Exhibit 10.1
AGENCY AGREEMENT
This
Agency Agreement is made as of this 31 st day of
December 2004, by and between HILCO MERCHANT RESOURCES, LLC (the
“ Agent ”) and THE WET SEAL, INC., THE WET SEAL
RETAIL, INC., WET SEAL CATALOG, INC. and WET SEAL GC, INC.
(collectively, 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, as identified, on Exhibit 1A annexed hereto (each,
individually, a “ Store ”, and, collectively,
the “ Stores ”), by means of a promotional,
store closing or similar sale, as further described herein (the
“ Store Closing Sale ”), and (b) selling
Merchant’s owned FF&E located at the Stores (the “
FF&E Sale ,” collectively with the Store Closing
Sale, the “ 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 . The terms set forth below are defined in
the referenced sections of this Agreement:
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Defined Term
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Section
Reference
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Additional
Clearance Merchandise
Adjustment Amount
Agency Accounts
Agency Documents
Agent
Agent Claim
Agent Indemnified Parties
Agent Letter of Credit
Agent's Fee
Benefits Cap
Central Service Expenses
Defective Merchandise
Designated Merchant Accounts
Estimated Guaranteed Amount
Excluded Benefits
Excluded Pricing Adjustments
Expenses
FF&E
FF&E Sale
Final Gross Rings Report
Global Inventory Adjustment
Guaranteed Amount
Guaranty Percentage
Gross Rings
Interim Guaranty Installments
Initial Guaranty Payment
Interim Sale Expense Period
Interim Sale Period
Interim Sale Proceeds
Merchandise
Merchandise Threshold
Merchant
Merchant Consignment Goods
Occupancy Agreements
Occupancy Expenses
Payment Date
Payment Date Installment
Proceeds
Recovery Amount
Retail Price
Retained Employee
Retention Bonuses
Returned Merchandise
Sale Commencement Date
Sale Term
Sale Termination Date
Sales Taxes
Sharing Threshold
Store(s)
Store Closing Sale
Supplies
WARN Act
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Section 5.2
Section 3.3(c)
Section 3.3(d)
Section 11.1(b)
Preamble
Section 12.5
Section 13.1
Section 3.4
Section 3.1(a)(ii)
Section 4.1(b)
Section 4.1
Section 5.2(b)
Section 3.3(d)
Section 3.3(b)
Section 4.1
Section 5.3(a)
Section 4.1
Section 5.2(a)
Recitals
Section 6.3
Section 5.3(b)
Section 3.1(a)(i)
Section 3.1(a)(i)
Section 6.3
Section 3.3(a)
Section 3.3(b)
Section 3.3(a)
Section 3.3(a)
Section 3.3(a)
Section 5.2(a)
Section 3.1(a)(ii)
Preamble
Section 5.4
Section 8.1
Section 4.1(p)
Section 3.3(c)
Section 3.3(b)
Section 7.1
Section 3.1(a)(ii)
Section 5.3(a)
Section 9.1
Section 9.3
Section 8.5
Section 6.1
Section 6.1
Section 6.1
Section 8.3
Section 3.1(a)(ii)
Recitals
Recitals
Section 8.4
Section 9.1
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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 Store Closing 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.
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(a)
(i) As a guaranty of Agent’s performance hereunder, Agent
Guarantied that Merchant shall receive the sum of 22.9% (the
“ Guaranty Percentage ”)of the aggregate Retail
Price of the Merchandise (the “Guaranteed Amount
”), plus reimbursement of Expenses (as defined
herein).
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(ii)
To the extent that Proceeds exceed the sum of (x) the Guaranteed
Amount, (y) Expenses of the Sale and (z) one and one-half of one
percent (1.5%) of the aggregate Retail Price of the Merchandise
(the “ Agent’s Fee ” ) (the
sum of (x), (y) and (z), the “ Sharing
Threshold ” ), then all remaining Proceeds of the
Sale above the Sharing Threshold shall be shared seventy-five
percent (75%) to Merchant and twenty-five percent (25%) to Agent.
All amounts, if any, to be received by Merchant from Agent in
excess of the Sharing Threshold shall be referred to as the
“ Recovery Amount ” .
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(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 and the Recovery Amount will be
calculated based upon the aggregate Retail Price of the Merchandise
as determined by the aggregate amount of Gross Rings of Merchandise
included in the Sale (as adjusted for shrinkage and the Global
Inventory Adjustment per this Agreement), if applicable, and (C)
the aggregate amount of any Additional Clearance Merchandise
received in the Stores after the completion of the Inventory Taking
at such Stores.
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(b)
The Guaranteed Amount and Recovery Amount have been calculated and
agreed upon based upon the estimation that (i) the aggregate Retail
Price of the Merchandise included in the Sale, including Remaining
Merchandise, but without taking into account the Global Inventory
Adjustment will not be less than $18 million (the “
Merchandise Threshold ”) and no more than $19,850,000
(the “ Merchandise Ceiling ”). Merchant and
Agent agree that in the event that the Retail Price of Merchandise
is less than the Merchandise Threshold, or more than the
Merchandise Ceiling, then, unless otherwise agreed to between
Merchant and Agent, the Guaranty Percentage on which the Guaranteed
Amount is based shall be reduced as provided in Exhibit
3.1(b) attached hereto. Merchant and Agent agree that to the
extent the inclusion of Additional Clearance Merchandise in the
Sale would cause the aggregate Retail Price of the Merchandise
included in the Sale to exceed the Merchandise Ceiling then such
event shall not trigger an adjustment pursuant to this Section
3.1(b); provided however , to the extent that the inclusion
of Additional Clearance Merchandise would cause the aggregate
Retail Price of the Merchandise included in the Sale to exceed the
Merchandise Ceiling, then the inclusion of such excess amount shall
require the prior consent of the Lenders, Merchant and
Agent.
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3.2
Compensation to Agent . As its compensation for services
rendered to Merchant, after sufficient Proceeds have been generated
to pay the Guaranteed Amount and all Expenses, Agent shall be
entitled to receive Proceeds up to an amount equal to the
Agent’s Fee. Agent shall use its reasonable best efforts to
sell all of the Merchandise during the Sale. All Merchandise
remaining, if any, at the Sale Termination Date (the
“Remaining Merchandise”) shall become the property of
Agent, free and clear of all liens, claims and encumbrances, and
Agent shall dispose of the Remaining Merchandise is a commercially
reasonable manner and any proceeds received by Agent from the
disposition of such Remaining Merchandise shall constitute Proceeds
hereunder; providedhowever , at the conclusion of the Sale
Term, Merchant and Agent may agree to remove such Remaining
Merchandise from the Sale and thus shall not be included for
purposes of the Final Gross Rings Report, in which case such
Remaining Merchandise shall be the property of the Merchant and
shall be transferred to Merchant’s On-Going Locations (as
defined below); providedfurtherhowever , such removal shall
not be taken into account for purposes of determining whether the
Merchandise Threshold has been reached. Notwithstanding the
foregoing, at the conclusion of the Sale, Merchant and Agent shall
jointly conduct a physical inventory taking of the Remaining
Merchandise to calculate the aggregate Retail Price of such
Remaining Merchandise (the “ Aggregate Retail Price of
Remaining Merchandise ”) for the purposes of calculating
the portion of the Guaranteed Amount attributable to such Remaining
Merchandise in the event that Merchant and Agent do not agree to
exclude it from Merchandise included in the Sale.
3.3
Time of Payments.
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(a)
Subject to Section 8.8 below, during each week’s
reconciliation as provided for in section 8.8 during period between
the Sale Commencement Date and the Payment Date (as defined below),
Merchant shall collect all of the Proceeds of the Sale of
Merchandise (the “Interim Sale Proceeds”) and (x) all
Interim Sale Proceeds shall first be applied to the payment of
Expenses that are incurred during the Interim Sale Period and
become due and owing (collectively, the “ Interim Sale
Period Expenses ”) and (y) all remaining Interim Sale
Proceeds after payment of Interim Sale Period Expenses (the “
Remaining Interim Sale Proceeds ”) shall be applied by
Merchant against the Guaranteed Amount (collectively, the “
Interim Guaranty Installments ”) until the Guaranteed
Amount shall have been paid in full.
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(b)
On the first business day following the later of (a) the Sale
Commencement Date, or (b) the date that (i) Merchant and Agent
execute a security agreement documenting Merchant’s grant of
a security interest set forth in Section 16.12 hereof, that is
reasonably acceptable to Merchant and Agent (the “
Security Agreement ”), and (ii) Merchant, Agent and
Fleet Retail Group, Inc. (“Fleet”), and S.A.C. Capital
Associates, LLC, each as administrative and collateral agent for
certain of Merchant’s secured lenders (collectively, the
“Lenders”), execute a subordination agreement that is
reasonably acceptable to Merchant, Agent and the Lenders, with
respect to the Merchandise and the Proceeds from the Sale of such
Merchandise (as the case may be, the “ Payment Date
”), Agent shall pay Merchant eighty percent (80%) of the
difference between (x) the estimated Guaranteed Amount, calculated
based upon the estimated aggregate Retail Price 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, and after applying the Global Inventory
Adjustment (the “ Estimated Guaranteed Amount ”)
and (y) the aggregate amount of the Interim Guaranty Installments
applied by Merchant towards the Estimated Guaranteed Amount in
accordance with Section 3.3(a) hereof (such difference hereinafter,
the “ Payment Date Installment ”, and
together with the Interim Guaranty Installments, the “
Initial Guaranty Payment ” ).
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(c)
The balance of the Guaranteed Amount, if any, or of the Estimated
Guaranteed Amount shall be paid by Agent to Merchant by delivering
such amounts to Fleet for Merchant’s account, on the date
that is the earlier of (i) ten (10) days after the last Sale
Termination Date in the Stores (in which case payment shall be of
the balance of the Estimated Guaranteed Amount) (the “
Final Payment Date ”), and (ii) the first business day
following the issuance of the final audited report of the aggregate
Retail Price of the Merchandise calculated by the Gross Rings,
after verification and reconciliation thereof by Agent and Merchant
(the “ Final Gross Rings Report ”
) and Agent’s failure to pay such balance shall entitle Fleet
to draw upon the Agent Letter of Credit to the extent of such
balance; provided , however , Merchant and Agent
shall use their reasonable best efforts to reconcile and verify the
Final Gross Rings Report within seven (7) days after the last Sale
Termination Date in the Stores. In the event there is any dispute
with respect to the reconciliation of the aggregate Retail Price of
the Merchandise following the Gross Rings, then any such dispute
shall be resolved in the manner and at the times set forth in
Section 3.4(b) hereof. In the event that the Final Gross Rings
Report is issued after payment of the Estimated Guaranteed Amount,
the Agent or Merchant, as the case may be, shall pay to the
Merchant or Agent, as the case may be, the amount (the
“ Adjustment Amount ” ) by which
the actual Guaranteed Amount exceeds or is less than the Estimated
Guaranteed Amount actually paid as set forth above, within two (2)
business days after the Final Gross Rings Report has been
issued.
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(d)
Within ten (10) business days after the Sale Commencement Date,
Agent shall establish its own bank accounts, dedicated solely for
the deposit of Proceeds and the disbursement of amounts payable by
Agent hereunder, which accounts may be the Designated Merchant
Accounts so long as Merchant, Agent and the Lenders agree on an
appropriate protocol for such use and remittance of Proceeds (the
“ Agency Accounts ”). Merchant shall, promptly
upon Agent’s request, execute and deliver all necessary
documents to open and maintain the Agency Accounts. Agent shall
exercise sole signatory authority and control with respect to the
Agency Accounts; provided however , 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 fees and charges, including wire transfer charges, related to
the Agency Accounts and or Designated Merchant Accounts, whether
received during or after the Sale Term. Upon Agent’s
designation of the Agency Accounts, all Proceeds of the Sale
(including credit card proceeds) shall be deposited into the Agency
Accounts. During the period between the Sale Commencement Date and
the later of (a) the Payment Date or (b) the date Agent designates
the Agency Accounts, all Proceeds of the Sale (including credit
card proceeds), shall be collected by Agent and deposited on a
daily basis into Merchant’s existing accounts designated for
the Stores (the “ Designated Merchant Accounts
”). Commencing on the first business day following the
Payment Date, and on each business day thereafter (or as soon
thereafter as is practicable), until such time as Agent designates
the Agency Accounts, Merchant shall promptly pay to Agent by wire
funds transfer all collected funds constituting Proceeds deposited
in such accounts (but not any other funds, including, without
limitation, any proceeds of Merchant’s inventory sold prior
to the Sale Commencement Date or at any of Merchant’s retail
store locations not included on Exhibit 1 hereto, or collections of
accounts receivable at the Store level, if any). During this
interim period, Agent shall control the Proceeds of the Sale, and,
provided no Event of Default by Agent has occurred and is
continuing, the Lenders shall not take any action with respect to
such Proceeds deposited into the Designated Merchant Accounts,
which shall inure solely for the benefit of Agent, subject only to
Agent’s payment obligations hereunder.
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(e)
Agent shall be permitted to satisfy a portion of its payment
obligations under this Section 3.3 by offsetting undisputed
Proceeds held by Merchant against such payment obligations;
provided , however , nothing contained in this
Section 3.3(d) shall be deemed to amend, modify or otherwise
affect the timing of Agent’s obligations to pay the
Guaranteed Amount or the estimated balance of the Guaranteed Amount
pursuant to Section 3.3(a).
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(f)
All payments by Merchant to Agent or Agent to Merchant hereunder
shall be by wire transfer of immediately available
funds.
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(g)
To the extent that the Final Gross Rings Reconciliation provided
for below shows that the Initial Guaranty Payment exceeded the
amount due Merchant in respect of the Guaranteed Amount, then (i)
Merchant shall cause any overpayment to be immediately refunded to
Agent, and (ii) if such overpayment was received by the Lenders,
then, notwithstanding any other rights or claims that the Lenders
may have against Merchant, the Lenders shall immediately refund
such overpayment to Agent.
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3.4
Agent Letter of Credit
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(a)
To secure payment of the unpaid portion 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, naming Fleet as beneficiary, substantially in the
form of Exhibit 3.4 attached hereto, in the original face
amount equal to the unpaid portion of the Estimated Guaranteed
Amount as of the Payment Date, plus three (3) weeks estimated
Expenses (the “ Agent Letter of Credit ”). Agent
shall use its best efforts to cause the Agent Letter of Credit to
be delivered no later than the Payment Date. In the event that
Agent shall fail to pay to Fleet, for the benefit of Merchant, any
amount required to be paid hereunder, Fleet shall be entitled to
draw on the Agent Letter of Credit to fund such amount following
five (5) days’ written notice to Agent of Fleet’s
intention to do so. The Agent Letter of Credit shall expire on
April 29, 2005; providedhowever ; Fleet, Merchant and Agent
agree that after payment of the unpaid portion of the Guaranteed
Amount (whether the Estimated Guaranteed Amount or the Guaranteed
Amount calculated pursuant to the Final Gross Rings Report)
pursuant to Section 3.3(c), the face amount of the Agent Letter of
Credit shall be reduced in an amount(s) to be agreed upon by
Merchant, Lenders, and Agent, providedhowever , in no event
shall the Agent Letter of Credit be reduced to an amount less than
two (2) weeks estimated Expenses.
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Section
4. Expenses of the Store Closing Sale.
Section
4.1 Expenses . Effective from and after the Sale
Commencement Date, Agent shall be unconditionally responsible for
all Expenses incurred in conducting the Sale during the Sale Term,
which expenses may be funded and paid from the Proceeds of the
Sale, to the extent available and in accordance with Section 4.2
below. Notwithstanding the foregoing, Agent shall be responsible
for all such Expenses, even if Proceeds are insufficient. To the
extent the incurrence of any Expense is discretionary, Agent shall
have sole discretion with respect to the amount and type of such
Expense utilized during the Sale Term. 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:
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(a)
base payroll and commissions for Retained Employees for actual
days/hours worked during the Sale Term;
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(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 21%
of base payroll and commissions (exclusive of Retention Bonuses)
for the Retained Employees in the aggregate (the “
Benefits Cap ”);
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(c)
Agent’s commercially reasonable supervision fees and expenses
(including, without limitation, travel costs and
bonuses);
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(d)
advertising and signage expenses (at Agent’s actual
documented cost);
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(e)
long distance telephone expenses incurred in the conduct of the
Store Closing Sale;
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(f)
check authorization, credit card and bank card fees and discounts
(at Merchant’s actual costs), chargebacks and costs of
returned checks;
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(g)
costs of security personnel in the Stores and for armored car
service;
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(h)
a pro-rata portion of Merchant’s casualty insurance premiums
attributable to the Merchandise;
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(i)
costs of transfers of Merchandise during the Sale Term between the
Stores;
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(j)
Retention Bonuses as described in Section 9.4
below;
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(k)
Agent’s documented cost of capital and letter of credit fees
for the Agent Letter of Credit;
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(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 due
diligence, negotiation, and performance of the transactions
contemplated hereby;
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(m)
costs and expenses of additional Supplies as provided in Section
8.4 ;
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(n)
Occupancy Expenses for (i) all Stores, other than the Westfield
Stores (as identified on Exhibit (4.1), on a per diem per Store
basis and limited to those amounts and categories as described in
Exhibit 4.1 attached hereto, from and after February 1,
2005; and (ii) the Westfield Stores from and after February 16,
2005, on a per diem per Store basis and limited to those amounts
and categories as described in Exhibit 4.1 attached hereto;
and
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(o)
Actual costs incurred by Agent of obtaining all permits, licenses,
consents and approvals required pursuant to Section 8.7
hereof;
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(p)
the costs and expenses of providing such additional services that
Merchant and Agent mutually and reasonably agree are appropriate;
and
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(q)
third party payroll processing costs.
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“Expenses”
shall not include: (i) Excluded Benefits; (ii) any rent or
occupancy expenses related to the Stores other than the Occupancy
Expenses set forth in Section 4.1(n) above; (iii) Central Service
Expenses; and (iv) 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.
As
used herein, the following terms have the following respective
meanings:
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“
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, internal payroll processing, cash
reconciliation, inventory processing and handling and data
processing and reporting.
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“
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,
pension benefits, ERISA coverage and similar contributions and (ii)
payroll taxes, worker’s compensation and health insurance
benefits in excess of the Benefits Cap.
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“
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 described on Exhibit 4.1 attached
hereto.
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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 [Intentionally Left Taking]
5.2
Merchandise Subject to this Agreement . (a) For purposes of
this Agreement, “ Merchandise ” shall mean all:
(i) finished goods inventory that is located at the Stores as of
the Sale Commencement Date saleable in the ordinary course of
business, including Defective Merchandise; and (ii) Additional
Clearance Merchandise received in the Stores on or before January
10, 2005 (the “Store Receipt Deadline”).
Notwithstanding the foregoing, “Merchandise” shall not
include: (1) goods that belong to third party sublessees, licensees
or concessionaires of Merchant other than Merchant; (2) goods held
by Merchant on memo, on consignment or as bailee for a third party
other than Merchant; (3) furnishings, trade fixtures,
equipment and improvements to real property which are located in
the Stores (collectively, “ FF&E ”); (4)
theft sensors that are attached to the items of Merchandise; and
(6) Merchant Consignment Goods.
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(b)
As used in this Agreement, the following terms have the respective
meanings set forth below:
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“
Additional Clearance Merchandise ” means such items of
clearance merchandise located on Merchant’s On-Going
Locations that Merchant and Agent mutually agree to include in the
Sale that is received in the Stores on or before January 10,
2005.
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“
Defective Merchandise ” means any item of Merchandise
that is 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.
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5.3
Valuation.
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(a)
For purposes of this Agreement, “ Retail Price ”
shall mean, with respect to each item of Merchandise, other than
Additional Clearance Merchandise that is delivered to the Stores
between January 4, 2005 through January 10, 2005, the lower of the
lowest ticketed price, the marked, or shelf price, SKU price, or
Merchant’s PLU file for each such item of Merchandise for
such period (the “ Base Retail Price ”);
provided , however , Excluded Pricing Adjustments
shall not be taken into account in determining the Base Retail
Price. With respect to Additional Clearance Merchandise received
after January 3, 2005, but on or before the Store Receipt Deadline,
“Retail Price” shall mean the Base Retail Price for
such item applicable to the Store in which such item was received,
multiplied by the inverse of the prevailing discount in such Store.
Any Additional Clearance Merchandise which is not received by the
Stores before Store Receipt Deadline shall be excluded from the
definition of Merchandise. The Retail Price of any item of
Merchandise shall be determined as provided for by this Agreement
and in Section 6.3 hereof. For the purposes of this Agreement,
“ Excluded Pricing Adjustments ” shall mean the
following discounts or price adjustments offered by Merchant during
the applicable period: (i) point-of-sale discounts or similar
adjustments, regardless of duration; (ii) employee discounts;
(iii) member or customer appreciation points or coupons;
(iv) multi-unit purchase discounts; (v) adjustments for
damaged, defective, or “as-is” items;
(vi) coupons, catalog, website, or circular prices,
“buy, one” get one type discounts; and
(vii) customer savings pass discounts or bounce back coupons,
or discounts for future purchases based on dollar value of past
purchases, or similar customer specific, temporary, or employee
non-product specific discounts or pricing
accommodations.
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(b)
In lieu of any other adjustments to the Retail Price of Merchandise
under this Agreement ( e.g. , adjustments for Defective
Merchandise, Clearance Merchandise, mis-mates and near-mates,
sample merchandise, and/or Excluded Pricing Adjustments), for
purposes of calculating the Guaranteed Amount (but not for purposes
of calculating the Merchandise Threshold) the aggregate Retail
Price of the Merchandise shall be multiplied by ninety-eight
percent (98%) (the “ Global Inventory Adjustment
”).
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(c)
The Retail 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 Retail Price, 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
Retail Price was mismarked.
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5.4
Excluded Goods
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(a)
Merchant shall retain all responsibility for any goods not included
as “Merchandise” hereunder. If Merchant elects at the
beginning of the Sale Term, and Agent, in its sole discretion,
agrees, Agent shall accept goods not included as
“Merchandise” hereunder for sale as “ Merchant
Consignment Goods ” at prices established by the Agent.
The Agent shall retain 25% of the sale price for all sales of
Merchant Consignment Goods, and Merchant shall receive 75% of the
receipts in respect of such sales. Merchant shall receive its share
of the receipts of sales of Merchant Consignment Goods on a weekly
basis, immediately following the weekly Store Closing Sale
reconciliation by Merchant and Agent pursuant to Section 8.8 below.
If Merchant does not elect to have Agent sell goods not included as
Merchandise, or Agent does not agree to include such goods as
Merchant Consignment Goods, then all such items will be removed by
Merchant from the Stores at its expense as soon as practicable
after the date hereof. Except as expressly provided in this
Section 5.4 , Agent shall have no cost, expense or
responsibility in connection with any goods not included in
Merchandise.
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Section
6. Store Closing Sale Term.
6.1
Term . Subject to any restrictions that my exist by virtue
of negotiations being conducted by Hilco Real Estate, LLC
(“HRE”), an affiliate of Agent, in connection with the
Termination of the leases for the subject Stores (the “HRE
Negotiations”), the Sale shall commence at the Stores on
December 26, 2004 (the “ Sale Commencement Date
”); providedhowever , for operational purposes
Merchant and Agent agree that Merchant shall operate the Stores on
December 26, 2004 consistent with the ordinary course of business,
but Agent shall receive the benefit of the sales of Merchandise and
shall be responsible for all Expenses for and after December 26,
2004. Subject to any restrictions that may exist by virtue of
applicable law or regulation (except as may otherwise be provided
in an agreement resulting from the HRE Negotiations, the Agent
shall complete the Sale at each Store, and shall vacate each
Store’s premises in favor of Merchant or its representative
or assignee on or before February 28, 2005 (the “ Sale
Termination Date ”). The period from the Sale
Commencement Date to the Sale Termination Date shall be referred to
herein as the “ Sale Term ”. Subject to
applicable law or regulation , the Sale Termination Date may be
(a) extended by mutual written agreement of Agent, Merchant,
in consultation with the Lenders and HRE, upon request of Agent; or
(b) accelerated by Agent, in which case Agent shall provide
Merchant with not less than seven (7) days advance written notice
of any such planned accelerated Sale Termination Date; or (c)
accelerated if HRE, in consultation with Merchant and based on the
HRE Negotiations with Merchant’s lessors, upon not less than
ten (10) days’ prior written notice to Agent, unless
otherwise agreed to by Merchant, in consultation with HRE, and
Agent.
6.2
Vacating the Stores . Subject to the terms of
Section 6.1 and the HRE Negotiations, Agent shall provide
Merchant, with not less than seven (7) days’ advance written
notice of its intention to vacate any Store. On the Sale
Termination Date, Agent shall vacate in favor of Merchant or its
representatives or assignee, remove all unsold Merchandise (which
shall be transferred to another Store) and leave the Stores in
“broom clean” condition (ordinary wear and tear
excepted). All assets of Merchant used by Agent in the conduct of
the Sale ( e.g. , FF&E, theft sensors, supplies, etc.)
shall be returned by Agent to Merchant or left at the Stores’
premises at the end of the Sale Term to the extent the same have
not been used in the conduct of the Sale or have not been otherwise
disposed of through no fault of Agent.
6.3
Calculating The Aggregate Retail Price of Merchandise and Gross
Rings . The aggregate Retail Price of the Merchandise included
in the Sale shall be determined by calculating the sum of (i)
aggregate Retail Price of Merchandise sold through the Gross Rings
method (the “Gross Rings Merchandise”), as adjusted for
shrink as provided for below; plus (ii) to the extent Agent elects
not to return such Remaining Merchandise to Merchant, the aggregate
Retail Price of the Remaining Merchandise, as adjusted for shrink,
as provided for below. Under the Gross Rings method, Agent and
Merchant shall jointly keep (i) a strict count of gross register
receipts less applicable Sales Taxes (“ Gross Rings
”), and (ii) cash reports of sales within such Store.
Register receipts shall show for each item sold the Retail Price
for such item and the Storewide or other markdown or discount
granted by Agent in connection with such sale. All such records and
reports shall be made available to Agent and Merchant during
regular business hours upon reasonable notice. The aggregate Retail
Price of the Gross Rings Merchandise and the Aggregate Retail Price
of Remaining Merchandise shall be multiplied by 102% to account for
shrinkage. All records and reports indicating Gross Rings and the
discounts granted by Agent shall be made available to Agent and
Merchant during regular business hours upon reasonable
notice.
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 Agreement, exclusive of Sales Taxes, and specifically
excluding (i) proceeds from Merchant’s sale of
merchandise prior to the Sale Commencement Dates; and
(ii) collections of accounts receivable at the Store level, if
any; and (b) all proceeds of Merchant’s insurance for
loss or damage to Merchandise or loss of cash arising from events
occurring during the Sale Term; provided , however ,
to the extent that such insurance proceeds exceeds the sum of
(x) the portion of the Guaranteed Amount attributable to such
lost or damaged Merchandise, plus (y) Expenses incurred to
date and directly attributable to the sale of such lost or damaged
Merchandise, plus (z) Agent’s Fee 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
treated as Proceeds. Proceeds shall also include any and all
proceeds received by Agent from the disposition, in a commercially
reasonable manner, of Remaining Merchandise at the end of the Sale
whether through salvage, bulk sale or otherwise.
7.2
Credit Card Proceeds . Agent shall use its reasonable best
efforts to establis
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