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):
July 21, 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 of Number) Identification No.)
7 River Park Place East, Fresno, California 93720
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code:
(209) 434-4800
Not Applicable
(Former Name or Former Address, if Changed Since Last
Report.)
Item 5. Other Events
Gottschalks Inc. ("Gottschalks") entered into an Asset
Purchase Agreement (the "Asset Purchase Agreement")
dated as of July 21, 1998 among Gottschalks, The Harris
Company ("Harris") and El Corte Ingles, S.A., the
parent of Harris ("ECI"), pursuant to which Gottschalks
will acquire the assets and certain of the liabilities
of Harris for a purchase price consisting of 2,095,900
shares of common stock of Gottschalks, an extendable
subordinated note due 2003 in the principal amount of
$22,217,598, and the assumption of certain liabilities
of Harris. As part of the transaction, Gottschalks
will be assuming the leases on five of the stores
currently operated by Harris and will be entering into
new leases with ECI with respect to the remaining four
stores operated by Harris. Concurrently with the
closing of the Asset Purchase Agreement, the parties
will enter into, among other agreements, a
Stockholders' Agreement, a Standstill Agreement and a
Registration Rights Agreement, forms of which are filed
herewith as Exhibits to the Asset Purchase Agreement.
Completion of the transaction is subject to obtaining
necessary regulatory approvals and various other
customary closing conditions. Assuming such approvals
are obtained and conditions satisfied, it is
anticipated that the transaction will close in August,
1998.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
2.1 Asset Purchase Agreement dated
as of July 21, 1998, among
Gottschalks Inc., The Harris
Company and El Corte Ingles,
S.A., together with all
Exhibits thereto. *
* The Schedules to the Asset Purchase Agreement are
not filed herewith. The registrant will furnish
supplementary a copy of any such omitted Schedule to
the Commission upon request.
ASSET PURCHASE AGREEMENT
dated as of
July 21, 1998,
among
Gottschalks Inc.
The Harris Company
and
El Corte Ingles, S.A.
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II SALE OF ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED TRANSACTIONS. 8
2.1 Purchase and Sale of Assets 8
2.2 Assumption of Certain Liabilities 11
2.3 Purchase Price and Allocation 13
ARTICLE III CLOSING 13
3.1 The Closing 13
3.2 Items to be Delivered at the Closing
By Seller or ECI 13
3.3 Items to be Delivered at the Closing
By Buyer 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF ECI AND SELLER 15
4.1 Organization and Related Matters 15
4.2 Financial Statements; Changes;
Contingencies 15
4.3 Tax and Other Returns and Reports 17
4.4 Contracts 17
4.5 Real and Personal Property; Title to
Property; Leases 18
4.6 Intangible Property 20
4.7 Authorization;No Conflicts 21
4.8 Legal Proceedings 21
4.9 Accounting Records; Internal
Controls; Absence of Certain
Payments 22
4.10 Insurance 22
4.11 Permits 22
4.12 Compliance with Law 22
4.13 Dividends and other Distributions 23
4.14 Employee Benefits 23
4.15 Certain Interests 25
4.16 Intercompany Transactions 25
4.17 Bank Accounts, Powers, etc. 25
4.18 No Brokers or Finders 25
4.19 Net Assets 25
4.20 Inventories 26
4.21 Receivables 26
4.22 Vendor Obligations and Deposits
and Bank Loan 26
4.23 Suppliers 26
4.24 Environmental Compliance 26
4.25 Powers of Attorney 27
4.26 Seller's Investment Representation 27
4.27 Discharge of Certain Obligations 27
4.28 Employees 27
4.29 Accuracy of Information 27
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF BUYER 27
5.1 Organization and Related Matters 28
5.2 Authorization 28
5.3 No Conflicts 28
5.4 No Brokers or Finders 28
5.5 Legal Proceedings 28
5.6 Buyer's Stock 29
5.7 Buyer Reports; Financial Statements 29
5.8 Absence of Certain Changes 30
5.9 Issuance of 8% Subordinated Note 30
5.10 Accounting Records; Internal
Controls 30
ARTICLE VI COVENANTS WITH RESPECT TO
CONDUCT OF ECI, SELLER AND BUYER PRIOR
TO CLOSING 31
6.1 Access 31
6.2 Material Adverse Changes; Reports;
Financial Statements 31
6.3 Conduct of Business 32
6.4 Notification of Certain Matters 34
6.5 Subsequent Contracts; Termination
Notices 34
6.6 Preservation of Business Prior to
Closing Date 34
6.7 Sales and Transfer Taxes 34
6.8 Certain Filings 35
6.9 Repair of Damage; Condemnation 35
6.10 Listing Application 36
6.11 No Other Bids 36
6.12 Real Property and Leases 37
6.13 Revolving Credit Facility 37
ARTICLE VII COVENANTS RELATING TO
APPROVALS, ESTOPPELS, SNDA'S
AND PERMITS 37
7.1 Mutual Cooperation 37
7.2 Third Party Approvals 38
7.3 Estoppel Certificates 38
7.4 SNDA's 38
7.5 Certificates of Occupancy 38
7.6 Failure to Obtain Approvals,
Permits, Estoppels or SNDA's
Prior to Closing 38
ARTICLE VIII ADDITIONAL CONTINUING
COVENANTS 39
8.1 Noncompetition 39
8.2 Nondisclosure of Proprietary Data 40
8.3 Tax Cooperation 40
8.4 Employment Matters 40
8.5 Auditor's Consent 43
8.6 San Bernardino Store 43
8.7 Point of Sale Equipment; ECI
Software 44
8.8 ECI Cooperation 44
8.9 Buyer SEC Reports 44
8.10 Letters of Credit 44
8.11 San Bernardino Offices. 44
ARTICLE IX CONDITIONS OF PURCHASE 45
9.1 GeneralConditions 45
9.2 Conditions to Obligations of Buyer 45
9.3 Conditions to Obligations of
Seller 46
ARTICLE X TERMINATION OF OBLIGATIONS;
SURVIVAL 47
10.1 Termination of Agreement 47
10.2 Effect of Termination 48
10.3 Survival of Representations and
Warranties 48
ARTICLE XI INDEMNIFICATION 48
11.1 Indemnity Obligations of ECI and
Seller 48
11.2 Special Indemnity Obligations of
Seller and ECI 49
11.3 Obligations of Buyer 50
11.4 Certain Tax Matters 50
11.5 Limitations on Indemnification 51
11.6 Procedure 51
11.7 Survival 51
11.8 Notice by ECI and Seller 52
11.9 Not Exclusive Remedy 52
11.10 Offset 52
11.11 Prejudgment Interest 52
ARTICLE XII GENERAL 52
12.1 Amendments;Waivers 52
12.2 Schedules; Exhibits; Integration 52
12.3 Best Efforts; Further Assurances 53
12.4 Governing Law 53
12.5 No Assignment 54
12.6 Headings 54
12.7 Counterparts 54
12.8 Publicity and Reports 54
12.9 Confidentiality 54
12.10 Parties in Interest 55
12.11 Performance by Subsidiaries 55
12.12 Notices 55
12.13 Expenses 56
12.14 Remedies; Waiver 56
12.15 Attorney's Fees 56
12.16 Knowledge Convention 57
12.17 Representation By Counsel;
Interpretation 57
12.18 Specific Performance 57
12.19 Severability 57
12.20 Currency; Withholding 57
12.21 Force Majeure 58
ARTICLE XIII ARBITRATION OF DISPUTES 58
13.1 Agreement to Arbitrate 58
13.2 Choice of Law 59
13.3 Place of Arbitration 59
13.4 Judgment 59
Exhibits
EXHIBIT A Form of 8% Subordinated Note
EXHIBIT B Form of Distribution Center
Sublease
EXHIBIT C Form of Lease Assignment and
Assumption Agreement
EXHIBIT D Form of Bakersfield Store Lease
EXHIBIT E Form of Palmdale Store Lease
EXHIBIT F Form of Moreno Valley Store
Lease
EXHIBIT G Form of Downtown San Bernardino
Store Lease
EXHIBIT H Form of Registration Rights
Agreement
EXHIBIT I Form of Subordination,
Nondisturbance and
Attornment Agreement
EXHIBIT J Form of Standstill Agreement
EXHIBIT K Form of Stockholders' Agreement
EXHIBIT L Form of Tradename License
Agreement
EXHIBIT M Form of Bill of Sale and
Assignment
EXHIBIT N Form of Special Power of
Attorney
EXHIBIT O Form of Assumption Agreement
EXHIBIT P Form of Estoppel Certificate
for Acquired Leases
EXHIBIT Q Form of Estoppel Certificate
for Mall Agreements
EXHIBIT R Form of ECI and Seller Landlord
Agreement
EXHIBIT S Form of Third Party Landlord
Agreement
EXHIBIT T Form of Opinion of Seller's
Counsel
EXHIBIT U Employee Lease Agreement
EXHIBIT V Form of Investment Letter
EXHIBIT W Form of Opinion of ECI's
Counsel
EXHIBIT X Form of Opinion of Buyer's
Counsel
Schedules
SCHEDULE 1.1(a) Assumed Contracts List
SCHEDULE 1.1(b) Mall Agreements List
SCHEDULE 1.1(c) Severance Policies List
SCHEDULE 2.2(b) Assumed Liabilities List
SCHEDULE 3.2 UCC Equipment Filing List
SCHEDULE 4.1 Directors and Executive
Officers List
SCHEDULE 4.2 Seller Other Liabilities List
SCHEDULE 4.4 Material Contract List
SCHEDULE 4.5A Personal Property List
SCHEDULE 4.5B Real Property List
SCHEDULE 4.6 Intangible Property List
SCHEDULE 4.7 Authorization List
SCHEDULE 4.8 Litigation List
SCHEDULE 4.10 Insurance List
SCHEDULE 4.11 Excluded Permits List
SCHEDULE 4.14 Employee Benefit Plan List
SCHEDULE 4.15 Certain Interests List
SCHEDULE 4.16 Intercompany Transactions List
SCHEDULE 4.17 Bank List
SCHEDULE 4.20 Inventory of Seller as of July
4, 1998 List
SCHEDULE 4.21 Receivables List
SCHEDULE 4.22A Vendor Obligations List
SCHEDULE 4.22B Vendor Deposits List
SCHEDULE 4.23 Suppliers List
SCHEDULE 4.27 Discharge of Certain
Obligations List
SCHEDULE 4.28 Employee List
SCHEDULE 5.3 Buyer Consent List
SCHEDULE 5.8 Buyer Other Liabilities List
SCHEDULE 8.7 Designated MIS Employees List
SCHEDULE 8.11 Retained Employees With Access
to San Bernardino Headquarters
SCHEDULE 11.2 Liquidated Damages List
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into
as of July 21, 1998, by and among Gottschalks Inc., a
Delaware corporation ("Buyer"), The Harris Company, a
California corporation
("Seller"), and El Corte Ingles, S.A., a
Spanish corporation and the parent of Seller ("ECI").
R E C I T A L S
WHEREAS, Seller owns all of the assets used in
connection with its department store business.
WHEREAS, Seller desires to sell, and Buyer
desires to purchase substantially all of such assets on
the terms and conditions set
forth in this Agreement.
A G R E E M E N T
In consideration of the mutual promises
contained herein and intending to be legally bound, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.For all purposes of this
Agreement, except as otherwise expressly provided or
unless the context otherwise
requires,
(a) the terms defined in this Article I have
the meanings assigned to them in this Article I and
include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted
accounting principles,
(c) all references in this
Agreement to designated "Articles,"
"Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of
the body of this Agreement,
(d) pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section
or other subdivision.
As used in this Agreement and the Exhibits and
Schedules delivered pursuant to this Agreement, the
following definitions
shall apply.
"8% Subordinated Note" means the
$22,217,598.00 principal amount
of 8% Non-Negotiable, Extendable, Subordinated
Note due 2003, in the form of Exhibit A hereto.
"Accounts Receivable" has the meaning
specified in Section 2.1(a).
"Acquired Leases" means all of the Leases
(including, but not limited to the leases with respect
to the Hemet, Indio, Redlands,
Riverside and Victorville stores currently
operated by Seller) except the ECI Leases.
"Acquired Locations" means the following store
locations operated by Seller: Hemet, Indio, Redlands,
Riverside, Victorville,
Bakersfield, Moreno Valley and Palmdale.
"Action" means any action, complaint,
investigation, petition, suit or other proceeding,
whether civil or criminal, in law or in equity, or
before any arbitrator or
Governmental Entity.
"Affiliate" means a Person that directly or
indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common
control with, a specified Person.
"Agreement" means this Agreement by and among
Buyer, Seller and ECI as amended or supplemented
together with all Exhibits and
Schedules attached or incorporated by
reference.
"Approval" means any approval, authorization,
consent, qualification or registration, or any waiver
of any of the foregoing, required to be obtained from,
or any notice, statement
or other communication required to be filed
with or delivered to, any Governmental Entity or any
other Person.
"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; and
(c) any relative or spouse of such person or
any relative of such spouse.
"Assumed Contracts" means those Contracts
listed on Schedule 1.1(a).
"Assumed Liabilities" has the meaning
specified in Section 2.2(b).
"Auditors" means Eadie and Payne, independent
public accountants to Seller.
"Business" means the business of Seller and
shall be deemed to include each or any of the following
incidents of such business:
income, cash flow, operations, condition
(financial or other), Purchased Assets, anticipated
revenue or income, prospects,
Assumed Liabilities, and personnel.
"Buyer Disclosure Schedule" means the
Disclosure Schedule dated July 21, 1998 and delivered
by Buyer to Seller. The Sections of
the Disclosure Schedule shall be numbered to
correspond to the applicable Section of this Agreement
and, together with all
matters under such heading, shall be deemed to
qualify only that Section.
"Buyer Indemnified Party" has the meaning set
forth in Section 11.1.
"Buyer's Shares" has the meaning specified in
Section 2.3.
"Closing" means the consummation of the
transaction contemplated by this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of
1986, as amended.
"Contract" means any agreement, arrangement,
bond, commitment, franchise, indemnity, indenture,
instrument, lease, license or
understanding, whether or not in writing,
including without limitation the Acquired Leases (but
excluding the ECI Leases) and
any Mall Agreement.
"Designated MIS Employees" has the meaning set
forth in Section 8.7.
"Distribution Center" means that certain
distribution center of Seller located at 636 South "G"
Street, San Bernardino,
California.
"Distribution Center Lease" means that certain
Lease dated April 1, 1998, as amended, by and between
Seller and Kevin J. Waddell
(predecessor-in-interest of the present
landlord), for the lease of the Distribution Center.
"Distribution Center Sublease" means that
sublease agreement to be entered into by and between
Buyer and Seller with respect to
the Distribution Center, in the form attached
hereto as Exhibit B.
"Downtown San Bernardino Store" has the
meaning specified in Section 8.6.
"ECI Leases" means the Leases by and between
Seller, as tenant, and ECI, as landlord, with respect
to the Seller's Bakersfield,
Palmdale, Moreno Valley, and Downtown San
Bernardino, California stores.
"ECI Real Property" means all real property of
ECI encumbered by the ECI Leases, appurtenances
thereto, rights in connection
therewith, fixtures and improvements attached
thereto, and any interest therein.
"Employee Lease Agreement" means the agreement
by Seller to provide the services of certain of its
employees to Buyer following the Closing, in the form
of Exhibit U hereto.
"Encumbrance" means any claim, charge, lease,
covenant, easement, encumbrance, security interest,
lien, option, pledge, rights of
others, or restriction (whether on voting,
sale, transfer, disposition or otherwise), whether
imposed by agreement,
understanding, law, equity or otherwise,
except for any restrictions on transfer generally
arising under any applicable
federal or state securities law.
"Equity Securities" means any capital stock or
other equity interest or any securities convertible
into or exchangeable for
capital stock or any other rights, warrants or
options to acquire any of the foregoing securities.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the related
regulations and published
interpretations.
"ERISA Affiliate" means (i) any corporation
which is a member of a group of corporations of which
Seller is a member and which is
a controlled group of corporations within the
meaning of Section 414(b) of the Code; (ii) any trade
or business (whether or not
incorporated) which is a member of a group of
trades or businesses under common control within the
meaning of Section
414(c) of the Code of which Seller is a
member; and (iii) a member of an affiliated service
group within the meaning of
Section 414(m) or (o) of the Code of which
Seller, any corporation described in clause (i) above
or any trade or
business described in clause (ii) above is a
member.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Excluded Assets" has the meaning specified in
Section 2.1(a).
"Excluded Liabilities" has the meaning
specified in Section 2.2(a).
"GAAP" means generally accepted accounting
principles in the United States, as in effect from time
to time.
"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.
"Group A Employees" has the meaning set forth
in Section 8.4(c).
"Group B Employees" has the meaning set forth
in Section 8.4(c).
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the
related regulations and published interpretations.
"Hazardous Substance" means (but shall not be
limited to) substances that are defined or listed in,
or otherwise classified
pursuant to, any applicable Laws as "hazardous
substances," "hazardous materials," "hazardous wastes"
or "toxic substances," or any other formulation
intended to define, list or classify substances by
reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP
toxicity," and
petroleum and drilling fluids, produced waters
and other wastes associated with the exploration,
development, or production of
crude oil, natural gas or geothermal energy.
"Hired Employees" has the meaning set forth in
Section 8.4(c).
"Indemnifiable Claim" means any Loss for or
against which any party is entitled to indemnification
under this Agreement;
"Indemnified Party" means the party entitled
to indemnity hereunder; and "Indemnifying Party" means
the party obligated to
provide indemnification hereunder.
"Initial WARN Liability" means the liability
for up to two weeks of compensation to Terminated
Employees arising from Seller's
failure to timely comply or provide notices
under WARN, if such notice was provided as required in
Section 8.4(e).
"Intangible Property" means any trade secret,
secret process or other confidential information or
know-how and any and all Marks.
"Inventory" has the meaning specified in
Section 2.1(a).
"IRS" means the Internal Revenue Service or
any successor entity.
"Labor Matters" has the meaning specified in
Section 4.8.
"Law" means any constitutional provision,
statute or other law, rule, regulation, or
interpretation of any Governmental Entity
and any Order.
"Lease" means any real property lease,
sublease, license, concession or other rental agreement
to which Seller is a party,
together with all amendments, modifications,
alterations, and other changes thereto. However, the
term "Lease" does not refer
to any such agreement which has expired or
terminated such that Seller has no further possessory
interest thereunder.
"Leased Employees" has the meaning specified
in Section 8.4. "Lease Assignment" means an Assignment
and Assumption of Lease, in the form of Exhibit C
hereto, pursuant to which Seller assigns to Buyer, and
Buyer assumes an Acquired Lease.
"Leased Property" means the property leased,
sublet, licensed or rented pursuant to an Acquired
Lease.
"Loss" means any action, cost, damage
(including, without limitation, direct, indirect or
consequential damages),
disbursement, expense, liability, loss
(including, without limitation, lost profits),
deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable
or unforeseeable, including but not limited to,
interest or other carrying costs, penalties, legal,
accounting and other professional fees and expenses
incurred in the investigation, collection, prosecution
and defense of claims and amounts paid in settlement,
that may be
imposed on or otherwise incurred or suffered by the
specified person.
"Mall Agreement" means any reciprocal easement
agreement, development agreement, agreement of
covenants, conditions and restrictions, or other such
agreement among (or binding on)
tenants or owners of portions of any mall,
shopping center or other development at which Real
Property is located which is binding on (or benefits)
Seller or ECI, all as more particularly described on
Schedule 1.1(b) hereto.
"Mark" means any brand name, copyright,
patent, service mark, trademark, tradename, and all
registrations or application for
registration of any of the foregoing.
"Material Contract" means any Contract
material to the Business of the subject person as of or
after the date hereof and includes
but is not limited to those Contracts deemed
material by Section 4.4.
"New Leases" means the leases to be entered
into by and between Buyer and ECI with respect to the
Seller's Bakersfield, Palmdale
and Moreno Valley, California stores in the
forms of Exhibits D, E and F hereto, and, in the event
Buyer enters into a lease of
the Downtown San Bernardino Store pursuant to
Section 8.6 of this Agreement, the lease of the
Downtown San Bernardino Store, in the
form of Exhibit G hereto.
"NYSE" means the New York Stock Exchange.
"Order" means any decree, injunction,
judgment, order, ruling, assessment or writ.
"Permit" means any license, permit, franchise,
certificate of authority, or order, or any waiver of
the foregoing, required to
be issued by any Governmental Entity.
"Permitted Exceptions" means (a) Taxes not yet
due and payable or the validity of which are being
contested in good faith by appropriate actions and
which are described on Schedule 4.5B hereto and (b) all
existing deeds of trust of record (other than deeds of
trust encumbering the Acquired Leases), subject to
Buyer's right to receive an SNDA with respect
to all such deeds of trust pursuant to Article VII
hereof.
"Person" means an association, a corporation,
an individual, a partnership, a trust or any other
entity or organization, including a Governmental
Entity.
"Preliminary Title Report" means an extended
coverage preliminary title report or title insurance
commitment issued by the Title
Company showing all Encumbrances affecting all
Real Property, together with legible copies of all
documents referred to in such preliminary title report.
"Prepaid Expenses" has the meaning specified
in Section 2.1(a).
"PSE" means the Pacific Stock Exchange.
"Purchase Price" has the meaning set forth in
Section 2.3.
"Purchased Assets" has the meaning set forth
in Section 2.1(a).
"Real Property" means all Seller Real Property
and all ECI Real Property.
"Registration Rights Agreement" means the
Registration Rights Agreement to be entered into by and
between Buyer and Seller in
the form of Exhibit H hereto.
"Reimbursement Notices" has the meaning set
forth in Section 8.4(c).
"Retained Employees" has the meaning set forth
in Section 8.4(a).
"Retention Bonuses" has the meaning set forth
in Section 8.4(c).
"Revolving Credit Facility" means that certain
Business Loan Agreement dated as of February 4, 1997 by
and between Bank of America National Trust and Savings
Association
and Seller, as amended.
"SEC" means the Securities and Exchange
Commission or any successor entity.
"Securities Act" means the Securities Act of
1933, as amended.
"Seller Disclosure Schedule" means the
Disclosure Schedule dated July 21, 1998 and delivered
by Seller to Buyer. The Sections of
the Disclosure Schedule shall be numbered to
correspond to the applicable Section of this Agreement
and, together with all
matters under such heading, shall be deemed to
qualify only that section.
"Seller Indemnified Party" has the meaning set
forth in Section 11.3.
"Seller Real Property" means all real property
of Seller, appurtenances thereto, rights in connection
therewith, fixtures and improvements attached thereto,
and any
interest therein, including without limitation Buyer's
right, title and interest
under any Leases, but excluding Buyer's right,
title and interest under the ECI Leases and the
Distribution Center Lease.
"Severance Amounts" has the meaning set forth
in Section 8.4(c).
"Severance Policies" means all severance
policies of Seller as identified on Schedule 1.1(c)
hereto.
"SNDA" means a subordination, nondisturbance
and attornment agreement executed by the holder of an
Encumbrance with respect
to any Real Property in the form of Exhibit I
hereto.
"Standstill Agreement" means the Standstill
Agreement to be entered into by and between Buyer and
ECI in the form of Exhibit
J hereto.
"Stockholders' Agreement" means the
Stockholders' Agreement to be entered into by and among
Buyer, ECI, Joseph Levy and Bret Levy in the form of
Exhibit K hereto.
"Subsequent Contract" has the meaning
specified in Section 6.5.
"Subsidiary" means any Person in which Seller has a
direct or indirect equity or ownership interest in
excess of 20%.
"Survey" means a survey complying with
ALTA/ACM requirements certified to Buyer and the Title
Company in form reasonably
acceptable to Buyer.
"Tax" means any foreign, federal, state,
county or local income, sales and use, excise,
franchise, real and personal property,
transfer, gross receipt, capital stock,
production, business and occupation, disability,
employment, payroll, severance or
withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil
or criminal) related thereto or to the nonpayment
thereof, and any Loss in
connection with the determination, settlement or
litigation of any Tax liability.
"Tax Return" means a report, return or other
information required to be supplied to a Governmental
Entity with respect to Taxes
including, where permitted or required,
combined or consolidated returns for any group of
entities that includes any Subsidiary.
"Temporary Employees" has the meaning set
forth in Section 8.4.
"Terminated Employees" has the meaning set
forth in Section 8.4(a).
"Termination Date" means the specific date
first set forth in Section 10.1.
"Tradename License Agreement" means that
certain tradename license agreement to be entered into
by and between Buyer and
Seller in the form of Exhibit L hereto.
"Undisputed Claim" means an Indemnifiable
Claim as to which there is either no dispute between
the parties as to which the dispute
has been resolved pursuant to Article XII
hereof.
"Vendor Obligations" means all obligations of
Seller to vendors with respect to merchandise supplied
to Seller that appears as an
account payable on the books and records of
Seller or to be supplied to Seller for which Seller has
issued a written purchase
order.
"WARN" means the Worker Adjustment and
Retraining Notification Act.
ARTICLE II
SALE OF ASSETS, ASSUMPTION OF LIABILITIES AND
RELATED TRANSACTIONS.
2.1 Purchase and Sale of Assets.
(a) Purchased Assets. Subject to the terms
and conditions of this Agreement, on the Closing Date
Seller shall sell, convey,
assign, transfer and deliver to Buyer, and
Buyer shall purchase, acquire and accept from Seller,
all of the assets, properties,
rights, privileges, claims and contracts of
every kind and nature, real and personal, tangible and
intangible, absolute or
contingent, wherever located, owned by Seller
or used in connection with the Business (the "Purchased
Assets"), except the assets specifically identified in
Section 2.1(b) (the "Excluded Assets"). The Purchased
Assets shall include, but shall not be limited to, the
following:
(i) All Seller Real Property.
(ii) The rights, title and
interest of the sublessee under the Distribution Center
Sublease.
(iii)All machinery, apparatus, furniture
and fixtures, materials, supplies, motor vehicles, and
other equipment of every type owned or leased by
Seller.
(iv) All of Seller's accounts
receivable as of the date hereof ("Accounts
Receivable"), together with any additions
thereto and subject to any reductions therefrom
received or incurred by Seller in operating the
Business in the ordinary
course and in compliance with Section 6.3
hereof after the date hereof through the Closing Date.
(v) All inventory of saleable
goods, including all merchandise and other tangible
personal property held for sale or used in connection
with the Business as of the date hereof (the
"Inventory"), together with any additions thereto and
subject to any reductions therefrom received or
incurred by
Seller operating the Business in the ordinary
course and in compliance with Section 6.3 hereof after
the date hereof through the Closing Date.
(vi) All of Seller's rights and
interests arising under or in connection with any
Contracts to which Seller is a party and which relate
to the Business (including, but not limited to, the
Acquired Leases and the Mall Agreements) and other
documents relating to the Business, but excluding
Seller's
reversionary interest as sublessor under the
Distribution Center Lease.
(vii)All of Seller's
rights and interests with respect to proceeds under
insurance policies to which the
Business is a beneficiary to the extent that
such proceeds relate to an Assumed Liability.
(viii)Seller's prepaid
expenses and merchandise deposits as of the date hereof
("Prepaid Expenses"),
together with any additions thereto and
subject to any reductions
therefrom made or accrued by Seller in
operating the Business in
the ordinary course and in compliance with
Section 6.3 hereof after the date hereof through the
Closing Date.
(ix) All information services
systems and software.
(x) All cash except for an
amount of cash necessary to pay Seller's final payroll
through the Closing Date
for all employees being terminated by Seller
on such date, accrued vacation expense for such
employees and amounts necessary
to pay employer taxes with respect to such
payroll (it being understood that Seller will make
appropriate withholdings from
such payroll and deposit such withholdings
with appropriate third parties including (1) employee
contributions to The Harris
Company's 401(k) Savings Plan, (2) payroll
taxes for employer and employee payrolls with respect
to state unemployment insurance
(undeposited employer tax); (3) state
disability insurance (undeposited employee
withholding); (4) state withholding tax
(undeposited employee withholdings); (5)
federal withholding tax (undeposited employee
withholdings, and federal unemployment
insurance (undeposited employer tax); (6)
payroll taxes for FICA (employer) and FICA (employee);
(7) Booster Club withholdings
from Seller's employees (unremitted); (8)
United Way withholdings from Seller's employees
(unremitted); (9) withholding to be
applied to employee charge accounts, (10)
garnishments of wages (unremedied) and (11) Credit
Union withholdings from Seller's
employees (unremitted)) and as to which Seller
shall render an accounting to Buyer and remit to Buyer
any excess cash retained.
(xi) Sales data, customer
lists, information relating to customers, suppliers'
names, mailing lists, and, if
any, advertising matter and all rights thereto
relating to the Business.
(xii)Other than Seller's
corporate name "The Harris Company" and the tradenames
"Harris" and "Harris Stores",
all of Seller's Intangible Property, and trade
names and Marks, including all of Seller's rights in
the Marks in any location in
the United States or in any foreign country
and goodwill associated with the Business.
(xiii) All Seller's books
and records relating to the Business and those
employees of Seller that Buyer hires
after the Closing.
(xiv) All transferable
Permits.
(xvi) All cash, Accounts
Receivable, Inventory, fixtures and equipment
associated with the Seller's
Downtown San Bernardino Store, regardless of
whether or not Buyer enters into a lease of the
Downtown San Bernardino Store pursuant
to Section 8.6 of this Agreement.
(b) Excluded Assets. The assets that
constitute Excluded Assets shall include only:
(i) The consideration
delivered to Seller pursuant to this Agreement.
(ii) Seller's articles of
incorporation, non-transferable franchises, corporate
seals, minute books, stock
books and other corporate records having to do
with the corporate organization and capitalization of
Seller and all income tax
records and nontransferable Permits; provided,
however, that copies of such corporate and tax records
and nontransferable
Permits shall be provided to Buyer at the
Closing.
(iii) Seller's books of
account; provided, however, that copies of such books
of account shall be provided
to Buyer at the Closing.
(iv) Any shares of the capital
stock of Seller held as treasury shares.
(v) Any income Tax refund of
Seller.
(vi) The Distribution Center
Lease.
(vii) The ECI Leases.
(viii) Seller's reversionary
interest as sublessor under the Distribution Center
Sublease.
(ix) Subject to the Tradename
License Agreement, all of Seller's right, title and
interest in and to the corporate
name "The Harris Company" and the tradenames
"Harris" and "Harris Stores."
(x) The ECI Property listed on
Schedule 4.15, except for any interest of Seller
therein (licenses or otherwise).
(xi) All unemployment
compensation, workers' compensation and other credits,
reserves or deposits with
applicable Governmental Entities relating to
Seller's employees.
(c) New Leases. Subject to the terms and
conditions of this Agreement, on the Closing Date (i)
ECI and Seller shall terminate
the ECI Leases, (ii) ECI and Buyer shall enter
into the New Leases and (iii) ECI shall deliver
possession of the ECI Real
Property to Buyer in accordance with the New
Leases.
2.2 Assumption of Certain Liabilities.
(a) Liabilities Not Assumed. Except for the
liabilities and obligations specifically assumed
pursuant to and identified in
Section 2.2(b) below, Buyer shall not assume,
shall not take subject to and shall not be liable for,
any liabilities or
obligations of any kind or nature, whether
absolute, contingent, accrued, known or unknown, of
Seller or any Affiliate of Seller,
the ("Excluded Liabilities") including, but
not limited to, the following:
(i) Any liabilities or
obligations incurred, arising from or out of or in
connection with Seller's operations,
the condition of its assets or places of
business, its ownership of the Purchased Assets, or the
issuance, sale, repayment or
repurchase of any of its securities.
(ii) Any liabilities or
obligations incurred, arising from or out of, in
connection with or as a result of
claims made by or against Seller whether
before or after the Closing Date that arise out of
events prior to the Closing Date.
(iii) Any liabilities or
obligations incurred, arising from or out of, in
connection with or as a result of any
alleged or actual defect in any product or in
connection with any alleged or actual breach of
warranty (whether express or implied)
in relation to any product sold by Seller
prior to the Closing Date.
(iv) Subject to the provisions
of Section 11.3, any liabilities or obligations
(whether assessed or unassessed)
of Seller for any Taxes, including any Taxes
arising by reason of the transactions contemplated
herein, as of, or for any period
ending on or prior to, the Closing Date.
(v) Any liabilities of Seller
for violation of any Law prior to the Closing by Seller
or any Person acting on behalf of Seller, including,
without limitation, any Law dealing with labor matters,
health, safety or
environmental protection.
(vi) All liabilities relating
to the generation, use, transportation, treatment,
storage, release or disposal,
before Closing, of Hazardous Substances at any
property or facility of Seller (including the Real
Property).
(vii) The presence of
Hazardous Substances at any property or facility
(including the Real Property) by reason of events
occurring prior to Closing.
(viii)Any third party
claims or demands regarding the conduct of the Business
prior to the Closing that are asserted after the
Closing.
(ix) Any liabilities or
obligations, other than those set forth on Schedule
2.2(b), accruing prior to the Closing
Date under any Acquired Lease, Mall Agreement
or other Contract relating to real property, regardless
of whether such liabilities
or obligations become due and payable before
or after the Closing Date.
(x) Any liabilities or
obligations, other than those set forth on Schedule
2.2(b), accruing under any ECI Lease,
regardless of whether such liabilities or
obligations become due and payable before or after the
Closing Date.
(xi) Any liabilities or
obligations to former or current officers, directors,
employees or Affiliates of Seller,
including without limitation any liabilities
or obligations of Seller or ECI in connection with any
employee benefit plans or collective bargaining, labor
or employment agreement or other similar arrangement or
obligations in respect of retiree health benefits.
(xii) Any liabilities or
obligations relating to Seller's plans, agreements and
arrangements required to be set
forth in Schedule 4.14.
(xiii) All fees and expenses
of Seller in connection with the transactions
contemplated herein.
(xiv) All fees and
expenses, if any, of Seller in connection with the
dissolution and liquidation of Seller and
withdrawal from business by Seller, if Seller
so dissolves, liquidates or withdraws from business.
(xv) Any liabilities or
obligations to stockholders or former stockholders of
Seller.
(xvi) Any liabilities or
obligations of Seller incurred, arising from or out of
or in connection with this
Agreement or the events or negotiations
leading up to this Agreement.
(b) Assumed Liabilities. Notwithstanding
Section 2.2(a), on the Closing Date Buyer shall assume
the liabilities or obligations
specifically identified on Schedule 2.2(b)
attached hereto and incorporated herein by this
reference (the "Assumed Liabilities").
2.3 Purchase Price and Allocation.
The total purchase price (the "Purchase
Price") to be paid to Seller by Buyer at the Closing
for the Purchased Assets shall be
(i) the assumption of the Assumed Liabilities,
plus (ii) the issuance and delivery by Buyer to Seller
of 2,095,900 shares of
Buyer's Common Stock, $0.01 par value per
share ("Buyer's Shares"), plus (iii) the delivery by
Buyer to Seller of the 8%
Subordinated Note plus (iv) the repayment by
Buyer of Seller's Revolving Credit Facility pursuant to
Section 9.3(f) hereof.
The specific number of Buyer's Shares so
issuable in exchange for the Purchased Assets shall be
subject to proportionate adjustment
in the event of any stock split, reverse stock
split, dividend payable in stock, reclassification, or
extraordinary distribution whereby Buyer issues without
consideration additional shares of
its Common Stock with a record date prior to
the Closing Date.
Seller and Buyer agree to negotiate in good
faith with respect to the allocation of the Purchase
Price among the Purchased Assets
and Assumed Liabilities; provided, however,
that such agreement shall not constitute a condition to
either party's obligation to
consummate the transactions contemplated by
this Agreement.
Buyer and Seller agree that their agreed upon
allocation shall be used, reported and implemented for
all federal, state, local and
other tax purposes.
ARTICLE III
CLOSING
3.1 The Closing. Upon the terms and subject
to the conditions set forth in this Agreement, the
Closing of the transaction shall
take place at the offices of O'Melveny & Myers
LLP, 400 South Hope Street, Los Angeles, California, at
10:00 a.m. on the third
business day after the satisfaction of the
conditions in Article IX, or at such other location or
time as Seller and Buyer may
agree, but in no event later than August 24,
1998.
3.2 Items to be Delivered at the Closing By
Seller or ECI. At the Closing, Seller (or ECI, where
appropriate) shall deliver or
cause to be delivered to Buyer: (a) A Bill of Sale and
Assignment, in the form of Exhibit M
hereto.
(b) Lease Assignments for all of the Acquired
Leases except the Distribution Center Lease, executed
by Seller.
(c) The New Leases, executed by ECI, together
with agreements terminating the ECI Leases effective on
the Closing Date, executed by ECI and Seller.
(d) The Distribution Center Sublease,
executed by Seller.
(e) All written instruments evidencing the
Approvals obtained by Seller or ECI pursuant to Section
7.2.
(f) All executed estoppel certificates,
landlord agreements, SNDA's and certificates of
occupancy obtained by Seller or ECI
pursuant to Sections 7.3, 7.4 and 7.5.
(g) Instruments of transfer acceptable to
Buyer in the form customarily used in commercial
transactions in the area in which
the personal property is located sufficient to
transfer each personal property interest owned by
Seller.
(h) Such other instruments of transfer
necessary or appropriate to transfer to and vest in
Buyer all of Seller's right, title and
interest in and to the Purchased Assets.
(i) All documentation required to exempt
Seller from the withholding requirement of Section 1445
of the Code, consisting
of (a) an affidavit from Seller to Buyer
stating under penalty of perjury that Seller is not a
foreign person and providing
Seller's U.S. taxpayer identification number,
or (b) a sworn affidavit of Seller that it is not a
"U.S. real property holding
corporation," as defined in Section 897 of the
Code or (c) a "qualifying statement" obtained by Seller
from the Internal
Revenue Service.
(j) The opinions, certificates, consents and
other documents referred to herein as then deliverable
by Seller.
(k) A special power of attorney to Buyer, in
the form of Exhibit N hereto.
(l) A list of the locations of all deposits
of Purchased Assets held by other Persons and not
listed on Schedule 4.17.
(m) The keys to all locks located
on or in the Real Property (and any and all cards,
devices or things necessary to
access any Purchased Assets).
(n) The Tradename License Agreement, executed
by Seller.
(o) UCC-3 Termination Statements evidencing
the release of all liens on the Purchased Assets,
including but not limited to the
liens of Bank of America to be released
concurrently with the repayment of the Revolving Credit
Facility pursuant to Section
9.3(f) other than the UCC-1 Financing
Statement filings against certain equipment leases set
forth on Schedule 3.2 hereto.
(p) The Employee Lease Agreement, executed by
Seller.
(q) Landlord Agreements in the form of
Exhibit R executed by ECI with respect to the New
Leases and executed by Seller with
respect to the Distribution Center Sublease.
3.3 Items to be Delivered at the Closing by
Buyer. At the Closing, Buyer shall deliver to Seller:
(a) Certificates representing the number of
shares of the Buyer's Shares to be issued and delivered
at the Closing.
(b) The 8% Subordinated Note.
(c) An Assumption Agreement, in the form of
Exhibit O hereto.
(d) The opinions, certificates, consents and
other documents referred to herein as then deliverable
by Buyer.
(e) The Lease Assignments, executed by Buyer.
(f) The New Leases, executed by Buyer.
(g) The Distribution Center Sublease,
executed by Buyer.
(h) The Tradename License Agreement, executed
by Buyer.
(i) The Employee Lease Agreement, executed by
Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ECI AND
SELLER
Except as otherwise indicated on the Seller
Disclosure Schedule previously delivered to Buyer, each
of ECI and Seller jointly and
severally represents, warrants and agrees as
follows:
4.1 Organization and Related Matters.
Each of ECI and Seller is a corporation duly
organized, validly existing and in good standing under
the laws of the jurisdiction
of its incorporation or organization. Each of
ECI and Seller has all necessary corporate power and
authority to execute, deliver
and perform this Agreement and any related
agreements to which it is a party. Seller has no
Subsidiaries. All of Seller's
outstanding Equity Securities are held,
beneficially and of record, by ECI. Seller does
business only in the State of
California and neither the character nor the
location of the assets owned or used by it nor the
nature of the business conducted by it requires Seller
to be qualified or licensed to do business as a foreign
Person in any other
jurisdiction. Seller has all necessary corporate power
and authority to own its
properties and assets and to carry on its
business as now conducted. Schedule 4.1 correctly
lists the current directors
and executive officers of Seller. True,
correct and complete copies of the charter documents of
ECI and Seller as in effect on
the date hereof have been delivered to Buyer.
4.2 Financial Statements; Changes;
Contingencies.
(a) Audited Financial Statements. Seller has
delivered to Buyer true and correct balance sheets for
Seller at January 29, 1994,
January 28, 1995, February 3, 1996, February
1, 1997 and January 31, 1998 and the related statements
of operations, changes in
stockholder's equity and changes in financial
position or cash flow for the periods then ended. All
such financial statements
have been examined by the Auditors whose
reports thereon are included with such financial
statements. All such financial
statements have been prepared in conformity
with GAAP applied on a consistent basis (except for
changes, if any, required by GAAP
and disclosed therein). Such statements of
operations and cash flow present fairly the results of
operations and cash flows of
Seller for the respective periods covered, and
the balance sheets present fairly the financial
condition of Seller as of their
respective dates. Seller has made available
to Buyer copies of each management letter or other
letter delivered to Seller by
Auditors in connection with such financial
statements or relating to any review by Auditors of the
internal controls of Seller
during the five-year period ended January 31,
1998 or thereafter, and has made available for
inspection all reports and working
papers produced or developed by Auditors or
management in connection with their examination of such
financial statements,
as well as all such reports and working papers
for prior periods for which any tax liability of Seller
has not been finally determined or barred by applicable
statutes of limitation. Since January 31, 1998, there
has been no change in any of the significant accounting
policies, practices or procedures of
Seller.
(b) Unaudited Interim Financial Statements.
Seller has delivered to Buyer balance sheets for Seller
at May 30, 1998 and May 29, 1997, and the related
statements of operations and cash flows and changes in
stockholder's equity for the periods then ended. Such
interim financial statements have been certified by
the chief financial officer of Seller. All
such interim financial statements have been prepared in
conformity with GAAP
applied on a consistent basis with the audited
financial statements for January 31, 1998 except for
changes, if any,
required by GAAP and disclosed therein. The
statements of operations and cash flows present fairly
the results of
operations of Seller for the respective
periods covered, and the balance sheets present fairly
the financial condition of Seller as of their
respective dates. All such
interim financial statements reflect all adjustments
(which consist only of normal
recurring adjustments not material in amount
and include but are not limited to estimated provisions
for year end adjustments)
necessary for a fair presentation. At the
dates of such balance sheets, Seller did not have any
material liability (actual,
contingent or accrued) that, in accordance
with GAAP applied on a consistent basis, should have
been shown or reflected therein but were not except for
the omission of notes with respect to contingent
liabilities that in the aggregate did not materially
exceed those so reported in the most recent of
the audited statements delivered and that were of
substantially the same type as so reported.
(c) No Material Adverse Changes. Since
January 31, 1998, whether or not in the ordinary course
of business, there has not
been, occurred or arisen:
(i) any change in or event affecting Seller,
the Business, the Purchased Assets or the Assumed
Liabilities that has had or may
reasonably be expected to have a material
adverse effect on Seller, the Business or the Purchased
Assets or the Assumed
Liabilities, or (ii) any agreement, condition, action
or omission which would be
proscribed by (or require consent under)
Section 6.3 had it existed, occurred or arisen after
the date of this Agreement, or
(iii) any strike or other labor dispute,
or (iv) any casualty, loss, damage or destruction
(whether or not covered by insurance) of any of the
Purchased Assets with a book value in excess of $20,000
or that has
involved or may involve a loss to Seller of more than
$10,000 in excess of applicable
insurance coverage.
(d) No Other Liabilities or Contingencies.
Seller does not have any liabilities of any nature,
whether accrued, absolute,
contingent or otherwise, and whether due or to
become due, probable of assertion or not, except
liabilities that (i) are
reflected or disclosed in the most recent of
the financial statements referred to in subsection (a)
or (b) above, (ii) were
incurred after May 30, 1998 in the ordinary
course of business and in the aggregate do not exceed
$50,000 (other than
liabilities incurred in the ordinary course
pursuant to existing Contracts of Seller that have been
disclosed to Buyer in the
Schedules to this Agreement), (iii) are set
forth in Schedule 4.22A hereto, (iv) are Excluded
Liabilities or (v) are set forth
in Schedule 4.2 hereto.
4.3 Tax and Other Returns and Reports.
Seller has timely filed or will file (or,
where permitted or required, its respective direct or
indirect parents have timely
filed or will file) all required Tax Returns
and have paid all Taxes due for all periods ending on
or before January 31, 1998.
Adequate provision has been made in the books
and records of Seller, and to the extent required by
GAAP in the financial
statements referred to in Section 4.2 above,
for all Taxes whether or not due and payable and
whether or not disputed.
Seller has not elected to be treated as a
consenting corporation under Section 341(f) of the
Code. All Taxes imposed on
activities or for periods prior to the Closing
Date are Excluded Liabilities.
4.4 Contracts.
(a) Schedule 4.4 lists each contract to which
Seller is a party or to which Seller or any of its
properties is subject or by
which any thereof is bound that is deemed a
Material Contract under this Agreement and is organized
by subsection and contains
a brief description of the Material Contract.
Unless otherwise so noted in Schedule 4.4, each such
Contract was entered into in
the ordinary course of business. Each
Contract that (i) after January 31, 1998 obligates
Seller to pay an amount of $100,000 or more for the
purchase of merchandise or
$20,000 or more for any other reason, (ii) has an
unexpired term as of January 31, 1998
in excess of one year, (iii) represents a
Contract upon which the Business is substantially
dependent or is otherwise material to the Business,
(iv) provides for the extension of credit other than
consistent with normal credit terms, (v) limits or
restricts the ability of Seller to compete or otherwise
conduct its business, including as to manner or place,
(vi) provides for a
guaranty or indemnity by Seller, (vii) grants
a power of attorney, agency or similar authority to
another person or
entity, (viii) contains a right of first
refusal, (ix) contains a right or obligation of or to
any Affiliate, officer or director
or any Associate, of Seller, (x) constitutes a
collective bargaining agreement or provides for
severance benefits to any officer, director or
employee, or (xi) requires Seller to buy or sell goods
or services with respect to which there will be
material losses (other than as provided for or
otherwise reserved
against on the most recent of the balance
sheets referred to in Section 4.2) or (xii) was not
made in the ordinary course of
business, shall be deemed to be a Material
Contract and is identified on such Schedule 4.4.
(b) True, correct and complete copies of the
agreements appearing on Schedules 1.1(a) and 4.4,
including all amendments and supplements, have been
delivered to Buyer. Each Assumed
Contract and each Material Contract is valid
and subsisting; Seller has duly performed all its
obligations thereunder to the
extent that such obligations to perform have
accrued; and no breach or default, alleged breach or
default, or event which
would (with the passage of time, notice or
both) constitute a breach or default thereunder by
Seller (or, to the best knowledge of Seller, any other
party or obligor with respect thereto), has
occurred or as a result of this Agreement or
its performance will occur. Consummation of the
transactions contemplated by this
Agreement will not (and will not give any
person a right to) terminate or modify any rights of,
or accelerate or augment any
obligation of, Seller under any such
agreements.
4.5 Real and Personal Property; Title to
Property; Leases.
(a) Schedule 4.5A lists, by item: (i) all
personal property (whether tangible or intangible) that
is material to the
Business, except for: (A) the Excluded
Assets; (B) the Intangible Property; and (C) all
inventory held for sale; and
(ii) all furniture, fixtures and equipment
used by Seller in connection with the Business, whether
or not material to the
Business with a current book value greater
than $5,000.00. All personal property of Seller
(except for the Excluded Assets) are
in a reasonable and prudent state of
maintenance and repair, have been regularly and
appropriately maintained, repaired and
replaced, are not materially defective except
for ordinary wear and tear and are adequate for use in
the Business. All of the
items listed on Schedule 4.5A are included in
the Purchased Assets (and thus covered by the
representations and warranties provided in subsection
(c), below).
(b) Schedule 4.5B lists, by site, all Real
Property used by Seller in the conduct of the Business
and properly identifies the
Seller's interest in such property.
(c) (i) Seller has good and marketable title
to each of the Purchased Assets, free and clear of any
Encumbrances except
Permitted Exceptions. Seller has all rights,
power and authority to sell, convey, assign, transfer
and deliver the Purchased
Assets to Buyer in accordance with the terms
of this Agreement.
At the Closing, Seller shall deliver the
Purchased Assets to Buyer, free and clear of any
Encumbrances except for Permitted
Exceptions.
(ii) ECI has good and
marketable fee simple title to all ECI Real Property,
free and clear of any Encumbrances
except Permitted Encumbrances. ECI has all
rights, power and authority to lease the ECI Real
Property to Buyer in accordance
with the terms of this Agreement. At the
Closing, Seller shall deliver possession of the ECI
Real Property to Buyer pursuant to
the New Leases, free and clear of any
Encumbrances except for Permitted Exceptions.
(d) The Real Property is in a reasonable and
prudent state of maintenance and repair, has been
regularly and appropriately
maintained, repaired and replaced, is
reasonably adequate for use in the Business and has no
material physical, structural,
geological or mechanical defects (including,
without limitation, defects in the plumbing, heating,
sprinkler, air conditioning,
ventilation and electrical systems and the
roof) and is in good operating condition.
(e) Neither Seller nor ECI has received
notice of any proposed special assessments, or any
proposed material changes in property
tax or land use laws affecting the Real
Property.
(f) (i) All Acquired Leases are
valid, binding and enforceable leases, subject only to
such exceptions as are not,
individually or in the aggregate, material to
the Business.
(ii) Seller has heretofore
delivered to Buyer a true, correct and complete copy of
each Lease.
(iii) The Leases constitute
the entire agreement to which Seller is a party with
respect to the properties which are demised pursuant
thereto (including all
amendments, modifications or supplements
(whether written or otherwise)).
(iv) The copies of the Acquired
Leases and other amendments, supplements, agreements
relating thereto delivered to
Buyer are true, correct and complete copies,
and there are no other leases, licenses or occupancy
agreements affecting the Seller's interests under the
Acquired Leases.
(v) The term of each Acquired
Lease is accurately set forth on Schedule 4.5B. Seller
has accepted possession of
each Leased Property and is in actual
possession thereof and has not sublet, assigned or
hypothecated its leasehold interest.
(vi) As of the date hereof, all
conditions precedent to the enforceability of each
Acquired Lease have been satisfied and there exists no
breach or default, nor state of facts which, with the
passage of time, notice, or both, would result in a
breach or default on the part of either Seller or the
lessor thereunder. No lessor has asserted a
defense to, or offset or claim against, its obligations
under any Acquired Lease. Seller has not paid any rent
under any Acquired Lease
more than one month in advance.
(vii) All space and
improvements leased by Seller have been fully and
satisfactorily completed and furnished
in accordance with the provisions of each
Lease.
(viii) There are no
brokerage or leasing fees or commissions or other
compensation due or payable on an
absolute or contingent basis to any person,
firm, corporation, or other entity, with respect to or
on account of any of the
Acquired Leases and no such fees, commissions
or other compensation shall, by reason of any existing
agreement, become due during the terms of any of the
Acquired Leases or with
respect to any renewal or extension thereof or
the leasing of additional space by Seller.
(g) The use and operation of the Real
Property for purposes of and in connection with the
Business is in compliance with
applicable building codes, environmental,
zoning, subdivision, and land use Laws, and other Laws,
including the Americans with
Disabilities Act, Public Law 101-336, as such
act has been codified. Neither ECI nor Seller has
received (i) any notice
from any Governmental Entity advising either
of them of a violation (or an alleged violation) of any
such Laws, (ii) any
notice of non-compliance with any restriction
encumbering any Real Property or (iii) notice of any
zoning violations affecting
any Real Property.
(h) To Seller's and ECI's knowledge, there is
no pending or threatened Action that would materially
interfere with the quiet
enjoyment of any Real Property by Seller or
ECI (as appropriate) or that might materially interfere
with Buyer's quiet enjoyment
of any Real Property, New Lease or the
Distribution Center Sublease after the Closing.
(i) All water, sewer, gas, electric,
telephone, and drainage facilities and all other
utilities required by Law for the
present use and operation of the Real Property
are installed across public property or valid easements
to the boundary lines
of the Real Property, and are connected
pursuant to valid permits, and such facilities are
adequate to service the Real
Property and are in reasonable and prudent
operating condition.
(j) There are no condemnation, environmental,
zoning or other land-use regulation proceedings, either
instituted or planned to
be instituted, which would detrimentally
affect the value of any of the Real Property or the use
and operation thereof for the
Business, nor does ECI or Seller know of any
assessments affecting any of the Real Property.
(k) There are no outstanding contracts made
by or on behalf of ECI or Seller for the construction
or repair of any improvements
to any of the Seller properties leased under
the Acquired Leases or the ECI Leases (including,
without limitation, tenant
improvements) which have not been fully paid
for and ECI or Seller, as appropriate, shall cause to
be discharged all mechanics' or materialmen's liens
arising from any labor or
materials furnished to Real Property prior to
the Closing (regardless of whether such liens are filed
prior to or after the Closing).
(l) Each Mall Agreement is valid and in full
force and effect, and enforceable in accordance with
its terms.
True and correct copies of all Mall Agreements,
including any amendments,
modifications and supplements thereto have
been delivered to Buyer, except for any publicly
available documents to which
neither ECI nor Seller is a party.
(m) Seller and ECI are in full compliance
with all Mall Agreements and there has been no default
or event which, with the
giving of notice or the passage of time, or
both, would constitute a default by Seller or ECI under
any Mall Agreement
and no party to a Mall Agreement has asserted
that Seller or ECI is in default under the applicable
Mall Agreement. Seller or
ECI, as applicable, has paid or caused to be
paid any and all amounts due and payable under all Mall
Agreements.
4.6 Intangible Property.
Schedule 4.6 lists any and all Marks and other
material items of Intangible Property in which Seller
has an interest and the nature of such interest. Such
assets include all Permits or
other rights with respect to any of the
foregoing. Seller has complete rights to and ownership
of all Intangible Property
required for use in connection with the
Business. Seller does not use any Intangible Property
by consent of any other person
and is not required to and does not make any
payments to others with respect thereto. The
Intangible Property of Seller is fully
assignable free and clear of any Encumbrances.
Seller has in all material respects performed all
obligations required to be
performed by it, and Seller is not in default
in any material respect under any Contract relating to
any of the foregoing.
Neither ECI nor Seller has received any notice
to the effect (or is otherwise aware) that the
Intangible Property or any use by
Seller of any such property conflicts with or
infringes (or allegedly conflicts with or infringes)
the rights of any Person.
4.7 Authorization; No Conflicts.
The execution, delivery and performance of
this Agreement and any related agreements by each of
ECI and Seller have been duly and
validly authorized by the Board of Directors
of ECI and Seller, respectively, and by all other
necessary corporate action on the
part of ECI and Seller. This Agreement and
any related agreements constitute the legally valid and
binding obligation of
each of ECI and Seller, enforceable against
ECI and Seller, respectively, in accordance with their
respective terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable
principles relating to or limiting creditors rights
generally.
The execution, delivery and performance of
this Agreement by each of ECI and Seller and the
execution, delivery and performance of
any related agreements or contemplated
transactions by each of ECI and Seller will not
violate, or constitute a breach or
default (whether upon lapse of time and/or the
occurrence of any act or event or otherwise) under, the
charter documents or by-
laws of either of such entities or any
Contract of either ECI or Company, result in the
imposition of any Encumbrance against any
assets or properties of ECI or Seller or any
of the Purchased Assets or violate any Law. Schedule
4.7 lists all Permits and
Approvals required to be obtained by ECI or
Seller to consummate the transactions contemplated by
this Agreement (including,
without limitation, any Approvals required to
be obtained from any lessors under Acquired Leases and
any Persons holding
Encumbrances on Real Property). Except for
matters identified in Schedule 4.7 as requiring that
certain actions be taken by or
with respect to a third party or Governmental
Entity, the execution and delivery of this Agreement by
ECI and Seller and
the performance of this Agreement and any
related or contemplated transactions by ECI and Seller
will not require filing or
registration with, or the issuance of any
Permit by, any other third party or Governmental Entity
under the terms of any
applicable Laws or Contracts.
4.8 Legal Proceedings.
There is no Order or Action pending, or, to
the best knowledge of Seller, threatened, against or
affecting ECI or Seller or any of
their respective properties or assets that
individually or when aggregated with one or more other
Orders or Actions has or might
reasonably be expected to have a material
adverse effect on Seller, the Business, the Purchased
Assets (or the use, operation
or value thereof), the Assumed Liabilities,
ECI's or Seller's ability to perform this Agreement, or
any aspect of the
transactions contemplated by this Agreement.
There is no organized labor strike, dispute, slowdown
or stoppage, or collective bargaining or unfair labor
practice claim
(collectively, "Labor Matters"), pending or to
the best knowledge of ECI or Seller threatened, against
or affecting the Seller or
the Business. Schedule 4.8 lists each Order,
Action and Labor Matter that involves a claim or
potential claim of aggregate liability in excess of
$10,000 against, or that enjoins or
compels or seeks to enjoin or to compel any
activity by Seller.
There is no matter as to which ECI or Seller
has received any notice, claim or assertion, or, to the
best knowledge of ECI or
Seller, which otherwise has been threatened or
is reasonably expected to be threatened or initiated,
against or affecting any
director, officer, employee, agent or
representative of Seller or any other Person, nor to
the best knowledge of ECI or Seller is
there any reasonable basis therefor, in
connection with which any such Person has or may
reasonably be expected to have any right
to be indemnified by Seller.
4.9 Accounting Records; Internal Controls;
Absence of Certain Payments.
(a) Accounting Records. Seller has records
that accurately and validly reflect its transactions,
and accounting controls
sufficient to insure that such transactions
are (i) executed in accordance with management's
general or specific authorization
and (ii) recorded in conformity with GAAP so
as to maintain accountability for assets.
(b) Data Processing; Access. Such records,
to the extent they contain important information that
is not easily and readily
available elsewhere, have been duplicated, and
such duplicates are stored safely and securely.
4.10 Insurance.
Seller is, and at all times during the past
three years has been, insured with reputable insurers
against all risks normally
insured against by companies in similar lines
of business, and all of the insurance policies and
bonds maintained by Seller are
in full force and effect. Schedule 4.10 lists
all insurance policies and bonds that are material to
the Business. Seller is
not in default under any such policy or bond.
Seller has timely filed claims with its insurers with
respect to all matters and
occurrences for which it believes it has
coverage. Seller has received no notice or other
indication from any insurer or agent
of any intent to cancel or not so renew any of
such insurance policies. There are no outstanding
requirements or
recommendations by any insurance company that
issued a policy with respect to any of the properties
and assets, including the
Purchased Assets, of Seller by any Board of
Fire Underwriters or other body exercising similar
functions or by any Governmental
Entity requiring or recommending any action
which has not been taken.
4.11 Permits.
Seller holds all Permits that are required by
any Governmental Entity to permit it to conduct the
Business as now conducted and
operate the Purchased Assets as they are now
operated, and all such Permits are valid and in full
force and effect and will
remain in full force and effect for the
benefit of Buyer upon consummation of the transactions
contemplated by this Agreement,
except for those Permits identified on
Schedule 4.11 as not transferable to Buyer. Except as
set forth in Schedule 4.11, all
such Permits are Purchased Assets. No
suspension, cancellation or termination of any of such
Permits is threatened or imminent.
4.12 Compliance with Law.
(a) Seller is organized and has conducted the
Business in accordance with applicable Laws, and the
forms, procedures and practices of Seller are in
compliance with all such Laws, to the extent
applicable. Without limiting the foregoing, the Seller
has complied with all Laws relating to the extension of
credit to consumers, usury, collections, truth in
lending and any other Law applicable to Seller's store
credit programs.
(b) The use and operation of the Purchased
Assets are in compliance with all applicable Laws, and
there are no violations
of any such Laws.
4.13 Dividends and other Distributions.
There has been no dividend or other
distribution of assets or securities whether consisting
of money, property or any other
thing of value, declared, issued or paid
subsequent to the date of the most recent financial
statements described in Section 4.2
by Seller.
4.14 Employee Benefits.
(a) Employee Benefit Plans, Collective
Bargaining and Employment Agreements, and Similar
Arrangements.
(i) Schedule 4.14 lists (by entity subject
thereto or bound thereby) all employee benefit plans
and collective bargaining,
employment or severance agreements and other
similar arrangements, whether written or unwritten, to
which Seller or
any Subsidiary is or during the last five
years has been a party or by which any of them is or
during the last five years has been
bound, legally or otherwise (except for any
fully-performed employment agreements with respect to
which Seller has no
outstanding liabilities or obligations),
including, without limitation, (a) any profit-sharing,
deferred compensation, bonus,
stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or
arrangement, (b) any plan, agreement or
arrangement providing for "fringe benefits" or
perquisites to employees, officers,
directors or agents, including but not limited
to benefits relating to company automobiles, clubs,
vacation, child care, parenting, sabbatical, sick
leave, medical, dental,
hospitalization, life insurance and other
types of insurance, (c) any employment agreement, or
(d) any other "employee benefit
plan" (within the meaning of Section 3(3) of
ERISA).
(ii) Seller has delivered to Buyer true and
complete copies of all documents and summary plan
descriptions with respect to such
plans, agreements and arrangements, or summary
descriptions of any such plans, agreements or
arrangements not otherwise in writing.
(iii) There are no negotiations, demands
or proposals that are pending or have been made which
concern matters now covered,
or that would be covered, by plans, agreements
or arrangements of the type described in this section.
(iv) Seller and its Subsidiaries are in full
compliance with the applicable provisions of ERISA (as
amended through the date of
this Arrangement), the regulations and
published authorities thereunder, and all other Laws
applicable with respect to all
such employee benefit plans, agreements and
arrangements. Seller and its Subsidiaries have
performed all of their obligations
under all such plans, agreements and
arrangements and all such plans, agreements and
arrangements have been operated in
compliance with their terms. To the best
knowledge of Seller, there are no Actions (other than
routine claims for benefits)
pending or threatened against such plans or
their assets, or arising out of such plans, agreements
or arrangements, and, to
the best knowledge of Seller, no facts exist
which could give rise to any such Actions.
(v) All obligations of Seller and its
Subsidiaries under each such plan agreement and
arrangement (x) that are due prior to the
Closing Date have been paid or will be paid
prior to that time and (y) that have accrued prior to
the Closing Date have been or
will be paid or properly accrued.
(b) Qualified Plans.
(i) Schedule 4.14 lists all "employee pension
benefit plans" (within the meaning of Section 3(2) of
ERISA) in Schedule 4.14
which are also stock bonus, pension or
profit-sharing plans within the meaning of Section
401(a) of the Code.
(ii) Each such plan has been duly authorized
by the appropriate board of directors of Seller and
each participating Subsidiary.
Each such plan is qualified in form and
operation under Section 401(a) of the Code and each
trust under each such plan is exempt
from tax under Section 501(a) of the Code. No
event has occurred that will or could give rise to
disqualification or loss of tax-
exempt status of any such plan or trust under
such sections. No event has occurred that will or
could subject any such plans to
tax under Section 511 of the Code. No
prohibited transaction (within the meaning of Section
4975 of the Code) or party-in-
interest transaction (within the meaning of
Section 406 of ERISA) has occurred with respect to any
of such plans.
(iii) Seller has delivered to Buyer for
each such plan copies of the following documents: (i)
the Form 5500 filed in the most recent plan year,
including but not limited to all schedules thereto and
financial statements with attached opinions of
independent accountants, (ii) the most recent
determination letter from the IRS, (iii) the
consolidated statement of assets
and liabilities of such plan as of its most
recent valuation date, and (iv) the statement of
changes in fund balance and in
financial position or the statement of changes
in net assets available for benefits under such plan
for the most recently ended plan year. The financial
statements so delivered fairly present the financial
condition and the
results or operations of each of such plans as of such
dates, in accordance with GAAP.
(c) Title IV Plans.
No plan listed in Schedule 4.14 is a plan
subject to Title IV of ERISA.
(d) Multiemployer Plans.
No plan listed in Schedule 4.14 is a
"multiemployer plan" (within the meaning of Section
3(37) of ERISA). Neither Seller nor any Subsidiary has
ever contributed to or had an obligation to contribute
to any multiemployer plan.
(e) Health Plans. All group health plans of
Seller, any Subsidiary and any ERISA Affiliate have
been operated in compliance with the group health plan
continuation coverage
requirements of Section 4980B of the Code to
the extent such requirements are applicable. Except as
required under Section
4980B of the Code, neither Seller nor any
Subsidiary or ERISA Affiliate has any obligation to
provide health benefits to any
employee following termination of employment.
(f) Fines and Penalties. There has been no
act or omission by Seller or any Subsidiary or any
ERISA Affiliate that has given
rise to or may give rise to fines, penalties,
taxes, or related charges under Section 502(c) or (i)
or Section 4071 of ERISA or Chapter 43 of the Code.
4.15 Certain Interests.
Except as specifically described on Schedule
4.15, no Affiliate of ECI or Seller nor any officer or
director of any thereof, nor
Associate of any such individual, has any
material interest in any of the Purchased Assets, the
Assumed Liabilities or any
property used in or pertaining to the
Business; no such Person is indebted or otherwise
obligated to Seller (except for employees' obligations
under Seller's store credit card program which are
customary and non-delinquent); and Seller is not
indebted or
otherwise obligated to any such Person, except
for amounts due under the ECI Leases or normal
arrangements applicable to all employees generally as
to salary or reimbursement of ordinary business
expenses not unusual in amount or significance. Except
as set forth on Schedule 4.15, the consummation of the
transactions contemplated by this Agreement
and any related agreements will not (either alone, or
upon the occurrence of any
act or event, or with the lapse of time, or
both) result in any benefit or payment (severance or
other) arising or becoming due
from Seller or the successor or assign of any
thereof to any Person.
4.16 Intercompany Transactions.
Except as specifically described on Schedule
4.16, since January 31, 1998 Seller has not engaged in
any transaction with ECI or
any Affiliate of Seller or been subject to or
bound by any Contract to which ECI or any Affiliate of
ECI is a party. Seller
does not have any liabilities or obligations
to any Affiliate of Seller and none of such Affiliates
has any obligations to Seller.
The consummation of the transactions
contemplated by this Agreement will not (either alone,
or upon the occurrence of any
act or event, or with the lapse of time, or
both) result in any payment arising or becoming due
from Seller or the successor or
assign of any thereof to any Affiliate of
Seller.
4.17 Bank Accounts, Powers, etc.
Schedule 4.17 ("Bank List") lists each bank,
trust company, savings institution, brokerage firm,
mutual fund or other financial institution with which
Seller has an
account or safe deposit box and the names and
identification of all Persons
authorized to draw thereon or to have access
thereto, and lists the names of each Person holding
powers of attorney or agency
authority from Seller and a summary of the
terms thereof.
4.18 No Brokers or Finders.
No agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by
or acting on behalf of Seller or
any of its Affiliates in connection with the
negotiation, execution or performance of this Agreement
or the transactions
contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or
other commission as a
result of this Agreement or such transactions,
other than Financo, Inc., as to which Seller shall have
full responsibility
and Buyer shall have no liability.
4.19 Net Assets.
[INTENTIONALLY OMITTED]
4.20 Inventories.
Schedule 4.20 is a complete and accurate list
of the inventories of Seller as of July 4, 1998,
including Seller's gross book value
of the inventories and the amount of any
reserves relating thereto.
4.21 Receivables.
Schedule 4.21 is a complete and accurate list
of the amount of all receivables of Seller as of July
4, 1998. Schedule 4.21 also
includes a complete and accurate aging list of
all receivables of Seller as of July 4, 1998. Since
January 31, 1998, Seller has
not in any way changed or modified: (a) the
criteria by which or manner in which Seller extends
credit to its customers or
generates its receivables; or (b) the manner,
procedures or policies by which Seller takes reserves
with respect to its
receivables.
4.22 Vendor Obligations and Deposits and Bank
Loan. Schedule 4.22A is a complete and accurate list
and description of
all outstanding Vendor Obligations of the
Seller as of July 4, 1998. Schedule 4.22B is a
complete and accurate list by vendor
and amount of all deposits Seller has made
with its vendors as of July 4, 1998. As of July 4,
1998, the outstanding balance of
Seller's obligations under the Revolving
Credit Facility is $1,500,000.
4.23 Suppliers.
Schedule 4.23 lists the names of and describes
all Contracts with and the appropriate percentage of
Business attributable to, the
ten (10) most significant vendors or suppliers
of the Business at the date of this Agreement, and any
sole-source vendors or
suppliers of significant goods or services
(other than electricity, gas, telephone or water) to
Seller with respect to
which alternative sources of supply are not
readily available on comparable terms and conditions.
4.24 Environmental Compliance.
To the best of Seller's and ECI's knowledge,
no Hazardous Substances are located on any of the Real
Property. To the best
of Seller's and ECI's knowledge, Seller has
not generated, used, transported, treated, stored,
released or disposed of, or has
suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any
Hazardous Substance which
is regulated or prohibited by any Law, or has
created or might reasonably be expected to create any
liability under any Law or
which would require reporting to or
notification of any Governmental Entity. To the best
of Seller's and ECI's
knowledge, there has not been any generation,
use, transportation, treatment, storage, release or
disposal of any Hazardous Substance in connection with
the conduct of the
Business of Seller or the use of any Real
Property or to the knowledge of ECI or Seller any
nearby or adjacent properties
which is regulated or prohibited by any Law,
or has created or might reasonably be expected to
create any liability under any
Law or which would require reporting to or
notification of any Governmental Entity. To the best
of Seller's and ECI's
knowledge, no asbestos, lead-based paint or
polychlorinated biphenyl or storage tank (above-ground
or underground) is
contained in or located at any facility of
Seller. To the best of Seller's and ECI's knowledge,
any Hazardous Substance handled
or dealt with in any way in connection with
the businesses of Seller, whether before or during
Seller's ownership, has been and
is being handled or dealt with in all respects
in compliance with all applicable Laws. All
liabilities of Seller in connection
with Hazardous Substances or Laws regulating
Hazardous Substances are Excluded Liabilities.
4.25 Powers of Attorney Seller has not given any power
of attorney (irrevocable or
otherwise) to any person or entity for any
purpose relating to the Business, Purchased Assets or
Assumed Liabilities, other than
powers of attorney given to regulatory
authorities in connection with routine qualifications
to do business.
4.26 Seller's Investment Representation.
Seller is acquiring the Buyer's Shares for
Seller's own account for investment purposes only and
not with a view to or for sale
in connection with a distribution thereof
(except for a possible
transfer to an Affiliate of Seller as
permitted by the Stockholders' Agreement). Seller
acknowledges that the Buyer's
Shares will be "restricted securities" under
the Securities Act and will bear a prominent legend
with respect to restrictions on
transfer under the Securities Act, applicable
state securities laws and the Standstill Agreement.
4.27 Discharge of Certain Obligations.
Except as set forth on Schedule 4.27 or
matters that do not exceed $15,000 in the aggregate,
since January 31, 1998 Seller
has not paid, satisfied, discharged or
released any liability or obligation that would have
been an Excluded Liability pursuant to this Agreement.
4.28 Employees.
Schedule 4.28 contains a complete list as of
July 20, 1998 of all employees of Seller, including the
name, job title, current
compensation and date of hire.
4.29 Accuracy of Information.
The representations and warranties made by
Seller and ECI herein, taken as a whole, do not contain
any untrue statement of a
material fact or omit to state a material fact
necessary to make any statement therein not misleading.
If any of such
information, taken as a whole, at any time
subsequent to its delivery and prior to Closing becomes
untrue or misleading in any
material respect, Seller will promptly notify
Buyer in writing of such fact and of the reasons for
such change.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise indicated on the Buyer
Disclosure Schedulepreviously delivered to Seller,
Buyer represents, warrants and
agrees as follows:
5.1 Organization and Related Matters.
Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware. Buyer has
all necessary corporate power and authority to
carry on its business as now being conducted. Buyer
has the necessary
corporate power and authority to execute,
deliver and perform this Agreement and any related
agreements to which it is a party.
5.2 Authorization.
The execution, delivery and performance of
this Agreement and any related agreements by Buyer:
(a) has been duly and validly
authorized by the Board of Directors of Buyer
and by all other necessary corporate action on the part
of Buyer; and (b) does not
require the consent of Buyer's stockholders.
This Agreement constitutes the legal, valid and binding
obligation of Buyer,
enforceable against Buyer in accordance with
its terms except as such enforceability may be limited
by bankruptcy, insolvency,
reorganization, moratorium and other similar
laws and equitable principles relating to or limiting
creditors'rights generally.
5.3 No Conflicts.
The execution, delivery and performance of
this Agreement and any related agreements by Buyer will
not violate the provisions of,
or constitute a breach or default whether upon
lapse of time and/or the occurrence of any act or event
or otherwise under (a)
the charter documents or bylaws of Buyer, (b)
any Law to which Buyer is subject or (c) any Contract
to which Buyer is a party
that is material to the financial condition,
results of operations or conduct of the business of
Buyer, provided that the
appropriate regulatory approvals are received
as contemplated by Section 9.1 and the Approvals listed
on Schedule 5.3 are secured.
5.4 No Brokers or Finders.
No agent, broker, finder or investment or
commercial banker, or other Person or firms engaged by
or acting on behalf of Buyer or
its Affiliates in connection with the
negotiation, execution or performance of this Agreement
or the transactions contemplated by
this Agreement, is or will be entitled to any
broker's or finder's or similar fees or other
commissions as a result of this
Agreement or such transactions other than
Prudential Securities, Inc., as to which ECI and Seller
shall have no liability.
5.5 Legal Proceedings.
There is no Order or Action pending or to the
best knowledge of Buyer, threatened against or
affecting Buyer that individually or
when aggregated with one or more other Actions
has or might reasonably be expected to have a material
adverse effect on the
Buyer or Buyer's ability to perform this
Agreement or any other aspect of the transactions
contemplated by this Agreement.
5.6 Buyer's Stock.
As of July 14, 1998, the authorized capital
stock of Buyer consists of 30,000,000 shares of Common
Stock, par value $.01 per
share of which 10,479,655 shares are issued
and outstanding and 2,000,000 shares of preferred
stock, par value $.10 per share,
none of which are issued or outstanding. Upon
issuance in accordance with the terms of this
Agreement, Buyer's Shares will be validly issued, fully
paid and nonassessable.
5.7 Buyer Reports; Financial Statements.
(a) Since January 31, 1998, Buyer has filed
with the SEC all material forms, statements, reports
and documents (including all
exhibits, amendments and supplements thereto)
required to be filed by it under the Exchange Act and
the respective rules and
regulations thereunder, all of which complied
in all material respects with all applicable
requirements of the Exchange Act and
the rules and regulations thereunder. Buyer
has delivered to ECI (i) the proxy statement filed by
it with the SEC for the 1998
Annual Meeting of Stockholders, (ii) Buyer's
Annual Report on Form 10-K for the fiscal year ended
January 31, 1998, and (iii)
Buyer's Quarterly Report on Form 10-Q for the
quarter ended May 2, 1998, each in the form (including
exhibits and any amendments
thereto) filed with the SEC (collectively, the
"Buyer Reports").
As of their respective dates, the Buyer
Reports did not contain any 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, in the light
of the circumstances under
which they were made, not misleading. Each of
the consolidated balance sheets included in or
incorporated by reference into the
Buyer Reports (including the related notes and
schedules) fairly presents in all material respects the
consolidated financial
position of Buyer and its subsidiary as of its
date and each of the consolidated statements of income,
of changes in
stockholders' equity and cash flows included
in or incorporated by reference into the Buyer Reports
(including any related notes
and schedules) fairly presents in all material
respects the results of operations, retained earnings
and cash flows, as the
case may be, of Buyer and its consolidated
subsidiary for the periods set forth therein (subject,
in the case of unaudited
statements, to normal year-end audit
adjustments), in each case in accordance with GAAP
consistently applied during the periods
involved, except as may be noted therein.
Other than the Buyer Reports and the Annual Report on
Form 11-K relating to Buyer's
Retirement Savings Plan, Buyer has not filed
prior to the date hereof any definitive reports or
statements with the SEC since
January 1, 1998.
(b) Interim Financial Statements. Buyer has
delivered to Seller a consolidated balance sheet for
Buyer and its subsidiary at May
30, 1998, and the related consolidated
statement of operations for the period then ended.
Such interim financial statements
have been certified by the chief financial
officer of Buyer. All such interim financial
statements have been prepared in
conformity with GAAP applied on a consistent
basis with the audited financial statements for January
31, 1998 except for
changes, if any, required by GAAP and
disclosed therein. The statement of operations
presents fairly the
results of operations of Buyer for the period covered,
and the balance sheet presents
fairly the financial condition of Buyer as of
its date. All such interim financial statements
reflect all adjustments (which
consist only of normal recurring adjustments:
(i) not material in amount; or (ii) estimated
provisions for year-end adjustments)
necessary for a fair presentation. At the
date of such balance sheet, Buyer did not have any
material liability (actual,
contingent or accrued) that, in accordance
with GAAP applied on a consistent basis, should have
been shown or reflected therein but were not except for
the omission of notes with respect to contingent
liabilities that in the aggregate did not materially
exceed those so reported in the most recent of
the audited statements delivered and that were of
substantially the same type
as so reported.
5.8 Absence of Certain Changes.
Except as disclosed in the Buyer Reports or as
disclosed to Seller in writing on or prior to the date
hereof, since January
31, 1998, to the date hereof, Buyer and its
subsidiary have conducted their respective businesses
only in, and have not
engaged in any material transaction other than
in the ordinary and usual course of such business and
there has not been: (i)
any material adverse change in the financial
condition, cash flows, properties, businesses,
prospects or results of operations
of Buyer and its subsidiary taken as a whole
or any development or combination of developments of
which management of Buyer is
aware which is reasonably likely to result in
any such change; (ii) any change by Buyer in accounting
principles, practices or
methods, other than as disclosed in the Buyer
Reports; (iii) any declaration, setting aside or
payment of any dividend or other
distribution with respect to the capital stock
of Buyer; or (iv) any material revaluation by Buyer of
any of its assets. Neither
Buyer nor its subsidiary has any liabilities
required to be set forth on a balance sheet in
accordance with GAAP, except (i)
liabilities that are reflected or disclosed in
the financial statements referred to in Section 5.7
above, (ii) liabilities
incurred after May 30, 1998 in the ordinary
course of business and consistent in size and amount
with Buyer's prior experience
reflected in the Buyer Reports or (iii)
liabilities that are set forth on Schedule 5.8.
5.9 Issuance of 8% Subordinated Note.
The execution and delivery of the 8%
Subordinated Note will not violate the provisions of or
constitute a breach or default under any covenants of
Buyer in any existing loan agreement to which
Buyer is a party. The 8% Subordinated Note,
when executed and delivered to Seller hereunder, will
be a legally valid and
binding obligation of Buyer, enforceable
against Buyer in accordance with its terms except as
may be limited by bankruptcy,
insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to
or limiting creditors' rights
generally.
5.10 Accounting Records; Internal Controls.
(a) Accounting Records. Buyer has records
that accurately and validly reflect its transactions,
and accounting controls
sufficient to insure that such transactions
are (i) executed in accordance with management's
general or specific authorization
and (ii) recorded in conformity with GAAP so
as to maintain accountability for assets.
(b) Data Processing; Access. Such records,
to the extent they contain important information that
is not easily and readily
available elsewhere, have been duplicated, and
such duplicates are stored safely and securely.
ARTICLE VI
COVENANTS WITH RESPECT TO CONDUCT OF ECI,
SELLER
AND BUYER PRIOR TO CLOSING
6.1 Access.
ECI and Seller will authorize and permit Buyer
and its representatives (which term shall be deemed to
include its
independent accountants and counsel) to have
reasonable access during normal business hours, upon
reasonable notice and in such
manner as will not unreasonably interfere with
the conduct of its business, to all of its properties,
books, records, operating
instructions and procedures, Tax Returns,
surveys, plans and specifications, certificate(s) of
occupancy,
warranties, and all other information with respect to
the Business, the Purchased
Assets and the ECI Real Property as Buyer may
from time to time request, and to make copies of such
books, records and other
documents and to discuss its business with
such third Persons, including, without limitation, its
directors, officers,
employees, accountants, counsel, suppliers,
customers, and creditors, as Buyer considers necessary
or appropriate for the
purposes of familiarizing itself with the
Business, the Purchased Assets or the Assumed
Liabilities, obtaining any necessary
Approvals of or Permits for the transactions
contemplated by this Agreement and conducting an
evaluation of the organization and
Business of Seller. In addition, Seller will
authorize and permit Buyer and its representatives to
have reasonable access
during normal business hours, upon reasonable
notice and in such manner as will not unreasonably
interfere with the conduct of its
business to Seller's employees to enable Buyer
to determine which, if any, of the Terminated Employees
Buyer will offer employment.
6.2 Material Adverse Changes; Reports;
Financial Statements. (a) Seller will promptly notify
Buyer of any event of which ECI or Seller obtains
knowledge which has had or might reasonably be expected
to have a material adverse effect on the Business or
any
of the Purchased Assets or Assumed Liabilities
or which if known as of the date hereof would have been
required to be disclosed to
Buyer.
(b) Seller will furnish to Buyer (i) as soon
as available, and in any event within 10 days after it
is prepared, any report by
Seller for ECI or for submission to Seller's
board of directors and other operating or financial
reports (including any
projections and budgets) prepared for
management of any of their respective businesses,
together with any working papers related thereto, (ii)
as soon as available, copies of all portions of all
reports, renewals, filings, certificates,
statements and other documents filed with any
Governmental Entity, (iii) monthly and
quarterly unaudited balance sheets, statements
of operations and cash flow and changes in
stockholder's equity of Seller, and (v)
such other reports as Buyer may reasonably
request relating to Seller. Each of the financial
statements delivered pursuant to
this Section 6.2(b) shall be prepared in
accordance with GAAP, consistently applied, except that
such financial statements may
omit statements of changes in financial
position and footnote disclosures required by GAAP to
the extent the content thereof
would not materially differ from those
disclosures reported in the most recent audited period
and year-end adjustments to the
extent not material. Each of the financial
statements delivered pursuant to this Section 6.2(b)
shall be accompanied by a
certificate of the Chief Financial Officer of
Seller to the effect that such financial statements
present fairly the
financial condition and changes in equity and
results of operations and cash flow of Seller for the
periods covered and
reflect all adjustments (which consist only of
normal recurring adjustments not material in amount)
necessary for a fair
presentation.
(c) Buyer will promptly notify Seller of any
event of which Buyer obtains knowledge which has had or
might reasonably be
expected to have a material adverse effect on
the Buyer or which if known as of the date hereof would
have been required to be
disclosed to Seller.
6.3 Conduct of Business.
Seller will not, without the prior consent in
writing of Buyer:
(a) conduct the Business except in the
ordinary course consistent with past practices or
engage in any transaction out
of the usual and ordinary course of business;
or (b) amend, modify, terminate, renew or
renegotiate any Assumed Contract or Material Contract
or default (or take or omit to take
any action that with or without the giving of
notice or passage of time or both, would constitute a
default) in any of its
obligations under any Assumed Contract or
Material Contract or enter into any new Material
Contract or take any action that
would jeopardize the continuance of its
material supplier or customer relationships; or (c)
terminate or fail to renew any existing insurance
coverage;
or (d) terminate, amend or fail to renew or
preserve any Permits; or (e) incur or agree to incur
any obligation or liability
(absolute or contingent) that individually
calls for payment by Seller of more than $10,000 in any
specific case or $100,000 in
the aggregate, in each case excluding
purchases of merchandise which shall not exceed in cost
$50,000 in any
individual order or $5,000,000 in the aggregate; or (f)
make any loan, guaranty or other extension of credit,
or
enter into any commitment to make any loan,
guaranty or other extension of credit, to or for the
benefit of any Affiliate,
director, officer, employee, shareholder or
any of their respective Associates or Affiliates except
for customary
merchandise purchases using Seller's store
credit card; or (g) grant any increase in the rates of
pay or benefits to
officers, directors or employees (or a class
thereof) or any material increase in salary or benefits
of any officer, director,
employee or agent or pay any bonus to any
person, or enter into any new employment, collective
bargaining or severance agreement,
except that Seller may grant increases in the
rates of pay to non-managerial employees in the
ordinary course and consistent with
its past practice provided that any such
increase shall not exceed five percent (5%) in the case
of any individual employee;
or (h) sell, transfer, mortgage, encumber or
otherwise dispose of any assets or any liabilities,
including the Purchased Assets and Assumed Liabilities,
except, subject to
paragraph (q) below, (i) for dispositions of property
not material in amount, or (ii) in
the ordinary course of business or (iii) as
contemplated by this Agreement; or
(i) issue, sell, redeem or acquire for value,
or agree to do so, any debt obligations or Equity
Securities of Seller; or
(j) declare, issue, make or pay any dividend
or other distribution, whether consisting of money,
securities, other
personal property, real property or other
thing of value, to its shareholder, or split, combine,
dividend, distribute or
reclassify any shares of its Equity
Securities; or (k) change or amend any of its charter
documents or bylaws; or
(l) make any capital expenditures or
commitments with respect thereto aggregating more than
$20,000, except for necessary
repairs to existing equipment in an amount not
to exceed $50,000 in the aggregate; or
(m) make special or extraordinary payments to
any Person; or (n) make any material investment, by
purchase, contribution to
capital, property transfer, or otherwise, in
any other Person; or (o) dispose of or permit to lapse
any Intangible Property or any
rights to its use or disclosure any Intangible
Property not a matter of public knowledge; or
(p) compromise or otherwise settle any
claims, or adjust any assertion or claim of a
deficiency in Taxes, or file any appeal
from an asserted deficiency, except in a form
previously approved by Buyer in writing, or file or
amend any Tax Return, in any
matter that involves or may involve any of the
Assumed Liabilities or Purchased Assets, before
furnishing a copy to
Buyer and affording Buyer an opportunity to
consult with respect thereto; or
(q) notwithstanding anything in this
Agreement to the contrary, pay or provide anything of
value to satisfy, discharge or release any liability or
obligation that is an
Excluded Liability hereunder; provided, however, that
Seller may use its cash or
Revolving Credit Facility to pay, satisfy,
discharge or release any such liability or obligation
if ECI simultaneously
contributes an amount in cash equal to such
amount to Seller without any obligation of Seller to
repay such amount; or
(r) make any Tax election, change any method
or period of accounting or change any significant
accounting policy, practice
or procedure, or introduce any new method of
management or operation in respect of the Business; or
(s) fail to maintain or repair any Purchased Asset in
accordance
with reasonable and prudent maintenance and
repair procedures; or (t) engage in any transaction
with any Affiliate; provided,
however that Seller may perform its existing
obligations under those Contracts disclosed on Schedule
4.15 or 4.16; or
(u) agree to or make any commitment to take
any action that is or would be prohibited by this
Section 6.3.
6.4 Notification of Certain Matters.
ECI and Seller shall give prompt notice to
Buyer, and Buyer shall give prompt notice to ECI and
Seller, of (i) the occurrence, or
failure to occur, of any event that would be
likely to cause any of its representations or
warranties contained in this Agreement
to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to
the Closing Date and (ii) any
failure on its part to comply with or satisfy,
in any material respect, any covenant, condition or
agreement to be complied with
or satisfied by it under this Agreement. No
such notification shall affect the representations or
warranties of the parties or the conditions to their
respective obligations hereunder.
6.5 Subsequent Contracts; Termination
Notices.
(a) From the date of this Agreement to the
Closing Date, Seller agrees to use its best efforts to
include in each Contract
entered into subsequent to the date of this
Agreement ("Subsequent Contract") a provision
permitting the assignment of
any such Subsequent Contract to Buyer (which
shall only become an Assumed Contract hereunder with
Buyer's prior written consent
which may be withheld in Buyer's sole and
absolute discretion) and providing that upon such
assignment, Buyer shall succeed to
all of Seller's rights, title and interests
thereunder subject only to Buyer's express assumption
of all Seller's duties, powers
and obligations after the Closing Date under
such Subsequent Contract.
(b) From the date of this Agreement to the
Closing Date, Seller shall, upon Buyer's request, give
written notice to terminate any
of the Assumed Contracts listed on Schedule
1.1(a) that Buyer desires to be so terminated. Until
such Assumed Contracts are so
terminated Buyer agrees to honor the terms of
such contracts; provided that Buyer shall be obligated
to perform the obligations
under the Assumed Contracts relating to the
Downtown San Bernardino Store and the Distribution
Center only until January
31, 1999 and Seller shall remain obligated to
perform under such Contracts for any periods
thereafter.
6.6 Preservation of Business Prior to Closing
Date.
During the period beginning on the date hereof
and ending on the Closing Date, (a) Seller will use its
best efforts to preserve
the Business and to preserve the goodwill of
customers, suppliers and others having business
relations with Seller and (b) Seller
and Buyer will consult with each other
concerning, and Seller will cooperate to keep available
to Buyer, the services of the
officers and employees of Seller that Buyer
may wish to retain. Nothing in this Section shall
obligate Buyer after the Closing to
retain or offer employment to any officer or
employee of Seller.
6.7 Sales and Transfer Taxes.
Seller shall pay all real and personal
property transfer taxes, if any, and all sales, use and
other similar taxes, if any,
imposed on or in connection with the purchase,
sale or transfer of the Purchased Assets to, and the
assumption of the Assumed
Liabilities by, Seller pursuant to this
Agreement or on the use thereof by Buyer after the
Closing Date.
6.8 Certain Filings.
Buyer and ECI will each make any and all
filings required to be made on its part under the
Hart-Scott-Rodino Act and within one
week of the date of this Agreement, ECI and
Buyer shall make their respective initial filings under
such Act. ECI and Buyer
shall furnish each other such necessary
information and reasonable assistance as the other may
request in connection with
its preparation of necessary filings or
submissions under the provisions of such laws. ECI and
Buyer will supply each other
with copies of all correspondence, filings or
communications, including file memoranda evidencing
telephonic conferences, with
representatives of any Governmental Entity or
member of its staff, with respect to the transactions
contemplated by this
Agreement and any related or contemplated or
transactions, except for documents filed pursuant to
Item 4(c) of the Notification and
Report Form or communications regarding the
same. All documents required to be filed by ECI or any
Affiliate with any
Governmental Entity in connection with this
Agreement or the transactions contemplated by this
Agreement will comply in all
material respects with the provisions of
applicable Law.
6.9 Repair of Damage; Condemnation.
(a) In the event that prior to the Closing
there is any "Non-Material" (as defined in subsection
(e) hereof) damage to the
Purchased Assets, or any part thereof, at
Buyer's option, either (i) ECI shall at its cost and in
a good and workmanlike manner
repair or replace such damage prior to the
Closing, or (ii) Buyer shall accept such Purchased
Assets in their then-current
condition, and ECI shall promptly pay to Buyer
an amount necessary to fully repair and restore such
damaged Purchased
Assets, less (provided Buyer shall be entitled
to all such insurance proceeds) the amount of insurance
proceeds received by
Buyer with respect to such damage, and Buyer
and Seller shall proceed with the Closing.
(b) In the event that prior to the Closing
there is any "Non-Material" damage to ECI Real
Property, or any part thereof, at
Buyer's option either (i) ECI shall at its
cost and in a good and workmanlike manner repair or
replace such damage prior to the
Closing, or (ii) the New Lease applicable to
such property shall be modified (as reasonably
necessary) to expressly provide (A)
ECI's obligation to promptly repair or replace
such damage after the Closing, and (B) abatement of
Buyer's rental obligations
under such New Lease in proportion to the area
rendered unusable for the Business pending such repair
or replacement.
(c) In the event that prior to the Closing,
any Non-Material portion of the Purchased Assets is
subject to a taking, Buyer
shall accept the Purchased Assets in their
then-current condition and proceed with the Closing, in
which case Buyer shall be
entitled to an assignment of all of Seller's
rights to any award in connection with such taking. In
the event of any such Non-
Material taking, Seller shall not compromise,
settle or adjust any claims to such award without
Buyer's prior written consent.
(d) In the event that prior to the Closing,
any Non-Material portion of the ECI Property is subject
to a taking, Buyer shall
accept the Purchased Assets in their
then-current condition and proceed with the Closing, in
which case Buyer shall be entitled
to an assignment (from ECI or Seller, as
appropriate) of that portion of any award in connection
with such taking which Buyer
would be entitled to claim as lessee under the
terms of the applicable New Lease if such New Lease
were in effect on the date
of such taking. The provisions of the
applicable New Lease which
apply in the event of condemnation shall apply
with respect to such taking. In the event of any such
Non-Material taking,
neither ECI nor Seller shall compromise,
settle or adjust any claims to such award without
Buyer's prior written consent.
(e) For the purpose of this Section 6.9,
damage to the Purchased
Assets or a taking of a portion thereof shall
be deemed to be "Non-Material" if: (i) in the case of
inventory, the reasonably
estimated cost of restoration or repair of
such damage or the amount of the condemnation award
with respect of such taking
shall not exceed $5,000,000; and (ii) in the
case of any damage to a Purchased Asset, or any part
thereof, other than inventory,
the reasonably estimated cost of restoration
or repair of such damage shall not exceed $350,000 and
the restoration or repair of
such damage shall be completed within 90 days;
and (iii) in the case of a taking of any Purchased
Asset, or any part thereof,
other than inventory, the amount of the
condemnation award with respect of such taking shall
not exceed $350,000. Any damage or
cost of restoration or repair in excess of
such amounts or time periods shall be deemed to be
Material for the purposes of this
Section 6.9. (f) In the event that prior to the
Closing there is any Material
damage (as defined in subsection (e) above) to
the Purchased Assets, or any part thereof, or the ECI
Real Property, or any
part thereof, or a Material taking of the
Purchased Assets, or any part thereof, or the ECI
Property, or any part thereof, the
parties shall proceed with the Closing and
Seller shall indemnify and hold harmless Buyer from and
against any and all Losses of
Buyer, directly or indirectly, as a result of,
or based upon or arising from such damage or taking.
(g) Seller agrees to give Buyer prompt notice
of any taking, damage or destruction of the Purchased
Assets or the ECI Real
Property.
6.10 Listing Application.
Buyer shall prepare and submit to the NYSE and
the PSE listing applications covering the Buyer's
Shares, and shall use its best
efforts to obtain, prior to the Closing Date,
approval for the Buyer's Shares to be admitted to
trading on the NYSE and the PSE
upon official notice of issuance.
6.11 No Other Bids.
ECI shall not, either directly or indirectly,
through Seller or otherwise, and their respective
Affiliates, representatives and
agents shall not, initiate, solicit or
encourage any inquiry, offer or proposal with respect
to, any acquisition, merger,
tender or exchange offer or other form of
business combination, or any acquisition or disposition
of all or any substantial part
of the assets or the stock or other securities
of Seller. ECI will promptly notify buyer of the
details of any discussions with
or proposal or offer from any other Person
relating to an acquisition, merger, tender or exchange
offer or other form of
business combination involving Seller or any
of its securities or substantial assets or any other
proposal, the acceptance of which
would be inconsistent with the consummation of
this Agreement in accordance with its terms.
Compliance with this Section shall
not relieve ECI of any other express or
implied obligations under this Agreement or under
applicable Law.
6.12 Real Property and Leases.
(a) Seller shall not, without first obtaining
Buyer's consent, amend, modify, terminate, renew or
renegotiate any Acquired Lease
or the Distribution Center Lease or default
(or take or omit to take any action that with or
without the giving of notice or
passage of time or both, would constitute a
default) in any of its obligations under any Acquired
Lease or the Distribution
Center Lease or enter into any new Lease.
(b) Seller shall not exercise any option
provided under any Acquired Lease without first
obtaining Buyer's consent. If so
instructed by Buyer, Seller shall take actions
necessary to exercise or preserve Seller's rights under
any option provided in
any Acquired Lease.
(c) Buyer may (without obligation to do so)
negotiate for a new lease or a lease renewal with the
lessor under any Acquired Lease
which is scheduled to expire within twelve
months after the Closing Date, and Seller shall
cooperate with Buyer's efforts to
do so. (Buyer shall not bind Seller to any
new lease or lease renewal without Seller's consent,
which shall not be unreasonably
withheld.)
(d) Neither Seller nor ECI shall, without
first obtaining Buyer's consent, amend, modify,
terminate, renew or renegotiate
any Mall Agreement or default (or take or omit
to take any action that with or without the giving of
notice or passage of time or
both, would constitute a default) in any of
its obligations under any Mall Agreement or enter into
any new Mall Agreement.
(e) Seller and ECI shall maintain the Real
Property in reasonable and prudent condition and repair
(it being agreed that
the foregoing covenant does not alter Seller's
and ECI's agreement to allocate responsibility for such
maintenance between
them pursuant to the ECI Leases).
6.13 Revolving Credit Facility.
In order to assist Buyer in promptly having
Seller's inventory included in the "borrowing base"
under Buyer's revolving credit
facility as of the Closing and to allow Buyer
to repay Seller's Revolving Credit Facility as of the
Closing as provided in
Section 9.3(a) hereof, ECI and Seller shall
cooperate with, and use their best efforts to, assist
Buyer in the audit or
evaluation of the Purchased Assets by Buyer's
lender, including, but not limited to, providing Buyer,
its lender and their
respective representatives with access to the
Purchased Assets and the books and records relating
thereto.
ARTICLE VII
COVENANTS RELATING TO APPROVALS, ESTOPPELS,
SNDA'S AND PERMITS
7.1 Mutual Cooperation.
ECI, Seller and Buyer each agree to cooperate
and use their best efforts to obtain (and will
immediately prepare all registrations, filings and
applications, requests and notices
preliminary to obtaining all) Approvals and
Permits required to be obtained by such party pursuant
to the terms of this Agreement
that may be necessary or that may be
reasonably requested by the other party to consummate
the transactions contemplated by this Agreement.
7.2 Third Party Approvals.
To the extent that the Approval of a third
party (including without limitation, any lessor under
an Acquired Lease, any party
to a Mall Agreement or any mortgagee of, or
party holding a security interest in, any Leased
Property or ECI Real Property)
or any Permit is required in connection with
the transactions contemplated by this Agreement
(including without limitation, any
change in the name under which the Business is
conducted), Seller or ECI (as appropriate) shall use
its best efforts to obtain such
Approval prior to the Closing Date.
7.3 Estoppel Certificates.
(a) Seller and ECI shall use their best
efforts to obtain, prior to Closing Date, executed
lessor estoppel certificates, in the
form of Exhibit P hereto, and executed
landlord agreements, in the form of Exhibit S hereto,
from each lessor under any Acquired
Lease.
(b) Seller and ECI shall use their best
efforts to obtain, prior to Closing Date, executed
estoppel certificates, in the form of
Exhibit Q hereto, from each Person which is a
party to a Mall Agreement (other than Seller or ECI),
with respect to each Mall
Agreement to which such Person is a party.
7.4 SNDA's.
Seller and ECI shall use their best efforts to
obtain, prior to Closing Date, executed SNDA's with
respect to all Acquired Leases
and the New Leases executed by the Person
holding the subject Encumbrance and the lessor under
the subject lease (if required
by the form of SNDA).
7.5 Certificates of Occupancy.
Seller and ECI shall use their best efforts to
obtain and furnish to Buyer any and all certificate(s)
of occupancy or similar
documents required from any Governmental
Entity in connection with Buyer's possession of the
Real Property under the New Leases
and the Acquired Leases.
7.6 Failure to Obtain Approvals, Permits,
Estoppels or SNDA's Prior to Closing.
If Seller or ECI fails to obtain any of the
items described in this Article VII prior to the
Closing, Seller and ECI shall
continue to use their best efforts to obtain
and provide to Buyer as soon as possible following the
Closing all such Approvals,
Permits estoppel certificates, SNDA's and
certificates of occupancy in the form required by this
Article VII.
ARTICLE VIII
ADDITIONAL CONTINUING COVENANTS
8.1 Noncompetition.
(a) Restrictions on Competitive Activities.
ECI and Seller agree that, after the Closing, Buyer
shall be entitled to the
goodwill and going concern value of the
Business and to protect and preserve the same to the
maximum extent permitted by law.
ECI and Seller also acknowledge that in light
of the experience and understanding of ECI and Seller
of the Business and ECI's
future representation on Buyer's Board of
Directors, it would be unfair for ECI or Seller to
compete with Buyer and that ECI's and Seller's
management contributions to the
Business have been uniquely valuable and involve
proprietary information that would
be competitively unfair to make available to
any competitor of the Business. For these and other
reasons and as an inducement
to Buyer to enter into this Agreement, ECI and
Seller agree that for a period ending on the earlier
of: (i) five years after the
Closing; and (ii) approval by the Board of
Directors of Buyer (without ECI's, or its Affiliates'
approval) of a Covered
Transaction (as such term is defined in the
Standstill Agreement) ECI and Seller will not, directly
or indirectly, for their 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 in the case of Seller, allow its
name or reputation to be used in
or by any other present or future business
enterprise that competes with Buyer in activities
similar to the Business as of
the Closing Date (i) in the counties of Los
Angeles, Orange, Riverside, Kern, San Bernardino,
Imperial, and San Diego in which
Buyer now operates; (ii) in the state of
California; and (iii) in the states of Arizona,
Colorado, Idaho, Montana, Nevada, New
Mexico, Oklahoma, Oregon, Texas, Utah,
Washington or Wyoming. (b) Exceptions. Nothing
contained herein shall limit the right
of ECI or Seller, 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
ECI's and Seller's combined equity interest therein
together with any of their
Affiliates does not equal or exceed 5% of the
outstanding shares or interests in such corporation or
partnership.
(c) Special Remedies and Enforcement. ECI
and Seller recognize and agree that a breach by ECI or
Seller of any of the covenants
set forth in this Section 8.1 could (and
likely would) cause irreparable harm to Buyer, that
Buyer's remedies at law in the
event of such breach may be difficult to
ascertain with sufficient certainty and accordingly
that Buyer's remedies at law
in the event of such breach would be
inadequate, and that, accordingly, in the event of such
breach a restraining order or
injunction or both may be issued against
Seller, in addition to any other rights and remedies
which are available to Buyer. If
this Section 8.1 is more restrictive than
permitted by the Laws of any jurisdiction in which
Buyer seeks enforcement hereof, this
Section 8.1 shall be limited to the extent
required to permit enforcement under such Laws. In
particular, the parties intend
that the covenants contained in the preceding
portions of this Section 8.1 shall be construed as a
series of separate covenants,
one for each county and/or state specified.
Except for geographic coverage, each such separate
covenant shall be deemed
identical in terms. If, it is determined in
any judicial proceeding, that any of the separate
covenants deemed included in
this paragraph may not be enforced, then such
unenforceable covenant shall be deemed eliminated from
these provisions for the
purpose of those proceedings to the extent
necessary to permit the remaining separate covenants to
be enforced.
(d) Tax Allocation. For income tax purposes
only, Buyer and Seller agree that $100,000 of the
purchase price under this Agreement shall be allocated
to the covenants in this Section 8.1.
8.2 Nondisclosure of Proprietary Data.
None of ECI, Seller nor any of their
respective representatives shall, except as required by
law, at any time, make use of,
divulge or otherwise disclose, directly or
indirectly, any trade secret or other proprietary data
(including, but not limited to, any customer list,
record or financial
information) concerning the Business or the business or
policies of Seller related to the
Business that ECI or Seller or any
representative of ECI or Seller may have learned as an
owner or a shareholder, employee, officer or director
of the Business. In addition, none of ECI, Seller nor
any of their respective representatives shall make use
of, divulge or otherwise disclose, directly or
indirectly, to persons other than Buyer, any
confidential information concerning
the Business that may have been learned in any
such capacity.
8.3 Tax Cooperation.
After the Closing, Seller shall, and shall
cause its Affiliates to, cooperate fully with Buyer in
the preparation of all Tax
Returns and shall provide, or cause to be
provided at Seller's sole cost and expense, to Buyer
any records and other information
requested by such parties in connection
therewith as well as access to, and the cooperation of,
the Auditors of Seller and its
Affiliates. After the Closing, Seller shall,
and shall cause its Affiliates to, cooperate fully with
Buyer in connection with any
Tax investigation, audit or other proceeding
relating to the Business. Any information obtained
pursuant to this Section 8.3
or pursuant to any other Section hereof
providing for the sharing of information or the review
of any Tax Return or other Schedule
relating to Taxes shall be subject to Section
12.9.
8.4 Employment Matters.
(a) Employees. Seller shall terminate all of
its employees as of the Closing (the "Terminated
Employees") except for those
employees identified in writing by Buyer that
are to be leased from Seller to Buyer after the Closing
(the "Leased Employees")
and those employees to be retained by Seller
that will continue to provide services to Seller after
the Closing that are
identified in writing by Seller at least two
days prior to the Closing Date (the "Retained
Employees") (it being understood that
Seller shall not retain any employee that
Buyer notifies Seller of its desire to employ at least
three days prior to the Closing
Date). As of the Closing Date, Buyer may, at
its option, offer employment to any Terminated Employee
on such terms and
conditions as Buyer may determine in its sole
and absolute discretion. Seller shall use its best
efforts to assist Buyer in
hiring any Terminated Employees with respect
to whom Buyer elects to offer employment. Seller shall
not take any action, directly
or indirectly, to prevent or discourage any
such Terminated Employee from being employed by Buyer
as of the Closing Date and
shall not solicit, invite, induce or entice
any such Terminated Employee to remain in the employ of
Seller or its Affiliates or
otherwise attempt to retain the services of
any such Terminated Employee, except with the prior
written consent of Buyer. Seller
agrees to consult with Buyer on all material
oral or written communications or meetings primarily
regarding future employment
with the Terminated Employees or the Leased
Employees.
(b) Payment of Pre-Closing Employee Benefits.
Seller shall be responsible for and promptly pay all
obligations for compensation, wages, bonuses, vacation
time, pay in lieu of
vacation, sickness and accident benefits,
leaves of absence, and similar employee benefits
provided by Seller for the period prior to the Closing
Date.
(c) Severance Obligations.
(i) Fully-Reimbursed Severance Amounts.
Subject to subsection (vi) below, with respect to those
Terminated Employees
working at the store-level (other than
store-level employees located at the San Bernardino
Store) to whom Buyer has not
offered employment (the "Group A Employees"),
Buyer shall reimburse Seller for all severance
obligations paid or owed to
such employees by Seller pursuant to the
severance policies (the "Severance Amounts").
(ii) Allocated Severance Amounts.
Subject to subsection (vi) below, with respect to all
employees of Seller other than
the Group A Employees (the "Group B
Employees"), Buyer and Seller will share the cost of
all of Seller's Severance Amounts, the
cost of any Retention Bonuses (as defined
below) and the cost of any Initial WARN Liability to
employees to whom Buyer has not
offered employment, as follows: (A) Buyer
shall bear the first $1.353 million of Severance
Amounts, Retention Bonuses and
Initial WARN Liability and 50% of any
Severance Amounts, Retention Bonuses and Initial WARN
Liability above $1.353
million; and (B) Seller shall bear only 50% of
such Severance Amounts, Retention Bonuses and Initial
WARN Liability above
$1.353 million.
(iii) Retention Bonuses. Buyer may
hire certain of the Terminated Employees immediately
following the Closing (the
"Hired Employees"). Certain of such Hired
Employees Buyer may hire for only a temporary period of
time following the Closing
(the "Temporary Employees"). Buyer may offer
retention bonuses to such Temporary Employees in order
to encourage them to remain
in the employ of Buyer for the period Buyer
desires. Any such Retention Bonuses shall be in an
amount equal to the amount of
severance that such Hired Employee would have
received from Seller pursuant to the Severance Policies
had such Hired Employee
not been hired by Buyer immediately following
the Closing.
(iv) Employee Lease Agreement. Seller shall
retain and lease to Buyer the Leased Employees pursuant
to the terms of the Employee
Lease Agreement. Provided that the Leased
Employees remain in the employ of Seller and are leased
to Buyer up until the time
Buyer no longer desires such Leased Employees'
services, Severance Amounts paid to such Leased
Employees shall be included
in the amounts allocated between Buyer and
Seller pursuant to paragraph (c)(ii) above.
(v) Procedures for
Reimbursement.
(A) Accounting. Prior to
the time at which the first Severance Amounts are to be
paid to the Terminated
Employees, Seller shall provide Buyer with a
written notice setting forth a detailed accounting of
the Severance Amounts for
which Seller believes it should be reimbursed
by Buyer pursuant to this paragraph (c) with respect to
such Terminated Employees
(including the names of all employees, the
amount of the severance paid or to be paid to such
employee, the date on which
such severance was paid or is to be paid and a
statement to the effect that such amounts were paid or
are to be paid pursuant to
the Severance Policies and are the subject of
proper reimbursement pursuant to this Agreement (each a
"Reimbursement
Notice"). To the extent that Seller desires
to be reimbursed for such amounts prior to the payment
to employees, Seller shall
provide Buyer with the Reimbursement Notice at
least three business days prior to payment by Seller.
Buyer shall promptly review the Reimbursement Notice,
and, subject to subsection (C)
below, not later than one business day prior
to such scheduled payment, pay to Seller the amount set
forth in the Reimbursement
Notice.
(B) Subsequent
Accounting. If further Severance Amounts become due
and owing to Buyer as a result of
the termination of Leased Employees, Seller
shall provide Buyer with a Reimbursement Notice with
respect to such Severance
Amounts. To the extent that Seller desires to
be reimbursed for such amounts prior to the payment to
employees, Seller shall
provide Buyer with the Reimbursement Notice at
least three business days prior to payment by Seller.
Buyer shall promptly review the Reimbursement Notice,
and, subject to subsection (C)
below, not later than one business day prior
to such scheduled payment, pay to Seller the amount set
forth in the Reimbursement
Notice. If Seller is required to pay
additional compensation to any terminated employee as a
result of its failure to timely
comply or provide notices under WARN, Seller
shall promptly provide Buyer with a written notice
setting forth a detailed
accounting of such liability for which Seller
believes it should be reimbursed by Buyer pursuant to
this Section (each a "WARN
Notice")at least three business days prior to
any payment thereof by Seller. If Buyer has paid any
Retention Bonuses pursuant to
subsection (iii) above, Buyer shall, on a
monthly basis, provide Seller with a written notice of
the names of all employees to
whom a payment was made, the amount of the
Retention Bonuses paid and a statement to the effect
that such amounts are the
subject of inclusion as a Retention Bonus
pursuant to the Agreement.
(C) Objections to
Reimbursement Notices and WARN Notices. If Buyer
believes in good faith that any
amount set forth in a Reimbursement Notice or
a WARN Notice is not due and owing to Seller pursuant
to this Agreement, either
because such amount is improper, or because,
with respect to Reimbursement Notices, Buyer has paid
Retention Bonuses that
pursuant to subject (iii) above shall reduce
the amount owing by Buyer to Seller, Buyer shall pay to
Seller the amount it believes
is proper and at the same time provide Seller
with written notice of any objections or differences in
amount.
If, with respect to Reimbursement Notices, as a result
of paying Retention Bonuses,
the amounts reimbursed by Buyer to Seller and
the amounts paid pursuant to the Retention Bonuses
exceeds the total amount for
which Buyer is responsible pursuant to
subsection (ii), Seller shall promptly pay to Buyer any
amount of overpayment. Buyer and
Seller shall endeavor to resolve by written
agreement any differences with respect to amounts to be
paid pursuant to this
paragraph (c). In the event the parties are
not able to resolve any differences within 10 days,
then the parties shall seek to
resolve such dispute pursuant to the dispute
resolution mechanisms set forth in this Agreement.
(vi) Reimbursement Limitations.
Notwithstanding anything in this
Agreement to the contrary: (A) Buyer shall
only be required to reimburse Seller for amounts paid
or owed by Seller pursuant to
the Severance Policies and for liabilities of
Seller for Seller's failure to timely provide notices
under WARN as provided
for in this Section 8.4; (B) Buyer shall have
no liability or obligation whatsoever to pay or
reimburse Seller for any
severance amounts paid or owed by Seller to
any Terminated Employee that is offered employment by
Buyer following the
Closing (where, in the case of any individual
Terminated Employee other than Louis Horvitz, such
offer of employment does not
require any such Terminated Employee to
relocate); (C) Buyer shall have liability or obligation
whatsoever with respect to any
severance obligation paid or owed by Seller to
any Leased Employee that does not remain in the employ
of Seller and leased
to Buyer until Buyer no longer desires such
Leased Employee's services pursuant to the Employee
Lease Agreement; and (D) Buyer
shall have no liability or obligation
whatsoever with respect to any severance obligation
paid or owed by Seller to any Retained Employee of
Seller that is terminated after January 30, 1999.
(d) Cooperation and Records. ECI and Seller
will provide Buyer with access to and copies of
personnel files, grievance and
arbitration files, health and safety files,
negotiation files, and the availability of and access
to Seller's labor relations
personnel for information and advice regarding
arbitrations and negotiating history with respect to
all Terminated Employees of
Seller that are hired by Buyer.
(e) Worker Adjustment and Retraining
Notification (WARN). Not later than one day after the
date hereof, Seller shall provide
proper notice under WARN to all of its
employees. If Seller provides the notice required by
WARN as provided herein, the
parties acknowledge and agree that any Initial
WARN Liability shall be allocated between Buyer and
Seller as set forth in
Section 8.4(c)(ii) above and that, if Seller
is required to pay additional compensation to any
terminated employee as a result of
Seller's failure to provide notices within the
time periods specified by WARN in excess of the Initial
WARN Liability, Buyer
shall promptly reimburse Seller for 50% of any
such additional compensation; provided, however, that
Buyer shall reimburse
Seller for 100% of any compensation required
to be paid to Group A Employees as a result of Seller's
failure to provide notices
within the time periods specified by WARN.
(f) No Third Party Beneficiaries.
Notwithstanding any possible
inferences to the contrary, none of ECI,
Seller or Buyer intends for this Section 8.4 to create
any rights or obligations except
as among ECI, Seller and Buyer, and no past,
present or future employees of Seller or Buyer shall be
treated as third-party
beneficiaries of this Section 8.4.
8.5 Auditor's Consent.
ECI and Seller shall use their best efforts to
cause Auditors to provide any and all consents
necessary in connection with filing
the Auditors' report on the financial
statements of Seller in any documents filed by Buyer
with the SEC.
8.6 San Bernardino Store.
Buyer shall operate Seller's store located in
downtown San Bernardino (the "Downtown San Bernardino
Store") until January
31, 1999, or such longer period as the parties
hereto may agree, if Buyer and ECI secure Buyer's
release, to the satisfaction of
Buyer, from an existing lease clause
restricting Buyer from directly or indirectly operating
the Downtown San Bernardino
Store. Buyer and ECI shall use commercially
reasonable efforts to secure such release. If Buyer
operates the Downtown San
Bernardino store pursuant to this Section 8.6,
Buyer will enter into a lease of such facility in the
form of Exhibit G hereto.
8.7 Point of Sale Equipment; ECI Software.
(a) The parties acknowledge that Seller's
sales transactions using its existing point of sale
equipment are processed through
ECI's mainframe computer location in Spain.
ECI acknowledges that Buyer may, at Buyer's option,
continue to use ECI's existing
point of sale equipment after the Closing. In
connection therewith, ECI agrees that it shall, at
Buyer's option, provide
Buyer through December 15, 1998 (i) the same
point of sale processing capabilities (using ECI's
mainframe computer located
in Spain) for Buyer's point of sale
transactions relating to the
Business as ECI provided to Seller prior to
the date hereof at no cost to Buyer; and (ii) maintain
in San Bernardino and provide to
Buyer the services of those employees of ECI
listed on Schedule 8.7 hereto (the "Designated MIS
Employees") at no cost to Buyer
to assist Buyer in operating the mainframe
computer and related programs through such period;
provided, however, that ECI shall
not be required to pay for or maintain any
other employees at the Downtown San Bernardino Store
for such purposes.
(b) The parties acknowledge and agree that
the software owned by ECI listed on Schedule 4.15 is an
Excluded Asset as provided in
Section 2.1(b)(x). However, ECI agrees to
provide Buyer with a royalty-free license to allow
Buyer to continue to use all
software owned by ECI and currently used by
Seller through December 15, 1998.
8.8 ECI Cooperation.
If requested by Buyer, ECI agrees to cooperate
with and assist Buyer in purchasing merchandise at
prices obtained by ECI,
including having ECI's merchandise buyers and
other employees cooperate with Buyer's personnel.
8.9 Buyer SEC Reports.
For five years after the date of Closing,
Buyer agrees to promptly provide ECI with copies of all
statements, reports and
documents filed by Buyer under the Exchange
Act and the rules and regulations thereunder.
8.10 Letters of Credit.
Seller agrees that it shall keep outstanding
its letters of credit listed on Schedule 4.4 (the
"Letters of Credit") until the
current expiration of such Letters of Credit.
Buyer agrees to pay any fees incurred by Seller after
the Closing that are
required to maintain such Letters of Credit
until their expiration date and to indemnify Seller
with respect to any draws
on such Letters of Credit between the Closing
and the termination of such Letters of Credit.
8.11 San Bernardino Offices.
Following the Closing, those Retained
Employees of Seller listed on Schedule 8.11 hereto
shall be entitled to have access to
office space in the Buyer's offices at the
Downtown San Bernardino Store until no later than
January 30, 1999. Such
Retained Employees may enter such premises
only during Buyer's normal business hours at such
location and shall abide by all of
Buyer's policies, rules and regulations
relating to such location.
ARTILE IX
CONDITIONS OF PURCHASE
9.1 General Conditions.
The obligations of the parties to effect the
Closing shall be subject to the following conditions
unless waived in writing by
all parties:
(a) No Orders; Legal Proceedings. No Law or
Order shall have been enacted, entered, issued,
promulgated or enforced by any
Governmental Entity, nor shall any Action have
been instituted and remain pending or, to the best
knowledge of any party have
been threatened and remain so by any
Governmental Entity at what would otherwise be the
Closing Date, that prohibits or restricts
or would (if successful) prohibit or restrict
the transactions contemplated by this Agreement or
(with respect to obligations of
Buyer only) which would not permit the
Business as presently conducted to continue unimpaired
following the Closing Date. No
Governmental Entity shall have notified any
party to this Agreement that consummation of the
transactions contemplated by
this Agreement would constitute a violation of
any Laws of any jurisdiction and/or that it intends to
commence proceedings to
restrain or prohibit such transactions or
force divestiture or rescission, unless such
Governmental Entity shall have withdrawn
such notice and abandoned any such proceedings
prior to the scheduled Closing.
(b) Approvals. To the extent required by
applicable Law, all Permits and Approvals required to
be obtained from any
Governmental Entity shall have been received
or obtained on or prior to the Closing Date without the
imposition of any burdens
or conditions materially adverse to the party
or parties entitled to the benefit thereof and any
applicable waiting period under
the Hart-Scott-Rodino Act shall have expired
or been terminated.
9.2 Conditions to Obligations of Buyer.
The obligations of Buyer to effect the Closing
shall be subject to the following conditions except to
the extent waived in writing by Buyer:
(a) Representations and Warranties and
Covenants of ECI and Seller. The representations and
warranties of
ECI and Seller herein contained shall be true at the
Closing Date with the same
effect as though made at such time, ECI and
Seller shall have in all material respects performed
all obligations and complied with
all covenants and conditions required by this
Agreement to be performed or complied with by them at
or prior to the Closing
Date, and ECI and Seller shall have delivered
to Buyer certificates of ECI and Seller in form and
substance satisfactory
to Buyer, dated the Closing Date and signed by
the Chief Executive Officer and Chief Financial Officer
of ECI and Seller
to such effect.
(b) No Material Adverse Change. There shall
not have been any material adverse change in or
affecting the Business, or Seller
or any of the Purchased Assets or Assumed
Liabilities subsequent to January 31, 1998.
(c) Listing Application. Buyer shall have
obtained approval of its NYSE and PSE listing
applications covering the Buyer's
Shares.
(d) Opinion of Counsel. Buyer shall receive
at the Closing from McPeters, McAlearney, Shimoff &
Hatt, counsel to ECI and Seller,
an opinion dated the Closing Date, in form and
substance as set forth in Exhibit T hereto.
(e) Consents. Seller, ECI and Buyer shall
have obtained all Approvals and Permits required by
Law.
(f) Seller Investment Letter. Buyer shall
have received from Seller an Investment Letter, in the
form of Exhibit V hereto.
(g) Related Agreements.
(i) ECI shall have executed
and delivered to Buyer the Standstill Agreement, the
Stockholders' Agreement and,
the New Leases.
(ii) Seller shall have executed
and delivered to Buyer the Registration Rights
Agreement, the Distribution Center
Sublease, the Tradename License Agreement and
the Employee Lease Agreement.
(h) Opinion of Spanish Counsel. Buyer shall
receive at the Closing from outside Spanish counsel to
ECI, an opinion dated the
Closing Date, in form and substance as set
forth in Exhibit W hereto.
(i) Certified Resolutions. Buyer shall have
received copies of the resolutions of ECI and Seller
approving this Agreement and
the transactions contemplated hereby and the
transactions certified as of the Closing Date by the
Chief Executive Officer
or Secretary of ECI and Seller, respectively.
9.3 Conditions to Obligations of Seller.
The obligations of ECI and Seller to effect
the Closing shall be subject to the following
conditions, except to the extent waived
in writing by ECI or Seller:
(a) Representations and Warranties and
Covenants of Buyer. The representations and warranties
of Buyer herein contained shall be
true at the Closing Date with the same effect
as though made at such time; Buyer shall have in all
material respects performed
all obligations and complied with all
covenants and conditions
required by this Agreement to be performed or
complied with by them at or prior to the Closing Date,
and Buyer shall have
delivered to Seller certificates of Buyer in
form and substance satisfactory to Seller, dated the
Closing Date and signed by
Chief Executive Officer and Chief Financial
Officer of Buyer, to such effect.
(b) No Material Adverse Change. There shall
not have been any Material Adverse Change in or
affecting Buyer subsequent to
January 31, 1998.
(c) Opinion of Counsel. Seller shall receive
at the Closing from O'Melveny & Myers LLP, counsel to
Buyer, an opinion dated
the Closing Date, in form and substance as set
forth in Exhibit X hereto.
(d) Listing. The Buyer's Shares shall have
been approved for listing on the NYSE.
(e) Related Agreements.
(i) Buyer shall have executed
and delivered to ECI the Stockholders' Agreement and
the New Leases.
(ii) Buyer shall have executed
and delivered to Seller the Registration Rights
Agreement and the Distribution
Center Sublease.
(f) Certified Resolutions. Seller shall have
received a copy of the resolutions of Buyer approving
this Agreement and the
transactions contemplated hereby, certified as
of the Closing Date by the Chief Execute Officer or
Secretary of Buyer.
(g) Revolving Credit Facility.
Simultaneously with the Closing, Buyer shall repay
Seller's outstanding obligations under the Revolving
Credit Facility and Seller shall
deliver UCC-3 Termination Statements evidencing the
release of the liens of
Bank of America with respect to the Revolving
Credit Facility.
ARTICLE X
TERMINATION OF OBLIGATIONS; SURVIVAL
10.1 Termination of Agreement.
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this
Agreement shall terminate at the close of business on
August 24, 1998 unless extended by mutual consent in
writing of Buyer, ECI and Seller
and may otherwise be terminated at any time
before the Closing as follows and in no other manner:
(a) Mutual Consent. By mutual consent in
writing of Buyer, ECI and Seller.
(b) Conditions to Buyer's Performance Not
Met. By Buyer upon written notice to ECI or Seller if
any event occurs which would
render impossible the satisfaction of one or
more conditions to the obligations of Buyer to
consummate the transactions
contemplated by this Agreement as set forth in
Section 9.1 or 9.2.
(c) Conditions to Seller's Performance Not
Met. By ECI and Seller upon written notice to Buyer if
any event occurs which
would render impossible the satisfaction of
one or more conditions to the obligation of Seller to
consummate the
transactions contemplated by this Agreement as
set forth in Section 9.1 or 9.3.
(d) Material Breach. By Buyer on the one
hand or ECI or Seller on the other hand if there has
been a material misrepresentation
or material breach on the part of the other
party in its representations, warranties or covenants
set forth herein.
(e) Withheld Information; Pursuit of Other
Offers. By Buyer, if Seller shall under Section 6.1
withhold material information
requested by Buyer in writing or deny access
to Buyer in any material respect or if Seller solicits,
encourages, initiates or
negotiates any other sale or combination of
the Business or any substantial part thereof.
10.2 Effect of Termination.
In the event that this Agreement shall be
terminated pursuant to Section 10.1, all further
obligations of the parties under this
Agreement shall terminate without further
liability of any party to another; provided that the
obligations of the parties
contained in Section 12.9 [Confidentiality],
Section 12.13 [Expenses] and Section 12.15 [Attorney's
Fees] shall survive any
such termination. A termination under Section
10.1 shall not relieve any party of any liability for a
breach of, or for any
misrepresentation under this Agreement, or be
deemed to constitute a waiver of any available remedy
(including specific performance if available) for any
such breach
or misrepresentation.
10.3 Survival of Representations and
Warranties.
The representations and warranties contained
in or made pursuant to this Agreement shall expire on
the second anniversary of the
Closing except that (i) the representations
and warranties contained in Sections 4.1 [Organization
and Related Matters], 4.7
[Authorization; No Conflicts], 4.18 [No
Brokers or Finders], 4.24
[Environmental Compliance], 5.1 [Organization
and Related Matters], 5.4 [No Brokers or Finders],
Section 6.7 [Sales and
Transfer Taxes], and 6.9 [Repair of Damage;
Condemnation] shall survive the Closing and shall
remain in full force and effect
indefinitely, (ii) the representations and
warranties contained in Section 4.3 [Tax and Other
Returns and Reports] shall continue
through the expiration of the applicable
statute of limitations (or, if a claim has been
asserted prior to such expiration, until
after the date of its final resolution), (iii)
the agreements made in this Section 10.3 and Sections
8.1 [Noncompetition], 11.1
[Indemnity Obligations of ECI and Seller],
11.2 [Special Indemnity Obligations of Seller and ECI],
11.3 [Obligations of
Buyer],11.4 [Certain Tax Matters] and 12.4
[Governing Law] and Article XIII [Arbitration] shall
survive indefinitely, unless
otherwise stated therein, and (iv) if a claim
or notice is given under Article XI [Indemnification]
with respect to any
representation or warranty prior to the
applicable expiration date, such representation or
warranty shall
continue indefinitely until the applicable claim is
finally resolved.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnity Obligations of ECI and Seller.
ECI and Seller agree to indemnify and hold
harmless Buyer, and its directors, officers, employees,
affiliates, agents and
assigns (each a "Buyer Indemnified Party" and
collectively, the "Buyer Indemnified Parties") from and
against any and all Losses
of Buyer, directly or indirectly, as a result
of, or based upon or arising from:
(a) any inaccuracy in or breach or
nonperformance of any of the
representations or warranties made by ECI or
Seller in or pursuant to this Agreement; or
(b) any breach or nonperformance of any of
the covenants or agreements made by ECI or Seller in or
pursuant to this
Agreement; or (c) any matter arising from or related
to any Excluded Liability
or Excluded Asset; or (d) any liability or obligation
of Seller or any of its
Affiliates not expressly assumed by Buyer
pursuant to Section 2.2(b) hereof; or
(e) any other matter as to which ECI or
Seller in other provisions of this Agreement has agreed
to indemnify Buyer; or
(f) any third party claims or demands in
respect of the Business (or regarding the conduct of
the Business) prior to the Closing
that are asserted after the Closing.
11.2 Special Indemnity Obligations of Seller
and ECI.
(a) ECI and Seller agree to indemnify and
hold harmless the Buyer Indemnified Parties from and
against any and all Losses of
Buyer (other than indirect or consequential
damages or lost profits of Buyer due to Buyer's
inability to operate any of the
Acquired Locations for which ECI and Seller
agree to indemnify the Buyer Indemnified Parties
pursuant to paragraph (b) below)
directly or indirectly, as a result of, or
based upon or arising from:
(i) Seller's or ECI's failure
to obtain any of the Approvals, Permits, estoppels,
SNDA's, certificates of
occupancy or other items described in Article
VII (such that Buyer shall be placed in the same
position Buyer would have been
if had such Approvals, Permits, estoppels,
SNDA's certificates of occupancy or other items
described in Article VII been obtained
prior to the Closing); or
(ii) any Encumbrance on the
Real Property other than the Permitted Exceptions (such
that Buyer shall be placed in
the same position Buyer would have been in if
such Encumbrance did not exist).
(b) If Seller or ECI fails to obtain any of
the Approvals, Permits, estoppels, SNDA's, certificates
of occupancy or other
items described in Article VII or there is any
Encumbrance on the Real Property other than the
Permitted Exceptions, in addition to
any Loss for which Seller and ECI are required
to indemnify the Buyer Indemnified Parties pursuant to
paragraph (a) of this
Section 11.2, the parties agree that if Buyer
is at any time prevented from operating any of the
Acquired Locations in the
ordinary course, Seller and ECI shall pay to
Buyer as liquidated damages (in lieu of lost profits
arising from Buyer's inability
to operate an Acquired Location) the amount
set forth on Schedule 11.2 for each of the Acquired
Locations that Buyer is prevented
from operating in the ordinary course. The
parties further acknowledge and agree that such amounts
are not penalties but the
parties' good faith estimate of the lost
future profits of Buyer as a result of such inability
to operate an Acquired Location and
are not in lieu of actual damages for not
being able to operate an Acquired Location (including,
but not limited to such actual
damages as severance obligations paid to
employees terminated as a result of the inability to
operate a store,
the cost of moving merchandise, inventories and
fixtures out of such locations,
claims of third parties for breach of contract
or tortious interference etc.) for which Seller and ECI
are required to
indemnify the Buyer Indemnified Parties
pursuant to paragraph (a) of this Section
11.2.
11.3 Obligations of Buyer.
Buyer agrees to indemnify and hold harmless,
ECI and Seller (each a "Seller Indemnified Party" and
collectively, the "Seller
Indemnified Parties") from and against any and
all Losses of ECI or Seller, directly or indirectly, as
a result of, or based upon
or arising from:
(a) any inaccuracy in or breach or
nonperformance of any of the
representations or warranties made by Buyer in
or pursuant to this Agreement; or
(b) any breach or nonperformance of any of
the covenants or agreements made by Buyer pursuant to
this Agreement; or
(c) any other matter as to which Buyer in
other provisions of this Agreement has agreed to
indemnify ECI and Seller.
11.4 Certain Tax Matters.
(a) ECI and Seller Indemnity. ECI and Seller
agree to indemnify, defend and hold harmless Buyer
against (i) any Tax
payable by or on behalf of Seller or any of
its Affiliates, (ii) any deficiencies in any Tax
payable by or on behalf of Seller or
any of its Affiliates with respect to any
period ending (or treated by this Agreement as ending)
on or prior to the Closing
Date, (iii) Taxes of any member of a
consolidated or combined tax group of which Seller or
any of its Affiliates
is, or was at any time, a member, for which Buyer is
jointly or severally liable as
a result of Seller's or any Subsidiary's
inclusion in such group,
(iv) any claim or demand for reimbursement or
indemnification resulting from any transfer by Seller
or any Subsidiary prior to
the Closing to any other person of any Tax
benefits or credits attributable to the Business, the
Purchased Assets or the Assumed
Liabilities, (v) any Tax liability arising
out of the transfer of the Purchased Assets, or
assumption of the Assumed
Liabilities, and (vi) with respect to any
Taxes payable by Buyer with respect to the operation of
the Business and the ownership
of the Purchased Assets (other than Buyer's
income or franchise taxes) due for periods commencing
on or prior to and ending after
the Closing Date (whether or not assessed
prior to the Closing Date), a pro-rata share of such
Taxes, calculated as if the
period ended on the Closing Date.
(b) Audit Matters. Seller shall have the
responsibility for, and the right to control, at
Seller's expense, the audit (and
disposition thereof) of any Tax Return
relating to periods ending
on or prior to the Closing Date and shall have
the right to participate in and approve the disposition
of the audit of any
Tax Return relating to the periods ending
after the Closing Date if and to the extent that such
audit or disposition thereof could
give rise to a claim for indemnification
hereunder. Buyer shall have the right directly or
through its designated
representatives, to review in advance and
comment upon all submissions made in the course of
audits or appeals thereof to
any Governmental Entity relating to periods
ending (or treated by this Agreement as ending) on or
prior to the
Closing Date and to approve the disposition of any
audit adjustment with respect to
such periods if such disposition will or might
reasonably be expected to result in an increase in
Taxes of
Buyer for any period beginning at or after the Closing.
11.5 Limitations on Indemnification.
(a) Seller and ECI shall not be required to
indemnify a Buyer Indemnified Party under Section
11.1(a) unless the aggregate of
all amounts for which indemnity would
otherwise be payable to the
Buyer Indemnified Parties thereunder exceeds
$400,000, in which case Seller and ECI shall be
responsible for all Losses,
including amounts under $400,000. The
indemnity obligations of
Seller and ECI under Section 11.1(a) shall be
limited, in the aggregate, to $40 million; provided,
however, that if ECI or
Seller shall be found to have committed an
intentional misrepresentation, the limitations on
indemnification under this
paragraph (a) shall be ignored.
(b) Buyer shall not be required to indemnify
a Seller Indemnified Party under Section 11.3(a) unless
the aggregate of
all amounts for which indemnity would
otherwise be payable to the
Seller Indemnified Parties thereunder exceeds
$400,000, in which case Buyer shall be responsible for
all Losses, including amounts
under $400,000. The indemnity obligations of
Buyer under Section 11.3(a) shall be limited, in the
aggregate, to $40 million;
provided, however, that if Buyer shall be
found to have committed an intentional
misrepresentation, the limitations on
indemnification under this paragraph (b) shall
be ignored.
11.6 Procedure.
(a) Notice. Any party seeking
indemnification (an "Indemnified
Party") with respect to any Loss shall give
notice thereof to the
party required to provide indemnity hereunder
(the "Indemnifying Party"). The Indemnifying Party
shall promptly respond in
writing to the Indemnified Party and, if not a
third party claim, either admit such claim and make
prompt payment thereof or
dispute such claim.
(b) Defense. If any claim, demand or
liability is asserted by
any third party against any Indemnified Party,
the Indemnifying Party shall upon the written request
of the Indemnified Party,
defend any action or proceeding brought
against the Indemnified
Party in respect of matters embraced by the
indemnity with counsel satisfactory to the Indemnified
Party but the Indemnified
Party shall have the right to conduct and
control the defense, compromise or settlement of any
Indemnifiable Claim if the
Indemnified Party chooses to do so, on behalf
of and for the account and risk of the Indemnifying
Party who
shall be bound by the result so obtained to the extent
provided herein. If, after
a request to defend any action or proceeding,
the Indemnifying Party neglects or refuses to defend
the Indemnified Party, a
recovery against the latter suffered by it in
good faith, is conclusive in its favor against the
Indemnifying Party, provided
however that, if the Indemnifying Party has
not received reasonable notice of the action or
proceeding against the
Indemnified Party, or is not allowed to
control its defense, judgment against the Indemnified
Party is only presumptive
evidence against the Indemnifying Party. The
parties shall cooperate in the defense of all third
party claims which may give
rise to Indemnifiable Claims hereunder. In
connection with the defense of any claim, each party
shall make available to the
party controlling such defense, any books,
records or other documents within its control that are
reasonably requested in the
course of such defense.
11.7 Survival.
This Article XI shall survive any termination
of this Agreement.
11.8 Notice by ECI and Seller.
ECI and Seller agree to notify Buyer of any
liabilities, claims or misrepresentations, breaches or
other matters covered by this
Article XI upon discovery or receipt of notice
thereof (other than from Buyer), whether before or
after Closing.
11.9 Not Exclusive Remedy.
This Article XI shall not be deemed to
preclude or otherwise limit in any way the exercise of
any other rights or pursuit of
other remedies for the breach of this
Agreement or with respect
to any misrepresentation.
11.10 Offset.
At the time any payment is due from Buyer to
ECI or Seller under this Agreement or any related
agreement, Buyer shall have the
right, in addition to other rights and
remedies (whether under this Agreement or applicable
Law), to withhold
from such payment an amount equal to the amount of any
Undisputed Claim.
11.11 Prejudgment Interest.
In the event a claim for indemnification is
made hereunder and such claim is disputed by the
Indemnifying Party, if it is
finally determined (by agreement among the
parties or by arbitration as provided in Article XII)
that such claim is an
Indemnifiable Claim hereunder, the Indemnified
Party shall be entitled to receive the amount of such
claim, together with
interest at 10% per annum from the date such
claim was made on the Indemnifying Party until paid.
ARTICLE XII
GENERAL
12.1 Amendments; Waivers.
This Agreement and any schedule or exhibit
attached hereto 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.
12.2 Schedules; Exhibits; Integration.
Each schedule and exhibit delivered pursuant
to the terms of this Agreement shall be in writing and
shall constitute a part of this
Agreement, although schedules need not be
attached to each copy of this Agreement. This
Agreement, together with such schedules
and exhibits, constitutes the entire agreement
among the parties pertaining to the subject matter
hereof and supersedes all prior
agreements and understandings of the parties
in connection therewith, including, but not limited to,
the letter of intent
dated July 3, 1997, between ECI and Buyer and
any term sheet subsequent thereto.
12.3 Best Efforts; Further Assurances.
(a) Standard. Each party will use its best
efforts to cause all conditions to its obligations
hereunder to be timely satisfied
and to perform and fulfill all obligations on
its part to be performed and fulfilled under this
Agreement, to the end that the
transactions contemplated by this Agreement
shall be effected substantially in accordance with its
terms as soon as feasible.
The parties shall cooperate with each other in
such actions and in securing requisite Approvals. Each
party shall execute and
deliver both before and after the Closing such
further certificates, agreements and other documents
and take such other
actions as may be necessary or appropriate to
consummate or implement the transactions contemplated
hereby or to evidence
such events or matters.
(b) Limitation. As used in this Agreement,
the term "best efforts" shall not mean efforts which
require the performing
party to do any act that is unreasonable under
the circumstances, to make any capital contribution or
to expend
any funds other than in payment of reasonable
out-of-pocket expenses incurred in
satisfying obligations hereunder, including
but not limited to the fees, expenses and disbursements
of its accountants,
actuaries, counsel and other professional
advisers.
12.4 Governing Law.
This Agreement, the legal relations between
the parties and any Action, 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
Agreement, including but not limited to the
negotiation, execution, interpretation,
coverage, scope, performance, breach,
termination, validity, or enforceability of this
Agreement, 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 State of Delaware, the jurisdiction of
incorporation of the Buyer.
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 11.12 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
11.12; 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 11.12. 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.
12.5 No Assignment.
Neither this Agreement nor any rights or
obligations under any of them are assignable.
12.6 Headings.
The descriptive headings of the articles,
sections and subsections of this Agreement are for
convenience only and do not
constitute a part of this Agreement.
12.7 Counterparts.
This Agreement and any amendment hereto or any
other agreement (or document) delivered pursuant hereto
may be executed in one or
more counterparts and by different parties in
separate counterparts. All of such counterparts shall
constitute one and
the same agreement (or other document) and
shall become effective (unless otherwise therein
provided) when one or more counterparts have been
signed by each party and delivered to the other party.
12.8 Publicity and Reports.
ECI, Seller and Buyer shall coordinate all
publicity relating to the transactions contemplated by
this Agreement, and no party
shall issue any press release, publicity
statement or other public notice relating to this
Agreement, or the transactions
contemplated by this Agreement, without
obtaining the prior consent of the other party except
to the extent that a particular
action is required by applicable Law. Seller
shall obtain the prior consent of Buyer to the form and
content of any application
or report made to any Governmental Entity that
relates or refers to this Agreement.
12.9 Confidentiality.
All information disclosed in writing and
designated in writing as confidential by any party (or
its representatives) whether before
or after the date hereof, in connection with
the transactions contemplated by, or the discussions
and negotiations preceding,
this Agreement to any other party (or its
representatives) shall be kept confidential by such
other party and its representatives
and shall not be used by any Persons other
than as contemplated by this Agreement, except to the
extent that such information (i)
was known by the recipient when received, (ii)
it is or hereafter becomes lawfully obtainable from
other sources, (iii) is
necessary or appropriate to disclose to a
Governmental Entity having jurisdiction over the
parties, (iv) as may otherwise be
required by law or (v) to the extent such duty
as to confidentiality is waived in writing by the other
party. If this
Agreement is terminated, each party shall use
all reasonable efforts to return upon written request
from the other party all
documents (and reproductions thereof) received
by it or its representatives from such other party
(and, in the case of
reproductions, all such reproductions made by
the receiving party) that include information not
within the exceptions
contained in the first sentence of this
Section 11.9, unless the
recipients provide assurances reasonably
satisfactory to the requesting party that such
documents have been destroyed.
12.10 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.
12.11 Performance by Subsidiaries.
Each party agrees to cause its Subsidiaries to
comply with any obligations hereunder relating to such
Subsidiaries and to cause
its Subsidiaries to take any other action
which may be necessary or reasonably requested by the
other party in order to consummate
the transactions contemplated by this
Agreement.
12.12 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:
If to Buyer, addressed to:
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Attn: General Counsel
Facsimile: (209) 434-4666
With a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attn: D. Stephen Antion, Esq.
Facsimile: (213) 430-6407
If to ECI or Seller, addressed to:
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
or to such other address or to such other
person as either party shall have last designated by
such notice to
the other party.
12.13 Expenses.
Each of ECI and Buyer shall pay its own
expenses incident to the negotiation, preparation and
performance of
this Agreement, the transactions contemplated hereby
and any agreements contemplated
hereby, including but not limited to the fees,
expenses and disbursements of its investment bankers,
accountants and counsel
and of securing third party consents and
approvals required to be
obtained by it. Seller's expenses shall be
paid by ECI.
Seller shall pay any documentary transfer tax,
real property transfer or gains tax, document recording
fees and charges, and
any income, franchise or revenue tax or excise
tax (and any surtax thereon) due in connection with the
consummation of the
transactions contemplated by this Agreement.
Buyer shall pay the filing fee imposed on
Buyer as a result of its Hart-Scott Rodino filing and
ECI shall pay the filing fee
imposed on ECI as a result of its Hart-Scott
Rodino filing.
12.14 Remedies; Waiver.
Subject to Article XII, all rights and
remedies existing under
this Agreement and any related agreements or
documents are cumulative to, and not exclusive of, any
rights or remedies
otherwise available under applicable Law. No
failure on the part of any party to exercise or delay
in exercising any right
hereunder shall be deemed a waiver thereof,
nor shall any single
or partial exercise preclude any further or
other exercise of such or any other right.
12.15 Attorney's Fees.
In the event of any Action by any party
arising under or out of, in connection with or in
respect of, this Agreement and the
transactions contemplated hereby, the
prevailing party shall be entitled to reasonable
attorney's fees, costs
and expenses incurred in such Action in addition to
pre-judgment interest on
the amount of any monetary award calculated at
10% per annum from the date the claim was made on the
other party. Attorney's fees
incurred in enforcing any judgement 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.
12.16 Knowledge Convention.
Whenever any statement herein or in any
schedule, exhibit, certificate or other documents
delivered to any party pursuant to
this Agreement is made "to [its] knowledge" or
"to [its] best knowledge" or words of similar intent or
effect of any party or
its representative, such person shall make
such statement only after conducting a diligent
investigation of the subject matter
thereof, and each statement shall be deemed to
include a representation that such investigation has
been conducted.
12.17 Representation By Counsel;
Interpretation.
ECI, Seller and Buyer each acknowledge that
each party to this Agreement has been represented by
counsel in connection with this
Agreement and the transactions contemplated by
this Agreement.
Accordingly, any rule of Law, including but
not limited to Section 1654 of the California Civil
Code, or any legal decision
that would require interpretation of any
claimed ambiguities in this Agreement against the party
that drafted it has no
application and is expressly waived.
12.18 Specific Performance.
ECI, Seller and Buyer each acknowledge that,
in view of the uniqueness of the Business and the
transactions 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.
12.19 Severability.
If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by
any Governmental
Entity, the remaining provisions of this Agreement
shall remain in full force
and effect provided that the economic and
legal substance of the transactions contemplated is not
affected in
any manner materially adverse to any party. In event
of any such determination, the parties agree to
negotiate in good faith to
modify this Agreement to fulfill as closely as
possible the original intents and purposes hereof.
12.20 Currency; Withholding.
Any monetary amounts to be paid or delivered
under this Agreement or any transactions in connection
herewith shall be payable in
U.S. dollars. If and to the extent
withholding is necessary under the Code or any other
applicable Law with respect to any
payment obligations due from Buyer to Seller
or ECI under this Agreement or any related agreement by
virtue of ECI's foreign
status, Buyer may withhold such amounts as it
reasonably deems necessary under the Code or any other
applicable Law.
12.21 Force Majeure.
Notwithstanding any other provisions of this
Agreement, Buyer shall not be required to purchase or
pay for any assets and Buyer
may terminate this Agreement or may delay
payment for assets, if prior to the Closing Date any of
the following conditions exist
or shall have occurred and, at the time Buyer
gives notice to Seller of Buyer's intent to invoke this
provision, shall be
continuing: (i) any general suspension of
trading in, or limitation on prices for, securities on
the NYSE, (ii) a
declaration of a banking moratorium by federal
or state authorities or any suspension of payments in
respect of banks in
the United States, (iii) any material
limitation (whether or not
mandatory) imposed by any federal or state
authority on the extension of credit by lending
institutions in the United States,
or (iv) a decline of at least 25% in the Dow
Jones Industrial Average or the Standard & Poor's 500
Index as measured from the
close of business on the date on which this
Agreement is signed, (v) any material disruption or
material adverse change in the
financial or capital markets generally or (vi)
any other occurrence or circumstance beyond the
reasonable control of Buyer
or occurring without negligence on the part of
Buyer (including but not limited to sudden actions of
the elements, actions by any
Governmental Entity, epidemic, riot,
unavailability of resources
due to national defense priorities, delays
resulting from the failure of a third party to perform
any related matter which such
third party is required to perform, strikes,
walkouts, major accidents, flood, drought, earthquake,
storm, fire, pestilence,
lightning, volcanic eruption, or other natural
catastrophe or civil disturbance) that renders
materially more burdensome the
obligations, or materially less valuable the
rights, of Buyer hereunder.
ARTICLE XIII
ARBITRATION OF DISPUTES
13.1 Agreement to Arbitrate.
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 Article XIII 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
ECI and/or Seller, on the one hand, and Buyer,
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 party's
rights to specific performance pursuant to Section
8.1(c) or 12.18 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.
13.2 Choice of Law.
Proceedings under and the provisions of this
Article XIII shall be subject to Section 12.4 of this
Agreement.
13.3 Place of Arbitration.
Any arbitration proceedings hereunder shall be
held in Los Angeles, California.
13.4 Judgment.
Judgment upon any award rendered by the
arbitrator(s) may be entered by any court having
jurisdiction thereof.
IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be executed by its
duly authorized officers as of
the day and year first above written.
GOTTSCHALKS INC.
By: \s\ JAMES FAMALETTE
Its: PRESIDENT
By: \s\ ALAN WEINSTEIN
Its: SENIOR VP/CFO
THE HARRIS COMPANY
By: \s\ LOPOLDO DEL NOGAL
Its: PRESIDENT AND CEO
By: \s\ JORGE PONT
Its: DIRECTOR
EL CORTE INGLES, S.A.
By: \s\ CARLOS MARTINEZ ECHAVARRIA
Its: EXECUTIVE DIRECTOR
NON-NEGOTIABLE, EXTENDABLE,
SUBORDINATED NOTE DUE _________, 2003
$22,217,598.00 Fresno, California
__________ __, 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 Two Hundred Seventeen
Thousand Five Hundred Ninety-Eight
Dollars ($22,217,598.00) 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 __________ and __________ 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
__________, 2003 [fifth anniversary of Closing] (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 _________, 2006 (the "Extended
Maturity Date") [eighth
anniversary of Closing] 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
_____________________ [location
designated by Seller] 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.
By:
Name:
Title:
EXHIBIT B
FORM OF DISTRIBUTION CENTER SUBLEASE
636 South G Street
San Bernardino, California
THIS SUBLEASE (this "Sublease") is entered
into as of _______________, 1998, by and between THE
HARRIS COMPANY, a
California corporation ("Sublessor"), and
GOTTSCHALKS INC., a Delaware corporation ("Sublessee").
R E C I T A L S
A. Sublessor is the "Tenant" under the lease
described on Schedule 1 hereto (the "Lease"). The
following (collectively, "Landlord") comprise the
"Landlord" under the
Lease: (i) West 38th Street Partnership, a Colorado
general partnership, as to an
undivided 50% interest; (ii) Tennyson
Investments, L.P., a Utah limited partnership, as to an
undivided 45% interest; and (iii)
Herrick Johnson and Eileen M. Johnson, husband
and wife, as joint tenants, as to an undivided 5%
interest. The Lease covers
certain premises located at 636 South G
Street, San Bernardino, California, as more
particularly described in the Lease (the
"Premises").
B. In conjunction with the transactions
contemplated by that certain Asset Purchase Agreement
(the "Asset Purchase
Agreement"), dated as of July 21, 1998, among
Sublessor, Sublessee, and El Corte Ingles, S.A., a
Spanish corporation, Sublessee wishes to sublease from
Sublessor the Premises covered by the Lease, on the
terms described herein.
NOW, THEREFORE, for good and valuable
consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Sublessee hereby
subleases the entire Premises from Sublessor upon the
following terms:
1. Term. The initial term of this Sublease
shall commence on the Closing Date (as such term is
defined in the Asset Purchase
Agreement), and shall expire on January 30,
1999 (the "Sublease Term").
2. Rent and other Charges. Sublessee shall
pay directly to Landlord (or to Sublessor, if so
instructed by Sublessor) base
rent, at the same monthly rate as the base
rent specified in the Lease, on the first day of each
month of the Sublease Term.
Sublessee shall be responsible for paying for
all utilities used in or in connection with the
Premises. In addition, Sublessee
shall pay directly to Landlord (or to
Sublessor, if so instructed by Sublessor) all other
charges due under the Lease as and when
such sums shall become due and payable under
the terms of the Lease. All rent and other charges due
under this Sublease shall
be prorated, based upon a 30-day month, for
any partial month during the Sublease Term. Any
payments made by Sublessee to
Landlord shall be deemed the equivalent of
payments of such sums to Sublessor.
3. Obligations of Sublessee.
a. Sublessee shall perform all of the
obligations, and shall have all of the rights, of
Sublessor under the Lease to the
extent applicable to the Sublease Term as if
Sublessee were the tenant under the Lease and Sublessor
were the landlord under the
Lease; provided, however, that Sublessee shall
have no obligation to perform obligations under the
Lease which are inconsistent
with this Sublease. Sublessor shall perform
all Lease obligations which are not assumed by
Sublessee hereunder.
b. In the event Sublessee fails to comply
with the terms of this Sublease, Sublessor, after
giving Sublessee five days
written notice and an opportunity to cure,
shall be entitled to all of the remedies granted to
Landlord in the Lease, together
with any other rights Sublessor might
otherwise have under applicable law.
c. Sublessee will indemnify, defend, and
hold harmless Sublessor against any loss, liability,
and expense (including
reasonable attorney's fees and costs) arising
out of any default under the Lease caused by a default
by Sublessee under this
Sublease, and Sublessor will indemnify,
defend, and hold harmless
Sublessee against any loss, liability, and
expense (including reasonable attorney's fees and
costs) arising out of any default
under the Lease caused by Sublessor.
d. Sublessee shall perform routine
maintenance to the Premises and its systems, as
necessary to maintain them in good operating condition,
but shall have no obligation to perform capital
repairs or improvements of any kind to the
Premises or to its systems (except to the extent of
damages caused by Sublessee).
4. Representations of Sublessor.
a. Sublessor represents and warrants that
the Lease is in good standing and that Sublessor has,
to the best of its knowledge,
complied with all of its obligations under the
Lease through the date hereof. So long as Sublessee is
not in default hereunder,
Sublessor shall make all rental and other
payments required by the Lease.
b. Sublessor hereby represents and warrants
that all of Sublessor's representations and warranties
contained in the Asset
Purchase Agreement (specifically including,
without limitation, those representations and
warranties in Sections 4.5(c) through
4.5(k), 4.8, 4.10 through 4.12, and 4.24) are
true, accurate and complete as of the date hereof,
insofar as such representations
and warranties are applicable to the Lease and
the Premises. All such representations and warranties
are hereby incorporated by
reference into this Sublease as if set forth
in full herein.
5. Insurance. During the Sublease Term,
Sublessee shall carry all insurance required to be
carried by the Tenant under the
terms of the Lease.
6. Severability. If any term, covenant, or
provision of this Sublease is held by a court of
competent jurisdiction to be void,
invalid or unenforceable, the remainder of the
provisions shall continue in full force and effect and
shall in no way be
affected, impaired or invalidated.
7. Assigns. This Sublease shall inure to
the benefit of and be binding upon the successors and
assigns of the
parties hereto, subject to the restrictions on transfer
set forth in the Lease.
8. Entire Agreement. This Sublease and the
Asset Purchase Agreement set forth the entire agreement
between the parties with
respect to the subject matter hereof; no other
agreements or negotiations, whether oral or written,
shall affect this
Sublease. Any amendment to this Sublease must
be in writing and signed by the parties.
9. Attorneys' Fees. Section 12.15 of the
Asset Purchase Agreement is hereby incorporated by
reference
into this Sublease as if set forth in full herein.
10. Counterparts. This Sublease may be
executed in counterparts, each of which shall be deemed
to be an original,
and all of which together shall constitute one
document.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, Sublessor and Sublessee
have caused this Sublease to be executed by their duly
authorized representatives
as of the date stated above.
Sublessor:
THE HARRIS COMPANY,
a California corporation
By:_________________________________
Name:
Title:
Sublessee:
GOTTSCHALKS INC.,
a Delaware corporation
By: _________________________________
Name:
Title:
LANDLORD CONSENT
Landlord, by its signature below, hereby
consents to the foregoing Sublease, provided such
consent shall not relieve
Sublessor of any of its liability under the
Lease, nor shall this consent be deemed consent to any
further subletting or assignment thereunder.
WEST 38TH STREET PARTNERSHIP,
A Colorado general partnership
By:_________________________________
Name:
Title:
TENNYSON INVESTMENTS, L.P.,
a Utah limited partnership
By:_________________________________
Name:
Title:
HERRICK JOHNSON
_________________________________
EILEEN M. JOHNSON
_________________________________
SCHEDULE 1
Description of Lease
1. Lease, effective as of April 1, 1998,
between Kevin J. Waddell (as landlord) and The Harris
Company (as tenant);
2. First Amendment to Lease, effective as of
May 8, 1998, among Kevin J. Waddell (as former
landlord), Aquarius Partners, LLC (as
new landlord) and The Harris Company (as
tenant);
3. Assignment of Lease with Lease Assignment
Acceptance and Assumption, dated June 10, 1998, among
Aquarius Partners, LLC (as
assignor) and West 38th Street Partnership, a
Colorado general partnership, as to an undivided 50%
interest; Tennyson
Investments, L.P., a Utah limited partnership,
as to an undivided 45% interest; and Herrick Johnson
and Eileen M. Johnson, husband
and wife, as joint tenants, as to an undivided
5% interest (as assignees).
EXHIBIT C
FORM OF LEASE ASSIGNMENT AND ASSUMPTION
AGREEMENT
PREPARED BY AND
RETURN TO WHEN RECORDED:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93729
Attn: Warren L. Williams, Esq.
______________________________________________
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
(this "Assignment") is dated as of
_________________, 1998, and is
entered into by and between THE HARRIS
COMPANY, a California corporation ("Assignor"), and
GOTTSCHALKS INC., a Delaware
corporation ("Assignee").
R E C I T A L S
A. Assignor is currently the lessee under
the lease described on Schedule 1 hereto (the "Lease"),
whereby Assignor leases
certain premises, more particularly described
in the Lease, located in the [name of
shopping center] ,
[city] , California.
B. In conjunction with the transactions
contemplated by that certain Asset Purchase Agreement
(the "Asset Purchase
Agreement"), dated as of July 21, 1998, among
Assignor, Assignee, and El Corte Ingles, S.A., a
Spanish corporation, Assignor wishes
to assign to Assignee all right, title and
interest of Assignor
under the Lease, and Assignee wishes to assume
all obligations of Assignor under the Lease.
NOW, THEREFORE, for good and valuable
consideration, the receipt
and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns to
Assignee all right, title and interest of Assignor in,
to and under the Lease and the
rights and premises covered thereby, subject
to the terms and provisions of the Asset Purchase
Agreement, TO HAVE AND TO HOLD
the same unto Assignee and to its successors
and assigns forever.
2. Assumption. Assignee hereby accepts the
foregoing assignment and agrees to assume and perform
all obligations of
Assignor under the Lease, subject to the terms
and provisions of the Asset Purchase Agreement. From
and after the date of this
Assignment, Assignee will be the lessee under
the Lease for all purposes.
3. Counterparts. This Assignment may be
executed in counterparts, each of which shall be deemed
an original, but all
of which when taken together shall constitute
one and the same instrument.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, Assignor and Assignee have
caused this Assignment to be executed by their duly
authorized representatives as of the date stated above.
Assignor:
THE HARRIS COMPANY,
a California corporation
By:_________________________________
Name:
Title:
Assignee:
GOTTSCHALKS INC.,
a Delaware corporation
By:_________________________________
Name:
Title:
State of California )
) SS.
County of ____________________ )
On ______________________, 1998 before me,
___________________________, personally
appeared
______________________________________,
personally known to me
(or proved to me on the basis of satisfactory
evidence) to be the
person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________
(Seal)
State of California )
) SS.
County of ____________________ )
On ______________________, 1998 before me,
___________________________, personally
appeared
______________________________________,
personally known to me
(or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are
subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the
person(s)
acted, executed the
instrument.
WITNESS my hand and official seal.
Signature ________________________________
(Seal)
SCHEDULE 1
Description of Lease
[Insert description of Lease]
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES,
as "Landlord"
and
GOTTSCHALKS INC,
as "Tenant"
Dated as of __________, 1998
East Hills Mall, Bakersfield, California
STORE LEASE AGREEMENT
East Hills Mall, Bakersfield, California
THIS STORE LEASE AGREEMENT (this
"Lease"), made as of this ___ day of ___________, 1998,
by and between EL CORTE
INGLES, S.A., a Spanish corporation, having an
address at Hermosilla, 112, 28009 Madrid SPAIN,
Attention: _______________
("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
(defined below).
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 I.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 mean-ing 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, side-walks, 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.
"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 inter-est 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, part-nership, corporation, business trust,
joint stock compa-ny, trust, unincor-porated
association, joint venture,
governmental authority or other entity of whatever
na-ture.
"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, Per-centage 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 feder-al, state and local statutes, laws,
ordinances, rules, regulations, autho-
rizations and requirements relating to the
Premises or the use thereof, including, without
limitation, planning, zoning, subdi-
vision, environmental, toxic and hazardous
waste, health, fire safety and handi-cap access and all
encumbrances, covenants,
conditions and restrictions, violation of
which encumbrances, cove-nants, 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 300 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 commenc-ing on the Term Commencement Date and
expiring on __________, 2007
[INSERT TERMINATION DATE FOR INITIAL 10-YEAR
TERM], 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 Terms(s).
"Term Commencement Date":
_______________ ___, 1998.
"Unavoidable Delays" shall
have the meaning ascribed thereto in Section 13.4.
Section I.2 Effect of Basic
Terms. Each of the fore-going 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 II.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 II.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
cove-nants 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 peace-fully 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 II.3 Surrender of
Premises. Upon the expiraion 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, 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 obliga-tions and condi-tions
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 ex-pended such
amounts.
Section II.4 Holding Over. If not
sooner terminated, this Lease shall end on the date set
forth 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, re-mains 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 there-from 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 III.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 III.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
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 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 IV.1 Minimum Annual Rent.
Tenant agrees to pay to Landlord as rental for the
Premises the sum of
_____________________ Dollars ($__________)
per Lease Year [INSERT AMOUNT EQUAL TO 3% OF ACTUAL
1997 GROSS SALES PER LETTER
OF BUSINESS TERMS] (the "Minimum Annual
Rent"), payable in advance in equal monthly
installments
of_____________________________________________________
Dollars ($_________), 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 IV.2 Percentage Rent.
(a) Formula for Calculation.
In addition to Minimum Annual Rent, Tenant covenants
and agrees to pay to Land-
lord 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
state-ment (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 accurate-ly 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 accepted accounting practices
consis-tently applied for all
operations of the business con-ducted 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 expira-tion of
the Term or earlier termination
of this Lease.
(d) Review of Books and
Records. The acceptance by Landlord of pay-ments 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 pre-ceding the day of
the giving of such notice by Landlord to Tenant.
Landlord or its duly authorized
representa-tives 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
neces-sary 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 Percent-age Rent with, interest thereon
calculated at the Inter-est 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 IV.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or respective utilities companies for all
required utility services
to the Pre-mises. 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 IV.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 letter thereunder. Tenant shall pay Common
Area Maintenance charges as
referenced herein within thirty (30) days
after Tenant has received a bill therefor.
Section IV.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 addition-al 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 accom-
plish 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 deter-
mination 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 IV.6 Late Payment Charges.
Late pay-ments 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 IV.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 at
_______________________________________________, 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 V.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 V.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 V.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 V.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 to the officers, directors,
employees and agents of Tenant's subtenants,
concessionaires and licensees, and to 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 V.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 V.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, provided that (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 V.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
Tenant's said default,
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 VI.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 Repai 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 VI.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 VII.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 VII.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 awarded 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 of 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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XII.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 XII.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 XII.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 XII.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 XIII.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 o r
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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 incorpora-
tion 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 desig-nates and ap-points 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 effect-ive 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 per-mitted 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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.19 Attachments.
Attached hereto and made a
part of this Lease are the following:
Exhibits A-G, inclusive.
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:_______________________
Its:____________________
By:_______________________
Its:____________________
TENANT:
GOTTSCHALKS INC.
By: _______________________
Its:____________________
By: _______________________
Its:____________________
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
SITE PLAN 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 _________, 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
_____________, 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
__________ and expiring on ____________, 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 Memo-randum
as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By:
Its:
TENANT:
GOTTSCHALKS INC.
By:
Its:
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:
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 5
Section 2.1 Grant and Term of Lease 5
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 11
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 13
Section 5.5 Compliance with REA 14
Section 5.6 Compliance with
Requirements 15
Section 5.7 Liens 15
ARTICLE VI
REPAIRS AND MAINTENANCE 16
Section 6.1 Tenant's Obligations 16
Section 6.2 Landlord's Obligations 17
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION 17
Section 7.1 Damage or Destruction 17
Section 7.2 Condemnation 19
ARTICLE VIII
INSURANCE 20
Section 8.1 Tenant's Insurance 20
Section 8.2 Landlord's Insurance 22
Section 8.3 Waiver of Subrogation 22
Section 8.4 Governmental and
Insurance Requirements 22
Section 8.5 Indemnification 23
Section 8.6 Landlord Exculpation 23
ARTICLE IX
ASSIGNMENT AND SUBLETTING 24
Section 9.1 Notice to Landlord 24
Section 9.2 Landlord's Approval 24
Section 9.3 Permitted Transactions 25
Section 9.4 Compliance with REA 25
Section 9.5 Documentation and
Expenses 25
ARTICLE X
DEFAULT 26
Section 10.1 Events of Default 26
Section 10.2 Remedies 27
Section 10.3 Attorneys' Fees 29
Section 10.4 Agreement to Arbitrate 29
Section 10.5 No Set-off/
Counterclaims 30
Section 10.6 Right of Redemption 30
Section 10.7 No Waiver 30
Section 10.8 Unperformed Covenants
of Landlord May Be
Performed By Tenant 31
ARTICLE XI
[INTENTIONALLY OMITTED] 31
ARTICLE XII
OPTIONS 31
Section 12.1 Renewal Options 31
Section 12.2 Lease Terms Applicable 31
Section 12.3 Rent During Renewal
Terms 32
Section 12.4 Lease Amendment 32
ARTICLE XIII
MISCELLANEOUS PROVISIONS 33
Section 13.1 Notices 33
Section 13.2 Brokers 33
Section 13.3 Subordination of Lease 33
Section 13.4 Unavoidable Delays 34
Section 13.5 Estoppel Certificates 34
Section 13.6 Relationship of
Parties 34
Section 13.7 Governing Law;
Jurisdiction 35
Section 13.8 Interpretation 35
Section 13.9 Captions 36
Section 13.10 Partial Invalidity 36
Section 13.11 Waivers 36
Section 13.12 Accord and
Satisfaction 36
Section 13.13 Counterparts 36
Section 13.14 Entire Agreement 36
Section 13.15 Successors and Assigns 37
Section 13.16 Survival of
Obligations 37
Section 13.17 Submission of Lease 37
Section 13.18 Memorandum of Lease 37
Section 13.19 Attachments 37
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING
CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C SITE PLAN 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
by and between
EL CORTE INGLES,
as "Landlord"
and
GOTTSCHALKS INC,
as "Tenant"
Dated as of __________, 1998
Antelope Valley Mall
Palmdale, California
STORE LEASE AGREEMENT
Antelope Valley Mall
Palmdale, California
THIS STORE LEASE AGREEMENT (this
"Lease"), made as of this ___ day of ___________, 1998,
by and between EL CORTE
INGLES, S.A., a Spanish corporation, having an
address at Hermosilla, 112, 28009 Madrid SPAIN,
Attention: _______________
("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
(defined below).
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 I.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 mean-ing 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, side-walks, 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.
"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 inter-est 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, part-nership, corporation, business trust,
joint stock compa-ny, trust, unincor-porated
association, joint venture,
governmental authority or other entity of whatever
na-ture.
"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, Per-centage 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 feder-al, state and local statutes, laws,
ordinances, rules, regulations, autho-
rizations and requirements relating to the
Premises or the use thereof, including, without
limitation, planning, zoning, subdi-
vision, environmental, toxic and hazardous
waste, health, fire safety and handi-cap access and all
encumbrances, covenants,
conditions and restrictions, violation of
which encumbrances, cove-nants, 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 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 __________, 2007
[INSERT TERMINATION DATE FOR INITIAL 10-YEAR
TERM], 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 Terms(s).
"Term Commencement Date":
_______________ ___, 1998.
"Unavoidable Delays" shall
have the meaning ascribed thereto in Section 13.4.
Section I.2 Effect of Basic
Terms. Each of the fore-going 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 11
GRANT AND TERM
Section II.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 II.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
cove-nants 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 peace-fully 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 II.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, 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 condi-tions
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 II.4 Holding Over. If not
sooner terminated, this Lease shall end on the date set
forth 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 conces-
sionaires, re-mains 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 there-from 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 III.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 III.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
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 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 IV.1 Minimum Annual Rent.
Tenant agrees to pay to Landlord as rental for the
Premises the sum of _____________________ Dollars
($__________) per Lease Year
[INSERT AMOUNT EQUAL TO 3% OF ACTUAL 1997
GROSS SALES PER LETTER OF BUSINESS TERMS] (the "Minimum
Annual Rent"), payable in
advance in equal monthly installments of
___________________________________________________
Dollars ($_________), 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 IV.2 Percentage Rent.
(a) Formula for Calculation.
In addition to Minimum Annual Rent, Tenant covenants
and agrees to pay to Land-
lord 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
state-ment (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 accurate-ly 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 accepted accounting practices consistently applied
for all operations of the business con-ducted 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 expira-tion of the Term or
earlier termination of this Lease.
(d) Review of Books and
Records. The acceptance by Landlord of pay-ments 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 pre-ceding the day of
the giving of such notice by Landlord to Tenant.
Landlord or its duly authorized
representa-tives 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
neces-sary 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 Percent-age Rent with, interest thereon
calculated at the Inter-est 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 IV.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or respective utilities companies for all
required utility services
to the Pre-mises. 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 IV.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 letter thereunder. Tenant shall pay Common
Area Maintenance charges as
referenced herein within thirty (30) days
after Tenant has received a bill therefor.
Section IV.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 addition-al 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 accom-
plish 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 deter-
mination 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 IV.6 Late Payment Charges.
Late pay-ments 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 IV.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 at
_______________________________________________, 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 V.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 V.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 V.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 V.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 to the officers, directors,
employees and agents of Tenant's subtenants,
concessionaires and licensees, and to 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 V.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 V.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, provided that (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 V.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
Tenant's said default,
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 VI.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 VI.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 VII.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 VII.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 awarded 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 of
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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XII.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 XII.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 XII.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 XII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 incorpora-
tion 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 desig-nates and ap-points 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 effect-ive 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 per-mitted 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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.19 Attachments.
Attached hereto and made a
part of this Lease are the following:
Exhibits A-G, inclusive.
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: _______________________
Its:____________________
By: _______________________
Its:____________________
TENANT:
GOTTSCHALKS INC.
By:_______________________
Its:____________________
By: _______________________
Its:____________________
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
SITE PLAN 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 _________, 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
_____________, 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
__________ and expiring on ____________, 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 Memo-randum
as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By:__________________________________
Its:
___________________________
TENANT:
GOTTSCHALKS INC.
By:__________________________________
Its:
____________________________
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:
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 5
Section 2.1 Grant and Term of
Lease 5
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 11
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 13
Section 5.5 Compliance with REA 14
Section 5.6 Compliance with
Requirements 15
Section 5.7 Liens 15
ARTICLE VI
REPAIRS AND MAINTENANCE 16
Section 6.1 Tenant's Obligations 16
Section 6.2 Landlord's
Obligations 17
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION 17
Section 7.1 Damage or Destruction 17
Section 7.2 Condemnation 19
ARTICLE VIII
INSURANCE 20
Section 8.1 Tenant's Insurance 20
Section 8.2 Landlord's Insurance 22
Section 8.3 Waiver of Subrogation 22
Section 8.4 Governmental and Insurance
Requirements 22
Section 8.5 Indemnification 23
Section 8.6 Landlord Exculpation 23
ARTICLE IX
ASSIGNMENT AND SUBLETTING 24
Section 9.1 Notice to Landlord 24
Section 9.2 Landlord's Approval 24
Section 9.3 Permitted
Transactions 25
Section 9.4 Compliance with REA 25
Section 9.5 Documentation and
Expenses 25
ARTICLE X
DEFAULT 26
Section 10.1 Events of Default 26
Section 10.2 Remedies 27
Section 10.3 Attorneys' Fees 29
Section 10.4 Agreement to
Arbitrate 29
Section 10.5 No Set-off/
Counterclaims 30
Section 10.6 Right of Redemption 30
Section 10.7 No Waiver 30
Section 10.8 Unperformed Covenants
of Landlord May Be
Performed By Tenant 31
ARTICLE XI
[INTENTIONALLY OMITTED] 31
ARTICLE XII
OPTIONS 31
Section 12.1 Renewal Options 31
Section 12.2 Lease Terms Applicable 31
Section 12.3 Rent During Renewal
Terms 32
Section 12.4 Lease Amendment 32
ARTICLE XIII
MISCELLANEOUS PROVISIONS 33
Section 13.1 Notices 33
Section 13.2 Brokers 33
Section 13.3 Subordination of Lease 33
Section 13.4 Unavoidable Delays 34
Section 13.5 Estoppel Certificates 34
Section 13.6 Relationship of
Parties 34
Section 13.7 Governing Law;
Jurisdiction 35
Section 13.8 Interpretation 35
Section 13.9 Captions 36
Section 13.10 Partial Invalidity 36
Section 13.11 Waivers 36
Section 13.12 Accord and
Satisfaction 36
Section 13.13 Counterparts 36
Section 13.14 Entire Agreement 36
Section 13.15 Successors and
Assigns 37
Section 13.16 Survival of
Obligations 37
Section 13.17 Submission of Lease 37
Section 13.18 Memorandum of Lease 37
Section 13.19 Attachments 37
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING
CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C SITE PLAN 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
by and between
EL CORTE INGLES,
as "Landlord"
and
GOTTSCHALKS INC,
as "Tenant"
Dated as of __________, 1998
Carousel Mall
San Bernardino, CA
STORE LEASE AGREEMENT
Carousel Mall
San Bernardino, CA
THIS STORE LEASE AGREEMENT (this
"Lease"), made as of
this ___ day of ___________, 1998, by and
between EL CORTE
INGLES, S.A., a Spanish corporation, having an
address at
Hermosilla, 112, 28009 Madrid SPAIN,
Attention: _______________
("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
(defined below).
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 I.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 mean-ing
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, side-
walks, 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.
"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) 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 inter-est 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, part-nership,
corporation, business trust, joint stock
compa-ny, trust, unincor-
porated association, joint venture,
governmental authority or
other entity of whatever na-ture.
"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 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.
"Rent": Per-centage 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 feder-al, state
and local statutes, laws, ordinances, rules,
regulations, autho-
rizations and requirements relating to the
Premises or the use
thereof, including, without limitation,
planning, zoning, subdi-
vision, environmental, toxic and hazardous
waste, health, fire
safety and handi-cap access and all
encumbrances, covenants,
conditions and restrictions, violation of
which encumbrances,
cove-nants, conditions and restrictions could
either create a
lien or result in a termination of any
agreement benefi-cial 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 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 period
commenc-ing 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":
_______________
___, 1998.
"Unavoidable Delays" shall
have the meaning
ascribed thereto in Section 13.4.
Section I.2 Effect of Basic
Terms. Each of the fore-
going 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 II.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 II.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
cove-nants 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 peace-fully 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 II.3 Surrender of
Premises. Upon the expira-
tion 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, 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 obliga-tions and condi-tions
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 II.4 Holding Over. If not
sooner terminated,
this Lease shall end on the date set forth 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, includ-
ing, without limitation, subtenants, licensees
or conces-
sionaires, re-mains 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 there-from 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 III.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 III.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
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 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 IV.1 [Intentionally
Omitted]
Section IV.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 Bernadino
store).
(vii) The prorated
portion of the following
items of Tenant's general 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
state-ment (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 accurate-ly
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 accepted accounting practices
consis-tently applied for all
operations of the business con-ducted 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 expira-tion of
the Term or earlier termination of this Lease.
(d) Review of Books and
Records. The acceptance
by Landlord of pay-ments 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 reason-
able 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
representa-tives 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 neces-sary for a
proper examination
and audit thereof. If such audit discloses an
understatement in
an Report of Gross Sales, Tenant shall pay the
deficiency in
Percent-age Rent with, interest thereon
calculated at the Inter-
est 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 IV.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or
respective utilities companies for all
required utility services
to the Pre-mises. 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 IV.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 letter
thereunder. Tenant shall pay Common Area
Maintenance charges as
referenced herein within thirty (30) days
after Tenant has
received a bill therefor.
Section IV.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, "Impo-
sitions"). 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 addition-al 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 con-trary
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 accom-
plish 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 deter-
mination 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 IV.6 Late Payment Charges.
Late pay-ments 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 IV.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 at
_______________________________________________, 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 V.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 V.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 V.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 V.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 to the officers, directors,
employees and agents
of Tenant's subtenants, concessionaires and
licensees, and to 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 V.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 V.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, provided that (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 V.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
Tenant's said default,
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 VI.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 VI.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 VII.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 VII.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 awarded 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
of 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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 incorpora-
tion 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 desig-nates and ap-points 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 effect-ive 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 per-mitted 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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.19 Attachments.
Attached hereto and made a
part of this Lease are the following:
Exhibits A-G, inclusive.
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:_______________________
Its:____________________
By:_______________________
Its:____________________
TENANT:
GOTTSCHALKS INC.
By: _______________________
Its:____________________
By: _______________________
Its:____________________
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
SITE PLAN OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DEPARTMENT LEASES
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 _________, 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
_____________, 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 __________, 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 Memo-randum
as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By:
__________________________________
Its:
____________________________
TENANT:
GOTTSCHALKS INC.
By:
__________________________________
Its:
____________________________
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:
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 5
Section 2.1 Grant and Term of Lease 5
Section 2.2 Acceptance of Premises;
Quiet Enjoyment. 5
Section 2.3 Surrender of Premises. 5
Section 2.4 Holding Over. 6
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT
AGREEMENT 6
Section 3.1 Lease Controls Over REA. 6
Section 3.2 Covenants Regarding REA. 7
ARTICLE IV
RENT AND OTHER CHARGES 7
Section 4.2 Percentage Rent 7
Section 4.3 Utilities Charge 9
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 11
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 11
Section 5.1 Permitted Use 11
Section 5.2 Signs 11
Section 5.3 Alterations of Premises 12
Section 5.4 Use of Common Areas 13
Section 5.5 Compliance with REA 14
Section 5.6 Compliance with
Requirements 14
Section 5.7 Liens 15
ARTICLE VI
REPAIRS AND MAINTENANCE 15
Section 6.1 Tenant's Obligations 15
Section 6.2 Landlord's Obligations 16
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION 16
Section 7.1 Damage or Destruction 16
Section 7.2 Condemnation 17
ARTICLE VIII
INSURANCE 18
Section 8.1 Tenant's Insurance 18
Section 8.2 Landlord's Insurance 20
Section 8.3 Waiver of Subrogation 20
Section 8.4 Governmental and Insurance
Requirements 20
Section 8.5 Indemnification 21
Section 8.6 Landlord Exculpation 22
ARTICLE IX
ASSIGNMENT AND SUBLETTING 22
Section 9.1 Notice to Landlord 22
ARTICLE X
DEFAULT 22
Section 10.1 Events of Default 22
Section 10.2 Remedies 23
Section 10.3 Attorneys' Fees 26
Section 10.4 Agreement to Arbitrate 26
Section 10.5 No Set-off/
Counterclaims 26
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 27
ARTICLE XI
[INTENTIONALLY OMITTED] 28
ARTICLE XII 28
ARTICLE XIII
MISCELLANEOUS PROVISIONS 28
Section 13.1 Notices 28
Section 13.2 Brokers 29
Section 13.3 Subordination of Lease 29
Section 13.4 Unavoidable Delays 29
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 31
Section 13.13 Counterparts 31
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 32
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING
CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C SITE PLAN 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
EXHIBIT F
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES,
as "Landlord"
and
GOTTSCHALKS INC,
as "Tenant"
Dated as of __________, 1998
Moreno Valley Mall at Towngate
Moreno Valley, California
STORE LEASE AGREEMENT
Moreno Valley Mall at Towngate
Moreno Valley, California
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of
this ___ day of ___________, 1998, by and between EL
CORTE
INGLES, S.A., a Spanish corporation, having an address
at
Hermosilla, 112, 28009 Madrid SPAIN, Attention:
_______________
("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 (defined
below).
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 I.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
mean-ing
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,
side-
walks, 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.
"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
inter-est 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,
part-nership,
corporation, business trust, joint stock compa-ny,
trust, unincor-
porated association, joint venture, governmental
authority or
other entity of whatever na-ture.
"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,
Per-centage
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
feder-al, state
and local statutes, laws, ordinances, rules,
regulations, autho-
rizations and requirements relating to the Premises or
the use
thereof, including, without limitation, planning,
zoning, subdi-
vision, environmental, toxic and hazardous waste,
health, fire
safety and handi-cap access and all encumbrances,
covenants,
conditions and restrictions, violation of which
encumbrances,
cove-nants, conditions and restrictions could either
create a
lien or result in a termination of any agreement
benefi-cial 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
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
commenc-ing on
the Term Commencement Date and expiring on __________,
2007
[INSERT TERMINATION DATE FOR INITIAL 10-YEAR TERM], 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 Terms(s).
"Term Commencement Date":
_______________
___, 1998.
"Unavoidable Delays" shall have the
meaning
ascribed thereto in Section 13.4.
Section I.2 Effect of Basic Terms. Each
of the fore-
going 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 II.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 II.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
cove-nants 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 peace-fully 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 II.3 Surrender of Premises. Upon
the expira-
tion 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,
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 obliga-tions and condi-tions 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.
7
Section II.4 Holding Over. If not sooner
terminated,
this Lease shall end on the date set forth 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, includ-
ing, without limitation, subtenants, licensees or
conces-
sionaires, re-mains 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
there-from 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 III.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 III.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
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 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 IV.1 Minimum Annual Rent. Tenant
agrees to
pay to Landlord as rental for the Premises the sum of
_____________________ Dollars ($__________) per Lease
Year
[INSERT AMOUNT EQUAL TO 3% OF ACTUAL 1997 GROSS SALES
PER LETTER
OF BUSINESS TERMS] (the "Minimum Annual Rent"), payable
in
advance in equal monthly installments of
_____________________________________________________
Dollars
($_________), 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 IV.2 Percentage Rent.
(a) Formula for Calculation. In
addition to
Minimum Annual Rent, Tenant covenants and agrees to pay
to Land-
lord 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 state-ment
(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
accurate-ly 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 accepted accounting practices consis-tently
applied for all
operations of the business con-ducted 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 expira-tion of the Term or earlier
termination
of this Lease.
(d) Review of Books and Records. The
acceptance
by Landlord of pay-ments 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 reason-
able 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 pre-ceding the day of the
giving of such
notice by Landlord to Tenant. Landlord or its duly
authorized
representa-tives 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 neces-sary 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 Percent-age Rent with, interest thereon calculated
at the
Inter-est 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 IV.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or
respective utilities companies for all required utility
services
to the Pre-mises. 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 IV.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
letter
thereunder. Tenant shall pay Common Area Maintenance
charges as
referenced herein within thirty (30) days after Tenant
has
received a bill therefor.
Section IV.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, "Impo-
sitions"). 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 addition-al 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
con-trary
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
accom-
plish 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 deter-
mination 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 IV.6 Late Payment Charges. Late
pay-ments 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 IV.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 at
_______________________________________________, 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 V.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 V.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 V.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 V.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 to the officers, directors, employees
and agents
of Tenant's subtenants, concessionaires and licensees,
and to 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 V.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 V.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, provided that (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 V.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 Tenant's
said default,
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 VI.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 VI.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 VII.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 VII.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 awarded 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 of
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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XII.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 XII.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 XII.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 XII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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
incorpora-
tion 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 desig-nates and ap-points 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 effect-ive 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 per-mitted 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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.19 Attachments. Attached hereto
and made a
part of this Lease are the following: Exhibits A-G,
inclusive.
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_____________________
Its:____________________
By: _______________________
Its:____________________
TENANT:
GOTTSCHALKS INC.
By: _______________________
Its:____________________
By: _______________________
Its:____________________
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
SITE PLAN 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 _________, 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
_____________, 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
__________ and expiring on ____________, 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
Memo-randum
as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By: __________________________________
Its: ____________________________
TENANT:
GOTTSCHALKS INC.
By: __________________________________
Its: ____________________________
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:
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 5
Section 2.1 Grant and Term of Lease 5
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 11
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 13
Section 5.5 Compliance with REA 14
Section 5.6 Compliance with
Requirements 15
Section 5.7 Liens 15
ARTICLE VI
REPAIRS AND MAINTENANCE 16
Section 6.1 Tenant's Obligations 16
Section 6.2 Landlord's Obligations 17
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION 17
Section 7.1 Damage or Destruction 17
Section 7.2 Condemnation 19
ARTICLE VIII
INSURANCE 20
Section 8.1 Tenant's Insurance 20
Section 8.2 Landlord's Insurance 22
Section 8.3 Waiver of Subrogation 22
Section 8.4 Governmental and Insurance
Requirements 22
Section 8.5 Indemnification 23
Section 8.6 Landlord Exculpation 23
ARTICLE IX
ASSIGNMENT AND SUBLETTING 24
Section 9.1 Notice to Landlord 24
Section 9.2 Landlord's Approval 24
Section 9.3 Permitted Transactions 25
Section 9.4 Compliance with REA 25
Section 9.5 Documentation and
Expenses 25
ARTICLE X
DEFAULT 26
Section 10.1 Events of Default 26
Section 10.2 Remedies 27
Section 10.3 Attorneys' Fees 29
Section 10.4 Agreement to Arbitrate 29
Section 10.5 No Set-off/Counterclaims 30
Section 10.6 Right of Redemption 30
Section 10.7 No Waiver 30
Section 10.8 Unperformed Covenants of
Landlord May Be
Performed By Tenant 31
ARTICLE XI
[INTENTIONALLY OMITTED] 31
ARTICLE XII
OPTIONS 31
Section 12.1 Renewal Options 31
Section 12.2 Lease Terms Applicable 31
Section 12.3 Rent During Renewal Terms 32
Section 12.4 Lease Amendment 32
ARTICLE XIII
MISCELLANEOUS PROVISIONS 33
Section 13.1 Notices 33
Section 13.2 Brokers 33
Section 13.3 Subordination of Lease 33
Section 13.4 Unavoidable Delays 34
Section 13.5 Estoppel Certificates 34
Section 13.6 Relationship of Parties 34
Section 13.7 Governing Law;
Jurisdiction 35
Section 13.8 Interpretation 35
Section 13.9 Captions 36
Section 13.10 Partial Invalidity 36
Section 13.11 Waivers 36
Section 13.12 Accord and Satisfaction 36
Section 13.13 Counterparts 36
Section 13.14 Entire Agreement 36
Section 13.15 Successors and Assigns 37
Section 13.16 Survival of Obligations 37
Section 13.17 Submission of Lease 37
Section 13.18 Memorandum of Lease 37
Section 13.19 Attachments 37
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING
CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C SITE PLAN 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
EXHIBIT G
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES,
as "Landlord"
and
GOTTSCHALKS INC,
as "Tenant"
Dated as of __________, 1998
Carousel Mall
San Bernardino, CA
STORE LEASE AGREEMENT
Carousel Mall
San Bernardino, CA
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of
this ___ day of ___________, 1998, by and between EL
CORTE
INGLES, S.A., a Spanish corporation, having an address
at
Hermosilla, 112, 28009 Madrid SPAIN, Attention:
_______________
("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 (defined
below).
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 I.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
mean-ing
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,
side-
walks, 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.
"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) 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
inter-est 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,
part-nership,
corporation, business trust, joint stock compa-ny,
trust, unincor-
porated association, joint venture, governmental
authority or
other entity of whatever na-ture.
"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
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.
"Rent": Per-centage 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
feder-al, state
and local statutes, laws, ordinances, rules,
regulations, autho-
rizations and requirements relating to the Premises or
the use
thereof, including, without limitation, planning,
zoning, subdi-
vision, environmental, toxic and hazardous waste,
health, fire
safety and handi-cap access and all encumbrances,
covenants,
conditions and restrictions, violation of which
encumbrances,
cove-nants, conditions and restrictions could either
create a
lien or result in a termination of any agreement
benefi-cial 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
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 period commenc-ing 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":
_______________
___, 1998.
"Unavoidable Delays" shall have the
meaning
ascribed thereto in Section 13.4.
Section I.2 Effect of Basic Terms. Each
of the fore-
going 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 II.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 II.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
cove-nants 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 peace-fully 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 II.3 Surrender of Premises. Upon
the expira-
tion 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,
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 obliga-tions and condi-tions 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 II.4 Holding Over. If not sooner
terminated,
this Lease shall end on the date set forth 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, includ-
ing, without limitation, subtenants, licensees or
conces-
sionaires, re-mains 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
there-from 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 III.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 III.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
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 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 IV.1 [Intentionally Omitted]
Section IV.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
Bernadino
store).
(vii) The prorated portion of the
following
items of Tenant's general 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 state-ment (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
accurate-ly
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 accepted accounting practices consis-tently
applied for all
operations of the business con-ducted 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
expira-tion of
the Term or earlier termination of this Lease.
(d) Review of Books and Records. The
acceptance
by Landlord of pay-ments 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 reason-
able 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
representa-tives 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 neces-sary for a proper
examination
and audit thereof. If such audit discloses an
understatement in
an Report of Gross Sales, Tenant shall pay the
deficiency in
Percent-age Rent with, interest thereon calculated at
the Inter-
est 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 IV.3 Utilities Charge.
(a) Tenant shall apply to the
municipality or
respective utilities companies for all required utility
services
to the Pre-mises. 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 IV.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
letter
thereunder. Tenant shall pay Common Area Maintenance
charges as
referenced herein within thirty (30) days after Tenant
has
received a bill therefor.
Section IV.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, "Impo-
sitions"). 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 addition-al 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
con-trary
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
accom-
plish 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 deter-
mination 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 IV.6 Late Payment Charges. Late
pay-ments 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 IV.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 at
_______________________________________________, 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 V.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 V.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 V.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 V.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 to the officers, directors, employees
and agents
of Tenant's subtenants, concessionaires and licensees,
and to 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 V.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 V.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, provided that (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 V.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 Tenant's
said default,
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 VI.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 VI.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 VII.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 VII.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 awarded 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 of
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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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
incorpora-
tion 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 desig-nates and ap-points 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 effect-ive 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 per-mitted 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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.19 Attachments. Attached hereto
and made a
part of this Lease are the following: Exhibits A-G,
inclusive.
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: _______________________
Its:____________________
By: _______________________
Its:____________________
TENANT:
GOTTSCHALKS INC.
By _______________________
Its:____________________
By: _______________________
Its:____________________
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
SITE PLAN OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DEPARTMENT LEASES
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 _________, 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
_____________, 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 __________, 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
Memo-randum
as of the date first written above.
LANDLORD:
EL CORTE INGLES, S.A.
By:
Its:
TENANT:
GOTTSCHALKS INC.
By:
Its:
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:
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 5
Section 2.1 Grant and Term of Lease 5
Section 2.2 Acceptance of Premises;
Quiet Enjoyment. 5
Section 2.3 Surrender of Premises. 5
Section 2.4 Holding Over. 6
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT
AGREEMENT 6
Section 3.1 Lease Controls Over REA. 6
Section 3.2 Covenants Regarding REA. 7
ARTICLE IV
RENT AND OTHER CHARGES 7
Section 4.2 Percentage Rent 7
Section 4.3 Utilities Charge 9
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 11
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 11
Section 5.1 Permitted Use 11
Section 5.2 Signs 11
Section 5.3 Alterations of Premises 12
Section 5.4 Use of Common Areas 13
Section 5.5 Compliance with REA 14
Section 5.6 Compliance with
Requirements 14
Section 5.7 Liens 15
ARTICLE VI
REPAIRS AND MAINTENANCE 15
Section 6.1 Tenant's Obligations 15
Section 6.2 Landlord's Obligations 16
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION 16
Section 7.1 Damage or Destruction 16
Section 7.2 Condemnation 17
ARTICLE VIII
INSURANCE 18
Section 8.1 Tenant's Insurance 18
Section 8.2 Landlord's Insurance 20
Section 8.3 Waiver of Subrogation 20
Section 8.4 Governmental and Insurance
Requirements 20
Section 8.5 Indemnification 21
Section 8.6 Landlord Exculpation 22
ARTICLE IX
ASSIGNMENT AND SUBLETTING 22
Section 9.1 Notice to Landlord 22
ARTICLE X
DEFAULT 22
Section 10.1 Events of Default 22
Section 10.2 Remedies 23
Section 10.3 Attorneys' Fees 26
Section 10.4 Agreement to Arbitrate 26
Section 10.5 No Set-off/Counterclaims 26
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 27
ARTICLE XI
[INTENTIONALLY OMITTED] 28
ARTICLE XII 28
ARTICLE XIII
MISCELLANEOUS PROVISIONS 28
Section 13.1 Notices 28
Section 13.2 Brokers 29
Section 13.3 Subordination of Lease 29
Section 13.4 Unavoidable Delays 29
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 31
Section 13.13 Counterparts 31
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 32
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING
CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER B-1
EXHIBIT C SITE PLAN 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
EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")
is made and
entered into as of ____________, 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 _______
__, 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.
By:
Its:
THE HARRIS COMPANY
By:
Its:
Notice Address:
EXHIBIT I
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
PREPARED BY AND
RETURN TO WHEN RECORDED:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93729
Attn: Warren L. Williams, Esq.
_________________________________________________________________
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the _____
day of
____________, 1998, by and between
_____________________________
("Lender") and GOTTSCHALKS INC., 7 River Park Place
East, Fresno,
California 93729 ("Tenant").
WITNESSETH:
WHEREAS, by the lease described on Schedule 1 hereto
(the
"Lease"), the Tenant has leased from
______________________
("Landlord") certain premises ("Premises") located in
the City of
_____________, County of _______________, State of
California,
which Premises are legally described on Schedule 2
attached
hereto, together with and subject to various easements
and rights
as referenced in the Lease.
WHEREAS, Lender is the holder of a [deed of trust and
assignment
of rents] on the Premises, given to the Lender by
Landlord, dated
as of ___________ ____, 19___, recorded in the Official
Records
of ______________ County, California as Instrument No.
_____________ (collectively referred to herein with any
other
documents securing the debt secured by the deed of
trust as the
"Mortgage").
NOW, THEREFORE, in consideration of the premises and
other
valuable consideration, the receipt and sufficiency of
which are
hereby acknowledged, the parties hereby agree as
follows:
1. Lender hereby consents to the Lease. The Lease
and all
extensions, renewals, replacements or modifications
thereof are
and shall be subject and subordinate to the Mortgage
and all
terms and conditions thereof insofar as it affects the
Premises,
and to all renewals, modifications, consolidations,
replacements
and extensions thereof, to the full extent of amounts
secured
thereby and interest thereon.
2. Tenant shall attorn to and recognize any purchaser
at a
foreclosure sale under the Mortgage, any transferee who
acquires
the Premises by deed in lieu of foreclosure, and the
successors
and assigns of such purchaser(s), as its landlord for
the
unexpired balance (and any extensions, if exercised) of
the term
of the Lease on the same terms and conditions set forth
in the
Lease.
3. If it becomes necessary to foreclose the Mortgage,
Lender
shall neither terminate the Lease nor join Tenant in
summary or
foreclosure proceedings so long as Tenant is not in
default under
any of the terms, covenants or conditions of the Lease.
4. Nothing herein contained shall impose any
obligations upon
Lender to perform any of the obligations of Landlord as
landlord
under the Lease, unless and until Lender shall become
owner or
lender in possession of the Premises.
5. Any notice required or desired to be given under
this
Agreement shall be in writing and shall be deemed given
(a) upon
receipt if delivered personally; (b) two (2) business
days after
being deposited into the U.S. mail if being sent by
certified or
registered mail, return receipt requested, postage
prepaid; or
(c) one (1) business day after being sent by reputable
overnight
courier service (e.g., Federal Express, Airborne, etc.)
with
guaranteed overnight delivery, and addressed as
follows:
If to Lender:
_________________________
_________________________
_________________________
_________________________
If to Tenant: GOTTSCHALKS INC.
[Store Address]
_________________________
Attn: Manager
With a copy to: GOTTSCHALKS INC.
7 River Park Place East
Fresno, California 93729
Attn: General Counsel
6. This Agreement shall be binding upon and inure to
the
benefit of any person or entity acquiring rights to the
Premises
by virtue of the Mortgage, and the successors,
administrators and
assigns of the parties hereto.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed
these
presents as of the day and year first above written.
LENDER:
By:
Name:
Title:
TENANT: GOTTSCHALKS INC.,
a Delaware corporation
By:
Name:
Title:
State of California )
) SS.
County of ____________________ )
On ______________________, 1998 before me,
___________________________, personally appeared
______________________________________, personally
known to me
(or proved to me on the basis of satisfactory evidence)
to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they
executed the
same in his/her/their authorized capacity(ies), and
that by
his/her/their signature(s) on the instrument the
person(s), or
the entity upon behalf of which the person(s) acted,
executed the
instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
State of California )
) SS.
County of ____________________ )
On ______________________, 1998 before me,
___________________________, personally appeared
______________________________________, personally
known to me
(or proved to me on the basis of satisfactory evidence)
to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they
executed the
same in his/her/their authorized capacity(ies), and
that by
his/her/their signature(s) on the instrument the
person(s), or
the entity upon behalf of which the person(s) acted,
executed the
instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
SCHEDULE 1
Description of Lease
[Insert description of Lease]
SCHEDULE 2
Description of Premises
[Insert description of Premises]
EXHIBIT J
STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement") is entered
into as
of ________, 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
$22,217,598.00 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 ___________, 2003 [the fifth anniversary of the
Closing]
(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.
By:
Name:
Title:
GOTTSCHALKS INC.
By:
Name:
Title:
EXHIBIT K
STOCKHOLDERS' AGREEMENT
by and among
EL CORTE INGLES, S.A.,
GOTTSCHALKS INC.,
JOSEPH LEVY
and
BRET LEVY
dated as of
___________, 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 ________, 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) __________, 2003 [fifth
anniversary
of Closing], 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)
__________, 2003
[fifth anniversary of Closing], 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) 434-4666
Bret Levy
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Telecopier: (209) ________
(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.
By_______________________________
Name:
Title:
GOTTSCHALKS INC.
By_______________________________
Name:
Title:
__________________________________
JOSEPH LEVY
__________________________________
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:
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:
EXHIBIT L
TRADENAME LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (the
"Agreement")
dated as of __________ __, 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
By:____________________________
Name:__________________________
Title:___________________________
GOTTSCHALKS INC.
Licensee
By:____________________________
Name:__________________________
Title:___________________________
SCHEDULE 1
"Harris Stores"
"Harris"
EXHIBIT M
BILL OF SALE AND ASSIGNMENT
For good and valuable consideration, receipt of which
is hereby
acknowledged, and pursuant to the Asset Purchase
Agreement dated
as of July 21, 1998 (the "Agreement"), by and among
GOTTSCHALKS
INC., a Delaware corporation ("Buyer"), THE HARRIS
COMPANY, a
California corporation ("Seller"), and EL CORTE INGLES,
S.A., a
Spanish corporation and the parent of Seller ("ECI"),
and
intending to be legally bound hereby, Seller does
hereby
unconditionally and irrevocably sell, convey, grant,
assign and
transfer to Buyer, its successors and assigns, all of
Seller's
legal, beneficial and other right, title and interest
in and to
the business and assets, properties, rights, interests,
privileges, claims and contracts of every kind and
nature,
tangible and intangible, of Seller including, without
limitation,
the items described more particularly in Schedule 1
attached
hereto and incorporated herein by reference
(collectively, the
"Purchased Assets").
Terms used herein and not defined have the meanings
assigned to
them in the Agreement. Nothing herein is intended to
limit or
supersede or enlarge or modify in any way the
representations and
warranties of Seller set forth in the Agreement.
Notwithstanding anything to the contrary contained in
this Bill
of Sale and Assignment, the "Purchased Assets" do not
include,
and Seller does not hereby sell, convey, assign or
transfer to
Buyer any of Seller's right, title or interest in or
to, the
Excluded Assets described in Schedule 2 attached hereto
and
incorporated herein by reference.
Seller hereby represents and warrants that (i) the
Purchased
Assets are free and clear of any Encumbrance (as
defined in the
Agreement), except Permitted Exceptions, (ii) that it
has good
and marketable title to the Purchased Assets, and no
agreements
or understandings exist which limit or restrict the
right of
Seller to transfer the Purchased Assets to Buyer, and
(iii) the
Purchased Assets are the assets described in Section
2.1(a) of
the Agreement.
Seller, for itself and its respective successors and
assigns,
hereby covenants and agrees that, without further
consideration,
at any time and from time to time after the date
hereof, it will
execute and deliver to Buyer such further instruments
of sale,
conveyance, assignment and transfer, and take such
other action,
all upon the reasonable request of Buyer, in order more
effectively to sell, convey, grant, assign, transfer
and deliver
all or any portion of the Purchased Assets to Buyer,
and to
assure and confirm to any other person the ownership of
the
Purchased Assets by Buyer, and to permit Buyer to
exercise any of
the franchises, rights, licenses or privileges intended
to be
sold conveyed, assigned, transferred and delivered by
Seller to
Buyer pursuant to this Bill of Sale and Assignment.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale
and
Assignment to be executed this _____ day of ______,
1998.
THE HARRIS COMPANY
By:
Name:
Title:
ACCEPTED AND AGREED:
GOTTSCHALKS INC.
By: ________________________
Name: ______________________
Title: _____________________
EXHIBIT N
SPECIAL POWER OF ATTORNEY
THE HARRIS COMPANY, a California corporation
("Seller"), does
hereby constitute and appoint GOTTSCHALKS INC., a
Delaware
corporation ("Buyer"), the true and lawful
attorney-in-fact of
Seller in its name, place and stead,
(i) to execute, acknowledge and deliver
all such
further assignments, transfers, conveyances, deeds,
bills of sale
or other instruments, documents or assurances as may be
required
to transfer to or vest in Buyer or to protect the
right, title
and interest of Buyer in the Purchased Assets conveyed
(or
intended to be conveyed) by Seller to Buyer pursuant to
the Asset
Purchase Agreement dated as of July 21, 1998 by and
among Buyer,
Seller and El Corte Ingles, S.A., a Spanish corporation
and the
parent of Seller (the "Agreement");
(ii) to enforce the provisions of insurance
policies
included in the Purchased Assets; and
(iii) to accept and endorse and deposit for Buyer's
own
account instruments, drafts, checks, notes and other
similar
items payable to Seller (or presented in payment to
Buyer) for
any of the Purchased Assets.
This power of attorney may be exercised on behalf of
Buyer by any
officer or employee of Buyer by affixing the manual or
facsimile
signature of any such officer or employee of Buyer to
any such
instrument or other document.
Seller further gives and grants to its said
attorney-in-fact full
power and authority to do and perform every act
necessary and
proper to be done in the exercise of the foregoing
powers as
fully as Seller might or could do, with full power of
substitution and revocation, hereby ratifying and
confirming all
that said attorney-in-fact shall lawfully do or cause
to be done
by virtue hereof.
This Special Power of Attorney is coupled with an
interest and is
irrevocable.
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, Seller has executed this Special
Power of
Attorney this ____ day of _______, 1998, at
________________________.
THE HARRIS COMPANY
By:
Name:
Title:
STATEMENT OF WITNESSES
I declare under penalty of perjury under the laws of
California
that the person who signed or acknowledged this
document is
personally known to me (or proved to me on the basis of
convincing evidence) to be the principal, that the
principal
signed or acknowledged this power of attorney in my
presence and
that the principal appears to be of sound mind and
under no
duress, fraud or undue influence.
Signature: ______________________________
Print Name: ______________________________
Date: ____________________________________
Residence Address: _______________________
__________________________________________
__________________________________________
Signature: ______________________________
Print Name: ______________________________
Date: ____________________________________
Residence Address: _______________________
__________________________________________
__________________________________________
STATE OF )
) SS
COUNTY OF )
On _____________________, 19__, before me
____________________, a
Notary Public for the State of California, personally
appeared
___________________, known to me to be the
________________________________ and
_________________________,
respectively, of THE HARRIS COMPANY, the corporation
that
executed the within power of attorney, and acknowledged
to me
that such corporation executed the same.
_____________________________
Notary Public for the
State
of California
[SEAL]
My Commission Expires
_____________________________
See Cal. Civ. Code 1190.
EXHIBIT O
ASSUMPTION AGREEMENT
For good and valuable consideration, receipt of which
is hereby
acknowledged, and pursuant to the Asset Purchase
Agreement dated
as of July 21, 1998 (the "Agreement"), by and among
GOTTSCHALKS
INC., a Delaware corporation ("Buyer"), THE HARRIS
COMPANY, a
California corporation ("Seller"), and EL CORTE INGLES,
S.A., a
Spanish corporation and the parent of Seller, Seller
hereby
assigns and Buyer hereby assumes and agrees to pay and
otherwise
perform the liabilities and obligations (the "Assumed
Liabilities") set forth on Exhibit A, attached hereto
and
incorporated herein by this reference.
Upon the reasonable request of Seller at any time, and
from time
to time, after the date hereof, without further
consideration,
Buyer shall execute and deliver such further
instruments of
assumption and take such other actions as Seller
reasonably may
require for Buyer to more effectively evidence the
assumption of
the Assumed Liabilities.
This Assumption Agreement shall be binding upon and
inure to the
benefit of Buyer and Seller and their respective
successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this
Assumption Agreement to be executed this ___ day of
____________,
1998.
GOTTSCHALKS INC.
By:
THE HARRIS COMPANY
By:
By:
EL CORTE INGLES, S.A.
By:
EXHIBIT P
FORM OF ESTOPPEL CERTIFICATE FOR ACQUIRED LEASES
TO: Gottschalks Inc.
7 River Park Place East
Fresno, California 93729
Attn: Warren L. Williams, Esq.
Re: Lease described in Schedule 1 hereto (the "Lease")
with
respect to certain premises (the "Leased Premises") in
the
[name of shopping center] (the "Shopping
Center"),
[city] , California
The undersigned (the "Landlord"), the landlord under
the Lease
covering the Leased Premises, has been informed by The
Harris
Company ("Harris"), the tenant under the Lease, that
Harris has
assigned or will assign the Lease to Gottschalks Inc.
("Gottschalks") and that Gottschalks has assumed or
will assume
the obligations of Harris under the Lease
(collectively, the
"Assignment"). After the Assignment, Gottschalks will
continue
to operate the department store currently operated by
Harris on
the Leased Premises. The department store will be
operated under
the trade name "Harris-Gottschalks".
As a condition precedent to the Assignment, Gottschalks
is
requiring and will be relying on this Landlord Estoppel
Certificate (this "Certificate"). Accordingly,
Landlord hereby
certifies to Gottschalks the following as of the date
hereof:
1. Landlord is the lessor under the Lease, pursuant
to which
Harris leases the Leased Premises. The Lease has not
been
modified, changed, altered, supplemented or amended in
any
respect, nor have any provisions thereof been waived,
except as
described in Schedule 1 hereto.
2. The Lease is valid and in full force and effect on
the date
hereof. Landlord does not have any other agreements
with Harris
with respect to the Lease or the Leased Premises.
3. Harris is the current tenant under the Lease. All
rent and
other sums (including, but not limited to, taxes,
utilities,
maintenance fees, and insurance) due and payable under
the Lease
have been paid through the date of this Certificate.
No rents or
other charges (including, but not limited to, taxes,
utilities,
maintenance fees, and insurance) have been prepaid,
other than as
provided in the Lease.
4. No event has occurred and no condition exists that
constitutes, or that would constitute with the giving
of notice
or the lapse of time or both, a default by Landlord or,
to the
best knowledge of Landlord, by Harris under the Lease.
Landlord
has no existing credits, defenses, offsets or
counterclaims
against the enforcement of the Lease by Harris.
5. All work required to be performed by Harris under
the Lease
has been completed, and all conditions of the Lease
required to
be satisfied by Harris have been satisfied, other than
ongoing
obligations such as the payment of rent.
6. The Lease term commenced on _____________________,
_______,
and, exclusive of unexercised renewal options (as
identified
below) contained in the Lease, the Lease expires on
_______________. Harris has ______ remaining option(s)
to renew
the term of the Lease for ______ year(s) each.
7. The security deposit held by Landlord under the
Lease is
$________________.
8. Landlord has no knowledge of and has received no
notice of
any assignment, hypothecation or pledge of Harris's
interest in
the Lease.
9. Landlord has not received any notice of any
present
violation of any laws, regulations, or ordinances
relating to the
use or condition of the Leased Premises or the Shopping
Center.
10. Landlord does not currently engage in or permit,
and has not
in the past engaged in or permitted, within or upon the
Leased
Premises or the Shopping Center, any use or disposal of
any toxic
or hazardous substances which are regulated under any
federal,
state, county or municipal laws, regulations, or
ordinances,
other than minimal, non-reportable quantities of
substances used
in the ordinary course of business. To Landlord's
knowledge, no
occupant of any portion of the Shopping Center has used
or
disposed of any toxic or hazardous substances on the
Shopping
Center premises, other than minimal, non-reportable
quantities of
substances used by such occupants in the ordinary
course of
business.
11. Landlord is not the subject of any voluntary
actions or, to
Landlord's knowledge, involuntary actions under any
insolvency or
bankruptcy laws.
12. This Certificate binds Landlord and its
representatives,
successors and assigns. Landlord shall notify all
successor
owners, assignees and mortgagees of the existence and
terms of
this Certificate. Landlord understands that
Gottschalks is
relying upon the truth of the statements made in this
Certificate
in entering into the Assignment, and this Certificate
shall inure
to the benefit of Gottschalks, Harris and their
respective
representatives, successors and assigns. The
undersigned has the
power and authority to render this Certificate on
behalf of
Landlord.
Date: __________________, 1998 LANDLORD:
[NAME OF LANDLORD]
By:
__________________________
Name:
Title:
SCHEDULE 1
Description of Lease
[Insert description of Lease]
EXHIBIT Q
FORM OF ESTOPPEL CERTIFICATE FOR MALL AGREEMENTS
TO: Gottschalks Inc.
7 River Park Place East
Fresno, California 93729
Attn: Warren L. Williams, Esq.
Re: Reciprocal Easement Agreement - [name of
shopping
center] (the "Shopping Center"),
[city]
, California
The undersigned has been informed by The Harris Company
("Harris") that Gottschalks Inc. ("Gottschalks")
intends to
purchase substantially all of the assets of Harris (the
"Acquisition"). Harris presently [owns/leases] and
operates a
department store in the Shopping Center. After the
Acquisition,
Gottschalks will continue to operate the department
store
currently operated by Harris in the Shopping Center.
The
department store will be operated under the trade name
"Harris-
Gottschalks".
The Shopping Center premises are encumbered and
benefitted by
that certain [title of
reciprocal
easement agreement] described
in Schedule
1 hereto (the "REA"). As a condition precedent to the
Acquisition, Gottschalks is requiring and will be
relying on this
Estoppel Certificate (this "Certificate").
The undersigned, a "Party" to the REA [and a party to
the
Additional Agreement described in Schedule 2 hereto
(the
"Additional Agreement")], hereby confirms, as of the
date of this
Certificate, as follows:
1. To the knowledge of the undersigned, no party is
in default
under the REA [or the Additional Agreement].
2. There has been no assignment, modification or
amendment of
the REA [or the Additional Agreement].
3. The REA [and the Additional Agreement] [is/are] in
full
force and effect.
This Certificate is for the benefit of and may be
relied upon by
Gottschalks and its successors and assigns from time to
time.
Very truly yours,
By:
Name:
Title:
Date: ____________________, 1998
SCHEDULE 1
Description of REA
[Insert description of REA]
EXHIBIT R
[Form for ECI Leases] KDW Draft 7/17/98
LANDLORD AGREEMENT
CONGRESS FINANCIAL CORPORATION, a Delaware
corporation
("Congress") has entered into financing arrangements
with
GOTTSCHALKS INC., a Delaware corporation ("Debtor")
pursuant to
which Congress has been granted a security interest in
any or all
of Debtor's or its affiliates' personal property,
including, but
not limited to, inventory and equipment (hereinafter
"Personal
Property"). For purpose of this Agreement, the term
"Personal
Property" does not include plumbing and electrical
fixtures,
heating, ventilation and air conditioning, wall and
floor
coverings, walls or ceilings and other fixtures not
constituting
trade fixtures. Some of the Personal Property has or
may from
time to time become affixed to or be located on, wholly
or in
part, the real property leased by Debtor or its
affiliates
located at [Street Address of Property], the legal
description of
which is attached as Exhibit A (the "Premises"). The
undersigned is the owner or lessor of the Premises.
In order for Congress to consider making loans or
providing
other financial accommodations to Debtor or its
affiliates in
reliance upon the Personal Property as collateral, the
undersigned agrees as follows:
1. The undersigned waives and relinquishes any
landlord's
lien, rights of levy or distraint, claim, security
interest or
other interest the undersigned may now or hereafter
have in or
with respect to any of the Personal Property, whether
for rent or
otherwise.
2. The Personal Property may be installed in or
located on
the Premises and is not and shall not be deemed a
fixture or part
of the real property but shall at all times be
considered
personal property.
3. Congress, at its option, may either and use
the
Premises for the purpose of repossessing, removing,
selling or
otherwise dealing with any of the Personal Property,
and such
license shall be irrevocable and shall continue from
the date
Congress enters the Premises for a period of up to
ninety (90)
days after the receipt by Congress of written notice
from the
undersigned directing removal of the Personal Property;
provided,
that, (a) for each day that Congress uses the Premises
pursuant
to the rights granted to it hereunder, unless the
undersigned has
otherwise been paid rent in respect of any of such
period,
Congress shall pay the regularly scheduled rent
provided under
the lease relating to the Premises between the
undersigned and
Debtor (the "Lease"), prorated on a per diem basis to
be
determined on a thirty (30) days month, without thereby
assuming
the Lease or incurring any other obligations of Debtor
and (b)
any damage to the Premises caused by Congress or its
representatives will be repaired by Congress at its
sole expense.
4. The undersigned agrees to send notice in
writing of any
default under the Lease to:
Congress Financial Corporation
225 South Lake Avenue, Suite 1000
Pasadena, California 91101
Attention: Kristine Metchikian
Upon receipt of such notice, Congress shall
have the
right, but not the obligation, to cure such default
within ten
(10) days thereafter. Any payment made or act done by
Congress
to cure any such default shall not constitute an
assumption of
the Lease or any obligations of Debtor.
5. This waiver may not be changed or terminated
orally or
by course of conduct and is binding upon the
undersigned and the
heirs, personal representatives, successors and assigns
of the
undersigned and inures to the benefit of Congress and
the
successors and assigns of Congress.
6. LANDLORD WAIVES ANY RIGHT TO A JURY TRIAL OF
ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT.
Dated this _____ day of July, 1998.
EL CORTE INGLES, S.A.
By: _________________________________
Name: _______________________________
Title: ________________________________
EXHIBIT A
Legal Property Description
STATE OF CALIFORNIA )
)
SS.
COUNTY OF _______________ )
On __________________________ before me,
_______________________________________________________
Date
Name and Title of Officer (e.g. "Jane Doe, Notary
Public")
personally appeared
_________________________________________________________________
__________
Name of Signer(s)
[ ] personally known to me -- OR -- [ ]
proved
to me the basis of satisfactory evidence to the
person(s)
whose name(s) is/are subscribed to the within
instrument
and acknowledged to me that he/she/they executed the
same
in his/her/their authorized capacity(ies) and that by
his/her/their
signature(s) on the instrument person(s), or the entity
upon
behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
_________________________________________________
Signature of Notary Public
___________________________
OPTIONAL
Though the data below is not required by law, it may
prove
valuable to persons relying on the document and could
prevent
fraudulent reattachment of this form.
CAPACITY(IES) CLAIMED BY SIGNER(S)
DESCRIPTION OF ATTACHED DOCUMENT
[ ] Individual
[ ] Corporate Officer
Landlord Agreement
____________________________________________
_________________________________________
Title(s)
Title of Type of Document
[ ] Partner(s) [ ] Limited
[ ] General
__________________________________________
Number of
Pages
[ ] Attorney-in-Fact
[ ] Trustee(s)
[ ] Guardian/Conservator
[ ] Other _________________________________
__________________________________________
Date of
Document
Signer is Representing:
Name of Person(s) or Entity(ies)
_____________________________________________
___________________________________________
Signer(s) Other Than Named
Above
_____________________________________________
EXHIBIT S
[Form for Acquired Leases] KDW Draft 7/17/98
LANDLORD AGREEMENT
CONGRESS FINANCIAL CORPORATION, a Delaware
corporation
("Congress") has entered into financing arrangements
with
GOTTSCHALKS INC., a Delaware corporation ("Debtor")
pursuant to
which Congress has been or may be granted a security
interest in
any or all of Debtor's or its affiliates' personal
property,
including, but not limited to, inventory and equipment
(hereinafter "Personal Property"). For purpose of this
Agreement, the term "Personal Property" does not
include plumbing
and electrical fixtures, heating, ventilation and air
conditioning, wall and floor coverings, walls or
ceilings and
other fixtures not constituting trade fixtures. Some
of the
Personal Property has or may from time to time become
affixed to
or be located on, wholly or in part, the real property
leased by
Debtor or its affiliates located at [Street Address of
Property],
the legal description of which is attached as Exhibit A
(the
"Premises"). The undersigned is the owner or lessor of
the
Premises.
In order for Congress to consider making loans or
providing
other financial accommodations to Debtor or its
affiliates in
reliance upon the Personal Property as collateral, the
undersigned agrees as follows:
1. The undersigned waives and relinquishes any
landlord's
lien, rights of levy or distraint, claim, security
interest or
other interest the undersigned may now or hereafter
have in or
with respect to any of the Personal Property, whether
for rent or
otherwise.
2. The Personal Property may be installed in or
located on
the Premises and is not and shall not be deemed a
fixture or part
of the real property but shall at all times be
considered
personal property.
3. Congress, at its option, may either and use
the
Premises for the purpose of repossessing, removing,
selling or
otherwise dealing with any of the Personal Property,
and such
license shall be irrevocable and shall continue from
the date
Congress enters the Premises for a period of up to
ninety (90)
days after the receipt by Congress of written notice
from the
undersigned directing removal of the Personal Property;
provided,
that, (a) for each day that Congress uses the Premises
pursuant
to the rights granted to it hereunder, unless the
undersigned has
otherwise been paid rent in respect of any of such
period,
Congress shall pay the regularly scheduled rent
provided under
the lease relating to the Premises between the
undersigned and
Debtor (the "Lease"), prorated on a per diem basis to
be
determined on a thirty (30) days month, without thereby
assuming
the Lease or incurring any other obligations of Debtor
and (b)
any damage to the Premises caused by Congress or its
representatives will be repaired by Congress at its
sole expense.
4. The undersigned agrees to send notice in
writing of any
default under the Lease to:
Congress Financial Corporation
225 South Lake Avenue, Suite 1000
Pasadena, California 91101
Attention: Kristine Metchikian
Upon receipt of such notice, Congress shall
have the
right, but not the obligation, to cure such default
within ten
(10) days thereafter. Any payment made or act done by
Congress
to cure any such default shall not constitute an
assumption of
the Lease or any obligations of Debtor.
5. This waiver may not be changed or terminated
orally or
by course of conduct and is binding upon the
undersigned and the
heirs, personal representatives, successors and assigns
of the
undersigned and inures to the benefit of Congress and
the
successors and assigns of Congress.
6. LANDLORD WAIVES ANY RIGHT TO A JURY TRIAL OF
ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT.
Dated this _____ day of July, 1998.
[NAME OF LANDLORD]
By: ________________________________
Name: ______________________________
Title: _______________________________
EXHIBIT A
Legal Property Description
STATE OF CALIFORNIA )
)
SS.
COUNTY OF _______________ )
On __________________________ before me,
_______________________________________________________
Date
Name and Title of Officer (e.g. "Jane Doe, Notary
Public")
personally appeared
_________________________________________________________________
__________
Name of Signer(s)
[ ] personally known to me -- OR -- [ ]
proved
to me the basis of satisfactory evidence to the
person(s)
whose name(s) is/are subscribed to the within
instrument
and acknowledged to me that he/she/they executed the
same
in his/her/their authorized capacity(ies) and that by
his/her/their
signature(s) on the instrument person(s), or the entity
upon
behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
_________________________________________________
Signature of Notary Public
_________________________________________________________________
___________________________
OPTIONAL
Though the data below is not required by law, it may
prove
valuable to persons relying on the document and could
prevent
fraudulent reattachment of this form.
CAPACITY(IES) CLAIMED BY SIGNER(S)
DESCRIPTION OF ATTACHED DOCUMENT
[ ] Individual
[ ] Corporate Officer
Landlord Agreement
____________________________________________
_________________________________________
Title(s)
Title of Type of Document
[ ] Partner(s) [ ] Limited
[ ] General
__________________________________________
Number of
Pages
[ ] Attorney-in-Fact
[ ] Trustee(s)
[ ] Guardian/Conservator
[ ] Other _________________________________
__________________________________________
Date of
Document
Signer is Representing:
Name of Person(s) or Entity(ies)
_____________________________________________
___________________________________________
Signer(s) Other Than Named Above
_____________________________________________
EXHIBIT T
FORM OF OPINION OF
McPETERS McALEARNEY SHIMOFF & HATT
_____________ __, 1998
Gottschalks Inc.
7 River Park Place East
Fresno, California 93270
Ladies and Gentlemen:
We have acted as general counsel for The Harris
Company, a
California corporation ("Seller") and as U.S. counsel
to El Corte
Ingles, S.A., a Spanish corporation and the parent of
Seller
("ECI"), in connection with the sale by Seller and the
purchase
by Gottschalks Inc., a Delaware corporation ("Buyer"),
of
substantially all of the assets of Seller and the
assumption by
Buyer of certain specified liabilities of Seller
pursuant to the
Asset Purchase Agreement dated as of July 21, 1998, by
and among
Buyer, Seller and ECI (the "Asset Purchase Agreement).
This
opinion is being delivered to you at the request of ECI
and
Seller pursuant to Section 9.2(d) of the Asset Purchase
Agreement. Capitalized terms used herein without
definition have
the same meanings as set forth in the Asset Purchase
Agreement.
In our capacity as such counsel we have examined
originals or
copies certified or otherwise identified to our
satisfaction as
being true copies of such records, documents or other
instruments
necessary or appropriate to enable us to render the
opinions
expressed below. These records, documents and
instruments
include the following:
(a) Certificate of Incorporation of Seller, as amended
to date;
(b) the Bylaws of Seller and ECI, as amended to date;
(c) all records of proceedings and actions of the
Board of
Directors and shareholders of Buyer relating to the
Asset
Purchase Agreement and the transactions contemplated
thereby;
(d) the Asset Purchase Agreement;
(e) the Tradename License Agreement;
(f) the Employee Lease Agreement;
(g) the Registration Rights Agreement;
(h) the Standstill Agreement; and
(i) the Stockholders' Agreement.
Documents (d) - (i) are collectively referred to as the
"Transaction Documents".
We have assumed the genuineness of all signatures
(except for
those of the officers of Seller and ECI executing the
Transaction
Documents), the authenticity of all items submitted to
us as
originals, the conformity with originals of all items
submitted
to us as copies. As to material matters of fact, we
have, when
relevant facts were not independently established,
relied upon
the [Officer's Certificate of Seller], dated as of
______, 1998
and the [Officers' Certificate of ECI], dated as of
________,
1998 furnished to us by Seller and ECI respectively,
copies of
each of which have been delivered to you.
On the basis of such examination and our consideration
of such
questions of law as we have deemed relevant in the
circumstances,
we are of the opinion, subject to the assumptions and
limitations
set forth herein, that:
1. Seller is a corporation duly organized, validly
existing and
in good standing under the laws of the State of
California.
Seller has the corporate power to own its properties
and conduct
its business. Seller has the corporate power and
corporate
authority to enter into the Seller Transaction
Documents and to
carry out the provisions of the Seller Transaction
Documents.
2. Neither the execution and delivery of any of the
Transaction
Documents nor the consummation of the transactions
contemplated
thereby will conflict with or result in a breach by
Seller or
constitute a default under, the Articles of
Incorporation or
Bylaws of Seller, or result in the imposition of any
Encumbrance
against any asset of Seller, or violate any Order or
United
States federal or California law applicable to Seller
or any of
Seller's assets.
3. Each of the Seller Transaction Documents have been
duly
authorized by all necessary corporate action on the
part of
Seller. Each of the Seller Transaction Documents has
been duly
executed and delivered by Seller, and the Seller
Transaction
Documents each constitute the legally valid and binding
obligation of Seller, enforceable against Seller in
accordance
with their respective terms, except as limited by
bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting
creditors' rights generally. We advise you that the
enforceability of each of the Seller Transaction
Documents is
subject to the effect of general principles of equity,
including,
without limitation, concepts of materiality,
reasonableness, good
faith and fair dealing, and the possible unavailability
of
specific performance or injunctive relief, regardless
of whether
considered in a proceeding in equity or at law.
4. Each of the Asset Purchase Agreement, the
Standstill
Agreement, the Stockholders' Agreement, the Assumption
Agreement
and the New Leases (the "ECI Transaction Documents")
has been
duly executed and delivered by ECI, and the ECI
Transaction
Documents each constitute the legally valid and binding
obligation of ECI, enforceable against ECI in
accordance with
their respective terms, except as limited by
bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting
creditors' rights generally. We advise you that the
enforceability of each of the ECI Transaction Documents
is
subject to the effect of general principles of equity,
including,
without limitation, concepts of materiality,
reasonableness, good
faith and fair dealing, and the possible unavailability
of
specific performance or injunctive relief, regardless
of whether
considered in a proceeding in equity or at law.
5. Except for those approvals and consents that have
been
obtained, the consummation of the sale of the Purchased
Assets
and Assumed Liabilities by Seller and ECI pursuant to
the
Transaction Agreements does not require any order,
consent,
approval of, or filing or registration with any
Governmental
Entity. All required proceedings and other action to
assure
compliance with applicable bulk sales laws have been
duly taken.
In rendering the opinions expressed in Clauses 3 and 4,
we have
assumed that each of the Transaction Documents to which
Buyer is
a party has been duly authorized, executed and
delivered by
Buyer, that Buyer has the requisite power and authority
to
execute, deliver and perform each of the Transaction
Documents to
which it is a party, that each of the Transaction
Documents to
which Buyer is a party constitutes the legal, valid and
binding
obligation of Buyer, enforceable against it in
accordance with
its terms (as similarly qualified), and that Buyer has
obtained
all necessary Approvals and Permits required to be
obtained by
Buyer in order to acquire the Purchased Assets and
Assumed
Liabilities.
We express no opinion concerning (a) the laws of any
jurisdiction
other than California, the General Corporation Law of
Delaware
and the United States or (b) securities or antitrust
law matters.
This opinion is solely for your benefit in connection
with your
acquisition of the Purchased Assets and assumption of
Assumed
Liabilities and related transactions and may not be
relied upon
by, nor may copies be delivered to, any person other
than a
permitted assignee under the Asset Purchase Agreement,
or used
for any other purpose, without our prior written
consent.
Respectfully submitted,
EXHIBIT U
EMPLOYEE LEASE AGREEMENT
This Employee Lease Agreement (the "Agreement") is
entered into
as of _______________, 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
_________________
_________________
Attention: ____________________
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.
By
Its
THE HARRIS COMPANY
By
Its
E X H I B I T A
Name of Employee Services
Payroll Period
Service Fee
EXHIBIT V
INVESTMENT REPRESENTATIONS AND CERTIFICATION
The undersigned, The Harris Company, a
California
corporation ("Seller") hereby certifies to and agrees
with
Gottschalks Inc., a Delaware corporation ("Buyer") as
follows,
and makes the following representations to Buyer, with
the intent
that Buyer rely thereon to determine Seller's
suitability as an
investor in Buyer and to assure compliance with
applicable
securities laws. This certificate is being delivered
pursuant to
Section 9.2(f) of the Asset Purchase Agreement by and
among
Buyer, Seller and El Corte Ingles, S.A., a Spanish
corporation
and the parent of Seller dated as of July 21, 1998 (the
"Agreement"; capitalized terms used but not defined
herein have
the meanings set forth in the Agreement).
1. Seller has been provided copies of, and has
read and
understood the Agreement and all exhibits and schedules
attached
thereto, other agreements contemplated thereby to which
Seller or
any of its Affiliates or Associates is a party, the
Buyer
Disclosure Schedule and all other information
concerning Buyer
that has been provided to Seller in writing in
connection
therewith.
2. Seller has such knowledge and experience in
business
and financial matters that Seller is capable of
utilizing the
information provided about Buyer to evaluate the risks
and merits
of the exchange of the Purchased Assets for Buyer's
Common Stock
and the 8% Subordinated Note and Seller's other rights
and duties
under the Agreement and hereunder.
3. Seller has adequate means of providing for
Seller's
current financial needs and possible contingencies and
has no
need in the foreseeable future to sell or pledge any
securities
issued by Buyer.
4. Seller is acquiring certain of Buyer's
securities
pursuant to the Agreement for Seller's own account for
investment
without a view to or for sale in connection with any
distribution
thereof, and will not sell or distribute any of such
securities
in violation hereof or of the Agreement, the
Stockholders'
Agreement, the Securities Act, the General Rules and
Regulations
of the SEC promulgated thereunder, or any other
applicable
securities laws, including but not limited to those of
the United
States, the State of California and the State of
Delaware.
5. Seller acknowledges and agrees that:
(a) Notwithstanding anything in this Section 5,
Seller's
rights with respect to the Buyer's Common Stock are
limited by
the Stockholders' Agreement;
(b) Buyer's Common Stock must be held, and
neither such
stock nor any interest therein may be sold, transferred
or
otherwise disposed of, unless any transfer thereof is
then
registered or qualified under the Securities Act and
any other
applicable state securities laws or Buyer has received
a written
opinion of Seller's counsel, satisfactory to counsel
for Buyer,
to the effect that an exemption from such registration
and
qualification is available with respect to such action;
(c) if such opinion relies on the exemption from
registration in Section 4(1) or 4(2) of, or any rule
interpretation derived therefrom under, the Securities
Act (or
any analogous exemptions under state securities laws)
Seller
shall obtain, to the extent required by such opinion or
by Buyer,
and deliver to Buyer a copy of the prospective
transferee's: (i)
representations to Buyer, similar to those contained
herein or
otherwise customary in the circumstances as to the
transferee's
non-distributive intent, sophistication, understanding
of (and
ability to bear) risk, and access to information, (ii)
acknowledgement concerning restrictions on transfer of
Buyer's
Common Stock and (iii) assumption of obligations of
Seller
hereunder;
(d) Buyer's registrar and transfer agent will
maintain a
stop transfer order against the registration or
transfer of
Buyer's Common Stock held by Seller to assure
compliance with
applicable securities laws; and
(e) the certificate(s) representing Buyer's
Common Stock to
be held by Seller will bear a legend in substantially
the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN
REGISTERED OR QUALIFIED UNDER ANY STATE OR FEDERAL LAW
AND
NEITHER THE SHARES NOR ANY INTEREST THEREIN MAY BE SOLD
OR
TRANSFERRED WITHOUT COMPLYING WITH SUCH LAWS AND
PROVIDING TO THE
ISSUER A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER
THAT AN EXEMPTION FROM REGISTRATION OR QUALIFICATION
UNDER
APPLICABLE STATE AND FEDERAL LAWS IS THEN AVAILABLE.
THESE
SECURITIES ARE SUBJECT TO CERTAIN OTHER RESTRICTIONS
PURSUANT TO
AN AGREEMENT BETWEEN THE ISSUER, HOLDER AND CERTAIN EL
CORTE
INGLES, S.A. DATED AS OF __________, 1998.
6. Seller does not have in mind any sale of
Buyer's Common
Stock either currently or after the passage of a fixed
or
determinable period of time or upon the occurrence or
nonoccurrence of any specific event or circumstance;
has no
present or contemplated agreement, undertaking,
arrangement,
obligation, indebtedness or commitment providing for,
or which is
likely to compel a disposition of Buyer's Common Stock
or any
interest therein, by pledge or otherwise; and is not
aware of any
circumstances presently in existence that are likely in
the
future to prompt such a transfer or other disposition
thereof.
7. Seller agrees to indemnify Buyer and hold
Buyer
harmless from and against any Losses incurred on
account of or
arising out of any inaccuracy in Seller's declarations,
representations, and covenants set forth herein, the
disposition
of any of Buyer's Common Stock Seller will receive
contrary to
his foregoing declarations, representations, and
covenants, and
any action, suit or proceeding based upon the claim
that Seller's
declarations, representations, or covenants were
inaccurate or
misleading or otherwise cause for obtaining damages or
redress
from Buyer or the disposition of any of Buyer's Common
Stock or
any part thereof in violation hereof or of any
securities laws.
Executed this __________ day of _______, 1998.
THE HARRIS COMPANY
By__________________________
Name:
Title:
EXHIBIT W
FORM OF OPINION OF
[ECI'S COUNSEL]
_____________ __, 1998
Gottschalks Inc.
7 River Park Place East
Fresno, California 93270
Ladies and Gentlemen:
We have acted as counsel for El Corte Ingles, S.A., a
Spanish
corporation ("ECI"), in connection with the sale by The
Harris
Company, a California corporation and a wholly-owned
subsidiary
of ECI ("Seller"), and the purchase by Gottschalks
Inc., a
Delaware corporation ("Buyer"), of substantially all of
the
assets of Seller and the assumption by Buyer of certain
specified
liabilities of Seller pursuant to the Asset Purchase
Agreement
dated as of July 21, 1998, by and among Buyer, Seller
and ECI
(the "Asset Purchase Agreement"). This opinion is being
delivered
to you at the request of ECI and Seller pursuant to
Section
9.2(d) of the Asset Purchase Agreement. Capitalized
terms used
herein without definition have the same meanings as set
forth in
the Asset Purchase Agreement.
In our capacity as such counsel we have examined
originals or
copies certified or otherwise identified to our
satisfaction as
being true copies of such records, documents or other
instruments
necessary or appropriate to enable us to render the
opinions
expressed below. These records, documents and
instruments
include the following:
(a) Certificate of Incorporation of ECI [or Spanish
equivalent],
as amended to date;
(b) the Bylaws of ECI [or Spanish equivalent], as
amended to
date;
(c) all records of proceedings and actions of the
Board of
Directors of ECI relating to the Asset Purchase
Agreement and the
transactions contemplated thereby;
(d) the Asset Purchase Agreement;
(e) the Standstill Agreement; and
(f) the Stockholders' Agreement.
Documents (d) - (f) are collectively referred to as the
ECI
Transaction Documents.
We have assumed the genuineness of all signatures
(except those
of the officers of Seller and ECI executing the ECI
Transaction
Documents), the authenticity of all items submitted to
us as
originals, the conformity with originals of all items
submitted
to us as copies [and the due authority of all persons
executing
the same]. As to material matters of fact, we have,
when
relevant facts were not independently established,
relied upon
the [Officer's Certificate of Seller], dated as of
______, 1998
and the [Officers' Certificate of ECI], dated as of
________,
1998 furnished to us by Seller and ECI respectively,
copies of
each of which have been delivered to you.
On the basis of such examination and our consideration
of such
questions of law as we have deemed relevant in the
circumstances,
we are of the opinion, subject to the assumptions and
limitations
set forth herein, that:
1. ECI is duly organized, existing and in good
standing under
the laws of Spain with corporate power to own its
properties and
conduct its business. ECI has the corporate power and
corporate
authority to enter into each of the ECI Transaction
Documents and
to carry out the provisions of each of the ECI
Transaction
Documents.
2. Neither the execution and delivery of any of the
ECI
Transaction Documents nor the consummation of the
transactions
contemplated thereby will conflict with or result in a
breach by
ECI or constitute a default under, the charter
documents of ECI
or any material agreement or instrument to which ECI is
a party
or is bound, or result in the imposition of any
Encumbrance
against any asset of ECI, or violate any Order or Law
applicable
to ECI.
3. Each of the ECI Transaction Documents has been
duly
authorized by all necessary corporate action on the
part of ECI.
4. Except for those approvals and consents that have
been
obtained, the performance of ECI under the ECI
Transaction
Documents does not require any order, consent, approval
of, or
filing or registration with any Governmental Entity of
Spain.
5. A money judgment obtained in the courts of the
United States
against ECI will be recognized and enforceable against
ECI and
its assets in the courts of Spain. A arbitration award
obtained
from a United States arbitrator pursuant to the terms
of the ECI
Transaction Documents against ECI will be recognized
and
enforceable against ECI and its assets in the courts of
Spain, if
that arbitration award meets the requirements of the
U.N.
Convention on the Recognition and Enforcement of
Foreign Aribtral
Awards.
We express no opinion concerning the laws of any
jurisdiction
other than Spain.
This opinion is solely for your benefit in connection
with your
acquisition of the Purchased Assets and assumption of
Assumed
Liabilities and related transactions and may not be
relied upon
by, nor may copies be delivered to, any person other
than a
permitted assignee under the Asset Purchase Agreement,
or used
for any other purpose, without our prior written
consent.
Respectfully submitted,
EXHIBIT X
FORM OF OPINION OF O'MELVENY & MYERS LLP
_________________ __, 1998
The Harris Company
El Corte Ingles, S.A.
Ladies and Gentlemen:
We have acted as counsel for Gottschalks Inc., a
Delaware
corporation ("Buyer"), in connection with the
acquisition by
Buyer of substantially all of the assets of The Harris
Company, a
California corporation ("Seller") pursuant to the Asset
Purchase
Agreement dated as of July 21, 1998, (the "Asset
Purchase
Agreement"), by and among Buyer, Seller and El Corte
Ingles,
S.A., a Spanish corporation and the parent of Seller
("ECI"). We
are providing this opinion to you at the request of
Buyer
pursuant to Section 9.3(c) of the Asset Purchase
Agreement.
Except as otherwise indicated, capitalized terms used
in this
opinion and defined in the Asset Purchase Agreement
will have the
meanings given in the Asset Purchase Agreement.
In our capacity as such counsel, we have examined
originals or
copies of those corporate and other records and
documents we
considered appropriate including the following:
(a) Certificate of Incorporation of Buyer, as amended
to date;
(b) the Bylaws of Buyer, as amended to date;
(c) all records of proceedings and actions of the
Board of
Directors of Buyer relating to the Asset Purchase
Agreement and
the transactions contemplated thereby;
(d) the Asset Purchase Agreement;
(e) the Tradename License Agreement;
(f) the Employee Lease Agreement;
(g) the Registration Rights Agreement;
(h) the Standstill Agreement;
(i) the Stockholders' Agreement; and
(j) the 8% Subordinated Note.
Documents (d) - (j) are collectively referred to as the
Buyer
Transaction Documents.
As to relevant matters, we have relied upon, among
other things,
the Buyer's factual representations in the Officers'
Certificate
of Buyer. In addition, we have obtained and relied
upon those
certificates of public officials we considered
appropriate.
We have assumed the genuineness of all signatures
(other than the
signatures of persons signing the Buyer Transaction
Documents and
the 8% Subordinated Note on behalf of Buyer), the
authenticity of
all documents submitted to us as originals and the
conformity
with originals of all documents submitted to us as
copies. To
the extent the Buyer's obligations depend on the
enforceability
of the Buyer Transaction Documents against the other
parties to
the Buyer Transaction Documents, we have assumed that
the Buyer
Transaction Documents are enforceable against the other
parties
thereto. On the basis of such examination, our reliance
upon the
assumptions in this opinion and our consideration of
those
questions of law we considered relevant, and subject to
the
limitations and qualifications in this opinion, we are
of the
opinion that:
1. Buyer has been duly incorporated and is validly
existing in
good standing under the laws of the State of Delaware,
with
corporate power to enter into the Buyer Transaction
Documents,
and to perform its obligations under the Buyer
Transaction
Documents.
2. The execution, delivery and performance of the
Buyer
Transaction Documents have been duly authorized by all
necessary
corporate action on the part of the Buyer, and the
Buyer
Transaction Documents have been duly executed and
delivered by
the Buyer.
3. Each Buyer Transaction Document constitutes the
legally
valid and binding obligation of Buyer, enforceable
against Buyer
in accordance with its terms, except as may be limited
by
bankruptcy, insolvency, reorganization, moratorium or
similar
laws relating to or affecting creditors' rights
generally
(including, without limitation, fraudulent conveyance
laws) and
by general principles of equity, including, without
limitation,
concepts of materiality, reasonableness, good faith and
fair
dealing and the possible unavailability of specific
performance
or injunctive relief, regardless of whether considered
in a
proceeding in equity or at law.
4. Buyer's execution and delivery of, and performance
of its
obligations, on or prior to the date of this opinion,
under the
Buyer Transaction Documents do not (i) violate the
Buyer's
Certificate of Incorporation and Bylaws, (ii) violate,
breach or
result in a default under, any existing obligation of
or
restriction on the Buyer under any other agreement (the
"Other
Agreements") listed in an exhibit to Buyer's most
recent annual
report on Form 10-K or (iii) breach or otherwise
violate any
existing obligation of or restriction on Buyer under
any order,
judgment or decree of any California or federal court
or
governmental authority binding on Buyer identified the
Officers'
Certificate of Buyer.
5. The execution by Buyer of, and performance of its
obligations under, the Asset Purchase Agreement do not
violate
any California or federal statute, rule or regulation
that we
have, in the exercise of customary professional
diligence,
recognized as applicable to Buyer or to transactions of
the type
contemplated by the Asset Purchase Agreement.
6. The shares of Buyers' common stock to be issued as
payment,
in part, for the Purchased Assets have been duly
authorized by
all necessary corporate action on the part of Buyer
and, upon
payment for and delivery of the shares of common stock
in
accordance with the Asset Purchase Agreement and the
countersigning of the certificate or certificates
representing
the shares of common stock by a duly authorized
signatory of the
registrar for Buyer's common stock, the shares will be
validly
issued, fully paid and non-assessable.
Our opinion in paragraph 3 above as to the
enforceability of the
Buyer Transaction Documents is subject to (i) public
policy
considerations, statues or court decisions that may
limit the
rights of a party to obtain indemnification against its
own
negligence, willful misconduct or unlawful conduct;
(ii) the
unenforceability under certain circumstances of
provisions
imposing penalties, liquidated damages, acceleration of
future
amounts due (other than principal) without appropriate
discount
to present value, late charges, prepayment charges and
increased
interest rates upon default; (iii) the unenforceability
under
certain circumstances of choice of law provisions; and
(iv) with
respect to the Registration Rights Agreement, the
unenforceability of the indemnity provisions contained
therein as
they relate to the federal securities law.
We express no opinion with respect to your ability to
collect
attorneys' fees and costs in an action involving the
Buyer
Transaction Documents if you are not the prevailing
party in that
action (we call your attention to the effect of Section
1717 of
the California Civil Code, which provide that where a
contract
permits on party thereto to recover attorneys' fees,
the
prevailing party in any action to enforce any provision
o the
contract shall be entitled to recover its reasonable
attorneys'
fees).
We express no opinion as to any provision of the Buyer
Transaction Documents requiring written amendments or
waivers of
the Buyer Transaction Documents insofar as it suggests
that oral
or other modifications, amendments or waivers could not
be
effectively agreed upon by the parties or that the
doctrine of
promissory estoppel might not apply.
We express no opinion (i) concerning federal or state
securities
law or regulations, (ii) federal or state antitrust,
unfair
competition or trade practice laws or regulations or
federal or
state laws and regulations concerning filing
requirements.
We advise you that Section 12.4 of the Asset Purchase
Agreement,
which provides for exclusive jurisdiction of the courts
of the
State of California, may not be binding on the courts
in the
forum selected or excluded.
The law covered by this opinion is limited to the
present federal
law of the United States and the present law of the
States of
California and the General Corporation Law of Delaware.
We
express no opinion as to the laws of any other
jurisdiction and
no opinion regarding the statues, administrative
decisions,
rules, regulation or requirements of any county,
municipality,
subdivision or other local authority of any
jurisdiction.
This opinion is furnished by us as counsel for Buyer
and may be
relied upon you only in connection with the
transactions
contemplated by the Asset Purchase Agreement. This
opinion may
not be used or relied upon by you for any other purpose
or by any
other person, nor may copies by delivered to any other
person,
without in each instance our prior written consent.
Respectfully submitted,
