Document/Exhibit Description Pages Size
1: 8-K Current Report 4± 24K
10: EX-2.10 Plan of Acquisition, Reorganization, Arrangement, 54± 227K
Liquidation or Succession
11: EX-2.11 Plan of Acquisition, Reorganization, Arrangement, 42± 175K
Liquidation or Succession
2: EX-2.2 Plan of Acquisition, Reorganization, Arrangement, 9± 39K
Liquidation or Succession
3: EX-2.3 Plan of Acquisition, Reorganization, Arrangement, 12± 56K
Liquidation or Succession
4: EX-2.4 Plan of Acquisition, Reorganization, Arrangement, 6± 27K
Liquidation or Succession
5: EX-2.5 Plan of Acquisition, Reorganization, Arrangement, 6± 24K
Liquidation or Succession
6: EX-2.6 Plan of Acquisition, Reorganization, Arrangement, 17± 79K
Liquidation or Succession
7: EX-2.7 Plan of Acquisition, Reorganization, Arrangement, 7± 36K
Liquidation or Succession
8: EX-2.8 Plan of Acquisition, Reorganization, Arrangement, 54± 225K
Liquidation or Succession
9: EX-2.9 Plan of Acquisition, Reorganization, Arrangement, 54± 226K
Liquidation or Succession
EX-2.8 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
STORE LEASE AGREEMENT
by and between
EL CORTE INGLES, S.A.,
as "Landlord"
and
GOTTSCHALKS INC.,
as "Tenant"
Dated as of August 20, 1998
East Hills Mall
Bakersfield, California
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS. . 1
Section 1.1 Definitions. . . . . . . . 1
Section 1.2 Effect of Basic Terms. . . 5
ARTICLE II
GRANT AND TERM . . . . . . 6
Section 2.1 Grant and Term of Lease. . 6
Section 2.2 Acceptance of Premises;
Quiet Enjoyment. . . . . 6
Section 2.3 Surrender of Premises. . . 6
Section 2.4 Holding Over.. . . . . . . 7
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT 7
Section 3.1 Lease Controls Over REA. . 7
Section 3.2 Covenants Regarding REA. . 7
ARTICLE IV
RENT AND OTHER CHARGES . . . . 8
Section 4.1 Minimum Annual Rent. . . . 8
Section 4.2 Percentage Rent. . . . . . 8
Section 4.3 Utilities Charge . . . . . 10
Section 4.4 Common Area Maintenance
Costs. . . . . . . . . . . . . . . . 10
Section 4.5 Taxes. . . . . . . . . . . 10
Section 4.6 Late Payment Charges . . . 11
Section 4.7 Rent Payments. . . . . . . 12
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS 12
Section 5.1 Permitted Use. . . . . . . 12
Section 5.2 Signs. . . . . . . . . . . 12
Section 5.3 Alterations of Premises. . 12
Section 5.4 Use of Common Areas. . . . 14
Section 5.5 Compliance with REA. . . . 15
Section 5.6 Compliance with Requirements 15
Section 5.7 Liens. . . . . . . . . . . 16
ARTICLE VI
REPAIRS AND MAINTENANCE. . . . 16
Section 6.1 Tenant's Obligations . . . 16
Section 6.2 Landlord's Obligations . . 18
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION. 18
Section 7.1 Damage or Destruction. . . 18
Section 7.2 Condemnation . . . . . . . 19
ARTICLE VIII
INSURANCE . . . . . . . 21
Section 8.1 Tenant's Insurance . . . . 21
Section 8.2 Landlord's Insurance . . . 22
Section 8.3 Waiver of Subrogation. . . 23
Section 8.4 Governmental and Insurance
Requirements .. . . . . . 23
Section 8.5 Indemnification. . . . . . 24
Section 8.6 Landlord Exculpation . . . 24
ARTICLE IX
ASSIGNMENT AND SUBLETTING . . . 25
Section 9.1 Notice to Landlord . . . . 25
Section 9.2 Landlord's Approval. . . . 25
Section 9.3 Permitted Transactions . . 26
Section 9.4 Compliance with REA. . . . 26
Section 9.5 Documentation and Expenses 26
ARTICLE X
DEFAULT. . . . . . . . 27
Section 10.1 Events of Default. . . . . 27
Section 10.2 Remedies . . . . . . . . . 28
Section 10.3 Attorneys' Fees. . . . . . 30
Section 10.4 Agreement to Arbitrate . . 30
Section 10.5 No Set-off/Counterclaims . 31
Section 10.6 Right of Redemption. . . . 31
Section 10.7 No Waiver. . . . . . . . . 31
Section 10.8 Unperformed Covenants of
Landlord May Be Performed By
Tenant . . . . . . . . . . 31
ARTICLE XI
[INTENTIONALLY OMITTED]. . . . 32
ARTICLE XII
OPTIONS. . . . . . . . 32
Section 12.1 Renewal Options. . . . . . 32
Section 12.2 Lease Terms Applicable . . 32
Section 12.3 Rent During Renewal Terms. 33
Section 12.4 Lease Amendment. . . . . . 33
ARTICLE XIII
MISCELLANEOUS PROVISIONS. . . . 34
Section 13.1 Notices. . . . . . . . . . 34
Section 13.2 Brokers. . . . . . . . . . 34
Section 13.3 Subordination of Lease . . 34
Section 13.4 Unavoidable Delays . . . . 35
Section 13.5 Estoppel Certificates. . . 35
Section 13.6 Relationship of Parties. . 35
Section 13.7 Governing Law; Jurisdiction 36
Section 13.8 Interpretation . . . . . . 36
Section 13.9 Captions . . . . . . . . . 37
Section 13.10 Partial Invalidity . . . . 37
Section 13.11 Waivers. . . . . . . . . . 37
Section 13.12 Accord and Satisfaction. . 37
Section 13.13 Counterparts . . . . . . . 37
Section 13.14 Entire Agreement . . . . . 37
Section 13.15 Successors and Assigns . . 37
Section 13.16 Survival of Obligations. . 38
Section 13.17 Submission of Lease. . . . 38
Section 13.18 Memorandum of Lease. . . . . 38
Section 13.19 Attachments. . . . . . . . 38
EXHIBITS
EXHIBIT A LEGAL DESCRIPTION OF SHOPPING CENTER A-1
EXHIBIT B SITE PLAN OF SHOPPING CENTER. B-1
EXHIBIT C LEGAL DESCRIPTION OF PREMISES C-1
EXHIBIT D SCHEDULE OF REA AND RELATED AGREEMENTS D-1
EXHIBIT E DETERMINATION OF FAIR MARKET RENTAL VALUE E-1
EXHIBIT F FORM OF MEMORANDUM OF LEASE . G-1
EXHIBIT G SCHEDULE OF EXISTING MORTGAGES H-1
STORE LEASE AGREEMENT
East Hills Mall
Bakersfield, California
THIS STORE LEASE AGREEMENT (this "Lease"),
made as of this 20th day of August, 1998, by and
between EL CORTE INGLES, S.A., a Spanish corporation,
having an address at Hermosilla, 112, 28009 Madrid
SPAIN, Attention: Mr. Jorge Pont ("Landlord"), and
GOTTSCHALKS INC., a Delaware corporation, having an
address at 7 River Park Place East, Fresno, California
93720, Attention: General Counsel ("Tenant").
R E C I T A L S
A. Landlord, Tenant and Harris
(defined below) are parties to that certain Asset
Purchase Agreement (defined below). Prior to the date
hereof, Harris leased the Premises (defined below) from
Landlord. Pursuant to the Asset Purchase Agreement,
Tenant is to purchase certain assets of Harris. The
Asset Purchase Agreement requires Landlord to terminate
Harris' lease and enter into this Lease with Tenant.
B. Concurrently with execution of
this Lease, Landlord has terminated Harris' lease.
Landlord now desires to lease to Tenant, and Tenant
desires to lease from Landlord, the Premises on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the
foregoing Recitals, the receipt and sufficiency of
which is hereby acknowledged by each party as of the
time of execution and delivery hereof, and in further
consideration of the rents reserved and the covenants
and conditions set forth herein, Landlord and Tenant
agree as follows:
ARTICLE I
DEFINITIONS AND BASIC PROVISIONS
Section 1.1 Definitions. As used in this
Lease, the following Terms shall have the meanings set
forth below:
"Alterations" shall have the
meaning ascribed thereto in Section 5.3.
"Annual Report" shall have the
meaning ascribed thereto in Section 4.2(b).
"Asset Purchase Agreement":
That certain Asset Purchase Agreement dated as of July
21, 1998, by and among Tenant, as Buyer, Harris, as
Seller, and Landlord, in its capacity as the sole
shareholder of Harris, together with all other
agreements and documents entered into by Landlord and
Tenant in connection therewith.
"Common Areas": The parking
areas, sidewalks, landscaped areas, courts, malls,
roofs, streets, roadways, loading platforms, service
area, curbs, corridors, stairways, elevators,
escalators, comfort stations, lounges and shelters and
all other facilities designated as "Common Area" under
the REA.
"Default" shall have the
meaning ascribed thereto in Section 10.1.
"Developer" shall mean the
Person responsible for managing and maintaining the
Common Areas under the REA.
"Fair Market Rental Value"
shall mean the fair market rental value of the
Premises, as of the date and for the time period of
determination, to be determined in accordance with the
terms of Article XII and, as necessary, Exhibit E
attached hereto and made a part hereof.
"Floor Area" shall have the
meaning given such term in the REA.
"Gross Sales" shall mean the
gross selling price of all merchandise or services sold
in or from the Premises by Tenant, its subtenants,
licensees or concessionaires, whether for cash or on
credit, adjusted by excluding the following:
(i) Any exchange of merchandise
between stores owned by or
affiliated with Tenant where such
exchange is made solely for the
convenient operation of Tenant's
business and not for the purpose
of consummating a sale made in, at
or from the Premises, or for the
purpose of depriving Landlord of
the benefit of a sale which would
otherwise be made in or at the
Premises;
(ii) Returns to shippers or
manufacturers;
(iii) Cash or credit refunds to
customers on transactions (not to
exceed the actual selling price of
the item returned) otherwise
included in Monthly Gross Sales,
including, without limitation, (a)
sums and credits received in the
settlement of claims for loss of
or damage to merchandise, to the
extent previously reported as part
of Gross Sales and (b) the price
allowed on all merchandise traded
in by customers for credit or the
amount of credit for discounts and
allowances made in lieu of
acceptance thereof, but not
including any amount paid or
payable for what are commonly
referred to as trading stamps;
(iv) Sales of fixtures, machinery,
equipment or property which are
not stock in trade;
(v) Amounts collected and paid by
Tenant to any government for any
sales, excise, luxury, gross
receipts taxes or other similar
taxes now or hereafter imposed
upon the sales of merchandise or
services;
(vi) The amount of any discount on
sales to employees;
(vii) Alteration workroom charges and
delivery charges;
(viii) Interest, service or sales
carrying charges or other charges,
however denominated, paid by
customers for extension of credit
on sales and where not included in
the merchandise sales price;
(ix) Receipts from public telephones,
stamp machines, public toilet
locks or vending machines
installed solely for use by
Tenant's employees; and
(x) Gift certificates, or like
vouchers, until such time as the
same shall have been converted
into a sale by redemption.
"Harris" means The Harris
Company, a California corporation, a wholly-owned
subsidiary of Landlord.
"Imposition" shall have the
meaning ascribed thereto in Section 4.5.
"Initial Term": The initial
10-year Term of this Lease.
"Interest Rate": The rate of
interest per annum equal to the lesser of: (i) the
highest lawful rate of interest that Tenant may be
charged; or (ii) the "prime rate" announced from time
to time by Chase Manhattan Bank, N.A., New York, New
York, for short-term, unsecured loans to its most
credit-worthy customers. In the event Chase Manhattan
Bank, N.A. shall discontinue reporting its "prime rate"
or shall cease to exist, Landlord shall select a
substitute bank, and the "prime rate" reported by such
bank shall be used for computing interest payable
hereunder.
"Lease Year": A period of
twelve (12) consecutive full calendar months,
commencing as of the day after the Saturday which is
closest (by number of days) to January 31 and ending on
the Saturday which is closest (by number of days) to
January 31 of the following calendar year. The first
Lease Year shall be the period commencing on the Term
Commencement Date and ending on January 30, 1999. The
final Lease Year shall be the period commencing on the
day after the Saturday which is closest (by number of
days) to January 31st of the calendar year in which the
Lease Term (as it may be extended) expires and ending
on the expiration date of the Lease Term. It is
acknowledged that this definition of Lease Year is
intended to coincide with Tenant's fiscal year.
"Major" shall mean each of the
parties to the REA, as more particularly set forth in
Exhibit D attached hereto and made a part hereof.
"Minimum Annual Rent" shall
have the meaning ascribed thereto in Section 4.1.
"Mortgages" shall have the
meaning ascribed thereto in Section 13.3.
"Notice" shall have the meaning
ascribed thereto in Section 13.1(a).
"Option(s)" shall have the
meaning ascribed thereto in Article XII.
"Percentage Rent" shall have
the meaning ascribed thereto in Section 4.2(a).
"Permitted Use" shall mean any
lawful use which complies with the REA and is not
prohibited for the Premises by the REA.
"Person" means any individual,
partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint
venture, governmental authority or other entity of
whatever nature.
"Premises": That certain real
property and improvements thereon described in Exhibit
C attached hereto and made a part hereof.
"Prohibited Use" shall mean any
use which is prohibited for the Premises by the REA.
"REA" shall mean that certain
East Hills Mall Construction, Operation and Reciprocal
Easement Agreement and each of the other documents
related thereto, as more particularly described in
Exhibit D attached hereto and made a part hereof, all
as the same may be amended or modified from time to
time.
"Renewal Term(s)" shall have
the meaning ascribed thereto in Article XII.
"Rent": Minimum Annual Rent,
Percentage Rent, utilities charges, Impositions,
insurance costs and all other amounts and charges
payable by Tenant under any provision of this Lease.
"Requirements" shall mean all
federal, state and local statutes, laws, ordinances,
rules, regulations, authorizations and requirements
relating to the Premises or the use thereof, including,
without limitation, planning, zoning, subdivision,
environmental, toxic and hazardous waste, health, fire
safety and handicap access and all encumbrances,
covenants, conditions and restrictions, violation of
which encumbrances, covenants, conditions and
restrictions could either create a lien or result in a
termination of any agreement beneficial to the use or
manner of use of the Premises or any portion thereof.
"Shopping Center": The land
and improvements known as "East Hills Mall", with a
street address of 2900 Mall View Road, in the City of
Bakersfield, County of Kern, and State of California,
more particularly described in Exhibit A attached
hereto and made a part hereof and depicted on the site
plan attached hereto as Exhibit B and made a part here-
of.
"Taking" shall have the meaning
ascribed thereto in Section 7.2(a).
"Tenant's Employees and
Invitees" shall have the meaning ascribed thereto in
Section 5.4.
"Term": The 10-year period
commencing on the Term Commencement Date and expiring
on August 20, 2008, as such term may be extended or
shortened pursuant to the terms hereof, including,
without limitation, as it may be extended for the
period of any Renewal Term(s).
"Term Commencement Date":
August 20, 1998.
"Unavoidable Delays" shall have
the meaning ascribed thereto in Section 13.4.
Section 1.2 Effect of Basic Terms. Each of
the foregoing definitions and basic provisions is set
forth in this Article I for convenient reference only
and shall be construed in conjunction with, and limited
by, references thereto in other provisions of this
Lease.
ARTICLE II
GRANT AND TERM
Section 2.1 Grant and Term of Lease.
(a) Landlord does hereby let and lease to Tenant the
Premises, together with all right to use the Common
Areas for the Term, subject to the terms and conditions
set forth in this Lease.
(b) Landlord reserves the right to enter the Premises
at any time in case of emergency and at all other
reasonable times and upon reasonable advance notice (i)
to inspect the condition of the Premises; and (ii) to
make repairs to the building in which the Premises are
located, to the extent Landlord is required to do so,
or is otherwise permitted to do so, pursuant to the
terms of this Lease.
Section 2.2 Acceptance of Premises; Quiet
Enjoyment.
(a) Acceptance of Premises. Tenant accepts the
Premises "as-is," but subject to the express
representations, warranties and covenants of Landlord
set forth in the Asset Purchase Agreement and in this
Lease.
(b) Quiet Enjoyment. Landlord covenants that Tenant,
upon paying the Rent and performing and observing all
other terms and conditions of this Lease to be
performed or observed by Tenant, shall peacefully and
quietly have, hold and enjoy the Premises and the
appurtenances thereto throughout the Term without
hindrance, ejection or molestation by Landlord or any
other person or entity lawfully claiming through
Landlord or claiming paramount title to Landlord,
subject only to the terms of this Lease, the REA and
any Mortgage or ground lease to which this Lease is
subordinate.
Section 2.3 Surrender of Premises. Upon
the expiration or earlier termination of the Term,
Tenant shall deliver up and surrender to Landlord
possession of the Premises, including all alterations,
additions, improvements and fixtures, other than
Tenant's trade fixtures, in good order, condition and
state of repair, ordinary wear and tear excepted, and
shall deliver all keys to the Premises to the office of
Landlord at the Shopping Center or as otherwise
directed by Landlord. Tenant shall have fifteen (15)
days after the date the Term of this Lease expires or
earlier terminates to remove its personal property and
trade fixtures; provided, however, that (a) Tenant
shall repair all damage to the Premises resulting from
or arising out of such removal, (b) during such period
Tenant shall perform and be liable for all obligations
and conditions imposed on Tenant hereunder except for
the payment of Rent, including, without limitation,
maintenance, repair, apportionment of taxes,
maintenance of insurance, compliance with Requirements
and assumption of liability for the Premises. The
obligations set forth in the preceding sentence shall
survive the termination of this Lease. Any property of
Tenant not removed from the Premises within such
fifteen (15) day period shall be deemed abandoned. In
addition to all other remedies available, Landlord may,
but shall not be obligated to, retain or dispose of any
or all such property without liability to Tenant. In
the event that Landlord elects to dispose of such
property, Landlord shall so notify Tenant, and Tenant
shall, no later than ten (10) days after such notice,
remove all such property from the Premises; provided,
however, that if Tenant fails to so remove such
property, then Landlord may do so, and Tenant shall pay
to Landlord, on demand, all costs and expenses incurred
by Landlord in disposing of such property, including,
without limitation, reasonable attorneys' fees and
disbursements, together with interest thereon, calcu-
lated at the Interest Rate, from the date Landlord ex-
pended such amounts.
Section 2.4 Holding Over. If not sooner
terminated, this Lease shall end on the date set forth
in the definition of "Term" in Section 1.1 without the
necessity of notice from either Landlord or Tenant to
terminate this Lease, Tenant hereby waiving notice to
vacate the Premises. If Tenant, or any party claiming
under Tenant, including, without limitation,
subtenants, licensees or concessionaires, remains in
possession of the Premises or any part thereof after
the expiration or termination of this Lease, no tenancy
or interest in the Premises shall result therefrom but
such holding over shall, at Landlord's option, be
deemed a month-to-month tenancy and, otherwise, shall
be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal. As
Landlord's sole remedy for such holding over, Tenant
shall pay to Landlord for any full or partial month
Tenant holds over in the Premises after the expiration
or termination of this Lease a sum equal to one hundred
fifty percent (150%) of the Minimum Annual Rent and
Percentage Rent paid or payable by Tenant under this
Lease with respect to the last full month of the Lease
Term.
ARTICLE III
MATTERS RELATED TO RECIPROCAL EASEMENT AGREEMENT
Section 3.1 Lease Controls Over REA. As
between Landlord and Tenant, the terms and provisions
of this Lease shall control notwithstanding any
conflict with the provisions of the REA. Tenant shall
be fully liable for the performance of all obligations
under the REA in accordance with all of the terms and
provisions thereof, to the extent that Tenant has
expressly assumed responsibility for the performance of
any such obligations under the terms of this Lease.
Landlord is and shall remain fully liable for the
performance of all of Landlord's obligations under the
REA in accordance with all of the terms and provisions
thereof, to the extent that Tenant has not expressly
assumed responsibility for the performance of such
obligations under the terms of this Lease.
Section 3.2 Covenants Regarding REA.
Landlord will fully and faithfully carry out and
perform the terms, covenants, provisions and conditions
of the REA to be performed by the Landlord. Tenant
will fully and faithfully carry out and perform the
terms, covenants, provisions and conditions of the REA
which, under the express terms of this Lease, are to be
performed by the Tenant. Landlord will exert its best
efforts in exercising all of Landlord's rights and
remedies under the REA to enforce performance of all
terms, covenants, provisions, and conditions of the
REA; and Landlord will not take any of the actions
requiring Landlord's approval thereunder, without first
having delivered to Tenant a copy of the request for
approval and any documentation or material as to which
such approval is requested or required and thereafter
obtained Tenant's written approval thereof, which
approval shall not be unreasonably withheld,
conditioned or delayed. Landlord will not enter into
any agreement amending, supplementing or cancelling the
REA without first obtaining Tenant's prior written
approval thereto, which approval shall not be
unreasonably withheld, conditioned or delayed.
Landlord hereby appoints Tenant as Landlord's true and
lawful attorney-in-fact to take in Landlord's name
whatever reasonable action Tenant may deem appropriate
to enforce performance of the terms of the REA and to
avail itself on Landlord's behalf of any remedy therein
granted Landlord in the event (i) Tenant shall notify
Landlord that the obligations under the REA are not
being properly performed and (ii) Landlord shall fail
to take action to Tenant's reasonable satisfaction
within a reasonable time after receiving notice
thereof.
It is the intent of the parties to this Lease
that this Lease and the REA are and shall remain
mutually dependent and co-existent documents. Tenant
shall have the right (in its sole and absolute
discretion) to terminate this Lease by giving Landlord
notice to such effect within ninety (90) days after the
REA shall, under its express terms and conditions,
expire or terminate or be cancelled, and this Lease
shall terminate on the last day of the month next
succeeding the month in which such notice is given.
ARTICLE IV
RENT AND OTHER CHARGES
Section 4.1 Minimum Annual Rent. Tenant
agrees to pay to Landlord as rental for the Premises
the sum of Three Hundred Fifty-Three Thousand One
Hundred Fifty-Nine Dollars ($353,159.00) per Lease Year
(the "Minimum Annual Rent"), payable in advance in
equal monthly installments of Twenty-Nine Thousand Four
Hundred Twenty-Nine and 91/100 Dollars ($29,429.91), on
or before the first (1st) day of each calendar month
for the balance of the Term. Minimum Annual Rent shall
be prorated (on the basis of a 30-day month and 360-day
year) for any partial month and partial Lease Year
comprising a portion of the Term of this Lease. In the
event that the Term expires or is terminated on a date
other than the last day of a calendar month, Tenant
shall pay Landlord, on the first (1st) day of the last
month of the Term, a pro rata portion of a monthly
installment of such Minimum Annual Rent, calculated on
a per diem basis for a month of thirty (30) days.
Section 4.2 Percentage Rent.
(a) Formula for Calculation. In addition to Minimum
Annual Rent, Tenant covenants and agrees to pay to
Landlord as additional rent for each Lease Year the sum
of Three percent (3.0%) of the amount by which Tenant's
Gross Sales for such Lease Year exceeds the Minimum
Annual Rent ("Percentage Rent"). Percentage Rent shall
be payable, in arrears, on or before March 10 for the
immediately preceding Lease Year. The amount of
Percentage Rent payable by Tenant hereunder for the
first Lease Year shall be prorated by computing the
Percentage Rent that would be payable based on Gross
Sales for the first 365 days of the Term and
multiplying that number by a fraction, the numerator of
which is the number of days in the first Lease Year and
the denominator of which is 365. Such prorated
Percentage Rent for the first Lease Year shall be
payable prior to the 455th day of the Term. The
Percentage Rent payable by Tenant for the final Lease
Year shall be prorated by computing the Percentage Rent
that would be payable based on Gross Sales for the last
365 days of the Term and multiplying that number by a
fraction, the numerator of which is the number of days
in the final Lease Year and the denominator of which is
365. Such prorated Percentage Rent for the final Lease
Year shall be payable within 90 days after the Term
expiration date.
(b) Annual Report. On or before March 10 during the
Term (including the March 10 following the end of the
Term), Tenant shall furnish Landlord with a written
statement (the "Annual Report"), certified by Tenant's
chief financial officer or comptroller, of total Gross
Sales made from the Premises during the preceding Lease
Year, which Annual Report shall contain Tenant's
computation of Percentage Rent for such Lease Year.
The Annual Report shall be in form reasonably
satisfactory to Landlord and shall contain such details
and breakdown as may accurately depict Gross Sales.
The Annual Report shall not carry forward transactions
completing in the preceding Lease Year, or carry back
transactions completed in the following Lease Year.
(c) Records. Tenant shall maintain at the Premises
or at its principal record keeping office within the
continental United States at all times during the Term,
full, complete and accurate books of account and
records in accordance with generally accepted
accounting practices consistently applied for all
operations of the business conducted in or from the
Premises, including the recording of Gross Sales and
the receipt of all merchandise into, and the delivery
of all merchandise from, the Premises during the Term,
and shall retain such books and records, copies of all
tax reports and tax returns submitted to taxing
authorities, as well as copies of contracts, vouchers,
checks, inventory records, electronic data recordings
and other documents, recordings, and papers in any way
related to the operation of such business for at least
three (3) years from the end of the period to which
they are applicable, or, if any audit is required or a
controversy should arise between the parties hereto
regarding the Rent payable hereunder, until such audit
or controversy is terminated, even though such
retention period may extend beyond the expiration of
the Term or earlier termination of this Lease.
(d) Review of Books and Records. The acceptance by
Landlord of payments of Percentage Rent or any Annual
Report pursuant to Section 4.2(b) above shall not
prejudice Landlord's right to examine Tenant's books,
records and accounts in order to verify the amounts set
forth thereon. Landlord may at any reasonable time
during the Term (but not more frequently than once
during any calendar year) cause a complete or partial
audit to be made of Tenant's books, records and other
documents relating to the Premises, including the books
and records of any subtenant, licensee or
concessionaire, for all or any part of the three (3)
year period immediately preceding the day of the giving
of such notice by Landlord to Tenant. Landlord or its
duly authorized representatives shall have full and
free access to such books and records and the right to
require of Tenant, its agents and employees, such
information or explanation with respect to such books
and records as may be necessary for a proper
examination and audit thereof. If such audit discloses
an understatement in an Annual Report of Gross Sales,
Tenant shall pay the deficiency in Percentage Rent
with, interest thereon calculated at the Interest Rate,
and, if Gross Sales have been understated in any Annual
Report by four percent (4%) or more, Tenant shall pay
to Landlord, as Rent, the cost of said audit, upon
demand.
(e) Confidentiality. Any information regarding
Tenant's business operations delivered to or made
available to Landlord, or otherwise obtained by
Landlord in the exercise of its rights under subsection
(d), above, shall be held in strictest confidence by
Landlord. Landlord shall disclose such information
only to its accountants, attorneys and other
consultants and shall require all such parties to keep
all information regarding Tenant strictly confidential.
Nothing in this subsection (e) prohibits Landlord from
disclosing such material when ordered to do so by a
court of competent jurisdiction, or when necessary to
properly plead or prosecute a legal action brought by
Landlord against Tenant for nonpayment of Percentage
Rent.
Section 4.3 Utilities Charge.
(a) Tenant shall apply to the municipality or
respective utilities companies for all required utility
services to the Premises. Tenant shall pay all
required deposits and meter charges for utilities to
the Premises to the respective utility supplier(s).
(b) Tenant shall pay promptly, as and when same shall
become due, all water rents, rates and charges, all
sewer rents, rates and charges and all charges for
electricity, gas, heat, steam, hot and/or chilled
water, air conditioning, ventilating, lighting systems,
sprinkler systems and all other utilities supplied to
the Premises.
Section 4.4 Common Area Maintenance Costs.
Tenant shall pay, as Rent, Common Area Maintenance
charges as specified in the REA or any lesser amount
specified in a separate agreement thereunder. Tenant
shall pay Common Area Maintenance charges as referenced
herein within thirty (30) days after Tenant has
received a bill therefor.
Section 4.5 Taxes.
(a) Tenant shall pay before delinquency all real and
personal property taxes, general and special
assessments, and other public charges levied upon or
assessed against the Premises, the land thereunder, or
any of the building structures, fixtures, equipment, or
improvements thereon (collectively, "Impositions").
Tenant shall deliver to Landlord reasonable evidence of
payment prior to the time said Impositions have become
delinquent.
(b) Any Imposition relating to a fiscal period of the
taxing authority, a part of which period is included
within the Term of this Lease and a part of which is
included prior to the beginning of the Term of this
Lease or after the termination of this Lease shall
(whether or not such Imposition shall be paid,
assessed, levied or imposed upon or become due and
payable and a lien upon the Premises or a part thereof
during the term of this Lease) be adjusted as between
Landlord and Tenant as of the Term Commencement Date or
as of the date of the termination of the Term of this
Lease, as the case shall require, so that Landlord
shall pay that proportion of such Imposition which that
part of such fiscal period included in the period of
time prior to the commencement or after the termination
of the Term, as the case may be, bears to such fiscal
period, and Tenant shall pay the remainder thereof.
(c) In the event Landlord is unable to secure
separate tax bills for Tenant as herein described, then
Tenant shall pay to Landlord, prior to such time as
said Impositions would be due and payable, all Imposi-
tions attributable to the Premises. Personal property
taxes shall be allocated directly to Tenant's personal
property. Real property taxes will be allocated by
virtue of the ratio of the Floor Area of the Premises
to the total gross leasable area in the Shopping
Center, which said gross leasable area shall not
include any part of the Common Area in the Shopping
Center, being assessed on the tax bill which relates to
the Premises.
(d) If Tenant fails to pay any such taxes,
assessments or other public charges which it is
obligated to pay as provided in this section before the
same become delinquent, then and in such event,
Landlord may pay the same together with any interest
and penalties thereon, and the amount so paid shall be
deemed additional Rent immediately due and payable by
Tenant to Landlord on demand, together with interest
thereon at the Interest Rate.
(e) Anything in this section to the contrary
notwithstanding, Landlord agrees that Tenant shall have
the right, at Tenant's sole cost and expense, to
contest the legality or validity of any Impositions
payable by Tenant, but no such contest shall be carried
on or maintained by Tenant after such Impositions
become delinquent unless Tenant shall have duly paid
the amount involved under protest or shall procure and
maintain a stay of all proceedings to enforce any
collection thereof and any forfeiture or sale of the
leased property, and shall also provide for payment
thereof together with all penalties, interest, costs
and expenses by deposit of a sufficient sum of money or
by a good and sufficient undertaking as may be required
by law to accomplish such stay. Landlord shall, at the
request of Tenant and at Tenant's sole expense, execute
or join in the execution of any instrument of documents
necessary in connection with any such contest except
bonds of undertakings. In the event of any such
contest made by Tenant, Tenant shall promptly, upon
final determination thereof, pay and discharge the
amount indicated or resulting from said contest,
together with any penalties, fines, interest, costs and
expenses that may have accrued thereon.
Section 4.6 Late Payment Charges. Late
payments of Rent or any other sum due from Tenant
hereunder, including all amounts paid by Landlord on
behalf of Tenant to satisfy any condition or covenant
of this Lease and all costs incurred by Landlord in
enforcing the terms of this Lease, shall bear interest
from the date Tenant receives written notice of such
late payment or default (as applicable) until paid at
the Interest Rate.
Section 4.7 Rent Payments. All Rent
payable by Tenant under this lease shall be paid in
United States Dollars without prior demand therefor and
without any deductions, offsets or counterclaims except
those expressly permitted under the terms of this
Lease, to Landlord and shall be delivered on or before
the due date thereof via wire transfer to
Bank of America, S.A.
Principal Office: Madrid
1 Capitan Haya St.
28009 Madrid SPAIN
For Credit To:
El Corte Ingles, S.A.
Account number 31922020
or to such other payee and at such other place as
Landlord may hereafter designate from time to time by
written notice to Tenant. Notwithstanding anything to
the contrary in this Lease, Tenant may withhold any
portion of Rent which Tenant is required to withhold by
virtue of Landlord's status as a foreign person under
Section 1445 of the Internal Revenue Code or other
applicable law.
ARTICLE V
OPERATION OF PREMISES AND COMMON AREAS
Section 5.1 Permitted Use.
(a) Tenant shall use the Premises only for the
Permitted Use and for no other purpose whatsoever.
(b) Tenant covenants that Tenant shall not use or
allow the Premises or any part thereof to be used or
occupied for any Prohibited Use or any immoral or
unlawful purpose or in violation of any certificate of
occupancy or certificate of compliance for the
Premises.
Section 5.2 Signs. Tenant shall have the
right, without Landlord's consent, to erect any and all
signs on or about the Premises it elects, provided that
such signage complies with the REA and all
Requirements. From time to time upon Tenant's request,
Landlord covenants to assist Tenant (at no cost or
expense to Landlord) in processing any and all
approvals necessary for Tenant to erect such signage.
Section 5.3 Alterations of Premises.
(a) All changes, alterations or
modifications to the Premises (collectively,
"Alterations") shall be made in accordance with this
Section 5.3. Tenant shall have the right to perform
non-structural modifications to, remodel and
redecorate, retexturize, recarpet and repaint the
Premises without obtaining the prior written consent of
Landlord; provided (i) the proposed Alteration does not
affect the exterior appearance of the Premises,
including, without limitation, the storefront or the
storefront sign of the Premises, or the roof,
foundation, supports or structural integrity of the
building of which the Premises is a part; (ii) Tenant
submits an information copy of all remodeling plans to
Landlord at least thirty (30) days prior to the date
any such work is scheduled to commence; (iii) the total
cost of all work involved in the Alteration does not
exceed Three Hundred Thousand Dollars ($300,000) in any
one project or an aggregate amount of Six Hundred
Thousand Dollars ($600,000) in any one Lease Year; and
(iv) such work does not violate any code, ordinance or
Requirement and does not cause Landlord's insurance
rates to increase. Except for the foregoing, Tenant
shall not make any Alterations to any portion of the
Premises without, in each instance, obtaining
Landlord's prior written consent.
(b) All work ("Work") pertaining to any Alteration to
the Premises, including, without limitation, Tenant's
Work, shall comply with the following:
(i) No Work shall be undertaken
until Tenant shall have procured and paid for, so
far as the same may be required, from time to
time, all permits and authorizations of all
municipal departments and governmental
subdivisions having jurisdiction. Provided no
default exists hereunder, Landlord shall join in
the application for such permits and
authorizations whenever such action is necessary;
provided, however, that Landlord shall not incur
any expense or be subject to any liability as a
result of joining in any such application.
Within ten (10) days after completion of the
Work, Tenant shall deliver to Landlord a
certificate of occupancy or such similar
certificates as may be required or customary by
applicable laws and legal requirements.
(ii) All Work shall be performed
promptly and in a good and workmanlike manner and
in compliance with all applicable permits and
laws, and in accordance with the orders, rules
and regulations of the National Board of Fire
Underwriters or any other body hereafter
exercising similar functions, and Tenant shall
furnish Landlord with evidences and assurances
reasonably acceptable to Landlord that all such
Work shall be completed, subject to Unavoidable
Delays, at least one (1) year prior to the end of
the Term of this Lease.
(iii) The cost of any Work shall
be paid promptly by Tenant so that the Premises
shall at all times be free and clear of liens for
labor and materials supplied or claimed to have
been supplied in connection therewith.
(iv) Tenant shall carry, or
shall cause to be carried, worker's compensation
insurance covering all persons employed in
connection with any Work and with respect to whom
death or bodily injury claims could be asserted
against Landlord, Tenant or the Premises, and,
without duplication of any insurance required by
Article VIII hereof, adequate all-risk and
builders risk insurance for the mutual benefit of
Tenant and Landlord in amounts satisfactory to
Landlord and, at Landlord's request, such other
insurance in favor of Landlord in types and
amounts as are reasonable and customary, all at
Tenant's expense, at all times when any such Work
is in progress; provided, however, that Tenant
shall be fully liable for any failure to maintain
such insurance, including, without limitation,
Tenant's obligation to indemnify Landlord for the
failure to maintain insurance in accordance with
the provisions of this Lease. All such insurance
shall be provided by a company or companies of
recognized responsibility and reasonably
satisfactory to Landlord, and all policies or
certified copies of policies issued by the
respective insurers, bearing notations evidencing
the payment of premiums or accompanied by other
evidence satisfactory to Landlord of such
payment, shall be delivered to Landlord prior to
the commencement of any Work.
Section 5.4 Use of Common Areas.
(a) All Common Areas shall be subject to the
exclusive control and management of Developer as set
forth in the REA. Tenant and Tenant's officers,
directors, employees, agents, subtenants, contractors,
subcontractors, concessionaires and licensees, and the
officers, directors, employees and agents of Tenant's
subtenants, concessionaires and licensees, and the
customers, patrons and business invitees of Tenant and
of Tenant's subtenants, concessionaires and licensees
(hereinafter, collectively, "Tenant's Employees and
Invitees") shall have the non-exclusive right to use
(without cost or expense to Tenant or Tenant's
Employees or Invitees other than as expressly provided
in this Lease) the Common Areas for the purpose of
gaining ingress to and egress from the Premises, for
the passage and parking of vehicles, and for the
passage and accommodation of pedestrians, such right to
be in common with Landlord and those occupants (and the
employees and invitees of such occupants) of the
Shopping Center from time to time authorized to use
said common areas for such purposes.
(b) Notwithstanding anything to the contrary
contained in Section 5.4(a) hereof, Landlord shall
exercise best efforts to cause Developer to maintain,
manage and operate the Common Areas (including, but not
by way of limitation, the parking area) in good order,
condition and repair in conformity with the REA so as
to at all times maintain an appearance and
attractiveness reasonably equivalent to the level of
same existing as of the date hereof. Developer's
obligations to be enforced by Landlord pursuant to the
preceding sentence in respect of the maintenance,
management and operation of the Common Areas shall
include, but not be limited to, the following:
(i) Undertaking such maintenance
and construction work (including replacements as
required) as is necessary to preserve and
maintain the utility of the Common Areas;
(ii) The care and maintenance of
all identification signs and all planters
(including those adjacent to the Premises but
excluding any signs and planters of Tenant) and
landscaping at the Shopping Center;
(iii) The adequate illumination
of the Common Areas at all times of darkness that
Tenant is open for business (plus a period of
one-half hour after Tenant closes for business);
(iv) The payment prior to
delinquency of all real estate and personal
property taxes and assessments levied on the
Common Areas;
(v) The removal of dirt and
debris and rubbish (including the regular
sweeping of the parking area and all sidewalks);
and
(vi) The operation, management
and maintenance of the enclosed mall, including
the heating, ventilating, air-conditioning,
lighting and housekeeping of the same and the
maintenance (and replacement as required) of
landscaping therein.
Section 5.5 Compliance with REA. Tenant
shall abide by the terms of the REA. Landlord agrees
that it will not change, amend or alter (or agree or
consent to change, amend or alter) any term or
condition of the REA without the prior written consent
of Tenant, which consent shall not be unreasonably
withheld.
Section 5.6 Compliance with Requirements.
(a) Insofar as the same relate to or are caused by
Tenant's occupancy and use of the Premises, and
Tenant's other activities under this Lease, throughout
the Term, Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future
Requirements applicable to the Premises, subject,
however, to Tenant's rights to contest any such
Requirements, as set forth in clause (b) below. Tenant
shall likewise comply with the provisions of all of
Tenant's insurance policies required to be maintained
hereunder or otherwise carried by Tenant with respect
to the Premises from time to time.
(b) Tenant shall have the right, after prior notice
to Landlord, at Tenant's sole cost and expense, to
contest by appropriate legal proceedings diligently
prosecuted in good faith, in the name of Tenant, the
validity or application of any Requirements; provided,
however, that Tenant may delay compliance therewith
until the final determination of such proceeding only
if by the terms of any such Requirements, compliance
therewith pending the prosecution of any such
proceeding may legally be delayed without subjecting
Landlord to the risk of any criminal liability, or
imminent forfeiture of its estate, for failure so to
comply therewith, and provided further that if any
fine, lien, charge or civil liability may be incurred
by reason of such non-compliance, (i) Tenant furnishes
to Landlord security satisfactory to Landlord, against
such fine, lien, charge or civil liability in
accordance with Section 5.7, and (ii) Tenant shall be
solely responsible for payment of such fine, lien,
charge or civil liability and shall indemnify, defend
and hold Landlord harmless with respect thereto.
Section 5.7 Liens.
(a) Tenant agrees that it will pay or cause to be
paid all costs for work done by it or caused to be done
by it on the Premises of a character which will or may
result in liens on Landlord's reversionary estate
therein, and Tenant shall keep the Premises free and
clear of all mechanics' liens and other liens on
account of work done for Tenant or persons claiming
under it. If any such lien shall at any time be filed
against the Premises, Tenant shall either cause the
same to be discharged within thirty (30) days after the
recording thereof, or, if Tenant, in Tenant's
discretion and in good faith, determines that such lien
should be contested, shall furnish such security as may
be necessary or required to prevent any foreclosure
proceedings against the Premises during the pendency of
such contest. If Tenant shall fail to furnish such
security, then, in addition to any other right or
remedy of Landlord resulting from such failure,
Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due,
procuring the discharge of such lien by giving
security, or in such other manner as is, or may be,
prescribed by law. Tenant shall repay to Landlord, as
Rent, on demand, all sums disbursed or deposited by
Landlord pursuant to the provisions of this Section
5.7, including all costs, expenses and attorneys' fees
incurred by Landlord in connection therewith. Nothing
contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to
liability under any mechanics' lien or other lien law.
(b) Should any claims of lien be filed against the
Premises or any action affecting the title to the
Premises be commenced, the party receiving notice of
such lien or action shall forthwith give the other
party written notice thereof. Landlord or its
representative shall have the right to post and keep
posted upon the Premises notices of nonresponsibility
or such other notices which Landlord may deem to be
proper for the protection of Landlord's interest in the
Premises. Tenant shall, before the commencement of any
work which might result in any such lien, give to
Landlord advance written notice of its intention to do
so in reasonably sufficient time to enable the posting
of such notices.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense
(except as provided to the contrary in this Section
6.1) at all times during the Term and any extensions
thereof, keep the Premises in good order, condition and
repair, damage by casualty excepted. Subject to the
limitations set forth in Section 6.1(b), Tenant's
maintenance and repair obligation hereunder include,
without limitation:
(i) all equipment or facilities
serving the Premises, such as plumbing, heating,
air conditioning, ventilating, electrical or
lighting facilities, fire sprinkler and/or
standpipe and hose or other automatic fire
extinguishing systems, including fire alarm
and/or smoke detection systems and equipment,
fire hydrants, fixtures, walls (interior and
exterior) including reasonably periodic painting
of interior walls in painting of exterior walls
to the extent required by the REA, ceilings,
floors, windows, doors, plate glass, landscaping,
driveways, parking lots, fences, signs, sidewalks
and parkways; and
(ii) restorations, replacements
or renewals, when necessary, to keep the Premises
and all improvements thereon or a part thereof in
good order, condition and state of repair.
(iii) Tenant shall maintain
maintenance contracts with respect to the
elevators, the escalators and the heating,
ventilation and air conditioning systems located
in the Premises.
(b) Notwithstanding anything to the contrary in
Section 6.1(a), Tenant is not responsible for
maintenance, repairs or replacements which are
(i) the responsibility of
Landlord pursuant to Section 6.2, or
(ii) the responsibility of the
Developer or any other party pursuant to the REA.
(c) Notwithstanding anything to the contrary in
Section 6.1(a), if (i) any repair or replacement which
is reasonably estimated to exceed $100,000 is required
with respect to any portion of the Premises for which
Tenant is responsible pursuant to Section 6.1(a)
(hereinafter, a "Capital Repair"), and (ii) the Useful
Life of such Capital Repair (as defined herein) exceeds
the Remaining Term of the Lease (as defined herein),
then Landlord shall fund a portion of the cost of such
repair or replacement equal to a fraction, the
numerator of which is the Excess Useful Life (as
defined herein) and the denominator of which is the
Useful Life. As used herein, (A) the "Useful Life" of
a Capital Repair means the reasonably anticipated
useful life of such Capital Repair (determined by
generally accepted accounting standards, consistently
applied), (B) the "Remaining Term" means the portion of
the Term remaining, including the Renewal Term under
any Option which has been exercised, but not the
Renewal Term under any Option which has not been
exercised and (C) the term "Excess Useful Life" means,
with respect to a Capital Repair, the difference
between the Useful Life thereof and the Remaining Term.
As used herein, "Landlord's Capital Repair
Contribution" means, with respect to any Capital
Repair, Landlord's contribution to the cost of such
Capital Repair made pursuant to this Section 6.1(c).
Landlord shall fund Landlord's Capital Repair
Contribution within ten (10) business days after
receipt of invoices therefor from Tenant (which may be
submitted as Tenant receives invoices for such work).
(d) If Tenant exercises an Option after the Excess
Useful Life of a Capital Repair has been determined,
then Tenant shall reimburse to Landlord, on the first
day of the Renewal Term with respect to such Option, a
portion of Landlord's Capital Repair Contribution equal
to a fraction (not to exceed 100%), the numerator of
which is the Renewal Term and the denominator of which
is the Excess Useful Life. In order that this Section
6.1(d) may be properly applied with respect to
subsequent Option exercises, (i) the Excess Useful Life
of a Capital Repair will be deemed reduced by the
period of each Renewal Term with respect to which
payment is made by Tenant pursuant to this Section
6.1(d) and (ii) Landlord's Capital Repair Contribution
with respect to a Capital Repair will be deemed reduced
by each payment received by Landlord pursuant to this
Section 6.1(d) with respect to that Capital Repair.
Section 6.2 Landlord's Obligations.
Notwithstanding anything to the contrary herein,
Landlord shall be responsible throughout the Term for
maintaining and repairing all structural portions of
the Building, including the roof (including any
skylights), foundations, structural walls, and other
load-bearing portions of the structure.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage or Destruction.
(a) Tenant shall give Landlord prompt notice of any
damage to the Premises by fire or other casualty.
(b) If the Premises shall be rendered wholly
untenantable by a casualty, unless terminated pursuant
to Section 7.1(d)(i) or 7.1(d)(ii) hereof, this Lease
shall remain in full force and effect except that Rent
shall fully abate commencing on the date of loss and
continuing until the earlier to occur of: (i) the date
Tenant reopens the Premises for business, which
reopening Landlord and Tenant shall diligently work
together to expedite, or (ii) the date forty five (45)
days after Tenant completes the restoration, pursuant
to Section 7.1(e), of the structural elements of the
building of which the Premises form a part.
(c) If only a portion of the Premises shall be
rendered untenantable, this Lease shall remain in full
force and effect except that Rent shall partially abate
commencing on the date of loss and continuing until the
earlier to occur of: (i) the date Tenant reopens the
repaired portion of the Premises for business, which
reopening Landlord and Tenant shall diligently work
together to expedite, or (ii) the date forty five (45)
days after Landlord completes the restoration, pursuant
to Section 7.1(e), of the structural elements of the
building of which the Premises form a part. In such
event, the Rent shall be reduced to an amount computed
by multiplying the Rent applicable prior to such damage
by a fraction, the numerator of which is the Floor Area
of the Premises tenantable after such damage and the
denominator of which is the Floor Area of the Premises
prior to such damage.
(d) If there shall be damage to the Shopping Center
by fire or other casualty, whether or not the Premises
is affected thereby, in which: (i) the Premises shall
be sufficiently damaged to render the entire Premises
wholly untenantable; (ii) the damage or destruction to
the Premises is to an extent that it cannot be repaired
with reasonable diligence within one (1) year after the
destruction or damage; (iii) either the Shopping Center
or the building of which the Premises are a part is
damaged to the extent of fifty percent (50%) or more of
its insured replacement cost; (iv) the loss is caused
by any risk not covered by either Landlord's or
Tenant's insurance; (v) the damage occurs during the
last three (3) years of the Term; or, (vi) any
insurance proceeds received by Landlord or Tenant for
such damage are inadequate or unavailable for repairs,
other than because of any deductible amount of any
policy other than Tenant's earthquake insurance policy,
then, in any such event, either party shall have the
option to terminate this Lease. Said option shall be
exercised, if at all, by notice to the other party on
or before the ninetieth (90th) day after the date of
loss and, if exercised, shall be effective on the last
day of the first (1st) full calendar month falling at
least sixty (60) days after such notice. If Tenant
elects to terminate this Lease pursuant to this Section
7.1(d), then Tenant shall turn over to Landlord any
insurance proceeds received by Tenant with respect such
damage and destruction (other than proceeds of
insurance covering tenant's personal property
(including, without limitation, merchandise and
equipment) and trade fixtures. If either party elects
to terminate this Lease pursuant to clause (iv) or
(vi), above, the other party may avoid termination of
this Lease by (i) committing in writing to pay the
additional funds required to complete the necessary
repairs and restoration, which writing shall be
delivered to the terminating party within ten (10) days
after delivery of the termination notice, and (ii)
providing to the terminating party, within a reasonable
period after delivery of such notice, not to extend
beyond the date which is 90 days after the date of
loss, security for payment of such excess costs
reasonably satisfactory to the terminating party and
its lenders (if any).
(e) If there shall be damage to the Premises by fire
or other casualty and this Lease is not terminated,
Tenant shall promptly commence and diligently prosecute
the restoration and repair of the Premises, including
all exterior walls, roofs, floors and supports, all
internal partitions, fixtures, trade fixtures,
shelving, casework, furniture and furnishings used in
connection with the operation of Tenant's business in
the Premises, as nearly as practicable to their
respective conditions prior to such damage.
Section 7.2 Condemnation.
(a) The term "Taking" as used in this Section 7.2,
shall mean an appropriation or taking under the power
of eminent domain by any public or quasi-public
authority or a voluntary sale or conveyance in lieu of
condemnation but under threat of condemnation.
(b) In the event of a Taking of the entire Premises,
this Lease shall terminate and expire as of the date
possession is delivered to the condemning authority and
Landlord and Tenant shall each be released from any
liability accruing pursuant to this Lease after such
termination.
(c) If there is a Taking of (a) more than twenty-five
percent (25%) of the Premises, or (b) any portion of
the Building and, regardless of the amount taken, if
the remainder of the Building is not one undivided
structure, either Landlord or Tenant may terminate this
Lease as of the date Tenant is required to vacate the
Premises upon giving notice in writing of such election
within thirty (30) days after receipt of Tenant from
Landlord of written notice that a portion of the
Premises has been so appropriated or taken.
(d) If this Lease is terminated as a result of a
Taking, Tenant shall be entitled to any separate award
made to Tenant for relocation costs, good will and any
of Tenant's fixtures and equipment which are not
capable of removal from the Premises; provided such
separate award does not diminish Landlord's award.
Subject to the foregoing, Landlord shall be entitled to
the entire award or compensation in such condemnation
proceedings, or settlement in lieu thereof,
irrespective of whether such award or settlement shall
be obtained as compensation for diminution in value to
the leasehold or the leasehold improvements thereto or
to the fee of the Premises, but the Minimum Annual
Rent, Percentage Rent and any other Rent for the last
month of Tenant's occupancy shall be prorated and
Landlord shall refund to Tenant any Minimum Annual
Rent, Percentage Rent and other Rent paid in advance.
Notwithstanding the foregoing and subject to Section
2.3, in the event this Lease is terminated as provided
above, Tenant may remove all of its removable trade
fixtures, furniture and equipment from the Premises,
provided that Tenant immediately repairs any damage
occasioned to the Premises by reason of such removal so
as to leave the Premises in a neat and clean condition.
Notwithstanding the foregoing, in no event shall Tenant
be entitled to any portion of any award or
compensation, if following the payment of such sum to
Tenant, there would not be sufficient funds or proceeds
to pay the unpaid principal balance of any obligation
of Landlord secured by a deed(s) of trust or
mortgage(s) on the fee interest in the Premises and/or
the Building.
(e) In the event of a Taking, if Landlord and Tenant
elect not to so terminate this Lease as provided above
(or have no right to so terminate), Tenant agrees, at
Tenant's cost and expense (subject to Tenant's rights
hereunder) as soon as reasonably possible after the
Taking, to restore the Building on the Land remaining
to a complete unit of like quality and character as
existed prior to the Taking, and thereafter the Minimum
Annual Rental payable hereunder shall be reduced on an
equitable basis, taking into account the relative value
of the portion taken as compared by the portion
remaining. In such event, Tenant shall be entitled to
receive any and all award or compensation in connection
with such Taking until Tenant has received funds
sufficient to complete such restoration, and Landlord
shall be entitled to receive the remaining portion of
the total award of compensation.
ARTICLE VIII
INSURANCE
Section 8.1 Tenant's Insurance.
(a) Tenant shall carry, from and at all times after
the date hereof, at Tenant's sole cost and expense, the
following insurance:
(i) public liability and
property damage insurance covering the Premises
and Tenant's use thereof against claims for
personal injury or death and property damage
occurring in, on or about the Premises and
affording protection to the limits of not less
than Three Million Dollars ($3,000,000) per
occurrence with respect to any one (1) bodily
injury or damage to property, which insurance
shall, in addition, extend to any liability of
Tenant arising out of the indemnities contained
in Section 8.5 by contractual liability
endorsement. All liability policies shall
contain a so called "occurrence clause";
(ii) fire and casualty insurance
covering the Premises, in an amount equal to
ninety percent (90%) of the replacement cost
thereof (excluding foundations and footings);
(iii) fire insurance with
extended coverage, covering such items of
Tenant's merchandise, inventory, signs,
furniture, trade fixtures, equipment, leasehold
improvements and other property of Tenant, now or
hereafter placed in, on or about the Premises in
an amount equal to ninety percent (90%) of the
replacement cost thereof;
(iv) business interruption
insurance covering Tenant's loss of business
income for the period it would take to
reconstruct the Premises after a casualty using
reasonable diligence and rental loss insurance
covering Tenant's obligation to pay Minimum
Annual Rent under this Lease;
(v) in the event Tenant installs
in, adjoining or beneath the Premises any steam
boiler or similar equipment, broad form boiler
insurance;
(vi) earthquake insurance in an
amount equal to one hundred percent (100%) of the
replacement cost of the Premises, to the extent
the same is available at commercially reasonable
rates and with deductibles of commercially
reasonable amounts (it being agreed that Tenant
may maintain required earthquake coverage through
a blanket policy covering several (or all) store
locations owned or affiliated with Tenant and
having a maximum aggregate coverage limit of
Twenty Million Dollars ($20,000,000)); and
(vii) such other insurance as
may in Tenant's reasonable judgment be prudent to
carry from time to time.
(b) All insurance policies required to be carried by
Tenant shall be issued by companies with a general
policyholder's rating of not less than "A" and a
financial size rating of "VI" as rated in the most
current available "Best's Insurance Reports", and
qualified to do business in the State of California.
Each insurance policy shall name Landlord, Tenant and
Mortgagee as insureds as their interests may appear
and, to the extent possible, any other parties in
interest from time to time designated in writing by
notice from Landlord to Tenant. Executed copies of
each insurance policy, duplicate originals or original
certificates thereof (provided that such certificates
shall evidence all of the required coverage herein
provided) shall be delivered by Tenant to Landlord
within ten (10) days after delivery of possession of
the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of prior policies.
All insurance policies shall contain a provision that
the underwriter will give Landlord and Mortgagee at
least thirty (30) days prior written notice of any
cancellation or lapse of such insurance or the
effective date of any reduction in the amounts thereof
or increase of the deductible. All insurance policies
shall be written as primary policies which do not
contribute to, and are in excess of, any coverage which
Landlord may carry. All insurance policies shall
contain an agreement by the insurers that the coverage
afforded thereby shall not be affected by any
construction work in or about the Premises and that no
act or omission by the Tenant shall impair or affect
the rights of the Landlord to receive and collect the
proceeds under the policies.
(c) Any insurance required to be carried by Tenant
may be provided under a blanket policy of insurance
covering additional items or locations or insureds;
provided, however, that: (i) Landlord and Mortgagee
shall be named as an additional insured thereunder (or
covered by broad form Landlord endorsement or
contractual coverage); (ii) any such blanket policy or
policies shall specify total insurance allocated to
Tenant's improvements and property; and (iii) the
requirements for Tenant's insurance set forth herein
are otherwise satisfied. Tenant agrees to use its best
efforts to ensure that the coverage afforded Landlord
and any such other parties in interest under any future
blanket policy of insurance will not be diminished by
reason of the use of such blanket policy of insurance,
and Tenant shall expend commercially reasonable amounts
in connection with obtaining such coverage.
(d) The deductibles and self-insured retentions
included in Tenant's insurance policies shall be in
amounts as may be commercially reasonable from time to
time.
(e) If Tenant refuses or neglects to secure and
maintain insurance policies complying with the
provisions of this Section 8.1, Landlord may secure the
appropriate insurance policies and Tenant shall pay,
upon demand, the costs of same to Landlord as Rent.
Section 8.2 Landlord's Insurance. Landlord
at its cost shall carry, from and at all times after
the date of delivery of the Premises to Tenant, all
insurance required to be carried by Landlord pursuant
to (i) any Mortgages which either presently or in the
future may exist as a lien against the Premises and
(ii) the REA, to the extent that insurance required to
be carried by Tenant pursuant to this Lease is
insufficient to satisfy either of such obligations of
Landlord.
Section 8.3 Waiver of Subrogation.
Landlord and Tenant each waive any rights it may have
against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be,
their respective property, the Premises or its contents
or to other portions of the Shopping Center arising
from any liability, loss, damage or injury caused by
fire or other casualty for which property insurance is
carried or required to be carried pursuant to this
Lease. Each of the parties hereto, on behalf of their
respective insurance companies insuring the property of
either Landlord or Tenant against any such loss, to the
extent of any recovery under such insurance, waives any
right of subrogation that it may have against the
other. Each waiver shall be expressly included in, and
shall comply with the requirements of, the respective
insurance policies.
Section 8.4 Governmental and Insurance
Requirements.
(a) Tenant shall comply, at Tenant's sole cost and
expense, with all reasonable requirements of the
insurance underwriters, or any similar public or
private body, provided that any such requirements of
such insurance underwriters, or any similar public or
private body, are conditions to the continuance of any
of the insurance coverage required hereunder, and any
governmental authority having jurisdiction over
insurance rates with respect to the use or occupancy of
the Premises as a part of Shopping Center, including,
without limitation (i) installing fire extinguishers or
automatic dry chemical extinguishing systems; (ii)
making any changes, modifications, alterations or
additions in the sprinkler system within the Premises;
and (iii) relocating partitions, trade fixtures or
other contents within the Premises.
(b) Tenant shall not commit any act or suffer to
exist on the Premises any circumstances which will
violate any reasonable restrictions contained in any of
Tenant's or Landlord's policies of fire and casualty or
public liability insurance, prevent Landlord from
continuing the coverage presently provided in
Landlord's insurance policies from insurance companies
reasonably acceptable to Landlord or cause the rates
for any such policies to increase beyond the minimum
rates from time to time applicable to the Premises or
the Shopping Center for the Permitted Use, provided
such minimum rate would have been available to Landlord
but for Tenant's actions or use. In the event that
Landlord receives any notice from Landlord's insurance
company regarding any violation by Tenant of any of
Landlord's insurance policies, or of any proposed
increase in Landlord's premiums from the minimum rate
from time to time applicable thereunder because of any
act, omission or sufferance by Tenant in, on or under
the Premises, Landlord shall notify Tenant, and Tenant
shall reimburse Landlord as additional Rent the amount
of any such increase promptly following Landlord's
written demand therefor.
(c) In the event that Landlord receives any notice
from Landlord's insurance company regarding any
violation by Tenant of any of Landlord's insurance
policies, or of any proposed increase in Landlord's
premiums from the minimum rate from time to time
applicable thereunder because of any act, omission or
sufferance by Tenant in, on or under the Premises,
Landlord shall notify Tenant, and Tenant shall
reimburse Landlord as additional Rent the amount of any
such increase promptly following Landlord's written
demand therefor.
Section 8.5 Indemnification. To the
fullest extent permitted by law, Tenant covenants with
Landlord that Landlord shall not be liable for any
damage or liability of any kind or for any injury to or
death of persons or damage to property of Tenant or any
other person occurring from and after the date Tenant
is given access to the Premises from any cause
whatsoever related to the use, occupancy or enjoyment
of the Premises including, but not limited to, the
sidewalks and landscaped areas immediately adjacent to
the Building and Tenant's drive-through area, if any,
by Tenant or any person thereon or holding under Tenant
including, without limitation, damages resulting from
any labor dispute, and Tenant shall defend (using
counsel mutually approved by Landlord and Tenant or
Tenant's insurer), indemnify and save Landlord harmless
from all liability whatsoever on account of any real or
alleged damage or injury and from liens, claims and
demands related to the use of the Premises and its
facilities, or any repairs, alterations or improvements
(including any improvements and fixtures constructed or
installed by Tenant) which Tenant may make or cause to
be made with respect to the Premises, and any loss or
interruption of business or loss of rental income
resulting therefrom. Notwithstanding anything to the
contrary in the foregoing, Tenant shall not be liable
for damage or injury occasioned by the negligence or
willful misconduct of Landlord or any ground lessor,
mortgagee or owner of all or any part of the Shopping
Center or their respective employees, agents or
contractors.
Section 8.6 Landlord Exculpation. Landlord
shall endeavor to conduct its activities with respect
to the Premises in a prudent and businesslike manner.
However, Landlord shall not be liable for any damage to
property entrusted to employees of Landlord, its
partners or agents, nor for loss of or damage to any
property damage or loss of business which may be
sustained by the person, goods, ware, merchandise or
property of Tenant, its employees, invitees or
customers or any other person in or about the Premises
caused by or resulting from, but not limited to, fire,
steam, electricity, gas, water or rain which may leak
or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of same, whether the
injury, damage or loss of business results from
conditions arising upon the Premises, other portions of
the Shopping Center or from other sources, so long as
the same does not result from the negligence or wilful
misconduct of Landlord or its employees, agents, and
contractors or Landlord's breach of any of its express
obligations under this Lease. Landlord shall not be
liable for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the
Premises or in the Shopping Center or of defects
therein or in the fixtures or equipment. Landlord
shall not be liable for any damages arising from any
act or neglect of any other tenant in the Shopping
Center, except to the extent of Landlord's liability
for breach of Landlord's obligation to enforce the REA,
as provided in Section 3.2.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Notice to Landlord. If Tenant
wishes to assign its rights under this Lease or sublet
all or any portion of the Premises, Tenant shall
deliver written notice of its intention to do so to
Landlord at least thirty (30) days prior to the
effective date of any such proposed assignment or
subletting, specifying in such notice whether Tenant
proposes to assign or sublet, the proposed effective
date thereof, identification of the proposed assignee
or sublessee with a description of the proposed
business operations to be conducted at the Premises.
Such notice shall also be accompanied by current
financial statements of the proposed assignee or
subtenant, a copy of the proposed assignment or
sublease documents, or, if not available, a letter of
commitment or letter of intent setting forth material
terms and provisions of the proposed assignment or
sublease.
Section 9.2 Landlord's Approval. Landlord
will notify Tenant of its approval or disapproval of a
proposed assignment or sublease within a reasonable
time (in no event earlier than fifteen (15) days nor
longer than thirty (30) days) after receipt of such
notice from Tenant as set forth above. Landlord shall
not unreasonably withhold its approval of Tenant's
assignment of this Lease or subletting of the Premises.
The factors which may be viewed in determining the
reasonableness of Landlord's approval or disapproval of
a proposed assignment or subletting and the conditions
which may be imposed by Landlord as part of its
consenting thereto shall be as follows:
(a) The use of the Premises following
the assignment or sublease would
be different from the Permitted
Use set forth in this Lease;
(b) In Landlord's reasonable business
judgment, the proposed assignee or
subtenant lacks sufficient
business reputation or experience
to operate a business of the type
and quality permitted under the
terms of this Lease;
(c) In Landlord's reasonable business
judgment, the present financial
worth of the proposed assignee or
subtenant is inadequate to ensure
such assignee's or subtenant's
performance under the terms of its
agreement relating to the
Premises;
(d) The proposed assignment or
sublease transaction would breach
a covenant of Landlord respecting
radius, location, use or exclusive
use in any other lease, financing
agreement or other agreement
relating to the Shopping Center.
It is expressly understood and agreed that Landlord's
consent shall not be required for any transfer of
Tenant's interest under this Lease which is considered
to be a Permitted Transaction (as defined below).
Section 9.3 Permitted Transactions.
Notwithstanding anything to the contrary herein,
Landlord's consent shall not be required for any of the
following (collectively, "Permitted Transactions"):
(i) Any transfer by Tenant of any
interest under this Lease to any
corporation, partnership or other
entity which controls, is
controlled by, or is under common
control with the named Tenant
hereunder or its successors by
merger, consolidation or other
comparable transaction, the
primary purpose of which is not
the transfer of Tenant's interest
under this Lease.
(ii) Any transfer by Tenant of any
interest under this Lease to the
owner of a department store chain
with assets equal to or greater
than Tenant's.
(iii) Tenant may enter into concession
arrangements or license
agreements, or otherwise permit
the occupation and use of a
portion of the Premises by a
subtenant, licensee or
concessionaire, provided that the
areas covered by such licenses or
concession agreements do not
exceed usage in excess of twenty-five
percent (25%) of the Floor
Space of the Premises; provided,
however that all sales of
licensees or concessionaires shall
be included within Gross Sales as
defined in this Lease.
Section 9.4 Compliance with REA. Tenant
shall not assign its rights under this Lease or sublet
all or any portion of the Premises unless Tenant
complies, at Tenant's expense, with the provisions of
the REA applicable to such assignment or subletting.
Landlord agrees to cooperate, at no expense to
Landlord, with Tenant's efforts to obtain any consents
required under the REA and to otherwise comply with the
REA in connection with any proposed assignment or
sublease.
Section 9.5 Documentation and Expenses.
Each assignment or sublease shall be evidenced by an
instrument made in such written form as is satisfactory
to Landlord and executed by Tenant and the assignee or
subtenant. In the event of an assignment, the assignee
shall assume and promise to perform the terms,
covenants and conditions of this Lease which are
obligations of Tenant, from and after the date the
Assignee takes possession. Unless expressly released
by Landlord, in writing, Tenant shall remain fully
liable to perform its duties under this Lease following
any assignment of the Lease. Tenant shall, on demand
of Landlord, reimburse Landlord for Landlord's
reasonable costs, including attorneys' fees, incurred
in obtaining advice and preparing documentation for
each assignment or sublease, up to a maximum of $1,500
per transaction.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the following events
shall constitute a "Default" by Tenant under this
Lease:
(a) If Tenant shall fail to pay any Rent under this
Lease when the same shall become due and payable and
the failure shall continue for five (5) business days
after written notice (it being understood such period
shall run concurrently with any statutory notice
period); or
(b) If Tenant shall transfer Tenant's interest in
this Lease in contravention of Article IX hereof; or
(c) If Tenant shall fail to perform or observe any of
its obligations under this Lease (including, without
limitation, Tenant's failure to perform those
obligations under the REA expressly assumed by Tenant
in this Lease) other than those specified above in this
Section 10.1 and the failure shall continue for thirty
(30) days after notice, unless a shorter period of time
for such performance or observance is otherwise
expressly set forth in this Lease; provided, however,
that in the case of a Default which cannot with
reasonable diligence be remedied by Tenant within said
period of thirty (30) days, if Tenant proceeds as
promptly as may reasonably be possible after the
service of such notice and with all reasonable
diligence to remedy the Default and thereafter
prosecute the remedying of such Default with all
reasonable diligence, the period of time after the
giving of such notice within which to remedy the
Default shall be extended for such period as shall be
reasonably necessary to remedy the same with all
reasonable diligence;
(d) If the Premises are deemed abandoned pursuant to
California Civil Code Section 1951.3; or
(e) If an event of insolvency shall occur including:
(i) Tenant's making an
assignment for the benefit of creditors;
(ii) Tenant's failure generally
to pay its debts as they become due;
(iii) A material adverse change
in the financial condition of Tenant;
(iv) Tenant's filing, or
acquiescing to the filing of, a petition seeking
an order for relief against it in any state or
federal court in any bankruptcy, reorganization,
liquidation, composition, extension, arrangement
or insolvency proceeding;
(v) Tenant's making an
application for, or acquiescing to, the
appointment of a trustee, examiner or custodian
for it or all or any portion of its property;
(vi) Any petition being filed
against Tenant in any state or federal court
seeking reorganization or liquidation or
insolvency proceedings, and the proceedings shall
not be dismissed, discontinued or vacated within
ninety (90) days; or
(vii) Any trustee, examiner or
custodian being appointed for Tenant, or for all
or any portion of Tenant's property, and the
trustee, examiner, or custodian shall not be set
aside within ninety (90) days after such
appointment.
Section 10.2 Remedies. Upon the occurrence of a Default, and
in addition to any other rights or remedies available
to Landlord at law or in equity, Landlord shall have
the right to:
(a) terminate this Lease and all
rights of Tenant by giving Tenant written notice that
this Lease is terminated, in which case Landlord may
recover from Tenant the sum of :
(i) the worth at the time of award of any unpaid Rent
that had been earned at the time of termination.
(ii) the worth at the time of award of the amount by
which (A) the unpaid Rent that would have been earned
after termination until the time of award exceeds (B)
the amount of rental loss, if any, as Tenant
affirmatively proves could have been reasonably
avoided;
(iii) the worth at the time of award of the amount by
which (A) the unpaid Rent for the balance of the Term
after the time of award exceeds (B) the amount of
rental loss, if any, as Tenant affirmatively proves
could be reasonably avoided;
(iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations or that, in the
ordinary course of things, would be likely to result;
and
(v) all other amounts in addition to or in lieu of
those previously stated as may be provided from time to
time by California law; or
(b) continue this Lease, and from time
to time, without terminating this Lease, either (i)
recover all Rent and other amounts payable as they
become due or (ii) relet the Premises or any part of
the Premises on behalf of Tenant for any term, at any
rent, and pursuant to any other provisions as Landlord
deems advisable, all with the right, at Tenant's cost,
to make alterations and repairs to the Premises.
As used in clauses 10.2(a)(i) and 10.2(a)(ii) of
this Section, the worth at the time of award is
computed by allowing interest at the Interest Rate. As
used in clause 10.2(a)(iii) of this Section, the worth
at the time of award is computed by discounting that
amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent
(1%).
(c) Upon the occurrence of a Default,
Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises.
Landlord may cause property so removed from the
Premises to be stored in a public warehouse or
elsewhere at the expense and for the account of Tenant.
(d) None of the following remedial
actions, singly or in combination, shall be construed
as an election by Landlord to terminate this Lease
unless Landlord has in fact given Tenant written notice
that this Lease is terminated or unless a court of
competent jurisdiction decrees termination of this
Lease; any act by Landlord to maintain or preserve the
Premises; any efforts by Landlord to relet the
Premises; any re-entry, repossession, or reletting of
the Premises; or any reentry, repossession, or
reletting of the Premises by Landlord pursuant to this
Section. If Landlord takes any of the previous
remedial actions without terminating this Lease,
landlord may nevertheless at any time after taking any
remedial action terminate this lease by written notice
to Tenant.
(e) If Landlord relets the Premises,
Landlord shall apply the revenue as follows: first, to
the payment of any reasonable cost of reletting,
including without limitation finder's fees and leasing
commissions; and second, to the payment of Rent and
other amounts due and unpaid under this Lease.
Landlord shall hold and apply the residue, if any, to
payment of future amounts payable as they become due
and, to the extent the residue exceeds such amounts,
shall remit such excess to Tenant. Should revenue from
reletting during any month, after application pursuant
to the foregoing provisions, be less than the
reasonable cost of reletting and the Rent and other
amounts due and unpaid under this Lease, Tenant shall
pay the deficiency to Landlord promptly upon demand.
(f) After the occurrence of a Default,
Landlord, in addition to or in lieu of exercising other
remedies, may, but without any obligation to do so,
cure the breach underlying the Default for the account
and at the expense of Tenant; provided that Landlord by
prior notice shall first allow Tenant a reasonable
opportunity to cure, except in cases of emergency,
where Landlord may proceed without prior notice to
Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of
settlements, defense court costs, and attorney fees,
that Landlord may incur in the course of any such cure.
(g) No security, guaranty or security
interest granted for the performance of Tenant's
obligations, which Landlord may now or hereafter hold,
shall in any way constitute a bar or defense to any
action initiated by Landlord for unlawful detainer or
for the recovery of the Premises, for enforcement of
any obligation of Tenant, or for the recovery of
damages caused by a breach of this Lease by Tenant or
by a Default.
(h) Except as expressly provided in
this Lease to the contrary, no right or remedy
conferred upon or reserved to either party is intended
to be exclusive of any other right or remedy given now
or later or existing at law or in equity or by statute.
Except to the extent that either party may have
otherwise agreed in writing, no waiver by that party of
any violation or nonperformance by the other party of
any obligations, agreements, or covenants shall be
deemed to be a waiver of any subsequent violation or
nonperformance of the same or any other covenant,
agreement, or obligation, nor shall any forbearance by
either party to exercise a remedy for any violation or
nonperformance by the other party be deemed a waiver by
that party of rights or remedies with respect to that
violation or nonperformance.
(i) Landlord may require Tenant or any
trustee for Tenant under the United States Bankruptcy
Code (as amended, the "Bankruptcy Code") to cure
Tenant's Default and to provide adequate assurances of
future performance of this Lease as provided in Section
365(b)(3) of the Bankruptcy Code, including, without
limitation, adequate assurance that; (i) Rent will be
paid when due; (ii) there shall be no substantive
breach in the provisions of this Lease relating to the
Shopping Center including, without limitation, the
Permitted Use; and (iii) that there shall be no
disruption in any Tenant mix or Tenant balance in the
Shopping Center. If Tenant or the trustee does not
cure existing Defaults and provide such assurances of
future performance within sixty (60) days after there
has been an order for relief pursuant to the Bankruptcy
Code, this Lease shall be deemed rejected, and Landlord
shall have no further liability hereunder to Tenant or
any person claiming through or under Tenant and, if
Tenant or any such person is in possession. Tenant or
any such person shall forthwith quit and surrender the
premises to Landlord.
Section 10.3 Attorneys' Fees. In the event that either party
hereto commences an action related to this Lease, the
prevailing party shall be entitled to recover from the
other party all of its costs and expenses incurred
therein, including, without limitation, reasonable
attorneys' fees and disbursements. If either party
hereto is, without fault on its own part, made a party
to any action instituted by or against the other party
to this Lease due to such other party's fault, such
other party shall indemnify the party innocently
involved and defend and hold it harmless against and
from all such costs and expenses incurred therein
including, without limitation, reasonable attorneys'
fees and disbursements.
Section 10.4 Agreement to Arbitrate. Any controversy, dispute
or claim under, arising out of, in connection with or
in relation to this Lease, including but not limited to
the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or
enforceability of this Lease or any provision hereof
shall be determined by arbitration conducted in
accordance with the Commercial Arbitration Rules or
then existing rules for commercial arbitration of the
American Arbitration Association. The arbitration
shall additionally be governed by the California
Arbitration Act. The arbitration shall be conducted in
a location in San Bernardino County and shall be before
a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven
potential arbitrators provided by the American
Arbitration Association. If the parties cannot agree
on an arbitrator from this first list, the parties
hereto shall select an arbitrator for such arbitration
from a second list of seven potential arbitrators
provided by the American Arbitration Association with
each party alternately striking names, with the last
name remaining to be the arbitrator so selected. In
the event that either party seeks a temporary
restraining order, preliminary injunction or other
provisional relief, the provisions of Section 1281.8 of
the California Code of Civil Procedure shall apply.
The arbitration of such issues, including the
determination of any amount of damages suffered by any
party hereto by reason of the acts or omissions of any
party, shall be final and binding upon the parties to
the maximum extent permitted by law. Judgment upon any
award rendered by the arbitrator(s) may be entered by
any court having jurisdiction thereof. The parties
intend that this Article shall be valid, binding,
enforceable and irrevocable and shall survive the
termination of this Agreement. It is understood and
agreed that the terms of this Section 10.4 shall not
apply to a determination of Fair Market Rental Value,
which shall be determined pursuant to Section 12.3 of
this Lease.
Section 10.5 No Set-off/Counterclaims. Tenant shall pay all
Rent due hereunder, free of any charges, assessments,
impositions or deductions and without abatement,
deferral, reduction, set-off, counterclaim, defense or
deduction except as permitted under the express terms
of this Lease or the Asset Purchase Agreement. Tenant
shall not interpose any counterclaim(s) in any action
brought by Landlord based, in whole or in part, on
Tenant's failure to pay Rent; provided, however, that,
the foregoing to the contrary notwithstanding: (i)
Tenant may interpose any counterclaim deemed
"compulsory" under applicable court rules of civil
procedure; (ii) Tenant shall be permitted to bring a
separate action against Landlord based on any claim
which Tenant is prohibited by this Lease from asserting
as a set-off or counterclaim; and (iii) Tenant may
bring actions and assert defenses, setoffs and
counterclaims permitted to be brought or asserted
against Landlord in accordance with the terms of the
Asset Purchase Agreement.
Section 10.6 Right of Redemption. Tenant hereby waives, for
itself and all persons claiming by, through or under
Tenant, any right of redemption or for the restoration
of the operation of this Lease under any present or
future law in the event Landlord shall obtain
possession of the Premises.
Section 10.7 No Waiver. No receipt of monies by Landlord from
Tenant after the termination or cancellation of this
Lease in any lawful manner shall reinstate the Term of
this Lease, or operate as a waiver of the right of
Landlord to enforce the payment of Rent then due, or
operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action,
proceeding or remedy; it being agreed that, after the
termination or cancellation of this Lease, or after a
final order or judgment for the possession of the
Premises, Landlord may demand, receive and collect any
monies due, without in any manner affecting such
notice, proceeding, suit, action, order or judgment;
and any and all such monies collected shall be deemed
to be payment on account of the use and occupation or
Tenant's liability hereunder.
Section 10.8 Unperformed Covenants of Landlord May Be
Performed By Tenant. If Landlord shall fail to perform
any of the terms, provisions, covenants or conditions
to be performed or complied with by Landlord pursuant
to this Lease, or if Landlord should fail to make any
payment which Landlord agrees to make, and any such
failure shall, if it relates to a matter which is not
of any emergency nature, remain uncured for a period of
thirty (30) days after Tenant shall have served upon
Landlord notice of such failure, or for a period of
twenty-four (24) hours after service of such notice, if
in Tenant's judgment reasonably exercised such failure
related to a matter which is of an emergency nature,
then Tenant may at Tenant's option, at any time prior
to commencement of Landlord's acting to cure such
failure and thereafter if Landlord fails to diligently
perform the curing of such failure, perform any such
term, provision, covenant or condition or to make any
such payment, as Landlord's agent, and in Tenant's sole
discretion as to the necessity therefor, and Tenant
shall not be liable or responsible for any loss or
damage resulting to Landlord or anyone holding under
Landlord on account thereof. The full amount of the
cost and expense entailed, or payment so made, shall
immediately be owing and payable by Landlord to Tenant.
The option given in this Section is for the sole
protection of Tenant, and its existence shall not
release Landlord from the obligation to perform the
terms, provisions, covenants and conditions herein
provided to be performed by Landlord or deprive Tenant
of any legal rights which it may have by reason of any
such default by Landlord.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
OPTIONS
Section 12.1 Renewal Options. Contingent upon Tenant
satisfying all of the following conditions, and
provided that Tenant has not filed for protection under
the Federal Bankruptcy Laws at the time such option is
exercised, Tenant is hereby granted four (4) separate
options (each an "Option" and two or more,
collectively, the "Options") to extend the Term of this
Lease, each for an additional period of five (5) years
(each a "Renewal Term"), conditioned upon satisfaction
of the following requirements:
(a) No Default by Tenant shall have occurred and
remain uncured as of the date of Tenant's exercise of
its Option; and
(b) Tenant shall deliver written notice to Landlord
exercising the applicable Option not less than six (6)
full calendar months prior to the expiration of the
Term (as it may be extended by Tenant's exercise of any
Options).
Section 12.2 Lease Terms Applicable. In the event that Tenant
exercises one or more of the Options herein granted,
then all of the terms and provisions of this Lease as
are applicable during the initial Term shall likewise
be applicable during each of the applicable Renewal
Terms except that Minimum Annual Rent and Percentage
Rent payable by Tenant for each Renewal Term shall be
as set forth in Section 12.3 below.
Section 12.3 Rent During Renewal Terms.
(a) The Minimum Annual Rent (as defined in Section
4.1 of this Lease) which shall be due and payable
during the first Renewal Term, if exercised by Tenant,
shall be determined prior to the commencement of each
applicable Renewal Term and shall be equal to three
percent (3.0%) of the average of annual Gross Sales at
the Premises for the two (2) Lease Years preceding the
commencement of the applicable Renewal Term.
Percentage Rent for the first Renewal Term shall be
calculated in accordance with the terms of Section 4.2
of this Lease.
(b) Minimum Annual Rent and Percentage Rent
(including the formula for the calculation thereof) for
each of the second, third and fourth Renewal Terms, if
exercised by Tenant, shall be equal to the Fair Market
Rental Value of the Premises, each with respect to the
5-year term first day as of the commencement of the
applicable Renewal Term. The Fair Market Rental Value
of the Premises shall be based upon the rental amounts
paid by tenant-operators of department stores for
retail store space of substantially the same type, size
and quality as the Premises, and located in major
regional malls in San Bernardino County or Riverside
County. Within thirty (30) days following Landlord's
receipt of Tenant's written notice that it wishes to
exercise the applicable Option, Landlord shall deliver
to Tenant a written notice specifying Landlord's good
faith estimate of the Fair Market Rental Value for the
Premises for the applicable Renewal Term. Within
thirty (30) days following Tenant's receipt of
Landlord's good faith estimate of the Fair Market
Rental Value of the Premises, Tenant may deliver a
written notice to Landlord either setting forth
Tenant's good faith of Fair Market Rental Value, in
which case Landlord and Tenant will promptly meet and
attempt to agree in good faith upon the Fair Market
Rental Value, or agreeing to Landlord's estimate of
Fair Market Rental Value. If no agreement regarding
the applicable Fair Market Rental Value for the
Premises can be reached within fifteen (15) days after
Landlord's receipt of Tenant's estimate of Fair Market
Rental Value for the Premises, Tenant shall have ten
(10) days to cancel its exercise of the applicable
Option by delivering written notice to Landlord within
such 10-day period. If Tenant does not terminate its
exercise of the applicable Option within such 10-day
period, the Fair Market Rental Value of the Premises
for the applicable Renewal Term shall be determined in
accordance with the terms of Exhibit E.
Section 12.4 Lease Amendment. Following Tenant's exercise of
each Option and the determination of the Fair Market
Rental Value of the Premises for the applicable Renewal
Term, Landlord and Tenant will enter into an amendment
to this Lease confirming the extension of the Term of
this Lease in accordance with the terms hereof.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Notices.
(a) Any notice, demand, request, approval, consent or
other instrument (collectively, a "Notice") which may
be, or is required to be, given under this Lease shall
be in writing and given by hand or sent by United
States certified or registered mail, return receipt
requested, postage prepaid, or by an overnight
nationally recognized courier service, addressed to
Landlord at the address herein first given with a copy
to: McPeters McAlearny Shimoff & Hatt, 4 West Redlands
Boulevard, P.O. Box 2084, Redlands, CA 92373-0661
Attn: Thomas H. McPeters, Esq., or to such other
address as Landlord may from time to time designate to
Tenant by notice in accordance with this Section, and
to Tenant at the Premises and to Tenant's address
herein first given Attention: Law Department, or to
such other address as Tenant may from time to time
designate to Landlord by notice in accordance with this
Section. All Notices shall be deemed given or served
three (3) business days after the date of registration
or certification by the postal authorities, if mailed,
or upon receipt, if sent by overnight courier or
delivered in person.
(b) Any notice which may or shall be given under this
Lease by Landlord may be given by Landlord, by any
employee of Landlord, by any attorney representing
Landlord, by any management company operating the
Shopping Center on behalf of Landlord or any employee
of, or attorney retained by, said management company,
and all notices from any of the foregoing shall be as
effective as if given by Landlord itself.
(c) Any Notice with respect to any assignment,
alleged default, termination or other material issue
given to Landlord shall also be given to each mortgagee
of Landlord's interest in the Shopping Center, the name
and address of which mortgagee Landlord has previously
given Tenant written notice.
Section 13.2 Brokers. Landlord and Tenant each warrants and
represents to the other party hereto that it has not
dealt with any broker in negotiating or consummating
this Lease, and Landlord and Tenant each hereby agrees
to indemnify, defend and hold harmless the other party
hereto against and from any and all claims losses or
liabilities as a result of any inaccuracy in the
foregoing representation. This Section shall survive
the Term of this Lease.
Section 13.3 Subordination of Lease.
(a) This Lease is subordinate to the lien of all
mortgages, deeds of trust and security instruments
(collectively, "Mortgages"), and to all ground leases,
easement agreements and operating agreements now
covering or affecting all or any part of the Shopping
Center, including, without limitation, the REA, and to
all modifications, consolidations, renewals,
replacements and extensions of any of the foregoing.
Landlord hereby represents and warrants that there are
no Mortgages in effect with respect to the Shopping
Center or the Premises except as specifically set forth
in Exhibit G attached hereto and made a part hereof,
nor are there any REAs affecting the Shopping Center or
Tenant's rights under this Lease except as set forth in
Exhibit D attached hereto and made a part hereof.
Landlord shall exercise best efforts to obtain from
each mortgagee under a Mortgage listed on Exhibit G a
nondisturbance agreement in the form of the "SNDA"
attached to the Asset Purchase Agreement.
(b) Subject to the terms of any nondisturbance
agreement entered into by Tenant, should any mortgagee
under a Mortgage succeed to Landlord's interest in this
Lease, Tenant shall, upon demand, attorn to and
recognize such mortgagee as Landlord under this Lease.
In the event of a sale or assignment of Landlord's
interest in this Lease or the Premises, Tenant shall
attorn to and recognize such purchaser or assignee as
Landlord under this Lease without further act by
Landlord or such purchaser or assignee.
Section 13.4 Unavoidable Delays. In the event that either
party shall be delayed or hindered in, or prevented
from, the performance of any work, service or other act
required under this Lease to be performed by such party
and such delay or hindrance is due to: (i) strikes,
lockouts, or other labor disputes; (ii) inability to
obtain labor or materials or reasonable substitutes
therefor; or, (iii) acts of God, governmental
restrictions, enemy act, civil commotion, unavoidable
fire or other casualty, or other causes of a like
nature beyond the control of the party so delayed or
hindered (collectively, "Unavoidable Delays"), then
performance of such work, service or other act shall be
excused for the period of such delay and the period for
the performance of such work, service or other act
shall be extended by a period equivalent to the period
of such delay. In no event shall any such delay
constitute a termination or extension of this Lease.
The provisions of this Section shall not operate to
excuse Tenant from the timely payment of Rent.
Section 13.5 Estoppel Certificates. Upon ten (10) business
days prior written request therefor by Landlord or
Tenant from time to time, each party agrees to execute
and to deliver to the requesting party, or to such
other addressee or addressees as the requesting party
may designate, a written statement certifying that:
(i) this Lease is in full force and effect and
unmodified, or describing any modification; (ii) that
there are no defenses or offsets against the
enforcement of this Lease, or stating with
particularity defenses or offsets claimed; stating the
date to which Rent has been paid; and (iv) stating the
Term Commencement Date and the date this Lease expires.
Section 13.6 Relationship of Parties. Nothing contained in
this Lease shall be deemed or construed as creating the
relationship of principal and agent or of partnership
or of joint venture between the parties hereto, it
being understood and agreed that neither the method of
computing Rent nor any other provision contained herein
nor any acts of the parties hereto shall be deemed to
create any relationship between the parties other than
that of Landlord and Tenant.
Section 13.7 Governing Law; Jurisdiction.
(a) Governing Law. This Lease, the legal relations
between the parties and any Action (defined below),
whether contractual or non-contractual, instituted by
any party with respect to matters arising under or
growing out of or in connection with or in respect of
this Lease, including but not limited to the
negotiation, execution, interpretation, coverage,
scope, performance, breach, termination, validity, or
enforceability of this Lease, shall be governed by and
construed in accordance with the laws of the State of
California applicable to contracts made and performed
in such State and without regard to conflicts of law
doctrines, except to the extent that certain matters
are preempted by federal law or are governed as a
matter of controlling law by the law of the
jurisdiction of incorporation of the Tenant.
(b) Jurisdiction. Each party hereby irrevocably
submits to and accepts for itself and its properties,
generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the
laws of the State of California and the rules of its
courts, waives any defense of forum non conveniens and
agrees to be bound by any judgment rendered thereby
arising under or out of in respect of or in connection
with this Lease or any related document or obligation.
Each party further irrevocably designates and appoints
the individual identified in or pursuant to Section
13.1 hereof to receive notices on its behalf, as its
agent to receive on its behalf service of all process
in any such Action before any body, such service being
hereby acknowledged to be effective and binding service
in every respect. A copy of any such process so served
shall be mailed by registered mail to each party at its
address provided in Section 13.1; provided that, unless
otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of the
service of such process. If any agent so appointed
refuses to accept service, the designating party hereby
agrees that service of process sufficient for personal
jurisdiction in any action against it in the applicable
jurisdiction may be made by registered or certified
mail, return receipt requested, to its address provided
in Section 13.1. Each party hereby acknowledges that
such service shall be effective and binding in every
respect. Nothing herein shall affect the right to
serve process in any other manner permitted by
applicable law.
(c) As used in this Section 13.7, "Action" shall mean
any action, complaint, petition, investigation suit or
other proceeding before any arbitrator or any other
governing body or entity having appropriate
jurisdiction.
Section 13.8 Interpretation. The neuter, feminine or
masculine pronoun when used herein shall each include
each of the other genders and the use of the singular
shall include the plural. In the event of any conflict
between the terms of this Lease, and the terms of the
Asset Purchase Agreement (including any related
agreements entered into by Landlord and Tenant), the
terms of the Asset Purchase Agreement shall prevail
over any contrary term of this Lease.
Section 13.9 Captions. The captions of Articles and Sections
contained in this Lease are for convenient reference
only and shall not be deemed or construed as in any
manner limiting or amplifying the terms and provisions
hereof.
Section 13.10 Partial Invalidity. If any term or provision of
this Lease, or the application thereof to any person or
circumstance, shall to any extent be determined to be
invalid or unenforceable by a court of competent
jurisdiction, then the remainder of this Lease, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby.
Section 13.11 Waivers. The waiver by Landlord of any breach of
any term, covenant or condition contained in this Lease
shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of
the same or any other term, covenant or condition
contained in this Lease. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease or of any right of
Landlord to a forfeiture of the Lease by reason of such
breach, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such
Rent. No term, covenant or condition of this Lease
shall be deemed to have been waived by Landlord unless
such waiver be in writing and signed by Landlord.
Section 13.12 Accord and Satisfaction. No payment by Tenant,
or receipt by Landlord, of a lesser amount than the
Rent payment due under this Lease shall be deemed or
construed to be other than a payment or receipt on
account of the earliest Rent due. Neither the
endorsement or statement on any check nor the receipt
or negotiation of any such check by Landlord, shall be
deemed or construed to be an accord and satisfaction.
Section 13.13 Counterparts. This Lease may be executed in
several counterparts, each of which shall be deemed an
original and all of which shall together constitute one
and the same instrument.
Section 13.14 Entire Agreement. This Lease and the Asset
Purchase Agreement incorporate all undertakings between
the parties hereto with respect to Tenant's lease of
the Premises. Tenant hereby acknowledges that neither
Landlord nor Landlord's employees, agents or
contractors have made any representations or promises
to Tenant with regard to the Premises or the Shopping
Center or this Lease that have not been expressly
stated in this Lease and, therefore, Tenant hereby
waives any and all claims against, or liability of,
Landlord and Landlord's employees, agents, and
contractors based thereon. Landlord hereby
acknowledges that Tenant and its employees and officers
have made no representations or promises with regard to
Tenant's operations, sales figures or methods of doing
business or any other matter except as expressly
contained in this Lease, and Landlord, therefore,
hereby waives any claim with respect thereto or based
thereon.
Section 13.15 Successors and Assigns. This Lease and each of
the terms and conditions hereof shall inure to the
benefit of, and be binding upon, Landlord, and
Landlord's heirs, executors, administrators, successors
and assigns. This Lease and each of the terms and
conditions hereof shall also be binding upon Tenant,
and Tenant's heirs, executors, administrators,
successors and assigns and shall inure to the benefit
of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been made and consented to in
accordance with the provisions of Article IX of this
Lease.
Section 13.16 Survival of Obligations. All obligations of each
party which by their nature involve performance after
the end of the Term, or which cannot be ascertained or
have been fully performed until after the end of the
Term, shall survive the expiration or earlier
termination of this Lease.
Section 13.17 Submission of Lease. Submission of this Lease by
one party to the other for examination or execution
does not constitute an offer made, or an option
granted, to enter into this Lease.
Section 13.18 Memorandum of Lease. Landlord and Tenant agree
to execute a memorandum of this Lease, which memorandum
shall be substantially in the form attached hereto as
Exhibit F and shall be recorded in the applicable real
property records as soon as possible after the date of
this Lease.
Section 13.19 Attachments. Attached hereto and made a part of
this Lease are the following: Exhibits A-G, inclusive.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Lease as of the date first above written.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATION DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMALETTE
Its: PRESIDENT
EXHIBIT A
LEGAL DESCRIPTION OF SHOPPING CENTER
EXHIBIT B
SITE PLAN OF SHOPPING CENTER
EXHIBIT C
LEGAL DESCRIPTION OF PREMISES
EXHIBIT D
SCHEDULE OF REA AND RELATED AGREEMENTS
EXHIBIT E
DETERMINATION OF FAIR MARKET RENTAL VALUE
1. Efforts to Agree Upon Fair Market Rental Value.
If pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined with
respect to any Renewal Term, Landlord and Tenant
shall promptly commence negotiation to reach
agreement on Fair Market Rental Value for the
applicable Renewal Term. If Landlord and Tenant
are unable to reach agreement on Fair Market
Rental Value within the time period provided in
the Lease and the parties wish to proceed with a
method of resolving the disagreement regarding
Fair Market Rental Value, the terms of Section 2
below shall apply.
2. Arbitration Regarding Fair Market Rental Value.
(a) If Landlord and Tenant are to proceed with
the method of determining Fair Market
Rental Value under this Exhibit E, then
within ten (10) days of the date either
Landlord or Tenant delivers written notice
to the other party hereto confirming that,
pursuant to the terms of the Lease, Fair
Market Rental Value is to be determined in
accordance with the terms of Exhibit E,
Landlord and Tenant shall each
simultaneously submit to the other in a
sealed envelope its good faith estimate of
Fair Market Rental Value. If the higher of
such estimates is not more than one hundred
five percent (105%) of the lower of such
estimates, then Fair Market Rental Value
shall be the average of the two estimates.
If one party ("Refusing Party") refuses to
simultaneously submit such estimate to the
other party ("Other") within such 10-day
period, then the Other may notify the
Refusing Party of the Other's willingness
to make such simultaneous submittal. If
the Refusing Party fails to make such
simultaneous submittal within five (5)
business days thereafter, the other party's
good faith estimate of Fair Market Rental
Value shall be Fair Market Rental Value.
(b) If the higher of the estimates is more than
one hundred five percent (105%) of the
lower of such estimates, then either
Landlord or Tenant may, by written notice
to the other at any time within ten (10)
days following the exchange of estimates,
require that the disagreement be resolved
by arbitration. Within seven (7) days
after such notice, the parties shall select
as an arbitrator a mutually acceptable
independent MAI appraiser with experience
in real estate activities, including at
least ten (10) years experience in
appraising anchor store retail space in
major regional shopping malls. If the
parties cannot agree on an appraiser within
such seven (7) day period, then within a
second period of seven (7) days, each shall
select and inform the other party of an
independent MAI appraiser meeting the
aforementioned criteria and within a third
period of seven (7) days, the two
appraisers shall select a panel of three
additional appraiser meeting the
aforementioned criteria and the three
appraisers shall determine Fair Market
Rental Value pursuant to this Exhibit E by
majority vote of such three appraisers.
Both Landlord and Tenant shall be entitled
to present evidence supporting their
respective positions to the panel of three
appraisers. If one party shall fail to
make such appointment within said second
seven (7) day period, then the appraiser
chosen by the other party shall be the sole
arbitrator, who shall determine Fair Market
Rental Value pursuant to this Exhibit E.
(c) Once the arbitrators have been selected as
provided above, then, as soon thereafter as
practicable but in any case within fourteen
(14) days, the arbitrators shall select one
of the two estimates of Fair Market Rental
Value submitted by Landlord and Tenant,
which must be the one that is closer to
Fair Market Rental Value as determined by
the majority of the arbitrators. The
arbitrators' selection shall be binding
upon Landlord and Tenant. The party whose
estimate is not chosen by the arbitrators
shall pay the costs of the arbitrators and
any experts retained by the arbitrators.
Any fees of any counsel or expert engaged
directly by Landlord or Tenant, however,
shall be borne by the party retaining such
counsel or expert.
EXHIBIT F
FORM OF MEMORANDUM OF LEASE
Recording Requested By And
When Recorded Return To:
Gottschalks Inc.
7 River Park Place East
Fresno, California 93720
Attention: General Counsel
______________________________________________________________________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this
"Memorandum"), dated as of August 20, 1998, is entered
into by and between El Corte Ingles, S.A., a Spanish
corporation ("Landlord"), and Gottschalks Inc., a
Delaware corporation ("Tenant"). Landlord and Tenant
have entered into that certain Store Lease Agreement
dated as of August 20, 1998 (the "Store Lease"),
pursuant to which Landlord demised and leased to Tenant
and Tenant hired from Landlord the Premises as more
particularly described in the Lease (the "Premises"),
which Premises are located on the real property
described in Exhibit A attached hereto and made a part
hereof.
LANDLORD AND TENANT AGREE AS FOLLOWS:
1. For and in consideration of the
rental reserved and of the mutual covenants, agreements
and conditions set forth in that certain Store Lease,
Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord, upon all terms and
conditions set forth in the Store Lease, the Premises.
The primary term of the Lease is ten (10) years
commencing on August 20, 1998 and expiring on August 20,
2007.
2. On the terms and conditions more
specifically set forth in the Store Lease, Tenant has
certain fixed rights to renew the Term of the Lease as
more specifically set forth therein. Specifically,
Tenant has been granted four separate options to renew
the Term of the Lease, each for an additional period of
five (5) years.
3. This Memorandum has been prepared
to provide notice that the Premises are subject to the
terms and conditions of the Store Lease, which terms
are hereby incorporated into this Memorandum by this
reference. In no event shall the terms of this
Memorandum be deemed to modify, amend, limit or
otherwise affect the terms and conditions of the Store
Lease. In the event of any inconsistency between the
terms of this Memorandum and the terms of the Store
Lease, the terms of the Store Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant
have caused their duly authorized representatives to
execute this Memorandum as of the date first written
above.
LANDLORD:
EL CORTE INGLES, S.A.
By: /s/ JORGE PONT
Its: INTERNATIONAL DIVISION DIRECTOR
TENANT:
GOTTSCHALKS INC.
By: /s/ JAMES FAMAELTTE
Its: PRESIDENT
EXHIBIT A
Description of Real Property
EXHIBIT G
SCHEDULE OF EXISTING MORTGAGES
A. Current preliminary title report:
Title Company:
Date of report:
Order No.:
B. Existing Mortgages:
Dates Referenced Herein and Documents Incorporated by Reference
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