COMPREHENSIVE AGENCY AGREEMENT by and between A JOINT VENTURE COMPRISED OF KRC CAPITAL SERVICES, LLC, GORDON BROTHERS GROUP, LLC, THE NASSI GROUP, LLC, SB CAPITAL GROUP, LLC AND DJM REALTY SERVICES, LLC as Agent and THE PENN TRAFFIC COMPANY AND ITS...
by
and between
A
JOINT VENTURE COMPRISED OF KRC CAPITAL SERVICES, LLC, XXXXXX XXXXXXXX GROUP,
LLC, THE NASSI GROUP, LLC, SB CAPITAL GROUP, LLC AND DJM REALTY SERVICES,
LLC
as
Agent
and
THE
PENN TRAFFIC COMPANY AND ITS DEBTOR AFFILIATES
as
Merchant
Dated
as of December 4, 2009
TABLE
OF CONTENTS
Section
1.
|
Defined
Terms
|
1
|
||
Section
2.
|
Appointment
of Agent
|
5
|
||
Section
3.
|
Assets
to be Sold by Agent
|
5
|
||
3.1
|
Assets
|
5
|
||
3.2
|
Excluded
Assets
|
6
|
||
3.3
|
Certain
Definitions
|
6
|
||
Section
4.
|
Consideration
to Merchant and Agent
|
7
|
||
4.1
|
Payments
to Merchant
|
7
|
||
4.2
|
Consideration
to Merchant
|
8
|
||
4.3
|
Consideration
to Agent
|
8
|
||
4.4
|
Method
and Timing of Payment
|
9
|
||
4.5
|
Security
|
9
|
||
4.6
|
Replenishment
Goods
|
10
|
||
Section
5.
|
Sale
and Assignment of Properties
|
10
|
||
5.1
|
Owned
Properties
|
10
|
||
5.2
|
Leased
Properties
|
11
|
||
5.3
|
Covenants
of Merchant Regarding Sale of Properties
|
12
|
||
Section
6.
|
Deliveries
|
13
|
||
|
||||
Section
7.
|
Expenses
of the Store Closing Sale
|
13
|
||
7.1
|
Expenses
|
13
|
||
7.2
|
Other
Expenses of the Comprehensive Sale
|
16
|
||
7.3
|
Payment
of Expenses
|
16
|
||
Section
8.
|
Expenses
with Respect to Properties
|
16
|
||
8.1
|
Marketing
Period Costs - Owned Properties
|
16
|
||
8.2
|
Marketing
Period Costs - Leased Properties
|
17
|
||
8.3
|
Limitation
on Marketing Period Costs
|
17
|
||
Section
9.
|
Inventory
Valuation
|
18
|
||
9.1
|
Gross
Rings
|
18
|
||
9.2
|
Valuation
|
18
|
||
Section
10.
|
Store
Closing Sale Term; Marketing Period for Properties
|
18
|
||
10.1
|
Term
|
18
|
||
10.2
|
Vacating
the Stores
|
18
|
||
10.3
|
Marketing
Period
|
18
|
||
Section
11.
|
Conduct
of the Store Closing Sale
|
19
|
||
11.1
|
|
Rights
of Agent
|
|
19
|
i
11.2
|
Terms
of Sales to Customers
|
20
|
||
11.3
|
Deposit
of Store Closing Sale Proceeds
|
20
|
||
11.4
|
Sales
Taxes
|
20
|
||
11.5
|
Supplies
|
20
|
||
11.6
|
Returns
of Merchandise
|
21
|
||
11.7
|
Gift
Certificates
|
21
|
||
11.8
|
Manufacturers’
Coupons
|
21
|
||
Section
12.
|
Comprehensive
Sale Reconciliation
|
21
|
||
Section
13.
|
Employee
Matters
|
21
|
||
13.1
|
Merchant’s
Employees
|
21
|
||
13.2
|
Termination
of Employees
|
22
|
||
13.3
|
Payroll
Matters
|
22
|
||
13.4
|
Employee
Retention Bonuses
|
22
|
||
Section
14.
|
Representations,
Warranties, Covenants and Agreements
|
22
|
||
14.1
|
Representations,
Warranties, Covenants and Agreements of Merchant
|
22
|
||
14.2
|
Representations,
Warranties and Covenants of Agent
|
28
|
||
Section
15.
|
Conditions
Precedent to Effectiveness
|
28
|
||
15.1
|
Conditions
Precedent to Obligations of Both Merchant and Agent
|
28
|
||
15.2
|
Additional
Conditions Precedent to Obligations of Agent
|
29
|
||
Section
16.
|
Insurance;
Risk of Loss
|
31
|
||
16.1
|
Merchant’s
Liability Insurance
|
31
|
||
16.2
|
Merchant’s
Casualty Insurance
|
31
|
||
16.3
|
Agent’s
Insurance
|
31
|
||
16.4
|
Worker’s
Compensation Insurance
|
32
|
||
16.5
|
Risk
of Loss
|
32
|
||
16.6
|
Force
Majeure
|
32
|
||
16.7
|
Non-Assumption
of Liability
|
33
|
||
Section
17.
|
Indemnification
|
33
|
||
17.1
|
Merchant
Indemnification
|
33
|
||
17.2
|
Agent
Indemnification
|
33
|
||
Section
18.
|
Events
of Default and Remedies
|
34
|
||
18.1
|
Events
of Default
|
34
|
||
18.2
|
Remedies
|
34
|
||
Section
19.
|
Break-Up
Fee/Expense Reimbursement
|
34
|
||
Section
20.
|
Miscellaneous
|
35
|
||
20.1
|
Notices
|
35
|
||
20.2
|
Governing
Law; Consent to Jurisdiction
|
36
|
||
20.3
|
|
Entire
Agreement
|
|
36
|
ii
20.4
|
Amendments
and Waivers
|
37
|
||
20.5
|
Setoff
|
37
|
||
20.6
|
No
Waiver
|
37
|
||
20.7
|
Successors
and Assigns
|
37
|
||
20.8
|
Execution
in Counterparts; Facsimile Signatures
|
37
|
||
20.9
|
Section
Headings
|
37
|
||
20.10
|
Survival
|
37
|
||
20.11
|
No
Third Party Beneficiaries
|
37
|
||
20.12
|
Further
Assurances; Power of Attorney
|
37
|
||
20.13
|
|
Security
Interest
|
|
38
|
iii
LIST
OF EXHIBITS
EXHIBIT
4.1(c)(i)
|
Merchandise
Threshold Adjustment Schedule
|
|
EXHIBIT
4.1(c)(ii)
|
Pharmacy
Products Adjustment Schedule
|
|
EXHIBIT
4.1(c)(iii)
|
Patient
Prescriptions Adjustment Schedule
|
|
EXHIBIT
4.5
|
Letter
of Credit
|
|
EXHIBIT
7.1(a)(ix)
|
Per
Store Per Diem Occupancy Expense Schedule
|
|
EXHIBIT
7.1(l)
|
Per
Distribution Center Per Diem Occupancy Expense Schedule
|
|
EXHIBIT
8.2
|
Marketing
Period Occupancy Expense Schedule
|
|
EXHIBIT
8.3
|
Repairs
Required to be Made Under Leases
|
|
EXHIBIT
13.3
|
Payroll
Matters
|
|
EXHIBIT
14.1(d)
|
Promotions
and Sales
|
|
EXHIBIT
14.1(f)
|
Cost
Factor Threshold Adjustment Schedule
|
|
EXHIBIT
14.1(g)
|
Store
Goods
|
|
EXHIBIT
14.1(l)
|
Historic
Sales
|
|
EXHIBIT
14.1(n)(i)
|
Lease
Defaults
|
|
EXHIBIT
14.1(n)(ii)
|
Items
Not In Working Order
|
|
EXHIBIT
14.1(r)
|
Unpaid
Advertising Liabilities
|
|
EXHIBIT
14.1(t)(ii)
|
Condemnation
Proceedings
|
|
EXHIBIT
14.1(t)(iii)
|
Lease
Terms, Breach, Default
|
|
EXHIBIT
14.1(u)
|
Repair
and Maintenance of Owned Properties
|
|
EXHIBIT
14.1(v)
|
Repair
and Maintenance of Leased Properties
|
|
EXHIBIT
15.1
|
|
Order
|
iv
This
Comprehensive Agency Agreement (this “Agreement”) is made
and entered into as of this 3rd day of December 2009, by and between a joint
venture comprised of KROC Capital Services, LLC, Xxxxxx Xxxxxxxx Group, LLC, The
Nassi Group, LLC, SB Capital Group, LLC and DJM Realty Services, LLC, as agent
(the “Agent”),
on the one hand, and The Penn Traffic Company, a Delaware corporation, its
debtor affiliates, and their respective chapter 11 estates (jointly and
severally, the “Merchant”), on the
other hand.
RECITALS
WHEREAS,
Merchant is a specialty retailer operating supermarkets located throughout the
northeastern United States;
WHEREAS,
on November 18, 2009 (the “Filing Date”),
Merchant filed voluntary petitions (collectively, the “Petition”) for relief
under chapter 11 of Title 11, United States Code (the “Bankruptcy Code”), in
the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”)
where the Merchant’s case (the “Case”) is currently
pending; and
WHEREAS,
Agent desires to act as the exclusive agent to Merchant in connection with the
sale or other disposition of the Assets and Merchant desires that Agent act as
Merchant’s exclusive agent in connection with the sale or other disposition of
the Assets and other matters as specified herein (as further described below,
the “Comprehensive
Sale”), including, without limitation, the conduct of a
going-out-of-business, store closing, or similar such sale (as further described
below, the “Store
Closing Sale”);
NOW
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Agent and Merchant hereby agree as
follows:
Section
1. Defined
Terms. Each of the terms set forth below is defined in the
referenced section of this Agreement set forth opposite such term
below.
Defined
Term
|
Section
Reference
|
|
Adjustment
Amount
|
4.4(d)
|
|
Agent
|
Preamble
|
|
Agent
Claim
|
16.5
|
|
Agent’s
Fee
|
4.1(b)
|
|
Agent
Indemnified Parties
|
17.1
|
|
Agreement
|
Preamble
|
|
Alternative
Transaction
|
19(a)
|
|
Assets
|
3.1
|
|
Bakery/Deli
Materials
|
|
3.3
|
Defined
Term
|
Section
Reference
|
|
Bankruptcy
Code
|
Recitals
|
|
Bankruptcy
Court
|
Recitals
|
|
Beneficiaries
|
4.5
|
|
Benefits
Cap
|
7.1(a)
|
|
Bid
Procedures Order
|
15.1(b)
|
|
Break-Up
Fee
|
19(a)
|
|
Case
|
Recitals
|
|
Central
Services Expenses
|
7.1
|
|
Closing
Date
|
15.1(d)
|
|
Comprehensive
Agency Documents
|
14.1(c)
|
|
Comprehensive
Sale
|
Recitals
|
|
Comprehensive
Sale Proceeds
|
3.3
|
|
Cost
Factor
|
14.1(f)
|
|
Cost
Factor Threshold
|
14.1(f)
|
|
Cure
Amounts
|
5.2(e)
|
|
Customer
Information
|
10.1
|
|
Distribution
Centers
|
3.1(d)
|
|
Dropout
Date
|
5.2(g)
|
|
Dropout
Notice
|
5.2(g)
|
|
Environmental
Laws
|
14.1(x)
|
|
Events
of Default
|
18.1
|
|
Excluded
Assets
|
3.2
|
|
Excluded
Benefits
|
7.1
|
|
Excluded
Stores
|
3.3
|
|
Exercising
Party
|
20.5
|
|
Expense
Reimbursement
|
19(a)
|
|
Expenses
|
7.1
|
|
FF&E
|
3.1(d)
|
|
Filing
Date
|
Recitals
|
|
Final
Reconciliation
|
12
|
|
GECC
|
|
4.5
|
2
Defined
Term
|
Section
Reference
|
|
Gift
Cards
|
11.7
|
|
Gross
Rings
|
9.1(i)
|
|
Guaranteed
Amount
|
4.1(a)
|
|
Hazardous
Materials
|
14.1(x)
|
|
Initial
Payment
|
4.4(a)
|
|
Kimco
|
15.2(g)
|
|
Lease
Assumption Notice
|
5.2(b)
|
|
Leased
Property Designee
|
5.2(b)
|
|
Leased
Property Termination Date
|
10.3(c)
|
|
Leases
|
3.1(e)
|
|
Letter
of Credit
|
4.5
|
|
Manufacturers’
Coupons
|
11.8
|
|
Marketing
Period
|
10.3(a)
|
|
Merchandise
|
3.3
|
|
Merchandise
Threshold
|
4.1(c)
|
|
Merchant
|
Preamble
|
|
Motion
|
15.1(a)
|
|
Occupancy
Expenses
|
7.1
|
|
Order
|
15.1(c)
|
|
Other
Pharmacy Assets
|
3.3
|
|
Owned
Property
|
3.1(f)
|
|
Owned
Property Designee
|
5.1(b)
|
|
Owned
Property Marketing Period
|
||
Expiration
Transfer Notice
|
5.1(d)
|
|
Owned
Property Sale Notice
|
5.1(b)
|
|
Owned
Property Termination Date
|
10.3(b)
|
|
Patient
Prescriptions
|
4.1(c)
|
|
Patient
Prescriptions Threshold
|
4.1(c)
|
|
Petition
|
Recitals
|
|
Pharmacy
Products
|
3.3
|
|
Pharmacy
Products Threshold
|
4.1(c)
|
|
Properties
|
|
3.1(f)
|
3
Defined
Term
|
Section
Reference
|
|
Property
Sale Agreement
|
5.3(a)
|
|
|
||
Records
|
3.3
|
|
Recovery
Amount
|
4.1(b)
|
|
Replenishment
Goods
|
4.7
|
|
Retail
Value
|
14.1(f)
|
|
Retained
Employee
|
13.1
|
|
Retention
Bonuses
|
13.4
|
|
Returned
Merchandise
|
11.6
|
|
Revocation
Notice
|
8.2(d)
|
|
Sale
Commencement Date
|
10.1
|
|
Sale
Term
|
10.1
|
|
Sale
Termination Date
|
10.1
|
|
Sales
Taxes
|
11.4
|
|
Setoff
Party
|
20.5
|
|
Sharing
Threshold
|
4.1(b)
|
|
Spoiled/Unsaleable
Merchandise
|
3.3
|
|
Stores
|
3.3
|
|
Store
Closing Sale
|
Recitals
|
|
Store
Closing Sale Reconciliation
|
12
|
|
Store
Closing Sale Reconciliation
|
||
Payment
|
4.4(b)
|
|
Stores
|
3.3
|
|
Supplies
|
11.5
|
|
Vacate
Notice
|
10.1
|
|
WARN
Act
|
13.1
|
4
Section
2. Appointment
of Agent. Merchant hereby unconditionally and irrevocably
appoints Agent, and Agent hereby agrees to serve, as Merchant’s exclusive agent
for the limited purpose of conducting the Comprehensive Sale in accordance with
the terms and conditions of this Agreement and exercising Agent’s other rights,
duties and obligations under the Agreement.
Section
3. Assets to
be Sold by Agent.
3.1 Assets. The
assets to be sold or otherwise disposed of at the direction of Agent
(collectively, the “Assets”) shall consist of any and all of Merchant’s assets
and properties, wherever located, in whatever form, other than the Excluded
Assets, all of which Assets shall be sold, transferred and conveyed at the time
the Agent so directs to third parties or Agent’s designee (including, without
limitation, Agent or any member of Agent) free and clear of any and all liens,
claims, security interests and/or other encumbrances of any kind or nature
whatsoever in accordance with the terms and conditions of this Agreement and the
Order. Without limiting the foregoing, the Assets shall include all
of the Merchant’s right, title and interest in and to the
following:
(a) All
Merchandise (as hereinafter defined);
(b) All
Pharmacy Products (as hereinafter defined) and Other Pharmacy Assets (as
hereinafter defined);
(c) All
signage, Supplies (as hereinafter defined), parts and machinery located at any
of the Stores and the Merchant’s headquarters office;
(d) All
furniture, removable fixtures and equipment located at the Stores (as
hereinafter defined) (excepting the Excluded Stores (as hereinafter defined))
and all of the Company’s distribution centers (the “Distribution
Centers”) (the “FF&E”);
(e) The
leases for all of the Stores (other than the Excluded Stores) and Distribution
Centers (together with all amendments, supplements, assignments, and renewals or
extensions thereof, collectively the “Leases”), including, without limitation,
any deposits or other security given or made in respect of the Leases, which
shall be assumed and assigned or rejected at the direction of the Agent pursuant
to section 365 of the Bankruptcy Code in accordance with Section 5.2
hereof;
(f) Any
real property constituting Stores (including all buildings, improvements and
fixtures and betterments affixed to and which are part of the realty) owned by
the Merchant (other than the Excluded Stores) (the “Owned Property” and,
together with the Leases, the “Properties”);
(g) All
other personal property wherever located;
(h) All
guarantees, warranties, licenses, including, without limitation, liquor licenses
and other governmental permits, approvals and permissions;
(i) All
contracts that are to be assumed by Merchant and assigned at the direction of
the Agent pursuant to applicable law; and
5
(j) All
deposits in respect of any and all Leases that the Agent directs the Merchant to
assume and assign.
3.2 Excluded
Assets. Notwithstanding anything to the contrary set forth in
Section 3.1 hereof or elsewhere in this Agreement, the Assets shall not include
any of the “Excluded
Assets” set forth below and Agent shall have no rights to sell or
otherwise dispose of the Excluded Assets:
(a) All
cash and cash equivalents held by Merchant;
(b) All
accounts receivable (inclusive of tax refunds) owing to the
Merchant;
(c) All
causes of action owing to the Merchant;
(d) FF&E
located at the Excluded Stores;
(e) Leases
for any Excluded Stores;
(f) Any
real property constituting Excluded Stores or Distribution Centers;
(g) All
intellectual property, including, without limitation, trademarks, tradenames,
trade secrets, patents, licenses and any other intellectual
property
(h) All
information technology located in the Distribution Centers; and
(i) All
prepaid expenses, deposits (excepting deposits in respect of any and all Leases
that the Agent directs the Merchant to assume and assign), credits, rebates,
notes, utility deposits, amounts due from suppliers and vendors and insurance
refunds relating to the Stores, Leases, Owned Property or
otherwise.
3.3 Certain
Definitions.
As used
in this Agreement, the following terms shall have the respective meanings set
forth below:
“Bakery/Deli
Materials” means all materials and ingredients used in the bakery, deli,
ready-to-serve foods, or other such Store departments not usually sold to the
public by themselves and that are generally converted or processed into the
finished product.
“Comprehensive Sale
Proceeds” means the aggregate of (a) the total amount (in dollars) of all
sales, collections, liquidations, designations, licensing, transfers,
assignments, dispositions and/or other monetizations of or on account of Assets,
exclusive of Sales Taxes, including, without limitation, all proceeds realized
from the Store Closing Sales, any deposits received from landlords of assumed
and assigned Leases, any deposits received from prospective purchasers that fail
to close purchases of Leases or Owned Properties, and any and all gross proceeds
realized in respect of any Leases, Owned Properties or other Assets sold or
otherwise disposed of pursuant hereto; (b) all proceeds of Merchant’s insurance
for loss or damage to the Assets or loss of cash arising from events occurring
after the date the Order is entered; and (c) all interest actually earned on
such amounts.
6
“Excluded Stores”
means the four Stores numbered: 13060, 13090, 13125 and
13188.
“Merchandise” means
(i) all finished goods inventory that is owned by Merchant located in the Stores
on the Sale Commencement Date (as hereinafter defined) (or to be shipped from
the Distribution Centers to the Stores according to a schedule approved by the
Agent), other than Pharmacy Products and Other Pharmacy Assets, but including,
but not limited to, cigarettes and liquor, provided that the Agent complies with
all applicable laws. Notwithstanding the foregoing, “Merchandise”
shall not include: (1) goods which belong to sublessees, licensees or
concessionaires of Merchant; (2) goods held by Merchant on memo, on consignment
or as bailee; (3) Bakery/Deli Materials; (4) Spoiled/Unsaleable Merchandise; (5)
goods or operations relating to ATM machines, “Coin Star” machines, bottle
returns and “bale” salvage at the Stores; provided however, Merchant shall have
the right (but not the obligation) to continue such operations at the Stores and
retain all proceeds relating to such operations; provided
further however, all direct costs and
expenses associated or incurred in connection with such operations at the
Stores, shall be at Merchant’s sole expense; and (6) FF&E and improvements
to real property which are located at the Stores.
“Other Pharmacy
Assets” means all prescription files and records, customer lists and
patient profiles relating to the pharmacies owned or operated by the Merchant,
including any such files or records (collectively, the “Records”) maintained
by computer currently located at the pharmacies or any Records added prior to
the Closing Date (as hereinafter defined).
“Pharmacy Products”
means the entire inventory of drug products located in the pharmacies owned or
operated by the Merchant, including full and partial containers and controlled
substances, as well as insulin, syringes and over-the-counter
items.
“Spoiled/Unsaleable
Merchandise” means spoiled perishables and produce inventory, such as
opened boxes, bottles or cans, near-dated or expired or out-of-date goods, or
near-dated or out-of-date groceries, meat, eggs, milk, yogurt, bread, baked
goods, deli, ready-to-serve foods, defrosted frozen goods, and produce that
would not be bought by a customer in the ordinary course or any other
Merchandise that is defective, damaged or otherwise not saleable in the ordinary
course.
“Stores” means all
stores of the Debtor, whether owned or leased, but excluding any Distribution
Centers.
Section
4. Consideration
to Merchant and Agent.
4.1 Payments to
Merchant.
(a) Subject
to any adjustment set forth herein, as a guaranty of Agent’s performance
hereunder, Agent guarantees that Merchant shall receive aggregate cash
consideration of Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000)
(the “Guaranteed
Amount”).
7
(b) To
the extent that the Comprehensive Sale Proceeds exceed the sum of (x) the
Guaranteed Amount, (y) the aggregate amount of the Expenses and (z) Six Million
Five Hundred Thousand Dollars ($6,500,000) (the “Agent’s Fee”) (the
sum of (x), (y) and (z), the “Sharing Threshold”),
then all remaining Comprehensive Sale Proceeds above the Sharing Threshold shall
be shared fifty percent (50%) to Merchant and fifty percent (50%) to
Agent. All amounts, if any, to be received by Merchant from
Comprehensive Sale Proceeds in excess of the Sharing Threshold shall be referred
to as the “Recovery
Amount”. Agent shall pay to Merchant the Guaranteed Amount and
the Recovery Amount, if any, in the manner and at the times specified in Section
4.4 below. To the extent that Merchant is entitled to receive a
Recovery Amount from the Comprehensive Sale Proceeds, Agent shall pay such
Recovery Amount as part of the Final Reconciliation under Section 12, as soon as
commercially reasonable thereafter.
(c) The
Guaranteed Amount has been fixed based upon (i) the aggregate Cost Value of the
Merchandise as of the Sale Commencement Date (as hereinafter defined) being at
least equal to Forty Million Five Hundred Thousand Dollars ($40,500,000) (the
“Merchandise
Threshold”), (ii) the aggregate Cost Value of the Pharmacy Products as of
the Closing Date being at least equal to Four Million Dollars ($4,000,000) (the
“Pharmacy Products
Threshold”) and (iii) the number of individual patient prescriptions on
record (the “Patient
Prescriptions”) that are included in the Other Pharmacy Assets as of the
Closing Date being at least six hundred thousand (600,000) (the “Patient Prescriptions
Threshold”). To the extent that (i) the aggregate Cost Value
of the Merchandise included in the Store Closing Sale is less than or greater
than the Merchandise Threshold, the Guaranteed Amount shall be adjusted downward
or upward in accordance with Exhibit 4.1(c)(i)
annexed hereto (in addition to any adjustment applicable pursuant to Exhibit 4.1(c)(ii),
Exhibit
4.1(c)(iii) or Exhibit 14.1(f)
hereof, as and where applicable); (ii) the aggregate Cost Value of the Pharmacy
Products as of the Closing Date is less than or greater than the Pharmacy
Products Threshold, the Guaranteed Amount shall be adjusted downward or upward
in accordance with Exhibit 4.1(c)(ii)
annexed hereto (in addition to any adjustment applicable pursuant to Exhibit 4.1(c)(i),
Exhibit
4.1(c)(iii) or Exhibit 14.1(f)
hereof, as and where applicable); and (iii) the number of Patient Prescriptions
as of the Closing Date is less than or greater than the Patient Prescriptions
Threshold, the Guaranteed Amount shall be adjusted downward or upward in
accordance with Exhibit 4.1(c)(iii)
annexed hereto (in addition to any adjustment applicable pursuant to Exhibit 4.1(c)(i),
Exhibit
4.1(c)(ii) or Exhibit 14.1(f)
hereof, as and where applicable).
4.2 Consideration to
Merchant. Agent shall pay
to Merchant the Guaranteed Amount and the Recovery Amount, if any, in the manner
and at the times specified in Section 4.4 below.
4.3 Consideration to
Agent. Agent shall
receive, as its compensation for services rendered to Merchant, the Agent’s Fee,
plus all remaining Comprehensive Sale Proceeds, including, without limitation,
all proceeds realized upon the sale or other disposition of the Merchandise,
Pharmacy Products, Other Pharmacy Assets and FF&E and any payments made
(other than payments by the Merchant) on account of any assumption, assignment,
disposition, transfer, sale or termination of the Leases, Owned Property and/or
other Assets, after payment of the Guaranteed Amount, the Expenses and the
Recovery Amount, if any. The Agent shall take good, marketable and
insurable title, free and clear of any and all liens, claims, security interests
and/or other encumbrances of any kind or nature whatsoever to (a) any unsold
Merchandise, Pharmacy Products and Other Pharmacy Assets and subject to the
Agent’s right to leave behind, FF&E, upon the expiry of the Sale Term (as
hereinafter defined) and (b) Owned Property and any other Assets, if the Agent
so elects, on the date that is 180 days after the Sale Termination Date (as
hereinafter defined) (or such earlier date as the Agent determines in its sole
and absolute discretion).
8
4.4 Method and Timing of
Payment.
(a) Within
two (2) business days of entry of the Order, the Agent shall remit a cash
payment of Twenty-Nine Million Two Hundred Thousand Dollars ($29,200,000) (the
“Initial
Payment”) to the Merchant.
(b) Within
two (2) business days of the completion of the Store Closing Sale
Reconciliation, Agent shall, subject to any downward or upward adjustments set
forth herein, make an additional payment to Merchant of Five Million Two Hundred
Thousand Dollars ($5,200,000) of the unpaid portion of the Guaranteed Amount
(the “Store Closing
Sale Reconciliation Payment”). Within two (2) business days of
the completion of the Final Reconciliation, Agent shall, subject to any downward
or upward adjustments set forth herein, make an additional payment to Merchant
of the final Two Million One Hundred Thousand Dollars ($2,100,000) of the unpaid
portion of the Guaranteed Amount.
(c) To
the extent that Merchant is entitled to receive a Recovery Amount from
Comprehensive Sale Proceeds, Agent shall pay such Recovery Amount to Merchant as
part of the Final Reconciliation, as soon as commercially reasonable
thereafter.
(d) In
the event that either the Store Closing Sale Reconciliation or Final
Reconciliation, as the case may be, indicates that the sum of (x) the Initial
Payment and (y) the Store Closing Sale Reconciliation Payment, if any, exceeded
the amount that Merchant was entitled to receive hereunder on account of the
Guaranteed Amount (after taking into account any claims that Agent may have
against Merchant hereunder), as a result of adjustments to the Guaranteed Amount
provided for herein, including breaches of the Merchandise Threshold and Cost
Factor Threshold or other breaches of representations, warranties, covenants or
obligations of Merchant hereunder, the Merchant shall pay to the Agent the
amount (the “Adjustment Amount”) by which the sum of
(x) the Initial Payment and (y) the Store Closing Sale Reconciliation Payment,
if any, exceeds the Guaranteed Amount, as adjusted, within two (2) business days
after the Store Closing Sale Reconciliation or Final Reconciliation,
as the case may be, has been issued. Any amounts paid in respect of
the Adjustment Amount on the Store Closing Sale Reconciliation shall be deducted
from the Final Adjustment Amount so that no payment made by the Merchant on
account of the Adjustment Amount is duplicative.
4.5 Security. To guaranty its obligations to pay
the Guaranteed Amount to the Merchant hereunder, the Agent shall deliver to
Merchant an irrevocable standby letter of credit, the terms of which are
reasonably acceptable to Merchant, in the original face amount of Seven Million
Three Hundred Thousand Dollars ($7,300,000) naming Merchant and General Electric
Capital Corporation (“GECC”) as
co-beneficiaries (the “Beneficiaries”),
substantially in the form of Exhibit 4.5 attached
hereto (the “Letter of
Credit”). The Letter of Credit shall be delivered no later
than two (2) business days following the entry of the Order and shall have an
expiration date of no earlier than thirty (30) days subsequent to the
termination of the Marketing Period. To the extent that
the Agent pays to Merchant any amounts pursuant to Section 4.4(b), the Letter of
Credit immediately shall be reduced by an amount equal to such payment (and
Merchant and GECC shall execute any document, instrument or other agreement
necessary to reflect such reduction). In the event that Agent, after
receipt of five (5) business days’ notice (which notice shall not be require if
Agent or any member of Agent shall be a debtor under title 11, United States
Code), fails to make any payment due under Section 4.4(b) when due, the
Beneficiaries collectively may draw on the Letter of Credit in an amount equal
to the unpaid, past due amount that is not the subject of a reasonable
dispute.
9
4.6 Replenishment
Goods. Merchant shall
cooperate with and assist Agent in procuring Replenishment Goods throughout the
Sale Term. The cost of purchasing such Replenishment Goods shall be
an “Expense” and the proceeds of the sale of such Replenishment Goods shall
constitute Comprehensive Sale Proceeds. For purposes of this
Agreement, “Replenishment Goods”
means, certain inventory (i) replenished in the ordinary course (e.g.
perishables) including, without limitation, meat, eggs, milk, yogurt, bread,
baked goods, deli, ready-to-serve foods, and produce, and DSD (direct store
delivery goods); and (ii) other items of inventory (e.g., private label goods,
bailment goods).
Section
5. Sale and
Assignment of Properties. Agent shall have the exclusive
right, in the exercise of its sole and absolute discretion, to market and
attempt to sell all of Merchant’s right, title and interest in and to one or
more of the Properties.
5.1 Owned Properties.
(a) During
the Marketing Period for each Owned Property, Agent may market and attempt to
sell the Owned Property in whole or in part. During the Marketing
Period for each Owned Property, Merchant may take such actions as shall be
necessary to implement any sale of the Owned Property or portion thereof that
the Agent, in its sole and absolute discretion, determines to
pursue.
(b) At
any time prior to expiration of the Marketing Period for Owned Properties, Agent
shall have the right, which right may be exercised at any time and from time to
time in Agent’s sole and absolute discretion, to provide notice to Merchant
(each such notice, an “Owned Property Sale
Notice”) of Agent’s election to require Merchant to convey Merchant’s
right, title and interest in and to one or more Owned Properties or part thereof
to any such party (including, without limitation, Agent or any member of Agent)
as Agent shall designate (each, an “Owned Property
Designee”).
(c) Within
five (5) business days following the date upon which Agent delivers to Merchant
an Owned Property Sale Notice, or on such longer term as Agent may designate in
its sole and absolute discretion, Merchant shall take all requisite actions and
direct its professionals to take all requisite actions (including, without
limitation, actions required to obtain approval under section 363 of the
Bankruptcy Code) to convey all of Merchant’s right, title and interest in and to
such Owned Property to such Owned Property Designee.
10
(d) Upon
the expiration of the Marketing Period for Owned Properties, Merchant
shall notify Agent that the Marketing Period for Owned Properties has expired
and shall, if Agent so elects in a notice (an “Owned Property Marketing
Period Expiration Transfer Notice”), promptly (and, in any event within
five (5) business days) convey Merchant’s right, title and interest in and to
any Owned Properties that Agent so elects to take in the Owned Property
Marketing Period Expiration Transfer Notice to Agent or its
designee.
5.2 Leased
Properties.
(a) During
the Marketing Period for each Leased Property, Agent may market and attempt to
assign the Leases.
(b) Subject
to the limitations set forth in Section 10.3(c) hereof, at any time prior to the
expiration of the Marketing Period for Leased Properties, Agent shall have the
right, which right may be exercised at any time and from time to time in Agent’s
sole and absolute discretion, to provide notice to Merchant (each such notice, a
“Lease Assumption
Notice”) of Agent’s election to require Merchant, under section 365 of
the Bankruptcy Code, to assume and assign to a third party (including, without
limitation, Agent or any member of Agent) designated by the Agent (each a “Leased Property
Designee”) any or all of the Leases at no additional cost or expense to
the Agent (excepting Cure Amounts solely related to Agent’s failure to pay rent
and other occupancy expenses for periods occurring after the Closing Date (as
hereinafter defined)).
(c) Within
five (5) business days following the date upon which Agent delivers a Lease
Assumption Notice to Merchant, or on such longer term as Agent may designate in
its sole and absolute discretion, Merchant shall take all requisite actions and
direct its professionals to take all requisite actions (including, without
limitation, actions required to obtain approval under section 365 of the
Bankruptcy Code) to assume and assign to a Leased Property Designee the Lease(s)
designated by Agent.
(d) Without
limiting the generality of the foregoing, upon receipt of a Lease Assumption
Notice, Merchant shall use its reasonable best efforts to obtain the entry of an
order of the Bankruptcy Court approving the assumption of the Lease or Leases
identified in such Lease Assumption Notice and the assignment of such Lease or
Leases to such Leased Property Designee.
(e) In
the event Agent elects to require Merchant to assume and assign any Lease,
Merchant shall pay any and all cure amounts (“Cure Amounts”) with
respect to such Lease arising under section 365(b)(1) of the Bankruptcy Code
(excepting cure costs solely related to Agent’s failure to pay rent and other
occupancy expenses for periods occurring after the Closing Date). Any
claim Agent has against Merchant resulting from Merchant’s failure to pay Cure
Amounts shall constitute an administrative expense claim with superpriority
status pursuant to section 364(c) of the Bankruptcy Code and shall rank senior
in priority to all secured indebtedness and other expenses of administration,
and shall be secured by the Guaranteed Amount paid by the
Agent.
11
(f) Notwithstanding
anything contained herein to the contrary, Merchant covenants and agrees to pay
to the lessors under the Store Lease(s) when due all amounts payable under the
Lease(s), including, without limitation, base rent, taxes and percentage
rent, from the Closing Date through the Leased Property Termination
Date, which amounts to the extent that they are an “Expense” hereunder shall be
reimbursed by Agent; provided that if the
Leased Property Termination Date for a Store is (i) a day that is in the first
fifteen (15) days of any calendar month, the pro rata payment of the monthly
rent through the fifteenth (15th) day of such month shall be an “Expense”; (ii)
a day that is after the first fifteen (15) days of a calendar month, any pro
rata payment of the monthly rent through such date only shall be an
“Expense.” For the avoidance of doubt, Merchant’s sole obligation in
respect of the Distribution Centers shall be to pay per diem Distribution Center
Occupancy Expenses set forth on Exhibit 7.1(l) in an
aggregate amount not to exceed $800,000
(g) At
any time prior to the expiration of the Marketing Period for any Leased
Property, Agent shall have the right, which right may be exercised at any time
and from time to time in Agent’s sole and absolute discretion, to provide notice
to Merchant (each such notice, a “Dropout Notice”) of
Agent’s election to discontinue its efforts to market and attempt to sell such
Leased Property. Upon the seventh (7th) business day following the
delivery of a Dropout Notice (or such later date specified in such Dropout
Notice) (the “Dropout
Date”) by Agent to Merchant with respect to any Leased Property, Agent
shall have no further obligation or liability with respect thereto and Merchant
shall be solely responsible for all amounts payable or other obligations or
liabilities that may be owed in connection with such Leased Property (including,
without limitation, any damages resulting from the rejection of the Lease
applicable to any such Leased Property under section 365 of the Bankruptcy Code
or otherwise). Notwithstanding anything herein to the contrary, the
cost and expenses of the rejection at any time of any one or more Leases,
including the filing and prosecuting of any motions or other papers with respect
to the same, shall be borne solely by Merchant and paid for solely by Merchant
and its chapter 11 estate, and such cost and expenses shall not be treated as an
“Expense” hereunder.
(h) Subject
to Section 7.1(l), Merchant shall have the right to use the Distribution
Centers to dispose of any FF&E located in the Distribution Centers for up to
the first four (4) weeks of the Sale Term (as determined by the Agent in its
reasonable discretion).
5.3 Covenants of Merchant
Regarding Sale of Properties.
(a) Following
the delivery of an Owned Property Sale Notice (with respect to Owned Properties)
or a Lease Assumption Notice (with respect to Leased Properties) to Merchant,
Merchant shall execute and deliver any purchase and sale, transfer or other
similar agreement requested by Agent with respect to such sale, transfer or
assumption and assignment (each a “Property Sale
Agreement”). Merchant further covenants to use its reasonable
best efforts to comply with the terms of any Property Sale Agreement, fulfill
any and all conditions to closing set forth therein, and close such sale on the
terms and conditions thereof.
(b) Without
limiting Section 5.3(a), following the Closing Date, Merchant agrees to
cooperate with Agent to arrange for the sale of the Owned Properties and the
leasehold interests of Merchant in the Leased Properties as provided in this
Agreement. Without limiting the generality of the foregoing, Merchant
agrees (i) to provide Agent with all such diligence materials and information in
Merchant’s possession as Agent shall reasonably request in connection with its
efforts to market and attempt to sell the Properties (including, without
limitation, existing real property surveys, environmental reports, real estate
tax and utility records, service contracts, existing contractors’ and
construction warranties and guarantees, and complete copies of the Leases and
all communications with the lessors thereunder) and (ii) to cooperate with
Agent, its agents and any potential purchasers of any of the Properties to
provide reasonable access to the Properties. In the event Merchant
receives any written offer or letter of intent for any of the Properties,
Merchant shall provide Agent with a copy of such offer or letter of
intent.
12
(c) From
the date hereof through and until (i) in the case of an Owned Property, ten (10)
business days after the applicable Owned Property Termination Date or (ii) in
the case of a Leased Property, the applicable Leased Property Termination Date,
Merchant shall not enter into, renew, extend, amend, supplement, exercise any
right or option to purchase or expand, reject or otherwise terminate any
material agreement with respect to any such Property, or grant any party a lien
or security interest in any or all of the Properties, in each case without the
prior written consent of Agent.
Section
6. Deliveries. The
transfer and sale of any of the Assets shall be effected by delivery by Merchant
to the designee of Agent (including, without limitation, Agent or a member of
Agent) at any time Agent so directs of such agreements, deeds, bills of sale,
endorsements, assignments (including assignments of warranties and guaranties),
and other good and sufficient instruments of sale, transfer, assignment,
conveyance, and warrant and all consents of third parties necessary thereto as
are required, pursuant to Bankruptcy Court order under Sections 363 and 365 of
the Bankruptcy Code and other applicable bankruptcy law, to vest in the designee
of Agent (including, without limitation, Agent or a member of Agent) good,
marketable and insurable title to the Assets, free and clear of any and all
liens, claims, security interests and other encumbrances of any kind or nature
whatsoever. Merchant will, to the extent required after the closing
date of the sale or other transfer of any Owned Property or assignment of any
Lease, upon the request of Agent, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all such additional documents as
may reasonably be required by Agent to effectuate the sale, conveyance,
transfer, assignment and delivery by Merchant of the Assets and the ownership by
the Agent of the Assets. In addition to the foregoing, with respect
to the transfer and/or sale of the Properties, Merchant agrees to provide such
affidavits, information and materials as shall be required by any national title
company selected to provide title insurance in connection with any such transfer
and/or sale, or by a lender to the purchaser or acquiror of the Property in
question, including, without limitation, owner’s affidavits, “no change”
affidavits with respect to existing surveys and flood
certificates. Notwithstanding any other provision of this Agreement,
Merchant shall not be obligated to execute or deliver any document of any kind
whatsoever that exposes Merchant to a contingent liability (other than liability
in respect of any fraud or intentional misrepresentation by the Merchant) to the
purchaser of any Assets, provided that such contingent liability was not in
existence, reasonable contemplation or reasonably foreseeable prior to the
respective Asset sale.
Section
7. Expenses
of the Store Closing Sale.
7.1 Expenses. Agent
shall be responsible for and shall pay from the Comprehensive Sale Proceeds
Expenses incurred in connection with the Comprehensive Sale. Expenses
shall consist of and be limited to the following:
13
(a) The
following Store level operating Expenses of the Store Closing Sale which arise
during the Sale Term at the Stores:
(i) base
payroll for Retained Employees for actual days/hours worked in the conduct of
the Store Closing Sale;
(ii) amounts
actually payable in respect of FICA, unemployment taxes, worker’s compensation,
vacation days that were earned during the Sale Term and health care benefits and
pension benefits that accrued during the Sale Term for Retained Employees, in an
amount not to exceed 41.4% of base payroll for each Retained Employee (the
“Benefits
Cap”);
(iii) Agent’s
supervision fees and expenses (including, without limitation, fees, travel costs
and bonuses);
(iv) costs
of security personnel in the Stores;
(v) a
pro-rata portion of Merchant’s casualty insurance premiums attributable to the
Merchandise;
(vi) costs
of transfers of Merchandise and Replenishment Goods between the
Stores (it being understood and agreed that Merchant will not operate
any Distribution Centers during the Sale Term);
(vii) Retention
Bonuses as described in Section 13.4 below;
(viii) costs
and expenses of additional Supplies;
(ix) Subject
to Section 5.2(f), Occupancy Expenses on a per Store per diem basis in an amount
up to the per Store per diem amount set forth on Exhibit 7.1(a)(ix);
and
(x) costs
of armored car services;
(b) any
collection fees, commissions, auction fees, brokerage fees or other similar fee,
expense or cost incurred in connection with the Comprehensive Sale;
(c) local
and long distance telephone expenses in connection with the Comprehensive
Sale;
(d) property
insurance attributable to the Assets for which Agent is responsible during the
Marketing Period pursuant to Sections 8.1 and 8.2 hereof;
(e) costs
of advertising, sign walkers, signage, and direct mailings relating to the
Comprehensive Sale, including, without limitation, postage, courier and
overnight mail charges (at Merchant’s contract rates);
14
(f) bank
service charges and fees for bank accounts, credit cards and bank cards,
chargebacks and discounts, existing or new, used in connection with the
Comprehensive Sale (at Merchant’s contract rates);
(g) Agent’s
cost of capital and letter of credit fees1;
(h) Agent’s
legal fees and expenses in connection with the negotiation and documentation of
this Agreement in an amount of Two Hundred Thousand Dollars
($200,000);
(i) Replenishment
Goods;
(j) the
costs and expenses outlined in Sections 7.1 or otherwise described in this
Agreement as “Expenses”, and any other expenses approved by Agent and Merchant
relating to any sale, transfer or assignment directed by Agent with respect to
the Properties or other Assets, including, without limitation, all personal and
real property taxes and transfer taxes payable by a seller, title insurance
premiums, marketing and advertising expenses, legal fees and expenses, costs of
diligence materials commissioned from third parties (including, without
limitation, surveys, environmental reports, engineering reports and pest control
reports) and other customary closing costs agreed to by Merchant and Agent,
except for (i) attorneys’ fees and costs and other expenses of Merchant in
connection with preparing or obtaining any agreements, motions or Bankruptcy
Court orders to effectuate any sale, transfer or assignment of any Properties or
other Assets, (ii) lease cure amounts (excepting any cure amounts solely related
to Agent’s failure to pay rent and other occupancy expenses for periods
occurring after the Closing Date), and (iii) any and all amounts due under any
mortgage on any of the Properties or to release any liens on the Properties, all
of which shall be the sole responsibility of Merchant and shall be paid by
Merchant when due;
(k) Central
Services Expenses equal to $20,000 per week during the Sale Term;
(l) Occupancy
Expenses on a per Distribution Center per diem basis set forth on Exhibit 7.1(l) in an
aggregate amount for all Distribution Centers not to exceed $800,000;
and
(m) any
other reasonable or necessary expense incurred directly by Agent (and approved
by Agent and Merchant) in connection with the sale, collection or monetization
of the Assets.
Notwithstanding
anything herein to the contrary, to the extent that an Expense is listed in more
than one place in this Agreement (including exhibits hereto), such Expense shall
only be counted once and not double counted.
“Expenses” shall not
include: (i) Excluded Benefits; (ii) subject to Section 5.2(f), any
rent or occupancy expenses related to any Store other than Occupancy Expenses
for periods prior to the Leased Property Termination Date or the Owned Property
Termination Date, as the case may be; and (iii) any costs, expenses and
liabilities that would otherwise constitute Expenses hereunder but that arise
from contracts or agreements that were not disclosed to Agent prior to the date
of this Agreement.
1 The
Agent will be reaching out to Merchant to discuss estimated
amount.
15
As used
herein, the following terms have the following respective meanings:
“Central Services
Expenses” means costs and expenses for Merchant’s central administrative
services necessary for the Store Closing Sale, including, but not limited to,
MIS services, payroll processing, cash reconciliation, inventory processing and
handling and data processing and reporting.
“Excluded Benefits”
means (i) pension benefits, vacation days or vacation pay that accrued prior to
the Sale Commencement Date, sick days or sick leave, maternity leave or other
leaves of absence, termination or severance pay, union dues, ERISA coverage and
similar contributions, and (ii) payroll taxes, worker’s compensation and health
insurance benefits in excess of the Benefits Cap.
“Occupancy Expenses”
means base rent, percentage rent, HVAC, utilities, CAM, real estate and use
taxes, merchant’s association dues, cleaning expenses, salting and snow removal,
trash removal and building insurance relating to the Stores or Distribution
Centers, all of the foregoing as categorized and reflected on Exhibit
7.1(a)(ix) and Exhibit 7.1(l)
hereto, as the case may be. For the avoidance of doubt, subject to
Section 5.2(f) and Section 7.1(l), Agent shall only be responsible as an
“Occupancy Expense” of any Property for the pro-rated portion of real estate and
use taxes due in respect of such Property for the period from (x) the Closing
Date to (y) the Leased Property Termination Date or the Owned Property
Termination Date, as the case may be.
7.2 Other Expenses of the
Comprehensive Sale. All expenses required for Merchant to
perform its obligations hereunder other than the Expenses, including, without
limitation, the items expressly excluded from the definition of “Expenses” in
Section 7.1, shall be payable by Merchant (and not reimbursed by Agent) when
such expenses are due (and in any event promptly on demand).
7.3 Payment of
Expenses. All Expenses incurred during each week of the
Comprehensive Sale (i.e., Sunday through
Saturday) shall be paid by Agent out of Comprehensive Sale Proceeds, or offset
from the Comprehensive Sale Proceeds held by Agent, immediately following the
Comprehensive Sale reconciliation by Merchant and Agent pursuant to Section 12
hereof, based on invoices and other documentation reasonably satisfactory to
Agent and Merchant.
Section
8. Expenses
with Respect to Properties.
8.1 Marketing Period Costs -
Owned Properties. During the Marketing Period with respect to
each Owned Property, Agent shall bear all of the carrying costs (including the
costs of any repairs (as limited by Section 8.3 below) of the Owned Property,
including without limitation prorated real estate taxes and utilities from and
after the Closing Date. All such costs shall be an “Expense” for
purposes hereunder.
16
8.2 Marketing
Period Costs - Leased Properties.
(a) During the
Marketing Period with respect to each Leased Property, Agent shall reimburse, on
a timely basis, all amounts for the payment of rent, CAM, taxes, maintenance and
repairs (as limited by Section 8.3 below), all other amounts due and owing by
Merchant under the Leases (limited to the amounts set forth on the Marketing
Period Occupancy Expense Schedule attached hereto as Exhibit 8.2), and utilities and all
other usual and customary operating costs incurred in connection with the Leases
and consistent with Merchant’s prior practices.
(b) From and
after the date hereof, Merchant shall not extend, reject or otherwise terminate
or assume and assign to a third party, without the Agent’s prior written
consent, any of the Leases.
(c) The Agent’s
obligations under Section 8.2(a), and the Merchant’s obligations under Section
8.2(b) shall expire in respect of any Lease upon the applicable Leased Property
Termination Date. Upon the applicable Leased Property Termination
Date, (A) the Agent shall have no further obligation or liability of any nature
for any amounts payable to the lessor under the applicable Lease(s), or for any
costs associated with the Store(s) to which such Lease(s) relate; and (B)
Merchant shall be solely responsible for all amounts payable to the lessor under
the applicable Lease(s), including without limitation, any damages resulting
from the rejection of such Lease(s) under section 365 of the Bankruptcy Code or
otherwise.
(d) Subject to
the limitation set forth in Section 8.3 hereof, if Agent fails to pay, on a
timely basis, any of the amounts set forth in Section 8.2(a) with respect to any
Lease, then following the expiration of a ten (10) business day cure period
after receipt by Agent of written notice from Merchant or the landlord of such
failure to pay, in addition to all of its other rights at law and equity,
Merchant shall be entitled to revoke Agent’s right to use and occupy the
premises covered by such Lease and to reject such Lease. Such
revocation shall be effective upon Agent’s receipt of written notification from
Merchant (each, a “Revocation
Notice”).
8.3
Limitation on Marketing Period
Costs. The Merchant shall not make any individual repairs
having a total cost in excess of Ten Thousand Dollars ($10,000) without the
prior written consent of Agent. The cost of any such repairs in
excess of Ten Thousand Dollars ($10,000) that are undertaken without the express
written consent of the Agent shall not be treated as “Expenses”
hereunder. All repairs that Agent consents to in writing or any
repairs undertaken by Merchant with a total cost not exceeding Ten Thousand
Dollars ($10,000) shall be treated as an “Expense” hereunder; provided however, any repairs made by Merchant
to comply with covenants (or cure breaches thereof) shall be for Merchant’s own
account and not be an “Expense” hereunder. Merchant hereby represents
that to the best of its knowledge, except as set forth on Exhibit 8.3, it is not aware of any
existing repair or maintenance problems with respect to any of the premises
covered by the Leases or which may be required to be made under the terms of the
Leases or any of the furniture, fixtures, equipment and other personal property
covered by the Leases or located at the real property subject to the
Leases.
17
Section
9.
|
Inventory
Valuation.
|
9.1 Gross Rings. The Cost Value
and Retail Value of the Merchandise as of the Sale Commencement Date shall be
determined on a Gross Rings basis. During the Sale Term,
Agent and Merchant shall jointly keep (i) a strict count of gross
register receipts less applicable Sales Taxes (“Gross Rings”) and (ii) cash reports of
sales within each of the Stores. For the avoidance of doubt, any
Replenishment Goods will not be included in the Gross Rings. Agent
and Merchant shall keep a strict count of register receipts and reports to
determine the actual Cost Value and Retail Value of the Merchandise sold by
SKU. All such records and reports shall be made available to Agent
and Merchant during regular business hours upon reasonable notice.
9.2 Valuation. For purposes of
this Agreement, “Cost Value” and
“Retail Value” of the
Merchandise shall mean the Gross Rings multiplied by one hundred one percent
(101.0%).
Section
10.
|
Store Closing Sale Term; Marketing
Period for
Properties.
|
10.1
Term. Subject to the
satisfaction of the conditions precedent set forth in Section
15 hereof, the Store Closing Sale shall commence at each Store on the first
business day following the entry of the Order, but in no event later than
January 15, 2010 (the “Sale
Commencement Date”). The Sale Commencement Date shall not
occur prior to the date on which the Order is signed by the
Court. The Agent shall complete the Store Closing Sale at each Store
and vacate such Store in broom-clean condition by no later than March 12, 2010,
unless the Store Closing Sale at such Store is extended by mutual written
agreement of Agent and Merchant or terminated earlier in accordance with the
last sentence of this Section 10.1 (the “Sale Termination Date”; the period
from the Sale Commencement Date to the Sale Termination Date as to each Store
being the “Sale
Term”). The Agent may, in its discretion, terminate the Store
Closing Sale at any Store at any time within the Sale Term (i) upon the
occurrence of an Event of Default by Merchant, or (ii) upon not less than ten
(10) days’ prior written notice (a “Vacate Notice”) to
Merchant. Notwithstanding anything herein to the contrary, the Agent
may use all intellectual property, including, without limitation, trademarks,
tradenames, trade secrets, patents, licenses and any other intellectual property
and any information technology located in the Distribution Centers during the
Sale Term. Additionally, Agent shall have the right to use tradenames
owned by Merchant (or transfer a limited license to use a tradename owned by
Merchant to any designee) throughout the Marketing Period and for a period of up
to one (1) year thereafter in connection with the grocery or supermarket
operations conducted on any Properties transferred, sold, conveyed or otherwise
disposed of hereunder. To the extent that such intellectual property
described immediately above includes the use of Store-level and corporate
customer lists, mailing lists and customer e-mail lists, including any
associated with Merchant’s customer loyalty programs (the “Customer Information”), at Agent’s
request to Merchant, Merchant shall facilitate advertising and promotion of the
Store Closing Sale by using Merchant’s Customer Information.
10.2 Vacating the Stores. At the
conclusion of the Store Closing Sale, Agent agrees to leave the Stores in “broom
clean” condition, ordinary wear and tear excepted, except for remaining Supplies
and unsold items of FF&E.
10.3 Marketing Period.
(a) For each
Property, the period commencing on the Closing Date and ending (i) in the case
of any Owned Property, on the Owned Property Termination Date, and (ii) in
the case of any Leased Property, on the Leased Property Termination
Date, shall be known as the “Marketing
Period” for such Property.
18
(b) With
respect to each Owned Property, the “Owned Property Termination Date” shall
be the first to occur of (i) the closing date of the sale or transfer of such
Owned Property, (ii) the date on which the Agent, in its sole and absolute
discretion, terminates its right to market such Owned Property and (iii) August
31, 2010.
(c) With
respect to each Leased Property, the “Leased Property Termination Date”
shall be the first to occur of (i) the Dropout Date, (ii) Agent’s receipt of a
Revocation Notice with respect to such Leased Property, (iii) the closing date
of the assignment of the Lease with respect to such Leased Property, and (iv)
the date 210 days after the date on which the Cases were commenced (or such
later date that the affected landlord consents to under Bankruptcy Code Section
365(d)(4)); provided that such
extension is at no cost to the Agent (other than costs the Agent expressly
agrees to assume). Notwithstanding anything set forth herein to the
contrary, (i) Merchant may not deliver a Revocation Notice pursuant to Section
8.2(d) with respect to any Leased Property until the Store Closing Sale at such
Leased Property is completed and (ii) any Dropout Notice delivered by the Agent
shall not designate a Dropout Date earlier than the date on which the Store
Closing Sale at such Leased Property is completed.
Section
11.
|
Conduct of the Store Closing
Sale.
|
11.1 Rights of Agent. Agent
shall be permitted to conduct the Store Closing Sale as a “store closing,”
“going out of business” or similar such sale throughout the Sale
Term. Agent shall conduct the Comprehensive Sale in the name of and
on behalf of Merchant in a commercially reasonable manner and in compliance with
(i) the terms of this Agreement and (ii) the Order. In addition to
any other rights granted to Agent hereunder, in conducting the Sale, Agent, in
the exercise of its sole and absolute discretion, shall have the right, subject
to the immediately preceding sentence:
(a) to
establish and implement advertising, signage, and promotion programs consistent
with the “store closing,” “going out of business” theme (including, without
limitation, by means of media advertising, banners, A-frame, sign walkers, and
similar interior and exterior signs);
(b) to
establish Store Closing Sale prices and Store hours;
(c) to use
without charge during the Sale Term all FF&E, motor vehicles, advertising
materials, bank accounts, Store-level customer lists and mailing lists, computer
hardware and software, Supplies, intangible assets (including Merchant’s name,
logo and tax identification numbers), Store keys, case keys, security codes, and
safe and lock combinations required to gain access to and operate the Stores,
and any other assets of Merchant located at the Stores or the Distribution
Centers (whether owned, leased, or licensed);
(d) to transfer
Merchandise between Stores; and
(e) to use (i)
Merchant’s central office facilities, POS systems, central and administrative
services and personnel to process payroll, perform MIS services, sales audit
and cash reconciliation, and provide other central office services,
necessary for the Comprehensive Sale, and (ii) one office located at Merchant’s
central office facility.
19
11.2 Terms of Sales to
Customers. 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, to the extent legally permissible, pass on all manufacturer’s warranties
to customers. All sales will be made only for cash, by approved
check, and by bank credit cards currently accepted by Merchant. Agent
shall have the right to use Merchant’s credit card facilities (including,
without limitation, Merchant’s credit card terminals and processor(s), credit
card processor coding, Merchant identification numbers and existing bank
accounts) for sales made during the Store Closing Sale. Merchant
shall promptly (and, in any event, at least three times per week during the Sale
Term) pay over to Agent all proceeds from such credit card sales that it
receives.
11.3 Deposit of Store Closing Sale
Proceeds. During the Sale Term, all proceeds of the Store
Closing Sale shall be deposited in Merchant’s accounts until such time as Agent
elects, in its sole and absolute discretion, to establish its own account for
the proceeds of the Store Closing Sale. All proceeds of the Store
Closing Sale deposited in Merchant’s accounts will be transferred on a daily
basis to an account designed by Agent. Agent and Merchant shall have
the right to audit and review all entries, record and other documents relating
to such bank accounts. It is understood and agreed that subject to
the payment of the Guaranteed Amount, Expenses and Recovery Amount, Merchant
shall have no right or interest in any Comprehensive Sale Proceeds.
11.4 Sales Taxes. During the
Sale Term, all sales, excise, gross receipts and other taxes attributable to
sales of Merchandise (other than taxes on income) payable to any taxing
authority having jurisdiction (collectively, “Sales Taxes”) shall be added to the
sales price of Merchandise and collected by Agent at the time of
sale. The Agent shall transfer funds in the amount so collected to
Merchant, which funds shall be delivered together with accompanying schedules to
Merchant on a timely basis for payment of taxes when due. Merchant
shall promptly pay all Sales Taxes and file all applicable reports and documents
required by the applicable taxing authorities. Merchant will be given
access to the computation of gross receipts for verification of all such tax
collections.
11.5 Supplies. Agent shall have
the right to use, without charge, all existing supplies located at the Stores,
Distribution Centers and Merchant’s headquarters, including, without limitation,
boxes, bags, paper bags, plastic bags, paper, twine and similar sales materials
(collectively, “Supplies”). In the event
that additional Supplies are required in any of the Stores during the Sale,
Merchant agrees to promptly provide the same to Agent, if
available.
11.6
Returns of
Merchandise. During the Sale Term the Agent shall accept
returns of goods sold by Merchant from the Stores prior to the Sale Commencement
Date (“Returned Merchandise”),
provided such goods are accompanied by the original Store receipt and such
return is otherwise in accordance with the applicable return policy for such
Store in effect prior to the Sale Commencement Date. Returned
Merchandise shall not be considered Merchandise. Merchant shall
reimburse Agent in cash for all amounts reimbursed on a weekly basis during the
weekly sale reconciliations set forth in Section 12 below.
20
11.7 Gift
Certificates. During the Sale Term, Agent shall accept
Merchant’s gift certificates, gift cards and Store credits which have been
issued by Merchant prior to the Sale Commencement Date (collectively, “Gift Cards”). Merchant
shall reimburse Agent in cash for such amounts on a weekly basis during the
weekly sale reconciliation. Agent shall not be required to accept any
rain checks or other promotional items providing the customer with an additional
discount on Merchandise.
11.8
Manufacturers’
Coupons. During the Sale Term, the Agent shall honor
manufacturers’ coupons and rebates and vendor product allowances (collectively,
the “Manufacturers’ Coupons”);
provided however, as part of the weekly sale
reconciliations set forth in Section 12 below, the Agent shall be reimbursed by
the Merchant for the Manufacturers’ Coupons accepted during the prior
week. Merchant and the Agent shall prepare all appropriate
documentation incidental to the submission of the Manufacturers’ Coupons to the
respective manufacturer and/or vendor and Merchant shall retain all monies
received from the manufacturers or vendors on account of such Manufacturers’
Coupons.
Section 12.
Comprehensive
Sale Reconciliation. On each Wednesday during the Sale Term,
commencing on the second Wednesday after the Closing Date, Agent and Merchant
shall cooperate to reconcile Expenses associated with the Store Closing Sales,
receipts of Returned Merchandise and Gift Cards, Manufacturers’ Coupons and such
other Store Closing Sale-related items as either party shall reasonably request,
in each case for the prior week or partial week (i.e., Sunday through Saturday),
all pursuant to procedures agreed upon by Merchant and Agent. Within
thirty (30) days after the end of the Sale Term with respect to all Stores,
Agent and Merchant shall complete a final reconciliation of the Store Closing
Sale (the “Store Closing Sale
Reconciliation”), the written results of which shall be certified by
Merchant and Agent as a final settlement of accounts between Merchant and Agent
relating to the Store Closing Sale. In addition, on each Wednesday
during the period from the Closing Date until the end of the Marketing Period
with respect to all Properties, commencing on the second Wednesday after the
Closing Date, Agent and Merchant shall cooperate to reconcile Expenses not
associated with the Store Closing Sale and such other Comprehensive Sale-related
items as either party shall reasonably request, in each case for the prior week
or partial week (i.e., Sunday
through Saturday),
all pursuant to procedures agreed upon by Merchant and Agent. Within
thirty (30) days after the end of the Marketing Period with respect to all
Properties, Agent and Merchant shall complete a final reconciliation of the
Comprehensive Sale (the “Final
Reconciliation”), the written results of which shall be certified by
representatives of each of Merchant and Agent as a final settlement of all
accounts between Merchant and Agent.
Section
13.
|
Employee
Matters.
|
13.1 Merchant’s Employees. Agent
may use any of Merchant’s employees (each such employee, a “Retained Employee”) to the extent
Agent, in its sole and absolute discretion, determines
appropriate. Retained Employees shall at all times remain employees
of Merchant, and shall not be considered or deemed to be employees of
Agent. Merchant and Agent acknowledge and agree that except to the
extent that wages and benefits of Retained Employees constitute Expenses
hereunder, nothing contained in this Agreement and none of Agent’s actions taken
in respect of the Comprehensive Sale shall be or otherwise be deemed to
constitute an assumption by Agent of any of Merchant’s obligations relating to
any of Merchant’s employees including, without limitation, Excluded
Benefits, Worker Adjustment Retraining Notification Act (“WARN Act”) claims and other
termination type claims and obligations, or any other amounts required to be
paid by statute or law; nor shall Agent become liable under any collective
bargaining or employment agreement or be deemed a joint or successor employer
with respect to such employees. Merchant shall not, without Agent’s
prior written consent, raise the salary or wages or increase the benefits for,
or pay any bonuses or make any other extraordinary payments to, any of its
employees on or after the date of this Agreement.
21
13.2 Termination of
Employees. Agent may, in its sole and absolute discretion,
stop using any Retained Employee at any time during the term of this Agreement
and direct Merchant to terminate such Retained Employee. In the event
of termination of any Retained Employee, Agent will use all reasonable efforts
to notify Merchant at least five (5) days prior thereto, except for termination
“for cause” (such as dishonesty, fraud or breach of employee duties), in which
event no prior notice to Merchant shall be required, provided Agent shall notify
Merchant as soon as practicable after such termination. From and
after the date of this Agreement, Merchant shall not transfer or dismiss
employees of the Stores except “for cause” without Agent’s prior written
consent.
13.3 Payroll Matters. Merchant
shall process the base payroll for all Retained Employees and any additional
employees hired to assist with the Store Closing Sale. Attached
hereto as Exhibit 13.3 is a
description of Merchant’s base payroll, related payroll taxes, worker’s
compensation and employee benefits, which Merchant represents is true and
accurate as of the date hereof.
13.4 Employee Retention
Bonuses. Agent may pay as an Expense retention bonuses (“Retention Bonuses”) (which bonuses
shall be inclusive of payroll taxes but as to which no benefits shall be
payable) to Retained Employees who do not voluntarily leave employment and are
not terminated “for cause.” Such Retention Bonuses shall be processed
through Merchant’s payroll system. Agent shall within seven (7) days
of the Sale Commencement Date implement an employee retention plan and share
details of such plan with Merchant.
Section
14.
|
Representations,
Warranties, Covenants and
Agreements.
|
14.1 Representations, Warranties, Covenants and
Agreements of Merchant. Merchant hereby
represents, warrants, covenants and agrees in favor of Agent as of the Closing
Date (and at such times thereafter as set forth below) as follows:
(a) Good Standing. Merchant (i)
is and will remain through the end of the Marketing Period, a corporation duly
organized, validly existing and in good standing under the laws of the state of
its organization; (ii) has and will continue to have through the end of the
Marketing Period all requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as presently conducted; and
(iii) is and until the end of the Marketing Period with respect to all
Properties will continue to be, duly authorized and qualified to do business and
in good standing in each jurisdiction where the nature of its business or
properties requires such qualification, including all jurisdictions in which the
Stores are located.
22
(b) Motion, Preliminary
Order. Merchant shall fully prosecute the Motion (as
hereinafter defined), and shall otherwise use its reasonable best efforts to
obtain the entry of the Preliminary Order (as hereinafter defined), the Order
(as hereinafter defined) and the consummation of the transactions contemplated
hereby.
(c) Due Authorization; Binding
Agreement. Subject to entry of the Order, the Merchant has the
right, power and authority to execute and deliver this Agreement and each other
document and agreement contemplated hereby (collectively, together with this
Agreement, the “Comprehensive Agency
Documents”) and to perform fully its obligations
thereunder. Subject to entry of the Order, Merchant has taken all
necessary actions required to authorize the execution, delivery and performance
of the Comprehensive Agency Documents, and no further consent or approval is
required for Merchant to enter into and deliver the Comprehensive Agency
Documents, to perform its obligations thereunder, and to consummate the
Comprehensive Sale. Each of the Comprehensive Agency Documents has
been duly executed and delivered by Merchant and constitutes the legal, valid
and binding obligation of Merchant enforceable in accordance with its
terms. Except for the Order, no court order or decree of any federal,
state or local governmental authority or regulatory body is in effect that would
prevent or impair, or is required for the Merchant’s consummation of, the
transactions contemplated by this Agreement, and no consent of any third party
which will not be obtained prior to the Closing Date is required
therefor. No contract or other agreement to which the Merchant is a
party or by which the Merchant is otherwise bound or shall become
bound prior to end of the Marketing Period will prevent or impair the
consummation of the Comprehensive Sale and the transactions contemplated by this
Agreement.
(d) Operations. From December
1, 2009 through the Closing Date, the Merchant has operated and will operate in
the ordinary course of business consistent with its historical ordinary course
operations. Without limiting the foregoing, from December 1, 2009
through the Closing Date, (i) Merchant has not conducted and will not conduct
any promotions or advertised sales at the Stores except promotions and sales in
the ordinary course of business consistent with historic promotions and sales
for comparable periods last year, all as described in Exhibit 14.1(d) attached
hereto, (ii) Merchant has continued and will continue to replenish its
inventories with new Merchandise in a manner consistent with historic practices,
(iii) Merchant has not and will not return inventory to vendors (except in the
ordinary course consistent with past practice); (iv) Merchant has not and will
not make any management personnel moves or changes; and (v) Merchant has not and
will not enter into real estate contracts, renew leases, enter into leases,
terminate leases, reject leases, amend leases, consent to the assignment of
leases or grant or terminate any other interests in any Assets without Agent’s
prior written consent.
(e) Pricing Files. Merchant has
maintained its pricing files in the ordinary course of business. All
pricing files and records since December 1, 2009 relative to the Merchandise
have been made available to Agent in the file named
[ ]. All
such pricing files and records are true and accurate in all material respects as
to the actual cost to Merchant for purchasing the goods referred to therein and
as to the selling price to the public for such goods as of the dates and for the
periods indicated therein.
23
(f) Cost Factor. The aggregate
Cost Value of the Merchandise as a percentage of the aggregate Retail Value of
the Merchandise (the “Cost
Factor”) shall not be greater than sixty-two and one-half percent (62.5)%
(the “Cost Factor Threshold”)
and to the extent that the actual Cost Factor of the Merchandise is more than
the Cost Factor Threshold, then the Guaranteed Amount shall be adjusted (in
addition to any adjustment applicable pursuant to Exhibit 4.1(c)(i), Exhibit 4.1(c)(ii) or Exhibit 4.1(c)(iii)) in accordance
with Exhibit
14.1(f). For purposes of this Agreement, “Retail Value” means, for each item of
Merchandise, the lower of (a) the lowest ticketed, shelf or marked price, (b)
the PLU, scan or file price and (c) the lowest price offered to the public by
any and all means (excepting any prices offered to the public in advertising
circulars promoting temporary or promotional prices that are not in effect as of
the Closing Date) since December 1, 2009.
(g) Level and Mix of
Inventory. As of the Closing Date, the levels of Merchandise
(as to quantity) and the mix of Merchandise (as to type, category, style, brand
and description) at the Stores, Distribution Centers and in Merchant’s
pharmacies are in all material respects described in Exhibit 14.1(g) attached
hereto.
(h) Markdowns. As of the
Closing Date, all normal course permanent markdowns on inventory will have been
taken on a basis consistent with Merchant’s historical practices and
policies.
(i) Price Increases. Merchant
has not and will not have from December 1, 2009 through the Closing Date, marked
up or raised the price of any items of inventory, or removed or altered any
tickets or any indicia of clearance merchandise, except in the ordinary course
of business.
(j)
Ticketing. Merchant
has ticketed or marked all items of inventory received at the Stores prior to
the Closing Date (including, without limitation, all Merchandise located in the
Distribution Centers), in a manner consistent with similar inventory located at
the Stores and in accordance with Merchant’s historic practices and policies
relative to the pricing and marking of inventory.
(k) Transfers of
Inventory. Merchant has not purchased or transferred any
inventory outside the ordinary course of business.
(l)
Historic Sales and
Inventory. Exhibit
14.1(l) attached hereto sets forth (i) historic sales at the Stores for
the past twelve (12) months, and (ii) the levels and mix of inventories at the
Stores during such period.
(m) Product Safety Laws. To the
best of Merchant’s knowledge, the Assets are 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 Closing Date.
24
(n) Use and Occupancy. As of
the Closing Date, except as set forth on Exhibit 14.1(n)(i), no event of
default or event which with the giving of notice, the passage of time, or both
has occurred on the part of the Merchant under any lease, reciprocal easement
agreement or other easement, covenant, condition or restriction or any other
occupancy agreement which could have a material adverse effect on the
Comprehensive Sale. From and after the Closing Date, the Agent shall
have the right to the unencumbered use and occupancy of, and peaceful and quiet
possession of, each of the Stores, the Assets currently located at the Stores,
the Distribution Centers, Merchant’s headquarters, and the utilities and other
services provided at the Stores, the Distribution Centers and Merchant’s
headquarters. As of the Closing Date, to the best of Merchant’s
knowledge, except as set forth on Exhibit 14.1(n)(ii), all cash
registers, heating systems, air conditioning systems, elevators, escalators,
Store alarm systems, and all other mechanical devices used in the ordinary
course of operation of the Stores are in good working order and not in need of
repair.
(o)
Required Merchant
Payments. Merchant has paid, is current in the payment of, and
will continue to pay (i) all self-insured or Merchant funded employee benefit
programs for employees, including health and medical benefits and insurance and
all proper claims made or to be made in accordance with such programs, (ii) all
casualty, liability, worker’s compensation and other insurance premiums, (iii)
all utilities provided to the Stores, and (iv) all applicable
taxes.
(p) Increased Costs. Merchant
has not and shall not take any actions the result of which is to materially
increase the cost of operating the Comprehensive Sale, including, without
limitation, increasing salaries or other amounts payable to
employees.
(q) Labor Matters. During the
Sale Term, no work stoppages or other labor disturbances affecting the Stores or
the Distribution Centers having a material adverse effect on the Store Closing
Sale at any Store or Distribution Center shall occur. Merchant
represents and warrants that throughout the Sale Term the Stores and
Distribution Centers shall in all material respects be staffed in the ordinary
course consistent with past practice.
(r)
Advertising. As of
the date of this Agreement, except as set forth on Exhibit 14.1(r), Merchant is current
in the payment of all post-petition advertising liabilities and
expenses.
(s) Information
Provided. Merchant has provided Agent with all information
requested by Agent and all information so provided is true, correct and
complete.
(t) Title.
(i) Merchant
owns and will own at all times until sold pursuant to the terms of this
Agreement, good and marketable and insurable title to all of the Assets free and
clear of any and all liens, claims, security interests and/or other encumbrances
of any kind or nature whatsoever (excepting any liens in respect of pre-petition
secured credit facilities and all amounts due under any mortgage on any of the
Properties). Merchant shall not create, incur, assume or suffer to
exist any security interest, lien or other charge or encumbrance (excepting any
liens in respect of pre-petition secured credit facilities and all amounts due
under any mortgage on any of the Properties) upon or with respect to any of the
Assets or the Comprehensive Sale Proceeds. Merchant represents and
warrants that it shall convey all of the Assets at the direction of Agent to
third parties or Agents’ designee (including, without limitation, Agent or any
member of Agent) free and clear of any and all liens, claims,
security interests and/or other encumbrances of any kind or nature
whatsoever.
25
(ii) Except as
set forth on Exhibit 14.1(t)(ii)
hereto, to the actual knowledge of the employees of Merchant on the date hereof,
there is no pending or threatened condemnation proceeding affecting any of the
Properties.
(iii) A full and
complete copy of each of the Leases, with all amendments thereto, has been
delivered to Agent. Each of the Leases is in full force and effect,
is for the term set forth on Exhibit
14.1(t)(iii) hereto, and Merchant is not in breach or default thereof and
no cure amount would be due if any Lease were assumed as of the date hereof
except as set forth on Exhibit
14.1(t)(iii) hereto.
(u) Repair and Maintenance of Owned
Properties. Except as set forth on Exhibit 14.1(u), to the best of
Merchant’s knowledge as of the Closing Date, each of the Owned Properties,
including without limitation the roof, foundation and structure of all
improvements thereon and all mechanical systems thereat including heating,
cooling, ventilating, electrical and plumbing fixtures and systems and all
appliances, are in good working order, condition and repair, and are not in need
of maintenance or repair.
(v) Repair and Maintenance of Leased
Properties. Except as set forth on Exhibit 14.1(v), to the best of
Merchant’s knowledge as of the Closing Date, each of the Leased Properties,
including without limitation the roof, foundation and structure of all
improvements thereon and all mechanical systems thereat including heating,
cooling, ventilating, electrical and plumbing fixtures and systems and all
appliances, are in good working order, condition and repair, and are not in need
of maintenance or repair.
(w) Relationship with
Agent. Merchant’s relationship with Agent is solely that of
agent and principal, not that of joint venturers or partners.
(x) Environmental
Compliance. There has not occurred any unauthorized or illegal
emission, leak, discharge, spill or release into the environment of any
Hazardous Materials (as hereinafter defined) by Merchant or any use of Hazardous
Materials on or from any Property which, in any material respect, violates any
applicable federal, state or local law, rule, regulation governing the use,
storage, treatment, handling, production or disposal of such Hazardous Materials
or any other Environmental Laws (as hereinafter defined) that would result in
liability to Merchant or such Property. For purposes of this Section
14.1(x), the term “Hazardous
Materials” shall include, without limitation, any asbestos, PCBs,
pollutants, contaminants, chemicals, freon, wastes and other carcinogenic,
ignitable, corrosive, reactive, toxic or otherwise hazardous substance or
materials (whether solid, liquid or gaseous) subject to regulation, control or
remediation under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resources Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, the Clean Water Act, as amended, the Safe
Drinking Water Act, as amended, the Clean Air Act, as amended, the Occupational
Safety and Health Act, as amended, the Atomic Energy Act of 1954, as amended,
and all analogous or related laws and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal,
state or local environmental law, ordinance, rule or regulation
(collectively, the “Environmental
Laws”). Notwithstanding, anything to the contrary herein, in
no event shall the Agent be responsible for the removal or remediation of
Hazardous Materials located on or at any of the Properties.
26
(y) Legal Proceedings. Other
than the Petition and matters of record in Merchant’s chapter 11 cases, no
action, arbitration, suit, notice, or legal, administrative or other proceeding
before any court or governmental body has been instituted by or against Merchant
or any Property, or has been settled or resolved, or has been threatened against
or affects Merchant or any Assets, which if adversely determined, would give
rise to a lien or other encumbrance on any Property, or have a material adverse
effect upon any Property, Merchant’s ability to perform its obligations under
this Agreement or the conduct of the Comprehensive Sale.
(z) Governmental Consents and
Permits. Except for the Order, no consent, approval, license
(including any applicable liquor license or pharmaceutical license), permit,
authorization, declaration, filing, registration or other document with any
government or regulatory authority is required to be made or obtained by the
Merchant in connection with the execution, delivery and performance of this
Agreement or the sale, collection, liquidation, designation, license, transfer,
assignment, disposition and other monetization of or on account of
Assets. Furthermore, any consent, approval, license (including any
applicable liquor license or pharmaceutical license), permit, authorization,
declaration, filing, registration or other document with any government or
regulatory authority currently held by Merchant or Merchant’s estate for use in
the sale, collection, liquidation, designation, license, transfer, assignment,
disposition and other monetization of or on account of Assets remains valid and
in force and effect such that the sale, collection, liquidation, designation,
license, transfer, assignment, disposition and other monetization of or on
account of Assets may proceed without interruption, obstacle or
hindrance. Finally, Merchant has not received any notice to the
effect that, or otherwise been advised that, Merchant is not in compliance with
any consent, approval, license (including any applicable liquor license or
pharmaceutical license), permit, authorization, declaration, filing,
registration or other document with any government or regulatory authority or is
required to obtain any consent, approval, license (including any applicable
liquor license), permit or authorization in connection with the sale,
collection, liquidation, designation, license, transfer, assignment, disposition
and other monetization of or on account of Assets.
(aa)
Merchandise
Replenishment. Merchant has and will continue to replenish the
Stores in the ordinary course of business through the Sale Commencement
Date. Merchant shall cooperate with and assist Agent in procuring
Replenishment Goods throughout the Sale Term.
(bb)
Sales
Taxes. From and after the Closing Date, Merchant’s registers
shall be pre-programmed to accurately include in the total amount due from
customer all sales taxes due and payable in respect of the
Merchandise.
(cc)
Operation of Business From and
After Closing Date. After the Closing Date, the Merchant shall
operate its business subject to the terms of this Agreement and the instructions
of Agent and no transactions outside of the ordinary course of business shall be
taken without the express consent of the Agent. Specifically,
Merchant shall not without the prior written consent of Agent (i)
sell any Assets, (ii) grant any security interests or liens on the Assets or
proceeds thereof; (iii) cancel or terminate any insurance policy or service
contract relating to any of the Assets or Agent’s rights hereunder or (iv)
abandon any of the Assets.
27
14.2
Representations, Warranties and
Covenants of Agent. Agent hereby represents, warrants and
covenants in favor of the Merchant as of the Closing Date as
follows:
(a) Good Standing. Each member
of Agent (i) is a limited liability company duly organized, validly existing and
in good standing under the laws of the state of organization; (ii) has all
requisite power and authority under its charter and bylaws to consummate the
transactions contemplated hereby; and (iii) is and during the Sale Term will
continue to be, duly authorized and qualified to do business and in good
standing in each jurisdiction where the nature of its business or properties
requires such qualification.
(b) Due Authorization. Agent
has the right, power and authority to execute and deliver each of the
Comprehensive Agency Documents to which it is a party and to perform fully its
obligations thereunder. Agent has taken all necessary actions
required under its operating agreement to authorize the execution, delivery, and
performance of the Comprehensive Agency Documents. Each of the
Comprehensive Agency Documents has been duly executed and delivered by Agent and
constitutes the legal, valid and binding obligation of Agent enforceable in
accordance with its terms. No contract or other agreement to which
Agent is a party or by which Agent is otherwise bound will prevent or impair the
consummation of the transactions contemplated by this Agreement.
(c) Legal Proceedings. No
action, arbitration, suit, notice, or legal, administrative or other proceeding
before any court or governmental body has been instituted by or against Agent,
or has been settled or resolved, or to Agent’s knowledge, has been threatened
against or affects Agent, which questions the validity of this Agreement or any
action taken or to be taken by the Agent in connection with this Agreement, or
which if adversely determined, would have a material adverse effect upon the
Agent’s ability to perform its obligations under this Agreement.
Section 15.
|
Conditions Precedent to
Effectiveness.
|
15.1
Conditions Precedent to
Obligations of Both Merchant and Agent. Merchant or Agent may
terminate this Agreement if any of the following conditions precedent are not
satisfied at the times or during the periods indicated and the termination of
this Agreement pursuant to this Section 15.1 shall not result in any liability
to Agent and shall not result in any liability of Merchant except its obligation
to pay the Breakup Fee and Expense Reimbursement:
(a) Motion. On or prior to
December 7, 2009, Merchant shall file a motion with the Court requesting the
Court to approve the procedures associated with the sale of the Assets and this
Agreement (the “Motion”). Agent shall
approve the form and substance of the Motion prior to filing.
(b) Bid Procedures Order. On or
prior to December 10, 2009 or such later date approved by the Bankruptcy Court
(but in no event later than December 17, 2009), the Court shall enter a
preliminary order, which, among other things, shall schedule an auction of the
Assets
and grant Agent the bid protection, Breakup Fee and Expense Reimbursement set
forth in Section 19 hereto (the “Bid
Procedures Order”).
28
(c) Order. On or prior to
January 14, 2010, the Court shall have entered an order in form and substance
satisfactory to Agent and Merchant (the “Order”): (i) approving this
Agreement in its entirety; (ii) authorizing the Comprehensive Sale pursuant to
the terms of this Agreement and in a manner satisfactory to Agent in its sole
and absolute discretion (A) notwithstanding any state or local laws or
regulations otherwise governing or purporting to govern the licensing and
conduct of the Comprehensive Sale, (B) notwithstanding provisions in leases,
reciprocal easement agreements or other contracts that purport to limit, govern
or restrict the Comprehensive Sale, and (C) without the necessity of obtaining
any third party consents; (iii) requiring that no liens, security interests or
other encumbrances shall encumber the Assets or the Comprehensive Sale Proceeds
but shall attach only to the Guaranteed Amount and Recovery Amount, if any; (iv)
upon the occurrence of the Closing Date, granting the obligations payable to
Agent under this Agreement superpriority status pursuant to section 364(c) of
the Bankruptcy Code; (v) upon the occurrence of the Closing Date, granting the
Agent a first priority priming lien pursuant to section 364(d) of the Bankruptcy
Code on the Merchandise and the Comprehensive Sale Proceeds to secure the
obligations payable to Agent under this Agreement; and (vi) which Order shall
not have been reversed, stayed, modified or amended and as to which (a) the time
to appeal or seek review, reargument or rehearing has expired and as to which no
appeal or petition for certiorari, review or rehearing is pending, or (b) if
appeal, review, reargument, rehearing or certiorari of such order has been
sought, such order has been affirmed and the request for further review,
reargument, rehearing or certiorari has expired, as a result of which such order
has become final and nonappealable in accordance with applicable
law. Notwithstanding the foregoing clause, the Agent, in its sole and
absolute discretion, may close the transactions contemplated herein prior to the
Order becoming final; provided that the Court enters an order in form and
substance satisfactory to the Agent approving this Agreement and authorizing the
Merchant to consummate the transactions contemplated hereby, in which order the
Court finds that the transactions contemplated by this Agreement were negotiated
at arms-length and in good faith and the Agent acted in good faith in all
respects, and such order is not stayed pending appeal. The Order
shall be binding upon any mortgagee holding a mortgage with respect to any
Property, and shall provide that each Property may be freely transferred by
Merchant without the consent of the mortgagee or any other person or entity
notwithstanding any corporate or trust structure or any other purported
restriction on transferability, in each case, regardless whether any Property is
sold or otherwise transferred by Agent, transferred by Merchant to the
applicable mortgagee or otherwise retained by Merchant or disposed
of.
(d) Closing Date. The Closing
Date shall have occurred on or prior to January 15, 2010. The date on
which the closing of this Agreement occurs is referred to herein as the “Closing
Date.”
15.2
Additional Conditions Precedent
to Obligations of Agent. Agent may terminate this Agreement if
any of the following conditions precedent are not satisfied at the times or
during the periods indicated and the termination of this Agreement by Agent
pursuant to this Section 15.2 shall not result in any liability to
Agent:
29
(a) Agent Access. Prior to the
Closing Date, Merchant shall have provided Agent reasonable access to all
pricing and cost files, computer hardware, software and data 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.
(b)
Agent
Inspection. Agent shall have had the opportunity to inspect
the Stores, the Distribution Centers and the Merchant’s headquarter offices and
the Merchandise prior to the Closing Date.
(c) No Breach or Default. All
representations and warranties of Merchant hereunder shall be true and correct
in all material respects and no Event of Default by Merchant shall have occurred
at and as of the date hereof and as of the Closing Date.
(d) Non-Residential Real Property
Leases. The Court shall have entered an order extending the
period within which non-residential real property leases must be assumed or
assigned through and including the date that is 210 days after the date on which
the Cases were commenced.
(e) Material Adverse
Change. Through the Closing Date, the Merchant’s business
shall be conducted in the ordinary course consistent with past practices,
including, without limitation, with ordinary and customary xxxx-down policies,
provided, however, that Merchant shall not be
permitted to enter into real estate contracts, renew Leases, enter into leases,
terminate Leases, reject Leases, amend Leases, consent to the assignment of
Leases or grant or terminate any other interests in the Stores, sell Other
Pharmacy Assets or close Stores without the Agent’s prior written consent;
provided that Agent is deemed to have consented to the rejection of the six (6)
unexpired leases that the Merchant has already requested court approval in
respect of. If there has been, occurred or arisen (i) any damage or
destruction in the nature of a casualty loss, whether covered by insurance or
not, in an amount in excess of One Hundred Thousand Dollars ($100,000) affecting
any of the Assets, or (ii) any event that has materially impaired or would
reasonably be expected to materially impair the ability of Agent to carry on the
sale or liquidation of the Assets, including, without limitation, the Store
Closing Sales, then, and in such event, the Agent may withdraw or terminate this
Agreement. In such event, neither party shall have any liability or
obligation to the other in respect of the withdrawal or termination of this
Agreement.
(f)
Reports
Regarding Environmental Liability and Condition of
Properties. On or Prior to the Closing Date, Merchant shall
have delivered to Agent (i) a report in form and substance satisfactory to Agent
regarding compliance with Environmental Laws at the Properties and the existence
of Hazardous Materials at the Properties and (ii) a report in form and substance
satisfactory to Agent regarding the condition of the roof, foundation and
structure of each of the Properties.
(g)
Secured Lender Consent. On
or prior to the Closing Date, GECC and Kimco Capital Corp. (“Kimco”) shall have consented to the
transactions contemplated hereby in all respects, including, without limitation,
the grants of all security interests (and priority thereof) and Agent’s right to
receive the Comprehensive Sale Proceeds. The consent of GECC and Kimco shall be
in form and substance satisfactory to the Agent, in its sole and absolute
discretion. GECC and Kimco hereby agree to pay over to the Agent any amounts
due and owing by Merchant to Agent hereunder that Merchant shall not timely pay;
provided that Agent has met all
of its obligations to Merchant hereunder and GECC and Kimco have received
payments in respect of the Guaranteed Amount.
30
Section
16.
|
Insurance; Risk of
Loss.
|
16.1 Merchant’s Liability
Insurance. Merchant shall continue until the end of the
Marketing Period with respect to all Properties, in such amounts as it currently
has in effect, all of its liability insurance policies including, but not
limited to, products liability, comprehensive public liability, auto liability
and umbrella liability insurance, covering injuries to persons and property in,
or in connection with Merchant’s operation of the Properties and the Stores, and
shall cause Agent to be named an additional named insured with respect to all
such policies. The cost and expense of maintaining such insurance
shall be treated as an “Expense” hereunder. Within 10 days after the
Closing Date, Merchant shall deliver to Agent certificates evidencing such
insurance setting forth the duration thereof and naming Agent as an additional
named insured, in form reasonably satisfactory to Agent. All such
policies shall require at least thirty (30) days prior notice to Agent of
cancellation, non-renewal or material change. In the event of a claim
under any such policies Merchant shall be responsible for the payment of all
deductibles, retentions or self-insured amounts thereunder, in which case, any
deductibles, retentions or self-insured amounts shall be paid as an “Expense”
hereunder.
16.2
Merchant’s Casualty
Insurance. Merchant will provide until the end of the
Marketing Period for all of the Properties, as an “Expense” hereunder, fire,
flood, theft and extended coverage casualty insurance covering the unsold Assets
in a total amount equal to no less than the appraised value
thereof. From and after the date of this Agreement until the end of
the Marketing Period for all of the Properties, all such policies will name
Agent as loss payee. In the event of a loss to the Assets on or after
the date of this Agreement, the proceeds of such insurance attributable to the
Assets plus any self insurance amounts and the amount of any deductible (which
amounts shall be paid by Merchant), shall constitute Comprehensive Sale Proceeds
hereunder. In the event of such a loss Agent shall have the sole
right to adjust the loss with the insurer. Within 10 days after the
Closing Date, Merchant shall deliver to Agent certificates evidencing such
insurance setting forth the duration thereof and naming the Agent as loss payee,
in form and substance reasonably satisfactory to Agent. All such
policies shall require at least thirty (30) days prior notice to the Agent of
cancellation, non-renewal or material change. Merchant shall not make
any change in the amount of any deductibles or self insurance amounts prior to
the end of the Marketing Period for all of the Properties without Agent’s prior
written consent.
16.3
Agent’s
Insurance. Agent shall maintain, as an “Expense” hereunder,
until the end of the Marketing Period for all of the Properties, in such amounts
as it currently has in effect, comprehensive public liability insurance policies
covering injuries to persons and property in or in connection with Agent’s
agency at the Stores, and shall cause Merchant to be named an additional insured
with respect to such policies. Prior to the Closing Date, Agent shall
deliver to Merchant certificates evidencing such insurance policies setting
forth the duration thereof and naming Merchant as an additional insured, in form
and substance reasonably satisfactory to Merchant. In the event of a
claim under any such policies Agent shall be responsible for
the payment of all deductibles, retentions or self-insured amounts
thereunder, unless it is determined that liability arose by reason of the
wrongful acts or omissions or negligence of Merchant or Merchant’s employees,
independent contractors or agents (other than Agent or Agent’s employees, agents
or independent contractors), in which case, any deductibles, retentions or
self-insured amounts shall be paid as an “Expense” hereunder.
31
16.4
Worker’s Compensation
Insurance. Merchant shall at all times maintain, as an
“Expense” hereunder, worker’s compensation insurance (including employer
liability insurance) covering all Retained Employees in compliance with all
statutory requirements. Prior to the Closing Date, Merchant shall
deliver to Agent a certificate of Merchant’s insurance broker or carrier
evidencing such insurance.
16.5
Risk of
Loss. Without limiting any other provision of this Agreement,
Merchant acknowledges that Agent is conducting the Comprehensive Sale on behalf
of Merchant solely in the capacity of an agent, and that in such capacity (i)
Agent shall not be deemed to be in possession or control of the Stores or the
assets located therein or associated therewith, or of Merchant’s employees
located at the Stores, and (ii) except as expressly provided in this Agreement,
Agent does not assume any of Merchant’s obligations or liabilities with respect
to any of the foregoing. Merchant and Agent agree that Merchant shall
bear all responsibility for liability claims of customers, employees and other
persons arising from events occurring at the Stores during and after the Sale
Term, except to the extent any such claim arises directly from the acts or
omissions of Agent, or its supervisors or employees located at the Stores (an
“Agent Claim”). In
the event of any such liability claim other than an Agent Claim, Merchant shall
administer such claim and shall present such claim to Merchant’s liability
insurance carrier in accordance with Merchant’s historic policies and
procedures, and shall provide a copy of the initial documentation relating to
such claim to Agent. To the extent that Merchant and Agent agree that
a claim constitutes an Agent Claim, Agent shall administer such claim and shall
present such claim to its liability insurance carrier, and shall provide a copy
of the initial documentation relating to such claim to Merchant. In
the event that Merchant and Agent cannot agree whether a claim constitutes an
Agent Claim, each party shall present the claim to its own liability insurance
carrier, and a copy of the initial claim documentation shall be delivered to the
other party.
16.6
Force
Majeure. If any casualty or act of God or other event or
occurrence beyond the reasonable control of Agent prevents or substantially
inhibits the conduct of business in the ordinary course at any Store, such Store
and the Merchandise located at such Store shall, in Agent’s discretion, be
eliminated from the Comprehensive Sale and considered to be deleted from this
Agreement as of the date of such event, and Agent and Merchant shall have no
further rights or obligations hereunder with respect thereto; provided, however, that (i) the proceeds of any
insurance attributable to such Store, such Merchandise and any other Assets
located at such Store shall constitute Comprehensive Sale Proceeds hereunder,
and (ii) the Guaranteed Amount shall be reduced in accordance with Exhibit 4.1(c)(i), Exhibit 4.1(c)(ii) and Exhibit 4.1(c)(iii) to account for any
Assets eliminated from the Comprehensive Sale which are not the subject of
insurance proceeds.
32
16.7
Non-Assumption of
Liability. Agent shall not assume any debt, liability or
obligation of Merchant, except as expressly agreed to herein. Even
with respect to such expressly assumed debts, liabilities and
obligations, Agent’s only liability for such amounts shall be its obligations to
Merchant hereunder. Under no circumstances shall Agent have any
direct liability to any third party by virtue of this
Agreement. Without limiting the foregoing, Agent does not assume any
liability to third parties with respect to any Property. Agent does
not hereby assume any control or possession of any Property.
Section
17.
|
Indemnification.
|
17.1
Merchant
Indemnification. Provided that Agent makes a written demand on
Merchant for indemnification on or prior to December 31, 2010, Merchant shall
indemnify and hold Agent and its officers, directors, employees, agents and
independent contractors (collectively, “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:
(a) Merchant’s
material breach of or failure to comply with any of its agreements, covenants,
representations or warranties contained in any Agency Document;
(b) any
failure of Merchant to pay to its employees any wages, salaries or benefits due
to such employees during the Sale Term;
(c) subject
to Agent’s compliance with its obligations under Section 11.4 hereof, any
failure by Merchant to pay any Sales Taxes to the proper taxing authorities or
to properly file with any taxing authorities any reports or documents required
by applicable law to be filed in respect thereof;
(d) any
consumer warranty or products liability claims relating to
Merchandise;
(e) any
liability or other claims asserted by customers, any of Merchant’s employees, or
any other person against any Agent Indemnified Party (including, without
limitation, claims by employees arising under collective bargaining agreements,
worker’s compensation or under the WARN Act); and
(f) the
gross negligence or willful misconduct of Merchant or any of its officers,
directors, employees, agents or representatives.
17.2
Agent
Indemnification. Provided that Merchant makes a written demand
on Agent for indemnification on or prior to December 31, 2010, Agent shall
indemnify and hold Merchant and its officers, directors, employees, agents and
representatives harmless form 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:
(a) Agent’s
material breach of or failure to comply with any of its agreements, covenants,
representations or warranties contained in any Agency Document;
33
(b) 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;
(c) any
claims by any party engaged by Agent as an employee or independent contractor
arising out of such employment; and
(d) the
gross negligence or willful misconduct of Agent or any of its officer,
directors, employees, agents or representatives.
Section
18.
|
Events
of Default and Remedies.
|
18.1
Events of
Default. The following shall constitute “Events of Default”
hereunder:
(a) Merchant’s
or Agent’s failure to perform any of their respective material obligations
hereunder if such failure remains uncured ten (10) days after receipt of written
notice thereof;
(b) any
representation or warranty made by Merchant or Agent proves untrue in any
material respect as of the date made or at any time through the end of the
Marketing Period and, to the extent, curable, continues uncured ten (10) days
after written notice to the defaulting party;
(c) prior
to the entry of the Order, the entry of an order of the Bankruptcy Court in any
of the Merchant’s chapter 11 cases (i) appointing a trustee under chapter 7 or
chapter 11 of the Bankruptcy Code, (ii) appointing an examiner with enlarged
powers relating to the operation of the Merchant’s business under Section
1106(b) of the Bankruptcy Code, (iii) dismissing any of the Merchant’s chapter
11 cases, (iv) converting any of the Merchant’s chapter 11 cases to chapter 7
cases or (v) confirming a plan of reorganization or liquidation in any of the
Merchant’s chapter 11 cases; or
(d) the
occurrence and continuance of a breach, default or event of default by Merchant
under any Property Sale Agreement after the expiration of any applicable cure
period set forth therein.
18.2
Remedies. Upon
the occurrence of an Event of Default, the non-defaulting party (or, in the case
of an Event of Default under Sections 18.1(c) or 18.1(d), Agent) may, in its
discretion, (x) elect to terminate this Agreement and all other Comprehensive
Agency Documents without liability and (y) exercise any and all other rights and
remedies at law and equity, including the right of setoff against any and all
amounts owed by the non-defaulting party to the defaulting party.
Section 19.
Break-Up
Fee/Expense Reimbursement. In consideration of Agent
conducting its due diligence and entering into this Agreement, which serves as a
base by which other offers may be measured and is subject to higher and better
offers by way of an auction process (as more fully set forth in the Preliminary
Order), all subject to the approval of the Court:
34
(a) in
the event that this Agreement shall not be consummated because Merchant elects
to pursue an Alternative Transaction, Merchant agrees to pay Agent from
the proceeds of the winning bid at auction (or any other alternative
disposition of any or all of the Assets) a break-up fee (the “Break-Up Fee”) in the amount of Three
Hundred Fifty Thousand Dollars ($350,000) and an expense reimbursement (the
“Expense Reimbursement”) in the
amount of Two Hundred Fifty Thousand Dollars ($250,000), such Break-Up Fee and
Expense Reimbursement to be paid upon the earlier of the closing of the winning
bid (or other alternative disposition of the Assets) and ten (10) days after the
Bankruptcy Court hearing approving such winning bid (or other alternative
disposition of the Assets). For purposes of this Agreement, an “Alternative Transaction” means any
transaction where all or any part of the Merchandise, FF&E, Leases, Owned
Property or other Assets is conveyed, directly or indirectly, whether by sale,
merger, consolidation, lease, transfer of equity interests, plan of
reorganization or liquidation, sale of control of Merchant or otherwise, and
whether in one or more transactions or series of transactions, to one or more
persons or entities other than the Agent;
(b) the
Merchant shall not, at auction or otherwise, accept any alternative to this
Agreement with Agent with respect to the disposition of all or substantially all
of the Assets unless such alternative shall provide net (after taking into
account payment of the Break-Up Fee and Expense Reimbursement) value to the
Merchant that exceeds the value provided hereunder by an amount equal to not
less than Two Hundred Fifty Thousand Dollars ($250,000).
Section
20.
|
Miscellaneous.
|
20.1 Notices. All notices and
communications provided for pursuant to this Agreement
shall be in writing, and sent by hand, by facsimile, or a recognized overnight
delivery service, as follows:
If
to Agent:
|
KROC
Capital Services, LLC
|
0000
Xxx Xxxx Xxxx Xxxx
|
|
Xxxxx
000
|
|
Xxx
Xxxx Xxxx, XX 00000
|
|
Attn:
Xxx Xxxxxxx
|
|
Telecopy
No. (000) 000-0000
|
|
Xxxxxx
Xxxxxxxx Group, LLC
|
|
000
Xxxxxxxxxx Xxxxxx
|
|
Xxxxx
Xxxxx
|
|
Xxxxxx,
XX 00000
|
|
Attn:
Xxxxx Xxxxx
|
|
Telecopy
No.
|
|
The
Nassi Group LLC
|
|
000
Xxxxx Xxxxxxxx Xxxxxxxxx
|
|
Xxxxx
000
|
|
Xxxxxxxx
Xxxxxxx, XX 00000
|
|
Attn:
Xxx Xxxx
|
|
Telecopy
No. (000)
000-0000
|
35
SB
CAPITAL GROUP, LLC
|
|
0000
Xxxxxxxx Xxxx.
|
|
Xxxxx
000
|
|
Xxxxx
Xxxx, XX 00000
|
|
Attn:
Xxxxxx Xxxxxx
|
|
Telecopy
No. (000) 000-0000
|
|
DJM
REALTY SERVICES, LLC
|
|
000
Xxxxxxxxxxx Xxxx
|
|
Xxxxx
000
|
|
Xxxxxxxx,
XX 00000
|
|
Attn:
Xxxxxx Xxxxxxxx
|
|
Telecopy
No. (000) 000-0000
|
|
With
a copy to:
|
WACHTELL,
LIPTON, XXXXX & XXXX
|
00
Xxxx 00xx Xxxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attn:
Xxxxx X. Xxxxxxx
|
|
Xxxxxx
X. Xxxx
|
|
Telecopy
No. (000) 000-0000
|
|
If
to Merchant:
|
THE
PENN TRAFFIC COMPANY
|
0000
Xxxxx Xxxx Xxxx.
|
|
Xxxxxxxx,
XX 00000
|
|
Attn:
Xxxxxxx X. Xxxxx
|
|
Telecopy
No.
|
|
With
a copy to:
|
XXXXXX
& XXXXX LLP
|
0000
Xxxxxx xx xxx Xxxxxxxx
|
|
00xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attn:
Xxxxxxx X. Xxxxxxx
|
|
Xxxxxx
Xxxxxxx
|
|
Telecopy
No. (000) 000-0000
|
20.2 Governing Law; Consent to
Jurisdiction. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to conflict
of laws principles thereof. The parties hereto agree that any legal
action or proceeding arising out of or in connection with this Agreement shall
be adjudicated by the Bankruptcy Court, and by execution of this Agreement each
party hereby irrevocably accepts and submits to the jurisdiction of the
Bankruptcy Court with respect to any such action or proceeding.
20.3
Entire
Agreement. This Agreement and the Exhibits hereto contains the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes and cancels all prior agreements, including,
but not limited to, all proposals, letters of intent or representations, written
or oral, with respect thereto.
36
20.4
Amendments and
Waivers. No amendment, modification, termination or waiver of
any provision of this Agreement or any other Comprehensive Agency Document shall
be effective unless in a written instrument executed by each of the parties
hereto.
20.5 Setoff. At any time after
the Closing Date, any party hereto (the “Exercising Party”) shall have the
right to setoff against any payment owing to any other party hereto (the “Setoff Party”), the amounts owed by
the Setoff Party to the Exercising Party.
20.6 No Waiver. No consent or
waiver by any party, express or implied, to or of any breach or default by the
other in the performance of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligation 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.
20.7 Successors and
Assigns. This Agreement shall inure to the benefit of and be
binding upon Agent and Merchant, and their respective successors and assigns;
provided however, that this Agreement may not
be assigned by Merchant or Agent to any party without the prior written consent
of the other.
20.8
Execution in Counterparts;
Facsimile Signatures. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one agreement. This Agreement may
be executed by facsimile, and each such facsimile signature shall be treated as
an original signature for all purposes.
20.9 Section Headings. The
headings of sections of this Agreement are inserted for convenience only and
shall not be considered for the purpose of determining the meaning or legal
effect of any provisions hereof.
20.10
Survival. All
representations, warranties, covenants and agreements made by the parties hereto
shall be continuing, shall be considered to have been relied upon by the parties
and shall survive the execution, delivery and performance of this
Agreement.
20.11
No Third Party
Beneficiaries. This Agreement is for the benefit of the
parties hereto, and nothing in this Agreement (except the Letter of Credit),
whether express or implied, is intended to confer any rights or remedies on any
person or entity other than Merchant and Agent.
20.12
Further Assurances; Power of
Attorney. Merchant hereby agrees to use all reasonable efforts
and to proceed with due diligence to cause the conditions to the obligations
herein set forth to be satisfied. Merchant hereby agrees to execute
and deliver any and all further agreements, documents or instruments reasonably
necessary to effectuate this Agreement and any Property Sale
Agreement. Immediately upon the filing of any motion or request to
dismiss Merchant’s chapter 11 case or any subsequent case or any request for
confirmation of a plan of reorganization or liquidation (a) Merchant shall
provide notice of the hearing thereon to Agent and (b) Merchant shall be deemed
to have granted to Agent a power of attorney to take all actions and
sign all documents on Merchant’s behalf that are necessary or desirable to
perfect Agent’s security interest granted herein under applicable state
law. All powers conferred upon Agent pursuant to the preceding
sentence, being coupled with an interest, shall be irrevocable until the
termination of the Marketing Period for all Properties.
37
20.13 Security Interest. Upon
issuance of the Letter of Credit, and payment of the Initial Payment, and
effective thereon, Merchant hereby grants to Agent a valid, binding, enforceable
and perfected first priority security interest in and lien upon all assets owned
by Merchant (including, without limitation, the Assets) and the Comprehensive
Sale Proceeds to secure all obligations of Merchant to Agent hereunder; provided however, until full payment of the
Guaranteed Amount, Expenses and the Recovery Amount, in full, the security
interest granted to Agent hereunder shall remain junior to and subordinate in
all respects to the security interest of the secured lenders, in each case to
the extent of the unpaid portion of the Guaranteed Amount, Expenses and the
Recovery Amount, if any. Upon entry of the Order, and payment of the
Initial Payment pursuant to Section 4.4(a) hereof, and the issuance of the
Letter of Credit, the security interest granted to Agent hereunder shall be
deemed properly perfected without the need for further filings or
documentation.
[Signature
Page Follows]
38
IN
WITNESS WHEREOF, Agent and Merchant hereby execute this Agreement by their duly
authorized representatives as of the day and year first written
above.
THE
PENN TRAFFIC COMPANY
|
By:
|
Title:
|
SVP
|
SUNRISE
PROPERTIES, INC.
|
By:
|
Title:
|
VP
|
PENNWAY
EXPRESS, INC.
|
By:
|
Title:
|
VP
|
XXXXX
XXXXXXX BAKING COMPANY, INC.
|
By:
|
Title:
|
VP
|
39
BIG
M SUPERMARKETS, INC.
|
By:
|
Title:
|
VP
|
COMMANDER
FOODS INC.
|
By:
|
Title:
|
VP
|
P
AND C FOOD MARKETS INC. OF
VERMONT
|
By:
|
Title:
|
VP
|
P.T.
DEVELOPMENT, LLC
|
By:
|
Title:
|
VP
|
P.T.
FAYETTEVILLE/UTICA, LLC
|
By:
|
Title:
|
VP
|
40
ON
BEHALF OF THE AGENT
|
By:
|
Xxxxxxxx X Xxxxx |
Title:
|
AUTHORIZED REPRESENTATIVE |
GENERAL
ELECTRIC CAPITAL
CORPORATION
|
Solely
in respect of Paragraphs 4.5, l5.1(g) and
20.12
|
By:
|
Title:
|
KIMCO
CAPITAL CORP.
|
Solely
in respect of Paragraphs l5.l(g) and
20.12
|
By:
|
Title:
|
41
EXHIBIT
4.1(c)(i)
Merchandise
Threshold Adjustment Schedule
THE PENN
TRAFFIC COMPANY
Exhibit
4.1 (c)(i)
Merchandise
Threshold
(In
Thousands)
Cost
|
Adjustment
|
Adjustment
|
||||||
Value
|
%
|
$
|
||||||
35,000
|
57.75 | % | (2,887.50 | ) | ||||
35,500
|
57.40 | % | (2,583.00 | ) | ||||
36,000
|
57.05 | % | (2,282.00 | ) | ||||
36,500
|
56.70 | % | (1,984.50 | ) | ||||
37,000
|
56.35 | % | (1,690.50 | ) | ||||
37,500
|
56.10 | % | (1,402.50 | ) | ||||
38,000
|
55.75 | % | (1,115.00 | ) | ||||
38,500
|
55.50 | % | (832.50 | ) | ||||
39,000
|
55.25 | % | (552.50 | ) | ||||
39,500
|
55.00 | % | (275.00 | ) | ||||
40,000
|
0.00 | % | - | |||||
40,500
|
0.00 | % | - | |||||
41,000
|
0.00 | % | - | |||||
41,500
|
55.00 | % | 275.00 | |||||
42,000
|
55.00 | % | 550.00 | |||||
42,500
|
55.00 | % | 825.00 | |||||
43,000
|
55.00 | % | 1,100.00 |
EXHIBIT
4.1(c)(ii)
Pharmacy
Products Adjustment Schedule
THE PENN
TRAFFIC COMPANY
Exhibit
4.1 (c)(ii)
Pharmacy
Products Threshold
(In
Thousands)
Cost
|
Adjustment
|
Adjustment
|
||||||
Value
|
%
|
$
|
||||||
3,000
|
90.00 | % | (720.00 | ) | ||||
3,200
|
90.00 | % | (540.00 | ) | ||||
3,400
|
90.00 | % | (360.00 | ) | ||||
3,600
|
90.00 | % | (180.00 | ) | ||||
3,800
|
0.00 | % | - | |||||
4,000
|
0.00 | % | - | |||||
4,200
|
0.00 | % | - | |||||
4,400
|
90.00 | % | 180.00 | |||||
4,600
|
90.00 | % | 360.00 | |||||
4,800
|
90.00 | % | 540.00 | |||||
5,000
|
90.00 | % | 720.00 |
EXHIBIT
4.1(c)(i)
Patient
Prescriptions Adjustment Schedule
THE PENN
TRAFFIC COMPANY
Exhibit
4.1 (c)(iii)
Patient
Prescription Threshold
LTM
Rx
|
Adjustment
|
Adjustment
|
||||||
Count
|
per
|
$
|
||||||
725,000
|
$ | 5.00 | 500,000.00 | |||||
700,000
|
$ | 5.00 | 375,000.00 | |||||
675,000
|
$ | 5.00 | 250,000.00 | |||||
650,000
|
$ | 5.00 | 125,000.00 | |||||
625,000
|
$ | - | - | |||||
600,000
|
$ | - | - | |||||
575,000
|
$ | - | - | |||||
550,000
|
$ | 5.00 | (125,000.00 | ) | ||||
525,000
|
$ | 5.00 | (250,000.00 | ) | ||||
500,000
|
$ | 5.00 | (375,000.00 | ) | ||||
475,000
|
$ | 5.00 | (500,000.00 | ) |
EXHIBIT
4.5
Letter of
Credit
EXHIBIT
7.1(a)(ix)
Per Store
Per Diem Occupancy Expense Schedule
EXHIBIT
7.1(l)
Per
Distribution Center Per Diem Occupancy Expense Schedule
EXHIBIT
8.2
Marketing
Period Occupancy Expense Schedule
EXHIBIT
8.3
Repairs
Required to be Made Under Leases
EXHIBIT
13.3
Payroll
Matters
EXHIBIT
14.1(d)
Promotions
and Sales
EXHIBIT
14.1(f)
Cost
Factor Threshold Adjustment Schedule
THE PENN
TRAFFIC COMPANY
Exhibit
14.1 (f)
Cost
Factor Threshold
Cost
Factor
|
Adjustment
$
|
Cumulative
Adjustment $
|
||||||
62.50%
|
- | - | ||||||
62.75%
|
92,500.00 | (92,500 | ) | |||||
63.00%
|
92,500.00 | (185,000 | ) | |||||
63.25%
|
92,500.00 | (277,500 | ) | |||||
63.50%
|
92,500.00 | (370,000 | ) | |||||
63.75%
|
92,500.00 | (462,500 | ) | |||||
64.00%
|
92,500.00 | (555,000 | ) | |||||
64.25%
|
92,500.00 | (647,500 | ) | |||||
64.50%
|
92,500.00 | (740,000 | ) | |||||
64.75%
|
92,500.00 | (832,500 | ) | |||||
65.00%
|
92,500.00 | (925,000 | ) |
|
Adjustments
greater than the above limit would be at the same increments as
above.
|
EXHIBIT
14.1(g)
Store
Goods
EXHIBIT
14.1(l)
Historic
Sales
EXHIBIT
14.1(n)(i)
Lease
Defaults
EXHIBIT
14.1(n)(ii)
Items Not
In Working Order
EXHIBIT
14.1(r)
Unpaid
Advertising Liabilities
EXHIBIT
14.1(t)(ii)
Condemnation
Proceedings
EXHIBIT
14.1(t)(iii)
Lease
Terms, Breach, Default
EXHIBIT
14.1(u)
Repair
and Maintenance of Owned Properties
EXHIBIT
14.1(v)
Repair
and Maintenance of Leased Properties
EXHIBIT
15.1
Order