Exhibit 10.59
THE JOINT VENTURE FORMED BY
GREAT AMERICAN GROUP,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ RETAIL PARTNERS, LLC AND
DJM ASSET MANAGEMENT
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
December 14, 2001
Tractor Supply Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Re: Quality Stores, Inc., et al. Debtors
Dear ▇▇. ▇▇▇▇▇▇:
As you are aware from discussions being had between Tractor
Supply Company ("TSC"), Great American Group ("Great American"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Retail Partners, LLC ("GBRP"), and DJM Asset Management ("DJM")(Great American,
GBRP and DJM are collectively referred to herein as "GA/GBRP"), GA/GBRP and TSC
are in the process of formulating and presenting to Quality Stores, Inc., et
al., debtors and debtors in possession (collectively, the "Debtors"), a
comprehensive proposal (the "Proposal") to acquire, and/or the right to direct
the disposition of, certain assets and/or contractual rights of the Debtors,
including, without limitation, certain merchandise inventories, furniture,
fixtures and equipment, and real estate interests (collectively, the "Assets"),
which disposition rights would be exclusive in nature (the "Transaction").
As you also are aware from our discussions, included among the
Assets that are covered by the Transaction, and therefore would be subject to
such exclusive acquisition and disposition rights, are those various (i) owned
realty interests and (ii) non-residential real property leases (including,
without limitation, any and all FF&E associated therewith) that TSC has
identified to GA/GBRP that it desires to acquire by way of sale and/or
assumption and assignment from the Debtors, as the case may be (collectively,
the "TSC Identified Properties"), which TSC Identified Properties appear in
Schedule 1 hereto and incorporated herein.
The purpose of this Letter is to memorialize, for the mutual
benefit of GA/GBRP and TSC, the understandings and agreements reached between
and among them in respect of the Transaction, subject in all respects to the
conditions set forth in Section 5 below.
1. TSC Offer to Acquire Debtor-Owned Assets. TSC, in conjunction
with GA/GBRP, shall formulate and submit the Proposal for the
Debtors' consideration providing that TSC will acquire, or
acquire the right to direct and cause the disposition of, all
or substantially all of the Debtors' owned assets, including,
but not limited to, merchandise inventories, furniture,
fixtures and equipment, real estate, and certain other
tangible and intangible rights and interests to be set forth
with particularity in the Proposal, which Proposal shall be in
form and substance reasonably satisfactory to each of TSC and
GA/GBRP.
2. Designation Rights; TSC Identified Properties to TSC. As part
of the Transaction, TSC shall obtain "designation rights" with
respect to all of the Debtors' owned and leased
non-residential real property. Upon obtaining the approvals
set forth in Section 7 below, TSC shall designate that the TSC
Identified Properties (excluding any properties rejected by
TSC pursuant to the exercise of its rights under the Proposal)
shall be sold, transferred and conveyed, and/or assumed by the
Debtors and thereupon assigned, as applicable, to TSC (or a
designee thereof) on the economic terms and conditions set
forth in Paragraph 4 below. With regard to the balance of the
Debtor-owned/leased realty interests (which may, at GA/GBRP's
option, include any properties rejected by TSC), GA/GBRP shall
market same for sale, transfer and conveyance consistent with
the terms and provisions of the parties' letter of intent. In
consideration of GA/GBRP's marketing and sale efforts with
respect to the non-TSC Identified Properties, (i) GA/GBRP
shall pay TSC (or to the Debtors upon TSC's direction) the sum
of $4 Million and (ii) GA/GBRP shall thereupon be entitled to
retain all proceeds and profits realized upon a disposition of
the subject realty interests; provided, however, in addition
to the other amounts referenced in subclause (i) above and
▇▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇/▇▇▇▇ shall pay to TSC an amount equal to
ten percent (10%) of the net profits realized upon a
disposition of the non-TSC Identified Properties.
3. Disposition of Debtors' Merchandise Inventories and FF&E. As
part of the Transaction, TSC (or a designee thereof) shall
acquire, and/or shall acquire the right to direct the
disposition of, all of the Debtors' merchandise inventories
and furniture, fixtures and equipment ("FF&E"). Among other
things, the letter of intent shall provide that TSC shall be
granted the right to conduct (or cause the Debtors to conduct)
"going out of business", "store closing", or similar theme
sales form each of the Debtors' retail store locations for the
purpose of disposing of the merchandise inventories and FF&E
in orderly and efficient fashion. As
part of the Transaction, TSC and GA/GBRP (and to the extent
TSC elects not to take title to the Debtors' merchandise
inventories and FF&E, the Debtors) shall enter into a form of
Agency and License Agreement under which GA/GBRP shall serve
as TSC's (or the Debtors') exclusive agent for purposes of
implementing the subject inventory/FF&E disposition effort. In
consideration of TSC's agreement to engage (or cause the
Debtors to engage) GA/GBRP as the exclusive agent to implement
the subject inventory/FF&E disposition effort, GA/GBRP shall
pay to TSC a guaranteed recovery upon the disposition of the
Debtors' inventory and FF&E, which guaranteed recovery shall
be in an amount, and paid at such times, as shall be provided
in the agency agreement. Assuming the Debtors' inventory at
the closing of the Transaction has an aggregate cost value of
not less than $133 million, and is otherwise consistent as to
quality, mix and makeup as has been observed by GA/GBRP in the
course of its due diligence, and as has otherwise been
represented by the Debtors and their representatives, GA/GBRP
to TSC and amount equal to fifty-eight and six -tenths of one
percent (58.6%) of the aggregate "cost value" of the
merchandise inventory as of the closing date (the "GA/GBRP
Guaranty"). Assuming the Debtors' inventory at the closing of
the Transaction has an aggregate cost value of not less than
$133 million, and is otherwise consistent as to quality, mix
and makeup as has been observed by GA/GBRP in the course of
its due diligence, and as has otherwise been represented by
the Debtors and their representatives, GA/GBRP estimates that
the GA/GBRP Guaranty will be approximately $78 Million . The
agency agreement and other Transaction Documents shall provide
that GA/GBRP shall pay the GA/GBRP Guaranty to TSC (or to the
Debtors upon TSC's direction) as follows: (i) $56 Million on
the Closing Date and (ii) the remaining $22 Million in
accordance with the time line set forth in the definitive
documentation memorializing the Transaction. It is further
understood that the FF&E located in the TSC Identified
Properties shall not be the subject of GA/GBRP's disposition
efforts, but instead shall remain in the affected premises at
the conclusion of the store closing sales and become the
property of TSC. The subject agency agreement shall otherwise
contain such terms, conditions, representations and warranties
as are customary for similar inventory/FF&E disposition
transactions.
4. TSC Identified Properties Purchase Consideration. TSC agrees
that as part of the Transaction, under which the TSC
Identified Properties shall be sold, transferred, conveyed and
assumed by the Debtors and thereupon assigned to TSC, it shall
commit to contribute a sum of $20 Million (the
"TSC Purchase Price") in respect of the acquisition cost
associated with the TSC Identified Properties and related
FF&E; provided, however, in the event TSC conducts additional
due diligence with regard to any TSC Identified Property(ies)
and determines not acquire any such property(ies), then the
purchase price to be paid the Debtors, and the TSC Purchase
Price shall be adjusted as reflected in Schedule 1 hereto. TSC
shall pay the TSC Purchase Price at such time(s) and in such
manner as shall be agreed by the parties and set forth in
definitive documentation memorializing the Transaction
following acceptance thereof by the Debtors.
5. Exclusive Transaction. Upon acceptance of this Letter
Agreement by TSC and GA/GBRP, each party hereby covenants and
agrees that by its/their acceptance of this Letter Agreement,
each acknowledges that it understands that the proposal to
consummate the Transaction with the Debtors is premised upon
each having accepted the terms and conditions of this Letter
Agreement. As a consequence of the foregoing, subject to
paragraph 9 hereof, TSC and GA/GBRP each agrees that it/they
shall not enter into a transaction relative to the acquisition
by it/them of any of the Debtors' assets, including, but not
limited to, the TSC Identified Properties, the non-TSC
Indentifed Properties, the Debtors' merchandise inventories,
or the Debtors' FF&E, except as is provided herein, unless
otherwise agreed in writing by the other party(ies) hereto.
6. Confidentiality. Each of GA/GBRP and TSC acknowledge and
understand that the Transaction, and all of the matters
related thereto, are confidential and proprietary in nature.
Each of GA/GBRP and TSC therefore covenant and agree, except
as and to the extent permitted by this Letter or as otherwise
required by law or upon advice of counsel, maintain strict
confidentiality with respect to all information delivered to
such party pursuant hereto, and with respect to the existence
of negotiations with respect to the transactions contemplated
herein.
7. Conditions to GA/GBRP's and TSC's Obligations Hereunder. The
performance by either party to this Letter Agreement shall be
conditioned upon the satisfaction of each of the following
conditions, unless such condition is waived in writing by the
party for whose benefit such condition exists:
a. Bankruptcy Court Approval of Transaction. The
Bankruptcy Court shall have entered one or more
orders, inter alia, approving the Transaction, which
order(s) must be in a form and content that
is reasonably satisfactory to GA/GBRP and TSC;
b. Bankruptcy Court Approval of Transfer of TSC
Identified Properties to TSC. The Bankruptcy Court
shall have entered one or more orders, inter alia,
approving the sale, transfer, conveyance, assumption
and assignment of the TSC Identified Properties by
the Debtors to TSC, which order(s) must be in a form
and content that is reasonably satisfactory to
GA/GBRP and TSC; and c. TSC obtaining the requisite
approval of its Board of Directors to enter into the
Transaction.
8. Binding Nature. The parties hereto have each entered into this
Letter Agreement with the understanding and intent to be bound
thereby. Each party therefore covenants and agrees to use its
best efforts to insure the timely performance of its
respective obligations arising under or in connection with
this Letter Agreement. In facilitation of the effectuation of
the Transaction and this Letter Agreement, each of TSC and
GA/GBRP agree that upon the execution and delivery of
definitive documentation memorializing the Transaction they
shall each obtain and have issued for the benefit of the
parties hereto a standby letter of credit in an amount equal
to their respective obligations hereunder and under any
Transaction Documents.
9. Termination of Agreement. In the event that (a) the Debtors'
elect not to proceed with the sale of the assets in a "bulk
bid", but rather elect to conduct an auction on the individual
lots of assets; (b) GA/GBRP and TSC are not the successful
bidder at the auction; (c) either GA/GBRP or TSC elect not to
continue to bid at the auction; or (d) the Court does not
approve the Transaction as contemplated by the joint proposal
submitted by GA/GBRP and TSC , then the provisions of this
letter agreement shall terminate and each party is free to
participate in such auction or any subsequent proceeding
related to the sale of the Debtors' assets in their individual
capacity without liability to the other parties under this
agreement
10. Overbid Protection; Break-Up Fee. In addition to the other
terms and provisions to be contained in the Letter of Intent,
the Letter of Intent shall contain provision fore the payment
of a break-up fee and other bid protections to TSC and
GA/GBRP, with such break-up fee to be divided among the
parties as follows: 80% to GA/GBRP and 20% to TSC.
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If the transaction outlined herein is consistent with your
understanding of our discussions to date, and is otherwise acceptable to TSC,
please sign where indicated below and return a copy of this letter to us. Upon
receipt of your acceptance, we will promptly begin work to meet our mutual goals
as outlined herein. We look forward to working with your organization in
connection with this matter.
Very truly yours,
GREAT AMERICAN GROUP
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ RETAIL PARTNERS, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
DJM Asset Management
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREED AND ACKNOWLEDGED THIS
14th DAY OF DECEMBER, 2001:
TRACTOR SUPPLY COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President and Chief Operating Officer
cc: ▇▇▇▇ ▇▇▇▇▇, Esq.
