Exhibit 10.2
EXECUTION COPY
AGENCY AGREEMENT
This Agency (the “ Agreement ”) is made as of May
13, 2008, by and between a joint venture formed among: (a) Hilco
Consumer Capital, LLC, (b) Hilco Merchant Resources, LLC, (c)
Gordon Brothers Retail Partners, LLC, and (d) GB Brands, LLC
(collectively, the “ Agent ”) and Sharper Image
Corporation (the “ Merchant ”), with a principal
place of business at 350 The Embarcadero, 6th floor, San Francisco,
CA 94105.
R E C I T A L S
WHEREAS , the Merchant
has commenced a case (the “ Bankruptcy Case ”) under
chapter 11 of title 11 of the United States Code (the
“ Bankruptcy Code
”) in the United States Bankruptcy Court for
the District of Delaware (the “ Bankruptcy Court ”);
WHEREAS , the Merchant
operates retail stores and desires that the Agent act as the
Merchant’s exclusive agent for the limited purpose of selling
all of the Merchandise located in the Merchant’s retail store
location(s) (each a “ Store ” and, collectively, the
“ Stores ”), and certain merchandise located in Merchant’s
distribution centers all listed on Exhibit 1 attached hereto, by
means of a “going-out-of-business,” “store
closing,” “bankruptcy,” or similarly themed sale
(as further described below, the “ Sale ”);
WHEREAS , the Agent has
agreed to act as the Merchant’s exclusive agent on the terms
and conditions set forth herein;
WHEREAS ,
contemporaneously herewith, the Agent and the Merchant have entered
into that certain Asset Purchase Agreement, dated as of May ___,
2008 (the “ APA
”), which is hereby incorporated
herein.
NOW THEREFORE , in
consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Agent and the
Merchant hereby agree as follows:
Section
1.
Defined Terms . All
capitalized terms not defined herein shall have the meaning set
forth in the APA. As used herein, the following terms shall have
the following meanings:
“Agreement” has the meaning assigned to
that term in the Preamble hereto.
“Agent” has the meaning assigned to that
term in the Preamble hereto.
“APA” has the meaning assigned to that
term in the Recitals hereto.
“Bankruptcy Case” has the meaning
assigned to that term in the APA.
“Bankruptcy Code” has the meaning
assigned to that term in the APA.
“Benefits Cap” has the meaning assigned
to that term in Section 4.1 hereof.
“Central Expenses” has the meaning
assigned to that term in Section 4.2 hereof.
“Closing” means the closing of
transactions contemplated by this Agreement and the APA as set
forth in Section 2.3 hereof.
“COBRA” means the Consolidated Omnibus
Budget Reconciliation Act of 1986, as amended.
“Committee” means the statutory
creditors’ committee appointed in the Bankruptcy
Case.
“Defective Merchandise” has the meaning
assigned to that term in Section 5.1(b) hereof.
“Designated Merchant Account” has the
meaning assigned to that term in Section 3.1 hereof.
“DIP Credit Agreement” has the meaning
assigned to that term in Section 3.3 hereof.
“Environmental Law” has the meaning
assigned to that term in Section 11.1(o) hereof.
“Excluded Benefits” has the meaning
assigned to that term in Section 4.2 hereof.
“Excluded Goods” has the meaning
assigned to that term in Section 5.3 hereof.
“Expense L/C” has the meaning assigned
to that term in Section 3.3 hereof.
“Expenses” has the meaning assigned to
that term in Section 4 hereof.
“FF&E” has the meaning assigned to
that term in Section 5.1 hereof.
“Final Inventory Report” has the meaning
assigned to that term in Section 3.3(b) hereof.
“Final Reconciliation” has the meaning
assigned to that term in Section 3.4 hereof.
“Guaranteed Amount” has the meaning
assigned to that term in Section 3.1 hereof.
“Guaranty L/C” has the meaning assigned
to that term in Section 3.3 hereof.
“Gross Rings” has the meaning assigned
to that term in Section 5.5 hereof.
“Inventory Date’ has the meaning
assigned to that term in Section 5.1 hereof.
“Initial Guaranty Payment” has the
meaning assigned to that term in Section 3.3 hereof.
“Inventory Taking” has the meaning
assigned to that term in Section 5.4 hereof.
“Inventory Taking Service” has the
meaning assigned to that term in Section 5.4 hereof.
“Lender” has the meaning assigned to
that term in Section 3.3 hereof.
“Lien” means any lien, security
interest, pledge, hypothecation, encumbrance or other interest or
claim (including but not limited to any and all
“claims,” as defined in section 10l(5) of the
Bankruptcy Code, and any and all rights and claims under any bulk
transfer statutes and similar laws) in or with respect to any of
the Leases (including but not limited to any options or rights to
purchase or recapture such Leases and any mechanics’ or tax
liens), whether arising by agreement, by statute or otherwise and
whether arising prior to, on or after the Petition Date.
“Maximum Inventory Amount” has the
meaning assigned to that term in Section 3.1 hereof.
“Merchandise” has the meaning assigned
to that term in Section 5.1 hereof.
“Merchant” has the meaning assigned to
that term in the Preamble hereto.
“Minimum Inventory Amount” has the
meaning assigned to that term in Section 3.1 hereof.
“Occupancy Expenses” has the meaning
assigned to that term in Section 3.3 hereof.
“On-Order Merchandise has the meaning assigned
to that term in Section 5.1(b) hereof.
“Performance Bonuses” has the meaning
assigned to that term in Section 9.4 hereof.
“Petition Date” means February 19,
2008.
“Proceeds” has the meaning assigned to
that term in Sections 3.1 and 7.1 hereof.
“Remaining Merchandise” has the meaning
assigned to that term in Section 3.2 hereof.
“Retained Employee” has the meaning
assigned to that term in Section 9.1 hereof.
“Retail Price” has the meaning assigned
to that term in Section 5.2 hereof.
“Sale” has the meaning assigned to that
term in the Recitals hereto.
“Sale Commencement Date” has the meaning
assigned to that term in Section 6.1 hereof.
“Sale Documents” has the meaning
assigned to that term in Section 12.1 hereof.
“Sale Order” has the meaning assigned to
that term in Section 2.2 hereof.
“Sale Term” has the meaning assigned to
that term in Section 6.1 hereof.
“Sale Termination Date” has the meaning
assigned to that term in Section 6.1 hereof.
“Sales Taxes” has the meaning assigned
to that term in Section 8.3 hereof.
“Store” has the meaning assigned to that
term in the Recitals hereto.
“Supplies” has the meaning assigned to
that term in Section 8.4 hereof.
“Taxes” means (i) all federal, state,
local and foreign taxes, including income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, withholding, social security, unemployment,
disability, real property, personal property, registration,
environmental, custom duties, value added, alternative or add-on
minimum, estimated or other tax, including any interest, penalties
or additions thereto, whether disputed or not, or (ii) liability
for the payment of any amounts of the type described in clause (i)
as a result of being party to any agreement or any express or
implied obligation to indemnify any other person, or (iii) in the
case of Seller, liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before
the Closing Date a member of an affiliated, consolidated, combined
or unitary group, or a party to any agreement or arrangement, as a
result of which liability of Seller is determined or taken into
account with reference to the liability of any other
person.
“Vacate Date” has the meaning assigned
to that term in Section 6.2 hereof.
“WARN Act” means the Workers’
Adjustment and Retraining Notification Act.
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Section 2.
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Appointment of Agent .
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2.1. The Merchant
hereby appoints the Agent, and the Agent hereby agrees to serve, as
the Merchant’s exclusive agent for the purposes conducting
the Sale in accordance with the terms and conditions of this
Agreement.
2.2. The Merchant
shall apply to the Bankruptcy Court for an order approving this
Agreement and the APA in their entirety and the transactions
contemplated therein (the “ Sale
Order ”). The Sale Order shall
provide, in a form reasonably satisfactory to the Merchant and
Agent, inter alia , that (i) this Agreement and the APA (and each of the
transactions contemplated thereby) are approved in their entirety;
(ii) Merchant and Agent shall be authorized to continue to take any
and all actions as may be necessary or desirable to implement this
Agreement and the APA and each of the transactions contemplated
thereby; (iii) Agent shall be entitled to sell all Merchandise
hereunder free and clear of all liens, claims or encumbrances
thereon, with any presently existing liens encumbering all or any
portion of the Merchandise or the Proceeds attaching only to the
Guaranteed Amount and other amounts to be received by Merchant
under this Agreement; (iv) Agent shall have the right to use the
Stores and all related Store services, furniture, fixtures,
equipment and other assets of Merchant as designated hereunder for
the purpose of conducting the Sale, free of any interference from
any entity or person subject to compliance with the Sale Order; (v)
Agent, as agent for Merchant, is authorized to conduct, advertise,
post signs and otherwise promote the Sale as a
“going-out-of-business,” “store closing,”
“bankruptcy,” or similarly themed sale (including,
without limitation, by means of media advertising, A-frame,
interior and exterior banners and similar signage and use of
sign
walkers), without further consent of any person, in
accordance with the terms and conditions of this Agreement and the
Sale Order (as the same may be modified and approved by the
Bankruptcy Court), and without further compliance with applicable
federal, state or local laws governing, inter alia , the conduct of store
closing sales (the “ Liquidation
Sale Laws ”), other than those
designed to protect public health and safety; (vi) Agent shall be
granted a limited license and right to use until the Sale
Termination Date the trade names, logos and customer and mailing
lists relating to and used in connection with the operation of the
Stores, solely for the purpose of advertising the Sale in
accordance with the terms of this Agreement; (vii) all utilities,
landlords, creditors and all persons acting for or on their behalf
shall not interfere with or otherwise impede the conduct of the
Sale, institute any action in any court (other than in the
Bankruptcy Court) or before any administrative body which in any
way directly or indirectly interferes with or obstructs or impedes
the conduct of the Sale; (viii) the Bankruptcy Court shall retain
jurisdiction over the parties to enforce this Agreement and the
APA; (ix) Agent shall not be liable for any claims against the
Merchant other than as expressly provided for in this Agreement;
and (x) Agent shall be granted a security interest in the
Merchandise and the Proceeds as provided for in Section 16
hereof.
2.3.
Closing . If the Sale
Order is entered, then, subject to the satisfaction or waiver by
the parties of the conditions to their respective obligations set
forth in Sections 11 and 12 below and in the APA, the Closing shall
take place as set forth in the APA. All transactions at the Closing
shall be deemed to take place simultaneously and none shall be
deemed to have taken place until all shall have taken
place.
2.4.
Assumed Liabilities .
Except as specified in this Agreement and the APA, the Agent does
not assume any liabilities or obligations of the Merchant,
including, without
limitation, severance, termination pay, pension,
profit sharing or any other employee benefit plans, compensation or
retiree medical and other benefits and obligations or any
obligation, claim or amount under the WARN Act or COBRA, Taxes,
Liens, “adequate protection” obligations, mortgage
obligations or legal fees incurred by professionals retained in the
Merchant’s Bankruptcy Case, liability to any landlords under
the Leases for reimbursement of prior construction work, rent
concession, allowances or the like, whether known or unknown,
disputed or undisputed, contingent or non-contingent, liquidated or
unliquidated, or otherwise.
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Section 3.
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Guaranteed Amount and Other Payments
.
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3.1.
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Payments to the Merchant and the Agent
.
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(a) As a
guaranty of the Agent’s performance hereunder, and under the
contemporaneously entered APA, in addition to the payment of
Expenses as provided for in Section 4 below and subject to the
potential adjustments in this Agreement and the APA, the Agent
guarantees that the Merchant shall receive the Purchase Price (as
defined in the APA) (for purposes of this Agreement, the
“ Guaranteed Amount
”). The Agent shall pay to the Merchant the
Guaranteed Amount, as adjusted in part, to reflect the values
calculated through the: (A) Final Inventory Report, and (B)
aggregate amount of Gross Rings, as adjusted for shrinkage per this
Agreement.
(b) All
proceeds of the Sale (the “ Proceeds ”) shall be deposited
in the Merchant’s existing accounts and disbursed in
accordance with Section 3.3 hereof; provided that
as soon as practicable following the Sale
Commencement Date, the Merchant shall establish segregated accounts
for deposit of the Proceeds (the “ Designated Merchant Accounts ”). The Merchant shall pay to the Agent all Proceeds on a
daily basis, commencing on the first business
day following payment of the Initial Guaranty
Payment and delivery of the Guaranty L/C and Expense
L/C.
(c) The
Guaranteed Amount has been calculated and agreed to based upon the
aggregate Retail Price of the Merchandise not being less than, or
in excess of, $56,000,000 (the “ Minimum Inventory Amount ”). To
the extent that the aggregate Retail Price of the Merchandise, as
determined by the final results of the Inventory Taking (defined
below), is (x) less than the Minimum Inventory Amount, then the
Guaranteed Amount shall be decreased by an amount equal to 65% of
such deficiency, or (y) greater than the Minimum Inventory Amount,
the Guaranteed Amount shall be increased by an amount equal to 36%
of such excess.
(d) On the
Sale Commencement Date, Merchant shall provide $1,000 in cash in
each of the Stores. Within 10 days of the Sale Commencement Date,
Agent shall reimburse Merchant for all of such cash. Merchant and
Agent shall cooperate to develop mutually agreeable procedures to
verify such amounts.
3.2.
Remaining Merchandise .
All unsold Merchandise remaining, if any, in the Stores at the Sale
Termination Date (the “ Remaining
Merchandise ”) shall become the
property of the Agent, free and clear of all liens, claims and
encumbrances.
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3.3.
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Time of Payments and Control of
Proceeds .
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(a) On the
Closing Date, the Agent shall (i) pay the Merchant ninety percent
(95%) of the Guaranteed Amount (the “ Initial Guaranty Payment ”),
(ii) pay the first week’s estimated Expenses as mutually
agreed to by the Merchant and the Agent, and (iii) deliver to Wells
Fargo Retail Finance, LLC (the “ Lender ”), as agent and lender
under that certain Debtor in Possession Loan and Security
Agreement, dated February 19, 2008 (the “
DIP Credit Agreement ”), as beneficiary, two letters of credit from a
financial institution acceptable to the
Merchant as follows: (A) a “
Guaranty L/C ” in
the original face amount equal to the unpaid portion of the
Guaranteed Amount, in a form to be agreed upon by the Merchant, the
Agent, and the Lender, which shall terminate upon payment of the
full Guaranteed Amount, and (B) an “ Expense L/C ” in the original
face amount equal to three (3) weeks of estimated Expenses as
mutually agreed to by the Merchant and the Agent, in a form to be
agreed to by the Merchant, the Agent, and the Lender. The Initial
Guaranty Payment and amount of the Guaranty L/C shall be calculated
based upon the estimated aggregate Retail Price of the Merchandise
to be included in the Sale, as reflected on the Merchant’s
books and records on the last business day immediately preceding
the Sale Commencement Date minus the aggregate Retail Price for the
On-Order Merchandise. Payments related to On-Order Merchandise
shall be made as part of the weekly Sale reconciliation as On-Order
Merchandise is received at the Stores.
(b) The
unpaid portion of the Guaranteed Amount shall be paid by the Agent
to the Merchant on the later of (i) the date that is 30 days after
the Sale Commencement Date, and (ii) the second business day
following the issuance of the final audited report of the aggregate
Retail Price of the Merchandise by the Inventory Taking Service,
after verification and reconciliation of the listing and tabulation
of the Inventory Taking by the Agent and the Merchant (the
“ Final Inventory Report
”). In the event there is any dispute with
respect to the reconciliation of the aggregate Retail Price of the
Merchandise following the Inventory Taking, then any such dispute
shall be resolved by the Bankruptcy Court.
(c) All
amounts required to be paid by the Agent or the Merchant under any
provision of this Agreement shall be made by wire transfer of
immediately available funds, which shall be wired by the Agent or
the Merchant, as applicable, no later than 2:00 p.m.
(Eastern Time) on the date that such payment is due.
In the event that the date on which such payment is due is not a
business day, then such payment shall be due on the next business
day.
(d) The
Guaranty L/C and the Expense L/C shall secure payment of the
balance of any unpaid portion of the Guaranteed Amount, the
Expenses, and any other amounts due from the Agent to the Merchant
hereunder, shall be issued by a bank selected by the Agent and
reasonably acceptable to the Merchant, and shall contain terms,
provisions and conditions mutually acceptable to the Merchant and
the Agent. Within five (5) business days after its receipt of
written notice from the Lender or the Merchant that the obligations
owed to the Lender have each been paid in full and all commitments
under the DIP Credit Agreement terminated, the Agent shall cause
the Guaranty L/C and the Expense L/C to be amended to name the
Merchant as the beneficiary. The Guaranty L/C and the Expense L/C
shall expire no earlier than 60 days after the Sale Termination
Date. Unless the parties have mutually agreed in writing that they
have completed the Final Reconciliation under this Agreement, then,
at least 30 days prior to the expiration date of the Guaranty L/C
and the Expense L/C, the Agent shall amend the Guaranty L/C and the
Expense L/C solely to extend the respective expiration dates by at
least an additional 60 days. If the Lender or the Merchant, as the
case may be, does not receive such amendments to the Guaranty L/C
and the Expense L/C, then all amounts hereunder shall become
immediately due and payable, and the Lender or the Merchant, as the
case may be, shall be permitted to draw the full amounts available
under the Guaranty L/C and the Expense L/C and apply the amounts so
drawn towards amounts then owed. Any amounts drawn in excess of the
amounts then owed shall be held as security for amounts that may
thereafter become due and payable to the Merchant
hereunder.
(e) In the
event that the Agent, after receipt of five (5) days’ written
notice (which notice shall not be required if the Agent or any
member of the Agent shall be a debtor under the Bankruptcy Code),
fails to pay the Guaranteed Amount, Expenses, or any portion
thereof, or other obligations hereunder when due, the Lender or the
Merchant, as the case may be, shall be permitted to draw the full
amounts available under the Guaranty L/C and the Expense L/C and
apply the amounts so drawn in payment of amounts then owed, and any
amounts drawn in excess of the amounts then owed shall be held as
security for amounts that may thereafter become due and payable to
the Merchant hereunder. To the extent that after drawing upon the
Guaranty L/C and the Expense L/C there are additional unpaid
amounts due to the Merchant or the Lender, the Agent shall
immediately pay such additional amounts in accordance with Section
3.3(c) hereof. The Merchant and the Agent agree that after payment
of the full Guaranteed Amount (calculated pursuant to the Final
Inventory Report) pursuant to Section 3.3(b) hereof, the Guaranty
L/C shall be terminated and redelivered to the Agent. The remedies
of the Merchant and the Lender under this Section 3.3(e) are in
addition to any other remedies the Merchant and the Lender may have
at law, equity, or under this Agreement, including without
limitation, Section 3.4 hereof.
(f) During the
Sale Term, all Proceeds of the Sale (including credit card
proceeds), shall be deposited on a daily basis into the Designated
Merchant Accounts. Commencing on the first business day following
the payment of the Initial Guaranty Payment and the posting of the
Guaranty L/C and the Expense L/C, and on each business day
thereafter (or as soon thereafter as is practicable), the Merchant
shall promptly pay to the Agent by wire funds transfer all
collected funds constituting Proceeds of the Sale held by the
Merchant (including credit card Proceeds, but excluding any other
funds, including, without limitation, any
proceeds of Merchant’s inventory sold prior to
the Sale Commencement Date, such as special order goods or
collections of accounts receivable at the Store level, if
any).
(g) Merchant agrees
that if at any time during the Sale Term Merchant holds any amounts
due to Agent as Proceeds hereunder, Agent may, in its discretion,
offset such Proceeds being held by Merchant against any amounts due
and owing to Merchant pursuant to this Section 3.3 or
otherwise under this Agreement. In addition, Merchant and Agent
further agree that if at any time during the Sale Term Agent holds
any amounts due to Merchant under this Agreement, Agent may, in its
discretion, offset such amounts being held by it against any
amounts due and owing by, or required to be paid by, Merchant
hereunder.
(h) If and
to the extent that Agent over-funds any amounts in respect of the
Guaranteed Amount hereunder, then Merchant agrees to promptly
reimburse such undisputed overpayment amounts to Agent. To the
extent that any over-funded amounts in respect of the Guaranteed
Amount hereunder have been received by the Lender and have not been
reimbursed by Merchant, Agent shall inform the Lender of such
overpayment in respect of the Guaranteed Amount hereunder and the
Lender agrees to disgorge such overpayment in respect of the
Guaranteed Amount hereunder to Agent within two (2) business days
of such notice.
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3.4.
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Final Reconciliation .
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(a) Within
thirty (30) days after the end of the Sale Term, Agent and Merchant
shall complete a final reconciliation of the Sale, the written
results of which shall be certified by representatives of each of
Merchant and Agent as a final settlement of accounts between
Merchant and Agent (the “ Final
Reconciliation ”). Within five (5)
days of completion of the Final Reconciliation, the Agent shall pay
to the Merchant, or the Merchant shall pay to the
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Agent, as the case may be, any and all amounts due
the other pursuant to the Final Reconciliation. During the Sale
Term, and until all of the Agent’s obligations under this
Agreement have been satisfied, the Merchant and the Agent shall
have reasonable access to the Merchant’s and the
Agent’s records with respect to taxes and Expenses to review
and audit such records.
(b) In the
event that there is any dispute with respect to the Final
Reconciliation, such dispute shall be promptly (and in no event
later than the third business day following the written request by
either the Merchant or the Agent) submitted to the Bankruptcy Court
for a determination. The Merchant and the Agent hereby agree to
submit to the jurisdiction of the Bankruptcy Court for such
determination.
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Section 4.
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Expenses of the Sale .
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4.1.
Expenses . The Merchant
is obligated to pay, subject to its right to receive reimbursement
on a weekly basis pursuant to the reconciliation procedures set
forth in Section 4.3 below, the expenses directly incurred in
connection with and attributable to the Sale (collectively, the
“ Expenses ”), limited to the following:
(a) (i)
base payroll of the Merchant’s Store-level Retained Employees
used in connection with the Sale for actual days worked (or in the
case of hourly employees, the hours worked), plus (ii) an amount
not to exceed 21.5% percent
of such base payroll (the “
Benefits Cap ”)
for the payment of all actual related payroll taxes, workers’
compensation, and benefits of the Merchant’s Retained
Employees used in connection with the Sale (including, without
limitation, medical and dental benefits, group life insurance,
accidental death and dismemberment insurance, short and long term
disability, and accrual for vacation and holiday
pay) for all such Retained Employees used, which
accrue during the period of the Sale and are attributable to the
Sale, plus (iii) actual costs payable to third party payroll
processors;
(b) costs
of all security in the Stores including, without limitation,
courier and guard service;
(c) Performance
Bonuses for Retained Employees, plus payroll taxes, as provided for
in Section 9.4 below;
(d) (i)
advertising and direct mailings relating to the Sale and (ii) Store
interior and exterior signage and banners;
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(e)
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local and long-distance telephone expenses and line
charges;
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(f) bank card
fees, bank card error fees, credit card fees, and chargebacks in
respect of disputed sales;
(g) bank
service charges, check guarantee fees, and bad check expenses, each
as relates to the Sale;
(h) costs
for additional Supplies in accordance with Section 8.4
hereof;
(i) all fees and
charges required to comply with all laws and regulations applicable
to the Sale;
(j) any and all
costs, including delivery and freight costs, related to the
processing, transfer and consolidation of Merchandise between the
Stores and the distribution centers (excluding all costs, including
delivery and freight costs, to deliver the On-Order Merchandise to
the Stores, but including, from and after the Sale Commencement
Date, all costs of processing the On-Order Merchandise upon its
arrival at the Stores and thereafter);
(k) trash
removal, housekeeping and cleaning expenses related to the
Stores;
(l) all
reasonable travel expenses, including living expenses, payable to
Merchant’s Retained Employees relating to travel by such
Retained Employees at the direction of the Agent, which shall
include, without limitation, the costs of transferring the
Merchant’s Retained Employees between Stores;
(m) all costs and
expenses of providing such additional Store-level services,
including, without limitation, the employment of temporary help
(which shall be coordinated and implemented through the
Merchant’s human resources department), which the Agent in
its reasonable discretion considers appropriate, and other approved
miscellaneous Store-level expenses incurred by the
Agent;
(n) postage, courier
and overnight mail charges to and from or among the Stores and
central office (solely to the extent relating to the
Sale);
(o) Occupancy Expenses
on a per Store, per diem, basis and limited to those categories of
expenses described and up to the maximum amounts set forth
on Exhibit 4.1
hereto;
(p) Central
Expenses of $50.00 per Store per week during the Sale Term
(prorated for any partial week ) ;
(q) the
Merchant’s liability insurance and casualty insurance
premiums in the amount of $
25.00 per Store per week (prorated for any partial
week) required under Sections 13.1 and 13.2 hereto;
(r) any other
expense approved by the Merchant directly incurred by the Agent in
connection with the Sale;
(s) Agent’s
documented cost of capital (which documents shall be provided to a
representative of the Merchant agreeable to the Merchant and the
Agent and subject to appropriate confidentiality agreement),
including letter of credit fees;
(t) Agent’s
reasonable supervision expense, including, (i) fees of the
Agent’s supervisors, (ii) expenses and travel costs for
Agent’s supervisors, and (iii) supervisor bonuses;
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(u)
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Agent’s due diligence and legal expenses
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(v) 50% of
the fees, costs and expenses of the Inventory Taking Service for
the Inventory Taking; provided that the fees, costs, and expenses
of the Inventory Taking Service for the Inventory Taking shall not
include any fees, costs, or expenses relating to Retained Employees
utilized during the Inventory Taking, which expenses shall be borne
solely by Agent;
(w) (w) Agent’s
actual cost of insurance as required by Section 13.3
hereof.
There will be no double payment of Expenses to the
extent that an Expense appears or is contained in more than one
category. Notwithstanding anything herein to the contrary, to the
extent that any Expense listed in Section 4.1 is also included on
Exhibit 4.1, then Exhibit 4.1 shall control and such Expenses shall
not be double counted.
4.2.
Definition of Certain Expenses
. As used herein, the following terms have the
following respective meanings:
(a) “Central
Expenses” means costs and expenses for the Merchant’s
central administrative services necessary for the Sale consisting
of sales audit, MIS services,
POS systems, payroll processing, cash
reconciliation, inventory processing and handling, data processing
and reporting and any similar services.
(b) “Excluded
Benefits” means the following benefits, except as provided in
Section 4.1(a): maternity leave or other leaves of absence,
termination or severance pay, union dues or other amounts due under
any union contract or collective bargaining agreement, pension
benefits, ERISA coverage and similar contributions, and payroll
taxes, worker’s compensation, and health insurance benefits,
and any other benefits in excess of the Benefits Cap, including any
payments due under the Worker Adjustment Retraining Notification
Act (“ WARN Act
”).
(c) “Occupancy
Expenses” means base rent, percentage rent, HVAC, utilities,
CAM, real estate and use taxes, merchant’s association dues
and expenses, rental for furniture, fixtures and equipment
(including, without limitation, Store-level point of sale
equipment), cash register maintenance, security systems, building
alarm service, alarm service maintenance and store trash and snow
removal expenses, all of the foregoing as categorized or reflected
on Exhibit 4.1
hereto.
(d) “Expenses”
shall not include: (i) Excluded Benefits; (ii) Central Expenses in
excess of the amount set forth in Section 4.1(p) above; and (iii)
any other costs, expenses or liabilities payable by the Merchant
under this Agreement (other than Expenses or other obligations of
the Agent hereunder) all of which shall be paid by Merchant
promptly when due during the Sale Term.
4.3. Payment of Expenses . The Agent shall
be responsible to reimburse the Merchant for all Expenses of the
Sale. All Expenses incurred during each week of the Sale (i.e.,
Sunday through Saturday) shall be paid by the Merchant as provided
for herein, subject to
reimbursement by the Agent at the end of each week
based on a weekly estimate to be mutually agreed upon on a weekly
basis by the Merchant and the Agent or based upon an invoice
submitted by the Merchant to the Agent. The Agent and the Merchant
may review or audit the Expenses at any time.
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Section 5.
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Inventory Valuation; Merchandise
.
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5.1.
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Merchandise Subject to this Agreement
.
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(a) For
purposes of this Agreement, “Merchandise” shall mean:
(i) all saleable finished goods inventory that is owned by the
Merchant and located at the Stores as of the Sale Commencement Date
(including saleable samples, open box items, in-store clearance
items, discontinued items and returns); (ii) Defective Merchandise;
and (iii) On-Order Merchandise. Notwithstanding the foregoing,
“Merchandise” shall not include: (1) goods which belong
to sublessees, licensees, department lessees, or concessionaires of
Merchant; (2) goods held by Merchant on memo, on consignment, or as
bailee; (3) furnishings, trade fixtures, equipment and/or
improvements to real property which are located in the Stores
(collectively, “ FF&E
”); (4) Excluded Defective Merchandise; (5)
Merchant Consignment Goods; and (6) Additional Agent
Merchandise.
(b) As used
in this Agreement the following terms have the respective meanings
set forth below:
(i) “Defective
Merchandise” means any goods reasonably agreed upon by the
Merchant’s representative and the Agent’s
representative during the Inventory Taking as defective or
otherwise not saleable in the ordinary course of Merchant’s
business at Retail Price, as if the Merchandise were not defective
and as to which Merchant and Agent mutually agree as to the Retail
Price of such Defective Merchandise. Display
merchandise shall not be presumed to be defective.
Packaging material that has minor wear, soiling, stains, dents,
tears, scratches, or fading shall not render the Merchandise
therein “defective.”
(ii) “On-Order
Merchandise” means merchandise currently ordered by Merchant
and listed on Exhibit
5.1 but which has not been received
in the Stores prior to the Sale Commencement Date but which is
received at the Stores within 10 days following the Sale
Commencement Date. Following such 10 th day, On-Order
Merchandise (if applicable) arriving at the Stores shall be valued
at the Retail Price applicable to such items, less the prevailing
Sale discount at the time of delivery to the Stores. Any increase
to the Guaranteed Amount relative to On-Order Merchandise (if
applicable) delivered to the Stores following the Inventory Date
shall be reconciled by the parties as part of the weekly Sale
reconciliation. Nothing herein shall obligate the Merchant to
purchase or include On-Order Merchandise in the Sale.
(iii) “Excluded
Defective Merchandise” means (i) spare parts, component
parts, Supplies and other items not intended to be sold to
customers as a complete item of merchandise, (ii) returned to
vendor inventory located at the Little Rock, AK distribution
center, (iii) inventory currently at RMI, the domestic refurbisher
in Chicago, IL, (iv) refurbished inventory currently overseas, (v)
domestic inventory that has yet to be sent out to be refurbished
from the Stores, (vi) inventory already designated as return to
vendor or marked “out of stock” , and (vii) those items
of Defective Merchandise that are not saleable because they are so
damaged or defective that such inventory cannot be used for the
purpose for which they were intended.
(a) For
purposes of this Agreement, “Retail Price” shall mean
the lower of (i) the Merchant’s “register” price,
or (ii) the ticketed, marked or shelf price of each item of
Merchandise, in each case as of the Sale Commencement Date.
Notwithstanding the foregoing, the “ Retail Price ” of items of
Defective Merchandise shall be mutually agreed by the Merchant and
the Agent.
(b) The
Retail Price of any item of Merchandise shall not be reduced
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