AMENDMENT AND DISTRIBUTION AGREEMENT
by and among
DESIGNS JV CORP.,
LDJV INC.
and
THE DESIGNS/OLS PARTNERSHIP
DATED AS OF
October 31, 1998
AMENDMENT AND DISTRIBUTION AGREEMENT
This Amendment and Distribution Agreement dated as of October 31, 1998
(this "Distribution Agreement") is made by and among Designs JV Corp., a
Delaware corporation (the "Designs Partner"), LDJV Inc., a Delaware corporation
(the "LOS Partner"), and The Designs/OLS Partnership, a Delaware general
partnership (the "Partnership").
WHEREAS, the Designs Partner and the LOS Partner (collectively, the
"Partners") formed the Partnership on January 28, 1995 to own and operate retail
stores in a specified territory;
WHEREAS, the Partners have decided to cause the Partnership to (i)
distribute certain stores and other assets to the Partners or their designees,
(ii) close the remaining stores, (iii) dissolve and wind up the Partnership,
(iv) liquidate the remaining Partnership assets and (v) distribute the cash
proceeds and any remaining Partnership assets and liabilities to the Partners
and their designees in the manner, and subject to the terms and conditions, set
forth below; and
WHEREAS, the Management Committee of the Partnership has unanimously
approved the termination of the Partnership and the distribution of its assets
in accordance with the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the Partners and the Partnership
(collectively, the "Parties") hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in Glossary. Capitalized terms used, but not
otherwise defined, in this Distribution Agreement shall have the meanings given
them in the Glossary which the Parties executed simultaneously with the
execution of the Original Partnership Agreement.
1.2 Terms Defined in this Distribution Agreement. When used with
initial capital letters in the Closing Documents or the Transaction Documents,
as amended, the following terms have the following meanings:
"ASA Amendment" has the meaning set forth in Section
9.2(a)(ii)(C) of this Distribution Agreement.
"closed", with respect to any Remaining Store, has the meaning
set forth in Section 5.1 of this Distribution Agreement.
"Closing Documents" means this Distribution Agreement and all
other documents, certificates and instruments signed and delivered by one or
more of the Parties in order to effect the Store Distribution Closing.
"Credit Agreement" has the meaning set forth in Section
9.2(a)(ii)(G) of this Distribution Agreement.
"Designs Partner Closing Contribution" has the meaning set
forth in Section 4.1 of this Distribution Agreement.
"Estimated Outlet Assets Value" has the meaning set forth in
Section 2.3(b) of this Distribution Agreement.
"Estimated UIS Assets Value" has the meaning set forth in
Section 3.3(b) of this Distribution Agreement.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Liquidators" has the meaning set forth in Section 6.2(a) of this
Distribution Agreement.
"LOS Partner Closing Contribution" has the meaning set forth
in Section 4.2 of this Distribution Agreement.
"Original Partnership Agreement" means the Partnership
Agreement dated as of January 28, 1995 among the Parties.
"Outlet Assets" has the meaning set forth in Sections 2.1 and 2.2
of this Distribution Agreement.
"Outlet Asset Statement" has the meaning set forth in Section
2.3(c) of this Distribution Agreement.
"Outlet Assets Value" has the meaning set forth in Section
2.3(a) of this Distribution Agreement.
"Outlet Consumer Data" has the meaning set forth in Section
2.1(e) of this Distribution Agreement.
"Outlet Contracts" means all Outlet Store Leases, purchase
orders for inventory ordered but not yet received or paid for, and other
contracts and understandings to which the Partnership is a party with respect to
any goods or services (for example, utilities) that are used or consumed at any
Outlet Store. (The Outlet Contracts are listed in Schedule 2.1.)
"Outlet Employees" means the employees of the Partnership
employed at the Outlet Stores on the date of the Store Distribution Closing.
"Outlet License Agreement" has the meaning set forth in
Section 9.2(a)(ii)(B) of this Distribution Agreement.
"Outlet POS Equipment" has the meaning set forth in Section
2.4(b) of this Distribution Agreement.
"Outlet Store Leases" has the meaning set forth in Section
2.1(a) of this Distribution Agreement.
"Outlet Stores" means the Outlets listed in Schedule 1.2 under
the heading AOutlet Stores".
"Outstanding Personal Pair Orders" has the meaning set forth
in Section 3.11 of this Distribution Agreement.
"Participation Agreement Amendment" has the meaning set forth
in Section 9.2(a)(ii)(D) of this Distribution Agreement.
"Remaining Store Consumer Data" has the meaning set forth in
Section 5.6(a) of this Distribution Agreement.
"Remaining Store Inventory" means inventory located at or in
transit to a Remaining Store.
"Remaining Store POS Equipment" has the meaning set forth in
Section 5.5 of this Distribution Agreement.
"Remaining Stores" means the OLSs listed in Schedule 1.2 under
the heading ARemaining Stores".
"Store Distribution Closing" means the consummation of the
transactions contemplated by Articles 2, 3 and 4 of this Distribution Agreement.
"Store Distribution Closing Date" has the meaning set forth in
Section 9.1 of this Distribution Agreement.
"Surplus Cash" means the cash and cash equivalents of the
Partnership determined by the Liquidators to be available for distribution to
the Partners or their designees after setting aside adequate reserves (i) to
operate the Partnership until all Partnership Assets have been sold or
distributed, (ii) to discharge all of the Partnership's remaining known and
contingent liabilities and (iii) to wind up the affairs of the Partnership.
"Termination Date" has the meaning set forth in Section 6.1 of
this Distribution Agreement.
"UIS Assets" has the meaning set forth in Sections 3.1 and 3.2
of this Distribution Agreement.
"UIS Asset Statement" has the meaning set forth in Section
3.3(c) of this Distribution Agreement.
"UIS Assets Value" has the meaning set forth in Section 3.3(a)
of this Distribution Agreement.
"UIS Close-Out Inventory" has the meaning set forth in Section
3.2(b) of this Distribution Agreement.
"UIS Consumer Data" has the meaning set forth in Section
3.1(e) of this Distribution Agreement.
"UIS Contracts" means all UI Store Leases, purchase orders for
inventory ordered but not yet received or paid for, and other contracts and
understandings to which the Partnership is a party with respect to any goods or
services (for example, utilities) that are used or consumed at any Urban Image
Store. (The UIS Contracts are listed in Schedule 3.1.)
"UIS Employees" means the employees of the Partnership
employed at the Urban Image Stores on the date of the Store Distribution
Closing.
"UIS POS Equipment" has the meaning set forth in Section
3.4(b) of this Distribution Agreement.
"UI Store Leases" has the meaning set forth in Section 3.1(a)
of this Distribution Agreement.
"Unassigned Partnership Liability" has the meaning set forth
in Section 10.1(o)(ii) of this Distribution Agreement.
"Urban Image Stores" means the OLSs listed in Schedule 1.2 under
the heading "Urban Image Stores".
1.3 Accounting Terms. For purposes of this Distribution Agreement,
all accounting terms not otherwise defined in this Distribution Agreement shall
have the meanings assigned to them by GAAP, applied in a manner consistent with
how the Partnership maintains its books and records (unless the Parties agree
otherwise).
1.4 Certain Matters of Construction. A reference to a Schedule or
Exhibit shall mean a Schedule or Exhibit to this Distribution Agreement unless
otherwise expressly stated. The titles and headings herein are for reference
purposes only and shall not in any manner limit the construction of this
Distribution Agreement which shall be considered as a whole. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice-versa.
ARTICLE 2
DISTRIBUTION OF OUTLET STORES TO DESIGNS PARTNER
2.1 Distribution of Outlet Assets. At the Store Distribution Closing,
the Partnership shall distribute to the Designs Partner or its designee all of
the Partnership's right, title and interest in and to the Outlet Assets. The
"Outlet Assets" consist of:
(a) the lease agreements for the real estate occupied by the
Outlet Stores (the "Outlet Store Leases") and related security deposits;
(b) all fixtures and tangible personal property owned by the
Partnership and located at any Outlet Store on the Store Distribution Closing
Date, including, for example, furniture, equipment, inventory, supplies, signage
and copies, but not originals, of records;
(c) except as set forth in Section 2.4(c) of this Distribution
Agreement, all rights that accrue after the Store Distribution Closing under the
Outlet Contracts;
(d) all third party warranties to the Partnership relating to
the Outlet Assets, whether expressed or implied, and claims arising under
warranties, representations and guaranties made to the Partnership in connection
with the operation of the Outlet Stores;
(e) consumer names, addresses, order profiles and any other
consumer database information, and any market or research data collected by the
Partnership and relating to the Outlet Stores or their consumers or markets (the
"Outlet Consumer Data");
(f) cash in the Outlet Stores in an aggregate amount equal to
$14,900; and
(g) the UIS Close-Out Inventory.
Schedule 2.1 to this Distribution Agreement is a list of the Outlet Assets
segregated by Outlet Store, excepting items of owned tangible property that had
an original cost of less than $1,000. Because the Partnership prepared Schedule
2.1, any failure to identify any Outlet Assets on Schedule 2.1 shall not
prejudice the right of the Designs Partner to those assets.
2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1 of
this Distribution Agreement, the Outlet Assets do not include cash (other than
the cash described in Section 2.1(f)), cash equivalents (other than security
deposits), accounts receivable, claims, rights to refunds or claims of rights to
refunds.
2.3 Value of Outlet Assets.
(a) General. For the purposes of Section 9.1(b) of the
Original Partnership Agreement, the value of the Outlet Assets shall be equal to
the net book value of the Outlet Assets as of the Store Distribution Closing
Date, determined in accordance with GAAP (the "Outlet Assets Value").
(b) Estimated Outlet Assets Value. For the purposes of
calculating the amounts of certain contributions and distributions under this
Distribution Agreement prior to the determination of the final Outlet Assets
Value pursuant to Section 2.3(c), the Parties' preliminary estimate of the
Outlet Assets Value is $6,325,164 (the "Estimated Outlet Assets Value").
(c) Final Outlet Assets Value. After the Store Distribution
Closing, the Parties shall determine the final Outlet Assets Value as follows:
(i) Within 60 days after the Store Distribution Closing
Date, the Partnership shall deliver a statement to the Designs Partner and the
LOS Partner setting forth all the figures needed to determine the final Outlet
Assets Value (the "Outlet Asset Statement"). The Outlet Asset Statement shall be
certified by the Chief Financial Officer of Designs as having been prepared in
accordance with GAAP. Within 30 days after the Partnership delivers the Outlet
Asset Statement to the Designs Partner, the Designs Partner shall (i) accept the
Outlet Asset Statement or (ii) furnish the Partnership and the LOS Partner with
a statement objecting to one or more of the figures in the Outlet Asset
Statement and the basis for its objections and/or requiring that one or more of
the figures in the Outlet Asset Statement be audited. If the Designs Partner
does not respond within those 30 days, the Designs Partner shall be deemed to
have accepted the Outlet Asset Statement. The Partnership shall furnish the
Designs Partner and its representatives and the LOS Partner with all information
reasonably requested by the Designs Partner or its representatives to enable it
to assess the Outlet Asset Statement both during and after that 30-day period.
(ii) If the Designs Partner timely objects to any aspect of
the Outlet Asset Statement or, in any event, the Designs Partner requests that
one or more figures in the Outlet Asset Statement be audited, the open issues
shall be resolved or the audit shall be performed by an accounting firm jointly
selected by the Partners. The firm selected shall be instructed to resolve the
matters in controversy within 30 days after it is selected or as soon thereafter
as is reasonable. The Partnership and the Designs Partner shall furnish that
firm with all information it reasonably requests in order to perform its task
and meet that schedule. That firm's resolution of the open issues shall bind all
of the Parties. The Partnership and the Designs Partner shall each pay one-half
of the fees and expenses of that firm.
2.4 Assumption of Obligations; Certain Liabilities.
(a) General. At the Store Distribution Closing, the Designs
Partner shall assume the Partnership's obligations under each Outlet Contract
listed in Schedule 2.1, to the extent (but only to the extent) that those
obligations accrue after the Store Distribution Closing Date. The Designs
Partner also shall be responsible for all other obligations and liabilities that
arise from the operation of the Outlet Stores after the Store Distribution
Closing Date.
(b) Outlet POS Equipment. The Partnership shall allow the
Designs Partner or its designee to use the point-of-sale registers, printers,
LED displays, backroom terminals and related equipment located at the Outlet
Stores on the Store Distribution Closing Date (the "Outlet POS Equipment"). For
the purposes of Section 10.1(o) of this Distribution Agreement, the Designs
Partner shall be deemed to have assumed all rent or other obligations of the
Partnership relating to the Outlet POS Equipment to the extent (but only to the
extent) that those obligations accrue after the Store Distribution Closing Date.
The Partnership shall not actually assign to the Designs Partner any obligations
or liabilities under the Partnership lease that relates to the Outlet POS
Equipment.
(c) Certain Outlet Contracts. Notwithstanding Section 2.1(c)
of this Distribution Agreement, certain Outlet Contracts relate also to tangible
personal property, other items or services that are used at Stores owned or
operated by the Partnership which are not Outlet Stores or at stores owned or
operated by others. Those Outlet Contracts shall not be assigned and assumed, as
such. However, unless and until the Designs Partner enters into a separate
agreement with the relevant vendor or a substitute vendor, the Parties shall
cooperate in order to do what they can to enable the Designs Partner to realize
the benefits of those Outlet Contracts, subject to the burdens of those Outlet
Contracts, but with respect to the Outlet Stores only, and the Designs Partner
shall reimburse the Partnership for its costs related to such benefits and
burdens. The Parties shall cooperate to cause the Partnership to obtain such
separate agreements as soon as is reasonably practicable.
2.5 Gift Certificates and Credits. Before the Store Distribution
Closing, the Partnership issued gift certificates and merchandise credits that
are redeemable at the Outlet Stores. A number of those certificates and credits
are still outstanding. The Designs Partner shall honor those certificates and
credits after the Store Distribution Closing. The Designs Partner shall
periodically submit copies of those gift certificates and merchandise credits
redeemed after the Store Distribution Closing to the Partnership and the LOS
Partner. Within 30 days after each such submission, the Partnership shall either
(i) pay the Designs Partner an amount equal to the total face amount of the
redeemed certificates and credits that were the subject of that submission or
(ii) notify the Designs Partner and the LOS Partner that the Partnership does
not have a sufficient amount of cash available to make such payment. Within 30
days after receipt of any such notice from the Partnership, the LOS Partner
shall pay the Designs Partner an amount equal to 30 percent of the total face
amount of the redeemed certificates and credits that were the subject of the
Designs Partner's submission.
2.6 No Other Assumed Obligations or Liabilities. The Designs Partner
shall not assume hereunder any obligations or liabilities of the Partnership
relating to the Outlet Assets, except as expressly provided in Sections 2.4 and
2.5 of this Distribution Agreement. For example, the Partnership shall retain
and discharge all obligations and liabilities associated with its employees,
including any of its employees who are hired by the Designs Partner, for the
period they were or are employed by the Partnership, including any and all
obligations and liabilities for severance, vacation, personal time and sick
time. Other excluded liabilities include claims that arise from the operation of
the Outlet Stores before the Store Distribution Closing, whether or not such
claims are the subject of litigation on the Store Distribution Closing Date.
2.7 Prorations. In order to implement this Article 2, the Partnership
and the Designs Partner shall prorate, as between them, all expenses associated
with the Outlet Assets and the operation of the Outlet Stores. They shall do
that as of 12:01 a.m. on the day immediately after the Store Distribution
Closing Date. Examples are utilities, rent (including, for example, common area
maintenance charges, taxes and other landlord's charges), insurance premiums
(unless and to the extent the Designs Partner displaces existing coverage with
other coverage), HVAC maintenance charges and security service charges. The
prorations shall be based on the number of days elapsed during the relevant
period up to, and including, the Store Distribution Closing Date, unless such
proration period would be manifestly unfair. An example of such "unfairness"
would be a waterpipe break at a store, two days after the Store Distribution
Closing Date, that results in charges for one million gallons of water on the
water xxxx for that Outlet Store for the period up to, and including, the Store
Distribution Closing Date. Under that circumstance, the Designs Partner would
pay those incremental charges.
2.8 Outlet Employees. At the Distribution Closing, the Partnership
shall make all Outlet Employees available to the Designs Partner for hiring by
the Designs Partner.
2.9 Outlet Consumer Data. The Designs Partner will not use the Outlet
Consumer Data in any manner that is inconsistent with the customer data policies
and practices of the Partnership as in effect immediately prior to the Store
Distribution Closing.
ARTICLE 3
DISTRIBUTION OF URBAN IMAGE STORES TO LOS PARTNER
3.1 Distribution of UIS Assets. At the Store Distribution Closing,
the Partnership shall distribute to the LOS Partner or its designees all of the
Partnership's right, title and interest in and to the UIS Assets. The "UIS
Assets" consist of:
(a) the lease agreements for the real estate occupied by the
Urban Image Stores (the "UI Store Leases") and related security deposits;
(b) all fixtures and tangible personal property owned by the
Partnership and located at any Urban Image Store on the Store Distribution
Closing Date, including, for example, furniture, equipment, inventory (except
for UIS Close-Out Inventory), supplies, signage and copies, but not originals,
of records;
(c) except as set forth in Section 3.4(c) of this Distribution
Agreement, all rights that accrue after the Store Distribution Closing under the
UIS Contracts;
(d) all third party warranties to the Partnership relating to
the UIS Assets, whether express or implied, and claims arising under warranties,
representations and guaranties made to the Partnership in connection with the
operation of the Urban Image Stores;
(e) consumer names, addresses, order profiles and any other
consumer database information, and any market or research data collected by the
Partnership and relating to the Urban Image Stores or their consumers or markets
(the "UIS Consumer Data"); and
(f) cash in the Urban Image Stores in an aggregate amount
equal to $6,800.
Schedule 3.1 to this Distribution Agreement is a list of the UIS Assets
segregated by Urban Image Store, excepting items of owned tangible property that
had an original cost of less than $1,000. Because the Partnership prepared
Schedule 3.1, any failure to identify any UIS Assets on Schedule 3.1 shall not
prejudice the right of the LOS Partner to those assets.
3.2 Excluded Assets. Notwithstanding the provisions of Section 3.1
of this Distribution Agreement, the UIS Assets do not include:
(a) the UIS POS Equipment, cash (other than the cash described
in Section 3.1(f)), cash equivalents (other than security deposits), accounts
receivable, claims, rights to refunds or claims of rights to refunds;
(b) the close-out, irregular and end-of-season inventory
described in Schedule 3.2(b) (the "UIS Close-Out Inventory"); and
(c) mannequins and other items of equipment that are stored
at, and not currently being used at, the Urban Image Stores.
3.3 Value of UIS Assets.
(a) General. For the purposes of Section 9.1 of the Original
Partnership Agreement, the value of the UIS Assets shall be equal to the net
book value of the UIS Assets as of the Store Distribution Closing Date,
determined in accordance with GAAP (the "UIS Assets Value").
(b) Estimated UIS Assets Value. For the purposes of
calculating the amounts of certain contributions and distributions under this
Distribution Agreement prior to the determination of the final UIS Assets Value
pursuant to Section 3.3(c), the Parties' preliminary estimate of the UIS Assets
Value is $5,567,569 (the "Estimated UIS Assets Value").
(c) Final UIS Assets Value. After the Store Distribution
Closing, the Parties shall determine the final UIS Assets Value as follows:
(i) Within 60 days after the Store Distribution Closing,
the Partnership shall deliver a statement to the LOS Partner and the Designs
Partner setting forth all the figures needed to determine the final UIS Assets
Value (the "UIS Asset Statement"). The UIS Asset Statement shall be certified
by the Chief Financial Officer of Designs as having been prepared in accordance
with GAAP. Within 30 days after the Partnership delivers the UIS Asset Statement
to the LOS Partner, the LOS Partner shall (i) accept the UIS Asset Statement or
(ii) furnish the Partnership and the Designs Partner with a statement objecting
to one or more of the figures in the UIS Asset Statement and the basis for its
objections and/or requiring that one or more of the figures in the UIS Asset
Statement be audited. If the LOS Partner does not respond within those 30 days,
the LOS Partner shall be deemed to have accepted the UIS Asset Statement. The
Partnership shall furnish the LOS Partner and its representatives and the
Designs Partner with all information reasonably requested by the LOS Partner or
its representatives to enable it to assess the UIS Asset Statement both during
and after that 30-day period.
(ii) If the LOS Partner timely objects to any aspect of the
UIS Asset Statement or, in any event, the LOS Partner requests that one or more
figures in the UIS Asset Statement be audited, the open issues shall be resolved
or the audit shall be performed by an accounting firm jointly selected by the
Partners. The firm selected shall be instructed to resolve the matters in
controversy within 30 days after it is selected or as soon thereafter as is
reasonable. The Partnership and the LOS Partner shall furnish that firm with all
information it reasonably requests in order to perform its task and meet that
schedule. That firm's resolution of the open issues shall bind all of the
Parties. The artnership and the LOS Partner shall each pay one-half of the fees
and expenses of that firm.
3.4 Assumption of Obligations; Certain Liabilities.
(a) General. At the Store Distribution Closing, the LOS
Partner shall assume the Partnership's obligations under each UIS Contract
listed in Schedule 3.1, to the extent (but only to the extent) that those
obligations accrue after the Store Distribution Closing Date. The LOS Partner
also shall be responsible for all other obligations and liabilities that arise
from the operation of the Urban Image Stores after the Store Distribution
Closing Date.
(b) UIS POS Equipment. The Partnership shall not distribute to
the LOS Partner the point-of-sale registers, printers, LED displays, backroom
terminals and related equipment located at the Urban Image Stores on the Store
Distribution Closing Date (the "UIS POS Equipment"). Immediately after the Store
Distribution Closing Date, the Partnership shall ship the UIS POS Equipment from
the Urban Image Stores to a storage facility designated by the Partnership. For
the purposes of Section 10.1(o) of this Distribution Agreement, the Partnership
shall retain after the Store Distribution Closing Date all obligations and
liabilities of the Partnership relating to the UIS POS Equipment.
(c) Certain UIS Contracts. Notwithstanding Section 3.1(c) of
this Distribution Agreement, certain UIS Contracts relate also to tangible
personal property, other items or services that are used at Stores owned or
operated by the Partnership which are not Urban Image Stores or at stores owned
or operated by others. Those UIS Contracts shall not be assigned and assumed, as
such. However, unless and until the LOS Partner enters into a separate agreement
with the relevant vendor or a substitute vendor, the Parties shall cooperate in
order to do what they can to enable the LOS Partner to realize the benefits of
those UIS Contracts, subject to the burdens of those UIS Contracts, but with
respect to the Urban Image Stores only, and the LOS Partner shall reimburse the
Partnership for its costs related to such benefits and burdens. The Parties
shall cooperate to cause the Partnership to obtain such separate agreements as
soon as is reasonably practicable.
3.5 Gift Certificates and Credits. Before the Store Distribution
Closing, the Partnership issued gift certificates and merchandise credits that
are redeemable at the Urban Image Stores. A number of those certificates and
credits are still outstanding. The LOS Partner shall honor those certificates
and credits after the Store Distribution Closing. The LOS Partner shall
periodically submit copies of those gift certificates and merchandise credits
redeemed after the Store Distribution Closing to the Partnership and the Designs
Partner. Within 30 days after each such submission, the Partnership shall either
(i) pay the LOS Partner an amount equal to the total face amount of the redeemed
certificates and credits that were the subject of that submission or (ii) notify
the LOS Partner and the Designs Partner that the Partnership does not have a
sufficient amount of cash available to make such payment. Within 30 days after
receipt of any such notice from the Partnership, the Designs Partner shall pay
the LOS Partner an amount equal to 70 percent of the total face amount of the
redeemed certificates and credits that were the subject of the LOS Partner's
submission.
3.6 No Other Assumed Obligations or Liabilities. The LOS Partner
shall not assume hereunder any obligations or liabilities of the Partnership
relating to the UIS Assets, except as expressly provided in Sections 3.4 and 3.5
of this Distribution Agreement. For example, the Partnership shall retain and
discharge all obligations and liabilities associated with its employees,
including any of its employees who are hired by the LOS Partner, for the period
they were or are employed by the Partnership, including any and all obligations
and liabilities for severance, vacation, personal time and sick time. Other
excluded liabilities include (i) the Partnership's obligations under the
equipment lease for point-of-sale equipment located at the Urban Image Stores
and (ii) claims that arise from the operation of the Urban Image Stores before
the Store Distribution Closing, whether or not such claims are the subject of
litigation on the Store Distribution Closing Date.
3.7 Prorations. In order to implement this Article 3, the Partnership
and the LOS Partner shall prorate, as between them, all expenses associated with
the UIS Assets and the operation of the Urban Image Stores. They shall do that
as of 12:01 a.m. on the day immediately after the Store Distribution Closing
Date in the manner described in Section 2.7 of this Distribution Agreement.
3.8 UIS Employees. At the Store Distribution Closing, the Partnership
shall make all UIS Employees available to the LOS Partner for hiring by the LOS
Partner.
3.9 UIS Consumer Data. The LOS Partner will not use the UIS Consumer
Data in any manner that is inconsistent with the customer data policies and
practices of the Partnership as in effect immediately prior to the Store
Distribution Closing.
3.10 UIS Close-Out Inventory. The Partnership shall package and
otherwise prepare the UIS Close-Out Inventory for shipment and the Designs
Partner shall arrange for shipment, at its expense and risk, of the UIS
Close-Out Inventory from the Urban Image Stores to one or more locations
designated by the Designs Partner.
3.11 Personal Pair Program. As soon as practicable after the Store
Distribution Closing, the Partnership shall transfer to the LOS Partner all
deposits and all invoices for outstanding orders received by the Partnership at
any Urban Image Store before the Store Distribution Date in connection with the
Personal PairTM program (the "Outstanding Personal PairTM Orders"). At the time
that the LOS Partner receives the deposits and invoices for the Outstanding
Personal PairTM Orders, the Partnership shall be deemed to have transferred and
assigned to the LOS Partner, and the LOS Partner shall be deemed to have assumed
(without the need for any further documentation), all obligations and
liabilities of the Partnership related to the Outstanding Personal PairTM
Orders. For the purposes of Section 9.1 of the Original Partnership Agreement,
this transfer of assets and liabilities to the LOS Partner from the Partnership
shall not affect the Capital Accounts of the Partners.
ARTICLE 4
CAPITAL CONTRIBUTIONS
MADE IN CONNECTION WITH THE STORE DISTRIBUTION CLOSING
4.1 Designs Partner. At the Store Distribution Closing, the Designs
Partner shall make a cash capital contribution to the Partnership (the "Designs
Partner Closing Contribution") in the amount of $133,621. The Designs Partner
shall transfer the Designs Partner Closing Contribution to an account designated
by the Partnership.
4.2 LOS Partner. At the Store Distribution Closing, the LOS Partner
shall make a cash capital contribution to the Partnership (the "LOS Partner
Closing Contribution") in the amount of $2,909,750. The LOS Partner shall wire
transfer the LOS Partner Closing Contribution to an account designated by the
Partnership.
4.3 Use of Closing Date Capital Contributions. The Designs Partner
Closing Contribution and the LOS Partner Closing Contribution may be used by the
Partnership for general purposes, the closure of the Remaining Stores and the
winding up of the Partnership.
ARTICLE 5
CLOSURE OF REMAINING STORES
5.1 In General. After the Store Distribution Closing, the Partnership
shall continue to negotiate the closure of the Remaining Stores that have not
already been closed. For the purposes of this Distribution Agreement, a
Remaining Store shall be deemed "closed" as of 11:59 p.m. on the final date that
it is open for business to the public.
5.2 Timing. The Partnership shall close all of the Remaining Stores
by January 30, 1999, unless the Partners agree in writing to continue to operate
one or more Remaining Store until a later date certain by which all of the
Remaining Stores are to be closed. The Partners shall promptly deliver to the GM
any such written agreement extending the date of the final closure of the
Remaining Stores.
5.3 Operation of Remaining Stores. The Partnership shall continue to
operate each Remaining Store until it is closed. The Partnership shall (i)
operate the Remaining Stores in a manner consistent with the Transaction
Documents, as amended, and (ii) negotiate suitable arrangements with landlords
and other third parties for the closure of the Remaining Stores. The Parties
will cooperate in good faith concerning marketing, merchandise pricing and other
matters concerning the operation of the Remaining Stores until they are closed.
5.4 Distribution of Inventory to Designs Partner. The Partnership
shall liquidate the assets of the Remaining Stores in the manner provided in
Section 6.2 of this Distribution Agreement; provided, however, that all of the
Remaining Store Inventory shall be distributed to the Designs Partner or its
designees. The Remaining Store Inventory of each Remaining Store shall be
transferred to the Designs Partner, before and after such Remaining Store is
closed, in accordance with the transfer policies of the Partnership in effect
prior to the Store Distribution Closing Date. The Partnership shall package and
otherwise prepare the Remaining Store Inventory for shipment and the Designs
Partner shall arrange for shipment, at its expense and risk, of the Remaining
Store Inventory from the Remaining Stores to one or more locations designated by
the Designs Partner. For the purposes of Section 9.1 of the Original Partnership
Agreement and the following sentence, the Remaining Store Inventory of each
Remaining Store shall be valued as of the date such Store is closed in
accordance with GAAP, adjusted in accordance with the transfer and markdown
policies of the Partnership in effect on the date hereof. If a distribution of
Remaining Store Inventory would cause the Capital Account of the Designs Partner
to have a negative balance, then the Designs Partner shall promptly contribute
to the Partnership an amount of cash sufficient to cause its Capital Account to
have a balance of at least $0.
5.5 Remaining Store POS Equipment. Notwithstanding Section 6.2 of
this Distribution Agreement, the Partnership shall not sell or distribute the
point-of-sale registers, printers, LED displays, backroom terminals and related
equipment located at any of the Remaining Stores (the "Remaining Store POS
Equipment"). Immediately after the closing of a Remaining Store, the Partnership
shall ship any Remaining Store POS Equipment from such Remaining Store to a
storage facility designated by the Partnership. For the purposes of Section
10.1(o) of this Distribution Agreement, the Partnership shall retain after the
closing of each Remaining Store all obligations and liabilities of the
Partnership relating to the Remaining Store POS Equipment.
5.6. Remaining Store Consumer Data.
(a) Remaining Store Consumer Data. On the date that any
Remaining Store is closed, the Partnership shall distribute to the Partners or
their respective designees all consumer names, addresses, order profiles and any
other consumer database information, and any market or research data collected
by the Partnership and relating to the Remaining Stores or their consumers or
markets except for consumer information specifically related to the Personal
PairTM marketing program (the "Remaining Store Consumer Data"). Neither Partner
shall use the Remaining Store Consumer Data in any manner that is inconsistent
with the customer data policies and practices of the Partnership as in effect
immediately prior to the Store Distribution Closing. For the purposes of Section
9.1 of the Original Partnership Agreement, the Remaining Store Consumer Data
shall have no value.
(b) Personal Pair Consumer Data. On the date that any
Remaining Store is closed, the Partnership shall destroy or return to LS&CO. any
consumer information specifically related to the Personal PairTM marketing
program in its possession. Neither the LOS Partner nor its designees shall have
any restrictions hereunder on the use of such information and, for the purposes
of Section 9.1 of the Original Partnership Agreement, such information shall
have no value.
5.7 Expenses. In accordance with Section 10.1(k) of this Distribution
Agreement, the Partnership shall bear the costs of closing the Remaining Stores,
including expenses relating to severance or stay payments for employees,
termination of leases, and the liquidation or disposal of fixed and other assets
associated with the Remaining Stores. The Designs Partner shall bear the costs
and risks of shipping the Remaining Store Inventory to destinations designated
by Designs.
ARTICLE 6
TERMINATION, DISSOLUTION AND WINDING UP
6.1 Termination Date. The Partnership shall dissolve on the date that
the last Remaining Store is closed (the "Termination Date").
6.2 Liquidation of Partnership Assets.
(a) Liquidators.
(i) Appointment. On the Termination Date, the Partnership
will appoint one officer of each of the Partners to serve as liquidators of the
Partnership (collectively, the "Liquidators"). The form of appointment which
designates the Liquidators is attached as Exhibit 6.2(a)(i).
(ii) Authority. Subject to Section 6.2(a)(iii), the
Liquidators shall have authority to liquidate and wind up the Partnership,
including the authority to sell, donate, distribute or otherwise dispose of
fixed and other Partnership Assets, and to establish acceptable administrative,
insurance and other arrangements for the purpose of winding up the business and
affairs of the Partnership The Liquidators shall organize and conduct sales of
the Partnership Assets in accordance with this Section 6.2 of this Distribution
Agreement.
(iii) Management of Litigation. The Designs Partner shall
have the exclusive authority to manage and settle for and on behalf of the
Partnership all pending litigation involving the Partnership and third parties,
including the authority to agree to amounts to be paid in settlement, to execute
and deliver releases, and to execute and deliver all other agreements, documents
and instruments it deems appropriate; provided, however, that the Designs
Partner shall have no authority to agree to a settlement agreement which burdens
the Partners other than in accordance with their respective Percentage Interests
without the consent of the disproportionately burdened Partner. Schedule 6.2(a)
(iii) is a list of all suits, actions, investigations or other proceedings
pending or, to the knowledge of any Party, threatened against the Partnership.
(b) Timing.
(i) Liquidation Prior to Termination Date. During the
period between the Store Distribution Closing Date and the Termination Date, the
Partnership shall sell or otherwise dispose of all those Partnership Assets that
are located at, or in transit to, the premises of the Remaining Stores;
provided, however, that, without the consent of the Designs Partner, the
Partnership shall not sell or otherwise dispose of any Remaining Store
Inventory, but rather, shall distribute such inventory to the Designs Partner or
its designees as provided in Section 5.4 of this Distribution Agreement. The
Partnership shall endeavor to coordinate the timing of the sale and distribution
of the assets of the Remaining Stores so that each Remaining Store may continue
to operate as profitably as reasonably possible until the day that it is closed.
(ii) Liquidation After the Termination Date. Immediately
after the Termination Date, the Partnership shall proceed as promptly as
reasonably possible to sell or otherwise dispose of all of the then remaining
Partnership Assets.
(c) Certain Terms of Sale. The Partnership may sell the
Partnership Assets to one or more purchasers. The Partnership shall endeavor to
sell the Partnership Assets for cash, plus the assumption by the purchaser of
the Partnership's and the Partners' obligations and liabilities. Either Partner
and any Affiliate of either Partner may bid on and purchase any and all
Partnership Assets offered for sale under this Section 6.2. However, neither
Partner and no Affiliate of either Partner shall have any special advantage in
that process. The price and other features of any bid by a Partner or Affiliate
of a Partner shall be compared with the price and other features of all other
bids as though the Partner or Affiliate were an "outside" bidder. Any sale of
Partnership Assets to a Partner or an Affiliate of a Partner shall be subject to
the approval of the "disinterested" Partner in accordance with Section 5.11 of
the Original Partnership Agreement.
6.3 Valuation Adjustments.
(a) Outlet Assets Value. If the Parties determine, in
accordance with Section 2.3(c) of this Distribution Agreement, that the final
Outlet Assets Value is higher or lower than the Estimated Outlet Assets Value,
then the Partnership shall promptly adjust the Capital Accounts of the Partners
in accordance with Section 9.1 of the Original Partnership Agreement.
(b) UIS Assets Value. If the Parties determine, in accordance
with Section 3.3(c) of this Distribution Agreement, that the final UIS Assets
Value is higher or lower than the Estimated UIS Assets Value, then the
Partnership shall promptly adjust the Capital Accounts of the Partners in
accordance with Section 9.1 of the Original Partnership Agreement.
6.4. Capital Contributions.
(a) Closing Date Capital Contributions. On the Store
Distribution Closing Date, the Designs Partner shall make the Designs Partner
Closing Contribution in accordance with Section 4.1 of this Distribution
Agreement and the LOS Partner shall make the LOS Partner Closing Contribution in
accordance with Section 4.2 of this Distribution Agreement.
(b) Restoration of Capital Accounts. This Section 6.4(b) shall
apply after:
(i) in accordance with this Article 6, the Partnership has
sold or distributed all Partnership Assets and discharged or provided for all
Partnership obligations and liabilities;
(ii) in accordance with Article 9 of the Original
Partnership Agreement, the Partnership has allocated all items of income, gain,
loss and deduction, and made all required adjustments to Capital Accounts; and
(iii) all distributions to Partners or their designees
otherwise required by Section 6.5(e) of this Distribution Agreement have been
made.
If, thereafter, a Partner has a negative balance in its Capital Account, it
shall contribute sufficient cash to the capital of the Partnership to eliminate
that deficit. The amounts so contributed shall then be distributed as provided
in Section 6.5(e) of this Distribution Agreement.
6.5 Distributions.
(a) Outlet Assets. On the Store Distribution Closing Date, the
Partnership shall distribute the Outlet Assets to the Designs Partner or its
designees in accordance with Article 2 of this Distribution Agreement.
(b) UIS Assets. On the Store Distribution Closing Date, the
Partnership shall distribute the UIS Assets to the LOS Partner or its designees
in accordance with Article 3 of this Distribution Agreement.
(c) Remaining Store Inventory. The Partnership shall
distribute the Remaining Store Inventory to the Designs Partner or its designees
in accordance with Section 5.4 of this Distribution Agreement.
(d) Cash Distributions Prior to Termination Date. During the
period between the Store Distribution Closing Date and the Termination Date, the
Partnership may distribute Surplus Cash to the Partners or their respective
designees in accordance with their respective Percentage Interests. The amount
and timing of any distributions of Surplus Cash prior to the Termination Date
shall be determined by the Partners. The Partners may consider the projected
inventory, cash and other requirements of the Partnership and any other
projections they deem relevant and satisfactory in connection with any decision
related to the distribution of Surplus Cash.
(e) Distributions After the Termination Date. After (A) the
Liquidators have sold or otherwise disposed of all Partnership Assets and
discharged or provided for all Partnership obligations and liabilities other
than those Partnership Assets or liabilities that either Partner is willing to
accept or assume and (B) the determinations of the final Outlet Assets Valuation
and final UIS Assets Valuation, the remaining Partnership Assets (including the
net proceeds of the sales of Partnership Assets) and any liabilities and
obligations of the Partnership not discharged or otherwise provided for by such
date shall be distributed according to these priorities:
(i) first, to discharge or provide for all obligations and
liabilities of the Partnership, including to Persons that are Affiliates of a
Partner, but not to Partners themselves;
(ii) then, to discharge and provide for all obligations and
liabilities of the Partnership to the Partners (it being understood that a
Partner may not cause an obligation or liability owed to it to be accorded the
priority of Subsection 6.5(e)(i) of this Distribution Agreement by assigning
that obligation or liability to an Affiliate of that Partner) and
(iii) then, to the Partners to the extent of the positive
balances ( if any) in their Capital Accounts.
For purposes of determining the amounts of any distributions under Section
6.5(e)(iii) of this Distribution Agreement, if (A) any Partnership Assets are to
be distributed in kind to a Partner or its designees or (B) any liabilities or
obligations of the Partnership are distributed to and assumed by a Partner or
its designees, they shall be valued as provided by this Agreement or, if not so
provided, by the Liquidators and the Partners' Capital Accounts shall be
adjusted in accordance with Subsection 9.1 of the Original Partnership
Agreement.
(f) Subsequent Adjustments. If after all the distributions
described in Section 6.5 of this Distribution Agreement the Parties determine
that the Partnership Assets were not distributed (or liabilities and obligations
of the Partnership were not delegated and assumed) to the Partners in proportion
to their respective Percentage Interests, the Parties will make such payments,
refunds, contributions and/or distributions as are necessary to achieve the
correct proportionate distributions.
(g) No Other Distributions. Notwithstanding any other
provision of this Distribution Agreement or the Original Partnership Agreement,
the Partnership shall not distribute cash or any other Partnership Assets to
either Partner or their respective designees except as provided in this Section
6.5.
6.6 Timing. The Partnership shall use reasonable efforts to complete
the payments, distributions and contributions described in Sections 6.4 and 6.5
of this Distribution Agreement within 45 days after the Termination Date.
6.7 Partners to Remain in Existence. Each of the Partners agrees to
remain in existence for not less than two years after the Termination Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE DESIGNS PARTNER
The Designs Partner represents and warrants to the Partnership and the
LOS Partner that as of the Store Distribution Closing Date:
7.1 Organization and Authority. The Designs Partner is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Designs Partner has all requisite power and authority to
enter into and perform the Closing Documents. The signing, delivery and
performance by the Designs Partner of the Closing Documents have been duly and
validly authorized by all necessary corporate action on the part of the Designs
Partner. Each Closing Document constitutes a valid and binding obligation of the
Designs Partner enforceable against the Designs Partner in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws that generally affect creditors and
except as may be limited by general principles of equity. The signing, delivery
and performance by the Designs Partner of each Closing Document will not: (a)
violate or conflict with any provision of the Certificate of Incorporation or
By-laws of the Designs Partner; (b) violate, conflict with or result in a breach
or termination of any contract or other instrument to which the Designs Partner
is a party or by which any of its assets is bound; (c) result in the creation of
any Lien on any assets of the Designs Partner or the Partnership; (d) violate
any judgment, order, injunction, decree or award that binds the Designs Partner
or any of its assets; or (e) assuming the truth and accuracy of the
representation of the LOS Partner in Section 8.4 of this Distribution Agreement,
constitute a violation of law.
7.2 Consents and Approvals. Schedule 7.2 to this Distribution
Agreement lists all consents and approvals of, and filings and registrations
with, any Person required to be obtained by the Designs Partner at or before the
Store Distribution Closing Date in order for the Designs Partner to sign,
deliver and perform the Closing Documents. An example is consents from the
lessors of the Outlet Store Leases. Except as provided in Schedule 7.2, the
Designs Partner has obtained all of those consents and approvals and made all of
those filings and registrations.
7.3 Litigation and Claims. There is no suit, action, investigation or
other proceeding pending or, to the best knowledge of the Designs Partner,
threatened against the Designs Partner relating to any of the transactions
contemplated by this Distribution Agreement.
7.4 HSR Act. The Chief Executive Officer and Chief Financial Officer
of the Designs Partner, acting on authority duly delegated from its Board of
Directors, has determined that the value of the assets being distributed to the
Designs Partner hereunder is less than $15 million. Value, for this purpose,
means the higher of (i) the sum of the respective values of the Outlet Assets
and the Remaining Store Inventory for purposes of this Distribution Agreement
and (ii) the fair market value of such assets as contemplated by 16 C.F.R.
'801.10 promulgated under the HSR Act.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE LOS PARTNER
The LOS Partner represents and warrants to the Partnership and the
Designs Partner that as of the Store Distribution Closing Date:
8.1 Organization and Authority. The LOS Partner is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The LOS Partner has all requisite power and authority to enter into
and perform the Closing Documents. The signing, delivery and performance by the
LOS Partner of the Closing Documents have been duly and validly authorized by
all necessary corporate action on the part of the LOS Partner. Each Closing
Document constitutes a valid and binding obligation of the LOS Partner
enforceable against the LOS Partner in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
and other laws that generally affect creditors and except as may be limited by
general principles of equity. The signing, delivery and performance by the LOS
Partner of each Closing Document will not: (a) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of the LOS Partner; (b)
violate, conflict with or result in a breach or termination of any contract or
other instrument to which the LOS Partner is a party or by which any of its
assets is bound; (c) result in the creation of any Lien on any assets of the LOS
Partner or the Partnership; (d) violate any judgment, order, injunction, decree
or award that binds the LOS Partner or any of its assets; or (e) assuming the
truth and accuracy of the representation of the Designs Partner in Section 7.4
of this Distribution Agreement, constitute a violation of law.
8.2 Consents and Approvals. Schedule 8.2 to this Distribution
Agreement lists all consents and approvals of, and filings and registrations
with, any Person required to be obtained by the LOS Partner at or before the
Store Distribution Closing Date in order for the LOS Partner to sign, deliver
and perform the Closing Documents. Except as provided in Schedule 8.2, the LOS
Partner has obtained all of those consents and approvals and made all of those
filings and registrations.
8.3 Litigation and Claims. There is no suit, action, investigation or
other proceeding pending or, to the best knowledge of the LOS Partner,
threatened against the LOS Partner relating to any of the transactions
contemplated by this Distribution Agreement.
8.4 HSR Act. The management of the LOS Partner, acting on the
authority duly delegated to it by the voting trust for LS&CO., has determined
that the value of the assets being distributed to the LOS Partner hereunder is
less than $15 million. Value, for this purpose, means the higher of the UIS
Assets Value and fair market value as contemplated by 16 C.F.R. Section 801.10
promulgated under the HSR Act.
ARTICLE 9
STORE DISTRIBUTION CLOSING
9.1 Date and Place. Subject to the terms and conditions of this
Distribution Agreement, the Store Distribution Closing shall take place at the
offices of Xxxxx, Xxxx & Xxxxx LLP, One Post Office Square, Boston,
Massachusetts, U.S.A. or at such other location as may be agreed upon among the
Parties on October 31, 1998 or on such other date as may be agreed upon among
the Parties (the "Store Distribution Closing Date").
9.2 Closing Conditions.
(a) Conditions Precedent to Closing by Designs. The
obligations of the Designs Partner under Article 2 of this Distribution
Agreement are subject to satisfaction of the following conditions precedent, or
the waiver of such conditions by the Designs Partner, at or before the Store
Distribution Closing Date:
(i) Corporate Proceedings. All corporate, partnership and
other proceedings to be taken and all waivers and consents to be obtained on or
before such date in connection with the Store Distribution Closing shall have
been taken or obtained and all documents incident to such transactions shall be
reasonably satisfactory in form and substance to the Designs Partner and its
counsel, who shall have received all such originals or certified or other copies
of such documents as they may reasonably request.
(ii) Related Agreements and Documents. At or before the
Store Distribution Closing Date:
(A) the Partnership, the Designs Partner and Designs
shall have entered into a Transfer and Assumption Agreement relating to the
Outlet Assets;
(B) Designs and LS&CO. shall have executed and
delivered an amendment and restatement of the Trademark License Agreement dated
as of November 15, 1996, between Designs and LS&CO., as amended (the "Outlet
License Agreement"), which amendment and restatement will add the Outlet Stores
to the exhibit to the Outlet License Agreement listing the stores covered by the
Outlet License Agreement;
(C) Designs and the Partnership shall have executed
and delivered an amendment to the Administrative Services Agreement (the "ASA
Amendment");
(D) the Designs Partner, Designs, the LOS Partner, LOS
Inc. and LS&CO. shall have executed and delivered an amendment to the
Participation Agreement (the "Participation Agreement Amendment");
(E) Designs and the Partnership shall have executed
and delivered an amendment to the Designs License Agreement;
(F) the Partnership shall have assigned to LOS the
Personal PairTM License Agreement dated May 30, 1995, and LS&CO. shall have
consented to such assignment;
(G) LOS Inc. shall have surrendered to the Partnership
for cancellation any original promissory notes issued to LOS Inc. pursuant to
the Credit Agreement dated as of October 1, 1996 among the Partnership, Designs,
LOS Inc. and Designs as agent, as amended (the "Credit Agreement");
(H) LS&Co. shall have executed and delivered the
Guaranty in favor of the Designs Partner and the Affiliates of the Designs
Partner; and
(I) the parties thereto shall have executed and
delivered such other documents consistent with the terms hereof as the Designs
Partner shall reasonably request.
(iii) Third Party Consents, Licenses and Approvals. The
Designs Partner shall have obtained all of the consents, permits and approvals
set forth in Schedule 7.2.
(iv) Distribution of UIS Assets. The Partnership shall be
simultaneously distributing the UIS Assets to the LOS Partner in accordance with
Article 3.
(v) LOS Partner Closing Contribution. The LOS Partner
shall be simultaneously contributing the LOS Partner Closing Contribution to the
Partnership in accordance with Section 4.2.
(b) Conditions Precedent to Closing by LOS Partner. The
obligations of the LOS Partner under Articles 3 and 4 of this Distribution
Agreement are subject to satisfaction of the following conditions precedent, or
the waiver of such conditions by the LOS Partner, at or before the Store
Distribution Closing Date:
(i) Corporate Proceedings. All corporate, partnership and
other proceedings to be taken and all waivers and consents to be obtained on or
before such date in connection with the Store Distribution Closing shall have
been taken or obtained and all documents incident to such transactions shall be
reasonably satisfactory in form and substance to the LOS Partner and its
counsel, who shall have received all such originals or certified or other copies
of such documents as they may reasonably request.
(ii) Related Agreements and Documents. At or before the
Store Distribution Closing Date:
(A) the Partnership, the LOS Partner and LOS Inc.
shall have entered into a Transfer and Assumption Agreement relating to the
UIS Assets;
(B) Designs and the Partnership shall have executed
and delivered the ASA Amendment;
(C) the Designs Partner, Designs, the LOS Partner,
LOS Inc. and LS&CO. shall have executed and delivered the Participation
Agreement Amendment;
(D) the Partnership shall have assigned to LOS the
Personal PairTM License Agreement dated May 30, 1995, and LS&CO. shall have
consented to such assignment;
(E) Designs shall have surrendered to the Partnership
for cancellation any original promissory notes issued to Designs pursuant to the
Credit Agreement;
(F) Designs. shall have executed and delivered the
Guaranty in favor of the LOS Partner and the Affiliates of the LOS Partner; and
(G) the parties thereto shall have executed and
delivered such other documents consistent with the terms hereof as the LOS
Partner shall reasonably request.
(iii) Third Party Consents, Licenses and Approvals. The LOS
Partner shall have obtained all of the consents, permits and approvals set forth
in Schedule 8.2.
(iv) Distribution of Outlet Assets. The Partnership shall
be simultaneously distributing the Outlet Assets to the Designs Partner in
accordance with Article 2.
(v) Designs Partner Closing Contribution. The Designs
Partner shall be simultaneously contributing the Designs Partner Closing
Contribution to the Partnership in accordance with Section 4.1.
ARTICLE 10
AMENDMENT OF PARTNERSHIP AGREEMENT
10.1 Amendments. The Original Partnership Agreement is hereby amended
in the following respects:
(a) Principal Office. Section 2.6 of the Original Partnership
Agreement is hereby amended by deleting the address "1244 Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000" and inserting in its place the address "66 X
Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000".
(b) Term. Section 2.7 of the Original Partnership Agreement is
hereby amended by deleting the words "January 29, 2005 (the "Termination Date")"
and inserting in its place the defined term "Termination Date".
(c) Approval of Certain Distributions. Section 5.9(q) of the
Original Partnership Agreement is hereby amended by deleting the cross-reference
to "Section 9.3 or any other provision of this Agreement" and inserting in its
place the cross-reference to "Section 6.5 of the Distribution Agreement".
(d) Distributions of Excess Cash. Article 9 of the Original
Partnership Agreement is hereby amended by deleting Section 9.3(a) in its
entirety.
(e) Certain Allocations. Article 9 of the Original Partnership
Agreement is hereby amended by deleting Section 9.4(b) in its entirety.
(f) Articles Relating to Purchases, Sales and Dissolution. The
Original Partnership Agreement is hereby amended by deleting Articles 10 through
17 in their entirety and inserting in their place Articles 2 through 9 of this
Distribution Agreement.
(g) Certain Consequences of Transactions. Article 18 of the
Original Partnership Agreement is hereby amended by deleting the cross-reference
to "Articles 12 through 17 of this Agreement" from each sentence in which it
appears and inserting in each such place the cross-reference to "Articles 2
through 9 of the Distribution Agreement".
(h) Impact on Status of Partnership. Article 18 of the
Original Partnership Agreement is hereby amended by deleting Section 18.4 in its
entirety.
(i) Intellectual Property. Article 18 of the Original
Partnership Agreement is hereby amended by deleting Section 18.6 in its
entirety. Consequently, the matters addressed in Section 18.6 of the Original
Partnership Agreement shall be governed by any other applicable agreements,
policies and laws in effect as of the date of this Agreement.
(j) Title. Section 18.8 of the Original Partnership Agreement
is hereby amended by deleting the cross-reference to "Article 13, 14, 15, 16 or
17" and inserting in its place the cross-reference to "Articles 2 and 3 of the
Distribution Agreement".
(k) Expenses. Section 18.9 of the Original Partnership
Agreement is hereby amended by deleting all of the text after the heading and
inserting the following text in its place:
Except for expenses associated with the transfer or termination of
leases and other matters of mutual interest that the Partnership will
bear, and subject to Section 5.7, each of the Partners agrees to pay
its own legal, accounting, investment banking, regulatory filing,
consulting and other expenses in connection with the transactions
contemplated by this Distribution Agreement, any further transactions
or matters pursuant hereto, or in connection herewith except to the
extent the indemnification provisions of this Distribution Agreement
may otherwise require.
(l) Assumptions. Article 18 of the Original Partnership
Agreement is hereby amended by deleting Section 18.10 in its entirety.
(m) Indemnification. Section 18.11 of the Original Partnership
Agreement is hereby amended by deleting Sections 18.11(a) and (b) in their
entirety.
(n) Special Netting Rules. Article 18 of the Original
Partnership Agreement is hereby amended by deleting Section 18.12 in its
entirety.
(o) Other Indemnifications.
(i) Breach; Gross Negligence. Section 19.2 of the Original
Partnership Agreement is hereby amended by deleting the clause "Subject to the
principles set forth in Section 16.6 of this Agreement," and capitalizing the
first letter of the word "each" that appears immediately after such clause.
(ii) Certain Liabilities. Article 19 of the Original
Partnership Agreement is hereby amended by inserting the following section
immediately after Section 19.3:
19.4 Indemnification as to Certain Liabilities.
(a) By the Designs Partner. The Designs Partner
agrees to indemnify the LOS Partner and the LOS Partner's Affiliates
and hold them harmless from and against (i) all Damages relating to any
obligation or liability of the Partnership assigned to and assumed by
the Designs Partner or its designees and (ii) 70 percent of all Damages
incurred by the LOS Partner or the LOS Partner's Affiliates and related
to any obligation or liability of the Partnership not assigned to or
assumed by either Partner (an "Unassigned Partnership Liability"). If
the LOS Partner or any Affiliate of the LOS Partner reasonably
anticipates that it may incur Damages in excess of its 30 percent share
of an Unassigned Partnership Liability, it may notify the Designs
Partner and the Designs Partner will thereupon be required to pay its
70 percent share of such liability to the LOS Partner, or the LOS
Partner's Affiliate as the case may be, without requiring the LOS
Partner, or the LOS Partner's Affiliate as the case may be, to first
pay its 30 percent share.
(b) By the LOS Partner. The LOS Partner agrees to
indemnify the Designs Partner and the Designs Partner's Affiliates and
hold them harmless from and against (i) all Damages relating to any
obligation or liability of the Partnership assigned to and assumed by
the LOS Partner or its designees and (ii) 30 percent of all Damages
incurred by the Designs Partner or the Designs Partner's Affiliates and
related to any Unassigned Partnership Liability. If the Designs Partner
or any Affiliate of the Designs Partner reasonably anticipates that it
may incur Damages in excess of its 70 percent share of an Unassigned
Partnership Liability, it may notify the LOS Partner and the LOS
Partner will thereupon be required to pay its 30 percent share of such
liability to the Designs Partner, or the Designs Partner's Affiliate as
the case may be, without requiring the Designs Partner, or the Designs
Partner's Affiliate as the case may be, to first pay its 70 percent
share.
(c) Special Netting Rules. Notwithstanding any other
provision of Article 19 of the Original Partnership Agreement, as
amended, any amount due from one Partner to the other Partner pursuant
to such Article may be offset against amounts due from such other
Partner.
(p) Notices. Section 21.3 of the Original Partnership
Agreement is hereby amended by deleting the address "1244 Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000" from each place that it appears and
inserting in each such place the address "66 X Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000". Section 21.3 of the Original Partnership Agreement is hereby further
amended by deleting the facsimile number "(000) 000-0000" from each place that
it appears and inserting in each such place the facsimile number "(781)
449-8666".
(q) Expenses. Section 21.8 of the Original Partnership
Agreement is hereby amended by inserting "(i)" after the word "drafting" and
inserting the following at the end of the sentence:
and (ii) the Distribution Agreement and the other Closing Documents and
in effecting the Store Distribution Closing.
10.2 Effect on Original Partnership Agreement. As amended and modified
hereby, the Original Partnership Agreement shall remain in full force and effect
in accordance with its terms. However, any conflict between any provision of
this Distribution Agreement and any provision of the Original Partnership
Agreement shall be resolved in favor of the provision of this Distribution
Agreement.
ARTICLE 11
AMENDMENTS TO AND TERMINATION OF
OTHER TRANSACTION DOCUMENTS
11.1 Glossary.
(a) Deleted Definitions. The Glossary is hereby amended by
deleting the following definitions therefrom: Bankruptcy Event, CD, Designated
Value, Designs Transferor, Excess Cash, Fundamental Change, Liquidator, Minimum
Value, OLS Opportunity, Outlet Opportunity, Outlet Value, Party, Parties,
Profitable OLSs, Purchasing Partner, Qualified Transferee, Reputation Event,
Selling Partner, Subject Property, Termination Date, Transfer, Transferee,
Trigger Notice and Unauthorized Termination.
(b) Additional Definitions. The Glossary is hereby amended by
inserting therein the definitions of Section 1.2 of this Distribution Agreement
in alphabetical order. For the purpose of clarification, the definition of
"Termination Date" in Section 1.2 of this Distribution Agreement is replacing
the definition of "Termination Date" that appeared in the Glossary executed on
January 28, 1995.
11.2 The LOS Sublicense Agreement. The LOS Partner hereby agrees that
the LOS Sublicense Agreement shall remain in full force and effect until all of
the Remaining Stores are closed and shall then terminate without the necessity
for any Party to sign any further documents or take any further action.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law. This Distribution Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts entered into and to be performed within Delaware by Delaware
residents.
12.2 Cooperation. Unless otherwise specified in this Agreement, each
Partner agrees to implement all the procedures and complete all the transactions
required or permitted to be implemented and completed under this Distribution
Agreement. That shall include signing and delivering all documents, obtaining
all consents from and making all filings with private and governmental third
parties, and taking all other actions, both before and after a transaction
closes, which are reasonably requested by the other Partner to effect or better
memorialize the transaction or the various "transitions" connected with that
transaction. Examples are recording memoranda of leases (or, if appropriate at
the time, real estate deeds), obtaining consents from landlords, and cooperating
to enforce third party warranties transferred by the Partnership to the Partners
or their respective designees.
12.3 Counterparts. This Distribution Agreement may be signed in one
or more counterparts. Each counterpart shall be deemed an original of this
Distribution Agreement.
* * * * *
IN WITNESS WHEREOF, the Parties have entered into this Amendment and
Distribution Agreement as of the date first written above.
DESIGNS JV CORP.
By /s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx
President
LDJV INC.
By /s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Vice President
THE DESIGNS/OLS PARTNERSHIP
By Designs JV Corp., a Partner
Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx
President
By LDJV Inc., a Partner
Xxxxxx Xxxxx
Xxxxxx Xxxxx
Vice President
