained herein, in the Note or the
Other Security Documents;
(vi) recover judgment on the
Note either before, during or after any proceedings for the
enforcement of this
Deed of Trust;
(vii) apply for the
appointment of a trustee, receiver, liquidator or conservator of
the Mortgaged Property,
without notice and without regard for the adequacy
of the security for the Debt or the solvency of Borrower, any
Guarantor or of
any person, firm or other entity liable for the
payment of the Debt;
(viii) enforce Lender's
interest in the Leases and Rents and enter into or upon the
Mortgaged Property, either
personally or by its agents, nominees or attorneys
and dispossess Borrower and its agents and servants therefrom,
and thereupon
Lender may: (A) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all
and every part of
the Mortgaged Property and conduct the business
thereat; (B) complete any construction on the Mortgaged Property
in such manner
and form as Lender deems advisable; (C) make
alterations, additions, renewals, replacements and improvements
to or on the
Mortgaged Property; (D) exercise all rights and
powers of Borrower with respect to the Mortgaged Property,
whether in the name of
Borrower or otherwise, including, without
limitation, the right to make, cancel, enforce or modify Leases,
obtain and evict
tenants, and demand, sue for, collect and receive
all earnings, revenues, rents, issues, profits and other income
of the
Mortgaged Property and every part thereof; and (E)
apply the receipts from the Mortgaged Property to the payment of
the Debt,
after deducting therefrom all expenses (including
reasonable attorney fees) incurred in connection with the
aforesaid operations
and all amounts necessary to pay the Taxes,
assessments, Insurance Premiums and Other Charges in connection
with the Mortgaged
Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and
employees; or
(ix) pursue such other
rights and remedies as may be available at law and in equity.
In the event of a sale, by foreclosure or otherwise, of
less than all of the Mortgaged Property, this Deed of Trust
shall continue as a
lien on the remaining portion of the Mortgaged Property.
(b) To the extent permitted by applicable law,
Trustee may adjourn from time to time any sale by it to be made
under or
by virtue of this Deed of Trust by announcement at the
time and place appointed for such sale or for such adjourned
sale or sales; and,
except as otherwise provided by law, Trustee, without
further notice or publication, may make such sale at the time
and place to which
the same shall be so adjourned.
(c) Upon the completion of any sale or sales
made by Trustee under or by virtue of this Deed of Trust,
Trustee, or an
officer of any court empowered to do so, shall execute
and deliver to the purchaser or purchasers a good and sufficient
instrument, or
good and sufficient instruments, conveying, assigning
and transferring all estate, right, title and interest in and to
the property and
rights sold. Trustee is hereby irrevocably appointed
the true and lawful attorney of Borrower, in its name and stead,
to make all
necessary conveyances, assignments, transfers and
deliveries of the Mortgaged Property and rights so sold, and for
that purpose Trustee
may execute all necessary instruments of conveyance,
assignment and transfer, and may substitute one or more persons
with like power,
Borrower hereby ratifying and confirming all that
Trustee or such substitute or substitutes shall lawfully do by
virtue hereof. Any
such sale or sales made under or by virtue of this Deed
of Trust, whether made under the power of sale herein granted or
under or by
virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the
estate, right,
title, interest, claim and demand whatsoever, whether at
law or in equity, of Borrower in and to the properties and
rights so sold, and
shall be a perpetual bar both at law and in equity
against Borrower and against any all persons claiming or who may
claim the same, or
any part thereof from, through or under Borrower.
(d) Upon any sale made under or by virtue of
this Deed of Trust (whether made under the power of sale herein
granted or
under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale), Lender may bid for
and acquire the
Mortgaged Property or any part thereof and in lieu of
paying cash therefor may make settlement for the purchase price
by crediting upon
the Debt the net sales price after deducting therefrom
(to the extent allowed by applicable law) the expenses of the
sale and costs of
the action and any other sums which Lender is authorized
to deduct under this Deed of Trust.
(e) No recovery of any judgment by Lender and
no levy of an execution under any judgment upon the Mortgaged
Property or
upon any other property of Borrower shall affect in any
manner or to any extent the lien of this Deed of Trust upon the
Mortgaged
Property or any part thereof, or any liens, rights,
powers or remedies of Lender hereunder, but such liens, rights,
powers and remedies
of Lender shall continue unimpaired as before.
24. Late Charges. If any portion of the Debt is not
actually received by Lender by close of business on the tenth
(10th) day
after the date on which it was due, Borrower shall pay to
Lender an amount (the "Late Charge") equal to the lesser of five
percent (5%) of
such unpaid portion of the Debt or the maximum amount
permitted by applicable law, to defray the expenses incurred by
Lender in handling and
processing such delinquent payment and to compensate Lender
for the loss of the use of such delinquent payment. All such
Late Charges shall
be automatically due and payable without any notice or demand
and shall be secured by this Deed of Trust and the Other
Security Documents.
25. Changes in the Laws Regarding Taxation. If any
law is enacted or adopted or amended after the date of this Deed
of Trust
which deducts the Debt from the value of the Mortgaged
Property for the purpose of taxation or which imposes a tax,
either directly or
indirectly, on the Debt or Lender's interest in the Mortgaged
Property, Borrower will pay such tax, with interest and
penalties thereon, if
any. In the event Lender is advised by counsel chosen by it
that the payment of such tax or interest and penalties by
Borrower would be
unlawful or taxable to Lender or unenforceable or provide the
basis for a defense of usury, then in any such event, Lender
shall have the
option, by written notice of not less than ninety (90) days,
to declare the entire Debt immediately due and payable;
provided, however, that
no Prepayment Consideration shall be required solely as a
result of a prepayment required by any such declaration.
26. No Credits on Account of the Debt. Borrower
will not claim or demand or be entitled to any credit or credits
on account of
the Debt for any part of the Taxes or Other Charges assessed
against the Mortgaged Property, or any part thereof, and no
deduction shall
otherwise be made or claimed from the assessed value of the
Mortgaged Property, or any part thereof, for real estate tax
purposes by reason
of this Deed of Trust or the Debt. In the event such claim,
credit or deduction shall be required by law, Lender shall have
the option, by
written notice of not less than ninety (90) days, to declare
the entire Debt immediately due and payable; provided, however,
that no
Prepayment Consideration shall be required solely as a result
of a prepayment required by any such declaration.
27. Documentary Stamps. If at any time the United
States of America, any State thereof or any subdivision of any
such State
shall require revenue or other stamps to be affixed to the
Note or this Deed of Trust, or impose any other tax or charge on
the same,
Borrower will pay for the same, with interest and penalties
thereon, if any.
28. Usury Laws. This Deed of Trust, the Other
Security Documents and the Note are subject to the express
condition that at no
time shall Borrower be obligated or required to pay interest
on the Debt or any other charges at a rate which could subject
Lender to either
civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower is permitted by law to
contract or
agree to pay. If by the terms of this Deed of Trust, the
Other Security Documents or the Note, Borrower is at any time
required or obligated
to pay any such amounts at a rate in excess of such maximum
rate, the rate of interest under the Note shall be deemed to be
immediately
reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all previous payments in
excess of such
maximum rate shall be deemed to have been payments in
reduction of the principal and not on account of the interest
due hereunder.
29. Right of Entry. Lender and its agents shall
have the right to enter and inspect the Mortgaged Property at
all reasonable
times.
30. Reasonable Use and Occupancy. In addition to
the rights which Lender may have herein, upon the occurrence of
any Event of
Default, Lender, at its option, may require Borrower to pay
monthly in advance to Lender, or any receiver appointed to
collect the Rents, the
fair and reasonable rental value for the use and occupation of
such part of the Mortgaged Property as may be occupied by
Borrower, or may
require Borrower to vacate and surrender possession of the
Mortgaged Property to Lender or to such receiver and, in default
thereof, Borrower
may be evicted by summary proceedings or otherwise.
31. Security Agreement. This Deed of Trust is both
a real property deed of trust and a "security agreement" within
the meaning
of the Uniform Commercial Code adopted and enacted by the
State or States where any of the Mortgaged Property is located
(the "Uniform
Commercial Code"), made by and between Borrower, as debtor,
and Lender, as secured party, and by and between Borrower, as
debtor, and
Trustee, as secured party. Borrower by executing and
delivering this Deed of Trust has granted and hereby grants to
Lender, as security for
the Debt, a security interest in the Mortgaged Property to the
full extent that the Mortgaged Property may be subject to the
Uniform
Commercial Code (said portion of the Mortgaged Property so
subject to the Uniform Commercial Code being herein referred to
as the
"Collateral"). If an Event of Default shall occur, Lender and
Trustee, in addition to any other rights and remedies which they
may have,
shall have and may exercise immediately and without demand any
and all rights and remedies granted to a secured party upon
default under the
Uniform Commercial Code, including, without limiting the
generality of the foregoing, the right to take possession of the
Collateral or any
part thereof, and to take such other measures as Trustee or
Lender may deem necessary for the care, protection and
preservation of the
Collateral. Upon request or demand of Lender or Trustee,
Borrower shall at its expense assemble the Collateral and make
it available to
Lender or Trustee at a convenient place acceptable to Lender
or Trustee. Borrower shall pay to Lender or Trustee on demand
any and all
expenses, including legal expenses and attorney fees, incurred
or paid by Lender or Trustee in protecting the interest in the
Collateral and
in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended
action by Lender or
Trustee with respect to the Collateral sent to Borrower in
accordance with the provisions hereof at least five (5) days
prior to such action,
shall constitute commercially reasonable notice to Borrower.
The proceeds of any disposition of the Collateral, or any part
thereof, may be
applied by Lender to the payment of the Debt in such priority
and proportions as Lender in its discretion shall deem proper.
32. Actions and Proceedings. Lender or Trustee has
the right to appear in and defend any action or proceeding
brought with
respect to the Mortgaged Property and to bring any action or
proceeding, in the name and on behalf of Borrower, which Lender,
in its
discretion, decides should be brought to protect its interest
in the Mortgaged Property. Lender shall, at its option, be
subrogated to the
lien of any deed of trust, mortgage or other security
instrument discharged in whole or in part by the Debt, and any
such subrogation rights
shall constitute additional security for the payment of the
Debt.
33. Waiver of Counterclaim. Borrower hereby waives
the right to assert a counterclaim, other than a mandatory or
compulsory
counterclaim, in any action or proceeding brought against it
by Lender, and, to the extent permitted by law, waives trial by
jury in any
action or proceeding brought by either party hereto against
the other or in any counterclaim asserted by Lender against
Borrower, or in any
matters whatsoever arising out of or in any way connected with
this Deed of Trust, the Note, any of the Other Security
Documents or the Debt.
34. Recovery of Sums Required to Be Paid. Lender
shall have the right from time to time to take action to recover
any sum or
sums which constitute a part of the Debt as the same become
due, without regard to whether or not the balance of the Debt
shall be due, and
without prejudice to the right of Lender or Trustee thereafter
to bring an action of foreclosure, or any other action, for a
default or
defaults by Borrower existing at the time such earlier action
was commenced.
35. Marshalling and Other Matters. Borrower hereby
waives, to the extent permitted by law, the benefit of all
appraisement,
valuation, stay, extension, reinstatement, redemption and
similar laws now or hereafter in force and all rights of
marshalling in the event
of any sale hereunder of the Mortgaged Property or any part
thereof or any interest therein. Further, Borrower hereby
expressly waives any
and all rights of redemption from sale under any order or
decree of foreclosure of this Deed of Trust on behalf of
Borrower, and on behalf of
each and every person acquiring any interest in or title to
the Mortgaged Property subsequent to the date of this Deed of
Trust and on behalf
of all persons to the extent permitted by applicable law.
36. Hazardous Waste. Borrower hereby represents and
warrants to Lender that, to the best of Borrower's knowledge,
after due
inquiry and investigation: (a) except as disclosed to Lender
in the environmental report specifically referred to in an
addendum (if any)
attached hereto, the Mortgaged Property is not in violation of
any local, state, federal or other governmental authority,
statute, ordinance,
code, order, decree, law, rule or regulation pertaining to or
imposing liability or standards of conduct concerning
environmental regulation,
contamination or cleanup including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended
("CERCLA"), the Resource Conservation and Recovery Act, as
amended ("RCRA"), and any state superlien and environmental
cleanup statutes
(collectively, "Environmental Laws"); (b) the Mortgaged
Property is not subject to any private or governmental lien or
judicial or
administrative notice or action relating to hazardous and/or
toxic, dangerous and/or regulated, substances, wastes,
materials, pollutants or
contaminants, petroleum, petroleum by-products, friable
asbestos, tremolite, anthlophylie or actinolite or
polychlorinated biphenyls
(including, without limitation, any raw materials which
include hazardous constituents) and any other substances or
materials which are
included under or regulated by Environmental Laws
(collectively, "Hazardous Substances"); (c) except as disclosed
to Lender in the
environmental report specifically referred to in an addendum
(if any) attached hereto, no Hazardous Substances are or have
been discharged,
generated, treated, disposed of or stored on, incorporated in,
or removed or transported from the Mortgaged Property otherwise
than in
compliance with all Environmental Laws; and (d) except as
disclosed to Lender in the environmental report specifically
referred to in an
addendum (if any) attached hereto, no underground storage
tanks exist on any of the Mortgaged Property.
Notwithstanding anything previously disclosed to
Lender, so long as Borrower owns or is in possession of the
Mortgaged Property,
Borrower shall keep or cause the Mortgaged Property to be kept
free from Hazardous Substances and in compliance with all
Environmental Laws
and shall notify Lender within five (5) business days after
Borrower becomes aware of the existence of any Hazardous
Substances on, or any
alleged or actual violation of any Environmental Laws with
respect to, the Mortgaged Property. Borrower shall remove any
such Hazardous
Substances and/or cure any such violations, as applicable, as
required by law, promptly after Borrower becomes aware of same,
at Borrower's
sole expense. Additionally, Borrower shall obtain and
implement an asbestos-containing material operations and
maintenance program for all
identified and presumed asbestos-containing materials on or in
the Mortgaged Property. Nothing herein shall prevent Borrower
from recovering
such expenses from any other party (excluding Lender and
Trustee) that may be liable for such removal or cure. If, at
any time and from time
to time while this Deed of Trust is in effect, Lender has
reasonable cause to believe that Borrower has violated, or
permitted any
violations, under this paragraph 36, then Borrower shall
provide, at Borrower's sole expense, an inspection or audit of
the Mortgaged
Property prepared by a licensed hydrogeologist or licensed
environmental engineer approved by Lender indicating the
presence or absence of
Hazardous Substances on, or violation of Environmental Laws at
the Mortgaged Property. If Borrower fails to provide such
inspection or audit
within thirty (30) days after such request, Lender may order
same, and Borrower hereby grants to Lender and its employees and
agents access
to the Mortgaged Property to undertake such inspection or
audit. The cost of such inspection or audit shall be
immediately due and payable,
shall be added to the Debt and shall bear interest at the
Default Rate from the date expended by Lender until paid by
Borrower. The
obligations and liabilities of Borrower under this paragraph
36 shall survive any termination, satisfaction, or assignment of
this Deed of
Trust and the exercise by Lender of any of its rights or
remedies hereunder, including but not limited to, the
acquisition of the Mortgaged
Property by nonjudicial or judicial foreclosure or by a
conveyance in lieu of foreclosure.
37. Access Laws.
(a) Borrower agrees that the Mortgaged Property
shall at all times comply with the requirements of the Americans
with
Disabilities Act of 1990, the Fair Housing Amendments
Act of 1988, all similar state and local laws and ordinances
related to access
and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with
Disabilities Act
Accessibility Guidelines for Buildings and Facilities
(collectively the "Access Laws").
(b) Notwithstanding any provisions set forth
herein or in any other document regarding Lender's approval of
alterations
of the Mortgaged Property, Borrower shall not alter the
Mortgaged Property in any manner which would increase Borrower's
responsibilities for compliance with the applicable
Access Laws without the prior written approval of Lender. The
foregoing shall
apply to tenant improvements constructed by Borrower or
by any of its tenants. Lender may condition any such approval
upon receipt of
a certificate of an architect, engineer or other person
acceptable to Lender regarding compliance with applicable Access
Laws.
(c) Borrower agrees to give prompt notice to
Lender of the receipt by Borrower of any complaints related to
any
violations of any Access Laws and of the commencement of
any proceedings or investigations which relate to compliance
with applicable
Access Laws.
38. Indemnification. In addition to any other
indemnifications provided herein or in the Other Security
Documents, Borrower
shall protect, defend, indemnify and save harmless Lender and
Trustee from and against all liabilities, obligations, claims,
demands,
damages, penalties, causes of action, losses, fines, costs and
expenses (including without limitation reasonable attorney fees
and expenses),
imposed upon, incurred by or asserted against Lender or
Trustee by reason of:
(a) ownership of this Deed of Trust, the
Mortgaged Property or any interest therein or receipt of any
Rents;
(b) any accident, injury to or death of persons
or loss of or damage to property occurring in, on or about the
Mortgaged
Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways;
(c) any use, non-use or condition in, on or
about the Mortgaged Property or any part thereof or on adjoining
sidewalks,
curbs, adjacent property or adjacent parking areas.
streets or ways;
(d) any failure on the part of Borrower or
Trustee to perform or comply with any of the terms of this Deed
of Trust;
(e) performance of any labor or services or the
furnishing of any materials or other property in respect of the
Mortgaged
Property or any part thereof;
(f) the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened
release of any
Hazardous Substance on, from or affecting: (I) the
Mortgaged Property; or (II) any other property by reason of any
use or ownership of
the Mortgaged Property or any action or inaction by
Borrower;
(g) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or
related to any
Hazardous Substance;
(h) any lawsuit brought or threatened,
settlement reached, or government order relating to any
Hazardous Substance on,
from or affecting: (I) the Mortgaged Property; or (II)
any other property by reason of any use or ownership of the
Mortgaged Property
or any action or inaction by Borrower;
(i) any violation of the Environmental Laws,
which are based upon or in any way related to any Hazardous
Substance
including, without limitation, the costs and expenses of
any remedial action, attorney and consultant fees, investigation
and
laboratory fees, court costs, and litigation expenses;
and
(j) any failure of the Mortgaged Property to
comply with any Access Laws.
Any amounts payable to Lender or Trustee by reason of the
application of this indemnification shall be secured by this
Deed of Trust and the
Other Security Documents, shall become immediately due and
payable and shall bear interest at the Default Rate from the
date loss or damage
is sustained by Lender or Trustee until paid. The obligations
and liabilities of Borrower under this paragraph 38 shall
survive any termina-
tion, satisfaction or assignment of this Deed of Trust and the
exercise by Lender of any of its rights or remedies hereunder,
including, but
not limited to, the acquisition of the Mortgaged Property by
nonjudicial or judicial foreclosure or by a conveyance in lieu
of foreclosure.
Notwithstanding the foregoing provisions of this
paragraph 38, or the provisions of paragraph 36 above, or
anything else
contained in this Deed of Trust which may be construed to the
contrary, the indemnity obligations of Borrower specified in
this Deed of Trust
which pertain to Hazardous Substances and Environmental Laws
and which are secured hereby (the "Secured Environmental
Indemnity Obligations")
shall not cover or apply to "Post-Foreclosure Transfer
Environmental Losses" (as defined in the Unsecured Environmental
Indemnity Agreement),
which shall be covered by the Unsecured Environmental
Indemnity Agreement. To the extent that any liabilities,
obligations, claims, demands,
damages, penalties, causes of action, losses, fines, costs and
expenses and other "Losses" (as defined in the Unsecured
Environmental
Indemnity Agreement) are covered by the indemnities of
Borrower to Lender set forth in the Unsecured Environmental
Indemnity Agreement, such
"Losses" shall not be deemed to be covered by or be a part of
the Secured Environmental Indemnity Obligations set forth in
this Deed of Trust
and shall not be secured by this Deed of Trust.
39. Notices. Except as otherwise specified herein,
any notice, consent, request or other communication required or
permitted
to be given hereunder shall be in writing, addressed to the
other party as set forth below (or to such other address or
person as any party
or person entitled to notice may by notice to the other
parties specify), and shall be: (a) personally delivered; (b)
delivered by Federal
Express or some comparable overnight delivery service; or (c)
transmitted by United States certified mail, return receipt
requested with
postage prepaid; to:
Lender: MIDLAND LOAN SERVICES, L.P.
210 West 10th Street, 6th Floor
Kansas City, Missouri 64105
Borrower: GOTTSCHALKS, INC.
7 River Park Place East
Fresno, California 93720
Attention: Alan A. Weinstein
Trustee: FIRST AMERICAN TITLE INSURANCE COMPANY
2000 North Schnoor, Suite 101
Madera, California 93637
Attention: Darryl Evans
Unless otherwise specified, all notices and other
communications shall be deemed to have been duly given on the
first to occur of actual
receipt of the same or: (i) the date of delivery if personally
delivered; (ii) one (1) business day after depositing the same
with the
delivery service if by overnight delivery service; and (iii)
three (3) business days following posting if transmitted by
mail.
40. Authority.
(a) Borrower (and the undersigned
representative of Borrower, if any) has full power, authority
and right to execute,
deliver and perform its obligations pursuant to this
Deed of Trust, and to mortgage, give, grant, bargain, sell,
alien, enfeoff,
convey, confirm, pledge, hypothecate and assign the
Mortgaged Property pursuant to the terms hereof and to keep and
observe all of the
terms of this Deed of Trust on Borrower's part to be
performed.
(b) Borrower represents and warrants that
Borrower is not a "foreign person" within the meaning of Section
1445(f)(3) of
the Internal Revenue Code of 1986, as amended, and the
related Treasury Department regulations, including temporary
regulations.
41. Waiver of Notice. Borrower shall not be
entitled to any notices of any nature whatsoever from Lender or
Trustee except
with respect to matters for which this Deed of Trust
specifically and expressly provides for the giving of notice by
Lender or Trustee to
Borrower and except with respect to matters for which Lender
or Trustee is required by applicable law to give notice, and
Borrower hereby
expressly waives the right to receive any other notice.
42. Remedies of Borrower. In the event that a claim
or adjudication is made that Lender has acted unreasonably or
unreasonably
delayed acting in any case where by law or under the Note,
this Deed of Trust or the Other Security Documents, it has an
obligation to act
reasonably or promptly, Lender shall not be liable for any
monetary damages, and Borrower's remedies shall be limited to
injunctive relief or
declaratory judgment.
43. Sole Discretion of Lender. Wherever pursuant to
this Deed of Trust, Lender exercises any right given to it to
approve or
disapprove, or any arrangement or term is to be satisfactory
to Lender, the decision of Lender to approve or disapprove or to
decide that
arrangements or terms are satisfactory or not satisfactory
shall be in the sole and absolute discretion of Lender and shall
be final and
conclusive, except as may be otherwise expressly and
specifically provided herein.
44. Nonwaiver. The failure of Lender or Trustee to
insist upon strict performance of any term hereof shall not be
deemed to be
a waiver of any term of this Deed of Trust. Borrower shall
not be relieved of Borrower's obligations hereunder by reason
of: (a) the failure
of Lender or Trustee to comply with any request of Borrower or
any Guarantor to take any action to foreclose this Deed of Trust
or otherwise
enforce any of the provisions hereof, of the Note or the Other
Security Documents; (b) the release, regardless of
consideration, of the whole
or any part of the Mortgaged Property, or of any person liable
for the Debt or any portion thereof; or (c) any agreement or
stipulation by
Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Deed of Trust or the
Other Security
Documents. Lender may resort for the payment of the Debt to
any other security held by Lender in such order and manner as
Lender, in its
discretion, may elect. Lender or Trustee may take action to
recover the Debt, or any portion thereof, or to enforce any
covenant hereof
without prejudice to the right of Lender or Trustee thereafter
to foreclose this Deed of Trust. The rights and remedies of
Lender or Trustee
under this Deed of Trust and the Other Security Documents
shall be separate, distinct and cumulative and none shall be
given effect to the
exclusion of the others. No act of Lender or Trustee shall be
construed as an election to proceed under any one provision
herein to the
exclusion of any other provision. Trustee and Lender shall
not be limited exclusively to the rights and remedies herein
stated but shall be
entitled to every right and remedy now or hereafter afforded
at law or in equity.
45. No Oral Change. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived,
extended, changed,
discharged or terminated orally or by any act or failure to
act on the part of Borrower or Lender, but only by an agreement
in writing signed
by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination
is sought.
46. Liability. If Borrower consists of more than
one person, the obligations and liabilities of each such person
hereunder
shall be joint and several. This Deed of Trust shall be
binding upon and inure to the benefit of Borrower and Lender and
their respective
successors and assigns forever.
47. Inapplicable Provisions. If any term, covenant
or condition of the Note or this Deed of Trust is held to be
invalid,
illegal or unenforceable in any respect, the Note and this
Deed of Trust shall be construed without such provision.
48. Headings, etc. The headings and captions of
various paragraphs of this Deed of Trust are for convenience of
reference only
and are not to be construed as defining or limiting, in any
way, the scope or intent of the provisions hereof.
49. Duplicate Originals. This Deed of Trust may be
executed in any number of duplicate originals and each such
duplicate
original shall be deemed to be an original.
50. Concerning Trustee. Trustee shall be under no
duty to take any action hereunder except as expressly required
hereunder or
by law, or to perform any act which would impose upon Trustee
any expense or liability, or require Trustee to institute or
defend any suit in
respect hereof, unless properly indemnified to Trustee's
reasonable satisfaction. Trustee, by acceptance of this Deed of
Trust, covenants to
perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby
waives any
statutory fee and agrees to accept reasonable compensation in
lieu thereof for any services rendered by Trustee hereunder.
Trustee may
resign at any time upon giving thirty (30) days' notice to
Lender. In the event of the death, removal, resignation, or
refusal or inability
to act of Trustee or any duly appointed successor Trustee, or
in Lender's sole discretion for any reason whatsoever, Lender,
from time to
time without notice and without specifying any reason therefor
and without applying to any court, may select and appoint a
successor trustee
by an instrument recorded wherever this Deed of Trust is
recorded and all powers, rights, duties and authority of Trustee
hereunder shall
thereupon become vested in such successor. Such successor
trustee shall not be required to give bond for the faithful
performance of the
duties of Trustee hereunder unless required by Lender. The
procedure provided for in this Deed of Trust for the appointment
of a successor
for the Trustee shall be in addition to and not in exclusion
of any other provisions for such an appointment, by law or
otherwise.
51. Trustee's Costs. Borrower shall pay all costs,
fees and expenses incurred by Trustee and Trustee's agents and
counsel in
connection with the Trustee's performance of its duties
hereunder and all such costs, fees and expenses shall be secured
by this Deed of
Trust.
52. Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically
provided herein,
words used in this Deed of Trust (including pronouns) shall
include the corresponding masculine, feminine or neuter forms,
and the singular
form of such words shall include the plural and vice versa.
The word "Borrower" shall mean "each Borrower and any subsequent
owner or owners
of the Mortgaged Property or any part thereof or any interest
therein"; the word "Lender" shall mean "Lender and any
subsequent holder of the
Note"; the word "Trustee" shall mean "Trustee and any
subsequent holder of this Deed of Trust"; the word "Note" shall
mean "the Note and any
other evidence of indebtedness secured by this Deed of Trust";
the word "person" shall include an individual, corporation,
partnership,
trust, unincorporated association, government, governmental
authority and any other entity; and the words "Mortgaged
Property" shall include
any portion of the Mortgaged Property and any interest
therein.
53. Homestead. Borrower hereby waives and renounces
all homestead and exemption rights provided by the constitution
and the
laws of the United States and of any state, in and to the
Mortgaged Property as against the collection of the Debt, or any
part hereof.
54. Assignments. Lender shall have the right to
assign or transfer its rights under this Deed of Trust without
limitation.
Any assignee or transferee shall be entitled to all the
benefits afforded Lender under this Deed of Trust.
55. Fixture Filing. This Deed of Trust covers
certain Equipment which is or is to become fixtures related to
the Premises and
Improvements and constitutes a "fixture filing" with respect
to such Equipment executed by Borrower (as "debtor") in favor of
Lender (as
"secured party").
56. Integration. This Deed of Trust, the Note and
the Other Security Documents embody the entire agreement by and
between
Borrower and Lender with respect to the Loan, and any and all
prior correspondence, discussions or negotiations are deemed
merged therein;
provided, however, that except to the extent inconsistent with
the specific terms and provisions of this Deed of Trust, the
Note and the
Other Security Documents, all representations, warranties,
statements, covenants and agreements of Borrower contained in
any loan commitment
and/or loan application executed in connection with the Loan
shall survive the funding of the Loan, any termination,
satisfaction, or
assignment of this Deed of Trust and the exercise by Lender of
any of its rights or remedies hereunder, including but not
limited to, the
acquisition of the Mortgaged Property by foreclosure or a
conveyance in lieu of foreclosure.
57. Applicable Law; Jurisdiction. This Deed of
Trust shall be governed and construed in accordance with the
laws of the state
in which the Premises or Improvements encumbered by this Deed
of Trust are located, without regard to conflict of law
provisions thereof.
Borrower hereby submits to personal jurisdiction in the state
courts located in said state and the federal courts of the
United States of
America (and any appellate courts taking appeals thereof)
located in said state for the enforcement of Borrower's
obligations hereunder and
waives any and all personal rights under the law of any other
state to object to jurisdiction within such state for the
purposes of any
action, suit, proceeding or litigation to enforce such
obligations of Borrower. Borrower hereby waives and agrees not
to assert, as a
defense in any action, suit, proceeding or litigation arising
out of or relating to this Deed of Trust, the Note and/or any of
the Other Loan
Documents: (a) that it is not subject to such jurisdiction or
that such action, suit, proceeding or litigation may not be
brought or is not
maintainable in those courts or that this Deed of Trust, the
Note and/or any of the Other Loan Documents may not be enforced
in or by those
courts or that it is exempt or immune from execution; (b) that
the action, suit, proceeding or litigation is brought in an
inconvenient
forum; or (c) that the venue of the action, suit, proceeding
or litigation is improper.
58. Additional Terms and Provisions. Certain
additional and supplemental terms and provisions of this Deed of
Trust are set
forth in the Addendum to Deed of Trust, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing attached
hereto and
incorporated herein by this reference.
59. Counterparts. This Deed of Trust may be
executed in counterparts.
IN WITNESS WHEREOF, Borrower has executed this Deed
of Trust, Security Agreement, Assignment of Leases and Rents and
Fixture
Filing to be effective as of the day and year first above
written.
"Borrower":
GOTTSCHALKS, INC., a Delaware
corporation
By: S/ALAN A. WEINSTEIN_______________
Alan A. Weinstein,
Senior Vice President
By: ___CLARANCE A. KRANTZ_________
__SENIOR VICE PRESIDENT________
[Printed Name and Title]
ADDENDUM
TO
DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND
RENTS, AND FIXTURE FILING
This Addendum to Deed of Trust, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing ("Addendum")
contains
certain additional and supplemental terms and provisions of
the Deed of Trust, Security Agreement, Assignment of Leases and
Rents, and
Fixture Filing (the "Deed of Trust") dated as of September 29,
1995, executed by GOTTSCHALKS, INC., a Delaware corporation, as
Borrower, in
favor of FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee,
for the benefit of MIDLAND LOAN SERVICES, L.P., as Lender. The
terms and
provisions of this Addendum control and supersede any
conflicting terms and provisions contained in the body of such
Deed of Trust.
1. Environmental Report. The environmental report
referred to in the Deed of Trust is the Phase I Environmental
Site
Assessment dated September 22, 1995, prepared by Atec
Associates, Inc., in favor of Midland Commercial Funding.
2. Accounts Receivable. The term "Mortgaged
Property" shall not include accounts receivable arising out of
Borrower's private
label credit card program, and the collections and proceeds
thereof in whatever form (including any related "instruments,"
"documents" and
"chattel paper," each as defined under the California Uniform
Commercial Code), all deposit accounts associated therewith, and
all books and
records related thereto, after the sale of such accounts by
Borrower to Gottschalks Credit Receivables Corporation.
3. Cross Collateralization. In addition to all
other obligations secured by this Deed of Trust, this Deed of
Trust shall also
secure the payment and performance of all obligations secured
by the following deeds of trust (collectively, the "Additional
Deeds of
Trust"): (a) that certain Deed of Trust, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing dated as of
even date
herewith, executed by Borrower for the benefit of Lender with
respect to Lender's Loan No. 940902450, and to be recorded
substantially
concurrently herewith in the Official Records of Los Angeles
County, California (including without limitation all of
Borrower's obligation in
connection with that certain Promissory Note dated September
29, 1995, in the original face amount of $6,075,000, executed by
Borrower to the
order of Lender); (b) that certain Deed of Trust, Security
Agreement, Assignment of Leases and Rents, and Fixture Filing
dated as of even
date herewith, executed by Borrower for the benefit of Lender
with respect to Lender's Loan No. 940902452, and to be recorded
substantially
concurrently herewith in the Official Records of Humboldt
County, California (including without limitation all of
Borrower's obligation in
connection with that certain Promissory Note dated September
29, 1995, in the original face amount of $4,355,000, executed by
Borrower to the
order of Lender); and (c) that certain Deed of Trust, Security
Agreement, Assignment of Leases and Rents, and Fixture Filing
dated as of even
date herewith, executed by Borrower for the benefit of Lender
with respect to Lender's Loan No. 940902453, and to be recorded
substantially
concurrently herewith in the Official Records of Sutter
County, California (including without limitation all of
Borrower's obligation in
connection with that certain Promissory Note dated September
29, 1995, in the original face amount of $4,470,000, executed by
Borrower to the
order of Lender). In addition, the Additional Deeds of Trust
shall secure the payment and performance of all obligations
secured by this
Deed of Trust.
4. Cross Default. Any event of default under any
of the Additional Deeds of Trust shall, at Lender's option,
constitute an
Event of Default under this Deed of Trust. In addition, any
Event of Default under this Deed of Trust shall, at Lender's
option, constitute
an event of default under the Additional Deeds of Trust.
5. Release. Lender, in its sole discretion, shall
have the right to release this Deed of Trust and/or any of the
Additional
Deeds of Trust from the provisions of Section 1 and/or Section
2 of this Addendum. Lender shall give Borrower notice of any
such release
within a reasonable time following such release.
6. Waiver of Marshalling Rights. Without limiting
any other provision of this Deed of Trust, Borrower waives all
rights to
have all or part of the Mortgaged Property described herein
and/or any of the properties encumbered by the Additional Deeds
of Trust
marshalled upon any foreclosure of the Deed of Trust or any of
the Additional Deeds of Trust. Lender shall have the right to
sell, and any
court in which foreclosure proceedings may be brought shall
have the right to order a sale of the property described in this
Deed of Trust
and/or any of the Additional Deeds of Trust as a whole or in
separate parcels, in any order that Lender may designate.
Borrower makes this
waiver for itself, for all persons and entities claiming
through or under Borrower and for persons and entities who may
acquire a lien on all
or any part of the property described in this Deed of Trust
and/or any of the Additional Deeds of Trust, or on any interest
therein.
7. Escrowed Funds. Borrower shall make the monthly
deposits with Lender of the Escrowed Funds described in Section
6 of this
Deed of Trust; provided, however, that (a) so long as Borrower
is providing financial reporting to, and is in good standing
with, the
Security and Exchange Commission, Borrower shall not be
required to make monthly deposits of the portion of the Escrowed
Funds required for
payment of Insurance Premiums, and (b) Lender shall hold the
Escrowed Funds in an interest bearing account, with accrued
interest to be
applied, in lender's sole discretion, towards payment of
future Taxes and Other Charges or returned to Borrower.
8. Assignment of Purchase Option Proceeds. Without
in any way limiting any other provision of this Deed of Trust,
Borrower
agrees as follows:
(a) Pursuant to certain separate agreements
(collectively, the "Separate Agreement") dated October 1, 1989
between County East Mall,
a California joint venture partnership ("Developer") and
Borrower, a memorandum of which was recorded November 28, 1990
in Book 16269, Page
251 in the Official Records of Contra Costa County,
California, Developer has the option ("Purchase Option") to
purchase the Mortgaged
Property from Borrower upon the occurrence of certain
events.
(b) To further secure the payment and
performance of the Loan and all other present and future
indebtedness and
obligations now or hereafter secured by this Deed of
Trust and/or the Other Security Documents, Borrower hereby
assigns, grants,
transfers, conveys and pledges to Lender, with power of
sale, all of Borrower's present and future right, title and
interest in and to
the Purchase Option and all proceeds payable to Borrower
in connection therewith ("Proceeds"), including without
limitation all down
payments, deposits, option payments, extension payments
and any other payments of the purchase price for the Mortgaged
Property,
whether held by Borrower, an escrow agent, a broker, or
any other person or entity.
(c) Borrower represents, warrants and agrees
that: (i) Borrower has and will continue to have full right,
title and
interest in and to the seller's interest in the Purchase
Option and the Proceeds, free from any liens, encumbrances,
defenses or other
claims; (ii) the assignment of such interest and the
Proceeds constitutes and will continue to constitute a first,
prior and
indefeasible assignment; (iii) no financing statement
covering Borrower's interest in the Purchase Option, the
Proceeds, or any part
thereof, is on file in any public office, except in
favor of Lender; (iv) Borrower will execute all documents and
take such other
action as Lender deems necessary to create and perfect a
valid first priority assignment in Borrower's interest in the
Purchase Option
and the Proceeds; (v) Borrower will, at its sole cost
and expense, defend any claims that may be made against or with
respect to
Borrower's interest in the Purchase Option or the
Proceeds; (vi) Borrower will not, without Lender's prior written
consent, transfer,
sell, encumber or otherwise dispose of Borrower's
interest in the Purchase Option or the Proceeds; and (vii)
Borrower will permit
Lender to inspect Borrower's books and records
pertaining to the Purchase Option and the Proceeds at any
reasonable time.
(d) Borrower further represents, warrants and
agrees that: (i) the Purchase Option is enforceable in
accordance with its
terms and has not been altered, amended or modified in
anyway and Borrower's right to the Proceeds is not subject to
any defenses,
offsets or other claims; (ii) Borrower has not
heretofore transferred, conveyed, encumbered, assigned or
released any of its interest
in the Purchase Option or the Proceeds; (iii) Borrower
will take all steps necessary to preserve and maintain its
interest in the
Purchase Option and the Proceeds; (iv) Borrower will
perform each obligation required of Borrower in the Separate
Agreement and will
enforce or secure the performance of each obligation of
the Developer thereunder; and (v) Borrower will not, without
Lender's prior
written consent, alter, amend, cancel, extend, modify,
renew, supplement or terminate the Purchase Option.
(e) Unless Lender otherwise consents in
writing, all Proceeds shall be paid directly to Lender, and
shall be applied to
the indebtedness and obligations secured by this Deed of
Trust in such order and manner as Lender, in its sole
discretion, may require.
(f) Borrower hereby irrevocably authorizes and
directs Developer, or any escrow agent handling the purchase, to
pay all
Proceeds directly to Lender (until receipt by Developer
or such escrow agent of a contrary direction by Lender in
writing), and all
such Proceeds received by Lender shall be as if received
by Borrower for purposes of consummating the sale of the
Mortgaged Property in
accordance with the Purchase Option. Borrower hereby
agrees that if any Proceeds are delivered to Borrower, Borrower
acknowledges that
it shall be deemed to be holding such Proceeds in trust
for the benefit of Lender and shall immediately turn over the
same to Lender.
<PAGE>
EXHIBIT A
Legal
Description
PARCEL 1
PARCEL D OF THAT CERTAIN PARCEL MAP SUBDIVISION J.S. 10-90, IN
THE CITY OF ANTIOCH COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA
FILED NOVEMBER
27, 1990 IN BOOK 149, PAGE 41, OF PARCEL MAPS, RECORDS OF
CONTRA COSTA COUNTY, CALIFORNIA.
PARCEL 2
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, INCLUDING BUT
NOT LIMITED TO EASEMENTS FOR INGRESS AND EGRESS, AUTOMOBILE
PARKING, PEDESTRIAN
USES, CONSTRUCTION, INSTALLATION, OPERATION AND MAINTENANCE OF
SEPARATE AND COMMON UTILITY LINES, STRUCTURE SUPPORT, SIGNS AND
OTHER USES,
ALL AS GRANTED BY THAT CERTAIN DOCUMENT ENTITLED:
"THIRD AMENDMENT TO AND RESTATEMENT OF CONSTRUCTION, OPERATION
AND RECIPROCAL EASEMENT AGREEMENT" DATED OCTOBER 1, 1989,
EXECUTED BY AND
BETWEEN COUNTY EAST MALL, A CALIFORNIA JOINT VENTURE
PARTNERSHIP, AND HEXALON REAL ESTATE, INC., A DELAWARE
CORPORATION, SUCCESSOR IN
INTEREST TO COUNTY EAST ASSOCIATES, A PARTNERSHIP, SEARS,
ROEBUCK AND CO., A NEW YORK CORPORATION, MERVYN'S, A CALIFORNIA
CORPORATION,
GOTTSCHALKS INC., A DELAWARE CORPORATION, AND J.C. PENNEY
COMPANY, INC., A DELAWARE CORPORATION, RECORDED ON NOVEMBER 28,
1990 IN BOOK 16269,
AT PAGE 1, OFFICIAL RECORDS OF CONTRA COSTA COUNTY,
CALIFORNIA, IN, OVER AND UPON THE LAND DESCRIBED THEREIN.
PARCEL 3
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, FOR PURPOSES OF
VEHICULAR PARKING AND PEDESTRIAN AND VEHICULAR INGRESS AND
EGRESS TO AND FROM
PUBLIC STREETS, ON, OVER AND ACROSS THOSE PORTIONS OF THE
"DEVELOPER TRACT", AS DESCRIBED IN THAT CERATIN EASEMENT
AGREEMENT, DATED OCTOBER
1, 1989 BY AND BETWEEN GOTTSCHALKS INC., A CALIFORNIA
CORPORATION AND COUNTY EAST MALL, A JOINT VENTURE PARTNERSHIP,
RECORDED NOVEMBER 28,
1990 IN BOOK 16269, PAGE 287, OF OFFICIAL RECORDS OF CONTRA
COSTA COUNTY.
<PAGE>
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
)
COUNTY OF __________ )
On ______________, 1995 before me,
___________________________,
Notary Public, personally appeared
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to
the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and
that by
his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS my hand and official seal.
_______________________________
STATE OF CALIFORNIA )
)
COUNTY OF __________ )
On ______________, 1995 before me,
___________________________,
Notary Public, personally appeared
personally known to me or proved to me on the basis of
satisfactory
evidence to be the person(s) whose name(s) is/are subscribed
to the within instrument and acknowledged to me that he/she/they
executed the
same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or
the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
09-28-95/KBP-55812/MYC
RECORDING REQUESTED BY AND )
WHEN RECORDED RETURN TO: )
)
MIDLAND LOAN SERVICES, L.P. )
210 West 10th Street, 6th Fl. )
Kansas City, MO 64105 )
Attention: MCF Closing Dept. )
Loan No.: 94-0902451 )
___________________________________________________________________________
SPACE ABOVE LINE FOR RECORDER'S USE ONLY
GOTTSCHALKS,
INC.
(Borrower)
to
MIDLAND LOAN
SERVICES, L.P.
(Lender)
ASSIGNMENT OF LEASES
AND RENTS
Dated: September
29, 1995
Location: Antioch,
California
<PAGE>
ASSIGNMENT OF LEASES
AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS ("Assignment") is
made as of the 29th day of September, 1995, by GOTTSCHALKS,
INC., a
Delaware corporation ("Borrower") having its principal place
of business at 7 River Park Place East, Fresno, California
93720, to Midland
Loan Services, L.P., a Missouri limited partnership
("Lender"), having its principal place of business at 210 West
10th Street, 6th Floor,
Kansas City, Missouri 64105.
W I T N E S S E
T H:
THAT Borrower for good and valuable consideration,
receipt whereof is hereby acknowledged, hereby grants, transfers
and
absolutely and unconditionally assigns to Lender Borrower's
entire interest in and to all current and future leases,
reciprocal easement
agreements and other agreements (together with any extensions
or renewals of the same without further or supplemental
assignment), now or
hereafter made and affecting the use, enjoyment, or occupancy
of all or any part of that certain real property more
particularly described in
Exhibit A attached hereto and made a part hereof, together
with the buildings, structures, fixtures, additions,
enlargements, extensions,
modifications, repairs, replacements and improvements now or
hereafter located thereon (hereinafter collectively referred to
as the
"Mortgaged Property"), all of the same being hereinafter
collectively referred to as the "Leases";
TOGETHER WITH all rents (including, without
limitation, percentage rents), income, issues, revenues,
proceeds and profits arising
from the Leases and all rents, income, issues, revenues,
proceeds and profits (including, but not limited to, all oil and
gas or other
mineral royalties and bonuses) from the use, enjoyment and
occupancy of the Mortgaged Property (hereinafter collectively
referred to as the
"Rents").
THIS ASSIGNMENT is made on the following terms,
covenants and conditions:
1. Indebtedness Secured. This Assignment is made
for the purposes of securing:
(a) The payment of the Debt (hereinafter
defined), including, without limitation, the principal sum,
interest and all
other sums evidenced by that certain Promissory Note
(the "Note") executed by Borrower contemporaneously with this
Assignment and
payable to the order of Lender.
(b) The performance and discharge of each and
every obligation, covenant and agreement of Borrower contained
herein, in
the Note, in the Mortgage (as defined in the Note) and
in any of the Other Security Documents (as defined in the Note).
2. Borrower's Warranties. Borrower warrants that:
(i) Borrower is the sole owner of the entire lessor's interest
in the
Leases; (ii) the Leases are in all material respects valid and
enforceable and have not been altered, modified or amended in
any manner since
copies of same were last delivered to Lender; (iii) none of
the Rents reserved in the Leases have been assigned or otherwise
pledged or
hypothecated; (iv) none of the Rents have been collected for
more than one (1) month in advance; (v) Borrower has full power
and authority to
execute and deliver this Assignment and the execution and
delivery of this Assignment has been duly authorized and does
not conflict with or
constitute a default under any law, judicial order or other
agreement affecting Borrower or the Mortgaged Property; (vi) the
premises demised
under the Leases have been completed and the tenants under the
Leases have accepted the same and have taken possession of the
same on a rent-paying basis; (vii) to the best of Borrower's
knowledge, there exist no offsets or defenses to the payment of
any portion of the Rents; and
(viii) other than Leases for all or any part of the Mortgaged
Property for residential purposes, for congregate care services
or for mini-warehouse storage rentals (except for storage
rentals of ten percent (10%) or more of the rentable square
footage of such storage facility)
(collectively "Residential Leases"), true and correct copies
of all Leases in existence as of the date of this Assignment
were delivered to
Lender prior to the execution of this Assignment.
3. Present and Absolute Assignment. Borrower does
hereby absolutely and unconditionally assign to Lender all of
Borrower's
right, title and interest in all current and future Leases and
Rents, it being intended by Borrower that this Assignment
constitutes a
present, absolute and unconditional assignment and not an
assignment for additional security only. Nothing herein shall
be construed to bind
Lender to the performance of any of the covenants, conditions,
or provisions contained in any of the Leases or otherwise to
impose any
obligation upon Lender. Borrower agrees to execute and
deliver to Lender such additional instruments, in form and
substance satisfactory to
Lender, as Borrower may hereinafter require to further
evidence and confirm this Assignment. Lender is hereby granted
the right to enter the
Mortgaged Property for the purpose of enforcing Lender's
interest in the Leases and the Rents, this Assignment
constituting a present,
absolute and unconditional assignment of the Leases and Rents.
Nevertheless, subject to the terms hereof, Lender grants to
Borrower a
revocable license to operate and manage the Mortgaged Property
and to collect the Rents. Borrower shall hold the Rents for use
in the
payment of all current sums due on the Debt. Upon an Event of
Default (as defined in the Mortgage), the license granted to
Borrower herein
shall be automatically terminated and Lender shall immediately
be entitled to receive and apply all Rents, whether or not
Lender enters upon
and takes possession or control of the Mortgaged Property.
Lender is hereby granted the right, at its option, upon the
termination of the
license granted Borrower herein to enter upon the Mortgaged
Property in person, by agent or by court-appointed receiver to
collect the Rents.
Any Rents collected after the termination of the license
herein granted may be applied toward payment of the Debt in such
order and manner as
Lender, in its sole and absolute discretion, shall deem
proper.
4. Performance of Leases. With respect to all Leases,
Borrower shall: (i) observe and perform all the obligations
imposed upon
Borrower as landlord; (ii) not do or permit to be done
anything to impair the value of any of the Leases as security
for the Debt;
(iii) other than Residential Leases, promptly send to Lender
copies of all notices of default which Borrower shall send or
receive
thereunder; (iv) enforce all of the material terms, covenants
and conditions which are to be performed by any tenant, short of
termination
thereof; (v) not collect any of the Rents more than one (1)
month in advance; (vi) not execute any other assignment of
Borrower's interest in
any of the Leases or the Rents; (vii) execute and deliver at
the request of Lender all such further assurances, confirmations
and assignments
in connection with the Mortgaged Property as Lender shall from
time to time require; and (viii) not extend any Lease or enter
into any new or
renewal Lease affecting the Mortgaged Property except as
allowed pursuant to this Assignment.
5. Acts Requiring Lender's Approval.
(a) Without obtaining Lender's prior written
approval (which shall not be unreasonably withheld), Borrower
shall not:
(i) extend any Lease or enter into
any new or renewal Lease affecting the Mortgaged Property;
provided,
however, that no such approval is required if: (A)
such Lease is written on a standard form of lease approved in
writing by
Lender with no material changes to such standard
form; (B) all of the terms of such Lease equal or exceed the
requirements set
forth in the then applicable Lease Report (as
defined in the Mortgage); (C) such Lease is an arm's-length
transaction with an
unrelated third party tenant; (D) an executed copy
of such Lease (other than Residential Leases, unless requested
by Lender)
shall be furnished to Lender within ten (10) days
after its execution; (E) such Lease provides that upon
Borrower's request the
tenant thereunder shall subordinate such Lease to
the Mortgage and shall agree to attorn to Lender and such
subordination and
attornment shall be evidenced by a written agreement
executed by such tenant in form and substance satisfactory to
Lender;
(ii) other than Residential
Leases, consent to any assignment of or subletting by any tenant
under any of the
Leases (except in accordance with the terms of such
tenant's Lease);
(iii) alter, modify, change,
cancel or terminate any guaranty of any of the Leases;
(iv) other than Residential
Leases, materially alter, modify, change the terms of, cancel,
terminate or accept
a surrender of any of the Leases; or
(v) transfer or permit a
transfer of the Mortgaged Property or of any interest therein,
even if such a
transfer is permitted under the Mortgage, if such
transfer would effect a merger of the estates and rights of, or
a termination
or diminution of the obligations of, tenants under
any of the Leases.
Each request by Borrower for Lender's written approval under
this Section 5(a) shall be made in accordance with Section 12
hereof.
(b) Notwithstanding anything to the contrary
contained in Section 5(a), Borrower agrees that: (i) Borrower
shall not
modify, amend, supplement or replace the approved
standard form of lease referred to in Section 5(a)(i) without
Lender's prior written
approval, which approval shall not be unreasonably
withheld; and (ii) Borrower shall not enter into, materially
modify, extend, renew
or terminate any Lease in respect of forty percent (40%)
or more of the rentable space at the Mortgaged Property without
Lender's prior
written approval, which approval may be withheld or
granted in Lender's sole discretion. Any request for approval
under this
Section 5(b) shall be made in accordance with Section 12
hereof.
6. Remedies of Lender. Upon or at any time after an
Event of Default, Lender may, at its option, without waiving
such Event of
Default, without notice and without regard to the adequacy of
the security for the Debt: (i) in person or by agent, with or
without bringing
any action or proceeding, or by a receiver appointed by a
court, take possession of the Mortgaged Property and have, hold,
manage, lease and
operate the Mortgaged Property on such terms and for such
period of time as Lender may deem proper; (ii) with or without
taking possession of
the Mortgaged Property in its own name, demand, sue for or
otherwise collect and receive all Rents, including those past
due and unpaid, and
(iii) make from time to time all alterations, renovations,
repairs or replacements to the Mortgaged Property as Lender
deems proper. Lender
may apply any Rents obtained by it to the payment of the
following in such manner and order as Lender in its sole and
absolute discretion may
determine, any law, custom or use to the contrary
notwithstanding: (a) all expenses of securing, managing,
operating and maintaining the
Mortgaged Property, including, without limitation, the
salaries, fees and wages of a managing agent and such other
employees or agents as
Lender may deem necessary or desirable, all taxes, charges,
claims, assessments, water charges, sewer rents and any other
liens, premiums for
all insurance which Lender may deem necessary or desirable,
the cost of all alterations, renovations, repairs or
replacements, and all
expenses incident to taking and retaining possession of the
Mortgaged Property; and (b) the Debt, together with all court
costs and attorney
fees, receiver fees and all other costs and expenses incurred
by Lender. Upon the occurrence of an Event of Default, Lender,
at its option,
may either require Borrower to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair
and reasonable
rental value for the use and occupation of such part of the
Mortgaged Property as may be in possession of Borrower or may
require Borrower to
vacate and surrender possession of the Mortgaged Property to
Lender or to such receiver and, in default thereof, Borrower may
be evicted by
summary proceedings or otherwise. Borrower grants to Lender
its irrevocable power of attorney, coupled with an interest, to
take any and all
actions allowed hereunder and any or all other actions
designated by Lender for the proper management and preservation
of the Mortgaged
Property. The exercise by Lender of any particular remedy or
right hereunder and the collection of the Rents and the
application thereof as
herein provided shall not be considered a waiver of any Event
of Default by Borrower.
7. No Liability of Lender. Lender shall not be liable
for any loss sustained by Borrower resulting from Lender's
failure to let the
Mortgaged Property after an Event of Default or from any other
act or omission of Lender in managing the Mortgaged Property
after an Event of
Default unless such loss is caused by the willful misconduct
and bad faith of Lender. Lender shall not be obligated to
perform or discharge
any obligation, duty or liability under the Leases or under or
by reason of this Assignment. Borrower hereby agrees to hold
Lender harmless
from any and all liability, loss or damage (including attorney
fees and the costs of defense) from any and all claims and
demands whatsoever
asserted against Lender pursuant to the Leases or this
Assignment, including, without limitation, any claims or demands
related to any
alleged obligations or alleged undertakings on Lender's part
to perform or discharge any of the terms, covenants or
agreements contained in
the Leases. Borrower shall reimburse Lender immediately upon
demand for the amount of any such liability, loss or damage, the
payment of
which shall be secured by this Assignment, by the Mortgage and
by the Other Security Documents. Upon the failure of Borrower
to reimburse
Lender, Lender may, at its option, declare the entire Debt
immediately due and payable. This Assignment shall not obligate
or make Lender
liable for (i) the control, care, management or repair of the
Mortgaged Property, (ii) the carrying out of any of the terms
and conditions of
the Leases, (iii) any waste committed on the Mortgaged
Property by the tenants or any other parties, (iv) any dangerous
or defective
condition of the Mortgaged Property, including without
limitation the presence of any Hazardous Substances (as defined
in the Mortgage), or
(v) any negligence in the management, upkeep, repair or
control of the Mortgaged Property resulting in loss or injury or
death to any tenant,
licensee, employee or stranger.
8. Notice to Tenants. Borrower hereby authorizes and
directs all tenants or occupants now or in the future possessing
any rights in
the Mortgaged Property pursuant to any of the Leases, upon
receipt from Lender of written notice to the effect that Lender
is then the holder
of the Mortgage and that a default exists thereunder, under
this Assignment, under the Note or under the Other Security
Documents, to pay
over to Lender all Rents and to continue to do so until
otherwise notified by Lender in writing.
9. Other Security. Lender may take or release other
security for the payment of the Debt, may release any party
primarily or
secondarily liable therefor and may apply any other security
held by it to the reduction or satisfaction of the Debt without
prejudice to any
of its rights under this Assignment.
10. Other Remedies. Nothing contained in this Assignment
and no act done or omitted by Lender pursuant to the power and
rights
granted to Lender hereunder shall be deemed to prejudice or
waive Lender's rights and remedies under the Note, the Mortgage,
or the Other
Security Documents. Lender's right to collect the Debt and to
enforce any other security held by it may be exercised by Lender
either prior
to, simultaneously with, or subsequent to any action taken by
it hereunder.
11. No Mortgagee-in-Possession. Nothing herein contained
shall be construed as constituting Lender a
"mortgagee-in-possession" or
"beneficiary-in-possession" in the absence of the taking of
actual possession of the Mortgaged Property by Lender. Borrower
hereby expressly
waives and releases all claims and liability against Lender in
Lender's exercise of its rights and powers hereunder.
12. Notices. Except as otherwise specified herein, any
notice, consent, request or other communication required or
permitted to be
given hereunder shall be in writing, addressed to the other
party as set forth below (or to such other address or person as
either party or
person entitled to notice may by notice to the other party
specify), and shall be: (a) personally delivered; (b) delivered
by Federal Express
or other comparable overnight delivery service; or (c)
transmitted by United States certified mail, return receipt
requested with postage
prepaid; to:
Lender: MIDLAND LOAN SERVICES, L.P.
210 West 10th Street, 6th Floor
Kansas City, Missouri 64105
Borrower: GOTTSCHALKS, INC.
7 River Park Place East
Fresno, California 93720
Attention: Alan A. Weinstein
Unless otherwise specified, all notices and other
communications shall be deemed to have been duly given on the
first to occur of actual
receipt of the same or: (i) the date of delivery if personally
delivered; (ii) one (1) business day after depositing the same
with the
delivery service if by overnight delivery service; and (iii)
three (3) days following posting if transmitted by mail.
13. Conflict of Terms. In case of any conflict between
the terms of this Assignment and the terms of either the Note or
the
Mortgage, the terms of the Note and the Mortgage shall
prevail.
14. No Oral Change. This Assignment and any provisions
hereof may not be modified, amended, waived, extended, changed,
discharged or
terminated orally, or by any act or failure to act on the part
of Borrower or Lender, but only by an agreement in writing
signed by the party
against whom the enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.
15. Certain Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically
provided herein,
words used in this Assignment (including pronouns) shall
include the corresponding masculine, feminine or neuter forms,
and the singular form
of such words shall include the plural and vice versa. The
word "Borrower" shall mean "each Borrower and any subsequent
owner or owners of
the Mortgaged Property or any part thereof or any interest
therein"; the word "Lender" shall mean "Lender and any
subsequent holder of the
Note"; the word "Note" shall mean "the Note and any other
evidence of indebtedness secured by the Mortgage"; the word
"person" shall include
an individual, corporation, partnership, trust, unincorporated
association, government, governmental authority and any other
entity; the
words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein; and the word "Debt"
shall mean all
amounts due and payable under the Note, together with all sums
due under the Mortgage and the Other Security Documents,
including applicable
attorney fees and costs.
16. Non-Waiver. The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be
a waiver of any
term of this Assignment. Borrower shall not be relieved of
Borrower's obligations hereunder by reason of (i) failure of
Lender to comply
with any request of Borrower or any other party to take any
action to enforce any of the provisions hereof or of the
Mortgage, the Note or
the Other Security Documents; (ii) the release, regardless of
consideration, of the whole or any part of the Mortgaged
Property, or (iii) any
agreement or stipulation by Lender extending the time of
payment or otherwise modifying or supplementing the terms of
this Assignment, the
Note, the Mortgage or the Other Security Documents. Lender
may resort for the payment of the Debt to any other security
held by Lender in
such order and manner as Lender, in its sole and absolute
discretion, may elect. Lender may take any action to recover
the Debt, or any
portion thereof or to enforce any covenant hereof without
prejudice to the right of Lender thereafter to enforce its
rights under this
Assignment. The rights of Lender under this Assignment shall
be separate, distinct and cumulative and none shall be given
effect to the
exclusion of the others. No act of Lender shall be construed
as an election to proceed under any one provision herein to the
exclusion of
any other provision.
17. Inapplicable Terms, Covenants or Conditions. If any
term, covenant or condition of this Assignment is held to be
invalid,
illegal or unenforceable in any respect, this Assignment shall
be construed without such term, covenant or condition.
18. Duplicate Originals. This Assignment may be executed
in counterparts and in any number of duplicate originals, each
of which
shall be deemed to be an original.
19. Applicable Law; Jurisdiction. This Assignment shall
be governed and construed in accordance with the laws of the
state in which
the real property encumbered by the Mortgage is located,
without regard to conflict of law provisions thereof. Borrower
hereby submits to
personal jurisdiction in the state courts located in said
state and the federal courts of the United States of America
(and any appellate
courts taking appeals thereof) located in said state for the
enforcement of Borrower's obligations hereunder and waives any
and all personal
rights under the law of any other state to object to
jurisdiction within such state for the purposes of any action,
suit, proceeding or
litigation to enforce such obligations of Borrower. Borrower
hereby waives and agrees not to assert, as a defense in any
action, suit,
proceeding or litigation arising out of or relating to this
Assignment, the Note, the Mortgage and/or any of the Other
Security Documents:
(a) that it is not subject to such jurisdiction or that such
action, suit, proceeding or litigation may not be brought or is
not maintainable
in those courts or that this Assignment, the Note, the
Mortgage and/or any of the Other Security Documents may not be
enforced in or by those
courts or that it is exempt or immune from execution; (b) that
the action, suit, proceeding or litigation is brought in an
inconvenient
forum; or (c) that the venue of the action, suit, proceeding
or litigation is improper.
20. Termination of Assignment. Upon payment in full of
the Debt and the delivery and recording of a satisfaction,
conveyance or
discharge of the Mortgage duly executed by Lender, this
Assignment shall be deemed null and void and of no further
effect.
21. Successors and Assigns. This Assignment, together
with the covenants and warranties herein contained, shall inure
to the benefit
of Lender and any subsequent holder of the Note and
beneficiary under the Mortgage and shall be binding upon
Borrower, its heirs, executors,
administrators, successors and assigns and any subsequent
owner of the Mortgaged Property.
22. Additional Terms and Provisions. Certain additional
and supplemental terms and provisions of this Assignment are set
forth in
the Addendum to Assignment of Leases and Rents attached hereto
and incorporated herein by this reference.
23. WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY
MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION IN CONNECTION WITH
THIS ASSIGNMENT, THE NOTE, THE MORTGAGE OR ANY OF THE OTHER
SECURITY DOCUMENTS,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER VERBAL OR WRITTEN) OR ACTION OF BORROWER OR LENDER.
THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER'S MAKING OF THE LOAN SECURED BY
THE MORTGAGE AND THE OTHER SECURITY DOCUMENTS.
IN WITNESS WHEREOF, Borrower has executed this
Assignment of Leases and Rents to be effective as of the day and
year first above
written.
"Borrower":
GOTTSCHALKS, INC., a Delaware
corporation
By: __S/ALAN A. WEINSTEIN___________
Alan A. Weinstein,
Senior Vice President
By: _CLARANCE A. KRANTZ______________
_SENIOR VICE PRESIDENT__________
[Printed Name and Title]
ADDENDUM TO ASSIGNMENT OF
LEASES AND RENTS
This Addendum to Assignment of Leases and Rents
("Addendum") contains certain additional and supplemental terms
and provisions of the
Assignment of Leases and Rents dated as of September 29, 1995
("Assignment"), executed by GOTTSCHALKS, INC., as Borrower, in
favor of Midland
Loan Services, L.P., as Lender. The terms and provisions of
this Addendum control and supersede any conflicting terms and
provisions
contained in the body of such Assignment.
1. Additional Acts Requiring Lender's Approval. Without
limiting any other provision of this Assignment, Borrower shall
not lease more than
twenty percent (20%) of the rentable space at the Mortgaged
Property to an entity other than an affiliate or subsidiary of
Borrower unless
such Lease (a) has been approved in writing by Lender or (b)
such Lease (i) has a term of at least twenty (20) years, (ii) is
a triple net
Lease, and (iii) the tenant under such Lease is an ivestment
grade tenant which has a creditworthiness rating by Moody's of
Baa or higher or
by Standard and Poors of BBB or higher.
<PAGE>
EXHIBIT A
Legal
Description
PARCEL 1
PARCEL D OF THAT CERTAIN PARCEL MAP SUBDIVISION J.S. 10-90, IN
THE CITY OF ANTIOCH COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA
FILED NOVEMBER
27, 1990 IN BOOK 149, PAGE 41, OF PARCEL MAPS, RECORDS OF
CONTRA COSTA COUNTY, CALIFORNIA.
PARCEL 2
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, INCLUDING BUT
NOT LIMITED TO EASEMENTS FOR INGRESS AND EGRESS, AUTOMOBILE
PARKING, PEDESTRIAN
USES, CONSTRUCTION, INSTALLATION, OPERATION AND MAINTENANCE OF
SEPARATE AND COMMON UTILITY LINES, STRUCTURE SUPPORT, SIGNS AND
OTHER USES,
ALL AS GRANTED BY THAT CERTAIN DOCUMENT ENTITLED:
"THIRD AMENDMENT TO AND RESTATEMENT OF CONSTRUCTION, OPERATION
AND RECIPROCAL EASEMENT AGREEMENT" DATED OCTOBER 1, 1989,
EXECUTED BY AND
BETWEEN COUNTY EAST MALL, A CALIFORNIA JOINT VENTURE
PARTNERSHIP, AND HEXALON REAL ESTATE, INC., A DELAWARE
CORPORATION, SUCCESSOR IN
INTEREST TO COUNTY EAST ASSOCIATES, A PARTNERSHIP, SEARS,
ROEBUCK AND CO., A NEW YORK CORPORATION, MERVYN'S, A CALIFORNIA
CORPORATION,
GOTTSCHALKS INC., A DELAWARE CORPORATION, AND J.C. PENNEY
COMPANY, INC., A DELAWARE CORPORATION, RECORDED ON NOVEMBER 28,
1990 IN BOOK 16269,
AT PAGE 1, OFFICIAL RECORDS OF CONTRA COSTA COUNTY,
CALIFORNIA, IN, OVER AND UPON THE LAND DESCRIBED THEREIN.
PARCEL 3
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, FOR PURPOSES OF
VEHICULAR PARKING AND PEDESTRIAN AND VEHICULAR INGRESS AND
EGRESS TO AND FROM
PUBLIC STREETS, ON, OVER AND ACROSS THOSE PORTIONS OF THE
"DEVELOPER TRACT", AS DESCRIBED IN THAT CERATIN EASEMENT
AGREEMENT, DATED OCTOBER
1, 1989 BY AND BETWEEN GOTTSCHALKS INC., A CALIFORNIA
CORPORATION AND COUNTY EAST MALL, A JOINT VENTURE PARTNERSHIP,
RECORDED NOVEMBER 28,
1990 IN BOOK 16269, PAGE 287, OF OFFICIAL RECORDS OF CONTRA
COSTA COUNTY.
<PAGE>
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss:
COUNTY OF ___________ )
On ______________, 1995, before me,
__________________________,
Notary Public, personally appeared
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to
the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and
that by
his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS my hand and official seal.
_________________________________
Signature
STATE OF CALIFORNIA )
) ss:
COUNTY OF ___________ )
On ______________, 1995, before me,
__________________________,
Notary Public, personally appeared
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to
the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and
that by
his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS my hand and official seal.
_________________________________
Signature
FINANCING STATEMENT (continued)
NAME OF DEBTOR: GOTTSCHALKS, INC., a Delaware corporation
SCHEDULE 1
Item No. 6:
All of Debtor's estate, right, title and interest in,
to, and under any and all of the following described property
(collectively
the "Mortgaged Property"), whether now owned or held or
hereafter acquired:
(a) The real property described in Exhibit A
attached hereto (the "Premises") and the buildings, structures,
fixtures
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon
(the
"Improvements");
(b) all easements, rights-of-way, strips and gores
of land, streets, ways, alleys, passages, sewer rights, water,
water
courses, water rights and powers, air rights and development
rights, and all estates, rights, titles, interests, privileges,
liberties,
tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating or pertaining to the
Premises and the
Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road or
avenue, opened
or proposed, in front of or adjoining the Premises, to the
center line thereof and all the estates, rights, titles,
interests, dower and
rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in
equity, in and to the
Premises and the Improvements and every part and parcel
thereof, with the appurtenances thereto;
(c) all machinery, equipment, fixtures (including
but not limited to all heating, air conditioning, plumbing,
lighting,
communications and elevator fixtures, but excluding
non-attached trade fixtures), building equipment, materials and
supplies, and other
property of every kind and nature, whether tangible or
intangible, owned by Debtor, or in which Debtor has or shall
have an interest, now or
hereafter located upon the Premises and the Improvements, or
appurtenant thereto, and usable in connection with the present
or future
operation and occupancy of the Premises and the Improvements
(hereinafter collectively called the "Equipment"), including the
proceeds of any
sale or transfer of the foregoing, and, without limiting the
generality of the foregoing, if any such Equipment is subject to
any prior
security interest or prior security agreement (as such terms
are defined in the Uniform Commercial Code, as adopted and
enacted in the State
or States in which any of the Mortgaged Property is located),
then the Mortgaged Property shall include all of the right,
title and interest
of Debtor in and to any such Equipment, together with all
deposits and payments now or hereafter made by Debtor with
respect to such
Equipment;
(d) all awards, payments or compensation, including
interest thereon, heretofore or hereafter made with respect to
the
Mortgaged Property for any injury to or decrease in the value
of the Mortgaged Property related to any exercise of the right
of eminent
domain or condemnation (including without limitation, any
transfer made in lieu of or in anticipation of the exercise of
said rights or for a
change of grade);
(e) all leases, reciprocal easement agreements, and
other agreements and arrangements affecting the use, enjoyment
or occupancy
of, or the conduct of any activity upon or at the Premises and
the Improvements heretofore or hereafter entered into (the
"Leases"), all
income, rents (including, without limitation, all percentage
rents), issues, profits and revenues (including all oil and gas
or other mineral
royalties and bonuses) from the Mortgaged Property (the
"Rents") and all proceeds from the sale or other disposition of
the Leases and the
right to receive and apply the Rents to the payment of the
Debt;
(f) all proceeds of, and any unearned premiums on, any
insurance policies covering the Mortgaged Property, including,
without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for
damage to the
Mortgaged Property, and all Proceeds (as defined in the
Addendum to the Deed of Trust described below); and
(g) the right, in the name and on behalf of Debtor, to
appear in and defend any action or proceeding brought with
respect to
the Mortgaged Property and to commence any action or
proceeding to protect the interest of Secured Party in the
Mortgaged Property.
The term "Mortgaged Property" shall not include accounts
receivable arising out of Debtor's private label credit card
program,
and the collections and proceeds thereof in whatever form
(including any related "instruments," "documents" and "chattel
paper," each as
defined under the California Uniform Commercial Code), all
deposit accounts associated therewith, and all books and records
related thereto,
after the sale of such accounts by Debtor to Gottschalks
Credit Receivables Corporation.
Concurrently with signing this financing statement,
Debtor, as Trustor, is executing for the benefit of Secured
Party, as
Beneficiary, a Deed of Trust, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing (the "Deed of Trust"),
encumbering
certain property as therein described. The filing of this
financing statement shall not be construed to derogate from or
impair the lien or
provisions of the Deed of Trust with respect to any property
described in it which is real property. Subject to the
definition of Mortgaged
Property above, the intention of Debtor and Secured Party is
that everything used in connection with the production of income
from that real
property, or adapted for use in or on it is, and at all times
and for all purposes and in all proceedings, both legal and
equitable, shall be
regarded as, real property and part of the real property
encumbered by the Deed of Trust, regardless of whether or not
the same is physically
attached to the Improvements. Similarly, nothing in this
financing statement shall be construed to alter any of the
rights of Secured Party
as determined by the Deed of Trust or the priority of Secured
Party's lien thereby created. This financing statement is
declared to be for
the protection of Secured Party in the event any court shall
at any time hold that notice of Secured party's priority of
interest in any
property or interest described in the Deed of Trust must, in
order to be effective against a particular class of persons,
including, but not
limited to, the United States Government or any of its
agencies, be filed in the office where this financing statement
is filed.
Item No. 9:
This Schedule 1 to Financing Statement may be executed
in counterparts.
Date: September 29, 1995
"Debtor"
GOTTSCHALKS, INC., a Delaware
corporation
BY: S/ALAN A. WEINSTEIN________
Alan A. Weinstein,
Senior Vice President
By: S/CLARANCE A. KRANTZ
__SENIOR VICE PRESIDENT_______
[Printed Name and Title] EXHIBIT A
Legal
Description
PARCEL 1
PARCEL D OF THAT CERTAIN PARCEL MAP SUBDIVISION J.S. 10-90, IN
THE CITY OF ANTIOCH COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA
FILED NOVEMBER
27, 1990 IN BOOK 149, PAGE 41, OF PARCEL MAPS, RECORDS OF
CONTRA COSTA COUNTY, CALIFORNIA.
PARCEL 2
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, INCLUDING BUT
NOT LIMITED TO EASEMENTS FOR INGRESS AND EGRESS, AUTOMOBILE
PARKING, PEDESTRIAN
USES, CONSTRUCTION, INSTALLATION, OPERATION AND MAINTENANCE OF
SEPARATE AND COMMON UTILITY LINES, STRUCTURE SUPPORT, SIGNS AND
OTHER USES,
ALL AS GRANTED BY THAT CERTAIN DOCUMENT ENTITLED:
"THIRD AMENDMENT TO AND RESTATEMENT OF CONSTRUCTION, OPERATION
AND RECIPROCAL EASEMENT AGREEMENT" DATED OCTOBER 1, 1989,
EXECUTED BY AND
BETWEEN COUNTY EAST MALL, A CALIFORNIA JOINT VENTURE
PARTNERSHIP, AND HEXALON REAL ESTATE, INC., A DELAWARE
CORPORATION, SUCCESSOR IN
INTEREST TO COUNTY EAST ASSOCIATES, A PARTNERSHIP, SEARS,
ROEBUCK AND CO., A NEW YORK CORPORATION, MERVYN'S, A CALIFORNIA
CORPORATION,
GOTTSCHALKS INC., A DELAWARE CORPORATION, AND J.C. PENNEY
COMPANY, INC., A DELAWARE CORPORATION, RECORDED ON NOVEMBER 28,
1990 IN BOOK 16269,
AT PAGE 1, OFFICIAL RECORDS OF CONTRA COSTA COUNTY,
CALIFORNIA, IN, OVER AND UPON THE LAND DESCRIBED THEREIN.
PARCEL 3
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, FOR PURPOSES OF
VEHICULAR PARKING AND PEDESTRIAN AND VEHICULAR INGRESS AND
EGRESS TO AND FROM
PUBLIC STREETS, ON, OVER AND ACROSS THOSE PORTIONS OF THE
"DEVELOPER TRACT", AS DESCRIBED IN THAT CERATIN EASEMENT
AGREEMENT, DATED OCTOBER
1, 1989 BY AND BETWEEN GOTTSCHALKS INC., A CALIFORNIA
CORPORATION AND COUNTY EAST MALL, A JOINT VENTURE PARTNERSHIP,
RECORDED NOVEMBER 28,
1990 IN BOOK 16269, PAGE 287, OF OFFICIAL RECORDS OF CONTRA
COSTA COUNTY.
GOTTSCHALKS,
INC.
(Borrower)
to
MIDLAND LOAN
SERVICES, L.P.
(Lender)
UNSECURED ENVIRONMENTAL
INDEMNITY AGREEMENT
Loan No.:
94-0902451
09-28-95/KBP-55812/MYC
UNSECURED ENVIRONMENTAL
INDEMNITY AGREEMENT
THIS UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT
("Indemnity") is entered into by the undersigned ("Borrower") in
favor of
Midland Loan Services, L.P., a Missouri limited partnership
("Lender").
WITNESSETH
Contemporaneously with this Indemnity, Lender is making a
loan to Borrower (the "Loan"), which Loan is evidenced by a
Promissory Note
(the "Note") of even date herewith executed by Borrower to the
order of Lender. The Note is secured by, among other security,
the Mortgage
(as defined in the Note), which Mortgage encumbers the property
(real and personal) described in the Mortgage (herein
collectively referred
to as the "Premises") and including, without limitation, the
real property more particularly described in Exhibit A attached
hereto.
As a result of the exercise of Lender's rights and remedies
in connection with the Loan transaction, one or more of the
Indemnitees
(hereinafter defined) may hereafter become the owner of the
Premises pursuant to a foreclosure sale or deed in lieu thereof.
In such event,
one or more of the Indemnitees may thereafter incur or suffer
certain liabilities, costs and expenses in connection with the
Premises
relating to Hazardous Materials (hereinafter defined) released
on, in or under the Premises. Lender has therefore made it a
condition of the
making of the Loan that this Indemnity be executed and delivered
by Borrower in order to protect Indemnitees and each of them
from any such
liabilities, costs and expenses, together with all other
Post-Foreclosure Transfer Environmental Losses (hereinafter
defined).
NOW, THEREFORE, in consideration of the foregoing, of
Lender making the Loan and other valuable consideration, the
receipt and
adequacy of which is hereby acknowledged, Borrower agrees as
follows:
Certain Defined Terms. As used in this Indemnity, the
following terms shall have the following meanings:.
"CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 U.S.C.
9601 et seq.), as
heretofore or hereafter amended from time to time.
"Environmental Laws" means all present and future laws
(whether common law, statute, rule, regulation or otherwise),
permits and
other requirements of governmental authorities relating to
the environment or to any Hazardous Material or Hazardous
Material Activity,
including, without limitation, CERCLA; the Hazardous
Materials Transportation Act; the Resource Conservation and
Recovery Act; the
Toxic Substance Control Act; the Clean Air Act; the Federal
Water Pollution Control Act; the Hazardous Substance Control
Act; the
Hazardous Substance Act; the Occupational Health and Safety
Act; the Porter-Cologne Water Control Act; the Waste Management
Act of
1980; the Toxic Pit Cleanup Act; the Underground Tank Act
of 1984; any so-called "Super-Fund" or "Super-Lien" law, or any
other
federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to, or
imposing liability
or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, as of now or at any time
hereafter
in effect.
"Foreclosure Transfer" means the transfer of title to
all or any part of the Premises in connection with a foreclosure
of the
Mortgage, including, without limitation, a sale pursuant to
judicial decree or power of sale, or by deed in lieu of such
foreclosure.
"Hazardous Material" means, at any time: (i) any
substance that is then defined or listed in, or otherwise
classified,
designated, or regulated pursuant to, any applicable
Environmental Laws as a "hazardous substance", "hazardous
material", "hazardous
waste", "infectious waste", "toxic substance", "toxic
pollutant" or any other formulation intended to define, list, or
classify
substances by reason of deleterious properties such as
radioactivity, ignitability, corrosivity, reactivity,
carcinogenicity, toxicity,
explosiveness, reproductive toxicity or "EP toxicity"; (ii)
any petroleum and petroleum byproducts, drilling fluids,
produced waters
and other wastes associated with the exploration,
development or production of crude oil, natural gas or
geothermal resources; and
(iii) asbestos and polychlorinated biphenyls.
"Hazardous Material Activity" means any actual,
proposed or threatened storage, holding, existence, release,
emission, discharge,
generation, processing, abatement, removal, disposition,
handling or transportation of any Hazardous Material from,
under, into or on
the Premises or surrounding property.
"Indemnitee" or "Indemnitees" shall mean Lender, its
successors, assigns and participants, their respective parent,
subsidiary
and affiliated corporations and entities, and the
respective partners, directors, officers, agents, attorneys and
employees of each of
the foregoing.
"Losses" means any and all losses, liabilities,
damages, demands, claims, actions, judgments, causes of action,
assessments,
penalties, costs and expenses (including, without
limitation, all fees and costs of any attorneys and accountants,
including on appeal
and in any bankruptcy case or proceeding) and all
consequential damages.
"Post-Foreclosure Transfer Environmental Losses" means
Losses suffered or incurred by any Indemnitee following a
Foreclosure
Transfer, arising out of or as a result of: (i) the
occurrence of any Hazardous Material Activity prior to a
Foreclosure Transfer; (ii)
any violation of any applicable Environmental Laws relating
to the Premises or the ownership, use, maintenance, occupancy or
operation
thereof prior to a Foreclosure Transfer; (iii) any
investigation, inquiry, order, hearing, action, or other
proceeding by or before any
governmental agency in connection with any Hazardous
Material Activity occurring or allegedly occurring prior to a
Foreclosure
Transfer; and (iv) any claim, demand or cause of action, or
any action or other proceeding, whether meritorious or not,
brought or
asserted against any Indemnitee to the extent directly or
indirectly relating to, arising from or based on any of the
matters described
in clauses (i), (ii) or (iii) above, or any allegation of
any such matters.
Indemnity. Borrower hereby agrees to indemnify,
defend and hold harmless Indemnitees, and each of them, from and
against any and
all Post-Foreclosure Transfer Environmental Losses, excluding
with respect to any Indemnitee, any such losses arising from
such Indemnitee's
gross negligence or willful misconduct..
Independent Obligations. Prior to a Foreclosure
Transfer: (a) Borrower's obligations to Lender with respect to
Hazardous
Materials shall be governed by the Mortgage; and (b) Borrower
shall not have any liability hereunder and no claim may be made
hereunder by
any Indemnitee. This Indemnity is a separate, unsecured
obligation of Borrower to Lender and is not secured by the
Mortgage or any of the
Other Security Documents (as defined in the Mortgage). This
Indemnity is given solely to protect Lender and the other
Indemnitees against
Post-Foreclosure Transfer Environmental Losses, and not as
additional security for, or as a means of repayment of, the
Loan. The obligations
of Borrower under this Indemnity are independent of, and shall
not be measured or affected by: (i) any amounts at any time
owing under the
Loan or the Note, or secured by the Mortgage or Other Security
Documents (as defined in the Mortgage); (ii) the sufficiency or
insufficiency
of any collateral (including, without limitation, the Premises)
given to Lender to secure repayment of the Loan; (iii) any
obligations of
Borrower under the Note, Mortgage or Other Security Documents;
(iv) the consideration given by Lender or any other party in
order to acquire
the Premises or any portion thereof; (v) the modification,
expiration or termination of the Note, the Mortgage or any Other
Security
Document; (vi) the discharge or repayment in full of the Loan
(including, without limitation, by amounts paid or credit bid at
a foreclosure
sale or by discharge in connection with a deed in lieu of
foreclosure); or (vii) any limitations on Lender's recourse for
recovery of the
Loan..
Survival. Borrower's obligations hereunder shall
survive any Foreclosure Transfer and any sale or other transfer
of the Premises
prior to a Foreclosure Transfer. The rights of each Indemnitee
under this Indemnity shall be in addition to any other rights
and remedies of
such Indemnitee against Borrower under any other document or
instrument now or hereafter executed by Borrower, or at law or
in equity
(including, without limitation, any right of reimbursement or
contribution pursuant to CERCLA or any other Environmental Law),
and shall not
in any way be deemed a waiver of any such rights. This
Indemnity is in addition to, and separate and distinct from the
environmental
indemnity contained in the Mortgage..
Demand Obligations. All obligations of Borrower
hereunder shall be payable on demand, and any amount due and
payable hereunder
to any Indemnitee by Borrower which is not paid within thirty
(30) days after written demand therefor from such Indemnitee
shall bear
interest from the date of such demand at a per annum interest
rate equal to the Default Rate (as defined in the Note) which
would have been
in effect as if the Note were in existence and an Event of
Default had occurred under the Note upon the date of such
demand..
Costs and Expenses. Borrower shall pay to each
Indemnitee all Losses incurred by such Indemnitee in connection
with this
Indemnity or the enforcement hereof..
Successors and Assigns. This Indemnity shall be
binding upon Borrower, its heirs, representatives,
administrators, executors,
successors and assigns and shall inure to the benefit of and
shall be enforceable by each Indemnitee, its successors,
endorsees and assigns
(including, without limitation, any entity to which Lender
assigns or sells all or any portion of its interest in the
Loan). As used herein,
the singular shall include the plural and the masculine shall
include the feminine and neuter and vice versa, if the context
so requires..
Applicable Law; Jurisdiction. This Indemnity shall be
governed by and construed in accordance with the laws of the
state in
which the real property described in Exhibit A is located
without regard to conflict of law provisions thereof. Borrower
hereby submits to
personal jurisdiction in the state courts located in said state
and the federal courts of the United States of America (and any
appellate
courts taking appeals thereof) located in said state for the
enforcement of Borrower's obligations hereunder and waives any
and all personal
rights under the law of any other state to object to
jurisdiction within such state for the purposes of any action,
suit, proceeding or
litigation to enforce such obligations of Borrower. Borrower
hereby waives and agrees not to assert, as a defense in any
action, suit,
proceeding or litigation arising out of or relating to this
Indemnity, the Note, the Mortgage and/or any of the Other
Security Documents:
(a) that it is not subject to such jurisdiction or that such
action, suit, proceeding or litigation may not be brought or is
not maintainable
in those courts or that this Indemnity, the Note, the Mortgage
and/or any of the Other Security Documents may not be enforced
in or by those
courts or that it is exempt or immune from execution; (b) that
the action, suit, proceeding or litigation is brought in an
inconvenient
forum; or (c) that the venue of the action, suit, proceeding or
litigation is improper..
Severability. Every provision of this Indemnity is
intended to be severable. If any provision of this Indemnity or
the
application of any provision hereof to any party or circumstance
is declared to be illegal, invalid or unenforceable, for any
reason, by a
court of competent jurisdiction, such invalidity shall not
affect the balance of the terms and provisions hereof or the
application of the
provision in question to any other party or circumstance, all of
which shall continue in full force and effect..
No Waiver; No Oral Change. No failure or delay on the
part of any Indemnitee to exercise any power, right or privilege
under
this Indemnity shall impair any such power, right or privilege,
or be construed to be a waiver of any default or an acquiescence
therein, nor
shall any single or partial exercise of such power, right or
privilege preclude other or further exercise thereof or of any
other right,
power or privilege. No provision of this Indemnity may be
changed, waived, discharged or terminated except by an
instrument in writing
signed by the party against whom enforcement of the change,
waiver, discharge, or termination is sought..
Notices. Except as otherwise specified herein, any
notice, consent, request or other communication required or
permitted to be
given hereunder shall be in writing, addressed to the other
party as set forth below (or to such other address or person as
either party or
person entitled to notice may by notice to the other party
specify), and shall be: (a) personally delivered; (b) delivered
by Federal Express
or other comparable overnight delivery service; or (c)
transmitted by United States certified mail, return receipt
requested with postage
prepaid; to:.
Lender: MIDLAND LOAN SERVICES, L.P.<PAGE>
210 West 10th Street, 6th Floor
Kansas City, Missouri 64105<PAGE>
Attention: Midland Commercial Funding
Borrower: GOTTSCHALKS, INC.<PAGE>
7 River Park Place East
Fresno, California 93720 Attention: Alan A. Weinstein
Unless otherwise specified, all notices and other
communications shall be deemed to have been duly given on the
first to occur of actual
receipt of the same or: (i) the date of delivery if personally
delivered; (ii) one (1) business day after depositing the same
with the
delivery service if by overnight delivery service; and (iii)
three (3) days following posting if transmitted by mail.
Counterparts. This Indemnity may be executed in
counterparts..
IN WITNESS WHEREOF, this Unsecured Environmental
Indemnity Agreement is executed by Borrower as of September 29,
1995.
"Borrower":
GOTTSCHALKS, INC., a Delaware
corporation
By:S/ALAN A. WEINSTEIN
Alan A. Weinstein, Senior Vice
President
By: S/CLARANCE A. KRANTZ
_SENIOR VICE PRESIDENT_____
[Printed Name and Title]
EXHIBIT A
Legal
Description
PARCEL 1
PARCEL D OF THAT CERTAIN PARCEL MAP SUBDIVISION J.S. 10-90, IN
THE CITY OF ANTIOCH COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA
FILED NOVEMBER
27, 1990 IN BOOK 149, PAGE 41, OF PARCEL MAPS, RECORDS OF
CONTRA COSTA COUNTY, CALIFORNIA.
PARCEL 2
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, INCLUDING BUT
NOT LIMITED TO EASEMENTS FOR INGRESS AND EGRESS, AUTOMOBILE
PARKING, PEDESTRIAN
USES, CONSTRUCTION, INSTALLATION, OPERATION AND MAINTENANCE OF
SEPARATE AND COMMON UTILITY LINES, STRUCTURE SUPPORT, SIGNS AND
OTHER USES,
ALL AS GRANTED BY THAT CERTAIN DOCUMENT ENTITLED:
"THIRD AMENDMENT TO AND RESTATEMENT OF CONSTRUCTION, OPERATION
AND RECIPROCAL EASEMENT AGREEMENT" DATED OCTOBER 1, 1989,
EXECUTED BY AND
BETWEEN COUNTY EAST MALL, A CALIFORNIA JOINT VENTURE
PARTNERSHIP, AND HEXALON REAL ESTATE, INC., A DELAWARE
CORPORATION, SUCCESSOR IN
INTEREST TO COUNTY EAST ASSOCIATES, A PARTNERSHIP, SEARS,
ROEBUCK AND CO., A NEW YORK CORPORATION, MERVYN'S, A CALIFORNIA
CORPORATION,
GOTTSCHALKS INC., A DELAWARE CORPORATION, AND J.C. PENNEY
COMPANY, INC., A DELAWARE CORPORATION, RECORDED ON NOVEMBER 28,
1990 IN BOOK 16269,
AT PAGE 1, OFFICIAL RECORDS OF CONTRA COSTA COUNTY,
CALIFORNIA, IN, OVER AND UPON THE LAND DESCRIBED THEREIN.
PARCEL 3
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, FOR PURPOSES OF
VEHICULAR PARKING AND PEDESTRIAN AND VEHICULAR INGRESS AND
EGRESS TO AND FROM
PUBLIC STREETS, ON, OVER AND ACROSS THOSE PORTIONS OF THE
"DEVELOPER TRACT", AS DESCRIBED IN THAT CERATIN EASEMENT
AGREEMENT, DATED OCTOBER
1, 1989 BY AND BETWEEN GOTTSCHALKS INC., A CALIFORNIA
CORPORATION AND COUNTY EAST MALL, A JOINT VENTURE PARTNERSHIP,
RECORDED NOVEMBER 28,
1990 IN BOOK 16269, PAGE 287, OF OFFICIAL RECORDS OF CONTRA
COSTA COUNTY.
GOTTSCHALKS,
INC.
(Borrower)
to
MIDLAND LOAN
SERVICES, L.P.
(Lender)
BORROWER'S
CERTIFICATE
Loan No.:
94-0902451
<PAGE>
09-28-95/KBP-55812
BORROWER'S
CERTIFICATE
THIS BORROWER'S CERTIFICATE ("Certificate") is executed by
the undersigned ("Borrower") in favor of Midland Loan Services,
L.P., a
Missouri limited partnership ("Lender").
WITNESSETH
To induce Lender to make a first mortgage loan to Borrower
on or about the date hereof (the "Loan") evidenced by a
Promissory Note (the
"Note") executed contemporaneously herewith by Borrower, as
maker, and payable to the order of Lender, which Note is secured
by: (i) the
Mortgage (as defined in the Note) encumbering the Property
(hereinafter defined); and (ii) the Other Security Documents (as
defined in the
Mortgage); Borrower certifies, represents and warrants to
Lender that:
1. Borrower is the owner of the property (real and
personal) described in the Mortgage (the "Property"), including
without
limitation, the real property described in Exhibit A attached
hereto and made a part hereof. The Borrower is the only person
(other than
Lender) who possesses any interest in the right to receive any
payments due under the Leases (as defined in the Mortgage).
2. The Property is now free of all liens, encumbrances
and all other matters affecting title thereto except: (a) for
those matters
shown in the title insurance policy in favor of the Lender
insuring the lien of the Mortgage; and (b) the financing
statements described in
Exhibit B attached hereto and made a part hereof.
3. All improvements located upon the Property have been
fully completed and all costs and expenses of construction have
been fully
paid. Except current bills for minor maintenance and repair
(none of which are overdue), complete and final payment has been
made for all
construction, repairs or new improvements made to the Property
within the applicable period for filing lien claims in the state
in which the
real property encumbered by the Mortgage is located.
4. Except as disclosed on Exhibit B, there are no
chattel mortgages, conditional sales contracts, bills of sale,
financing
statements, retention of title agreements, security agreements
or equipment or personal property leases affecting, or any
unpaid bills
related to, any portion of the Property, including without
limitation, any fixtures, attachments, appliances, equipment,
machinery and other
articles attached to or located on or within the Property.
5. Except for the tenancy rights of tenants under the
Leases (none of which tenants hold any unrecorded deeds,
contracts or options
to purchase all or any part of the Property), Borrower is in
possession of the Property and there are no other persons,
firms, corporations
or entities having any right of possession of any of the
Property under any lease, option, deed or other written
instrument of any kind or
character.
6. Borrower possesses all necessary approvals and
authority to execute and deliver the Note, the Mortgage and the
Other Security
Documents.
7. Neither Borrower nor any general partner (if any) in
Borrower is the subject of any pending: (a) petition in
bankruptcy
(voluntary or otherwise); (b) assignment for the benefit of
creditors; (c) petition for the appointment of a receiver or
trustee or seeking
reorganization, arrangement, composition, extension or
adjustment of any obligations of Borrower or any of its general
partners (if any); or
(d) other action or proceeding brought under any federal or
state bankruptcy laws or any similar laws. There are no
unsatisfied judgments
against Borrower or any general partner in Borrower (if any).
8. All financial statements and other financial
information previously submitted to Lender by Borrower are true,
correct and
complete in all material respects and fairly present the
financial condition of Borrower or the Property for the
specified period(s) of time,
and (except as disclosed to Lender in writing) no material
adverse changes in the financial condition of either the
Borrower or the Property
have occurred from the date of such financial statements and
other financial information.
9. The Property is in good repair and free of any waste,
defective condition or damage by fire or other cause which has
not been
repaired, and is not subject to any pending condemnation or
eminent domain proceedings. Based upon Borrower's best
knowledge, after diligent
inquiry, no such condemnation or eminent domain proceedings
are pending or threatened against any of the Property.
10. All premiums for any Policies (as defined in the
Mortgage) which became due and payable prior to the date of this
Certificate
have been paid, and the benefits of coverages provided
pursuant to the Policies has not been materially impaired in any
manner.
11. Borrower executed and delivered the Note, the
Mortgage and Other Security Documents and received and applied
the proceeds of the
Loan for its own account and not as an agent, nominee or
trustee for any other party or entity. No part of the proceeds
of the Loan will be
used for the purposes of financing the construction or
rehabilitation of the Property, for personal, family or
household purposes, or for the
purpose (whether immediate, incidental or ultimate) of
"purchasing" or "carrying" any "margin security", as such terms
are defined in
Regulation G (12 C.F.R., Chapter II, Part 207) of the Board of
Governors of the Federal Reserve System or for the purpose of
reducing or
retiring any indebtedness which was originally incurred for
any such purpose.
12. Borrower has obtained all required inspections,
licenses, permits, authorizations, certificates and approvals of
all applicable
governmental authorities and agencies for the use, occupancy
and operation of the Property in accordance with the intended
uses previously
communicated to Lender in writing, including without
limitation, certificates of occupancy and fire underwriter
certificates. No notice has
been received by Borrower that it has failed to obtain any
such inspections, licenses, permits, authorizations,
certificates and approvals.
13. Borrower has complied with, and the Property is in
compliance with, all laws, statutes, rules, regulations, codes,
ordinances and
insurance requirements applicable to the Property (the
"Applicable Laws") related to the construction, use, occupancy
or operation of the
Property, including without limitation, those related to
zoning, building, land use, the environment, pollution control,
fire, health and
safety. There are presently no pending actions or proceedings
of any kind instituted by any governmental authority or agency
against
Borrower based upon any charge or complaint that any of the
Property, or the operation thereof, is in material
non-compliance with, or is
being used, operated or occupied unlawfully or in violation of
any of the Applicable Laws, and, as of the date hereof, no
notice has been
received by Borrower that any such action or proceeding is
imminent or is being considered.
14. As of the date hereof, Borrower is: (a) in good
standing in and is qualified to do business in the State of its
organization; and
(b) in good standing in and is authorized to do business in
the State in which the Property is located.
15. Neither Borrower nor any person or entity owning a
beneficial interest in Borrower is a "foreign person", "foreign
corporation",
"foreign partnership", "foreign trust", or "foreign estate"
under the provisions of Section 1445 of the Internal Revenue
Code.
16. This Certificate is made with the knowledge and
intent that Lender will rely on the warranties, representations
and
certifications herein contained in making the Loan.
17. This Certificate may be executed in counterparts.
18. This Certificate shall inure to the benefit of Lender
and any subsequent holder of the Note and beneficiary under the
Mortgage
and shall be binding upon Borrower, its heirs, executors,
administrators, successors and assigns and any subsequent owner
of the Mortgaged
Property.
IN WITNESS WHEREOF, this Borrower's Certificate is
executed by the Borrower as of September 29, 1995.
"Borrower":
GOTTSCHALKS, INC., a Delaware
corporation
By: __S/ALAN A. WEINSTEIN____
Alan A. Weinstein,
Senior Vice President
By: __S/CLARANCE A. KRANTZ______
_SENIOR VICE PRESIDENT______
[Printed Name and Title]
EXHIBIT A
Legal
Description
PARCEL 1
PARCEL D OF THAT CERTAIN PARCEL MAP SUBDIVISION J.S. 10-90, IN
THE CITY OF ANTIOCH COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA
FILED NOVEMBER
27, 1990 IN BOOK 149, PAGE 41, OF PARCEL MAPS, RECORDS OF
CONTRA COSTA COUNTY, CALIFORNIA.
PARCEL 2
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, INCLUDING BUT
NOT LIMITED TO EASEMENTS FOR INGRESS AND EGRESS, AUTOMOBILE
PARKING, PEDESTRIAN
USES, CONSTRUCTION, INSTALLATION, OPERATION AND MAINTENANCE OF
SEPARATE AND COMMON UTILITY LINES, STRUCTURE SUPPORT, SIGNS AND
OTHER USES,
ALL AS GRANTED BY THAT CERTAIN DOCUMENT ENTITLED:
"THIRD AMENDMENT TO AND RESTATEMENT OF CONSTRUCTION, OPERATION
AND RECIPROCAL EASEMENT AGREEMENT" DATED OCTOBER 1, 1989,
EXECUTED BY AND
BETWEEN COUNTY EAST MALL, A CALIFORNIA JOINT VENTURE
PARTNERSHIP, AND HEXALON REAL ESTATE, INC., A DELAWARE
CORPORATION, SUCCESSOR IN
INTEREST TO COUNTY EAST ASSOCIATES, A PARTNERSHIP, SEARS,
ROEBUCK AND CO., A NEW YORK CORPORATION, MERVYN'S, A CALIFORNIA
CORPORATION,
GOTTSCHALKS INC., A DELAWARE CORPORATION, AND J.C. PENNEY
COMPANY, INC., A DELAWARE CORPORATION, RECORDED ON NOVEMBER 28,
1990 IN BOOK 16269,
AT PAGE 1, OFFICIAL RECORDS OF CONTRA COSTA COUNTY,
CALIFORNIA, IN, OVER AND UPON THE LAND DESCRIBED THEREIN.
PARCEL 3
ALL EASEMENTS APPURTENANT TO PARCEL ONE ABOVE, FOR PURPOSES OF
VEHICULAR PARKING AND PEDESTRIAN AND VEHICULAR INGRESS AND
EGRESS TO AND FROM
PUBLIC STREETS, ON, OVER AND ACROSS THOSE PORTIONS OF THE
"DEVELOPER TRACT", AS DESCRIBED IN THAT CERATIN EASEMENT
AGREEMENT, DATED OCTOBER
1, 1989 BY AND BETWEEN GOTTSCHALKS INC., A CALIFORNIA
CORPORATION AND COUNTY EAST MALL, A JOINT VENTURE PARTNERSHIP,
RECORDED NOVEMBER 28,
1990 IN BOOK 16269, PAGE 287, OF OFFICIAL RECORDS OF CONTRA
COSTA COUNTY.
<PAGE>
EXHIBIT B
Description of
Financing Statements
None
FORBEARANCE AGREEMENT
This Forbearance Agreement (this "Forbearance Agreement") is entered into as
of the 11th day of December, 1995, by and between Fleet Capital Corporation,
formerly known as Shawmut Capital Corporation, a Connecticut corporation, as
successor-in-interest to Barclays Business Credit, Inc. ("Lender"), and
Gottschalks Inc., a Delaware corporation ("Borrower"), with reference to the
following facts:
A. Lender and Borrower are parties to that certain Loan and Security
Agreement, dated as of March 30, 1994, as amended, pursuant to which
Lender has provided financial accommodations to Borrower on the terms
and conditions set forth therein. (Said Loan and Security Agreement,
as in effect from time to time, together with all exhibits and
schedules thereto, is hereinafter referred to as the "Loan
Agreement.")
B. Borrower's business has experienced certain negative developments, and
Borrower has informed Lender that Borrower anticipates being in
violation of certain financial covenants contained in Section 8.3 of
the Loan Agreement as of the end of its December 1995 and January 1996
Fiscal Periods.
C. Borrower has requested that Lender agree to temporarily forbear from
taking action against Borrower based upon Borrower's anticipated
violations of certain financial covenants contained in Section 8.3 of
the Loan Agreement, and Lender is willing to do so on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, Lender and Borrower hereby agree as follows:
1. Use of Terms Defined in Loan Agreement. All capitalized terms
that are defined in the Loan Agreement and that are used without definition
herein shall have the meanings given to them in the Loan Agreement.
2. Borrower's Acknowledgment of Existing Loans. Borrower
acknowledges and agrees that, as of December 1, 1995, Borrower was indebted
to Lender for outstanding Loans in an aggregate outstanding principal amount
of not less than $60,687,397.64, and that Borrower does not have any
offsets, defenses, counterclaims, disputes or disagreements of any kind or
nature whatsoever with respect to the amount of such indebtedness.
3. Borrower's Acknowledgment of Anticipated Events of Default.
a. Borrower acknowledges that it anticipates being in
violation of the following financial covenants of the Loan Agreement as of
the end of its December 1995 Fiscal Period.
i. Section 8.3(D)(iii), which requires that Borrower
have Consolidated Adjusted Net Earnings from Operations of not less than
<$2,500,000> for the period of twelve (12) consecutive Fiscal Periods
including and ending with such Fiscal Period; and
ii. Section 8.3(G), which requires that Borrower have a
Times Interest Earned Ratio of not less than .70 to 1.0 at all times during
such Fiscal Period.
b. Borrower acknowledges that it anticipates being in
violation of the following financial covenants of January 1996 Fiscal
Period:
i. Section 8.3(D)(i), which requires that Borrower have
Consolidated Adjusted Net Earnings from Operations of not less than
<$2,500,000> for such Fiscal Period;
ii. Section 8.3(D)(iii), which requires that Borrower
have Consolidated Adjusted Net Earnings from Operations of not less than
<$2,500,000> for the period of twelve (12) consecutive Fiscal Periods
including and ending with such Fiscal Period;
iii. Section 8.3(F), which requires that Borrower have a
Senior Debt Coverage Ratio of not less than 1.0 to 1.0 at all times during
such Fiscal Period; and
iv. Section 8.3(F), which requires that Borrower have a
Times Interest Earned Ratio of not less than .70 to 1.0 at all time during
such Fiscal Period.
Borrower acknowledges that each of the violations described in this
paragraph 3 (collectively, the "Anticipated Defaults") would constitute an
Event of Default under the Loan Agreement.
4. Lender's Agreement to Forbear Action Based on Anticipated
Defaults. Lender agrees that until February 28, 1996, it will forbear from
exercising any remedies arising from the occurrence of any of the
Anticipated Defaults; provided, however, that Lender, in its sole
discretion, may terminate such forbearance without any notice or demand of
any kind whatsoever upon the occurrence of any of the following:
a. Borrower has Consolidated Adjusted Net Earnings
from Operations of less than <$3,000,000> for its
January 1996 Fiscal Period;
b. Borrower has Consolidated Adjusted Net Earnings
from Operations of less than <$7,200,000> for the
period of twelve (12) consecutive Fiscal Periods
including and ending with its January 1996 Fiscal
Period; or
c. any Event of Default occurs under the Loan
Agreement, other than the Anticipated Defaults.
Such forbearance shall not constitute a waiver by Lender of the existence of
any of the Anticipated Defaults that may arise, and Lender shall not be
under any obligation to waive any of the Anticipated Defaults or to grant
any further forbearances with respect thereto. This Forbearance Agreement
shall not constitute a waiver or agreement to forbear with respect to any
other Default that might now exist or hereafter arise under the Loan
Agreement.
5. Continuing Representations of Borrower. Borrower
represents and warrants to Lender that as of the date hereof all
representations and warranties continued in the Loan Agreement are complete
and correct in all material respects, and that no Defaults or Events of
Default under the Loan Agreement have occurred and are continuing.
6. Incorporation into Loan Agreement. The terms and
conditions of this Forbearance Agreement shall be incorporated by reference
in the Loan Agreement as thought set forth in full therein. In the event of
any inconsistency between the provisions of this Forbearance Agreement and
any other provision of the Loan Agreement, the terms and provisions of this
Forbearance Agreement shall govern and control. Except to the extent, if
any, otherwise provided herein, all of the provisions of the Loan Agreement
shall remain in full force and effect to the extent in effect on the date
hereof. The Loan Agreement, this Forbearance Agreement, and the other Loan
Documents constitute the complete agreement among the parties and supersede
any prior written or oral agreements, writing, communications, or
understandings of the parties with respect to the subject matter hereof and
thereof.
7. Section Headings. The headings of the Sections hereof are
for convenience only and without substantive meaning, and shall not be used
in interpreting any provision of this Forbearance Agreement.
8. Counterparts. This Forbearance Agreement may be executed
in counterparts, each of which shall be deemed to be an original but all of
which shall be one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Forbearance Agreement as of the day and year first written above.
("Lender")
FLEET CAPITAL CORPORATION
By_CLARANCE A. KRANTZ____
("Borrower")
GOTTSCHALKS INC.
By__S/ALAN A. WEINSTEIN_____
Alan A. Weinstein
Senior Vice President and
Chief Financial Officer
