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) :March 15, 1995
Stuarts Department Stores, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-13184 04-2817110
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Id No.)
16 Forge Parkway, Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 520-4540
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On March 15, 1995, Stuarts Department Stores, Inc. issued a press release
(the "Press Release"), a copy of which is annexed hereto as Exhibit 28-1 and
incorporated herein by reference. There can be no assurance as to whether
the Company's downsizing or increased focus on exploring opportunities for
the sale of the retail chain referred to in the Press Release will be
successful.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
The following Exhibit is filed herewith:
Exhibit
10-1 Agency Agreement between the Company and Garcel, Inc.
dated February 24, 1995.
28-1 Press Release dated March 15, 1995.
<PAGE>
SIGNATURE
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.
STUARTS DEPARTMENT STORES, INC.
DATED :March 15, 1995 by: /s/ Antone F. Moreira
Antone F. Moreira
Executive Vice President
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Location
10-1 Agency Agreement between the Company Page 5
and Garcel, Inc. dated February 24, 1995
28-1 Press release dated March 15, 1995 Page 23
<PAGE>
AGENCY AGREEMENT
This Agency Agreement together with all schedules, exhibits and
attachments hereto dated February 24, 1995 (the "Agreement") is
made by and between a joint venture comprising Garcel, Inc.
d/b/a Great American Asset Management, a California corporation
with its principal offices at 2812 Santa Monica Boulevard, Suite
204, Santa Monica, CA 90404 and Hilco Trading Company, Inc., an
Illinois corporation with its principal offices at 5 Revere
Drive, Suite 206, Northbrook, IL 60062 (collectively, "Agent")
and Stuarts Department Stores, Inc., a Delaware corporation with
its principal offices at 16 Forge Parkway, Franklin, MA 02038
("Merchant") for the express purpose of Merchant engaging Agent
as its sole and exclusive agent to assist Merchant in conducting
a store closing sale with respect to Merchant's Retail Inventory
(as hereinafter defined) in five (5) of Merchant's Stuarts
stores including all Uncle Joe's $1 stores as set forth on
Schedule A attached hereto and made a part hereof (the "Stores").
WITNESSETH:
WHEREAS, Merchant currently operates twenty (20) Stuarts stores
throughout the Northeastern United States, in five (5) of which
Merchant wishes Agent to conduct the Sale (as hereinafter
defined).
WHEREAS, Merchant desires to engage Agent to provide certain
disposition services and to serve as Merchant's sole and
exclusive agent as provided above for the purposes of conducting
a store closing sale (the "Sale") whereby Agent assists Merchant
in selling its entire Retail Inventory located in the Stores
upon the terms and conditions and in the manner set forth in
this Agreement; and,
WHEREAS, Agent is willing to provide certain disposition
services to Merchant and serve as Merchant's sole and exclusive
agent for purposes of conducting the Sale upon the terms and
conditions and in the manner set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth hereinafter, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the terms listed below shall
have the meanings indicated:
"Augmentation Fee" shall mean a fee equal to five percent (5%)
of the Sale Proceeds realized from the sale of the Augmented
Merchandise during the Sale Term.
"Augmented Merchandise" shall mean those items of merchandise
that Agent adds to the Sale for sale to the public during the
Sale Term which merchandise is in addition to the Retail
Inventory and for which Agent shall pay Merchant an additional
fee.
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"Bonuses" shall mean all discretionary incentive bonuses paid
by Agent to the key Sale Employees.
"Damaged Merchandise" shall mean merchandise that is damaged,
dented, ripped, soiled, scratched, faded, torn, stained, worn,
broken, mismatched, mechanically defective, or, in the case of
perishable items, because the manufacturer's sale expiration
date has expired or will expire within thirty (30) days, or
otherwise unsaleable as goods with the quality ordinarily sold
by Merchant in the ordinary course of Merchant's business.
"Display Merchandise" shall mean merchandise which Merchant
utilizes in the Stores for display purposes (e.g., small
appliances, hardware, sporting goods, electronics, furniture,
etc.) and shall be valued as set forth in Section 3.4.
"Excluded FF&E" shall mean any FF&E and all appurtenances
thereto which Merchant may specifically exclude from any
liquidation of the FF&E conducted by Agent pursuant to Section 9
herein.
"Final Reconciliation" shall mean the process set forth in
greater detail in Section 7.3 herein whereby Merchant and Agent
conduct a final audit of the Sale reconciling all Sale Proceeds,
Agent's Fees, FF&E Proceeds, FF&E Fee, Merchant Goods Fee and
Sale Expenses to determine any and all amounts due and owing
each party as a result of the Sale. As an essential part of
this process, Merchant shall deliver to Agent a detailed, line
item statement certified by the Merchant including back-up
documentation setting forth all of the Sale Expenses which shall
serve as the basis for a final audit of the Sale Expenses.
"FF&E" shall mean all of Merchant's furniture, fixtures and
equipment contained in Merchant's Stores.
"FF&E Fee" shall mean an amount equal to seven and one-half
percent (7.5%) of all FF&E Proceeds derived from the sale of
Merchant's FF&E through the Sale pursuant to Section 9 herein.
"FF&E Proceeds" shall mean the gross proceeds (less applicable
sales and use taxes) derived from the sale of any FF&E by Agent
pursuant to Section 9 herein.
"Guaranteed Payment" shall mean an amount in U.S. dollars equal
to forty-nine and one-half percent (49.5%) of the Retail
Inventory Value the total of which Agent shall deliver to
Merchant within forty-eight (48) hours of the Inventory
Service's delivery to both Merchant and Agent of the report
certifying the Retail Inventory Value and in accordance with the
procedures set forth in Section 4.1 herein.
"Independent Third Party" shall have the meaning set forth in
Section 7 herein.
"Inventory Service" shall mean RGIS or a similar independent
professional inventory taking service who shall be employed by
Agent.
"Lease Departments" shall mean the J. Baker shoe departments
contained within the Stores in which Merchant maintains a lease
arrangement with J. Baker whereby J. Baker supplies the shoe
inventory and staffs and operates this department for which
Merchant receives a fee equal to a percentage of the net shoe
department sales.
<PAGE>
"Material" shall mean any dispute where the amount in question
exceeds ten thousand dollars ($10,000), or any equivalent
thereof.
"Merchant" shall mean as defined herein and shall include any
successors or assigns including an Assignee or Trustee in
Bankruptcy.
"Payroll Expenses" shall mean all direct and indirect employee
costs of the Sale Employees, temporary employees hired by Agent
in the Stores to assist with the Sale and the Supervisors
consisting of basic wages, salaries and benefits [including
employer contributions for taxes, workers' compensation,
insurance premiums, unemployment taxes, statutory disability,
fringe benefits, group life insurance, pension or similar
benefits, sick pay, holiday pay and vacation pay] that are
actually earned by Merchant's employee and actually accrued by
Merchant during the Sale Term (collectively, "Benefits") which
Benefits shall be limited to 18% of base payroll.
"Retail Inventory" shall mean all of Merchant's saleable
merchandise as determined pursuant to the Store Inventory
contained in the Stores or any offsite warehouses or storage
areas which Merchant and Agent agree shall be delivered to the
Stores prior to the Store Inventory and all Seasonal
Merchandise, Display Merchandise and Damaged Merchandise to
which Merchant and Agent assign an agreed upon value. Retail
Inventory shall specifically exclude all items of Damaged
Merchandise, Display Merchandise or Seasonal Merchandise for
which Merchant and Agent cannot assign an agreed upon value, all
consignment merchandise, merchandise retained by Merchant as
bailee, FF&E, all merchandise subject to "special orders",
merchandise owned by any concessionaires or lessees, merchandise
held for layaway or those held by Merchant for repair.
"Retail Inventory Value" shall mean the value of the Retail
Inventory determined by the procedures set forth in Section 3
herein.
"Retail Price" shall mean the lowest ticketed price for each
item of Retail Inventory from February 22, 1995 until the Store
Inventory date for each Store, except Damaged Merchandise,
Display Merchandise and Seasonal Merchandise not already reduced
which items shall be separately valued pursuant to Schedule B
and the provisions of Sections 3.4 herein. All items of Retail
Inventory bearing either a red and/or green price ticket and all
fine jewelry shall be valued at fifty percent (50%) of the
regular retail price for each such item of merchandise.
"Sale" shall mean the sale of Merchant's Retail Inventory
located at the Stores as provided for in this Agreement.
"Sale Commencement Date" shall mean the date mutually agreed
upon by Merchant and Agent, but in any event no later than
February 25, 1995 for each Store upon the completion of the
Store Inventory in each such Store.
"Sale Employees" shall mean those employees of Merchant as
selected from time to time by Agent and any temporary employees
engaged by Merchant and/or Agent who shall work in the Stores
during the Sale Term to assist Agent in conducting the Sale.
<PAGE>
"Sale Expenses" shall mean only direct expenses incurred during
the Sale Term in connection with the Sale, which expenses shall
be limited to Payroll Expenses and Bonuses, occupancy costs
(including rent, real estate taxes, percentage rent, CAM, HVAC
and utilities) which costs shall be prorated during the actual
Sale Term, cost of additional Supplies, security costs, all
advertising, signage and promotional expenses, Store cleaning,
trash removal, telephone charges and other direct costs of the
Sale which costs and expenses shall be prorated daily during the
Sale Term. All other costs and expenses incurred by Merchant or
Agent on behalf of Merchant as a result of the Sale, including
without limitation, major repairs, Merchant's association dues,
all central or head office and administration charges and
expenses of any kind, lease payments for personal property and
machinery or equipment, use taxes, and building and property
insurance maintained by Merchant relating to the Stores shall
remain Merchant's sole responsibility and not the responsibility
of Agent.
"Sale Proceeds" shall mean all collections, receipts or
payments realized during the Sale Term upon the sale or other
disposition of the Retail Inventory as well as the fee income
generated by the Lease Departments less applicable sales taxes
including, but not limited to, any insurance proceeds realized
thereon.
"Sale Term" shall mean the period of time beginning with the
Sale Commencement Date and ending on the Sale Termination Date
which Sale Term shall be approximately eight to ten (8-10) weeks
but in any event shall be no later than May 15, 1995 in Store
numbers 5, 12, 28 and 29 and April 30, 1995 in Store number 6
(Nashua, New Hampshire).
"Sale Termination Date" the last day the Sale is conducted in
any Store which shall be no later than May 15, 1995.
"Seasonal Merchandise" means (i) Retail Inventory intended to
be sold during special holidays not occurring during the
Agreement Period (such as Independence Day, Halloween,
Christmas, Valentine's Day or any other similar holiday but not
including St. Patrick's Day, Easter or Passover) (i) Fall,
Winter and Clearance merchandise and (iii) those items of Retail
Inventory set forth on Schedule B attached hereto and made a
part hereof. For purposes of the Sale, Seasonal Merchandise
shall be included in Retail Inventory at the values set forth on
Schedule B or if not addressed on Schedule B, at a price
mutually agreed upon by Merchant and Agent.
"Stores" shall mean any one Stuarts Store listed on Schedule A
and "Stores" shall mean all of the Stuarts Stores listed on
Schedule A including all Uncle Joe's $1 stores located at the
Stuarts Stores listed on Schedule A.
"Store Closing Date" shall mean the last day the Sale is
conducted in a Store which shall be no later than May 15, 1995
in Store numbers 5, 12, 28 and 29 and April 30, 1995 in Store
number 6.
"Store Inventory" shall mean the counting of the Retail
Inventory by the Inventory Service as provided for in Section 3
hereof.
"Supervisors" shall mean such individuals as Agent may engage
to assist Agent in conducting the Sale on behalf of Merchant.
<PAGE>
"Supplies" shall mean all supplies located at the Stores
including, but not limited to, signs, bags, boxes, ribbons,
hangers, twine, tape, paper and similar sale materials.
2. AGENT'S RIGHTS AND OBLIGATIONS
2.1 Merchant hereby retains Agent, and Agent agrees to serve,
as Merchant's agent in connection with the sale of Merchant's
Retail Inventory located in the Stores upon the terms and
conditions hereinafter set forth, commencing as of the date of
this Agreement. Agent shall provide Merchant with the following
services:
supervising, scheduling and staffing all Sale Employees
necessary to conduct the Sale which employees shall be employees
of Merchant and not of Agent;
managing the Sale, including the discounting/pricing of the
Retail Inventory and determining all intra-store and inter-store
transfers and consolidations of the Retail Inventory and whether
merchandise should be accepted for inclusion in the Sale from
any outside vendors of Merchant;
designing, scheduling and implementing an advertising program
for the Sale with Merchant's cooperation and approval which
approval shall not be unreasonably withheld; and
creating and implementing all strategy with respect to the sale
of the Retail Inventory and, for purposes of the Sale, all
operational and merchandising decisions.
2.2 Merchant hereby appoints Agent as Merchant's sole and
exclusive agent for purposes of conducting the Sale in the
Stores. Agent hereby accepts such exclusive appointment and
agrees to act as Merchant's agent in accordance with the terms
and conditions of this Agreement.
3. INVENTORY
3.1 Merchant and Agent shall cause the Inventory Service to
take a physical inventory of the Retail Inventory at the Stores
commencing on Saturday, February 25, 1995. The procedures to
perform the inventory taking and its verifications are set forth
in Exhibit 3.1. Merchant shall close the Stores as of the
normal closing time on Friday, February 24, 1995 and shall keep
each Store closed for inventory taking purposes until completion
of the Store Inventory in that Store. Upon completion of the
Store Inventory in each Store, Merchant and Agent shall reopen
the Stores and from the time of reopening onward, Agent shall be
credited with all Sale Proceeds realized in each Store. The
Inventory Service shall be instructed to tabulate the Retail
Inventory Value by aggregating the Retail Price for each item of
Retail Inventory. The Inventory Service shall be instructed to
prepare and deliver within forty-eight (48) hours of the Store
Inventory to both Merchant and Agent a copy of the report
certifying the Retail Inventory Value.
<PAGE>
3.2 Each of the parties shall have the right to have its own
employees and representatives present at the Stores to observe
the physical counting and review the listing and tabulation of
Retail Inventory Value and verify and test the same. Each party
shall bear the cost of its employees and representatives used in
observing and verifying the taking of the Store Inventory.
3.3 The costs and expenses of the Inventory Service shall be
borne solely (100%) by Agent.
3.4 All Damaged Merchandise, Display Merchandise and Seasonal
Merchandise shall be segregated from the Retail Inventory and
not included therein unless Agent and Merchant can agree upon
the Retail Price with respect to such item of merchandise. If
Merchant and Agent cannot reach an agreement as to a mutually
acceptable Retail Price for such item(s) of merchandise, then
such item(s) of merchandise shall be excluded from the Sale
hereunder provided, however, that Agent will accept these items,
at Merchant's sole election, as "Merchant Goods" for sale at the
Stores at prices Agent establishes solely and Agent shall be
paid a separate fee for these items as set forth in Section 8.2
below.
3.5 Merchant estimates that the beginning retail dollar value
of all of Merchant's merchandise contained in the Stores and in
any warehouses or other offsite storage areas together with any
merchandise which is on order from or is to be delivered by
outside vendors or other similar sources is approximately
$7,000,000 in the Stores as of the Sale Commencement Date.
3.6 Subject to applicable law, Agent shall have the election to
supplement the Retail Inventory with Augmented Merchandise
during the Sale Term, Agent shall maintain separate inventory
and sales records with respect to the Augmented Merchandise and
shall pay to Merchant an Augmentation Fee as part of the Final
Reconciliation.
4. PAYMENT TO MERCHANT/ACCOUNTING FOR SALE PROCEEDS
4.1 Within forty-eight (48) hours after delivery by the
Inventory Service to Merchant and Agent of the report certifying
the Retail Inventory Value, Agent shall deliver to Merchant the
Guaranteed Payment in immediately available funds. In the event
the Sale is stopped by Merchant's action or omission, Merchant
will indemnify Agent for any direct out of pocket expenses Agent
has incurred in conducting the Sale as well as any portion of
the Guaranteed Payment paid by Agent to Merchant and not fully
recovered by Agent from the Sale Proceeds pursuant to Section 8
hereof and Agent's obligations hereunder shall immediately and
forever cease absent an alternative arrangement mutually
acceptable to the parties.
4.2 Agent shall retain all Sale Proceeds from the Sale and
deposit same in a segregated account(s) established by Agent at
a bank of its choosing. Merchant shall execute and deliver all
necessary documents to open and maintain all such accounts and
Agent shall have sole signatory powers over all such accounts.
All such Sale Proceeds retained and earned by Agent hereunder
shall remain Agent's sole and exclusive property which, in the
event Merchant becomes subject to a bankruptcy or other
insolvency proceeding shall not be deemed property of the
bankrupt pursuant to Section 541 of the Bankruptcy Code. Agent
shall recover the Guaranteed Payment and reimburse Merchant for
all Sale Expenses out of the Sale Proceeds it retains.
<PAGE>
4.3 During the Sale Term, Merchant shall not, without notice to
and coordination with Agent, seek to file a Bankruptcy petition
or any other similar insolvency proceeding. In the event the
Sale is stopped as a result of such voluntary Bankruptcy action
or by Merchant's action or omission, Merchant will indemnify
Agent for any direct out of pocket expenses Agent has incurred
in conducting the Sale as well as any portion of the Guaranteed
Payment paid by Agent to Merchant and not fully recovered by
Agent from the Sale Proceeds pursuant to Section 8 hereof and
Agent's obligations hereunder shall immediately and forever
cease absent an alternative arrangement mutually acceptable to
the parties. Moreover, Merchant shall have no legal or
equitable claim to the Guaranteed Payment and the Guaranteed
Payment shall in no circumstances be deemed to constitute
property of the estate within the meaning of Section 541 of the
Bankruptcy Code.
4.4 One (1) business day prior to each day that Merchant must
fund the Payroll Expenses or other Sale Expenses, Agent shall
pay to Merchant the estimated amount of such expenses. Two (2)
business days after each payment of any Sale Expense by
Merchant, Agent shall pay the amount, if any, by which the
actual Payroll and/or Sale Expense exceeded the amount
transferred and Merchant shall pay Agent the amount, if any, by
which the amount transferred exceeds the actual Payroll or Sale
Expense. During the Final Reconciliation, as set forth in
Section 7.3 herein, Merchant and Agent shall make a final
determination of the FF&E Proceeds and FF&E Fee, if any,
Merchant Goods Fee, if any, Augmentation Fees, if any, Sale
Expenses and make any necessary adjustments and reciprocate
payments, if any, within thirty (30) days after the Sale
Termination Date.
5. CONDUCT OF THE SALE
5.1 Agent shall conduct the Sale on behalf of Merchant with
respect to the Retail Inventory at the Stores on the terms and
conditions set forth in this Agreement and in compliance with
applicable law. Agent shall use its best efforts to sell all of
the Retail Inventory in conducting the Sale. Agent, with the
assistance of the Sale Employees and Merchant's employees,
agents and representatives shall vacate each Store within
forty-eight (48) hours of the Store Closing Date and shall leave
each Store in a neat and orderly condition other than the
existence of any unsold FF&E or other leased personal property
maintained by Merchant.
5.2 Merchant shall assist Agent in establishing the requisite
systems to monitor and report sales, cash collected and Sale
Proceeds on a daily basis and Sale Expenses on a weekly basis.
5.3 Agent shall collect all sales and use taxes payable on the
sale of the Retail Inventory ("Taxes") which Taxes shall be
added to the sale price of each item of Retail Inventory sold
during the Sale and shall be paid by the customer at the time
such item of merchandise is purchased. Agent shall promptly pay
over to Merchant all such Taxes. Merchant shall remit on a
timely basis all such Taxes together with all required returns,
reports, documents and statements in respect thereof to the
appropriate taxing authorities. Merchant hereby agrees to
indemnify and hold Agent harmless from and against any and all
damages, fines, penalties, losses, claims or expenses
(including, without limitation, attorneys' fees) that Agent may
incur or sustain arising out of Merchant's failure to pay over
to the appropriate taxing authority any Taxes paid over to
Merchant by Agent generated by and collected from the Sale.
<PAGE>
5.4 Agent shall directly retain and engage the Supervisors who
shall be independent contractors of Agent. The Supervisors are
not employees or agents of Merchant in any manner whatsoever nor
do the Supervisors have any relationship with Merchant by virtue
of this Agreement or otherwise which creates any liability or
responsibility on behalf of Merchant for such Supervisors other
than for liability directly caused by the willful or illegal
acts or wanton misconduct of Merchant and/or its employees,
representatives, agents or principals (other than Agent,
Supervisors or any person acting under the direction of Agent or
any Supervisor).
5.5 Agent, as Merchant's exclusive agent, shall have the right,
subject to applicable law, to:
a. Conduct the Sale in the name of "Stuarts Stores," "Uncle
Joe's $1" and/or "Stuarts" and during the Sale Term, for the
purposes of the Sale, Agent shall have the license and right to
use all operating assets of the Merchant and the Stores,
including, but not limited to, trade names, logos, customer
lists, supplies, credit card facilities, tax identification
numbers, computer hardware and software, and FF&E.
b. Create and arrange all advertising and promotion for the
Sale, provided that Merchant shall have the right to approve all
advertising, which consent shall not be unreasonably withheld;
and that all advertising and promotion shall be submitted to Mr.
Dave Ferguson, via Facsimile (508) 520-4557, and, unless
objected to within twenty-four (24) hours of submission, shall
be deemed accepted provided that all advertising shall indicate
that none of Merchant's other stores are closing;
c. Select and schedule the number and type of Sale Employees
required by Agent to conduct the Sale;
d. Subject to the requirements of applicable law, determine
the discount from the Retail Price at which the Retail Inventory
is to be sold and consolidate the Retail Inventory among the
Stores for purposes of the Sale.
e. Merchant covenants that it shall provide Agent with the
peaceful use and occupancy of the Stores for the purpose of
conducting and advertising a store closing or similar type sale
in the Stores and take all reasonable steps necessary including
obtaining any necessary consents to maintain Agent's right to
conduct the Sale in the Stores during the Sale Term. If any
such consent(s) are required and Merchant fails to obtain them
or make alternate provisions acceptable to Agent, then this
Agreement is null and void and Merchant shall immediately pay
over to Agent the Guaranteed Payment to the extent paid by Agent
to Merchant and any other payments made by Agent to Merchant in
connection with the transactions contemplated by this Agreement,
including, without limitation, any and all amounts paid to
Merchant pursuant to Section 4 or otherwise;
<PAGE>
f. All Sales of Retail Inventory pursuant to the Sale shall be
final. The purchase price of all Retail Inventory sold pursuant
to the Sale shall be paid by cash or by major, third-party
credit card;
g. Agent shall have the right to use all Supplies in the
course of the Sale without cost or expense and shall have the
right to reasonably obtain or order from Merchant or its
supplier additional supplies at Merchant's cost;
h. Agent, its employees, Agents and representatives have the
right to be physically present on the premises to conduct the
Sale in each of the Stores and take all affirmative steps
necessary to maintain such right uninterrupted throughout the
Sale Term;
i. With prior written consent of Merchant, Agent shall have
the right to extend the Sale in any Store beyond the Sale
Termination Date except Store number 6 (Nashua, NH);
j. Except as otherwise provided herein, to make all
merchandising, payroll, employment, advertising and other
related operational decisions with respect to the Sale;
In addition, the following rights and covenants shall be
observed, granted and provided, subject to applicable law, as to
the Stores;
k. Agent shall have the uninterrupted right to use, or receive
the services of, as the case may be the Store premises, all
utilities and all trade fixtures, equipment, furniture and
appurtenances therein including, without limitations, cash
registers and/or point of sale systems, Store keys, case keys,
security codes, safe and lock combinations to gain access to and
operate the Stores and any applicable storage areas and any
security systems. Merchant shall take all reasonable steps
necessary to maintain such rights;
l. Agent shall accept during the Sale Term gift certificates,
store credits for the Sale Stores only, returns, promotional
give-aways or any other related discounts or allowances issued
prior to the Sale Commencement Date for which Merchant shall
reimburse Agent for the face amount of all such accepted items;
m. Agent shall separately account for all returns and
allowances on merchandise sold prior to the Sale Commencement
Date, for which Merchant shall reimburse Agent and which returns
and allowances shall not be included for purposes of calculating
the Sale Proceeds realized during the Sale Term, except in
accordance with Section 5.5 (n) herein;
n. All merchandise received by Merchant as a result of a
return for sales made prior to the Sale Commencement Date
("Return Item") shall be added to the Retail Inventory Value at
the Retail Price for that item less the prevailing discount in
that Stores if the Return Item is not Damaged Merchandise. For
Damaged Merchandise that is a Return Item, Merchant and Agent
shall agree upon the appropriate value for each such Return Item
as an express condition to such item being included as part of
the Retail Inventory; and
<PAGE>
o. Agent shall have the absolute right, subject to entering
into an appropriate arrangement with J. Baker, to retain all fee
income generated by the Lease Departments which sum shall be
included in the Sale Proceeds.
5.6 Agent shall have the right and authority to transfer Retail
Inventory between the Stores, the cost of which shall be
included in the Sale Expenses. In addition, Agent shall have
the right and authority, at its sole discretion, to close any
Store during the course of the Sale. Except as otherwise
expressly provided herein Agent shall not be entitled to sell or
otherwise dispose of any inventory or assets other than those of
Merchant at the Stores.
5.7 At the conclusion of the Sale and the clean-up at each
Stores, Agent shall forward to Mr. Art Landay, Director of
Construction and Store Planning, via facsimile (508) 520-4556,
written notice of the turnover of each Stores to Merchant on a
form similar to that attached hereto as Schedule 5.7.
5.8 Agent shall provide Merchant with daily and weekly reports
of sales in a form and manner mutually agreeable between the
parties.
5.9 As consideration, in part, for the services provided by
Agent, all Retail Inventory that remains unsold after the Sale
Termination Date shall become the sole and exclusive property of
the Agent, free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever and, in the event
Merchant obtains bankruptcy relief or involuntarily enters into
such relief, such unsold Retail Inventory shall not be deemed
property of the estate for purposes of Section 541 of the
Bankruptcy Code. Should Agent exercise such right at the
conclusion of the Sale, Agent shall remove such unsold Retail
Inventory, at its sole cost and expense, within forty-eight (48)
hours of each Store Closing Date.
6. EMPLOYEES
6.1 Agent with Merchant's reasonable approval shall have the
right to select the Sale Employees to be retained for the
purposes of completing the Sale. Agent may cease using any Sale
Employee at any time during the Sale Term, however, at least
seven (7) days prior thereto, Agent will notify Merchant of any
Sale Employee who Agent will no longer require for the purposes
of completing the Sale, unless such decision was made "for
cause" such as dishonesty, fraud, breach of employee duties, and
Agent shall not be responsible for incurring any further Payroll
Expenses of such Sale Employees for the purposes of the Sale.
Agent shall notify Merchant immediately of any Sale Employee
dismissed for cause, which notice shall state among other
things, the basis for such termination.
6.2 Merchant shall make available to Agent all reasonably
necessary personnel to conduct the Sale and process and handle
requisite office tasks and paperwork that Agent reasonably
requires in conducting the Sale.
<PAGE>
6.3 All Sale Employees shall for all purposes remain the sole
responsibility of Merchant, and Agent, subject to Section 7.1
herein, shall have no liability whatsoever to and for the Sale
Employees including, without limitation, liability to any of
Merchant's former employees with respect to severance pay,
termination pay, vacation pay, pay in lieu of reasonable notice
of termination, or any other liability arising from Merchant's
employment of such Sale Employees prior to, during and
subsequent to the Sale other than for liability directly caused
by the willful or illegal acts or wanton misconduct of Agent
and/or its employees, representatives, agents or principals.
6.4 During the Sale Term, Merchant shall process the base
payroll for all Sale Employees who were employed by Merchant and
retained by Agent as of the Sale Commencement Date.
6.5 Agent, at its sole discretion, may provide Bonuses to
certain key Sale Employees who work in the Stores during the
Sale Term and do not voluntarily leave employment or are not
terminated "for cause". The allocation of such Bonuses shall be
in Agent's sole discretion and Merchant agrees to process any
such Bonuses as if they were part of Merchant's payroll.
7. EXPENSES
7.1 Agent shall be responsible for and assume all Sale
Expenses. Merchant further agrees that, subject to the Sale
Expenses, Agent shall not incur or be responsible in any way for
any other cost or expense associated with the Sale including,
without limitation, all severance costs, employee termination
costs, shutdown expenses and any other related costs.
7.2 Merchant shall provide to Agent, on a weekly basis, a
statement of the Sale Expenses (which statement shall be
furnished with invoices or such other documentation
substantiating such actual Sale Expenses) for the prior week
including all weekly payroll reports.
7.3 Within thirty (30) days after the Sale Termination Date,
Merchant and Agent shall reconcile (a) the actual Sale Expenses
to the estimated Sale Expenses Agent has previously paid and (c)
the FF&E Proceeds, FF&E Fee, Augmentation Fee and Merchant Goods
Fee to determine any and all amounts due and owing each party as
a result of the Sale (the "Final Reconciliation"). As part of
the Final Reconciliation, Agent shall provide Merchant and
Merchant shall provide Agent with all information maintained by
each party during the Sale Term relating to the foregoing items
including Merchant providing Agent with all invoices as well as
any and all documentation, including Merchant's weekly payroll
reports, substantiating each item of actual Sale Expenses. If
Merchant and Agent are unable to resolve any dispute which
arises as a result of the Final Reconciliation or which may
arise under this Section 7 or any other Section of this
Agreement relating to the Sale Expenses within thirty (30) days,
Merchant and Agent further agree to immediately submit any such
unresolvable Material dispute to an Independent Third Party to
be mutually agreed upon by Agent and Merchant whose decision as
to any such dispute(s) shall be binding upon by both parties.
<PAGE>
8. AGENT'S FEES
8.1 In consideration for its services as agent hereunder, Agent
shall be entitled to retain for its sole benefit and as its
exclusive property all Sale Proceeds.
8.2 In the event Merchant elects to supply Agent with Merchant
Goods for sale at the Stores, Agent shall receive a separate and
additional fee equal to twenty-five percent (25%) of the sale
receipts generated by Agent's sale of the Merchant Goods
("Merchant Goods Fee"). Agent shall retain all such sales
receipts in a segregated account at the Bank and shall deliver
to Merchant on each Wednesday seventy-five percent (75%) of such
sales receipts generated for the previous week (Sunday through
Saturday).
9. FURNITURE, FIXTURES AND EQUIPMENT SALES
9.1 Merchant shall pay Agent seven and one-half percent (7.5%)
of gross proceeds (less applicable sales and use taxes) derived
from the sale of any of Merchant's FF&E contained in the Stores
that Merchant designates for sale and directs Agent to sell
pursuant to the Sale (the "FF&E Fee"). Agent shall retain all
such FF&E Proceeds in a separate segregated account at the Bank
and remit to Merchant all such FF&E Proceeds less any FF&E Fee
as part of the Final Reconciliation.
9.2 Merchant and Agent shall mutually determine the price for
each item of FF&E.
10. AFFIRMATIVE DUTIES OF MERCHANT
10.1 Merchant shall cooperate with and, upon Agent's reasonable
request, assist Agent in obtaining all necessary Sale permits
and/or licenses required in by applicable federal, provincial,
local or other governmental authorities for Merchant to conduct
the Sale in the Stores.
10.2 Merchant shall provide Agent, at Merchant's sole cost,
sufficient space, telephones, fax machine and copier access and
support services to the extent available within Merchant's
corporate/head offices which Agent requires and reasonably
requests Merchant to provide throughout the Sale Term. Agent
estimates that during the Sale Term, it will need one office,
two telephone lines and copier and facsimile access to properly
supervise and conduct Sale.
10.3 Merchant shall maintain in working order the cash
registers, heating and air systems, Store alarm systems and all
other key mechanical devices used in the ordinary course of
operations of the Stores and ensure continuous essential utility
services are provided to the Stores (the "Essential Systems")
without interruption during the Sale Term. Any such costs
incurred with respect to ordinary maintenance and repairs to the
Essential Systems shall be included in Sale Expenses, however,
any extraordinary and/or major repairs to any of the Essential
Systems shall be borne solely by the Merchant and shall not be
included in Sale Expenses. To the best of Merchant's knowledge,
none of the above-referenced items are in need of major repair.
Agent shall bear no cost or responsibility in connection
therewith.
<PAGE>
10.4 Merchant shall remain solely responsible for all
contracts, agreements or other obligations relating to all items
of Damaged Merchandise, Display Merchandise or Seasonal
Merchandise for which Merchant and Agent cannot assign an agreed
upon value, all consignment merchandise, merchandise retained by
Merchant as bailee, FF&E, all merchandise subject to "special
orders", merchandise owned by any concessionaires, merchandise
held for layaway or those held by Merchant for repair as well as
processing, handling and, as of each Store Closing Date,
removing from the Stores all such .
10.5 Merchant shall not ship, transfer, direct or redirect any
merchandise or Supplies between or among the Stores or
Merchant's other retail locations or storage facilities from
February 25, 1995 onward so as to materially alter the mix or
quantities of the merchandise or Supplies of the Stores that
existing in the Stores on February 25, 1995 provided that
Merchant (a) may ship or transfer to or from any Stores
merchandise excluded from the Sale hereunder, (b) may make
shipments to or from the Stores or other locations of Merchant
in the ordinary course of business and consistent with
Merchant's past practices and the terms of this Agreement, and
(c) may redirect to Merchant's other stores any merchandise on
order from vendors that Merchant and Agent agree shall be
excluded from the Sale.
10.6 Merchant agrees that during the Sale Term it shall not
aggressively discount the merchandise in its non-Sale stores
located within the same local advertising market of any Store
such that a substantial portion of any such store's merchandise
is at a discount and/or selling price equal to or lower than
that in any Sale Store.
11. REPRESENTATIONS AND WARRANTIES OF MERCHANT
Merchant represents and warrants as follows:
11.1. Merchant has taken all necessary action and possesses the
right, power and authority required to execute, perform fully
its obligations hereunder and deliver this Agreement and to
consummate the transactions contemplated hereby. No additional
Board of Directors' or other corporate approval is necessary to
effectuate this Agreement nor is any court order or decree of
any federal, provincial or local government authority or
regulatory body is in effect that would prevent or impair
consummation of the transactions contemplated by this Agreement
and any and all required consents have been obtained from third
parties.
11.2 The Retail Inventory may be sold by Agent through the
Sale, subject to the terms hereof, free and clear of all liens
mortgages, pledges, charges, encumbrances or claims of whatever
nature other than those created by or with respect to Agent.
<PAGE>
11.3 Merchant has not raised any of the Retail Prices marked
on any of the Inventory since February 21, 1995 and has not
raised any of the Retail Prices in anticipation of this
Agreement. Merchant shall conduct business at the Stores in the
ordinary course between the date hereof and the Sale
Commencement Date, and there have not been, and there shall be
no, promotions, advertised sales or other discounting of
inventory at the Stores outside the ordinary course pending the
Sale Commencement Date. Store operations, profile and business
will remain consistent with historic operations, profile and
business customary to the Stores pending the Sale Commencement
Date. Since February 1, 1995, Merchant has maintained its
pricing files of goods in the ordinary course and all costs
listed for the goods purchased by Merchant represent the actual
costs of each item of merchandise listed and that the prices
charged to the public for goods (whether in-store, by
advertisement or otherwise) are true and accurate.
11.4 This Agreement is the valid and binding obligation of
Merchant and is enforceable in accordance with its term.
11.5 Within the past 5 years, Merchant has not used any
business or trade names other than the name "Stuarts Stores,"
"Uncle Joe's $1" or "Stuarts" at the Stores.
11.6 Merchant is not aware of any items of Retail Inventory not
being in compliance with all applicable consumer product safety
standards or rules. Merchant shall defend, indemnify and hold
Agent harmless from and against any liens, mortgages, pledges,
charges, encumbrances, equities or claims against the Retail
Inventory or any liability of Agent resulting therefrom or from
Merchant's breach of the representations and warranties in this
Section 11.6.
11.7 Merchant knows that Agent is relying upon the truth and
accuracy of all financial and other information provided to
Agent in writing prior to the date hereof and in connection with
this Agreement, and to the extent any such information becomes
inaccurate, outdated or no longer true, Merchant shall notify
Agent of same as promptly as practicable. Any information
provided to Agent by Merchant in connection with the Sale and
the services of Agent hereunder shall remain subject to
verification by Agent until Merchant fulfills all obligations
hereunder.
11.8 No broker, finder, agent or similar intermediary has acted
for or on behalf of Merchant in connection with the Sale or this
Agreement, and no broker, finder, agent or similar intermediary
is entitled to any broker's, finder's or similar fee or other
commission in connection with the Sale or this Agreement.
11.9 No legal action or proceeding has been instituted against
Merchant or, to its knowledge, threatened which would affect the
consummation of this transaction. In addition, Merchant has no
knowledge of nor has it received any notice of any involuntary
bankruptcy filing or threat of such filing by any of Merchant's
creditors.
12. REPRESENTATIONS AND WARRANTIES OF AGENT
Agent represents and warrants as follows:
12.1 Agent has taken all necessary action required to authorize
the execution, performance and delivery of this Agreement and to
consummate the transactions contemplated hereby.
<PAGE>
12.2 This Agreement is a valid and binding obligation of Agent
enforceable in accordance with its terms.
12.3 No legal action or proceeding has been instituted against
Agent or, to its knowledge, threatened which would affect the
consummation of this transaction.
12.4 No broker, finder, agent or similar intermediary has acted
for or on behalf of Agent in connection with the Sale or this
Agreement, and no broker, finder, agent or similar intermediary
is entitled to any broker's, finder's similar fee or other
commission in connection with the Sale or this Agreement.
13. INSURANCE
13.1 Effective as of the date of this Agreement until the
expiration of the Sale Term, Merchant shall continue in force
all worker's compensation, general liability (including product
liability and completed operations) and property coverages in
such amounts as Merchant currently has in effect. In addition,
Merchant shall add Agent as an additional insured for the
purpose of Merchant's general liability and inventory insurance
and Agent shall provide Merchant with evidence of similar
coverage.
13.2 During the Sale Term, Agent shall maintain, at its cost,
comprehensive public liability insurance for injury to persons
and for property, naming Merchant as an additional insured.
13.3 In the event of an uninsured loss to the Retail Inventory
occurring subsequent to the Store Inventory and prior to the
Sale Termination Date, the proceeds of such insurance
attributable to the Retail Inventory, but specifically excluding
any proceeds of business interruption insurance, shall be
accounted for by Merchant and such proceeds shall be deemed to
be included as part of the Sale Proceeds. Any portions of such
insurance proceeds due Agent shall be paid promptly to Agent
upon receipt thereof.
14. INDEMNIFICATION
14.1 In addition to any specific indemnification provided for
herein, Merchant hereby agrees to indemnify, defend, protect and
hold harmless Agent and its officers, directors, shareholders,
employees, agents and representatives from and against all
demands, claims, actions, assessments, losses, damages,
liabilities costs and expenses (including reasonable attorneys'
fees, costs and expenses irrespective of actual litigation), or
other claims or assertions of any kind or nature whatsoever,
whether now existing or hereafter arising or discovered,
pertaining or related to or in connection with the Sale
("Claims"), including without limitation, demands by third
parties claiming a security interest in, or lien or encumbrance
against, the Retail Inventory, or proceeds thereof, Claims with
respect to Sale Employee severance and/or termination liability,
Claims with respect to consigned merchandise, and any Claims
concerning any matters with respect to which Merchant warrants,
represents and covenants herein.
<PAGE>
14.2 Agent agrees to indemnify, defend and hold Merchant
harmless from and against any and all Claims and expenses
(including but not limited to reasonable attorneys' fees and
costs of suit), of any kind and nature whatsoever, arising out
of or in connection with the services rendered by Agent and
Supervisors pursuant to this Agreement resulting from the gross
negligence or willful misconduct of Agent or Supervisors in
performing such services, including without limitation, Agent's
breach of any term of this Agreement.
15. OPERATING PROVISIONS
15.1 Each of Merchant and Agent shall from time to time, both
before and after the date of this Agreement, diligently take or
cause to be taken such action and execute and deliver or cause
to be executed and delivered to the other such documents and
further assurances as may, in the reasonable opinion of counsel
for the other, be necessary or advisable to give effect to this
Agreement.
15.2 Each party shall provide to the other such information and
copies of such records and documents as the other may reasonably
request for the purpose of confirming the calculation of any
amounts hereunder. Except as required by applicable law, Agent
shall keep all information and records relating to Merchant, the
Stores, the Sale and this Agreement in strictest confidence and
shall not disclose any such information or records to any person
or entity other than its own financial, legal and accounting
professionals for Agent's internal purposes only.
15.3 Any notice or other communication under this Agreement
shall be in writing and may be delivered personally or sent by
facsimile or by prepaid registered or certified mail, addressed
as follows:
(i) in the case of Agent:
Mr. Rick Rosenbloom
Hilco Trading Company, Inc.
5 Revere Drive, Suite 206
Northbrook, IL 60062
Telephone: (708) 509-1020
Facsimile: (708) 509-1050
with a copies to:
Mr. Gary Mintz
Great American Asset Management
2812 Santa Monica Blvd., Suite 204
Santa Monica, CA 90404
Telephone:(310) 310-1515
Facsimile: (310) 315-9225
<PAGE>
(ii) and in the case of Merchant:
Mr. David S. Ferguson
Stuarts Department Stores, Inc.
15 Forge Parkway
Franklin, MA 02038
Telephone: (508) 520-4540, Ext. 224
Facsimile: (508) 520-4557
with a copy to:
Mr. Richard Langan, Jr., Esq.
Nixon, Hargrave, Devans & Doyle
437 Madison Avenue
New York, NY 10022
Telephone: (212) 940-3140
Facsimile: (212) 940-3111
15.4 Time shall be of the essence of this Agreement.
15.5 All references to currency in this Agreement shall be
references to U.S. dollars.
15.6 This Agreement is expressly subject to the following
conditions:
(a) Merchant shall obtain all consents and approvals necessary
for Merchant to execute and perform this Agreement; and
(b) Merchant shall obtain all consents and approvals necessary
to prevent, cure or waive any breaches or defaults under any
agreement to which Merchant is a party whether or not occasioned
by the execution and performance of this Agreement necessary to
perform its obligations under this Agreement.
15.7 This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
15.8 This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes
all prior negotiations and understandings.
15.9 This Agreement shall not be assigned by either party
without the written consent of the other and shall inure to the
benefit of, and be binding upon, the parties and their
respective successors and permitted assigns.
15.10 This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original
and such counterparts, together, shall constitute one and the
same instrument. Delivery by facsimile of this agreement or an
executed counterpart hereof shall be deemed a good and valid
execution and delivery hereof.
<PAGE>
15.11 It is expressly agreed that Agent is acting as an
independent contractor in performing its services hereunder.
Merchant shall carry no Worker's Compensation insurance or any
health or accident insurance to cover Agent nor Supervisors, or
any employees of either. Merchant shall not pay any
contribution to Social Security, unemployment insurance federal
or state withholding taxes, nor provide any other contributions
or benefits to Agent nor Supervisors, or employees of either.
15.12 Neither Agent nor Supervisors shall have or hold
themselves out as having, any right, power, or authority to
create any contract or obligation, either express or implied, on
behalf of, in the name of, or binding upon Merchant, or to
pledge Merchant's credit, or to extend credit in Merchant's name
unless Merchant shall consent thereto in advance in writing.
15.13 Agent and Supervisors shall perform their duties in
strict compliance with all, and shall not cause Merchant to be
in violation of any, applicable laws, rules and regulations of
duly constituted governmental authorities, and shall obtain all
licenses, registrations or other approvals required by law in
connection with the services to be rendered hereunder.
15.14 Nothing contained herein shall be deemed to create any
relationship between the parties other than the relationship of
Agent and Merchant. It is stipulated that the parties are not
partners, or joint venturers, or, except as expressly provided
to the contrary herein, agents of one another.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement on the day and year first written above.
Great American Asset Management
By: __________________________
Name: Gary Mintz
Position: President
Hilco Trading Company, Inc.
By:___________________________
Name: Harvey M. Yellen
Position: Vice President
Stuarts Department Stores, Inc.*
By:__________________________
Name: David S. Ferguson
Position: President and COO
*Dave Ferguson's signature represents the binding obligation of
Stuarts with full Board of Directors' approval.
STUARTS REPORTS SALES DECLINE
Stuarts to Focus on Sale of Retail Chain and Consider
Alternatives
Liquidation Sales Conducted at Five Stores
FRANKLIN, MASS., March 15, 1995 -- Stuarts Department
Stores, Inc. (NASDAQ - STUS) announced today that its sales for
its four week period ended February 25, 1995 were $3,635,000, a
decrease of 26% from same store sales of $4,880,000 realized
during the comparable 1994 period. Total sales realized by the
Company during February 1995 were $3,780,000. The Company
believes that the February sales results reflect the continued
erosion of its sales performance in a difficult retail
environment.
The Company stated further that, as a result of its
continued financial difficulties, the Company plans to increase
its focus on exploring opportunities for the sale of the
remaining retail chain and to consider other alternatives
available to the Company.
Stuarts announced also that, in furtherance of its
previously announced plans to close certain stores, it had
entered into arrangements with Garcel, Inc., an affiliate of
Hilco Trading Company, Inc., for the sale of inventory at its
Haverhill, Massachusetts, Malden, Massachusetts, Taunton,
Massachusetts, Nashua, New Hampshire, and Johnston, Rhode Island
stores in connection with the closing of those stores. Those
stores are expected to be closed by May 15, 1995. As of
February 25, 1995, the aggregate book value, on a cost basis, of
inventory in such stores was approximately $4,260,000. The
amount presently estimated to be paid to the Company by Garcel,
Inc. pursuant to those arrangements is approximately $3,500,000.
For further information, contact:
Mr. David Ferguson, President
508-520-4540, ext. 224
Mr. Antone F. Moreira, Executive Vice President and CFO
508-520-4540, ext. 222
<PAGE>
