Exhibit 10.60
THE JOINT VENTURE FORMED BY
GREAT AMERICAN GROUP,
XXXXXX XXXXXXXX RETAIL PARTNERS, LLC AND
DJM ASSET MANAGEMENT
XXX XXXXXXX XXXXX
XXXXX 000
XXXXXXXXX, XXXXXXXX 00000
January 8, 2002
Tractor Supply Company
000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
Re: Quality Stores, Inc., et al. Debtors
Dear Xx. Xxxxxx:
This letter agreement (the "Amended Letter Agreement") will
serve to amend the letter agreement, dated December 14, 2001, between the
members of the joint venture comprised of Tractor Supply Company ("TSC"), Great
American Group ("Great American"), Xxxxxx Xxxxxxxx Retail Partners, LLC
("GBRP"), and DJM Asset Management ("DJM")(Great American, GBRP and DJM are
collectively referred to herein as "GA/GBRP/DJM", and together with TSC, the
"Joint Venture") (the "Letter Agreement") to reflect the agreement reached
between the members of the Joint Venture in connection with the successful bid
submitted at the auction conducted by Quality Stores, Inc., et al., debtors and
debtors in possession (collectively, the "Debtors") on December 27, 2001 (the
"Auction"), relating to the acquisition, and/or the right to direct the
disposition of, certain assets and/or contractual rights of the Debtors,
including, without limitation, certain merchandise inventories, furniture,
fixtures and equipment, and real estate interests (collectively, the "Assets"),
which disposition rights would be exclusive in nature (the "Transaction"),
pursuant to the terms of the form Agency Agreement submitted by the Joint
Venture on December 26, 2001, as modified during discussions among the Joint
Venture partners in connection with the submission of the successful bide at the
Auction (the "Agency Agreement"). Capitalized terms used herein without
definition shall have the respective meanings ascribed to them in the Agency
Agreement.
Included among the Assets that are covered by the Transaction,
and therefore would be subject to such exclusive acquisition and disposition
rights, are those various (i) owned realty interests and (ii) non-residential
real property leases (including, without limitation, any and all FF&E associated
therewith) that TSC has identified to GB/GBRP/DJM that it desires to acquire by
way of sale and/or assumption and assignment from the Debtors, as the case may
be (collectively, the "TSC Designated
Properties"), which TSC Designated Properties appear in Schedule 1 hereto and
incorporated herein.
The purpose of this Amended Letter Agreement is to
memorialize, for the mutual benefit of the members of the Joint Venture, the
understandings and agreements reached between and among them in respect of the
Transaction, subject in all respects to the conditions set forth in Section 5
below.
1. Successful Bid. The Joint Venture was the successful bidder
at the Auction, pursuant to which the Joint Venture submitted a bid to pay a
Transaction Consideration in the aggregate amount of $104,000,000, in addition
to assuming certain Expense obligations set forth in the Agency Agreement.
2. TSC Designated Properties. Under the Agency Agreement, the
Joint Venture will obtain "designation rights" with respect to 152 of the
Debtors' owned and leased non-residential real property store locations (the
"Stores"). Upon obtaining the approvals set forth in Section 8 below, the Joint
Venture shall designate that the TSC Designated Properties shall be sold,
transferred and conveyed, and/or assumed by the Debtors and thereupon assigned,
as applicable, to TSC (or a designee thereof) on the economic terms and
conditions set forth in Paragraph 4 below. TSC reserves the right to reject any
of the TSC Designated Properties, provided however, there shall be no adjustment
to the TSC Purchase Price in connection therewith. With regard to Stores that
are not TSC Designated Properties and at GA/GBRP/DJM'S option, any TSC
Designated Properties, that are rejected by TSC (collectively, the "Non-TSC
Properties"), GA/GBRP/DJM shall market the Non-TSC Properties for sale, transfer
and conveyance consistent with the terms and provisions of the Agency Agreement;
provided that GA/GBRP/DJM agree that they will not market or sell any of the
Non-TSC Properties to any other farm store chain. In consideration of
GA/GBRP/DJM's marketing and sale efforts with respect to the Non-TSC Properties
and the consideration to be paid by GA/GBRP/DJM pursuant to paragraph 3 hereof,
GA/GBRP/DJM shall be entitled to retain all proceeds and profits realized upon a
disposition of the Non-TSC properties. GB/GBRP/DJM shall be responsible for the
payment to the Debtors, as and when due, of all of the Real Estate Occupancy
Expenses provided for in Section 15.5(b) of the Agency Agreement.
3. Disposition of Debtors' Merchandise Inventories and FF&E.
(a) Under the Agency Agreement, the Joint Venture will acquire the right to
direct the disposition of all of the Debtors' merchandise inventories and
furniture, fixtures and equipment ("FF&E") at the Stores and in the Debtors'
warehouse. The parties agree that GA/GBRP/DJM shall have the exclusive right to
exercise the Joint Venture's right under the Agency Agreement to conduct, as the
Debtors' agent, "going out of business", "store closing", or similar theme sales
form each of the Stores for the purpose of disposing of the all of the
merchandise inventories in all of the Stores and FF&E in the Non-TSC Properties,
in orderly and efficient fashion. Assuming the Debtors' inventory at the closing
of the Transaction has an aggregate cost value of not less than $130 million.
GA/GBRP/DJM shall contribute $70 Million ((the "GA/GBRP/DJM Guaranty") and the
Agency Agreement and other Transaction Documents shall provide that GA/GBRP/DJM
shall pay the GA/GBRP/DJM Guaranty as follows: (i) $67 Million on the Closing
Date
and (ii) the remaining $3 Million into escrow pending the completion of the
physical inventory count at the Closing Locations that have not been completed
as of the Closing Date in accordance with the provisions of the Agency
Agreement. In the event that the aggregate cost value of the Merchandise is less
than $130,000,000 then the GA/GBRP/DJM Guaranty shall be subject to the
adjustments as set forth in the Agency Agreement. GA/GBRP/DJM shall also be
responsible for (i) the payment to the Debtors, as and when due, of all Expenses
incurred in conducting the Sale during the Sale Term as provided in Section 3 of
the Agency Agreement, and (ii) posting and maintaining the Expense L/C in
accordance with Section 3.2(b) of the Agency Agreement.
(b) To the extent that Proceeds of the Sale exceed the sum of
(x) the GA/GBRP/DJM Guaranty Payment (y) Expenses of the Sale, as enumerated in
the Agency Agreement and (z) four percent (4%) of the aggregate Retail Price of
the Merchandise (the "GA/GBRP/DJM Fee") (the sum of (x), (y) and (z), the
"Sharing Threshold"), then all remaining Proceeds of the Sale above the Sharing
Threshold shall be shared seventy-five percent (75%) to GA/GBRP/DJM and
twenty-five percent (25%) to TSC ("TSC Sharing Recovery"). Within 30 days after
the Sale Termination Date, GA/GBRP/DJM and TSC shall reconcile the Proceeds of
the Sale and upon the completion of such reconciliation, GA/GBRP/DJM shall
tender payment of the TSC Sharing Recovery, if any, to TSC. It is further
understood that the FF&E located in the TSC Designated Properties (including any
TSC Designated Properties that are rejected by TSC pursuant to Paragraph 3
hereof) shall not be the subject of GA/GBRP/DJM's disposition efforts, but
instead shall remain in the affected premises at the conclusion of the store
closing sales and become the property of TSC, unless TSC elects to reject such
TSC Designated Property and determines not to transfer the FF&E in such rejected
TSC Designated Property into another TSC Designated Property.
4. TSC Designated Properties Purchase Consideration. TSC
agrees that as part of the Transaction, under which the TSC Designated
Properties shall be sold, transferred, conveyed and assumed by the Debtors and
thereupon assigned to TSC, it shall contribute $34 Million (the "TSC Purchase
Price") in respect of the acquisition cost associated with the TSC Designated
Properties and related FF&E. On the Closing Date, TSC shall pay the TSC Purchase
Price to the Debtors.
5. Indemnification.
(a) GB/GBRP/DJM Indemnification. In connection with any
performance or omission on its/their part with regard to the
transactions contemplated under the Agency Agreement and/or
this Agreement, GB/GBRP/DJM shall indemnify and hold TSC and
its officers, directors, employees, agents and representatives
(the "TSC Indemnified Parties") harmless from and against all
claims, demands, penalties, losses, liability or damage,
including, without limitation, reasonable attorneys' fees and
expenses, asserted directly or indirectly against, any TSC
Indemnified Party resulting from, or related to (including
acts or omissions of persons or entities affiliated with or
acting on behalf of GB/GBRP/DJM):
(i) Except as otherwise provided in the Agency
Agreement or the Approval Order, GB/GBRP/DJM's material breach
of or failure to
comply with any local, state, or federal laws or regulations,
or any of the Joint Venture's agreements and covenants
contained in the Agency Agreement which agreements or
covenants are to be performed on behalf of the Joint Venture
by GB/GARP/DJM pursuant hereto;
(ii) any harassment, discrimination or violation of
any laws or regulations or any other unlawful, tortious or
otherwise actionable treatment of any employees or agents of
Debtors by GB/GBRP/DJM or any of its employees, agents,
independent contractors or other officers, directors or
representatives of GB/GARP/DJM;
(iii) any claims by any party engaged by GB/GBRP/DJM
as an employee or independent contractor arising out of such
engagement;
(iv) any fact or circumstance arising during the Sale
in any of the Closing Locations; and
(v) the gross negligence or willful misconduct of
GB/GBRP/DJM or any of its officer, directors, employees,
agents or representatives.
(b) TSC Indemnification. In connection with any performance or
omission on its part with regard to the transactions
contemplated under the Agency Agreement and/or this Agreement,
TSC shall indemnify and hold GB/GBRP/DJM and its officers,
directors, employees, agents and representatives (the
"GB/GBRP/DJM Indemnified Parties") harmless from and against
all claims, demands, penalties, losses, liability or damage,
including, without limitation, reasonable attorneys' fees and
expenses, asserted directly or indirectly against, any
GB/GBRP/DJM Indemnified Party resulting from, or related to
(including acts or omissions of persons or entities affiliated
with or acting on behalf of TSC):
(i) Except as otherwise provided in the Agency
Agreement or the Approval Order, TSC's material breach of or
failure to comply with any local, state, or federal laws or
regulations, or any of the Joint Venture's agreements and
covenants contained in the Agency Agreement which agreements
or covenants are to be performed on behalf of the Joint
Venture by TSC pursuant hereto;
(ii) any harassment, discrimination or violation of
any laws or regulations or any other unlawful, tortious or
otherwise actionable treatment of any employees or agents of
Debtors by TSC or any of its employees, agents, independent
contractors or other officers, directors or representatives of
TSC;
(iii) any claims by any party engaged by TSC as an
employee or independent contractor arising out of such
engagement;
(iv) the gross negligence or willful misconduct of
TSC or any of its officer, directors, employees, agents or
representatives.
6. Exclusive Transaction. Each party hereby covenants,
acknowledges and agrees that the terms of the Amended Letter Agreement as
outlined in discussions between the members of the Joint Venture during the
Auction and the terms and conditions of the successful bid submitted at the
Auction were premised upon each having accepted the terms and conditions of this
Amended Letter Agreement. As a consequence of the foregoing, subject to
paragraph 9 hereof, each member of the Joint Venture agrees that it/they shall
not enter into a transaction relative to the acquisition by it/them of any of
the Debtors' assets that were the subject of the auction, including, but not
limited to, the TSC Designated Properties, the non-TSC Properties, the Debtors'
merchandise inventories, or the Debtors' FF&E at the Stores, except as is
provided herein or the Agency Agreement, unless otherwise agreed in writing by
the other party(ies) hereto. Nothing contained in this Paragraph 6shall restrict
any party's right to seek to acquire any assets of the Debtors that were not the
subject of the Auction or which are not covered by the definitive Agency
Agreement.
7. Confidentiality. Each member of the Joint Venture
acknowledges and understands that the terms of the Letter Agreement and this
Amended Letter Agreement are confidential and proprietary in nature. Each of
GB/GBRP/DJM and TSC therefore covenant and agree, except as and to the extent
permitted by the Letter Agreement or this Amended Letter Agreement, or as
otherwise required by law or upon advice of counsel, maintain strict
confidentiality with respect to all information delivered to such party pursuant
hereto. The parties acknowledge that TSC has been advised by counsel that it
will likely be required to issue a press release promptly following the issuance
of the Approval Order and that disclosure of the terms of this agreement will be
required under the rules of the Securities Exchange Commission applicable to
TSC.
8. Conditions to Parties Obligations Hereunder. The
performance by either party to this Amended Letter Agreement shall be
conditioned upon the satisfaction of each of the following conditions, unless
such condition is waived in writing by the party for whose benefit such
condition exists:
a. Execution of Agency Agreement. The Joint Venture
and the Debtors shall have executed the Agency
Agreement, which shall be in a form and content
reasonably satisfactory of the Joint Venture;
b. Bankruptcy Court Approval Of Transaction. The
Bankruptcy Court shall have entered one or more
orders, inter alia, approving the Transaction, which
order(s) must be in a form and content that is
reasonably satisfactory to the Joint Venture; and
b. Bankruptcy Court Approval of Transfer of TSC
Designated Properties to TSC. The Bankruptcy Court
shall
have entered one or more orders, inter alia,
approving the sale, transfer, conveyance, assumption
and assignment of the TSC Designated Properties by
the Debtors to TSC, which order(s) must be in a form
and content that is reasonably satisfactory to the
Joint Venture.
8. Binding Nature. The parties hereto have each entered into
this Amended Letter Agreement with the understanding and intent to be bound
thereby. Each party therefore covenants and agrees to use its best efforts to
insure the timely performance of its respective obligations arising under or in
connection with this Amended Letter Agreement.
9. Termination of Agreement. In the event that the Court does
not approve the Transaction as contemplated by the Agency Agreement on or before
January 4, 2002, unless another date is mutually agreed upon by the parties
heretothen the provisions of this Letter Agreement shall terminate and each
party is free to participate in such auction or any subsequent proceeding
related to the sale of the Debtors' assets in their individual capacity without
liability to the other parties under this agreement
If the transaction outlined herein is consistent with your
understanding of our discussions to date, and is otherwise acceptable to TSC,
please sign where indicated below and return a copy of this letter to us. Upon
receipt of your acceptance, we will promptly begin work to meet our mutual goals
as outlined herein. We look forward to working with your organization in
connection with this matter.
Very truly yours,
GREAT AMERICAN GROUP
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------
Xxxxxxxx X. Xxxxxxx
XXXXXX XXXXXXXX RETAIL PARTNERS, LLC
By: /s/ Xxxxx Xxxxxx
--------------------------------
Xxxxx Xxxxxx
DJM Asset Management
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
AGREED AND ACKNOWLEDGED THIS
8th DAY OF DECEMBER 2001:
TRACTOR SUPPLY COMPANY
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Its: President and Chief Operating Officer
cc: Xxxx Xxxxx, Esq.
