FORM OF INTERCOMPANY SERVICES AGREEMENT
This Services Agreement (this "Agreement") is being entered into as of the
___ day of __ __________, 1999 and is entered into by and between xXXxX*s Inc.,
a Delaware corporation ("xXXxX*s"), and iTurf Inc., a Delaware corporation
("iTurf").
RECITALS
A. iTurf is currently a wholly-owned subsidiary of xXXxX*s and obtains
various corporate, administrative and other services from xXXxX*s;
B. iTurf is considering an initial public offering of its common stock
("IPO");
C. After the IPO, iTurf desires to continue to obtain various
corporate, administrative and other services ("Services") from
xXXxX*s, and xXXxX*s desires to continue to provide such Services
following the closing date of the IPO.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
Section 1. Services.
xXXxX*s or, at its option, its subsidiaries (other than iTurf and
its subsidiaries) shall render to iTurf the following Services in accordance
with the terms of this Agreement:
(a) Corporate Services. xXXxX*s shall provide, directly or through
its subsidiaries, the services described on Exhibit A hereto, at the cost
specified and on the other terms and conditions set forth on Exhibit A.
(b) Fulfillment Services. xXXxX*s shall provide, directly or through
its subsidiaries, the services described on Exhibit B hereto, at the cost
specified and on the other terms and conditions set forth on Exhibit B.
(c) Supply Services. iTurf shall have the right to purchase from
xXXxX*s, and xXXxX*s shall sell goods to iTurf solely for resale through the
channels approved under the Trademark License and Customer List Agreement on and
subject to the terms of Exhibit C hereto.
(d) Advertising Services. xXXxX*s shall provide, directly or through
its subsidiaries, the services described on Exhibit D hereto, at the cost
specified and on the other terms and conditions set forth on Exhibit D.
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(e) Space Sharing. xXXxX*s may make certain office space available
to iTurf at the cost specified and the other terms and conditions set forth on
Exhibit E.
(f) In the event that iTurf requires services that exceed the scope
or extent of the Services provided for herein, and if xXXxX*s agrees to provide
such services, xXXxX*s and iTurf shall negotiate in good faith the terms and
conditions, including price, under which xXXxX*s shall provide such Services;
provided, however, that the fee payable by iTurf for such Services shall be no
less favorable to iTurf than the charges for comparable services from
unaffiliated third parties.
Section 2. Compensation.
iTurf shall pay to xXXxX*s when due a fee for each of the Services
equal to the amount described in the appropriate Exhibit hereto relating to such
Service, provided that in the event iTurf terminates any Service in accordance
with Section 3 hereof, the fee for such Service shall no longer be payable
following the effective date of such termination. Late payments shall accrue
interest at a rate equal to the prime rate announced from time to time by First
Union National Bank plus 300 basis points.
Section 3. Term.
(a) The term of this Agreement shall begin on the date of the closing of
the IPO (the "Effective Date") and shall continue for an indefinite period in
full force and effect until it is terminated in accordance with this Section 3.
(b) xXXxX*s shall have the right (but not the obligation) to terminate
immediately this Agreement:
(i) if iTurf is in material breach of any of its obligations or
representations hereunder, which breach is not cured within
(twenty) 20 days of receipt of written notice from xXXxX*s of
such breach,
(ii) iTurf is the subject of a voluntary petition in bankruptcy or
any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors, if
such petition or proceeding is not dismissed within sixty (60)
days of filing, or becomes the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating
to insolvency, receivership, liquidation, or composition for
the benefit of creditors, if such petition or proceeding is
not dismissed within sixty (60) days of filing,
(iii) if the business of iTurf is liquidated or otherwise terminated
for insolvency or any other basis, or
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(iv) if iTurf becomes insolvent or unable to pay its debts as they
mature or makes an assignment for the benefit of its
creditors.
(c) iTurf shall have the right (but not the obligation) to terminate
immediately this Agreement:
(i) if xXXxX*s is in material breach of any of its obligations or
representations hereunder, which breach is not cured within
(twenty) 20 days of receipt of written notice from iTurf of
such breach,
(ii) xXXxX*s is the subject of a voluntary petition in bankruptcy
or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of
creditors, if such petition or proceeding is not dismissed
within sixty (60) days of filing, or becomes the subject of
any involuntary petition in bankruptcy or any involuntary
proceeding relating to insolvency, receivership, liquidation,
or composition for the benefit of creditors, if such petition
or proceeding is not dismissed within sixty (60) days of
filing,
(iii) if the business of xXXxX*s is liquidated or otherwise
terminated for insolvency or any other basis, or
(iv) if xXXxX*s becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its
creditors.
(d) xXXxX*s shall have the right (but not the obligation) to terminate
this Agreement and the rights granted to iTurf hereunder, upon (ninety) 90 days
written notice to iTurf, following the acquisition of the direct or beneficial
ownership of 20% or more of the voting power represented by the voting
securities of iTurf by any person other than an affiliate of xXXxX*s or a
Strategic Partner. For purposes of this Agreement, (i) the term "beneficial
ownership" shall have the meaning set forth in Section 13(d) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
(ii) the term "voting securities" shall mean the Class A common stock and Class
B common stock of iTurf and any other securities issued by iTurf having the
power to vote in the election of directors of iTurf, including without
limitation any securities having such power only upon the occurrence of a
default or any other extraordinary contingency, and (iii) the term "Strategic
Partner" has the meaning given to it in iTurf's Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on ________, 1999.
For purposes of this Section 3, an acquisition shall not include the acquisition
by a person of voting securities of iTurf pursuant to an involuntary disposition
by xXXxX*s through foreclosure or similar event, but shall include a subsequent
acquisition of voting securities pursuant to a disposition by the person that
acquired the voting securities in such involuntary disposition.
(e) A party may exercise its right to terminate pursuant to this Section 3
by sending appropriate notice to the other party. No exercise by a party of its
rights under this Section 3 will
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limit its remedies by reason of the other party's default, the party's rights to
exercise any other rights under this Section 3, or any of that party's other
rights.
Section 4. Records and Accounts.
xXXxX*s shall maintain accurate books, records and accounts of all
transactions relating to the Services performed by it pursuant to this
Agreement. iTurf may, at its own expense, examine and copy those books and
records as provided in this Section 4. Such books, records and accounts shall be
maintained separately from xXXxX*s own records and accounts and shall reflect
such information as would normally be examined by an independent accountant in
performing an audit pursuant to United States generally accepted auditing
standards for the purpose of certifying financial statements, and to permit
verification thereof by governmental agencies. iTurf may make those examinations
only during xXXxX*s usual business hours, and at the place where it keeps the
books and records. iTurf will be required to notify xXXxX*s at least ten (10)
days before the date of planned examination. If iTurf's examination is not
completed within two months from commencement, xXXxX*s may require iTurf to
terminate it on seven (7) days' notice to iTurf at any time, provided that
xXXxX*s has cooperated with iTurf in the examination of such books and records.
Section 5. Directors and Officers of xXXxX*s.
Nothing in this Agreement shall limit or restrict the right of any
of xXXxX*s directors, officers or employees to engage in any other business or
devote their time and attention in part to the management or other aspects of
any other business, whether of a similar nature, or to limit or restrict the
right of xXXxX*s to engage in any other business or to render services of any
kind to any corporation, firm, individual, trust or association.
Section 6. Independent Contractor.
xXXxX*s is an independent contractor and when its employees act
under the terms of this Agreement, they shall be deemed at al times to be under
the supervision and responsibility of xXXxX*s; and no person employed by xXXxX*s
and acting under the terms of this Agreement shall be deemed to be acting as
agent or employee of iTurf or any customer of iTurf for any purpose whatsoever.
Section 7. Other Agreements.
From time to time, iTurf may find it necessary or desirable either to
enter into agreements covering services of the type contemplated by this
Agreement to be provided by parties other than xXXxX*s or to enter into other
agreements covering functions to be performed by xXXxX*s hereunder. Nothing in
this Agreement shall be deemed to limit in any way the right of iTurf to acquire
such services from others or to enter into such other agreements.
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Section 8. Confidentiality.
xXXxX*s agrees to hold in strict confidence, and to use reasonable efforts
to cause its employees and representatives to hold in strict confidence (a) all
confidential information concerning iTurf furnished to or obtained by xXXxX*s in
the course of providing the Services except to the extent that such information
has been in the public domain through no fault of xXXxX*s (b) disclosure or
release is compelled by judicial or administrative process, or (c) in the
opinion of counsel to xXXxX*s, disclosure or release is necessary pursuant to
requirements of law or the requirements of any governmental entity including,
without limitation, disclosure requirements under the Securities Exchange Act of
1934, as amended.
Section 9. Miscellaneous.
(a) Neither party may assign this Agreement, or their respective
rights and obligations hereunder, in whole or in part without the other party's
prior written consent. Any attempt to assign this Agreement without such consent
shall be void and of no effect ab initio. Notwithstanding the foregoing, either
party may assign this Agreement or any of its rights and obligations hereunder
to any entity controlled by it or to any entity that acquires it by purchase of
stock or by merger or otherwise, or by obtaining substantially all of its assets
(a "Permitted Assignee"), provided that any such Permitted Assignee, or any
division thereof, thereafter succeeds to all of the rights and is subject to all
of the obligations of xXXxX*s under this Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State. Each party shall comply in all respects with
all laws and regulations applicable to its activities under this Agreement.
(c) Each party hereto irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County,
or (b) the United States District Court for the Southern District of New York,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby or thereby. Each of xXXxX*s and
iTurf agrees to commence any such action, suit or proceeding either in the
United States District Court for the Southern District of New York or if such
suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of xXXxX*s and iTurf further agrees that service of any process,
summons, notice or documents by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any maters to which it has
submitted to jurisdiction in this Section 9(c). Each of xXXxX*s and iTurf
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby and thereby in (i) the Supreme Court of the State of New
York, New York County, or (ii) the United States District Court for the Southern
District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to
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plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
(d) If any provision of this Agreement (or any portion thereof) or
the application of any such provision (or any portion thereof) to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other persons or circumstances.
(e) All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to iTurf,
iTurf Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
(ii) if to xXXxX*s,
xXXxX*s Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
(f) The provisions of Section 9 hereof shall survive any termination
of this Agreement.
(g) The parties to this Agreement are independent contractors. There
is no relationship of partnership, joint venture, employment, franchise, or
agency between the parties. Neither party shall have the power to bind the other
or incur obligations on the other's behalf without the other's prior written
consent.
(h) No failure of either party to exercise or enforce any of its
rights under this Agreement shall act as a waiver of such right.
(i) This Agreement, along with the Exhibits hereto, contains the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither
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party shall be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein.
(j) This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of the
parties and delivered to each of the other parties.
(k) This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto; provided, however, that
as long as xXXxX*s has direct or beneficial ownership of 30% or more of the
voting power represented by the voting securities of iTurf and no other person
directly or beneficially owns a greater percentage of such voting power, no
amendment of a material term or waiver of a material obligation of this
Agreement shall be valid unless it has been approved by a majority of the
members of the board of directors of iTurf, who are not directors or officers of
xXXxX*s or the beneficial owners of five percent or more of the outstanding
voting securities of xXXxX*s.
(l) This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights hereunder.
(m) The headings contained in this Agreement or in any Exhibit
hereto are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Exhibits annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Exhibit but
not otherwise defined therein, shall have the meaning as defined in this
Agreement. When a reference is made in this Agreement to a Section or an
Exhibit, such reference shall be to a Section of, or an Exhibit to, this
Agreement unless otherwise indicated.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO INTERCOMPANY SERVICES AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
xXXxX*s Inc.
By:_____________________________________________
Name:
Title:
iTurf Inc.
By:_____________________________________________
Name:
Title:
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EXHIBIT A
CORPORATE SERVICES: xXXxX*s shall provide, by itself or through its
subsidiaries, the services described below.
(a) Scope of Services: All services currently provided by xXXxX*s and its
subsidiaries to iTurf (other than the Fulfillment
Services described in Exhibit B, including,
without limitation merchandising, inventory
management, creative, marketing, technical, human
resources, finance, accounting, administrative and
legal services, as well as services required by
iTurf by virtue of its status as an issuer subject
to reporting requirements under the federal
securities laws. Notwithstanding the foregoing,
the scope of services provided may not increase
from one year to the next.
(b) Quality of Services: At least equal to the quality of services being
provided prior to the effectiveness of the
agreement.
(c) Price: The price paid by iTurf will be at 105% of xXXxX*s
cost.
(d) Payment and Accounting: xXXxX*s shall invoice iTurf within 45 days of the
end of each fiscal quarter for services rendered
in such fiscal quarter. iTurf shall pay such
invoice within 30 days of receipt.
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EXHIBIT B
FULFILLMENT SERVICES: xXXxX*s shall provide, by itself or through its
subsidiaries the services described below.
(a) Scope of Services: Receiving, quality control, storage, picking,
packing, shipping of inventory to customers and
processing of customer returns.
(b) Consideration: iTurf shall pay xXXxX*s an amount equal to the
product of xXXxX*s Average Warehouse Cost Per
Package Shipped multiplied by the Number of
Packages Shipped by iTurf multiplied by 105%.
"xXXxX*s Average Warehouse Cost Per Package
Shipped" includes all warehouse costs, including
the cost of receiving inventory, quality control,
storage, picking, packing, shipping, returns
processing and overhead costs including rent, CAM,
depreciation and other operating and
administrative costs.
(c) Postage: iTurf shall be directly responsible for third
party shipping costs (e.g., USPS, FedEx, UPS).
(d) Supplies: iTurf shall be directly responsible for the cost
of all shipping and packaging supplies unique to
its business.
(e) Quality of Services: A level at least equal to the quality of services
being provided by xXXxX*s to iTurf prior to the
effectiveness of the agreement.
(f) Payment and Accounting: xXXxX*s shall invoice iTurf within 45 days of the
end of each fiscal quarter for services rendered
in such fiscal quarter. iTurf shall pay such
invoice within 30 days of receipt.
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EXHIBIT C
INVENTORY SUPPLY: iTurf may purchase inventory from xXXxX*s and its
subsidiaries solely for resale through the
channels approved under the Trademark License and
Customer List Agreement between the parties hereto
on the following
terms.
(a) Price: The lesser of:
(a) 105% multiplied by (the cost of goods
+ in-bound freight + all other direct
costs charged to xXXxX*s by its
supplier, e.g., screening or
labeling), and
(b) "xXXxX*s Best Available Resale Price"
Such lesser price is referred to herein as the
"Intercompany Sales Price."
"xXXxX*s Best Available Resale Price" means that
price stated by a senior member of xXXxX*s
inventory department as the highest price at which
xXXxX*s believes in good faith it could resell the
particular inventory, whether through xXXxX*s
catalogs (premium or sales), xXXxX*s-owned retail
stores, third party liquidators or other channels.
(b) Terms: Net seven (7) days.
(c) Returns: iTurf shall have the right to sell to xXXxX*s, and
xXXxX*s shall have the obligation to purchase from
iTurf, any inventory originally purchased by iTurf
from xXXxX*s and subsequently shipped to and then
returned to iTurf by customers of iTurf. The
purchase price for such inventory shall be equal
to the Intercompany Sales Price for such inventory
decreased by an amount equal to any reserves
(whether or obsolescence, damages or otherwise)
taken by xXXxX*s with respect to such inventory in
accordance with GAAP.
(d) Projections: iTurf will provide xXXxX*s twice-annually with its
best projections of sales for the next six months,
broken down monthly by category. iTurf will update
these projections each month. xXXxX*s will use
best efforts to meet the
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anticipated demand for xXXxX*s inventory generated
by iTurf in accordance with the projections.
(e) Closeout Inventory: In addition to the foregoing, iTurf shall have the
right but not the obligation to purchase from
xXXxX*s up to $300,000 each fiscal year of
closeout inventory (valued at xXXxX*s cost) for
the lesser of (i) the Intercompany Sale Price or
(ii) 33 1/3% of xXXxX*s cost, such closeout
inventory to be selected by xXXxX*s.
(f) Minimum Resale Prices: iTurf may not, without xXXxX*s consent, resell any
inventory purchased from xXXxX*s at less than the
lesser of (i) 10% below xXXxX*s suggested retail
price or (ii) 140% of the Intercompany Sales
Price.
(g) Other: All vendor warranties with respect to inventory
purchased by iTurf hereunder are hereby assigned
to iTurf.
(h) No Contact: iTurf may not, directly or indirectly, contact
any of the xXXxX*s merchandise vendors without the
prior consent of xXXxX*s.
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EXHIBIT D
ADVERTISING SERVICES: Subject to the Minimum Advertising Commitment,
iTurf may at its option purchase advertising from
xXXxX*s as follows.
(a) Cost: $40 cost per thousand catalogs distributed in
fiscal 1999 for the "Minimum Advertising Space"
set forth below.
(b) Minimum Advertising
Space: The amount of space allocated to the above
advertising shall be not less than the following:
- A web site URL shall be featured on
substantially all of the pages as an ordering
method.
- At least 1 square inch on the cover of each
catalog.
- A bind-in card or similar promotion in each
catalog.
- 15 square inches on the xXXxX*s catalog order
form.
(c) Minimum Advertising
Commitment: iTurf is obligated to purchase advertising space
in at least 50 percent of xXXxX*s catalogs
distributed each fiscal year.
(d) Failure to Meet
Minimum Performance
Standards: In the event xXXxX*s delivers less than the
Minimum Advertising Space set forth above in a
material number catalogs, iTurf shall be relieved
of all obligations hereunder in that fiscal year.
(e) Additional Advertising: In addition, iTurf may purchase the following
advertising from xXXxX*s based on xXXxX*s
advertising rate card then in effect less a 20%
discount:
- additional advertising in xXXxX*s catalog pages.
- bounceback flyer in every customer package.
- point of sale displays in xXXxX*s-branded retail
stores.
- such other advertising opportunities as xXXxX*s
may from time to time develop.
(f) Annual Inflation
Adjustment: All rates shall be adjusted annually by the U.S.
consumer price index (all goods).
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(g) Payment and Accounting: xXXxX*s shall invoice iTurf within 45 days of the
end of each fiscal quarter for services rendered
in such fiscal quarter. iTurf shall pay such
invoice within 30 days of receipt.
(h) Projection: By December 1 of each fiscal year, xXXxX*s shall
provide iTurf with a projection of catalogs to be
distributed in the in the next fiscal year. By
January 1, iTurf shall provide xXXxX*s with
projections of the number of catalogs in the next
fiscal year in which it intends to advertise.
(i) Exclusivity: iTurf shall be the exclusive e-commerce and
Internet community advertiser in xXXxX*s catalogs.
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EXHIBIT E
Space Sharing
(a) License to Use Space. During the term of this Agreement, xXXxX*s
shall permit iTurf to use a portion of xXXxX*s (or any of its subsidiaries')
offices ("xXXxX*s Offices") for the purposes permitted under the lease
agreements pursuant to which xXXxX*s leases such offices (to the extent such
offices are leased), subject to the terms and conditions set forth in this
Agreement. The space to be used by iTurf shall be as mutually agreed by the
parties from time to time. iTurf's right to use a portion of xXXxX*s Offices
shall terminate on the earlier of (i) 90 days after iTurf notifies xXXxX*s that
iTurf no longer desires to use any portion of xXXxX*s Offices, or (ii) 90 days
after xXXxX*s notifies iTurf that iTurf may no longer use any portion of xXXxX*s
Offices.
(b) Consideration. So long as iTurf uses any portion of xXXxX*s
Offices, iTurf shall pay to xXXxX*s on the first day of each calendar month an
amount equal to the product of (X) the lesser of (i) the prevailing market rate
per square foot for similar offices (taking all relevant factors into account,
including location, age of facility and facility amenities) and (ii) the highest
rate per square foot then being paid by xXXxX*s (or any of its subsidiaries) for
offices in the metropolitan area in which the specific xXXxX*s offices are
located, and (Y) the number of square feet agreed to pursuant to paragraph (a)
above, in each case determined in the same manner as rent is computed under the
relevant lease, or if the offices are owned by xXXxX*s, in the same manner as
the parties agree is customary for commercial leases of similar offices.
Payments for any partial calendar month shall be prorated on a per diem basis.
(c) Compliance with Leases. iTurf hereby agrees not to take any
action or fail to take any action in connection with its use of a portion of
xXXxX*s Offices a result of which would be xXXxX*s violation of any of the terms
and conditions of any lease or other restriction on xXXxX*s use of such offices.
iTurf agrees to comply with the terms and provisions of any such leases for
xXXxX*s Offices in which it uses space.
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