Exhibit 10.19


 


FIRST AMENDMENT TO

AGENCY AGREEMENT


 


This FIRST AMENDMENT TO AGENCY AGREEMENT (this “Amendment”)
is dated as of October 1, 2003 and entered into by and among , by and between a
joint venture composed of Trans World Entertainment Corporation (“TWEC”),
Hilco Merchant Resources, LLC, Hilco Real Estate, LLC, Gordon Brothers Retail
Partners, LLC, and The Ozer Group LLC (collectively, the “Agent”), on
the one hand, and Wherehouse Entertainment Inc., its debtor affiliates and
their respective chapter 11 estates (jointly and severally, the “Merchant”),
on the other hand.


 


This Amendment
is made with reference to that certain Agency Agreement dated September 19,
2003 between Agent and Merchant (the “Agency Agreement”).  Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Agency
Agreement.


 


RECITALS


 


WHEREAS, the Parties
wish to amend the Agency Agreement (i) to make clear that Rental
Merchandise will result in a payment separate from the adjustment in Section
4.4 based upon certain agreed upon values, (ii) to set forth the
arrangement that the parties have agreed to with respect to the Central Office
Expenses set forth in Section 7.2, (iii) to amend the timing of the
Inventory Taking set forth in Section 9.1 with respect to the Warehouse, and
(iv) to replace one Store currently designated as a TWEC Store with a Store
currently designated as a SC Store; and


 


WHEREAS, in
connection with the foregoing the Parties wish to attach updated Exhibits to
the Agency Agreement.


 


NOW, THEREFORE,
in consideration of the premises and the agreements, provisions and covenants
herein contained, the Parties hereto agree as follows:


 


Section 1.              AMENDMENTS TO THE
AGENCY AGREEMENT


 


1.1          Amendments to Section
4: Consideration to Merchant.


 


A.    Section
4.2(a) of the Agency Agreement is hereby replaced in its entirety with the
following:


 


“Payment of Merchandise Guaranteed Amount.  On the Closing Date, Agent shall (i) pay 75%
of the Guaranteed Amount (less any deposit posted by Agent) in cash; (ii)
deliver to Merchant an irrevocable standby letter of credit, in form and
substance satisfactory, to Merchant in the original face amount of 25% of the
Guaranteed Amount; (iii) deliver to Merchant the letter of credit specified in
Section 8.3; (iv) pay to Merchant the difference between $1.1 million and
the liabilities assumed by Agent pursuant to Section 3.3(v) to the extent that
the liabilities assumed pursuant to Section 3.3(v) are less than $1.1 million
and (v) an


 

















 


amount equal to the value of the Rental Inventory as valued in Section
9.3.  Subject to the adjustments of the
Guaranteed Amount described in Section 4.4 below, Agent shall pay the unpaid
and undisputed balance of the Guaranteed Amount in cash to Merchant no later
than two (2) business days following the reconciliation by Merchant and Agent
of the Inventory Taking.  If Merchant
and Agent disagree as to the amount of the unpaid Guaranteed Amount, Merchant
and Agent shall attempt to resolve such dispute, in good faith, within thirty
(30) days of the date on which the dispute arises.  If Merchant and Agent are unable to resolve such dispute within
such thirty (30) day period, then the Merchant and Agent agree to bring such
dispute before the exclusive jurisdiction of the Bankruptcy Court.  Upon payment of the Guaranteed Amount,
Merchant shall cooperate with Agent in order to terminate the letter of credit
required to be posted under clause (ii) of this paragraph.  To the extent that the amount paid pursuant
to clause (i) above is in excess of the Guaranteed Amount (after adjustment
pursuant to section 4.4 herein), Merchant shall pay to Agent such excess within
two (2) business days following the reconciliation by Merchant and Agent of the
Inventory Taking.”


 


1.2          Amendments to Section
7: Expenses of the Sale.


 


A.    Section
7.2 of the Agency Agreement is hereby replaced in its entirety with the
following:


 


“Central Office Expense. 
Attached hereto as Exhibit 7.2 is a budget for transition
services to be provided by Merchant for up to 90 days after the Closing
Date.  Merchant and Agent agree that
Merchant shall be reimbursed for 75% of actual expenses incurred in connection
with rendering such services but shall not be reimbursed for amounts beyond 75%
of the amounts set forth in Exhibit 7.2; provided, however, that Agent
shall not be obligated for any expenses related to a transition services on the
fourteenth (14th) day following notice from Agent to Merchant that
Agent no longer requires such transition services.  Merchant shall not be required to provide such services beyond 90
days after the Closing Date or to the extent that it would result in costs
beyond the amounts set forth in Exhibit 7.2. 
As the parties gain experience with providing such Central Office
services, Merchant and Agent agree to work in good faith to reduce the actual
expenses to the amount practicable.”


 


1.3          Amendments to Section
9: Inventory Taking and Valuation.


 


A.    Section
9.1(a) of the Agency Agreement is hereby replaced in its entirety with the
following:


 


“Inventory Taking. 
Merchant and Agent shall cause to be taken a Cost Value physical
inventory of the Merchandise (the “Inventory Taking”) at the Stores and
the Warehouse, commencing on the day that the Order is entered.  The Inventory Taking for each Store shall be
completed prior to the Closing Date and the Inventory Taking for the Warehouse
shall be completed as soon as commercially


 


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practicable after the Closing Date. 
The date of the Inventory Taking at each Store and the Warehouse shall
be the “Inventory Date” for such Store or the Warehouse (as the case may
be).”


 


B.    Section
9.3 of the Agency Agreement is hereby replaced in its entirety with the
following:


 


“Valuation.  For purposes
of this Agreement “Cost Value” of Merchandise shall mean the weighted
average cost of Merchandise using methods and assumptions historically applied
by Merchant in calculating its inventory value for financial reporting purposes
as reflected on document provided to Agent on September 5, 2003 with the inventory filename
“Inventory as of 073103.mdb” except that the Cost Value of
Defective Merchandise, Display Merchandise, and Out-Of-Date Merchandise shall
be the price mutually agreed upon by Merchant and Agent, provided that any
adjustment to the Cost Value of the Merchandise on account of Defective
Merchandise, Display Merchandise, or Out-of-Date Merchandise shall not exceed
$500,000.  Rental Inventory will not
count as Merchandise whose Cost Value is applied towards the Cost Value of
Inventory for purposes of the adjustment to the Guaranteed Amount set forth in
Section 4.4. Instead, Rental Inventory will result in the payment set forth in
Section 4.2(a)(v) with Rental Inventory being valued as follows: DVDs at $5 per
unit, VHS cassettes at $3 per unit, and videogames at $6 per unit.”


 


1.4          Amendments to Section
15: Representations, Warranties, Covenants and Agrements.


 


A.    The
reference to an exhibit in 15.1(s) is hereby changed to Exhibit 15.1(s).


 


1.5          Amendments to Section
17: Conditions Precedent to Effectiveness


 


A.    The
Closing Date is hereby changed to October 2, 2003.


 


1.6          Amendments to Section
18: Insurance; Risk of Loss


 


A.    The
reference to an exhibit in Section 18.3 is hereby changed to Exhibit 18.3.


 


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1.7          Modification of
Schedules


 


A.    Exhibit
5.4 to the Agency Agreement is replaced in its entirety with the Exhibit
attached as Exhibit A to this Amendment.


 


B.    A
new Exhibit 7.2 to the Agency Agreement is hereby added with the Exhibit
attached as Exhibit B to this Amendment.


 


C.    Exhibit
8.1 to the Agency Agreement is replaced in its entirety with the Exhibit
attached as Exhibit C to this Amendment.


 


Section 2.              MISCELLANEOUS


 


A.    Notices. 
All notices and communications provided for pursuant to this
Amendment shall be in writing, and sent by hand, by facsimile, or a recognized
overnight delivery service, as follows:


 


	
  If to Agent:

  	
   

  	
  Trans World Entertainment Corporation

  38 Corporate Circle

  Albany, NY 12203

  Attn:  John Sullivan

  Telecopy No. (518) 452-1242

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hilco Merchant Resources, LLC

  One Northbrook Place

  5 Revere Drive, Suite 206

  Northbrook, IL  60062

  Attn:  Jeffrey Linstrom

  Telecopy No. (847) 509-1150

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gordon Brothers Retail Partners, LLC
40 Broad Street

  Boston, MA 02109
Attn: Bradley Snyder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Ozer Group LLC

  75 Second Avenue

  Needham, MA 02494

  Attn: David Peress

  Telecopy No. (781) 707-4255

  



 


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With a copy to:

  	
   

  	
  Skadden, Arps, Slate, Meagher

  & Flom (Illinois)

  333 West Wacker Drive

  Chicago, IL  60106

  Attn:  Timothy R. Pohl

  Telecopy No. (312) 407-0411

  
	
   

  	
   

  	
   

  
	
  
If to Merchant:

  	
   

  	
  Wherehouse Entertainment, Inc.

  19701 Hamilton Avenue

  Torrance, CA 90502

  Attn: Charles Fuertsch

  Telecopy No. (650) 965-8300

  
	
   

  	
   

  	
   

  
	
  
With a copy to:

  	
   

  	
  O’Melveny & Myers LLP

  400 South Hope Street

  Los Angeles, CA 90071

  Attn: Ben Logan

  Telecopy No. (213) 430-6407

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  O’Melveny & Myers LLP

  610 Newport Center Drive

  Newport Beach, CA 90071

  Attn: Suzzanne Uhland

  Vicki Nash

  Telecopy No. (949) 823-6994

  



 


B.    Successors and Assigns.  This Amendment shall inure to the
benefit of and be binding upon Agent, the Agent, and Merchant, and their
respective successors and assigns, including, without limitation, any
liquidating trustee or post-confirmation committee in Merchant’s chapter 11
case, or any succeeding chapter 11 or chapter 7 case.


 


C.    Governing Law; Consent to Jurisdiction.  This Amendment 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 Amendment shall be adjudicated by the Bankruptcy
Court, and by execution of this Amendment each party hereby irrevocably accepts
and submits to the jurisdiction of the Bankruptcy Court with respect to any
such action or proceeding.


 


D.    Execution in Counterparts; Facsimile
Signatures.  This Amendment
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 Amendment may be
executed by facsimile, and each such facsimile signature shall be treated as an
original signature for all purposes.


 


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E.     Section Headings.  The headings of sections of this Amendment are
inserted for convenience only and shall not be considered for the purpose of
determining the meaning or legal effect of any provisions hereof.


 


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of page intentionally left blank; signature pages to follow]


 


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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.


 


	
   

  	
  WHEREHOUSE
  ENTERTAINMENT, 

  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Anton Caracciolo, as Authorized

  Representative of the AGENT

  



 


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