EMPLOYEE LEASE AGREEMENT
This Employee Lease Agreement (the "Agreement") is
entered into as of August 20, 1998, by and between
Gottschalks Inc., a Delaware corporation ("Recipient"),
and The Xxxxxx Company, a California corporation
("Provider").
R E C I T A L S
WHEREAS, Recipient and Provider are parties to an Asset
Purchase Agreement (the "Purchase Agreement") pursuant
to which Recipient will acquire substantially all of
the assets of Provider's department store business.
WHEREAS, the execution and delivery of this Agreement
by the parties hereto is a condition to the Closing (as
defined in the Purchase Agreement).
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises
contained herein and intending to be legally bound, the
parties agree as follows:
1. Transition Services. The Provider shall provide the
Recipient with the services of the Provider's employees
named on Exhibit A (the "Employees") which exhibit is
attached hereto and made a part hereof. The services
to be provided by each of the Employees shall also be
set forth on Exhibit A. The Provider shall use its
best efforts to assure that each Employee performs such
services in the same manner that such Employee
performed such services prior to the Closing Date (as
defined in the Purchase Agreement), except as such
services may be modified by the Recipient. Recipient
shall provide written notice to the Provider (with a
copy to the affected Employee) of any such
modification.
2. Term. The Provider shall provide the services of
each of the Employees to the Recipient for a term
commencing at the Closing Date and ending with respect
to each of the Employees as of a date to be determined
by the Recipient (the "Termination Date"). The
Recipient shall provide written notice to the Provider
(with a copy to the affected Employee) of each
Employee's Termination Date at least three days prior
to the Termination Date for the relevant Employee. In
no event shall any Termination Date be more than ninety
days after the Closing Date. The Provider shall use
its best efforts to retain the services of each
Employee until his or her Termination Date.
3. Benefits. Unless otherwise requested by Recipient,
the Provider shall furnish and keep in full force and
effect with respect to each Employee (and, with respect
to group health insurance, his or her eligible
dependents) from the Closing Date until the Employee's
Termination Date such group health, disability and life
insurance, vacation, holiday and sick pay policies,
workers' compensation insurance, 401(k) savings plan,
general liability insurance and, with respect to any
Employee who was an officer of the Provider immediately
prior to the Closing, such car allowance as was in
effect with respect to such Employee immediately prior
to the Closing Date.
4. Service Fee. The Recipient shall pay to the
Provider for each payroll period the amount set forth
in Exhibit A for each Employee who has not reached his
or her Termination Date (the "Fee"). The Recipient may
issue a single check covering the Fee for all of the
Employees for a payroll period. The amount set forth
on Exhibit A for each of the Employees shall be limited
to the following items (the "Reimbursable Expenses")
with respect to each of the Employees:
(a) his or her salary for the payroll period;
(b) the Provider's share of the Employee's payroll
taxes;
(c) any costs incurred by the Provider for the payroll
period to provide the Employee with the benefits set
forth in Section 3 of this Agreement; and
(d) any reasonable and necessary costs incurred by the
Provider for the payroll period to administer this
Agreement including but not limited to payroll
processing costs for the Employees (but excluding any
personnel costs of Provider of employees whose services
are not provided to Recipient hereunder).
The Fee may be prorated for any payroll period in which
an Employee's services are not provided to the
Recipient for a full payroll period. For any payroll
period which includes an Employee's final date of
employment with the Provider, the Fee shall also
include any accrued vacation pay of such Employee
attributable to the term of this Agreement.
5. Billing and Payment. The Provider shall receive
payment of the Fee for each payroll period at its
office no later than three days before the date on
which payroll checks are to be distributed to the
Employees. The Provider shall provide to the Recipient
immediately following the distribution of payroll
checks a record of the exact amounts paid by the
Provider for the Reimbursable Expenses for the
applicable payroll period. If the amount actually paid
by the Provider for a particular payroll period for the
Reimbursable Expenses differs from the Fee paid to the
Provider by the Recipient for that payroll period, the
Recipient shall make the appropriate adjustment in the
payment of the Fee for the following payroll period.
If at the end of the final payroll period in which this
Agreement is in effect, the aggregate amount of Fees
paid by the Recipient to the Provider differs from the
aggregate amount of Reimbursable Expenses paid by the
Provider, any excess amount received by the Provider
shall be promptly refunded to the Recipient or any
amount due the Provider shall be promptly paid to the
Provider.
6. Independent Contractor Status. The parties
acknowledge that Provider is an independent contractor
of the Recipient and that all of the Employees are
employees of Provider only. Notwithstanding the
foregoing, Recipient may offer any Employee employment
with the Recipient commencing immediately following the
Employee's Termination Date. The Provider shall not
represent itself as having any relationship to the
Recipient other than that of an independent contractor
for the limited purposes described in this Agreement.
During the term of this Agreement and upon each
Employee's Termination Date, the Provider shall comply
with all federal, state and local laws applicable to
its employment of the Employees, including but not
limited to the continuation of medical coverage
requirements of federal law. The Provider shall be
responsible for the payment of all salaries, federal,
state and local payroll taxes and all benefits
described in Section 3 for and on behalf of the
Employees.
7. Severance Obligations. Each of the Employees who
continues to be employed by the Provider and provide
services to the Recipient pursuant to this Agreement
from the Closing Date until his Termination Date shall
be entitled to receive severance pay from the Provider
in accordance with the Provider's severance pay policy
in effect immediately prior to the Closing Date.
Amounts paid to the Employees pursuant to the preceding
sentence shall be treated as "Severance Amounts" for
purposes of applying the provisions of Section 8.4(c)
of the Purchase Agreement.
8. Indemnification.
(a) Recipient shall indemnify and hold the Provider
harmless for any penalty, claim, liability, deficiency,
damages, loss or litigation costs (including without
limitation reasonable attorneys' fees) arising from:
(i) the performance by Provider of its obligations
under this Agreement in accordance with its terms; (ii)
the performance of services by the Employees in
accordance with this Agreement; (iii) any act, incident
or injury (other than a failure described in Section
8(b) below) arising out of and relating to the
performance of services in accordance with this
Agreement; and (iv) Recipient's failure to fulfill its
obligations under this Agreement.
(b) Provider shall indemnify and hold the Recipient
harmless for any penalty, claim, liability, deficiency,
damages, loss or litigation costs (including without
limitation reasonable attorneys' fees) arising from the
Provider's failure to fulfill its obligations under
this Agreement.
9. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and
shall be deemed to have been given upon delivery in
person or by telecopier or other standard form of
telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as
follows:
(a) If to Recipient:
Gottschalks Inc.
0 Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
(b) If to Provider:
The Xxxxxx Company
x/x Xx Xxxxx Xxxxxx, X.X.
Xxxxxxxxxx, 000
00000 Xxxxxx, XXXXX
Attention: Xxxxx Xxxx
10. Counterparts. This Agreement may be executed in
any number of separate counterparts signed by one or
more of the parties hereto, each such counterpart being
deemed to be an original instrument, and all such
counterparts shall together constitute the same
agreement.
11. Binding Effect; Assignability. This Agreement
shall be binding on and inure solely to the benefit of
the parties hereto, their respective successors and
permitted assigns, and is not intended to create rights
for any third party. This Agreement and the rights and
obligations hereunder may not be assigned by either
party hereto, whether by operation of law or otherwise,
without the written consent of the other party and any
such attempt at assignment shall be void and
unenforceable.
12. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the state
of California, except to the extent that such laws are
preempted by federal law.
13. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto relating to
the subject matter hereof and supersedes all prior or
contemporaneous agreements and understandings of the
parties relating thereto.
14. Modification and Amendment. Neither this Agreement
nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only by an
instrument in writing signed by the party against which
the enforcement of such termination, amendment,
supplement, waiver or modification is sought. No
failure on the part of either party to exercise, no
delay in exercising, no partial exercise of, and no
course of dealing with respect to, any right, power or
privilege under this Agreement shall operate as a
waiver thereof.
15. Dispute Resolution. The provisions of sections
13.1, 13.3 and 13.4 of the Purchase Agreement are
incorporated by references herein as if set forth in
full herein.
16. Severability. Every section, paragraph, clause and
subclause of this Agreement shall as far as possible be
deemed to be severable from every other section,
paragraph, clause and subclause. If for any reason any
such section, paragraph, clause or subclause is held by
a court of competent jurisdiction or a competent
administrative body to be illegal, unlawful, void,
voidable, invalid or unenforceable, then (i) such
holding shall not (unless it expressly provides to the
contrary) render illegal, unlawful, void, voidable,
invalid or unenforceable any other such section,
paragraph, clause or subclause, and (ii) the parties
hereby agree to negotiate in good faith to replace the
section, paragraph, clause or subclause that is the
subject matter of the holding with a similar but
permissible provision.
17. Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in
any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have signed this
Agreement on the date first set forth above.
GOTTSCHALKS INC.
/S/ XXXXX XXXXXXXXX
THE XXXXXX COMPANY
/S/ XXXXXXXX DEL XXXXX
/S/ XXXXXX XXXXXXXX
