SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): JULY 28, 1997
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L. LURIA & SON, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation
1-8057 59-0620505
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(Commission File Number) (IRS Employer Identification No.)
5770 MIAMI LAKES DRIVE
MIAMI LAKES, FLORIDA 33014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 557-9000
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Company has entered into an agency agreement with Gordon Brothers
Partners, Inc. with respect to liquidation sales to be conducted at
eleven stores. Under the current agreement with Gordon Brothers, the
Company received an up-front cash payment of approximately $11.5
million for the merchandise located at the stores, which was used to
pay down debt. The liquidation sales are part of the Company's strategy
to address its working capital needs as previously announced in a
recovery plan set forth in the Company's Form 10-Q for the 13 weeks
ended November 2, 1996 (the "November 10-Q") and in a Form 8-K, dated
December 17, 1996 (the "December Form 8-K"). Although the Company has
taken many of the steps set forth in the November 10-Q and December
Form 8-K to address its working capital needs, the Company continues to
experience difficulties in meeting its debts as they become due and is
considering various alternatives. The Company closed two additional
stores on June 30 and July 7 of this year. After all liquidation sales
are completed, the Company will operate six stores in Florida and will
take a restructuring charge for the closed stores.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
EXHIBITS
2.1 Agency Agreement, dated July 28, 1997, between Gordon Brothers
Partners, Inc. and the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
L. LURIA & SON, INC.
Dated: August 7, 1997 By: /S/RACHMIL LEKACH
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Rachmil Lekach, Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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2.1 Agency Agreement, dated as of July 28, 1997 between
Gordon Brothers Partners, Inc. and the Company.
EXHIBIT 2.1
AGENCY AGREEMENT
DATED AS OF
JULY 28, 1997
BETWEEN
GORDON BROTHERS PARTNERS, INC.,
AS AGENT
AND
L. LURIA & SON, INC.,
AS MERCHANT
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TABLE OF CONTENTS
SECTION PAGE
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Section 1. Defined Terms 1
Section 2. Appointment of Agent 2
Section 3. Consideration to Merchant and Agent 3
3.1 Payments to Merchant 3
3.2 Compensation to Agent 4
3.3 Time of Payments 4
Section 4. Expenses of the Sale 5
4.1 Expenses 5
4.2 Payment of Expenses 7
Section 5. Inventory Valuation; Merchandise 7
5.1 Inventory Taking 7
5.2 Merchandise Subject to this Agreement 9
5.3 Valuation 11
5.4 Excluded Goods 12
Section 6. Sale Term 13
6.1 Term 13
6.2 Vacating the Stores 14
6.3 Gross Rings 14
Section 7. Sale Proceeds 15
7.1 Proceeds 15
7.2 Deposit of Proceeds 15
7.3 Credit Card Proceeds 15
Section 8. Conduct of the Sale 16
8.1 Rights of Agent 16
8.2 Terms of Sales to Customers 18
8.3 Sales Taxes 18
8.4 Supplies 19
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8.5 Returns of Merchandise 19
8.6 Layaway, Repair and Special Order Merchandise 21
8.7 Compliance with Law, Etc. 22
8.8 Sale Reconciliation 22
8.9 Force Majeure 23
Section 9. Employee Matters 23
9.1 Merchant's Employees 23
9.2 Termination of Employees 24
9.3 Payroll Matters 25
9.4 Employee Retention Bonuses 25
Section 10. Conditions Precedent 25
Section 11. Representations, Warranties and Covenants 27
11.1 Merchant Representations, Warranties 27
and Covenants
11.2 Agent Representations, Warranties and Covenants 34
Section 12. Insurance 35
12.1 Merchant's Liability Insurance 35
12.2 Merchant's Casualty Insurance 36
12.3 Agent's Insurance 37
12.4 Worker's Compensation Insurance 37
12.5 Risk of Loss 38
Section 13. Indemnification 39
13.1 Merchant Indemnification 39
13.2 Agent Indemnification 40
Section 14. Defaults 41
Section 15. Sale of FF&E 41
Section 16. Miscellaneous 42
16.1 Notices 42
16.2 Governing Law; Consent to Jurisdiction 42
16.3 Termination 43
16.4 Entire Agreement 43
16.5 Amendments 44
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16.6 No Waiver 44
16.7 Successors and Assigns 44
16.8 Execution in Counterparts 44
16.9 Section Headings 44
16.10 Survival 45
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AGENCY AGREEMENT
This Agency Agreement is made as of this 28th day of July, 1997 by and
between GORDON BROTHERS PARTNERS, INC., a Massachusetts corporation with a
principal place of business at 40 Broad Street, Boston, Massachusetts 02109 (the
"AGENT") and L. LURIA & SON, INC., a Florida corporation with a principal place
of business at 5770 Miami Lakes Drive, Miami, FL 33014 (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 selling all of the Merchandise (as
hereinafter defined) located in Merchant's 11 retail store locations listed 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").
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:
DEFINED TERM SECTION REFERENCE
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Agency Accounts Section 7.2
Agency Documents Section 11.1(b)
Agent Preamble
Agent Claim Section 12.5
Agent Indemnified Parties Section 13.1
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Agent's Fee Section 3.2
Benefits Cap Section 4.1
Central Administrative
Expenses Section 4.1
Cost Value Section 3.1(a)
Defective Merchandise Section 5.2(b)
Excluded Benefits Section 4.1
Expenses Section 4.1
FF&E Section 5.2(a)
Guaranteed Amount Section 3.1(a)
Gross Rings Section 6.3
Inventory Date Section 5.1
Inventory Taking Section 5.1
Layaway Pick-up Date Section 8.6
Layaway, Repair and
Special Order Merchandise Section 5.2(b)
Merchandise Section 5.2(a)
Merchant Preamble
Occupancy Agreements Section 8.7
Occupancy Expenses Section 4.1
Proceeds Section 7.1
Remaining Stores Section 8.4
Retail Price Section 5.3
Retained Employee Section 9.1
Retention Bonus Section 9.4
Returned Merchandise Section 8.5
Sale Recitals
Sale Commencement Date Section 6.1
Sale Term Section 6.1
Sale Termination Date Section 6.1
Sales Taxes Section 8.3
Security Agreement Section 10(g)
Store(s) Recitals
Supplies Section 8.4
WARN Act Section 9.1
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
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purpose of conducting the Sale in accordance with the terms and conditions of
this Agreement.
SECTION 3. CONSIDERATION TO MERCHANT AND AGENT.
3.1. PAYMENTS TO MERCHANT.
(a) (i) As a guaranty of Agent's performance hereunder,
Merchant shall receive from Agent the sum of 86.5% of the aggregate Cost Value
of the Merchandise (the "GUARANTEED AMOUNT") plus all petty cash on hand at the
Stores on a dollar for dollar basis. "Cost Value" shall mean the SKU cost of the
Merchandise as reflected and recorded in the Merchant's perpetual inventory
system, and as set forth in the July 22 Inventory Report.
(ii) Agent shall pay to Merchant the Guaranteed Amount
in the manner and at the time specified in Section 3.3 below. The Guaranteed
Amount will be calculated based upon (A) the final audited report of the
inventory taking service after verification thereof by Agent and Merchant, and
(B) the aggregate amount of Gross Rings.
(b) All Merchandise remaining at the conclusion of the Sale
shall become the property of Merchant, free and clear of all liens, claims and
encumbrances of any kind or nature created by Agent.
3.2. COMPENSATION TO AGENT. Agent shall receive as its
compensation for services rendered to Merchant all Proceeds of the Sale (with
Agent being
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responsible for the payment of the Guaranteed Amount in full, and all Expenses
as herein provided) (the "AGENT'S FEE").
3.3. TIME OF PAYMENTS. The Agent shall pay to Merchant 90% of the
estimated Guaranteed Amount on the Sale Commencement Date, which amount will be
calculated based upon the net book value of the Merchandise as of July 22, 1997
as set forth in Merchant's record attached or described in EXHIBIT 3.3 (the
"July 22 Inventory Report"). Thereafter, within two (2) business days of the
issuance of the final inventory report by the inventory taking service and
reconciliation of the same by Merchant and Agent, Agent shall pay to Merchant
the unpaid balance of the Guaranteed Amount or, to the extent that Agent's
payment on account of the estimated Guaranteed Amount exceeds the actual
Guaranteed Amount, Merchant shall reimburse such excess to Agent. The Agent
shall make weekly payments of the portion of the Guaranteed Amount relative to
Returned Merchandise arriving at the Stores after the Inventory Date upon
receipt of such Merchandise at the Stores immediately following the weekly Sale
reconciliation by Merchant and Agent pursuant to Section 8.8 below. All payments
by Merchant or Agent hereunder shall be by wire transfer of immediately
available funds. Merchant agrees that any amounts due by Agent to Merchant
pursuant to this Section 3 may in Agent's discretion and upon notice to Merchant
be offset by the amount of credit card Proceeds processed by Merchant for
Agent's account (if any) which have not, as of the applicable date of payment by
Agent to Merchant been transferred by Merchant to Agent in accordance with
Section 7.3.
SECTION 4. EXPENSES OF THE SALE.
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4.1. EXPENSES. Agent shall be responsible for all Expenses
incurred in conducting the Sale. As used herein, "EXPENSES" shall mean all
Store-level operating expenses of the Sale which arise during the Sale Term at
the Stores, limited to the following:
(a) base payroll for Retained Employees for actual
days/hours worked in the conduct of the Sale;
(b) amounts actually payable in respect of FICA,
unemployment taxes, worker's compensation and health care insurance benefits for
Retained Employees, in an amount not to exceed 20% of base payroll for each
Retained Employee (the "BENEFITS CAP");
(c) 50% of the fees and costs of the inventory taking
service to conduct the Inventory Taking at the Stores;
(d) Agent's supervision expenses;
(e) advertising and signage expenses (at Merchant's contract
rates, if available);
(f) long distance telephone expenses incurred in the conduct
of the Sale;
(g) credit card and bank card fees, chargebacks and
discounts;
(h) costs of security personnel in the Stores;
(i) a pro-rata portion of Merchant's casualty insurance
premiums attributable to the Merchandise;
(j) costs of transfers of Merchandise during the Sale Term;
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(k) Retention Bonuses as described in Section 9.4 below;
(l) costs of sizing and repairing Merchandise necessary to
make such items salable or to satisfy customer needs in the ordinary course; and
(m) the out of pocket costs and expenses of providing such
additional goods and services which Merchant and Agent shall mutually determine
appropriate.
"Expenses" shall not include: (i) Excluded Benefits; (ii)
Occupancy Expenses; (iii) Central Service Expenses; (iv) costs of obtaining all
permits, licenses, consents and approvals required under Sections 10(a) and
10(c) hereof; and (v) 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:
"CENTRAL SERVICE EXPENSES" means costs and expenses for
Merchant's central administrative services necessary for the Sale, including,
but not limited to, MIS services, payroll processing, inventory processing and
handling and data processing and reporting.
"EXCLUDED BENEFITS" means 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 payroll taxes, worker's compensation 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 and
expenses, building insurance related to the Stores, base telephone charges,
trash removal, Merchant's liability insurance, cash register maintenance,
building maintenance, landscaping and structural repair, building alarm service
and alarm service maintenance, and rental for furniture, fixtures and equipment.
4.2. PAYMENT OF EXPENSES. 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 immediately following the weekly Sale reconciliation by
Merchant and Agent pursuant to Section 8.3 below.
SECTION 5. INVENTORY VALUATION; MERCHANDISE.
5.1. INVENTORY TAKING.
Merchant and Agent shall cause to be taken (i) a Retail
Price physical inventory, and (ii) an "SKU" inventory of the Merchandise (the
"INVENTORY TAKING") commencing at the close of business at the Stores on a date
mutually agreed upon by Agent and Merchant, but in no event later than August 1,
1997 (the date of the Inventory Taking at each Store being the "INVENTORY DATE"
for such Store). Merchant and Agent shall jointly employ RGIS 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. Except as provided in the immediately
preceding sentence, Merchant and Agent shall bear their respective costs and
expenses relative to the Inventory Taking. Merchant
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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 prior to the Inventory Date.
5.2. MERCHANDISE SUBJECT TO THIS AGREEMENT.
(a) For purposes of this Agreement, "MERCHANDISE" shall
mean: (i) all finished goods inventory that is owned by Merchant and located at
the Stores as of the Sale Commencement Date, including, (A) sample Merchandise
that is not Defective Merchandise and (B) Merchandise subject to Gross Rings;
and (ii) Layaway, Repair and Special Order Merchandise which is not picked up by
customers or removed by Merchant from the Stores prior to the Layaway Pick-up
Date. Notwithstanding the foregoing, "Merchandise" shall not include: (1) goods
which belong to sublessees, licensees or concessionaires of Merchant; (2)
firearms, ammunition, alcohol, tobacco products and prescription medicines
(unless such products may be sold by Agent pursuant to law and Agent has
obtained all licenses, permits and governmental consents required therefor); (3)
goods held by Merchant on memo, on consignment, or as bailee; (4) Defective
Merchandise; (5) furnishings, trade fixtures,
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equipment and improvements to real property which are located in the Stores
(collectively, "FF&E"); and (6) items of Boucheron jewelry
(b) As used in this Agreement the following terms have the
respective meanings set forth below: "DEFECTIVE MERCHANDISE" means (i) any item
of Merchandise identified by Agent in its sole discretion during the Inventory
Taking as (A) incomplete or (B) so damaged or near dated that Merchant would not
have offered such item at full retail price prior to the Sale or as to near date
merchandise, the expiry date is within 30 days of the Sale Commencement Date.
"LAYAWAY, REPAIR, AND SPECIAL ORDER MERCHANDISE" means all
items of Merchandise held at the Stores on layaway or for repair, or
customer-specific special orders for goods, in each case pursuant to binding
agreements, invoices or other legal documentation, where (A) the documentation
is clear as to the name, address, telephone number, date of last payment and
balance due from the customer, and (B) the goods subject to layaway, repair or
special order are properly identified, segregated, and in a condition as
described in the documentation.
5.3. DEFINITION OF RETAIL PRICE. For purposes of this Agreement,
"RETAIL PRICE" shall mean, with respect to each item of Merchandise, the lower
of (a) the lowest ticketed, lowest marked, or lowest shelf price of such item on
or after May 31, 1997, or (b) the lowest UPC or "scan" price of such item on or
after May 31,1997 in each case, exclusive of point of sale, temporary in-Store,
or advertised discounts.
The Retail Price of any item of Merchandise shall exclude all Sales
Taxes, and Merchant represents that (i) the ticketed prices of items of
Merchandise at the Stores
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do not and shall not include any Sales Taxes, and (ii) 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 if multiple items of the same SKU are marked at
different prices, the lowest ticketed 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 ticket price was mismarked. Notwithstanding the
foregoing sentence, the Guaranteed Amount shall be based solely on the "Cost
Value" of the Merchandise.
5.4. EXCLUDED GOODS. Merchant shall retain all responsibility for
any goods not included as "Merchandise" hereunder. Merchant shall remove at its
cost all such items from the applicable Store (including but not limited to
Defective Merchandise) as soon as practicable. Any layaway, repair or special
order goods not constituting Merchandise, together with all contracts relating
thereto, shall remain Merchant's liability and responsibility, but Agent shall
cooperate with Merchant in administering such matters. 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.
SECTION 6. SALE TERM.
6.1. TERM. The Sale shall commence at each Store on July 29, 1997
(such date with respect to each Store being the "SALE COMMENCEMENT DATE"). The
Agent shall complete the Sale at each Store no later than October 31, 1997,
unless the Sale is extended by mutual written agreement of Agent and Merchant
(the "SALE
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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 Sale at any Store at any time within the Sale Term
upon the occurrence of an Event of Default by Merchant.
6.2. VACATING THE STORES. At the conclusion of the Sale, Agent
agrees to leave the Stores in "broom clean" condition, ordinary wear and tear
excepted. Agent shall vacate the Stores on or before the Sale Termination Date,
at which time Agent shall surrender and deliver the Store premises and Store
keys to Merchant. All assets of Merchant used by Agent in the conduct of the
Sale (e.g. FF&E, supplies, etc.) shall be returned by Agent to Merchant 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 the Agent.
6.3. GROSS RINGS. In the event that the 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 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.
SECTION 7. SALE PROCEEDS.
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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 (i) Sales Taxes, (ii) credit
card and bankcard fees and chargebacks, and (iii) returns, allowances and
customer credits subject to Section 8.5; 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.
7.2. DEPOSIT OF PROCEEDS. All cash Proceeds shall be deposited by
Agent in agency accounts established by Agent (the "AGENCY ACCOUNTS"). Agent
may, in its discretion, designate new or existing accounts of Agent or Merchant
as the Agency Accounts, provided that such accounts are dedicated solely to the
deposit of Proceeds and the disbursement of Expenses and amounts payable to
Merchant pursuant to Section 3 hereof. Agent shall exercise sole signatory
authority and control with respect to the Agency Accounts. Merchant shall
promptly upon Agent's request execute and deliver all necessary documents to
open and maintain the Agency Accounts.
7.3. CREDIT CARD PROCEEDS. Agent shall have the right (but not
the obligation) 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) for credit card Proceeds.
In the event that Agent elects so 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
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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). All credit card Proceeds
will constitute the property of the Agent and shall be held by Merchant in trust
for Agent. 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. 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 Sale,
whether received during or after the Sale Term.
SECTION 8. CONDUCT OF THE SALE.
8.1. RIGHTS OF AGENT. The Agent shall be permitted to conduct
the Sale as a "store closing" or similar sale throughout the Sale Term. The
Agent shall conduct the Sale in the name of and on behalf of the Merchant in a
commercially reasonable manner and in compliance with (i) the terms of this
Agreement, (ii) provisions of applicable laws, regulations and ordinances, and
(iii) provisions of Occupancy Agreements. In addition to any other rights
granted to Agent hereunder, in conducting the Sale the Agent, in the exercise of
its sole discretion, shall have the right, subject to the immediately preceding
sentence:
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(a) to establish and implement advertising, signage
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); provided, however, that Agent shall deliver copies
of all advertising materials for the Sale to Rachmil Lekach or another designee
of Merchant identified in writing, who shall have the right, within one business
day of such delivery, to approve such materials (which approval shall not be
unreasonably withheld or delayed); and provided further that the failure of such
designee to respond to any request for approval within one business day shall be
deemed to be approval of the subject materials;
(b) to establish Sale prices and Store hours;0
(c) to use without charge during the Sale Term all FF&E,
advertising materials, store-level bank accounts, Store-level customer lists and
mailing lists, computer hardware and 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 (whether owned, leased, or licensed);
(d) to transfer Merchandise between Stores as determined by
the Agent to be reasonably necessary. and
(e) to use without charge (i) Merchant's central office
facilities, central and administrative services and personnel to process
payroll, perform
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MIS cash reconciliation, and provide other central office services necessary for
the 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. 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 for cash, and by bank credit cards
currently accepted by Merchant, but excluding Merchant's private label charge
account. Agent shall at Merchant's request accept Merchant gift certificates and
Store credits 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 taxing authority having jurisdiction (collectively,
"SALES TAXES") shall be added to the sales price of Merchandise and collected by
Agent at the time of sale.
The Merchant (based upon information provided by Agent) shall wire transfer
funds to the applicable taxing authorities in the amount so collected, with
accompanying schedules prepared and delivered by Agent 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. Agent shall reimburse Merchant in the amounts so paid to the taxing
authorities, by wire transfer to
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Merchant, within 24 hours of the time Merchant provides evidence to Agent of the
wire transfer to the 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, including, without limitation, boxes, bags, paper, twine
and similar sales materials (collectively, "SUPPLIES") located at the Stores. In
the event that additional Supplies are required in any of the Stores during the
Sale, Merchant agrees to promptly 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 Sale. Supplies have not been since
July 1, 1997, and shall not be prior to the Sale Commencement Date, transferred
by Merchant between or among the Stores, Merchant's other locations not subject
to the Sale (the "REMAINING STORES") and/or Merchant's distribution center(s) 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 of 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 and such return is otherwise in accordance with
the applicable return policy for such Store in effect prior to the Sale
Commencement Date. Merchant shall reimburse Agent in cash for the amount of any
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store credit or refund given to any customer in respect of Returned Merchandise.
To the extent that Returned Merchandise is salable as first-quality merchandise,
it shall be included in Merchandise and for purposes of calculation of the
Guaranteed Amount, shall be valued at 90% of the Cost Value applicable to such
item if such item is returned within the first 15 days of the Sale Term, and
during the subsequent 15 days, valued at the Cost Value applicable to such item
multiplied by the compliment of the prevailing Sale discount at the time of the
return; provided, that, the Merchant shall have the option to exclude the
Returned Merchandise from the Sale if the Returned Merchandise is being sold by
the Agent at a discounted price of greater than 20% off of the amount refunded
to the customer for such Returned Merchandise. Subject to Merchant's
reimbursement to Agent of the amount of any store credit or refund granted for
any Returned Merchandise, the aggregate Cost Value of the Merchandise shall be
increased by the Cost Value of any Returned Merchandise included in Merchandise
(determined in accordance with this Section 8.5), and the Guaranteed Amount
shall be adjusted accordingly. Any Returned Merchandise which is not included in
Merchandise shall be disposed of by Agent in accordance with instructions
received from Merchant. Any increases in the Guaranteed Amount and any
reimbursements due to Agent as result of Returned Merchandise shall be accounted
for and paid by Agent and/or Merchant, as applicable, immediately following the
weekly Sale reconciliation pursuant to Section 8.8 hereof.
8.6. LAYAWAY, REPAIR AND SPECIAL ORDER MERCHANDISE. Promptly
after the execution of this Agreement, Merchant shall notify each customer for
which
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Merchant holds Layaway, Repair and Special Order Merchandise of the Sale
and request such customers to pick up and pay for the applicable item(s) by
August 23, 1997 (the "LAYAWAY PICK-UP DATE"). Any amounts paid for Layaway,
Repair and Special Order Merchandise on or before the close of business on the
Layaway Pick-up Date shall be for the sole account of Merchant. Subject to any
written agreement with customers and to applicable law, any Layaway, Repair and
Special Order Merchandise unclaimed by customers or not removed by the Merchant
from the Stores by the Layaway Pick-up Date shall be included in Merchandise and
the Guaranteed Amount shall be adjusted to account for such items in the manner
prescribed for Returned Merchandise in Section 8.5 above. Prior to the Layaway
Pick-up Date, Agent shall administer all Layaway, Repair and Special Order
Merchandise in accordance with the documents and agreements relating thereto,
provisions of applicable law, and Merchant's historic policies provided to Agent
in writing. In the event that Agent is required to issue refunds to customers in
respect of Layaway, Repair and Special Order Merchandise, Merchant shall
reimburse Agent in cash for all such amounts. At the end of the Sale Term, Agent
shall transfer responsibility for any remaining items of Layaway, Repair and
Special Order Merchandise back to Merchant after appropriate and legally
required communications to customers and reconciliation between Agent and
Merchant. All payments by Agent and Merchant required under this Section 8.6
shall be made immediately following the weekly Sale reconciliation by Agent and
Merchant pursuant to Section 8.8 hereof.
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8.7. COMPLIANCE WITH LAW, ETC.. Agent shall comply in the conduct
of the Sale with (i) all applicable statutes, rules, regulations and orders of,
and applicable restrictions imposed by, governmental authorities, including,
without limitation, all so called "going out of business laws" and all laws and
regulations relating to employees, (ii) all of Merchant's employee rules,
regulations, guidelines and policies, which have been provided to Agent in
writing and which are listed in EXHIBIT 8.7 attached hereto, and (iii) all Store
leases, reciprocal easement agreements and other similar agreements relating to
the occupancy of the Stores which have been provided to or made available to
Agent in writing (collectively, "OCCUPANCY AGREEMENTS"), subject, in each case,
to Merchant's reasonable cooperation as needed to comply with such matters.
8.8. SALE RECONCILIATION. On or before each Tuesday during the
Sale Term, commencing on the first Tuesday after the Sale Commencement Date,
Agent and Merchant shall cooperate to reconcile Expenses, receipts of Returned
Merchandise at the Stores (including quantities and Retail Price thereof), sales
of Merchant Consignment Goods, Gross Rings, and such other Sale-related items as
either party shall reasonably request, in each case for the prior week or
partial week (i.e. Sunday through Saturday), all pursuant to procedures agreed
upon by Merchant and Agent. Within thirty (30) days after the end of the Sale
Term, Agent and Merchant shall complete a final reconciliation of the Sale, the
written results of which shall be certified by representations of each of
Merchant and Agent as a final settlement of accounts between Merchant and Agent.
Upon request, each of Merchant and Agent
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shall provide access to the other to all records and information related to the
Sale in such party's possession.
8.9. FORCE MAJEURE. If any casualty or act of God prevents or
substantially inhibits the conduct of business in the ordinary course at any
Store, such Store and the Merchandise located at such Store shall be eliminated
from the Sale and considered to be deleted from this Agreement as of the date of
such event, and Agent and Merchant shall have no further rights or obligations
hereunder with respect thereto; PROVIDED, HOWEVER, that (i) the proceeds of any
insurance attributable to such Merchandise shall constitute Proceeds hereunder,
and (ii) the Guaranteed Amount shall be reduced to account for any Merchandise
eliminated from the Sale as a result of such force majeure event and which is
not the subject of insurance proceeds, and Merchant shall reimburse Agent for
the amount the Guaranteed Amount is so reduced prior to the end of the Sale
Term.
SECTION 9. EMPLOYEE MATTERS.
9.1. MERCHANT'S EMPLOYEES. Agent may use Merchant's employees in
the conduct of the Sale to the extent Agent in its sole discretion deems
expedient, and Agent may select and schedule the number and type of Merchant's
employees required for the Sale. Agent shall identify any such employees to be
used in connection with the Sale (each such employee, a "RETAINED EMPLOYEE")
prior to the Sale Commencement Date. Retained Employees shall at all times
remain employees of Merchant, and shall not be considered or deemed to be
employees of Agent. Merchant and Agent agree that except to the extent that
wages and benefits of Retained Employees constitute
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Expenses hereunder, nothing contained in this Agreement and none of Agent's
actions taken in respect of the Sale shall be deemed to constitute an assumption
by Agent of any of Merchant's obligations relating to any of Merchant's
employees including, without limitation, Excluded Benefits, Worker Adjustment
Retraining Notification Act ("WARN ACT") claims and other termination type
claims and obligations, or any other amounts required to be paid by statute or
law; nor shall Agent become liable under any collective bargaining or employment
agreement or be deemed a joint or successor employer with respect to such
employees. Merchant shall not, without Agent's prior written consent, raise the
salary or wages or increase the benefits for, or pay any bonuses or make any
other extraordinary payments to, any Retained Employees or other employees
responsible for Central Administrative Services prior to the Sale Termination
Date.
9.2. TERMINATION OF EMPLOYEES. Agent may in its discretion stop
using any Retained Employee at any time during the Sale. In the event of
termination of any Retained Employee, Agent will use all reasonable efforts to
notify Merchant at least five (5) days prior thereto, except for termination
"for cause" (such as dishonesty, fraud or breach of employee duties), in which
event no prior notice to Merchant shall be required, provided Agent shall notify
Merchant as soon as practicable after such termination. From and after the date
of this Agreement and until the Sale Termination Date, Merchant shall not
transfer or dismiss employees of the Stores except "for cause" without Agent's
prior consent, which consent shall not be unreasonably withheld.
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Without limiting the foregoing, Merchant has not distributed, and shall not
without prior consultation with Agent, distribute any notice to its employees
under the WARN Act.
9.3. PAYROLL MATTERS. During the Sale Term Merchant shall
process the base payroll for all Retained Employees. Each Wednesday during the
Sale Term the Agent shall transfer from the Agency Accounts to Merchant's
payroll accounts an amount equal to the base payroll for Retained Employees plus
related payroll taxes, worker's compensation and benefits for such week which
constitute Expenses hereunder. Attached hereto as EXHIBIT 9.3 is a description
of Merchant's base payroll, related payroll taxes, worker's compensation and
employee benefits, which Merchant represents is true and accurate as of the date
hereof.
9.4. EMPLOYEE RETENTION BONUSES. In Agent's sole discretion
Proceeds may be used to pay, as an Expense, retention bonuses ("RETENTION
BONUSES") (which bonuses shall be inclusive of payroll taxes but as to which no
benefits shall be payable) ("RETENTION BONUSES") in an aggregate amount of up to
10% of base payroll for each Store (which amount is inclusive of payroll taxes
and as to which no benefits shall be payable) to Retained Employees who do not
voluntarily leave employment and are not terminated "for cause." Such Retention
Bonuses shall be payable within thirty (30) days after the Sale Termination
Date, and shall be processed through Merchant's payroll system.
SECTION 10. CONDITIONS PRECEDENT. The willingness of Agent and Merchant
to enter into the transactions contemplated under this Agreement are directly
conditioned upon the satisfaction of the following conditions within fourteen
(14) days of the Sale
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Commencement Date or at the time or during the time periods specifically
indicated below unless specifically waived in writing by the applicable party:
(a) Merchant shall have made all required filings and
registrations and shall have obtained all permits, licenses, consents,
authorizations and approvals required under applicable laws, rules, regulations,
and court or administrative orders for Merchant to execute and deliver this
Agreement and to consummate the Sale; provided that Agent agrees to cooperate
fully with Merchant in obtaining such permits, licenses, consents,
authorizations and approvals.
(b) The Inventory Taking at the Stores shall have been
completed at each of the Stores on or before August 1, 1997 and the inventory
taking service shall have issued its final certified report to Merchant and
Agent.
(c) Merchant shall have obtained all approvals and consents
under applicable Occupancy Agreements and other contracts required for Merchant
to execute and deliver this Agreement and to consummate the Sale; provided that
Agent agrees to cooperate fully with Merchant in obtaining such consents and
approvals.
(d) All representations and warranties of Merchant and Agent
hereunder shall be true and correct in all material respects and no Event of
Default shall have occurred at and as of the date hereof and as of the Sale
Commencement Date.
(e) Merchant shall have provided Agent reasonable access to
all pricing and cost files, computer hardware, software and data files,
inter-Store
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transfer logs, markdown schedules, invoices, style runs and all other documents
relative to the price, mix and quantities of inventory located at the Stores.
(f) Agent shall have had the opportunity to inspect the
Stores and the inventory on the date immediately preceding the Inventory Date.
(g) Merchant shall have executed and delivered to Agent a
Security Agreement in the form of EXHIBIT 10(G) attached hereto (the "SECURITY
AGREEMENT"), together with accompanying Uniform Commercial Code financing
statements sufficient to grant to Agent a valid and perfected first priority
security interest in all of the Merchandise and the Proceeds.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1 MERCHANT REPRESENTATIONS, WARRANTIES AND COVENANTS. Merchant
hereby represents, warrants and covenants in favor of Agent as follows:
(a) Merchant: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
(ii) has all requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as presently conducted;
and (iii) is and during the Sale Term will continue to be, duly authorized and
qualified as a foreign corporation to do business and in good standing in each
jurisdiction where the nature of its business or properties requires such
qualification, including all jurisdictions in which the Stores are located.
(b) The Merchant has the right, power and authority to
execute and deliver this Agreement and each other document and agreement
contemplated
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hereby (collectively, together with this Agreement, the "AGENCY DOCUMENTS") and
to perform fully its obligations thereunder. Merchant has taken all necessary
actions required to authorize the execution, delivery and performance of the
Agency Documents, and no further consent or approval is required for Merchant to
enter into and deliver the Agency Documents, to perform its obligations
thereunder, and to consummate the Sale. Each of the Agency Documents has been
duly executed and delivered by Merchant and constitutes the legal, valid and
binding obligation of Merchant enforceable in accordance with its terms, subject
to applicable bankruptcy law, general principles of equity and other laws
generally affecting creditors. To the best of Merchant's knowledge, no court
order or decree of any federal, state or local governmental authority or
regulatory body is in effect that would prevent or impair, or is required for
the Merchant's consummation of, the transactions contemplated by this Agreement,
and no consent of any third party which has not been obtained is required
therefor. To the best of Merchant's knowledge, no contract or other agreement to
which the Merchant is a party or by which the Merchant is otherwise bound will
prevent or impair the consummation of the Sale and the other transactions
contemplated by this Agreement.
(c) Other than adding and deleting certain departments since
March 15, 1997, the Merchant (i) has operated the Stores and the Remaining
Stores in the ordinary course of business consistent with historical operations,
and (ii) has not conducted any promotions or advertised sales at the Stores
except promotions and
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sales in the ordinary course of business consistent with historic promotions and
sales for comparable periods last year, all as described in EXHIBIT 11.1(C)
attached hereto.
(d) Merchant owns and will own at all times during the Sale
Term, good and marketable title to all of the Merchandise free and clear of all
liens, claims and encumbrances of any nature except (i) the presently existing
lien in favor of Foothill Capital Corporation which shall be released upon full
payment of the Guaranteed Amount, (ii) statutory liens in favor of landlords,
and (iii) liens granted to Agent pursuant to the Security Agreement
(collectively, "PERMITTED LIENS"). Merchant shall not create, incur, assume or
suffer to exist any security interest, lien or other charge or encumbrance upon
or with respect to any of the Merchandise or the Proceeds except for Permitted
Liens.
(e) Merchant has maintained its pricing files in the
ordinary course of business, and prices charged to the public for goods (whether
in-Store, by advertisement or otherwise) are the same in all material respects
as set forth in such pricing files for the periods indicated therein, except for
the promotions and sales described in Section 11.1(c). All pricing files and
records since March 15, 1997 relative to the Merchandise have been made
available to Agent and are listed in EXHIBIT 11.1(E). All such pricing files and
records are true and accurate in all material respects as to the actual cost to
Merchant for purchasing the goods referred to therein and as to the selling
price to the public for such goods as of the dates and for the periods indicated
therein. Since March 15, 1997, the pricing of Merchandise at the Stores has
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been substantially the same as the pricing of the corresponding inventory at the
Remaining Stores.
(f) As of the Sale Commencement Date, the levels of goods
(as to quantity) and the mix of goods (as to type, category, style, brand and
description) at the Stores are described on EXHIBIT 11.1(F) attached hereto. As
of the Sale Commencement Date, the inventory mix will be reasonably similar to
the inventory mix as of July 22, 1997, and Merchant's initial mark-up will be
approximately 58.14% as to jewelry Merchandise and 49.73 % as to hardline
Merchandise, all as reflected on the July 22 Inventory Report.
(g) As of the Sale Commencement Date, all normal course
permanent markdowns on inventory located at the Stores will have been taken on a
basis consistent with Merchant's historical practices and policies and on a
basis consistent with markdowns taken at the Remaining Stores.
(h) Merchant has not since May 31, 1997, and shall not up to
the Sale Commencement Date, marked up or raised the price of any items of
Merchandise, or removed or altered any tickets or any indicia of clearance
merchandise, except in the ordinary course of business.
(i) Merchant shall ticket or mark all items of inventory
received at the Stores prior to the Sale Commencement Date in a manner
consistent with similar Merchandise located at the Stores and the Remaining
Stores and in accordance with Merchant's historic practices and policies
relative to pricing and marking inventory.
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(j) All point of sale activity at the Stores has occurred
and will occur up to the Sale Commencement Date in the ordinary course of
business and consistent with promotions described in Section 11.1(c).
(k) Since July 1, 1997, Merchant has not, and from and after
the date hereof Merchant shall not, purchase for or transfer to or from the
Stores any merchandise or goods outside the ordinary course in anticipation of
the Sale or of the Inventory Taking, without Agent's prior consent.
(l) As of the Sale Commencement Date, (i) goods constituting
Merchandise located at the Stores shall be no less than $ 14,000,000 at Cost
Value, and (ii) jewelry at Cost Value shall not constitute more than 54.0% of
all of the Merchandise.
(m) No action, arbitration, suit, notice, or legal,
administrative or other proceeding before any court or governmental body has
been instituted by or against the Merchant, or has been settled or resolved, or
to Merchant's knowledge, is threatened against or affects Merchant, relative to
Merchant's business or properties, or which questions the validity of this
Agreement which, in each case, if adversely determined, would have a material
adverse effect upon the Merchant's ability to perform its obligations under this
Agreement.
(n) Intentionally omitted.
(o) Merchant covenants to continue to operate the Stores in
the ordinary course of business from the date of this Agreement to the Sale
Commencement Date, and to operate the Remaining Stores in the ordinary course of
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business from the date of this Agreement through the Sale Termination Date, in
each case: (i) selling inventory during such period at customary prices; (ii)
not promoting or advertising any sales or in-store promotions (including POS
promotions) to the public (except for Merchant's historic and customary
promotions for all of its locations as set forth in EXHIBIT 11.1(C) attached
hereto); (iii) not returning inventory to vendors and not transferring inventory
or supplies between or among Stores, Remaining Stores and Merchant's
distribution center(s), except (A) as permitted under Section 8.4 above; and
(iv) not making any management personnel moves or changes at the Stores without
Agent's prior written consent (which consent will not be unreasonably withheld).
Without limiting the foregoing, Merchant shall not conduct or advertise "going
out of business", "store closing", or "liquidation" sales at any of the
Remaining Stores located within the market area under the same newspaper
advertising umbrella of any Store at any time during the Sale Term; provided,
however, if Merchant closes a store or stores in such market area, Merchant will
be permitted to place signs within such stores or stores, but not in the
windows, stating that "this location is closing" and advising the customer of
Merchant's other locations within the said area which are remaining open,
provided, further, Merchant shall not offer a discount in such closing store or
stores greater than that being simultaneously offered by Agent in the Stores in
such market area.
(p) To the best of Merchant's knowledge, all Merchandise is
in compliance with all applicable federal, state or local product safety laws,
rules and
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standards. Merchant shall provide Agent with its historic policies and practices
regarding product recalls prior to the taking of the inventory at the Stores.
(q) Immediately prior to the Sale Commencement Date, no
event of default or event which with the giving of notice, the passage of time,
or both has occurred on the part of the Merchant under any Occupancy Agreement
which could have a material adverse affect on the Sale. Throughout the Sale
Term, the Agent shall have the right to the unencumbered use and occupancy of,
and peaceful and quiet possession of, each of the Stores, the assets currently
located at the Stores, and the services provided at the Stores. Merchant shall
throughout the Sale Term maintain in good working order, condition and repair,
at its sole expense, all cash registers, heating systems, air conditioning
systems, elevators, escalators, Store alarm systems, and all other mechanical
devices used in the ordinary course of operation of the Stores.
(r) Merchant has paid and will continue to pay throughout
the Sale Term, all self-insured or Merchant funded employee benefit programs for
employees, including health and medical benefits and insurance and all proper
claims made or to be made in accordance with such programs.
(s) Merchant has not and shall not throughout the Sale Term
take any actions the result of which is to increase in any material respect the
cost of operating the Sale, including, without limitation, increasing salaries
or other amounts payable to Retained Employees or other employees responsible
for Central Administrative Services.
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(t) Except as disclosed on EXHIBIT 11.1 (T) attached hereto,
(i) Merchant is not a party to any collective bargaining agreements with its
employees, (ii) to the best of Merchant's knowledge, no labor unions represent
Merchant's employees at the Stores, and (iii) to the best of Merchant's
knowledge, there are currently no strikes, work stoppages or other labor
disturbances affecting the Stores, Merchant's central office facilities (or the
Warehouse).
(u) As of the date of this Agreement, Merchant is current in
the payment of all utilities, taxes and insurance liabilities. Merchant agrees
that in the event that Agent receives notice that any such utility, tax or
insurance liability is overdue or unpaid and such non-payment reasonably could
be expected to cause a material adverse effect on the Sale, Merchant shall
immediately pay such applicable balances in full. In the event that Agent is
unable to advertise the Sale with any newspapers, magazines, radio or television
stations or other media providers which target or serve the market areas of the
Stores or is unable to obtain Merchant's contract rate with any such provider as
a result of the Merchant's failure to pay its outstanding balances with such
advertising providers, Merchant shall immediately pay such applicable balances
in full.
11.2 AGENT REPRESENTATIONS AND WARRANTIES. The Agent hereby
represents, warrants and covenants in favor of the Merchant as follows:
(a) The Agent: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts;
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(ii) has all requisite corporate power and authority to consummate the
transactions contemplated hereby; and (iii) is and during the Sale Term will
continue to be, duly authorized and qualified as a foreign corporation to do
business and in good standing in each jurisdiction where the nature of its
business or properties requires such qualification.
(b) The Agent has the right, power and authority to execute
and deliver each of the Agency Documents to which it is a party and to perform
fully its obligations thereunder. Agent has taken all necessary actions required
to authorize the execution, delivery, and performance of the Agency Documents,
and no further consent or approval is required on the part of the Agent for
Agent to enter into and deliver the Agency Documents and to perform its
obligations thereunder. Each of the Agency Documents has been duly executed and
delivered by the Agent and constitutes the legal, valid and binding obligation
of the Agent enforceable in accordance with its terms, subject to applicable
bankruptcy law, general principles of equity and other laws generally affecting
creditors. No court order or decree of any federal, state or local governmental
authority or regulatory body is in effect that would prevent or impair or is
required for the Agent's consummation of the transactions contemplated by this
Agreement, and no consent of any third party which has not been obtained is
required therefor. No contract or other agreement to which the Agent is a party
or by which the Agent is otherwise bound will prevent or impair the consummation
of the transactions contemplated by this Agreement.
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(c) No action, arbitration, suit, notice, or legal,
administrative or other proceeding before any court or governmental body has
been instituted by or against the Agent, or has been settled or resolved, or to
Agent's knowledge, has been threatened against or affects Agent, which questions
the validity of this Agreement or any action taken or to be taken by the Agent
in connection with this Agreement, or which if adversely determined, would have
a material adverse effect upon the Agent's ability to perform its obligations
under this Agreement.
12. INSURANCE.
12.1 MERCHANT'S LIABILITY INSURANCE. Merchant shall continue
at its cost and expense until the Sale Termination Date, in such amounts as it
currently has in effect, all of its liability insurance policies including, but
not limited to, products liability, comprehensive public liability, auto
liability and umbrella liability insurance, covering injuries to persons and
property in, or in connection with Merchant's operation of the Stores, and shall
cause Agent to be named an additional named insured with respect to all such
policies through the Sale Termination Date. EXHIBIT 12.1 attached hereto
contains a description of all such policies. Prior to the Sale Commencement
Date, Merchant shall deliver to Agent certificates evidencing such insurance
setting forth the duration thereof and naming Agent as an additional named
insured, in form reasonably satisfactory to Agent. All such policies shall
require at least thirty (30) days prior notice to Agent of cancellation,
non-renewal or material change. In the event of a claim under any such policies
Merchant shall be responsible for the payment of all deductibles,
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retentions or self-insured amounts thereunder, unless it is determined that
liability arose by reason of the wrongful acts or omissions or negligence of
Agent, or Agent's employees, independent contractors or agents (other than
Merchant's employees).
12.2 MERCHANT'S CASUALTY INSURANCE. Merchant will provide
throughout the Sale Term, at Agent's cost as an Expense hereunder, fire, flood,
theft and extended coverage casualty insurance covering the Merchandise in a
total amount equal to no less than the cost value thereof. EXHIBIT 12.2 attached
hereto contains a description of all such policies. From and after the date of
this Agreement until the Sale Termination Date, all such policies will name
Agent as loss payee. In the event of a loss to the Merchandise on or after the
date of this Agreement, the proceeds of such insurance attributable to the
Merchandise plus any self insurance amounts and the amount of any deductible
(which amounts shall be paid by Merchant), shall constitute Proceeds hereunder
and shall be paid to Agent. In the event of such a loss payable to Agent, Agent
shall have the sole right to adjust the loss with the insurer, but shall keep
the Merchant informed as to its actions. Prior to the Sale Commencement Date,
Merchant shall deliver to Agent certificates evidencing such insurance setting
forth the duration thereof and naming the Agent as loss payee, in form and
substance reasonably satisfactory to Agent. All such policies shall require at
least thirty (30) days prior notice to the Agent of cancellation, non-renewal or
material change. Merchant shall not make
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any change in the amount of any deductibles or self insurance amounts prior to
the Sale Termination Date without Agent's prior written consent.
12.3 AGENT'S INSURANCE. Agent shall maintain at Agent's cost and
expense throughout the Sale Term, in such amounts as it currently has in effect,
comprehensive public liability and automobile liability insurance policies
covering injuries to persons and property in or in connection with Agent's
agency at the Stores, and shall cause Merchant to be named an additional insured
with respect to such policies. EXHIBIT 12.3 attached hereto contains a
description of all such policies. Prior to the Sale Commencement Date, Agent
shall deliver to Merchant certificates evidencing such insurance policies
setting forth the duration thereof and naming Merchant as an additional insured,
in form and substance reasonably satisfactory to Merchant. In the event of a
claim under any such policies Agent shall be responsible for the payment of all
deductibles, retentions or self-insured amounts thereunder, unless it is
determined that liability arose by reason of the wrongful acts or omissions or
negligence of Merchant or Merchant's employees, independent contractors or
agents (other than Agent or Agent's employees, agents or independent
contractors).
12.4 WORKER'S COMPENSATION INSURANCE. Merchant shall at all times
during the Sale Term maintain in full force and effect worker's compensation
insurance (including employer liability insurance) covering all Retained
Employees in compliance with all statutory requirements. Prior to the Sale
Commencement Date, Merchant shall deliver to Agent a certificate of Merchant's
insurance broker or carrier evidencing such insurance.
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12.5 RISK OF LOSS. Without limiting any other provision of this
Agreement, Merchant acknowledges that Agent is conducting the Sale on behalf of
Merchant solely in the capacity of an agent, and that in such capacity (i) Agent
shall not be deemed to be in possession or control of the Stores or the assets
located therein or associated therewith, or of Merchant's employees located at
the Stores, and (ii) except as expressly provided in this Agreement, Agent does
not assume any of Merchant's obligations or liabilities with respect to any of
the foregoing. Merchant and Agent agree that Merchant shall bear all
responsibility for liability claims of customers, employees and other persons
arising from events occurring at the Stores during and after the Sale Term,
except to the extent any such claim arises directly from the acts or omissions
of Agent, or its supervisors or employees located at the Stores (an "AGENT
CLAIM"). In the event of any such liability claim other than an Agent Claim,
Merchant shall administer such claim and shall present such claim to Merchant's
liability insurance carrier in accordance with Merchant's historic policies and
procedures, and shall provide a copy of the initial documentation relating to
such claim to Agent at 40 Broad Street, Boston, MA 02109, Attn: Andrea Wheeler.
To the extent that Merchant and Agent agree that a claim constitutes an Agent
Claim, Agent shall administer such claim and shall present such claim to its
liability insurance carrier, and shall provide a copy of the initial
documentation relating to such claim to Merchant at 5770 Miami Lakes Drive,
Miami Lakes, Florida 33014, Attn: Rachmil Lekach. In the event that Merchant and
Agent cannot agree whether a claim constitutes an Agent Claim, each party shall
present the
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claim to its own liability insurance carrier, and a copy of the initial claim
documentation shall be delivered to the other party to the foregoing address.
13. INDEMNIFICATION
13.1. MERCHANT INDEMNIFICATION. Merchant shall indemnify and hold
Agent and its officers, directors, employees, agents and independent contractors
(collectively, "Agent Indemnified Parties") harmless from and against all
claims, demands, penalties, losses, liability or damage, including, without
limitation, reasonable attorneys' fees and expenses, directly or indirectly
asserted against, resulting from, or related to:
(i) Merchant's material breach of or failure to comply
with any of its agreements, covenants,
representations or warranties contained in any Agency
Document;
(ii) any failure of Merchant to pay to its Retained
Employees or other employees responsible for Central
Administrative Services, any wages, salaries or
benefits due to such employees during the Sale Term;
(iii) subject to Agent's compliance with its obligations
under Section 8.3 hereof, any failure by Merchant to
pay any Sales Taxes to the proper taxing authorities
or to properly file with any taxing
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authorities any reports or documents required by
applicable law to be filed in respect thereof;
(iv) any consumer warranty or products liability claims
relating to Merchandise or Merchant Consignment
Goods;
(v) any liability or other claims asserted by customers,
any of Merchant's employees, or any other person
against any Agent Indemnified Party (including,
without limitation, claims by employees arising under
collective bargaining agreements, worker's
compensation or under the WARN Act), except for Agent
Claims; and
(vi) the gross negligence or willful misconduct of
Merchant or any of its officers, directors,
employees, agents or representatives.
13.2 AGENT INDEMNIFICATION. Agent shall indemnify and hold
Merchant and its officers, directors, employees, agents and representatives
harmless from and against all claims, demands, penalties, losses, liability or
damage, including, without limitation, reasonable attorneys' fees and expenses,
directly or indirectly asserted against, resulting from, or related to:
(i) Agent's material breach of or failure to comply with
any of its agreements, covenants, representations or
warranties contained in any Agency Document;
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(ii) any harassment or any other unlawful, tortious or
otherwise actionable treatment of any employees or
agents of Merchant by Agent or any of its
representatives;
(iii) any claims by any party engaged by Agent as an
employee or independent contractor arising out of
such employment;
(iv) any Agent Claims; and
(v) the gross negligence or willful misconduct of Agent
or any of its officer, directors, employees agents or
representatives.
14. DEFAULTS
The following shall constitute "Events of Default"
hereunder:
(a) Merchant's or Agent's failure to perform any of their
respective material obligations hereunder, which failure shall continue uncured
seven (7) days after written notice thereof to the defaulting party; or
(b) Any representation or warranty made by Merchant or Agent
proves untrue in any material respect as of the date made; or
(c) The Sale is terminated at a Store for any reason other
than (i) an Event of Default by Agent, or (ii) any other breach or action by
Agent not authorized hereunder, or (iii) an event administered pursuant to
Section 8.8 above.
In the event of an Event of Default, any party's damages or
entitlement to equitable relief shall be determined by a court of competent
jurisdiction located in the State of Florida.
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15. SALE OF FF&E. If requested by Merchant, Agent shall advertise in
the context of advertising for the Sale that items of FF&E at the Stores are for
sale, and shall contact and solicit known purchasers and dealers of furniture
and fixtures. Merchant shall notify Agent if any such FF&E are to be excluded
from sale and/or if terms and conditions of sale are to be set or restricted in
any manner. In consideration of providing such services, Agent shall retain ten
percent (10%) of receipts (net of Sales Taxes) from all sales or other
dispositions of FF&E. Agent shall have no liability to Merchant for its failure
to sell any or all of the FF&E.
Section 16. MISCELLANEOUS.
16.1 NOTICES. All notices and communications provided for
pursuant to this Agreement shall be in writing, and sent by hand, by facsimile,
or by Federal Express or other recognized overnight delivery service, as
follows:
If to the Agent: Gordon Brothers Partners, Inc.
40 Broad Street
Boston, MA 02109
Attn: Mr. Stephen Goldberger
Telecopy No. (617) 422-6288
If to the Merchant: L. Luria & Son, Inc.
5770 Miami Lakes Drive
Miami Lakes, FL 33014
Attn: Mr. I. Lekach
Telecopy No. (305) 825-3711
with a copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen and Quentel
1221 Brickell Ave.
Miami, FL 33131
Attn: Rebecca R. Orand, Esq.
Telecopy No. (305-579-0717)
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16.2. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed and construed in accordance with the laws of the State of
Florida without regard to conflicts of laws principles thereof. The parties
hereto agree that any legal action or proceeding arising out of or in connection
with this Agreement may be brought in the federal or state courts located in the
State of Florida, and by execution of this Agreement each party hereby
irrevocably accepts and submits to the jurisdiction of such courts in personam
with respect to any such action or proceeding.
16.3. TERMINATION. This Agreement shall remain in full force and
effect until the first to occur of: (i) receipt by Merchant of written notice
from Agent that any of the conditions specified in Section 10 hereof have not
been satisfied within 14 days of the anticipated Sale Commencement Date set
forth in Section 6.1; or (ii) the expiration of the Sale Term and completion and
certification by Merchant and Agent of the final Sale reconciliation pursuant to
Section 8.8 above; (iii) receipt by Agent of written notice from Merchant
delivered within two (2) business days after the completion of the
reconciliation of the Inventory Taking by Merchant and Agent, that based on the
results of the Inventory Taking the Guaranteed Amount is less than 80% of the
cost value of the Merchandise. In the event of a termination pursuant to the
foregoing clause (iii), (A) Merchant shall immediately reimburse Agent for any
portion of the Guaranteed Amount previously paid by Agent, (less monies
previously collected by Agent related to sales from the Sale Commencement Date
through the Sale Termination Date), PLUS, all out of pocket Expenses which have
been paid or incurred by Agent through the date of such termination other than
Agent's costs of supervision, and (B) Merchant covenants
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and agrees that it shall immediately commence a "store closing" or "liquidation"
sale at each of the Stores using only its own personnel rather than any other
consultant. Notwithstanding the foregoing, the representations and warranties
of Merchant and Agent contained herein and the provisions of Section 13 above
shall survive the termination of this Agreement pursuant to this Section 16.3.
16.4. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes and cancels all prior agreements, including,
but not limited to, all proposals, letters of intent or representations, written
or oral, with respect thereto.
16.5. AMENDMENTS. This Agreement may not be modified except in a
written instrument executed by each of the parties hereto.
16.6. NO WAIVER. No consent or waiver by any party, express or
implied, to or of any breach or default by the other in the performance of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligation of such party. Failure on the part of any party to
complain of any act or failure to act by the other party or to declare the other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder.
16.7. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon Agent and Merchant, and their respective
successors and
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assigns; provided, however, that this Agreement may not be assigned by Merchant
or Agent to any party without the prior written consent of the other.
16.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute but one agreement. This Agreement may be
executed by facsimile, and such facsimile signature shall be treated as an
original signature hereunder.
[END OF PAGE]
16.9. SECTION HEADINGS. The headings of sections of this
Agreement are inserted for convenience only and shall not be considered for the
purpose of determining the meaning or legal effect of any provisions hereof.
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16.10. SURVIVAL. All representations, warranties, covenants and
agreements made by the parties hereto shall be considered to have been relied
upon by the parties and shall survive the execution, delivery and performance of
this Agreement.
IN WITNESS WHEREOF, the Agent and Merchant hereby execute this
Agreement by their duly authorized representatives as a sealed instrument as of
the day and year first written above.
GORDON BROTHERS PARTNERS, INC.
By:
------------------------------
Its:
L. LURIA & SON, INC.
By:
------------------------------
Its:
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LIST OF EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Exhibit 1 The Stores
Exhibit 3.3 6/10/97 Inventory Report
Exhibit 5.1 Inventory Taking Procedures
Exhibit 8.7 Merchant's Employee Rules
Exhibit 9.3 Employee Payroll and Benefits
Exhibit 10(g) Security Agreement
Exhibit 11.1(c) Promotional Activity
Exhibit 11.1(e) List of Pricing Files, Etc.
Exhibit 11.1(f) Levels and mix of goods
Exhibit 11.1(t) Labor Matters
Exhibit 12.1 Merchant Liability Insurance
Exhibit 12.2 Merchant Casualty Insurance
Exhibit 12.3 Agent's Liability Insurance
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