Report of Independent Registered Public Accounting Firm
EX-10.91 6 l31064bexv10w91.htm EX-10.91 EX-10.91
Exhibit 10.91
SUPPLY AGREEMENT
(Combo Stores)
(Combo Stores)
THIS SUPPLY AGREEMENT (Combo Stores) (this Agreement) is made to be effective as of January 30, 2005 (Effective Date), by and between DSW Inc. (f.k.a. Shonac Corporation), an Ohio corporation with a business address at 4150 East Fifth Ave, Columbus, Ohio 43219 (the Supplier), and Filenes Basement Inc., a Delaware corporation with a business address at 12 Gill Street, Suite 1600, Woburn, MA 01801 (Filenes).
BACKGROUND
The following facts constitute the background for this Agreement:
A. Filenes currently owns and operates certain retail stores (Store(s)) and Supplier is a distributor of shoes and related merchandise.
B. Filenes desires to have Supplier supply Merchandise (as defined herein) for footwear departments in certain of its Stores by obtaining Merchandise from Supplier who will select the Merchandise, be the sole owner of the same, and place Merchandise in such Stores with Filenes retaining a portion of the sales price of all Merchandise sold as provided herein.
C. Filenes and Supplier are parties to an Agreement dated April 1, 2000 (the Original Agreement) relating to Suppliers supply of Merchandise to Filenes. Filenes and Supplier wish to amend and restate the Original Agreement as it related to Covered Stores (as defined herein). Contemporaneously herewith, Filenes and Supplier have also executed a Licensed Department Supply Agreement (as defined herein) to amend and restate the Original Agreement as it related to Licensed Departments (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
1. DEFINITIONS.
In addition to the other terms defined herein, capitalized terms shall have the meanings given to them as follows:
1.1. Consignment Property means, collectively, the following described property whether now consigned, owned or existing or in the future consigned, acquired or arising: (i) all Merchandise which has been, is now or in the future consigned or delivered, directly or indirectly, by Supplier to, or for the benefit of, Filenes; (ii) all replacements, additions, accessions, substitutions, returns, repossessions and exchanges of any and all Merchandise; (iii) all records of the foregoing (whether the records are maintained in written or electronic form); and (iv) all products and proceeds of the foregoing described property (such proceeds being in whatever form, including, without limitation, additional Merchandise, accounts, inventory, instruments, documents, chattel paper, general intangibles, money, bank accounts and deposits, cash and all insurance proceeds payable by reason of any loss or damage of any or all of the foregoing described property).
1.2. Consignment Obligations means, as of any date, the total unpaid Supplier Proceeds owed to Supplier for Merchandise which has been, is now, or in the future will be, delivered by Supplier to Filenes.
1.3. Covered Stores means all of the Stores operated by Filenes that include Shoe Departments and which Supplier has agreed to supply hereunder, each of which have 10,000 or more square feet of sales floor dedicated to the Shoe Department for each such Store, which number of Stores may change, increase or decrease to reflect additional or closed Store locations from time to time during the term of this Agreement.
1.4. Covered Store Schedule means that schedule attached as Exhibit A hereto of two (2) Stores in which Shoe Departments will be supplied under this Agreement. Exhibit A may be updated from time to time by written agreement of the parties. The Covered Store Schedule shall be amended from time to time to include any new Covered Stores which include a Shoe Department.
1.5. Force Majeure means an event which shall prevent Supplier from performing, or causes a delay in, the performance of, any obligation required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure goods, failure of power, riots, insurrection, fires, floods, explosions, vandalism, acts of a governmental authority, failure of transportation not under the reasonable control of Supplier, acts of terrorism, whether foreign or domestic, war, armed conflict, or other reasons of a like nature which are beyond the control of Supplier.
1.6. Gross Sales means the gross proceeds from all sales of Merchandise, including (i) the entire sales price of all Merchandise sold, (ii) the amount of all credit sales, whether or not collected, (iii) the amount of all deposits not refunded to customers, and (iv) any sales, excise or similar tax chargeable with respect to sales of Merchandise and collected from customers.
1.7. Licensed Department means a store which has less than 10,000 square feet of sales floor dedicated to the Shoe Department and which is the subject of the Licensed Department Supply Agreement.
1.8. Licensed Department Supply Agreement means the Supply Agreement dated the same date hereof, between Supplier and Filenes covering Licensed Departments.
1.9. Merchandise means shoes, sneakers, boots, sandals, specialty dance footwear, cleated shoes and other sports shoes, skates, shoe care products (e.g. polish, cleaners and water proofers), and laces.
1.10. Net Sales means the Gross Sales from the sale of Merchandise less the value of (i) voided sales, cash or credit refunds or adjustments made with respect to Merchandise sold and returned, (ii) all returns to manufacturers or shippers, or returns so damaged they must be written off, (iii) transfers, sales and exchanges among Shoe Departments to other locations as requested by Supplier, (iv) sales not in the ordinary course of business, (v) employee discounts actually allowed by Supplier, and (vi) sales tax or excise tax chargeable with respect to Merchandise sales and collected from customers.
1.11. Shoe Department means the area in the Covered Stores in which Filenes will offer for sale the Merchandise.
1.12. SKU means the stock keeping unit number assigned to each separate item of Merchandise supplied by Supplier.
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1.13. Suppliers Supervisor means an individual or individuals employed by Supplier, at Suppliers cost to provide supervision and recommendations as to the Shoe Departments of multiple Covered Stores.
2. GRANT OF SUPPLY RIGHT. Filenes hereby grants to the Supplier an exclusive supply right (the Supply Right) to supply Merchandise to the Shoe Departments of all Covered Stores. Subject to Section 3, all Merchandise shall be owned by Supplier with Filenes having the right to sell such Merchandise for the benefit of Supplier and Filenes as provided in this Agreement. Filenes shall give Supplier the first right of refusal to supply Merchandise pursuant to this Agreement to any Store that will open a Shoe Department and which Store is not on the Covered Store Schedule at the time the decision is made by Filenes to open a Shoe Department in that Store. Filenes shall provide Supplier ninety (90) days advance written notice of its intention to open a new footwear department in any Store that is not a Covered Store or to add a Covered Store and Supplier shall have thirty (30) days after the date of such notice to agree, in Suppliers sole discretion, to supply Merchandise to the new Shoe Department. If Supplier does not so agree, Filenes may supply Merchandise to the new department itself or through a third party. In the event that Filenes intends to open a significant number of Shoe Departments within a short time period and Supplier agrees to supply such Shoe Departments as provided above, Supplier shall have a reasonable amount of time, under the circumstances, to supply such Shoe Departments. Notwithstanding anything to the contrary herein, Filenes and Supplier agree that the Filenes Basement Store # 51 located at 426 Washington Street, Boston, MA 02101 will not be subject to this Agreement.
3. SUPPLY OF MERCHANDISE. Supplier will supply Merchandise for each Covered Store on the Covered Store Schedule. Filenes shall acquire no ownership rights in and to the Merchandise supplied by the Supplier hereunder and title to Merchandise shall remain in and with Supplier until actually sold, except that title to Merchandise sold to Filenes customers shall pass to Filenes at the instant the sale of such Merchandise is effected. In the event that Merchandise is returned by the customer to a Store, title shall automatically re-vest in Supplier.
4. MERCHANDISING AND PRICE PRACTICES.
4.1. Merchandise Supplied. Supplier shall determine the quantity and mix of the Merchandise to be sold at the Covered Stores. Supplier shall continuously provide the Covered Stores with a complete line of salable inventory of current season Merchandise in appropriate quantities and of a quality in keeping with the quality of other merchandise sold by Filenes and targeted to Filenes normal customer. The Merchandise supplied will generally be shipped in pre-assorted case packs typical in the footwear industry, and Supplier will not replenish pairs sold at a size level. Supplier will coordinate with Filenes to provide Merchandise with scannable bar codes which are readily readable by Filenes normal ticket scanning equipment.
4.2. Compliance with Law. Supplier shall be responsible to assure that no Merchandise will be supplied, and no Merchandise will be offered at any price or in any manner, that violates any applicable Federal, state or other applicable statute or regulation. If a Filenes store manager or officer becomes aware of any actual or suspected violation, Filenes will immediately advise Supplier of that violation. Filenes agrees to comply with all applicable laws and regulations in the performance of this Agreement and in the operation of the Covered Stores.
4.3. Delivery Responsibility. Supplier shall arrange to deliver Merchandise, at Suppliers cost, to Covered Stores, and Filenes employees shall be responsible for receiving the Merchandise, accounting for the Merchandise received, and stocking the Merchandise in or on the display case or fixture at each of the Covered Stores. Filenes will maintain the Shoe Departments in a normal and neat condition consistent with other departments in the Store. Mismates, defective or damaged Merchandise received from Supplier will be noted and set aside for inspection by Suppliers Supervisor and for
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disposition at Suppliers direction within a reasonable time. Supplier shall be exempt from Filenes distribution center, vendor and data exchange requirements.
4.4. Transfers of Refunded Merchandise in non-Covered Stores. Filenes will make good faith efforts to ensure that Merchandise returned to Stores which are not Covered Stores will be transferred or shipped to a Covered Store at Suppliers expense.
4.5. Prices and Discounts. Supplier will set the prices at which its Merchandise will be sold and put in force reasonable discounting policies designed to clear stale Merchandise. Except as provided below, Supplier shall have the only authority to markdown Merchandise. Nevertheless, Supplier agrees (i) to participate in limited, selected promotional events in the Covered Stores as agreed upon in advance by Supplier, and (ii) to maintain a policy of periodic markdowns based on length of time Merchandise has been on the selling floor. Supplier shall offer to employees who receive a discount from Filenes own departments under Filenes policies the same discount on all sales of Merchandise as is normally received by them under Filenes then current policies in effect from time to time. Notwithstanding the foregoing, discounts for sales to Filenes employees shall only be in accordance with Filenes normal policies in effect from time to time and shall in no event exceed 30% of the otherwise applicable price for the Merchandise.
4.6. Supervisors. Supplier shall provide, at its expense, a sufficient number of trained Suppliers Supervisors who will coordinate and make recommendations as to arrangement, presentation and organization of the Shoe Departments in the Covered Stores.
4.7. Space. Filenes, at its expense, shall make available an amount of space for the Shoe Department in a size and location as listed on the Covered Store Schedule, which space is not to be less than the greater of (i) the existing Shoe Department space in each Shoe Department on the date of this Agreement or (ii) 15,000 square feet, unless a smaller space is agreed to by Supplier. Filenes shall make available for Suppliers use with a Shoe Department a minimum of 1,000 square feet of storage space in each Covered Store. Filenes may, at Filenes expense, relocate or renovate the Shoe Department of at any time and from time to time, upon reasonable notice to Supplier and upon prior approval from Supplier for relocations.
4.8. Utilities and Personnel. Filenes, at its expense, will provide all utilities and personnel to operate the Shoe Department in each Covered Store. Filenes will be responsible for all store staffing and all decisions relating to hiring and termination of such personnel related to the Covered Stores (including all sales and stocking personnel), and will bear all expenses relating thereto including without limitation, the cost of all employee salaries, payroll taxes and employee benefits. Filenes shall use commercially reasonable efforts to assure that the quality of the personnel in the Shoe Department is consistent with the quality of its personnel in other departments in the same Covered Store. Supplier at its expense shall provide Merchandise-related training for Filenes personnel serving the Shoe Department. Filenes agrees to indemnify Supplier from all damages, costs of defense and expenses (including attorneys fees) relating to claims based on wrongdoing by Filenes employees, agents or contractors unless caused by Supplier or its agents, contractors, or employees active negligence (not including negligence by omission or inaction), gross negligence or willful wrongdoing.
4.9 Advertising; License. Supplier will, upon request, provide to Filenes information related to Merchandise to be advertised in newspapers or other public media. Filenes will be responsible for producing the advertising copy and placing it with the appropriate media according to Filenes normal procedures for its own merchandise. Supplier will not be obligated to pay any advertising expenses relating to the Shoe Departments of the Covered Stores. Supplier hereby grants to Filenes, a non-exclusive and non-assignable, indivisible right and license to use the DSW name and logo (License) as necessary solely for the purposes of operating the Covered Stores and producing advertising copy for
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Covered Stores. Prior to the use of the DSW name or logo Filenes shall submit to Supplier any and all advertising copy and related information for review and approval by Supplier. Commencing with the first payment which shall be due on January 30, 2005, and continuing on the first day of Filenes fiscal year thereafter, providing (i) Filenes maintains a 52-53 week fiscal year as traditionally done in the retail industry, or (ii) if Filenes does not use the 52-53 week fiscal year, the first day of the traditional retail year as provided by the National Retail Federation 4-5-4 Merchandising Calendar, Filenes shall pay to Supplier $100,000 per Covered Store, in advance, as consideration for the use of the License for the fiscal year of this Agreement then commencing. The payment shall be prorated for any Covered Store closed during the year covered by such payment, based upon the number of days such Covered Store was open, with the balance refunded to Filenes within thirty (30) days of such Covered Stores closing. Supplier and Filenes shall both use their best efforts to maintain, and to cause its employees and agents to maintain, the high standard, image and prestige of the name, trademarks, service marks, symbols or logos associated with the other party hereto.
4.10. Standards of Operation. The following standards of operation shall be applicable to the operation of Covered Stores. In the event this Section 4.10 conflicts with other provisions of this Agreement, this Section 4.10 shall control.
4.10.1. Filenes shall install, maintain and replace at Filenes expense the DSW sign on the outside of Covered Stores and at such other locations in the interior of the Covered Store in such number, size and location as agreed to by Filenes and Supplier. Supplier shall provide at Suppliers expense specialty and basic visual merchandising and signage in the Shoe Department, which merchandising and signage will be subject to Filenes reasonable approval.
4.10.2. The department manager of the Shoe Department shall be an employee of Supplier and will report to Suppliers Supervisor, but will comply with all applicable Filenes policies. Supplier will pay the salary, applicable employer payroll taxes, employer benefits, workmens compensation and expenses of such department manager.
4.10.3. Filenes shall notify Supplier in writing no less than 180 days prior to the expiration, non-renewal or termination of any Covered Stores lease and provide to Supplier all pertinent facts relating to such expiration, non-renewal or termination. In the event that Filenes fails to provide such notice and that failure causes Supplier lost revenue or damages, Filenes shall indemnify Supplier for such lost revenue or damages.
4.10.4. Filenes shall not operate any going out of business sale, liquidation or the like which could create any possible confusion with the public as to whether any of Suppliers assets are being liquidated.
4.10.5. Filenes shall not display any merchandise in the Shoe Department other than Merchandise without the consent of Supplier and shall immediately remove any merchandise from the Shoe Department upon request by Supplier. Supplier shall not display any Merchandise outside of the Shoe Department without the consent of Filenes and shall immediately remove any merchandise outside of the Shoe Department upon request by Filenes.
4.10.6. Filenes shall use best efforts to accept returns of Merchandise which are returned under conditions that would be permitted by the return policy as in effect in DSW stores from time to time.
4.10.7. Filenes shall accept for return at any Covered Store any footwear merchandise purchased from a store operated by Supplier as a DSW store.
4.10.8. Filenes shall accept from customers for discounted purchases of Merchandise the DSW Reward Your Style program (or other similar program operated by Supplier in DSW
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stores) and transmit information related to customers use of such program to DSW. Filenes shall not take any action which may discourage the enrollment in or use of the DSW Reward Your Style program. Filenes shall accept other promotions by Supplier unless the promotion would interfere with Filenes business.
5. FIXTURES, EQUIPMENT, LOCATION AND LAYOUT. Filenes shall at its sole cost provide the fixtures and equipment to display Suppliers Merchandise in the Covered Stores or as needed to replace existing fixtures. The fixtures and equipment decisions with respect to design, type, color, material, layout, and location (subject to Section 4.7) within each Covered Store and related matters for new fixtures shall be made jointly by Supplier and Filenes. Filenes shall maintain at its expense all displays and fixtures in good repair and condition, ordinary wear and tear excepted. Supplier shall, subject to Filenes approval, provide individual Merchandise case talkers for depicting the style, price, and any other pertinent information that Supplier deems appropriate. Title to all fixtures paid for by Filenes shall remain in Filenes name and title to all fixtures paid for by Supplier shall remain in Suppliers name. Upon termination of this Agreement, and at Filenes request, Supplier will remove such fixtures not owned by Filenes. Absent a continuing Event of Default, no fixtures or equipment belonging to Supplier or any patented fixtures of Supplier shall be transferred or removed from a Store without the consent of Supplier; and, further, in no event will Filenes sell, transfer or otherwise dispose of any fixtures patented by Supplier without Suppliers express written consent.
6. SALES REVENUE SHARING; ACCOUNTING PROCEDURES.
6.1 Sales. All sales of Merchandise will be identified with the Shoe Department and shall be made through Filenes normal cash registers or point-of-sale systems and by use of Filenes normal sales recording equipment. Net Sales from sales of Merchandise shall be split 80% to Supplier and 20% to Filenes. Suppliers 80% portion of the Net Sales (Suppliers Proceeds) shall be held in trust for the benefit of Supplier and Suppliers Lender; provided however, that prior to receiving written notice to the contrary from Suppliers Lender, Filenes shall deliver all of Suppliers Proceeds directly to Supplier and shall be released from any claim by Suppliers Lender for all such funds turned over to Supplier.
6.2 Reports. The reporting of all sales of Merchandise shall be made in conformity with the methods established by Filenes from time to time. The costs of such methods and point-of-sale equipment and maintenance thereof shall be borne by Filenes. Filenes also agrees to provide and make accessible to Supplier information, statistics and reports available within Filenes existing merchandise processing system which relate to the Merchandise. Any special reports or enhancements required by the Supplier will be subject to Filenes approval. Filenes hereby agrees to cooperate and coordinate with Supplier the implementation of electronic exchange and communication between Filenes computer system and Suppliers computer system in connection with point-of-sale, receiving and shipping and inventory information related to the Merchandise, including Merchandise returns at any Stores which are not Covered Stores.
6.3. Books & Records. Supplier shall maintain and preserve the records required to be maintained hereunder for the length of time required by applicable law. Supplier shall have the right to obtain from Filenes all statements, data or explanations reasonably necessary to validate each Accounting Statement (as defined in Section 6.5) provided by Filenes to Supplier. Filenes shall keep true and correct books of accounts in accordance with Filenes regular accounting practices related to the Merchandise, which entries shall be open to examination and inspection by Supplier upon reasonable advance notice during all normal business hours during the term of this Agreement and for three (3) years thereafter. Such examination and inspection will not occur more than twice in any twelve (12) month period.
6.4. Filenes Fee. In consideration of granting the Supply Right, Filenes shall be entitled to twenty percent (20%) of Net Sales of Merchandise (Filenes Fee).
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6.5. Accounting. No later than Friday of each week Filenes shall send to Supplier a written statement (the Accounting Statement) by electronic mail or by personal delivery setting forth with respect to the immediately preceding week the following:
(i) the total amount of Gross Sales and Net Sales, and
(ii) the amount of Filenes Fee.
6.6. Settlement. Contemporaneously with the submission of the Accounting Statement, Filenes shall pay to Supplier in immediately available funds or by another method agreed to by the parties, subject to the provisions of Section 13, an amount equal to Net Sales in or from the Shoe Department during the immediately preceding week less the amount identified in clause (ii) of Section 6.5. Supplier may, by notice to Filenes given no later than ninety (90) days following the date of an Accounting Statement, question the accuracy of such Accounting Statement. Filenes and Supplier shall make diligent, good faith efforts to resolve the disagreement within thirty (30) days following such notice. If Filenes does not receive a notice of dispute from Supplier within one hundred twenty (120) days after the date of the applicable Accounting Statement, Supplier will be deemed to have accepted such Accounting Statement, subject to any adjustment required as permitted herein.
7. TERM AND TERMINATION.
7.1. Basic Term and Renewals. The original term of this Agreement shall commence on January 30, 2005, and continue through and include January 29, 2010, unless previously terminated in accordance with the provisions of this Agreement. This Agreement shall be automatically extended for additional periods of one (1) year each. If either party chooses not to renew this Agreement at the end of the original term or any successive renewal term, it shall deliver a written termination notice to the other party not less than one hundred eighty (180) days prior to the end of the then effective term.
7.2. Termination for Breach. Either party may terminate the Supply Right and obligations related thereto as to a particular Shoe Department in an individual Covered Store or as to all Covered Stores at any time for any Event of Default hereunder by the other party hereto by giving ninety (90) days prior written notice to the defaulting party. In addition, an individual Store shall no longer be a Covered Store, and this Agreement shall terminate as to such individual Store, if at any time that Store ceases for any reason to be operated by Filenes. Filenes shall provide to Supplier written notice no later than ninety (90) days prior to the date when any Covered Store will no longer be operated by Filenes.
7.3. [Intentionally deleted.]
7.4. [Intentionally deleted.]
7.5. Effect of Termination. Except as otherwise provided in Section 13 hereof, upon the termination of the Supply Right and obligations related hereto for any reason permitted herein as to a particular Covered Store, individually, or as to all Covered Stores (a) Supplier shall have the option to liquidate existing inventory of the Merchandise; provided, however, that such right to continue selling shall not extend beyond the date upon which this Agreement shall formally terminate unless agreed in writing by the parties, (b) Filenes shall be entitled to offer for sale Merchandise not obtained from Supplier for a period of thirty (30) days prior to the effective date of any such termination, and (c) Filenes will continue to display the remaining inventory of Merchandise in a manner consistent with such displays prior to such termination although the space allocated to that remaining inventory of Merchandise will be reduced as the quantity of that inventory of Merchandise is reduced. Except as otherwise provided in Section 13, Supplier shall remove, at Suppliers expense within ninety (90) days following such termination: (y) all Merchandise supplied by Supplier located in any Filenes Store, and (z) if demanded by Filenes in writing, and except as otherwise provided herein, all fixtures provided by Supplier (if any) which Filenes demands be removed. Supplier may purchase from Filenes any patented fixtures installed in the Shoe
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Departments at a price equal to 100% of the unamortized costs of such fixtures with those costs being amortized on a straight-line basis over five (5) years; provided however, the purchase price of such patented fixtures shall not be less than 5% of the original cost of such fixtures. Supplier will promptly pay all costs associated with the repair of any damage to a Store caused by such removal. Except as otherwise provided in Section 13 hereof, any Merchandise or fixtures not removed by Supplier as provided above will be deemed abandoned and Filenes may take such actions (including destroying) with respect to such items without liability.
8. SHORTAGES AND DAMAGES. Supplier will maintain complete and accurate records of the inventory of its Merchandise at each Store and make that information available to Filenes. At the time of each Annual Inventory (as defined below), Filenes, at Suppliers expense, shall arrange for having an inventory to be taken of Suppliers Merchandise at the same time of Filenes scheduled year-end physical inventory (the Annual Inventory). Supplier, at its expense, may have a representative observe the taking of the Annual Inventory. In the event that the Annual Inventory shows shrinkage in Merchandise in excess of one percent (1%) of annual Net Sales (Allowable Shrink), Filenes will pay to Supplier 50% of the retail value (as listed in Suppliers inventory retail stock ledger) of that shrinkage amount which exceeds the Allowable Shrink (less any insurance proceeds payable to Supplier with respect to such loss) within thirty (30) days of the date of the Annual Inventory.
9. IDENTITY, INDEMNITY AND RELATIONSHIP TO PARTIES.
9.1. No Agency. Each party to this Agreement agrees that in performing its respective duties and obligations hereunder, and in exercising any of the rights or benefits granted hereunder, neither shall at any time hold itself out to be the agent, servant, or employee of the other party, in any manner whatsoever, and it is expressly understood that it is the intention of this Agreement that neither party hereto shall at any time be or act as the agent, servant or employee of the other.
9.2. Indemnity of Filenes. Supplier will indemnify Filenes and save it harmless from and against any and all claims, actions, damages, liability and expense (including attorneys fees) in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence caused by Supplier, by its agents, contractors, or employee negligence, omission or deliberate acts. In case Filenes shall, without fault on its part, be made a party to any litigation commenced by or against Supplier and relating to any of the foregoing matters, then Supplier shall protect and hold Filenes harmless and shall pay all costs, expenses and reasonable attorneys fees that may be incurred or paid by Filenes in defending such action.
9.3. Indemnity of Supplier. Filenes will indemnify Supplier and save it harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property rising from or out of any occurrence caused by Filenes or its agents, contractors, or employees negligence, omission or deliberate acts. In case Supplier shall, without fault on its part, be made a party to any litigation commenced by or against Filenes and relating to any of the foregoing matters, then Filenes shall protect and hold Supplier harmless and shall pay all costs, expenses and reasonable attorneys fees that may be incurred or paid by Supplier in defending such action.
9.4. Indemnification Procedure
9.4.1. Notice. If any third party makes a claim for which Supplier or Filenes, as the case may be, (the Indemnified Party) seeks indemnity from the other party hereto (Indemnitor), the Indemnified Party shall as soon as practicable notify Indemnitor of the details of the claim (Claim Notice).
9.4.2. Defense of Admitted Indemnified Claim. After receiving a Claim Notice, Indemnitor may elect, by written notice to the Indemnified Party, to assume the defense of such claim by using counsel selected by Indemnitor, acting reasonably. If Indemnitor assumes such
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defense and admits that the claim is subject to the Indemnitors indemnity obligations, then: (i) the claim shall be deemed to be a claim indemnified by the Indemnitor; (ii) the Indemnified Party may, at its election, participate in the defense of the claim, but Indemnitor will have no obligation to pay for any defense costs including attorneys fees of the Indemnified Party after Indemnitor assumes the defense of the claim; and (iii) Indemnitor will have the right, without cost to Indemnified Party, to compromise and settle the claim on any basis believed reasonable, in good faith, by Indemnitor, and Indemnified Party shall be bound thereby.
9.4.3. Disputed Indemnity. After receiving a Claim Notice, if Indemnitor either does not assume the defense thereof, or does so under a reservation of rights without admitting that the claim is subject to the Indemnitors indemnity obligations, then: (i) the claim shall not be deemed to be a claim indemnified by the Indemnitor and neither party shall have waived any rights to assert that the claim is or is not properly a claim subject to the Indemnitors indemnity obligations; (ii) both Indemnitor and Indemnified Party may, at their individual election, participate in the defense of such claim but Indemnitor will remain responsible for the costs of defense, including reasonable attorneys fees of the Indemnified Party should the claim ultimately be determined to be subject to Indemnitors indemnity obligation; and (iii) the Indemnified Party shall have the right to compromise and settle the claim on any basis believed reasonable, in good faith, by the Indemnified Party, and the Indemnitor will be bound thereby should the claim ultimately be determined to be subject to Indemnitors indemnity obligation.
10. INSURANCE DAMAGE.
10.1. Supplier Liability Insurance. Supplier shall maintain commercial general and product liability insurance coverage against any loss or liability for damages which may result from Suppliers operations or Suppliers Merchandise either to persons or property with limits of not less than $2 million for injury to one person; and not less than $500,000 for property damage or occurrence in each location (subject to normal deductibles and retentions). Suppliers liability insurance shall name Filenes as an additional insured and shall contain provisions waiving subrogation against Filenes; provided however, that this provision shall not cover claims provided for in the indemnity clauses of Section 4.8 and/or 9.3.
10.2. Supplier Casualty Insurance. Supplier agrees to keep, at its own cost and expense, all of its property and its Merchandise and all fixtures provided by it in the Store adequately insured against loss by fire and all other casualties covered by broad form extended coverage and sprinkler leakage insurance policies (or Supplier may self-insure the same). Supplier shall bear the entire risk of a casualty to its Merchandise and other property and all fixtures located in the Stores; provided, however, that this provision shall not cover claims provided for in the indemnity clauses Sections 4.8 and/or 9.3.
10.3. Filenes Liability Insurance. Filenes shall provide broad form comprehensive commercial general liability insurance coverage insuring Filenes and Supplier against any loss or liability for damages which may result from Filenes operations or Suppliers operations within the Covered Stores with limits of not less than $2 million for injury to one person, and for property damage or occurrence in each location (subject to normal deductibles and retentions); provided, however, that this provision shall not cover claims provided for in the indemnity clause of Section 9.2 for injuries to persons or damage to property. The limits indicated herein may be satisfied by a primary policy and umbrella liability policy showing the primary liability policy as an underlying policy. A certificate of insurance naming Supplier, as an additional insured shall evidence the insurance required herein. The primary liability policy shall contain provisions waiving subrogation against Supplier.
10.4. Filenes Worker Compensation Insurance. Filenes shall provide to Supplier proof of insurance for worker compensation insurance for all Covered Stores which insurance shall meet or exceed the regulatory requirements of the state in which Covered Stores are located. Filenes agrees to indemnify and defend Supplier for all claims brought by employees of Filenes.
11. LIENS AND TAXES. Supplier agrees to pay all ad valorem, personal property, excise, use or other taxes and assessments and licenses of every description assessed against it, in respect of or
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measured by the Merchandise or other property of Supplier and all fixtures provided by Supplier. Filenes shall be responsible for the payment of all sales taxes resulting from sales of the Merchandise under this Agreement.
12. DEFAULT.
12.1. Any one of the following shall constitute an event of default (Event of Default) hereunder:
12.1.1. Either party fails to comply with or perform as and when required or to observe any of the terms, conditions, or covenants of this Agreement, and such failure continues for a period of (a) ten (10) days after notice thereof to the defaulting party with respect to monetary defaults, and (b) thirty (30) days after notice thereof to the defaulting party with respect to non-monetary defaults; or
12.1.2. Any proceeding under the United States Bankruptcy Code or any successor law or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment is instituted by either party; any such proceeding is instituted against either party and is consented to by the respondent or remains undismissed for sixty (60) days; an order for relief is entered under the United States Bankruptcy Code or any successor law against either party; either party is adjudicated a bankrupt; a trustee, receiver or similar fiduciary is appointed to administer any substantial part of the property of either party; or either party makes an assignment for the benefit of creditors, admits in writing an inability to pay debts generally as they become due or becomes insolvent; or
12.1.3 Any failure by Filenes to comply with the provisions of Section 4.10 and such failure is not cured within ten (10) days after notice thereof is given by Supplier to Filenes.
12.2. Upon the occurrence of an Event of Default hereunder, the non-defaulting party may terminate this Agreement as provided in Section 7.2, and/or exercise any other remedy provided by law or equity. An Event of Default under Section 12.1.2 above shall be effective without notice or the taking of any action by the non-defaulting party.
13. SUPPLIERS LENDER. If at any time during the term of this Agreement Supplier and Lender shall no longer both be Loan Parties (as defined in the credit facilities existing on the date hereof) to the same credit facilities, or if Suppliers supplying of Merchandise hereunder would otherwise constitute a default under any such credit facility, Suppliers obligations to supply Merchandise hereunder shall cease until consent therefor has been obtained from Suppliers Lender. Upon the obtaining of such consent, Filenes and Supplier hereby agree, for the benefit of such commercial lender(s) which from time to time provide Suppliers principal credit facilities (Suppliers Lender), to the following:
13.1. Security Interest/Consignment.
13.1.1. All Merchandise delivered by Supplier from time to time to Filenes under this Agreement is made on a consignment sales basis. Filenes acknowledges that Supplier is the sole owner of, and holds sole title to, the Merchandise.
13.1.2. Filenes hereby acknowledges that Supplier has granted to Suppliers Lender a security interest in substantially all of its assets, including, without limitation, all Merchandise, fixtures, equipment and other personal property owned by Supplier and the proceeds thereof now or hereafter held by, shipped to or otherwise in possession of or controlled by Filenes, and unremitted Suppliers Proceeds (collectively, the Collateral, and as to the Merchandise, the Collateral Merchandise), and Filenes waives and relinquishes any lien rights or claims of any
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kind against the Collateral. Filenes authorizes Supplier to file UCC-1 financing statements covering the Merchandise supplied as part of this Agreement, such UCC-1 financing statements to be in a form reasonably acceptable to Filenes and Suppliers Lender to acknowledge Suppliers and/or Suppliers Lenders interest in the Collateral. Upon Suppliers Lenders request, Filenes will execute any documents reasonably required to perfect or acknowledge Suppliers Lenders security interest or other rights in the Collateral; Filenes will execute any documents in a form reasonably acceptable to Filenes which indicate that the Merchandise has been consigned to Filenes or that Filenes has not granted to any party a lien upon the Collateral, other than any liens which have been expressly subordinated to the interests of Supplier and Suppliers Lender. Notwithstanding the foregoing, the security interests acknowledged under this Agreement and, to the extent permitted by the Bankruptcy Code, in any order of the Bankruptcy Court approving the agreement are to be deemed perfected without the necessity of filing any documents otherwise required under non-bankruptcy law for the perfection of security interests in real or personal property, with such perfection being binding upon any subsequently appointed trustee either under Chapter 11 or any other chapter of the Bankruptcy Code and upon all creditors of the debtor.
13.1.3. It is the intent of Supplier and Filenes to create a true consignment arrangement with regard to Suppliers supply of Merchandise to Filenes with Supplier as consignor and Filenes as consignee. Suppliers ownership of the Merchandise notwithstanding, as a precaution and without affecting the intention of the parties to create a true consignment arrangement, Filenes, by this Agreement, grants to, and creates in favor of, Supplier a continuing security interest in the Consignment Property to secure the Consignment Obligations. It is the intention of the parties that the precautionary security interest granted by Filenes to Supplier hereby is and will be a first priority security interest in the Consignment Property.
13.2. Notice of Identity. Supplier will give written notice to Filenes from time to time of the identity of the Suppliers Lender, and Filenes shall be under no obligation hereunder to any party unless and until Filenes shall have received such notice, and then Filenes sole obligation to Suppliers Lender are only as expressly provided in Section 13 hereof and to follow such instructions as to remitting Suppliers Proceeds. Upon receipt by Filenes of such notice from the Supplier, Filenes will acknowledge only the party specifically named by Supplier in such notice as Suppliers Lender. Any notice subsequently given by Supplier and signed by the lender named in the preceding notice shall revoke any previous notice given by Supplier hereunder. Upon receipt by Filenes of such subsequent notice, Filenes shall have no obligation to any party previously named by Supplier as Suppliers Lender.
13.3. Collateral.
13.3.1. Filenes agrees that upon receipt of written notice from Suppliers Lender referring to this Section 13, Filenes will hold Suppliers Proceeds from the Collateral for the account of Suppliers Lender and subject to Suppliers Lenders instructions and shall release such proceeds only to Suppliers Lender or as otherwise directed by a court. Any such payments shall be made free of any set-off, reduction, or counterclaim, (including, without limitation, any set-off, reduction or counterclaim based upon any alleged breach by Supplier of this Agreement). Supplier agrees to indemnify and hold harmless Filenes for complying with any notice purporting to be the written notice of Suppliers Lender.
13.3.2. Upon receipt of Lenders Default Notice (as defined below), Filenes agrees to provide Suppliers Lender with all reasonably requested reporting regarding the Collateral that it would otherwise provide to Supplier.
13.3.3. Filenes agrees that, in addition to its obligations under this Section 13, upon receipt of written notice from Suppliers Lender (Lenders Default Notice) referring to this Section 13.3 that represents to Filenes that there is the occurrence and continuance of a default under the financing arrangements between Supplier and Suppliers Lender and stating the intent of Suppliers Lender to exercise its remedies as a result of the occurrence of such default, such
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Lenders Default Notice shall constitute a termination of the Supply Right and Filenes shall hold the Suppliers Proceeds for the account of Suppliers Lender and subject to the instructions of Suppliers Lender. In that regard, Suppliers Lender may elect to immediately remove the Collateral or it may sell the then existing inventory of Collateral Merchandise subject to Section 7.5 for a period of up to ninety (90) days after Filenes receipt of Lenders Default Notice (but in no event later than the then current termination date of this Agreement) and in connection with such sale, Filenes shall comply with its obligations under this Agreement to the same extent as if Suppliers Lender were the Supplier. At the end of such sale, and subject to the provisions of Section 5 hereof, the Suppliers Lender may repossess and remove any remaining Collateral from the Filenes locations, as Suppliers Lender in its discretion may elect; provided, however, that Suppliers Lender agrees to the removal of such Collateral only in accordance with such reasonable limitations on the time and manner of such removal as Filenes shall require which limitations are intended to avoid disruption of Filenes normal operations or any possible confusion in the mind of the public as to whether any of Filenes assets are being removed. In connection with any sale of the Collateral Merchandise from Filenes premises, all advertising with respect to such sale shall be subject to the prior approval of Filenes (which approval shall not be unreasonably withheld and given promptly so as not to unreasonably delay the exercise of Suppliers Lenders rights). Filenes shall not be deemed to have failed to have acted in good faith or unreasonably withheld approval by refusing to approve any advertising which refers to any going out of business sale, liquidation or similar terms or which could create any possible confusion in the mind of the public as to whether any of Filenes assets are being liquidated. Upon any removal of the Collateral in accordance with this Agreement, Suppliers Lender shall not be liable for any diminution in the value of Filenes business which is caused by the termination of the Supply Right or the removal or absence of the Collateral; provided however, Suppliers Lender does hereby agree to indemnify and hold harmless Filenes from (i) all damages and costs of defense (including reasonable attorneys fees) arising from the claims of any and all third parties, including, without limitation, Supplier, against Filenes for complying with any directions of Suppliers Lender, except to the extent Filenes is finally determined by a court of competent jurisdiction to have committed willful misconduct or to have acted in a grossly negligent manner or in actual bad faith; and (ii) any costs, damages or expenses to Filenes tangible property or third party claims for personal injury arising as a result of Suppliers Lender exercising its rights hereunder.
13.3.4. Nothing contained herein shall obligate Suppliers Lender to undertake any such action, nor shall anything contained herein constitute the Suppliers Lenders assumption of any obligations of the Supplier under this Agreement. However, to the extent and during the period of Suppliers Lenders exercise of control over the Collateral while in Filenes stores, Suppliers Lender agrees to abide by the terms hereof as they relate to the Collateral and Filenes right to its 20% split of the Net Sales.
13.3.5. Filenes will provide to the Suppliers Lender, as and when forwarded or furnished to the Supplier, a copy of any formal notice of any breach by Supplier (with the same degree of particularity as Filenes provides Supplier) of this Agreement given by Filenes to the Supplier and any notice of termination of this Agreement. Filenes acknowledges that Suppliers Lender shall have the right but not the obligation to cure any such breach within the time frames and/or conditions set forth in this Agreement which are otherwise applicable to Supplier.
13.3.6. Filenes acknowledges and agrees that the Suppliers Lender has no obligation to make any loan or advance to the Supplier for the purpose of assisting the Supplier in the performance of its obligations under this Agreement, including, without limitation, for paying any amounts due from the Supplier to Filenes. Filenes is not a beneficiary of the financing agreements and shall have no right to enforce the terms thereof or assert any claims thereunder.
14. | MISCELLANEOUS. |
14.1. Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise
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any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
14.2. Confidentiality. The terms of this Agreement are confidential to the parties hereto and each party agrees not to make any public announcement related to this Agreement or the relationship of the parties without prior notice to the other party hereto except as may be required by law.
14.3. Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of Ohio.
14.4. Notices. All notices, requests, demands and other communications, required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered (personally, by courier service such as Federal Express, or by other messenger) against receipt or upon actual receipt of registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:
To Filenes: | Filenes Basement Inc. | |||
12 Gill Street, Suite 1600 | ||||
Woburn, MA 01801 | ||||
Attn: Jim Rudd | ||||
and | ||||
with a copy to: | General Counsel | |||
3241 Westerville Road | ||||
Columbus, OH 43224 | ||||
If to Supplier: | DSW Inc. | |||
4150 East Fifth Avenue | ||||
Columbus, OH 43219 | ||||
Attn: Doug Probst | ||||
and | ||||
General Counsel | ||||
3241 Westerville Road | ||||
Columbus, OH 43224 |
Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice.
14.5. Arbitration.
14.5.1. The parties agree that arbitration is the sole and exclusive remedy for each of them to resolve and redress any dispute, claim or controversy involving the interpretation of this Agreement or the terms, conditions or termination of this Agreement. The arbitrator will be mutually agreed upon by the parties, and the arbitration will be conducted in accordance with the
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Commercial Arbitration Rules of the American Arbitration Association. The parties will have the right to conduct discovery for such arbitration pursuant to the Federal Rules of Civil Procedure; provided, however, that the arbitrator will have the authority to establish an expedited discovery schedule and discovery cut-off point, and to resolve any discovery disputes. The arbitrator will have no jurisdiction or authority to change any provision of this Agreement by alterations of, additions to or subtractions from the terms of this Agreement. The arbitrators sole authority will be to interpret or apply any provision(s) of this Agreement or any public law alleged to have been violated. The arbitrator will be limited to awarding compensatory damages, but, to the extent allowed by law, will have no authority to award punitive, exemplary or similar-type damages. The parties intend that any arbitration award will be final and binding on them, and that a judgment on the award may be entered in any court of competent jurisdiction, and enforcement may be had according to the terms of that award. This Section will survive the termination or expiration of this Agreement.
14.5.2. The parties shall share equally the arbitrators fee and other costs associated with any arbitration.
14.5.3. The parties acknowledge that, because arbitration is the exclusive remedy for resolving issues arising under this Agreement, neither party may resort to any federal, state or local court or administrative agency concerning breaches of this Agreement or any other matter subject to arbitration under this Section, and that the decision of the arbitrator will be a complete defense to any suit, action or proceeding instituted in any federal, state or local court or before any administrative agency with respect to any arbitrable claim or controversy.
14.5.4. The parties each waive the right to have a claim or dispute with one another decided in a judicial forum or by a jury.
14.6. Binding Nature of Agreement. Subject to the provisions hereof relating to assignments, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assign.
14.7. Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
14.8. Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
14.9. Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understanding, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and /or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
14.10. Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.
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14.11. Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.
14.12. Number of Days. In computing the number of days for purposes of any payments due under this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday.
14.13. Assignment. Except as provided in Section 14.16, neither the Supplier nor Filenes may assign or in any other manner transfer by voluntary act, operation of law or otherwise, its rights hereunder without the written consent of the other party hereto, provided, however, that Filenes may assign this Agreement to an affiliate or any entity which acquires substantially all of its assets.
14.14. No Conflict. Each party hereto represents to the other that the entering into of this Agreement and the carrying out of the terms hereof does not conflict with the terms of any other agreement by which the representing party is bound.
14.15. Amendment/Waiver. This Agreement may be modified or amended only in writing signed by an officer of Filenes and by Supplier. No failure by any party to enforce any provision of this Agreement or to exercise any right or remedy resulting from a breach thereof, no acceptance of full or partial payment or acceptance of performance with the knowledge of the breach of any provision of this Agreement, and no custom or practice of the parties at variance with the terms of this Agreement shall be construed as a waiver of such breach, any provision of this Agreement or other right of such party under this Agreement. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom such waiver is charged. Further, except to add or delete one or more Covered Stores to the coverage of this Agreement, this Agreement shall not be amended, revised, supplemented, or otherwise changed without prior written notice to Suppliers Lender, and, if such modifications affect Suppliers Lenders rights under this Agreement, such modifications shall not be effective without the consent of the Suppliers Lender, which consent shall not unreasonably be withheld or delayed.
14.16. Third Party Beneficiaries. Filenes acknowledges that Suppliers Lender is an intended beneficiary of this Agreement, has been collaterally assigned and granted a security interest in all of Suppliers rights hereunder and, upon the terms and conditions specified herein, shall have the right to directly enforce the provisions hereof as though Suppliers Lender stood in Suppliers shoes. By accepting any of the benefits of this Agreement, Suppliers Lender agrees to be bound by the provisions hereof relating to Suppliers Lender.
14.17. Force Majeure. If an event of Force Majeure prevents Supplier from carrying out its responsibilities in any Covered Store, Supplier shall not be deemed in default under this Agreement.
15. AMENDMENT AND RESTATEMENT. The parties agree that this Agreement amends and restates the Original Agreement and shall replace the Original Agreement for all Shoe Departments which equal or exceed 10,000 square feet. For all Shoe Departments which are less than 10,000 square feet, the Licensed Department Supply Agreement, executed contemporaneously herewith as between Supplier and Filenes, shall control. Notwithstanding the foregoing, nothing herein shall be deemed to release or terminate any obligations of the parties which accrued under the Original Agreement with respect to the Covered Stores subject to this Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement by their duly authorized officers as of the date first above written.
DSW INC. | ||||||
By: | /s/ Peter Z. Horvath | |||||
Printed Name: Peter Z. Horvath | ||||||
Title: Executive Vice President | ||||||
FILENES BASEMENT INC. | ||||||
By: | /s/ James A. McGrady | |||||
Printed Name: James A. McGrady | ||||||
Title: Executive Vice President |
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Date: January 30, 2005
Amendment:
Amendment:
EXHIBIT A
Covered Store Schedule
Covered Store Schedule
Filenes Basement
Covered Stores
Combo Stores
Covered Stores
Combo Stores
Unit | Name | Street Address | City | State | Zip | Sq. Feet | ||||||||||||||||||
53800 | SAWMILL | 3700 W. Dublin-Granville Rd. | Columbus | OH | 43235 | 22,201 | ||||||||||||||||||
56000 | JERSEY GARDENS | 651 Kapkowski Rd | Elizabeth | NJ | 07021 | 13,652 |
Filenes Basement Inc. | DSW Inc. | |||||||||
By: | /s/ James A. McGrady | By: | /s/ Peter Z. Horvath | |||||||
Name: James A. McGrady | Name: Peter Z. Horvath | |||||||||
Title: Executive Vice President | Title: Executive Vice President |