Exhibit 2.10
LEASE INDEMNIFICATION
AND REIMBURSEMENT AGREEMENT
between
XXXX XXX CORPORATION
and
COACH, INC.
LEASE INDEMNIFICATION AND
REIMBURSEMENT AGREEMENT
This Lease Indemnification and Reimbursement Agreement (this
"Agreement"), is dated as of August 24, 2000, between Xxxx Xxx
Corporation ("Xxxx Xxx"), a Maryland corporation, and Coach, Inc. ("Coach"),
a Maryland corporation. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in Article VI hereof.
RECITALS
WHEREAS, Xxxx Xxx currently owns all of the issued and
outstanding common stock of Coach;
WHEREAS, the Boards of Directors of Xxxx Xxx and Coach have
each determined that it would be appropriate and desirable for Xxxx Xxx to
contribute and transfer to Coach, and for Coach to receive and assume,
directly or indirectly, assets and liabilities currently held by Xxxx Xxx and
associated with the Coach Business (the "Separation");
WHEREAS, in connection with the Separation, Xxxx Xxx shall
assign, or cause its applicable Subsidiary to assign, and Coach shall accept
and assume, or cause its applicable Subsidiary to accept and assume, Xxxx
Xxx'x or its Subsidiary's interest in certain leased properties used in
connection with the Coach Business (the "Leased Properties") pursuant to that
certain Real Estate Matters Agreement;
WHEREAS, after the Separation, Xxxx Xxx will continue to have
Obligations under the leases relating to certain Leased Properties and will
have Obligations under the leases relating to certain leased properties
listed in Schedule 1.9 of the Real Estate Matters Agreement (the leases under
which Xxxx Xxx shall have Obligations after the Separation, the "Guaranteed
Leases," and the properties to which the Guaranteed Leases relate
individually, a "Property," and collectively, the "Properties"); and
WHEREAS, due to such Xxxx Xxx Obligations, Coach has agreed to
maintain after the Distribution Date (as defined herein), for the benefit of
Xxxx Xxx, a Letter of Credit.
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NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements set forth below, the parties hereto agree as follows:
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ARTICLE I
LETTER OF CREDIT
Section 1.1 INITIAL LETTER OF CREDIT. Coach agrees that it
shall maintain, effective commencing on the Distribution Date, a Letter of
Credit in favor of Xxxx Xxx for the benefit of Xxxx Xxx in an available
amount (the "Required Amount") which is initially equal to the sum of:
(a) the total of:
(i) the Base Rent payable under all of the
Guaranteed Leases (excluding the lease for the property at 000 X. 00xx
Xxxxxx, Xxx Xxxx (the "Executive Offices Lease")) on the Distri bution
Date PLUS the Base Rent payable under all of the Guaranteed Leases
(excluding the Executive Offices Lease) on the last day of the fiscal
year in which the Distribution occurs; DIVIDED by
(ii) two (2); PLUS
(b) six (6) multiplied by the average monthly rent
payment under the Executive Office Lease for the six (6) month period
commencing with the Distribution Date; PLUS
(c) the Additional Expenses.
The Required Amount shall be adjusted each fiscal year of Coach, as applicable,
pursuant to Section 1.2.
Section 1.2 ADJUSTMENT OF REQUIRED AMOUNT. (a) At least
forty-five (45) days prior to the beginning of each Coach fiscal year, Coach
shall provide to Xxxx Xxx a certificate (the "Certificate") of Coach's Chief
Operating Officer or Chief Financial Officer certifying (i) the amount of
Coach's Base Rent payable under the Guaranteed Leases with respect to which Xxxx
Xxx has Obligations for the next succeeding Coach fiscal year, calculated by
adding the Base Rent payable under
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such Guaranteed Leases on the first day of such fiscal year and the Base Rent
payable under such Guaranteed Leases on the last day of such fiscal year, and
dividing such sum by two (2) and (ii) the amount of six (6) times Coach's
average monthly rent payment under the Executive Offices Lease for such
fiscal year, in each case calculated consistently with Section 1.1 and
previous calculations, if any, under this Section 1.2. The Certificate shall
include a summary of the foregoing calculations. Xxxx Xxx shall be entitled
to review and copy relevant documentation of Coach to substantiate such
calculations. If Coach excludes from the amounts certified in the Certificate
the Executive Offices Lease or any lease that is or previously was a
Guaranteed Lease, Coach shall provide to Xxxx Xxx appropriate documentation
confirming Coach's assertion that Xxxx Xxx has no Obligations or further
liability for such leases, which may include a certificate from Coach's Chief
Executive Officer or the Chief Operating Officer.
(b) At the beginning of each Coach fiscal year, either (i)
Xxxx Xxx shall reduce the amount available under the Letter of Credit or (ii)
Coach shall increase the amount available under the Letter of Credit, as
appropriate, to equal the sum of the equation set for in Section 1.1
(adjusted per Section 1.2) to arrive at a new Required Amount using the
appropriate amounts as set forth in the Certificate for such fiscal year;
PROVIDED that Xxxx Xxx shall not have delivered a written notice of objection
to Coach within ten (10) days of receipt of the Certificate from Coach.
(c) If Xxxx Xxx delivers a notice of objection to Coach within
ten (10) days of receipt of the Certificate from Coach and for so long as a
Dispute exists between the parties with respect to the Required Amount
available under the Letter of Credit, Coach shall renew or continue the
Letter of Credit not later than the first day of such fiscal year in an
amount equal to the Required Amount of the Letter of Credit for the most
recently completed Coach fiscal year. If Xxxx Xxx delivers a written notice
of objection to Coach within ten (10) days of receipt of the Certificate from
Coach, the parties agree to resolve such Dispute in accordance with the
procedures set forth in Section 5.17 hereof.
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Section 1.3 TERM. Coach shall be obligated to maintain the
Letter of Credit (the "Letter of Credit Term") in the Required Amount until
the earlier of (a) the unconditional release, expiration of termination of
all of Xxxx Xxx'x Obligations with respect to all Guaranteed Leases or (b)
the date on which the Required Amount falls below $2,000,000.
ARTICLE II
NOTICE OF DEFAULT
Section 2.1 NOTICE OF DEFAULT UNDER THE GUARANTEED LEASES;
INDEMNIFICATION AND REIMBURSEMENT. (a) Coach hereby agrees to provide Xxxx
Xxx with a copy of any written notice of default, notice of alleged default
or other notice from a Landlord that may result in a material event of
default that Coach receives with respect to any Guaranteed Lease, which copy
or copies shall be given to Xxxx Xxx as soon as practicable and in any event
no later than five (5) business days after Coach's receipt of any such
notice. Xxxx Xxx hereby agrees to provide Coach with a copy of any written
notice of default, notice of alleged default or other notice from a Landlord
that Xxxx Xxx receives with respect to any Guaranteed Lease, which copy or
copies shall be given to Coach as soon as practicable and in any event no
later than five (5) business days after Xxxx Xxx'x receipt of any such notice.
(b) Coach shall deliver to Xxxx Xxx, as soon as practicable
and in any event no later than five (5) business days after Coach's receipt
of any notice described in Section 2.1(a) hereof, a statement from Coach
concerning Coach's intentions with respect to said default or alleged
default. If Coach indicates its intent to cure such default, Coach shall cure
said default within the time period set forth in the
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applicable Guaranteed Lease, or if said default is of a character which does
not permit the curing of said default within the time period set forth in the
applicable Guaranteed Lease, Coach shall eliminate, cure, obtain a waiver or
otherwise con structively address such default and proceed diligently with
respect to said default until cured, waived or eliminated, but, in any event,
in the manner required under the terms and conditions of the applicable
Guaranteed Lease. So long as Coach is working diligently to cure such default
in accordance with the foregoing, Xxxx Xxx agrees that it shall refrain from
taking actions to cure such default and shall xxxxxx ate with Coach with
respect to curing such breach or settling such dispute with the landlord;
PROVIDED, HOWEVER, that (i) if Xxxx Xxx incurs any Losses as a result of
Coach's breach and Coach does not pay to Xxxx Xxx the full amount of the
Losses incurred by Xxxx Xxx promptly after receipt of notice from Xxxx Xxx,
or (ii) Xxxx Xxx reasonably believes that it will suffer adverse consequences
as a result of such breach if it is not cured promptly, then, notwithstanding
the foregoing, Xxxx Xxx shall be entitled to exercise any and all remedies
available to it hereunder, including without limitation, drawing on the
Letter of Credit pursuant to Section 3.1. If Coach (i) indicates to Xxxx Xxx
its intention not to cure said default, (ii) fails to send any notice of its
intentions, or (iii) fails to cure a default in accordance with its previous
notice to Xxxx Xxx, then, in any such event, Xxxx Xxx will (unless it
reasonably believes that it will suffer adverse consequences as a result)
give Coach written notice of Xxxx Xxx'x intention to cure the default under
such Guaranteed Lease. If Coach has not cured such default within five (5)
days after Coach's receipt of Xxxx Xxx'x written notice to Coach (or, if such
default cannot be cured within such five (5) day period, Coach has not
commenced to cure and continued to diligently pursue such cure to completion
in accordance with the terms of the applicable Guaranteed Lease), then,
regardless of any stated intention of Coach, Xxxx Xxx may (without any
obligation to do so) elect to cure such default on behalf of Coach in
accordance with the terms of the applicable Guaranteed Lease at Coach's sole
cost and expense.
(c) Coach, for itself and as agent for each member of the
Coach Group, hereby agrees to indemnify, defend (or, where applicable, pay
the defense costs for)
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and hold harmless Xxxx Xxx Indemnitees from and against and shall reimburse
such Xxxx Xxx Indemnitees with respect to, Losses (excluding contingent
liabilities) actually incurred by the Xxxx Xxx Indemnitees, in excess of any
amounts drawn by Xxxx Xxx under the Letter of Credit, by reason of (i) the
incurrence by Xxxx Xxx Indemnitees of reasonable out-of-pocket costs of
enforcement (excluding any internal Xxxx Xxx administrative costs) of any
terms, covenants or agreements contained in this Agreement, (ii) any and all
payments or performance required of Xxxx Xxx Indemnitees with respect to any
Obligation, and (iii) any default by Coach under any Guaranteed Lease, except
to the extent any such Losses (A) arise solely from the acts or omissions of
Xxxx Xxx occurring after the date, if ever, that Xxxx Xxx takes possession
of, or acquires Coach's right, title and interest to, any Property pursuant
to the exercise of the remedies set forth in Sections 2.2(b) or 2.2(c) below
or (B) have been finally judicially determined to have resulted directly from
the gross negligence or willful misconduct of any Xxxx Xxx Indemnitee. Should
Xxxx Xxx incur any such Losses, Coach shall reimburse Xxxx Xxx for the full
amount thereof, such reimbursement to be due and payable within fifteen (15)
days after written demand therefor by Xxxx Xxx; PROVIDED, that each demand
for reimbursement by Xxxx Xxx shall be accompa xxxx by copies of supporting
invoices and copies of paid receipts, cancelled checks or other proof of
payment or incurrence of liability by Xxxx Xxx. In the event Coach shall
assume the defense of Xxxx Xxx (only with the consent of Xxxx Xxx) with
respect to any Action arising pursuant to this Section 2.1(c), such defense
shall include the employment of counsel reasonably satisfactory to Coach and
Xxxx Xxx and the payment by Coach of all of such counsel's fees and expenses.
Xxxx Xxx shall not be liable for the payment of any settlement of any such
Action effected by Coach without the written consent of Xxxx Xxx. Coach shall
not, without the prior written consent of Xxxx Xxx (not to be unreasonably
withheld or delayed), effect any settle ment of any Action in respect of
which Xxxx Xxx is a party and indemnification could have been sought
hereunder by Xxxx Xxx, unless such settlement is paid, in the first instance,
by Coach and includes an unconditional release of Xxxx Xxx from all liability
on all claims that are the subject matter of such Action.
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In the event of any claim against Coach or Xxxx Xxx by a third party for
which Xxxx Xxx could seek indemnification hereunder, Xxxx Xxx agrees to
reasonably cooperate with Coach's defense thereof or actions taken in
connection therewith.
Section 2.2 TERMINATION OF ASSIGNMENT UPON BREACH OR EVENT OF
DEFAULT. If (i) a breach or default occurs under any of the Guaranteed Leases
due to Coach's failure to pay rent thereunder and such default goes uncured
for a period of at least twelve (12) months or (ii) Coach ceases the
operation of its business as a Coach retail operation at any of the
Properties underlying any Guaranteed Lease for a period of at least twelve
(12) months, then Xxxx Xxx, at its election, shall have the following
non-exclusive remedies:
(a) Xxxx Xxx shall be entitled to all of the rights and
remedies which Xxxx Xxx may have under this Agreement, each Obligation or at
law or in equity;
(b) the assignment to Coach of Xxxx Xxx'x right, title
and interest in and to the Property or Properties with respect to which such
breach or event of default exists pursuant to the Real Estate Matters
Agreement shall automati cally terminate without any further action required
on the part of Xxxx Xxx, and such assignment shall be of no further force and
effect, and Xxxx Xxx may require that Coach assign, convey, grant or
otherwise transfer to Xxxx Xxx all of its right, title and interest in and to
any related improvements and fixtures (as defined in the Uniform Commercial
Code) (but excluding any furnishings, trade fixtures and business equipment),
used in connection with the Property or Properties with respect to which such
breach or event of default exists (collectively, the "Related Property"), and
in furtherance of such remedy Coach hereby irrevocably constitutes and
appoints Xxxx Xxx its true and lawful attorney-in-fact for the purpose of
carrying out the terms and provisions of this Agreement, in Coach's name and
stead (A) to secure and maintain the use and possession of any or all of the
Property or Properties with respect to which such breach or event of default
exists and such Related Property; and (B) to take any and all actions which
Xxxx Xxx deems
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necessary to protect, maintain and secure its interest in any or all of the
Property or Properties with respect to which such breach or event of default
exists and such Related Property. Coach hereby further grants to Xxxx Xxx the
full power and authority as the attorney-in-fact of Coach for the purpose of
carrying out the terms and provisions of this Agreement, to constitute,
appoint and authorize for Coach and in its place and stead to put and
substitute, one or more agents or attorneys for Coach, and as its attorney or
attorneys-in-fact, to do, execute, perform and finish for Coach those matters
which shall be reasonably necessary or advisable or which Coach's
attorney-in-fact or its substitute shall deem reasonably necessary or
advisable touching or concerning any or all of the Property or Properties
with respect to which such breach or event of default exists or the Related
Property, including, without limitation, executing on behalf of Coach any
instrument deemed necessary by Xxxx Xxx to evidence the termination of
assignment, as thoroughly, amply and fully as Coach could do concerning the
same being personally present. Coach further agrees that the various powers
of attorney granted herein shall be deemed coupled with an interest and shall
be irrevocable; and
(c) Xxxx Xxx shall have the immediate right to
possession and use of the Property or Properties with respect to which such
breach or event of default exists and Related Property, after delivering
written notice to vacate to Coach or the current party or parties in
possession, such that Coach or the current party or parties in possession of
the Property or Properties with respect to which such breach or event of
default exists shall yield up and deliver up the Property or Properties with
respect to which such breach or event of default exists and Related Property
to Xxxx Xxx, broom clean, with all rubbish, debris and personal property
belonging to Coach or the current party or parties in possession (other than
the Related Property) having been removed from the Property or Properties
with respect to which such breach or event of default exists; PROVIDED,
HOWEVER, that Coach shall be entitled to a ten (10) day license from the
receipt of such vacation notice for the purpose of and in order to comply
with the terms of this Section 2.2, and that during the
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period Coach occupies any Property or Properties with respect to which such
breach or event of default exists after the occurrence of such breach or
event of default it shall indemnify and hold harmless Xxxx Xxx from and
against any Losses incurred by Xxxx Xxx as a result of the actions or
omissions of Coach during such possession.
(d) In the event that Xxxx Xxx shall exercise its
remedies under clauses 2.2(b) or (c) above with respect to any Properties,
Xxxx Xxx shall have the obligation to mitigate any Losses resulting
therefrom, including the obligation to relet said Properties at the best
market rent readily obtainable (making commercially reasonable efforts
therefor) and the right to receive the rent therefrom; PROVIDED, HOWEVER,
Coach shall remain liable for the equivalent of the amount of all rent
reserved under the applicable Guaranteed Lease less the avails of reletting,
if any, after deducting therefrom the reasonable cost of obtaining possession
of the Property and the reasonable cost of any repairs and alterations
necessary to prepare same for reletting. Any and all deficiencies so payable
by Coach shall be paid monthly on the date provided for the payment of rent
under the applicable Guaranteed Lease.
ARTICLE III
DRAWING UNDER THE LETTER OF CREDIT
Section 3.1 DRAWING EVENTS. The occurrence of any of the
following events shall be deemed a drawing event (a "Drawing Event")
hereunder and shall entitle Xxxx Xxx to draw under the Letter of Credit in
the amounts specified with respect to each Drawing Event:
(a) If any of the Xxxx Xxx Indemnitees actually incur
any Losses (excluding contingent liabilities) resulting from any payment or
performance required of the Xxxx Xxx Indemnitees with respect to any
Guaranteed Lease, Xxxx Xxx, subject to Section 2.1(b), shall be entitled to
draw under the Letter of Credit in an amount equal to such Losses and Coach
shall promptly restore any amounts so drawn pursuant to this Section 3.1(a).
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(b) Upon acceleration of Coach's bank indebtedness in
an amount exceeding $5,000,000, Xxxx Xxx shall be entitled to draw under the
Letter of Credit in an amount equal to the Required Amount under the Letter
of Credit; PROVIDED, HOWEVER, that Xxxx Xxx shall not be entitled to draw on
the Letter of Credit if Coach is able to replace such bank indebtedness with
a facility from substitute Qualified Bank in an amount at least equal to
Coach's existing bank indebtedness within fifteen (15) days of such
acceleration, or if such acceleration is withdrawn within such 15-day period.
(c) If:
(i) Coach shall commence any Action under any
existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors
(A) seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorgani
zation, arrangement, adjustment, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appoint
ment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, or Coach shall make
a general assignment for the benefit of its creditors;
(ii) there shall be commenced against Coach, any
Action of a nature referred to in clause (i) above or seeking issuance
of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its property, which Action (X)
results in the entry of an order for relief or (Y) remains undismissed,
undischarged and unbonded for a period of sixty (60) days; or
(iii) Coach shall take any action indicating its
consent to, approval of, or acquiescence in, or in furtherance of, any
of
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the acts set forth in clause (i) or (ii) above; or
(iv) Coach shall generally not, or shall be unable
to, pay its debts as they become due or shall admit in writing its
inability to pay its debts; then
Xxxx Xxx shall be entitled to draw under the Letter of Credit in an
amount equal to the Required Amount under the Letter of Credit.
(d) If Coach is obligated to restore any Required
Amounts under the Letter of Credit due to any amounts being drawn under the
Letter of Credit pursuant to Section 3.1(a) above and Coach fails to effect
such restoration within fifteen (15) days, Xxxx Xxx shall be entitled to draw
under the Letter of Credit in an amount equal to the Required Amount under
the Letter of Credit.
(e) If, during the Letter of Credit Term, the Letter of
Credit is scheduled to expire and Coach does not obtain, at least thirty (30)
days prior to the scheduled expiration date of the Letter of Credit, an
irrevocable written commitment to renew the Letter of Credit or a replacement
Letter of Credit, then Xxxx Xxx shall be entitled to draw under the Letter of
Credit in an amount equal to the Required Amount under the Letter of Credit.
(f) If, during the Letter of Credit Term, the financial
institution issuing the Letter of Credit is not a Qualified Bank and Coach
does not obtain, within at least thirty (30) days of the issuing
institution's failure to qualify as a Qualified Bank, a replacement Letter of
Credit from another Qualified Bank, then Xxxx Xxx shall be entitled to draw
under the Letter of Credit in an amount equal to the Required Amount under
the Letter of Credit.
ARTICLE IV
COVENANTS
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Section 4.1 MERGER. As long as Coach is required to maintain a
Letter of Credit pursuant to Section 1.3, Coach shall not consolidate with or
merge into any Person or permit any Person to consolidate with or merge into
Coach unless:
(a) the surviving Person of such merger or
consolidation (the "Surviving Person") (i) is rated at least BBB- by Standard
& Poor's or at least Baa3 by Xxxxx'x Investors Services or, if the Surviving
Person is not rated, then the Surviving Person's ratio of EBITDAR to Fixed
Charges immediately after such Merger or consolidation is greater than 2.5
and (ii) the Surviving Person assumes all of Coach's obligations under this
Agreement and the Letter of Credit and (iii) the Letter of Credit remains in
full effect in the Required Amount after such transaction; or
(b) Coach obtains Xxxx Xxx'x prior written consent, not
to be unreasonably withheld, and (i) the Surviving Person's ratio of EBITDAR
to Fixed Charges immediately after such merger or consolidation is greater
than 1.75, and (ii) the Surviving Person assumes all of Coach's obligations
under this Agreement and the Letter of Credit and (iii) the Letter of Credit
remains in full effect in the Required Amount after such transaction; or
(c) Coach obtains the prior written consent of Xxxx Xxx.
Section 4.2 SECURITY INTERESTS. As long as Xxxx Xxx'x duties
under any Obligation remain outstanding, Coach shall not, in connection with
any Indebt edness, pledge, hypothecate, collaterally assign, mortgage or
otherwise encumber, or permit any lien or encumbrance upon or grant any
security interest in, any of Coach's right title or interest, as lessee or
assignee, in or to any of the Properties or any rents thereunder, except to
the extent any such lien, encumbrance or security interest is subordinate to
and would not otherwise interfere with the interests, rights or reme dies of
Xxxx Xxx with respect to such Property under the terms of this Agreement;
PROVIDED, that this Section 4.2 shall not apply to any liens against the
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Properties for real estate taxes which Coach has no obligation to pay or
mechanics' liens based upon claims for work, labor or materials supplied to
or for the benefit of parties other than Coach. Notwithstanding the
foregoing, Coach may mortgage or permit a lien upon any of the Guaranteed
Leases to the provider or providers of any senior working capital facility
and/or any senior term loan facility established for the purpose of funding
the growth or expansion of the Coach Business; PROVIDED, HOWEVER, that at the
time such mortgage or lien is granted, Coach's ratio of Adjusted Debt (as
this term is defined by Xxxxx'x Investors Services) to EBITAR is less than
4.0. Xxxx Xxx shall have the right to obtain a mortgage or lien upon any of
the Guaranteed Leases; PROVIDED, HOWEVER, that Xxxx Xxx agrees to subordinate
any such mortgage or lien to rank second in priority to any liens or
mortgages of the provider or providers of any senior working capital facility
and/or senior term loan facility described in this Section 4.2.
Section 4.3 SHARING OF INFORMATION. As long as any Xxxx Xxx
Obligations remain outstanding, Coach shall deliver to Xxxx Xxx, upon
request, copies of all documents filed with the Securities and Exchange
Commission or required to be delivered to Coach's shareholders, and such
other documentation or information as Xxxx Xxx may reasonably request with
respect to Coach's compliance with the financial ratios set forth in this
Agreement (but not more often than four times per annum). Coach also will
provide to Xxxx Xxx, no later than 15 days after the end of each fiscal
quarter of Coach, a certificate of Coach's Chief Operating Officer or Chief
Financial Officer that (a) certifies the accuracy of an attached schedule
listing each Guaranteed Lease and, with respect thereto, (i) the location of
the Property covered by, and the parties to, such Guaranteed Lease, (ii) the
expira tion date of each Guaranteed Lease, and (iii) the current monthly
lease payment payable by Coach and the date of any contractual escalation in
the monthly lease payment of each Guaranteed Lease, and (b) certifies that
Coach is not in breach or default under any of the Guaranteed Leases and that
no event exists which, with the passage of time, would become an event of
breach or default.
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Section 4.4 LIMITATION ON ASSIGNMENT. As long as any Xxxx Xxx
Obligations remain outstanding, Coach may assign or otherwise convey or
transfer all of its interest under any such Property, or sublease all or
substantially all of any such Property covered by such Guaranteed Lease, to a
third party assignee, sublessee or transferee (any such proposed assignee,
sublessee or transferee hereinafter referred to as the "Proposed Transferee,"
and any such proposed assignment, sublease or transfer hereinafter referred
to as the "Proposed Transfer"); PROVIDED, HOWEVER, that (a) Xxxx Xxx consents
to such Proposed Transfer, which consent shall not be unrea sonably withheld
or (b) effective upon or before such Proposed Transfer, Xxxx Xxx is fully and
unconditionally released from any and all Obligations under such Guaran xxxx
Lease. Without limiting any other rights or remedies available to Xxxx Xxx at
law or equity, any transfer in violation of this Section 4.4 is voidable at
the option of Xxxx Xxx. Notwithstanding anything to the contrary contained in
this Section 4.4, the provisions of this Section shall not apply to any
Proposed Transfer to a Proposed Transferee that is a direct or indirect
wholly-owned subsidiary of Coach at all times; PROVIDED Coach remains
primarily liable for the payment and performance of the duties of Coach
hereunder as if Coach were still tenant or assignee under the applicable
Guaranteed Lease or Guaranteed Leases.
ARTICLE V
MISCELLANEOUS
Section 5.1 REMEDIES CUMULATIVE. The rights and remedies of
Xxxx Xxx hereunder are cumulative and not in lieu of, but are in addition to,
any rights of remedies which Xxxx Xxx shall have under each Obligation or at
law or in equity, including, without limitation, Xxxx Xxx'x subrogation
rights, if any, under each Obligation, which rights and remedies may be
exercised by Xxxx Xxx either prior to, simultaneously with, or subsequent to,
any action taken hereunder. The rights and remedies of Xxxx Xxx may be
exercised from time
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to time and as often as such exercise is deemed expedient, and the failure of
Xxxx Xxx to avail itself of any of the terms, provisions, and conditions of
this Agreement for any period of time, at any time or times, shall not be
construed or deemed to be a waiver of any rights under the terms hereof.
Section 5.2 TERMINATION. Notwithstanding anything to the
contrary contained in this Agreement, Xxxx Xxx acknowledges and agrees that
the rights and remedies set forth in this Agreement shall not be exercisable
against a Property underlying any Guaranteed Lease if the duties of Xxxx Xxx
under the Obligation corresponding to such Guaranteed Lease have been
unconditionally released or otherwise expired or terminated without Xxxx Xxx
having incurred any liability under this Agreement or such Obligation for
which it is entitled to reimbursement hereun der and for which it has been so
reimbursed.
Section 5.3 BINDING EFFECT. All of the covenants herein
contained shall inure to the benefit of Xxxx Xxx and its successors and
assigns. This Agreement shall be binding upon Coach and any successor or
assign of Coach that, through sale of stock, merger, consolidation or
otherwise, acquires or succeeds to all or substan tially all of the assets of
Coach or all or substantially all of Coach's interest in the Guaranteed
Leases or the Properties. Any references in this Agreement to "Coach" or
"Xxxx Xxx" also shall be deemed references to their respective corporate
succes sors or assigns.
Section 5.4 REFERENCE TO DAYS. Any reference to "days" herein
which is not specifically referenced as "business" days shall be deemed to
refer to calendar days.
Section 5.5 GOVERNING LAW AND JURISDICTION. This Agreement
shall be construed in accordance with and all Disputes hereunder shall be
governed by the laws of the State of Illinois, excluding its conflict of law
rules. The parties agree that the Circuit Court of Xxxx County, Illinois
and/or the United States District Court for the Northern District of Illinois
shall have
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exclusive jurisdiction over all actions between the parties for preliminary
relief in aid of arbitration pursuant to Section herein, and non exclusive
jurisdiction over any Action for enforcement of an arbitral award.
Section 5.6 PARTIES IN INTEREST. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein,
shall be binding upon Xxxx Xxx, Xxxx Xxx'x Subsidiaries, Coach and Coach's
Subsidiaries and inure solely to the benefit of Coach and Xxxx Xxx and their
respective permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
Section 5.7 ENTIRE AGREEMENT. This Agreement, the Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
attached hereto and thereto, constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
Section 5.8 AMENDMENTS. No change or amendment will be made to
this Agreement except by an instrument in writing signed on behalf of each of
the parties to this Agreement.
Section 5.9 INTERPRETATION. The headings contained in this
Agree ment, in any exhibit or schedule hereto and in the table or contents to
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized term
used in any Schedule or Exhibit but not otherwise defined therein, shall have
the meaning assigned to such term in this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
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Section 5.10 NOTICES. Notices, offers, requests or other
communica tions required or permitted to be given by either party pursuant to
the terms of this Agreement shall be given in writing to the respective
parties to the following addresses or facsimile numbers:
If to Xxxx Xxx, at:
Xxxx Xxx Corporation
Three First National Plaza
00 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
If to Coach, at:
Coach, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
or to such other address or facsimile number as the party to whom notice is
given may have previously furnished to the other in writing as provided
herein. Any notice involving non-performance, termination, or renewal shall
be sent by hand delivery, recognized overnight courier or, within the United
States, may also be sent via certified mail, return receipt requested. All
other notices may also be sent by facsimile, confirmed by first class mail.
All notices shall be deemed to have been given when received, if hand
delivered; when transmitted, if transmitted by facsimile or similar
electronic transmission method; one working day after it is sent, if sent by
recognized overnight courier; and three days after it is postmarked, if
mailed first class mail or certified mail, return receipt requested, with
postage prepaid.
Section 5.11 COUNTERPARTS. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein,
may be executed in counterparts, each of which shall be deemed to be an
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original but all of which shall constitute one and the same agreement.
Section 5.12 SEVERABILITY. If any term or other provision of
this Agreement or the schedules or exhibits attached hereto is determined by
a nonappealable decision by a court, administrative agency or arbitrator to
be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contem plated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the fullest extent possible.
Section 5.13 EFFECTIVENESS. This Agreement shall become
effective upon execution by the parties hereto.
Section 5.14 ESTOPPEL CERTIFICATE. Upon the written request of
Coach, Xxxx Xxx shall deliver to Coach an estoppel certificate containing
such matters as may be reasonably requested by Coach in connection with this
Agreement.
Section 5.15 FURTHER ASSURANCES. Coach and Xxxx Xxx agree that
at any time and from time to time, upon the request of the other party, each
of Coach and Xxxx Xxx shall execute and deliver such further instruments and
documents, and do such further acts and things, as such other party may
reasonably request in order to effectuate fully the purposes of this
Agreement.
Section 5.16 RECORDABLE INSTRUMENT. Xxxx Xxx and Coach agree
to execute, at any time at the request of either party, a short form of this
Agreement in recordable form, which short form shall refer to a
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particular Property by separate legal description for recording purposes.
Such short form shall be limited to reciting that Coach's interest under the
particular Guaranteed Lease may be subject in certain circumstances to
certain rights of Xxxx Xxx as guarantor of Coach's duties under the
Guaranteed Lease to regain possession of the Property and/or to sublease or
take an assignment of Coach's interest in the Guaranteed Lease, all of which
rights are subject to the terms of the Guaranteed Lease and any rights of the
Landlord with respect to such Guaranteed Lease. The party recording such
short form of this Agreement shall deliver to the other party a copy of the
recorded short form within thirty (30) days after the same has been recorded.
At such time as Xxxx Xxx shall have no further duties under the Obligation
relating to a particular Property and shall have no further rights or claims
under this Agreement as to such Property, Xxxx Xxx shall, at the request of
Coach, execute, record and deliver to Coach a written instru ment,
substantially in the form of Exhibit A annexed hereto and made a part hereof,
terminating of record the short form of this Agreement and acknowledging that
this Agreement is no longer applicable to the Property or Coach's interest
therein.
Section 5.17 DISPUTE RESOLUTION.
(a) Any dispute, controversy or claim arising out of
or relating to this Agreement or the Ancillary Agreements or the breach,
termination or validity thereof ("Dispute") which arises between the parties
shall first be negotiated between appropriate senior executives of each party
who shall have the authority to resolve the matter. Such executives shall
meet to attempt in good faith to negotiate a resolution of the Dispute prior
to pursuing other available remedies, within 10 days of receipt by a party of
notice of a dispute, which date of receipt shall be referred to herein as the
"Dispute Resolution Commencement Date." Discussions and corre spondence
relating to trying to resolve such Dispute shall be treated as confidential
information developed for the purpose of settlement and shall be exempt from
discovery or production and shall not be admissible in any subsequent
proceeding between
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the parties. If the senior executives are unable to resolve the Dispute
within thirty (30) days from the Dispute Resolution Commencement Date, then,
on the request of any party, the Dispute will be mediated by a mediator
appointed pursuant to the mediation rules of the American Arbitration
Association ("AAA"). Both parties will share the administrative costs of the
mediation and the mediator's fees and expenses equally, and each party shall
bear all of its other costs and expenses related to the mediation, including
but not limited to attorney's fees, witness fees, and travel expenses. The
mediation shall take place in Xxxx County Illinois or in whatever alternative
forum on which the parties may agree.
(b) Any Dispute which the parties cannot resolve
through mediation within forty-five days of the appointment of the mediator,
shall at the request of any party be submitted to final and binding
arbitration under the then current Commercial Arbitration Rules of the AAA in
Xxxx County, Illinois. There shall be three (3) neutral arbitrators of whom
Xxxx Xxx shall appoint one and Coach shall appoint one within 30 days of the
receipt by the respondent of the demand for arbitration. The two arbitrators
so appointed shall select the chair of the arbitral tribunal within 30 days
of the appointment of the second arbitrator. If any arbitrator is not
appointed within the time limit provided herein, such arbitrator shall be
appointed by the American Arbitration Association by using a list striking
and ranking procedure in accordance with the Rules. Any arbitrator appointed
by the AAA shall be a retired judge or a practicing attorney with no less
than fifteen years of experience and an experienced arbitrator. The
prevailing party in such arbitration shall be entitled to be awarded its
expenses, including its share of administrative and arbitrator fees and
expenses and reasonable attorneys' and other professional fees, incurred in
connection with the arbitration (but excluding any costs and fees associ ated
with prior negotiation or mediation). The decision of the arbitrators shall
be final and binding on the parties and may be enforced in any court of
competent jurisdiction.
(c) By agreeing to arbitration, the parties do not
intend to deprive any court of its jurisdiction to issue a pre-arbitral
injunction, pre-
22
arbitral attachment, or other order in aid of arbitration proceedings and the
enforcement of any award. Without prejudice to such provisional remedies as
may be available under the jurisdiction of a court, the arbitral tribunal
shall have full authority to grant provisional remedies or modify or vacate
any temporary or preliminary relief issued by a court, to issue an award for
temporary or permanent injunctive relief (including specific performance) and
to award damages for the failure of any party to respect the arbitral
tribunal's orders to that effect.
Section 5.18 NO OBLIGATION TO PAY RENT. The parties hereto
acknowl edge that nothing in the instruments assigning the Guaranteed Leases
to Coach, this Agreement or any other agreement between Coach and Xxxx Xxx
creates any obliga tion on the part of Xxxx Xxx to pay any amounts due or
owing under any of the Guaranteed Leases.
ARTICLE VI
DEFINITIONS
Section 6.1 AAA. "AAA" has the meaning set forth in Section
5.17(a).
Section 6.2 ACTION. "Action" means any demand, action, case,
suit, countersuit, arbitration, inquiry, proceeding or investigation by or
before any federal, state, local, foreign or international governmental
authority or any arbitration or mediation tribunal.
Section 6.3 ADDITIONAL EXPENSES. "Additional Expenses"
initially means $500,000 and, in each subsequent fiscal year, shall equal
$500,000 multiplied by the total of (a) Base Rent under the Guaranteed Leases
as of the Distribution Date divided by (b) Base Rent under the Guaranteed
Leases as of a x date, where "x date" is the first day of the fiscal year for
which such calculation is being performed.
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Section 6.4 ANCILLARY AGREEMENTS. "Ancillary Agreements" has
the meaning set forth in the Separation Agreement.
Section 6.5 BASE RENT. "Base Rent" means the minimum aggregate
annual rent that Coach, or any member of the Coach Group is required to pay
under the Guaranteed Leases, regardless of such Person's volume of business.
Section 6.6 CERTIFICATE. "Certificate"has the meaning set
forth in Section 1.2.
Section 6.7 COACH BUSINESS. "Coach Business" means the
business of producing, marketing and selling handbags, accessories, business
cases, luggage and travel accessories, time management products, outerwear,
gloves, scarves, watches, footwear, eyewear, home furnishings and furniture.
Section 6.8 COACH GROUP. "Coach Group" means the Affiliated
Group, or similar group of entities as defined under corresponding provisions
of the laws of other jurisdictions, of which Coach will be the common parent
corporation immediately after the Distribution, and any corporation or other
entity which may become a member of such group from time to time.
Section 6.9 DISPUTE. "Dispute" has the meaning set forth in
Section 5.17(a).
Section 6.10 DISPUTE RESOLUTION COMMENCEMENT DATE. "Dispute
Resolution Commencement Date" has the meaning set forth in Section 5.17(a).
Section 6.11 DISTRIBUTION. A "Distribution" means the
divestiture by Xxxx Xxx of all or a significant portion of the shares of
capital stock of Coach owned by Xxxx Xxx which divestiture may be effected by
Xxxx Xxx as a dividend, an ex change with existing Xxxx Xxx stockholders for
shares of Xxxx Xxx capital stock, a spin-off or otherwise, as a result of
which Xxxx Xxx is no longer required to xxxxxxx date Coach's results of
operations and financial position
24
(determined in accordance with generally accepted accounting principles
consistently applied).
Section 6.12 DISTRIBUTION DATE. "Distribution Date" means the
date on which a Distribution is consummated.
Section 6.13 DRAWING EVENT. "Drawing Event" has the meaning
set forth in Section 3.1.
Section 6.14 EBITDAR. "EBITDAR" means the sum of, without
duplication, for the twelve (12) consecutive fiscal months then ended (a) net
income, PLUS (b) interest expense, including all commissions, discounts, fees
and other charges in connection with standby letters of credit and similar
instruments and all expenses associated with interest rate hedging
arrangements net of interest income, if any, PLUS (c) provision for income
taxes, PLUS (d) depreciation and amortization expense and any non-cash
extraordinary gains and losses and non-cash restructuring charges, plus (e)
Base Rent payable during such periods, all as determined in accordance with
generally accepted accounting principles.
Section 6.15 EXECUTIVE OFFICES LEASE. "Executive Offices
Lease" has the meaning set forth in Section 1.1(a)(i).
Section 6.16 FIXED CHARGES. "Fixed Charges" mean the sum of,
without duplication, for the twelve (12) consecutive fiscal months then ended
(a) interest expense for such period, including all commissions, discounts,
fees and other charges in connection with standby letters of credit and
similar instruments and all expenses associated with interest rate hedging
arrangements, net of interest income, if any, PLUS (b) Base Rent payments for
such periods, all as determined in accordance with generally accepted
accounting principles.
Section 6.17 GUARANTEED LEASES. "Guaranteed Leases" has the
meaning set forth in the recitals.
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Section 6.18 INDEBTEDNESS. "Indebtedness" shall mean, without
duplication, all (a) indebtedness of Coach for borrowed money (whether by
loan or the issuance and sale of debt securities), (b) indebtedness of Coach
for the deferred purchase or acquisition price of property or assets or
services, other than trade accounts payable (other than for borrowed money),
incurred in the ordinary course of business; (c) indebtedness of others
secured by a lien or encumbrance on the property of Coach, whether or not the
respective obligation so secured has been assumed by Coach; (d) reimbursement
duties of Coach in respect of letters of credit, bankers' acceptances, surety
or other bonds, or similar instruments issued or accepted by banks and other
financial institutions for the account of Coach; (e) duties in respect of
capital leases of Coach; (f) indebtedness or other duties of others directly
or indirectly guaranteed or assumed by Coach; and (g) duties of Coach with
respect to any capital stock, which by its terms or the terms of any security
into which such capital stock is convertible or exchangeable or otherwise, is
or upon the happening of any event or passage of time would be required to be
redeemed, or is redeemable at the option of the holder thereof, or is
convertible into or exchangeable for debt securities, in each case, prior to
the termination of this Agreement.
Section 6.19 LANDLORD. "Landlord" means any landlord or the
primary lessor with respect to a Guaranteed Lease.
Section 6.20 LEASED PROPERTIES. "Leased Properties" has the
meaning set forth in the recitals.
Section 6.21 LETTER OF CREDIT. "Letter of Credit" shall mean
an irrevocable standby letter of credit in the Required Amount obtain by
Coach and issued by a Qualified Bank for the benefit of Xxxx Xxx.
Section 6.22 LETTER OF CREDIT TERM. "Letter of Credit Term"
has the meaning set forth in Section 1.3.
26
Section 6.23 LIABILITIES. "Liabilities" means all debts,
liabilities, guarantees, assurances, commitments and obligations, whether
fixed, contingent or absolute, asserted or unasserted, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, due or
to become due, whenever or however arising (including, without limitation,
whether arising out of any contract or tort based on negligence or strict
liability) and whether or not the same would be required by generally
accepted principles and accounting policies to be reflected in financial
statements or disclosed in the notes thereto.
Section 6.24 LOSSES. "Losses" means any and all damages,
losses, deficiencies, Liabilities, obligations, penalties, judgments,
settlements, claims, payments, fines, interest, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions
and demands, assessments, judgments, settle ments and compromises relating
thereto and the costs and expenses of attorneys', accountants', consultants'
and other professionals' fees and expenses incurred in the investigation or
defense thereof or the enforcement of rights hereunder), including direct and
consequential damages, but excluding punitive damages (other than punitive
damages awarded to any third party against an indemnified party).
Section 6.25 QUALIFIED BANK. "Qualified Bank" shall be a
financial institution with a minimum rating of A by Standard & Poors or a
minimum rating of A2 by Xxxxx'x Investors Services.
Section 6.26 OBLIGATION AND OBLIGATIONS. "Obligation" and
"Obligations" means any and all obligations or liabilities of Xxxx Xxx or its
Subsidiaries as lessee, assignor, sublessor, guarantor or otherwise under any
Guaranteed Lease, including, without limitation, any guarantee, surety or
other security which Xxxx Xxx or its Subsidiaries have provided or will
provide to a Landlord with respect to any Guaranteed Lease, that have not
expired, terminated or been fully and uncondition ally released.
Section 6.27 PERSON. "Person" means an individual, a
partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated
27
organization or a governmental entity or any department, agency or political
subdivision thereof.
Section 6.28 PROPERTY OR PROPERTIES. "Property" or
"Properties" has the meaning set forth in the recitals.
Section 6.29 PROPOSED TRANSFER. "Proposed Transfer" has the
meaning set forth in Section 4.4.
Section 6.30 PROPOSED TRANSFEREE. "Proposed Transferee" has
the meaning set forth in Section 4.4.
Section 6.31 REAL ESTATE MATTERS AGREEMENT. "Real Estate
Matters Agreement" means that certain real estate matters agreement by and
between Coach and Xxxx Xxx effective as of the date hereof.
Section 6.32 REQUIRED AMOUNT. "Required Amount" has the
meaning set forth in Section 1.1.
Section 6.33 RELATED PROPERTY. "Related Property" has the
meaning set forth in Section 2.2(b).
Section 6.34 XXXX XXX GROUP. "Xxxx Xxx Group" means the
Affiliated Group, or similar group of entities as defined under corresponding
provisions of the laws of other jurisdictions, of which Xxxx Xxx is the
common parent corporation, and any corporation or other entity which may be,
may have been or may become a member of such group from time to time, but
excluding any member of the Coach Group.
Section 6.35 XXXX XXX INDEMNITEES. "Xxxx Xxx Indemnitees"
means Xxxx Xxx, each member of the Xxxx Xxx Group and each of their
respective directors, officers and employees.
Section 6.36 SEPARATION. "Separation" has the meaning set
forth in the recitals to the Separation Agreement.
28
Section 6.37 SEPARATION AGREEMENT. "Separation Agreement"
means the Master Separation Agreement dated as of August 24, 2000 between
Xxxx Xxx and Coach.
Section 6.37A SEPARATION DATE. "Separation Date" has the
meaning set forth in the Separation Agreement.
Section 6.38 SUBSIDIARY. "Subsidiary" of any Person means a
corporation or other organization whether incorporated or unincorporated of
which at lease a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others perform ing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries; PROVIDED, HOWEVER, that no
Person that is not directly or indirectly wholly-owned by any other Person
shall be a Subsidiary of such other Person unless such other Person controls,
or has the right, power or ability to control, that Person.
* * *
29
IN WITNESS WHEREOF, each of the parties has caused this Lease
Indemnification and Reimbursement Agreement to be executed on its behalf by
its officers hereunto duly authorized on the day and year first above written.
XXXX XXX CORPORATION
By:
-----------------------------
Name:
Title:
COACH , INC.
By:
-----------------------------
Name:
Title:
30
EXHIBIT A
Termination of Memorandum
31
TERMINATION OF MEMORANDUM OF
LEASE INDEMNIFICATION AND
REIMBURSEMENT AGREEMENT
Xxxx Xxx Corporation, a Maryland corporation, hereby
terminates in its entirety that certain Memorandum of Lease Indemnification
and Reimbursement Agreement (the "Memorandum") dated __________________,
20__, and recorded ________________, 20__, in [Liber _______, Page ________]
[Volume _________, Page _______] [as Instrument No. _____________] in the
Official Records of ____________ County, _______________ and acknowledges
that the Memorandum no longer encumbers the premises described therein or
_______________'s interest therein.
Dated as of this ______________, _____.
XXXX XXX CORPORATION, a
Maryland corporation
By:
--------------------------------
Its:
----------------------------
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this
______ day of ________________, 20___ by _____________________________________
of Xxxx Xxx Corporation, a Maryland corporation, on behalf of said corporation.
Witness my hand and official seal
---------------------------
Notary Public, ___________ County
State of _______________
My Commission Expires:
32
This instrument drafted by
and when recorded return to:
33
