Exhibit 10.1
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AGENCY
AGREEMENT
This Agency
Agreement is made as of December 9, 2008, by and between
Office Depot, Inc., a Delaware corporation, with a principal place
of business at 6600 North Military Trail, Boca Raton, FL 33496
(“ Merchant ”) and Gordon Brothers Retail
Partners, LLC, Delaware limited liability company with its
principal place of business at 101 Huntington Avenue, 10
th
Floor, Boston,
Massachusetts 02199 (the “ Agent ”).
R E C I T A L S
WHEREAS, the Merchant operates
retail stores in the United States and desires that the Agent act
as the Merchant’s exclusive agent for the limited purpose of:
(a) selling all of the Merchandise (as hereinafter defined)
from Merchant’s one hundred twelve (112) retail store
location(s) identified on Exhibit 1 attached hereto (each
individually a “ Store ” and collectively the
“ Stores ”) by means of a promotional, store
closing, or similar sale (as further described below, the “
Sale ”) to be conducted at the Stores (except for the
six (6) Stores located within the State of California, which
shall be referred to herein as the “ California Stores
”); and (b) subject to the provisions of Section 17
hereof, disposing of the Owned FF&E (as hereinafter defined) in
the Stores.
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. Intentionally
Deleted .
Section 2. Appointment of
Agent .
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 Sale at
the Stores and disposing of the Owned FF&E in the Stores in
accordance with the terms and conditions of this
Agreement.
Section 3. Consideration to
Merchant and Agent .
3.1 Payments to Merchant
.
(a) As a guaranty of Agent’s
performance hereunder, Agent shall pay Merchant an amount equal to
seventy-seven percent (77.0%) (the “ Guaranty
Percentage ”) of the aggregate Cost Value of the
Merchandise included in the Sale (the “ Guaranteed
Amount ”). Agent shall pay to Merchant the Guaranteed
Amount in the manner and at the times specified in, as applicable,
Section 3.3 and Section 16 below.
(b) The Guaranteed Amount will be
calculated based upon the aggregate Cost Value of the Merchandise
as determined by (i) the final report of the aggregate Cost
Value of the Merchandise by the Inventory Taking Service, after
review, reconciliation and verification thereof by Agent and
Merchant (the “ Final Inventory Report ”), and
(ii) amount of Gross Rings, as adjusted for shrinkage per this
Agreement.
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3.2 Compensation to Agent
.
(a) After payment of the Guaranteed
Amount by Agent to Merchant, Agent shall receive as its
compensation for services rendered to Merchant pursuant to this
Agreement: (i) five percent (5.0%) of the aggregate Cost
Value of the Merchandise (“Agent’s Fee”), plus
twenty-percent (20%) of all remaining Proceeds of the Sale
after payment of the Guaranteed Amount, Expenses, and all other
amounts payable to Merchant from Proceeds hereunder. Merchant shall
retain the other eighty percent (80%) of all such remaining
Proceeds of the Sale after payment of the Guaranteed Amount,
Expenses, and all other amounts payable to Merchant from Proceeds
hereunder.
(b) Provided that no Event of
Default has occurred and continues to exist on the part of Agent,
and after all payments are made to Merchant as required hereunder,
and provided the Security Conditions set forth in Section 16
are satisfied or the Guaranteed Amount has been paid in full, all
Merchandise remaining at the Sale Termination Date (the “
Remaining Merchandise ”) shall become the property of
Agent, free and clear of all liens, claims and encumbrances of any
kind or nature, and the proceeds received by Agent from the
disposition, in a commercially reasonable manner, of such unsold
Merchandise shall constitute Proceeds hereunder.
3.3 Time of Payments
.
(a) Immediately following each
weekly Sale reconciliation by Merchant and Agent pursuant to
Section 8.7 and payment of Expenses pursuant to
Section 4.2 by Agent and until payment in full of the
Guaranteed Amount, Merchant shall retain, on account of the
Guaranteed Amount, the remaining portion of the Proceeds with
respect to the prior week (each an “ Estimated Guaranteed
Amount Payment ” and, in the aggregate, the “
Estimated Guaranteed Amount Payments ”). Upon payment
in full of the Guaranteed Amount and provided that the Security
Conditions in Section 16 are satisfied, all Proceeds shall be
transferred to Agent pursuant to Section 7 , which
Proceeds shall be applied per Section 3.2(a). To the extent
that the Guaranteed Amount has not been paid in full by the Sale
Termination Date, Agent shall pay the unpaid portion of the
Guaranteed Amount to Merchant within ten business days
thereafter.
(b) If and to the extent that Agent
over-funds any amounts in respect of the Guaranteed Amount
hereunder on account of the Merchandise due hereunder, then
Merchant agrees to promptly reimburse such undisputed overpayment
amounts to Agent.
(c) Merchant agrees that if at any
time during the Sale Term, Merchant holds any undisputed amounts
due to Agent as Proceeds hereunder, whether by any payment by Agent
(including, without limitation, payment of the Remaining Guaranteed
Amount Payment, if applicable) or any draw on the Letter of Credit
by Merchant, Agent may, in its discretion, offset such Proceeds
being held by Merchant against any amounts due and owing by Agent
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
undisputed amounts due to Merchant under this Agreement, Agent may,
in its discretion, offset such amounts being held by Agent against
any amounts due and owing by, or required to be paid by, Merchant
hereunder.
(d) Agent agrees that if at any time
during the Sale Term, Agent holds any undisputed amounts due to
Merchant as Proceeds hereunder, whether by any payment by Merchant
or any draw on the Merchant LC by Agent, Merchant may, in its
discretion, offset such Proceeds being held by Agent against any
amounts due and owing by Merchant to Agent 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
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Term, Merchant holds any undisputed amounts due
to Agent under this Agreement, Merchant may, in its discretion,
offset such amounts being held by Merchant against any amounts due
and owing by, or required to be paid by, Agent
hereunder.
3.4 Security
. In order to secure all of Agent’s obligations under this
Agreement, including the payment of the Guaranteed Amount or any
unpaid portion thereof, Expenses and other obligations hereunder,
on the second (2 nd ) business day after the
Sale Commencement Date (or such later time as Agent and Merchant
shall mutually agree), Agent shall furnish Merchant an irrevocable
standby Letter of Credit naming Merchant as beneficiary (the
“ Beneficiary ”) in the aggregate original face
amount equal to the Estimated Guaranteed Amount (as defined below),
plus two (2) weeks estimated Expenses, which shall be
substantially in the form of Exhibit 3.4 hereof (the “
Letter of Credit ”). The “ Estimated
Guaranteed Amount” shall mean the estimated aggregate
Cost Value of the Merchandise to be included in the Sale as
reflected on Merchant’s books and records on the last
business day immediately preceding the Sale Commencement Date
multiplied by the Guaranty Percentage. The Letter of Credit shall
have an expiry date of no earlier than sixty (60) days after
the Sale Termination Date. Unless the parties shall have mutually
agreed that they have completed the Final Reconciliation under this
Agreement, then, at least thirty (30) days prior to the
initial or any subsequent expiry date, the Beneficiary shall
receive an amendment to the Letter of Credit solely extending (or
further extending, as the case may be) the expiry date by at least
sixty (60) days. If the Beneficiary fails to receive such
amendment to the Letter of Credit no later than thirty
(30) days before the expiry date, then all amounts hereunder
shall become immediately due and payable, and the Beneficiary shall
be permitted to draw the full amount under the Letter of Credit in
payment of amounts owed, and the Beneficiary shall hold the balance
of the amount drawn under the Letter of Credit as security for
amounts that may become due and payable to Merchant. At
Agent’s reasonable written request (which request shall not
be made by Agent until Merchant has received an amount equal to the
difference between the Guaranteed Amount and the original face
amount of the Letter of Credit), the Beneficiary shall take all
actions reasonably required to reduce the amount available to be
drawn under the Letter of Credit by amounts credited against the
Guaranteed Amount; provided however that the Letter
of Credit shall not be reduced below two (2) weeks of
estimated Expenses. In the event that Agent, after receipt of four
(4) days’ written notice (which notice shall not be
required if Agent or any member of Agent shall be a debtor under
title 11, United States Code), fails to pay the Guaranteed Amount,
or portion thereof, or any Expenses, the Beneficiary may draw on
the Letter of Credit in an amount equal to the unpaid, past due,
amount of the Guaranteed Amount or Expenses or other obligations
hereunder that is not the subject of a reasonable dispute. Merchant
and Agent agree that, from time to time upon Agent’s request,
the face amount of the Letter of Credit shall be reduced by the
aggregate amount of Estimated Guaranteed Amount Payments made to
the time of each such request. Upon payment of the Guaranteed
Amount in full (whether through collection of Proceeds or exercise
of the Merchant Option (as defined in Section 16(b) below)),
Merchant shall promptly return the original Letter of Credit to
Agent together with any executed original instruments required by
the Letter of Credit’s issuing bank to cancel the
same.
Section 4. Expenses of the
Sale .
4.1 Expenses . Agent shall be
unconditionally responsible for all Expenses incurred in conducting
the Sale during the Sale Term, which Expenses shall be paid by
Agent in accordance with Section 4.2 below. As used herein,
“ Expenses ” shall mean all Store-level
operating expenses of the Sale which arise during and are
attributable to the Sale Term, limited to the following:
(a) all payroll and commissions, if
applicable, for all Retained Employees, used in conducting the Sale
for actual days/hours worked during the Sale Term as well as
payroll for any temporary personnel engaged by Agent as independent
contractors for the Sale (including without limitation
Merchant’s former employees);
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(b) any amounts payable by Merchant
for benefits (including FICA, unemployment taxes, workers’
compensation and healthcare insurance, and vacation benefits that
accrue during the Sale Term, but excluding Excluded Benefits) for
Retained Employees used in the conduct of the Sale, in an amount
not to exceed 17.7% of the aggregate base payroll for each such
Retained Employee (the “ Benefits Cap
”);
(c) costs of Agent’s security
personnel and guard services in the Stores;
(d) fifty percent (50%) of the
fees and expenses of the inventory taking service to conduct the
Inventory Taking and fifty percent (50%) of the payroll and
related benefits (subject to the Benefits Cap) for the Retained
Employees used in connection with the Inventory Taking;
(e) Retention Bonuses for Retained
Employees, as provided for in Section 9.4 below;
(f) advertising and direct mailings
relating to the Sale, and Store interior and exterior signage and
banners;
(g) credit card fees, chargebacks
and discounts;
(h) bank service charges (for Store
and corporate accounts), check guarantee fees, and bad check
expenses;
(i) costs for additional
Supplies;
(j) all fees and charges required to
comply with applicable federal, state and local laws, rules,
regulations standards, and ordinances (“Applicable
Laws”) including without limitation any licenses required to
operate the Store and any fines or penalties assessed for failure
to comply with Applicable Laws;
(k) Store cash theft and other cash
shortfalls in the registers;
(l) any and all costs relating to
the processing, transfer and consolidation of Merchandise between
and among the Stores, including delivery and freight costs, and it
is understood that Agent shall be responsible for coordinating such
transfer of Merchandise;
(m) on-site supervision, including
base fees and bonuses of Agent’s field personnel, travel to
and from the Stores, and incidental out-of-pocket and commercially
reasonable travel expenses relating thereto;
(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) or otherwise relating
to the Sale;
(o) Agent’s due diligence
costs and reasonable fees of Agent’s legal counsel incurred
in implementing the transactions contemplated by this
Agreement;
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(p) Agent’s actual cost for
insurance under Section 12.3 ; and
(q) Agent’s cost of capital
(including, without limitation, Letter of Credit fees).
There will be no double payment of
Expenses to the extent that an Expense appears or is contained in
more than one category.
As used herein, the following terms
have the following respective meanings:
(i) “ Excluded Benefits
” means (i) the following benefits arising or accruing
prior to the Sale Commencement Date: (w) vacation days or
vacation pay, (x) sick days or sick leave or any other form of
paid time off, (y) maternity leave or other leaves of absence,
termination or severance pay and (z) Employee Retirement
Income Security Act (“ERISA”) coverage and similar
contributions and/or (ii) any other benefits in excess of the
Benefits Cap, including any payments due under the Worker
Adjustment Retraining Notification Act (“ WARN Act
”).
(ii) “ Occupancy
Expenses ” means base rent, percentage rent, heating,
ventilating and air conditioning (HVAC), utilities, common area
maintenance (CAM), storage costs, real estate and use taxes,
Merchant’s association dues and expenses, building insurance
related to the Stores, personal property leases (including, without
limitation, point of sale equipment), cash register maintenance,
building maintenance, alarm/security expenses (except as set forth
in Section 4.1(c)), property insurance attributable to the
Merchandise and liability insurance related to the Stores (other
than Agent’s actual cost for insurance under
Section 12.3 which is an Expense), local and long-distance
telephone expenses, trash and snow removal expenses and rental for
furniture, fixtures and equipment.
“ Expenses ”
shall not include: (i) Excluded Benefits; (ii) any
Occupancy Expenses; (iii) any and all expenses and costs
relating to the handling and transfer of all Merchandise from the
California Stores to other Stores as directed by Agent, and
(iii) any costs, expenses or liabilities arising during the
Sale Term in connection with the Sale other than the Expenses
listed above, all of which shall be paid by Merchant promptly when
due during the Sale Term.
4.2 Payment of Expenses
.
Agent shall be fully responsible for
the payment of all Expenses whether or not there are sufficient
Proceeds collected to pay such Expenses after the payment of the
Guaranteed Amount. All Expenses incurred during each week of the
Sale ( i.e . Sunday through Saturday) shall be paid by Agent
to or on behalf of Merchant, or paid by Merchant and thereafter
reimbursed by Agent as provided for herein, immediately following
the weekly Sale reconciliation by Merchant and Agent pursuant to
Section 8.7 below, provided however , in
the event that the actual amount of an Expense is unavailable on
the date of the reconciliation (such as payroll), Merchant and
Agent shall agree to an estimate of such amounts, which amounts
will be reconciled once the actual amounts of such Expense becomes
available. Agent and/or Merchant may review or audit the Expenses
at any time.
Section 5. Inventory
Valuation; Merchandise .
5.1 Inventory Taking
.
(a)
(i) Subject to the adjustment
provisions of this Section 5.1(a), the parties have agreed to
use the current book value of inventory as of the Sale Commencement
Date reflected on the Cost File to determine the aggregate Cost
Value of the Merchandise located in the Stores on the
Sale
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Commencement Date; provided ,
however , that Merchant and Agent agree that the Merchandise
transferred from the California Stores to other Stores shall be
counted and checked at the time it is received at each applicable
Stores by representatives of Merchant and Agent and that the
results of such counts will be compared to the book value of
inventory in the California Stores as of the Sale Commencement Date
as reflected on the Cost File to determine the aggregate Cost Value
of the Merchandise located at the California Stores on the Sale
Commencement Date. In order to test the validity of the aggregate
Cost Value of the Merchandise as reflected on Merchant’s
current books and records, as soon as practicable following the
Sale Commencement Date, Merchant and Agent shall cause a stock
keeping unit (“SKU”)-level and Retail Price physical
inventory to be taken of the Merchandise located in thirty-four
(34) of the Stores (the “Test Stores”) (the
“ Inventory Taking ”). Merchant and Agent each
shall designate 17 initial Test Stores, each in their sole
discretions. Merchant and Agent shall jointly employ a mutually
acceptable independent inventory taking service (the “
Inventory Taking Service ”) to conduct the Inventory
Taking. The Inventory Taking shall be conducted in accordance with
the procedures and instructions attached hereto as Exhibit
5.1 (the “ Inventory Taking Instructions ”).
As an Expense, Agent shall be responsible for (i) fifty
percent (50%) of the fees and expenses of the Inventory Taking
Service, and (ii) fifty percent (50%) of the payroll and
related benefits (subject to the Benefits Cap) for Retained
Employees utilized in the conduct of the Inventory Taking. Except
as provided in the immediately preceding sentence, Merchant and
Agent shall each bear their respective costs and expenses relative
to the Inventory Taking. Merchant and Agent may 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, the applicable Store shall be
closed to the public, and no sales or other transactions shall be
conducted within the applicable Store. Merchant and Agent further
agree that until the Inventory Taking in a particular Store is
completed, neither Merchant nor Agent shall: (i) move
Merchandise within or about the Store so as to make any such items
unavailable for counting as part of the Inventory Taking; or
(ii) remove any hang tags, price tickets, inventory control
tags affixed to any Merchandise or any other kind of in-store
pricing signage within the Store. Merchant and Agent agree to
cooperate with each other to conduct the Inventory Taking and agree
that the Inventory Taking will commence at a time that will
minimize the number of hours that such locations will be closed for
business.
(ii) The results of the Inventory
Taking at the Test Stores (and the Additional Test Stores if
applicable) with respect to the Retail Price shall be determinative
and shall be applied/extrapolated to all
Stores/Merchandise.
(iii) The results of the Inventory
Taking at the Test Stores (and the Additional Test Stores, if
applicable) shall be used to determine any adjustment as may be
required to the calculation of the aggregate Cost Value of the
Merchandise located in the Stores on the Sale Commencement Date as
follows: (A) for purposes of calculating the aggregate Cost
Value of the Merchandise at the Test Stores and, if applicable, the
Additional Test Stores (collectively, the “ Inventoried
Stores ”), the actual Test Store results for the
Inventoried Stores, as adjusted by Gross Rings for the period
between the Sale Commencement Date and the date of the Inventory
Taking for the applicable Test Store (the “ Gross Rings
Period ”) shall be used; (B) for purposes of
calculating the aggregate Cost Value of the Merchandise at the
Stores that do not constitute Inventoried Stores (the
“Non-Inventoried Stores ”), the actual Test
Store results at the Inventoried Stores shall be compared to Cost
Value of the Merchandise at the Inventoried Stores so as to
determine the variance (“Variance”), and the Variance
shall be applied and extrapolated across all Non-Inventoried
Stories; provided however ; for the purposes of
calculating the Variance, the Inventoried Stores having the results
from the one highest and one lowest variance percentage shall be
excluded. In the event that Merchant and/or Agent reasonably
believes that the Variance is not a reasonably expected variance,
Merchant and/or Agent may request an Inventory Taking at additional
Stores beyond the initial 34 Test Stores (the “ Additional
Test Stores ”) so as to minimize or eliminate the effect
of the Variance extrapolation and the Additional Test Stores shall
then be deemed Test Stores.
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The Cost Value and Retail Price determined
pursuant to the provisions of this Section 5.1(a) shall be
used for purposes of determining the level, mix and Cost
Value-to-Retail Price relationship for all purposes under this
Agreement.
(b) Agent and Merchant agree that
they will, and agree to cause their respective representatives to,
cooperate and assist in the calculation of the aggregate Cost Value
and Retail Price of the Merchandise. Merchant agrees to make
available information relating to sales, units, costs and retail
prices with respect to the Stores. Merchant will also make
available to Agent books, records, work papers and personnel to the
extent reasonably necessary to calculate the Cost Value and Retail
Price of the Merchandise in connection with the Sale and to perform
all other obligations set forth in this Agreement.
5.2 Merchandise Subject to This
Agreement .
(a) For purposes of this Agreement,
“ Merchandise ” shall mean: all saleable, first
quality inventory that is owned by Merchant and located at the
Stores as of the Sale Commencement Date, including,
(i) Defective Merchandise and (ii) Merchandise subject to
Gross Rings. 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; and
(5) Merchant Consignment Goods.
(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 dented, scratched,
broken, faded, mismatched, refurbished, incomplete (including
without limitation, missing power cords or other included
components), discolored, returned, out-of-box, display items or
items otherwise affected by other defects rendering it not first
quality, but which is nevertheless still saleable by Agent for its
intended purpose.
“ Excluded Defective
Merchandise ” means any item of Defective Merchandise
that for any reason is not suitable or saleable for its intended
purpose.
“ Merchant Consignment
Goods ” shall have the meaning assigned to such term in
Section 5.4 below.
5.3 Valuation .
(a) For purposes of this Agreement,
“ Cost Value ” shall mean the lower of
(i) the cost for the Merchandise as reflected on
Merchant’s inventory file named “112 store cost and
retail inv.xlsx” and provided to Agent by email on
December 4, 2008 at 2:45pm (the “ Cost File
”); or (ii) the lowest Retail Price for such item of
Merchandise. The Cost File contains Merchant’s internal
system cost for the compilation of products identified therein,
without giving effect to program, rebates or other purchase
incentives. Notwithstanding the immediately prior sentence, to the
extent of any inconsistencies, the actual data contained in Cost
File provided to Agent file shall prevail at all times.
(b) Notwithstanding
Section 5.3(a) , with respect to Defective Merchandise,
the Cost Value shall be mutually agreed upon between Merchant and
Agent during the Inventory Taking. In the event that Merchant and
Agent are unable to agree upon the Cost Value of any items of
Defective Merchandise, such item shall be deemed to be Excluded
Defective Merchandise.
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(c) Excluded Defective Merchandise
shall be identified and counted during the Inventory Taking, and
thereafter removed from the sales floor and segregated by Merchant
at its sole cost and expense (and as previously provided shall not
constitute “Merchandise”).
(d) “Retail Price” with
respect to each item of Merchandise shall mean the lower of
(i) the lowest ticketed, marked, or shelf price; or
(ii) the lowest price look-up (“PLU”), scan, or
file price for such item of Merchandise, excluding in each instance
Excluded Price Adjustments. “Excluded Price
Adjustments” shall mean: (i) employee discounts;
(ii) member or customer appreciation points;
(iii) multi-unit purchase discounts; (iv) customer
specific adjustments for damaged, defective, or “as-is”
items: (vi) customer loyalty discounts, or discounts for
future purchases based on dollar value of past purchases;
(vii) obvious ticketing or marking errors; or
(ix) similar customer specific, temporary, or employee
non-product specific discounts or pricing accommodations. If an
item of Merchandise has more than one ticketed price, or if
multiple items of the same SKU are ticketed at different prices, or
have a different PLU price, and such pricing does not otherwise
qualify as an Excluded Price Adjustment, the lowest Retail Price on
any such item shall prevail for all such items within the same SKU
that are located within the same location (as the case may be, the
“Lowest Location Price”).
5.4 Excluded Goods
.
(a) Merchant shall retain all
responsibility for any goods not included as
“Merchandise” hereunder. If Merchant elects on or
before the Sale Commencement Date, Agent shall accept the Excluded
Defective Merchandise hereunder for sale as “ Merchant
Consignment Goods ” at prices established by Agent. Agent
shall retain twenty percent (20%) of the sale price (less
Sales Taxes) for all sales of Merchant Consignment Goods, and
Merchant shall receive eighty percent (80%) of the receipts in
respect of such sales (less Sales Taxes). Merchant shall receive
its share of the receipts of sales of Merchant Consignment Goods on
a weekly basis, immediately following the weekly Sale
reconciliation by Merchant and Agent pursuant to
Section 8.7 below. If Merchant does not elect to have
Agent sell the Excluded Defective Merchandise, then all such items
will be removed by Merchant from the Stores at Merchant’s
expense as soon as practicable after the Sale Commencement Date.
Except as expressly provided in this Section 5.4 ,
Agent shall have no cost, expense or responsibility in connection
with any goods or inventory not included in Merchandise (and
Merchant shall at its expense remove any unsold Merchant
Consignment Goods at the conclusion of the Sale Term). Nothing in
this Section 5.4 shall be construed to limit Agent’s
obligation to pay any Expenses otherwise due hereunder.
(b) Notwithstanding the provisions
of Section 5.4(a) above, with respect solely to goods held by
Merchant on consignment from the vendors identified on Exhibit
5.4(b) and designated by Merchant pursuant to the option
described below (“Selected Consignment Goods”), at
Merchant’s option (exercisable at any time and from time to
time during the Sale), Merchant may elect to include any Selected
Consignment Goods in the Sale as “Merchant Consignment
Goods” (as defined in Section 5.4(a) above) provided
however that: (i) Agent shall retain only two percent
(2%) of the sale price (less Sales Taxes) for such Selected
Consignment Goods; and (ii) Agent shall not sell any item of
Selected Consignment Goods in the Sale for an amount less than
102.5% of Merchant’s cost therefor (which cost data shall be
provided by Merchant to Agent at the time of Merchant’s
election); and (iii) such Selected Consignment Goods shall
otherwise be treated for all respects hereunder not as Merchandise
but as Merchant Consignment Goods.
Section 6. Sale Term
.
6.1 Term . Subject to
satisfaction of the conditions precedent set forth in
Section 10 hereof, the Sale shall commence at each
Store on December 10, 2008 ( the “ Sale Commencement
Date ”),
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provided , however , that Merchant shall close the
California Stores no later than at the end of business on the Sale
Commencement Date. The Agent shall complete the Sale at each Store
and vacate such Store in broom-clean condition by no later than
March 28, 2009 unless the Sale is extended 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 ”). Agent may, in its discretion, terminate the Sale
at any Store upon not less than five (5) days’ prior
written notice (the “ Vacate Notice ”) to
Merchant (the end of such notice period, as to each such Store, as
applicable, the “ Vacate Date ”).
Notwithstanding the foregoing, with respect solely to Store # 2492
(Willow Grove, PA): in the event that Agent wishes to provide for a
Vacate Date which is prior to March 10, 2009, Agent shall
provide the Vacate Notice on not less than ten
(10) days’ prior written notice and Merchant shall have
the option of either (a) allowing the Vacate Date to be the
date selected by Agent; or (b) require Agent to continue to
conduct the Sale at such Store through and including March 10,
2009 provided however in such event Merchant (and not Agent) shall
be responsible for the payment of those Expenses contemplated by
subsections (a), (b), (c), (l), and (n) of Section 4.1
with respect to the period between the Vacate Date requested by
Agent and March 10, 2009.
6.2 Vacating the Stores . At
the conclusion of the Sale, Agent agrees to leave the Stores (other
than the California Stores) in “broom clean” condition,
ordinary wear and tear excepted, except for unsold items of
FF&E (as provided for in Section 17 below). Agent shall
vacate the Stores (other than the California Stores) on or before
the Sale Termination Date, as provided for herein, at which time
Agent shall surrender and deliver the Store premises and Store keys
to Merchant. Agent’s obligations to pay all Expenses for each
Store subject to Vacate Notice shall continue until the applicable
Vacate Date for such Store, provided Agent shall be obligated to
pay all such Expenses for each Store accruing through the Vacate
Date until paid in full. All assets of Merchant used by Agent in
the conduct of the Sale ( e.g . FF&E) shall be returned
by Agent to Merchant or left at the Store at the end of the Sale
Term to the extent the same have not been used in the conduct of
the Sale or sold.
6.3 Gross Rings . In the
event that the Sale commences at any Store subject to Inventory
Taking 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 date of the Inventory Taking for such Store, Agent
and Merchant shall jointly keep (i) a strict count of gross
register receipts less applicable Sales Taxes but excluding any
prevailing discounts (“ Gross Rings ”), and
(ii) cash reports of sales within such Store. Agent and
Merchant shall keep a strict count of register receipts and reports
to determine the actual Cost Value and Retail Price of the
Merchandise sold by SKU. All such records and reports shall be made
available to Agent and Merchant during regular business hours upon
reasonable notice. Any Merchandise included in the Sale using the
Gross Rings shall be included in Merchandise using the Gross Rings
method and, as soon as determinable, Agent shall pay that portion
of the Guaranteed Amount calculated on the Gross Rings basis, to
account for shrinkage, on the basis of 0.6% of the aggregate Cost
Value of the Merchandise (without taking into account any of
Agent’s point of sale discounts or point of sale markdowns)
sold during the Gross Rings Period.
Section 7. 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 Agreement, exclusive of Sales Taxes;
and (b) all proceeds of Merchant’s insurance for loss or
damage to Merchandise arising from events occurring during the Sale
Term; provided however , to the extent that such
insurance proceeds exceed the sum of the portion of the Guaranteed
Amount, Expenses, Agent’s Fee and remaining Proceeds of the
Sale payable to Agent pursuant to Section 3.2(a) attributable
or that would have been attributable to such lost or damaged
Merchandise (the “ Insurance Proceeds Threshold
’), then the excess insurance proceeds above the Insurance
Proceeds Threshold shall be shared between Merchant and Agent
as
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follows: Agent shall receive 20% and Merchant
shall retain the other 80% of the excess insurance proceeds above
the Insurance Proceeds Threshold. Proceeds shall also include any
and all proceeds received by Agent from the disposition, in a
commercially reasonable manner, of unsold Merchandise at the end of
the Sale whether through salvage, bulk sale or
otherwise.
7.2 Deposit of Proceeds .
(i) From and after payment in full of the Guaranteed Amount
(whether through collection of Proceeds or exercise of the Merchant
Option), Agent may establish its own accounts, dedicated solely for
the deposit of the Proceeds and the disbursement of amounts payable
to Agent hereunder (the “ Agency Accounts ”) and
Merchant shall promptly, upon Agent’s reasonable request,
execute and deliver all necessary documents to open and maintain
the Agency Accounts; provided , however , Agent may
elect to continue to use Merchant’s Designated Deposit
Accounts (as defined below) as the Agency Accounts. Provided the
Security Conditions are satisfied OR the Guaranteed Amount has been
paid in full, Agent shall exercise sole signatory authority and
control with respect to the Agency Accounts (provided that, if
Agent uses the Merchant Designated Deposit Accounts as the Agency
Accounts, the Security Conditions must be satisfied in order for
Agent to exercise sole signatory authority and control with respect
thereto). Unless Agent uses the Merchant Designated Deposit
Accounts as the Agency Accounts, the Agency Accounts shall be
dedicated solely to the deposit of Proceeds and the distribution of
amounts payable hereunder. Upon request, Agent shall deliver to
Merchant copies of all bank statements and other information
relating to such accounts. Merchant shall not be responsible for,
and Agent shall pay as an Expense hereunder, all bank fee and
charges, including wire transfer charges, related to the Agency
Accounts, whether received during or after the Sale Term. Upon
Agent’s notice to Merchant of Agent’s designation of
the Agency Accounts, and provided the Security Conditions are
satisfied, all Proceeds of the Sale (including credit card
Proceeds) shall be deposited into the Agency Accounts.
(ii) During the period between the
date the Guaranteed Amount is paid in full (whether through
collection of Proceeds or exercise of the Merchant Option) and the
date Agent establishes the Agency Accounts, and provided the
Security Conditions are satisfied, all Proceeds (including credit
card Proceeds), shall be collected by Merchant and deposited on a
daily basis into depository accounts designated by, owned and in
the name of, Merchant for the Stores, which accounts shall be
designated solely for the deposit of Proceeds (including credit
card Proceeds), and the disbursement of amounts payable by Agent
hereunder (the “ Designated Deposit Accounts
”).
(iii) From and after payment in full
of the Guaranteed Amount (whether through collection of Proceeds or
exercise of the Merchant Option), and on each business day
thereafter, provided the Security Conditions are satisfied,
Merchant shall promptly pay to Agent by wire funds transfer all
funds constituting Proceeds (including, without limitation,
Proceeds from credit card sales) deposited into the Designated
Deposit Accounts (but not any other funds, including, without
limitation, any proceeds of Merchant’s inventory sold prior
to the Sale Commencement Date).
7.3 Credit Card Proceeds .
From and after payment in full of the Guaranteed Amount (whether
through collection of Proceeds or exercise of the Merchant Option),
Agent shall have the right to use Merchant’s credit card
facilities (including Merchant’s credit card terminals and
processor(s), credit card processor coding, Merchant identification
number(s) and existing bank accounts, and further including
Merchant’s proprietary credit card) for credit card Proceeds
relating solely to the Sale. In the event that Agent elects to use
Merchant’s credit card facilities, Merchant shall process
credit card transactions on behalf of Agent and for Agent’s
account, applying customary practices and procedures. Without
limiting the foregoing, Merchant shall cooperate with Agent to
download data from all credit card terminals each day during the
Sale Term to effect settlement with Merchant’s credit card
processor(s), and shall take such other actions necessary to
process credit card transactions on behalf of Agent under
Merchant’s identification number(s). At Agent’s request
following payment in full of the
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