SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
August 20, 1998
GOTTSCHALKS INC.
_______________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 1-09100 77-0159791
_______________________________________________________
(State or other (Commission File (IRS Employer
jurisdiction Number) Identification No.)
of incorporation)
7 RIVER PARK PLACE EAST, FRESNO, CALIFORNIA 93720
_______________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code:
(209) 434-4800
Not Applicable
_______________________________________________________
(Former name or former address, if changed since last
report.)
Item 2. Acquisition or Disposition of Assets.
As of August 20, 1998, Gottschalks Inc. (the
"Registrant") completed its previously announced
acquisition of substantially all of the assets and
business of The Harris Company ("Harris"), including the
operation of nine department stores located in southern
California. The purchased assets consist primarily of
inventory, receivables, furniture, fixtures, equipment,
cash and certain intangibles. The purchase price for
these assets was the issuance to
Harris of 2,095,900 shares of the Registrant's common
stock, an 8% Non-Negotiable, Extendable, Subordinated
Note due August 20, 2003 in the aggregate principal
amount of $22,179,598 and the assumption of certain
liabilities relating to the business, including vendor
payables, store leases and certain other contracts
relating to the business. The purchase price was
determined as a result of arms-length negotiations
between the Registrant and Harris.
The Harris Stores will be operated by the
Registrant under the name "Harris/Gottschalks" and are
located in the cities of Bakersfield, Hemet, Indio,
Moreno Valley, Palmdale, Redlands, Riverside, San Bernardino,
and Victorville. The Registrant
entered into new long-term store leases with El Corte
Ingles, S.A. ("ECI"), the owner of
Harris, with respect to the stores located in
Bakersfield, Moreno Valley, and Palmdale. (See Exhibits
2.8, 2.9 and 2.10 hereto.) Registrant also entered into
a short-term lease with ECI for the store in San
Bernardino which expires on January 30, 1999. (See
Exhibit 2.11 hereto.) The Registrant assumed Harris'
leases for the other stores.
In connection with the transaction, ECI, the
Registrant, Joseph Levy and Bret Levy entered into a
Stockholders' Agreement which provides for the voting of
shares owned by such stockholders in the election of
directors, including ECI's right to nominate two persons
(subject to adjustment under certain circumstances) to
the Registrant's Board of Directors, and restricts ECI's
transfer of shares of the Registrant. (See Exhibit 2.6
hereto.) The parties also entered into a Standstill
Agreement restricting ECI's activities as an owner of the
Registrant's stock and a Registration Rights Agreement
granting Harris certain rights to participate in a
registration statement filed by the Registrant with the
Securities and Exchange Commission. (See Exhibits 2.7
and 2.3 hereto.) As part of the transaction, Harris and
the Registrant also entered into an Employee Lease
Agreement whereby the Registrant would obtain the
services of certain of Harris' employees for a transition
period following the closing of the transaction. (See
Exhibit 2.4 hereto.)
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Information of Business Acquired.
The following financial information and independent
auditors' reports are not included herewith and will
be filed by amendment not later than 60 days after
the date on which this Current Report on Form 8-K
is required to be filed:
(i) Audited financial statements of Harris
for the fiscal years ended January 31, 1998, February 1,
1997 and February 3, 1996 and the independent auditors'
report of Eadie & Payne with respect thereto.
(ii) Unaudited financial statements of
Harris for the six months ended August 1, 1998.
(b) Pro Forma Financial Information. The
following pro forma financial information is not included
herewith and will be filed by amendment not later than 60
days after the date on which this Current Report on Form
8-K is required to be filed:
(i) Gottschalks Inc. pro forma consolidated statement of
operations for the fiscal year ended January 31, 1998.
(ii) Gottschalks Inc. pro forma consolidated statement of
operations for the six months ended August 1, 1998.
(iii) Gottschalks Inc. pro forma consolidated balance
sheet as of August 1, 1998.
(c) Exhibits.
Exhibit
Number Description
2.2 Non-Negotiable, Extendable, Subordinated Note
due August 20, 2003 issued to The Harris
Company.
2.3 Registration Rights Agreement between The
Harris Company and Gottschalks Inc. dated
August 20, 1998.
2.4 Employee Lease Agreement between The Harris
Company and Gottschalks Inc. dated August 20,
1998.
2.5 Tradename License Agreement between The
Harris Company and Gottschalks Inc. dated
August 20, 1998.
2.6 Stockholders' Agreement among El Corte
Ingles, S.A., Gottschalks Inc., Joseph Levy
and Bret Levy dated August 20, 1998.
2.7 Standstill Agreement between El Corte Ingles,
S.A. and Gottschalks Inc. dated August 20,
1998.
2.8 Store Lease Agreement between El Corte
Ingles, S.A. and Gottschalks Inc. dated
August 20, 1998 re: East Hills Mall,
Bakersfield, California.
2.9 Store Lease Agreement between El Corte
Ingles, S.A. and Gottschalks Inc. dated
August 20, 1998 re: Moreno Valley Mall at
Towngate, Moreno Valley, California.
2.10 Store Lease Agreement between El Corte
Ingles, S.A. and Gottschalks Inc. dated
August 20, 1998 re: Antelope Valley Mall,
Palmdale, California.
2.11 Store Lease Agreement between El Corte
Ingles, S.A. and Gottschalks Inc. dated
August 20, 1998 re: Carousel Mall, San
Bernardino, California.
23.1 Consent of Eadie & Payne LLP *
* To be filed by amendment.
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.
By: /s/ Alan A. Weinstein
Senior Vice President,
Chief Financial Officer
DATED: September 2, 1998
NON-NEGOTIABLE, EXTENDABLE,
SUBORDINATED NOTE DUE AUGUST 20, 2003
$22,179,598.00 Los Angeles, California
August 20, 1998
FOR VALUE RECEIVED, GOTTSCHALKS INC., a Delaware
corporation (the "Buyer"), promises to pay to The
Harris Company, a California corporation (the
"Seller"), the principal amount of Twenty Two Million
One Hundred Seventy-Nine Thousand Five Hundred
Ninety-Eight Dollars ($22,179,598.00) as specified
below.
1. Interest. Buyer promises to pay simple interest
on the unpaid principal amount hereof from the date
hereof until paid at the rate of eight percent (8%) per
annum.
2. Payments.
(a) Accrued interest shall be due and payable
semi-annually on August 20 and February 20 of each
year, until the indebtedness evidenced by or payable
pursuant to this Extendable Subordinated Note is paid
in full. Interest on this Extendable Subordinated Note
shall accrue from the most recent date to which
interest has been paid or, if no interest has been
paid, from the date of original issuance.
(b) Principal shall be due and payable on August 20,
2003 (the "Maturity Date"), unless the Maturity Date is
extended pursuant to Section 6.
3. Prepayments. Buyer shall have the right at any
time to prepay the principal of this Extendable
Subordinated Note in whole or in part without penalty
or premium.
4. Subordination. This Extendable Subordinated Note
is issued subject to, and Seller accepts and agrees to,
the provision that the indebtedness evidenced by this
Extendable Subordinated Note shall be subordinate and
subject in right of payment to the prior payment in
full of Senior Debt to the extent set forth in
paragraphs (b) and (c) below.
(a) As used in this Extendable Subordinated Note, the
following terms have the following meanings:
"Affiliate" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the Exchange Act, and as
in effect on the date hereof.
"Beneficially Own" shall mean with respect to any
security, having direct or indirect (including through
any Subsidiary or Affiliate) "beneficial ownership" of
such security, as determined pursuant to Rule 13d-3
under the Exchange Act, including pursuant to any
agreement, arrangement or understanding, whether or not
in writing.
"Board" shall mean the board of directors of
Gottschalks.
"Change in Control" shall mean the occurrence of any of
the following events:
(1) An acquisition (other than directly from Buyer)
of any Voting Securities by any person immediately
after which such person has Beneficial Ownership of
fifty percent (50%) or more of the combined voting
power of Buyer's then outstanding Voting Securities;
provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (a) an
employee benefit plan (or a trust forming a part
thereof) maintained by (i) Buyer or (ii) a Subsidiary
of Buyer, (b) Buyer or any Subsidiary of Buyer, (c) any
person or Group who, immediately prior to the date
hereof had Beneficial Ownership of fifteen percent
(15%) or more of the Gottschalks Common Stock or (d)
any person in connection with a
"Non-Control Transaction" (as hereinafter defined).
(2) A merger, consolidation or reorganization
involving Buyer unless:
(a) the stockholders of Buyer
immediately before such merger, consolidation or
reorganization, own, directly or indirectly immediately
following such merger, consolidation or reorganization,
at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization; and
(b) the individuals who were
members of the Board immediately prior to the execution
of the agreement providing for such merger,
consolidation or reorganization constitute at least
two-thirds of the members of the Board of the Surviving
Corporation; and
(c) no person (other than Buyer or
any Subsidiary of Buyer, an employee benefit plan (or
any trust forming a part thereof) maintained by Buyer,
the Surviving Corporation or any Subsidiary of Buyer,
or any person who, immediately prior to such merger,
consolidation or reorganization had Beneficial
Ownership of twenty-five percent (25%) or more of the
then outstanding Voting Securities) has Beneficial
Ownership of twenty-five percent (25%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities; and
(d) a transaction described in
clauses (a) through (c) of this paragraph (2) shall
herein be referred to as a "Non-Control Transaction."
(3) A complete liquidation or dissolution of Buyer.
(4) An agreement for the sale or other disposition of
all or substantially all of the assets of Buyer to any
person (other than a transfer to a Subsidiary).
(5) The acquisition of any Voting Securities by
Joseph Levy, Sharon Levy or their lineal descendents
immediately after which Joseph Levy, Sharon Levy and
their lineal descendents together have a pecuniary
interest in more than fifty percent (50%) of the
combined voting power of Gottschalks' then outstanding
Voting Securities.
(6) The acquisition of any Voting Securities by
Gerald Blum, his spouse or his lineal descendents
immediately after which Gerald Blum, his spouse and his
lineal descendents together have a pecuniary interest
in more than fifty percent (50%) of the combined voting
power of Gottschalks' then outstanding Voting
Securities.
(7) Buyer is no longer a reporting company under the
Exchange Act.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any person
(the "Subject Person") acquired Beneficial Ownership of
more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of
Voting Securities by Buyer which, by reducing the
number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as
a result of the acquisition of Voting Securities by
Buyer, and after such share acquisition by Buyer, the
Subject Person becomes the Beneficial Owner of the
additional Voting Securities which increases the
percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change
in Control shall occur.
"Director" shall mean a member of the Board.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Event of Default" shall mean an event of default or a
default under Funded Debt of Buyer, whether now
existing or hereafter arising.
"Funded Debt" shall mean all present or future
indebtedness, contingent or otherwise, created,
incurred, assumed, or guaranteed by Buyer in respect of
borrowed money, or evidenced by bonds, notes,
reimbursement agreements in respect of letters of
credit, debentures, or similar instruments, and any and
all amendments, renewals, extensions, refinancings, or
refundings thereof, and any and all interest (including
all interest accruing after the filing of any petition
under the Bankruptcy Code of the United States), fees,
costs, expenses and other amounts due in connection
therewith, unless the instrument under which such
indebtedness is created, incurred, assumed, or
guaranteed expressly provides that such indebtedness is
not senior or superior in right of payment to this
Extendable Subordinated Note.
"Gottschalks Common Stock" shall mean the common stock,
par value $0.01 per share, of Gottschalks.
"Potential Event of Default" shall mean a condition or
event that, after notice or lapse of time or both,
would constitute an Event of Default.
"Senior Debt" shall mean the Funded Debt and the Trade
Debt together.
"Subsidiary" shall mean any corporation, partnership,
limited liability company, joint venture, business
trust or other entity of which the specified person,
directly or indirectly, owns or controls 50% or more of
the securities or other interests entitled to vote in
the election of directors (or others performing similar
functions) with respect to such corporation or other
organization, or otherwise has the ability to control
such corporation, partnership, limited liability
company, joint venture, business trust or other entity.
"Trade Debt" shall mean all present or future
indebtedness created or incurred by Buyer in respect of
merchandise or services provided to Buyer by vendors.
"Voting Securities" shall mean at any time shares of
any class of capital stock of Gottschalks which are
then entitled to vote generally in the election of
Directors.
(b) Notwithstanding any other provisions of this
Extendable Subordinated Note:
(i) no direct or indirect payment, whether in cash,
issuance of Gottschalks Common Stock or a combination
thereof, on account of the principal of or interest on
this Extendable Subordinated Note shall be made, nor
shall any property or assets of Buyer be applied to the
purchase or other acquisition or retirement of this
Extendable Subordinated Note, unless full payment of
amounts then due for principal of, premium, if any, or
interest on the Funded Debt has been made;
(ii) no direct or indirect payment, whether in cash,
issuance of Gottschalks Common Stock, or a combination
thereof, on account of principal of or interest on this
Extendable Subordinated Note shall be made, nor shall
any property or assets of Buyer be applied to the
purchase or other acquisition or retirement of this
Extendable Subordinated Note, if immediately after
giving effect to such payment or application an Event
of Default or Potential Event of Default (other than an
Event of Default or Potential Event of Default arising
solely from the nonperformance or nonobservance of any
provision contained in this Extendable Subordinated
Note) exists or would exist; and
(iii) in the event of any dissolution, winding up,
liquidation, reorganization or other similar
proceedings relative to Buyer, or any of its properties
or operations (whether in bankruptcy, insolvency or
receivership proceedings, or upon an assignment for the
benefit of creditors, or any other marshalling of the
assets of Buyer or otherwise), then all principal of,
premium, if any, and interest on Senior Debt shall
first be paid in full in cash before Seller shall be
entitled to receive any payment, whether in cash,
issuance of Common Stock, or a combination thereof, or
distribution in respect to principal of or interest on
this Extendable Subordinated Note, and in any such
proceedings any payment or distribution of any kind or
character, whether in cash, securities or other
property, to which Seller would be entitled if this
Extendable Subordinated Note were not subordinated to
Senior Debt, shall be paid by the trustee or agent or
other person making such payment or distribution, or by
Seller if received by it, directly to the holders of
Senior Debt (according to their relative priorities) or
to the representative of such holders to the extent
necessary to make payment in full of Senior Debt
remaining unpaid, after giving effect to any concurrent
payment or distribution to or for the holders of Senior
Debt, and Seller hereby irrevocably authorizes and
empowers each holder (and its representative or
representatives) of Senior Debt to demand, sue for,
collect and receive all such payments and
distributions, and to file and prove all such claims
and take all such other actions in the name of Seller
or otherwise, as such holder of Senior Debt determines
to be necessary or appropriate.
(c) In the event that Seller shall receive any
payment or distribution on this Extendable Subordinated
Note which Seller is not entitled to retain under the
provisions of the foregoing subparagraph (b), it will
hold any amount so received in trust for the holders of
the Funded Debt and, upon the request of any holder of
The Funded Debt, will forthwith turn over such payment
or distribution (without liability for interest
thereon) to the holders of the Funded Debt (pro rata)
in the form received to be applied to the Funded Debt.
Any such payments transferred by Seller to the holders
of Funded Debt shall not be considered a payment of
interest or principal under this Extendable
Subordinated Note.
(d) The holders of Senior Debt may, at any time and
from time to time, without the consent of or notice to
Seller, without incurring responsibility to Seller and
without impairing or releasing the obligations of
Seller hereunder to the holders of Senior Debt: (i)
renew, extend, modify or amend the Senior Debt; (ii)
change the manner or place of payment of Senior Debt;
(iii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing
Senior Debt; (iv) release any person liable in any
manner for the collection of Senior Debt; (v) exercise
or refrain from exercising any rights against Buyer or
any other person; and (vi) apply any sums by whomsoever
paid or however realized to Senior Debt.
(e) The foregoing provisions regarding subordination
are solely for the purpose of defining the relative
rights of the holders of Senior Debt on the one hand
and Seller on the other hand. Such provisions are for
the benefit of the holders of Senior Debt and shall be
enforceable by them directly against Seller, and no
holder of Senior Debt shall be prejudiced in its right
to enforce subordination of this Extendable
Subordinated Note by any act or failure to act by Buyer
or anyone in custody of its assets or property. Seller
waives any right it may now or hereafter have to
require any holder of Funded Debt to marshal assets, to
exercise rights or remedies in a particular manner, or
to forbear from exercising such rights and remedies in
any particular manner or order. Nothing contained in
this Extendable Subordinated Note is intended to or
shall impair, as between Buyer and Seller, the
obligation of Buyer, which is unconditional and
absolute, to pay to Seller the principal of and
interest on this Extendable Subordinated Note as and
when the same shall become due in accordance with its
terms, nor shall anything herein prevent Seller from
exercising all remedies otherwise permitted by
applicable law upon default under this Extendable
Subordinated Note subject, however, to the rights under
the foregoing subparagraphs of the holders of Senior
Debt. No modification may be made to this Extendable
Subordinated Note if it would adversely affect the
rights of any holder of Funded Debt.
5. Notice of Event of Default. Buyer shall provide
Seller with notice of the occurrence of an Event of
Default or Potential Event of Default within 10 days of
the occurrence thereof.
6. Buyer's Option to Extend Maturity Date. Buyer
shall have the right to extend the Maturity Date of
this Extendable Subordinated Note so that the principal
shall be due and payable on August 20, 2006 (the
"Extended Maturity Date") in the event that an Event of
Default or Potential Event of Default exists, or would
exist as a result of the repayment of the outstanding
principal amount plus accrued interest of this
Extendable Subordinated Note at the Maturity Date, with
respect to Funded Debt existing at the Maturity Date;
provided, that, if some portion of the amount due under
this Extendable Subordinated Note could be paid at the
Maturity Date without resulting in an Event of Default
or Potential Event of Default with respect to Funded
Debt existing at the Maturity Date, Buyer shall pay
such amount at the Maturity Date, with any and all
remaining amounts to be paid at the Extended Maturity
Date and provide further, that Buyer will use
commercially reasonable efforts to refinance the debt
evidenced by this Extendable Subordinated Note with
replacement debt if at the Maturity Date an Event of
Default exists or would exist as a result of repayment
of the outstanding principal amount plus accrued
interest of this Extendable Subordinated Note at the
Maturity Date.
7. Acceleration. If Buyer fails to make any payment
of interest when due under this Extendable Subordinated
Note and such failure continues for 10 business days,
Seller may, by written notice to Buyer, declare the
principal amount of this Extendable Subordinated Note
together with accrued interest thereon to be due and
payable, and the principal amount of this Extendable
Subordinated Note together with such interest shall
thereupon become immediately due and payable without
presentment, demand, notice, protest or other
requirements of any kind (all of which are expressly
waived by Buyer) (an "Acceleration"), subject to the
provisions of Section 4; provided, however, that in the
event that an Event of Default or Potential Event of
Default exists, or as a result of such Acceleration
would exist, with respect to Funded Debt as described
in Section 4, notwithstanding the provisions of Section
4(e) above, Seller shall not declare an Acceleration or
exercise any other remedies with respect to such
non-payment of interest for the shorter of (i) a period
of 180 days or (ii) until the Maturity Date or the
Extended Maturity Date, as applicable.
8. Cancellation of Extendable Subordinated Note.
Seller shall cancel this Extendable Subordinated Note
and return it to Buyer upon repayment in full.
9. Asset Purchase Agreement. This Extendable
Subordinated Note is issued pursuant to the terms of an
Asset Purchase Agreement by and among Buyer, Seller and
El Corte Ingles, S.A., a Spanish corporation and the
parent of the Seller, dated as of July 21, 1998 and is
subject to the terms and conditions thereof, including
Buyer's right of offset contained in Section 11.10
thereof.
10. Miscellaneous.
(a) All payments of interest and principal in respect
of this Extendable Subordinated Note shall be made in
lawful money of the United States of America at 300
North E Street, San Bernardino, California, 92416 or at
such other place as shall be designated in writing for
such purpose by Seller.
(b) This Extendable Subordinated Note shall be
governed by, and shall be construed and enforced in
accordance with, the laws of the State of California
and Seller and any future holder of this Extendable
Subordinated Note consent to exclusive jurisdiction in
California, service of process pursuant to the laws of
the State of California and waives any defense of forum
non conveniens.
11. Change in Control. Buyer shall provide Seller
with notice of a Change in Control within 10 days of
Buyer becoming aware of such Change in Control.
Subject to Section 4, upon the occurrence of a Change
in Control, Seller may, by written notice to Buyer,
require Buyer to redeem this Extendable Subordinate
Note within 30 days of the notice given by Seller
following a Change in Control by paying to Seller all
principal, plus accrued interest, to the date of such
repayment.
12. Senior Subordinated Indebtedness. Buyer shall
not create, incur, issue assume, guarantee or otherwise
become directly or indirectly liable with respect to
any indebtedness that is subordinate in right of
payment to the Funded Debt, unless such indebtedness is
specifically by its terms made pari passu with or
subordinate in right of payment to this Extendable
Subordinated Note.
13. Assignment. This Extendable Subordinated Note
shall not be assigned, except that Seller may assign
its rights hereunder to El Corte Ingles, S.A., its
parent.
IN WITNESS WHEREOF, Buyer has caused this
Extendable Subordinated Note to be executed and
delivered by its duly authorized officer, as of the day
and year and the place first written above.
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")
is made and entered into as of August 20, 1998, between
Gottschalks Inc., a Delaware corporation
("Gottschalks"), and The Harris Company, a California
corporation ("Harris").
RECITALS
WHEREAS, Gottschalks has entered into that certain
Asset Purchase Agreement, dated as of July 21, 1998
(the "Asset Purchase Agreement"; all capitalized terms
used herein and not otherwise defined shall have the
meanings given to such terms in the Asset Purchase
Agreement), with Harris and El Corte Ingles, S.A., a
Spanish corporation and the parent of Harris ("ECI").
WHEREAS, pursuant to the Asset Purchase Agreement (i)
Gottschalks has agreed to issue to Harris on the
Closing Date two million ninety-five thousand nine
hundred (2,095,900) shares (the "Shares") of
Gottschalks' common stock, par value $.01 per share
(the "Gottschalks Common Stock"),
WHEREAS, the Shares have not been registered under the
Securities Act and are subject to restrictions on
resale or other disposition;
WHEREAS, Gottschalks desires to grant, and Harris
desires to accept, the registration rights set forth in
this Agreement in respect of the Registrable Shares, as
defined herein; and
WHEREAS, execution and delivery of this Agreement by
the parties hereto is a condition precedent to the
closing of the Asset Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
contained herein and intending to be legally bound the
parties agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall
have the following respective meanings:
"Divesture Date" means any date upon which Harris or
ECI (if the Shares are transferred to ECI pursuant to
Section 8 hereof) is the registered owner of less than
ten percent (10%) on a fully diluted basis of the
Gottschalks Common Stock then outstanding.
"fully diluted" means, with respect to the Gottschalks
Common Stock, the total number of outstanding shares of
the Gottschalks Common Stock (for such purposes,
treating as outstanding Gottschalks Common Stock all
options or warrants to purchase and securities
convertible into (or exchangeable or redeemable for)
the Gottschalks Common Stock as of the relevant
measurement date).
"Holder" means Harris and any transferee or assignee as
permitted under Section 8 hereof up until but not
including and not beyond the Divesture Date.
"Registrable Shares" means the Shares issued to Harris
pursuant to the Asset Purchase Agreement or the
transactions contemplated thereby, including any
securities issued in respect thereof pursuant to a
stock dividend, stock split, recapitalization or
similar event. As to any particular Registrable
Shares, once issued such securities shall cease to be
Registrable Shares when (A) a registration statement
with respect to the sale of such securities shall have
become effective under the Securities Act and such
securities shall have been disposed of in accordance
with such registration statement, (B) such securities
shall have been sold in accordance with Rule 144 (or
any successor provision) under the Securities Act or
(C) such securities are eligible to be resold pursuant
to Rule 144(k).
The terms "register," "registered" and "registration"
refer to the preparation and filing with the SEC of a
registration statement or similar document in
compliance with the Securities Act and the declaration
or ordering of the effectiveness of such registration
statement or document.
"Registration Expenses" means all expenses, except
Selling Expenses, incurred by Gottschalks while
complying with Section 2 of this Agreement.
Registration Expenses shall include, without
limitation, all registration and filing fees and other
qualification fees, blue sky fees, printing expenses
and fees and disbursements of Gottschalks' accountants
and legal counsel incurred in any registration pursuant
to Section 2.
"SEC" means the United States Securities and Exchange
Commission or any successor agency.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and any successor statute.
"Selling Expenses" means all underwriting discounts,
selling commissions, stock transfer taxes relating to
any Holder's registered securities and any fees and
disbursements of counsel, accountants or other agents
for any Holder.
"Asset Purchase Agreement" shall have the meaning given
in the recitals hereof.
SECTION 2. Registration.
(a) Registration Statement. If Gottschalks proposes
to register any Gottschalks Common Stock, whether or
not for sale for its own account (other than a
registration relating to the sale of securities to
participants in a dividend reinvestment plan, a
registration on Form S-4 relating to a business
combination or similar transaction permitted to be
registered on such Form S-4, a registration on Form S-8
relating to the sale of securities to participants in a
stock or employee benefit plan, a registration
permitted under Rule 462 under the Securities Act
registering additional securities of the same class as
were included in an earlier registration statement for
the same offering, and declared effective, or any other
registration on a Form not suitable for the
registration of Registrable Shares), Gottschalks will
give written notice to all Holders of Gottschalks'
intention to effect such a registration and include in
such registration all Registrable Shares with respect
to which Gottschalks has received written notice from a
Holder for inclusion therein within 10 days after the
date of Gottschalks' notice (in such capacity such
Holder a "Requesting Holder"); provided, however, that
nothing in this Section 2 shall be construed as
granting to any Holder the right to require Gottschalks
to initiate the registration of any Gottschalks Common
Stock; provided, further, that:
(i) if, at any time after giving written notice of
its intention to register any shares and, prior to the
effective date of the Registration Statement filed in
connection with such registration, Gottschalks shall
determine for any reason not to register such shares,
Gottschalks may, at its election, give written notice
of such determination to each Holder requesting
inclusion therein, and, thereupon, Gottschalks shall be
relieved of its obligation to register any Registrable
Shares in connection with such withdrawn or unfiled
registration (but not of its obligation to pay the
Registration Expenses in connection therewith pursuant
to Section 3 hereto); and
(ii) if such registration shall be in connection with
an underwritten public offering and the underwriter or
managing underwriter, as the case may be, shall advise
Gottschalks that in its opinion the number of shares
requested to be included in such registration or
offering exceeds the number of such securities which
can be sold in (or during the time of) such offering or
would have an adverse impact on the price of such
securities, the amount to be registered shall be
allocated first, to Gottschalks, and second, pro rata
among the Requesting Holders desiring to participate in
such registration and the other holders of the
Gottschalks' securities requested to be included in
such registration, based on the numbers of shares
initially proposed to be included by such holders.
(b) Selection of Managing Underwriter; Customary
Agreements. If any registration pursuant to this
Section 2 is an underwritten public offering:
(i) the Holders shall not have the right to select the
managing underwriter to administer such offering; and
(ii) the Requesting Holders agree to enter into
customary agreements (including, if requested, an
underwriting agreement), and take such other actions in
connection therewith as Gottschalks or the
underwriter(s) shall request in order to consummate
such registration.
(c) Notice of Effectiveness. Upon declaration of
effectiveness by the SEC of a registration statement
filed pursuant to this Agreement, Gottschalks shall
give written notice thereof to each Holder whose
Registrable Securities are included in such
registration statement.
(d) Blackout Periods. Following the effective date
of any registration statement filed pursuant to this
Section 2, Gottschalks shall be entitled, from time to
time, to notify the Holders to discontinue offers or
sales of Registrable Securities pursuant to such
registration statement for the period of time stated in
such notice, up to a maximum of sixty (60) consecutive
days (such notice being a "Blackout Notice"), if
Gottschalks determines, in its reasonable business
judgment, that such offers and sales would materially
interfere with any financing, acquisition, corporate
reorganization, securities offering or other material
transaction, or if there has been any development,
event, occurrence or change in circumstances which
Gottschalks would not be required to disclose at such
time other than in connection with a registration
statement, involving Gottschalks or any of its
subsidiaries, taken as a whole. Such notice shall be
signed by an authorized officer of Gottschalks and
shall certify such determination. Each Holder agrees
that upon receipt of a Blackout Notice such Holder
shall discontinue offers or sales of Registrable
Securities pursuant to any such registration statement
for the period of time stated in the Blackout Notice
and the time period set forth in subsection 2(e) shall
be tolled during such period. Gottschalks may issue
any number of Blackout Notices and such notices may be
given consecutively.
(e) Effectiveness of Registration Statements.
Gottschalks shall cause any registration statement
filed pursuant to this Section 2 to remain effective
for at least ninety (90) days after it is declared or
ordered effective or until the Holders have completed
the distribution described therein, whichever first
occurs; provided, however, that in no event will
Gottschalks be required to prepare or file audited
financial statements with respect to any fiscal year by
a date prior to the date on which Gottschalks would be
so required to prepare and file such audited financial
statements if such registration statement were no
longer effective and usable.
(f) Holdback Agreement. In the event of any filing
of a prospectus supplement or the commencement of an
underwritten public distribution of the Gottschalks
Common Stock under a Registration Statement, whether or
not Registrable Shares are included, each Holder agrees
not to effect any public sale or distribution of the
Gottschalks Common Stock (except as part of such
underwritten public distribution), including a sale
pursuant to Rule 144 or Rule 144A under the Securities
Act, during a period designated by Gottschalks in a
written notice duly given to Holders, which period
shall commence approximately 14 days prior to the
effective date of any such filing of such prospectus
supplement or the commencement of such underwritten
public distribution of such Gottschalks Common Stock
under a Registration Statement and shall continue for
up to 90 consecutive days after such effective date or
commencement.
SECTION 3. Expenses of Registration.
For the first two registrations of Gottschalks Common
Stock in which any Holder exercises its right to
include in such registration Registrable Shares
pursuant to Section 2 hereof (in such capacity such
Holder a "Participating Holder"), Gottschalks shall
bear the Registration Expenses arising out of such
registrations; provided, however, that all Selling
Expenses relating to the registered securities of any
Participating Holder shall be borne by all
Participating Holders and Gottschalks shall have no
liability therefor. Thereafter, for any registration
of Gottschalks Common Stock pursuant to Section 2
hereof, the Participating Holders, jointly and
severally, shall promptly reimburse Gottschalks for all
incremental Registration Expenses attributable to the
inclusion of Registrable Shares in such registration
statement in addition to bearing pro rata all Selling
Expenses relating to the Registrable Shares.
SECTION 4. Registration Procedures.
For each registration, qualification or compliance
carried out by Gottschalks pursuant to this Agreement,
Gottschalks shall give each Holder written notice of
the initiation of such registration, qualification or
compliance and Gottschalks will:
(a) provide to each Holder participating in such
registration a reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and any other documents as may reasonably be
necessary to facilitate a public offering;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be
necessary to keep such registration statement effective
and to comply with the provisions of the Securities Act
with respect to the disposition of all Shares covered
by such registration statement during the effectiveness
of such registration statement;
(c) use its best efforts to register or qualify all
Shares covered by such registration statement under
such securities or blue sky laws of such jurisdiction
as each Holder shall reasonably request, except that
Gottschalks shall not for any such purpose be required
to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any such
jurisdiction or to consent generally to service of
process in any such jurisdiction; and
(d) immediately notify each Holder of Shares covered
by such registration statement, at any time when a
prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event
as a result of which the prospectus included in such
registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances then existing, and at the
request of any such Holder prepare and furnish to such
Holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of
such Shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances then existing.
SECTION 5. Information by Holder.
Each Holder of Registrable Securities participating in
any registration shall provide Gottschalks, when
requested, with written information regarding itself,
its ownership of securities of Gottschalks, the
distribution proposed by such Holder and such other
information as may be legally required in connection
with such registration. Such writing shall expressly
state that it is being furnished to Gottschalks for use
in the preparation of a registration statement,
preliminary prospectus, supplementary prospectus, final
prospectus or amendment or supplement thereto, as the
case may be. Each Holder agrees, by its acquisition of
Registrable Shares and its acceptance of the benefits
provided to it hereunder, to furnish promptly to
Gottschalks all information required to be disclosed in
order to make any previously furnished information not
misleading.
SECTION 6. Delay of Registration.
No Holder shall obtain or seek an injunction
restraining or otherwise delaying any registration
referred to in this Agreement as a result of any
controversy arising out of the interpretation or
implementation of this Agreement.
SECTION 7. Indemnification.
(a) Gottschalks will indemnify each Holder of Shares
covered by any such registration statement, its
officers, directors and partners and each person who
controls such Holder within the meaning of Section 15
of the Securities Act against all reasonable expenses,
claims, losses, damages and liabilities (or actions in
respect thereof), including any of the foregoing
incurred in the defense and settlement of any
litigation, arising out of or based upon any untrue
statement (or alleged untrue statement) of a material
fact contained in any registration statement,
prospectus or documents incorporated by reference
therein, or based upon any omission (or alleged
omission) of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and including any of the foregoing incurred
or arising out of any violation by Gottschalks of the
Securities Act or any rule or regulation promulgated
under the Securities Act; provided, however, that
Gottschalks will not be under an obligation to
indemnify any of them (i) if any of the foregoing are
based upon any untrue statement or omission or alleged
untrue statement or omission made in reliance upon
information furnished to Gottschalks by any Holder or
controlling person or (ii) to the extent that any such
loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of any
Holder's or underwriter's failure to send or give a
copy of the final prospectus or supplement to the
persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior
to the written confirmation of the sale of Registrable
Shares to such person if such statement or omission was
corrected in such final prospectus or supplement;
provided further, that the indemnity agreements
contained in this subsection shall not apply to amounts
paid in any settlement if such settlement is effected
without the consent of Gottschalks.
(b) Each Holder participating in a registration
pursuant to this Agreement will indemnify Gottschalks,
its directors and officers, each person who controls
Gottschalks within the meaning of Section 15 of the
Securities Act, and each other Holder and each of its
officers and directors and each person controlling such
Holder within the meaning of Section 15 of the
Securities Act, against all reasonable expenses,
claims, losses, damages and liabilities incurred and
actions arising out of any untrue statement (or alleged
untrue statement) of a material fact contained in any
registration statement and any documents related
thereto or based upon any omission (or alleged
omission) of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and including any of the foregoing incurred
or arising out of the violation by any such Holder of
the Securities Act or any rule or regulation
promulgated thereunder; provided, however, that such
Holder will only be obligated to indemnify any of them
for any of the foregoing based upon a material
misstatement or an omission (alleged or otherwise) made
in reliance upon information furnished to Gottschalks
by such Holder.
(c) Each party entitled to indemnification under this
Section 7 ("Indemnified Party") shall give prompt
notice to the party required to provide indemnification
("Indemnifying Party") as soon as Indemnified Party has
actual knowledge of any claim for which indemnify may
be sought, and shall permit Indemnifying Party to
assume and control the defense of any such claim or any
litigation resulting therefrom, provided that
Indemnified Party will have the right to approve (whose
approval shall not be unreasonably withheld) of the
counsel chosen by Indemnifying Party to defend such
claim or litigation, and provided that Indemnified
Party may participate in such defense at Indemnified
Party's expense. The failure of any Indemnified Party
to give notice of a claim subject to indemnification
shall not relieve Indemnifying Party of its obligations
under this Agreement unless the failure to give such
notice is materially prejudicial to Indemnifying
Party's ability to defend such claim. Indemnifying
Party shall not assume the defense for matters as to
which there is a conflict of interest or separate and
different defense. In defending such claim,
Indemnifying Party shall not, without the prior written
consent of Indemnified Party, consent to the entry of
any judgment or enter into any settlement which does
not include an unconditional provision releasing
Indemnified Party from all liability in respect to such
claim or litigation.
(d) The obligations of Gottschalks and Holders under
this Section 7 shall survive the completion of any
offering of Registrable Securities in a registration
statement under this Agreement, and otherwise.
SECTION 8. Transfer of Registration Rights.
Any Holder's rights under Section 2 hereof may not be
assigned or transferred except to an affiliate that is
bound by and becomes a party to that certain
Stockholders' Agreement dated as of August 20, 1998
among Gottschalks, ECI, Joseph Levy and Bret Levy.
SECTION 9. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or
in a particular instance and either retroactively or
prospectively), only with the written consent of
Gottschalks and Holders of a majority of the
Registrable Securities then outstanding. Any amendment
or waiver effected in accordance with this Section 9
shall be binding upon each Holder, each transferee or
assignee of Holder pursuant to Section 8 of this
Agreement.
SECTION 10. Termination of Registration Rights.
No Holder shall be entitled to exercise any right
provided for in this Agreement after the fifteenth
anniversary of the date hereof.
SECTION 11. Notices.
All notices, requests, consents and other
communications hereunder shall be in writing and shall
be deemed to have been made (i) when delivered
personally or by telecopier, (ii) if to a party in the
same country as the mailing party, when mailed first
class registered or certified mail, postage prepaid, or
(iii) if to a party in a different country from the
sending party, on the second day following deposit with
a reputable commercial air courier, charges prepaid, to
each respective party as shown below:
(a) If to the holders of Registrable Securities, to
the addresses shown on the signature page(s) hereto,
with a copy to:
McPeters, McAlearney, Shimoff & Hatt
4 W. Redlands Boulevard, 2nd Floor
P.O. Box 2084
Redlands, California 92373
Attention: Thomas H. McPeters, Esq.
Telecopier: (909) 792-6234
(b) If to Gottschalks to:
Gottschalks Inc.
7 River Park Place
Fresno, California 93720
Attention: General Counsel
Telecopier: (209) 434-4666
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: D. Stephen Antion, Esq.
Telecopier: (213) 430-6407
SECTION 12. Parties in Interest.
This Agreement shall be binding upon and inure to the
benefit of each party, and nothing in this Agreement,
express or implied, is intended to confer upon any
other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Nothing in this Agreement is intended to relieve or
discharge the obligation of any third person to any
party to this Agreement.
SECTION 13. Counterparts.
This Agreement may be executed in any number of
counterparts and by different parties in separate
counterparts, each of which when so executed shall be
deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 14. Headings.
The headings in this Agreement are for convenience only
and shall not limit or otherwise affect the meaning
hereof.
SECTION 15. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of California,
without regard to principles of conflict of law.
SECTION 16. Arbitration.
(a) Any controversy, dispute or claim under, arising
out of, in connection with or in relation to this
Agreement, including but not limited to the
negotiation, execution, interpretation, construction,
coverage, scope, performance, non-performance, breach,
termination, validity or enforceability of this
Agreement or this Section 16 shall be determined by
arbitration conducted in accordance with the Commercial
Arbitration Rules or then existing rules for commercial
arbitration of the American Arbitration Association.
The arbitration shall additionally be governed by the
California Arbitration Act. The arbitration shall be
before a single arbitrator who shall be selected by
mutual agreement of the parties from among a list of
seven potential arbitrators provided by the American
Arbitration Association. If the parties cannot agree
on an arbitrator from this first list, the parties
hereto shall select an arbitrator for such arbitration
from a second list of seven potential arbitrators
provided by the American Arbitration Association with
the Holders, on the one hand, and Gottschalks, on the
other, alternately striking names, with the last name
remaining to be the arbitrator so selected. In the
event that either party seeks a temporary restraining
order, preliminary injunction or other provisional
relief, the provisions of Section 1281.8 of the Cal.
Civ. Proc. Code shall apply. The arbitration of such
issues, including without limitation any award of
damages suffered by any party hereto by reason of the
acts or omissions of any party, shall be final and
binding upon the parties to the maximum extent
permitted by law. The parties intend that this Section
shall be valid, binding, enforceable and irrevocable
and shall survive the termination of this Agreement.
(b) Any arbitration proceedings hereunder shall be held
in Los Angeles, California.
(c) Judgment upon any award rendered by the
arbitrator(s) may be entered by any court having
jurisdiction thereof.
SECTION 17. Attorney's Fees. In the event of any
action complaint, petition or other proceeding,
("Action") by any party arising under or out of, in
connection with or in respect of, this Agreement, the
prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such
Action. Attorney's fees incurred in enforcing any
judgment in respect of this Agreement are recoverable
as a separate item. The parties intend that the
preceding sentences be severable from the other
provisions of this Agreement, survive any judgement
and, to the maximum extent permitted by law, not be
deemed merged into such judgment.
SECTION 18. Severability.
In the event that any one or more of the provisions
contained herein, or the application thereof in any
circumstance, is held invalid, illegal or
unenforceable, the validity, legality and
enforceability of any such provision in every other
respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
SECTION 19. Entire Agreement.
This Agreement, together with the Asset Purchase
Agreement and the other agreements of Gottschalks,
Harris and ECI of even date herewith, contains the
entire understanding of the parties with respect to the
subject matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
THE HARRIS COMPANY
/S/ LEOPOLDO DEL NOGAL
/S/ THOMAS MCPETERS
Notice Address:
c/o El Corte Ingles, S.A.
Hermosilla, 112
28009 Madrid, SPAIN
Attn: Jorge Pont
Facsimile: 011-34-91-402-1567
With a copy to:
McPeters McAlearney Shimoff
& Hatt
4 W.Redlands Boulevard, 2nd Floor
P.O. Box 2084
Redlands, CA 92373
Attn: Thomas H. McPeters, Esq.
Facsimile: (909) 792-6234
EMPLOYEE LEASE AGREEMENT
This Employee Lease Agreement (the "Agreement") is
entered into as of August 20, 1998, by and between
Gottschalks Inc., a Delaware corporation ("Recipient"),
and The Harris Company, a California corporation
("Provider").
R E C I T A L S
WHEREAS, Recipient and Provider are parties to an Asset
Purchase Agreement (the "Purchase Agreement") pursuant
to which Recipient will acquire substantially all of
the assets of Provider's department store business.
WHEREAS, the execution and delivery of this Agreement
by the parties hereto is a condition to the Closing (as
defined in the Purchase Agreement).
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises
contained herein and intending to be legally bound, the
parties agree as follows:
1. Transition Services. The Provider shall provide the
Recipient with the services of the Provider's employees
named on Exhibit A (the "Employees") which exhibit is
attached hereto and made a part hereof. The services
to be provided by each of the Employees shall also be
set forth on Exhibit A. The Provider shall use its
best efforts to assure that each Employee performs such
services in the same manner that such Employee
performed such services prior to the Closing Date (as
defined in the Purchase Agreement), except as such
services may be modified by the Recipient. Recipient
shall provide written notice to the Provider (with a
copy to the affected Employee) of any such
modification.
2. Term. The Provider shall provide the services of
each of the Employees to the Recipient for a term
commencing at the Closing Date and ending with respect
to each of the Employees as of a date to be determined
by the Recipient (the "Termination Date"). The
Recipient shall provide written notice to the Provider
(with a copy to the affected Employee) of each
Employee's Termination Date at least three days prior
to the Termination Date for the relevant Employee. In
no event shall any Termination Date be more than ninety
days after the Closing Date. The Provider shall use
its best efforts to retain the services of each
Employee until his or her Termination Date.
3. Benefits. Unless otherwise requested by Recipient,
the Provider shall furnish and keep in full force and
effect with respect to each Employee (and, with respect
to group health insurance, his or her eligible
dependents) from the Closing Date until the Employee's
Termination Date such group health, disability and life
insurance, vacation, holiday and sick pay policies,
workers' compensation insurance, 401(k) savings plan,
general liability insurance and, with respect to any
Employee who was an officer of the Provider immediately
prior to the Closing, such car allowance as was in
effect with respect to such Employee immediately prior
to the Closing Date.
4. Service Fee. The Recipient shall pay to the
Provider for each payroll period the amount set forth
in Exhibit A for each Employee who has not reached his
or her Termination Date (the "Fee"). The Recipient may
issue a single check covering the Fee for all of the
Employees for a payroll period. The amount set forth
on Exhibit A for each of the Employees shall be limited
to the following items (the "Reimbursable Expenses")
with respect to each of the Employees:
(a) his or her salary for the payroll period;
(b) the Provider's share of the Employee's payroll
taxes;
(c) any costs incurred by the Provider for the payroll
period to provide the Employee with the benefits set
forth in Section 3 of this Agreement; and
(d) any reasonable and necessary costs incurred by the
Provider for the payroll period to administer this
Agreement including but not limited to payroll
processing costs for the Employees (but excluding any
personnel costs of Provider of employees whose services
are not provided to Recipient hereunder).
The Fee may be prorated for any payroll period in which
an Employee's services are not provided to the
Recipient for a full payroll period. For any payroll
period which includes an Employee's final date of
employment with the Provider, the Fee shall also
include any accrued vacation pay of such Employee
attributable to the term of this Agreement.
5. Billing and Payment. The Provider shall receive
payment of the Fee for each payroll period at its
office no later than three days before the date on
which payroll checks are to be distributed to the
Employees. The Provider shall provide to the Recipient
immediately following the distribution of payroll
checks a record of the exact amounts paid by the
Provider for the Reimbursable Expenses for the
applicable payroll period. If the amount actually paid
by the Provider for a particular payroll period for the
Reimbursable Expenses differs from the Fee paid to the
Provider by the Recipient for that payroll period, the
Recipient shall make the appropriate adjustment in the
payment of the Fee for the following payroll period.
If at the end of the final payroll period in which this
Agreement is in effect, the aggregate amount of Fees
paid by the Recipient to the Provider differs from the
aggregate amount of Reimbursable Expenses paid by the
Provider, any excess amount received by the Provider
shall be promptly refunded to the Recipient or any
amount due the Provider shall be promptly paid to the
Provider.
6. Independent Contractor Status. The parties
acknowledge that Provider is an independent contractor
of the Recipient and that all of the Employees are
employees of Provider only. Notwithstanding the
foregoing, Recipient may offer any Employee employment
with the Recipient commencing immediately following the
Employee's Termination Date. The Provider shall not
represent itself as having any relationship to the
Recipient other than that of an independent contractor
for the limited purposes described in this Agreement.
During the term of this Agreement and upon each
Employee's Termination Date, the Provider shall comply
with all federal, state and local laws applicable to
its employment of the Employees, including but not
limited to the continuation of medical coverage
requirements of federal law. The Provider shall be
responsible for the payment of all salaries, federal,
state and local payroll taxes and all benefits
described in Section 3 for and on behalf of the
Employees.
7. Severance Obligations. Each of the Employees who
continues to be employed by the Provider and provide
services to the Recipient pursuant to this Agreement
from the Closing Date until his Termination Date shall
be entitled to receive severance pay from the Provider
in accordance with the Provider's severance pay policy
in effect immediately prior to the Closing Date.
Amounts paid to the Employees pursuant to the preceding
sentence shall be treated as "Severance Amounts" for
purposes of applying the provisions of Section 8.4(c)
of the Purchase Agreement.
8. Indemnification.
(a) Recipient shall indemnify and hold the Provider
harmless for any penalty, claim, liability, deficiency,
damages, loss or litigation costs (including without
limitation reasonable attorneys' fees) arising from:
(i) the performance by Provider of its obligations
under this Agreement in accordance with its terms; (ii)
the performance of services by the Employees in
accordance with this Agreement; (iii) any act, incident
or injury (other than a failure described in Section
8(b) below) arising out of and relating to the
performance of services in accordance with this
Agreement; and (iv) Recipient's failure to fulfill its
obligations under this Agreement.
(b) Provider shall indemnify and hold the Recipient
harmless for any penalty, claim, liability, deficiency,
damages, loss or litigation costs (including without
limitation reasonable attorneys' fees) arising from the
Provider's failure to fulfill its obligations under
this Agreement.
9. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and
shall be deemed to have been given upon delivery in
person or by telecopier or other standard form of
telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as
follows:
(a) If to Recipient:
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Attention: General Counsel
(b) If to Provider:
The Harris Company
c/o El Corte Ingels, S.A.
Hermosilla, 112
28009 Madrid, SPAIN
Attention: Jorge Pont
10. Counterparts. This Agreement may be executed in
any number of separate counterparts signed by one or
more of the parties hereto, each such counterpart being
deemed to be an original instrument, and all such
counterparts shall together constitute the same
agreement.
11. Binding Effect; Assignability. This Agreement
shall be binding on and inure solely to the benefit of
the parties hereto, their respective successors and
permitted assigns, and is not intended to create rights
for any third party. This Agreement and the rights and
obligations hereunder may not be assigned by either
party hereto, whether by operation of law or otherwise,
without the written consent of the other party and any
such attempt at assignment shall be void and
unenforceable.
12. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the state
of California, except to the extent that such laws are
preempted by federal law.
13. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto relating to
the subject matter hereof and supersedes all prior or
contemporaneous agreements and understandings of the
parties relating thereto.
14. Modification and Amendment. Neither this Agreement
nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only by an
instrument in writing signed by the party against which
the enforcement of such termination, amendment,
supplement, waiver or modification is sought. No
failure on the part of either party to exercise, no
delay in exercising, no partial exercise of, and no
course of dealing with respect to, any right, power or
privilege under this Agreement shall operate as a
waiver thereof.
15. Dispute Resolution. The provisions of sections
13.1, 13.3 and 13.4 of the Purchase Agreement are
incorporated by references herein as if set forth in
full herein.
16. Severability. Every section, paragraph, clause and
subclause of this Agreement shall as far as possible be
deemed to be severable from every other section,
paragraph, clause and subclause. If for any reason any
such section, paragraph, clause or subclause is held by
a court of competent jurisdiction or a competent
administrative body to be illegal, unlawful, void,
voidable, invalid or unenforceable, then (i) such
holding shall not (unless it expressly provides to the
contrary) render illegal, unlawful, void, voidable,
invalid or unenforceable any other such section,
paragraph, clause or subclause, and (ii) the parties
hereby agree to negotiate in good faith to replace the
section, paragraph, clause or subclause that is the
subject matter of the holding with a similar but
permissible provision.
17. Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in
any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have signed this
Agreement on the date first set forth above.
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
THE HARRIS COMPANY
/S/ LEOPOLDO DEL NOGAL
/S/ THOMAS MCPETERS
TRADENAME LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (the
"Agreement") dated as of August 20, 1998, is entered by
and between The Harris Company (the "Licensor"), a
California corporation, and Gottschalks Inc. (the
"Licensee"), a Delaware corporation.
WHEREAS, Licensor and Licensee have entered
into an Asset Purchase Agreement dated as of July 21,
1998 (the "Sale Agreement"), whereby Licensee agreed to
purchase substantially all of the Assets of Licensor;
and
WHEREAS, Licensor is the owner of certain
tradenames, trademarks and servicemarks used by
Licensor that were not sold to Licensee as part of the
Sale Agreement; and
WHEREAS, Licensee desires to use said
tradenames, trademarks and servicemarks for an
unlimited period of time following the closing of the
transactions contemplated by the Sale Agreement (the
"Closing");
WHEREAS, the parties desire to set forth
their agreement as to the use of said tradenames,
trademarks and servicemarks by Licensor and Licensee
following the Closing.
NOW, THEREFORE, in consideration of the
foregoing and of the mutual promises herein contained,
Licensor and Licensee agree as follows:
1. Definition
The term "Marks" when used herein means the
tradenames, trademarks and servicemarks listed on
Schedule 1 hereto, whether or not such tradenames,
trademarks or servicemarks have been registered by the
Licensor. All capitalized terms not defined herein
shall have the meanings specified in the Sale
Agreement.
2. Grant of License
(a) Licensor hereby grants to Licensee a
royalty-free, exclusive license to use the Marks in
connection with the operation of department stores,
retail or specialty stores or in any related activity
(including in connection with the sale of merchandise
via the Internet) (collectively, the "Field") in the
United States of America for a period of six months
after the Closing Date (the "Transitional License");
except that Licensee shall be entitled to use the Marks
beyond such six-month period in connection with the
following: (i) Licensee may continue to use existing
supplies, including but not limited to, shopping bags
with the Marks, and (ii) Licensee may allow customers
of Licensor to maintain existing customer credit cards
using the Marks rather than replacing such credit cards
with credit cards bearing Licensee's name.
(b) Licensor hereby further grants to Licensee
a perpetual, royalty-free, exclusive license to use the
servicemark "Harris", but only if used together with
"Gottschalks", in connection with the Field (the
"Perpetual License"). Such Exclusive License is
exclusive to Licensee.
(c) Licensor agrees that it shall not use or
grant to any third party the right to use the Marks or
any derivative thereof in the Field.
(d) Licensee shall not sublicense its rights
hereunder except to any of its wholly-owned
subsidiaries.
3. Representations
Licensor has complete rights to and ownership of
the Marks for use in the Field as set forth in this
Agreement and does not use the Marks in the Field by
consent of any other person and is not required to and
does not make payments to others with respect thereto.
Licensor has not received any notice to the effect (or
is otherwise aware) that its use of the Marks in the
Field conflicts with or infringes (or allegedly
conflicts with or infringes) the rights of any person.
4. Ownership
Licensee acknowledges that the Marks belong, subject to
the terms of this License Agreement, to Licensor.
5. Quality Maintenance
Licensor and Licensee each agree to supply each
other with specimens of Licensor's or Licensee's, as
applicable, use of the Marks upon request. Licensor
and Licensee shall advise each other of any new goods
to be sold or services to be rendered by Licensor or
Licensee, as applicable, using the Marks in order to
enable the other party to confirm that such use of the
Marks complies with the terms of this Agreement.
Licensor and Licensee each warrant and agree that it
shall comply with all applicable laws and regulations
and obtain all appropriate government approvals
pertaining to the sale, distribution and advertising of
goods and services covered by this Agreement.
6. Form of Use
Licensee and Licensor each agree that it will not
use the Marks in any way that would jeopardize, dilute,
degrade, demean, injure, or lessen the value of the
Marks, Licensor or Licensee and/or Licensor's or
Licensee's image nor will Licensor or Licensee allow
any third party to jeopardize, dilute, degrade, demean,
injure or lessen the value of the Marks.
7. Infringement Proceedings
Licensor and Licensee each agree to notify the
other in writing of any unauthorized use of the Marks
by others as soon as it comes to such party's
attention. Licensor agrees, at Licensee's request, to
pursue infringement or other unfair competition
proceedings involving the Marks in the Field (where
Licensee believes that such use is in violation of
Licensee's rights to the Marks as provided herein) at
Licensee's cost with counsel satisfactory to Licensee
but Licensee shall have the right to conduct and
control the proceedings, compromise or settlement if
Licensee chooses to do so. Licensee shall be entitled
to all damages recovered in the event that such use is
in violation of Licensee's rights to the Marks in the
Field as provided herein.
8. Termination for Cause
Licensor shall have the right to terminate this
Agreement in the event of (i) any affirmative act of
insolvency by Licensee, (ii) the appointment of any
receiver or trustee to take possession of the
properties of Licensee or upon the winding up of
Licensee or (iii) in the event of a material breach of
this Agreement by Licensee, if such breach remains
uncured after ten (10) days' written notice to
Licensee.
9. Effect of Termination
Upon termination of this Agreement, Licensee
agrees to discontinue all use of the Marks as promptly
as reasonably practicable, and to cooperate with
Licensor or its appointed agent to apply to the
appropriate authorities to cancel recording of this
Agreement from all government records.
10. Governing Law
It is agreed that this Agreement shall be
governed by the Laws of the State of California.
11. Relationship of the Parties
This Agreement does not create a partnership or
joint venture between the parties.
12. Assignment
The license granted to Licensee hereunder shall
not be assigned by either party, except that Licensee
may assign its rights hereunder to any wholly-owned
Subsidiary of Licensee, and Licensor may assign its
rights hereunder to any Affiliate of Licensor.
13. No Waivers
Failure by either party to enforce any rights
under this Agreement shall not be construed as a waiver
of such rights nor shall a waiver or default in one or
more instances be construed as constituting a
continuing waiver or as a waiver in other instances.
14. Specific Performance
Licensor and Licensee each acknowledge that, in
view of the uniqueness of the Marks and the license
thereto being granted by this Agreement, neither
Licensor nor Licensee would have an adequate remedy at
law in the event that this Agreement has not been
performed in accordance with its terms, and therefore
agrees that each party shall be entitled to specific
enforcement of the terms hereof in addition to any
other remedy to which each may be entitled at law or in
equity.
15. Attorney's Fees
In the event of any action, complaint, suit
or other proceeding by any party arising under or out
of, in connection with or in respect of, this Agreement
and the license of the Marks contemplated hereby, the
prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such
action, complaint, suit or other proceeding.
Attorney's fees incurred in enforcing any judgment in
respect of this Agreement are recoverable as a separate
item. The parties intend that the preceding sentences
be severable from the other provisions of this
Agreement, survive any judgment and, to the maximum
extent by law, not be deemed merged into such judgment.
16. Consent to Jurisdiction
Each party hereby irrevocably submits to
and accepts for itself and its properties, generally
and unconditionally, the exclusive jurisdiction of and
service of process pursuant to the laws of the State of
California and the rules of its courts, waives any
defense of forum nonconveniens and agrees to be bound
by any judgement rendered thereby arising under or out
of in respect of or in connection with this Agreement
or any related document or obligation. Each party
further irrevocably agrees that service of process in
any such proceeding in any such court may be made by
registered or certified mail, return receipt requested,
to Licensor or Licensee.
17. Agreement to Arbitrate
The provisions of Article 13 of the Sale
Agreement are incorporated by reference herein as if
set forth in full herein.
18. Titles
Articles and paragraph titles used in this
Agreement are for convenience only and shall not be
deemed to affect the meaning or construction of any of
the terms, provisions, covenants or conditions of this
Agreement.
19. Entire Agreement
This Agreement contains all of the terms
and conditions agreed upon by the parties hereto with
reference to the subject matter hereof. No other
agreements, oral or otherwise, pertaining to the
subject matter hereof shall be deemed to exist or to
bind any of the parties hereto and all such prior
agreements and understandings are superseded hereby.
No officer or employee or agent of Licensor or Licensee
has any authority to make any representation or promise
not contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the day and
year first above written.
THE HARRIS COMPANY,
Licensor
/S/ LEOPOLDO DEL NOGAL
/S/ THOMAS MCPETERS
GOTTSCHALKS INC.,
Licensee
/S/ JAMES FAMALETTE
SCHEDULE 1
"Harris Stores"
"Harris"
STOCKHOLDERS' AGREEMENT
by and among
EL CORTE INGLES, S.A.,
GOTTSCHALKS INC.,
JOSEPH LEVY
and
BRET LEVY
dated as of
August 20, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions 1
Section 1.1 "Affiliate" 1
Section 1.2 "Agreement" 1
Section 1.3 "Asset Purchase Agreement" 2
Section 1.4 "Beneficially Own" 2
Section 1.5 "Board" 2
Section 1.6 "Change in Control" 2
Section 1.7 "Closing" 3
Section 1.8 "Gottschalks Common Stock" 3
Section 1.9 "Designated Board" 3
Section 1.10 "Director" 3
Section 1.11 "Early Standstill
Termination Event" 4
Section 1.12 "ECI" 4
Section 1.13 "Exchange Act" 4
Section 1.14 "fully diluted" 4
Section 1.15 "Gottschalks" 4
Section 1.16 "Harris" 4
Section 1.17 "Governmental Entity" 4
Section 1.18 "Group" 4
Section 1.19 "Independent Nominees" 4
Section 1.20 "Investor" 4
Section 1.21 "Investor Nominees" 4
Section 1.22 "Management" 4
Section 1.23 "Management Nominees" 4
Section 1.24 "Nominating Committee" 4
Section 1.25 "person" 4
Section 1.26 "Securities Act" 5
Section 1.27 "Standstill Agreement" 5
Section 1.28 "Subsidiary" 5
Section 1.29 "Transfer" 5
Section 1.30 "Transferee" 5
Section 1.31 "Voting Securities" 5
ARTICLE 2 Board of Directors 5
Section 2.1 Members of the Board 5
Section 2.2 Committee Representation. 8
Section 2.3 Vacancies 8
ARTICLE 3 Voting Rights 9
Section 3.1 Gottschalks Common Stock -
Voting Rights and
Obligations 9
Section 3.2 Management Registration
Rights 9
ARTICLE 4 Restrictions on Transfer 9
Section 4.1 Restrictions on Transfer 9
Section 4.2 Notification of
Restrictions 10
Section 4.3 Notice to Gottschalks 11
Section 4.4 Compliance with Insider
Trading Policy 11
Section 4.5 Compliance with Law 11
ARTICLE 5 Non-Competition 11
ARTICLE 6 Miscellaneous 11
Section 6.1 Term 11
Section 6.2 Counterparts 12
Section 6.3 Governing Law 12
Section 6.4 Entire Agreement 12
Section 6.5 Expenses 12
Section 6.6 Notices 12
Section 6.7 Successors and Assigns 14
Section 6.8 Headings 14
Section 6.9 Amendments and Waivers 14
Section 6.10 Interpretation; Absence
of Presumption 14
Section 6.11 Severability 14
Section 6.12 Further Assurances 14
Section 6.13 Specific Performance 14
Section 6.14 Arbitration 15
Section 6.15 Attorney's Fees 15
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated
as of August 20, 1998, is made by and among El Corte Ingles, S.A.,
a Spanish corporation ("ECI"), Gottschalks Inc., a Delaware
corporation ("Gottschalks"), Joseph Levy, an individual and Bret
Levy, an individual. Capitalized terms used and not defined herein
have the meanings given to them in the Asset Purchase Agreement
(hereinafter defined).
RECITALS
WHEREAS, Gottschalks, ECI and The Harris Company, a California
corporation and a wholly-owned subsidiary of ECI ("Harris"), have
entered into an Asset Purchase Agreement, dated as of July 21, 1998
(the "Asset Purchase Agreement"), pursuant to which Harris has
agreed to sell, and Gottschalks has agreed to purchase,
substantially all of the assets and certain of the liabilities of
Harris for certain consideration, including, but not limited to,
certain shares of Gottschalks Common Stock (hereinafter defined),
upon the terms and subject to the conditions set forth therein; and
WHEREAS, the shares of Gottschalks Common Stock to be issued
pursuant to the Asset Purchase Agreement will be issued to Harris,
ECI's wholly-owned subsidiary; and
WHEREAS, it is a condition to the transactions contemplated by the
Asset Purchase Agreement and the parties believe it to be in their
best interests that they enter into this Agreement and provide for
certain rights and restrictions with respect to the investment by
ECI (through Harris) in Gottschalks, certain rights and
restrictions of Joseph Levy and Bret Levy with respect to their
ownership of Gottschalks Common Stock and the corporate governance
of Gottschalks.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Affiliate" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the Exchange Act, and as in effect on
the date hereof.
Section 1.2 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.3 "Asset Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
Section 1.4 "Beneficially Own" shall mean, with respect to any
security, having direct or indirect (including through any
Subsidiary or Affiliate) "beneficial ownership" of such security,
as determined pursuant to Rule 13d-3 under the Exchange Act,
including pursuant to any agreement, arrangement or understanding,
whether or not in writing.
Section 1.5 "Board" shall mean the board of directors of
Gottschalks.
Section 1.6 "Change in Control" shall mean the occurrence of any of
the following events:
(a) An acquisition (other than directly from Gottschalks) of any
Voting Securities by any person immediately after which such person
has Beneficial Ownership of fifty percent (50%) or more of the
combined voting power of Gottschalks' then outstanding Voting
Securities; provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof)
maintained by (i) Gottschalks or (ii) a Subsidiary of Gottschalks,
(2) Gottschalks or any Subsidiary of Gottschalks, (3) any person or
Group who, immediately prior to the date hereof had Beneficial
Ownership of fifteen percent (15%) or more of the Gottschalks
Common Stock or (4) any person in connection with a "Non-Control
Transaction" (as hereinafter defined).
(b) A merger, consolidation or reorganization involving
Gottschalks, unless:
(i) the stockholders of Gottschalks immediately before such
merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately before such
merger, consolidation or reorganization; and
(ii) the individuals who were members of the Designated
Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at
least two-thirds of the members of the Board of the Surviving
Corporation; and
(iii) no person (other than Gottschalks or any Subsidiary of
Gottschalks, any employee benefit plan (or any trust forming a
part thereof) maintained by Gottschalks, the Surviving Corporation
or any Subsidiary of Gottschalks, or any person who, immediately
prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty-five percent (25%) or more of the
then outstanding Voting Securities) has Beneficial Ownership of
twenty-five percent (25%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting securities; and
(iv) a transaction described in clauses (i) through (iii) of
this paragraph (b) shall herein be referred to as a "Non-Control
Transaction."
(c) A complete liquidation or dissolution of Gottschalks.
(d) An agreement for the sale or other disposition of all or
substantially all of the assets of Gottschalks to any person (other
than a transfer to a Subsidiary).
(e) The acquisition of any Voting Securities by Joseph Levy,
Sharon Levy or their lineal descendents immediately after which
Joseph Levy, Sharon Levy and their lineal descendents together have
a pecuniary interest in more than fifty percent (50%) of
Gottschalks' then outstanding equity securities.
(f) The acquisition of any Voting Securities by Gerald Blum, his
spouse or his lineal descendents immediately after which Gerald
Blum, his spouse and his lineal descendents together have a
pecuniary interest in more than fifty percent (50%) of Gottschalks'
then outstanding equity securities.
(g) Buyer is no longer a reporting company under the Exchange
Act.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any person (the "Subject Person")
acquired Beneficial Ownership or pecuniary interest of more than
the permitted amount of the outstanding Voting Securities or equity
securities as a result of the acquisition of Voting Securities or
equity securities by Gottschalks which, by reducing the number of
Voting Securities or equity securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Person or in which the subject person has a pecuniary interest,
provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of
Voting Securities by Gottschalks, and after such share acquisition
by Gottschalks, the Subject Person becomes the Beneficial Owner of
the additional Voting Securities which increases the percentage of
the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
Section 1.7 "Closing" shall have the meaning set forth in the Stock
Purchase Agreement.
Section 1.8 "Gottschalks Common Stock" shall mean the common stock,
par value $0.01 per share, of Gottschalks.
Section 1.9 "Designated Board" shall have the meaning set forth in
Section 2.1(a).
Section 1.10 "Director" shall mean a member of the Board.
Section 1.11 "Early Standstill Termination Event" shall have
the meaning set forth in the Standstill Agreement.
Section 1.12 "ECI" shall have the meaning set forth in the
first paragraph hereof.
Section 1.13 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
Section 1.14 "fully diluted" shall mean, with respect to the
Gottschalks Common Stock, the total number of outstanding shares of
Gottschalks Common Stock (for such purposes, treating as
outstanding Gottschalks Common Stock all options or warrants to
purchase and securities convertible into (or exchangeable or
redeemable for) the Gottschalks Common Stock as of the relevant
measurement date).
Section 1.15 "Gottschalks" shall have the meaning set forth in
the first paragraph hereof.
Section 1.16 "Harris" shall have the meaning set forth in the
second paragraph hereof.
Section 1.17 "Governmental Entity" means any government or any
agency, bureau, board, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
Section 1.18 "Group" shall mean a "group" as such term is used
in Section 13(d)(3) of the Exchange Act.
Section 1.19 "Independent Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.20 "Investor" shall mean ECI (through Harris),
together with and any Transferee, and so long as Harris and any
Transferee own shares of Gottschalks Common Stock, such persons
shall be treated as one entity for the purposes of this Agreement.
Section 1.21 "Investor Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.22 "Management" shall mean Joseph Levy and Bret
Levy.
Section 1.23 "Management Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.24 "Nominating Committee" shall mean the nominating
committee of the Board as it is constituted from time to time.
Section 1.25 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust,
unincorporated organization, other form of business or legal entity
or Governmental Entity.
Section 1.26 "Securities Act" shall mean the Securities Act of
1933, as amended.
Section 1.27 "Standstill Agreement" shall mean that certain
Standstill Agreement by and between ECI and Gottschalks dated the
date hereof.
Section 1.28 "Subsidiary" shall mean any corporation,
partnership limited liability company, joint venture, business
trust or other entity of which the specified person, directly or
indirectly, owns or controls 50% or more of the securities or other
interests entitled to vote in the election of directors (or others
performing similar functions) with respect to such corporation or
other organization, or otherwise has the ability to control such
corporation, partnership, limited liability company, joint venture,
business trust or other entity.
Section 1.29 "Transfer" shall have the meaning set forth in
Section 4.1.
Section 1.30 "Transferee" shall mean any Affiliate of Harris
to whom Harris has transferred shares of Gottschalks Common Stock
pursuant to Section 4.1(a)(iii) of this Agreement.
Section 1.31 "Voting Securities" shall mean at any time shares
of any class of capital stock of Gottschalks which are then
entitled to vote generally in the election of Directors.
ARTICLE 2
Board of Directors
Section 2.1 Members of the Board.
(a) Prior to the Closing, the Board is comprised of three members
of management of Gottschalks, one person related to certain members
of management of Gottschalks and five independent directors.
Immediately following the Closing, Gottschalks, Management and ECI
will take all action necessary to cause two Investor Nominees
(hereinafter defined) to be added to the Board. Thereafter,
subject to the terms of this Agreement, at each annual or special
meeting of stockholders of Gottschalks at, or the taking of action
by written consent of stockholders of Gottschalks with respect to,
which any Directors are to be elected, Gottschalks, Management and
Investor will take all action required by this Agreement to cause
the Board to be structured to consist of eleven (11) members, of
which two (2) members will be designees of ECI (the "Investor
Nominees") and the remaining nine (9) members will consist of
members of management or persons affiliated with management that
are designated by Management (the "Management Nominees") and
independent directors (the "Independent Nominees"), collectively,
the "Designated Board"; provided, however, that the Designated
Board shall be increased to twelve (12) members, and Investor shall
be entitled to a total of three (3) representatives on the
Designated Board, if and during such time as Investor Beneficially
Owns a number of shares of Gottschalks Common Stock equal to at
least 30% of the outstanding Gottschalks Common Stock, on a fully
diluted basis.
(b) Investor's representation on the Designated Board will be
reduced to one representative and the size of the Designated Board
will be reduced by the number of Investor Nominees so resigning if
either: (i) Investor disposes of more than 700,000 shares of
Gottschalks Common Stock; or (ii) Investor and its Affiliates
Beneficially Own a number of shares of Gottschalks Common Stock
equal to less than 10% of the outstanding Gottschalks Common Stock,
on a fully diluted basis.
(c) Investor's representation on the Board will be terminated on
the earlier of: (i) the date Investor disposes of more than
1,350,000 shares of Gottschalks Common Stock; or (ii) Investor and
its Affiliates Beneficially Own a number of shares of Gottschalks
Common Stock equal to less than 5% of the outstanding Gottschalks
Common Stock, on a fully diluted basis.
(d) Subject to the terms of this Agreement: (i) Investor has the
right to designate the Investor Nominees; (ii) Joseph Levy (if he
is alive and has the capacity) or Bret Levy (if Joseph Levy is not
alive or no longer has the capacity) has the right to designate the
Management Nominees; and (iii) the Nominating Committee, or the
Board if there is no Nominating Committee, has the right to
designate the Independent Nominees. In the event both Joseph Levy
and Bret Levy are deceased or incapacitated, the Management
Nominees shall be chosen by the Chief Executive Officer of
Gottschalks.
(e) Investor and Management each agrees not to name any person as
a nominee to the Board if (i) such person is not reasonably
experienced in business or financial matters, (ii) such person has
been convicted of, or has pled nolo contendere to, a felony, (iii)
the election of such person would violate any law, or (iv) any
event required to be disclosed pursuant to Item 401(f) of
Regulation S-K of the Exchange Act has occurred with respect to
such person. Investor and Management, respectively, shall each use
reasonable efforts to afford the Independent Nominees of
Gottschalks a reasonable opportunity to meet any individual that it
is considering naming as a nominee to the Board.
(f) Subject to Section 6.1 of this Agreement, Gottschalks will
support the nomination of and the election of each Investor
Nominee, each Management Nominee and each Independent Nominee to
the Board, and Gottschalks will exercise all authority under
applicable law to cause each Investor Nominee, each Management
Nominee and each Independent Nominee to be elected to the Board as
provided herein. Without limiting the generality of the foregoing,
with respect to each meeting of stockholders of Gottschalks at
which Directors are to be elected, Gottschalks shall use its
reasonable efforts to solicit from the stockholders of Gottschalks
eligible to vote in the election of Directors proxies in favor of
each Investor Nominee, each Management Nominee and each Independent
Nominee.
(g) Subject to Section 6.1 of this Agreement:
(i) During the period under this Agreement, if any, that
Investor shall be entitled pursuant to the proviso of Section
2.1(a) to designate three Investor Nominees, if the total size of
the Board is later increased (other than as the result of an
acquisition transaction approved by the Board) Investor shall be
entitled to a proportionate increase in the number of Investor
Nominees. The new number of Investor Nominees shall be calculated
by multiplying 3/12 by the size of the new Board (excluding any
Directors who have been added as a result of any acquisition
transaction approved by the Board) and rounding the result up to
the next whole number where the resulting fraction is .5 or above.
The table below is provided by way of example:
Number of Directors Number of Investor Nominees
13 3
14 4
15 4
16 4
17 4
(ii) During the period under this Agreement, if any, that
Investor shall be entitled to designate two Investor Nominees, if
the total size of the Board is increased (other than as the result
of an acquisition transaction approved by the Board), Investor
shall be entitled to a proportionate increase in the number of
Investor Nominees. The new number of Investor Nominees shall be
calculated by multiplying 2/11 by the size of the new Board
(excluding any Directors who have been added as a result of any
acquisition transaction approved by the Board) and rounding the
result up to the next whole number where the resulting fraction is
.5 or above. The table below is provided by way of example:
Number of Directors Number of Investor Nominees
12 2
13 2
14 3
15 3
16 3
17 3
(iii) During the period under this Agreement, if any, that
Investor shall be entitled to designate one Investor Nominee, if
the total size of the Board is increased (other than as the result
of an acquisition transaction approved by the Board), Investor
shall be entitled to a proportionate increase in the number of
Investor Nominees. The new number of Investor Nominees shall be
calculated by multiplying 1/11 by the size of the new Board
(excluding any Directors who have been added as a result of any
acquisition transaction approved by the Board) and rounding the
result up to the next whole number where the resulting fraction is
.5 or above. The table below is provided by way of example:
Number of Directors Number of Investor Nominees
12 1
13 1
14 1
15 1
16 1
17 2
(h) If the Board is increased as provided in paragraph (g) of
this Section 2.1, other than those new Directors which must be
Investor Nominees pursuant to such paragraph (g), new Directors to
be added to the Board shall be either Management Nominees or
Independent Nominees. Such Board, as then constituted, will be the
"Designated Board" for all purposes hereunder.
(i) If Investor's right to nominate directors to the Board is
reduced or terminated as set forth in this Agreement, Investor
shall cause the applicable number of its Investor Nominees to
immediately resign (regardless of the remaining term, if any) and,
in the event that the number of Investor Nominees is reduced rather
than terminated, the Designated Board shall be reduced in size by
the number of Investor Nominees so resigning.
(j) Except as otherwise set forth in this Section 2.1,
Gottschalks shall not reduce the number of Investor Nominees or
Independent Nominees without Investor's consent.
Section 2.2 Committee Representation. During such time, if any, as
Investor is entitled to have at least one Investor Nominee on the
Board, unless Investor chooses not to exercise its rights under
this Section 2.2, Gottschalks shall cause at least one Director who
is an Investor Nominee to be appointed to each standing committee
of the Board. Notwithstanding the foregoing, if none of the
Directors who are Investor Nominees would be considered
"independent" of Gottschalks, "disinterested," "nonemployee
directors" and "outside directors" (i) for purposes of any
applicable rule of the New York Stock Exchange or any other
securities exchange or other self-regulating organization requiring
that members of the audit committee of the Board be independent of
Gottschalks or (ii) for purposes of any law or regulation that
requires, in order to obtain or maintain favorable tax, securities,
corporate law or other material legal benefits with respect to any
plan or arrangement for employee compensation or benefits, that the
members of the committee of the Board charged with responsibility
for such plan or arrangement be "independent" of Gottschalks,
"disinterested," "nonemployed directors" or "outside directors,"
then a Director who is an Investor Nominee shall not be required to
be appointed to any such standing committee. In no event shall any
Investor Nominee serve on any committee of the Board evaluating any
transaction or potential transaction involving Gottschalks and any
of Investor, its Affiliates or any Group of which Investor is a
member or such other transaction or potential transaction which
would involve an actual or potential conflict of interest on the
part of the Directors who are Investor Nominees. Any members of
any committee who are Investor Nominees shall, in the event of any
vacancy in such membership, be replaced by a Director who is an
Investor Nominee elected by the Directors who are Investor
Nominees.
Section 2.3 Vacancies. In the event that any Investor Nominee
shall cease to serve as a Director for any reason other than the
fact that Investor no longer has a right to nominate such Director,
the vacancy resulting thereby shall be filled by an Investor
Nominee designated by Investor; provided, however, that any
Investor Nominee so designated shall satisfy the qualification
requirements set forth in Section 2.1(e). In the event that any
Management Nominee or Independent Nominee shall cease to serve as a
Director, the vacancy resulting thereby shall be filled in
accordance with the terms of this Agreement with either a
Management Nominee or an Independent Nominee provided, however,
that any nominee so designated shall satisfy the qualification
requirements set forth in Section 2.1(e).
ARTICLE 3
Voting Rights
Section 3.1 Gottschalks Common Stock - Voting Rights and
Obligations.
(a) Subject to the provisions of this Section 3.1(a), Investor
and its Affiliates may vote the shares of Gottschalks Common Stock
which they own in their sole and absolute discretion. Investor
shall and shall cause its Affiliates to: (i) be present, in person
or represented by proxy, at all stockholder meetings of Gottschalks
so that all Gottschalks Common Stock beneficially owned by Investor
and its Affiliates may be counted for the purpose of determining
the presence of a quorum at such meetings; and (ii) vote or
consent, or cause to be voted or a consent to be given, with
respect to all Gottschalks Common Stock owned beneficially or of
record by Investor or its Affiliates or of which Investor or its
Affiliates otherwise has the power to vote: (A) in favor of the
election of the Investor Nominees, the Management Nominees and the
Independent Nominees; and (B) with regard to any transaction which
would result in a Change in Control that has been approved by the
Board and submitted to a vote of Gottschalks' stockholders, as
recommended by the Board.
(b) Subject to the provisions of this Section 3.1(b), each member
of Management may vote the shares of Gottschalks Common Stock owned
by such member in his sole and absolute discretion. Management
shall: (i) be present, in person or represented by proxy, at all
stockholder meetings of Gottschalks so that all Gottschalks Common
Stock beneficially owned by Management may be counted for the
purpose of determining the presence of a quorum at such meetings;
and (ii) vote or consent, or cause to be voted or a consent to be
given, with respect to all Gottschalks Common Stock owned
beneficially or of record by Management or of which Management
otherwise has the power to vote in favor of the election of the
Investor Nominees, the Independent Nominees and the Management
Nominees.
Section 3.2 Management Registration Rights. With respect to any
request by members of management of Gottschalks or members of the
Joseph Levy family to the Board to participate in any registration
of shares of Gottschalks stock owned by such persons, Investor
shall cause the Investor Nominees to vote proportionately with the
group of Directors composed of the Management Nominees and the
Independent Nominees voting on such request, taken as a whole.
ARTICLE 4
Restrictions on Transfer
Section 4.1 Restrictions on Transfer.
(a) Until the earlier of (x) August 20, 2003, or (y) approval by
the stockholders of Gottschalks of a transaction which would result
in a Change in Control, Investor will not directly or indirectly
sell, transfer, pledge or otherwise dispose of (collectively,
"Transfer") any shares of Gottschalks Common Stock issued to Harris
except for: (i) Transfers made in compliance with the requirements
of Rule 144 of the Securities Act, (ii) Transfers pursuant to
negotiated transactions with third parties, provided that: (A) the
transferee acknowledges that it is subject to the Standstill
Agreement and the provisions of Articles 3 and 4 of this Agreement;
and (B) Gottschalks approves any such Transfer that would result in
a person beneficially owning more than 9.8% of the Gottschalks
Common Stock, (iii) Transfers to one or more Affiliates of Investor
who agree to be bound by the terms and conditions of the Standstill
Agreement and the obligations of the transferor under this
Agreement, (iv) pledges to a bona fide financial institution for
the purpose of securing bona fide indebtedness of Investor;
provided, that: (A) such indebtedness is full recourse
indebtedness; and (B) no such pledge, if enforced, would result in
the bona fide financial institution or any person acquiring the
pledged shares having Beneficial Ownership of more than 9.8% of the
Gottschalks Common Stock and (v) Transfers pursuant to or in
accordance with the Registration Rights Agreement in a bona fide
public offering.
(b) Any Transferee hereunder shall succeed to the obligations,
but not the rights, of ECI under this Agreement. Notwithstanding
the foregoing, ECI agrees that it shall remain fully liable for
ensuring that the Transferee complies with all obligations assumed
by Transferee pursuant to this Agreement.
(c) Any Transfer contrary to the provisions of this Section 4.1
shall be null and void and the transferee shall not be recognized
by Gottschalks as the holder or owner of such shares for any
purposes (including voting and dividend rights) unless and until
such provisions are satisfied.
(d) This Agreement places no restrictions on the Transfer by
Management of any shares of Gottschalks Common Stock owned by
Management.
Section 4.2 Notification of Restrictions.
(a) Any certificates representing the shares of Gottschalks
Common Stock issued by Gottschalks to Investor will bear the
following legend, which legend will remain until such time as the
securities represented by the certificates are transferred without
such shares continuing to be subject to this Agreement:
"THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT
AMONG EL CORTE INGLES, S.A. [OR TRANSFEREE], THE ISSUER, JOSEPH
LEVY AND BRET LEVY AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH."
(b) The following legend: (i) will be placed on any certificates
representing the shares of Gottschalks Common Stock owned or
acquired by Investor or its Affiliates that were not issued by
Gottschalks to Harris and will remain on such certificates until
the termination of this Agreement; and (ii) will be placed on any
certificates representing the shares of Gottschalks Common Stock
owned by Management and will remain on such certificates until the
earlier of the termination of this Agreement and the date on which
the shares represented by such certificate or certificates are
transferred by Management:
"THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT
AMONG EL CORTE INGLES, S.A., THE ISSUER, JOSEPH LEVY AND BRET
LEVY."
(c) None of Investor, any Affiliate of Investor or Management
shall deposit any shares of Gottschalks Common Stock owned by them
into a voting trust or subject any such shares to any arrangement
or agreement with respect to the voting of such shares inconsistent
with the terms of this Agreement.
Section 4.3 Notice to Gottschalks. During the period specified in
Section 4.1, if Investor wishes to sell pursuant to Section 4.1 any
shares of Gottschalks Common Stock, Investor shall give Gottschalks
15 days' prior written notice of such proposed sale, setting forth
the number of shares of Gottschalks Common Stock that Investor
proposes to sell, the expected timing of the proposed sale, and the
details of such sale, in order to enable Gottschalks and Management
to confirm that such sale complies with this Agreement.
Section 4.4 Compliance with Insider Trading Policy. For as long as
Investor Beneficially Owns any shares of Gottschalks Common Stock,
it will, and will use its best efforts to cause its directors,
officers, employees, agents, and representatives to, comply with
the written policy of Gottschalks designed to prevent violations of
insider trading and similar laws.
Section 4.5 Compliance with Law. During the term of this
Agreement, Investor shall comply with, and make timely filings in
accordance with, Sections 13 and 16 of the Exchange Act.
ARTICLE 5
Non-Competition
Investor acknowledges that in light of Investor's representation on
the Board, it would be unfair for Investor to compete with
Gottschalks. For these and other reasons, and as an inducement to
Gottschalks to enter into this Agreement, Investor agrees that
during the term of this Agreement, Investor will not and will not
allow Harris to, directly or indirectly, for its own benefit or as
agent for another, carry on or participate in the ownership,
management or control of, or the financing of, or be employed by,
or consult for or otherwise render services to, or allow its name
or reputation to be used in or by any other present or future
business enterprise that competes with Gottschalks in the States of
Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oklahoma, Oregon, Texas, Utah, Washington or Wyoming; provided,
however, that nothing contained herein shall limit the right of
Investor as an investor to hold and make investments in securities
of any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges
thereon or actively traded in a generally recognized
over-the-counter market, provided Investor's equity interest
therein does not exceed 5% of the outstanding shares or interests
in such corporation or partnership.
ARTICLE 6
Miscellaneous
Section 6.1 Term. The provisions of Article 4 of this Agreement
shall expire, upon the earlier of (i) August 20, 2003, or (ii)
approval by the stockholders of Gottschalks of a transaction which
would result in a Change of Control. All other provisions of this
Agreement shall expire, and Investor shall, in accordance with the
provisions of paragraph (i) of Section 2.1 require its Investor
Nominees to immediately resign, upon the earlier of: (i) the date
on which Investor no longer is entitled pursuant to Section 2.1 of
this Agreement to a representative on the Board; and (ii) the
expiration of the Standstill Agreement (other than as the result of
an Early Standstill Termination Event).
Section 6.2 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, all of which shall constitute one and the same
agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other
parties.
Section 6.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Each party hereby irrevocably submits to and accepts for itself and
its properties, generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the laws of the
State of California and the rules of its courts, waives any defense
of forum non conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of or in
connection with this Agreement or any related document or
obligation. Each party further irrevocably designates and appoints
the individual identified in or pursuant to Section 6.6 hereof to
receive notices on its behalf, as its agent to receive on its
behalf service of all process in any such action before any body,
such service being hereby acknowledged to be effective and binding
service in every respect. A copy of any such process so served
shall be mailed by registered mail to each party at its address
provided in Section 6.6; provided that, unless otherwise provided
by applicable law, any failure to mail such copy shall not affect
the validity of the service of such process. If any agent so
appointed refuses to accept service, the designating party hereby
agrees that service of process sufficient for personal jurisdiction
in any action against it in the applicable jurisdiction may be made
by registered or certified mail, return receipt requested, to its
address provided in Section 6.6. Each party hereby acknowledges
that such service shall be effective and binding in every respect.
Nothing herein shall affect the right to serve process in any other
manner permitted by law.
Section 6.4 Entire Agreement. This Agreement, together with the
Asset Purchase Agreement and the other agreements of the parties
hereto and Harris of even date herewith, contain the entire
agreement among the parties with respect to the subject matter
hereof. This Agreement is not intended to confer upon any person
not a party hereto (and their successors and assigns) any rights or
remedies hereunder.
Section 6.5 Expenses. Except as set forth in the Asset Purchase
Agreement, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and
expenses.
Section 6.6 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deeded to
have been made (i) when delivered personally or by telecopier, (ii)
if to a party in the same country as the mailing party, when mailed
first class registered or certified mail, postage prepaid, or (iii)
if to a party in a different country from the sending party, on the
second day following deposit with a reputable commercial air
courier, charges prepaid, to each respective party as shown below:
(a) If to Gottschalks:
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Attention: General Counsel
Telecopier: (209) 434-4666
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attention: D. Stephen Antion, Esq.
Telecopier: (213) 430-6407
(b) If to Management, to each of the following:
Joseph Levy
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Telecopier: (209) 434-4804
Bret Levy
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Telecopier: (209) 434-4804
(c) If to ECI:
El Corte Ingles, S.A.
Hermosilla, 112
28009 Madrid SPAIN
Attention: Mr Jorge Pont
Telecopier: 011-34-91-402-1567
With a copy to:
McPeters, McAlearney, Shimoff & Hatt
4 W. Redlands Boulevard, 2nd Floor
Redlands, California 92373
Attention: Thomas H. McPeters, Esq.
Telecopier: (909) 792-6234
Section 6.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Neither this
Agreement nor any rights or obligations under it are assignable by
any party hereto, except that ECI and any subsequent Transferee
shall be permitted to assign its rights hereunder as provided in
Section 4.1 hereof.
Section 6.8 Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the
meaning hereof.
Section 6.9 Amendments and Waivers. This Agreement may be amended
only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the
party to be bound and then only to the specific purpose, extent and
instance so provided.
Section 6.10 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context requires,
(ii) the terms "hereof", "herein", and "herewith" and words of
similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section and paragraph
references are to the Articles, Sections and paragraphs, of this
Agreement unless otherwise specified, (iii) the word "including"
and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise
requires or unless otherwise specified, (iv) the word "or" shall
not be exclusive, and (v) provisions shall apply, when appropriate,
to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
Section 6.11 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
Section 6.12 Further Assurances. Gottschalks and Investor
agree that, from time to time, each of them will, and will cause
their respective Affiliates to, and Management agrees that it will
execute and deliver such further instruments and take such other
action as may be necessary to carry out the purposes and intents
hereof.
Section 6.13 Specific Performance. Each of the parties hereto
acknowledges that, in view of the uniqueness of the arrangements
contemplated by this Agreement, each party would not have an
adequate remedy at law for money damages in the event that this
Agreement has not been performed in accordance with its terms, and
therefore agree that the other parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other
remedy to which the parties hereto may be entitled, at law or in
equity.
Section 6.14 Arbitration.
(a) Any controversy, dispute or claim under, arising out of, in
connection with or in relation to this Agreement, including but not
limited to the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or enforceability of this Agreement
or this Section 6.14 shall be determined by arbitration conducted
in accordance with the Commercial Arbitration Rules or then
existing rules for commercial arbitration of the American
Arbitration Association. The arbitration shall additionally be
governed by the California Arbitration Act. The arbitration shall
be before a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven potential
arbitrators provided by the American Arbitration Association. If
the parties cannot agree on an arbitrator from this first list, the
parties hereto shall select an arbitrator for such arbitration from
a second list of seven potential arbitrators provided by the
American Arbitration Association with each party, alternately
striking names, with the last name remaining to be the arbitrator
so selected. In the event that either party seeks a temporary
restraining order, preliminary injunction or other provisional
relief, the provisions of Section 1281.8 of the Cal. Civ. Proc.
Code shall apply. The arbitration of such issues, including
without limitation any party's rights to specific performance
pursuant to Article 5 or Section 6.13 hereof or to any award of
damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon the parties
to the maximum extent permitted by law. The parties intend that
this Article shall be valid, binding, enforceable and irrevocable
and shall survive the termination of this Agreement.
(b) Proceedings under and the provisions of this Section 6.14
shall be subject to Section 6.3 of this Agreement.
(c) Any arbitration proceedings hereunder shall be held in Los
Angeles, California.
(d) Judgment upon any award rendered by the arbitrator(s) may be
entered by any court having jurisdiction thereof.
Section 6.15 Attorney's Fees. In the event of any action,
complaint, petition, or other proceeding ("Action") by any party
arising under or out of, in connection with or in respect of, this
Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such Action.
Attorney's fees incurred in enforcing any judgment in respect of
this Agreement are recoverable as a separate item. The parties
intend that the preceding sentences be severable from the other
provisions of this Agreement, survive any judgment and, to the
maximum extent permitted by law, not be deemed merged into such
judgment.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto as of the day first above written.
EL CORTE INGLES, S.A.
/S/ JORGE PONT
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
/S/ JOSEPH LEVY
/S/ BRET LEVY
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Joseph Levy acknowledges that she has
read the attached Stockholders' Agreement of even date herewith and
agrees to be bound thereby.
Dated: August 20, 1998
/S/ SHARON LEVY
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Bret Levy acknowledges that she has read
the attached Stockholders' Agreement of even date herewith and
agrees to be bound thereby.
Dated: August 20, 1998
STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement") is entered into as of
August 20, 1998 between El Corte Ingles, S.A., a Spanish
corporation ("ECI"), and Gottschalks Inc., a Delaware corporation
("Gottschalks").
RECITALS
WHEREAS, pursuant to that certain Asset Purchase Agreement dated as
of July 21, 1998 (the "Asset Purchase Agreement"; all capitalized
terms used herein and not otherwise defined shall have the meanings
given to such terms therein) by and among Gottschalks, ECI and The
Harris Company, a California corporation and a wholly-owned
subsidiary of ECI ("Harris"), Gottschalks has agreed to acquire
from Harris substantially all of the assets and certain liabilities
of Harris for certain consideration, including, but not limited to,
certain shares of Common Stock, par value $0.01 per share, of
Gottschalks (the "Gottschalks Common Stock"), all as more fully set
forth in the Asset Purchase Agreement; and
WHEREAS, pursuant to the Asset Purchase Agreement, Harris shall
acquire as of the date hereof, 2,095,900 shares of Gottschalks
Common Stock (such shares, together with all Gottschalks Common
Stock subsequently acquired by Harris, ECI, or its Affiliates or
Associates, the "ECI Shares");
WHEREAS, ECI and Gottschalks are entering into this Agreement to
define certain rights between ECI and Gottschalks in respect of the
ECI Shares and certain other matters in consideration of the mutual
covenants contained herein; and
WHEREAS, execution and delivery of this Agreement by the parties
hereto is a condition precedent to the closing of the Asset
Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, Gottschalks
and ECI hereby agree as follows:
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "8% Subordinated Note" means that certain
$22,179,598.00 principal amount of 8% Non-Negotiable, Extendable
Subordinated Note of Gottschalks in favor of Harris due 2003.
Section 1.2 "Affiliate" has the meaning ascribed thereto in Rule
12b-2 promulgated under the Exchange Act, and as in effect on the
date hereof.
Section 1.3 "Associate" of a person means
(a) a corporation or organization (other than a
party to this Agreement) of which such person is a director, an
officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(b) any trust or other estate in which such
person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar capacity;
(c) any relative or spouse of such person or
any relative of such spouse; and
(d) a director or officer of such person, or a
person that directly or indirectly, is the beneficial owner of 10%
or more of any class of equity securities of such person or any
relative or spouse of such director, officer or beneficial owner or
any relative of such spouse.
Section 1.4 "Beneficially Own" means, with respect to any security,
having direct or indirect (including through any Subsidiary or
Affiliate) "beneficial ownership" of such security, as determined
pursuant to Rule 13d-3 under the Exchange Act, including pursuant
to any agreement, arrangement or understanding, whether or not in
writing.
Section 1.5 "Gottschalks Common Stock" has the meaning set forth in
the recitals of this Agreement.
Section 1.6 "Covered Transaction" means any merger, consolidation,
other business combination, liquidation, sale of Gottschalks or all
or substantially all of the assets of Gottschalks or any other
change of control of Gottschalks or similar extraordinary
transaction but excluding an acquisition by Gottschalks involving
an amount which is less than 50% of the Pro Forma Value of
Gottschalks after the acquisition and in which Gottschalks remains
in control following the acquisition.
Section 1.7 "Director" means a member of the Board of Directors of
Gottschalks.
Section 1.8 "Early Standstill Termination Event" has the meaning
set forth in Section 3.6.
Section 1.9 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
Section 1.10 "Gottschalks" has the meaning set forth in the
recitals of this Agreement.
Section 1.11 "Governmental Entity" means any government or any
agency, bureau, board, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
Section 1.12 "person" means any individual, corporation,
partnership, limited liability company, joint venture, trust,
unincorporated organization, other form of business or legal entity
or Governmental Entity.
Section 1.13 "Pro Forma Value" means the market value of
outstanding equity securities of Gottschalks (based upon a 20
trading day average closing price for publicly traded equity
securities), plus the debt reflected on Gottschalks' balance sheet,
less any cash on such balance sheet, immediately following the
consummation of the acquisition, merger or other business
combination transaction.
Section 1.14 "Standstill Extension Term" has the meaning set
forth in Section 3.6(a).
Section 1.15 "Standstill Period" has the meaning set forth in
Section 3.6(a).
Section 1.16 "Stockholders' Agreement" means that certain
Stockholders' Agreement among ECI, Gottschalks, Joseph Levy and
Bret Levy dated the date hereof.
Section 1.17 "Asset Purchase Agreement" has the meaning set
forth in the recitals of this Agreement.
Section 1.18 "Subsidiary" means any corporation, partnership
limited liability company, joint venture, business trust or other
entity of which the specified person, directly or indirectly, owns
or controls 50% or more of the securities or other interests
entitled to vote in the election of directors (or others performing
similar functions) with respect to such corporation or other
organization, or otherwise has the ability to control such
corporation, partnership, limited liability company, joint venture,
business trust or other entity.
ARTICLE 2. STANDSTILL PROVISIONS
Section 2.1 Standstill Provisions. ECI agrees that, during the
term of this Agreement, without Gottschalks' prior written consent,
ECI will not and will cause its Affiliates and Associates not to,
directly or indirectly:
(a) purchase or otherwise acquire shares of Gottschalks Common
Stock (or options, rights or warrants or other commitments to
purchase and securities convertible into (or exchangeable or
redeemable for) shares of Gottschalks Common Stock) as a result of
which, after giving effect to such purchase or acquisition, ECI and
its Affiliates and Associates would Beneficially Own in the
aggregate more than 33(% of the outstanding shares of Gottschalks
Common Stock;
(b) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to
any securities of Gottschalks;
(c) participate in or solicit, encourage or propose to effect or
negotiate any Covered Transaction (other than pursuant to the Asset
Purchase Agreement);
(d) initiate or propose any stockholder proposal with respect to
a Covered Transaction other than with the consent of Gottschalks'
Board of Directors or induce or attempt to induce any other person
to initiate any stockholder proposal with respect to a Covered
Transaction other than with the consent of Gottschalks' Board of
Directors or make any statement or proposal, whether written or
oral, to the Board of Directors of Gottschalks with respect to a
Covered Transaction, or to any director, officer or agent of
Gottschalks, or make any public announcement or proposal whatsoever
with respect to a Covered Transaction or solicit or encourage any
other person to make any such statement or proposal;
(e) solicit, initiate, encourage or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" or
become a "participant" in any "election contest" (as such terms are
defined or used in Regulation 14A under the Exchange Act,
disregarding clause (iv) of Rule 14a-1(l)(2) and including an
exempt solicitation pursuant to Rule 14a-2(b)(1)); call, or in any
way encourage or participate in a call for, any special meeting of
stockholders of Gottschalks (or take any action with respect to
acting by written consent of the stockholders of Gottschalks);
request, or take any action to obtain or retain any list of holders
of any securities of Gottschalks; or initiate or propose any
stockholder proposal or participate in or encourage the making of,
or solicit stockholders of Gottschalks for the approval of, one or
more stockholder proposals;
(f) propose a nominee for director, or express support or
opposition for any nominee for director or seek a change in the
composition or size of Gottschalks' Board of Directors other than
as provided in the Stockholders' Agreement; or
(g) make a request to Gottschalks (or its directors, officers,
stockholders, employees or agents) to amend or waive any provisions
of this Agreement, the Certificate of Incorporation or Bylaws of
Gottschalks or seek to challenge the legality or effect thereof,
including without limitation any public request to permit ECI or
any other person to take any action in respect of the matters
referred to in this Section 2.1;
(h) assist, advise, encourage or act in concert with any person
with respect to, or seek to do, any of the foregoing; or
(i) disclose any intention, plan or arrangement inconsistent with
the foregoing.
Without limiting the foregoing, but for clarification purposes
only, the above restrictions are not intended to limit the
performance by the ECI Directors of their fiduciary duties as
directors acting solely in that cacacity.
ARTICLE 3. GENERAL
Section 3.1 Notification as to Certain Matters. ECI will notify
Gottschalks of any change in the Beneficial Ownership of ECI and
its Affiliates and Associates involving in the aggregate not less
than 50,000 shares of Gottschalks Common Stock not later than two
business days after such change and from time to time, upon
request, will notify Gottschalks of the number of shares of
Gottschalks Common Stock Beneficially Owned by ECI and its
Affiliates and Associates and of the names and addresses of all
such persons, including, without limitation, Affiliates to whom ECI
Shares have been transferred in accordance with the Stockholders'
Agreement. Gottschalks will notify ECI from time to time, upon
request, of the number of shares of Gottschalks Common Stock
outstanding.
Section 3.2 Specific Performance. ECI and Gottschalks each
acknowledge that, in view of the uniqueness of arrangements
contemplated by this Agreement, each party would not have an
adequate remedy at law for money damages in the event that this
Agreement has not been performed in accordance with its terms, and
therefore agrees that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity.
Section 3.3 Amendments; Waiver. This Agreement may be amended
only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement or any agreement contemplated hereby shall be effective
unless in writing and signed by the party to be bound and then only
to the specific purpose, extent and instance so provided.
Section 3.4 Entire Agreement. This Agreement, together with the
Asset Purchase Agreement and the other agreements of the parties of
even date herewith, contains the entire understanding of the
parties with respect to the subject matter of this Agreement.
Except as specifically provided herein, this Agreement is not
assignable by either of the parties. This Agreement is binding upon
the respective successors of the parties and upon the Affiliates of
ECI to whom any of the ECI Shares have been transferred in
accordance with the Stockholders' Agreement.
Section 3.5 Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
Section 3.6 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to
have been made (i) when delivered personally or by telecopier, (ii)
if to a party in the same country as the mailing party, when mailed
first class registered or certified mail, postage prepaid, or (iii)
if to a party in a different country from the sending party, on the
second day following deposit with a reputable commercial air
courier, charges prepaid, to each respective party as shown below:
(a) If to Gottschalks:
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Attention: General Counsel
Telecopier: (209) 434-4666
with copies to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attention: D. Stephen Antion, Esq.
Telecopier: (213) 430-6407
(b) If to ECI:
El Corte Ingles, S.A.
Hermosilla, 112
28009 Madrid SPAIN
Attention: Jorge Pont
Telecopier: 011-34-91-402-1567
With copies to:
McPeters, McAlearney, Shimoff & Hatt
4 W. Redlands Boulevard, 2nd Floor
P.O. Box 2084
Redlands, California 92373
Attention: Thomas H. McPeters, Esq.
Telecopier: (909) 792-6234
Section 3.7 Term.
(a) This Agreement shall be effective from the date hereof
through August 20, 2003 (the "Standstill Period"), provided,
however, that the Standstill Period shall be automatically extended
for successive one-year periods (each such period, a "Standstill
Extension Term") unless ECI shall have given Gottschalks 120-days'
notice prior to the commencement of a Standstill Extension Term
that ECI elects that such Standstill Extension Term not commence.
(b) Notwithstanding the above, the Standstill Period (or the
Standstill Extension Term, as applicable) shall terminate upon the
occurrence of any of the following events:
(i) any default (not cured within the applicable cure period) by
Gottschalks under any of Gottschalks' material debt agreements
which default would result in a material adverse effect on
Gottschalks and its Subsidiaries taken as a whole;
(ii) approval by the Board of Directors of Gottschalks (without
ECI's or its Affiliates' approval) of a Covered Transaction;
(iii) material breach by Gottschalks, Joseph Levy or Bret Levy of
the Stockholders' Agreement which is neither cured nor desisted
from within 30 days of receipt of written notice from ECI of such
breach; or
(iv) material breach by Gottschalks of the 8% Subordinated Note,
which is neither cured nor desisted from within 30 days of receipt
of written notice from ECI of such breach.
Any event set forth in paragraph (b) of this Section 3.7 shall be
an "Early Standstill Termination Event."
Section 3.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California without regard to principles of conflict of law. Each
party hereby irrevocably submits to and accepts for itself and its
properties, generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the laws of the
State of California and the rules of its courts, waives any defense
of forum non conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of or in
connection with this Agreement or any related document or
obligation. Each party further irrevocably designates and appoints
the individual identified in or pursuant to Section 3.6 hereof to
receive notices on its behalf, as its agent to receive on its
behalf service of all process in any such Action before any body,
such service being hereby acknowledged to be effective and binding
service in every respect. A copy of any such process so served
shall be mailed by registered mail to each party at its address
provided in Section 3.6; provided that, unless otherwise provided
by applicable law, any failure to mail such copy shall not affect
the validity of the service of such process. If any agent so
appointed refuses to accept service, the designating party hereby
agrees that service of process sufficient for personal jurisdiction
in any action against it in the applicable jurisdiction may be made
by registered or certified mail, return receipt requested, to its
address provided in Section 3.6. Each party hereby acknowledges
that such service shall be effective and binding in every respect.
Nothing herein shall affect the right to serve process in any other
manner permitted by law.
Section 3.9 Attorney's Fees. In the event of any action,
complaint, petition or other proceeding, ("Action") by any party
arising under or out of, in connection with or in respect of, this
Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such Action.
Attorney's fees incurred in enforcing any judgment in respect of
this Agreement are recoverable as a separate item. The parties
intend that the preceding sentences be severable from the other
provisions of this Agreement, survive any judgment and, to the
maximum extent permitted by law, not be deemed merged into such
judgment.
Section 3.10 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one
and the same agreement.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered by their respective officers
thereunto duly authorized as of the date provided first written
above.
EL CORTE INGLES, S.A.
/S/ JORGE PONT
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES, S.A.,
as "Landlord"
and
GOTTSCHALKS INC.,
as "Tenant"
Dated as of August 20, 1998
East Hills Mall
Bakersfield, California
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS. . 1
Section 1.1 Definitions. . . . . . . . 1
Section 1.2 Effect of Basic Terms. . . 5
ARTICLE II
GRANT AND TERM . . . . . . 6
Section 2.1 Grant and Term of Lease. . 6
Section 2.2 Acceptance of Premises;
Quiet Enjoyment. . . . . 6
Section 2.3 Surrender of Premises. . . 6
Section 2.4 Holding Over.. . . . . . . 7
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT 7
Section 3.1 Lease Controls Over REA. . 7
Section 3.2 Covenants Regarding REA. . 7
ARTICLE IV
RENT AND OTHER CHARGES . . . . 8
Section 4.1 Minimum Annual Rent. . . . 8
Section 4.2 Percentage Rent. . . . . . 8
Section 4.3 Utilities Charge . . . . . 10
Section 4.4 Common Area Maintenance
Costs. . . . . . . . . . . . . . . . 10
Section 4.5 Taxes. . . . . . . . . . . 10
Section 4.6 Late Payment Charges . . . 11
Section 4.7 Rent Payments. . . . . . . 12
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 12
Section 5.1 Permitted Use. . . . . . . 12
Section 5.2 Signs. . . . . . . . . . . 12
Section 5.3 Alterations of Premises. . 12
Section 5.4 Use of Common Areas. . . . 14
Section 5.5 Compliance with REA. . . . 15
Section 5.6 Compliance with Requirements 15
Section 5.7 Liens. . . . . . . . . . . 16
ARTICLE VI
REPAIRS AND MAINTENANCE. . . . 16
Section 6.1 Tenant's Obligations . . . 16
Section 6.2 Landlord's Obligations . . 18
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION. 18
Section 7.1 Damage or Destruction. . . 18
Section 7.2 Condemnation . . . . . . . 19
ARTICLE VIII
INSURANCE . . . . . . . 21
Section 8.1 Tenant's Insurance . . . . 21
Section 8.2 Landlord's Insurance . . . 22
Section 8.3 Waiver of Subrogation. . . 23
Section 8.4 Governmental and Insurance
Requirements .. . . . . . 23
Section 8.5 Indemnification. . . . . . 24
Section 8.6 Landlord Exculpation . . . 24
ARTICLE IX
ASSIGNMENT AND SUBLETTING . . . 25
Section 9.1 Notice to Landlord . . . . 25
Section 9.2 Landlord's Approval. . . . 25
Section 9.3 Permitted Transactions . . 26
Section 9.4 Compliance with REA. . . . 26
Section 9.5 Documentation and Expenses 26
ARTICLE X
DEFAULT. . . . . . . . 27
Section 10.1 Events of Default. . . . . 27
Section 10.2 Remedies . . . . . . . . . 28
Section 10.3 Attorneys' Fees. . . . . . 30
Section 10.4 Agreement to Arbitrate . . 30
Section 10.5 No Set-off/Counterclaims . 31
Section 10.6 Right of Redemption. . . . 31
Section 10.7 No Waiver. . . . . . . . . 31
Section 10.8 Unperformed Covenants of
Landlord May Be Performed By
Tenant . . . . . . . . . . 31
ARTICLE XI
[INTENTIONALLY OMITTED]. . . . 32
ARTICLE XII
OPTIONS. . . . . . . . 32
Section 12.1 Renewal Options. . . . . . 32
Section 12.2 Lease Terms Applicable . . 32
Section 12.3 Rent During Renewal Terms. 33
Section 12.4 Lease Amendment. . . . . . 33
ARTICLE XIII
MISCELLANEOUS PROVISIONS. . . . 34
Section 13.1 Notices. . . . . . . . . . 34
Section 13.2 Brokers. . . . . . . . . . 34
Section 13.3 Subordination of Lease . . 34
Section 13.4 Unavoidable Delays . . . . 35
Section 13.5 Estoppel Certificates. . . 35
Section 13.6 Relationship of Parties. . 35
Section 13.7 Governing Law; Jurisdiction 36
Section 13.8 Interpretation . . . . . . 36
Section 13.9 Captions . . . . . . . . . 37
Section 13.10 Partial Invalidity . . . . 37
Section 13.11 Waivers. . . . . . . . . . 37
Section 13.12 Accord and Satisfaction. . 37
Section 13.13 Counterparts . . . . . . . 37
Section 13.14 Entire Agreement . . . . . 37
Section 13.15 Successors and Assigns . . 37
Section 13.16 Survival of Obligations. . 38
Section 13.17 Submission of Lease. . . . 38
Section 13.18 Memorandum of Lease. . . . . 38
Section 13.19 Attachments. . . . . . . . 38
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER. B-1
EXHIBIT C LEGAL DESCRIPTION OF PREMISES C-1
EXHIBIT D SCHEDULE OF REA AND RELATED AGREEMENTS D-1
EXHIBIT E DETERMINATION OF FAIR MARKET RENTAL VALUE E-1
EXHIBIT F FORM OF MEMORANDUM OF LEASE . G-1
EXHIBIT G SCHEDULE OF EXISTING MORTGAGES H-1
STORE LEASE AGREEMENT
East Hills Mall
Bakersfield, California
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of this 20th day of August, 1998, by and
between EL CORTE INGLES, S.A., a Spanish corporation,
having an address at Hermosilla, 112, 28009 Madrid
SPAIN, Attention: Mr. Jorge Pont ("Landlord"), and
GOTTSCHALKS INC., a Delaware corporation, having an
address at 7 River Park Place East, Fresno, California
93720, Attention: General Counsel ("Tenant").
R E C I T A L S
A. Landlord, Tenant and Harris
(defined below) are parties to that certain Asset
Purchase Agreement (defined below). Prior to the date
hereof, Harris leased the Premises (defined below) from
Landlord. Pursuant to the Asset Purchase Agreement,
Tenant is to purchase certain assets of Harris. The
Asset Purchase Agreement requires Landlord to terminate
Harris' lease and enter into this Lease with Tenant.
B. Concurrently with execution of
this Lease, Landlord has terminated Harris' lease.
Landlord now desires to lease to Tenant, and Tenant
desires to lease from Landlord, the Premises on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the
foregoing Recitals, the receipt and sufficiency of
which is hereby acknowledged by each party as of the
time of execution and delivery hereof, and in further
consideration of the rents reserved and the covenants
and conditions set forth herein, Landlord and Tenant
agree as follows:
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS
Section 1.1 Definitions. As used in this
Lease, the following Terms shall have the meanings set
forth below:
"Alterations" shall have the
meaning ascribed thereto in Section 5.3.
"Annual Report" shall have the
meaning ascribed thereto in Section 4.2(b).
"Asset Purchase Agreement":
That certain Asset Purchase Agreement dated as of July
21, 1998, by and among Tenant, as Buyer, Harris, as
Seller, and Landlord, in its capacity as the sole
shareholder of Harris, together with all other
agreements and documents entered into by Landlord and
Tenant in connection therewith.
"Common Areas": The parking
areas, sidewalks, landscaped areas, courts, malls,
roofs, streets, roadways, loading platforms, service
area, curbs, corridors, stairways, elevators,
escalators, comfort stations, lounges and shelters and
all other facilities designated as "Common Area" under
the REA.
"Default" shall have the
meaning ascribed thereto in Section 10.1.
"Developer" shall mean the
Person responsible for managing and maintaining the
Common Areas under the REA.
"Fair Market Rental Value"
shall mean the fair market rental value of the
Premises, as of the date and for the time period of
determination, to be determined in accordance with the
terms of Article XII and, as necessary, Exhibit E
attached hereto and made a part hereof.
"Floor Area" shall have the
meaning given such term in the REA.
"Gross Sales" shall mean the
gross selling price of all merchandise or services sold
in or from the Premises by Tenant, its subtenants,
licensees or concessionaires, whether for cash or on
credit, adjusted by excluding the following:
(i) Any exchange of merchandise
between stores owned by or
affiliated with Tenant where such
exchange is made solely for the
convenient operation of Tenant's
business and not for the purpose
of consummating a sale made in, at
or from the Premises, or for the
purpose of depriving Landlord of
the benefit of a sale which would
otherwise be made in or at the
Premises;
(ii) Returns to shippers or
manufacturers;
(iii) Cash or credit refunds to
customers on transactions (not to
exceed the actual selling price of
the item returned) otherwise
included in Monthly Gross Sales,
including, without limitation, (a)
sums and credits received in the
settlement of claims for loss of
or damage to merchandise, to the
extent previously reported as part
of Gross Sales and (b) the price
allowed on all merchandise traded
in by customers for credit or the
amount of credit for discounts and
allowances made in lieu of
acceptance thereof, but not
including any amount paid or
payable for what are commonly
referred to as trading stamps;
(iv) Sales of fixtures, machinery,
equipment or property which are
not stock in trade;
(v) Amounts collected and paid by
Tenant to any government for any
sales, excise, luxury, gross
receipts taxes or other similar
taxes now or hereafter imposed
upon the sales of merchandise or
services;
(vi) The amount of any discount on
sales to employees;
(vii) Alteration workroom charges and
delivery charges;
(viii) Interest, service or sales
carrying charges or other charges,
however denominated, paid by
customers for extension of credit
on sales and where not included in
the merchandise sales price;
(ix) Receipts from public telephones,
stamp machines, public toilet
locks or vending machines
installed solely for use by
Tenant's employees; and
(x) Gift certificates, or like
vouchers, until such time as the
same shall have been converted
into a sale by redemption.
"Harris" means The Harris
Company, a California corporation, a wholly-owned
subsidiary of Landlord.
"Imposition" shall have the
meaning ascribed thereto in Section 4.5.
"Initial Term": The initial
10-year Term of this Lease.
"Interest Rate": The rate of
interest per annum equal to the lesser of: (i) the
highest lawful rate of interest that Tenant may be
charged; or (ii) the "prime rate" announced from time
to time by Chase Manhattan Bank, N.A., New York, New
York, for short-term, unsecured loans to its most
credit-worthy customers. In the event Chase Manhattan
Bank, N.A. shall discontinue reporting its "prime rate"
or shall cease to exist, Landlord shall select a
substitute bank, and the "prime rate" reported by such
bank shall be used for computing interest payable
hereunder.
"Lease Year": A period of
twelve (12) consecutive full calendar months,
commencing as of the day after the Saturday which is
closest (by number of days) to January 31 and ending on
the Saturday which is closest (by number of days) to
January 31 of the following calendar year. The first
Lease Year shall be the period commencing on the Term
Commencement Date and ending on January 30, 1999. The
final Lease Year shall be the period commencing on the
day after the Saturday which is closest (by number of
days) to January 31st of the calendar year in which the
Lease Term (as it may be extended) expires and ending
on the expiration date of the Lease Term. It is
acknowledged that this definition of Lease Year is
intended to coincide with Tenant's fiscal year.
"Major" shall mean each of the
parties to the REA, as more particularly set forth in
Exhibit D attached hereto and made a part hereof.
"Minimum Annual Rent" shall
have the meaning ascribed thereto in Section 4.1.
"Mortgages" shall have the
meaning ascribed thereto in Section 13.3.
"Notice" shall have the meaning
ascribed thereto in Section 13.1(a).
"Option(s)" shall have the
meaning ascribed thereto in Article XII.
"Percentage Rent" shall have
the meaning ascribed thereto in Section 4.2(a).
"Permitted Use" shall mean any
lawful use which complies with the REA and is not
prohibited for the Premises by the REA.
"Person" means any individual,
partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint
venture, governmental authority or other entity of
whatever nature.
"Premises": That certain real
property and improvements thereon described in Exhibit
C attached hereto and made a part hereof.
"Prohibited Use" shall mean any
use which is prohibited for the Premises by the REA.
"REA" shall mean that certain
East Hills Mall Construction, Operation and Reciprocal
Easement Agreement and each of the other documents
related thereto, as more particularly described in
Exhibit D attached hereto and made a part hereof, all
as the same may be amended or modified from time to
time.
"Renewal Term(s)" shall have
the meaning ascribed thereto in Article XII.
"Rent": Minimum Annual Rent,
Percentage Rent, utilities charges, Impositions,
insurance costs and all other amounts and charges
payable by Tenant under any provision of this Lease.
"Requirements" shall mean all
federal, state and local statutes, laws, ordinances,
rules, regulations, authorizations and requirements
relating to the Premises or the use thereof, including,
without limitation, planning, zoning, subdivision,
environmental, toxic and hazardous waste, health, fire
safety and handicap access and all encumbrances,
covenants, conditions and restrictions, violation of
which encumbrances, covenants, conditions and
restrictions could either create a lien or result in a
termination of any agreement beneficial to the use or
manner of use of the Premises or any portion thereof.
"Shopping Center": The land
and improvements known as "East Hills Mall", with a
street address of 2900 Mall View Road, in the City of
Bakersfield, County of Kern, and State of California,
more particularly described in Exhibit A attached
hereto and made a part hereof and depicted on the site
plan attached hereto as Exhibit B and made a part here-
of.
"Taking" shall have the meaning
ascribed thereto in Section 7.2(a).
"Tenant's Employees and
Invitees" shall have the meaning ascribed thereto in
Section 5.4.
"Term": The 10-year period
commencing on the Term Commencement Date and expiring
on August 20, 2008, as such term may be extended or
shortened pursuant to the terms hereof, including,
without limitation, as it may be extended for the
period of any Renewal Term(s).
"Term Commencement Date":
August 20, 1998.
"Unavoidable Delays" shall have
the meaning ascribed thereto in Section 13.4.
Section 1.2 Effect of Basic Terms. Each of
the foregoing definitions and basic provisions is set
forth in this Article I for convenient reference only
and shall be construed in conjunction with, and limited
by, references thereto in other provisions of this
Lease.
ARTICLE II
GRANT AND TERM
Section 2.1 Grant and Term of Lease.
(a) Landlord does hereby let and lease to Tenant the
Premises, together with all right to use the Common
Areas for the Term, subject to the terms and conditions
set forth in this Lease.
(b) Landlord reserves the right to enter the Premises
at any time in case of emergency and at all other
reasonable times and upon reasonable advance notice (i)
to inspect the condition of the Premises; and (ii) to
make repairs to the building in which the Premises are
located, to the extent Landlord is required to do so,
or is otherwise permitted to do so, pursuant to the
terms of this Lease.
Section 2.2 Acceptance of Premises; Quiet
Enjoyment.
(a) Acceptance of Premises. Tenant accepts the
Premises "as-is," but subject to the express
representations, warranties and covenants of Landlord
set forth in the Asset Purchase Agreement and in this
Lease.
(b) Quiet Enjoyment. Landlord covenants that Tenant,
upon paying the Rent and performing and observing all
other terms and conditions of this Lease to be
performed or observed by Tenant, shall peacefully and
quietly have, hold and enjoy the Premises and the
appurtenances thereto throughout the Term without
hindrance, ejection or molestation by Landlord or any
other person or entity lawfully claiming through
Landlord or claiming paramount title to Landlord,
subject only to the terms of this Lease, the REA and
any Mortgage or ground lease to which this Lease is
subordinate.
Section 2.3 Surrender of Premises. Upon
the expiration or earlier termination of the Term,
Tenant shall deliver up and surrender to Landlord
possession of the Premises, including all alterations,
additions, improvements and fixtures, other than
Tenant's trade fixtures, in good order, condition and
state of repair, ordinary wear and tear excepted, and
shall deliver all keys to the Premises to the office of
Landlord at the Shopping Center or as otherwise
directed by Landlord. Tenant shall have fifteen (15)
days after the date the Term of this Lease expires or
earlier terminates to remove its personal property and
trade fixtures; provided, however, that (a) Tenant
shall repair all damage to the Premises resulting from
or arising out of such removal, (b) during such period
Tenant shall perform and be liable for all obligations
and conditions imposed on Tenant hereunder except for
the payment of Rent, including, without limitation,
maintenance, repair, apportionment of taxes,
maintenance of insurance, compliance with Requirements
and assumption of liability for the Premises. The
obligations set forth in the preceding sentence shall
survive the termination of this Lease. Any property of
Tenant not removed from the Premises within such
fifteen (15) day period shall be deemed abandoned. In
addition to all other remedies available, Landlord may,
but shall not be obligated to, retain or dispose of any
or all such property without liability to Tenant. In
the event that Landlord elects to dispose of such
property, Landlord shall so notify Tenant, and Tenant
shall, no later than ten (10) days after such notice,
remove all such property from the Premises; provided,
however, that if Tenant fails to so remove such
property, then Landlord may do so, and Tenant shall pay
to Landlord, on demand, all costs and expenses incurred
by Landlord in disposing of such property, including,
without limitation, reasonable attorneys' fees and
disbursements, together with interest thereon, calcu-
lated at the Interest Rate, from the date Landlord ex-
pended such amounts.
Section 2.4 Holding Over. If not sooner
terminated, this Lease shall end on the date set forth
in the definition of "Term" in Section 1.1 without the
necessity of notice from either Landlord or Tenant to
terminate this Lease, Tenant hereby waiving notice to
vacate the Premises. If Tenant, or any party claiming
under Tenant, including, without limitation,
subtenants, licensees or concessionaires, remains in
possession of the Premises or any part thereof after
the expiration or termination of this Lease, no tenancy
or interest in the Premises shall result therefrom but
such holding over shall, at Landlord's option, be
deemed a month-to-month tenancy and, otherwise, shall
be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal. As
Landlord's sole remedy for such holding over, Tenant
shall pay to Landlord for any full or partial month
Tenant holds over in the Premises after the expiration
or termination of this Lease a sum equal to one hundred
fifty percent (150%) of the Minimum Annual Rent and
Percentage Rent paid or payable by Tenant under this
Lease with respect to the last full month of the Lease
Term.
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT
Section 3.1 Lease Controls Over REA. As
between Landlord and Tenant, the terms and provisions
of this Lease shall control notwithstanding any
conflict with the provisions of the REA. Tenant shall
be fully liable for the performance of all obligations
under the REA in accordance with all of the terms and
provisions thereof, to the extent that Tenant has
expressly assumed responsibility for the performance of
any such obligations under the terms of this Lease.
Landlord is and shall remain fully liable for the
performance of all of Landlord's obligations under the
REA in accordance with all of the terms and provisions
thereof, to the extent that Tenant has not expressly
assumed responsibility for the performance of such
obligations under the terms of this Lease.
Section 3.2 Covenants Regarding REA.
Landlord will fully and faithfully carry out and
perform the terms, covenants, provisions and conditions
of the REA to be performed by the Landlord. Tenant
will fully and faithfully carry out and perform the
terms, covenants, provisions and conditions of the REA
which, under the express terms of this Lease, are to be
performed by the Tenant. Landlord will exert its best
efforts in exercising all of Landlord's rights and
remedies under the REA to enforce performance of all
terms, covenants, provisions, and conditions of the
REA; and Landlord will not take any of the actions
requiring Landlord's approval thereunder, without first
having delivered to Tenant a copy of the request for
approval and any documentation or material as to which
such approval is requested or required and thereafter
obtained Tenant's written approval thereof, which
approval shall not be unreasonably withheld,
conditioned or delayed. Landlord will not enter into
any agreement amending, supplementing or cancelling the
REA without first obtaining Tenant's prior written
approval thereto, which approval shall not be
unreasonably withheld, conditioned or delayed.
Landlord hereby appoints Tenant as Landlord's true and
lawful attorney-in-fact to take in Landlord's name
whatever reasonable action Tenant may deem appropriate
to enforce performance of the terms of the REA and to
avail itself on Landlord's behalf of any remedy therein
granted Landlord in the event (i) Tenant shall notify
Landlord that the obligations under the REA are not
being properly performed and (ii) Landlord shall fail
to take action to Tenant's reasonable satisfaction
within a reasonable time after receiving notice
thereof.
It is the intent of the parties to this Lease
that this Lease and the REA are and shall remain
mutually dependent and co-existent documents. Tenant
shall have the right (in its sole and absolute
discretion) to terminate this Lease by giving Landlord
notice to such effect within ninety (90) days after the
REA shall, under its express terms and conditions,
expire or terminate or be cancelled, and this Lease
shall terminate on the last day of the month next
succeeding the month in which such notice is given.
ARTICLE IV
RENT AND OTHER CHARGES
Section 4.1 Minimum Annual Rent. Tenant
agrees to pay to Landlord as rental for the Premises
the sum of Three Hundred Fifty-Three Thousand One
Hundred Fifty-Nine Dollars ($353,159.00) per Lease Year
(the "Minimum Annual Rent"), payable in advance in
equal monthly installments of Twenty-Nine Thousand Four
Hundred Twenty-Nine and 91/100 Dollars ($29,429.91), on
or before the first (1st) day of each calendar month
for the balance of the Term. Minimum Annual Rent shall
be prorated (on the basis of a 30-day month and 360-day
year) for any partial month and partial Lease Year
comprising a portion of the Term of this Lease. In the
event that the Term expires or is terminated on a date
other than the last day of a calendar month, Tenant
shall pay Landlord, on the first (1st) day of the last
month of the Term, a pro rata portion of a monthly
installment of such Minimum Annual Rent, calculated on
a per diem basis for a month of thirty (30) days.
Section 4.2 Percentage Rent.
(a) Formula for Calculation. In addition to Minimum
Annual Rent, Tenant covenants and agrees to pay to
Landlord as additional rent for each Lease Year the sum
of Three percent (3.0%) of the amount by which Tenant's
Gross Sales for such Lease Year exceeds the Minimum
Annual Rent ("Percentage Rent"). Percentage Rent shall
be payable, in arrears, on or before March 10 for the
immediately preceding Lease Year. The amount of
Percentage Rent payable by Tenant hereunder for the
first Lease Year shall be prorated by computing the
Percentage Rent that would be payable based on Gross
Sales for the first 365 days of the Term and
multiplying that number by a fraction, the numerator of
which is the number of days in the first Lease Year and
the denominator of which is 365. Such prorated
Percentage Rent for the first Lease Year shall be
payable prior to the 455th day of the Term. The
Percentage Rent payable by Tenant for the final Lease
Year shall be prorated by computing the Percentage Rent
that would be payable based on Gross Sales for the last
365 days of the Term and multiplying that number by a
fraction, the numerator of which is the number of days
in the final Lease Year and the denominator of which is
365. Such prorated Percentage Rent for the final Lease
Year shall be payable within 90 days after the Term
expiration date.
(b) Annual Report. On or before March 10 during the
Term (including the March 10 following the end of the
Term), Tenant shall furnish Landlord with a written
statement (the "Annual Report"), certified by Tenant's
chief financial officer or comptroller, of total Gross
Sales made from the Premises during the preceding Lease
Year, which Annual Report shall contain Tenant's
computation of Percentage Rent for such Lease Year.
The Annual Report shall be in form reasonably
satisfactory to Landlord and shall contain such details
and breakdown as may accurately depict Gross Sales.
The Annual Report shall not carry forward transactions
completing in the preceding Lease Year, or carry back
transactions completed in the following Lease Year.
(c) Records. Tenant shall maintain at the Premises
or at its principal record keeping office within the
continental United States at all times during the Term,
full, complete and accurate books of account and
records in accordance with generally accepted
accounting practices consistently applied for all
operations of the business conducted in or from the
Premises, including the recording of Gross Sales and
the receipt of all merchandise into, and the delivery
of all merchandise from, the Premises during the Term,
and shall retain such books and records, copies of all
tax reports and tax returns submitted to taxing
authorities, as well as copies of contracts, vouchers,
checks, inventory records, electronic data recordings
and other documents, recordings, and papers in any way
related to the operation of such business for at least
three (3) years from the end of the period to which
they are applicable, or, if any audit is required or a
controversy should arise between the parties hereto
regarding the Rent payable hereunder, until such audit
or controversy is terminated, even though such
retention period may extend beyond the expiration of
the Term or earlier termination of this Lease.
(d) Review of Books and Records. The acceptance by
Landlord of payments of Percentage Rent or any Annual
Report pursuant to Section 4.2(b) above shall not
prejudice Landlord's right to examine Tenant's books,
records and accounts in order to verify the amounts set
forth thereon. Landlord may at any reasonable time
during the Term (but not more frequently than once
during any calendar year) cause a complete or partial
audit to be made of Tenant's books, records and other
documents relating to the Premises, including the books
and records of any subtenant, licensee or
concessionaire, for all or any part of the three (3)
year period immediately preceding the day of the giving
of such notice by Landlord to Tenant. Landlord or its
duly authorized representatives shall have full and
free access to such books and records and the right to
require of Tenant, its agents and employees, such
information or explanation with respect to such books
and records as may be necessary for a proper
examination and audit thereof. If such audit discloses
an understatement in an Annual Report of Gross Sales,
Tenant shall pay the deficiency in Percentage Rent
with, interest thereon calculated at the Interest Rate,
and, if Gross Sales have been understated in any Annual
Report by four percent (4%) or more, Tenant shall pay
to Landlord, as Rent, the cost of said audit, upon
demand.
(e) Confidentiality. Any information regarding
Tenant's business operations delivered to or made
available to Landlord, or otherwise obtained by
Landlord in the exercise of its rights under subsection
(d), above, shall be held in strictest confidence by
Landlord. Landlord shall disclose such information
only to its accountants, attorneys and other
consultants and shall require all such parties to keep
all information regarding Tenant strictly confidential.
Nothing in this subsection (e) prohibits Landlord from
disclosing such material when ordered to do so by a
court of competent jurisdiction, or when necessary to
properly plead or prosecute a legal action brought by
Landlord against Tenant for nonpayment of Percentage
Rent.
Section 4.3 Utilities Charge.
(a) Tenant shall apply to the municipality or
respective utilities companies for all required utility
services to the Premises. Tenant shall pay all
required deposits and meter charges for utilities to
the Premises to the respective utility supplier(s).
(b) Tenant shall pay promptly, as and when same shall
become due, all water rents, rates and charges, all
sewer rents, rates and charges and all charges for
electricity, gas, heat, steam, hot and/or chilled
water, air conditioning, ventilating, lighting systems,
sprinkler systems and all other utilities supplied to
the Premises.
Section 4.4 Common Area Maintenance Costs.
Tenant shall pay, as Rent, Common Area Maintenance
charges as specified in the REA or any lesser amount
specified in a separate agreement thereunder. Tenant
shall pay Common Area Maintenance charges as referenced
herein within thirty (30) days after Tenant has
received a bill therefor.
Section 4.5 Taxes.
(a) Tenant shall pay before delinquency all real and
personal property taxes, general and special
assessments, and other public charges levied upon or
assessed against the Premises, the land thereunder, or
any of the building structures, fixtures, equipment, or
improvements thereon (collectively, "Impositions").
Tenant shall deliver to Landlord reasonable evidence of
payment prior to the time said Impositions have become
delinquent.
(b) Any Imposition relating to a fiscal period of the
taxing authority, a part of which period is included
within the Term of this Lease and a part of which is
included prior to the beginning of the Term of this
Lease or after the termination of this Lease shall
(whether or not such Imposition shall be paid,
assessed, levied or imposed upon or become due and
payable and a lien upon the Premises or a part thereof
during the term of this Lease) be adjusted as between
Landlord and Tenant as of the Term Commencement Date or
as of the date of the termination of the Term of this
Lease, as the case shall require, so that Landlord
shall pay that proportion of such Imposition which that
part of such fiscal period included in the period of
time prior to the commencement or after the termination
of the Term, as the case may be, bears to such fiscal
period, and Tenant shall pay the remainder thereof.
(c) In the event Landlord is unable to secure
separate tax bills for Tenant as herein described, then
Tenant shall pay to Landlord, prior to such time as
said Impositions would be due and payable, all Imposi-
tions attributable to the Premises. Personal property
taxes shall be allocated directly to Tenant's personal
property. Real property taxes will be allocated by
virtue of the ratio of the Floor Area of the Premises
to the total gross leasable area in the Shopping
Center, which said gross leasable area shall not
include any part of the Common Area in the Shopping
Center, being assessed on the tax bill which relates to
the Premises.
(d) If Tenant fails to pay any such taxes,
assessments or other public charges which it is
obligated to pay as provided in this section before the
same become delinquent, then and in such event,
Landlord may pay the same together with any interest
and penalties thereon, and the amount so paid shall be
deemed additional Rent immediately due and payable by
Tenant to Landlord on demand, together with interest
thereon at the Interest Rate.
(e) Anything in this section to the contrary
notwithstanding, Landlord agrees that Tenant shall have
the right, at Tenant's sole cost and expense, to
contest the legality or validity of any Impositions
payable by Tenant, but no such contest shall be carried
on or maintained by Tenant after such Impositions
become delinquent unless Tenant shall have duly paid
the amount involved under protest or shall procure and
maintain a stay of all proceedings to enforce any
collection thereof and any forfeiture or sale of the
leased property, and shall also provide for payment
thereof together with all penalties, interest, costs
and expenses by deposit of a sufficient sum of money or
by a good and sufficient undertaking as may be required
by law to accomplish such stay. Landlord shall, at the
request of Tenant and at Tenant's sole expense, execute
or join in the execution of any instrument of documents
necessary in connection with any such contest except
bonds of undertakings. In the event of any such
contest made by Tenant, Tenant shall promptly, upon
final determination thereof, pay and discharge the
amount indicated or resulting from said contest,
together with any penalties, fines, interest, costs and
expenses that may have accrued thereon.
Section 4.6 Late Payment Charges. Late
payments of Rent or any other sum due from Tenant
hereunder, including all amounts paid by Landlord on
behalf of Tenant to satisfy any condition or covenant
of this Lease and all costs incurred by Landlord in
enforcing the terms of this Lease, shall bear interest
from the date Tenant receives written notice of such
late payment or default (as applicable) until paid at
the Interest Rate.
Section 4.7 Rent Payments. All Rent
payable by Tenant under this lease shall be paid in
United States Dollars without prior demand therefor and
without any deductions, offsets or counterclaims except
those expressly permitted under the terms of this
Lease, to Landlord and shall be delivered on or before
the due date thereof via wire transfer to
Bank of America, S.A.
Principal Office: Madrid
1 Capitan Haya St.
28009 Madrid SPAIN
For Credit To:
El Corte Ingles, S.A.
Account number 31922020
or to such other payee and at such other place as
Landlord may hereafter designate from time to time by
written notice to Tenant. Notwithstanding anything to
the contrary in this Lease, Tenant may withhold any
portion of Rent which Tenant is required to withhold by
virtue of Landlord's status as a foreign person under
Section 1445 of the Internal Revenue Code or other
applicable law.
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS
Section 5.1 Permitted Use.
(a) Tenant shall use the Premises only for the
Permitted Use and for no other purpose whatsoever.
(b) Tenant covenants that Tenant shall not use or
allow the Premises or any part thereof to be used or
occupied for any Prohibited Use or any immoral or
unlawful purpose or in violation of any certificate of
occupancy or certificate of compliance for the
Premises.
Section 5.2 Signs. Tenant shall have the
right, without Landlord's consent, to erect any and all
signs on or about the Premises it elects, provided that
such signage complies with the REA and all
Requirements. From time to time upon Tenant's request,
Landlord covenants to assist Tenant (at no cost or
expense to Landlord) in processing any and all
approvals necessary for Tenant to erect such signage.
Section 5.3 Alterations of Premises.
(a) All changes, alterations or
modifications to the Premises (collectively,
"Alterations") shall be made in accordance with this
Section 5.3. Tenant shall have the right to perform
non-structural modifications to, remodel and
redecorate, retexturize, recarpet and repaint the
Premises without obtaining the prior written consent of
Landlord; provided (i) the proposed Alteration does not
affect the exterior appearance of the Premises,
including, without limitation, the storefront or the
storefront sign of the Premises, or the roof,
foundation, supports or structural integrity of the
building of which the Premises is a part; (ii) Tenant
submits an information copy of all remodeling plans to
Landlord at least thirty (30) days prior to the date
any such work is scheduled to commence; (iii) the total
cost of all work involved in the Alteration does not
exceed Three Hundred Thousand Dollars ($300,000) in any
one project or an aggregate amount of Six Hundred
Thousand Dollars ($600,000) in any one Lease Year; and
(iv) such work does not violate any code, ordinance or
Requirement and does not cause Landlord's insurance
rates to increase. Except for the foregoing, Tenant
shall not make any Alterations to any portion of the
Premises without, in each instance, obtaining
Landlord's prior written consent.
(b) All work ("Work") pertaining to any Alteration to
the Premises, including, without limitation, Tenant's
Work, shall comply with the following:
(i) No Work shall be undertaken
until Tenant shall have procured and paid for, so
far as the same may be required, from time to
time, all permits and authorizations of all
municipal departments and governmental
subdivisions having jurisdiction. Provided no
default exists hereunder, Landlord shall join in
the application for such permits and
authorizations whenever such action is necessary;
provided, however, that Landlord shall not incur
any expense or be subject to any liability as a
result of joining in any such application.
Within ten (10) days after completion of the
Work, Tenant shall deliver to Landlord a
certificate of occupancy or such similar
certificates as may be required or customary by
applicable laws and legal requirements.
(ii) All Work shall be performed
promptly and in a good and workmanlike manner and
in compliance with all applicable permits and
laws, and in accordance with the orders, rules
and regulations of the National Board of Fire
Underwriters or any other body hereafter
exercising similar functions, and Tenant shall
furnish Landlord with evidences and assurances
reasonably acceptable to Landlord that all such
Work shall be completed, subject to Unavoidable
Delays, at least one (1) year prior to the end of
the Term of this Lease.
(iii) The cost of any Work shall
be paid promptly by Tenant so that the Premises
shall at all times be free and clear of liens for
labor and materials supplied or claimed to have
been supplied in connection therewith.
(iv) Tenant shall carry, or
shall cause to be carried, worker's compensation
insurance covering all persons employed in
connection with any Work and with respect to whom
death or bodily injury claims could be asserted
against Landlord, Tenant or the Premises, and,
without duplication of any insurance required by
Article VIII hereof, adequate all-risk and
builders risk insurance for the mutual benefit of
Tenant and Landlord in amounts satisfactory to
Landlord and, at Landlord's request, such other
insurance in favor of Landlord in types and
amounts as are reasonable and customary, all at
Tenant's expense, at all times when any such Work
is in progress; provided, however, that Tenant
shall be fully liable for any failure to maintain
such insurance, including, without limitation,
Tenant's obligation to indemnify Landlord for the
failure to maintain insurance in accordance with
the provisions of this Lease. All such insurance
shall be provided by a company or companies of
recognized responsibility and reasonably
satisfactory to Landlord, and all policies or
certified copies of policies issued by the
respective insurers, bearing notations evidencing
the payment of premiums or accompanied by other
evidence satisfactory to Landlord of such
payment, shall be delivered to Landlord prior to
the commencement of any Work.
Section 5.4 Use of Common Areas.
(a) All Common Areas shall be subject to the
exclusive control and management of Developer as set
forth in the REA. Tenant and Tenant's officers,
directors, employees, agents, subtenants, contractors,
subcontractors, concessionaires and licensees, and the
officers, directors, employees and agents of Tenant's
subtenants, concessionaires and licensees, and the
customers, patrons and business invitees of Tenant and
of Tenant's subtenants, concessionaires and licensees
(hereinafter, collectively, "Tenant's Employees and
Invitees") shall have the non-exclusive right to use
(without cost or expense to Tenant or Tenant's
Employees or Invitees other than as expressly provided
in this Lease) the Common Areas for the purpose of
gaining ingress to and egress from the Premises, for
the passage and parking of vehicles, and for the
passage and accommodation of pedestrians, such right to
be in common with Landlord and those occupants (and the
employees and invitees of such occupants) of the
Shopping Center from time to time authorized to use
said common areas for such purposes.
(b) Notwithstanding anything to the contrary
contained in Section 5.4(a) hereof, Landlord shall
exercise best efforts to cause Developer to maintain,
manage and operate the Common Areas (including, but not
by way of limitation, the parking area) in good order,
condition and repair in conformity with the REA so as
to at all times maintain an appearance and
attractiveness reasonably equivalent to the level of
same existing as of the date hereof. Developer's
obligations to be enforced by Landlord pursuant to the
preceding sentence in respect of the maintenance,
management and operation of the Common Areas shall
include, but not be limited to, the following:
(i) Undertaking such maintenance
and construction work (including replacements as
required) as is necessary to preserve and
maintain the utility of the Common Areas;
(ii) The care and maintenance of
all identification signs and all planters
(including those adjacent to the Premises but
excluding any signs and planters of Tenant) and
landscaping at the Shopping Center;
(iii) The adequate illumination
of the Common Areas at all times of darkness that
Tenant is open for business (plus a period of
one-half hour after Tenant closes for business);
(iv) The payment prior to
delinquency of all real estate and personal
property taxes and assessments levied on the
Common Areas;
(v) The removal of dirt and
debris and rubbish (including the regular
sweeping of the parking area and all sidewalks);
and
(vi) The operation, management
and maintenance of the enclosed mall, including
the heating, ventilating, air-conditioning,
lighting and housekeeping of the same and the
maintenance (and replacement as required) of
landscaping therein.
Section 5.5 Compliance with REA. Tenant
shall abide by the terms of the REA. Landlord agrees
that it will not change, amend or alter (or agree or
consent to change, amend or alter) any term or
condition of the REA without the prior written consent
of Tenant, which consent shall not be unreasonably
withheld.
Section 5.6 Compliance with Requirements.
(a) Insofar as the same relate to or are caused by
Tenant's occupancy and use of the Premises, and
Tenant's other activities under this Lease, throughout
the Term, Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future
Requirements applicable to the Premises, subject,
however, to Tenant's rights to contest any such
Requirements, as set forth in clause (b) below. Tenant
shall likewise comply with the provisions of all of
Tenant's insurance policies required to be maintained
hereunder or otherwise carried by Tenant with respect
to the Premises from time to time.
(b) Tenant shall have the right, after prior notice
to Landlord, at Tenant's sole cost and expense, to
contest by appropriate legal proceedings diligently
prosecuted in good faith, in the name of Tenant, the
validity or application of any Requirements; provided,
however, that Tenant may delay compliance therewith
until the final determination of such proceeding only
if by the terms of any such Requirements, compliance
therewith pending the prosecution of any such
proceeding may legally be delayed without subjecting
Landlord to the risk of any criminal liability, or
imminent forfeiture of its estate, for failure so to
comply therewith, and provided further that if any
fine, lien, charge or civil liability may be incurred
by reason of such non-compliance, (i) Tenant furnishes
to Landlord security satisfactory to Landlord, against
such fine, lien, charge or civil liability in
accordance with Section 5.7, and (ii) Tenant shall be
solely responsible for payment of such fine, lien,
charge or civil liability and shall indemnify, defend
and hold Landlord harmless with respect thereto.
Section 5.7 Liens.
(a) Tenant agrees that it will pay or cause to be
paid all costs for work done by it or caused to be done
by it on the Premises of a character which will or may
result in liens on Landlord's reversionary estate
therein, and Tenant shall keep the Premises free and
clear of all mechanics' liens and other liens on
account of work done for Tenant or persons claiming
under it. If any such lien shall at any time be filed
against the Premises, Tenant shall either cause the
same to be discharged within thirty (30) days after the
recording thereof, or, if Tenant, in Tenant's
discretion and in good faith, determines that such lien
should be contested, shall furnish such security as may
be necessary or required to prevent any foreclosure
proceedings against the Premises during the pendency of
such contest. If Tenant shall fail to furnish such
security, then, in addition to any other right or
remedy of Landlord resulting from such failure,
Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due,
procuring the discharge of such lien by giving
security, or in such other manner as is, or may be,
prescribed by law. Tenant shall repay to Landlord, as
Rent, on demand, all sums disbursed or deposited by
Landlord pursuant to the provisions of this Section
5.7, including all costs, expenses and attorneys' fees
incurred by Landlord in connection therewith. Nothing
contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to
liability under any mechanics' lien or other lien law.
(b) Should any claims of lien be filed against the
Premises or any action affecting the title to the
Premises be commenced, the party receiving notice of
such lien or action shall forthwith give the other
party written notice thereof. Landlord or its
representative shall have the right to post and keep
posted upon the Premises notices of nonresponsibility
or such other notices which Landlord may deem to be
proper for the protection of Landlord's interest in the
Premises. Tenant shall, before the commencement of any
work which might result in any such lien, give to
Landlord advance written notice of its intention to do
so in reasonably sufficient time to enable the posting
of such notices.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense
(except as provided to the contrary in this Section
6.1) at all times during the Term and any extensions
thereof, keep the Premises in good order, condition and
repair, damage by casualty excepted. Subject to the
limitations set forth in Section 6.1(b), Tenant's
maintenance and repair obligation hereunder include,
without limitation:
(i) all equipment or facilities
serving the Premises, such as plumbing, heating,
air conditioning, ventilating, electrical or
lighting facilities, fire sprinkler and/or
standpipe and hose or other automatic fire
extinguishing systems, including fire alarm
and/or smoke detection systems and equipment,
fire hydrants, fixtures, walls (interior and
exterior) including reasonably periodic painting
of interior walls in painting of exterior walls
to the extent required by the REA, ceilings,
floors, windows, doors, plate glass, landscaping,
driveways, parking lots, fences, signs, sidewalks
and parkways; and
(ii) restorations, replacements
or renewals, when necessary, to keep the Premises
and all improvements thereon or a part thereof in
good order, condition and state of repair.
(iii) Tenant shall maintain
maintenance contracts with respect to the
elevators, the escalators and the heating,
ventilation and air conditioning systems located
in the Premises.
(b) Notwithstanding anything to the contrary in
Section 6.1(a), Tenant is not responsible for
maintenance, repairs or replacements which are
(i) the responsibility of
Landlord pursuant to Section 6.2, or
(ii) the responsibility of the
Developer or any other party pursuant to the REA.
(c) Notwithstanding anything to the contrary in
Section 6.1(a), if (i) any repair or replacement which
is reasonably estimated to exceed $100,000 is required
with respect to any portion of the Premises for which
Tenant is responsible pursuant to Section 6.1(a)
(hereinafter, a "Capital Repair"), and (ii) the Useful
Life of such Capital Repair (as defined herein) exceeds
the Remaining Term of the Lease (as defined herein),
then Landlord shall fund a portion of the cost of such
repair or replacement equal to a fraction, the
numerator of which is the Excess Useful Life (as
defined herein) and the denominator of which is the
Useful Life. As used herein, (A) the "Useful Life" of
a Capital Repair means the reasonably anticipated
useful life of such Capital Repair (determined by
generally accepted accounting standards, consistently
applied), (B) the "Remaining Term" means the portion of
the Term remaining, including the Renewal Term under
any Option which has been exercised, but not the
Renewal Term under any Option which has not been
exercised and (C) the term "Excess Useful Life" means,
with respect to a Capital Repair, the difference
between the Useful Life thereof and the Remaining Term.
As used herein, "Landlord's Capital Repair
Contribution" means, with respect to any Capital
Repair, Landlord's contribution to the cost of such
Capital Repair made pursuant to this Section 6.1(c).
Landlord shall fund Landlord's Capital Repair
Contribution within ten (10) business days after
receipt of invoices therefor from Tenant (which may be
submitted as Tenant receives invoices for such work).
(d) If Tenant exercises an Option after the Excess
Useful Life of a Capital Repair has been determined,
then Tenant shall reimburse to Landlord, on the first
day of the Renewal Term with respect to such Option, a
portion of Landlord's Capital Repair Contribution equal
to a fraction (not to exceed 100%), the numerator of
which is the Renewal Term and the denominator of which
is the Excess Useful Life. In order that this Section
6.1(d) may be properly applied with respect to
subsequent Option exercises, (i) the Excess Useful Life
of a Capital Repair will be deemed reduced by the
period of each Renewal Term with respect to which
payment is made by Tenant pursuant to this Section
6.1(d) and (ii) Landlord's Capital Repair Contribution
with respect to a Capital Repair will be deemed reduced
by each payment received by Landlord pursuant to this
Section 6.1(d) with respect to that Capital Repair.
Section 6.2 Landlord's Obligations.
Notwithstanding anything to the contrary herein,
Landlord shall be responsible throughout the Term for
maintaining and repairing all structural portions of
the Building, including the roof (including any
skylights), foundations, structural walls, and other
load-bearing portions of the structure.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage or Destruction.
(a) Tenant shall give Landlord prompt notice of any
damage to the Premises by fire or other casualty.
(b) If the Premises shall be rendered wholly
untenantable by a casualty, unless terminated pursuant
to Section 7.1(d)(i) or 7.1(d)(ii) hereof, this Lease
shall remain in full force and effect except that Rent
shall fully abate commencing on the date of loss and
continuing until the earlier to occur of: (i) the date
Tenant reopens the Premises for business, which
reopening Landlord and Tenant shall diligently work
together to expedite, or (ii) the date forty five (45)
days after Tenant completes the restoration, pursuant
to Section 7.1(e), of the structural elements of the
building of which the Premises form a part.
(c) If only a portion of the Premises shall be
rendered untenantable, this Lease shall remain in full
force and effect except that Rent shall partially abate
commencing on the date of loss and continuing until the
earlier to occur of: (i) the date Tenant reopens the
repaired portion of the Premises for business, which
reopening Landlord and Tenant shall diligently work
together to expedite, or (ii) the date forty five (45)
days after Landlord completes the restoration, pursuant
to Section 7.1(e), of the structural elements of the
building of which the Premises form a part. In such
event, the Rent shall be reduced to an amount computed
by multiplying the Rent applicable prior to such damage
by a fraction, the numerator of which is the Floor Area
of the Premises tenantable after such damage and the
denominator of which is the Floor Area of the Premises
prior to such damage.
(d) If there shall be damage to the Shopping Center
by fire or other casualty, whether or not the Premises
is affected thereby, in which: (i) the Premises shall
be sufficiently damaged to render the entire Premises
wholly untenantable; (ii) the damage or destruction to
the Premises is to an extent that it cannot be repaired
with reasonable diligence within one (1) year after the
destruction or damage; (iii) either the Shopping Center
or the building of which the Premises are a part is
damaged to the extent of fifty percent (50%) or more of
its insured replacement cost; (iv) the loss is caused
by any risk not covered by either Landlord's or
Tenant's insurance; (v) the damage occurs during the
last three (3) years of the Term; or, (vi) any
insurance proceeds received by Landlord or Tenant for
such damage are inadequate or unavailable for repairs,
other than because of any deductible amount of any
policy other than Tenant's earthquake insurance policy,
then, in any such event, either party shall have the
option to terminate this Lease. Said option shall be
exercised, if at all, by notice to the other party on
or before the ninetieth (90th) day after the date of
loss and, if exercised, shall be effective on the last
day of the first (1st) full calendar month falling at
least sixty (60) days after such notice. If Tenant
elects to terminate this Lease pursuant to this Section
7.1(d), then Tenant shall turn over to Landlord any
insurance proceeds received by Tenant with respect such
damage and destruction (other than proceeds of
insurance covering tenant's personal property
(including, without limitation, merchandise and
equipment) and trade fixtures. If either party elects
to terminate this Lease pursuant to clause (iv) or
(vi), above, the other party may avoid termination of
this Lease by (i) committing in writing to pay the
additional funds required to complete the necessary
repairs and restoration, which writing shall be
delivered to the terminating party within ten (10) days
after delivery of the termination notice, and (ii)
providing to the terminating party, within a reasonable
period after delivery of such notice, not to extend
beyond the date which is 90 days after the date of
loss, security for payment of such excess costs
reasonably satisfactory to the terminating party and
its lenders (if any).
(e) If there shall be damage to the Premises by fire
or other casualty and this Lease is not terminated,
Tenant shall promptly commence and diligently prosecute
the restoration and repair of the Premises, including
all exterior walls, roofs, floors and supports, all
internal partitions, fixtures, trade fixtures,
shelving, casework, furniture and furnishings used in
connection with the operation of Tenant's business in
the Premises, as nearly as practicable to their
respective conditions prior to such damage.
Section 7.2 Condemnation.
(a) The term "Taking" as used in this Section 7.2,
shall mean an appropriation or taking under the power
of eminent domain by any public or quasi-public
authority or a voluntary sale or conveyance in lieu of
condemnation but under threat of condemnation.
(b) In the event of a Taking of the entire Premises,
this Lease shall terminate and expire as of the date
possession is delivered to the condemning authority and
Landlord and Tenant shall each be released from any
liability accruing pursuant to this Lease after such
termination.
(c) If there is a Taking of (a) more than twenty-five
percent (25%) of the Premises, or (b) any portion of
the Building and, regardless of the amount taken, if
the remainder of the Building is not one undivided
structure, either Landlord or Tenant may terminate this
Lease as of the date Tenant is required to vacate the
Premises upon giving notice in writing of such election
within thirty (30) days after receipt of Tenant from
Landlord of written notice that a portion of the
Premises has been so appropriated or taken.
(d) If this Lease is terminated as a result of a
Taking, Tenant shall be entitled to any separate award
made to Tenant for relocation costs, good will and any
of Tenant's fixtures and equipment which are not
capable of removal from the Premises; provided such
separate award does not diminish Landlord's award.
Subject to the foregoing, Landlord shall be entitled to
the entire award or compensation in such condemnation
proceedings, or settlement in lieu thereof,
irrespective of whether such award or settlement shall
be obtained as compensation for diminution in value to
the leasehold or the leasehold improvements thereto or
to the fee of the Premises, but the Minimum Annual
Rent, Percentage Rent and any other Rent for the last
month of Tenant's occupancy shall be prorated and
Landlord shall refund to Tenant any Minimum Annual
Rent, Percentage Rent and other Rent paid in advance.
Notwithstanding the foregoing and subject to Section
2.3, in the event this Lease is terminated as provided
above, Tenant may remove all of its removable trade
fixtures, furniture and equipment from the Premises,
provided that Tenant immediately repairs any damage
occasioned to the Premises by reason of such removal so
as to leave the Premises in a neat and clean condition.
Notwithstanding the foregoing, in no event shall Tenant
be entitled to any portion of any award or
compensation, if following the payment of such sum to
Tenant, there would not be sufficient funds or proceeds
to pay the unpaid principal balance of any obligation
of Landlord secured by a deed(s) of trust or
mortgage(s) on the fee interest in the Premises and/or
the Building.
(e) In the event of a Taking, if Landlord and Tenant
elect not to so terminate this Lease as provided above
(or have no right to so terminate), Tenant agrees, at
Tenant's cost and expense (subject to Tenant's rights
hereunder) as soon as reasonably possible after the
Taking, to restore the Building on the Land remaining
to a complete unit of like quality and character as
existed prior to the Taking, and thereafter the Minimum
Annual Rental payable hereunder shall be reduced on an
equitable basis, taking into account the relative value
of the portion taken as compared by the portion
remaining. In such event, Tenant shall be entitled to
receive any and all award or compensation in connection
with such Taking until Tenant has received funds
sufficient to complete such restoration, and Landlord
shall be entitled to receive the remaining portion of
the total award of compensation.
ARTICLE VIII
INSURANCE
Section 8.1 Tenant's Insurance.
(a) Tenant shall carry, from and at all times after
the date hereof, at Tenant's sole cost and expense, the
following insurance:
(i) public liability and
property damage insurance covering the Premises
and Tenant's use thereof against claims for
personal injury or death and property damage
occurring in, on or about the Premises and
affording protection to the limits of not less
than Three Million Dollars ($3,000,000) per
occurrence with respect to any one (1) bodily
injury or damage to property, which insurance
shall, in addition, extend to any liability of
Tenant arising out of the indemnities contained
in Section 8.5 by contractual liability
endorsement. All liability policies shall
contain a so called "occurrence clause";
(ii) fire and casualty insurance
covering the Premises, in an amount equal to
ninety percent (90%) of the replacement cost
thereof (excluding foundations and footings);
(iii) fire insurance with
extended coverage, covering such items of
Tenant's merchandise, inventory, signs,
furniture, trade fixtures, equipment, leasehold
improvements and other property of Tenant, now or
hereafter placed in, on or about the Premises in
an amount equal to ninety percent (90%) of the
replacement cost thereof;
(iv) business interruption
insurance covering Tenant's loss of business
income for the period it would take to
reconstruct the Premises after a casualty using
reasonable diligence and rental loss insurance
covering Tenant's obligation to pay Minimum
Annual Rent under this Lease;
(v) in the event Tenant installs
in, adjoining or beneath the Premises any steam
boiler or similar equipment, broad form boiler
insurance;
(vi) earthquake insurance in an
amount equal to one hundred percent (100%) of the
replacement cost of the Premises, to the extent
the same is available at commercially reasonable
rates and with deductibles of commercially
reasonable amounts (it being agreed that Tenant
may maintain required earthquake coverage through
a blanket policy covering several (or all) store
locations owned or affiliated with Tenant and
having a maximum aggregate coverage limit of
Twenty Million Dollars ($20,000,000)); and
(vii) such other insurance as
may in Tenant's reasonable judgment be prudent to
carry from time to time.
(b) All insurance policies required to be carried by
Tenant shall be issued by companies with a general
policyholder's rating of not less than "A" and a
financial size rating of "VI" as rated in the most
current available "Best's Insurance Reports", and
qualified to do business in the State of California.
Each insurance policy shall name Landlord, Tenant and
Mortgagee as insureds as their interests may appear
and, to the extent possible, any other parties in
interest from time to time designated in writing by
notice from Landlord to Tenant. Executed copies of
each insurance policy, duplicate originals or original
certificates thereof (provided that such certificates
shall evidence all of the required coverage herein
provided) shall be delivered by Tenant to Landlord
within ten (10) days after delivery of possession of
the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of prior policies.
All insurance policies shall contain a provision that
the underwriter will give Landlord and Mortgagee at
least thirty (30) days prior written notice of any
cancellation or lapse of such insurance or the
effective date of any reduction in the amounts thereof
or increase of the deductible. All insurance policies
shall be written as primary policies which do not
contribute to, and are in excess of, any coverage which
Landlord may carry. All insurance policies shall
contain an agreement by the insurers that the coverage
afforded thereby shall not be affected by any
construction work in or about the Premises and that no
act or omission by the Tenant shall impair or affect
the rights of the Landlord to receive and collect the
proceeds under the policies.
(c) Any insurance required to be carried by Tenant
may be provided under a blanket policy of insurance
covering additional items or locations or insureds;
provided, however, that: (i) Landlord and Mortgagee
shall be named as an additional insured thereunder (or
covered by broad form Landlord endorsement or
contractual coverage); (ii) any such blanket policy or
policies shall specify total insurance allocated to
Tenant's improvements and property; and (iii) the
requirements for Tenant's insurance set forth herein
are otherwise satisfied. Tenant agrees to use its best
efforts to ensure that the coverage afforded Landlord
and any such other parties in interest under any future
blanket policy of insurance will not be diminished by
reason of the use of such blanket policy of insurance,
and Tenant shall expend commercially reasonable amounts
in connection with obtaining such coverage.
(d) The deductibles and self-insured retentions
included in Tenant's insurance policies shall be in
amounts as may be commercially reasonable from time to
time.
(e) If Tenant refuses or neglects to secure and
maintain insurance policies complying with the
provisions of this Section 8.1, Landlord may secure the
appropriate insurance policies and Tenant shall pay,
upon demand, the costs of same to Landlord as Rent.
Section 8.2 Landlord's Insurance. Landlord
at its cost shall carry, from and at all times after
the date of delivery of the Premises to Tenant, all
insurance required to be carried by Landlord pursuant
to (i) any Mortgages which either presently or in the
future may exist as a lien against the Premises and
(ii) the REA, to the extent that insurance required to
be carried by Tenant pursuant to this Lease is
insufficient to satisfy either of such obligations of
Landlord.
Section 8.3 Waiver of Subrogation.
Landlord and Tenant each waive any rights it may have
against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be,
their respective property, the Premises or its contents
or to other portions of the Shopping Center arising
from any liability, loss, damage or injury caused by
fire or other casualty for which property insurance is
carried or required to be carried pursuant to this
Lease. Each of the parties hereto, on behalf of their
respective insurance companies insuring the property of
either Landlord or Tenant against any such loss, to the
extent of any recovery under such insurance, waives any
right of subrogation that it may have against the
other. Each waiver shall be expressly included in, and
shall comply with the requirements of, the respective
insurance policies.
Section 8.4 Governmental and Insurance
Requirements.
(a) Tenant shall comply, at Tenant's sole cost and
expense, with all reasonable requirements of the
insurance underwriters, or any similar public or
private body, provided that any such requirements of
such insurance underwriters, or any similar public or
private body, are conditions to the continuance of any
of the insurance coverage required hereunder, and any
governmental authority having jurisdiction over
insurance rates with respect to the use or occupancy of
the Premises as a part of Shopping Center, including,
without limitation (i) installing fire extinguishers or
automatic dry chemical extinguishing systems; (ii)
making any changes, modifications, alterations or
additions in the sprinkler system within the Premises;
and (iii) relocating partitions, trade fixtures or
other contents within the Premises.
(b) Tenant shall not commit any act or suffer to
exist on the Premises any circumstances which will
violate any reasonable restrictions contained in any of
Tenant's or Landlord's policies of fire and casualty or
public liability insurance, prevent Landlord from
continuing the coverage presently provided in
Landlord's insurance policies from insurance companies
reasonably acceptable to Landlord or cause the rates
for any such policies to increase beyond the minimum
rates from time to time applicable to the Premises or
the Shopping Center for the Permitted Use, provided
such minimum rate would have been available to Landlord
but for Tenant's actions or use. In the event that
Landlord receives any notice from Landlord's insurance
company regarding any violation by Tenant of any of
Landlord's insurance policies, or of any proposed
increase in Landlord's premiums from the minimum rate
from time to time applicable thereunder because of any
act, omission or sufferance by Tenant in, on or under
the Premises, Landlord shall notify Tenant, and Tenant
shall reimburse Landlord as additional Rent the amount
of any such increase promptly following Landlord's
written demand therefor.
(c) In the event that Landlord receives any notice
from Landlord's insurance company regarding any
violation by Tenant of any of Landlord's insurance
policies, or of any proposed increase in Landlord's
premiums from the minimum rate from time to time
applicable thereunder because of any act, omission or
sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
Section 8.5 Indemnification. To the
fullest extent permitted by law, Tenant covenants with
Landlord that Landlord shall not be liable for any
damage or liability of any kind or for any injury to or
death of persons or damage to property of Tenant or any
other person occurring from and after the date Tenant
is given access to the Premises from any cause
whatsoever related to the use, occupancy or enjoyment
of the Premises including, but not limited to, the
sidewalks and landscaped areas immediately adjacent to
the Building and Tenant's drive-through area, if any,
by Tenant or any person thereon or holding under Tenant
including, without limitation, damages resulting from
any labor dispute, and Tenant shall defend (using
counsel mutually approved by Landlord and Tenant or
Tenant's insurer), indemnify and save Landlord harmless
from all liability whatsoever on account of any real or
alleged damage or injury and from liens, claims and
demands related to the use of the Premises and its
facilities, or any repairs, alterations or improvements
(including any improvements and fixtures constructed or
installed by Tenant) which Tenant may make or cause to
be made with respect to the Premises, and any loss or
interruption of business or loss of rental income
resulting therefrom. Notwithstanding anything to the
contrary in the foregoing, Tenant shall not be liable
for damage or injury occasioned by the negligence or
willful misconduct of Landlord or any ground lessor,
mortgagee or owner of all or any part of the Shopping
Center or their respective employees, agents or
contractors.
Section 8.6 Landlord Exculpation. Landlord
shall endeavor to conduct its activities with respect
to the Premises in a prudent and businesslike manner.
However, Landlord shall not be liable for any damage to
property entrusted to employees of Landlord, its
partners or agents, nor for loss of or damage to any
property damage or loss of business which may be
sustained by the person, goods, ware, merchandise or
property of Tenant, its employees, invitees or
customers or any other person in or about the Premises
caused by or resulting from, but not limited to, fire,
steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of same, whether the
injury, damage or loss of business results from
conditions arising upon the Premises, other portions of
the Shopping Center or from other sources, so long as
the same does not result from the negligence or wilful
misconduct of Landlord or its employees, agents, and
contractors or Landlord's breach of any of its express
obligations under this Lease. Landlord shall not be
liable for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the
Premises or in the Shopping Center or of defects
therein or in the fixtures or equipment. Landlord
shall not be liable for any damages arising from any
act or neglect of any other tenant in the Shopping
Center, except to the extent of Landlord's liability
for breach of Landlord's obligation to enforce the REA,
as provided in Section 3.2.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Notice to Landlord. If Tenant
wishes to assign its rights under this Lease or sublet
all or any portion of the Premises, Tenant shall
deliver written notice of its intention to do so to
Landlord at least thirty (30) days prior to the
effective date of any such proposed assignment or
subletting, specifying in such notice whether Tenant
proposes to assign or sublet, the proposed effective
date thereof, identification of the proposed assignee
or sublessee with a description of the proposed
business operations to be conducted at the Premises.
Such notice shall also be accompanied by current
financial statements of the proposed assignee or
subtenant, a copy of the proposed assignment or
sublease documents, or, if not available, a letter of
commitment or letter of intent setting forth material
terms and provisions of the proposed assignment or
sublease.
Section 9.2 Landlord's Approval. Landlord
will notify Tenant of its approval or disapproval of a
proposed assignment or sublease within a reasonable
time (in no event earlier than fifteen (15) days nor
longer than thirty (30) days) after receipt of such
notice from Tenant as set forth above. Landlord shall
not unreasonably withhold its approval of Tenant's
assignment of this Lease or subletting of the Premises.
The factors which may be viewed in determining the
reasonableness of Landlord's approval or disapproval of
a proposed assignment or subletting and the conditions
which may be imposed by Landlord as part of its
consenting thereto shall be as follows:
(a) The use of the Premises following
the assignment or sublease would
be different from the Permitted
Use set forth in this Lease;
(b) In Landlord's reasonable business
judgment, the proposed assignee or
subtenant lacks sufficient
business reputation or experience
to operate a business of the type
and quality permitted under the
terms of this Lease;
(c) In Landlord's reasonable business
judgment, the present financial
worth of the proposed assignee or
subtenant is inadequate to ensure
such assignee's or subtenant's
performance under the terms of its
agreement relating to the
Premises;
(d) The proposed assignment or
sublease transaction would breach
a covenant of Landlord respecting
radius, location, use or exclusive
use in any other lease, financing
agreement or other agreement
relating to the Shopping Center.
It is expressly understood and agreed that Landlord's
consent shall not be required for any transfer of
Tenant's interest under this Lease which is considered
to be a Permitted Transaction (as defined below).
Section 9.3 Permitted Transactions.
Notwithstanding anything to the contrary herein,
Landlord's consent shall not be required for any of the
following (collectively, "Permitted Transactions"):
(i) Any transfer by Tenant of any
interest under this Lease to any
corporation, partnership or other
entity which controls, is
controlled by, or is under common
control with the named Tenant
hereunder or its successors by
merger, consolidation or other
comparable transaction, the
primary purpose of which is not
the transfer of Tenant's interest
under this Lease.
(ii) Any transfer by Tenant of any
interest under this Lease to the
owner of a department store chain
with assets equal to or greater
than Tenant's.
(iii) Tenant may enter into concession
arrangements or license
agreements, or otherwise permit
the occupation and use of a
portion of the Premises by a
subtenant, licensee or
concessionaire, provided that the
areas covered by such licenses or
concession agreements do not
exceed usage in excess of twenty-five
percent (25%) of the Floor
Space of the Premises; provided,
however that all sales of
licensees or concessionaires shall
be included within Gross Sales as
defined in this Lease.
Section 9.4 Compliance with REA. Tenant
shall not assign its rights under this Lease or sublet
all or any portion of the Premises unless Tenant
complies, at Tenant's expense, with the provisions of
the REA applicable to such assignment or subletting.
Landlord agrees to cooperate, at no expense to
Landlord, with Tenant's efforts to obtain any consents
required under the REA and to otherwise comply with the
REA in connection with any proposed assignment or
sublease.
Section 9.5 Documentation and Expenses.
Each assignment or sublease shall be evidenced by an
instrument made in such written form as is satisfactory
to Landlord and executed by Tenant and the assignee or
subtenant. In the event of an assignment, the assignee
shall assume and promise to perform the terms,
covenants and conditions of this Lease which are
obligations of Tenant, from and after the date the
Assignee takes possession. Unless expressly released
by Landlord, in writing, Tenant shall remain fully
liable to perform its duties under this Lease following
any assignment of the Lease. Tenant shall, on demand
of Landlord, reimburse Landlord for Landlord's
reasonable costs, including attorneys' fees, incurred
in obtaining advice and preparing documentation for
each assignment or sublease, up to a maximum of $1,500
per transaction.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the following events
shall constitute a "Default" by Tenant under this
Lease:
(a) If Tenant shall fail to pay any Rent under this
Lease when the same shall become due and payable and
the failure shall continue for five (5) business days
after written notice (it being understood such period
shall run concurrently with any statutory notice
period); or
(b) If Tenant shall transfer Tenant's interest in
this Lease in contravention of Article IX hereof; or
(c) If Tenant shall fail to perform or observe any of
its obligations under this Lease (including, without
limitation, Tenant's failure to perform those
obligations under the REA expressly assumed by Tenant
in this Lease) other than those specified above in this
Section 10.1 and the failure shall continue for thirty
(30) days after notice, unless a shorter period of time
for such performance or observance is otherwise
expressly set forth in this Lease; provided, however,
that in the case of a Default which cannot with
reasonable diligence be remedied by Tenant within said
period of thirty (30) days, if Tenant proceeds as
promptly as may reasonably be possible after the
service of such notice and with all reasonable
diligence to remedy the Default and thereafter
prosecute the remedying of such Default with all
reasonable diligence, the period of time after the
giving of such notice within which to remedy the
Default shall be extended for such period as shall be
reasonably necessary to remedy the same with all
reasonable diligence;
(d) If the Premises are deemed abandoned pursuant to
California Civil Code Section 1951.3; or
(e) If an event of insolvency shall occur including:
(i) Tenant's making an
assignment for the benefit of creditors;
(ii) Tenant's failure generally
to pay its debts as they become due;
(iii) A material adverse change
in the financial condition of Tenant;
(iv) Tenant's filing, or
acquiescing to the filing of, a petition seeking
an order for relief against it in any state or
federal court in any bankruptcy, reorganization,
liquidation, composition, extension, arrangement
or insolvency proceeding;
(v) Tenant's making an
application for, or acquiescing to, the
appointment of a trustee, examiner or custodian
for it or all or any portion of its property;
(vi) Any petition being filed
against Tenant in any state or federal court
seeking reorganization or liquidation or
insolvency proceedings, and the proceedings shall
not be dismissed, discontinued or vacated within
ninety (90) days; or
(vii) Any trustee, examiner or
custodian being appointed for Tenant, or for all
or any portion of Tenant's property, and the
trustee, examiner, or custodian shall not be set
aside within ninety (90) days after such
appointment.
Section 10.2 Remedies. Upon the occurrence of a Default, and
in addition to any other rights or remedies available
to Landlord at law or in equity, Landlord shall have
the right to:
(a) terminate this Lease and all
rights of Tenant by giving Tenant written notice that
this Lease is terminated, in which case Landlord may
recover from Tenant the sum of :
(i) the worth at the time of award of any unpaid Rent
that had been earned at the time of termination.
(ii) the worth at the time of award of the amount by
which (A) the unpaid Rent that would have been earned
after termination until the time of award exceeds (B)
the amount of rental loss, if any, as Tenant
affirmatively proves could have been reasonably
avoided;
(iii) the worth at the time of award of the amount by
which (A) the unpaid Rent for the balance of the Term
after the time of award exceeds (B) the amount of
rental loss, if any, as Tenant affirmatively proves
could be reasonably avoided;
(iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations or that, in the
ordinary course of things, would be likely to result;
and
(v) all other amounts in addition to or in lieu of
those previously stated as may be provided from time to
time by California law; or
(b) continue this Lease, and from time
to time, without terminating this Lease, either (i)
recover all Rent and other amounts payable as they
become due or (ii) relet the Premises or any part of
the Premises on behalf of Tenant for any term, at any
rent, and pursuant to any other provisions as Landlord
deems advisable, all with the right, at Tenant's cost,
to make alterations and repairs to the Premises.
As used in clauses 10.2(a)(i) and 10.2(a)(ii) of
this Section, the worth at the time of award is
computed by allowing interest at the Interest Rate. As
used in clause 10.2(a)(iii) of this Section, the worth
at the time of award is computed by discounting that
amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent
(1%).
(c) Upon the occurrence of a Default,
Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises.
Landlord may cause property so removed from the
Premises to be stored in a public warehouse or
elsewhere at the expense and for the account of Tenant.
(d) None of the following remedial
actions, singly or in combination, shall be construed
as an election by Landlord to terminate this Lease
unless Landlord has in fact given Tenant written notice
that this Lease is terminated or unless a court of
competent jurisdiction decrees termination of this
Lease; any act by Landlord to maintain or preserve the
Premises; any efforts by Landlord to relet the
Premises; any re-entry, repossession, or reletting of
the Premises; or any reentry, repossession, or
reletting of the Premises by Landlord pursuant to this
Section. If Landlord takes any of the previous
remedial actions without terminating this Lease,
landlord may nevertheless at any time after taking any
remedial action terminate this lease by written notice
to Tenant.
(e) If Landlord relets the Premises,
Landlord shall apply the revenue as follows: first, to
the payment of any reasonable cost of reletting,
including without limitation finder's fees and leasing
commissions; and second, to the payment of Rent and
other amounts due and unpaid under this Lease.
Landlord shall hold and apply the residue, if any, to
payment of future amounts payable as they become due
and, to the extent the residue exceeds such amounts,
shall remit such excess to Tenant. Should revenue from
reletting during any month, after application pursuant
to the foregoing provisions, be less than the
reasonable cost of reletting and the Rent and other
amounts due and unpaid under this Lease, Tenant shall
pay the deficiency to Landlord promptly upon demand.
(f) After the occurrence of a Default,
Landlord, in addition to or in lieu of exercising other
remedies, may, but without any obligation to do so,
cure the breach underlying the Default for the account
and at the expense of Tenant; provided that Landlord by
prior notice shall first allow Tenant a reasonable
opportunity to cure, except in cases of emergency,
where Landlord may proceed without prior notice to
Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of
settlements, defense court costs, and attorney fees,
that Landlord may incur in the course of any such cure.
(g) No security, guaranty or security
interest granted for the performance of Tenant's
obligations, which Landlord may now or hereafter hold,
shall in any way constitute a bar or defense to any
action initiated by Landlord for unlawful detainer or
for the recovery of the Premises, for enforcement of
any obligation of Tenant, or for the recovery of
damages caused by a breach of this Lease by Tenant or
by a Default.
(h) Except as expressly provided in
this Lease to the contrary, no right or remedy
conferred upon or reserved to either party is intended
to be exclusive of any other right or remedy given now
or later or existing at law or in equity or by statute.
Except to the extent that either party may have
otherwise agreed in writing, no waiver by that party of
any violation or nonperformance by the other party of
any obligations, agreements, or covenants shall be
deemed to be a waiver of any subsequent violation or
nonperformance of the same or any other covenant,
agreement, or obligation, nor shall any forbearance by
either party to exercise a remedy for any violation or
nonperformance by the other party be deemed a waiver by
that party of rights or remedies with respect to that
violation or nonperformance.
(i) Landlord may require Tenant or any
trustee for Tenant under the United States Bankruptcy
Code (as amended, the "Bankruptcy Code") to cure
Tenant's Default and to provide adequate assurances of
future performance of this Lease as provided in Section
365(b)(3) of the Bankruptcy Code, including, without
limitation, adequate assurance that; (i) Rent will be
paid when due; (ii) there shall be no substantive
breach in the provisions of this Lease relating to the
Shopping Center including, without limitation, the
Permitted Use; and (iii) that there shall be no
disruption in any Tenant mix or Tenant balance in the
Shopping Center. If Tenant or the trustee does not
cure existing Defaults and provide such assurances of
future performance within sixty (60) days after there
has been an order for relief pursuant to the Bankruptcy
Code, this Lease shall be deemed rejected, and Landlord
shall have no further liability hereunder to Tenant or
any person claiming through or under Tenant and, if
Tenant or any such person is in possession. Tenant or
any such person shall forthwith quit and surrender the
premises to Landlord.
Section 10.3 Attorneys' Fees. In the event that either party
hereto commences an action related to this Lease, the
prevailing party shall be entitled to recover from the
other party all of its costs and expenses incurred
therein, including, without limitation, reasonable
attorneys' fees and disbursements. If either party
hereto is, without fault on its own part, made a party
to any action instituted by or against the other party
to this Lease due to such other party's fault, such
other party shall indemnify the party innocently
involved and defend and hold it harmless against and
from all such costs and expenses incurred therein
including, without limitation, reasonable attorneys'
fees and disbursements.
Section 10.4 Agreement to Arbitrate. Any controversy, dispute
or claim under, arising out of, in connection with or
in relation to this Lease, including but not limited to
the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or
enforceability of this Lease or any provision hereof
shall be determined by arbitration conducted in
accordance with the Commercial Arbitration Rules or
then existing rules for commercial arbitration of the
American Arbitration Association. The arbitration
shall additionally be governed by the California
Arbitration Act. The arbitration shall be conducted in
a location in San Bernardino County and shall be before
a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven
potential arbitrators provided by the American
Arbitration Association. If the parties cannot agree
on an arbitrator from this first list, the parties
hereto shall select an arbitrator for such arbitration
from a second list of seven potential arbitrators
provided by the American Arbitration Association with
each party alternately striking names, with the last
name remaining to be the arbitrator so selected. In
the event that either party seeks a temporary
restraining order, preliminary injunction or other
provisional relief, the provisions of Section 1281.8 of
the California Code of Civil Procedure shall apply.
The arbitration of such issues, including the
determination of any amount of damages suffered by any
party hereto by reason of the acts or omissions of any
party, shall be final and binding upon the parties to
the maximum extent permitted by law. Judgment upon any
award rendered by the arbitrator(s) may be entered by
any court having jurisdiction thereof. The parties
intend that this Article shall be valid, binding,
enforceable and irrevocable and shall survive the
termination of this Agreement. It is understood and
agreed that the terms of this Section 10.4 shall not
apply to a determination of Fair Market Rental Value,
which shall be determined pursuant to Section 12.3 of
this Lease.
Section 10.5 No Set-off/Counterclaims. Tenant shall pay all
Rent due hereunder, free of any charges, assessments,
impositions or deductions and without abatement,
deferral, reduction, set-off, counterclaim, defense or
deduction except as permitted under the express terms
of this Lease or the Asset Purchase Agreement. Tenant
shall not interpose any counterclaim(s) in any action
brought by Landlord based, in whole or in part, on
Tenant's failure to pay Rent; provided, however, that,
the foregoing to the contrary notwithstanding: (i)
Tenant may interpose any counterclaim deemed
"compulsory" under applicable court rules of civil
procedure; (ii) Tenant shall be permitted to bring a
separate action against Landlord based on any claim
which Tenant is prohibited by this Lease from asserting
as a set-off or counterclaim; and (iii) Tenant may
bring actions and assert defenses, setoffs and
counterclaims permitted to be brought or asserted
against Landlord in accordance with the terms of the
Asset Purchase Agreement.
Section 10.6 Right of Redemption. Tenant hereby waives, for
itself and all persons claiming by, through or under
Tenant, any right of redemption or for the restoration
of the operation of this Lease under any present or
future law in the event Landlord shall obtain
possession of the Premises.
Section 10.7 No Waiver. No receipt of monies by Landlord from
Tenant after the termination or cancellation of this
Lease in any lawful manner shall reinstate the Term of
this Lease, or operate as a waiver of the right of
Landlord to enforce the payment of Rent then due, or
operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action,
proceeding or remedy; it being agreed that, after the
termination or cancellation of this Lease, or after a
final order or judgment for the possession of the
Premises, Landlord may demand, receive and collect any
monies due, without in any manner affecting such
notice, proceeding, suit, action, order or judgment;
and any and all such monies collected shall be deemed
to be payment on account of the use and occupation or
Tenant's liability hereunder.
Section 10.8 Unperformed Covenants of Landlord May Be
Performed By Tenant. If Landlord shall fail to perform
any of the terms, provisions, covenants or conditions
to be performed or complied with by Landlord pursuant
to this Lease, or if Landlord should fail to make any
payment which Landlord agrees to make, and any such
failure shall, if it relates to a matter which is not
of any emergency nature, remain uncured for a period of
thirty (30) days after Tenant shall have served upon
Landlord notice of such failure, or for a period of
twenty-four (24) hours after service of such notice, if
in Tenant's judgment reasonably exercised such failure
related to a matter which is of an emergency nature,
then Tenant may at Tenant's option, at any time prior
to commencement of Landlord's acting to cure such
failure and thereafter if Landlord fails to diligently
perform the curing of such failure, perform any such
term, provision, covenant or condition or to make any
such payment, as Landlord's agent, and in Tenant's sole
discretion as to the necessity therefor, and Tenant
shall not be liable or responsible for any loss or
damage resulting to Landlord or anyone holding under
Landlord on account thereof. The full amount of the
cost and expense entailed, or payment so made, shall
immediately be owing and payable by Landlord to Tenant.
The option given in this Section is for the sole
protection of Tenant, and its existence shall not
release Landlord from the obligation to perform the
terms, provisions, covenants and conditions herein
provided to be performed by Landlord or deprive Tenant
of any legal rights which it may have by reason of any
such default by Landlord.
ARTICLE XI
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ARTICLE XII
OPTIONS
Section 12.1 Renewal Options. Contingent upon Tenant
satisfying all of the following conditions, and
provided that Tenant has not filed for protection under
the Federal Bankruptcy Laws at the time such option is
exercised, Tenant is hereby granted four (4) separate
options (each an "Option" and two or more,
collectively, the "Options") to extend the Term of this
Lease, each for an additional period of five (5) years
(each a "Renewal Term"), conditioned upon satisfaction
of the following requirements:
(a) No Default by Tenant shall have occurred and
remain uncured as of the date of Tenant's exercise of
its Option; and
(b) Tenant shall deliver written notice to Landlord
exercising the applicable Option not less than six (6)
full calendar months prior to the expiration of the
Term (as it may be extended by Tenant's exercise of any
Options).
Section 12.2 Lease Terms Applicable. In the event that Tenant
exercises one or more of the Options herein granted,
then all of the terms and provisions of this Lease as
are applicable during the initial Term shall likewise
be applicable during each of the applicable Renewal
Terms except that Minimum Annual Rent and Percentage
Rent payable by Tenant for each Renewal Term shall be
as set forth in Section 12.3 below.
Section 12.3 Rent During Renewal Terms.
(a) The Minimum Annual Rent (as defined in Section
4.1 of this Lease) which shall be due and payable
during the first Renewal Term, if exercised by Tenant,
shall be determined prior to the commencement of each
applicable Renewal Term and shall be equal to three
percent (3.0%) of the average of annual Gross Sales at
the Premises for the two (2) Lease Years preceding the
commencement of the applicable Renewal Term.
Percentage Rent for the first Renewal Term shall be
calculated in accordance with the terms of Section 4.2
of this Lease.
(b) Minimum Annual Rent and Percentage Rent
(including the formula for the calculation thereof) for
each of the second, third and fourth Renewal Terms, if
exercised by Tenant, shall be equal to the Fair Market
Rental Value of the Premises, each with respect to the
5-year term first day as of the commencement of the
applicable Renewal Term. The Fair Market Rental Value
of the Premises shall be based upon the rental amounts
paid by tenant-operators of department stores for
retail store space of substantially the same type, size
and quality as the Premises, and located in major
regional malls in San Bernardino County or Riverside
County. Within thirty (30) days following Landlord's
receipt of Tenant's written notice that it wishes to
exercise the applicable Option, Landlord shall deliver
to Tenant a written notice specifying Landlord's good
faith estimate of the Fair Market Rental Value for the
Premises for the applicable Renewal Term. Within
thirty (30) days following Tenant's receipt of
Landlord's good faith estimate of the Fair Market
Rental Value of the Premises, Tenant may deliver a
written notice to Landlord either setting forth
Tenant's good faith of Fair Market Rental Value, in
which case Landlord and Tenant will promptly meet and
attempt to agree in good faith upon the Fair Market
Rental Value, or agreeing to Landlord's estimate of
Fair Market Rental Value. If no agreement regarding
the applicable Fair Market Rental Value for the
Premises can be reached within fifteen (15) days after
Landlord's receipt of Tenant's estimate of Fair Market
Rental Value for the Premises, Tenant shall have ten
(10) days to cancel its exercise of the applicable
Option by delivering written notice to Landlord within
such 10-day period. If Tenant does not terminate its
exercise of the applicable Option within such 10-day
period, the Fair Market Rental Value of the Premises
for the applicable Renewal Term shall be determined in
accordance with the terms of Exhibit E.
Section 12.4 Lease Amendment. Following Tenant's exercise of
each Option and the determination of the Fair Market
Rental Value of the Premises for the applicable Renewal
Term, Landlord and Tenant will enter into an amendment
to this Lease confirming the extension of the Term of
this Lease in accordance with the terms hereof.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Notices.
(a) Any notice, demand, request, approval, consent or
other instrument (collectively, a "Notice") which may
be, or is required to be, given under this Lease shall
be in writing and given by hand or sent by United
States certified or registered mail, return receipt
requested, postage prepaid, or by an overnight
nationally recognized courier service, addressed to
Landlord at the address herein first given with a copy
to: McPeters McAlearny Shimoff & Hatt, 4 West Redlands
Boulevard, P.O. Box 2084, Redlands, CA 92373-0661
Attn: Thomas H. McPeters, Esq., or to such other
address as Landlord may from time to time designate to
Tenant by notice in accordance with this Section, and
to Tenant at the Premises and to Tenant's address
herein first given Attention: Law Department, or to
such other address as Tenant may from time to time
designate to Landlord by notice in accordance with this
Section. All Notices shall be deemed given or served
three (3) business days after the date of registration
or certification by the postal authorities, if mailed,
or upon receipt, if sent by overnight courier or
delivered in person.
(b) Any notice which may or shall be given under this
Lease by Landlord may be given by Landlord, by any
employee of Landlord, by any attorney representing
Landlord, by any management company operating the
Shopping Center on behalf of Landlord or any employee
of, or attorney retained by, said management company,
and all notices from any of the foregoing shall be as
effective as if given by Landlord itself.
(c) Any Notice with respect to any assignment,
alleged default, termination or other material issue
given to Landlord shall also be given to each mortgagee
of Landlord's interest in the Shopping Center, the name
and address of which mortgagee Landlord has previously
given Tenant written notice.
Section 13.2 Brokers. Landlord and Tenant each warrants and
represents to the other party hereto that it has not
dealt with any broker in negotiating or consummating
this Lease, and Landlord and Tenant each hereby agrees
to indemnify, defend and hold harmless the other party
hereto against and from any and all claims losses or
liabilities as a result of any inaccuracy in the
foregoing representation. This Section shall survive
the Term of this Lease.
Section 13.3 Subordination of Lease.
(a) This Lease is subordinate to the lien of all
mortgages, deeds of trust and security instruments
(collectively, "Mortgages"), and to all ground leases,
easement agreements and operating agreements now
covering or affecting all or any part of the Shopping
Center, including, without limitation, the REA, and to
all modifications, consolidations, renewals,
replacements and extensions of any of the foregoing.
Landlord hereby represents and warrants that there are
no Mortgages in effect with respect to the Shopping
Center or the Premises except as specifically set forth
in Exhibit G attached hereto and made a part hereof,
nor are there any REAs affecting the Shopping Center or
Tenant's rights under this Lease except as set forth in
Exhibit D attached hereto and made a part hereof.
Landlord shall exercise best efforts to obtain from
each mortgagee under a Mortgage listed on Exhibit G a
nondisturbance agreement in the form of the "SNDA"
attached to the Asset Purchase Agreement.
(b) Subject to the terms of any nondisturbance
agreement entered into by Tenant, should any mortgagee
under a Mortgage succeed to Landlord's interest in this
Lease, Tenant shall, upon demand, attorn to and
recognize such mortgagee as Landlord under this Lease.
In the event of a sale or assignment of Landlord's
interest in this Lease or the Premises, Tenant shall
attorn to and recognize such purchaser or assignee as
Landlord under this Lease without further act by
Landlord or such purchaser or assignee.
Section 13.4 Unavoidable Delays. In the event that either
party shall be delayed or hindered in, or prevented
from, the performance of any work, service or other act
required under this Lease to be performed by such party
and such delay or hindrance is due to: (i) strikes,
lockouts, or other labor disputes; (ii) inability to
obtain labor or materials or reasonable substitutes
therefor; or, (iii) acts of God, governmental
restrictions, enemy act, civil commotion, unavoidable
fire or other casualty, or other causes of a like
nature beyond the control of the party so delayed or
hindered (collectively, "Unavoidable Delays"), then
performance of such work, service or other act shall be
excused for the period of such delay and the period for
the performance of such work, service or other act
shall be extended by a period equivalent to the period
of such delay. In no event shall any such delay
constitute a termination or extension of this Lease.
The provisions of this Section shall not operate to
excuse Tenant from the timely payment of Rent.
Section 13.5 Estoppel Certificates. Upon ten (10) business
days prior written request therefor by Landlord or
Tenant from time to time, each party agrees to execute
and to deliver to the requesting party, or to such
other addressee or addressees as the requesting party
may designate, a written statement certifying that:
(i) this Lease is in full force and effect and
unmodified, or describing any modification; (ii) that
there are no defenses or offsets against the
enforcement of this Lease, or stating with
particularity defenses or offsets claimed; stating the
date to which Rent has been paid; and (iv) stating the
Term Commencement Date and the date this Lease expires.
Section 13.6 Relationship of Parties. Nothing contained in
this Lease shall be deemed or construed as creating the
relationship of principal and agent or of partnership
or of joint venture between the parties hereto, it
being understood and agreed that neither the method of
computing Rent nor any other provision contained herein
nor any acts of the parties hereto shall be deemed to
create any relationship between the parties other than
that of Landlord and Tenant.
Section 13.7 Governing Law; Jurisdiction.
(a) Governing Law. This Lease, the legal relations
between the parties and any Action (defined below),
whether contractual or non-contractual, instituted by
any party with respect to matters arising under or
growing out of or in connection with or in respect of
this Lease, including but not limited to the
negotiation, execution, interpretation, coverage,
scope, performance, breach, termination, validity, or
enforceability of this Lease, shall be governed by and
construed in accordance with the laws of the State of
California applicable to contracts made and performed
in such State and without regard to conflicts of law
doctrines, except to the extent that certain matters
are preempted by federal law or are governed as a
matter of controlling law by the law of the
jurisdiction of incorporation of the Tenant.
(b) Jurisdiction. Each party hereby irrevocably
submits to and accepts for itself and its properties,
generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the
laws of the State of California and the rules of its
courts, waives any defense of forum non conveniens and
agrees to be bound by any judgment rendered thereby
arising under or out of in respect of or in connection
with this Lease or any related document or obligation.
Each party further irrevocably designates and appoints
the individual identified in or pursuant to Section
13.1 hereof to receive notices on its behalf, as its
agent to receive on its behalf service of all process
in any such Action before any body, such service being
hereby acknowledged to be effective and binding service
in every respect. A copy of any such process so served
shall be mailed by registered mail to each party at its
address provided in Section 13.1; provided that, unless
otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of the
service of such process. If any agent so appointed
refuses to accept service, the designating party hereby
agrees that service of process sufficient for personal
jurisdiction in any action against it in the applicable
jurisdiction may be made by registered or certified
mail, return receipt requested, to its address provided
in Section 13.1. Each party hereby acknowledges that
such service shall be effective and binding in every
respect. Nothing herein shall affect the right to
serve process in any other manner permitted by
applicable law.
(c) As used in this Section 13.7, "Action" shall mean
any action, complaint, petition, investigation suit or
other proceeding before any arbitrator or any other
governing body or entity having appropriate
jurisdiction.
Section 13.8 Interpretation. The neuter, feminine or
masculine pronoun when used herein shall each include
each of the other genders and the use of the singular
shall include the plural. In the event of any conflict
between the terms of this Lease, and the terms of the
Asset Purchase Agreement (including any related
agreements entered into by Landlord and Tenant), the
terms of the Asset Purchase Agreement shall prevail
over any contrary term of this Lease.
Section 13.9 Captions. The captions of Articles and Sections
contained in this Lease are for convenient reference
only and shall not be deemed or construed as in any
manner limiting or amplifying the terms and provisions
hereof.
Section 13.10 Partial Invalidity. If any term or provision of
this Lease, or the application thereof to any person or
circumstance, shall to any extent be determined to be
invalid or unenforceable by a court of competent
jurisdiction, then the remainder of this Lease, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby.
Section 13.11 Waivers. The waiver by Landlord of any breach of
any term, covenant or condition contained in this Lease
shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of
the same or any other term, covenant or condition
contained in this Lease. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease or of any right of
Landlord to a forfeiture of the Lease by reason of such
breach, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such
Rent. No term, covenant or condition of this Lease
shall be deemed to have been waived by Landlord unless
such waiver be in writing and signed by Landlord.
Section 13.12 Accord and Satisfaction. No payment by Tenant,
or receipt by Landlord, of a lesser amount than the
Rent payment due under this Lease shall be deemed or
construed to be other than a payment or receipt on
account of the earliest Rent due. Neither the
endorsement or statement on any check nor the receipt
or negotiation of any such check by Landlord, shall be
deemed or construed to be an accord and satisfaction.
Section 13.13 Counterparts. This Lease may be executed in
several counterparts, each of which shall be deemed an
original and all of which shall together constitute one
and the same instrument.
Section 13.14 Entire Agreement. This Lease and the Asset
Purchase Agreement incorporate all undertakings between
the parties hereto with respect to Tenant's lease of
the Premises. Tenant hereby acknowledges that neither
Landlord nor Landlord's employees, agents or
contractors have made any representations or promises
to Tenant with regard to the Premises or the Shopping
Center or this Lease that have not been expressly
stated in this Lease and, therefore, Tenant hereby
waives any and all claims against, or liability of,
Landlord and Landlord's employees, agents, and
contractors based thereon. Landlord hereby
acknowledges that Tenant and its employees and officers
have made no representations or promises with regard to
Tenant's operations, sales figures or methods of doing
business or any other matter except as expressly
contained in this Lease, and Landlord, therefore,
hereby waives any claim with respect thereto or based
thereon.
Section 13.15 Successors and Assigns. This Lease and each of
the terms and conditions hereof shall inure to the
benefit of, and be binding upon, Landlord, and
Landlord's heirs, executors, administrators, successors
and assigns. This Lease and each of the terms and
conditions hereof shall also be binding upon Tenant,
and Tenant's heirs, executors, administrators,
successors and assigns and shall inure to the benefit
of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been made and consented to in
accordance with the provisions of Article IX of this
Lease.
Section 13.16 Survival of Obligations. All obligations of each
party which by their nature involve performance after
the end of the Term, or which cannot be ascertained or
have been fully performed until after the end of the
Term, shall survive the expiration or earlier
termination of this Lease.
Section 13.17 Submission of Lease. Submission of this Lease by
one party to the other for examination or execution
does not constitute an offer made, or an option
granted, to enter into this Lease.
Section 13.18 Memorandum of Lease. Landlord and Tenant agree
to execute a memorandum of this Lease, which memorandum
shall be substantially in the form attached hereto as
Exhibit F and shall be recorded in the applicable real
property records as soon as possible after the date of
this Lease.
Section 13.19 Attachments. Attached hereto and made a part of
this Lease are the following: Exhibits A-G, inclusive.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Lease as of the date first above written.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATION DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
LEGAL DESCRIPTION OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DETERMINATION OF FAIR MARKET RENTAL VALUE
1. Efforts to Agree Upon Fair Market Rental Value.
If pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined with
respect to any Renewal Term, Landlord and Tenant
shall promptly commence negotiation to reach
agreement on Fair Market Rental Value for the
applicable Renewal Term. If Landlord and Tenant
are unable to reach agreement on Fair Market
Rental Value within the time period provided in
the Lease and the parties wish to proceed with a
method of resolving the disagreement regarding
Fair Market Rental Value, the terms of Section 2
below shall apply.
2. Arbitration Regarding Fair Market Rental Value.
(a) If Landlord and Tenant are to proceed with
the method of determining Fair Market
Rental Value under this Exhibit E, then
within ten (10) days of the date either
Landlord or Tenant delivers written notice
to the other party hereto confirming that,
pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined in
accordance with the terms of Exhibit E,
Landlord and Tenant shall each
simultaneously submit to the other in a
sealed envelope its good faith estimate of
Fair Market Rental Value. If the higher of
such estimates is not more than one hundred
five percent (105%) of the lower of such
estimates, then Fair Market Rental Value
shall be the average of the two estimates.
If one party ("Refusing Party") refuses to
simultaneously submit such estimate to the
other party ("Other") within such 10-day
period, then the Other may notify the
Refusing Party of the Other's willingness
to make such simultaneous submittal. If
the Refusing Party fails to make such
simultaneous submittal within five (5)
business days thereafter, the other party's
good faith estimate of Fair Market Rental
Value shall be Fair Market Rental Value.
(b) If the higher of the estimates is more than
one hundred five percent (105%) of the
lower of such estimates, then either
Landlord or Tenant may, by written notice
to the other at any time within ten (10)
days following the exchange of estimates,
require that the disagreement be resolved
by arbitration. Within seven (7) days
after such notice, the parties shall select
as an arbitrator a mutually acceptable
independent MAI appraiser with experience
in real estate activities, including at
least ten (10) years experience in
appraising anchor store retail space in
major regional shopping malls. If the
parties cannot agree on an appraiser within
such seven (7) day period, then within a
second period of seven (7) days, each shall
select and inform the other party of an
independent MAI appraiser meeting the
aforementioned criteria and within a third
period of seven (7) days, the two
appraisers shall select a panel of three
additional appraiser meeting the
aforementioned criteria and the three
appraisers shall determine Fair Market
Rental Value pursuant to this Exhibit E by
majority vote of such three appraisers.
Both Landlord and Tenant shall be entitled
to present evidence supporting their
respective positions to the panel of three
appraisers. If one party shall fail to
make such appointment within said second
seven (7) day period, then the appraiser
chosen by the other party shall be the sole
arbitrator, who shall determine Fair Market
Rental Value pursuant to this Exhibit E.
(c) Once the arbitrators have been selected as
provided above, then, as soon thereafter as
practicable but in any case within fourteen
(14) days, the arbitrators shall select one
of the two estimates of Fair Market Rental
Value submitted by Landlord and Tenant,
which must be the one that is closer to
Fair Market Rental Value as determined by
the majority of the arbitrators. The
arbitrators' selection shall be binding
upon Landlord and Tenant. The party whose
estimate is not chosen by the arbitrators
shall pay the costs of the arbitrators and
any experts retained by the arbitrators.
Any fees of any counsel or expert engaged
directly by Landlord or Tenant, however,
shall be borne by the party retaining such
counsel or expert.
EXHIBIT F
FORM OF MEMORANDUM OF LEASE
Recording Requested By And
When Recorded Return To:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93720
Attention: General Counsel
______________________________________________________________________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this
"Memorandum"), dated as of August 20, 1998, is entered
into by and between El Corte Ingles, S.A., a Spanish
corporation ("Landlord"), and Gottschalks Inc., a
Delaware corporation ("Tenant"). Landlord and Tenant
have entered into that certain Store Lease Agreement
dated as of August 20, 1998 (the "Store Lease"),
pursuant to which Landlord demised and leased to Tenant
and Tenant hired from Landlord the Premises as more
particularly described in the Lease (the "Premises"),
which Premises are located on the real property
described in Exhibit A attached hereto and made a part
hereof.
LANDLORD AND TENANT AGREE AS FOLLOWS:
1. For and in consideration of the
rental reserved and of the mutual covenants, agreements
and conditions set forth in that certain Store Lease,
Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord, upon all terms and
conditions set forth in the Store Lease, the Premises.
The primary term of the Lease is ten (10) years
commencing on August 20, 1998 and expiring on August 20,
2007.
2. On the terms and conditions more
specifically set forth in the Store Lease, Tenant has
certain fixed rights to renew the Term of the Lease as
more specifically set forth therein. Specifically,
Tenant has been granted four separate options to renew
the Term of the Lease, each for an additional period of
five (5) years.
3. This Memorandum has been prepared
to provide notice that the Premises are subject to the
terms and conditions of the Store Lease, which terms
are hereby incorporated into this Memorandum by this
reference. In no event shall the terms of this
Memorandum be deemed to modify, amend, limit or
otherwise affect the terms and conditions of the Store
Lease. In the event of any inconsistency between the
terms of this Memorandum and the terms of the Store
Lease, the terms of the Store Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Memorandum as of the date first written
above.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMAELTTE
Its: PRESIDENT
EXHIBIT A
Description of Real Property
EXHIBIT G
SCHEDULE OF EXISTING MORTGAGES
A. Current preliminary title report:
Title Company:
Date of report:
Order No.:
B. Existing Mortgages:
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES, S.A.,
as "Landlord"
and
GOTTSCHALKS INC.,
as "Tenant"
Dated as of August 20, 1998
Moreno Valley Mall at Towngate
Moreno Valley, California
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS. . 1
Section 1.1 Definitions. . . . . . . . 1
Section 1.2 Effect of Basic Terms. . . 5
ARTICLE II
GRANT AND TERM . . . . . . 6
Section 2.1 Grant and Term of Lease. . 6
Section 2.2 Acceptance of Premises; Quiet
Enjoyment. . . . . . . . 6
Section 2.3 Surrender of Premises. . . 6
Section 2.4 Holding Over.. . . . . . . 7
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT 7
Section 3.1 Lease Controls Over REA. . 7
Section 3.2 Covenants Regarding REA. . 7
ARTICLE IV
RENT AND OTHER CHARGES . . . . 8
Section 4.1 Minimum Annual Rent. . . . 8
Section 4.2 Percentage Rent. . . . . . 8
Section 4.3 Utilities Charge . . . . . 10
Section 4.4 Common Area Maintenance Costs 10
Section 4.5 Taxes. . . . . . . . . . . 10
Section 4.6 Late Payment Charges . . . 11
Section 4.7 Rent Payments. . . . . . . 12
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 12
Section 5.1 Permitted Use. . . . . . . 12
Section 5.2 Signs. . . . . . . . . . . 12
Section 5.3 Alterations of Premises. . 12
Section 5.4 Use of Common Areas. . . . 14
Section 5.5 Compliance with REA. . . . 15
Section 5.6 Compliance with Requirements 15
Section 5.7 Liens. . . . . . . . . . . 16
ARTICLE VI
REPAIRS AND MAINTENANCE. . . . 16
Section 6.1 Tenant's Obligations . . . 16
Section 6.2 Landlord's Obligations . . 18
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION. 18
Section 7.1 Damage or Destruction. . . 18
Section 7.2 Condemnation . . . . . . . 19
ARTICLE VIII
INSURANCE . . . . . . . 21
Section 8.1 Tenant's Insurance . . . . 21
Section 8.2 Landlord's Insurance . . . 22
Section 8.3 Waiver of Subrogation. . . 23
Section 8.4 Governmental and Insurance
Requirements . . . . . . 23
Section 8.5 Indemnification. . . . . . 24
Section 8.6 Landlord Exculpation . . . 24
ARTICLE IX
ASSIGNMENT AND SUBLETTING . . . 25
Section 9.1 Notice to Landlord . . . . 25
Section 9.2 Landlord's Approval. . . . 25
Section 9.3 Permitted Transactions . . 26
Section 9.4 Compliance with REA. . . . 26
Section 9.5 Documentation and Expenses 26
ARTICLE X
DEFAULT. . . . . . . . 27
Section 10.1 Events of Default. . . . . 27
Section 10.2 Remedies . . . . . . . . . 28
Section 10.3 Attorneys' Fees. . . . . . 30
Section 10.4 Agreement to Arbitrate . . 30
Section 10.5 No Set-off/Counterclaims . 31
Section 10.6 Right of Redemption. . . . 31
Section 10.7 No Waiver. . . . . . . . . 31
Section 10.8 Unperformed Covenants of
Landlord May Be Performed By
Tenant . . . . . . . . . . 31
ARTICLE XI
[INTENTIONALLY OMITTED]. . . . 32
ARTICLE XII
OPTIONS. . . . . . . . 32
Section 12.1 Renewal Options. . . . . . 32
Section 12.2 Lease Terms Applicable . . 32
Section 12.3 Rent During Renewal Terms. 33
Section 12.4 Lease Amendment. . . . . . 33
ARTICLE XIII
MISCELLANEOUS PROVISIONS. . . . 34
Section 13.1 Notices. . . . . . . . . . 34
Section 13.2 Brokers. . . . . . . . . . 34
Section 13.3 Subordination of Lease . . 34
Section 13.4 Unavoidable Delays . . . . 35
Section 13.5 Estoppel Certificates. . . 35
Section 13.6 Relationship of Parties. . 35
Section 13.7 Governing Law; Jurisdiction 36
Section 13.8 Interpretation . . . . . . 36
Section 13.9 Captions . . . . . . . . . 37
Section 13.10 Partial Invalidity . . . . 37
Section 13.11 Waivers. . . . . . . . . . 37
Section 13.12 Accord and Satisfaction. . 37
Section 13.13 Counterparts . . . . . . . 37
Section 13.14 Entire Agreement . . . . . 37
Section 13.15 Successors and Assigns . . 37
Section 13.16 Survival of Obligations. . 38
Section 13.17 Submission of Lease. . . . 38
Section 13.18 Memorandum of Lease. . . . 38
Section 13.19 Attachments. . . . . . . . 38
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER. B-1
EXHIBIT C LEGAL DESCRIPTION OF PREMISES C-1
EXHIBIT D SCHEDULE OF REA AND RELATED AGREEMENTS D-1
EXHIBIT E DETERMINATION OF FAIR MARKET RENTAL VALUE E-1
EXHIBIT F FORM OF MEMORANDUM OF LEASE . G-1
EXHIBIT G SCHEDULE OF EXISTING MORTGAGES H-1
STORE LEASE AGREEMENT
Moreno Valley Mall at Towngate
Moreno Valley, California
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of this 20th day of August, 1998, by and
between EL CORTE INGLES, S.A., a Spanish corporation,
having an address at Hermosilla, 112, 28009 Madrid
SPAIN, Attention: Mr. Jorge Pont ("Landlord"), and
GOTTSCHALKS INC., a Delaware corporation, having an
address at 7 River Park Place East, Fresno, California
93720, Attention: General Counsel ("Tenant").
R E C I T A L S
A. Landlord, Tenant and Harris
(defined below) are parties to that certain Asset
Purchase Agreement (defined below). Prior to the date
hereof, Harris leased the Premises (defined below) from
Landlord. Pursuant to the Asset Purchase Agreement,
Tenant is to purchase certain assets of Harris. The
Asset Purchase Agreement requires Landlord to terminate
Harris' lease and enter into this Lease with Tenant.
B. Concurrently with execution of this
Lease, Landlord has terminated Harris' lease. Landlord
now desires to lease to Tenant, and Tenant desires to
lease from Landlord, the Premises on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the
foregoing Recitals, the receipt and sufficiency of
which is hereby acknowledged by each party as of the
time of execution and delivery hereof, and in further
consideration of the rents reserved and the covenants
and conditions set forth herein, Landlord and Tenant
agree as follows:
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS
Section 1.1 Definitions. As used in this
Lease, the following Terms shall have the meanings set
forth below:
"Alterations" shall have the
meaning ascribed thereto in Section 5.3.
"Annual Report" shall have the
meaning ascribed thereto in Section 4.2(b).
"Asset Purchase Agreement":
That certain Asset Purchase Agreement dated as of July
21, 1998, by and among Tenant, as Buyer, Harris, as
Seller, and Landlord, in its capacity as the sole
shareholder of Harris, together with all other
agreements and documents entered into by Landlord and
Tenant in connection therewith.
"Common Areas": The parking
areas, sidewalks, landscaped areas, courts, malls,
roofs, streets, roadways, loading platforms, service
area, curbs, corridors, stairways, elevators,
escalators, comfort stations, lounges and shelters and
all other facilities designated as "Common Area" under
the REA.
"Default" shall have the
meaning ascribed thereto in Section 10.1.
"Developer" shall mean the
Person responsible for managing and maintaining the
Common Areas under the REA.
"Fair Market Rental Value"
shall mean the fair market rental value of the
Premises, as of the date and for the time period of
determination, to be determined in accordance with the
terms of Article XII and, as necessary, Exhibit E
attached hereto and made a part hereof.
"Floor Area" shall have the
meaning given such term in the REA.
"Gross Sales" shall mean the
gross selling price of all merchandise or services sold
in or from the Premises by Tenant, its subtenants,
licensees or concessionaires, whether for cash or on
credit, adjusted by excluding the following:
(i) Any exchange of merchandise between
stores owned by or affiliated with
Tenant where such exchange is made
solely for the convenient operation
of Tenant's business and not for
the purpose of consummating a sale
made in, at or from the Premises,
or for the purpose of depriving
Landlord of the benefit of a sale
which would otherwise be made in or
at the Premises;
(ii) Returns to shippers or
manufacturers;
(iii) Cash or credit refunds to customers
on transactions (not to exceed the
actual selling price of the item
returned) otherwise included in
Monthly Gross Sales, including,
without limitation, (a) sums and
credits received in the settlement
of claims for loss of or damage to
merchandise, to the extent
previously reported as part of
Gross Sales and (b) the price
allowed on all merchandise traded
in by customers for credit or the
amount of credit for discounts and
allowances made in lieu of
acceptance thereof, but not
including any amount paid or
payable for what are commonly
referred to as trading stamps;
(iv) Sales of fixtures, machinery,
equipment or property which are not
stock in trade;
(v) Amounts collected and paid by
Tenant to any government for any
sales, excise, luxury, gross
receipts taxes or other similar
taxes now or hereafter imposed upon
the sales of merchandise or
services;
(vi) The amount of any discount on sales
to employees;
(vii) Alteration workroom charges and
delivery charges;
(viii) Interest, service or sales carrying
charges or other charges, however
denominated, paid by customers for
extension of credit on sales and
where not included in the
merchandise sales price;
(ix) Receipts from public telephones,
stamp machines, public toilet locks
or vending machines installed
solely for use by Tenant's
employees; and
(x) Gift certificates, or like
vouchers, until such time as the
same shall have been converted into
a sale by redemption.
"Harris" means The Harris
Company, a California corporation, a wholly-owned
subsidiary of Landlord.
"Imposition" shall have the
meaning ascribed thereto in Section 4.5.
"Initial Term": The initial
10-year Term of this Lease.
"Interest Rate": The rate of
interest per annum equal to the lesser of: (i) the
highest lawful rate of interest that Tenant may be
charged; or (ii) the "prime rate" announced from time
to time by Chase Manhattan Bank, N.A., New York, New
York, for short-term, unsecured loans to its most
credit-worthy customers. In the event Chase Manhattan
Bank, N.A. shall discontinue reporting its "prime rate"
or shall cease to exist, Landlord shall select a
substitute bank, and the "prime rate" reported by such
bank shall be used for computing interest payable
hereunder.
"Lease Year": A period of
twelve (12) consecutive full calendar months,
commencing as of the day after the Saturday which is
closest (by number of days) to January 31 and ending on
the Saturday which is closest (by number of days) to
January 31 of the following calendar year. The first
Lease Year shall be the period commencing on the Term
Commencement Date and ending on January 30, 1999. The
final Lease Year shall be the period commencing on the
day after the Saturday which is closest (by number of
days) to January 31st of the calendar year in which the
Lease Term (as it may be extended) expires and ending
on the expiration date of the Lease Term. It is
acknowledged that this definition of Lease Year is
intended to coincide with Tenant's fiscal year.
"Major" shall mean each of the
parties to the REA, as more particularly set forth in
Exhibit D attached hereto and made a part hereof.
"Minimum Annual Rent" shall
have the meaning ascribed thereto in Section 4.1.
"Mortgages" shall have the
meaning ascribed thereto in Section 13.3.
"Notice" shall have the meaning
ascribed thereto in Section 13.1(a).
"Option(s)" shall have the
meaning ascribed thereto in Article XII.
"Percentage Rent" shall have
the meaning ascribed thereto in Section 4.2(a).
"Permitted Use" shall mean any
lawful use which complies with the REA and is not
prohibited for the Premises by the REA.
"Person" means any individual,
partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint
venture, governmental authority or other entity of
whatever nature.
"Premises": That certain real
property and improvements thereon described in Exhibit
C attached hereto and made a part hereof.
"Prohibited Use" shall mean any
use which is prohibited for the Premises by the REA.
"REA" shall mean that certain
Construction, Operation and Reciprocal Easement
Agreement and each of the other documents related
thereto, as more particularly described in Exhibit D
attached hereto and made a part hereof, all as the same
may be amended or modified from time to time.
"Renewal Term(s)" shall have
the meaning ascribed thereto in Article XII.
"Rent": Minimum Annual Rent,
Percentage Rent, utilities charges, Impositions,
insurance costs and all other amounts and charges
payable by Tenant under any provision of this Lease.
"Requirements" shall mean all
federal, state and local statutes, laws, ordinances,
rules, regulations, authorizations and requirements
relating to the Premises or the use thereof, including,
without limitation, planning, zoning, subdivision,
environmental, toxic and hazardous waste, health, fire
safety and handicap access and all encumbrances,
covenants, conditions and restrictions, violation of
which encumbrances, covenants, conditions and
restrictions could either create a lien or result in a
termination of any agreement beneficial to the use or
manner of use of the Premises or any portion thereof.
"Shopping Center": The land
and improvements known as "Moreno Valley Mall at
Towngate", with a street address of 22650 Towngate
Circle, in the City of Moreno Valley, County of
Riverside, and State of California, more particularly
described in Exhibit A attached hereto and made a part
hereof and depicted on the site plan attached hereto as
Exhibit B and made a part hereof.
"Taking" shall have the meaning
ascribed thereto in Section 7.2(a).
"Tenant's Employees and
Invitees" shall have the meaning ascribed thereto in
Section 5.4.
"Term": The 10-year period
commencing on the Term Commencement Date and expiring
on August 20, 2008, as such term may be extended or
shortened pursuant to the terms hereof, including,
without limitation, as it may be extended for the
period of any Renewal Term(s).
"Term Commencement Date":
August 20, 1998.
"Unavoidable Delays" shall have
the meaning ascribed thereto in Section 13.4.
Section 1.2 Effect of Basic Terms. Each of
the foregoing definitions and basic provisions is set
forth in this Article I for convenient reference only
and shall be construed in conjunction with, and limited
by, references thereto in other provisions of this
Lease.
ARTICLE II
GRANT AND TERM
Section 2.1 Grant and Term of Lease.
(a) Landlord does hereby let and
lease to Tenant the Premises, together with all right
to use the Common Areas for the Term, subject to the
terms and conditions set forth in this Lease.
(b) Landlord reserves the right to
enter the Premises at any time in case of emergency and
at all other reasonable times and upon reasonable
advance notice (i) to inspect the condition of the
Premises; and (ii) to make repairs to the building in
which the Premises are located, to the extent Landlord
is required to do so, or is otherwise permitted to do
so, pursuant to the terms of this Lease.
Section 2.2 Acceptance of Premises; Quiet
Enjoyment.
(a) Acceptance of Premises. Tenant
accepts the Premises "as-is," but subject to the
express representations, warranties and covenants of
Landlord set forth in the Asset Purchase Agreement and
in this Lease.
(b) Quiet Enjoyment. Landlord
covenants that Tenant, upon paying the Rent and
performing and observing all other terms and conditions
of this Lease to be performed or observed by Tenant,
shall peacefully and quietly have, hold and enjoy the
Premises and the appurtenances thereto throughout the
Term without hindrance, ejection or molestation by
Landlord or any other person or entity lawfully
claiming through Landlord or claiming paramount title
to Landlord, subject only to the terms of this Lease,
the REA and any Mortgage or ground lease to which this
Lease is subordinate.
Section 2.3 Surrender of Premises. Upon
the expiration or earlier termination of the Term,
Tenant shall deliver up and surrender to Landlord
possession of the Premises, including all alterations,
additions, improvements and fixtures, other than
Tenant's trade fixtures, in good order, condition and
state of repair, ordinary wear and tear excepted, and
shall deliver all keys to the Premises to the office of
Landlord at the Shopping Center or as otherwise
directed by Landlord. Tenant shall have fifteen (15)
days after the date the Term of this Lease expires or
earlier terminates to remove its personal property and
trade fixtures; provided, however, that (a) Tenant
shall repair all damage to the Premises resulting from
or arising out of such removal, (b) during such period
Tenant shall perform and be liable for all obligations
and conditions imposed on Tenant hereunder except for
the payment of Rent, including, without limitation,
maintenance, repair, apportionment of taxes,
maintenance of insurance, compliance with Requirements
and assumption of liability for the Premises. The
obligations set forth in the preceding sentence shall
survive the termination of this Lease. Any property of
Tenant not removed from the Premises within such
fifteen (15) day period shall be deemed abandoned. In
addition to all other remedies available, Landlord may,
but shall not be obligated to, retain or dispose of any
or all such property without liability to Tenant. In
the event that Landlord elects to dispose of such
property, Landlord shall so notify Tenant, and Tenant
shall, no later than ten (10) days after such notice,
remove all such property from the Premises; provided,
however, that if Tenant fails to so remove such
property, then Landlord may do so, and Tenant shall pay
to Landlord, on demand, all costs and expenses incurred
by Landlord in disposing of such property, including,
without limitation, reasonable attorneys' fees and
disbursements, together with interest thereon, calcu-
lated at the Interest Rate, from the date Landlord ex-
pended such amounts.
Section 2.4 Holding Over. If not sooner
terminated, this Lease shall end on the date set forth
in the definition of "Term" in Section 1.1 without the
necessity of notice from either Landlord or Tenant to
terminate this Lease, Tenant hereby waiving notice to
vacate the Premises. If Tenant, or any party claiming
under Tenant, including, without limitation,
subtenants, licensees or concessionaires, remains in
possession of the Premises or any part thereof after
the expiration or termination of this Lease, no tenancy
or interest in the Premises shall result therefrom but
such holding over shall, at Landlord's option, be
deemed a month-to-month tenancy and, otherwise, shall
be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal. As
Landlord's sole remedy for such holding over, Tenant
shall pay to Landlord for any full or partial month
Tenant holds over in the Premises after the expiration
or termination of this Lease a sum equal to one hundred
fifty percent (150%) of the Minimum Annual Rent and
Percentage Rent paid or payable by Tenant under this
Lease with respect to the last full month of the Lease
Term.
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT
Section 3.1 Lease Controls Over REA. As
between Landlord and Tenant, the terms and provisions
of this Lease shall control notwithstanding any
conflict with the provisions of the REA. Tenant shall
be fully liable for the performance of all obligations
under the REA in accordance with all of the terms and
provisions thereof, to the extent that Tenant has
expressly assumed responsibility for the performance of
any such obligations under the terms of this Lease.
Landlord is and shall remain fully liable for the
performance of all of Landlord's obligations under the
REA in accordance with all of the terms and provisions
thereof, to the extent that Tenant has not expressly
assumed responsibility for the performance of such
obligations under the terms of this Lease.
Section 3.2 Covenants Regarding REA.
Landlord will fully and faithfully carry out and
perform the terms, covenants, provisions and conditions
of the REA to be performed by the Landlord. Tenant
will fully and faithfully carry out and perform the
terms, covenants, provisions and conditions of the REA
which, under the express terms of this Lease, are to be
performed by the Tenant. Landlord will exert its best
efforts in exercising all of Landlord's rights and
remedies under the REA to enforce performance of all
terms, covenants, provisions, and conditions of the
REA; and Landlord will not take any of the actions
requiring Landlord's approval thereunder, without first
having delivered to Tenant a copy of the request for
approval and any documentation or material as to which
such approval is requested or required and thereafter
obtained Tenant's written approval thereof, which
approval shall not be unreasonably withheld,
conditioned or delayed. Landlord will not enter into
any agreement amending, supplementing or cancelling the
REA without first obtaining Tenant's prior written
approval thereto, which approval shall not be
unreasonably withheld, conditioned or delayed.
Landlord hereby appoints Tenant as Landlord's true and
lawful attorney-in-fact to take in Landlord's name
whatever reasonable action Tenant may deem appropriate
to enforce performance of the terms of the REA and to
avail itself on Landlord's behalf of any remedy therein
granted Landlord in the event (i) Tenant shall notify
Landlord that the obligations under the REA are not
being properly performed and (ii) Landlord shall fail
to take action to Tenant's reasonable satisfaction
within a reasonable time after receiving notice
thereof.
It is the intent of the parties to this Lease
that this Lease and the REA are and shall remain
mutually dependent and co-existent documents. Tenant
shall have the right (in its sole and absolute
discretion) to terminate this Lease by giving Landlord
notice to such effect within ninety (90) days after the
REA shall, under its express terms and conditions,
expire or terminate or be cancelled, and this Lease
shall terminate on the last day of the month next
succeeding the month in which such notice is given.
ARTICLE IV
RENT AND OTHER CHARGES
Section 4.1 Minimum Annual Rent. Tenant
agrees to pay to Landlord as rental for the Premises
the sum of Two Hundred Forty-Four Thousand Eight
Hundred Forty-Three Dollars ($244,843.00) per Lease
Year (the "Minimum Annual Rent"), payable in advance in
equal monthly installments of Twenty Thousand Four
Hundred Three and 58/100 Dollars ($20,403.58), on or
before the first (1st) day of each calendar month for
the balance of the Term. Minimum Annual Rent shall be
prorated (on the basis of a 30-day month and 360-day
year) for any partial month and partial Lease Year
comprising a portion of the Term of this Lease. In the
event that the Term expires or is terminated on a date
other than the last day of a calendar month, Tenant
shall pay Landlord, on the first (1st) day of the last
month of the Term, a pro rata portion of a monthly
installment of such Minimum Annual Rent, calculated on
a per diem basis for a month of thirty (30) days.
Section 4.2 Percentage Rent.
(a) Formula for Calculation. In
addition to Minimum Annual Rent, Tenant covenants and
agrees to pay to Landlord as additional rent for each
Lease Year the sum of Three percent (3.0%) of the
amount by which Tenant's Gross Sales for such Lease
Year exceeds the Minimum Annual Rent ("Percentage
Rent"). Percentage Rent shall be payable, in arrears,
on or before March 10 for the immediately preceding
Lease Year. The amount of Percentage Rent payable by
Tenant hereunder for the first Lease Year shall be
prorated by computing the Percentage Rent that would be
payable based on Gross Sales for the first 365 days of
the Term and multiplying that number by a fraction, the
numerator of which is the number of days in the first
Lease Year and the denominator of which is 365. Such
prorated Percentage Rent for the first Lease Year shall
be payable prior to the 455th day of the Term. The
Percentage Rent payable by Tenant for the final Lease
Year shall be prorated by computing the Percentage Rent
that would be payable based on Gross Sales for the last
365 days of the Term and multiplying that number by a
fraction, the numerator of which is the number of days
in the final Lease Year and the denominator of which is
365. Such prorated Percentage Rent for the final Lease
Year shall be payable within 90 days after the Term
expiration date.
(b) Annual Report. On or before
March 10 during the Term (including the March 10
following the end of the Term), Tenant shall furnish
Landlord with a written statement (the "Annual
Report"), certified by Tenant's chief financial officer
or comptroller, of total Gross Sales made from the
Premises during the preceding Lease Year, which Annual
Report shall contain Tenant's computation of Percentage
Rent for such Lease Year. The Annual Report shall be
in form reasonably satisfactory to Landlord and shall
contain such details and breakdown as may accurately
depict Gross Sales. The Annual Report shall not carry
forward transactions completing in the preceding Lease
Year, or carry back transactions completed in the
following Lease Year.
(c) Records. Tenant shall maintain
at the Premises or at its principal record keeping
office within the continental United States at all
times during the Term, full, complete and accurate
books of account and records in accordance with
generally accepted accounting practices consistently
applied for all operations of the business conducted in
or from the Premises, including the recording of Gross
Sales and the receipt of all merchandise into, and the
delivery of all merchandise from, the Premises during
the Term, and shall retain such books and records,
copies of all tax reports and tax returns submitted to
taxing authorities, as well as copies of contracts,
vouchers, checks, inventory records, electronic data
recordings and other documents, recordings, and papers
in any way related to the operation of such business
for at least three (3) years from the end of the period
to which they are applicable, or, if any audit is
required or a controversy should arise between the
parties hereto regarding the Rent payable hereunder,
until such audit or controversy is terminated, even
though such retention period may extend beyond the
expiration of the Term or earlier termination of this
Lease.
(d) Review of Books and Records.
The acceptance by Landlord of payments of Percentage
Rent or any Annual Report pursuant to Section 4.2(b)
above shall not prejudice Landlord's right to examine
Tenant's books, records and accounts in order to verify
the amounts set forth thereon. Landlord may at any
reasonable time during the Term (but not more
frequently than once during any calendar year) cause a
complete or partial audit to be made of Tenant's books,
records and other documents relating to the Premises,
including the books and records of any subtenant,
licensee or concessionaire, for all or any part of the
three (3) year period immediately preceding the day of
the giving of such notice by Landlord to Tenant.
Landlord or its duly authorized representatives shall
have full and free access to such books and records and
the right to require of Tenant, its agents and
employees, such information or explanation with respect
to such books and records as may be necessary for a
proper examination and audit thereof. If such audit
discloses an understatement in an Annual Report of
Gross Sales, Tenant shall pay the deficiency in
Percentage Rent with, interest thereon calculated at
the Interest Rate, and, if Gross Sales have been
understated in any Annual Report by four percent (4%)
or more, Tenant shall pay to Landlord, as Rent, the
cost of said audit, upon demand.
(e) Confidentiality. Any
information regarding Tenant's business operations
delivered to or made available to Landlord, or
otherwise obtained by Landlord in the exercise of its
rights under subsection (d), above, shall be held in
strictest confidence by Landlord. Landlord shall
disclose such information only to its accountants,
attorneys and other consultants and shall require all
such parties to keep all information regarding Tenant
strictly confidential. Nothing in this subsection (e)
prohibits Landlord from disclosing such material when
ordered to do so by a court of competent jurisdiction,
or when necessary to properly plead or prosecute a
legal action brought by Landlord against Tenant for
nonpayment of Percentage Rent.
Section 4.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or respective utilities companies for all
required utility services to the Premises. Tenant
shall pay all required deposits and meter charges for
utilities to the Premises to the respective utility
supplier(s).
(b) Tenant shall pay promptly, as
and when same shall become due, all water rents, rates
and charges, all sewer rents, rates and charges and all
charges for electricity, gas, heat, steam, hot and/or
chilled water, air conditioning, ventilating, lighting
systems, sprinkler systems and all other utilities sup-
plied to the Premises.
Section 4.4 Common Area Maintenance Costs.
Tenant shall pay, as Rent, Common Area Maintenance
charges as specified in the REA or any lesser amount
specified in a separate agreement thereunder. Tenant
shall pay Common Area Maintenance charges as referenced
herein within thirty (30) days after Tenant has
received a bill therefor.
Section 4.5 Taxes.
(a) Tenant shall pay before
delinquency all real and personal property taxes,
general and special assessments, and other public
charges levied upon or assessed against the Premises,
the land thereunder, or any of the building structures,
fixtures, equipment, or improvements thereon
(collectively, "Impositions"). Tenant shall deliver to
Landlord reasonable evidence of payment prior to the
time said Impositions have become delinquent.
(b) Any Imposition relating to a
fiscal period of the taxing authority, a part of which
period is included within the Term of this Lease and a
part of which is included prior to the beginning of the
Term of this Lease or after the termination of this
Lease shall (whether or not such Imposition shall be
paid, assessed, levied or imposed upon or become due
and payable and a lien upon the Premises or a part
thereof during the term of this Lease) be adjusted as
between Landlord and Tenant as of the Term Commencement
Date or as of the date of the termination of the Term
of this Lease, as the case shall require, so that
Landlord shall pay that proportion of such Imposition
which that part of such fiscal period included in the
period of time prior to the commencement or after the
termination of the Term, as the case may be, bears to
such fiscal period, and Tenant shall pay the remainder
thereof.
(c) In the event Landlord is unable
to secure separate tax bills for Tenant as herein
described, then Tenant shall pay to Landlord, prior to
such time as said Impositions would be due and payable,
all Impositions attributable to the Premises. Personal
property taxes shall be allocated directly to Tenant's
personal property. Real property taxes will be
allocated by virtue of the ratio of the Floor Area of
the Premises to the total gross leasable area in the
Shopping Center, which said gross leasable area shall
not include any part of the Common Area in the Shopping
Center, being assessed on the tax bill which relates to
the Premises.
(d) If Tenant fails to pay any such
taxes, assessments or other public charges which it is
obligated to pay as provided in this section before the
same become delinquent, then and in such event,
Landlord may pay the same together with any interest
and penalties thereon, and the amount so paid shall be
deemed additional Rent immediately due and payable by
Tenant to Landlord on demand, together with interest
thereon at the Interest Rate.
(e) Anything in this section to the
contrary notwithstanding, Landlord agrees that Tenant
shall have the right, at Tenant's sole cost and
expense, to contest the legality or validity of any
Impositions payable by Tenant, but no such contest
shall be carried on or maintained by Tenant after such
Impositions become delinquent unless Tenant shall have
duly paid the amount involved under protest or shall
procure and maintain a stay of all proceedings to
enforce any collection thereof and any forfeiture or
sale of the leased property, and shall also provide for
payment thereof together with all penalties, interest,
costs and expenses by deposit of a sufficient sum of
money or by a good and sufficient undertaking as may be
required by law to accomplish such stay. Landlord
shall, at the request of Tenant and at Tenant's sole
expense, execute or join in the execution of any
instrument of documents necessary in connection with
any such contest except bonds of undertakings. In the
event of any such contest made by Tenant, Tenant shall
promptly, upon final determination thereof, pay and
discharge the amount indicated or resulting from said
contest, together with any penalties, fines, interest,
costs and expenses that may have accrued thereon.
Section 4.6 Late Payment Charges. Late
payments of Rent or any other sum due from Tenant
hereunder, including all amounts paid by Landlord on
behalf of Tenant to satisfy any condition or covenant
of this Lease and all costs incurred by Landlord in
enforcing the terms of this Lease, shall bear interest
from the date Tenant receives written notice of such
late payment or default (as applicable) until paid at
the Interest Rate.
Section 4.7 Rent Payments. All Rent
payable by Tenant under this lease shall be paid in
United States Dollars without prior demand therefor and
without any deductions, offsets or counterclaims except
those expressly permitted under the terms of this
Lease, to Landlord and shall be delivered on or before
the due date thereof via wire transfer to
Bank of America, S.A.
Principal Office: Madrid
1 Capitan Haya St.
28009 Madrid SPAIN
For Credit To:
El Corte Ingles, S.A.
Account number 31922020
or to such other payee and at such other place as
Landlord may hereafter designate from time to time by
written notice to Tenant. Notwithstanding anything to
the contrary in this Lease, Tenant may withhold any
portion of Rent which Tenant is required to withhold by
virtue of Landlord's status as a foreign person under
Section 1445 of the Internal Revenue Code or other
applicable law.
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS
Section 5.1 Permitted Use.
(a) Tenant shall use the Premises
only for the Permitted Use and for no other purpose
whatsoever.
(b) Tenant covenants that Tenant
shall not use or allow the Premises or any part thereof
to be used or occupied for any Prohibited Use or any
immoral or unlawful purpose or in violation of any
certificate of occupancy or certificate of compliance
for the Premises.
Section 5.2 Signs. Tenant shall have the
right, without Landlord's consent, to erect any and all
signs on or about the Premises it elects, provided that
such signage complies with the REA and all
Requirements. From time to time upon Tenant's request,
Landlord covenants to assist Tenant (at no cost or
expense to Landlord) in processing any and all
approvals necessary for Tenant to erect such signage.
Section 5.3 Alterations of Premises.
(a) All changes, alterations or
modifications to the Premises (collectively,
"Alterations") shall be made in accordance with this
Section 5.3. Tenant shall have the right to perform
non-structural modifications to, remodel and
redecorate, retexturize, recarpet and repaint the
Premises without obtaining the prior written consent of
Landlord; provided (i) the proposed Alteration does not
affect the exterior appearance of the Premises,
including, without limitation, the storefront or the
storefront sign of the Premises, or the roof,
foundation, supports or structural integrity of the
building of which the Premises is a part; (ii) Tenant
submits an information copy of all remodeling plans to
Landlord at least thirty (30) days prior to the date
any such work is scheduled to commence; (iii) the total
cost of all work involved in the Alteration does not
exceed Three Hundred Thousand Dollars ($300,000) in any
one project or an aggregate amount of Six Hundred
Thousand Dollars ($600,000) in any one Lease Year; and
(iv) such work does not violate any code, ordinance or
Requirement and does not cause Landlord's insurance
rates to increase. Except for the foregoing, Tenant
shall not make any Alterations to any portion of the
Premises without, in each instance, obtaining
Landlord's prior written consent.
(b) All work ("Work") pertaining to
any Alteration to the Premises, including, without
limitation, Tenant's Work, shall comply with the
following:
(i) No Work shall be undertaken
until Tenant shall have procured and paid for, so
far as the same may be required, from time to
time, all permits and authorizations of all
municipal departments and governmental
subdivisions having jurisdiction. Provided no
default exists hereunder, Landlord shall join in
the application for such permits and
authorizations whenever such action is necessary;
provided, however, that Landlord shall not incur
any expense or be subject to any liability as a
result of joining in any such application.
Within ten (10) days after completion of the
Work, Tenant shall deliver to Landlord a
certificate of occupancy or such similar
certificates as may be required or customary by
applicable laws and legal requirements.
(ii) All Work shall be performed
promptly and in a good and workmanlike manner and
in compliance with all applicable permits and
laws, and in accordance with the orders, rules
and regulations of the National Board of Fire
Underwriters or any other body hereafter
exercising similar functions, and Tenant shall
furnish Landlord with evidences and assurances
reasonably acceptable to Landlord that all such
Work shall be completed, subject to Unavoidable
Delays, at least one (1) year prior to the end of
the Term of this Lease.
(iii) The cost of any Work shall
be paid promptly by Tenant so that the Premises
shall at all times be free and clear of liens for
labor and materials supplied or claimed to have
been supplied in connection therewith.
(iv) Tenant shall carry, or
shall cause to be carried, worker's compensation
insurance covering all persons employed in
connection with any Work and with respect to whom
death or bodily injury claims could be asserted
against Landlord, Tenant or the Premises, and,
without duplication of any insurance required by
Article VIII hereof, adequate all-risk and
builders risk insurance for the mutual benefit of
Tenant and Landlord in amounts satisfactory to
Landlord and, at Landlord's request, such other
insurance in favor of Landlord in types and
amounts as are reasonable and customary, all at
Tenant's expense, at all times when any such Work
is in progress; provided, however, that Tenant
shall be fully liable for any failure to maintain
such insurance, including, without limitation,
Tenant's obligation to indemnify Landlord for the
failure to maintain insurance in accordance with
the provisions of this Lease. All such insurance
shall be provided by a company or companies of
recognized responsibility and reasonably
satisfactory to Landlord, and all policies or
certified copies of policies issued by the
respective insurers, bearing notations evidencing
the payment of premiums or accompanied by other
evidence satisfactory to Landlord of such
payment, shall be delivered to Landlord prior to
the commencement of any Work.
Section 5.4 Use of Common Areas.
(a) All Common Areas shall be
subject to the exclusive control and management of
Developer as set forth in the REA. Tenant and Tenant's
officers, directors, employees, agents, subtenants,
contractors, subcontractors, concessionaires and
licensees, and the officers, directors, employees and
agents of Tenant's subtenants, concessionaires and
licensees, and the customers, patrons and business
invitees of Tenant and of Tenant's subtenants,
concessionaires and licensees (hereinafter,
collectively, "Tenant's Employees and Invitees") shall
have the non-exclusive right to use (without cost or
expense to Tenant or Tenant's Employees or Invitees
other than as expressly provided in this Lease) the
Common Areas for the purpose of gaining ingress to and
egress from the Premises, for the passage and parking
of vehicles, and for the passage and accommodation of
pedestrians, such right to be in common with Landlord
and those occupants (and the employees and invitees of
such occupants) of the Shopping Center from time to
time authorized to use said common areas for such
purposes.
(b) Notwithstanding anything to the
contrary contained in Section 5.4(a) hereof, Landlord
shall exercise best efforts to cause Developer to
maintain, manage and operate the Common Areas
(including, but not by way of limitation, the parking
area) in good order, condition and repair in conformity
with the REA so as to at all times maintain an
appearance and attractiveness reasonably equivalent to
the level of same existing as of the date hereof.
Developer's obligations to be enforced by Landlord
pursuant to the preceding sentence in respect of the
maintenance, management and operation of the Common
Areas shall include, but not be limited to, the
following:
(i) Undertaking such maintenance
and construction work (including replacements as
required) as is necessary to preserve and
maintain the utility of the Common Areas;
(ii) The care and maintenance of
all identification signs and all planters
(including those adjacent to the Premises but
excluding any signs and planters of Tenant) and
landscaping at the Shopping Center;
(iii) The adequate illumination
of the Common Areas at all times of darkness that
Tenant is open for business (plus a period of
one-half hour after Tenant closes for business);
(iv) The payment prior to
delinquency of all real estate and personal
property taxes and assessments levied on the
Common Areas;
(v) The removal of dirt and
debris and rubbish (including the regular
sweeping of the parking area and all sidewalks);
and
(vi) The operation, management
and maintenance of the enclosed mall, including
the heating, ventilating, air-conditioning,
lighting and housekeeping of the same and the
maintenance (and replacement as required) of
landscaping therein.
Section 5.5 Compliance with REA. Tenant
shall abide by the terms of the REA. Landlord agrees
that it will not change, amend or alter (or agree or
consent to change, amend or alter) any term or
condition of the REA without the prior written consent
of Tenant, which consent shall not be unreasonably
withheld.
Section 5.6 Compliance with Requirements.
(a) Insofar as the same relate to
or are caused by Tenant's occupancy and use of the
Premises, and Tenant's other activities under this
Lease, throughout the Term, Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present
and future Requirements applicable to the Premises,
subject, however, to Tenant's rights to contest any
such Requirements, as set forth in clause (b) below.
Tenant shall likewise comply with the provisions of all
of Tenant's insurance policies required to be
maintained hereunder or otherwise carried by Tenant
with respect to the Premises from time to time.
(b) Tenant shall have the right,
after prior notice to Landlord, at Tenant's sole cost
and expense, to contest by appropriate legal
proceedings diligently prosecuted in good faith, in the
name of Tenant, the validity or application of any
Requirements; provided, however, that Tenant may delay
compliance therewith until the final determination of
such proceeding only if by the terms of any such
Requirements, compliance therewith pending the
prosecution of any such proceeding may legally be
delayed without subjecting Landlord to the risk of any
criminal liability, or imminent forfeiture of its
estate, for failure so to comply therewith, and
provided further that if any fine, lien, charge or
civil liability may be incurred by reason of such
non-compliance, (i) Tenant furnishes to Landlord
security satisfactory to Landlord, against such fine,
lien, charge or civil liability in accordance with
Section 5.7, and (ii) Tenant shall be solely
responsible for payment of such fine, lien, charge or
civil liability and shall indemnify, defend and hold
Landlord harmless with respect thereto.
Section 5.7 Liens.
(a) Tenant agrees that it will pay
or cause to be paid all costs for work done by it or
caused to be done by it on the Premises of a character
which will or may result in liens on Landlord's
reversionary estate therein, and Tenant shall keep the
Premises free and clear of all mechanics' liens and
other liens on account of work done for Tenant or
persons claiming under it. If any such lien shall at
any time be filed against the Premises, Tenant shall
either cause the same to be discharged within thirty
(30) days after the recording thereof, or, if Tenant,
in Tenant's discretion and in good faith, determines
that such lien should be contested, shall furnish such
security as may be necessary or required to prevent any
foreclosure proceedings against the Premises during the
pendency of such contest. If Tenant shall fail to
furnish such security, then, in addition to any other
right or remedy of Landlord resulting from such
failure, Landlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed
to be due, procuring the discharge of such lien by
giving security, or in such other manner as is, or may
be, prescribed by law. Tenant shall repay to Landlord,
as Rent, on demand, all sums disbursed or deposited by
Landlord pursuant to the provisions of this Section
5.7, including all costs, expenses and attorneys' fees
incurred by Landlord in connection therewith. Nothing
contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to
liability under any mechanics' lien or other lien law.
(b) Should any claims of lien be
filed against the Premises or any action affecting the
title to the Premises be commenced, the party receiving
notice of such lien or action shall forthwith give the
other party written notice thereof. Landlord or its
representative shall have the right to post and keep
posted upon the Premises notices of nonresponsibility
or such other notices which Landlord may deem to be
proper for the protection of Landlord's interest in the
Premises. Tenant shall, before the commencement of any
work which might result in any such lien, give to
Landlord advance written notice of its intention to do
so in reasonably sufficient time to enable the posting
of such notices.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost
and expense (except as provided to the contrary in this
Section 6.1) at all times during the Term and any
extensions thereof, keep the Premises in good order,
condition and repair, damage by casualty excepted.
Subject to the limitations set forth in Section 6.1(b),
Tenant's maintenance and repair obligation hereunder
include, without limitation:
(i) all equipment or facilities
serving the Premises, such as plumbing, heating,
air conditioning, ventilating, electrical or
lighting facilities, fire sprinkler and/or
standpipe and hose or other automatic fire
extinguishing systems, including fire alarm
and/or smoke detection systems and equipment,
fire hydrants, fixtures, walls (interior and
exterior) including reasonably periodic painting
of interior walls in painting of exterior walls
to the extent required by the REA, ceilings,
floors, windows, doors, plate glass, landscaping,
driveways, parking lots, fences, signs, sidewalks
and parkways; and
(ii) restorations, replacements
or renewals, when necessary, to keep the Premises
and all improvements thereon or a part thereof in
good order, condition and state of repair.
(iii) Tenant shall maintain
maintenance contracts with respect to the
elevators, the escalators and the heating,
ventilation and air conditioning systems located
in the Premises.
(b) Notwithstanding anything to the
contrary in Section 6.1(a), Tenant is not responsible
for maintenance, repairs or replacements which are
(i) the responsibility of
Landlord pursuant to Section 6.2, or
(ii) the responsibility of the
Developer or any other party pursuant to the REA.
(c) Notwithstanding anything to the
contrary in Section 6.1(a), if (i) any repair or
replacement which is reasonably estimated to exceed
$100,000 is required with respect to any portion of the
Premises for which Tenant is responsible pursuant to
Section 6.1(a) (hereinafter, a "Capital Repair"), and
(ii) the Useful Life of such Capital Repair (as defined
herein) exceeds the Remaining Term of the Lease (as
defined herein), then Landlord shall fund a portion of
the cost of such repair or replacement equal to a
fraction, the numerator of which is the Excess Useful
Life (as defined herein) and the denominator of which
is the Useful Life. As used herein, (A) the "Useful
Life" of a Capital Repair means the reasonably
anticipated useful life of such Capital Repair
(determined by generally accepted accounting standards,
consistently applied), (B) the "Remaining Term" means
the portion of the Term remaining, including the
Renewal Term under any Option which has been exercised,
but not the Renewal Term under any Option which has not
been exercised and (C) the term "Excess Useful Life"
means, with respect to a Capital Repair, the difference
between the Useful Life thereof and the Remaining Term.
As used herein, "Landlord's Capital Repair
Contribution" means, with respect to any Capital
Repair, Landlord's contribution to the cost of such
Capital Repair made pursuant to this Section 6.1(c).
Landlord shall fund Landlord's Capital Repair
Contribution within ten (10) business days after
receipt of invoices therefor from Tenant (which may be
submitted as Tenant receives invoices for such work).
(d) If Tenant exercises an Option
after the Excess Useful Life of a Capital Repair has
been determined, then Tenant shall reimburse to
Landlord, on the first day of the Renewal Term with
respect to such Option, a portion of Landlord's Capital
Repair Contribution equal to a fraction (not to exceed
100%), the numerator of which is the Renewal Term and
the denominator of which is the Excess Useful Life. In
order that this Section 6.1(d) may be properly applied
with respect to subsequent Option exercises, (i) the
Excess Useful Life of a Capital Repair will be deemed
reduced by the period of each Renewal Term with respect
to which payment is made by Tenant pursuant to this
Section 6.1(d) and (ii) Landlord's Capital Repair
Contribution with respect to a Capital Repair will be
deemed reduced by each payment received by Landlord
pursuant to this Section 6.1(d) with respect to that
Capital Repair.
Section 6.2 Landlord's Obligations.
Notwithstanding anything to the contrary herein,
Landlord shall be responsible throughout the Term for
maintaining and repairing all structural portions of
the Building, including the roof (including any
skylights), foundations, structural walls, and other
load-bearing portions of the structure.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage or Destruction.
(a) Tenant shall give Landlord
prompt notice of any damage to the Premises by fire or
other casualty.
(b) If the Premises shall be
rendered wholly untenantable by a casualty, unless
terminated pursuant to Section 7.1(d)(i) or 7.1(d)(ii)
hereof, this Lease shall remain in full force and
effect except that Rent shall fully abate commencing on
the date of loss and continuing until the earlier to
occur of: (i) the date Tenant reopens the Premises for
business, which reopening Landlord and Tenant shall
diligently work together to expedite, or (ii) the date
forty five (45) days after Tenant completes the
restoration, pursuant to Section 7.1(e), of the
structural elements of the building of which the
Premises form a part.
(c) If only a portion of the
Premises shall be rendered untenantable, this Lease
shall remain in full force and effect except that Rent
shall partially abate commencing on the date of loss
and continuing until the earlier to occur of: (i) the
date Tenant reopens the repaired portion of the
Premises for business, which reopening Landlord and
Tenant shall diligently work together to expedite, or
(ii) the date forty five (45) days after Landlord
completes the restoration, pursuant to Section 7.1(e),
of the structural elements of the building of which the
Premises form a part. In such event, the Rent shall be
reduced to an amount computed by multiplying the Rent
applicable prior to such damage by a fraction, the
numerator of which is the Floor Area of the Premises
tenantable after such damage and the denominator of
which is the Floor Area of the Premises prior to such
damage.
(d) If there shall be damage to the
Shopping Center by fire or other casualty, whether or
not the Premises is affected thereby, in which: (i)
the Premises shall be sufficiently damaged to render
the entire Premises wholly untenantable; (ii) the
damage or destruction to the Premises is to an extent
that it cannot be repaired with reasonable diligence
within one (1) year after the destruction or damage;
(iii) either the Shopping Center or the building of
which the Premises are a part is damaged to the extent
of fifty percent (50%) or more of its insured
replacement cost; (iv) the loss is caused by any risk
not covered by either Landlord's or Tenant's insurance;
(v) the damage occurs during the last three (3) years
of the Term; or, (vi) any insurance proceeds received
by Landlord or Tenant for such damage are inadequate or
unavailable for repairs, other than because of any
deductible amount of any policy other than Tenant's
earthquake insurance policy, then, in any such event,
either party shall have the option to terminate this
Lease. Said option shall be exercised, if at all, by
notice to the other party on or before the ninetieth
(90th) day after the date of loss and, if exercised,
shall be effective on the last day of the first (1st)
full calendar month falling at least sixty (60) days
after such notice. If Tenant elects to terminate this
Lease pursuant to this Section 7.1(d), then Tenant
shall turn over to Landlord any insurance proceeds
received by Tenant with respect such damage and
destruction (other than proceeds of insurance covering
tenant's personal property (including, without
limitation, merchandise and equipment) and trade
fixtures. If either party elects to terminate this
Lease pursuant to clause (iv) or (vi), above, the other
party may avoid termination of this Lease by (i)
committing in writing to pay the additional funds
required to complete the necessary repairs and
restoration, which writing shall be delivered to the
terminating party within ten (10) days after delivery
of the termination notice, and (ii) providing to the
terminating party, within a reasonable period after
delivery of such notice, not to extend beyond the date
which is 90 days after the date of loss, security for
payment of such excess costs reasonably satisfactory to
the terminating party and its lenders (if any).
(e) If there shall be damage to the
Premises by fire or other casualty and this Lease is
not terminated, Tenant shall promptly commence and
diligently prosecute the restoration and repair of the
Premises, including all exterior walls, roofs, floors
and supports, all internal partitions, fixtures, trade
fixtures, shelving, casework, furniture and furnishings
used in connection with the operation of Tenant's
business in the Premises, as nearly as practicable to
their respective conditions prior to such damage.
Section 7.2 Condemnation.
(a) The term "Taking" as used in
this Section 7.2, shall mean an appropriation or taking
under the power of eminent domain by any public or
quasi-public authority or a voluntary sale or
conveyance in lieu of condemnation but under threat of
condemnation.
(b) In the event of a Taking of the
entire Premises, this Lease shall terminate and expire
as of the date possession is delivered to the
condemning authority and Landlord and Tenant shall each
be released from any liability accruing pursuant to
this Lease after such termination.
(c) If there is a Taking of (a)
more than twenty-five percent (25%) of the Premises, or
(b) any portion of the Building and, regardless of the
amount taken, if the remainder of the Building is not
one undivided structure, either Landlord or Tenant may
terminate this Lease as of the date Tenant is required
to vacate the Premises upon giving notice in writing of
such election within thirty (30) days after receipt of
Tenant from Landlord of written notice that a portion
of the Premises has been so appropriated or taken.
(d) If this Lease is terminated as
a result of a Taking, Tenant shall be entitled to any
separate award made to Tenant for relocation costs,
good will and any of Tenant's fixtures and equipment
which are not capable of removal from the Premises;
provided such separate award does not diminish
Landlord's award. Subject to the foregoing, Landlord
shall be entitled to the entire award or compensation
in such condemnation proceedings, or settlement in lieu
thereof, irrespective of whether such award or
settlement shall be obtained as compensation for
diminution in value to the leasehold or the leasehold
improvements thereto or to the fee of the Premises, but
the Minimum Annual Rent, Percentage Rent and any other
Rent for the last month of Tenant's occupancy shall be
prorated and Landlord shall refund to Tenant any
Minimum Annual Rent, Percentage Rent and other Rent
paid in advance. Notwithstanding the foregoing and
subject to Section 2.3, in the event this Lease is
terminated as provided above, Tenant may remove all of
its removable trade fixtures, furniture and equipment
from the Premises, provided that Tenant immediately
repairs any damage occasioned to the Premises by reason
of such removal so as to leave the Premises in a neat
and clean condition. Notwithstanding the foregoing, in
no event shall Tenant be entitled to any portion of any
award or compensation, if following the payment of such
sum to Tenant, there would not be sufficient funds or
proceeds to pay the unpaid principal balance of any
obligation of Landlord secured by a deed(s) of trust or
mortgage(s) on the fee interest in the Premises and/or
the Building.
(e) In the event of a Taking, if
Landlord and Tenant elect not to so terminate this
Lease as provided above (or have no right to so
terminate), Tenant agrees, at Tenant's cost and expense
(subject to Tenant's rights hereunder) as soon as
reasonably possible after the Taking, to restore the
Building on the Land remaining to a complete unit of
like quality and character as existed prior to the
Taking, and thereafter the Minimum Annual Rental
payable hereunder shall be reduced on an equitable
basis, taking into account the relative value of the
portion taken as compared by the portion remaining. In
such event, Tenant shall be entitled to receive any and
all award or compensation in connection with such
Taking until Tenant has received funds sufficient to
complete such restoration, and Landlord shall be
entitled to receive the remaining portion of the total
award of compensation.
ARTICLE VIII
INSURANCE
Section 8.1 Tenant's Insurance.
(a) Tenant shall carry, from and at
all times after the date hereof, at Tenant's sole cost
and expense, the following insurance:
(i) public liability and
property damage insurance covering the Premises
and Tenant's use thereof against claims for
personal injury or death and property damage
occurring in, on or about the Premises and
affording protection to the limits of not less
than Three Million Dollars ($3,000,000) per
occurrence with respect to any one (1) bodily
injury or damage to property, which insurance
shall, in addition, extend to any liability of
Tenant arising out of the indemnities contained
in Section 8.5 by contractual liability
endorsement. All liability policies shall
contain a so called "occurrence clause";
(ii) fire and casualty insurance
covering the Premises, in an amount equal to
ninety percent (90%) of the replacement cost
thereof (excluding foundations and footings);
(iii) fire insurance with
extended coverage, covering such items of
Tenant's merchandise, inventory, signs,
furniture, trade fixtures, equipment, leasehold
improvements and other property of Tenant, now or
hereafter placed in, on or about the Premises in
an amount equal to ninety percent (90%) of the
replacement cost thereof;
(iv) business interruption
insurance covering Tenant's loss of business
income for the period it would take to
reconstruct the Premises after a casualty using
reasonable diligence and rental loss insurance
covering Tenant's obligation to pay Minimum
Annual Rent under this Lease;
(v) in the event Tenant installs
in, adjoining or beneath the Premises any steam
boiler or similar equipment, broad form boiler
insurance;
(vi) earthquake insurance in an
amount equal to one hundred percent (100%) of the
replacement cost of the Premises, to the extent
the same is available at commercially reasonable
rates and with deductibles of commercially
reasonable amounts (it being agreed that Tenant
may maintain required earthquake coverage through
a blanket policy covering several (or all) store
locations owned or affiliated with Tenant and
having a maximum aggregate coverage limit of
Twenty Million Dollars ($20,000,000)); and
(vii) such other insurance as
may in Tenant's reasonable judgment be prudent to
carry from time to time.
(b) All insurance policies required
to be carried by Tenant shall be issued by companies
with a general policyholder's rating of not less than
"A" and a financial size rating of "VI" as rated in the
most current available "Best's Insurance Reports", and
qualified to do business in the State of California.
Each insurance policy shall name Landlord, Tenant and
Mortgagee as insureds as their interests may appear
and, to the extent possible, any other parties in
interest from time to time designated in writing by
notice from Landlord to Tenant. Executed copies of
each insurance policy, duplicate originals or original
certificates thereof (provided that such certificates
shall evidence all of the required coverage herein
provided) shall be delivered by Tenant to Landlord
within ten (10) days after delivery of possession of
the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of prior policies.
All insurance policies shall contain a provision that
the underwriter will give Landlord and Mortgagee at
least thirty (30) days prior written notice of any
cancellation or lapse of such insurance or the
effective date of any reduction in the amounts thereof
or increase of the deductible. All insurance policies
shall be written as primary policies which do not
contribute to, and are in excess of, any coverage which
Landlord may carry. All insurance policies shall
contain an agreement by the insurers that the coverage
afforded thereby shall not be affected by any
construction work in or about the Premises and that no
act or omission by the Tenant shall impair or affect
the rights of the Landlord to receive and collect the
proceeds under the policies.
(c) Any insurance required to be
carried by Tenant may be provided under a blanket
policy of insurance covering additional items or
locations or insureds; provided, however, that: (i)
Landlord and Mortgagee shall be named as an additional
insured thereunder (or covered by broad form Landlord
endorsement or contractual coverage); (ii) any such
blanket policy or policies shall specify total
insurance allocated to Tenant's improvements and
property; and (iii) the requirements for Tenant's
insurance set forth herein are otherwise satisfied.
Tenant agrees to use its best efforts to ensure that
the coverage afforded Landlord and any such other
parties in interest under any future blanket policy of
insurance will not be diminished by reason of the use
of such blanket policy of insurance, and Tenant shall
expend commercially reasonable amounts in connection
with obtaining such coverage.
(d) The deductibles and
self-insured retentions included in Tenant's insurance
policies shall be in amounts as may be commercially
reasonable from time to time.
(e) If Tenant refuses or neglects
to secure and maintain insurance policies complying
with the provisions of this Section 8.1, Landlord may
secure the appropriate insurance policies and Tenant
shall pay, upon demand, the costs of same to Landlord
as Rent.
Section 8.2 Landlord's Insurance. Landlord
at its cost shall carry, from and at all times after
the date of delivery of the Premises to Tenant, all
insurance required to be carried by Landlord pursuant
to (i) any Mortgages which either presently or in the
future may exist as a lien against the Premises and
(ii) the REA, to the extent that insurance required to
be carried by Tenant pursuant to this Lease is
insufficient to satisfy either of such obligations of
Landlord.
Section 8.3 Waiver of Subrogation.
Landlord and Tenant each waive any rights it may have
against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be,
their respective property, the Premises or its contents
or to other portions of the Shopping Center arising
from any liability, loss, damage or injury caused by
fire or other casualty for which property insurance is
carried or required to be carried pursuant to this
Lease. Each of the parties hereto, on behalf of their
respective insurance companies insuring the property of
either Landlord or Tenant against any such loss, to the
extent of any recovery under such insurance, waives any
right of subrogation that it may have against the
other. Each waiver shall be expressly included in, and
shall comply with the requirements of, the respective
insurance policies.
Section 8.4 Governmental and Insurance
Requirements.
(a) Tenant shall comply, at
Tenant's sole cost and expense, with all reasonable
requirements of the insurance underwriters, or any
similar public or private body, provided that any such
requirements of such insurance underwriters, or any
similar public or private body, are conditions to the
continuance of any of the insurance coverage required
hereunder, and any governmental authority having
jurisdiction over insurance rates with respect to the
use or occupancy of the Premises as a part of Shopping
Center, including, without limitation (i) installing
fire extinguishers or automatic dry chemical
extinguishing systems; (ii) making any changes,
modifications, alterations or additions in the
sprinkler system within the Premises; and (iii)
relocating partitions, trade fixtures or other contents
within the Premises.
(b) Tenant shall not commit any act
or suffer to exist on the Premises any circumstances
which will violate any reasonable restrictions
contained in any of Tenant's or Landlord's policies of
fire and casualty or public liability insurance,
prevent Landlord from continuing the coverage presently
provided in Landlord's insurance policies from
insurance companies reasonably acceptable to Landlord
or cause the rates for any such policies to increase
beyond the minimum rates from time to time applicable
to the Premises or the Shopping Center for the
Permitted Use, provided such minimum rate would have
been available to Landlord but for Tenant's actions or
use. In the event that Landlord receives any notice
from Landlord's insurance company regarding any
violation by Tenant of any of Landlord's insurance
policies, or of any proposed increase in Landlord's
premiums from the minimum rate from time to time
applicable thereunder because of any act, omission or
sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
(c) In the event that Landlord
receives any notice from Landlord's insurance company
regarding any violation by Tenant of any of Landlord's
insurance policies, or of any proposed increase in
Landlord's premiums from the minimum rate from time to
time applicable thereunder because of any act, omission
or sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
Section 8.5 Indemnification. To the
fullest extent permitted by law, Tenant covenants with
Landlord that Landlord shall not be liable for any
damage or liability of any kind or for any injury to or
death of persons or damage to property of Tenant or any
other person occurring from and after the date Tenant
is given access to the Premises from any cause
whatsoever related to the use, occupancy or enjoyment
of the Premises including, but not limited to, the
sidewalks and landscaped areas immediately adjacent to
the Building and Tenant's drive-through area, if any,
by Tenant or any person thereon or holding under Tenant
including, without limitation, damages resulting from
any labor dispute, and Tenant shall defend (using
counsel mutually approved by Landlord and Tenant or
Tenant's insurer), indemnify and save Landlord harmless
from all liability whatsoever on account of any real or
alleged damage or injury and from liens, claims and
demands related to the use of the Premises and its
facilities, or any repairs, alterations or improvements
(including any improvements and fixtures constructed or
installed by Tenant) which Tenant may make or cause to
be made with respect to the Premises, and any loss or
interruption of business or loss of rental income
resulting therefrom. Notwithstanding anything to the
contrary in the foregoing, Tenant shall not be liable
for damage or injury occasioned by the negligence or
willful misconduct of Landlord or any ground lessor,
mortgagee or owner of all or any part of the Shopping
Center or their respective employees, agents or
contractors.
Section 8.6 Landlord Exculpation. Landlord
shall endeavor to conduct its activities with respect
to the Premises in a prudent and businesslike manner.
However, Landlord shall not be liable for any damage to
property entrusted to employees of Landlord, its
partners or agents, nor for loss of or damage to any
property damage or loss of business which may be
sustained by the person, goods, ware, merchandise or
property of Tenant, its employees, invitees or
customers or any other person in or about the Premises
caused by or resulting from, but not limited to, fire,
steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of same, whether the
injury, damage or loss of business results from
conditions arising upon the Premises, other portions of
the Shopping Center or from other sources, so long as
the same does not result from the negligence or wilful
misconduct of Landlord or its employees, agents, and
contractors or Landlord's breach of any of its express
obligations under this Lease. Landlord shall not be
liable for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the
Premises or in the Shopping Center or of defects
therein or in the fixtures or equipment. Landlord
shall not be liable for any damages arising from any
act or neglect of any other tenant in the Shopping
Center, except to the extent of Landlord's liability
for breach of Landlord's obligation to enforce the REA,
as provided in Section 3.2.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Notice to Landlord. If Tenant
wishes to assign its rights under this Lease or sublet
all or any portion of the Premises, Tenant shall
deliver written notice of its intention to do so to
Landlord at least thirty (30) days prior to the
effective date of any such proposed assignment or
subletting, specifying in such notice whether Tenant
proposes to assign or sublet, the proposed effective
date thereof, identification of the proposed assignee
or sublessee with a description of the proposed
business operations to be conducted at the Premises.
Such notice shall also be accompanied by current
financial statements of the proposed assignee or
subtenant, a copy of the proposed assignment or
sublease documents, or, if not available, a letter of
commitment or letter of intent setting forth material
terms and provisions of the proposed assignment or
sublease.
Section 9.2 Landlord's Approval. Landlord
will notify Tenant of its approval or disapproval of a
proposed assignment or sublease within a reasonable
time (in no event earlier than fifteen (15) days nor
longer than thirty (30) days) after receipt of such
notice from Tenant as set forth above. Landlord shall
not unreasonably withhold its approval of Tenant's
assignment of this Lease or subletting of the Premises.
The factors which may be viewed in determining the
reasonableness of Landlord's approval or disapproval of
a proposed assignment or subletting and the conditions
which may be imposed by Landlord as part of its
consenting thereto shall be as follows:
(a) The use of the Premises following
the assignment or sublease would be
different from the Permitted Use
set forth in this Lease;
(b) In Landlord's reasonable business
judgment, the proposed assignee or
subtenant lacks sufficient business
reputation or experience to operate
a business of the type and quality
permitted under the terms of this
Lease;
(c) In Landlord's reasonable business
judgment, the present financial
worth of the proposed assignee or
subtenant is inadequate to ensure
such assignee's or subtenant's
performance under the terms of its
agreement relating to the Premises;
(d) The proposed assignment or sublease
transaction would breach a covenant
of Landlord respecting radius,
location, use or exclusive use in
any other lease, financing
agreement or other agreement
relating to the Shopping Center.
It is expressly understood and agreed that Landlord's
consent shall not be required for any transfer of
Tenant's interest under this Lease which is considered
to be a Permitted Transaction (as defined below).
Section 9.3 Permitted Transactions.
Notwithstanding anything to the contrary herein,
Landlord's consent shall not be required for any of the
following (collectively, "Permitted Transactions"):
(i) Any transfer by Tenant of any
interest under this Lease to any
corporation, partnership or other
entity which controls, is
controlled by, or is under common
control with the named Tenant
hereunder or its successors by
merger, consolidation or other
comparable transaction, the primary
purpose of which is not the
transfer of Tenant's interest under
this Lease.
(ii) Any transfer by Tenant of any
interest under this Lease to the
owner of a department store chain
with assets equal to or greater
than Tenant's.
(iii) Tenant may enter into concession
arrangements or license agreements,
or otherwise permit the occupation
and use of a portion of the
Premises by a subtenant, licensee
or concessionaire, provided that
the areas covered by such licenses
or concession agreements do not
exceed usage in excess of twenty-five
percent (25%) of the Floor
Space of the Premises; provided,
however that all sales of licensees
or concessionaires shall be
included within Gross Sales as
defined in this Lease.
Section 9.4 Compliance with REA. Tenant
shall not assign its rights under this Lease or sublet
all or any portion of the Premises unless Tenant
complies, at Tenant's expense, with the provisions of
the REA applicable to such assignment or subletting.
Landlord agrees to cooperate, at no expense to
Landlord, with Tenant's efforts to obtain any consents
required under the REA and to otherwise comply with the
REA in connection with any proposed assignment or
sublease.
Section 9.5 Documentation and Expenses.
Each assignment or sublease shall be evidenced by an
instrument made in such written form as is satisfactory
to Landlord and executed by Tenant and the assignee or
subtenant. In the event of an assignment, the assignee
shall assume and promise to perform the terms,
covenants and conditions of this Lease which are
obligations of Tenant, from and after the date the
Assignee takes possession. Unless expressly released
by Landlord, in writing, Tenant shall remain fully
liable to perform its duties under this Lease following
any assignment of the Lease. Tenant shall, on demand
of Landlord, reimburse Landlord for Landlord's
reasonable costs, including attorneys' fees, incurred
in obtaining advice and preparing documentation for
each assignment or sublease, up to a maximum of $1,500
per transaction.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the following events
shall constitute a "Default" by Tenant under this
Lease:
(a) If Tenant shall fail to pay any
Rent under this Lease when the same shall become due
and payable and the failure shall continue for five (5)
business days after written notice (it being understood
such period shall run concurrently with any statutory
notice period); or
(b) If Tenant shall transfer
Tenant's interest in this Lease in contravention of
Article IX hereof; or
(c) If Tenant shall fail to perform
or observe any of its obligations under this Lease
(including, without limitation, Tenant's failure to
perform those obligations under the REA expressly
assumed by Tenant in this Lease) other than those
specified above in this Section 10.1 and the failure
shall continue for thirty (30) days after notice,
unless a shorter period of time for such performance or
observance is otherwise expressly set forth in this
Lease; provided, however, that in the case of a Default
which cannot with reasonable diligence be remedied by
Tenant within said period of thirty (30) days, if
Tenant proceeds as promptly as may reasonably be
possible after the service of such notice and with all
reasonable diligence to remedy the Default and
thereafter prosecute the remedying of such Default with
all reasonable diligence, the period of time after the
giving of such notice within which to remedy the
Default shall be extended for such period as shall be
reasonably necessary to remedy the same with all
reasonable diligence;
(d) If the Premises are deemed
abandoned pursuant to California Civil Code Section
1951.3; or
(e) If an event of insolvency shall
occur including:
(i) Tenant's making an
assignment for the benefit of creditors;
(ii) Tenant's failure generally
to pay its debts as they become due;
(iii) A material adverse change
in the financial condition of Tenant;
(iv) Tenant's filing, or
acquiescing to the filing of, a petition seeking
an order for relief against it in any state or
federal court in any bankruptcy, reorganization,
liquidation, composition, extension, arrangement
or insolvency proceeding;
(v) Tenant's making an
application for, or acquiescing to, the
appointment of a trustee, examiner or custodian
for it or all or any portion of its property;
(vi) Any petition being filed
against Tenant in any state or federal court
seeking reorganization or liquidation or
insolvency proceedings, and the proceedings shall
not be dismissed, discontinued or vacated within
ninety (90) days; or
(vii) Any trustee, examiner or
custodian being appointed for Tenant, or for all
or any portion of Tenant's property, and the
trustee, examiner, or custodian shall not be set
aside within ninety (90) days after such
appointment.
Section 10.2 Remedies. Upon the occurrence of a Default, and
in addition to any other rights or remedies available
to Landlord at law or in equity, Landlord shall have
the right to:
(a) terminate this Lease and all rights
of Tenant by giving Tenant written notice that this
Lease is terminated, in which case Landlord may recover
from Tenant the sum of :
(i) the worth at the time of award
of any unpaid Rent that had been earned at the time of
termination.
(ii) the worth at the time of award of the amount by
which (A) the unpaid Rent that would have been earned
after termination until the time of award exceeds (B)
the amount of rental loss, if any, as Tenant
affirmatively proves could have been reasonably
avoided;
(iii) the worth at the time of award of the amount by
which (A) the unpaid Rent for the balance of the Term
after the time of award exceeds (B) the amount of
rental loss, if any, as Tenant affirmatively proves
could be reasonably avoided;
(iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations or that, in the
ordinary course of things, would be likely to result;
and
(v) all other amounts in addition
to or in lieu of those previously stated as may be
provided from time to time by California law; or
(b) continue this Lease, and from time
to time, without terminating this Lease, either (i)
recover all Rent and other amounts payable as they
become due or (ii) relet the Premises or any part of
the Premises on behalf of Tenant for any term, at any
rent, and pursuant to any other provisions as Landlord
deems advisable, all with the right, at Tenant's cost,
to make alterations and repairs to the Premises.
As used in clauses 10.2(a)(i) and 10.2(a)(ii) of
this Section, the worth at the time of award is
computed by allowing interest at the Interest Rate. As
used in clause 10.2(a)(iii) of this Section, the worth
at the time of award is computed by discounting that
amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent
(1%).
(c) Upon the occurrence of a Default,
Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises.
Landlord may cause property so removed from the
Premises to be stored in a public warehouse or
elsewhere at the expense and for the account of Tenant.
(d) None of the following remedial
actions, singly or in combination, shall be construed
as an election by Landlord to terminate this Lease
unless Landlord has in fact given Tenant written notice
that this Lease is terminated or unless a court of
competent jurisdiction decrees termination of this
Lease; any act by Landlord to maintain or preserve the
Premises; any efforts by Landlord to relet the
Premises; any re-entry, repossession, or reletting of
the Premises; or any reentry, repossession, or
reletting of the Premises by Landlord pursuant to this
Section. If Landlord takes any of the previous
remedial actions without terminating this Lease,
landlord may nevertheless at any time after taking any
remedial action terminate this lease by written notice
to Tenant.
(e) If Landlord relets the Premises,
Landlord shall apply the revenue as follows: first, to
the payment of any reasonable cost of reletting,
including without limitation finder's fees and leasing
commissions; and second, to the payment of Rent and
other amounts due and unpaid under this Lease.
Landlord shall hold and apply the residue, if any, to
payment of future amounts payable as they become due
and, to the extent the residue exceeds such amounts,
shall remit such excess to Tenant. Should revenue from
reletting during any month, after application pursuant
to the foregoing provisions, be less than the
reasonable cost of reletting and the Rent and other
amounts due and unpaid under this Lease, Tenant shall
pay the deficiency to Landlord promptly upon demand.
(f) After the occurrence of a Default,
Landlord, in addition to or in lieu of exercising other
remedies, may, but without any obligation to do so,
cure the breach underlying the Default for the account
and at the expense of Tenant; provided that Landlord by
prior notice shall first allow Tenant a reasonable
opportunity to cure, except in cases of emergency,
where Landlord may proceed without prior notice to
Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of
settlements, defense court costs, and attorney fees,
that Landlord may incur in the course of any such cure.
(g) No security, guaranty or security
interest granted for the performance of Tenant's
obligations, which Landlord may now or hereafter hold,
shall in any way constitute a bar or defense to any
action initiated by Landlord for unlawful detainer or
for the recovery of the Premises, for enforcement of
any obligation of Tenant, or for the recovery of
damages caused by a breach of this Lease by Tenant or
by a Default.
(h) Except as expressly provided in
this Lease to the contrary, no right or remedy
conferred upon or reserved to either party is intended
to be exclusive of any other right or remedy given now
or later or existing at law or in equity or by statute.
Except to the extent that either party may have
otherwise agreed in writing, no waiver by that party of
any violation or nonperformance by the other party of
any obligations, agreements, or covenants shall be
deemed to be a waiver of any subsequent violation or
nonperformance of the same or any other covenant,
agreement, or obligation, nor shall any forbearance by
either party to exercise a remedy for any violation or
nonperformance by the other party be deemed a waiver by
that party of rights or remedies with respect to that
violation or nonperformance.
(i) Landlord may require Tenant or any
trustee for Tenant under the United States Bankruptcy
Code (as amended, the "Bankruptcy Code") to cure
Tenant's Default and to provide adequate assurances of
future performance of this Lease as provided in Section
365(b)(3) of the Bankruptcy Code, including, without
limitation, adequate assurance that; (i) Rent will be
paid when due; (ii) there shall be no substantive
breach in the provisions of this Lease relating to the
Shopping Center including, without limitation, the
Permitted Use; and (iii) that there shall be no
disruption in any Tenant mix or Tenant balance in the
Shopping Center. If Tenant or the trustee does not
cure existing Defaults and provide such assurances of
future performance within sixty (60) days after there
has been an order for relief pursuant to the Bankruptcy
Code, this Lease shall be deemed rejected, and Landlord
shall have no further liability hereunder to Tenant or
any person claiming through or under Tenant and, if
Tenant or any such person is in possession. Tenant or
any such person shall forthwith quit and surrender the
premises to Landlord.
Section 10.3 Attorneys' Fees. In the event that either party
hereto commences an action related to this Lease, the
prevailing party shall be entitled to recover from the
other party all of its costs and expenses incurred
therein, including, without limitation, reasonable
attorneys' fees and disbursements. If either party
hereto is, without fault on its own part, made a party
to any action instituted by or against the other party
to this Lease due to such other party's fault, such
other party shall indemnify the party innocently
involved and defend and hold it harmless against and
from all such costs and expenses incurred therein
including, without limitation, reasonable attorneys'
fees and disbursements.
Section 10.4 Agreement to Arbitrate. Any controversy, dispute
or claim under, arising out of, in connection with or
in relation to this Lease, including but not limited to
the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or
enforceability of this Lease or any provision hereof
shall be determined by arbitration conducted in
accordance with the Commercial Arbitration Rules or
then existing rules for commercial arbitration of the
American Arbitration Association. The arbitration
shall additionally be governed by the California
Arbitration Act. The arbitration shall be conducted in
a location in San Bernardino County and shall be before
a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven
potential arbitrators provided by the American
Arbitration Association. If the parties cannot agree
on an arbitrator from this first list, the parties
hereto shall select an arbitrator for such arbitration
from a second list of seven potential arbitrators
provided by the American Arbitration Association with
each party alternately striking names, with the last
name remaining to be the arbitrator so selected. In
the event that either party seeks a temporary
restraining order, preliminary injunction or other
provisional relief, the provisions of Section 1281.8 of
the California Code of Civil Procedure shall apply.
The arbitration of such issues, including the
determination of any amount of damages suffered by any
party hereto by reason of the acts or omissions of any
party, shall be final and binding upon the parties to
the maximum extent permitted by law. Judgment upon any
award rendered by the arbitrator(s) may be entered by
any court having jurisdiction thereof. The parties
intend that this Article shall be valid, binding,
enforceable and irrevocable and shall survive the
termination of this Agreement. It is understood and
agreed that the terms of this Section 10.4 shall not
apply to a determination of Fair Market Rental Value,
which shall be determined pursuant to Section 12.3 of
this Lease.
Section 10.5 No Set-off/Counterclaims. Tenant shall pay all
Rent due hereunder, free of any charges, assessments,
impositions or deductions and without abatement,
deferral, reduction, set-off, counterclaim, defense or
deduction except as permitted under the express terms
of this Lease or the Asset Purchase Agreement. Tenant
shall not interpose any counterclaim(s) in any action
brought by Landlord based, in whole or in part, on
Tenant's failure to pay Rent; provided, however, that,
the foregoing to the contrary notwithstanding: (i)
Tenant may interpose any counterclaim deemed
"compulsory" under applicable court rules of civil
procedure; (ii) Tenant shall be permitted to bring a
separate action against Landlord based on any claim
which Tenant is prohibited by this Lease from asserting
as a set-off or counterclaim; and (iii) Tenant may
bring actions and assert defenses, setoffs and
counterclaims permitted to be brought or asserted
against Landlord in accordance with the terms of the
Asset Purchase Agreement.
Section 10.6 Right of Redemption. Tenant hereby waives, for
itself and all persons claiming by, through or under
Tenant, any right of redemption or for the restoration
of the operation of this Lease under any present or
future law in the event Landlord shall obtain
possession of the Premises.
Section 10.7 No Waiver. No receipt of monies by Landlord from
Tenant after the termination or cancellation of this
Lease in any lawful manner shall reinstate the Term of
this Lease, or operate as a waiver of the right of
Landlord to enforce the payment of Rent then due, or
operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action,
proceeding or remedy; it being agreed that, after the
termination or cancellation of this Lease, or after a
final order or judgment for the possession of the
Premises, Landlord may demand, receive and collect any
monies due, without in any manner affecting such
notice, proceeding, suit, action, order or judgment;
and any and all such monies collected shall be deemed
to be payment on account of the use and occupation or
Tenant's liability hereunder.
Section 10.8 Unperformed Covenants of Landlord May Be
Performed By Tenant. If Landlord shall fail to perform
any of the terms, provisions, covenants or conditions
to be performed or complied with by Landlord pursuant
to this Lease, or if Landlord should fail to make any
payment which Landlord agrees to make, and any such
failure shall, if it relates to a matter which is not
of any emergency nature, remain uncured for a period of
thirty (30) days after Tenant shall have served upon
Landlord notice of such failure, or for a period of
twenty-four (24) hours after service of such notice, if
in Tenant's judgment reasonably exercised such failure
related to a matter which is of an emergency nature,
then Tenant may at Tenant's option, at any time prior
to commencement of Landlord's acting to cure such
failure and thereafter if Landlord fails to diligently
perform the curing of such failure, perform any such
term, provision, covenant or condition or to make any
such payment, as Landlord's agent, and in Tenant's sole
discretion as to the necessity therefor, and Tenant
shall not be liable or responsible for any loss or
damage resulting to Landlord or anyone holding under
Landlord on account thereof. The full amount of the
cost and expense entailed, or payment so made, shall
immediately be owing and payable by Landlord to Tenant.
The option given in this Section is for the sole
protection of Tenant, and its existence shall not
release Landlord from the obligation to perform the
terms, provisions, covenants and conditions herein
provided to be performed by Landlord or deprive Tenant
of any legal rights which it may have by reason of any
such default by Landlord.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
OPTIONS
Section 12.1 Renewal Options. Contingent upon Tenant
satisfying all of the following conditions, and
provided that Tenant has not filed for protection under
the Federal Bankruptcy Laws at the time such option is
exercised, Tenant is hereby granted four (4) separate
options (each an "Option" and two or more,
collectively, the "Options") to extend the Term of this
Lease, each for an additional period of five (5) years
(each a "Renewal Term"), conditioned upon satisfaction
of the following requirements:
(a) No Default by Tenant shall have
occurred and remain uncured as of the date of Tenant's
exercise of its Option; and
(b) Tenant shall deliver written
notice to Landlord exercising the applicable Option not
less than six (6) full calendar months prior to the
expiration of the Term (as it may be extended by
Tenant's exercise of any Options).
Section 12.2 Lease Terms Applicable. In the event that Tenant
exercises one or more of the Options herein granted,
then all of the terms and provisions of this Lease as
are applicable during the initial Term shall likewise
be applicable during each of the applicable Renewal
Terms except that Minimum Annual Rent and Percentage
Rent payable by Tenant for each Renewal Term shall be
as set forth in Section 12.3 below.
Section 12.3 Rent During Renewal Terms.
(a) The Minimum Annual Rent (as
defined in Section 4.1 of this Lease) which shall be
due and payable during the first Renewal Term, if
exercised by Tenant, shall be determined prior to the
commencement of each applicable Renewal Term and shall
be equal to three percent (3.0%) of the average of
annual Gross Sales at the Premises for the two (2)
Lease Years preceding the commencement of the
applicable Renewal Term. Percentage Rent for the first
Renewal Term shall be calculated in accordance with the
terms of Section 4.2 of this Lease.
(b) Minimum Annual Rent and
Percentage Rent (including the formula for the
calculation thereof) for each of the second, third and
fourth Renewal Terms, if exercised by Tenant, shall be
equal to the Fair Market Rental Value of the Premises,
each with respect to the 5-year term first day as of
the commencement of the applicable Renewal Term. The
Fair Market Rental Value of the Premises shall be based
upon the rental amounts paid by tenant-operators of
department stores for retail store space of
substantially the same type, size and quality as the
Premises, and located in major regional malls in San
Bernardino County or Riverside County. Within thirty
(30) days following Landlord's receipt of Tenant's
written notice that it wishes to exercise the
applicable Option, Landlord shall deliver to Tenant a
written notice specifying Landlord's good faith
estimate of the Fair Market Rental Value for the
Premises for the applicable Renewal Term. Within
thirty (30) days following Tenant's receipt of
Landlord's good faith estimate of the Fair Market
Rental Value of the Premises, Tenant may deliver a
written notice to Landlord either setting forth
Tenant's good faith of Fair Market Rental Value, in
which case Landlord and Tenant will promptly meet and
attempt to agree in good faith upon the Fair Market
Rental Value, or agreeing to Landlord's estimate of
Fair Market Rental Value. If no agreement regarding
the applicable Fair Market Rental Value for the
Premises can be reached within fifteen (15) days after
Landlord's receipt of Tenant's estimate of Fair Market
Rental Value for the Premises, Tenant shall have ten
(10) days to cancel its exercise of the applicable
Option by delivering written notice to Landlord within
such 10-day period. If Tenant does not terminate its
exercise of the applicable Option within such 10-day
period, the Fair Market Rental Value of the Premises
for the applicable Renewal Term shall be determined in
accordance with the terms of Exhibit E.
Section 12.4 Lease Amendment. Following Tenant's exercise of
each Option and the determination of the Fair Market
Rental Value of the Premises for the applicable Renewal
Term, Landlord and Tenant will enter into an amendment
to this Lease confirming the extension of the Term of
this Lease in accordance with the terms hereof.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Notices.
(a) Any notice, demand, request, approval, consent or
other instrument (collectively, a "Notice") which may
be, or is required to be, given under this Lease shall
be in writing and given by hand or sent by United
States certified or registered mail, return receipt
requested, postage prepaid, or by an overnight
nationally recognized courier service, addressed to
Landlord at the address herein first given with a copy
to: McPeters McAlearny Shimoff & Hatt, 4 West Redlands
Boulevard, P.O. Box 2084, Redlands, CA 92373-0661
Attn: Thomas H. McPeters, Esq., or to such other
address as Landlord may from time to time designate to
Tenant by notice in accordance with this Section, and
to Tenant at the Premises and to Tenant's address
herein first given Attention: Law Department, or to
such other address as Tenant may from time to time
designate to Landlord by notice in accordance with this
Section. All Notices shall be deemed given or served
three (3) business days after the date of registration
or certification by the postal authorities, if mailed,
or upon receipt, if sent by overnight courier or
delivered in person.
(b) Any notice which may or shall
be given under this Lease by Landlord may be given by
Landlord, by any employee of Landlord, by any attorney
representing Landlord, by any management company
operating the Shopping Center on behalf of Landlord or
any employee of, or attorney retained by, said
management company, and all notices from any of the
foregoing shall be as effective as if given by Landlord
itself.
(c) Any Notice with respect to any
assignment, alleged default, termination or other
material issue given to Landlord shall also be given to
each mortgagee of Landlord's interest in the Shopping
Center, the name and address of which mortgagee
Landlord has previously given Tenant written notice.
Section 13.2 Brokers. Landlord and Tenant each warrants and
represents to the other party hereto that it has not
dealt with any broker in negotiating or consummating
this Lease, and Landlord and Tenant each hereby agrees
to indemnify, defend and hold harmless the other party
hereto against and from any and all claims losses or
liabilities as a result of any inaccuracy in the
foregoing representation. This Section shall survive
the Term of this Lease.
Section 13.3 Subordination of Lease.
(a) This Lease is subordinate to
the lien of all mortgages, deeds of trust and security
instruments (collectively, "Mortgages"), and to all
ground leases, easement agreements and operating
agreements now covering or affecting all or any part of
the Shopping Center, including, without limitation, the
REA, and to all modifications, consolidations,
renewals, replacements and extensions of any of the
foregoing. Landlord hereby represents and warrants
that there are no Mortgages in effect with respect to
the Shopping Center or the Premises except as
specifically set forth in Exhibit G attached hereto and
made a part hereof, nor are there any REAs affecting
the Shopping Center or Tenant's rights under this Lease
except as set forth in Exhibit D attached hereto and
made a part hereof. Landlord shall exercise best
efforts to obtain from each mortgagee under a Mortgage
listed on Exhibit G a nondisturbance agreement in the
form of the "SNDA" attached to the Asset Purchase
Agreement.
(b) Subject to the terms of any
nondisturbance agreement entered into by Tenant, should
any mortgagee under a Mortgage succeed to Landlord's
interest in this Lease, Tenant shall, upon demand,
attorn to and recognize such mortgagee as Landlord
under this Lease. In the event of a sale or assignment
of Landlord's interest in this Lease or the Premises,
Tenant shall attorn to and recognize such purchaser or
assignee as Landlord under this Lease without further
act by Landlord or such purchaser or assignee.
Section 13.4 Unavoidable Delays. In the event that either
party shall be delayed or hindered in, or prevented
from, the performance of any work, service or other act
required under this Lease to be performed by such party
and such delay or hindrance is due to: (i) strikes,
lockouts, or other labor disputes; (ii) inability to
obtain labor or materials or reasonable substitutes
therefor; or, (iii) acts of God, governmental
restrictions, enemy act, civil commotion, unavoidable
fire or other casualty, or other causes of a like
nature beyond the control of the party so delayed or
hindered (collectively, "Unavoidable Delays"), then
performance of such work, service or other act shall be
excused for the period of such delay and the period for
the performance of such work, service or other act
shall be extended by a period equivalent to the period
of such delay. In no event shall any such delay
constitute a termination or extension of this Lease.
The provisions of this Section shall not operate to
excuse Tenant from the timely payment of Rent.
Section 13.5 Estoppel Certificates. Upon ten (10) business
days prior written request therefor by Landlord or
Tenant from time to time, each party agrees to execute
and to deliver to the requesting party, or to such
other addressee or addressees as the requesting party
may designate, a written statement certifying that:
(i) this Lease is in full force and effect and
unmodified, or describing any modification; (ii) that
there are no defenses or offsets against the
enforcement of this Lease, or stating with
particularity defenses or offsets claimed; stating the
date to which Rent has been paid; and (iv) stating the
Term Commencement Date and the date this Lease expires.
Section 13.6 Relationship of Parties. Nothing contained in
this Lease shall be deemed or construed as creating the
relationship of principal and agent or of partnership
or of joint venture between the parties hereto, it
being understood and agreed that neither the method of
computing Rent nor any other provision contained herein
nor any acts of the parties hereto shall be deemed to
create any relationship between the parties other than
that of Landlord and Tenant.
Section 13.7 Governing Law; Jurisdiction.
(a) Governing Law. This Lease, the
legal relations between the parties and any Action
(defined below), whether contractual or non-contractual,
instituted by any party with respect to
matters arising under or growing out of or in
connection with or in respect of this Lease, including
but not limited to the negotiation, execution,
interpretation, coverage, scope, performance, breach,
termination, validity, or enforceability of this Lease,
shall be governed by and construed in accordance with
the laws of the State of California applicable to
contracts made and performed in such State and without
regard to conflicts of law doctrines, except to the
extent that certain matters are preempted by federal
law or are governed as a matter of controlling law by
the law of the jurisdiction of incorporation of the
Tenant.
(b) Jurisdiction. Each party
hereby irrevocably submits to and accepts for itself
and its properties, generally and unconditionally, the
exclusive jurisdiction of and service of process
pursuant to the laws of the State of California and the
rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of
or in connection with this Lease or any related
document or obligation. Each party further irrevocably
designates and appoints the individual identified in or
pursuant to Section 13.1 hereof to receive notices on
its behalf, as its agent to receive on its behalf
service of all process in any such Action before any
body, such service being hereby acknowledged to be
effective and binding service in every respect. A copy
of any such process so served shall be mailed by
registered mail to each party at its address provided
in Section 13.1; provided that, unless otherwise
provided by applicable law, any failure to mail such
copy shall not affect the validity of the service of
such process. If any agent so appointed refuses to
accept service, the designating party hereby agrees
that service of process sufficient for personal
jurisdiction in any action against it in the applicable
jurisdiction may be made by registered or certified
mail, return receipt requested, to its address provided
in Section 13.1. Each party hereby acknowledges that
such service shall be effective and binding in every
respect. Nothing herein shall affect the right to
serve process in any other manner permitted by
applicable law.
(c) As used in this Section 13.7,
"Action" shall mean any action, complaint, petition,
investigation suit or other proceeding before any
arbitrator or any other governing body or entity having
appropriate jurisdiction.
Section 13.8 Interpretation. The neuter, feminine or
masculine pronoun when used herein shall each include
each of the other genders and the use of the singular
shall include the plural. In the event of any conflict
between the terms of this Lease, and the terms of the
Asset Purchase Agreement (including any related
agreements entered into by Landlord and Tenant), the
terms of the Asset Purchase Agreement shall prevail
over any contrary term of this Lease.
Section 13.9 Captions. The captions of Articles and Sections
contained in this Lease are for convenient reference
only and shall not be deemed or construed as in any
manner limiting or amplifying the terms and provisions
hereof.
Section 13.10 Partial Invalidity. If any term or provision of
this Lease, or the application thereof to any person or
circumstance, shall to any extent be determined to be
invalid or unenforceable by a court of competent
jurisdiction, then the remainder of this Lease, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby.
Section 13.11 Waivers. The waiver by Landlord of any breach of
any term, covenant or condition contained in this Lease
shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of
the same or any other term, covenant or condition
contained in this Lease. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease or of any right of
Landlord to a forfeiture of the Lease by reason of such
breach, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such
Rent. No term, covenant or condition of this Lease
shall be deemed to have been waived by Landlord unless
such waiver be in writing and signed by Landlord.
Section 13.12 Accord and Satisfaction. No payment by Tenant,
or receipt by Landlord, of a lesser amount than the
Rent payment due under this Lease shall be deemed or
construed to be other than a payment or receipt on
account of the earliest Rent due. Neither the
endorsement or statement on any check nor the receipt
or negotiation of any such check by Landlord, shall be
deemed or construed to be an accord and satisfaction.
Section 13.13 Counterparts. This Lease may be executed in
several counterparts, each of which shall be deemed an
original and all of which shall together constitute one
and the same instrument.
Section 13.14 Entire Agreement. This Lease and the Asset
Purchase Agreement incorporate all undertakings between
the parties hereto with respect to Tenant's lease of
the Premises. Tenant hereby acknowledges that neither
Landlord nor Landlord's employees, agents or
contractors have made any representations or promises
to Tenant with regard to the Premises or the Shopping
Center or this Lease that have not been expressly
stated in this Lease and, therefore, Tenant hereby
waives any and all claims against, or liability of,
Landlord and Landlord's employees, agents, and
contractors based thereon. Landlord hereby
acknowledges that Tenant and its employees and officers
have made no representations or promises with regard to
Tenant's operations, sales figures or methods of doing
business or any other matter except as expressly
contained in this Lease, and Landlord, therefore,
hereby waives any claim with respect thereto or based
thereon.
Section 13.15 Successors and Assigns. This Lease and each of
the terms and conditions hereof shall inure to the
benefit of, and be binding upon, Landlord, and
Landlord's heirs, executors, administrators, successors
and assigns. This Lease and each of the terms and
conditions hereof shall also be binding upon Tenant,
and Tenant's heirs, executors, administrators,
successors and assigns and shall inure to the benefit
of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been made and consented to in
accordance with the provisions of Article IX of this
Lease.
Section 13.16 Survival of Obligations. All obligations of each
party which by their nature involve performance after
the end of the Term, or which cannot be ascertained or
have been fully performed until after the end of the
Term, shall survive the expiration or earlier
termination of this Lease.
Section 13.17 Submission of Lease. Submission of this Lease by
one party to the other for examination or execution
does not constitute an offer made, or an option
granted, to enter into this Lease.
Section 13.18 Memorandum of Lease. Landlord and Tenant agree
to execute a memorandum of this Lease, which memorandum
shall be substantially in the form attached hereto as
Exhibit F and shall be recorded in the applicable real
property records as soon as possible after the date of
this Lease.
Section 13.19 Attachments. Attached hereto and made a part of
this Lease are the following: Exhibits A-G, inclusive.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Lease as of the date first above written.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
LEGAL DESCRIPTION OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DETERMINATION OF FAIR MARKET RENTAL VALUE
1. Efforts to Agree Upon Fair Market Rental Value.
If pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined with
respect to any Renewal Term, Landlord and Tenant
shall promptly commence negotiation to reach
agreement on Fair Market Rental Value for the
applicable Renewal Term. If Landlord and Tenant
are unable to reach agreement on Fair Market
Rental Value within the time period provided in
the Lease and the parties wish to proceed with a
method of resolving the disagreement regarding
Fair Market Rental Value, the terms of Section 2
below shall apply.
2. Arbitration Regarding Fair Market Rental Value.
(a) If Landlord and Tenant are to proceed with
the method of determining Fair Market
Rental Value under this Exhibit E, then
within ten (10) days of the date either
Landlord or Tenant delivers written notice
to the other party hereto confirming that,
pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined in
accordance with the terms of Exhibit E,
Landlord and Tenant shall each
simultaneously submit to the other in a
sealed envelope its good faith estimate of
Fair Market Rental Value. If the higher of
such estimates is not more than one hundred
five percent (105%) of the lower of such
estimates, then Fair Market Rental Value
shall be the average of the two estimates.
If one party ("Refusing Party") refuses to
simultaneously submit such estimate to the
other party ("Other") within such 10-day
period, then the Other may notify the
Refusing Party of the Other's willingness
to make such simultaneous submittal. If
the Refusing Party fails to make such
simultaneous submittal within five (5)
business days thereafter, the other party's
good faith estimate of Fair Market Rental
Value shall be Fair Market Rental Value.
(b) If the higher of the estimates is more than
one hundred five percent (105%) of the
lower of such estimates, then either
Landlord or Tenant may, by written notice
to the other at any time within ten (10)
days following the exchange of estimates,
require that the disagreement be resolved
by arbitration. Within seven (7) days
after such notice, the parties shall select
as an arbitrator a mutually acceptable
independent MAI appraiser with experience
in real estate activities, including at
least ten (10) years experience in
appraising anchor store retail space in
major regional shopping malls. If the
parties cannot agree on an appraiser within
such seven (7) day period, then within a
second period of seven (7) days, each shall
select and inform the other party of an
independent MAI appraiser meeting the
aforementioned criteria and within a third
period of seven (7) days, the two
appraisers shall select a panel of three
additional appraiser meeting the
aforementioned criteria and the three
appraisers shall determine Fair Market
Rental Value pursuant to this Exhibit E by
majority vote of such three appraisers.
Both Landlord and Tenant shall be entitled
to present evidence supporting their
respective positions to the panel of three
appraisers. If one party shall fail to
make such appointment within said second
seven (7) day period, then the appraiser
chosen by the other party shall be the sole
arbitrator, who shall determine Fair Market
Rental Value pursuant to this Exhibit E.
(c) Once the arbitrators have been selected as
provided above, then, as soon thereafter as
practicable but in any case within fourteen
(14) days, the arbitrators shall select one
of the two estimates of Fair Market Rental
Value submitted by Landlord and Tenant,
which must be the one that is closer to
Fair Market Rental Value as determined by
the majority of the arbitrators. The
arbitrators' selection shall be binding
upon Landlord and Tenant. The party whose
estimate is not chosen by the arbitrators
shall pay the costs of the arbitrators and
any experts retained by the arbitrators.
Any fees of any counsel or expert engaged
directly by Landlord or Tenant, however,
shall be borne by the party retaining such
counsel or expert.
EXHIBIT F
FORM OF MEMORANDUM OF LEASE
Recording Requested By And
When Recorded Return To:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93720
Attention: General Counsel
______________________________________________________________________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this
"Memorandum"), dated as of August 20, 1998, is entered
into by and between El Corte Ingles, S.A., a Spanish
corporation ("Landlord"), and Gottschalks Inc., a
Delaware corporation ("Tenant"). Landlord and Tenant
have entered into that certain Store Lease Agreement
dated as of August 20, 1998 (the "Store Lease"),
pursuant to which Landlord demised and leased to Tenant
and Tenant hired from Landlord the Premises as more
particularly described in the Lease (the "Premises"),
which Premises are located on the real property
described in Exhibit A attached hereto and made a part
hereof.
LANDLORD AND TENANT AGREE AS FOLLOWS:
1. For and in consideration of the
rental reserved and of the mutual covenants, agreements
and conditions set forth in that certain Store Lease,
Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord, upon all terms and
conditions set forth in the Store Lease, the Premises.
The primary term of the Lease is ten (10) years
commencing on August 20, 1998 and expiring on August 20,
2007.
2. On the terms and conditions more
specifically set forth in the Store Lease, Tenant has
certain fixed rights to renew the Term of the Lease as
more specifically set forth therein. Specifically,
Tenant has been granted four separate options to renew
the Term of the Lease, each for an additional period of
five (5) years.
3. This Memorandum has been prepared
to provide notice that the Premises are subject to the
terms and conditions of the Store Lease, which terms
are hereby incorporated into this Memorandum by this
reference. In no event shall the terms of this
Memorandum be deemed to modify, amend, limit or
otherwise affect the terms and conditions of the Store
Lease. In the event of any inconsistency between the
terms of this Memorandum and the terms of the Store
Lease, the terms of the Store Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Memorandum as of the date first written
above.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
Description of Real Property
EXHIBIT G
SCHEDULE OF EXISTING MORTGAGES
A. Current preliminary title report:
Title Company:
Date of report:
Order No.:
B. Existing Mortgages:
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES, S.A.,
as "Landlord"
and
GOTTSCHALKS INC.,
as "Tenant"
Dated as of August 20, 1998
Antelope Valley Mall
Palmdale, California
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS. . 1
Section 1.1 Definitions. . . . . . . . 1
Section 1.2 Effect of Basic Terms. . . 5
ARTICLE II
GRANT AND TERM . . . . . . 6
Section 2.1 Grant and Term of Lease. . 6
Section 2.2 Acceptance of Premises; Quiet
Enjoyment. . . . . . . . 6
Section 2.3 Surrender of Premises. . . 6
Section 2.4 Holding Over.. . . . . . . 7
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT
AGREEMENT 7
Section 3.1 Lease Controls Over REA. . 7
Section 3.2 Covenants Regarding REA. . 7
ARTICLE IV
RENT AND OTHER CHARGES . . . . 8
Section 4.1 Minimum Annual Rent. . . . 8
Section 4.2 Percentage Rent. . . . . . 8
Section 4.3 Utilities Charge . . . . . 10
Section 4.4 Common Area Maintenance
Costs. . . . . . . . . . 10
Section 4.5 Taxes. . . . . . . . . . . 10
Section 4.6 Late Payment Charges . . . 11
Section 4.7 Rent Payments. . . . . . . 12
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 12
Section 5.1 Permitted Use. . . . . . . 12
Section 5.2 Signs. . . . . . . . . . . 12
Section 5.3 Alterations of Premises. . 13
Section 5.4 Use of Common Areas. . . . 14
Section 5.5 Compliance with REA. . . . 15
Section 5.6 Compliance with Requirements15
Section 5.7 Liens. . . . . . . . . . . 16
ARTICLE VI
REPAIRS AND MAINTENANCE. . . . 17
Section 6.1 Tenant's Obligations . . . 17
Section 6.2 Landlord's Obligations . . 18
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION. 18
Section 7.1 Damage or Destruction. . . 18
Section 7.2 Condemnation . . . . . . . 20
ARTICLE VIII
INSURANCE . . . . . . . 21
Section 8.1 Tenant's Insurance . . . . 21
Section 8.2 Landlord's Insurance . . . 23
Section 8.3 Waiver of Subrogation. . . 23
Section 8.4 Governmental and Insurance
Requirements . . . . . . . . . . . . 23
Section 8.5 Indemnification. . . . . . 24
Section 8.6 Landlord Exculpation . . . 24
ARTICLE IX
ASSIGNMENT AND SUBLETTING . . . 25
Section 9.1 Notice to Landlord . . . . 25
Section 9.2 Landlord's Approval. . . . 25
Section 9.3 Permitted Transactions . . 26
Section 9.4 Compliance with REA. . . . 26
Section 9.5 Documentation and Expenses 26
ARTICLE X
DEFAULT. . . . . . . . 27
Section 10.1 Events of Default. . . . . 27
Section 10.2 Remedies . . . . . . . . . 28
Section 10.3 Attorneys' Fees. . . . . . 30
Section 10.4 Agreement to Arbitrate . . 31
Section 10.5 No Set-off/Counterclaims . 31
Section 10.6 Right of Redemption. . . . 31
Section 10.7 No Waiver. . . . . . . . . 31
Section 10.8 Unperformed Covenants of
Landlord May Be Performed By
Tenant . . . . . . . . . . 32
ARTICLE XI
[INTENTIONALLY OMITTED]. . . . 32
ARTICLE XII
OPTIONS. . . . . . . . 32
Section 12.1 Renewal Options. . . . . . 32
Section 12.2 Lease Terms Applicable . . 33
Section 12.3 Rent During Renewal Terms. 33
Section 12.4 Lease Amendment. . . . . . 34
ARTICLE XIII
MISCELLANEOUS PROVISIONS. . . . 34
Section 13.1 Notices. . . . . . . . . . 34
Section 13.2 Brokers. . . . . . . . . . 34
Section 13.3 Subordination of Lease . . 35
Section 13.4 Unavoidable Delays . . . . 35
Section 13.5 Estoppel Certificates. . . 35
Section 13.6 Relationship of Parties. . 36
Section 13.7 Governing Law; Jurisdiction 36
Section 13.8 Interpretation . . . . . . 36
Section 13.9 Captions . . . . . . . . . 37
Section 13.10 Partial Invalidity . . . . 37
Section 13.11 Waivers. . . . . . . . . . 37
Section 13.12 Accord and Satisfaction. . 37
Section 13.13 Counterparts . . . . . . . 37
Section 13.14 Entire Agreement . . . . . 37
Section 13.15 Successors and Assigns . . 38
Section 13.16 Survival of Obligations. . 38
Section 13.17 Submission of Lease. . . . 38
Section 13.18 Memorandum of Lease. . . . 38
Section 13.19 Attachments. . . . . . . . 38
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER. B-1
EXHIBIT C LEGAL DESCRIPTION OF PREMISES C-1
EXHIBIT D SCHEDULE OF REA AND RELATED AGREEMENTS D-1
EXHIBIT E DETERMINATION OF FAIR MARKET RENTAL VALUE E-1
EXHIBIT F FORM OF MEMORANDUM OF LEASE . G-1
EXHIBIT G SCHEDULE OF EXISTING MORTGAGES H-1
STORE LEASE AGREEMENT
Antelope Valley Mall
Palmdale, California
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of this 20th day of August, 1998, by and
between EL CORTE INGLES, S.A., a Spanish corporation,
having an address at Hermosilla, 112, 28009 Madrid
SPAIN, Attention: Mr. Jorge Pont ("Landlord"), and
GOTTSCHALKS INC., a Delaware corporation, having an
address at 7 River Park Place East, Fresno, California
93720, Attention: General Counsel ("Tenant").
R E C I T A L S
A. Landlord, Tenant and Harris (defined
below) are parties to that certain Asset Purchase
Agreement (defined below). Prior to the date hereof,
Harris leased the Premises (defined below) from
Landlord. Pursuant to the Asset Purchase Agreement,
Tenant is to purchase certain assets of Harris. The
Asset Purchase Agreement requires Landlord to terminate
Harris' lease and enter into this Lease with Tenant.
B. Concurrently with execution of this
Lease, Landlord has terminated Harris' lease. Landlord
now desires to lease to Tenant, and Tenant desires to
lease from Landlord, the Premises on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the
foregoing Recitals, the receipt and sufficiency of
which is hereby acknowledged by each party as of the
time of execution and delivery hereof, and in further
consideration of the rents reserved and the covenants
and conditions set forth herein, Landlord and Tenant
agree as follows:
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS
Section 1.1 Definitions. As used in this
Lease, the following Terms shall have the meanings set
forth below:
"Alterations" shall have the
meaning ascribed thereto in Section 5.3.
"Annual Report" shall have the
meaning ascribed thereto in Section 4.2(b).
"Asset Purchase Agreement":
That certain Asset Purchase Agreement dated as of July
21, 1998, by and among Tenant, as Buyer, Harris, as
Seller, and Landlord, in its capacity as the sole
shareholder of Harris, together with all other
agreements and documents entered into by Landlord and
Tenant in connection therewith.
"Common Areas": The parking
areas, sidewalks, landscaped areas, courts, malls,
roofs, streets, roadways, loading platforms, service
area, curbs, corridors, stairways, elevators,
escalators, comfort stations, lounges and shelters and
all other facilities designated as "Common Area" under
the REA.
"Default" shall have the
meaning ascribed thereto in Section 10.1.
"Developer" shall mean the
Person responsible for managing and maintaining the
Common Areas under the REA.
"Fair Market Rental Value"
shall mean the fair market rental value of the
Premises, as of the date and for the time period of
determination, to be determined in accordance with the
terms of Article XII and, as necessary, Exhibit E
attached hereto and made a part hereof.
"Floor Area" shall have the
meaning given such term in the REA.
"Gross Sales" shall mean the
gross selling price of all merchandise or services sold
in or from the Premises by Tenant, its subtenants,
licensees or concessionaires, whether for cash or on
credit, adjusted by excluding the following:
(i) Any exchange of merchandise between
stores owned by or affiliated with
Tenant where such exchange is made
solely for the convenient operation
of Tenant's business and not for the
purpose of consummating a sale made
in, at or from the Premises, or for
the purpose of depriving Landlord of
the benefit of a sale which would
otherwise be made in or at the
Premises;
(ii) Returns to shippers or
manufacturers;
(iii) Cash or credit refunds to customers
on transactions (not to exceed the
actual selling price of the item
returned) otherwise included in
Monthly Gross Sales, including,
without limitation, (a) sums and
credits received in the settlement
of claims for loss of or damage to
merchandise, to the extent
previously reported as part of Gross
Sales and (b) the price allowed on
all merchandise traded in by
customers for credit or the amount
of credit for discounts and
allowances made in lieu of
acceptance thereof, but not
including any amount paid or payable
for what are commonly referred to as
trading stamps;
(iv) Sales of fixtures, machinery,
equipment or property which are not
stock in trade;
(v) Amounts collected and paid by Tenant
to any government for any sales,
excise, luxury, gross receipts taxes
or other similar taxes now or
hereafter imposed upon the sales of
merchandise or services;
(vi) The amount of any discount on sales
to employees;
(vii) Alteration workroom charges and
delivery charges;
(viii) Interest, service or sales
carrying charges or other
charges, however denominated,
paid by customers for extension
of credit on sales and where
not included in the merchandise
sales price;
(ix) Receipts from public telephones,
stamp machines, public toilet locks
or vending machines installed solely
for use by Tenant's employees; and
(x) Gift certificates, or like vouchers,
until such time as the same shall
have been converted into a sale by
redemption.
"Harris" means The Harris
Company, a California corporation, a wholly-owned
subsidiary of Landlord.
"Imposition" shall have the
meaning ascribed thereto in Section 4.5.
"Initial Term": The initial
10-year Term of this Lease.
"Interest Rate": The rate of
interest per annum equal to the lesser of: (i) the
highest lawful rate of interest that Tenant may be
charged; or (ii) the "prime rate" announced from time
to time by Chase Manhattan Bank, N.A., New York, New
York, for short-term, unsecured loans to its most
credit-worthy customers. In the event Chase Manhattan
Bank, N.A. shall discontinue reporting its "prime rate"
or shall cease to exist, Landlord shall select a
substitute bank, and the "prime rate" reported by such
bank shall be used for computing interest payable
hereunder.
"Lease Year": A period of
twelve (12) consecutive full calendar months,
commencing as of the day after the Saturday which is
closest (by number of days) to January 31 and ending on
the Saturday which is closest (by number of days) to
January 31 of the following calendar year. The first
Lease Year shall be the period commencing on the Term
Commencement Date and ending on January 30, 1999. The
final Lease Year shall be the period commencing on the
day after the Saturday which is closest (by number of
days) to January 31st of the calendar year in which the
Lease Term (as it may be extended) expires and ending
on the expiration date of the Lease Term. It is
acknowledged that this definition of Lease Year is
intended to coincide with Tenant's fiscal year.
"Major" shall mean each of the
parties to the REA, as more particularly set forth in
Exhibit D attached hereto and made a part hereof.
"Minimum Annual Rent" shall
have the meaning ascribed thereto in Section 4.1.
"Mortgages" shall have the
meaning ascribed thereto in Section 13.3.
"Notice" shall have the meaning
ascribed thereto in Section 13.1(a).
"Option(s)" shall have the
meaning ascribed thereto in Article XII.
"Percentage Rent" shall have
the meaning ascribed thereto in Section 4.2(a).
"Permitted Use" shall mean any
lawful use which complies with the REA and is not
prohibited for the Premises by the REA.
"Person" means any individual,
partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint
venture, governmental authority or other entity of
whatever nature.
"Premises": That certain real
property and improvements thereon described in Exhibit
C attached hereto and made a part hereof.
"Prohibited Use" shall mean any
use which is prohibited for the Premises by the REA.
"REA" shall mean that certain
Amendment to and Restatement of Construction, Operation
and Reciprocal Easement Agreement and each of the other
documents related thereto, as more particularly
described in Exhibit D attached hereto and made a part
hereof, all as the same may be amended or modified from
time to time.
"Renewal Term(s)" shall have
the meaning ascribed thereto in Article XII.
"Rent": Minimum Annual Rent,
Percentage Rent, utilities charges, Impositions,
insurance costs and all other amounts and charges
payable by Tenant under any provision of this Lease.
"Requirements" shall mean all
federal, state and local statutes, laws, ordinances,
rules, regulations, authorizations and requirements
relating to the Premises or the use thereof, including,
without limitation, planning, zoning, subdivision,
environmental, toxic and hazardous waste, health, fire
safety and handicap access and all encumbrances,
covenants, conditions and restrictions, violation of
which encumbrances, covenants, conditions and
restrictions could either create a lien or result in a
termination of any agreement beneficial to the use or
manner of use of the Premises or any portion thereof.
"Shopping Center": The land
and improvements known as "Antelope Valley Mall", with
a street address of 1301 West Avenue "P", in the City
of Palmdale, County of Los Angeles, and State of
California, more particularly described in Exhibit A
attached hereto and made a part hereof and depicted on
the site plan attached hereto as Exhibit B and made a
part hereof.
"Taking" shall have the meaning
ascribed thereto in Section 7.2(a).
"Tenant's Employees and
Invitees" shall have the meaning ascribed thereto in
Section 5.4.
"Term": The 10-year period
commencing on the Term Commencement Date and expiring
on August 20, 2008, as such term may be extended or
shortened pursuant to the terms hereof, including,
without limitation, as it may be extended for the
period of any Renewal Term(s).
"Term Commencement Date":
August 20, 1998.
"Unavoidable Delays" shall have
the meaning ascribed thereto in Section 13.4.
Section 1.2 Effect of Basic Terms. Each of
the foregoing definitions and basic provisions is set
forth in this Article I for convenient reference only
and shall be construed in conjunction with, and limited
by, references thereto in other provisions of this
Lease.
ARTICLE II
GRANT AND TERM
Section 2.1 Grant and Term of Lease.
(a) Landlord does hereby let and
lease to Tenant the Premises, together with all right
to use the Common Areas for the Term, subject to the
terms and conditions set forth in this Lease.
(b) Landlord reserves the right to
enter the Premises at any time in case of emergency and
at all other reasonable times and upon reasonable
advance notice (i) to inspect the condition of the
Premises; and (ii) to make repairs to the building in
which the Premises are located, to the extent Landlord
is required to do so, or is otherwise permitted to do
so, pursuant to the terms of this Lease.
Section 2.2 Acceptance of Premises; Quiet
Enjoyment.
(a) Acceptance of Premises. Tenant
accepts the Premises "as-is," but subject to the
express representations, warranties and covenants of
Landlord set forth in the Asset Purchase Agreement and
in this Lease.
(b) Quiet Enjoyment. Landlord
covenants that Tenant, upon paying the Rent and
performing and observing all other terms and conditions
of this Lease to be performed or observed by Tenant,
shall peacefully and quietly have, hold and enjoy the
Premises and the appurtenances thereto throughout the
Term without hindrance, ejection or molestation by
Landlord or any other person or entity lawfully
claiming through Landlord or claiming paramount title
to Landlord, subject only to the terms of this Lease,
the REA and any Mortgage or ground lease to which this
Lease is subordinate.
Section 2.3 Surrender of Premises. Upon
the expiration or earlier termination of the Term,
Tenant shall deliver up and surrender to Landlord
possession of the Premises, including all alterations,
additions, improvements and fixtures, other than
Tenant's trade fixtures, in good order, condition and
state of repair, ordinary wear and tear excepted, and
shall deliver all keys to the Premises to the office of
Landlord at the Shopping Center or as otherwise
directed by Landlord. Tenant shall have fifteen (15)
days after the date the Term of this Lease expires or
earlier terminates to remove its personal property and
trade fixtures; provided, however, that (a) Tenant
shall repair all damage to the Premises resulting from
or arising out of such removal, (b) during such period
Tenant shall perform and be liable for all obligations
and conditions imposed on Tenant hereunder except for
the payment of Rent, including, without limitation,
maintenance, repair, apportionment of taxes,
maintenance of insurance, compliance with Requirements
and assumption of liability for the Premises. The
obligations set forth in the preceding sentence shall
survive the termination of this Lease. Any property of
Tenant not removed from the Premises within such
fifteen (15) day period shall be deemed abandoned. In
addition to all other remedies available, Landlord may,
but shall not be obligated to, retain or dispose of any
or all such property without liability to Tenant. In
the event that Landlord elects to dispose of such
property, Landlord shall so notify Tenant, and Tenant
shall, no later than ten (10) days after such notice,
remove all such property from the Premises; provided,
however, that if Tenant fails to so remove such
property, then Landlord may do so, and Tenant shall pay
to Landlord, on demand, all costs and expenses incurred
by Landlord in disposing of such property, including,
without limitation, reasonable attorneys' fees and
disbursements, together with interest thereon, calcu-
lated at the Interest Rate, from the date Landlord ex-
pended such amounts.
Section 2.4 Holding Over. If not sooner
terminated, this Lease shall end on the date set forth
in the definition of "Term" in Section 1.1 without the
necessity of notice from either Landlord or Tenant to
terminate this Lease, Tenant hereby waiving notice to
vacate the Premises. If Tenant, or any party claiming
under Tenant, including, without limitation,
subtenants, licensees or concessionaires, remains in
possession of the Premises or any part thereof after
the expiration or termination of this Lease, no tenancy
or interest in the Premises shall result therefrom but
such holding over shall, at Landlord's option, be
deemed a month-to-month tenancy and, otherwise, shall
be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal. As
Landlord's sole remedy for such holding over, Tenant
shall pay to Landlord for any full or partial month
Tenant holds over in the Premises after the expiration
or termination of this Lease a sum equal to one hundred
fifty percent (150%) of the Minimum Annual Rent and
Percentage Rent paid or payable by Tenant under this
Lease with respect to the last full month of the Lease
Term.
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT
Section 3.1 Lease Controls Over REA. As
between Landlord and Tenant, the terms and provisions
of this Lease shall control notwithstanding any
conflict with the provisions of the REA. Tenant shall
be fully liable for the performance of all obligations
under the REA in accordance with all of the terms and
provisions thereof, to the extent that Tenant has
expressly assumed responsibility for the performance of
any such obligations under the terms of this Lease.
Landlord is and shall remain fully liable for the
performance of all of Landlord's obligations under the
REA in accordance with all of the terms and provisions
thereof, to the extent that Tenant has not expressly
assumed responsibility for the performance of such
obligations under the terms of this Lease.
Section 3.2 Covenants Regarding REA.
Landlord will fully and faithfully carry out and
perform the terms, covenants, provisions and conditions
of the REA to be performed by the Landlord. Tenant
will fully and faithfully carry out and perform the
terms, covenants, provisions and conditions of the REA
which, under the express terms of this Lease, are to be
performed by the Tenant. Landlord will exert its best
efforts in exercising all of Landlord's rights and
remedies under the REA to enforce performance of all
terms, covenants, provisions, and conditions of the
REA; and Landlord will not take any of the actions
requiring Landlord's approval thereunder, without first
having delivered to Tenant a copy of the request for
approval and any documentation or material as to which
such approval is requested or required and thereafter
obtained Tenant's written approval thereof, which
approval shall not be unreasonably withheld,
conditioned or delayed. Landlord will not enter into
any agreement amending, supplementing or cancelling the
REA without first obtaining Tenant's prior written
approval thereto, which approval shall not be
unreasonably withheld, conditioned or delayed.
Landlord hereby appoints Tenant as Landlord's true and
lawful attorney-in-fact to take in Landlord's name
whatever reasonable action Tenant may deem appropriate
to enforce performance of the terms of the REA and to
avail itself on Landlord's behalf of any remedy therein
granted Landlord in the event (i) Tenant shall notify
Landlord that the obligations under the REA are not
being properly performed and (ii) Landlord shall fail
to take action to Tenant's reasonable satisfaction
within a reasonable time after receiving notice
thereof.
It is the intent of the parties to this Lease
that this Lease and the REA are and shall remain
mutually dependent and co-existent documents. Tenant
shall have the right (in its sole and absolute
discretion) to terminate this Lease by giving Landlord
notice to such effect within ninety (90) days after the
REA shall, under its express terms and conditions,
expire or terminate or be cancelled, and this Lease
shall terminate on the last day of the month next
succeeding the month in which such notice is given.
ARTICLE IV
RENT AND OTHER CHARGES
Section 4.1 Minimum Annual Rent. Tenant
agrees to pay to Landlord as rental for the Premises
the sum of Two Hundred Twenty-Six Thousand Six Hundred
Seventy-Nine Dollars ($226,679.00) per Lease Year (the
"Minimum Annual Rent"), payable in advance in equal
monthly installments of Eighteen Thousand Eight Hundred
Eighty-Nine and 91/100 Dollars ($18,889.91), on or
before the first (1st) day of each calendar month for
the balance of the Term. Minimum Annual Rent shall be
prorated (on the basis of a 30-day month and 360-day
year) for any partial month and partial Lease Year
comprising a portion of the Term of this Lease. In the
event that the Term expires or is terminated on a date
other than the last day of a calendar month, Tenant
shall pay Landlord, on the first (1st) day of the last
month of the Term, a pro rata portion of a monthly
installment of such Minimum Annual Rent, calculated on
a per diem basis for a month of thirty (30) days.
Section 4.2 Percentage Rent.
(a) Formula for Calculation. In
addition to Minimum Annual Rent, Tenant covenants and
agrees to pay to Landlord as additional rent for each
Lease Year the sum of Three percent (3.0%) of the
amount by which Tenant's Gross Sales for such Lease
Year exceeds the Minimum Annual Rent ("Percentage
Rent"). Percentage Rent shall be payable, in arrears,
on or before March 10 for the immediately preceding
Lease Year. The amount of Percentage Rent payable by
Tenant hereunder for the first Lease Year shall be
prorated by computing the Percentage Rent that would be
payable based on Gross Sales for the first 365 days of
the Term and multiplying that number by a fraction, the
numerator of which is the number of days in the first
Lease Year and the denominator of which is 365. Such
prorated Percentage Rent for the first Lease Year shall
be payable prior to the 455th day of the Term. The
Percentage Rent payable by Tenant for the final Lease
Year shall be prorated by computing the Percentage Rent
that would be payable based on Gross Sales for the last
365 days of the Term and multiplying that number by a
fraction, the numerator of which is the number of days
in the final Lease Year and the denominator of which is
365. Such prorated Percentage Rent for the final Lease
Year shall be payable within 90 days after the Term
expiration date.
(b) Annual Report. On or before
March 10 during the Term (including the March 10
following the end of the Term), Tenant shall furnish
Landlord with a written statement (the "Annual
Report"), certified by Tenant's chief financial officer
or comptroller, of total Gross Sales made from the
Premises during the preceding Lease Year, which Annual
Report shall contain Tenant's computation of Percentage
Rent for such Lease Year. The Annual Report shall be
in form reasonably satisfactory to Landlord and shall
contain such details and breakdown as may accurately
depict Gross Sales. The Annual Report shall not carry
forward transactions completing in the preceding Lease
Year, or carry back transactions completed in the
following Lease Year.
(c) Records. Tenant shall maintain
at the Premises or at its principal record keeping
office within the continental United States at all
times during the Term, full, complete and accurate
books of account and records in accordance with
generally accepted accounting practices consistently
applied for all operations of the business conducted in
or from the Premises, including the recording of Gross
Sales and the receipt of all merchandise into, and the
delivery of all merchandise from, the Premises during
the Term, and shall retain such books and records,
copies of all tax reports and tax returns submitted to
taxing authorities, as well as copies of contracts,
vouchers, checks, inventory records, electronic data
recordings and other documents, recordings, and papers
in any way related to the operation of such business
for at least three (3) years from the end of the period
to which they are applicable, or, if any audit is
required or a controversy should arise between the
parties hereto regarding the Rent payable hereunder,
until such audit or controversy is terminated, even
though such retention period may extend beyond the
expiration of the Term or earlier termination of this
Lease.
(d) Review of Books and Records.
The acceptance by Landlord of payments of Percentage
Rent or any Annual Report pursuant to Section 4.2(b)
above shall not prejudice Landlord's right to examine
Tenant's books, records and accounts in order to verify
the amounts set forth thereon. Landlord may at any
reasonable time during the Term (but not more
frequently than once during any calendar year) cause a
complete or partial audit to be made of Tenant's books,
records and other documents relating to the Premises,
including the books and records of any subtenant,
licensee or concessionaire, for all or any part of the
three (3) year period immediately preceding the day of
the giving of such notice by Landlord to Tenant.
Landlord or its duly authorized representatives shall
have full and free access to such books and records and
the right to require of Tenant, its agents and
employees, such information or explanation with respect
to such books and records as may be necessary for a
proper examination and audit thereof. If such audit
discloses an understatement in an Annual Report of
Gross Sales, Tenant shall pay the deficiency in
Percentage Rent with, interest thereon calculated at
the Interest Rate, and, if Gross Sales have been
understated in any Annual Report by four percent (4%)
or more, Tenant shall pay to Landlord, as Rent, the
cost of said audit, upon demand.
(e) Confidentiality. Any
information regarding Tenant's business operations
delivered to or made available to Landlord, or
otherwise obtained by Landlord in the exercise of its
rights under subsection (d), above, shall be held in
strictest confidence by Landlord. Landlord shall
disclose such information only to its accountants,
attorneys and other consultants and shall require all
such parties to keep all information regarding Tenant
strictly confidential. Nothing in this subsection (e)
prohibits Landlord from disclosing such material when
ordered to do so by a court of competent jurisdiction,
or when necessary to properly plead or prosecute a
legal action brought by Landlord against Tenant for
nonpayment of Percentage Rent.
Section 4.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or respective utilities companies for all
required utility services to the Premises. Tenant
shall pay all required deposits and meter charges for
utilities to the Premises to the respective utility
supplier(s).
(b) Tenant shall pay promptly, as
and when same shall become due, all water rents, rates
and charges, all sewer rents, rates and charges and all
charges for electricity, gas, heat, steam, hot and/or
chilled water, air conditioning, ventilating, lighting
systems, sprinkler systems and all other utilities sup-
plied to the Premises.
Section 4.4 Common Area Maintenance Costs.
Tenant shall pay, as Rent, Common Area Maintenance
charges as specified in the REA or any lesser amount
specified in a separate agreement thereunder. Tenant
shall pay Common Area Maintenance charges as referenced
herein within thirty (30) days after Tenant has
received a bill therefor.
Section 4.5 Taxes.
(a) Tenant shall pay before
delinquency all real and personal property taxes,
general and special assessments, and other public
charges levied upon or assessed against the Premises,
the land thereunder, or any of the building structures,
fixtures, equipment, or improvements thereon
(collectively, "Impositions"). Tenant shall deliver to
Landlord reasonable evidence of payment prior to the
time said Impositions have become delinquent.
(b) Any Imposition relating to a
fiscal period of the taxing authority, a part of which
period is included within the Term of this Lease and a
part of which is included prior to the beginning of the
Term of this Lease or after the termination of this
Lease shall (whether or not such Imposition shall be
paid, assessed, levied or imposed upon or become due
and payable and a lien upon the Premises or a part
thereof during the term of this Lease) be adjusted as
between Landlord and Tenant as of the Term Commencement
Date or as of the date of the termination of the Term
of this Lease, as the case shall require, so that
Landlord shall pay that proportion of such Imposition
which that part of such fiscal period included in the
period of time prior to the commencement or after the
termination of the Term, as the case may be, bears to
such fiscal period, and Tenant shall pay the remainder
thereof.
(c) In the event Landlord is unable
to secure separate tax bills for Tenant as herein
described, then Tenant shall pay to Landlord, prior to
such time as said Impositions would be due and payable,
all Impositions attributable to the Premises. Personal
property taxes shall be allocated directly to Tenant's
personal property. Real property taxes will be
allocated by virtue of the ratio of the Floor Area of
the Premises to the total gross leasable area in the
Shopping Center, which said gross leasable area shall
not include any part of the Common Area in the Shopping
Center, being assessed on the tax bill which relates to
the Premises.
(d) If Tenant fails to pay any such
taxes, assessments or other public charges which it is
obligated to pay as provided in this section before the
same become delinquent, then and in such event,
Landlord may pay the same together with any interest
and penalties thereon, and the amount so paid shall be
deemed additional Rent immediately due and payable by
Tenant to Landlord on demand, together with interest
thereon at the Interest Rate.
(e) Anything in this section to the
contrary notwithstanding, Landlord agrees that Tenant
shall have the right, at Tenant's sole cost and
expense, to contest the legality or validity of any
Impositions payable by Tenant, but no such contest
shall be carried on or maintained by Tenant after such
Impositions become delinquent unless Tenant shall have
duly paid the amount involved under protest or shall
procure and maintain a stay of all proceedings to
enforce any collection thereof and any forfeiture or
sale of the leased property, and shall also provide for
payment thereof together with all penalties, interest,
costs and expenses by deposit of a sufficient sum of
money or by a good and sufficient undertaking as may be
required by law to accomplish such stay. Landlord
shall, at the request of Tenant and at Tenant's sole
expense, execute or join in the execution of any
instrument of documents necessary in connection with
any such contest except bonds of undertakings. In the
event of any such contest made by Tenant, Tenant shall
promptly, upon final determination thereof, pay and
discharge the amount indicated or resulting from said
contest, together with any penalties, fines, interest,
costs and expenses that may have accrued thereon.
Section 4.6 Late Payment Charges. Late
payments of Rent or any other sum due from Tenant
hereunder, including all amounts paid by Landlord on
behalf of Tenant to satisfy any condition or covenant
of this Lease and all costs incurred by Landlord in
enforcing the terms of this Lease, shall bear interest
from the date Tenant receives written notice of such
late payment or default (as applicable) until paid at
the Interest Rate.
Section 4.7 Rent Payments. All Rent
payable by Tenant under this lease shall be paid in
United States Dollars without prior demand therefor and
without any deductions, offsets or counterclaims except
those expressly permitted under the terms of this
Lease, to Landlord and shall be delivered on or before
the due date thereof via wire transfer to
Bank of America, S.A.
Principal Office: Madrid
1 Capitan Haya St.
28009 Madrid SPAIN
For Credit To:
El Corte Ingles, S.A.
Account number 31922020
or to such other payee and at such other place as
Landlord may hereafter designate from time to time by
written notice to Tenant. Notwithstanding anything to
the contrary in this Lease, Tenant may withhold any
portion of Rent which Tenant is required to withhold by
virtue of Landlord's status as a foreign person under
Section 1445 of the Internal Revenue Code or other
applicable law.
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS
Section 5.1 Permitted Use.
(a) Tenant shall use the Premises
only for the Permitted Use and for no other purpose
whatsoever.
(b) Tenant covenants that Tenant
shall not use or allow the Premises or any part thereof
to be used or occupied for any Prohibited Use or any
immoral or unlawful purpose or in violation of any
certificate of occupancy or certificate of compliance
for the Premises.
Section 5.2 Signs. Tenant shall have the
right, without Landlord's consent, to erect any and all
signs on or about the Premises it elects, provided that
such signage complies with the REA and all
Requirements. From time to time upon Tenant's request,
Landlord covenants to assist Tenant (at no cost or
expense to Landlord) in processing any and all
approvals necessary for Tenant to erect such signage.
Section 5.3 Alterations of Premises.
(a) All changes, alterations or
modifications to the Premises (collectively,
"Alterations") shall be made in accordance with this
Section 5.3. Tenant shall have the right to perform
non-structural modifications to, remodel and
redecorate, retexturize, recarpet and repaint the
Premises without obtaining the prior written consent of
Landlord; provided (i) the proposed Alteration does not
affect the exterior appearance of the Premises,
including, without limitation, the storefront or the
storefront sign of the Premises, or the roof,
foundation, supports or structural integrity of the
building of which the Premises is a part; (ii) Tenant
submits an information copy of all remodeling plans to
Landlord at least thirty (30) days prior to the date
any such work is scheduled to commence; (iii) the total
cost of all work involved in the Alteration does not
exceed Three Hundred Thousand Dollars ($300,000) in any
one project or an aggregate amount of Six Hundred
Thousand Dollars ($600,000) in any one Lease Year; and
(iv) such work does not violate any code, ordinance or
Requirement and does not cause Landlord's insurance
rates to increase. Except for the foregoing, Tenant
shall not make any Alterations to any portion of the
Premises without, in each instance, obtaining
Landlord's prior written consent.
(b) All work ("Work") pertaining to
any Alteration to the Premises, including, without
limitation, Tenant's Work, shall comply with the
following:
(i) No Work shall be undertaken
until Tenant shall have procured and paid for, so
far as the same may be required, from time to
time, all permits and authorizations of all
municipal departments and governmental
subdivisions having jurisdiction. Provided no
default exists hereunder, Landlord shall join in
the application for such permits and
authorizations whenever such action is necessary;
provided, however, that Landlord shall not incur
any expense or be subject to any liability as a
result of joining in any such application.
Within ten (10) days after completion of the
Work, Tenant shall deliver to Landlord a
certificate of occupancy or such similar
certificates as may be required or customary by
applicable laws and legal requirements.
(ii) All Work shall be performed
promptly and in a good and workmanlike manner and
in compliance with all applicable permits and
laws, and in accordance with the orders, rules
and regulations of the National Board of Fire
Underwriters or any other body hereafter
exercising similar functions, and Tenant shall
furnish Landlord with evidences and assurances
reasonably acceptable to Landlord that all such
Work shall be completed, subject to Unavoidable
Delays, at least one (1) year prior to the end of
the Term of this Lease.
(iii) The cost of any Work shall
be paid promptly by Tenant so that the Premises
shall at all times be free and clear of liens for
labor and materials supplied or claimed to have
been supplied in connection therewith.
(iv) Tenant shall carry, or
shall cause to be carried, worker's compensation
insurance covering all persons employed in
connection with any Work and with respect to whom
death or bodily injury claims could be asserted
against Landlord, Tenant or the Premises, and,
without duplication of any insurance required by
Article VIII hereof, adequate all-risk and
builders risk insurance for the mutual benefit of
Tenant and Landlord in amounts satisfactory to
Landlord and, at Landlord's request, such other
insurance in favor of Landlord in types and
amounts as are reasonable and customary, all at
Tenant's expense, at all times when any such Work
is in progress; provided, however, that Tenant
shall be fully liable for any failure to maintain
such insurance, including, without limitation,
Tenant's obligation to indemnify Landlord for the
failure to maintain insurance in accordance with
the provisions of this Lease. All such insurance
shall be provided by a company or companies of
recognized responsibility and reasonably
satisfactory to Landlord, and all policies or
certified copies of policies issued by the
respective insurers, bearing notations evidencing
the payment of premiums or accompanied by other
evidence satisfactory to Landlord of such
payment, shall be delivered to Landlord prior to
the commencement of any Work.
Section 5.4 Use of Common Areas.
(a) All Common Areas shall be
subject to the exclusive control and management of
Developer as set forth in the REA. Tenant and Tenant's
officers, directors, employees, agents, subtenants,
contractors, subcontractors, concessionaires and
licensees, and the officers, directors, employees and
agents of Tenant's subtenants, concessionaires and
licensees, and the customers, patrons and business
invitees of Tenant and of Tenant's subtenants,
concessionaires and licensees (hereinafter,
collectively, "Tenant's Employees and Invitees") shall
have the non-exclusive right to use (without cost or
expense to Tenant or Tenant's Employees or Invitees
other than as expressly provided in this Lease) the
Common Areas for the purpose of gaining ingress to and
egress from the Premises, for the passage and parking
of vehicles, and for the passage and accommodation of
pedestrians, such right to be in common with Landlord
and those occupants (and the employees and invitees of
such occupants) of the Shopping Center from time to
time authorized to use said common areas for such
purposes.
(b) Notwithstanding anything to the
contrary contained in Section 5.4(a) hereof, Landlord
shall exercise best efforts to cause Developer to
maintain, manage and operate the Common Areas
(including, but not by way of limitation, the parking
area) in good order, condition and repair in conformity
with the REA so as to at all times maintain an
appearance and attractiveness reasonably equivalent to
the level of same existing as of the date hereof.
Developer's obligations to be enforced by Landlord
pursuant to the preceding sentence in respect of the
maintenance, management and operation of the Common
Areas shall include, but not be limited to, the
following:
(i) Undertaking such maintenance
and construction work (including replacements as
required) as is necessary to preserve and
maintain the utility of the Common Areas;
(ii) The care and maintenance of
all identification signs and all planters
(including those adjacent to the Premises but
excluding any signs and planters of Tenant) and
landscaping at the Shopping Center;
(iii) The adequate illumination
of the Common Areas at all times of darkness that
Tenant is open for business (plus a period of
one-half hour after Tenant closes for business);
(iv) The payment prior to
delinquency of all real estate and personal
property taxes and assessments levied on the
Common Areas;
(v) The removal of dirt and
debris and rubbish (including the regular
sweeping of the parking area and all sidewalks);
and
(vi) The operation, management
and maintenance of the enclosed mall, including
the heating, ventilating, air-conditioning,
lighting and housekeeping of the same and the
maintenance (and replacement as required) of
landscaping therein.
Section 5.5 Compliance with REA. Tenant
shall abide by the terms of the REA. Landlord agrees
that it will not change, amend or alter (or agree or
consent to change, amend or alter) any term or
condition of the REA without the prior written consent
of Tenant, which consent shall not be unreasonably
withheld.
Section 5.6 Compliance with Requirements.
(a) Insofar as the same relate to
or are caused by Tenant's occupancy and use of the
Premises, and Tenant's other activities under this
Lease, throughout the Term, Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present
and future Requirements applicable to the Premises,
subject, however, to Tenant's rights to contest any
such Requirements, as set forth in clause (b) below.
Tenant shall likewise comply with the provisions of all
of Tenant's insurance policies required to be
maintained hereunder or otherwise carried by Tenant
with respect to the Premises from time to time.
(b) Tenant shall have the right,
after prior notice to Landlord, at Tenant's sole cost
and expense, to contest by appropriate legal
proceedings diligently prosecuted in good faith, in the
name of Tenant, the validity or application of any
Requirements; provided, however, that Tenant may delay
compliance therewith until the final determination of
such proceeding only if by the terms of any such
Requirements, compliance therewith pending the
prosecution of any such proceeding may legally be
delayed without subjecting Landlord to the risk of any
criminal liability, or imminent forfeiture of its
estate, for failure so to comply therewith, and
provided further that if any fine, lien, charge or
civil liability may be incurred by reason of such
non-compliance, (i) Tenant furnishes to Landlord
security satisfactory to Landlord, against such fine,
lien, charge or civil liability in accordance with
Section 5.7, and (ii) Tenant shall be solely
responsible for payment of such fine, lien, charge or
civil liability and shall indemnify, defend and hold
Landlord harmless with respect thereto.
Section 5.7 Liens.
(a) Tenant agrees that it will pay
or cause to be paid all costs for work done by it or
caused to be done by it on the Premises of a character
which will or may result in liens on Landlord's
reversionary estate therein, and Tenant shall keep the
Premises free and clear of all mechanics' liens and
other liens on account of work done for Tenant or
persons claiming under it. If any such lien shall at
any time be filed against the Premises, Tenant shall
either cause the same to be discharged within thirty
(30) days after the recording thereof, or, if Tenant,
in Tenant's discretion and in good faith, determines
that such lien should be contested, shall furnish such
security as may be necessary or required to prevent any
foreclosure proceedings against the Premises during the
pendency of such contest. If Tenant shall fail to
furnish such security, then, in addition to any other
right or remedy of Landlord resulting from such
failure, Landlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed
to be due, procuring the discharge of such lien by
giving security, or in such other manner as is, or may
be, prescribed by law. Tenant shall repay to Landlord,
as Rent, on demand, all sums disbursed or deposited by
Landlord pursuant to the provisions of this Section
5.7, including all costs, expenses and attorneys' fees
incurred by Landlord in connection therewith. Nothing
contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to
liability under any mechanics' lien or other lien law.
(b) Should any claims of lien be
filed against the Premises or any action affecting the
title to the Premises be commenced, the party receiving
notice of such lien or action shall forthwith give the
other party written notice thereof. Landlord or its
representative shall have the right to post and keep
posted upon the Premises notices of nonresponsibility
or such other notices which Landlord may deem to be
proper for the protection of Landlord's interest in the
Premises. Tenant shall, before the commencement of any
work which might result in any such lien, give to
Landlord advance written notice of its intention to do
so in reasonably sufficient time to enable the posting
of such notices.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost
and expense (except as provided to the contrary in this
Section 6.1) at all times during the Term and any
extensions thereof, keep the Premises in good order,
condition and repair, damage by casualty excepted.
Subject to the limitations set forth in Section 6.1(b),
Tenant's maintenance and repair obligation hereunder
include, without limitation:
(i) all equipment or facilities
serving the Premises, such as plumbing, heating,
air conditioning, ventilating, electrical or
lighting facilities, fire sprinkler and/or
standpipe and hose or other automatic fire
extinguishing systems, including fire alarm
and/or smoke detection systems and equipment,
fire hydrants, fixtures, walls (interior and
exterior) including reasonably periodic painting
of interior walls in painting of exterior walls
to the extent required by the REA, ceilings,
floors, windows, doors, plate glass, landscaping,
driveways, parking lots, fences, signs, sidewalks
and parkways; and
(ii) restorations, replacements
or renewals, when necessary, to keep the Premises
and all improvements thereon or a part thereof in
good order, condition and state of repair.
(iii) Tenant shall maintain
maintenance contracts with respect to the
elevators, the escalators and the heating,
ventilation and air conditioning systems located
in the Premises.
(b) Notwithstanding anything to the
contrary in Section 6.1(a), Tenant is not responsible
for maintenance, repairs or replacements which are
(i) the responsibility of
Landlord pursuant to Section 6.2, or
(ii) the responsibility of the
Developer or any other party pursuant to the REA.
(c) Notwithstanding anything to the
contrary in Section 6.1(a), if (i) any repair or
replacement which is reasonably estimated to exceed
$100,000 is required with respect to any portion of the
Premises for which Tenant is responsible pursuant to
Section 6.1(a) (hereinafter, a "Capital Repair"), and
(ii) the Useful Life of such Capital Repair (as defined
herein) exceeds the Remaining Term of the Lease (as
defined herein), then Landlord shall fund a portion of
the cost of such repair or replacement equal to a
fraction, the numerator of which is the Excess Useful
Life (as defined herein) and the denominator of which
is the Useful Life. As used herein, (A) the "Useful
Life" of a Capital Repair means the reasonably
anticipated useful life of such Capital Repair
(determined by generally accepted accounting standards,
consistently applied), (B) the "Remaining Term" means
the portion of the Term remaining, including the
Renewal Term under any Option which has been exercised,
but not the Renewal Term under any Option which has not
been exercised and (C) the term "Excess Useful Life"
means, with respect to a Capital Repair, the difference
between the Useful Life thereof and the Remaining Term.
As used herein, "Landlord's Capital Repair
Contribution" means, with respect to any Capital
Repair, Landlord's contribution to the cost of such
Capital Repair made pursuant to this Section 6.1(c).
Landlord shall fund Landlord's Capital Repair
Contribution within ten (10) business days after
receipt of invoices therefor from Tenant (which may be
submitted as Tenant receives invoices for such work).
(d) If Tenant exercises an Option
after the Excess Useful Life of a Capital Repair has
been determined, then Tenant shall reimburse to
Landlord, on the first day of the Renewal Term with
respect to such Option, a portion of Landlord's Capital
Repair Contribution equal to a fraction (not to exceed
100%), the numerator of which is the Renewal Term and
the denominator of which is the Excess Useful Life. In
order that this Section 6.1(d) may be properly applied
with respect to subsequent Option exercises, (i) the
Excess Useful Life of a Capital Repair will be deemed
reduced by the period of each Renewal Term with respect
to which payment is made by Tenant pursuant to this
Section 6.1(d) and (ii) Landlord's Capital Repair
Contribution with respect to a Capital Repair will be
deemed reduced by each payment received by Landlord
pursuant to this Section 6.1(d) with respect to that
Capital Repair.
Section 6.2 Landlord's Obligations.
Notwithstanding anything to the contrary herein,
Landlord shall be responsible throughout the Term for
maintaining and repairing all structural portions of
the Building, including the roof (including any
skylights), foundations, structural walls, and other
load-bearing portions of the structure.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage or Destruction.
(a) Tenant shall give Landlord
prompt notice of any damage to the Premises by fire or
other casualty.
(b) If the Premises shall be
rendered wholly untenantable by a casualty, unless
terminated pursuant to Section 7.1(d)(i) or 7.1(d)(ii)
hereof, this Lease shall remain in full force and
effect except that Rent shall fully abate commencing on
the date of loss and continuing until the earlier to
occur of: (i) the date Tenant reopens the Premises for
business, which reopening Landlord and Tenant shall
diligently work together to expedite, or (ii) the date
forty five (45) days after Tenant completes the
restoration, pursuant to Section 7.1(e), of the
structural elements of the building of which the
Premises form a part.
(c) If only a portion of the
Premises shall be rendered untenantable, this Lease
shall remain in full force and effect except that Rent
shall partially abate commencing on the date of loss
and continuing until the earlier to occur of: (i) the
date Tenant reopens the repaired portion of the
Premises for business, which reopening Landlord and
Tenant shall diligently work together to expedite, or
(ii) the date forty five (45) days after Landlord
completes the restoration, pursuant to Section 7.1(e),
of the structural elements of the building of which the
Premises form a part. In such event, the Rent shall be
reduced to an amount computed by multiplying the Rent
applicable prior to such damage by a fraction, the
numerator of which is the Floor Area of the Premises
tenantable after such damage and the denominator of
which is the Floor Area of the Premises prior to such
damage.
(d) If there shall be damage to the
Shopping Center by fire or other casualty, whether or
not the Premises is affected thereby, in which: (i)
the Premises shall be sufficiently damaged to render
the entire Premises wholly untenantable; (ii) the
damage or destruction to the Premises is to an extent
that it cannot be repaired with reasonable diligence
within one (1) year after the destruction or damage;
(iii) either the Shopping Center or the building of
which the Premises are a part is damaged to the extent
of fifty percent (50%) or more of its insured
replacement cost; (iv) the loss is caused by any risk
not covered by either Landlord's or Tenant's insurance;
(v) the damage occurs during the last three (3) years
of the Term; or, (vi) any insurance proceeds received
by Landlord or Tenant for such damage are inadequate or
unavailable for repairs, other than because of any
deductible amount of any policy other than Tenant's
earthquake insurance policy, then, in any such event,
either party shall have the option to terminate this
Lease. Said option shall be exercised, if at all, by
notice to the other party on or before the ninetieth
(90th) day after the date of loss and, if exercised,
shall be effective on the last day of the first (1st)
full calendar month falling at least sixty (60) days
after such notice. If Tenant elects to terminate this
Lease pursuant to this Section 7.1(d), then Tenant
shall turn over to Landlord any insurance proceeds
received by Tenant with respect such damage and
destruction (other than proceeds of insurance covering
tenant's personal property (including, without
limitation, merchandise and equipment) and trade
fixtures. If either party elects to terminate this
Lease pursuant to clause (iv) or (vi), above, the other
party may avoid termination of this Lease by (i)
committing in writing to pay the additional funds
required to complete the necessary repairs and
restoration, which writing shall be delivered to the
terminating party within ten (10) days after delivery
of the termination notice, and (ii) providing to the
terminating party, within a reasonable period after
delivery of such notice, not to extend beyond the date
which is 90 days after the date of loss, security for
payment of such excess costs reasonably satisfactory to
the terminating party and its lenders (if any).
(e) If there shall be damage to the
Premises by fire or other casualty and this Lease is
not terminated, Tenant shall promptly commence and
diligently prosecute the restoration and repair of the
Premises, including all exterior walls, roofs, floors
and supports, all internal partitions, fixtures, trade
fixtures, shelving, casework, furniture and furnishings
used in connection with the operation of Tenant's
business in the Premises, as nearly as practicable to
their respective conditions prior to such damage.
Section 7.2 Condemnation.
(a) The term "Taking" as used in
this Section 7.2, shall mean an appropriation or taking
under the power of eminent domain by any public or
quasi-public authority or a voluntary sale or
conveyance in lieu of condemnation but under threat of
condemnation.
(b) In the event of a Taking of the
entire Premises, this Lease shall terminate and expire
as of the date possession is delivered to the
condemning authority and Landlord and Tenant shall each
be released from any liability accruing pursuant to
this Lease after such termination.
(c) If there is a Taking of (a)
more than twenty-five percent (25%) of the Premises, or
(b) any portion of the Building and, regardless of the
amount taken, if the remainder of the Building is not
one undivided structure, either Landlord or Tenant may
terminate this Lease as of the date Tenant is required
to vacate the Premises upon giving notice in writing of
such election within thirty (30) days after receipt of
Tenant from Landlord of written notice that a portion
of the Premises has been so appropriated or taken.
(d) If this Lease is terminated as
a result of a Taking, Tenant shall be entitled to any
separate award made to Tenant for relocation costs,
good will and any of Tenant's fixtures and equipment
which are not capable of removal from the Premises;
provided such separate award does not diminish
Landlord's award. Subject to the foregoing, Landlord
shall be entitled to the entire award or compensation
in such condemnation proceedings, or settlement in lieu
thereof, irrespective of whether such award or
settlement shall be obtained as compensation for
diminution in value to the leasehold or the leasehold
improvements thereto or to the fee of the Premises, but
the Minimum Annual Rent, Percentage Rent and any other
Rent for the last month of Tenant's occupancy shall be
prorated and Landlord shall refund to Tenant any
Minimum Annual Rent, Percentage Rent and other Rent
paid in advance. Notwithstanding the foregoing and
subject to Section 2.3, in the event this Lease is
terminated as provided above, Tenant may remove all of
its removable trade fixtures, furniture and equipment
from the Premises, provided that Tenant immediately
repairs any damage occasioned to the Premises by reason
of such removal so as to leave the Premises in a neat
and clean condition. Notwithstanding the foregoing, in
no event shall Tenant be entitled to any portion of any
award or compensation, if following the payment of such
sum to Tenant, there would not be sufficient funds or
proceeds to pay the unpaid principal balance of any
obligation of Landlord secured by a deed(s) of trust or
mortgage(s) on the fee interest in the Premises and/or
the Building.
(e) In the event of a Taking, if
Landlord and Tenant elect not to so terminate this
Lease as provided above (or have no right to so
terminate), Tenant agrees, at Tenant's cost and expense
(subject to Tenant's rights hereunder) as soon as
reasonably possible after the Taking, to restore the
Building on the Land remaining to a complete unit of
like quality and character as existed prior to the
Taking, and thereafter the Minimum Annual Rental
payable hereunder shall be reduced on an equitable
basis, taking into account the relative value of the
portion taken as compared by the portion remaining. In
such event, Tenant shall be entitled to receive any and
all award or compensation in connection with such
Taking until Tenant has received funds sufficient to
complete such restoration, and Landlord shall be
entitled to receive the remaining portion of the total
award of compensation.
ARTICLE VIII
INSURANCE
Section 8.1 Tenant's Insurance.
(a) Tenant shall carry, from and at
all times after the date hereof, at Tenant's sole cost
and expense, the following insurance:
(i) public liability and
property damage insurance covering the Premises
and Tenant's use thereof against claims for
personal injury or death and property damage
occurring in, on or about the Premises and
affording protection to the limits of not less
than Three Million Dollars ($3,000,000) per
occurrence with respect to any one (1) bodily
injury or damage to property, which insurance
shall, in addition, extend to any liability of
Tenant arising out of the indemnities contained
in Section 8.5 by contractual liability
endorsement. All liability policies shall
contain a so called "occurrence clause";
(ii) fire and casualty insurance
covering the Premises, in an amount equal to
ninety percent (90%) of the replacement cost
thereof (excluding foundations and footings);
(iii) fire insurance with
extended coverage, covering such items of
Tenant's merchandise, inventory, signs,
furniture, trade fixtures, equipment, leasehold
improvements and other property of Tenant, now or
hereafter placed in, on or about the Premises in
an amount equal to ninety percent (90%) of the
replacement cost thereof;
(iv) business interruption
insurance covering Tenant's loss of business
income for the period it would take to
reconstruct the Premises after a casualty using
reasonable diligence and rental loss insurance
covering Tenant's obligation to pay Minimum
Annual Rent under this Lease;
(v) in the event Tenant installs
in, adjoining or beneath the Premises any steam
boiler or similar equipment, broad form boiler
insurance;
(vi) earthquake insurance in an
amount equal to one hundred percent (100%) of the
replacement cost of the Premises, to the extent
the same is available at commercially reasonable
rates and with deductibles of commercially
reasonable amounts (it being agreed that Tenant
may maintain required earthquake coverage through
a blanket policy covering several (or all) store
locations owned or affiliated with Tenant and
having a maximum aggregate coverage limit of
Twenty Million Dollars ($20,000,000)); and
(vii) such other insurance as
may in Tenant's reasonable judgment be prudent to
carry from time to time.
(b) All insurance policies required
to be carried by Tenant shall be issued by companies
with a general policyholder's rating of not less than
"A" and a financial size rating of "VI" as rated in the
most current available "Best's Insurance Reports", and
qualified to do business in the State of California.
Each insurance policy shall name Landlord, Tenant and
Mortgagee as insureds as their interests may appear
and, to the extent possible, any other parties in
interest from time to time designated in writing by
notice from Landlord to Tenant. Executed copies of
each insurance policy, duplicate originals or original
certificates thereof (provided that such certificates
shall evidence all of the required coverage herein
provided) shall be delivered by Tenant to Landlord
within ten (10) days after delivery of possession of
the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of prior policies.
All insurance policies shall contain a provision that
the underwriter will give Landlord and Mortgagee at
least thirty (30) days prior written notice of any
cancellation or lapse of such insurance or the
effective date of any reduction in the amounts thereof
or increase of the deductible. All insurance policies
shall be written as primary policies which do not
contribute to, and are in excess of, any coverage which
Landlord may carry. All insurance policies shall
contain an agreement by the insurers that the coverage
afforded thereby shall not be affected by any
construction work in or about the Premises and that no
act or omission by the Tenant shall impair or affect
the rights of the Landlord to receive and collect the
proceeds under the policies.
(c) Any insurance required to be
carried by Tenant may be provided under a blanket
policy of insurance covering additional items or
locations or insureds; provided, however, that: (i)
Landlord and Mortgagee shall be named as an additional
insured thereunder (or covered by broad form Landlord
endorsement or contractual coverage); (ii) any such
blanket policy or policies shall specify total
insurance allocated to Tenant's improvements and
property; and (iii) the requirements for Tenant's
insurance set forth herein are otherwise satisfied.
Tenant agrees to use its best efforts to ensure that
the coverage afforded Landlord and any such other
parties in interest under any future blanket policy of
insurance will not be diminished by reason of the use
of such blanket policy of insurance, and Tenant shall
expend commercially reasonable amounts in connection
with obtaining such coverage.
(d) The deductibles and
self-insured retentions included in Tenant's insurance
policies shall be in amounts as may be commercially
reasonable from time to time.
(e) If Tenant refuses or neglects
to secure and maintain insurance policies complying
with the provisions of this Section 8.1, Landlord may
secure the appropriate insurance policies and Tenant
shall pay, upon demand, the costs of same to Landlord
as Rent.
Section 8.2 Landlord's Insurance. Landlord
at its cost shall carry, from and at all times after
the date of delivery of the Premises to Tenant, all
insurance required to be carried by Landlord pursuant
to (i) any Mortgages which either presently or in the
future may exist as a lien against the Premises and
(ii) the REA, to the extent that insurance required to
be carried by Tenant pursuant to this Lease is
insufficient to satisfy either of such obligations of
Landlord.
Section 8.3 Waiver of Subrogation.
Landlord and Tenant each waive any rights it may have
against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be,
their respective property, the Premises or its contents
or to other portions of the Shopping Center arising
from any liability, loss, damage or injury caused by
fire or other casualty for which property insurance is
carried or required to be carried pursuant to this
Lease. Each of the parties hereto, on behalf of their
respective insurance companies insuring the property of
either Landlord or Tenant against any such loss, to the
extent of any recovery under such insurance, waives any
right of subrogation that it may have against the
other. Each waiver shall be expressly included in, and
shall comply with the requirements of, the respective
insurance policies.
Section 8.4 Governmental and Insurance
Requirements.
(a) Tenant shall comply, at
Tenant's sole cost and expense, with all reasonable
requirements of the insurance underwriters, or any
similar public or private body, provided that any such
requirements of such insurance underwriters, or any
similar public or private body, are conditions to the
continuance of any of the insurance coverage required
hereunder, and any governmental authority having
jurisdiction over insurance rates with respect to the
use or occupancy of the Premises as a part of Shopping
Center, including, without limitation (i) installing
fire extinguishers or automatic dry chemical
extinguishing systems; (ii) making any changes,
modifications, alterations or additions in the
sprinkler system within the Premises; and (iii)
relocating partitions, trade fixtures or other contents
within the Premises.
(b) Tenant shall not commit any act
or suffer to exist on the Premises any circumstances
which will violate any reasonable restrictions
contained in any of Tenant's or Landlord's policies of
fire and casualty or public liability insurance,
prevent Landlord from continuing the coverage presently
provided in Landlord's insurance policies from
insurance companies reasonably acceptable to Landlord
or cause the rates for any such policies to increase
beyond the minimum rates from time to time applicable
to the Premises or the Shopping Center for the
Permitted Use, provided such minimum rate would have
been available to Landlord but for Tenant's actions or
use. In the event that Landlord receives any notice
from Landlord's insurance company regarding any
violation by Tenant of any of Landlord's insurance
policies, or of any proposed increase in Landlord's
premiums from the minimum rate from time to time
applicable thereunder because of any act, omission or
sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
(c) In the event that Landlord
receives any notice from Landlord's insurance company
regarding any violation by Tenant of any of Landlord's
insurance policies, or of any proposed increase in
Landlord's premiums from the minimum rate from time to
time applicable thereunder because of any act, omission
or sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
Section 8.5 Indemnification. To the
fullest extent permitted by law, Tenant covenants with
Landlord that Landlord shall not be liable for any
damage or liability of any kind or for any injury to or
death of persons or damage to property of Tenant or any
other person occurring from and after the date Tenant
is given access to the Premises from any cause
whatsoever related to the use, occupancy or enjoyment
of the Premises including, but not limited to, the
sidewalks and landscaped areas immediately adjacent to
the Building and Tenant's drive-through area, if any,
by Tenant or any person thereon or holding under Tenant
including, without limitation, damages resulting from
any labor dispute, and Tenant shall defend (using
counsel mutually approved by Landlord and Tenant or
Tenant's insurer), indemnify and save Landlord harmless
from all liability whatsoever on account of any real or
alleged damage or injury and from liens, claims and
demands related to the use of the Premises and its
facilities, or any repairs, alterations or improvements
(including any improvements and fixtures constructed or
installed by Tenant) which Tenant may make or cause to
be made with respect to the Premises, and any loss or
interruption of business or loss of rental income
resulting therefrom. Notwithstanding anything to the
contrary in the foregoing, Tenant shall not be liable
for damage or injury occasioned by the negligence or
willful misconduct of Landlord or any ground lessor,
mortgagee or owner of all or any part of the Shopping
Center or their respective employees, agents or
contractors.
Section 8.6 Landlord Exculpation. Landlord
shall endeavor to conduct its activities with respect
to the Premises in a prudent and businesslike manner.
However, Landlord shall not be liable for any damage to
property entrusted to employees of Landlord, its
partners or agents, nor for loss of or damage to any
property damage or loss of business which may be
sustained by the person, goods, ware, merchandise or
property of Tenant, its employees, invitees or
customers or any other person in or about the Premises
caused by or resulting from, but not limited to, fire,
steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of same, whether the
injury, damage or loss of business results from
conditions arising upon the Premises, other portions of
the Shopping Center or from other sources, so long as
the same does not result from the negligence or wilful
misconduct of Landlord or its employees, agents, and
contractors or Landlord's breach of any of its express
obligations under this Lease. Landlord shall not be
liable for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the
Premises or in the Shopping Center or of defects
therein or in the fixtures or equipment. Landlord
shall not be liable for any damages arising from any
act or neglect of any other tenant in the Shopping
Center, except to the extent of Landlord's liability
for breach of Landlord's obligation to enforce the REA,
as provided in Section 3.2.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Notice to Landlord. If Tenant
wishes to assign its rights under this Lease or sublet
all or any portion of the Premises, Tenant shall
deliver written notice of its intention to do so to
Landlord at least thirty (30) days prior to the
effective date of any such proposed assignment or
subletting, specifying in such notice whether Tenant
proposes to assign or sublet, the proposed effective
date thereof, identification of the proposed assignee
or sublessee with a description of the proposed
business operations to be conducted at the Premises.
Such notice shall also be accompanied by current
financial statements of the proposed assignee or
subtenant, a copy of the proposed assignment or
sublease documents, or, if not available, a letter of
commitment or letter of intent setting forth material
terms and provisions of the proposed assignment or
sublease.
Section 9.2 Landlord's Approval. Landlord
will notify Tenant of its approval or disapproval of a
proposed assignment or sublease within a reasonable
time (in no event earlier than fifteen (15) days nor
longer than thirty (30) days) after receipt of such
notice from Tenant as set forth above. Landlord shall
not unreasonably withhold its approval of Tenant's
assignment of this Lease or subletting of the Premises.
The factors which may be viewed in determining the
reasonableness of Landlord's approval or disapproval of
a proposed assignment or subletting and the conditions
which may be imposed by Landlord as part of its
consenting thereto shall be as follows:
(a) The use of the Premises following
the assignment or sublease would be
different from the Permitted Use set
forth in this Lease;
(b) In Landlord's reasonable business
judgment, the proposed assignee or
subtenant lacks sufficient business
reputation or experience to operate
a business of the type and quality
permitted under the terms of this
Lease;
(c) In Landlord's reasonable business
judgment, the present financial
worth of the proposed assignee or
subtenant is inadequate to ensure
such assignee's or subtenant's
performance under the terms of its
agreement relating to the Premises;
(d) The proposed assignment or sublease
transaction would breach a covenant
of Landlord respecting radius,
location, use or exclusive use in
any other lease, financing agreement
or other agreement relating to the
Shopping Center.
It is expressly understood and agreed that Landlord's
consent shall not be required for any transfer of
Tenant's interest under this Lease which is considered
to be a Permitted Transaction (as defined below).
Section 9.3 Permitted Transactions.
Notwithstanding anything to the contrary herein,
Landlord's consent shall not be required for any of the
following (collectively, "Permitted Transactions"):
(i) Any transfer by Tenant of any
interest under this Lease to any
corporation, partnership or other
entity which controls, is controlled
by, or is under common control with
the named Tenant hereunder or its
successors by merger, consolidation
or other comparable transaction, the
primary purpose of which is not the
transfer of Tenant's interest under
this Lease.
(ii) Any transfer by Tenant of any
interest under this Lease to the
owner of a department store chain
with assets equal to or greater than
Tenant's.
(iii) Tenant may enter into concession
arrangements or license agreements,
or otherwise permit the occupation
and use of a portion of the Premises
by a subtenant, licensee or
concessionaire, provided that the
areas covered by such licenses or
concession agreements do not exceed
usage in excess of twenty-five
percent (25%) of the Floor Space of
the Premises; provided, however that
all sales of licensees or
concessionaires shall be included
within Gross Sales as defined in
this Lease.
Section 9.4 Compliance with REA. Tenant
shall not assign its rights under this Lease or sublet
all or any portion of the Premises unless Tenant
complies, at Tenant's expense, with the provisions of
the REA applicable to such assignment or subletting.
Landlord agrees to cooperate, at no expense to
Landlord, with Tenant's efforts to obtain any consents
required under the REA and to otherwise comply with the
REA in connection with any proposed assignment or
sublease.
Section 9.5 Documentation and Expenses.
Each assignment or sublease shall be evidenced by an
instrument made in such written form as is satisfactory
to Landlord and executed by Tenant and the assignee or
subtenant. In the event of an assignment, the assignee
shall assume and promise to perform the terms,
covenants and conditions of this Lease which are
obligations of Tenant, from and after the date the
Assignee takes possession. Unless expressly released
by Landlord, in writing, Tenant shall remain fully
liable to perform its duties under this Lease following
any assignment of the Lease. Tenant shall, on demand
of Landlord, reimburse Landlord for Landlord's
reasonable costs, including attorneys' fees, incurred
in obtaining advice and preparing documentation for
each assignment or sublease, up to a maximum of $1,500
per transaction.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the following events
shall constitute a "Default" by Tenant under this
Lease:
(a) If Tenant shall fail to pay any
Rent under this Lease when the same shall become due
and payable and the failure shall continue for five (5)
business days after written notice (it being understood
such period shall run concurrently with any statutory
notice period); or
(b) If Tenant shall transfer
Tenant's interest in this Lease in contravention of
Article IX hereof; or
(c) If Tenant shall fail to perform
or observe any of its obligations under this Lease
(including, without limitation, Tenant's failure to
perform those obligations under the REA expressly
assumed by Tenant in this Lease) other than those
specified above in this Section 10.1 and the failure
shall continue for thirty (30) days after notice,
unless a shorter period of time for such performance or
observance is otherwise expressly set forth in this
Lease; provided, however, that in the case of a Default
which cannot with reasonable diligence be remedied by
Tenant within said period of thirty (30) days, if
Tenant proceeds as promptly as may reasonably be
possible after the service of such notice and with all
reasonable diligence to remedy the Default and
thereafter prosecute the remedying of such Default with
all reasonable diligence, the period of time after the
giving of such notice within which to remedy the
Default shall be extended for such period as shall be
reasonably necessary to remedy the same with all
reasonable diligence;
(d) If the Premises are deemed
abandoned pursuant to California Civil Code Section
1951.3; or
(e) If an event of insolvency shall
occur including:
(i) Tenant's making an
assignment for the benefit of creditors;
(ii) Tenant's failure generally
to pay its debts as they become due;
(iii) A material adverse change
in the financial condition of Tenant;
(iv) Tenant's filing, or
acquiescing to the filing of, a petition seeking
an order for relief against it in any state or
federal court in any bankruptcy, reorganization,
liquidation, composition, extension, arrangement
or insolvency proceeding;
(v) Tenant's making an
application for, or acquiescing to, the
appointment of a trustee, examiner or custodian
for it or all or any portion of its property;
(vi) Any petition being filed
against Tenant in any state or federal court
seeking reorganization or liquidation or
insolvency proceedings, and the proceedings shall
not be dismissed, discontinued or vacated within
ninety (90) days; or
(vii) Any trustee, examiner or
custodian being appointed for Tenant, or for all
or any portion of Tenant's property, and the
trustee, examiner, or custodian shall not be set
aside within ninety (90) days after such
appointment.
Section 10.2 Remedies. Upon the occurrence of a Default, and
in addition to any other rights or remedies available
to Landlord at law or in equity, Landlord shall have
the right to:
(a) terminate this Lease and all rights
of Tenant by giving Tenant written notice that this
Lease is terminated, in which case Landlord may recover
from Tenant the sum of :
(i) the worth at the time of award
of any unpaid Rent that had been earned at the time of
termination.
(ii) the worth at the time of award
of the amount by which (A) the unpaid Rent that would
have been earned after termination until the time of
award exceeds (B) the amount of rental loss, if any, as
Tenant affirmatively proves could have been reasonably
avoided;
(iii) the worth at the time of award of the amount by
which (A) the unpaid Rent for the balance of the Term
after the time of award exceeds (B) the amount of
rental loss, if any, as Tenant affirmatively proves
could be reasonably avoided;
(iv) any other amount necessary to
compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform Tenant's
obligations or that, in the ordinary course of things,
would be likely to result; and
(v) all other amounts in addition
to or in lieu of those previously stated as may be
provided from time to time by California law; or
(b) continue this Lease, and from time
to time, without terminating this Lease, either (i)
recover all Rent and other amounts payable as they
become due or (ii) relet the Premises or any part of
the Premises on behalf of Tenant for any term, at any
rent, and pursuant to any other provisions as Landlord
deems advisable, all with the right, at Tenant's cost,
to make alterations and repairs to the Premises.
As used in clauses 10.2(a)(i) and 10.2(a)(ii) of
this Section, the worth at the time of award is
computed by allowing interest at the Interest Rate. As
used in clause 10.2(a)(iii) of this Section, the worth
at the time of award is computed by discounting that
amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent
(1%).
(c) Upon the occurrence of a Default,
Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises.
Landlord may cause property so removed from the
Premises to be stored in a public warehouse or
elsewhere at the expense and for the account of Tenant.
(d) None of the following remedial
actions, singly or in combination, shall be construed
as an election by Landlord to terminate this Lease
unless Landlord has in fact given Tenant written notice
that this Lease is terminated or unless a court of
competent jurisdiction decrees termination of this
Lease; any act by Landlord to maintain or preserve the
Premises; any efforts by Landlord to relet the
Premises; any re-entry, repossession, or reletting of
the Premises; or any reentry, repossession, or
reletting of the Premises by Landlord pursuant to this
Section. If Landlord takes any of the previous
remedial actions without terminating this Lease,
landlord may nevertheless at any time after taking any
remedial action terminate this lease by written notice
to Tenant.
(e) If Landlord relets the Premises,
Landlord shall apply the revenue as follows: first, to
the payment of any reasonable cost of reletting,
including without limitation finder's fees and leasing
commissions; and second, to the payment of Rent and
other amounts due and unpaid under this Lease.
Landlord shall hold and apply the residue, if any, to
payment of future amounts payable as they become due
and, to the extent the residue exceeds such amounts,
shall remit such excess to Tenant. Should revenue from
reletting during any month, after application pursuant
to the foregoing provisions, be less than the
reasonable cost of reletting and the Rent and other
amounts due and unpaid under this Lease, Tenant shall
pay the deficiency to Landlord promptly upon demand.
(f) After the occurrence of a Default,
Landlord, in addition to or in lieu of exercising other
remedies, may, but without any obligation to do so,
cure the breach underlying the Default for the account
and at the expense of Tenant; provided that Landlord by
prior notice shall first allow Tenant a reasonable
opportunity to cure, except in cases of emergency,
where Landlord may proceed without prior notice to
Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of
settlements, defense court costs, and attorney fees,
that Landlord may incur in the course of any such cure.
(g) No security, guaranty or security
interest granted for the performance of Tenant's
obligations, which Landlord may now or hereafter hold,
shall in any way constitute a bar or defense to any
action initiated by Landlord for unlawful detainer or
for the recovery of the Premises, for enforcement of
any obligation of Tenant, or for the recovery of
damages caused by a breach of this Lease by Tenant or
by a Default.
(h) Except as expressly provided in this
Lease to the contrary, no right or remedy conferred
upon or reserved to either party is intended to be
exclusive of any other right or remedy given now or
later or existing at law or in equity or by statute.
Except to the extent that either party may have
otherwise agreed in writing, no waiver by that party of
any violation or nonperformance by the other party of
any obligations, agreements, or covenants shall be
deemed to be a waiver of any subsequent violation or
nonperformance of the same or any other covenant,
agreement, or obligation, nor shall any forbearance by
either party to exercise a remedy for any violation or
nonperformance by the other party be deemed a waiver by
that party of rights or remedies with respect to that
violation or nonperformance.
(i) Landlord may require Tenant or any
trustee for Tenant under the United States Bankruptcy
Code (as amended, the "Bankruptcy Code") to cure
Tenant's Default and to provide adequate assurances of
future performance of this Lease as provided in Section
365(b)(3) of the Bankruptcy Code, including, without
limitation, adequate assurance that; (i) Rent will be
paid when due; (ii) there shall be no substantive
breach in the provisions of this Lease relating to the
Shopping Center including, without limitation, the
Permitted Use; and (iii) that there shall be no
disruption in any Tenant mix or Tenant balance in the
Shopping Center. If Tenant or the trustee does not
cure existing Defaults and provide such assurances of
future performance within sixty (60) days after there
has been an order for relief pursuant to the Bankruptcy
Code, this Lease shall be deemed rejected, and Landlord
shall have no further liability hereunder to Tenant or
any person claiming through or under Tenant and, if
Tenant or any such person is in possession. Tenant or
any such person shall forthwith quit and surrender the
premises to Landlord.
Section 10.3 Attorneys' Fees. In the event that either party
hereto commences an action related to this Lease, the
prevailing party shall be entitled to recover from the
other party all of its costs and expenses incurred
therein, including, without limitation, reasonable
attorneys' fees and disbursements. If either party
hereto is, without fault on its own part, made a party
to any action instituted by or against the other party
to this Lease due to such other party's fault, such
other party shall indemnify the party innocently
involved and defend and hold it harmless against and
from all such costs and expenses incurred therein
including, without limitation, reasonable attorneys'
fees and disbursements.
Section 10.4 Agreement to Arbitrate. Any controversy, dispute
or claim under, arising out of, in connection with or
in relation to this Lease, including but not limited to
the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or
enforceability of this Lease or any provision hereof
shall be determined by arbitration conducted in
accordance with the Commercial Arbitration Rules or
then existing rules for commercial arbitration of the
American Arbitration Association. The arbitration
shall additionally be governed by the California
Arbitration Act. The arbitration shall be conducted in
a location in San Bernardino County and shall be before
a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven
potential arbitrators provided by the American
Arbitration Association. If the parties cannot agree
on an arbitrator from this first list, the parties
hereto shall select an arbitrator for such arbitration
from a second list of seven potential arbitrators
provided by the American Arbitration Association with
each party alternately striking names, with the last
name remaining to be the arbitrator so selected. In
the event that either party seeks a temporary
restraining order, preliminary injunction or other
provisional relief, the provisions of Section 1281.8 of
the California Code of Civil Procedure shall apply.
The arbitration of such issues, including the
determination of any amount of damages suffered by any
party hereto by reason of the acts or omissions of any
party, shall be final and binding upon the parties to
the maximum extent permitted by law. Judgment upon any
award rendered by the arbitrator(s) may be entered by
any court having jurisdiction thereof. The parties
intend that this Article shall be valid, binding,
enforceable and irrevocable and shall survive the
termination of this Agreement. It is understood and
agreed that the terms of this Section 10.4 shall not
apply to a determination of Fair Market Rental Value,
which shall be determined pursuant to Section 12.3 of
this Lease.
Section 10.5 No Set-off/Counterclaims. Tenant shall pay all
Rent due hereunder, free of any charges, assessments,
impositions or deductions and without abatement,
deferral, reduction, set-off, counterclaim, defense or
deduction except as permitted under the express terms
of this Lease or the Asset Purchase Agreement. Tenant
shall not interpose any counterclaim(s) in any action
brought by Landlord based, in whole or in part, on
Tenant's failure to pay Rent; provided, however, that,
the foregoing to the contrary notwithstanding: (i)
Tenant may interpose any counterclaim deemed
"compulsory" under applicable court rules of civil
procedure; (ii) Tenant shall be permitted to bring a
separate action against Landlord based on any claim
which Tenant is prohibited by this Lease from asserting
as a set-off or counterclaim; and (iii) Tenant may
bring actions and assert defenses, setoffs and
counterclaims permitted to be brought or asserted
against Landlord in accordance with the terms of the
Asset Purchase Agreement.
Section 10.6 Right of Redemption. Tenant hereby waives, for
itself and all persons claiming by, through or under
Tenant, any right of redemption or for the restoration
of the operation of this Lease under any present or
future law in the event Landlord shall obtain
possession of the Premises.
Section 10.7 No Waiver. No receipt of monies by Landlord from
Tenant after the termination or cancellation of this
Lease in any lawful manner shall reinstate the Term of
this Lease, or operate as a waiver of the right of
Landlord to enforce the payment of Rent then due, or
operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action,
proceeding or remedy; it being agreed that, after the
termination or cancellation of this Lease, or after a
final order or judgment for the possession of the
Premises, Landlord may demand, receive and collect any
monies due, without in any manner affecting such
notice, proceeding, suit, action, order or judgment;
and any and all such monies collected shall be deemed
to be payment on account of the use and occupation or
Tenant's liability hereunder.
Section 10.8 Unperformed Covenants of Landlord May Be
Performed By Tenant. If Landlord shall fail to perform
any of the terms, provisions, covenants or conditions
to be performed or complied with by Landlord pursuant
to this Lease, or if Landlord should fail to make any
payment which Landlord agrees to make, and any such
failure shall, if it relates to a matter which is not
of any emergency nature, remain uncured for a period of
thirty (30) days after Tenant shall have served upon
Landlord notice of such failure, or for a period of
twenty-four (24) hours after service of such notice, if
in Tenant's judgment reasonably exercised such failure
related to a matter which is of an emergency nature,
then Tenant may at Tenant's option, at any time prior
to commencement of Landlord's acting to cure such
failure and thereafter if Landlord fails to diligently
perform the curing of such failure, perform any such
term, provision, covenant or condition or to make any
such payment, as Landlord's agent, and in Tenant's sole
discretion as to the necessity therefor, and Tenant
shall not be liable or responsible for any loss or
damage resulting to Landlord or anyone holding under
Landlord on account thereof. The full amount of the
cost and expense entailed, or payment so made, shall
immediately be owing and payable by Landlord to Tenant.
The option given in this Section is for the sole
protection of Tenant, and its existence shall not
release Landlord from the obligation to perform the
terms, provisions, covenants and conditions herein
provided to be performed by Landlord or deprive Tenant
of any legal rights which it may have by reason of any
such default by Landlord.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
OPTIONS
Section 12.1 Renewal Options. Contingent upon Tenant
satisfying all of the following conditions, and
provided that Tenant has not filed for protection under
the Federal Bankruptcy Laws at the time such option is
exercised, Tenant is hereby granted four (4) separate
options (each an "Option" and two or more,
collectively, the "Options") to extend the Term of this
Lease, each for an additional period of five (5) years
(each a "Renewal Term"), conditioned upon satisfaction
of the following requirements:
(a) No Default by Tenant shall have
occurred and remain uncured as of the date of Tenant's
exercise of its Option; and
(b) Tenant shall deliver written
notice to Landlord exercising the applicable Option not
less than six (6) full calendar months prior to the
expiration of the Term (as it may be extended by
Tenant's exercise of any Options).
Section 12.2 Lease Terms Applicable. In the event that Tenant
exercises one or more of the Options herein granted,
then all of the terms and provisions of this Lease as
are applicable during the initial Term shall likewise
be applicable during each of the applicable Renewal
Terms except that Minimum Annual Rent and Percentage
Rent payable by Tenant for each Renewal Term shall be
as set forth in Section 12.3 below.
Section 12.3 Rent During Renewal Terms.
(a) The Minimum Annual Rent (as
defined in Section 4.1 of this Lease) which shall be
due and payable during the first Renewal Term, if
exercised by Tenant, shall be determined prior to the
commencement of each applicable Renewal Term and shall
be equal to three percent (3.0%) of the average of
annual Gross Sales at the Premises for the two (2)
Lease Years preceding the commencement of the
applicable Renewal Term. Percentage Rent for the first
Renewal Term shall be calculated in accordance with the
terms of Section 4.2 of this Lease.
(b) Minimum Annual Rent and
Percentage Rent (including the formula for the
calculation thereof) for each of the second, third and
fourth Renewal Terms, if exercised by Tenant, shall be
equal to the Fair Market Rental Value of the Premises,
each with respect to the 5-year term first day as of
the commencement of the applicable Renewal Term. The
Fair Market Rental Value of the Premises shall be based
upon the rental amounts paid by tenant-operators of
department stores for retail store space of
substantially the same type, size and quality as the
Premises, and located in major regional malls in San
Bernardino County or Riverside County. Within thirty
(30) days following Landlord's receipt of Tenant's
written notice that it wishes to exercise the
applicable Option, Landlord shall deliver to Tenant a
written notice specifying Landlord's good faith
estimate of the Fair Market Rental Value for the
Premises for the applicable Renewal Term. Within
thirty (30) days following Tenant's receipt of
Landlord's good faith estimate of the Fair Market
Rental Value of the Premises, Tenant may deliver a
written notice to Landlord either setting forth
Tenant's good faith of Fair Market Rental Value, in
which case Landlord and Tenant will promptly meet and
attempt to agree in good faith upon the Fair Market
Rental Value, or agreeing to Landlord's estimate of
Fair Market Rental Value. If no agreement regarding
the applicable Fair Market Rental Value for the
Premises can be reached within fifteen (15) days after
Landlord's receipt of Tenant's estimate of Fair Market
Rental Value for the Premises, Tenant shall have ten
(10) days to cancel its exercise of the applicable
Option by delivering written notice to Landlord within
such 10-day period. If Tenant does not terminate its
exercise of the applicable Option within such 10-day
period, the Fair Market Rental Value of the Premises
for the applicable Renewal Term shall be determined in
accordance with the terms of Exhibit E.
Section 12.4 Lease Amendment. Following Tenant's exercise of
each Option and the determination of the Fair Market
Rental Value of the Premises for the applicable Renewal
Term, Landlord and Tenant will enter into an amendment
to this Lease confirming the extension of the Term of
this Lease in accordance with the terms hereof.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Notices.
(a) Any notice, demand, request,
approval, consent or other instrument (collectively, a
"Notice") which may be, or is required to be, given
under this Lease shall be in writing and given by hand
or sent by United States certified or registered mail,
return receipt requested, postage prepaid, or by an
overnight nationally recognized courier service,
addressed to Landlord at the address herein first given
with a copy to: McPeters McAlearny Shimoff & Hatt, 4
West Redlands Boulevard, P.O. Box 2084, Redlands, CA
92373-0661 Attn: Thomas H. McPeters, Esq., or to such
other address as Landlord may from time to time
designate to Tenant by notice in accordance with this
Section, and to Tenant at the Premises and to Tenant's
address herein first given Attention: Law Department,
or to such other address as Tenant may from time to
time designate to Landlord by notice in accordance with
this Section. All Notices shall be deemed given or
served three (3) business days after the date of
registration or certification by the postal
authorities, if mailed, or upon receipt, if sent by
overnight courier or delivered in person.
(b) Any notice which may or shall
be given under this Lease by Landlord may be given by
Landlord, by any employee of Landlord, by any attorney
representing Landlord, by any management company
operating the Shopping Center on behalf of Landlord or
any employee of, or attorney retained by, said
management company, and all notices from any of the
foregoing shall be as effective as if given by Landlord
itself.
(c) Any Notice with respect to any
assignment, alleged default, termination or other
material issue given to Landlord shall also be given to
each mortgagee of Landlord's interest in the Shopping
Center, the name and address of which mortgagee
Landlord has previously given Tenant written notice.
Section 13.2 Brokers. Landlord and Tenant each warrants and
represents to the other party hereto that it has not
dealt with any broker in negotiating or consummating
this Lease, and Landlord and Tenant each hereby agrees
to indemnify, defend and hold harmless the other party
hereto against and from any and all claims losses or
liabilities as a result of any inaccuracy in the
foregoing representation. This Section shall survive
the Term of this Lease.
Section 13.3 Subordination of Lease.
(a) This Lease is subordinate to
the lien of all mortgages, deeds of trust and security
instruments (collectively, "Mortgages"), and to all
ground leases, easement agreements and operating
agreements now covering or affecting all or any part of
the Shopping Center, including, without limitation, the
REA, and to all modifications, consolidations,
renewals, replacements and extensions of any of the
foregoing. Landlord hereby represents and warrants
that there are no Mortgages in effect with respect to
the Shopping Center or the Premises except as
specifically set forth in Exhibit G attached hereto and
made a part hereof, nor are there any REAs affecting
the Shopping Center or Tenant's rights under this Lease
except as set forth in Exhibit D attached hereto and
made a part hereof. Landlord shall exercise best
efforts to obtain from each mortgagee under a Mortgage
listed on Exhibit G a nondisturbance agreement in the
form of the "SNDA" attached to the Asset Purchase
Agreement.
(b) Subject to the terms of any
nondisturbance agreement entered into by Tenant, should
any mortgagee under a Mortgage succeed to Landlord's
interest in this Lease, Tenant shall, upon demand,
attorn to and recognize such mortgagee as Landlord
under this Lease. In the event of a sale or assignment
of Landlord's interest in this Lease or the Premises,
Tenant shall attorn to and recognize such purchaser or
assignee as Landlord under this Lease without further
act by Landlord or such purchaser or assignee.
Section 13.4 Unavoidable Delays. In the event that either
party shall be delayed or hindered in, or prevented
from, the performance of any work, service or other act
required under this Lease to be performed by such party
and such delay or hindrance is due to: (i) strikes,
lockouts, or other labor disputes; (ii) inability to
obtain labor or materials or reasonable substitutes
therefor; or, (iii) acts of God, governmental
restrictions, enemy act, civil commotion, unavoidable
fire or other casualty, or other causes of a like
nature beyond the control of the party so delayed or
hindered (collectively, "Unavoidable Delays"), then
performance of such work, service or other act shall be
excused for the period of such delay and the period for
the performance of such work, service or other act
shall be extended by a period equivalent to the period
of such delay. In no event shall any such delay
constitute a termination or extension of this Lease.
The provisions of this Section shall not operate to
excuse Tenant from the timely payment of Rent.
Section 13.5 Estoppel Certificates. Upon ten (10) business
days prior written request therefor by Landlord or
Tenant from time to time, each party agrees to execute
and to deliver to the requesting party, or to such
other addressee or addressees as the requesting party
may designate, a written statement certifying that:
(i) this Lease is in full force and effect and
unmodified, or describing any modification; (ii) that
there are no defenses or offsets against the
enforcement of this Lease, or stating with
particularity defenses or offsets claimed; stating the
date to which Rent has been paid; and (iv) stating the
Term Commencement Date and the date this Lease expires.
Section 13.6 Relationship of Parties. Nothing contained in
this Lease shall be deemed or construed as creating the
relationship of principal and agent or of partnership
or of joint venture between the parties hereto, it
being understood and agreed that neither the method of
computing Rent nor any other provision contained herein
nor any acts of the parties hereto shall be deemed to
create any relationship between the parties other than
that of Landlord and Tenant.
Section 13.7 Governing Law; Jurisdiction.
(a) Governing Law. This Lease, the
legal relations between the parties and any Action
(defined below), whether contractual or non-contractual,
instituted by any party with respect to
matters arising under or growing out of or in
connection with or in respect of this Lease, including
but not limited to the negotiation, execution,
interpretation, coverage, scope, performance, breach,
termination, validity, or enforceability of this Lease,
shall be governed by and construed in accordance with
the laws of the State of California applicable to
contracts made and performed in such State and without
regard to conflicts of law doctrines, except to the
extent that certain matters are preempted by federal
law or are governed as a matter of controlling law by
the law of the jurisdiction of incorporation of the
Tenant.
(b) Jurisdiction. Each party
hereby irrevocably submits to and accepts for itself
and its properties, generally and unconditionally, the
exclusive jurisdiction of and service of process
pursuant to the laws of the State of California and the
rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of
or in connection with this Lease or any related
document or obligation. Each party further irrevocably
designates and appoints the individual identified in or
pursuant to Section 13.1 hereof to receive notices on
its behalf, as its agent to receive on its behalf
service of all process in any such Action before any
body, such service being hereby acknowledged to be
effective and binding service in every respect. A copy
of any such process so served shall be mailed by
registered mail to each party at its address provided
in Section 13.1; provided that, unless otherwise
provided by applicable law, any failure to mail such
copy shall not affect the validity of the service of
such process. If any agent so appointed refuses to
accept service, the designating party hereby agrees
that service of process sufficient for personal
jurisdiction in any action against it in the applicable
jurisdiction may be made by registered or certified
mail, return receipt requested, to its address provided
in Section 13.1. Each party hereby acknowledges that
such service shall be effective and binding in every
respect. Nothing herein shall affect the right to
serve process in any other manner permitted by
applicable law.
(c) As used in this Section 13.7,
"Action" shall mean any action, complaint, petition,
investigation suit or other proceeding before any
arbitrator or any other governing body or entity having
appropriate jurisdiction.
Section 13.8 Interpretation. The neuter, feminine or
masculine pronoun when used herein shall each include
each of the other genders and the use of the singular
shall include the plural. In the event of any conflict
between the terms of this Lease, and the terms of the
Asset Purchase Agreement (including any related
agreements entered into by Landlord and Tenant), the
terms of the Asset Purchase Agreement shall prevail
over any contrary term of this Lease.
Section 13.9 Captions. The captions of Articles and Sections
contained in this Lease are for convenient reference
only and shall not be deemed or construed as in any
manner limiting or amplifying the terms and provisions
hereof.
Section 13.10 Partial Invalidity. If any term or provision of
this Lease, or the application thereof to any person or
circumstance, shall to any extent be determined to be
invalid or unenforceable by a court of competent
jurisdiction, then the remainder of this Lease, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby.
Section 13.11 Waivers. The waiver by Landlord of any breach of
any term, covenant or condition contained in this Lease
shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of
the same or any other term, covenant or condition
contained in this Lease. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease or of any right of
Landlord to a forfeiture of the Lease by reason of such
breach, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such
Rent. No term, covenant or condition of this Lease
shall be deemed to have been waived by Landlord unless
such waiver be in writing and signed by Landlord.
Section 13.12 Accord and Satisfaction. No payment by Tenant,
or receipt by Landlord, of a lesser amount than the
Rent payment due under this Lease shall be deemed or
construed to be other than a payment or receipt on
account of the earliest Rent due. Neither the
endorsement or statement on any check nor the receipt
or negotiation of any such check by Landlord, shall be
deemed or construed to be an accord and satisfaction.
Section 13.13 Counterparts. This Lease may be executed in
several counterparts, each of which shall be deemed an
original and all of which shall together constitute one
and the same instrument.
Section 13.14 Entire Agreement. This Lease and the Asset
Purchase Agreement incorporate all undertakings between
the parties hereto with respect to Tenant's lease of
the Premises. Tenant hereby acknowledges that neither
Landlord nor Landlord's employees, agents or
contractors have made any representations or promises
to Tenant with regard to the Premises or the Shopping
Center or this Lease that have not been expressly
stated in this Lease and, therefore, Tenant hereby
waives any and all claims against, or liability of,
Landlord and Landlord's employees, agents, and
contractors based thereon. Landlord hereby
acknowledges that Tenant and its employees and officers
have made no representations or promises with regard to
Tenant's operations, sales figures or methods of doing
business or any other matter except as expressly
contained in this Lease, and Landlord, therefore,
hereby waives any claim with respect thereto or based
thereon.
Section 13.15 Successors and Assigns. This Lease and each of
the terms and conditions hereof shall inure to the
benefit of, and be binding upon, Landlord, and
Landlord's heirs, executors, administrators, successors
and assigns. This Lease and each of the terms and
conditions hereof shall also be binding upon Tenant,
and Tenant's heirs, executors, administrators,
successors and assigns and shall inure to the benefit
of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been made and consented to in
accordance with the provisions of Article IX of this
Lease.
Section 13.16 Survival of Obligations. All obligations of each
party which by their nature involve performance after
the end of the Term, or which cannot be ascertained or
have been fully performed until after the end of the
Term, shall survive the expiration or earlier
termination of this Lease.
Section 13.17 Submission of Lease. Submission of this Lease by
one party to the other for examination or execution
does not constitute an offer made, or an option
granted, to enter into this Lease.
Section 13.18 Memorandum of Lease. Landlord and Tenant agree
to execute a memorandum of this Lease, which memorandum
shall be substantially in the form attached hereto as
Exhibit F and shall be recorded in the applicable real
property records as soon as possible after the date of
this Lease.
Section 13.19 Attachments. Attached hereto and made a part of
this Lease are the following: Exhibits A-G, inclusive.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Lease as of the date first above written.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
LEGAL DESCRIPTION OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DETERMINATION OF FAIR MARKET RENTAL VALUE
1. Efforts to Agree Upon Fair Market Rental Value.
If pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined with
respect to any Renewal Term, Landlord and Tenant
shall promptly commence negotiation to reach
agreement on Fair Market Rental Value for the
applicable Renewal Term. If Landlord and Tenant
are unable to reach agreement on Fair Market
Rental Value within the time period provided in
the Lease and the parties wish to proceed with a
method of resolving the disagreement regarding
Fair Market Rental Value, the terms of Section 2
below shall apply.
2. Arbitration Regarding Fair Market Rental Value.
(a) If Landlord and Tenant are to proceed with
the method of determining Fair Market
Rental Value under this Exhibit E, then
within ten (10) days of the date either
Landlord or Tenant delivers written notice
to the other party hereto confirming that,
pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined in
accordance with the terms of Exhibit E,
Landlord and Tenant shall each
simultaneously submit to the other in a
sealed envelope its good faith estimate of
Fair Market Rental Value. If the higher of
such estimates is not more than one hundred
five percent (105%) of the lower of such
estimates, then Fair Market Rental Value
shall be the average of the two estimates.
If one party ("Refusing Party") refuses to
simultaneously submit such estimate to the
other party ("Other") within such 10-day
period, then the Other may notify the
Refusing Party of the Other's willingness
to make such simultaneous submittal. If
the Refusing Party fails to make such
simultaneous submittal within five (5)
business days thereafter, the other party's
good faith estimate of Fair Market Rental
Value shall be Fair Market Rental Value.
(b) If the higher of the estimates is more than
one hundred five percent (105%) of the
lower of such estimates, then either
Landlord or Tenant may, by written notice
to the other at any time within ten (10)
days following the exchange of estimates,
require that the disagreement be resolved
by arbitration. Within seven (7) days
after such notice, the parties shall select
as an arbitrator a mutually acceptable
independent MAI appraiser with experience
in real estate activities, including at
least ten (10) years experience in
appraising anchor store retail space in
major regional shopping malls. If the
parties cannot agree on an appraiser within
such seven (7) day period, then within a
second period of seven (7) days, each shall
select and inform the other party of an
independent MAI appraiser meeting the
aforementioned criteria and within a third
period of seven (7) days, the two
appraisers shall select a panel of three
additional appraiser meeting the
aforementioned criteria and the three
appraisers shall determine Fair Market
Rental Value pursuant to this Exhibit E by
majority vote of such three appraisers.
Both Landlord and Tenant shall be entitled
to present evidence supporting their
respective positions to the panel of three
appraisers. If one party shall fail to
make such appointment within said second
seven (7) day period, then the appraiser
chosen by the other party shall be the sole
arbitrator, who shall determine Fair Market
Rental Value pursuant to this Exhibit E.
(c) Once the arbitrators have been selected as
provided above, then, as soon thereafter as
practicable but in any case within fourteen
(14) days, the arbitrators shall select one
of the two estimates of Fair Market Rental
Value submitted by Landlord and Tenant,
which must be the one that is closer to
Fair Market Rental Value as determined by
the majority of the arbitrators. The
arbitrators' selection shall be binding
upon Landlord and Tenant. The party whose
estimate is not chosen by the arbitrators
shall pay the costs of the arbitrators and
any experts retained by the arbitrators.
Any fees of any counsel or expert engaged
directly by Landlord or Tenant, however,
shall be borne by the party retaining such
counsel or expert.
EXHIBIT F
FORM OF MEMORANDUM OF LEASE
Recording Requested By And
When Recorded Return To:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93720
Attention: General Counsel
______________________________________________________________________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this
"Memorandum"), dated as of August 20, 1998, is entered
into by and between El Corte Ingles, S.A., a Spanish
corporation ("Landlord"), and Gottschalks Inc., a
Delaware corporation ("Tenant"). Landlord and Tenant
have entered into that certain Store Lease Agreement
dated as of August 20, 1998 (the "Store Lease"),
pursuant to which Landlord demised and leased to Tenant
and Tenant hired from Landlord the Premises as more
particularly described in the Lease (the "Premises"),
which Premises are located on the real property
described in Exhibit A attached hereto and made a part
hereof.
LANDLORD AND TENANT AGREE AS FOLLOWS:
1. For and in consideration of the
rental reserved and of the mutual covenants, agreements
and conditions set forth in that certain Store Lease,
Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord, upon all terms and
conditions set forth in the Store Lease, the Premises.
The primary term of the Lease is ten (10) years
commencing on August 20, 1998 and expiring on August 20,
2007.
2. On the terms and conditions more
specifically set forth in the Store Lease, Tenant has
certain fixed rights to renew the Term of the Lease as
more specifically set forth therein. Specifically,
Tenant has been granted four separate options to renew
the Term of the Lease, each for an additional period of
five (5) years.
3. This Memorandum has been prepared to
provide notice that the Premises are subject to the
terms and conditions of the Store Lease, which terms
are hereby incorporated into this Memorandum by this
reference. In no event shall the terms of this
Memorandum be deemed to modify, amend, limit or
otherwise affect the terms and conditions of the Store
Lease. In the event of any inconsistency between the
terms of this Memorandum and the terms of the Store
Lease, the terms of the Store Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Memorandum as of the date first written
above.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
Description of Real Property
EXHIBIT G
SCHEDULE OF EXISTING MORTGAGES
A. Current preliminary title report:
Title Company:
Date of report:
Order No.:
B. Existing Mortgages:
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES, S.A.,
as "Landlord"
and
GOTTSCHALKS INC.,
as "Tenant"
Dated as of August 20, 1998
Carousel Mall
San Bernardino, California
TABLE OF CONTENTS
Page
ARTICLE I 2
Section 1.1 Definitions 2
Section 1.2 Effect of Basic Terms 5
ARTICLE II 6
Section 2.1 Grant and Term of Lease 6
Section 2.2 Acceptance of Premises; Quiet
Enjoyment. 6
Section 2.3 Surrender of Premises. 6
Section 2.4 Holding Over. 7
ARTICLE III 7
Section 3.1 Lease Controls Over REA. 7
Section 3.2 Covenants Regarding REA. 7
ARTICLE IV 8
Section 4.2 Percentage Rent 8
Section 4.3 Utilities Charge 10
Section 4.4 Common Area Maintenance Costs 10
Section 4.5 Taxes 10
Section 4.6 Late Payment Charges 11
Section 4.7 Rent Payments 12
ARTICLE V 12
Section 5.1 Permitted Use 12
Section 5.2 Signs 12
Section 5.3 Alterations of Premises 12
Section 5.4 Use of Common Areas 14
Section 5.5 Compliance with REA 15
Section 5.6 Compliance with Requirements 15
Section 5.7 Liens 15
ARTICLE VI 16
Section 6.1 Tenant's Obligations 16
Section 6.2 Landlord's Obligations 16
ARTICLE VII 17
Section 7.1 Damage or Destruction 17
Section 7.2 Condemnation 18
ARTICLE VIII 19
Section 8.1 Tenant's Insurance 19
Section 8.2 Landlord's Insurance 21
Section 8.3 Waiver of Subrogation 21
Section 8.4 Governmental and Insurance
Requirements 21
Section 8.5 Indemnification 22
Section 8.6 Landlord Exculpation 22
ARTICLE IX 23
Section 9.1 Notice to Landlord 23
ARTICLE X 23
Section 10.1 Events of Default 23
Section 10.2 Remedies 24
Section 10.3 Attorneys' Fees 26
Section 10.4 Agreement to Arbitrate 26
Section 10.5 No Set-off/Counterclaims 27
Section 10.6 Right of Redemption 27
Section 10.7 No Waiver 27
Section 10.8 Unperformed Covenants of
Landlord May Be Performed
By Tenant 28
ARTICLE XI 28
ARTICLE XII 28
ARTICLE XIII 28
Section 13.1 Notices 28
Section 13.2 Brokers 29
Section 13.3 Subordination of Lease 29
Section 13.4 Unavoidable Delays 30
Section 13.5 Estoppel Certificates 30
Section 13.6 Relationship of Parties 30
Section 13.7 Governing Law; Jurisdiction 30
Section 13.8 Interpretation 31
Section 13.9 Captions 31
Section 13.10 Partial Invalidity 31
Section 13.11 Waivers 31
Section 13.12 Accord and Satisfaction 32
Section 13.13 Counterparts 32
Section 13.14 Entire Agreement 32
Section 13.15 Successors and Assigns 32
Section 13.16 Survival of Obligations 32
Section 13.17 Submission of Lease 32
Section 13.18 Memorandum of Lease 32
Section 13.19 Attachments 33
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C LEGAL DESCRIPTION OF PREMISES C-1
EXHIBIT D SCHEDULE OF REA AND RELATED AGREEMENTS D-1
EXHIBIT E [INTENTIONALLY OMITTED] E-1
EXHIBIT F FORM OF MEMORANDUM OF LEASE G-1
EXHIBIT G SCHEDULE OF EXISTING MORTGAGES H-1
STORE LEASE AGREEMENT
Carousel Mall
San Bernardino, California
THIS STORE LEASE AGREEMENT (this "Lease"), made as of
this 20th day of August, 1998, by and between EL CORTE
INGLES, S.A., a Spanish corporation, having an address
at Hermosilla, 112, 28009 Madrid SPAIN, Attention: Mr.
Jorge Pont ("Landlord"), and GOTTSCHALKS INC., a
Delaware corporation, having an address at 7 River Park
Place East, Fresno, California 93720, Attention:
General Counsel ("Tenant").
R E C I T A L S
A. Landlord, Tenant and Harris (defined below) are
parties to that certain Asset Purchase Agreement
(defined below). Prior to the date hereof, Harris
leased the Premises (defined below) from Landlord.
Pursuant to the Asset Purchase Agreement, Tenant is to
purchase certain assets of Harris. The Asset Purchase
Agreement requires Landlord to terminate Harris' lease
and enter into this Lease with Tenant.
B. Concurrently with execution of this Lease,
Landlord has terminated Harris' lease. Landlord now
desires to lease to Tenant, and Tenant desires to lease
from Landlord, the Premises on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of the foregoing
Recitals, the receipt and sufficiency of which is
hereby acknowledged by each party as of the time of
execution and delivery hereof, and in further
consideration of the rents reserved and the covenants
and conditions set forth herein, Landlord and Tenant
agree as follows:
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS
Section 1.1 Definitions. As used in this Lease, the
following Terms shall have the meanings set forth
below:
"Alterations" shall have the meaning
ascribed thereto in Section 5.3.
"Annual Report" shall have the
meaning ascribed thereto in Section 4.2(b).
"Asset Purchase Agreement": That
certain Asset Purchase Agreement dated as of July 21,
1998, by and among Tenant, as Buyer, Harris, as Seller,
and Landlord, in its capacity as the sole shareholder
of Harris, together with all other agreements and
documents entered into by Landlord and Tenant in
connection therewith.
"Common Areas": The parking areas,
sidewalks, landscaped areas, courts, malls, roofs,
streets, roadways, loading platforms, service area,
curbs, corridors, stairways, elevators, escalators,
comfort stations, lounges and shelters and all other
facilities designated as "Common Areas" under the REA.
"Default" shall have the meaning
ascribed thereto in Section 10.1.
"Developer" shall mean the Person
responsible for managing and maintaining the Common
Areas under the REA.
"Floor Area" shall have the meaning
given such term in the REA.
"Gross Sales" shall mean the gross
selling price of all merchandise or services sold in or
from the Premises by Tenant, its subtenants, licensees
or concessionaires, whether for cash or on credit,
adjusted by excluding the following:
(i) Any exchange of merchandise between stores owned
by or affiliated with Tenant where such exchange is
made solely for the convenient operation of Tenant's
business and not for the purpose of consummating a sale
made in, at or from the Premises, or for the purpose of
depriving Landlord of the benefit of a sale which would
otherwise be made in or at the Premises;
(ii) Returns to shippers or manufacturers;
(iii) Cash or credit refunds to customers on
transactions (not to exceed the actual selling price of
the item returned) otherwise included in Monthly Gross
Sales, including, without limitation, (a) sums and
credits received in the settlement of claims for loss
of or damage to merchandise, to the extent previously
reported as part of Gross Sales and (b) the price
allowed on all merchandise traded in by customers for
credit or the amount of credit for discounts and
allowances made in lieu of acceptance thereof, but not
including any amount paid or payable for what are
commonly referred to as trading stamps;
(iv) Sales of fixtures, machinery, equipment or
property which are not stock in trade;
(v) Amounts collected and paid by Tenant to any
government for any sales, excise, luxury, gross
receipts taxes or other similar taxes now or hereafter
imposed upon the sales of merchandise or services;
(vi) The amount of any discount on sales to employees;
(vii) Interest, service or sales carrying charges or
other charges, however denominated, paid by customers
for extension of credit on sales and where not included
in the merchandise sales price;
(viii) Receipts from public telephones, stamp
machines, public toilet locks or vending machines
installed solely for use by Tenant's employees; and
(ix) Gift certificates, or like vouchers, until such
time as the same shall have been converted into a sale
by redemption.
"Harris" means The Harris Company, a
California corporation, a wholly-owned subsidiary of
Landlord.
"Imposition" shall have the meaning
ascribed thereto in Section 4.5.
"Interest Rate": The rate of
interest per annum equal to the lesser of: (i) the
highest lawful rate of interest that Tenant may be
charged; or (ii) the "prime rate" announced from time
to time by Chase Manhattan Bank, N.A., New York, New
York, for short-term, unsecured loans to its most
credit-worthy customers. In the event Chase Manhattan
Bank, N.A. shall discontinue reporting its "prime rate"
or shall cease to exist, Landlord shall select a
substitute bank, and the "prime rate" reported by such
bank shall be used for computing interest payable
hereunder.
"Major" shall mean each of the
parties to the REA, as more particularly set forth in
Exhibit D attached hereto and made a part hereof.
"Mortgages" shall have the meaning
ascribed thereto in Section 13.3.
"Notice" shall have the meaning
ascribed thereto in Section 13.1(a).
"Percentage Rent" shall have the
meaning ascribed thereto in Section 4.2(a).
"Permitted Use" shall mean any lawful
use which complies with the REA and is not prohibited
for the Premises by the REA.
"Person" means any individual,
partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint
venture, governmental authority or other entity of
whatever nature.
"Premises": That certain real
property and improvements thereon described in Exhibit
C attached hereto and made a part hereof.
"Prohibited Use" shall mean any use
which is prohibited for the Premises by the REA.
"REA" shall mean that certain
Declaration of Restrictions, Construction, Operation,
Restriction and Easement Agreement, and each of the
other documents related thereto, as more particularly
described in Exhibit D attached hereto and made a part
hereof, all as the same may be amended or modified from
time to time.
"Rent": Percentage Rent, utilities
charges, Impositions, insurance costs and all other
amounts and charges payable by Tenant under any
provision of this Lease.
"Requirements" shall mean all
federal, state and local statutes, laws, ordinances,
rules, regulations, authorizations and requirements
relating to the Premises or the use thereof, including,
without limitation, planning, zoning, subdivision,
environmental, toxic and hazardous waste, health, fire
safety and handicap access and all encumbrances,
covenants, conditions and restrictions, violation of
which encumbrances, covenants, conditions and
restrictions could either create a lien or result in a
termination of any agreement beneficial to the use or
manner of use of the Premises or any portion thereof.
"Shopping Center": The land and
improvements known as "Carousel Mall", with a street
address of 300 North "E" Street, in the City of San
Bernardino, County of San Bernardino, and State of
California, more particularly described in Exhibit A
attached hereto and made a part hereof and depicted on
the site plan attached hereto as Exhibit B and made a
part hereof.
"Taking" shall have the meaning
ascribed thereto in Section 7.2(a).
"Tenant's Employees and Invitees"
shall have the meaning ascribed thereto in Section 5.4.
"Term": The period commencing on the
Term Commencement Date and expiring on January 30,
1999, as such term may be extended or shortened
pursuant to the terms hereof.
"Term Commencement Date": August 20,
1998.
"Unavoidable Delays" shall have the
meaning ascribed thereto in Section 13.4.
Section 1.2 Effect of Basic Terms. Each of the
foregoing definitions and basic provisions is set forth
in this Article I for convenient reference only and
shall be construed in conjunction with, and limited by,
references thereto in other provisions of this Lease.
ARTICLE II
GRANT AND TERM
Section 2.1 Grant and Term of Lease.
(a) Landlord does hereby let and
lease to Tenant the Premises, together with all right
to use the Common Areas for the Term, subject to the
terms and conditions set forth in this Lease.
(b) Landlord reserves the right to
enter the Premises at any time in case of emergency and
at all other reasonable times and upon reasonable
advance notice (i) to inspect the condition of the
Premises; and (ii) to make repairs to the building in
which the Premises are located, to the extent Landlord
is required to do so, or is otherwise permitted to do
so, pursuant to the terms of this Lease.
Section 2.2 Acceptance of Premises; Quiet Enjoyment.
(a) Acceptance of Premises. Tenant
accepts the Premises "as-is," but subject to the
express representations, warranties and covenants of
Landlord set forth in the Asset Purchase Agreement and
in this Lease.
(b) Quiet Enjoyment. Landlord
covenants that Tenant, upon paying the Rent and
performing and observing all other terms and conditions
of this Lease to be performed or observed by Tenant,
shall peacefully and quietly have, hold and enjoy the
Premises and the appurtenances thereto throughout the
Term without hindrance, ejection or molestation by
Landlord or any other person or entity lawfully
claiming through Landlord or claiming paramount title
to Landlord, subject only to the terms of this Lease,
the REA and any Mortgage or ground lease to which this
Lease is subordinate.
Section 2.3 Surrender of Premises. Upon the expiration
or earlier termination of the Term, Tenant shall
deliver up and surrender to Landlord possession of the
Premises, including all alterations, additions,
improvements and fixtures, other than Tenant's trade
fixtures, in good order, condition and state of repair,
ordinary wear and tear excepted, and shall deliver all
keys to the Premises to the office of Landlord at the
Shopping Center or as otherwise directed by Landlord.
Tenant shall have fifteen (15) days after the date the
Term of this Lease expires or earlier terminates to
remove its personal property and trade fixtures;
provided, however, that (a) Tenant shall repair all
damage to the Premises resulting from or arising out of
such removal, (b) during such period Tenant shall
perform and be liable for all obligations and
conditions imposed on Tenant hereunder except for the
payment of Rent, including, without limitation,
maintenance, repair, apportionment of taxes,
maintenance of insurance, compliance with Requirements
and assumption of liability for the Premises. The
obligations set forth in the preceding sentence shall
survive the termination of this Lease. Any property of
Tenant not removed from the Premises within such
fifteen (15) day period shall be deemed abandoned. In
addition to all other remedies available, Landlord may,
but shall not be obligated to, retain or dispose of any
or all such property without liability to Tenant. In
the event that Landlord elects to dispose of such
property, Landlord shall so notify Tenant, and Tenant
shall, no later than ten (10) days after such notice,
remove all such property from the Premises; provided,
however, that if Tenant fails to so remove such
property, then Landlord may do so, and Tenant shall pay
to Landlord, on demand, all costs and expenses incurred
by Landlord in disposing of such property, including,
without limitation, reasonable attorneys' fees and
disbursements, together with interest thereon,
calculated at the Interest Rate, from the date Landlord
expended such amounts.
Section 2.4 Holding Over. If not sooner terminated,
this Lease shall end on the date set forth in the
definition of "Term" in Section 1.1 without the
necessity of notice from either Landlord or Tenant to
terminate this Lease, Tenant hereby waiving notice to
vacate the Premises. If Tenant, or any party claiming
under Tenant, including, without limitation,
subtenants, licensees or concessionaires, remains in
possession of the Premises or any part thereof after
the expiration or termination of this Lease, no tenancy
or interest in the Premises shall result therefrom but
such holding over shall, at Landlord's option, be
deemed a month-to-month tenancy and, otherwise, shall
be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal. As
Landlord's sole remedy for such holding over, Tenant
shall pay to Landlord for any full or partial month
Tenant holds over in the Premises after the expiration
or termination of this Lease a sum equal to one hundred
fifty percent (150%) of the Percentage Rent paid or
payable by Tenant under this Lease with respect to the
last full month of the Lease Term.
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT
Section 3.1 Lease Controls Over REA. As between
Landlord and Tenant, the terms and provisions of this
Lease shall control notwithstanding any conflict with
the provisions of the REA. Tenant shall be fully
liable for the performance of all obligations under the
REA in accordance with all of the terms and provisions
thereof, to the extent that Tenant has expressly
assumed responsibility for the performance of any such
obligations under the terms of this Lease. Landlord is
and shall remain fully liable for the performance of
all of Landlord's obligations under the REA in
accordance with all of the terms and provisions
thereof, to the extent that Tenant has not expressly
assumed responsibility for the performance of any such
obligations under the terms of this Lease.
Section 3.2 Covenants Regarding REA. Landlord will
fully and faithfully carry out and perform the terms,
covenants, provisions and conditions of the REA to be
performed by the Landlord. Tenant will fully and
faithfully carry out and perform the terms, covenants,
provisions and conditions of the REA which, under the
express terms of this Lease, are to be performed by the
Tenant. Landlord will exert its best efforts in
exercising all of Landlord's rights and remedies under
the REA to enforce performance of all terms, covenants,
provisions, and conditions of the REA; and Landlord
will not take any of the actions requiring Landlord's
approval thereunder, without first having delivered to
Tenant a copy of the request for approval and any
documentation or material as to which such approval is
requested or required and thereafter obtained Tenant's
written approval thereof, which approval shall not be
unreasonably withheld, conditioned or delayed.
Landlord will not enter into any agreement amending,
supplementing or cancelling the REA without first
obtaining Tenant's prior written approval thereto,
which approval shall not be unreasonably withheld,
conditioned or delayed. Landlord hereby appoints
Tenant as Landlord's true and lawful attorney-in-fact
to take in Landlord's name whatever reasonable action
Tenant may deem appropriate to enforce performance of
the terms of the REA and to avail itself on Landlord's
behalf of any remedy therein granted Landlord in the
event (i) Tenant shall notify Landlord that the
obligations under the REA are not being properly
performed and (ii) Landlord shall fail to take action
to Tenant's reasonable satisfaction within a reasonable
time after receiving notice thereof.
It is the intent of the parties to this Lease that this
Lease and the REA are and shall remain mutually
dependent and co-existent documents. Tenant shall have
the right (in its sole and absolute discretion) to
terminate this Lease by giving Landlord notice to such
effect within ninety (90) days after the REA shall,
under its express terms and conditions, expire or
terminate or be cancelled, and this Lease shall
terminate on the last day of the month next succeeding
the month in which such notice is given.
ARTICLE IV
RENT AND OTHER CHARGES
Section 4.1 [Intentionally Omitted].
Section 4.2 Percentage Rent.
(a) Formula for Calculation.
Tenant covenants and agrees to pay to Landlord as rent
for each Term the sum of Three percent (3.0%) of the
amount of Tenant's Gross Sales for the Term
("Percentage Rent"), provided, however, that the
Percentage Rent payable hereunder shall be reduced by
the amount of any Operating Loss, as defined below.
Percentage Rent shall be payable, in arrears, on or
before March 10, 1999. "Operating Loss" means the
excess, if any, of Fully Allocated Costs, as defined
below, over Gross Sales. "Fully Allocated Costs" means
the sum of all costs and expenses of every kind and
nature incurred by Tenant in connection with the
Premises or the business conducted thereon, including,
without limitation:
(i) Sums payable by the Tenant
under the terms of this Lease (including Percentage
Rent).
(ii) Other costs incurred by
Tenant in performing or complying under this Lease.
(iii) Other costs incurred by
Tenant in maintaining and repairing the Premises and
any and all fixtures, equipment or property therein.
(iv) Tenant's cost of all
merchandise sold in or from the Premises.
(v) Compensation and benefits
to Tenant's employees working at the Premises.
"Compensation and benefits" include, without
limitation, (A) wages, salaries, and bonuses, (B) all
contributions made and taxes paid with respect to
employees (such as social security contributions, and
employment taxes and workers' compensation payments)
and (C) health insurance, 401K matching contributions,
sick leave, vacations and pensions.
(vi) Sums payable by Tenant
pursuant to that certain Third Amendment to Lease dated
July 8, 1998 by and between Tenant and Mano Management
Company, Inc., a Delaware corporation (relating to
Tenant's existing Downtown San Bernardino store).
(vii) The prorated portion of
the following items of Tenant's corporate overhead for
Tenant's fiscal year 1998 allocable to the Premises:
(A) inventory carrying charges (i.e., interest paid on
inventory financing); (B) distribution costs (including
the cost of operating distribution centers); and (C)
advertising and marketing expenses. Such corporate
overhead items shall be prorated by multiplying such
corporate overhead by the fraction which is the number
of days in the Term divided by 365. Such corporate
overhead items shall be allocable to the Premises based
on the ratio that the Gross Sales in or from the
Premises bears to the Gross Sales of all stores
operated by Tenant.
(b) Report. On or before March 10,
1999, Tenant shall furnish Landlord with a written
statement (the "Report"), certified by Tenant's chief
financial officer or comptroller, of total Gross Sales
made from the Premises during the Term, which Report
shall contain Tenant's computation of Percentage Rent.
The Report shall be in form reasonably satisfactory to
Landlord and shall contain such details and breakdown
as may accurately depict Gross Sales.
(c) Records. Tenant shall maintain
at the Premises or at its principal record keeping
office within the continental United States at all
times during the Term, full, complete and accurate
books of account and records in accordance with
generally accepted accounting practices consistently
applied for all operations of the business conducted in
or from the Premises, including the recording of Gross
Sales and the receipt of all merchandise into, and the
delivery of all merchandise from, the Premises during
the Term, and shall retain such books and records,
copies of all tax reports and tax returns submitted to
taxing authorities, as well as copies of contracts,
vouchers, checks, inventory records, electronic data
recordings and other documents, recordings, and papers
in any way related to the operation of such business
for at least one (1) year from the end of the Term, or,
if any audit is required or a controversy should arise
between the parties hereto regarding the Rent payable
hereunder, until such audit or controversy is
terminated, even though such retention period may
extend beyond the expiration of the Term or earlier
termination of this Lease.
(d) Review of Books and Records.
The acceptance by Landlord of payments of Percentage
Rent or any Report pursuant to Section 4.2(b) above
shall not prejudice Landlord's right to examine
Tenant's books, records and accounts in order to verify
the amounts set forth thereon. Landlord may at any
reasonable time during the Term, or within one (1) year
after the Term (but not more than once) cause a
complete or partial audit to be made of Tenant's books,
records and other documents relating to the Premises,
including the books and records of any subtenant,
licensee or concessionaire. Landlord or its duly
authorized representatives shall have full and free
access to such books and records and the right to
require of Tenant, its agents and employees, such
information or explanation with respect to such books
and records as may be necessary for a proper
examination and audit thereof. If such audit discloses
an understatement in a Report of Gross Sales, Tenant
shall pay the deficiency in Percentage Rent with,
interest thereon calculated at the Interest Rate, and,
if Gross Sales have been understated in any Report by
four percent (4%) or more, Tenant shall pay to
Landlord, as Rent, the cost of said audit, upon demand.
(e) Confidentiality. Any
information regarding Tenant's business operations
delivered to or made available to Landlord, or
otherwise obtained by Landlord in the exercise of its
rights under subsection (d), above, shall be held in
strictest confidence by Landlord. Landlord shall
disclose such information only to its accountants,
attorneys and other consultants and shall require all
such parties to keep all information regarding Tenant
strictly confidential. Nothing in this subsection (e)
prohibits Landlord from disclosing such material when
ordered to do so by a court of competent jurisdiction,
or when necessary to properly plead or prosecute a
legal action brought by Landlord against Tenant for
nonpayment of Percentage Rent.
Section 4.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or respective utilities companies for all
required utility services to the Premises. Tenant
shall pay all required deposits and meter charges for
utilities to the Premises to the respective utility
supplier(s).
(b) Tenant shall pay promptly, as
and when same shall become due, all water rents, rates
and charges, all sewer rents, rates and charges and all
charges for electricity, gas, heat, steam, hot and/or
chilled water, air conditioning, ventilating, lighting
systems, sprinkler systems and all other utilities
supplied to the Premises.
Section 4.4 Common Area Maintenance Costs. Tenant
shall pay, as Rent, Common Area Maintenance charges as
specified in the REA or any lesser amount specified in
a separate agreement thereunder. Tenant shall pay
Common Area Maintenance charges as referenced herein
within thirty (30) days after Tenant has received a
bill therefor.
Section 4.5 Taxes.
(a) Tenant shall pay before
delinquency all real and personal property taxes,
general and special assessments, and other public
charges levied upon or assessed against the Premises,
the land thereunder, or any of the building structures,
fixtures, equipment, or improvements thereon
(collectively, "Impositions"). Tenant shall deliver to
Landlord reasonable evidence of payment prior to the
time said Impositions have become delinquent.
(b) Any Imposition relating to a
fiscal period of the taxing authority, a part of which
period is included within the Term of this Lease and a
part of which is included prior to the beginning of the
Term of this Lease or after the termination of this
Lease shall (whether or not such Imposition shall be
paid, assessed, levied or imposed upon or become due
and payable and a lien upon the Premises or a part
thereof during the term of this Lease) be adjusted as
between Landlord and Tenant as of the Term Commencement
Date or as of the date of the termination of the Term
of this Lease, as the case shall require, so that
Landlord shall pay that proportion of such Imposition
which that part of such fiscal period included in the
period of time prior to the commencement or after the
termination of the Term, as the case may be, bears to
such fiscal period, and Tenant shall pay the remainder
thereof.
(c) In the event Landlord is unable
to secure separate tax bills for Tenant as herein
described, then Tenant shall pay to Landlord, prior to
such time as said Impositions would be due and payable,
all Impositions attributable to the Premises. Personal
property taxes shall be allocated directly to Tenant's
personal property. Real property taxes will be
allocated by virtue of the ratio of the Floor Area of
the Premises to the total gross leasable area in the
Shopping Center, which said gross leasable area shall
not include any part of the Common Area in the Shopping
Center, being assessed on the tax bill which relates to
the Premises.
(d) If Tenant fails to pay any such
taxes, assessments or other public charges which it is
obligated to pay as provided in this section before the
same become delinquent, then and in such event,
Landlord may pay the same together with any interest
and penalties thereon, and the amount so paid shall be
deemed additional Rent immediately due and payable by
Tenant to Landlord on demand, together with interest
thereon at the Interest Rate.
(e) Anything in this section to the
contrary notwithstanding, Landlord agrees that Tenant
shall have the right, at Tenant's sole cost and
expense, to contest the legality or validity of any
Impositions payable by Tenant, but no such contest
shall be carried on or maintained by Tenant after such
Impositions become delinquent unless Tenant shall have
duly paid the amount involved under protest or shall
procure and maintain a stay of all proceedings to
enforce any collection thereof and any forfeiture or
sale of the leased property, and shall also provide for
payment thereof together with all penalties, interest,
costs and expenses by deposit of a sufficient sum of
money or by a good and sufficient undertaking as may be
required by law to accomplish such stay. Landlord
shall, at the request of Tenant and at Tenant's sole
expense, execute or join in the execution of any
instrument of documents necessary in connection with
any such contest except bonds of undertakings. In the
event of any such contest made by Tenant, Tenant shall
promptly, upon final determination thereof, pay and
discharge the amount indicated or resulting from said
contest, together with any penalties, fines, interest,
costs and expenses that may have accrued thereon.
Section 4.6 Late Payment Charges. Late payments of
Rent or any other sum due from Tenant hereunder,
including all amounts paid by Landlord on behalf of
Tenant to satisfy any condition or covenant of this
Lease and all costs incurred by Landlord in enforcing
the terms of this Lease, shall bear interest from the
date Tenant receives written notice of such late
payment or default (as applicable) until paid at the
Interest Rate.
Section 4.7 Rent Payments. All Rent payable by Tenant
under this lease shall be paid in United States Dollars
without prior demand therefor and without any
deductions, offsets or counterclaims except those
expressly permitted under the terms of this Lease, to
Landlord and shall be delivered on or before the due
date thereof via wire transfer to
Bank of America, S.A.
Principal Office: Madrid
1 Capitan Haya St.
28009 Madrid SPAIN
For Credit To:
El Corte Ingles, S.A.
Account number 31922020
or to such other payee and at such other place as
Landlord may hereafter designate from time to time by
written notice to Tenant. Notwithstanding anything to
the contrary in this Lease, Tenant may withhold any
portion of Rent which Tenant is required to withhold by
virtue of Landlord's status as a foreign person under
Section 1445 of the Internal Revenue Code or other
applicable law.
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS
Section 5.1 Permitted Use.
(a) Tenant shall use the Premises
only for the Permitted Use and for no other purpose
whatsoever.
(b) Tenant covenants that Tenant
shall not use or allow the Premises or any part thereof
to be used or occupied for any Prohibited Use or any
immoral or unlawful purpose or in violation of any
certificate of occupancy or certificate of compliance
for the Premises.
Section 5.2 Signs. Tenant shall have the right,
without Landlord's consent, to erect any and all signs
on or about the Premises it elects, provided that such
signage complies with the REA and all Requirements.
From time to time upon Tenant's request, Landlord
covenants to assist Tenant (at no cost or expense to
Landlord) in processing any and all approvals necessary
for Tenant to erect such signage.
Section 5.3 Alterations of Premises.
(a) All changes, alterations or modifications to
the Premises (collectively, "Alterations") shall be
made in accordance with this Section 5.3. Tenant shall
have the right to perform non-structural modifications
to, remodel and redecorate, retexturize, recarpet and
repaint the Premises without obtaining the prior
written consent of Landlord; provided (i) the proposed
Alteration does not affect the exterior appearance of
the Premises, including, without limitation, the
storefront or the storefront sign of the Premises, or
the roof, foundation, supports or structural integrity
of the building of which the Premises is a part; (ii)
Tenant submits an information copy of all remodeling
plans to Landlord at least thirty (30) days prior to
the date any such work is scheduled to commence; (iii)
the total cost of all work involved in the Alteration
does not exceed Three Hundred Thousand Dollars
($300,000) in any one project or an aggregate amount of
Six Hundred Thousand Dollars ($600,000); and (iv) such
work does not violate any code, ordinance or
Requirement and does not cause Landlord's insurance
rates to increase. Except for the foregoing, Tenant
shall not make any Alterations to any portion of the
Premises without, in each instance, obtaining
Landlord's prior written consent.
(b) All work ("Work") pertaining to
any Alteration to the Premises, including, without
limitation, Tenant's Work, shall comply with the
following:
(i) No Work shall be
undertaken until Tenant shall have procured and paid
for, so far as the same may be required, from time to
time, all permits and authorizations of all municipal
departments and governmental subdivisions having
jurisdiction. Provided no default exists hereunder,
Landlord shall join in the application for such permits
and authorizations whenever such action is necessary;
provided, however, that Landlord shall not incur any
expense or be subject to any liability as a result of
joining in any such application. Within ten (10) days
after completion of the Work, Tenant shall deliver to
Landlord a certificate of occupancy or such similar
certificates as may be required or customary by
applicable laws and legal requirements.
(ii) All Work shall be
performed promptly and in a good and workmanlike manner
and in compliance with all applicable permits and laws,
and in accordance with the orders, rules and
regulations of the National Board of Fire Underwriters
or any other body hereafter exercising similar
functions.
(iii) The cost of any Work
shall be paid promptly by Tenant so that the Premises
shall at all times be free and clear of liens for labor
and materials supplied or claimed to have been supplied
in connection therewith.
(iv) Tenant shall carry, or
shall cause to be carried, worker's compensation
insurance covering all persons employed in connection
with any Work and with respect to whom death or bodily
injury claims could be asserted against Landlord,
Tenant or the Premises, and, without duplication of any
insurance required by Article VIII hereof, adequate
all-risk and builders risk insurance for the mutual
benefit of Tenant and Landlord in amounts satisfactory
to Landlord and, at Landlord's request, such other
insurance in favor of Landlord in types and amounts as
are reasonable and customary, all at Tenant's expense,
at all times when any such Work is in progress;
provided, however, that Tenant shall be fully liable
for any failure to maintain such insurance, including,
without limitation, Tenant's obligation to indemnify
Landlord for the failure to maintain insurance in
accordance with the provisions of this Lease. All such
insurance shall be provided by a company or companies
of recognized responsibility and reasonably
satisfactory to Landlord, and all policies or certified
copies of policies issued by the respective insurers,
bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to Landlord
of such payment, shall be delivered to Landlord prior
to the commencement of any Work.
Section 5.4 Use of Common Areas.
(a) All Common Areas shall be
subject to the exclusive control and management of
Developer as set forth in the REA. Tenant and Tenant's
officers, directors, employees, agents, subtenants,
contractors, subcontractors, concessionaires and
licensees, and the officers, directors, employees and
agents of Tenant's subtenants, concessionaires and
licensees, and the customers, patrons and business
invitees of Tenant and of Tenant's subtenants,
concessionaires and licensees (hereinafter,
collectively, "Tenant's Employees and Invitees") shall
have the non-exclusive right to use (without cost or
expense to Tenant or Tenant's Employees or Invitees
other than as expressly provided in this Lease) the
Common Areas for the purpose of gaining ingress to and
egress from the Premises, for the passage and parking
of vehicles, and for the passage and accommodation of
pedestrians, such right to be in common with Landlord
and those occupants (and the employees and invitees of
such occupants) of the Shopping Center from time to
time authorized to use said common areas for such
purposes.
(b) Notwithstanding anything to the
contrary contained in Section 5.4(a) hereof, Landlord
shall exercise best efforts to cause Developer to
maintain, manage and operate the Common Areas
(including, but not by way of limitation, the parking
area) in good order, condition and repair in conformity
with the REA so as to at all times maintain an
appearance and attractiveness reasonably equivalent to
the level of same existing as of the date hereof.
Developer's obligations to be enforced by Landlord
pursuant to the preceding sentence in respect of the
maintenance, management and operation of the Common
Areas shall include, but not be limited to, the
following:
(i) Undertaking such
maintenance and construction work (including
replacements as required) as is necessary to preserve
and maintain the utility of the Common Areas;
(ii) The care and maintenance
of all identification signs and all planters (including
those adjacent to the Premises but excluding any signs
and planters of Tenant) and landscaping at the Shopping
Center;
(iii) The adequate illumination
of the Common Areas at all times of darkness that
Tenant is open for business (plus a period of one-half
hour after Tenant closes for business);
(iv) The payment prior to
delinquency of all real estate and personal property
taxes and assessments levied on the Common Areas;
(v) The removal of dirt and
debris and rubbish (including the regular sweeping of
the parking area and all sidewalks); and
(vi) The operation, management
and maintenance of the enclosed mall, including the
heating, ventilating, air-conditioning, lighting and
housekeeping of the same and the maintenance (and
replacement as required) of landscaping therein.
Section 5.5 Compliance with REA. Tenant shall abide by
the terms of the REA. Landlord agrees that it will not
change, amend or alter (or agree or consent to change,
amend or alter) any term or condition of the REA
without the prior written consent of Tenant, which
consent shall not be unreasonably withheld.
Section 5.6 Compliance with Requirements.
(a) Insofar as the same relate to
or are caused by Tenant's occupancy and use of the
Premises, and Tenant's other activities under this
Lease, throughout the Term, Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present
and future Requirements applicable to the Premises,
subject, however, to Tenant's rights to contest any
such Requirements, as set forth in clause (b) below.
Tenant shall likewise comply with the provisions of all
of Tenant's insurance policies required to be
maintained hereunder or otherwise carried by Tenant
with respect to the Premises from time to time.
(b) Tenant shall have the right,
after prior notice to Landlord, at Tenant's sole cost
and expense, to contest by appropriate legal
proceedings diligently prosecuted in good faith, in the
name of Tenant, the validity or application of any
Requirements; provided, however, that Tenant may delay
compliance therewith until the final determination of
such proceeding only if by the terms of any such
Requirements, compliance therewith pending the
prosecution of any such proceeding may legally be
delayed without subjecting Landlord to the risk of any
criminal liability, or imminent forfeiture of its
estate, for failure so to comply therewith, and
provided further that if any fine, lien, charge or
civil liability may be incurred by reason of such
non-compliance, (i) Tenant furnishes to Landlord
security satisfactory to Landlord, against such fine,
lien, charge or civil liability in accordance with
Section 5.7, and (ii) Tenant shall be solely
responsible for payment of such fine, lien, charge or
civil liability and shall indemnify, defend and hold
Landlord harmless with respect thereto.
Section 5.7 Liens.
(a) Tenant agrees that it will pay
or cause to be paid all costs for work done by it or
caused to be done by it on the Premises of a character
which will or may result in liens on Landlord's
reversionary estate therein, and Tenant shall keep the
Premises free and clear of all mechanics' liens and
other liens on account of work done for Tenant or
persons claiming under it. If any such lien shall at
any time be filed against the Premises, Tenant shall
either cause the same to be discharged within thirty
(30) days after the recording thereof, or, if Tenant,
in Tenant's discretion and in good faith, determines
that such lien should be contested, shall furnish such
security as may be necessary or required to prevent any
foreclosure proceedings against the Premises during the
pendency of such contest. If Tenant shall fail to
furnish such security, then, in addition to any other
right or remedy of Landlord resulting from such
failure, Landlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed
to be due, procuring the discharge of such lien by
giving security, or in such other manner as is, or may
be, prescribed by law. Tenant shall repay to Landlord,
as Rent, on demand, all sums disbursed or deposited by
Landlord pursuant to the provisions of this Section
5.7, including all costs, expenses and attorneys' fees
incurred by Landlord in connection therewith. Nothing
contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to
liability under any mechanics' lien or other lien law.
(b) Should any claims of lien be
filed against the Premises or any action affecting the
title to the Premises be commenced, the party receiving
notice of such lien or action shall forthwith give the
other party written notice thereof. Landlord or its
representative shall have the right to post and keep
posted upon the Premises notices of nonresponsibility
or such other notices which Landlord may deem to be
proper for the protection of Landlord's interest in the
Premises. Tenant shall, before the commencement of any
work which might result in any such lien, give to
Landlord advance written notice of its intention to do
so in reasonably sufficient time to enable the posting
of such notices.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1 Tenant's Obligations. Tenant shall at all
times keep the leased Premises, including maintenance
of entrances and all partitions, doors, windows,
fixtures, equipment and appurtenances thereof
(including lighting and plumbing fixtures) in good
order, condition and repair (including reasonably
periodic interior painting), damage by casualty
excepted, except for structural portions of the
Premises, which shall be maintained by Landlord as set
forth below. It is also agreed that the Tenant will
maintain and repair the heating, ventilating, and air
conditioning units, excluding replacement of
compressors and major component parts, it being agreed
that Tenant shall only be obligated to pay for
reasonable and necessary routine repairs to such
systems and equipment to keep them in good working
condition but not for any more extensive repairs or
replacements.
Section 6.2 Landlord's Obligations. Notwithstanding
anything to the contrary herein, it is understood and
agreed that Landlord shall be responsible throughout
the Term for maintaining and repairing all structural
portions of the Building, including the roof, walls,
glass and other load-bearing portions of the structure.
Landlord shall also be responsible for any necessary
replacements of any essential building systems,
including, without limitation, heating, ventilation and
air conditioning (HVAC) systems, plumbing, electrical
and sewage systems. Landlord shall be responsible for
any necessary repairs to the heating, ventilating, and
air conditioning units, excluding replacement of
compressors and major component parts, which are more
extensive than the reasonable and necessary routine
repairs for which Tenant is responsible pursuant to
Section 6.1. Landlord shall not be required to make
repairs to the extent made necessary by reason of
Tenant's negligent or intentional acts or omissions to
act. The parties acknowledge that, in light of the
very short term of this lease, Landlord may reasonably
elect to perform temporary repairs to systems and
equipment where more permanent repairs or replacement
might be more customary or economical if the lease were
of a longer term. Tenant agrees that Landlord may
elect such temporary measures so long as the service
provided to the Premises and Tenant's business by such
equipment or system is not materially adversely
affected.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage or Destruction.
(a) Tenant shall give Landlord
prompt notice of any damage to the Premises by fire or
other casualty.
(b) If the Premises shall be
rendered wholly untenantable by casualty, unless
terminated pursuant to Section 7.1(d) hereof, this
Lease shall remain in full force and effect except that
Rent shall fully abate commencing on the date of loss
and continuing until the earlier to occur of: (i) the
date Tenant reopens the Premises for business, which
reopening Landlord and Tenant shall diligently work
together to expedite, or (ii) the date forty five (45)
days after Landlord completes the restoration, pursuant
to Section 7.1(e), of the structural elements of the
building of which the Premises form a part.
(c) If only a portion of the
Premises shall be rendered untenantable, unless
terminated pursuant to Section 7.1(d) hereof, this
Lease shall remain in full force and effect except that
Rent shall partially abate commencing on the date of
loss and continuing until the earlier to occur of: (i)
the date Tenant reopens the repaired portion of the
Premises for business, which reopening Landlord and
Tenant shall diligently work together to expedite, or
(ii) the date forty five (45) days after Landlord
completes the restoration, pursuant to Section 7.1(e),
of the structural elements of the building of which the
Premises form a part. In such event, the Rent shall be
reduced to an amount computed by multiplying the Rent
applicable prior to such damage by a fraction, the
numerator of which is the Floor Area of the Premises
tenantable after such damage and the denominator of
which is the Floor Area of the Premises prior to such
damage.
(d) If any portion of the Premises
shall be rendered untenantable, or if there shall be
damage to the Shopping Center, by fire or other
casualty, whether or not the Premises is affected
thereby, either party shall have the option to
terminate this Lease. Said option shall be exercised,
if at all, by notice to the other party on or before
the ninetieth (90th) day after the date of loss and, if
exercised, shall be effective on the last day of the
first (1st) full calendar month falling at least sixty
(60) days after such notice.
(e) If there shall be damage to the
Premises by fire or other casualty and this Lease is
not terminated, Landlord shall promptly commence and
diligently prosecute the restoration and repair of the
structural elements of the building in which the
Premises are located, including all exterior walls,
roofs, floors and supports to structurally sound
condition, prepared for Tenant's restoration of the
interior portions of the Premises as set forth below.
Upon receipt of the repaired structural elements of the
building in which the Premises are located, Tenant
shall, at Tenant's sole cost and expense, promptly
commence and diligently prosecute the restoration and
repair of the nonstructural and interior portions of
the Premises, including, without limitation, all
internal partitions, fixtures, trade fixtures,
shelving, casework, furniture and furnishings used in
connection with the operation of Tenant's business in
the Premises, as nearly as practicable to their
respective conditions prior to such damage.
Section 7.2 Condemnation.
(a) The term "Taking" as used in
this Section 7.2, shall mean an appropriation or taking
under the power of eminent domain by any public or
quasi-public authority or a voluntary sale or
conveyance in lieu of condemnation but under threat of
condemnation.
(b) In the event of a Taking of the
entire Premises, this Lease shall terminate and expire
as of the date possession is delivered to the
condemning authority and Landlord and Tenant shall each
be released from any liability accruing pursuant to
this Lease after such termination.
(c) If there is a Taking of (a)
more than twenty-five percent (25%) of the Premises, or
(b) any portion of the Building and, regardless of the
amount taken, if the remainder of the Building is not
one undivided structure, either Landlord or Tenant may
terminate this Lease as of the date Tenant is required
to vacate the Premises upon giving notice in writing of
such election within thirty (30) days after receipt of
Tenant from Landlord of written notice that a portion
of the Premises has been so appropriated or taken.
(d) If this Lease is terminated as
a result of a Taking, Tenant shall be entitled to any
separate award made to Tenant for relocation costs,
good will and any of Tenant's fixtures and equipment
which are not capable of removal from the Premises;
provided such separate award does not diminish
Landlord's award. Subject to the foregoing, Landlord
shall be entitled to the entire award or compensation
in such condemnation proceedings, or settlement in lieu
thereof, irrespective of whether such award or
settlement shall be obtained as compensation for
diminution in value to the leasehold or the leasehold
improvements thereto or to the fee of the Premises, but
the Percentage Rent and any other Rent for the last
month of Tenant's occupancy shall be prorated and
Landlord shall refund to Tenant any Percentage Rent and
other Rent paid in advance. Notwithstanding the
foregoing and subject to Section 2.3, in the event this
Lease is terminated as provided above, Tenant may
remove all of its removable trade fixtures, furniture
and equipment from the Premises, provided that Tenant
immediately repairs any damage occasioned to the
Premises by reason of such removal so as to leave the
Premises in a neat and clean condition.
Notwithstanding the foregoing, in no event shall Tenant
be entitled to any portion of any award or
compensation, if following the payment of such sum to
Tenant, there would not be sufficient funds or proceeds
to pay the unpaid principal balance of any obligation
of Landlord secured by a deed(s) of trust or
mortgage(s) on the fee interest in the Premises and/or
the Building.
(e) In the event of a Taking, if
Landlord and Tenant elect not to so terminate this
Lease as provided above (or have no right to so
terminate), Tenant agrees, at Tenant's cost and expense
(subject to Tenant's rights hereunder) as soon as
reasonably possible after the Taking, to restore the
Building on the Land remaining to a complete unit of
like quality and character as existed prior to the
Taking. In such event, Tenant shall be entitled to
receive any and all award or compensation in connection
with such Taking until Tenant has received funds
sufficient to complete such restoration, and Landlord
shall be entitled to receive the remaining portion of
the total award or compensation.
ARTICLE VIII
INSURANCE
Section 8.1 Tenant's Insurance.
(a) Tenant shall carry, from and at
all times after the date hereof, at Tenant's sole cost
and expense, the following insurance:
(i) public liability and
property damage insurance covering the Premises and
Tenant's use thereof against claims for personal injury
or death and property damage occurring in, on or about
the Premises and affording protection to the limits of
not less than Three Million Dollars ($3,000,000) per
occurrence with respect to any one (1) bodily injury or
damage to property, which insurance shall, in addition,
extend to any liability of Tenant arising out of the
indemnities contained in Section 8.5 by contractual
liability endorsement. All liability policies shall
contain a so called "occurrence clause";
(ii) fire and casualty
insurance covering the Premises, in an amount equal to
ninety percent (90%) of the replacement cost thereof
(excluding foundations and footings);
(iii) fire insurance with
extended coverage, covering such items of Tenant's
merchandise, inventory, signs, furniture, trade
fixtures, equipment, leasehold improvements and other
property of Tenant, now or hereafter placed in, on or
about the Premises in an amount equal to ninety percent
(90%) of the replacement cost thereof;
(iv) in the event Tenant
installs in, adjoining or beneath the Premises any
steam boiler or similar equipment, broad form boiler
insurance;
(v) earthquake insurance in
an amount equal to one hundred percent (100%) of the
replacement cost of the Premises, to the extent the
same is available at commercially reasonable rates and
with deductibles of commercially reasonable amounts (it
being agreed that Tenant may maintain required
earthquake coverage through a blanket policy covering
several (or all) store locations owned or affiliated
with Tenant and having a maximum aggregate coverage
limit of Twenty Million Dollars ($20,000,000)); and
(vi) such other insurance as
may in Tenant's reasonable judgment be prudent to carry
from time to time.
(b) All insurance policies required
to be carried by Tenant shall be issued by companies
with a general policyholder's rating of not less than
"A" and a financial size rating of "VI" as rated in the
most current available "Best's Insurance Reports", and
qualified to do business in the State of California.
Each insurance policy shall name Landlord, Tenant and
Mortgagee as insureds as their interests may appear
and, to the extent possible, any other parties in
interest from time to time designated in writing by
notice from Landlord to Tenant. Executed copies of
each insurance policy, duplicate originals or original
certificates thereof (provided that such certificates
shall evidence all of the required coverage herein
provided) shall be delivered by Tenant to Landlord
within ten (10) days after delivery of possession of
the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of prior policies.
All insurance policies shall contain a provision that
the underwriter will give Landlord and Mortgagee at
least thirty (30) days prior written notice of any
cancellation or lapse of such insurance or the
effective date of any reduction in the amounts thereof
or increase of the deductible. All insurance policies
shall be written as primary policies which do not
contribute to, and are in excess of, any coverage which
Landlord may carry. All insurance policies shall
contain an agreement by the insurers that the coverage
afforded thereby shall not be affected by any
construction work in or about the Premises and that no
act or omission by the Tenant shall impair or affect
the rights of the Landlord to receive and collect the
proceeds under the policies.
(c) Any insurance required to be
carried by Tenant may be provided under a blanket
policy of insurance covering additional items or
locations or insureds; provided, however, that: (i)
Landlord and Mortgagee shall be named as an additional
insured thereunder (or covered by broad form Landlord
endorsement or contractual coverage); (ii) any such
blanket policy or policies shall specify total
insurance allocated to Tenant's improvements and
property; and (iii) the requirements for Tenant's
insurance set forth herein are otherwise satisfied.
Tenant agrees to use its best efforts to ensure that
the coverage afforded Landlord and any such other
parties in interest under any future blanket policy of
insurance will not be diminished by reason of the use
of such blanket policy of insurance, and Tenant shall
expend commercially reasonable amounts in connection
with obtaining such coverage.
(d) The deductibles and
self-insured retentions included in Tenant's insurance
policies shall be in amounts as may be commercially
reasonable from time to time.
(e) If Tenant refuses or neglects
to secure and maintain insurance policies complying
with the provisions of this Section 8.1, Landlord may
secure the appropriate insurance policies and Tenant
shall pay, upon demand, the costs of same to Landlord
as Rent.
Section 8.2 Landlord's Insurance. Landlord at its cost
shall carry, from and at all times after the date of
delivery of the Premises to Tenant, all insurance
required to be carried by Landlord pursuant to (i) any
Mortgages which either presently or in the future may
exist as a lien against the Premises and (ii) the REA,
to the extent that insurance required to be carried by
Tenant pursuant to this Lease is insufficient to
satisfy either of such obligations of Landlord.
Section 8.3 Waiver of Subrogation. Landlord and Tenant
each waive any rights it may have against the other on
account of any loss or damage occasioned to Landlord or
Tenant, as the case may be, their respective property,
the Premises or its contents or to other portions of
the Shopping Center arising from any liability, loss,
damage or injury caused by fire or other casualty for
which property insurance is carried or required to be
carried pursuant to this Lease. Each of the parties
hereto, on behalf of their respective insurance
companies insuring the property of either Landlord or
Tenant against any such loss, to the extent of any
recovery under such insurance, waives any right of
subrogation that it may have against the other. Each
waiver shall be expressly included in, and shall comply
with the requirements of, the respective insurance
policies.
Section 8.4 Governmental and Insurance Requirements.
(a) Tenant shall comply, at
Tenant's sole cost and expense, with all reasonable
requirements of the insurance underwriters, or any
similar public or private body, provided that any such
requirements of such insurance underwriters, or any
similar public or private body, are conditions to the
continuance of any of the insurance coverage required
hereunder, and any governmental authority having
jurisdiction over insurance rates with respect to the
use or occupancy of the Premises as a part of Shopping
Center, including, without limitation (i) installing
fire extinguishers or automatic dry chemical
extinguishing systems; (ii) making any changes,
modifications, alterations or additions in the
sprinkler system within the Premises; and (iii)
relocating partitions, trade fixtures or other contents
within the Premises.
(b) Tenant shall not commit any act
or suffer to exist on the Premises any circumstances
which will violate any reasonable restrictions
contained in any of Tenant's or Landlord's policies of
fire and casualty or public liability insurance,
prevent Landlord from continuing the coverage presently
provided in Landlord's insurance policies from
insurance companies reasonably acceptable to Landlord
or cause the rates for any such policies to increase
beyond the minimum rates from time to time applicable
to the Premises or the Shopping Center for the
Permitted Use, provided such minimum rate would have
been available to Landlord but for Tenant's actions or
use. In the event that Landlord receives any notice
from Landlord's insurance company regarding any
violation by Tenant of any of Landlord's insurance
policies, or of any proposed increase in Landlord's
premiums from the minimum rate from time to time
applicable thereunder because of any act, omission or
sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
(c) In the event that Landlord
receives any notice from Landlord's insurance company
regarding any violation by Tenant of any of Landlord's
insurance policies, or of any proposed increase in
Landlord's premiums from the minimum rate from time to
time applicable thereunder because of any act, omission
or sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
Section 8.5 Indemnification. To the fullest extent
permitted by law, Tenant covenants with Landlord that
Landlord shall not be liable for any damage or
liability of any kind or for any injury to or death of
persons or damage to property of Tenant or any other
person occurring from and after the date Tenant is
given access to the Premises from any cause whatsoever
related to the use, occupancy or enjoyment of the
Premises including, but not limited to, the sidewalks
and landscaped areas immediately adjacent to the
Building and Tenant's drive through area, if any, by
Tenant or any person thereon or holding under Tenant
including, without limitation, damages resulting from
any labor dispute, and Tenant shall defend (using
counsel mutually approved by Landlord and Tenant or
Tenant's insurer), indemnify and save Landlord harmless
from all liability whatsoever on account of any real or
alleged damage or injury and from liens, claims and
demands related to the use of the Premises and its
facilities, or any repairs, alterations or improvements
(including any improvements and fixtures constructed or
installed by Tenant) which Tenant may make or cause to
be made with respect to the Premises, and any loss or
interruption of business or loss of rental income
resulting therefrom. Notwithstanding anything to the
contrary in the foregoing, Tenant shall not be liable
for damage or injury occasioned by the negligence or
willful misconduct of Landlord or any ground lessor,
mortgagee or owner of all or any part of the Shopping
Center or their respective employees, agents or
contractors.
Section 8.6 Landlord Exculpation. Landlord shall
endeavor to conduct its activities with respect to the
Premises in a prudent and businesslike manner.
However, Landlord shall not be liable for any damage to
property entrusted to employees of Landlord, its
partners or agents, nor for loss of or damage to any
property damage or loss of business which may be
sustained by the person, goods, ware, merchandise or
property of Tenant, its employees, invitees or
customers or any other person in or about the Premises
caused by or resulting from, but not limited to, fire,
steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of same, whether the
injury, damage or loss of business results from
conditions arising upon the Premises, other portions of
the Shopping Center or from other sources, so long as
the same does not result from the negligence or wilful
misconduct of Landlord or its employees, agents, and
contractors or Landlord's breach of any of its express
obligations under this Lease. Landlord shall not be
liable for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the
Premises or in the Shopping Center or of defects
therein or in the fixtures or equipment. Landlord
shall not be liable for any damages arising from any
act or neglect of any other tenant in the Shopping
Center, except to the extent of Landlord's liability
for breach of Landlord's obligation to enforce the REA,
as provided in Section 3.2.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Notice to Landlord. Tenant may not assign
its rights under this Lease or sublet all or any
portion of the Premises.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the
following events shall constitute a "Default" by Tenant
under this Lease:
(a) If Tenant shall fail to pay any
Rent under this Lease when the same shall become due
and payable and the failure shall continue for five (5)
business days after written notice (it being understood
such period shall run concurrently with any statutory
notice period); or
(b) If Tenant shall transfer
Tenant's interest in this Lease in contravention of
Article IX hereof; or
(c) If Tenant shall fail to perform
or observe any of its obligations under this Lease
(including, without limitation, Tenant's failure to
perform those obligations under the REA expressly
assumed by Tenant in this Lease) other than those
specified above in this Section 10.1 and the failure
shall continue for thirty (30) days after notice,
unless a shorter period of time for such performance or
observance is otherwise expressly set forth in this
Lease; provided, however, that in the case of a Default
which cannot with reasonable diligence be remedied by
Tenant within said period of thirty (30) days, if
Tenant proceeds as promptly as may reasonably be
possible after the service of such notice and with all
reasonable diligence to remedy the Default and
thereafter prosecute the remedying of such Default with
all reasonable diligence, the period of time after the
giving of such notice within which to remedy the
Default shall be extended for such period as shall be
reasonably necessary to remedy the same with all
reasonable diligence;
(d) If the Premises are deemed
abandoned pursuant to California Civil Code Section
1951.3; or
(e) If an event of insolvency shall
occur including:
(i) Tenant's making an
assignment for the benefit of creditors;
(ii) Tenant's failure
generally to pay its debts as they become due;
(iii) A material adverse change
in the financial condition of Tenant;
(iv) Tenant's filing, or
acquiescing to the filing of, a petition seeking an
order for relief against it in any state or federal
court in any bankruptcy, reorganization, liquidation,
composition, extension, arrangement or insolvency
proceeding;
(v) Tenant's making an
application for, or acquiescing to, the appointment of
a trustee, examiner or custodian for it or all or any
portion of its property;
(vi) Any petition being filed
against Tenant in any state or federal court seeking
reorganization or liquidation or insolvency
proceedings, and the proceedings shall not be
dismissed, discontinued or vacated within ninety (90)
days; or
(vii) Any trustee, examiner or
custodian being appointed for Tenant, or for all or any
portion of Tenant's property, and the trustee,
examiner, or custodian shall not be set aside within
ninety (90) days after such appointment.
Section 10.2 Remedies. Upon the occurrence of a
Default, and in addition to any other rights or
remedies available to Landlord at law or in equity,
Landlord shall have the right to:
(a) terminate this Lease and all rights of Tenant by
giving Tenant written notice that this Lease is
terminated, in which case Landlord may recover from
Tenant the sum of :
(i) the worth at the time of award
of any unpaid Rent that had been earned at the time of
termination.
(ii) the worth at the time of award
of the amount by which (A) the unpaid Rent that would
have been earned after termination until the time of
award exceeds (B) the amount of rental loss, if any, as
Tenant affirmatively proves could have been reasonably
avoided;
(iii) the worth at the time of award
of the amount by which (A) the unpaid Rent for the
balance of the Term after the time of award exceeds (B)
the amount of rental loss, if any, as Tenant
affirmatively proves could be reasonably avoided;
(iv) any other amount necessary to
compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform Tenant's
obligations or that, in the ordinary course of things,
would be likely to result; and
(v) all other amounts in addition
to or in lieu of those previously stated as may be
provided from time to time by California law; or
(b) continue this Lease, and from time to time,
without terminating this Lease, either (i) recover all
Rent and other amounts payable as they become due or
(ii) relet the Premises or any part of the Premises on
behalf of Tenant for any term, at any rent, and
pursuant to any other provisions as Landlord deems
advisable, all with the right, at Tenant's cost, to
make alterations and repairs to the Premises.
As used in clauses 10.2(a)(i) and 10.2(a)(ii) of this
Section, the worth at the time of award is computed by
allowing interest at the Interest Rate. As used in
clause 10.2(a)(iii) of this Section, the worth at the
time of award is computed by discounting that amount at
the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(c) Upon the occurrence of a Default, Landlord shall
also have the right, with or without terminating this
Lease, to re-enter the Premises and remove all persons
and property from the Premises. Landlord may cause
property so removed from the Premises to be stored in a
public warehouse or elsewhere at the expense and for
the account of Tenant.
(d) None of the following remedial actions, singly or
in combination, shall be construed as an election by
Landlord to terminate this Lease unless Landlord has in
fact given Tenant written notice that this Lease is
terminated or unless a court of competent jurisdiction
decrees termination of this Lease; any act by Landlord
to maintain or preserve the Premises; any efforts by
Landlord to relet the Premises; any re-entry,
repossession, or reletting of the Premises; or any
reentry, repossession, or reletting of the Premises by
Landlord pursuant to this Section. If Landlord takes
any of the previous remedial actions without
terminating this Lease, landlord may nevertheless at
any time after taking any remedial action terminate
this lease by written notice to Tenant.
(e) If Landlord relets the Premises, Landlord shall
apply the revenue as follows: first, to the payment of
any reasonable cost of reletting, including without
limitation finder's fees and leasing commissions; and
second, to the payment of Rent and other amounts due
and unpaid under this Lease. Landlord shall hold and
apply the residue, if any, to payment of future amounts
payable as they become due and, to the extent the
residue exceeds such amounts, shall remit such excess
to Tenant. Should revenue from reletting during any
month, after application pursuant to the foregoing
provisions, be less than the reasonable cost of
reletting and the Rent and other amounts due and unpaid
under this Lease, Tenant shall pay the deficiency to
Landlord promptly upon demand.
(f) After the occurrence of a Default, Landlord, in
addition to or in lieu of exercising other remedies,
may, but without any obligation to do so, cure the
breach underlying the Default for the account and at
the expense of Tenant; provided that Landlord by prior
notice shall first allow Tenant a reasonable
opportunity to cure, except in cases of emergency,
where Landlord may proceed without prior notice to
Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of
settlements, defense court costs, and attorney fees,
that Landlord may incur in the course of any such cure.
(g) No security, guaranty or security interest
granted for the performance of Tenant's obligations,
which Landlord may now or hereafter hold, shall in any
way constitute a bar or defense to any action initiated
by Landlord for unlawful detainer or for the recovery
of the Premises, for enforcement of any obligation of
Tenant, or for the recovery of damages caused by a
breach of this Lease by Tenant or by a Default.
(h) Except as expressly provided in this Lease to the
contrary, no right or remedy conferred upon or reserved
to either party is intended to be exclusive of any
other right or remedy given now or later or existing at
law or in equity or by statute. Except to the extent
that either party may have otherwise agreed in writing,
no waiver by that party of any violation or
nonperformance by the other party of any obligations,
agreements, or covenants shall be deemed to be a waiver
of any subsequent violation or nonperformance of the
same or any other covenant, agreement, or obligation,
nor shall any forbearance by either party to exercise a
remedy for any violation or nonperformance by the other
party be deemed a waiver by that party of rights or
remedies with respect to that violation or
nonperformance.
(i) Landlord may require Tenant or any trustee for
Tenant under the United States Bankruptcy Code (as
amended, the "Bankruptcy Code") to cure Tenant's
Default and to provide adequate assurances of future
performance of this Lease as provided in Section
365(b)(3) of the Bankruptcy Code, including, without
limitation, adequate assurance that; (i) Rent will be
paid when due; (ii) there shall be no substantive
breach in the provisions of this Lease relating to the
Shopping Center including, without limitation, the
Permitted Use; and (iii) that there shall be no
disruption in any Tenant mix or Tenant balance in the
Shopping Center. If Tenant or the trustee does not
cure existing Defaults and provide such assurances of
future performance within sixty (60) days after there
has been an order for relief pursuant to the Bankruptcy
Code, this Lease shall be deemed rejected, and Landlord
shall have no further liability hereunder to Tenant or
any person claiming through or under Tenant and, if
Tenant or any such person is in possession. Tenant or
any such person shall forthwith quit and surrender the
premises to Landlord.
Section 10.3 Attorneys' Fees. In the event that
either party hereto commences an action related to this
Lease, the prevailing party shall be entitled to
recover from the other party all of its costs and
expenses incurred therein, including, without
limitation, reasonable attorneys' fees and
disbursements. If either party hereto is, without
fault on its own part, made a party to any action
instituted by or against the other party to this Lease
due to such other party's fault, such other party shall
indemnify the party innocently involved and defend and
hold it harmless against and from all such costs and
expenses incurred therein including, without
limitation, reasonable attorneys' fees and
disbursements.
Section 10.4 Agreement to Arbitrate. Any
controversy, dispute or claim under, arising out of, in
connection with or in relation to this Lease, including
but not limited to the negotiation, execution,
interpretation, construction, coverage, scope,
performance, non-performance, breach, termination,
validity or enforceability of this Lease or any
provision hereof shall be determined by arbitration
conducted in accordance with the Commercial Arbitration
Rules or then existing rules for commercial arbitration
of the American Arbitration Association. The
arbitration shall additionally be governed by the
California Arbitration Act. The arbitration shall be
conducted in a location in San Bernardino County and
shall be before a single arbitrator who shall be
selected by mutual agreement of the parties from among
a list of seven potential arbitrators provided by the
American Arbitration Association. If the parties
cannot agree on an arbitrator from this first list, the
parties hereto shall select an arbitrator for such
arbitration from a second list of seven potential
arbitrators provided by the American Arbitration
Association with each party alternately striking names,
with the last name remaining to be the arbitrator so
selected. In the event that either party seeks a
temporary restraining order, preliminary injunction or
other provisional relief, the provisions of Section
1281.8 of the California Code of Civil Procedure shall
apply. The arbitration of such issues, including the
determination of any amount of damages suffered by any
party hereto by reason of the acts or omissions of any
party, shall be final and binding upon the parties to
the maximum extent permitted by law. Judgment upon any
award rendered by the arbitrator(s) may be entered by
any court having jurisdiction thereof. The parties
intend that this Article shall be valid, binding,
enforceable and irrevocable and shall survive the
termination of this Agreement.
Section 10.5 No Set-off/Counterclaims. Tenant
shall pay all Rent due hereunder, free of any charges,
assessments, impositions or deductions and without
abatement, deferral, reduction, set-off, counterclaim,
defense or deduction except as permitted under the
express terms of this Lease or the Asset Purchase
Agreement. Tenant shall not interpose any
counterclaim(s) in any action brought by Landlord
based, in whole or in part, on Tenant's failure to pay
Rent; provided, however, that, the foregoing to the
contrary notwithstanding: (i) Tenant may interpose any
counterclaim deemed "compulsory" under applicable court
rules of civil procedure; (ii) Tenant shall be
permitted to bring a separate action against Landlord
based on any claim which Tenant is prohibited by this
Lease from asserting as a set-off or counterclaim; and
(iii) Tenant may bring actions and assert defenses,
setoffs and counterclaims permitted to be brought or
asserted against Landlord in accordance with the terms
of the Asset Purchase Agreement.
Section 10.6 Right of Redemption. Tenant hereby
waives, for itself and all persons claiming by, through
or under Tenant, any right of redemption or for the
restoration of the operation of this Lease under any
present or future law in the event Landlord shall
obtain possession of the Premises.
Section 10.7 No Waiver. No receipt of monies by
Landlord from Tenant after the termination or
cancellation of this Lease in any lawful manner shall
reinstate the Term of this Lease, or operate as a
waiver of the right of Landlord to enforce the payment
of Rent then due, or operate as a waiver of the right
of Landlord to recover possession of the Premises by
proper suit, action, proceeding or remedy; it being
agreed that, after the termination or cancellation of
this Lease, or after a final order or judgment for the
possession of the Premises, Landlord may demand,
receive and collect any monies due, without in any
manner affecting such notice, proceeding, suit, action,
order or judgment; and any and all such monies
collected shall be deemed to be payment on account of
the use and occupation or Tenant's liability hereunder.
Section 10.8 Unperformed Covenants of Landlord May
Be Performed By Tenant. If Landlord shall fail to
perform any of the terms, provisions, covenants or
conditions to be performed or complied with by Landlord
pursuant to this Lease, or if Landlord should fail to
make any payment which Landlord agrees to make, and any
such failure shall, if it relates to a matter which is
not of any emergency nature, remain uncured for a
period of thirty (30) days after Tenant shall have
served upon Landlord notice of such failure, or for a
period of twenty-four (24) hours after service of such
notice, if in Tenant's judgment reasonably exercised
such failure related to a matter which is of an
emergency nature, then Tenant may at Tenant's option,
at any time prior to commencement of Landlord's acting
to cure such failure and thereafter if Landlord fails
to diligently perform the curing of such failure,
perform any such term, provision, covenant or condition
or to make any such payment, as Landlord's agent, and
in Tenant's sole discretion as to the necessity
therefor, and Tenant shall not be liable or responsible
for any loss or damage resulting to Landlord or anyone
holding under Landlord on account thereof. The full
amount of the cost and expense entailed, or payment so
made, shall immediately be owing and payable by
Landlord to Tenant. The option given in this Section
is for the sole protection of Tenant, and its existence
shall not release Landlord from the obligation to
perform the terms, provisions, covenants and conditions
herein provided to be performed by Landlord or deprive
Tenant of any legal rights which it may have by reason
of any such default by Landlord.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
STORE CLOSING
Landlord acknowledges Tenant's intent to close the
department store to be operated on the Premises during
the month of January, 1999. The "Permitted Use"
includes the right to operate the Premises as a
discount or outlet store, and to conduct "close-out"
and "going out of business" sales on the Premises (so
long as such use complies with applicable law).
Landlord hereby agrees to indemnify, defend (using
counsel mutually approved by Tenant and Landlord or
Landlord's insurer) and hold Tenant harmless from and
against any loss, liability, suit, claim or demand
whatsoever arising out of any party's contention that
closing of the store violates any agreement or
obligation binding on Landlord or Tenant, including,
without limitation, any such claim brought under the
REA or any covenants, conditions or restrictions
applicable to the Premises.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Notices.
(a) Any notice, demand, request,
approval, consent or other instrument (collectively, a
"Notice") which may be, or is required to be, given
under this Lease shall be in writing and given by hand
or sent by United States certified or registered mail,
return receipt requested, postage prepaid, or by an
overnight nationally recognized courier service,
addressed to Landlord at the address herein first given
with a copy to: McPeters McAlearny Shimoff & Hatt, 4
West Redlands Boulevard, P.O. Box 2084, Redlands, CA
92373-0661 Attn: Thomas H. McPeters, Esq., or to such
other address as Landlord may from time to time
designate to Tenant by notice in accordance with this
Section, and to Tenant at the Premises and to Tenant's
address herein first given Attention: Law Department,
or to such other address as Tenant may from time to
time designate to Landlord by notice in accordance with
this Section. All Notices shall be deemed given or
served three (3) business days after the date of
registration or certification by the postal
authorities, if mailed, or upon receipt, if sent by
overnight courier or delivered in person.
(b) Any notice which may or shall
be given under this Lease by Landlord may be given by
Landlord, by any employee of Landlord, by any attorney
representing Landlord, by any management company
operating the Shopping Center on behalf of Landlord or
any employee of, or attorney retained by, said
management company, and all notices from any of the
foregoing shall be as effective as if given by Landlord
itself.
(c) Any Notice with respect to any
assignment, alleged default, termination or other
material issue given to Landlord shall also be given to
each mortgagee of Landlord's interest in the Shopping
Center, the name and address of which mortgagee
Landlord has previously given Tenant written notice.
Section 13.2 Brokers. Landlord and Tenant each
warrants and represents to the other party hereto that
it has not dealt with any broker in negotiating or
consummating this Lease, and Landlord and Tenant each
hereby agrees to indemnify, defend and hold harmless
the other party hereto against and from any and all
claims losses or liabilities as a result of any
inaccuracy in the foregoing representation. This
Section shall survive the Term of this Lease.
Section 13.3 Subordination of Lease.
(a) This Lease is subordinate to
the lien of all mortgages, deeds of trust and security
instruments (collectively, "Mortgages"), and to all
ground leases, easement agreements and operating
agreements now covering or affecting all or any part of
the Shopping Center, including, without limitation, the
REA, and to all modifications, consolidations,
renewals, replacements and extensions of any of the
foregoing. Landlord hereby represents and warrants
that there are no Mortgages in effect with respect to
the Shopping Center or the Premises except as
specifically set forth in Exhibit G attached hereto and
made a part hereof, nor are there any REAs affecting
the Shopping Center or Tenant's rights under this Lease
except as set forth in Exhibit D attached hereto and
made a part hereof. Landlord shall exercise best
efforts to obtain from each mortgagee under a Mortgage
listed on Exhibit G a nondisturbance agreement in the
form of the "SNDA" attached to the Asset Purchase
Agreement.
(b) Subject to the terms of any
nondisturbance agreement entered into by Tenant, should
any mortgagee under a Mortgage succeed to Landlord's
interest in this Lease, Tenant shall, upon demand,
attorn to and recognize such mortgagee as Landlord
under this Lease. In the event of a sale or assignment
of Landlord's interest in this Lease or the Premises,
Tenant shall attorn to and recognize such purchaser or
assignee as Landlord under this Lease without further
act by Landlord or such purchaser or assignee.
Section 13.4 Unavoidable Delays. In the event
that either party shall be delayed or hindered in, or
prevented from, the performance of any work, service or
other act required under this Lease to be performed by
such party and such delay or hindrance is due to: (i)
strikes, lockouts, or other labor disputes; (ii)
inability to obtain labor or materials or reasonable
substitutes therefor; or, (iii) acts of God,
governmental restrictions, enemy act, civil commotion,
unavoidable fire or other casualty, or other causes of
a like nature beyond the control of the party so
delayed or hindered (collectively, "Unavoidable
Delays"), then performance of such work, service or
other act shall be excused for the period of such delay
and the period for the performance of such work,
service or other act shall be extended by a period
equivalent to the period of such delay. In no event
shall any such delay constitute a termination or
extension of this Lease. The provisions of this
Section shall not operate to excuse Tenant from the
timely payment of Rent.
Section 13.5 Estoppel Certificates. Upon ten (10)
business days prior written request therefor by
Landlord or Tenant from time to time, each party agrees
to execute and to deliver to the requesting party, or
to such other addressee or addressees as the requesting
party may designate, a written statement certifying
that: (i) this Lease is in full force and effect and
unmodified, or describing any modification; (ii) that
there are no defenses or offsets against the
enforcement of this Lease, or stating with
particularity defenses or offsets claimed; stating the
date to which Rent has been paid; and (iv) stating the
Term Commencement Date and the date this Lease expires.
Section 13.6 Relationship of Parties. Nothing
contained in this Lease shall be deemed or construed as
creating the relationship of principal and agent or of
partnership or of joint venture between the parties
hereto, it being understood and agreed that neither the
method of computing Rent nor any other provision
contained herein nor any acts of the parties hereto
shall be deemed to create any relationship between the
parties other than that of Landlord and Tenant.
Section 13.7 Governing Law; Jurisdiction.
(a) Governing Law. This Lease, the
legal relations between the parties and any Action
(defined below), whether contractual or
non-contractual, instituted by any party with respect
to matters arising under or growing out of or in
connection with or in respect of this Lease, including
but not limited to the negotiation, execution,
interpretation, coverage, scope, performance, breach,
termination, validity, or enforceability of this Lease,
shall be governed by and construed in accordance with
the laws of the State of California applicable to
contracts made and performed in such State and without
regard to conflicts of law doctrines, except to the
extent that certain matters are preempted by federal
law or are governed as a matter of controlling law by
the law of the jurisdiction of incorporation of the
Tenant.
(b) Jurisdiction. Each party
hereby irrevocably submits to and accepts for itself
and its properties, generally and unconditionally, the
exclusive jurisdiction of and service of process
pursuant to the laws of the State of California and the
rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of
or in connection with this Lease or any related
document or obligation. Each party further irrevocably
designates and appoints the individual identified in or
pursuant to Section 13.1 hereof to receive notices on
its behalf, as its agent to receive on its behalf
service of all process in any such Action before any
body, such service being hereby acknowledged to be
effective and binding service in every respect. A copy
of any such process so served shall be mailed by
registered mail to each party at its address provided
in Section 13.1; provided that, unless otherwise
provided by applicable law, any failure to mail such
copy shall not affect the validity of the service of
such process. If any agent so appointed refuses to
accept service, the designating party hereby agrees
that service of process sufficient for personal
jurisdiction in any action against it in the applicable
jurisdiction may be made by registered or certified
mail, return receipt requested, to its address provided
in Section 13.1. Each party hereby acknowledges that
such service shall be effective and binding in every
respect. Nothing herein shall affect the right to
serve process in any other manner permitted by
applicable law.
(c) As used in this Section 13.7,
"Action" shall mean any action, complaint, petition,
investigation suit or other proceeding before any
arbitrator or any other governing body or entity having
appropriate jurisdiction.
Section 13.8 Interpretation. The neuter, feminine
or masculine pronoun when used herein shall each
include each of the other genders and the use of the
singular shall include the plural. In the event of any
conflict between the terms of this Lease, and the terms
of the Asset Purchase Agreement (including any related
agreements entered into by Landlord and Tenant), the
terms of the Asset Purchase Agreement shall prevail
over any contrary term of this Lease.
Section 13.9 Captions. The captions of Articles
and Sections contained in this Lease are for convenient
reference only and shall not be deemed or construed as
in any manner limiting or amplifying the terms and
provisions hereof.
Section 13.10 Partial Invalidity. If any term or
provision of this Lease, or the application thereof to
any person or circumstance, shall to any extent be
determined to be invalid or unenforceable by a court of
competent jurisdiction, then the remainder of this
Lease, or the application of such term or provision to
persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be
affected thereby.
Section 13.11 Waivers. The waiver by Landlord of
any breach of any term, covenant or condition contained
in this Lease shall not be deemed to be a waiver of
such term, covenant or condition or of any subsequent
breach of the same or any other term, covenant or
condition contained in this Lease. The subsequent
acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease or of
any right of Landlord to a forfeiture of the Lease by
reason of such breach, regardless of Landlord's
knowledge of such preceding breach at the time of
acceptance of such Rent. No term, covenant or
condition of this Lease shall be deemed to have been
waived by Landlord unless such waiver be in writing and
signed by Landlord.
Section 13.12 Accord and Satisfaction. No payment
by Tenant, or receipt by Landlord, of a lesser amount
than the Rent payment due under this Lease shall be
deemed or construed to be other than a payment or
receipt on account of the earliest Rent due. Neither
the endorsement or statement on any check nor the
receipt or negotiation of any such check by Landlord,
shall be deemed or construed to be an accord and
satisfaction.
Section 13.13 Counterparts. This Lease may be
executed in several counterparts, each of which shall
be deemed an original and all of which shall together
constitute one and the same instrument.
Section 13.14 Entire Agreement. This Lease and the
Asset Purchase Agreement incorporate all undertakings
between the parties hereto with respect to Tenant's
lease of the Premises. Tenant hereby acknowledges that
neither Landlord nor Landlord's employees, agents or
contractors have made any representations or promises
to Tenant with regard to the Premises or the Shopping
Center or this Lease that have not been expressly
stated in this Lease and, therefore, Tenant hereby
waives any and all claims against, or liability of,
Landlord and Landlord's employees, agents, and
contractors based thereon. Landlord hereby
acknowledges that Tenant and its employees and officers
have made no representations or promises with regard to
Tenant's operations, sales figures or methods of doing
business or any other matter except as expressly
contained in this Lease, and Landlord, therefore,
hereby waives any claim with respect thereto or based
thereon.
Section 13.15 Successors and Assigns. This Lease
and each of the terms and conditions hereof shall inure
to the benefit of, and be binding upon, Landlord, and
Landlord's heirs, executors, administrators, successors
and assigns. This Lease and each of the terms and
conditions hereof shall also be binding upon Tenant,
and Tenant's heirs, executors, administrators,
successors and assigns and shall inure to the benefit
of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been made and consented to in
accordance with the provisions of Article IX of this
Lease.
Section 13.16 Survival of Obligations. All
obligations of each party which by their nature involve
performance after the end of the Term, or which cannot
be ascertained or have been fully performed until after
the end of the Term, shall survive the expiration or
earlier termination of this Lease.
Section 13.17 Submission of Lease. Submission of
this Lease by one party to the other for examination or
execution does not constitute an offer made, or an
option granted, to enter into this Lease.
Section 13.18 Memorandum of Lease. Landlord and
Tenant agree to execute a memorandum of this Lease,
which memorandum shall be substantially in the form
attached hereto as Exhibit F and shall be recorded in
the applicable real property records as soon as
possible after the date of this Lease.
Section 13.19 Attachments. Attached hereto and
made a part of this Lease are the following: Exhibits
A-G, inclusive.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, Landlord and Tenant have caused
their duly authorized representatives to execute this
Lease as of the date first above written.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
LEGAL DESCRIPTION OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
[INTENTIONALLY OMITTED]
EXHIBIT F
FORM OF MEMORANDUM OF LEASE
Recording Requested By And
When Recorded Return To:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93720
Attention: General Counsel
________________________________________________________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this "Memorandum"), dated as
of August 20, 1998, is entered into by and between El
Corte Ingles, S.A., a Spanish corporation ("Landlord"),
and Gottschalks Inc., a Delaware corporation
("Tenant"). Landlord and Tenant have entered into that
certain Store Lease Agreement dated as of
Augus 20, 1998 (the "Store Lease"), pursuant to
which Landlord demised and leased to Tenant and Tenant
hired from Landlord the Premises as more particularly
described in the Lease (the "Premises"), which Premises
are located on the real property described in Exhibit A
attached hereto and made a part hereof.
LANDLORD AND TENANT AGREE AS FOLLOWS:
1. For and in consideration of the rental reserved
and of the mutual covenants, agreements and conditions
set forth in that certain Store Lease, Landlord does
hereby lease to Tenant and Tenant does hereby lease
from Landlord, upon all terms and conditions set forth
in the Store Lease, the Premises. The term of the
Lease commences on August 20, 1998 and expires on
January 30, 1999.
2. This Memorandum has been prepared to provide
notice that the Premises are subject to the terms and
conditions of the Store Lease, which terms are hereby
incorporated into this Memorandum by this reference.
In no event shall the terms of this Memorandum be
deemed to modify, amend, limit or otherwise affect the
terms and conditions of the Store Lease. In the event
of any inconsistency between the terms of this
Memorandum and the terms of the Store Lease, the terms
of the Store Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant have caused
their duly authorized representatives to execute this
Memorandum as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
Description of Real Property
EXHIBIT G
SCHEDULE OF EXISTING MORTGAGES
A. Current preliminary title report:
Title Company:
Date of report:
Order No.:
B. Existing Mortgages:
