MANAGEMENT EXPENSE REIMBURSEMENT AGREEMENT, dated as of August 20, 2002.
BY AND BETWEEN: MAYOR'S JEWELERS, INC., a company
incorporated under the laws of Delaware and
having its head office at 00000 Xxxxxxxxx
00xx Xxxxxx Xxxxxxx, XX 00000 (hereinafter
referred to as "Mayor's")
AND: XXXXX XXXXX & SONS INC., a company
incorporated under the laws of Canada and
having its head office at 1240 Xxxxxxxx
Square, Montreal, (Quebec) (hereinafter
referred to as "Birks")
THIS AGREEMENT WITNESSETH THAT, in consideration of the mutual covenants and
premises herein contained, it is agreed by and between the Parties as follows:
ARTICLE ONE
INTERPRETATION
1.1. DEFINITIONS. For the purposes hereof, the following words and phrases
shall have the following meanings, respectively, unless otherwise
specified by the context:
(a) "Advisory, Management and Corporate Services" shall have the
meaning ascribed thereto in Section 2.1 and shall be
hereinafter referred to as AMCS.
(b) "Agreement" shall mean this Consulting Agreement and all
instruments supplemental hereto or any amendment or
confirmation hereof; "herein", "hereof", "hereto" and
"hereunder" and similar expressions mean and refer to this
Agreement and not to any particular Article, Section,
Subsection or other subdivision.
(c) "CEO" shall mean the person then designated by the Board of
Directors of Mayor's as the Chief Executive Officer of
Mayor's.
(d) "Independent Committee" shall mean a committee composed of two
or more independent members of the Board of Directors of
Mayor's.
(e) "Event of Default" shall have the meaning ascribed thereto in
Section 4.2.
(f) "fiscal year" shall mean a fiscal year of Mayor's.
1
(g) "Parties" shall mean Mayor's and Birks and "Party" shall mean
any one of them.
1.2 HEADINGS. The division of this Agreement into Articles, Sections,
Subsections and other subdivisions and the insertion of headings are
for convenience or reference only and shall not affect or be utilized
in the construction or interpretation hereof.
1.3 SEVERABILITY. Any Article, Section, Subsection or other subdivision of
this Agreement or any other provision of this Agreement which is, or
becomes, illegal, invalid or unenforceable shall be severed here from
and shall be ineffective to the extent of such illegality, invalidity
or unenforceability and shall not affect or impair the remaining
provisions hereof, which provisions shall be severed from any illegal,
invalid or unenforceable Article, Section, Subsection or other
subdivision of this Agreement or any other provisions of this
Agreement.
1.4 ENTIRE AGREEMENT. This Agreement, together with any documents to be
delivered pursuant hereto or thereto, constitute the entire agreement
between the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties.
1.5 WAIVER. No waiver of any of the provisions of this Agreement shall be
deemed to constitute a waiver of any other provisions (whether similar
or not) nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided in writing and duly executed by the Party
to be bound thereby.
1.6 GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the Laws of the State of Delaware
applicable therein.
1.7 CURRENCY. Unless otherwise indicated, all dollar amounts in this
Agreement are expressed in United States dollars.
ARTICLE TWO
SERVICES
2.1 REVIEW OF PROJECT SCHEDULE. For each fiscal year under this Agreement,
the CEO of Mayor's shall present a proposed schedule to the Independent
Committee setting forth (i) the projects for which Birks' services will
be retained for that fiscal year and (ii) the anticipated costs of such
services (a "Project Schedule"). For the current fiscal year, the CEO
shall present the Project Schedule to the Independent Committee within
60 days of execution of this Agreement. For each subsequent fiscal year
under this Agreement, the CEO shall present a Project Schedule to the
2
Independent Committee by the end of the first quarter of the fiscal
year to which such Project Schedule applies. In each fiscal year, the
Independent Committee shall review the Project Schedule and approve the
Project Schedule either (i) as proposed by the CEO or (ii) as modified
by the Independent Committee in consultation with the CEO. Once
approved by the Independent Committee, a Project Schedule may be
amended by the CEO, in his discretion, to reflect changes in events,
circumstances or the requirements of Mayor's; provided that, any
material amendment shall be approved by the Independent Committee. By
the end of the first quarter of each fiscal year under this Agreement,
the CEO shall present a report to the Independent Committee summarizing
the progress of projects commenced under the Project Schedule for the
preceding fiscal year, whether completed or continuing, and the costs
at year-end associated with such projects. Notwithstanding anything to
the contrary herein contained, at any time during the pendency of this
Agreement the Independent Committee shall have authority to
investigate, audit, review or otherwise examine any services to be
provided by Birks hereunder, including without limitation, the quality,
cost, success or failure, and any other measure of the services to be
provided hereunder as the Independent Committee deems appropriate. The
Independent Committee shall consult with and advise the CEO of Mayor's
as the Independent Committee deems appropriate.
2.2 ADVISORY, MANAGEMENT AND CORPORATE SERVICES. On Mayors' request and in
accordance with a Project Schedule approved by the Independent
Committee, Birks agrees to provide whatever of the following services
(collectively known as the "AMCS") as might appear on a Project
Schedule and they might mutually agree:
(a) Consult, review and provide Mayor's with general guidance with
respect to, strategic issues and make recommendations as to
the development, planning and formulation of business
strategies;
(b) Consult, review and provide Mayor's with assistance concerning
merchandising, including but not limited to merchandise plans,
merchandise selection, purchase order commitments, merchandise
consignment agreements, vendor agreements, return-to-vendor
agreements, and similar agreements;
(c) Consult, review and provide Mayor's with assistance concerning
inventory management and merchandise administration, including
but not limited to providing recommendations on model stock
development, automatic inventory replenishment systems, stock
balancing, store allocation, inventory aging and slow moving
stock disposals;
(d) Consult, review and provide Mayor's with assistance concerning
gross-margin improvement, including but not limited to
pricing, merchandise xxxx-ups, merchandise exclusivity,
3
inventory sales and inventory xxxx-xxxxx, merchandise
write-offs.
(e) Consult, review and provide Mayor's with assistance concerning
all financial matters or other areas that may affect Mayor's
financial position, income from operations and cash flow,
including but not limited to financial arrangements, financial
projections and financing structures and models, reporting
systems and controls, capital expenditures or disposition of
assets, settlement of all nature, cash availability;
(f) Consult, review and provide Mayor's with assistance concerning
marketing and advertising, including but not limited to
strategy, research, creative direction, public relation and
events;
(g) Consult, review and provide Mayor's with assistance concerning
relations and/or negotiations with external bodies and other
companies, including but not limited to banks and financial
institutions, insurance companies, litigation parties and
governmental authorities;
(h) Consult, review and provide Mayor's with assistance concerning
the control, reduction and elimination of general operating
expenses including hiring, terminating employees; appointing
or terminating consultants; compensation plan, and insurance
renewals;
(i) Consult, review and provide Mayor's with assistance concerning
the preparation and implementation of management reports,
business plans, strategic plans, information systems and in
any necessary coordination relating thereto; and
(j) All other additional services that may be required by Mayor's.
2.2 REPRESENTATIONS AND WARRANTIES. Birks hereby represents and warrants to
Mayor's as follows and acknowledges that Mayor's is relying upon such
representations and warranties in connection with this agreement:
(a) the personnel of Birks will have the required skills and
capacity to provide AMCS in accordance with this Agreement;
and
(b) Birks represents that the amounts to be invoiced to Mayor's
shall be reasonable in all circumstances, having regard as to
the nature of the services to be rendered, the qualifications
of the person providing such services and generally prevailing
market conditions, and in accordance with Section 3.1 hereof.
4
2.3 STANDARD OF PERFORMANCE. The personnel of Birks will perform AMCS in a
professional and prudent manner, using sound and proven principles and
procedures.
2.4 ACCESS TO MAYOR'S. Mayor's agrees that in order for Birks to perform
its duties under this Agreement, the personnel of Birks providing AMCS
must have full access to Mayor's offices, stores, properties, other
facilities, books and records, officers, directors, employees, agents,
accountants and counsel and Mayor's hereby covenants that, unless
providing such access will have a material adverse effect on Mayor's
business, it will provide Birks with such access and cause its
officers, directors, employees, agents, accountants and counsel to
cooperate with Birks in the provision of AMCS to Mayor's.
2.5 NOTIFICATION. Each Party shall forthwith notify the other Party of any
circumstances or facts that materially and adversely affect or could
reasonably be expected to materially and adversely affect such Party's
performance of its obligations hereunder.
ARTICLE THREE
FEES - LIABILITY
3.1 FEES. Effective the date hereof, Mayor's shall pay to Birks, in
consideration of the AMCS, fees for services rendered by each employee
of Birks who has provided AMCS to Mayor's under a Project Schedule
approved by the Independent Committee. Such fees shall reflect the
total direct (such as salaries, bonuses and benefits) and indirect
costs (such as training, occupancy and administration) incurred by
Birks to employ each such Birks employee during the period such
employee provided AMCS.
3.2 OUT-OF-POCKET DISBURSEMENTS. Mayor's will reimburse Birks for the
following out-of-pocket disbursements reasonably and actually incurred
by Birks in the performance of AMCS:
(a) lodging and transportation expenses incurred by the personnel
of Birks;
(b) the cost of copies, prints, photographs, long-distance
telephone calls, delivery by messenger, etc.; and
(c) such other reasonable out-of-pocket disbursements.
3.3 INVOICES. Birks will invoice Mayor's for amounts payable pursuant to
Sections 3.1 and 3.2. With respect to Section 3.2, reasonable
documentation with respect to out-of-pocket expenses incurred by Birks
will be provided to Mayor's upon request. Each invoice will be itemized
to indicate, among other things, each Birks employee who during the
5
prior calendar month rendered AMCS, the number of hours worked by such
employee, and details of out-of-pocket disbursements and expenses
covered by such invoice. Each invoice shall be due and payable by
Mayor's upon 30 days of receipt.
3.4 MAXIMUM LIABILITY. Birks' maximum liability to Mayor's, its directors,
officers, shareholders, or agents, in the aggregate, arising for any
reason out of or relating to this engagement, whether a claim in tort,
contract, or otherwise shall be limited to the amount of monthly fees
paid by Mayors to Birks under this Agreement.
ARTICLE FOUR
TERM; REMEDIES
4.1 TERM. This Agreement will become effective on the date first mentioned
above and will remain in effect for an initial period of one year from
that date. The Agreement shall automatically renew for additional
one-year terms unless otherwise terminated.
4.2 TERMINATION. Birks or the Independent Committee shall have the right to
terminate this Agreement upon the occurrence of an Event of Default if
such default is not cured in 10 business days. Birks or the Independent
Committee may terminate this Agreement upon 90 days notice to the other
Party prior to the end of a term.
4.3 EVENT OF DEFAULT. An "Event of Default" will mean any of the following:
(a) The failure by any Party to perform or fulfill any obligation
pursuant to the Agreement;
(b) The bankruptcy of any Party or the making by such Party of an
assignment for the benefit of creditors, or the appointment of
a trustee or receiver and manager or liquidator to such Party
for all or a substantial part of its property, or the
commencement of bankruptcy, reorganization, arrangement,
insolvency or similar proceedings by or against such Party
under the laws of any jurisdiction, except where such
proceedings are defended in good faith by such Party.
4.4 REMEDIES. If any Event of Default shall have occurred to any Party,
then the other Party may exercise the remedies permitted by the law and
the Agreement shall immediately terminate and all amounts shall become
due and payable.
4.5 DEFAULT INTEREST. If any Party fails to pay as and when due and payable
any amount hereunder, then such Party shall pay interest on such amount
from the due date up to and including the date when such amount and all
interests thereon are paid in full at the rate per annum equal to 18%
(1.5% per month) Such interest shall be payable on demand.
6
ARTICLE FIVE
GENERAL
5.1 NOTICES. Any notice, consent, approval, direction or other instrument
required or permitted to be given hereunder shall be in writing and
given by delivery or sent by telex, telecopier or similar
telecommunication device and addressed:
(a) in the case of Mayor's:
Mayor's Jewelers, Inc.
00000 Xxxxxxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Attention: Chief Administrative Officer
(b) in the case of Birks to:
Xxxxx Xxxxx & Sons Inc
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx,
X0X 0X0, Xxxxxx
Attention: Chief Financial Officer
Any notice, consent, approval, direction or other instrument given as
aforesaid shall be deemed to have been effectively given and received,
if sent by telex, telecopier or similar telecommunications device on
the next business day following such transmission or, if delivered, to
have been given and received on the date of such delivery. Any Party
may change its address for service by written notice given as
aforesaid.
7
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and at
the place first above mentioned.
MAYOR'S JEWELERS, INC.
By: /s/ Xxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Operating Officer and
Senior Vice President
XXXXX XXXXX & SONS INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxxx
Title: President and
Chief Executive Officer
8
