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EXHIBIT 10-L
RETAIL CONVERSION FUNDS AGREEMENT
This Agreement, dated as of December 9, 1996, is made and entered into by
and among Xxxxxx & Company, a Delaware corporation ("Xxxxxx") and SERVISTAR
COAST TO COAST Corporation, a Pennsylvania corporation ("SCC").
WHEREAS, the parties have entered into an Agreement and Plan of Merger of
even date herewith (the "Plan"), and
WHEREAS, as a part of the consideration for entering the Plan, the parties
have agreed that TruServ will provide reimbursement for certain costs expected
to be incurred by shareholders in converting certain aspects of retail stores
systems and other costs related to the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the terms set
forth herein, and intending to be legally bound, the parties agree as follows:
1. The Plan is incorporated by reference in its entirety, and defined
terms in the Plan shall have the same meaning when used herein unless specified
to the contrary. References herein to "Xxxxxx Members" and "SCC Members", when
relating to periods after the Effective Time, refer to members of TruServ who
were formerly members of Xxxxxx or SCC, respectively.
A. CONVERSION FUND
2. The parties agree that TruServ shall make available to SCC Members the
aggregate amount of $14,000,000 (an approximate average of $3,000 per store) to
assist in funding the conversion of certain store systems from the former SCC
systems to Xxxxxx systems (the "Conversion Fund"), as more fully set forth
below.
3. SCC Members will be eligible for allocation of a portion of the
Conversion Fund in an amount, per member store, equal to 2.14% of handled
hardware purchases, such determination to be based on purchases during the
twelve month period preceding application for disbursement from the Conversion
Fund. Notwithstanding the foregoing, the minimum allocation shall be $1,000 per
member store, until such time as the Conversion Fund has been exhausted. The
term "member store" shall not include warehouse locations owned by the SCC
Member, but rather relates only to retail locations.
4. SCC Members may apply for conversion reimbursement from the Conversion
Fund, up to the amount of their allocation as calculated pursuant to paragraph
3 hereof, by completing and submitting a Conversion Fund Application Form and
Agreement in the form attached hereto as Exhibit "1" (the "Conversion
Application"). The Conversion Application must be submitted for preapproval
specifying or estimating the costs expected to be incurred in conversion of the
following:
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(a) Converting to Xxxxxx six digit SKU system
(b) Changing lines of vendors not offering conversion
funds
(c) Upgrading of stores through merchandising and/or
signage arising out of the Merger.
(d) Other miscellaneous costs, to the extent that the
aggregate cost of the foregoing items is less than the $1,000
minimum allocation described above.
5. If the Conversion Application is approved, it will be returned to the
applicant with written confirmation of such approval. After the project has
been completed and the expenses have been incurred, the applicant will receive
the appropriate reimbursement upon submission a copy of the previously approved
Conversion Application, together with invoices or other reasonable evidence of
the expenses; provided, however, that no documentation or evidence will be
required for the miscellaneous expenses described in paragraph 4(d), above.
6. Conversion reimbursement must be applied for no later than one year
after the date that the distribution center servicing the applicant has been
converted and/or consolidated into the commonized TruServ system, unless such
period is extended by TruServ, in its discretion. TruServ will use its best
efforts to attain such commonization as promptly as is practical.
B. INFORMATION SYSTEMS FUND
7. In addition to and not in lieu of the Conversion Fund, TruServ shall
make available to Xxxxxx Members and to SCC Members the aggregate amount of
$10,000,000 (the "Information Systems Fund") to assist owners in defraying a
portion of the cost of software enhancements and/or new computer systems as are
made available by or through TruServ as a result of the Merger and the
commonizing of inventories, pricing, billing, payments, claims, ordering, bin
labels and price tickets, conversion of SKUs, and related business elements
(the "Systems").
8. The Information Systems Fund shall be divided into two equal parts of
$5,000,000 each, one of such parts available to assist Xxxxxx Members with such
expenses, and the other to be available to SCC Members to assist with such
expenses.
9. The parties have not yet determined, as to each membership group,
whether the Information Systems Fund will be distributed via an
application/reimbursement system, such as that applicable to the other Funds
described in this Agreement, or whether a different procedure may be utilized
for either or both groups. The parties agree to pursue a final agreement on
this procedure diligently and in good faith (such agreement to be reached prior
to the Effective Time), and to revise or supplement the Applications as
appropriate based on such final agreement.
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10. If the application/reimbursement procedure is agreed upon for either
or both groups, then the members subject to such procedure shall be eligible
for reimbursement from the Information Systems Fund (until the Fund is
exhausted) only to the extent that they install such Systems and then only up
to the amount of any maximum, per member store as established by TruServ.
11. Such members may apply for conversion reimbursement from the
Information Systems Fund by completing and submitting an Application Form and
Agreement in the form attached hereto as Exhibit "2" (the "Application"). The
Application must be submitted for preapproval specifying or estimating the
costs expected to be incurred in conversion of the applicant's information
systems.
12. If the Application is approved, it will be returned to the applicant
with written confirmation of such approval. After the expenses have been
incurred, the applicant will receive the appropriate reimbursement upon
submission of a copy of the approved application together with invoices or
other reasonable evidence of the expenses.
13. Information Systems Fund reimbursement, where applicable, must be
applied for no later than one year after the date that the distribution center
servicing the applicant has been converted or consolidated into the commonized
TruServ system, unless such period is extended by TruServ, in its discretion.
TruServ will use its best efforts to attain such commonization as promptly as
is practical.
C. RETAIL STORE DEVELOPMENT FUND
14. In addition to and not in lieu of the foregoing, TruServ shall make
available to Xxxxxx Members and SCC Members the aggregate amount of $16,000,000
(the "Retail Store Development Fund") to assist owners in defraying a portion
of the costs of retrofitting and/or expanding an existing store or opening a
new store.
15. The Retail Store Development Fund shall be divided into two equal
parts of $8,000,000 each, one of such parts to be available for reimbursement
to Xxxxxx Members, and the other to be available for reimbursement to SCC
Members.
16. Reimbursements from the Retail Store Development Fund shall be made on
a first come, first served basis for preapproved projects which may include the
following:
- business plan
- new store floor plan
- new fixtures
- new signage
- merchandising assistance
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17. Funds for these projects would be made available as incentives for
owners to undertake preapproved improvements. Examples of the types of
incentives include:
(a) a subsidy of a portion of the interest on amounts financed
by the owner to complete such improvements of 3% (e.g. if owner
is paying 8% on financed portions of the approved project, the
Fund would reduce the interest expense to 5%), and
(b) a reimbursement of 30% of the total down payment for
approved project cost.
18. Unless otherwise determined by management, and until such time as the
Fund is exhausted, members will be eligible for reimbursement, up to a maximum
of 10% of the project cost, plus the 3% interest subsidy described above if
the member finances the project.
19. Members may apply for reimbursement from the Retail Store Development
Fund, up to the amount described in paragraph 18 hereof, by completing and
submitting an Application Form and Agreement in the form attached hereto as
Exhibit "2" (the "Application"). The Application must be submitted for
preapproval specifying or estimating the costs expected to be incurred in the
project.
20. If the Application is approved, it will be returned to the applicant
with written confirmation of such approval. After the expenses have been
incurred, the applicant will receive the appropriate reimbursement upon
submission of a copy of the approved Application together with invoices or
other reasonable evidence of the expenses.
21. Retail Store Development Fund reimbursement must be applied for no
later than one year after the date that the distribution center servicing the
applicant has been converted and consolidated into the commonized TruServ
system, unless such period is extended by TruServ, in its discretion. TruServ
will use its best efforts to attain such commonization as promptly as is
practical.
D. REPAYMENT OBLIGATION
22. As further specified in the Conversion Application and the
Application, any members receiving reimbursement from any of the Funds
described herein shall be obligated to repay a portion of the amount received
if during the five full fiscal years after receipt thereof, such member (i)
ceases to be a member in good standing for any reason, and/or (ii) decreases
purchases from TruServ materially (i.e. reduction of 15% or more during any
such full fiscal year as compared to the member's purchases in the full fiscal
year preceding the submission of the Conversion Application and/or the
Application).
23. The portion which must be repaid by the member in the event of a
default as described in Paragraph 22 shall be as follows:
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Year of Default (Based Upon Number of Amount to be
Complete Fiscal Years After Receipt of Funds) Refunded
0 120%
1 100%
2 80%
3 60%
4 40%
5 -0-
24. In the event of a repayment obligation under Paragraphs 22 and 23
hereof, all amounts due shall be immediately due and payable, and shall be
added to all other amounts due under the member's membership agreement. In
addition to all rights of TruServ under such membership agreement, the member
will agree, in the Application, that TruServ may, but is not required to, set
off any obligations hereunder against any stock or notes issued or to be issued
to the member.
25. The parties acknowledge that, if a procedure other than
application/reimbursement is used for Xxxxxx Members and/or SCC Members for the
Information Systems Fund, then an equitable refund system will be jointly
developed promptly for such procedure.
26. Upon written consent of TruServ, in its sole discretion, a Member may
assign his or her rights and obligations under the Application to a third party
who agrees to assume such obligations.
WITNESS the due execution hereof as of the date first specified above.
XXXXXX & COMPANY
By /s/Xxxxxx X. Xxxxxx
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SERVISTAR COAST TO COAST CORPORATION
By /s/Xxxx X. Xxxxx
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APPLICATION AND AGREEMENT FOR CONVERSIONS FUNDS
This Application and Agreement for Conversion Funds is submitted on , 19
by the undersigned, , a former member of SERVISTAR COAST TO COAST
Corporation, and a member in good standing of TruServ Corporation ("TruServ").
1. The undersigned ("Applicant") hereby applies for pre-approval for
reimbursement from the Conversion Fund for the following expenses:
(a) Converting to Xxxxxx six digit SKU system
(b) Changing lines of vendors not offering conversion
funds
(c) Upgrading of stores through merchandising and/or
signage arising out of the Merger.
(d) Other miscellaneous costs, to the extent that the
aggregate cost of the foregoing items is less than $1,000.
2. Applicant has attached a description of the project for which approval
is sought including estimated costs and any other supporting materials as have
been requested by TruServ to support this Application.
3. Applicant acknowledges that pre-approval of the project is required, and
that, after the project is completed, a copy of this Application, executed and
approved by TruServ where indicated below, must be forwarded to TruServ with
invoices or other documentation of expenses reasonably acceptable to TruServ;
provided, however, that no documentation will be required for the Conversion
Fund to the extent the aggregate total of documented expenses are less than
$1,000.
4. Applicant agrees to refund to TruServ all or a portion of any
distribution from the Conversion Fund in the event that the Applicant, during
the first full five fiscal years following the date of this Application, either
(i) ceases to be a member in good standing of TruServ for any reason, and/or
(ii) decreases purchases from TruServ materially (i.e. more than 15% during any
given fiscal year as compared to purchases during the full fiscal year preceding
the date of this Application.)
5. In the event of a default as described in the preceding paragraph,
Applicant agrees to repay to TruServ immediately that portion of the amounts
distributed hereunder as follows:
EXHIBIT 1
7
Date of Default (Based Upon Number of Amount to be
Complete Fiscal Years After Receipt of Funds) Refunded
0 120%
1 100%
2 80%
3 60%
4 40%
5 -0-
6. In the event of any repayment obligation as described herein, the
amount due shall be immediately due and payable without demand, and shall be
added to all other amounts due under the Applicant's membership agreement. In
addition to all rights of TruServ under such membership agreement, Applicant
agrees that TruServ may, but is not required to, set off any obligations
hereunder against any stock or notes issued or to be issued to the Applicant by
TruServ.
INTENDING TO BE LEGALLY BOUND, Applicant has duly executed this
Application and Agreement as of the date set forth above.
APPLICANT:
Store Number: ______________________ _______________________________
Address: ___________________________ By_____________________________
Application Approved:
TruServ Corporation
By__________________________________
Authorized Officer
Date: ______________________________
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APPLICATION AND AGREEMENT FOR INFORMATION
SYSTEMS FUND/RETAIL STORE DEVELOPMENT FUND
This Application and Agreement for Information Systems Fund/Retail Store
Development Fund is submitted on ,19 by the
undersigned , a former member of (CIRCLE ONE) (Xxxxxx & Company/SERVISTAR
COAST TO COAST Corporation) , and a member in good standing of TruServ
Corporation ("TruServ").
1. The undersigned ("Applicant") hereby applies for pre-approval for
reimbursement from the following Fund(s):
Check one or both, as applicable:
Information Systems Fund ------
Retail Store Development Fund ------
2. As to each of the Funds for which Application is being made, the
Applicant has attached a description of the projects for which approval is
sought, including estimated costs and any other supporting materials as have
been requested by TruServ to support this Application.
3. Applicant acknowledges that pre-approval of the project is required, and
that, after the project is completed, a copy of this Application, executed and
approved by TruServ where indicated below, must be forwarded to TruServ with
invoices or other documentation of expenses reasonably acceptable to TruServ.
4. Applicant agrees to refund to TruServ all or a portion of any
distribution from either of the Funds described above in the event that the
Applicant, during the first full five fiscal years following the date of this
Application, either (i) ceases to be a member in good standing of TruServ for
any reason, and/or (ii) decreases purchases from TruServ materially (i.e. more
than 15% during any given fiscal year as compared to purchases during the full
fiscal year preceding the date of this Application.)
5. In the event of a default as described in the preceding paragraph,
Applicant agrees to repay to TruServ immediately that portion of the amounts
distributed hereunder as follows:
EXHIBIT 2
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Date of Default (Based Upon Number of Amount to be
Complete Fiscal Years After Receipt of Funds) Refunded
0 120%
1 100%
2 80%
3 60%
4 40%
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6. In the event of any repayment obligation as described herein, the
amount due shall be immediately due and payable without demand, and shall be
added to all other amounts due under the Applicant's membership agreement. In
addition to all rights of TruServ under such membership agreement, Applicant
agrees that TruServ may, but is not required to, set off any obligations
hereunder against any stock or notes issued or to be issued to the Applicant by
TruServ.
INTENDING TO BE LEGALLY BOUND, Applicant has duly executed this
Application and Agreement as of the date set forth above.
APPLICANT:
Store Number: ______________________ _______________________________
Address: ___________________________ By_____________________________
Application Approved:
TruServ Corporation
By__________________________________
Authorized Officer
Date: ______________________________
