Exhibit 10.42
MANAGEMENT AND OPTION AGREEMENT
Management and Option Agreement made as of the 24th day of November,
1998, by and among Retail Entertainment Group, Inc., a New Jersey corporation
("REG") with an address at 000 Xxxxxxxx Xxxxxx, Xxxxx Xxx Xxxxxx 00000, Candy
Candy Acquisition Corporation, a New York corporation ("Candy Corp") with an
address at c/o 000 Xxxxxxxx Xxxxxx, Xxxxx Xxx Xxxxxx 00000 and Hope Associates
LLC, a New Jersey Limited Liability company ("Hope") with an address at c/o 000
Xxxxxxxx Xxxxxx, Xxxxx Xxx Xxxxxx 00000.
Whereas, REG owns and operates through a subsidiary a number of retail
candy stores and would like to purchase certain assets of Jonford Inc.
("Jonford") relating to eight retail candy stores (the "Jonford Stores"), but
has not been able to raise the funds to do so and fears that opportunity to do
so will not remain unless such acquisition can be done quickly;
Whereas, Hope is the shareholder of over 60% of the issued and
outstanding shares of REG, and is willing to arrange for the purchase of Jonford
through Candy Corp, a newly formed subsidiary pursuant to an Agreement of
Acquisition dated as of November 24, 1998 between Candy and Jonford (the
"Acquisition Agreement") and grant REG the Option to purchase Candy Corp, all as
provided below; and
Whereas, As a condition of the foregoing, Hope wishes to receive an
option to purchase shares of REG and REG and Hope wish REG to manage to the
Jonford Stores to be acquired by Candy pursuant to the Acquisition Agreement and
the store at Grand Central Stations (the "GCS Store") which Candy has agreed to
manage pursuant to a Management Agreement dated as of November 24, 1998 between
Candy and Jonford (the "GCS Management Agreement")
Now Therefore, in consideration of the foregoing premises, the parties
agree as follows:
ARTICLE 1
JONFORD ACQUISITION
1.1. Hope has formed Candy Corp and Hope agrees to cause Candy Corp.
and Candy Corp agrees to enter into Acquisition Agreement. Pursuant to the
Acquisition Agreement, Candy Corp agrees to make a down payment of $250,000 and
enter into a promissory note (the "Jonford Note"). In order to pay the down
payment for Candy Corp and provide necessary working capital, Hope are lending
Candy Corp $300,000 (the "Hope Loans")
ARTICLE 2
MANAGEMENT OF STORES
2.1 Services. REG will provide the following services with respect of
the Jonford Stores and the GCS Store
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(a) Management of Jonford Store. REG will be responsible to manage the day
to day operations of the Jonford Stores, merchandise the Jonford
Stores, cause to be hired and manage the staff of the Jonford Stores,
cause the Jonford Stores to open for business as required, make sure
that all bank deposits are deposited into the bank accounts set up by
Candy Corp., daily, provide appropriate records to Candy Corp, and
maintain a clean store, all according to the provisions of Schedule A
hereto, causing bills relating to the operations of the Jonford Stores
to be paid from the "Candy Corp Accounts" provided below; and securing
for the Jonford Stores such insurance as REG shall deem appropriate and
otherwise do such things as to reasonably maximize the profits of the
Jonford Stores.
(b) Reporting to Candy Corp. REG will provide Candy Corp. with regular
management reports regarding sales, cost of goods sold and other
expenses and inventory level. REG will provide Candy Corp. with notice
as to employees hired and fired and salary levels.
(c) Employees Candy Corp. shall approve all salary levels, raises, staffing
levels and hours and monthly payroll budgets that REG will provide to
Candy Corp.. All employees hired to work at the Jonford Stores will be
employees of Candy Corp..
(d) Invoices and Expenses. All invoices and expenses related to the Jonford
Stores will be made in the name of Candy Corp. (or such designee of
Candy Corp. as Candy Corp. may provide in writing) and mailed directly
to Jonford by the supplier. All such invoices shall be invoiced under
the Candy Corp. name and packing slips must be verified, marked with
received dates, and forwarded to Candy Corp.. Candy Corp. shall be
responsible to pay all invoices for suppliers to the Jonford Stores.
(e) Bank Account Candy Corp. will set up one or more depository accounts
(the Candy Corp. Accounts) in its name for the daily cash deposits of
receipts to the Jonford Stores. Candy Corp. agents will be the sole
signatories to this account and REG will have no access to these
accounts. To the extent that individuals who are officers or REG are
also appointed as agents of Candy Corp. for the purposes including the
acting as such signatories, it is agreed and understood that when
authorizing transactions to or from the Candy Corp. Accounts that they
will be acting as agents of and for the benefits of Candy Corp. and not
REG. REG will cause all cash at the GCS Store (less amounts needed to
start operations the next day) to be deposited into Candy Corp.'s
account daily and credit card receipts from the Jonford Store will be
automatically deposited into the Candy Corp. Accounts. All
correspondence, including monthly bank statement will be directly
mailed to Candy Corp., which will promptly cause a copy to be made and
sent to REG of all such statements relating to activity at the GCS
Store during the term of this Agreement.
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(f) GCS Store. REG shall manage the GCS Store pursuant to the terms and
conditions of the Management Agreement between Candy Corp and Jonford
dated November 24. 1998.
2.2. Management Fee. As compensation to REG for its services under this
Agreement, Candy Corp shall pay REG the following amounts (the "Management
Fee"):
(a) Percentage of Sales Six percent (6%) of "Gross Sales" from the
Jonford Stores as defined below; and
(b) Percentage of Excess Margin fifty percent (50%) of "Excess
Margin" of the Jonford Stores as defined below; and
(c) Percentage of GCS Management Fee. 100% of the Management Fee
payable under the GCS Management Agreement; and
(d) Out-of-Pocket Expense. All out-of-pocket expenses related to
Candy Corp. including legal, accounting and travel.
2.3 Certain Definitions and Calculations As used herein:
(a) "Gross Sales" shall mean all sales at the Jonford Stores less
returns, cash shortages and discounts if any;
(b) "Excess Margin" shall mean the amount by which "Cost of Goods
Sold" for any period on an annualized basis is less than 38%
of Gross Sales.
(c) "Cost of Goods Sold" Shall mean amounts paid for inventory
sold in conformity with Generally Accepted Accounting
Principals on a "First in-First Out" basis;
(d) Calculation of Gross Sales and Excess Margin" Gross Sales
and Excess Margin will be calculated at the end of periods
(which will be three months long except for the period ended
February 28, 1999 which may be longer or shorter) ending the
last day of February, May, August, and November, with respect
to the just ended period, except that for the period ended on
the last day of November, there shall be an adjustment, if
necessary, to ensure that the calculation is accurate for the
preceding 12 month period.
2.3 Payment of Management Fee. The payment of amount due under 2.2(a),
(b) and (c) shall occur and be due with respect to a three month period as soon
after the completion of such period as REG is able to calculate such amounts.
2.4 Distributions from Management Account. Upon the request of Candy
Corp, or without such request, from time to time at REG's discretion, REG shall
distribute to Candy Corp, all amounts in the Management Account as are not
needed as a reserve against reasonably anticipated expenses of the Jonford
Stores.
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2.5. Audits. Candy Corp shall be entitled to review or audit at its
expense all records reasonably relating to the management of the Jonford Stores
and the GCS Store
ARTICLE 3
OPTION TO REG
REG shall have the right and option (the "Option") from the date hereof
until November 30, 2001 to purchase all the outstanding stock (the "Stock") of
Candy Corp. The exercise price for the Option shall be equal to (i) the
outstanding balance of the Hope Loans and (ii) any additional capital
contributions or loans made by Hope to Candy Corp. The Option may be exercised
by 30 days written notice by REG to Candy Corp. At the closing of the exercise
of the Option Candy Corp shall deliver a certificate for the Stock duly endorsed
for transfer, and REG shall deliver a bank check for the cash portion of the
purchase price and an assumption agreement, reasonably satisfactory in form and
substance to Candy Corp, of the remaining payments of Candy Corp under its Note
to Jonford.
ARTICLE 4
OPTION TO HOPE
In consideration of all of the foregoing, REG hereby grants Hope an
option to purchase 500,000 shares of REG common stock for $1.25 per share. Such
option may be transferred by Hope to its members or other parties and may be
exercisable until November 30, 2002.
SECTION 6.
MISCELLANEOUS.
6.1 Entire Agreement. This Agreement, the Exhibits, and the Schedules,
contain all of the terms and conditions agreed upon by the parties with
reference to the subject matter and supersede any and all previous agreements,
representations, and communications between the parties, whether written or
oral. This Agreement, including its Exhibits and Schedules, may not be modified
or changed except by written instrument signed by all of the parties, or their
respective successors or assigns.
6.2 Assignment. This Agreement shall not be assigned or assignable by
any party, except as provided above without the express written consent of the
other party. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
6.3 Captions. All section, schedule, and exhibit headings are inserted
for the convenience of the parties and shall not be used in any way to modify,
limit, construe, or otherwise affect this Agreement.
6.4 Counterparts; Facsimile Signatures. This Agreement may be executed
in several counterparts, each of which shall be deemed to be an original and
which together
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shall constitute one and the same instrument. Facsimile signatures shall be of
the same legal effect as if signed originally.
6.5 Waiver. Each of the parties may, by written notice to the other,
(i) extend the time for the performance of any of the obligations or other
actions of the other party; (ii) waive any inaccuracies in the representations
or warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement; (iii) waive compliance with any other
covenants of the other party contained in this Agreement; or (v) waive, in whole
or in part, performance of any of the obligations of the other party. No action
taken pursuant to this Agreement, including, but not limited to, the
consummation of the Closing or any knowledge of or investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action, possessing such knowledge, or performing such investigation or
compliance with the representations, warranties, covenants, and agreements
contained herein. The waiver by any party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent or
similar breach.
6.6 Controlling Law. This Agreement has been entered into the State of
New York and shall be governed by and construed and enforced in accordance with
the laws of New Jersey.
6.7 Gender. Whenever in this Agreement the context so requires,
references to the masculine shall be deemed to include the feminine and the
neuter, references to the neuter shall be deemed to include the masculine and
the feminine, and references to the plural shall be deemed to include the
singular and the singular to include the plural.
6.8 Further Assurances. Each of the parties shall use all reasonable
efforts to bring about the transactions contemplated by this Agreement as soon
as practicable, including the execution and delivery of all instruments,
assignments, and assurances, and shall take or cause to be taken such reasonable
further or other actions necessary or desirable in order to carry out the intent
and purposes of this Agreement.
6.9 Attorneys' Fees. In the event a lawsuit is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the prevailing party shall be entitled to recover such
party's costs of suit and reasonable attorney's fees, through all appeals.
6.10 References to Agreement. The words "hereof," "herein,"
"hereunder," and other similar compounds of the word "here" shall mean and refer
to the entire Agreement and not to any particular section, article, provision,
annex, exhibit, schedule, or paragraph unless so required by the context.
6.11 Notices. Any notice, request, demand, or communication required or
permitted to be given to any provision of this Agreement shall be deemed to have
been delivered, given, and received for all purposes if written and (i) if
delivered personally, by facsimile, or by courier or delivery service, at the
time of such delivery or (ii) if
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directed by registered or certified United States mail, postage and charges
prepaid, addressed to the intended recipient, at the address specified below,
two business days after such delivery to the United States Postal Service.
If to REG: to the address provided above with a copy t
: Xxxx A Share, Esq.
000 Xxxxxxx Xxx.-Xxxxx 0000
Xxx Xxxx, XX 00000
If to Hope or Candy Corp to the address provided above with a copy to:
Xxxxxxx Xxxxxxxxxx
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________New Jersey
Any party may change the address to which notices are to be mailed by giving
notice as provided herein to all other parties.
6.12 Venue. Any litigation arising hereunder shall be instituted only
in New York County New York, the place where this Agreement was executed. All
parties agree that venue shall be proper in that county for all such legal or
equitable proceedings.
6.13 Severability. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant, and/or
provision. In the event that any provision of this Agreement shall finally be
determined to be unlawful, such provision shall be deemed severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
6.14 Rights in Third Parties. Except as otherwise specifically
provided, nothing expressed or implied in this Agreement is intended, or shall
be construed, to confer upon or give any person, form, or corporation, other
than the parties and their respective stockholders or shareholders, any rights
or remedies under or be reason of this Agreement.
6.15 Expenses. Each party shall pay its own expenses in connection with
the negotiation and consummation of the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Candy Candy Acquisition Corporation
___________________________ By: __________________________
Witness Xxxxxxx Xxxxxxxxxx, President
Retail Entertainment Group, Inc.
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___________________________ By: /s/ Xxxx Xxxxxxxxxx .
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Witness Xxxx Xxxxxxxxxx, President
Hope Associates, LLC
___________________________ By: /s/ Xxxxxxx Xxxxxxxxxx .
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Witness Xxxxxxx Xxxxxxxxxx
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