EXHIBIT 10.41
AGENCY AGREEMENT
This Agency Agreement is made this 15th day of January, 1997 by
and between Hilco/Great American Group, a joint venture comprised of
Hilco Trading Company, Inc., an Illinois corporation with a principal
place of business at One Northbrook Place, 0 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000 and Garcel, Inc., a California corporation,
with a principal place of business at 0000 Xxxxxx Xxxxxx, Xxxxxxxx
Xxxxx, Xxxxxxxxxx 00000, and doing business as Great American Asset
Management(the "Agent"), and Sportdepot Stores Inc. an Ontario
corporation having principal offices at 0000 Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxx X0X0X0 (the "Merchant").
WHEREAS, the Merchant operates retail stores under the name
Sportmart and the name Sportdepot in Canada and desires that the Agent
act as the Merchant's exclusive sales agent for the limited purpose of
conducting the Sale (as hereinafter defined);
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Agent and the Merchant hereby agree as follows:
1. Agency Appointment
The Agent shall serve as the Merchant's exclusive agent to
conduct a sale (the "Sale") of all inventory assets (as further
defined in subsection 2(c) hereof, the "Merchandise") from Merchant's
eleven (11) retail Sportmart and Sport Depot stores designated in
Exhibit 1 attached hereto (collectively, the "Stores"). It is
expressly agreed that subject to applicable law, Agent shall be
entitled, in its discretion, to advertise and conduct the Sale at each
Store as a "Store Closing," "Total Liquidation," "Going out of
Business" or similar sale.
2. Merchandise
(a) Inventory Taking Merchant and Agent shall cause to be
taken a "Retail Price" physical inventory of the "Merchandise" (as
such terms are defined in subsections 2(b) and 2(c), respectively),
located in the Stores and Merchant's "Big Ticket Item Warehouse"
beginning at the close of business at the Stores no later than January
24, 1997 (the date of the inventory taking at a Store being the
"Inventory Date" for such Store). During the taking of the inventory
at each Store, such Store shall be closed and no sales transacted.
Merchant and Agent shall jointly employ Western to conduct the
physical inventory, and Merchant and Agent shall each pay 50 percent
of the costs and fees of such inventory taking service. Other than
such costs and fees of Western, each of Merchant and Agent shall bear
their own costs relative to the inventory taking. Merchant and Agent
shall each have representatives present during the inventory taking,
and each shall have the right to review and verify the listing and
tabulation of the inventory count as provided by the inventory taking
service. The procedures to perform the inventory taking shall be as
mutually agreed by the parties. Prior to the inventory taking, Agent
shall have full access to all pricing and cost files of goods,
purchase journals, markdown calendars, POS calendars, advertising
schedules, inter-store transfer logs, markdown schedules, invoices,
style runs, data processing, computer hardware, software, data files
and all other documents of Merchant relative to its inventories, past,
current and future.
(b) Valuation
For purposes of this Agreement, "Retail Price" shall mean the
lowest ticketed retail price or other non-ticketed point of sale
discount price offered to the public by Merchant at the Stores for
each individual item of Merchandise on or after January 11, 1997 for
each item of Merchandise listed on the flyer dated January 4, 1997
which has been presented to Agent and on or after January 6, 1997 for
all other items of Merchandise (exclusive of sales, excise and gross
receipts taxes), except for "Defective Merchandise" and "Display
Merchandise"( both as defined in subsection 2(c)). The Retail Price
of any Display Merchandise shall be 90% of the lowest ticketed or
other retail price offered to the public by Merchant at the Stores for
such Merchandise on or after January 11, 1997. The Retail Price for
any Defective Merchandise shall be mutually agreed upon by Merchant
and Agent. If Agent raises any concerns as to the lowest ticketed or
other retail price offered to the public of any swim related or
"packaway" Merchandise, Merchant and Agent shall use reasonable
efforts to mutually agree on the Retail Price of any such Merchandise
provided that, if no agreement can be reached after such reasonable
efforts then such Merchandise shall remain at the Retail Price. In
the case of identical items offered at different prices, the lowest
Retail Price on any such item shall control for all such items, unless
it is clear that such lowest Retail Price is mismarked.
(c) Merchandise Subject to this Agreement
For purposes hereof, "Merchandise" shall mean all inventory
that is located in the Stores and the "Big Ticket Item Warehouse" on
the Sale Commencement Date (as defined herein), including, without
limitation "Defective Merchandise" and "Display Merchandise."
As used herein, the following terms have the respective meanings
set forth below:
"Defective Merchandise" means goods identified by Merchant and
Agent as defective, damaged or otherwise not salable in the ordinary
course during the inventory taking process because they are scratched,
worn, broken, faded, torn, stained, discolored, dented or contain
other characteristics making them not first quality, and in each case
as to which Agent and Merchant mutually agree on its value to define
its "Retail Price." Display Merchandise shall not be deemed defective
per se. If Merchant and Agent cannot agree on the value of an item
that is defective, then such item shall be excluded from Merchandise
for purposes of this Agreement and shall be removed by Merchant at its
cost.
"Display Merchandise" shall mean fitness equipment or table
games used solely for display.
"Merchandise" shall not include: (1) goods held by Merchant on
consignment; (2) on order inventory to be received or received at a
Store after the Inventory Date (unless Agent in its sole discretion
elects to include such inventory in Merchandise); (3) goods retained
by Merchant as bailee, goods which have been sold and are being held
for customers or are waiting to be delivered to customers; (4)
furnishings, store fixtures and equipment; (5) goods in leased or
licensed departments; (6) goods held at the Stores on layaway or for
repair; (7) special order goods for customers; (8) any "Thirty Day
Goods" as defined in the Bankruptcy and Insolvency Act (Canada), or
any other goods in respect of which a lien or encumberance is enforced
such that Agent cannot sell such goods at the Sale or, if sold, cannot
retain the proceeds thereof; and (9) trading cards and magazines.
Merchant shall remain responsible for processing and handling all
goods referred to in the preceding sentence, and contracts relating
thereto, and Agent shall have no cost, expense or responsibility in
connection therewith; provided that Agent shall cooperate with
Merchant in the administration of layaway, repair and special order
goods.
(d) Transfer of Inventory and Supplies
(i) Neither inventory nor supplies (e.g. boxes, bags,
twine, hangers, shoe coils) have been since January 6,
1997, and shall not be prior to the Sale Commencement
Date, redirected or directed by Merchant between or
among the Stores and any other store locations of
Merchant (the "Remaining Stores") so as to alter the
mix or quantities of inventory or supplies at the
Stores from that existing on January 6, 1997, except
for (A) transfers of goods excluded from Merchandise
hereunder, and (B) sales in the ordinary course of
business.
(ii) Merchant does not represent that adequate stocks of
supplies are or will be available at the Stores as of
the Sale Commencement Date. Agent shall have the right
to use all existing supplies at the Stores as of the
Sale Commencement Date, and to obtain additional
supplies reasonably needed for Agent's proper conduct
of the Sale from Merchant at Merchant's actual cost
therefore as an "Expense" (as defined in subsection
3(d)); provided, however, that Merchant shall be
entitled to remove all hangers, security tags and shoe
coils not in use by Agent or to be used by Agent at
Merchant's expense. At a mutually agreeable time
during the Sale, Merchant shall be entitled to
redistribute "Sportdepot" supplies and bags from its
Western stores to its Eastern Stores for use during the
Sale and therefore allow Merchant to redistribute
"Sportmart" bags to the U.S..
(e) Gross Rings
In the event that the Inventory Date for a Store is after
the Sale Commencement Date (as hereinafter defined), 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
tax, excise taxes and gross receipts taxes ("Gross Rings"), and (ii)
cash reports of sales within such Store. The register receipts shall
show for each item sold the Retail Price for such item and the
storewide or other markdown or discount granted by Agent in connection
with such sale. All such records and reports shall be made available
to Agent and Merchant during regular business hours upon reasonable
notice. The Retail Price of the Merchandise from which the Guaranteed
Amount (as hereinafter defined), the Agent Amount (as hereinafter
defined) and the Recovery Amount (as hereinafter defined) will be
calculated shall be the aggregate of (A) the Retail Price of the
respective items of Merchandise in the Stores on the Inventory Date as
determined in accordance with Section 2(a) hereof, plus (B) the
aggregate of the Retail Price of the Merchandise included in Gross
Rings multiplied by 1.009 (the "Gross Rings Amount").
3. Sale
(a) Term
The Sale shall commence on January 17, 1997 (the "Sale
Commencement Date"). The Agent shall complete the Sale no later than
April 30, 1997, and shall have the discretion to terminate the Sale as
to any Store at any time within that time frame, unless the Sale is
extended by mutual written agreement of Agent and Merchant (the "Sale
Termination Date"). If Agent terminates the Sale as to any particular
Store prior to the Sale Termination Date, Agent shall, subject to
applicable law and as an "Expense" (as defined in subsection 3(d)),
consolidate goods remaining therein in the other Stores (subject to
the limitation set forth in subsection 3(b)(i)(F)). Agent shall give
Merchant reasonable notice prior to terminating the Sale at a Store.
The period from the Sale Commencement Date to the Sale Termination
Date as to each Store shall be hereinafter referred to as the "Sale
Term".
(b) Rights of Agent; Final Sales
(i) The Agent shall conduct the Sale during the Sale Term
in the name of and on behalf of Merchant in a commercially reasonable
manner. The Agent, in the exercise of its reasonable discretion and
in accordance with applicable laws, regulations and ordinances shall
be entitled:
(A) to establish and implement advertising and promotion programs
consistent with the "Store Closing," "Total Liquidation" or "Going
Out of Business" theme to the extent permitted by applicable laws,
regulations and ordinances; provided, however, that Agent shall
deliver copies of all advertising materials for the Sale to
Merchant, Attn: Xxxxxxxx X. Xxxx (facsimile no. 847-520-1343) or
Xxxxxxx X. Fix, (facsimile no. 847-520-1380) who shall have the
right, within forty-eight (48) hours of such delivery, to
approve such materials (which approval shall not be unreasonably
withheld or delayed), and provided further that the failure of
Merchant to reasonably respond to any request for approval within
forty-eight (48) hours shall be deemed approval of the subject
materials;
(B) to establish Sale prices and discounts upon prior notice to
Merchant;
(C) to use without charge, during the Sale Term and for purposes
of selling the Merchandise, all customer lists, furniture, store
fixtures, equipment, advertising materials, supplies, credit
card facilities and processors including access to credit card
terminal processing coding, computer hardware and software,
Merchant's name, logo, and other assets of Merchant (whether owned,
leased, or licensed) located at the Stores, all of which
will be returned to Merchant at the end of the Sale Term, to the
extent the same (1) are remaining at the end of the Sale Term, (2)
have not been used (e.g. supplies), or (3) otherwise have not been
disposed of through no fault of Agent;
(D) to use the Merchant's personnel, to the extent that the Agent,
in the exercise of its sole discretion, shall deem appropriate
provided that Agent shall comply in all material respects with
Merchant's human resource policies and procedures which are disclosed
to Agent in writing prior to the Sale Commencement Date and provided
further that Agent shall use its reasonable efforts to retain
Merchant's employees for at least eight weeks from the Sale
Commencement Date.
(E) beginning on January 16, 1997 at 4:30 P.M., to have access to
the Stores to prepare for the Sale in a manner so as not to disrupt
Merchant's ongoing business operations, and during the Sale
Term to use all Store keys, case keys, security codes, and safe and
lock combinations to gain access to and to operate the Stores;
(F) to transfer Merchandise between and among the Stores subject to
applicable law and upon prior notice to Merchant; provided, however,
that no Merchandise transfers between the Stores or from the "Big
Ticket Item Warehouse" to the Stores shall be made between the Sale
Commencement Date and completion of the inventory at all of the
Stores; and
(G) to use Merchant's central administrative services and personnel
to process payroll, perform MIS and other central office services
necessary for the Sale.
(ii) Agent's rights expressed above are subject to:
(A) Agent's safekeeping and maintaining in confidence
information received about Merchant's business which is not
in the public domain; and
(B) The requirement that Agent return any assets required to
be returned to Merchant in the same condition as provided to
Agent at the Sale Commencement Date, ordinary wear and tear
and damage caused by Merchant or its employees or agents
excepted.
(iii) 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 pass manufacturers' warranties to customers, to the extent
transferable. In the conduct of the Sale, Agent shall not be required
or obligated to honor any discount coupons, circulars or similar items.
Merchant shall indemnify and hold harmless Agent, and its respective
officers, directors, agents and employees (collectively, the "Agent
Indemnified Parties") for all liabilities and costs of whatever kind
(including, but not limited to, reasonable attorneys' fees) related to
or resulting from any consumer warranty or products liability claims
relating to the Merchandise.
(c) Obligations of Agent
(i) During the Sale Term, Agent shall collect from sales at
the Stores Sale-related sales, excise and gross receipts taxes, as
calculated by Merchant's point-of-sale registers, payable to any taxing
authorities having jurisdiction, which taxes shall be added to the
sales price, shall be paid by the customer, and shall be promptly paid
over to Merchant. So long as Agent complies with the provisions of
this subsection, Merchant shall indemnify and hold harmless the Agent
Indemnified Parties from and against any and all costs,assessments,
fines, penalties and liabilities (including, but not limited to,
reasonable attorneys'fees), which any Agent Indemnified Party sustains
or incurs as a result or consequence of the failure by the
Merchant to promptly pay such taxes to the proper taxing authorities
and/or the failure by the Merchant to promptly file with such taxing
authorities any and all reports and other documents required, by
applicable law, to be filed with or delivered to such taxing
authorities. Agent shall indemnify and hold harmless the Merchant and
its officers, directors, agents, employees, and shareholder
(collectively, the "Merchant Indemnified Parties") from and against any
and all costs, assessments, fines, penalties and liabilities
(including, but not limited to, reasonable attorneys'fees), which the
Merchant sustains or incurs as a result or consequence of the failure
by Agent to fulfill its obligations under this subsection 3(c)(i).
(ii) During the Sale Term, the Merchant shall process the
base payroll for all Merchant employees utilized by the Agent. Such
employees will be identified by Agent prior to the Sale Commencement
Date. Merchant covenants and agrees with Agent that all wages
including applicalbe withholding (but excluding severence and termination
pay for which Merchant shall be liable to pay) have been paid or will be
paid when due, by Merchant to the Sale Commencement Date and will
continue to be paid by Merchant (including severence and termination)
pursuant to the provisions of this Agreement. Subject to the provisions
of Section 3(b)(i)(D) hereof, Agent may stop using any such
employee at any time during the Sale, provided that Agent shall not
terminate any employee without prior notice to Merchant. Base payroll
and related payroll taxes and benefits of employees are designated on
Exhibit 3(c)(ii) hereto. Prior to or during the Sale
Term, Merchant shall not dismiss employees of the Stores (except for
"cause") or transfer employees between the Stores and Remaining Stores
without Agent's consent. Agent acknowledges that Merchant has or will
provide notice of termination pursuant to applicable employment
legislation and consents to any terminations resulting therefrom.
Merchant and Agent acknowledge and agree that: (A) nothing herein nor
any of Agent's actions taken in respect hereto shall he deemed to
constitute an assumption by Agent of any of Merchant's obligations
relating to Merchant's employees, including, without limitation,
vacation, pension withdrawal, severance or other termination pay,
vacation pay, sick leave or pay, maternity leave or pay, Worker
Adjustment Retraining Act or similar law (if any); and (B) nothing herein
shall make Agent liable under any collective bargaining or employment
agreement, nor shall Agent be deemed a joint or successor employer.
(iii) Retention bonuses in the aggregate amount of up to
$66,000 shall be paid (inclusive of payroll taxes but exclusive of
benefits) to Store managers and employees who work during the Sale Term
and do not voluntarily leave employment or are not terminated "for
cause." Such bonuses shall be payable within thirty (30) days
of the end of the Sale Term. The recipients of such retention bonuses
shall be determined by Agent in its reasonable discretion, and such
retention bonuses shall be processed through Merchant's payroll system.
(iv) Except as specifically set forth in this Agreement,
Agent shall not assume, nor shall its actions be construed as an
assumption of, any of Merchant's liabilities or obligations. Merchant
shall indemnify and hold the Agent Indemnified Parties harmless in
respect of all losses, costs, expenses, liabilities and claims, if any,
arising from or relating to those obligations and liabilities not
specifically assumed by Agent hereunder.
(v) On the Sale Termination Date, Agent shall leave each of
the Stores vacant, broom clean and in good order and condition except
for normal wear and tear and remaining furniture, store fixtures and
equipment.
(vi) Agent shall comply in the conduct of the Sale with (A)
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 treatment of employees, (B) all Merchant's
employee rules, regulations, guidelines and policies, which have been
provided to Agent in writing, and (C) all Store leases, reciprocal
easement agreements and other similar agreements relating to the Stores,
provided that such compliance shall not limit Agent's ability to conduct
and advertise the Sales as a "Store Closing," "Total Liquidation,"
"Going Out of Business" or other similar sale.
(d) Expenses
As used herein, "Expenses" shall mean Store-level operating
expenses of the Sale which arise during the Sale Term at the Stores,
limited to the following: (A) advertising and signage (with Agent
having the benefit of Merchant's contract rates); (B) costs of
security personnel and armored car service (including, without
limitation, the cost of at least one security guard at each Store to
check receipts through and including the completion of the physical
inventory at such Store); (C) base payroll, including any overtime
pay, plus 15% thereof (in lieu of calculating related payroll taxes
and benefits); (D) on-site supervision (up to a maximum of $3,000
(U.S.) per week for the lead supervisor and $2,000 (U.S.) per week for
each additional supervisor); (E) telephone expenses in excess of base
telephone charges; (F) costs of postage and courier service incurred
in the conduct of the Sale; (G) credit card, debit card and bank card
fees, chargebacks and discounts; (H) merchandise transfer costs during
the Sale Term; (I) retention bonuses to Merchant's Store managers and
employees as described in Section 3(c)(iii) above; (J) fifty percent
(50%)of the fees and costs of Western, the inventory taking service,
to take the inventory (the other fifty percent (50%) to be borne by
Merchant as set forth in Section 2(a)); (K) costs of alarm systems;
(L) costs of janitorial services, trash removal, and Store cleaning;
(M) costs of check verification services; (N) the cost of ADP payroll
processing; (O) costs of additional supplies purchased during the Sale
Term; (P) the cost of music systems; (Q) the Agent Amount (as defined
herein), which shall be provisionally paid to Agent at $100,000
(Canadian) per week (but not more than an aggregate of $900,000
(Canadian)), by Wednesday of each week during the Sale Term commencing
on the fourth week of the Sale. Agent shall maintain the Agent Amount
in a segregated account until the Final Reconciliation (as defined
herein) and shall repay any payment of the Agent Amount to the extent
that the Proceeds are not sufficient to pay the Guaranteed Amount and
the Expenses; and (R) such other costs and expenses reasonably
incurred in providing such additional services which the Agent in its
discretion considers appropriate and which are approved by Merchant,
which approval will not be unreasonably withheld. "Expenses"
specifically excludes any other costs and expenses payable by
Merchant; payroll taxes and employee benefits costs in excess of the
15% amount described above (provided, however, that the costs of ADP
payroll processing shall not be included in this limitation and shall
constitute an Expense of the Sale); all licensing fees required to be
paid to governmental agencies to conduct the Sale; rental for
furniture, store fixtures and equipment, except for furniture, store
fixtures and equipment rented by Agent; and "Occupancy Costs".
"Occupancy Costs" means rent, percentage rent, CAM, HVAC, utilities,
merchant's association dues, building insurance, real estate taxes,
structural repair, base telephone charges and other rent and/or
occupancy costs payable either under leases or on account of occupancy
of the Stores, all of which Merchant has paid and will continue to pay
during the Sale Term for the Stores. Merchant represents and
covenants that it has paid, will pay, and continue to pay when due all
employee benefits programs (including health benefits and insurance),
and shall pay when due all proper claims made or to be made
thereunder, in each case for periods prior to and during the Sale Term
relative to Store employees.
All Expenses shall be paid by Merchant from the Proceeds when
such Expenses are due. To the extent the Proceeds are insufficient to
pay the Expenses, Merchant shall request payment from Agent. If Agent
does not pay Merchant the amount requested within 48 hours after
notice is given, Merchant shall be entitled to draw such amount from
the Letter of Credit.
4. Proceeds
(a) For purposes of this Agreement, "Proceeds" shall mean the
total amount (in Canadian dollars) of: (i) all sales of Merchandise
made under this Agreement (exclusive of sales, excise and gross
receipt taxes, credit card and bank card fees, and returns, allowances
and customer credits).
All sales will be made only for cash, and by credit and debit
cards currently accepted by Merchant. Agent may, at its decretion,
accept checks provided that the bad debt risk associated with such
checks shall be borne by Agent. Agent shall at Merchant's request
accept store credits, due bills and Merchant gift certificates issued
prior to the Sale Commencement Date, but conditioned upon arrangements
satisfactory to Agent that such amounts will be credited to Agent in
the weekly reconcilation. For seven days from the Sale Commencement
Date, Agent shall accept, for exchange only, returns of goods
evidenced by a receipt dated not more than one week prior to the Sale
Commencement Date. Returned goods that in Agent's reasonable
discretion are damaged or defective shall be set aside for Merchant.
Merchant shall credit Agent for the Retail Price of Merchandise given
to a customer in exchange for the damaged or defective goods returned.
Merchant may at its decretion accept returns of goods after the first
week of the Sale, but, unless otherwise agreed by the parties, such
returned goods shall be the sole responsibility of the Agent.
(b) All cash Proceeds shall be promptly paid over to Merchant
"Overs" and "Shorts" will be the responsibility of Agent, not Merchant.
5. Payments
(a) Payment Amounts
At the end of the Sale Term, the Proceeds shall be
distributed as follows:
(a) first, Proceeds equal to fifty and sixty-five one
hundredths of one percent (50.65%) of the aggregate Retail Price of
the Merchandise (the "Guaranteed Amount") shall be retained by Merchant;
(b) second, after payment in full of item (a) above, remaining Proceeds
equal to the total amount of the Expenses shall be retained by Merchant as
a reimbursement of the Expenses; third, after payment in full of items
(a) and (b) above, remaining Proceeds equal to two percent (2%) of the
aggregate Retail Price of the Merchandise (the "Agent Amount") shall be
paid by Merchant to Agent; and, fourth, after payment in full of items
(a), (b) and (c) above, one-half of the remaining Proceeds (the "Recovery
Amount") shall be paid by Merchant to Agent and one-half shall be retained
by Merchant.
(b) Reconciliations; Guaranty; Letter of Credit
(i) By Wednesday of each week during the Sale Term Merchant
and Agent shall reconcile the Proceeds and Expenses of the Sale for
the Merchandise sold during the prior week (i.e. Sunday through
Saturday). Within thirty (30) days after the Sale Termination Date
at the last Store, Merchant and Agent shall complete a final
reconciliation of all Proceeds and Expenses and Merchant and Agent
shall pay to one another any amounts due.
(ii) Subject to Merchant's compliance with paragraphs 6(c)
and 6(f) Agent hereby unconditionally guarantees to Merchant payment
of the Guaranteed Amount plus all Expenses. Provided, however, that
Agent's obligation to pay the Guaranteed Amount and Expenses shall not
limit or impair Agent's ability to assert damages against Merchant for
Merchant's breach of any of its other obligations or convenants
hereunder. If the Proceeds of the Sale are insufficient to pay the
Guaranteed Amount plus all Expenses, Agent shall pay to Merchant
within ten (10) days after the Sale Termination Date at the last Store,
an amount equal to (A) the sum of (I) the Guaranteed Amount plus (II)
all Expenses minus (B) the amount of the Proceeds.
(iii) To secure the payment by Agent to Merchant of the
Guaranteed Amount and Agent's obligations to pay Expenses as guaranteed
above, promptly upon the execution of this Agreement (but in no event
later than (2) days after the date hereof), Agent shall deliver to
Merchant a standby letter of credit in the original face amount of the
sum of $4,800,000 (U.S. dollars),naming Merchant as beneficiary
(the "Letter of Credit"). The Letter of Credit shall be issued by
LaSalle National Bank or another bank selected by Agent and reasonably
acceptable to Merchant, and shall contain terms, provisions and
conditions mutually acceptable to Agent and Merchant. In the event that
the Proceeds are insufficient to pay to Merchant (A) the Guaranteed
Amount required to be under Section 5 or (B) any Expenses, Merchant
shall be entitled to draw on the Letter of Credit to fund such amount
following five (5) days written notice to Agent of Merchant's
intention to do so. When the Proceeds equal the Guaranteed Amount, the
amount of the Letter of Credit may be reduced by ten percent (10%) for
every percentage point which the Proceeds exceed the Guaranteed Amount,
but in no event shall the amount of the Letter of Credit be less than
$750,000 (U.S.). Unless Merchant and Agent mutually agree that the
Letter of Credit may terminate earlier, the Letter of Credit shall
expire no earlier than forty-five (45) days following the Sale
Termination Date.
(c) Agent's Compensation
Provided that Agent has performed its obligations under
this Agreement and the Guaranteed Amount, the Expenses and all other
amounts due from Agent to Merchant hereunder are paid in full, all
Merchandise remaining at the conclusion of the Sale shall become the
property of Agent.
6. Conditions and Covenants
The Agent's and Merchant's willingness to enter into the
transactions contemplated hereunder and Agent's and Merchant's
obligations hereunder are directly conditioned upon the satisfaction,
compliance and completion of the following at the time or during the
time periods indicated, unless specifically waived in writing by both
parties:
(a) Agent on behalf of Merchant shall have obtained all
permits, licenses, authorizations and approvals required under
applicable laws, rules, regulations, and court or administrative
orders necessary to conduct the Sale; provided that Merchant shall
cooperate fully with Agent in obtaining such consents.
(b) The inventory taking shall have been completed at each of the
Stores on or before February 1, 1997 and the inventory taking service
shall have issued its final report to Merchant and Agent with regard
to the inventory. As of the Sale Commencement Date, goods
constituting Merchandise located at the Stores shall be no less than
$40 million (Canadian dollars) at Retail Price.
(c) Provided that Agent complies with the terms of Store leases
in the conduct of the Sale other than any restrictions on the ability
to advertise and conduct the Sale as a "Store Closing," "Total
Liquidation," "Going Out Of Business" or similar sale or any
restrictions on a third party conducting the Sale as agent, the
Merchant possessing and the Agent having the right to the undisturbed
and unencumbered use and occupancy of, and the peaceful and quiet
possession of, the Stores and assets currently located thereat and the
services provided thereto throughout the Sale Term, such that Agent
may conduct the Sale in the manner provided herein without
interference of any landlord, governmental agency or other third
party. If Merchant requests that Agent vacate any Store prior to the
completion of the Sale Term, Agent shall comply with such request,
provided that, Merchant shall reimburse Agent for any reduction of the
Agent Amount, any additional expenses or any other amounts due to or
incurred by Agent relating to or incurred as a result of vacating such
Store prior to the completion of the Sale Term.
(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, 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) If the conduct of business in the ordinary course at any
Store is interrupted for any reason other than a casualty or an act of
God, in Agent's discretion (i) the Merchandise at such Store may be
transferred to another Store or Stores and if appropriate an
adjustment to Proceeds and Guaranteed Amount shall be made to reflect
the inability of Agent to conduct the Sale at such Store or Stores.
7. Representations, Warranties and Covenants
(a) The Merchant hereby makes the following representations and
warranties to the Agent, which shall survive the execution and
delivery of this Agreement:
(i) Merchant is a corporation, duly organized, validly
existing and in good standing under the laws of the province of its
incorporation, and has the corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its
business as now being conducted. Merchant is authorized to conduct
business in all provinces in which Stores are located.
(ii) Merchant has, the right, power and authority required
to execute, deliver and perform fully its obligations hereunder.
This Agreement has been duly executed and delivered by Merchant and
constitutes the legal, valid and binding obligation of Merchant,
enforceable in accordance with its terms. No 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 no consent of any
third party is required therefor. No contract or other agreement to
which Merchant is a party or by which Merchant is otherwise bound will
prevent or materially impair the consummation of the Sale at any
location or the other transactions contemplated hereunder.
(iii) Merchant has operated and will continue to operate
the Stores to the Sale Commencement Date in the ordinary course of
business consistent with historical operations, applying procedures,
operations, practices and policies (including, but not limited to,
receipts of inventory at the Stores at a normal level through
January 1, 1997 and at the reduced level through January 14, 1997 that
has been disclosed to Agent) in substantially the same manner as
theretofore applied by Merchant at the Stores. Merchant has not
conducted at the Stores any promotions or advertised sales except
promotions and sales in the ordinary course of business
as described in Exhibit 7(a)(iii).
(iv) Merchant has, or will have as of the Sale Commencement
Date, good and marketable title to all of the Merchandise free and
clear of all liens, claims and encumbrances except for the liens of
Bankers Trust which have been disclosed to Agent prior to execution
of this Agreement. Merchant shall not create, incur, assume or suffer
to exist any security interest, lien or other encumbrance upon or with
respect to any of the Merchandise or Proceeds, except for presently
existing liens which have been disclosed to Agent.
(v) Merchant has maintained its prices of inventory in the
ordinary course, and prices charged to the public for inventory
(whether in-store, by advertisement or otherwise) are the same as set
forth in Merchant's records as of and for the periods indicated, except
for the promotions and sales described in Section 7(a)(iii). All
records since January 1, 1997 relating to all inventory in the Stores
have been or will be made available to Agent upon request, and are true
and accurate in all material respects for purchasing such inventory and
as to the selling price to the public therefor as of the dates and for
the periods of such files and records. Without limiting any of
Merchant's representations and covenants contained herein: (A)
Merchant has not since January 11, 1997 for each item of Merchandise
listed on Exhibit 2(b) and since January 6, 1997 for all other items of
Merchandise, and shall not up to the Sale Commencement Date, remove or
alter any tickets or raise the price of any items of Merchandise; and
(B) Merchant has not and shall not purchase or transfer to or from the
Stores any merchandise or goods outside the ordinary course in
anticipation of the Sale or of the taking of the inventory.
(vi) 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.
(vii) Merchant is not a party to any collective bargaining
agreements with its employees and, to the best of Merchant's knowledge,
no labor unions represent Merchant's employees at the Stores.
(viii) No event of default or event which with the giving of
notice or the passage of time or both has occurred on the part of
Merchant under any Store lease or other agreement relating to the
occupance of the Stores. During the Sale Term, Merchant shall timely
pay all Occupancy Costs and other obligations of Merchant under any
Store lease or other agreement relating to the occupance of the Stores.
(b) Agent represents and warrants to Merchant as follows,
which representations and warranties shall survive the execution of
this Agreement:
(i) Each of the corporations comprising Hilco/Great
American Group are duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and have the
power and authority to consummate the transactions contemplated hereby.
(ii) Agent has the right, power and authority to execute and
deliver this Agreement and perform its obligations hereunder and has
taken all necessary action required to authorize the execution,
delivery, and performance of this Agreement and no further
approval is required for Agent to enter into and deliver this Agreement
and to perform its obligations hereunder.
(iii)This Agreement has been duly executed and delivered by
Agent and constitutes the legal, valid and binding obligation of Agent
enforceable against the Agent in accordance with its terms. No court
order or decree of any federal, province, or local governmental
authority or regulatory body is in effect that would prevent or impair
or is required for Agent's consummation of the transactions contemplated
by this Agreement and no consent of any third party is required therefor.
No contract or other agreement to which 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.
(iv) To Agent's knowledge, no actions or proceedings
have been instituted by or against the Agent, or have been threatened,
which question the validity of this Agreement or any action taken or to
be taken by Agent in connection with this Agreement or that, if
adversely determined, would have a material adverse effect upon Agent's
ability to perform its obligations under this Agreement.
8. Insurance
(a) Merchant shall continue at its cost and expense until the
end of the Sale Term, in such amounts as it currently has in effect,
all of its liability insurance policies including, but not limited to,
its product liability, comprehensive public liability and auto liability
insurance policies covering injuries to persons and property in or in
connection with Merchant's operation of the Stores.
(b) Merchant will provide throughout the Sale Term, at its
expense and not as an Expense hereunder, fire, flood, theft and extended
coverage casualty insurance on the Merchandise in a total amount equal to
no less than the retail value thereof. In the event of a loss to the
Merchandise on or after the date of this Agreement, such Merchandise shall
be excluded from the Sale and the Retail Price and Guaranteed Amount adjusted
accordingly.
(c) Agent shall maintain at Agent's cost and expense from the
Sale Commencement Date until the Sale Termination Date in such amount
as it currently has in effect, liability insurance policies including,
but not limited to, products liability, comprehensive public liability
and auto liability insurance policies covering injuries to persons and
property in or in connection with Agent's agency at the Stores.
9. Defaults
The following shall be "Events of Default" hereunder:
(a) The Merchant or Agent shall fail to perform any material
obligation hereunder, and such failure shall remain uncured or unwaived
seven days after written notice thereof; or
(b) Any representation or warranty made by Merchant or Agent
proves untrue in any material respect when made.
Any party's damages or entitlement to equitable relief on account
of an Event of Default shall be determined by a court of competent
jurisdiction in Illinois.
10. Indemnification
(a) Without limiting any other indemnity provisions contained
herein, Merchant shall indemnify and hold the 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 material failure to
comply with any of its agreements, covenants,representations or
warranties contained in this Agreement;
(ii) any failure of Merchant to pay to its employees any
wages, salaries or benefits due to such employees during the Sale Term;
(iii) any consumer warranty or products liability claims
relating to the Merchandise;
(iv) any liability or other claims asserted by customers,
any of Merchant's employees, or any other person or government authority
against any Agent Indemnified Party (including, without limitation,
claims by employees arising under collective bargaining agreements,
worker's compensation or under the Worker Adjustment Retraining Act),
except for any such claims arising directly from the negligence or
willful misconduct of the Agent; and
(v) the negligence or willful misconduct of Merchant or any
of its officers, directors, employees, agents or representatives.
(b) Without limiting any other indemnity provisions contained
herein, Agent shall indemnify and hold the Merchant 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) Agent's material breach of or failure to comply with
any of its agreements, covenants, representations or warranties
contained in this Agreement;
(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) subject to the right of Agent to conduct the Sale
in accordance with the terms and provisions of this Agreement, any
failure of Agent to comply with the policies and procedures described
in Merchant's Human Resources Policies and Procedures (a copy of which
has been delivered to Agent concurrently with the execution
of this Agreement);
(iv) any claims by any party engaged by Agent as an employee
or independent contractor arising out of such employment; and
(v) the negligence or willful misconduct of Agent or any of
its officers, directors, employees, agents or representatives.
11. Fixtures
If requested by Merchant, Agent shall advertise, in the context
of advertising for the Sale, that furniture and store fixtures (except
leasehold improvements) at the Stores are for sale, and shall contact
and solicit known purchasers and dealers of furniture and store fixtures.
Merchant shall notify Agent if any such furniture and store fixtures are
to be sold and if terms and conditions of sale are to be set or restricted
by Merchant. In consideration of providing such services, Agent shall
retain ten percent (10%) of receipts (net of sales taxes) from sales or
other dispositions of such furniture and store fixtures.
12. Miscellaneous
(a) All communications provided for pursuant to this Agreement
must be in writing, and sent by telecopy or Federal Express or other
overnight delivery service, as follows:
If to the Agent to: Hilco/Great American Group, Inc.
One Northbrook Place
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxx Executive Vice President
and Xxxxxxxx X. Xxxxxxx,
Vice President and General Counsel
If to the Merchant to: Sportdepot Stores Inc.
c/o Sportmart, Inc.
0000 X. Xxxx Xx.
Xxxxx 000
Xxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxxxx Xxxxxxx Xxxx and Xxxxxxx X.Fix
(b) This Agreement shall be construed and enforced in accordance with
the internal laws of the State of Illinois.
(c) This Agreement contains the entire agreement between the parties
hereto, and no variations shall be binding upon any party unless set forth
in a document duly executed by and on behalf of such party.
(d) No consent or waiver, express or implied, by any party, to or of
any breach or default by the other in the performance by the other of its
obligations hereunder shall be deemed or construed to be a consent or a
waiver to or of any other breach or default in the performance by such other
party of the same or any other obligations 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.
(e) This Agreement shall inure to the benefit of and be binding
upon the undersigned, and their respective successors and assigns.
IN WITNESS WHEREOF, the Agent and Merchant hereby execute this
Agreement by their duly authorized representative as a sealed
instrument as of the day and year first written above.
HILCO/GREAT AMERICAN GROUP
By: /S/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
Executive Vice President
SPORTDEPOT STORES INC.
By: /S/ XXXXXXXX X. XXXX
Xxxxxxxx X. Xxxx
Senior Vice President
