Exhibit 10.1
AGENCY AGREEMENT
This Agency Agreement is made as of
this 14th day of February, 2008, by and between a joint venture
composed of HILCO MERCHANT RESOURCES, LLC, GORDON BROTHERS RETAIL
PARTNERS, LLC and HILCO REAL ESTATE, LLC (the “ Agent
”) and ROSEDALE WILSONS, INC., WILSONS LEATHER HOLDINGS INC.,
AND THOSE ENTITIES LISTED ON EXHIBIT 1A HERETO, all with a
principal place of business at 7401 Boone Avenue North, Brooklyn
Park, Minnesota 55428 (jointly and severally, the “
Merchant ”).
R E C I T A L
S
WHEREAS, the Merchant desires that
the Agent act as the Merchant’s exclusive agent for the
limited purpose of (a) selling the Merchandise (as hereinafter
defined) in Merchant’s retail store locations listed on
Exhibit 1B attached hereto (each, individually, a
“ Store ”, and, collectively, the “
Stores ”), by means of a promotional, store closing or
similar sale (the “ Store Closing Sale ”),
(b) selling the FF&E located at the Stores (the “
FF&E Sale ”), and (c) selling, assigning,
terminating or otherwise mitigating Merchant’s damages with
respect to, the leases (each, a “ Lease ” and,
collectively, the “ Leases ”) of the properties
listed on Exhibit 1C attached hereto (each, a “
Leased Property ” and, collectively, the “
Leased Properties ”) (collectively with the Store
Closing Sale and the FF&E Sale, the “ Comprehensive
Sale ”).
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 used herein shall have the meanings
ascribed to them in this Agreement:
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Material has been omitted pursuant to a request for
confidential treatment and such material has been filed separately
with the Securities and Exchange Commission. A series of three
asterisks within brackets denotes omissions. |
Section 2. Appointment of
Agent . The Merchant hereby appoints the Agent, and the Agent
hereby agrees to serve, as the Merchant’s exclusive agent for
the limited purpose of conducting the Comprehensive Sale in
accordance with the terms and conditions of this Agreement.
Section 3. Consideration to
Merchant and Agent for Store Closing Sale.
3.1
Payment(s) to Merchant.
(a)
(i) As a guaranty of Agent’s performance hereunder,
Merchant shall receive from Agent the sum of 77% of the aggregate
Cost Price of the Merchandise, except for Transfer Merchandise and
Warehouse Merchandise received at the Stores on and after the
Cutoff Date, as to which such percentage shall be the product of
77% times the complement of the then prevailing Store Closing Sale
discount at the time of the receipt of such Merchandise at the
Stores (the “ Guaranteed Amount ”). The “
Cutoff Date ” shall mean twenty-one (21) days
after the Sale Commencement Date, provided that, the aggregate Cost
Price of Transfer Merchandise, On-Order Merchandise, and Warehouse
Merchandise received at the Stores between the 14 th and 21
st day
after the Sale Commencement Date shall not exceed $1,000,000. In
addition, Agent guarantees that Proceeds shall be no less than the
sum of the Guaranteed Amount and Expenses hereunder.
(ii) To
the extent that Proceeds exceed the sum of the Guaranteed Amount,
plus all Expenses, plus the Agent’s Fee (“ Sharing
Threshold ”), Merchant shall receive from Agent 50% of
such excess Proceeds (the “ Recovery Amount
”).
(iii)
Agent shall pay to Merchant the Guaranteed Amount and the Recovery
Amount, if any, in the manner and at the times specified in
Section 3.3 below. The Guaranteed Amount, the Recovery
Amount and the Agent’s Fee will be calculated based upon (A)
the aggregate Cost Price of items of Merchandise established in
accordance with Section 5.1
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hereof
and (B) reconciliation by Merchant and Agent of Transfer
Merchandise and Warehouse Merchandise received at the Stores in the
manner provided herein.
(b) The
Guaranteed Amount and Recovery Amount have been calculated and
agreed upon based upon Merchant’s representation that
(i) the aggregate Cost Price of the Merchandise in the Stores
on the Sale Commencement Date will not be more than
20.8 million (the “ Merchandise Ceiling ”)
and (ii) all such Merchandise will conform to Merchant’s
representations and warranties contained herein, and that no
representations, warranties or covenants of Merchant hereunder have
been breached. Merchant and Agent agree that in the event that the
Cost Price of Merchandise is more than the Merchandise Ceiling,
then the percentage on which the Guaranteed Amount is based shall
be reduced as provided in Exhibit 3.1 attached
hereto.
3.2
Compensation to Agent . Agent shall receive as its base
compensation for services rendered to Merchant in connection with
the Store Closing Sale, excess Proceeds of the Store Closing Sale
after payment of the Guaranteed Amount and all Expenses, in an
amount up to 7.3% of the aggregate Cost Price of the Merchandise
(the “ Agent’s Fee ”). In addition,
following payment of the Guaranteed Amount, all Expenses and the
Agent’s Fee, if any, Agent shall receive and/or retain 50% of
any excess Proceeds of the Store Closing Sale above the Sharing
Threshold (“ Agent’s Additional Fee
”).
Provided that no Event of Default has
occurred and continues to exist on the part of the Agent, all
Merchandise remaining at the conclusion of the Store Closing Sale
shall become the property of Agent, free and clear of all liens,
claims and encumbrances of any kind or nature; provided, however,
that Agent shall use commercially reasonable efforts to sell all
Merchandise to the piece by the conclusion of the Store Closing
Sale.
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3.3
Time of Payments . Immediately following the weekly Store
Closing Sale reconciliation by Merchant and Agent pursuant to
Section 8.8 below, until the Guaranteed Amount has been
paid in full, Merchant shall retain the Proceeds from sales of
Merchandise during the prior week (i.e., Sunday through Saturday)
less the Expenses incurred during such week (the “ Weekly
Net Proceeds ”), which Weekly Net Proceeds shall be
applied to and credited against the Guaranteed Amount. After the
amount of Weekly Net Proceeds applied and credited against the
Guaranteed Amount equals the Guaranteed Amount, all Weekly Net
Proceeds collected by Merchant shall be paid by Merchant to Agent.
Any Expenses incurred directly by Agent shall be paid by Merchant
to Agent by wire transfer of immediately available funds on such
weekly basis.
The Guaranteed Amount attributable to
Transfer Merchandise, Warehouse Merchandise and Returned
Merchandise received at the Stores after the Cutoff Date shall be
reconciled on a weekly basis for all such items received during the
prior week (i.e., Sunday through Saturday). Any such payment shall
be made immediately following the weekly Store Closing Sale
reconciliation by Merchant and Agent pursuant to
Section 8.8 below.
Within ten (10) days after
completion by Merchant and Agent of the final Store Closing Sale
reconciliation pursuant to Section 8.8 below, Agent
shall pay to Merchant any unpaid portion of the Guaranteed Amount
and the Recovery Amount due hereunder, if any.
All payments by Merchant to Agent or
Agent to Merchant hereunder shall be by wire transfer of
immediately available funds; provided, however, Merchant agrees
that any amounts due by Agent to Merchant pursuant to this
Section 3 may in Agent’s discretion be offset by
the amount of Proceeds which have not, as of the applicable date of
payment by Agent to Merchant, been transferred by Merchant to
Agent.
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3.4
Agent Letter of Credit . To secure payment of the Guaranteed
Amount, Expenses, and any other amounts due from Agent to Merchant
hereunder, Agent shall deliver to Merchant an irrevocable standby
letter of credit in the original face amount of $5,000,000 naming
Merchant as beneficiary, substantially in the form of
Exhibit 3.4 attached hereto (the “ Agent
Letter of Credit ”). Agent shall use its best efforts to
cause the Agent Letter of Credit to be delivered no later than two
(2) business days following the Sale Commencement Date. The
Agent Letter of Credit shall be issued by a bank selected by Agent
and reasonably acceptable to Merchant, and shall contain terms,
provisions and conditions mutually acceptable to Agent and
Merchant. In the event that Agent shall fail to pay to Merchant any
amount required to be paid hereunder, Merchant shall be entitled to
draw on the Agent Letter of Credit to fund such amount following
five (5) days’ written notice to Agent of
Merchant’s intention to do so, provided that no material
default or Event of Default has then occurred on the part of the
Merchant hereunder and is continuing. The Agent Letter of Credit
shall expire on June 30, 2008, provided that in the event that
Agent shall have paid to Merchant the Guaranteed Amount prior to
such date, Merchant agrees to surrender the original Agent Letter
of Credit to the issuer thereof together with written notification
that the Agent Letter of Credit may be terminated. Merchant and
Agent agree that the face amount of the Agent Letter of Credit may
be reduced from time to time after payment of amounts due hereunder
upon mutual agreement of Agent and Merchant in good faith.
3.5
Merchant Letter of Credit . To secure payment of the
Agent’s Fee, Agent’s Additional Fee, Expenses paid by
Agent and any other amounts due from Merchant to Agent hereunder,
including, without limitation, amounts paid by Agent or required to
be paid to Agent under Section 17 hereof, Merchant
shall deliver to Agent an irrevocable standby letter of
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credit
in the original face amount of $3,000,000 naming Agent as
beneficiary, substantially in the form of Exhibit 3.5
attached hereto (the “ Merchant Letter of Credit
”). Merchant shall use its best efforts to cause the Merchant
Letter of Credit to be delivered no later than two
(2) business days following the Sale Commencement Date. The
Merchant Letter of Credit shall be issued by a bank selected by
Merchant and reasonably acceptable to Agent, and shall contain
terms, provisions and conditions mutually acceptable to Agent and
Merchant. In the event that Merchant shall fail to pay to Agent any
amount required to be paid hereunder, Agent shall be entitled to
draw on the Merchant Letter of Credit to fund such amount following
five (5) days’ written notice to Merchant of
Agent’s intention to do so, provided that no material default
or Event of Default has then occurred on the part of the Agent
hereunder. On the day that is five (5) days after the final
reconciliation of the Store Closing Sale pursuant to
Section 8.8 hereof, but in no event later than
June 30, 2008, the face amount of the Merchant Letter of
Credit shall be reduced to $1,000,000, provided, that, as of such
date, the Agent’s Fee, Agent’s Additional Fee, and the
Expenses have been paid to or escrowed on behalf of Agent. The
Merchant Letter of Credit shall expire on January 31, 2009,
provided that in the event that the final reconciliation of the
Store Closing Sale pursuant to Section 8.8 hereof shall
have been completed and all amounts paid by Agent or required to be
paid to Agent under Section 17 hereof shall have been
paid prior to such date, Agent agrees to surrender the original
Merchant Letter of Credit to the issuer thereof together with
written notification that the Merchant Letter of Credit may be
terminated.
Section 4. Expenses of the
Store Closing Sale .
4.1
Expenses . Agent shall be solely responsible for all
Expenses incurred in conducting the Store Closing Sale; provided,
however, that Expenses shall be paid by
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Merchant
as provided in Section 3.3 hereof. Notwithstanding the
foregoing, Agent shall be responsible for all Expenses, even if
Proceeds are insufficient. To the extent the incurrence of any
Expense is discretionary, Agent shall consult with Merchant with
respect to the amount and type of such Expense utilized during the
Sale Term. Agent shall provide an accounting to Merchant of all
Expenses from time to time upon Merchant’s request during the
Sale Term and as part of the final reconciliation. As used herein,
“ Expenses ” shall mean Store-level operating
expenses of the Store Closing Sale that arise during the Sale Term
at the Stores limited to the following:
(a) base
payroll and commissions for Retained Employees for actual
days/hours worked during the Sale Term;
(b) amounts
actually payable in respect of FICA, unemployment taxes,
worker’s compensation and health care insurance benefits for
Retained Employees (excluding vacation days or vacation pay, sick
days or sick leave, maternity leave or other leaves of absence,
termination or severance pay, union dues, pension benefits, ERISA
coverage and similar contributions), in an amount not to exceed 22%
of base payroll (exclusive of Retention Bonuses) for the Retained
Employees in the aggregate (the “ Benefits Cap
”);
(c) Agent’s
commercially reasonable supervision fees and expenses (including,
without limitation, travel costs and bonuses);
(d) advertising
and signage expenses (at Agent’s actual documented
cost);
(e) long
distance telephone expenses incurred in the conduct of the Store
Closing Sale;
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(f) credit
card and bank card fees and discounts (at Merchant’s actual
costs), chargebacks and costs of returned checks;
(g) costs
of security personnel in the Stores and for armored car
service;
(h) a
pro-rata portion of Merchant’s casualty insurance premiums
attributable to the Merchandise;
(i) costs
of transfers of Merchandise during the Sale Term between the
Stores, excluding any cost associated with transferring Transfer
Merchandise, On-Order Merchandise and Warehouse Merchandise to the
Stores;
(j) Retention
Bonuses as described in Section 9.4 below;
(k) Agent’s
documented letter of credit fees for the Agent Letter of
Credit;
(l) Agent’s
reasonable legal fees and expenses and other transaction reasonable
costs, including, without limitation, Agent’s out-of-pocket
costs, such as travel and other incidental costs incurred by Agent
in connection with performance of the transactions contemplated
hereby and in accordance with Merchant’s Travel Policy, which
shall be provided to Agent;
(m) costs
and expenses of additional Supplies as provided in
Section 8.4 ;
(n) Occupancy
Expenses, limited on a per diem per Store basis and limited to
those amounts and categories as described in
Exhibit 4.1 attached hereto;
(o) Actual
costs incurred by Agent of obtaining all permits, licenses,
consents and approvals required under Section 10(a)
hereof;
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(p) the
costs and expenses of providing such additional services that the
Agent in its reasonable discretion deems appropriate; and
(q) 50%
of the fees and costs of the inventory taking service to conduct
the Inventory Taking.
“Expenses” shall not
include: (i) Excluded Benefits; (ii) any rent or
occupancy expenses related to the Stores other than Occupancy
Expenses; (iii) Central Service Expenses; (iv) any rent,
occupancy and other expenses relating to the Warehouse or for the
transfer of Transfer Merchandise, On-Order Merchandise or Warehouse
Merchandise to the Stores; (v) any costs, expenses and
liabilities that would otherwise constitute “Expenses”
hereunder but that were not disclosed to Agent prior to the date of
this Agreement and (vi) except for costs, expenses or
liabilities subject to bona fide disputes, any other costs,
expenses or liabilities payable by Merchant, all of which shall be
paid by Merchant promptly when due for and during the Sale Term.
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
Expense shall not be double counted.
As used herein, the following terms
have the following respective meanings:
“
Central Service Expenses ” means costs and expenses
for Merchant’s central administrative services necessary for
the Store Closing Sale, including, but not limited to, sales audit,
MIS services, POS systems, payroll processing, cash reconciliation,
inventory processing and handling and data processing and
reporting.
“
Excluded Benefits ” means (i) vacation days or
vacation pay, sick days or sick leave, maternity leave or other
leaves of absence, termination or severance pay, union dues,
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pension
benefits, ERISA coverage and similar contributions and
(ii) payroll taxes, worker’s compensation and health
insurance benefits in excess of the Benefits Cap.
“
Occupancy Expenses ” means base rent, percentage rent,
HVAC, utilities, CAM, real estate and use taxes, merchant’s
association dues, merchant’s marketing and promotional funds,
merchant’s sprinkler fees and building insurance relating to
the Stores, limited on a per diem, per Store basis and limited to
those amounts and categories as described on
Exhibit 4.1 attached hereto.
4.2
Payment of Expenses . All Expenses incurred during each week
of the Store Closing Sale (i.e., Sunday through Saturday) shall be
paid by Merchant out of Proceeds as provided in
Section 3.3 above, immediately following the weekly
Store Closing Sale reconciliation by Merchant and Agent pursuant to
Section 8.8 below, based upon invoices and other
documentation reasonably satisfactory to Agent and Merchant.
Section 5. Inventory
Valuation; Merchandise .
5.1
Inventory Taking
Merchant and Agent shall cause to be
taken a SKU or “scan” price inventory of the
Merchandise and an audit of the Ticketed Price of the Merchandise
(the “ Inventory Taking ”) commencing at the
close of business at each of the Stores on a date mutually agreed
upon by Agent and Merchant (the date of the Inventory Taking at
each Store being the “ Inventory Date ” for such
Store). Merchant and Agent shall jointly employ RGIS, WIS or
another mutually acceptable inventory taking service to conduct the
Inventory Taking. Agent shall be responsible for 50% of the costs
and fees of the inventory taking service as an Expense hereunder,
and the balance of such costs and fees shall be paid by Merchant,
provided, however, that Merchant shall not be responsible for
out-of-pocket costs (which costs shall be treated as an Expense
hereunder)
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incurred
by Agent in connection with the presence of Agent’s employees
or representatives at the Inventory Taking. Except as provided in
the immediately preceding sentence, Merchant and Agent shall bear
their respective costs and expenses relative to the Inventory
Taking. Merchant and Agent shall each have representatives present
during the Inventory Taking, and shall each have the right to
review and verify the listing and tabulation of the inventory
taking service. Merchant agrees that during the conduct of the
Inventory Taking at each Store such Store shall be closed to the
public and no sales or other transactions shall be conducted. The
procedures to be used in the conduct of the Inventory Taking and
its verifications are set forth on Exhibit 5.1 attached
hereto. In order to facilitate the Inventory Taking, Merchant
agrees to make its SKU data files and related computer hardware and
software available to Agent and the inventory taking service
commencing prior to the Inventory Date. In connection with the
Inventory Taking, but prior to the final verification thereof,
Agent and Merchant shall perform an audit of the Ticketed Price by
comparing a sample of SKU selling prices of items of Merchandise
ascertained from the Inventory Taking with the actual prices at
which such items of Merchandise were offered to the public at the
Stores as of the Inventory Date. The procedures for this audit
shall be agreed upon between Merchant and Agent in good faith. If
the SKU selling price is greater than the actual price at which
items of Merchandise were offered to the public as of the Inventory
Date, Merchant and Agent shall agree on an adjustment to the Cost
Price to account for such discrepancy in good faith.
5.2 In
the event that the Store Closing Sale commences at any Store prior
to the completion of the Inventory Taking at such Store, then for
the period from the Sale Commencement Date for such Store until the
Inventory Date for such Store, Agent and Merchant shall jointly
keep (i) a strict count of gross register receipts less
applicable Sales Taxes (“ Gross
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Rings ”) and (ii) cash reports of sales within
such Store. Register receipts shall show for each item sold, the
SKU and price paid for such item in connection with such sale. All
such records and reports, including the master inventory file,
shall be made available to Agent and Merchant during regular
business hours upon reasonable notice. Merchant and Agent will
reconcile each item of Merchandise reflected in the Gross Rings
against the master inventory file of Merchant as of the Sale
Commencement Date to establish the unadjusted Retail Price,
Ticketed Price and Cost Price of such item of Merchandise. The
unadjusted Retail Price, Ticketed Price, and Cost Price determined
in accordance with the above, will each be adjusted (i) to
account for shrinkage by multiplying them by 101.3% and
(ii) to address Defective Merchandise by a process to be
agreed to by Merchant and Agent..
5.3
Merchandise Subject to this Agreement. (a) For purposes of
this Agreement, “ Merchandise ” shall mean all:
(i) first quality finished goods inventory that is located at
the Stores as of the Sale Commencement Date saleable in the
ordinary course of business; (ii) Repair and Special Order
Merchandise that is not picked up by customers prior to the Cutoff
Date; (iii) Transfer Merchandise; (iv) Warehouse
Merchandise; and (v) On-Order Merchandise. Notwithstanding the
foregoing, “Merchandise” shall not include:
(1) Defective Merchandise; (2) goods that belong to third
party sublessees, licensees or concessionaires of Merchant other
than Merchant; (3) goods held by Merchant on memo, on
consignment or as bailee for a third party other than Merchant;
(4) furnishings, trade fixtures, equipment and improvements to
real property which are located in the Stores or the Warehouse
(collectively, “ FF&E ”); (5) Transfer
Merchandise, On-Order Merchandise and Warehouse Merchandise
received at any Store after the Cutoff Date, unless Agent in its
discretion elects to include such goods in Merchandise;
(6) goods so damaged that they are not saleable in the
ordinary course of
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business
at any price; (7) Returned Defective Merchandise; and
(8) Repair and Special Order Merchandise picked up by
customers prior the Cutoff Date.
(b) As
used in this Agreement, the following terms have the respective
meanings set forth below:
“
Defective Merchandise ” means any item of Merchandise
that is agreed upon and identified by Agent and Merchant as
defective or otherwise not saleable in the ordinary course because
it is dented, worn, scratched, broken, faded, torn, mismatched or
affected by other similar defects rendering it not first quality,
but that is not so damaged that it is not saleable in the ordinary
course of business at any price. Sample merchandise and merchandise
on display shall not per se be deemed to be Defective Merchandise
so long as (x) the original packaging (including warranty
information, if any warranty applies, and all supplied accessories)
for such Merchandise is intact and available if needed to make the
item saleable in the ordinary course, and (y) such Merchandise
remains subject to its original warranty, if applicable.
“
Repair and Special Order Merchandise ” means all items
of Merchandise held at the Stores for repair, or customer-specific
special orders for goods, in each case where (i) the
documentation is clear as to the name, address, telephone number,
date of last payment and balance due from the customer, and
(ii) the goods subject to repair or special order are properly
identified, segregated and in a condition as described in the
documentation.
“
Transfer Merchandise ” means first quality seasonal
store Merchandise, outlet distribution center Merchandise, and
closing store Merchandise (i) received at the Stores no later
than the Cutoff Date, (ii) ticketed at Merchant’s
expense and in accordance with Merchant’s historic ticketing
practices upon delivery to the Warehouse or the Stores, and
(iii) set forth on Exhibit 5.2(b) attached hereto.
The Cost Price for Transfer Merchandise received at the
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Stores
on or after Cutoff Date shall be reduced by a number equal to the
Cost Price multiplied by the complement of the prevailing discount
at the Store on the day on which such Transfer Merchandise is
received by such Store.
“
Warehouse Merchandise ” means first-quality, in season
goods located at Merchant’s warehouse in Minneapolis,
Minnesota (the “ Warehouse ”) on the Sale
Commencement Date and which (i) at Merchant’s cost
(including, without limitation, costs of labor, freight and
supplies) are transferred to the Stores from the Warehouse on or
before the Cutoff Date, (ii) are ticketed by Merchant at its
expense and in accordance with Merchant’s historic ticketing
practices prior to or upon delivery to the Stores, (iii) are
consistent as to type, quality and assortment as Merchandise
presently located at the Stores, and (iv) are set forth on
Exhibit 5.2(b) attached hereto. The Cost Price for Warehouse
Merchandise received at the Stores on or after Cutoff Date shall be
reduced by a number equal to the Cost Price multiplied by the
complement of the prevailing discount at the Store on the day on
which such Warehouse Merchandise is received by such Store.
“
On-Order Merchandise ” means first-quality, in season
goods, ordered by Merchant for sale in the Stores in the ordinary
course of business prior to the Sale Commencement Date and listed
on Exhibit 5.2(b) , but that have not been received at
the Stores by the Cutoff Date. The Cost Price for On Order
Merchandise received at the Stores on or after Cutoff Date shall be
reduced by a number equal to the Cost Price multiplied by the
complement of the prevailing discount at the Store on the day on
which such On Order Merchandise is received by such Store.
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5.4
Valuation .
(a) For
purposes of this Agreement, “ Retail Price ”
shall mean, with respect to each item of Merchandise, the file
price of such item identified as “Retail” on
Merchant’s books and records as provided during the due
diligence period.
(b) For
purposes of this Agreement, “ Cost Price ” shall
mean, with respect to each item of Merchandise, the current
weighted average cost for such item reflected in any of
Merchant’s books and records.
(c) For
purposes of this Agreement, “Ticketed Price” shall mean
the lowest ticketed or marked price set forth on each item of
Merchandise identified as “Ticket” on Merchant’s
books and records as provided during the due diligence
period.
The Ticketed Price, Retail Price and
the Cost Price of any item of Merchandise shall exclude all Sales
Taxes, and Merchant represents that (a) the ticketed prices of
all items of Merchandise do not and shall not include any Sales
Taxes and (b) all registers located at the Stores are
programmed to correctly compute all Sales Taxes required to be paid
by the customer under applicable law. If an item of Merchandise has
more than one Ticketed Price or Retail Price, as applicable, or if
multiple items of the same SKU are marked at different prices, the
lowest Retail Price on any such item shall prevail for such item or
for all such items within the same SKU, as the case may be, unless
it is clear that the lowest Ticketed Price or Retail Price, as
applicable, was mismarked.
5.5
Excluded Goods . Merchant shall retain all responsibility
for any goods not included as “Merchandise” hereunder.
Defective Merchandise will be segregated and
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transferred out of the Stores at Merchant’s sole cost and
expense. Agent shall have no cost, expense or responsibility in
connection with any goods not included in Merchandise.
Section 6. Store Closing Sale
Term .
6.1
Term . Subject to satisfaction of the conditions precedent
set forth in Section 10 hereof, the Store Closing Sale
shall commence at each Store on February 15, 2008 (such date
with respect to each Store being the “ Sale Commencement
Date ”). The Agent shall complete the Store Closing Sale
at each Store no later than May 31, 2008, unless the Store
Closing Sale is extended pursuant to Section 8.10
hereof or by mutual written agreement of Agent and Merchant (the
“ Sale Termination Date ;” the period from the
Sale Commencement Date to the Sale Termination Date as to each
Store being the “ Sale Term ”). The Agent may,
in its discretion, terminate the Store Closing Sale at any Store or
Stores at any time or from time to time within the Sale Term
(a) upon the occurrence of an Event of Default by Merchant
that continues beyond any applicable period for cure or
(b) upon not less than ten (10) days’ prior written
notice to Merchant.
6.2
Vacating the Stores . At the conclusion of the Store Closing
Sale, Agent agrees to leave the Stores in “broom clean”
condition, ordinary wear and tear excepted, except for remaining
Supplies and unsold items of FF&E.
6.3
Intentionally Omitted ..
Section 7. Store Closing Sale
Proceeds .
7.1
Proceeds . For purposes of this Agreement, “
Proceeds ” shall mean the aggregate of: (a) the
total amount (in dollars) of all sales of Merchandise made under
this
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Agreement, exclusive of (i) Sales Taxes and (ii) returns,
allowances and customer credits and (b) all proceeds of
Merchant’s insurance for loss or damage to Merchandise or
loss of Store cash arising from events occurring during the Sale
Term.
7.2
Deposit of Proceeds . All cash Proceeds shall be deposited
in existing accounts of Merchant (such accounts, the “
Agency Accounts ”). Merchant and its lender, General
Electric Capital Corporation (“GECC”) shall exercise
sole signatory authority and control with respect to the Agency
Accounts. Proceeds collected in the Agency Accounts shall be
reconciled weekly in accordance with Section 8.8 hereof
and, immediately after such reconciliation, Merchant shall pay to
Agent any amounts due under Section 3.3 hereof. After
payment of the Guaranteed Amount, (a) Agent shall have the
right (but not the obligation) to open new accounts for which Agent
shall exercise sole signatory authority into which all cash
Proceeds of the Store Closing Sale shall be deposited, and
(b) to the extent that Agent shall elect to continue to use
the Agency Accounts, (i) all Proceeds deposited in such
accounts will constitute the property of Agent and shall be held in
trust by Merchant for Agent, and (ii) commencing on the first
business day following the date upon which the Guaranteed Amount is
paid in full, and on each business day thereafter, Merchant shall
pay to Agent by wire funds transfer all collected funds
constituting Proceeds deposited in such accounts. At any time
during the Sale Term, upon request by Agent, Merchant shall deliver
to Agent documentation reflecting the deposit and wire transfers of
such Proceeds. Merchant shall not be responsible for and Agent
shall pay as an Expense hereunder, all bank fees and charges,
including wire transfer charges, related to the Agency Accounts,
whether received during or after the Sale Term.
7.3
Credit Card Proceeds . Prior to the payment of the
Guaranteed Amount, Agent shall use Merchant’s credit card
facilities (including Merchant’s credit card
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terminals and processor(s), credit card processor coding, merchant
identification number(s) and existing bank accounts) for credit
card Proceeds. Merchant shall continue to process credit card
transactions applying customary practices and procedures. Without
limiting the foregoing, Merchant shall cooperate with Agent to
down-load data from all credit card terminals each day during the
Sale Term and to effect settlement with Merchant’s credit
card processor(s), and shall take such other actions necessary to
process credit card transactions under Merchant’s merchant
identification number(s). Prior to payment in full of the
Guaranteed Amount, Merchant and Agent shall reconcile credit card
Proceeds weekly as provided in Section 8.8 of this
Agreement. After payment in full of the Guaranteed Amount,
(a) all credit card Proceeds will constitute the property of
the Agent and shall be held by Merchant in trust for Agent and
(b) Merchant shall deposit all credit card Proceeds into a
designated account and shall transfer such Proceeds to Agent daily
(on the date received by Merchant if received prior to 12:00 noon,
or otherwise within one business day) by wire transfer of
immediately available funds. In addition, after payment in full of
the Guaranteed Amount, at Agent’s request, Merchant shall
cooperate with Agent to establish merchant identification numbers
under Agent’s name to enable Agent to process all credit card
Proceeds for Agent’s account. Merchant shall not be
responsible for and Agent shall pay as an Expense hereunder, all
credit card fees, charges and chargebacks related to the Store
Closing Sale, whether received during or after the Sale Term;
provided, however, the Merchant shall inform Agent of any
chargebacks as promptly as practicable.
Section 8. Conduct of the
Store Closing Sale .
8.1
Rights of Agent . Subject to the terms of all leases,
reciprocal easement agreements and other similar agreements
relating to the occupancy of the Stores and/or the Warehouse
(collectively, “ Occupancy Agreements ”), Agent
shall be permitted to conduct the
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Store
Closing Sale as a “store closing” or similar sale
throughout the Sale Term; provided, however, that notwithstanding
anything set forth in any Occupancy Agreement, Agent shall attempt
to conduct the Store Closing Sale as a “store closing”
or similar sale throughout the Sale Term,; provided further, in no
event shall Agent be precluded from using the “Everything
Must Go” handle during the Sale Term with industry standard
signage reflecting such message. To the extent that Agent is
precluded from using the “Everything Must Go” handle
during the Sale Term, Agent and Merchant shall mutually agree on a
remedy to address such a situation. Merchant shall use its best
efforts to assist Agent in connection with implementing the Store
Closing Sale as contemplated by this Agreement. Agent shall conduct
the Comprehensive Sale in the name of and on behalf of Merchant in
a commercially reasonable manner and in compliance with
(i) the terms of this Agreement and (ii) provisions of
applicable laws, regulations and ordinances. In addition to any
other rights granted to Agent hereunder, in conducting the Store
Closing Sale, Agent, in the exercise of its sole discretion, shall
have the right, subject to the immediately preceding
sentence:
(a) to
establish and implement advertising, signage and promotion programs
consistent with the “store closing” theme (including,
without limitation, by means of media advertising, banners, A-frame
and similar interior and exterior signs and use of sign walkers),
provided, that Agent shall not use the term “going out of
business” in any signage and, subject to the preamble to this
Section, be responsive to Merchant’s reasonable requests
regarding alteration or modification of any signage;
(b) to
establish Store Closing Sale prices and Store hours;
(c) to
use without charge during the Sale Term all FF&E, advertising
materials, bank accounts, Store-level customer lists and mailing
lists, computer hardware and
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software, Supplies, intangible assets (including Merchant’s
name, logo and tax identification numbers), Store keys, case keys,
security codes, and safe and lock combinations required to gain
access to and operate the Stores and any other assets of Merchant
located at the Stores or the Warehouse (whether owned, leased or
licensed); and
(d) to
have the benefit of, without charge, (i) Merchant’s
central office facilities, POS systems, central and administrative
services and personnel to process payroll, perform MIS services,
sales audit and cash reconciliation and provide other central
office services, necessary for the Comprehensive Sale and
(ii) one office located at Merchant’s central office
facility.
8.2
Terms of Sales to Customers . All sales of Merchandise will
be “final sales” and “as is,” and all
advertisements and sales receipts will reflect the same. In
addition, Agent shall indicate on any Merchandise sold that such
sale is “final,” “as is,” and shall be
marked in such a way as to prevent consumers from returning the
goods at other of Merchant’s stores. Agent shall not warrant
the Merchandise in any manner, but will, to the extent legally
permissible, pass on all manufacturer’s warranties to
customers. All sales will be made only (a) for cash, or
(b) by bank credit cards currently accepted by Merchant. Agent
shall accept Merchant gift certificates/gift cards, Store credits,
and other promotional items providing the customer with an
additional discount on Store Merchandise that have been issued by
Merchant prior to the Sale Commencement Date, provided that
Merchant agrees to reimburse Agent in cash for the face amount of
any such items within five (5) days after Agent’s
request therefor.
8.3
Sales Taxes . During the Sale Term, all sales, excise, gross
receipts and other taxes attributable to sales of Merchandise
(other than taxes on income) payable to any
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taxing
authority having jurisdiction (collectively, “ Sales
Taxes ”) shall be added to the sales price of Merchandise
and collected by Agent on behalf of Merchant at the time of sale.
The Agent shall draw checks on the Agency Accounts payable to the
applicable taxing authorities in the amount so collected, which
shall be delivered together with accompanying schedules to Merchant
on a timely basis for payment of taxes when due. Merchant shall
promptly pay all Sales Taxes and file all applicable reports and
documents required by the applicable taxing authorities. Merchant
will be given access to the computation of gross receipts for
verification of all such tax collections.
8.4
Supplies . Agent shall have the right to use, without
charge, all existing supplies located at the Stores and the
Warehouse, including, without limitation, boxes, bags, paper, twine
and similar sales materials (collectively, “ Supplies
”). In the event that additional Supplies are required in any
of the Stores during the Store Closing Sale, Merchant agrees
promptly to provide the same to Agent, if available, for which
Agent shall reimburse Merchant at Merchant’s cost therefor.
Merchant does not warrant that the existing Supplies in the Stores
as of the Sale Commencement Date are adequate for the purposes of
the Store Closing Sale. Supplies have not been since
January 1, 2008, and shall not be prior to the Sale
Commencement Date, transferred by Merchant between or among the
Stores and/or the Warehouse, so as to alter the mix or quantity of
Supplies at the Stores from that existing on such date, other than
in the ordinary course of business.
8.5
Returns of Merchandise . During the Sale Term, the Agent
shall accept returns only of defective goods sold by Merchant from
the Stores prior to the Sale Commencement Date (“ Returned
Merchandise ”), provided such goods are accompanied by
the original Store receipt. Merchant shall reimburse Agent in cash
for the amount of any store credit
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or
refund given to any customer in respect of Returned Defective
Merchandise. Any Returned Defective Merchandise shall be disposed
of by Agent in accordance with instructions received from Merchant
and at Merchant’s sole cost and expense. Any reimbursements
due to Agent as result of Returned Defective Merchandise shall be
accounted for and paid by Merchant immediately following the weekly
Store Closing Sale reconciliation pursuant to
Section 8.8 hereof.
8.6
Repair and Special Order Merchandise . Promptly after the
execution of this Agreement, Mer
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