SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): JUNE 12, 1997
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 within the next several weeks at nine stores.
Under the agreement with Gordon Brothers, Luria's received an
up-front cash payment of approximately $8.6 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 consolidate and geographically focus its efforts on
performing stores, while addressing its working capital needs
as previously announced in a Form 8-K, dated December 17,
1996. After the sales are completed, the Company will operate
18 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 June 12, 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: June 27, 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 June 12, 1997 between
Gordon Brothers Partners, Inc. and the Company.
AGENCY AGREEMENT
DATED AS OF
JUNE 12, 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
Section 2. Appointment of Agent
Section 3. Consideration to Merchant and Agent
3.1 Payments to Merchant
3.2 Compensation to Agent
3.3 Time of Payments
Section 4. Expenses of the Sale
4.1 Expenses
4.2 Payment of Expenses
Section 5. Inventory Valuation; Merchandise
5.1 Inventory Taking
5.2 Merchandise Subject to this Agreement
5.3 Valuation
5.4 Excluded Goods
Section 6. Sale Term
6.1 Term
6.2 Vacating the Stores
6.3 Gross Rings
Section 7. Sale Proceeds
7.1 Proceeds
7.2 Deposit of Proceeds
7.3 Credit Card Proceeds
Section 8. Conduct of the Sale
8.1 Rights of Agent
8.2 Terms of Sales to Customers
8.3 Sales Taxes
8.4 Supplies
8.5 Returns of Merchandise
8.6 Layaway, Repair and Special Order Merchandise
8.7 Compliance with Law, Etc.
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8.8 Sale Reconciliation
8.9 Force Majeure
Section 9. Employee Matters
9.1 Merchant's Employees
9.2 Termination of Employees
9.3 Payroll Matters
9.4 Employee Retention Bonuses
Section 10. Conditions Precedent
Section 11. Representations, Warranties and Covenants
11.1 Merchant Representations, Warranties and Covenants
11.2 Agent Representations, Warranties and Covenants
Section 12. Insurance
12.1 Merchant's Liability Insurance
12.2 Merchant's Casualty Insurance
12.3 Agent's Insurance
12.4 Worker's Compensation Insurance
12.5 Risk of Loss
Section 13. Indemnification
13.1 Merchant Indemnification
13.2 Agent Indemnification
Section 14. Defaults
Section 15. Sale of FF&E
Section 16. Miscellaneous
16.1 Notices
16.2 Governing Law; Consent to Jurisdiction
16.3 Termination
16.4 Entire Agreement
16.5 Amendments
16.6 No Waiver
16.7 Successors and Assigns
16.8 Execution in Counterparts
16.9 Section Headings
16.10 Survival
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AGENCY AGREEMENT
This Agency Agreement is made as of this 12th day of June, 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 9 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
Agent's Fee Section 3.2
Base Retail Price Section 5.3
Benefits Cap Section 4.1
Central Administrative
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Expenses Section 4.1
Clearance Merchandise Section 5.2(b)
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
Merchant Consignment
Goods Section 5.4
Near Date Merchandise Section 5.2(b)
Occupancy Agreements Section 8.7
Occupancy Expenses Section 4.1
Out of Season Merchandise Section 5.2(b)
Proceeds Section 7.1
Recovery Amount Section 3.1(a)
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 purpose of conducting the Sale in accordance with the terms and
conditions of this Agreement.
SECTION 3. CONSIDERATION TO MERCHANT AND AGENT.
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3.1. PAYMENTS TO MERCHANT.
(a) (i) As a guaranty of Agent's performance
hereunder, Merchant shall receive from Agent the sum of 40.0% of the aggregate
Retail Price of the Merchandise (the "GUARANTEED AMOUNT") plus all petty cash on
hand at the Stores on a dollar for dollar basis.
(ii) To the extent that Proceeds exceed the
sum of (A) the Guaranteed Amount, PLUS (B) the lesser of (x) all Expenses or (y)
an amount equal to 12.0% of the aggregate Retail Price of the Merchandise, PLUS
(C) the Agent's Fee, Merchant shall receive from Agent 70% of such excess
Proceeds (the "RECOVERY AMOUNT").
(iii) Agent shall pay to Merchant the
Guaranteed Amount and the Recovery Amount, if any, in the manner and at the
times specified in Section 3.3 below. The Guaranteed Amount, the Agent's Fee and
the Recovery 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 remaining Proceeds of the
Sale after payment of (A) the Guaranteed Amount, PLUS (B) the lesser of (x) all
Expenses or (y) an amount equal to 12.0% of the aggregate Retail Price of the
Merchandise, in an amount up to 1.5% of the aggregate Retail Price of the
Merchandise (the "AGENT'S FEE"). In addition, following payment of (A) the
Guaranteed Amount, PLUS (B) the lesser of (x) all Expenses or (y) an amount
equal to 12.0% of the aggregate Retail Price of the Merchandise all Expenses ,
PLUS (C) the Agent's Fee, Agent shall
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retain all Sale Proceeds in excess of the Recovery Amount, if any. All
Merchandise remaining at the conclusion of the Sale shall become the property of
Merchant.
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 June 10,
1997 as set forth in Merchant's record attached or described in EXHIBIT 3.3 (the
"June 10 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. Within ten
(10) days after completion by Merchant and Agent of the final Sale
reconciliation pursuant to Section 8.8 below, Agent shall pay to Merchant the
Recovery Amount due hereunder, if any. 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.
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SECTION 4. EXPENSES OF THE SALE.
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 four (4) 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;
(k) Retention Bonuses as described in Section 9.4
below; and
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(l) costs of sizing and repairing Merchandise
necessary to make such items salable or to satisfy customer needs in the
ordinary course;
(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.
"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.
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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.
(a) 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 four (4) of the
Stores selected by Agent in its sole discretion, on a date mutually agreed upon
by Agent and Merchant, but in no event later than June 18, 1997 (the date of the
Inventory Taking at each Store being the "INVENTORY DATE" for such Store).
Merchant and Agent shall jointly employ RGIS or another mutually acceptable
inventory taking service to conduct the Inventory Taking. Agent shall be
responsible for 50% of the costs and fees of the inventory taking service as an
Expense hereunder, and the balance of such costs and fees shall be paid by
Merchant. Except as provided in the immediately preceding sentence, Merchant and
Agent shall bear their respective costs and expenses relative to the Inventory
Taking. Merchant and Agent shall each have representatives present during the
Inventory Taking, and shall each have the right to review and verify the listing
and tabulation of the inventory taking service. Merchant agrees that during the
conduct of the Inventory Taking at each Store such Store shall be closed to the
public and no sales or other transactions shall be conducted. The procedures to
be used in the conduct of the Inventory Taking and its verifications are set
forth on EXHIBIT 5.1 attached hereto. In order to facilitate the Inventory
Taking, Merchant agrees to make its SKU data files and related computer hardware
and software available to Agent and the inventory taking service prior to the
Inventory Date.
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(b) Once the listing and tabulation of the inventory
taking service is complete, and reviewed and verified by Agent and Merchant, the
actual results of the Inventory Taking shall be compared to the book inventory
of the said (4) Stores on the Inventory Date, and the actual results of the
Inventory Taking shall control. Any variances as to quantity, by category/mix of
Merchandise, from the actual Inventory Taking to the book inventory on the
Inventory Date, shall be applied to the book inventory on the Inventory Date of
the remaining five (5) Stores, and such adjusted book inventory (e.g. applying
such variances) shall be the controlling inventory of the Merchandise in these
five (5) remaining Stores. Additionally, Retail Prices in the four (4) Stores
where there is an Inventory Taking shall control over any different retail
prices in the five (5) remaining Stores as to the same items, if any variances
in Retail Price exist.
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) Defective
Merchandise, (B) Out of Season Merchandise, (C) Near Date Merchandise, (D)
Clearance Merchandise, (E) sample Merchandise that is not Defective Merchandise;
and (F) 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
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Merchant on memo, on consignment, or as bailee; (4) defective goods, Near Date
Merchandise and Out of Season Merchandise and Clearance Merchandise which is not
marked with a ticketed price, in each case for which Merchant and Agent cannot
agree upon a Retail Price; (5) furnishings, trade fixtures, equipment and
improvements to real property which are located in the Stores (collectively,
"FF&E"); and (6) Merchant Consignment Goods.
(b) As used in this Agreement the following terms
have the respective meanings set forth below:
"CLEARANCE MERCHANDISE" means merchandise which is
either subject to hard markdown or should, based on Merchant's past practices,
be subject to hard markdown.
"DEFECTIVE MERCHANDISE" means (i) any item of
Merchandise agreed upon and identified by Agent and Merchant during the
Inventory Taking as (A) incomplete or (B) so damaged that Merchant would not
have offered such item at full retail price prior to the Sale, and, in each
case, as to which Agent and Merchant mutually agree on its value to define its
Retail Price. Sample merchandise and merchandise on display shall not be deemed
to be Defective Merchandise so long as the original packaging (including written
instructions and warranty information) for such merchandise is intact and
available if needed to make the item salable at full retail in the ordinary
course. For example, dinnerware sets without original packaging will, if
otherwise first quality, be valued at full retail, but electronics without
original packaging, instructions or warranty information may not.
"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
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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.
"NEAR DATE MERCHANDISE" means any item of Merchandise
with an expiration date 30 days or less after the Sale Commencement Date and as
to which Agent and Merchant mutually agree on its value to define its Retail
Price.
"OUT OF SEASON MERCHANDISE" means (i) goods which
Merchant and Agent agree are out of season, (ii) all items of Merchandise which
relate to holidays falling outside of the Sale Term, and (iii) items which are
packed away for sale on a future date which would not normally sell or be
offered for sale in the current season at regular retail price.
5.3. VALUATION. 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 except for:
(i) items of Out of Season Merchandise, where "Retail
Price" shall mean the lowest price offered to the public for such item at any
time by any and all means (including, without limitation, by means of
advertisement, coupon, circular, in-Store promotion, point of sale discount or
otherwise);
(ii) Defective Merchandise and Near Date Merchandise,
where "Retail Price" shall mean such value as to which Agent and Merchant shall
agree;
(iii) Clearance Merchandise, where "Retail Price"
shall mean the hard markdown price for each such item of Merchandise, whether or
not such item has, in fact, been marked down;
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(iv) items of Merchandise offered at any time within
thirty (30) days preceding the Sale Commencement Date as a "gift," or "gift with
purchase," or similar promotion, where "Retail Price" shall mean zero, unless
such Merchandise is usually sold separately at retail, then it shall be valued
at such retail price.
(v) items of "red dot" and "blue dot" fragrance
Merchandise, where "Retail Price" shall mean 60% of the lowest ticketed price on
the item; and
(vi) items of Boucheron jewelry Merchandise where
"Retail Price" shall mean such price as mutually agreed by Merchant and Agent.
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 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.
5.4. EXCLUDED GOODS. Merchant shall retain all responsibility
for any goods not included as "Merchandise" hereunder. If Merchant and Agent are
unable to agree upon the Retail Price of any item of Near Date Merchandise or
Defective Merchandise, or any item of Clearance Merchandise or Out of Season
Merchandise which is not marked with a ticketed price, the Merchant may exclude
such item from the Sale, and Merchant shall remove such item from the applicable
Store as soon as practicable. If Merchant elects at the beginning of the Sale
Term, Agent shall accept defective goods, and Near Date Merchandise not included
as "Merchandise"
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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
Sale reconciliation by Merchant and Agent pursuant to Section 8.8 below. If
Merchant does not elect to have Agent sell defective goods or Near Date
Merchandise not included as Merchandise, then all such items will be removed by
Merchant from the Stores at its expense as soon as practicable after the date
hereof. 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 June 13,
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 September 21,
1997, unless the Sale is extended by mutual written agreement of Agent and
Merchant (the "SALE TERMINATION DATE;" the period from the Sale Commencement
Date to the Sale Termination Date as to each Store being the "SALE TERM"). 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
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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.
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
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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 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.
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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:
(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;
(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);
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(d) to transfer Merchandise between Stores and/or
between the Stores and the Remaining Stores as determined by the Agent to be
reasonably necessary provided that (i) Agent will promptly notify Merchant
(attention Marta Hernandez) in writing 24 hours prior to all such transfers so
that Merchant may observe the transfers and its documentation (it being
understood that such transfers will transpire at the indicated time regardless
of whether Merchant elects to observe the transfers); (iii) all such transfers
shall be documented including information as to quantity (by department), Retail
Price, date of transfer and the Stores involved in the transfer; and (iii) Agent
shall reflect such transfers in its perpetual inventory records; and
(e) to use without charge (i) Merchant's central
office facilities, central and administrative services and personnel to process
payroll, perform 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
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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 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 April 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
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("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 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 Retail Price 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 Retail Price applicable to such item
multiplied by the compliment of the prevailing Sale discount at the time of the
return; provided, that, if the Returned Merchandise constitutes Defective
Merchandise, Near Date Merchandise, Clearance Merchandise or Out of Season
Merchandise, it shall be included in Merchandise and assigned a Retail Price in
accordance with the applicable provisions of Section 5.3 above, and provided
further 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 Retail Price of the Merchandise shall be increased by
the Retail Price 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
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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 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 July
5, 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 each Wednesday during the Sale
Term, commencing on the first Wednesday 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 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
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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 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
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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. 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
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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 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 four (4) Stores shall
have been completed at each of the Stores on or before June 18, 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.
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(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 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.
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(b) The Merchant has the right, power and authority
to execute and deliver this Agreement and each other document and agreement
contemplated 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 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.
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(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 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 June 10, 1997, and Merchant's
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initial mark-up will be approximately 57.8% as to jewelry Merchandise and 47.3 %
as to hardline Merchandise, all as reflected on the June 10 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, except
for Clearance Merchandise.
(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.
(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 June 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.
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(l) As of the Sale Commencement Date, (i) goods
constituting Merchandise located at the Stores shall be no less than $22,500,000
at Retail Price, and (ii) jewelry shall not constitute more than 61% 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 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
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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 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
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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.
(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:
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(a) The Agent: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts; (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.
(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
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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, 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
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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 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
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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.
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
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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 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 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;
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(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;
(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
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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.
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
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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)
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%
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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 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.
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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 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.
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.
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.
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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:/S/STEPHEN A. GOLDBERGER
--------------------------------
Its: Vice President
L. LURIA & SON, INC.
By:/s/RACHMIL LEKACH
--------------------------------
Its: Chief Executive Officer
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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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