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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
December 3, 1998
DESIGNS, INC.
(Exact Name of registrant as specified in its charter)
Delaware 0-15898 04-2623104
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
66 B Street, Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
(781) 444-7222
(Registrant's telephone number, including area code)
Item 5. Other Events
1. As previously announced, on September 30, 1998, Designs, Inc.
(the "Company") purchased nine Levi's(R) Outlet stores and 16 Dockers(R) Outlet
stores from Levi's Only Stores, Inc. ("LOS Inc."), a subsidiary of Levi Strauss
& Co. The terms and conditions of the purchase of these outlet stores are set
forth in an Asset Purchase Agreement between the Company and LOS Inc. dated as
of September 30, 1998 (the "Asset Purchase Agreement"), a copy of which is
attached as Exhibit 10.1 hereto.
2. As previously announced, on January 28, 1995, Designs JV Corp., a
wholly-owned subsidiary of the Company, and LDJV Inc., a wholly-owned subsidiary
of LOS Inc., entered into a Partnership Agreement (the "Partnership Agreement")
to sell Levi's(R) brand jeans and jeans-related products through retail stores
in a specified territory. The joint venture that was established by the
Partnership Agreement is known as The Designs/OLS Partnership (the "OLS
Partnership"). On October 31, 1998, Designs JV Corp., LDJV Inc. and the OLS
Partnership entered into an Amendment and Distribution Agreement (the
"Distribution Agreement") which, among other things, amends the terms of the
Partnership Agreement and provides for the dissolution and winding up of the OLS
Partnership. In accordance with the terms and conditions of the Distribution
Agreement, on October 31, 1998, the OLS Partnership distributed 11 Levi's(R)
Outlet stores to the Company and three Original Levi's Stores(TM) to LOS Inc.
The Distribution Agreement contemplates that the OLS Partnership will dissolve
and liquidators will be appointed when the last of its eight remaining Original
Levi's Stores(TM) closes for business to the public, which the Company
anticipates will occur, barring unforeseen circumstances, on or before January
30, 1999. A copy of the Distribution Agreement is attached as Exhibit 10.2
hereto.
3. In connection with the Distribution Agreement, the Company
entered into a Guaranty dated as of October 31, 1998 (the "Guaranty"). Under
the Guaranty, the Company unconditionally guaranteed, among other things, the
indemnification obligations of Designs JV Corp. set forth in the Partnership
Agreement and the Distribution Agreement. A copy of the Guaranty is attached as
Exhibit 10.3 hereto.
4. On November 15, 1996, the Company and Levi Strauss & Co. entered
into a trademark license agreement which provides the terms upon which the
Company is permitted to use certain Levi Strauss & Co. trademarks in connection
with the operations of the Company's Levi's(R) Outlet by Designs stores. As
previously announced, in connection with the transfer of outlet stores to
the Company under the Asset Purchase Agreement and the Distribution Agreement,
the Company and Levi Strauss & Co. entered into an Amended and Restated
Trademark License Agreement dated as of October 31, 1998, a copy of which is
attached as Exhibit 10.4 hereto.
5. As previously announced, the Company entered into an Amended and
Restated Loan and Security Agreement dated as of June 4, 1998 (the "Credit
Agreement"), with BankBoston Retail Finance, Inc. ("BBRF"), a subsidiary of
BankBoston, N.A., as agent for the lenders named therein (the "Lenders").
Effective September 29, 1998, the Company, BBRF and the Lenders entered into a
First Amendment to the Credit Agreement, a copy of which is attached as Exhibit
10.5 hereto.
6. Effective October 31, 1998, the Company, BBRF and the Lenders
entered into a Second Amendment to the Credit Agreement, a copy of which is
attached as Exhibit 10.6 hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 10.1 Asset Purchase Agreement, dated as of September 30,
1998, between Designs, Inc. (the "Company") and Levi's
Only Stores, Inc.
Exhibit 10.2 Amendment and Distribution Agreement, dated as of
October 31, 1998, among The Designs/OLS Partnership,
Designs JV Corp. and LDJV Inc.
Exhibit 10.3 Guaranty, dated as of October 31, 1998, of the Company
Exhibit 10.4 Amended and Restated Trademark License Agreement, dated
as of October 31, 1998, between the Company and Levi
Strauss & Co.
Exhibit 10.5 First Amendment to Amended and Restated Loan and
Security Agreement dated as of September 29, 1998,
among the Company, BankBoston Retail Finance, Inc.
("BBRF"), as agent for the lenders named therein (the
"Lenders"), and the Lenders
Exhibit 10.6 Second Amendment to Amended and Restated Loan and
Security Agreement dated as of October 31, 1998, among
the Company, BBRF and the Lenders
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DESIGNS, INC.
Date: December 3, 1998 By: /s/ Carolyn R. Faulkner
-------------------------------------
Carolyn R. Faulkner, Vice President,
Chief Financial Officer and Treasurer
ASSET PURCHASE AGREEMENT
between
DESIGNS, INC.
and
LEVI'S ONLY STORES, INC.
dated as of
September 30, 1998
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement dated as of September 30, 1998 (this
"Agreement") is made by and between Designs, Inc., a Delaware corporation
("Designs"), and Levi's Only Stores, Inc., a Delaware corporation ("LOS").
WHEREAS, Designs and LOS (collectively the "Parties" and each
individually a "Party") are in the business of owning and operating family
clothing retail stores; and
WHEREAS, Designs wishes to purchase certain assets from, and assume
certain obligations of, LOS related to the 25 stores listed on the Schedule of
Stores attached hereto (collectively, the "Stores"); and
WHEREAS, LOS wishes to sell such assets and delegate such obligations
to Designs subject to the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions
When used with initial capital letters in this Agreement, the
following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly Controls, is Controlled by, or is under
common Control with, the specified Person.
"Asset Statement" has the meaning set forth in Section 2.5 of
this Agreement.
"Assumed Contracts" means those Contracts listed in Schedule
2.1 that Designs will assume.
"Base Rate" means the "base" or "reference" rate of interest
quoted, from time to time, by Bank of America, N.T. & S.A. at its headquarters
in San Francisco, California. Any interest rate specified in this Agreement
based upon the "Base Rate" shall be adjusted, from time to time, whenever the
Base Rate changes. However, under no circumstances shall the Base Rate at any
time exceed the maximum rate permitted by applicable law.
"Closing" means the signing and delivery of the Transaction
Documents.
"Closing Date" means the date the Closing takes place.
"Contracts" means all Store Leases and other contracts and
understandings to which LOS is a party with respect to any goods and services
(for example, utilities) that are used or consumed at any Store.
"Control", as applied to any Person, means (and the terms
"Controls", "Controlling", "Controlled by" and "under common Control with" refer
to) the direct or indirect ownership of stock or other equity interests, or
contract or other rights, in any such case entitling their holder to elect at
least 50 percent of the directors or similar functionaries of that Person.
"Controversy" means any dispute or claim involving the rights,
obligations or liabilities of any Party under any Transaction Document. However,
"Controversy" shall not include any dispute which a Transaction Document
specifies will be resolved by or referred to an accounting firm or other expert
or specialist.
"Damages" means all losses, liabilities, damages,
deficiencies, judgments, assessments, interests, penalties, fines, costs and
expenses (including, without limitation, reasonable fees, disbursements and
other charges of attorneys, accountants, consultants, experts and other
professionals and irrespective of whether any underlying liability is
established). However, "Damages" shall not include any punitive, exemplary or
similar damages, it being understood that punitive, exemplary and similar
damages shall not be recoverable for any breach of this Agreement.
"Lien" means any mortgage, deed of trust, security interest,
retention of title or lease for security purposes, pledge, charge, encumbrance,
claim, easement, right of way, covenant, restriction, leasehold interest or
other right of any kind of any Person in or with respect to any property.
"LS&CO." means Levi Strauss & Co., a Delaware corporation.
"Person" means any individual or entity including, without
limitation, any government body.
"Purchase Price" has the meaning set forth in Section 2.3 of
this Agreement.
"Store Assets" has the meaning set forth in Sections 2.1 and
2.2 of this Agreement.
"Store Employee" has the meaning set forth in Section 4.8 of
this Agreement.
"Store Leases" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Stores" has the meaning set forth in the preliminary
paragraphs of this Agreement.
"Transaction Documents" means this Agreement, a First
Amendment to the Trademark License Agreement dated November 15, 1996 between
Designs and LS&CO. and all other documents, certificates and instruments signed
and delivered by one or both of the Parties in order to effect the Closing.
1.2 Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined in this Agreement have the meanings
assigned to them by generally accepted accounting principles.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. At the Closing, LOS shall sell
and transfer to Designs, and Designs shall purchase from LOS, all of LOS' right,
title and interest in and to all Store Assets. The Store Assets consist of:
(a) the lease agreements for the real estate occupied by
the Stores (the "Store Leases");
(b) all fixtures and tangible personal property owned by
LOS and located at any Store on the Closing Date, including, for example,
furniture, equipment, inventory, supplies, signage and copies, but not
originals, of records;
(c) all rights that accrue after the Closing under all
Assumed Contracts, including, without limitation, purchase orders for inventory
ordered but not yet received or paid for;
(d) all third party warranties to LOS relating to the Store
Assets, whether express or implied, and claims arising under warranties,
representations and guaranties made to LOS in connection with the operation of
the Stores; and
(e) cash in the Stores in an amount equal to $19,900.
Schedule 2.1 to this Agreement is a list of the Store Assets segregated by
Store, excepting items of owned tangible property that had an original cost of
less than $1,000. Because LOS prepared Schedule 2.1, any failure to identify any
Store Assets on Schedule 2.1 shall not prejudice the right of Designs to those
assets.
Certain Contracts relate also to tangible personal property, other
items or services that are also used at stores owned or operated by LOS which
are not Stores. Those Contracts shall not be assigned and assumed, as such.
However, unless and until Designs 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 Designs to realize the benefits of those Contracts,
subject to the burdens of those Contracts, but with respect to the Stores only,
and Designs shall reimburse LOS 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. In addition, LOS is
party to certain Store-related Contracts which LOS and Designs have decided will
not be assigned to Designs and with respect to which Designs will not assume the
obligations of LOS .
2.2 Excluded Assets. Notwithstanding the provisions of Section
2.1, the Store Assets do not include:
(a) cash (other than the cash in the Stores described
above), cash equivalents, security deposits, accounts receivable, claims, rights
to refunds, point-of-sale registers, printers, LED displays, backroom terminals
or claims of rights to refunds; and
(b) market or other research data and consumer names,
addresses, order profiles and other consumer database information relating to
the Stores, all of which LOS shall retain. The foregoing notwithstanding,
Designs shall be entitled to access to and use of data relating to individual
Store customers solely in connection with interactions with customers of the
relevant Stores (and not in connection with separate marketing activities to
promote businesses or products other than those offered for sale in the Stores)
and shall not transfer such data or information to any third party.
2.3 Purchase Price. The purchase price for the Store Assets (the
"Purchase Price") shall be equal to the net book value of the Store Assets as of
the Closing determined in accordance with generally accepted accounting
principles.
2.4 Payment. At the Closing, Designs shall pay LOS $10,434,625 in
cash, which represents the Parties' preliminary estimate of the Purchase Price
(the "Estimated Purchase Price"). Designs shall wire that sum to an account
designated by LOS. Further payments or refunds with respect to the Purchase
Price, if any, shall be calculated and paid in accordance with Section 2.5.
2.5 Adjustment. After the Closing, the Parties shall determine the
exact Purchase Price as follows:
(a) Within 60 days after the Closing, LOS shall deliver a
statement to Designs setting forth all the figures needed to determine the net
book value of the Store Assets (the "Asset Statement"). The Asset Statement
shall be certified by LOS' senior finance manager as having been prepared in
accordance with generally accepted accounting principles. Within 30 days after
LOS delivers the Asset Statement to Designs, Designs shall (i) accept the Asset
Statement or (ii) furnish LOS with a statement objecting to one or more of the
figures in the Asset Statement and the basis for its objections and/or requiring
that one or more of the figures in the Asset Statement be audited. If Designs
does not respond within those 30 days, Designs shall be deemed to have accepted
the Asset Statement. LOS shall furnish Designs and its representatives with all
information reasonably requested by Designs or its representatives to enable it
to assess the Asset Statement both during and after that 30-day period.
(b) If Designs timely objects to any aspect of the Asset
Statement or, in any event, Designs requests that one or more figures in the
Asset Statement be audited, the open issues shall be resolved or the audit shall
be performed by an accounting firm jointly selected by Designs and LOS. 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 Parties
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 both Parties. The Parties shall each pay one-half of the fees
and expenses of that firm.
(c) Within three business days after the final Asset
Statement has been completed (whether by acquiescence, negotiation or binding
resolution of the third accounting firm), Designs shall pay an additional amount
to LOS or LOS shall refund an amount to Designs (whichever is appropriate) equal
to the amount by which the Purchase Price shown on the final Asset Statement
differs from the Estimated Purchase Price. That payment or refund shall be
accompanied by interest from the Closing Date to the date of the payment or
refund calculated at the Base Rate.
(d) Computation of the Purchase Price shall reflect any
diminution in value of the Store Assets associated with wind, water or other
damage caused by Hurricane Georges to the Stores located in Gulfport,
Mississippi and Destin, Florida.
2.6 Assumption of Obligations. Subject to the accuracy of LOS'
representations and warranties set forth in Section 4.6, at the Closing, Designs
shall assume LOS' obligations under each Assumed Contract listed in Schedule
2.1, to the extent (but only to the extent) that those obligations accrue after
the Closing.
2.7 Gift Certificates and Credits. Before the Closing, LOS issued
gift certificates and merchandise credits that are redeemable at the Stores. A
number of those certificates and credits are still outstanding. Designs shall
honor those certificates and credits after the Closing. Designs shall
periodically submit copies of those gift certificates and merchandise credits
redeemed after the Closing to LOS or, instead, a statement listing the serial
numbers and face amounts of those redeemed certificates and credits. Within
thirty (30) days after each such submission, LOS shall pay Designs an amount
equal to the total face amount of the redeemed certificates and credits that
were the subject of that submission.
2.8 No Other Assumed Obligations or Liabilities. Designs shall not
assume any obligations or liabilities of LOS, except as expressly provided in
Sections 2.6 and 2.7. For example, LOS shall retain and discharge all
obligations and liabilities associated with its employees, including any of its
employees who are hired by Designs, for the period they were or are employed by
LOS, including any and all obligations and liabilities for severance, vacation,
holidays, personal time, sick time and other compensation and employee benefits.
2.9 Prorations. In order to implement this Article 2, LOS and
Designs shall prorate, as between them, all expenses associated with the Store
Assets and the operation of the Stores. They shall do that as of the opening of
business on the 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 Designs 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, but not including, the 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 Closing Date, that results in charges for
one million gallons of water on the water bill for that Store for the period
that up to, but not including, the Closing Date. Under that circumstance,
Designs would pay those incremental charges.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DESIGNS
Designs represents and warrants to LOS that as of the Closing Date:
3.1 Organization and Authority. Designs is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Designs has also qualified to conduct business or is in the process of
qualifying to conduct business in each of the states in which the Stores are
located. Designs has all requisite power and authority to enter into and perform
the Transaction Documents. The signing, delivery and performance by Designs of
the Transaction Documents have been duly and validly authorized by all necessary
corporate action on the part of Designs. Each Transaction Document constitutes a
valid and binding obligation of Designs enforceable against Designs 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 Designs of each Transaction Document will
not: (a) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Designs; (b) violate, conflict with or result in a
breach or termination of any contract or other instrument to which Designs is a
party or by which any of its assets is bound; (c) result in the creation of any
Lien on any assets of Designs; (d) violate any judgment, order, injunction,
decree or award that binds Designs or any of its assets; or (e) constitute a
violation of law.
3.2 Consents and Approvals. Schedule 3.2 to this Agreement lists
all consents and approvals of, and filings and registrations with, any Person
required in order for Designs to sign, deliver and perform the Transaction
Documents. An example is consents from Designs' lenders. Designs has obtained
all of those consents and approvals and made all of those filings and
registrations.
3.3 Litigation and Claims. There is no suit, action, investigation
or other proceeding pending or, to the best knowledge of Designs, threatened
against Designs relating to any of the transactions contemplated by this
Agreement.
3.4 Hart-Scott-Rodino Antitrust Improvements Act of 1976. The
Chief Executive Officer and Chief Financial Officer of Designs, acting on
authority duly delegated from its Board of Directors, have determined that the
value of the assets being acquired by Designs hereunder is less than $15
million. Value, for this purpose, means the higher of the acquisition price set
forth in this Agreement and fair market value as contemplated by 16 C.F.R.
ss.801.10 promulgated under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
3.5 Brokers and Finders. No broker, finder or other Person acting
on behalf of Designs is or will be entitled to any commission, fee or
reimbursement in connection with any of the transactions contemplated by this
Agreement. LOS shall have no liability to pay any broker, finder or other
Person, who may have acted on behalf of Designs, for any commission, fee or
reimbursement in connection with the transactions contemplated by this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LOS
LOS represents and warrants to Designs that, except as shown on
Schedule 4 to this Agreement, as of the Closing Date:
4.1 Organization and Authority. LOS and LS&CO. are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware. LOS is also duly qualified to conduct business
and is in good standing in each of the states in which the Stores are located.
LOS has all requisite power and authority to lease and operate the Stores, to
carry on the business of the Stores and to enter into and perform the
Transaction Documents. The signing, delivery and performance by LOS and LS&CO.
of the Transaction Documents have been duly and validly authorized by all
necessary corporate action on the part of LOS and LS&CO. Each Transaction
Document constitutes a valid and binding obligation of LOS and LS&CO., as the
case may be, and is enforceable against LOS and LS&CO. 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 LOS and LS&CO. of each Transaction Document signed by it will
not: (a) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of LOS or LS&CO.; (b) violate, conflict with or result
in a breach or termination of any contract or other instrument (including any
Contract) to which LOS or LS&CO. is a party or by which any of its assets
(including any Store Assets) is bound; (c) result in the creation of any Lien on
any assets of LOS (including any Store Assets) or LS&CO.; (d) violate any
judgment, order, injunction, decree or award that binds LOS or LS&CO. or any of
its assets (including any Store Assets); or (e) assuming the accuracy of
Designs' representation in Section 3.4, constitute a violation of law.
4.2 Consents, Permits and Approvals. Schedule 4.2 to this
Agreement lists all consents, permits and approvals of, and filings and
registrations with, all Persons required in order for LOS to sign, deliver and
perform the Transaction Documents and to enable Designs to continue to conduct,
at each Store after the Closing, the business that LOS conducted at that Store
before the Closing. Examples are consents from landlords under the Store Leases
and consents from other parties under other Assumed Contracts. LOS has obtained
all of those consents, permits and approvals and made all of those filings and
registrations.
4.3 Litigation and Claims. Except as set forth in Schedule 4.3,
there is no suit, action, investigation or other proceeding pending or, to the
best knowledge of LOS, threatened against LOS relating to any of the
transactions contemplated by this Agreement, any of the Store Assets (whether an
Assumed Contract or another asset), any Store or any aspect of the business
conducted at any Store. Nor is there any outstanding judgment, order,
injunction, decree or award that binds LOS with respect to, or otherwise
affects, any of the Store Assets (whether an Assumed Contract or another asset),
any Store or any aspect of the business conducted at any Store.
4.4 Compliance with Laws. Before the Closing, LOS was conducting
the business of the Stores in substantial compliance with all laws applicable to
LOS including, for example, all laws relating to employees, safety, the
environment, consumer protection and land use.
4.5 Title and Condition. At the Closing, LOS is conveying to
Designs good title in and to all the Store Assets free and clear of all Liens.
Immediately after the Closing, Designs will have good title to all the Store
Assets free and clear of all Liens. Except as set forth on Schedule 4.5, to the
best knowledge of LOS: (i) there are no material defects in the premises covered
by any of the Store Leases or the real estate on which those premises are
located; (ii) the utilities and other systems that serve those premises and real
estate are in normal working order and condition, ordinary wear and tear
excepted and (iii) all the material fixtures, equipment, furniture and vehicles
that are included among the Store Assets, as well as all the material fixtures,
equipment, furniture and vehicles leased or otherwise used at the Stores, are
also in normal working order and condition, ordinary wear and tear excepted.
4.6 Contracts. All the Assumed Contracts are identified on
Schedule 2.1. Except as set forth on Schedule 2.1, LOS has given Designs correct
and complete copies of all the Assumed Contracts, including copies of all
amendments to all the Assumed Contracts and all material written waivers of
rights under all the Assumed Contracts. All the Assumed Contracts are legal,
valid and binding obligations of LOS. To the knowledge of LOS, all the Assumed
Contracts are also legal, valid and binding obligations of the other parties to
the Assumed Contracts. Neither LOS nor, to the knowledge of LOS, any other party
to any Contract is in material default under any Assumed Contract. Neither LOS
nor, to the knowledge of LOS, any other such party has repudiated or purported
to repudiate any Assumed Contract. No party to any Assumed Contract other than
purchase orders to LS&CO. for inventory is an Affiliate, director or officer of
LOS.
4.7 Financial Statements. Schedule 4.7 contains an income
statement and an asset statement for each of the Stores for the periods and as
of the dates indicated on Schedule 4.7. Except as set forth on Schedule 4.7,
each such income statement and asset statement has been prepared in accordance
with generally accepted accounting principles.
4.8 Employees. Schedule 4.8 contains a complete and accurate list
of: (i) each employee of LOS employed at any Store (each such employee is
sometimes referred to herein as a "Store Employee") and (ii) each Store
Employee's salary or hourly rate currently in effect and annual bonus (last paid
or payable), if any. LOS has not and will not, at any time prior to the Closing,
increase the compensation payable or to become payable, or the benefits provided
to, any Store Employee except in the ordinary course of business consistent with
past practices. Except as set forth on Schedule 4.8, all Store Employees are
actually at work, and no Store Employee is currently on leave of absence,
layoff, military leave, suspension, sick leave, workers' compensation, salary
continuance or short or long term disability or otherwise not actively
performing such Store Employee's work during normally scheduled business hours.
Except as set forth in Schedule 4.8, there are no charges with respect to or
relating to the operation of any of the Stores before the Equal Employment
Opportunity Commission or any court or government agency relating to
discrimination or unlawful employment practices.
4.9 Employee Relations and ERISA. LOS is not a party to any
collective bargaining agreement that covers any of the Store Employees or any
other employees who worked at any Store at any time during the 12 months before
the Closing. To LOS' best knowledge, no union or other labor organization is
attempting or has attempted to organize any of the Store Employees or any such
other employees. Except as shown on Schedule 4.9, LOS neither maintains or
contributes to, nor has maintained or contributed to, any "employee pension
benefit plan" (including any "multiemployer plan") or any "employee welfare
benefit plan" (in each such case within the meaning of the of the Employee
Retirement Income Security Act of 1974, as amended, or any rule or regulation
adopted under that act) in which any Store Employees or any such other employees
participate or have participated.
4.10 Brokers and Finders. No broker, finder or other Person acting
on behalf of LOS is or will be entitled to any commission, fee or reimbursement
in connection with any of the transactions contemplated by this Agreement.
ARTICLE 5
EMPLOYEES
At the Closing, LOS shall make all Store Employees available to Designs
for hiring by Designs.
ARTICLE 6
INDEMNIFICATION
6.1 By Designs. Designs shall indemnify LOS and LOS' Affiliates
and hold them harmless from and against any and all Damages arising from: (a)
any breach of any covenant, representation or warranty of Designs set forth in
this Agreement; (b) all obligations of LOS to the extent (but only to the
extent) that Designs expressly assumed them under Section 2.6 or 2.7 of this
Agreement and all liabilities of LOS that arise out of Designs' access to and
use of data and information as Designs contemplated by Section 2.2; and (c) all
obligations and liabilities of Designs that arise from the ownership or
operation of the Stores by Designs after the Closing other than those arising
from or related to a breach of one or more of LOS' representations and
warranties contained in this Agreement.
6.2 By LOS. LOS shall indemnify Designs and Designs' Affiliates
and hold them harmless from and against any and all Damages arising from (a) any
breach of any covenant, representation or warranty of LOS set forth in this
Agreement; (b) all obligations and liabilities of LOS that in any way relate to
or are connected with the Stores or their operation before the Closing, other
than the obligations that Designs expressly assumed under Section 2.6 or 2.7 of
this Agreement; and (c) the failure of the Parties to comply with bulk sales
laws (if applicable) or any similar laws in connection with the transactions
contemplated by this Agreement.
6.3 Indemnification Rules. Indemnification under this Article 6
shall be governed by the rules set forth in Schedule 6.3 to this Agreement.
6.4 Deductible. Notwithstanding anything to the contrary in this
Agreement or otherwise provided by law, neither Party shall be required to
indemnify the other Party or the other Party's Affiliates unless the total
amount required to be so indemnified exceeds $10,000 (for all matters combined),
in which case the amount indemnified shall be the amount in excess of $10,000.
6.5 Limitation. Notwithstanding anything to the contrary in this
Agreement or otherwise provided by law, neither Party shall be required to
indemnify the other Party or the other Party's Affiliates for any amount (for
all matters combined) in excess of the Purchase Price.
6.6 Survival. The covenants, representations and warranties set
forth in this Agreement shall survive the Closing.
ARTICLE 7
DISPUTE RESOLUTION
Any Controversy under this Agreement or with respect to any of the
subjects treated in this Agreement shall be resolved, if possible, by the good
faith efforts of LOS and Designs including, if other efforts fail, a
face-to-face meeting between a senior manager of LOS and a senior manager of
Designs. If any Controversy is not settled by such efforts within 30 days after
LOS or Designs requests such a meeting, either of them shall be entitled to
cause the Controversy to be resolved by an arbitrator employed by
JAMS/Endispute. If Designs initiates arbitration, the arbitration shall be
conducted in San Francisco, California. If LOS initiates arbitration, the
arbitration shall be conducted in Boston, Massachusetts. The arbitration shall
be conducted in accordance with JAMS/Endispute's then-applicable Rules of
Practice and Procedure for Arbitration. Pending the completion of any
arbitration proceeding, obligations not in dispute shall continue to be
performed. Except as provided below, such arbitration shall be the Parties'
exclusive formal means of resolving any such Controversy. The decision of the
arbitrator shall be final and binding on both Parties. Judgment upon any award
rendered by the arbitrator may be entered by any state or federal court having
jurisdiction. Notwithstanding the foregoing, to preserve rights or prevent or
mitigate Damages and in aid of the arbitration process, LOS or Designs may apply
to such a court for temporary or preliminary injunctive or other equitable
relief pending the results of the arbitration. However, if the final decision of
the arbitrator is inconsistent with any such relief so obtained, the
arbitrator's final decision shall preempt that relief. Notwithstanding any other
provision of this Article 7, any dispute relating to the amount of the Purchase
Price shall be resolved in accordance with Section 2.5.
ARTICLE 8
MISCELLANEOUS
8.1 Sales and Lease Transfer Tax. Each Party shall pay one-half of
any sales or lease transfer taxes payable in connection with the transactions
contemplated by this Agreement.
8.2 Further Assurances. After the Closing, each Party, at its own
expense, shall sign and deliver all documents, and take all other actions,
reasonably requested by the other Party in order to memorialize, better
effectuate or perfect the sale and transfer of the Store Assets to Designs and
Designs' assumption of the obligations required by Section 2.6 of this
Agreement. Without limiting the generality of the foregoing, LOS agrees to
cooperate with and assist Designs in obtaining the benefits of all third party
warranties related to the Store Assets.
8.3 Successors and Assigns. The Parties shall not assign any of
their rights or delegate any of their duties under this Agreement. Any purported
assignment or delegation in violation of this Agreement shall be void.
8.4 Amendments. All amendments to this Agreement must be in
writing and be signed by both Parties.
8.5 Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been duly given only if and when delivered by hand,
by overnight delivery service or by telecopier, in all cases with receipt
confirmed, to the appropriate addressees and the addresses or telecopier numbers
set forth below, or to such other addressees, addresses or telecopier numbers as
may be designated by notice given in accordance with this section:
If to LOS: With a Copy to:
Levi's Only Stores, Inc. Levi Strauss & Co.
1159 Dublin Road Levi's Plaza
Columbus, OH 43215 1155 Battery Plaza
Attention: San Francisco, CA 94111
Facsimile: (614) 232-5580 Attention: General Counsel/LOS
Facsimile:(415) 501-7650
If to Designs: With a Copy to:
Designs, Inc. Designs, Inc.
66 B Street 66 B Street
Needham, MA 02494 Needham, MA 02494
Attention: President Attention: General Counsel
Facsimile: (781) 449-8666 Facsimile: (781) 449-8666
8.6 Counterparts. This Agreement may be signed in one or more
counterparts. Each counterpart shall be deemed an original of this Agreement.
8.7 Entire Agreement. This Agreement (including the Schedules to
this Agreement) and the other Transaction Documents contain all the
understandings between the Parties with respect to the subject matter of this
Agreement. They supersede all prior and contemporaneous agreements and
understandings among the Parties and their Affiliates relating to that subject
matter.
8.8 Severability. If any portion of this Agreement is determined
to be invalid or unenforceable, it shall be modified rather than voided, if
possible, in order to carry out the intent of this Agreement. In any event, the
remainder of this Agreement shall be valid and enforceable to the fullest extent
possible.
8.9 No Third Party Beneficiaries. This Agreement is for the sole
benefit of the Parties and their respective Affiliates and is not for the
benefit of any third party.
8.10 Costs of Enforcement. If either Party to this Agreement seeks
to enforce its rights under this Agreement by formal proceedings or otherwise,
the non-prevailing Party shall pay all costs and expenses incurred by the
prevailing Party (who shall be the Party which obtains substantially the relief
it sought, whether by settlement, compromise or judgment), including all
reasonable attorneys' fees and costs.
8.11 Expenses. Each Party shall pay its own expenses incurred in
negotiating and drafting this Agreement and the other Transaction Documents and
in effecting the Closing.
8.12 Governing Law. This 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.
8.13 Public Announcements. Except for announcements or filings
required by law, without the prior consent of the other Party, each Party will
not issue or permit any of its subsidiaries, directors, officers, employees or
agents to issue any press release or other information t the press or any third
party with respect to this Agreement or the transactions contemplated hereby.
8.14 Certain Matters of Construction. A reference to an Article,
Section or Schedule shall mean an Article of, Section in or Schedule to, this
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 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.
* * * * *
IN WITNESS WHEREOF, the parties hereto have entered into this Asset
Purchase Agreement as of the date first above written.
LEVI'S ONLY STORES, INC.
By /s/ Marion White
________________________________
Marion White, Vice President
DESIGNS, INC.
By /s/ Joel H. Reichman
_____________________________
Joel H. Reichman, President
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 Hart-Scott-Rodino 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 bill 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 Foley, Hoag & Eliot 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 Boylston Street,
Chestnut Hill, Massachusetts 01267" and inserting in its place the address "66 B
Street, Needham, Massachusetts 02494".
(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 Boylston Street,
Chestnut Hill, Massachusetts 02167" from each place that it appears and
inserting in each such place the address "66 B Street, Needham, Massachusetts
02494". Section 21.3 of the Original Partnership Agreement is hereby further
amended by deleting the facsimile number "(617) 734-3406" 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/ Joel H. Reichman
Joel H. Reichman
President
LDJV INC.
By /s/ Marion White
Marion White
Vice President
THE DESIGNS/OLS PARTNERSHIP
By Designs JV Corp., a Partner
Joel H. Reichman
Joel H. Reichman
President
By LDJV Inc., a Partner
Marion White
Marion White
Vice President
GUARANTY
(Designs, Inc.)
This Guaranty dated this 31st day of October, 1998 is made by Designs,
Inc., a Delaware corporation (the "Guarantor"), in favor of LDJV Inc., a
Delaware corporation (the "LOS Partner") and the Affiliates (as defined in the
Glossary referenced below) of the LOS Partner.
WHEREAS, the Guarantor owns all of the capital stock of Designs JV
Corp. (the "Designs Partner");
WHEREAS, the Designs Partner and the LOS Partner (collectively, the
"Partners") formed The Designs/OLS Partnership (the "Partnership") pursuant to a
Partnership Agreement dated as of January 28, 1995 (the "Original Partnership
Agreement") to own and operate retail stores in a specified territory;
WHEREAS, the Partners propose to enter into an Amendment and
Distribution Agreement dated as of the date of this Guaranty (the "Distribution
Agreement") which will amend the Original Partnership Agreement and provide for,
among other things, the distribution of certain partnership assets and
liabilities to the Partners and the termination, dissolution and winding up of
the Partnership;
WHEREAS, the Original Partnership Agreement, as amended by the
Distribution Agreement, contains certain obligations of the Designs Partner to
the LOS Partner and the LOS Partner's Affiliates that will survive the
dissolution of the Partnership, including an obligation by the Designs Partner
to indemnify the LOS Partner and the LOS Partner's Affiliates and hold them
harmless from and against certain liabilities; and
WHEREAS, the Guarantor wishes to execute this Guaranty and deliver it
to the LOS Partner in order to induce the LOS Partner to enter into the
Distribution Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the Guarantor agrees as follows:
1. Definitions. Capitalized terms used, but not otherwise defined, in
this Guaranty shall have the meanings given them in the Glossary which was
executed simultaneously with the Original Partnership Agreement, as such
Glossary is being amended by the Distribution Agreement.
2. Unconditional Guarantee. The Guarantor hereby irrevocably and
unconditionally guarantees the payment and performance of all Guaranteed
Obligations when due. As used herein, the term "Guaranteed Obligations" means
any and all liabilities, debts and obligations of the Designs Partner to the LOS
Partner and the LOS Partner's Affiliates, including, without limitation, the
indemnification obligations set forth in Article 19 of the Original Partnership
Agreement, as amended by Section 10.1(o) of the Distribution Agreement.
3. Primary Obligation of Guarantor. The obligations of the Guarantor
are primary, with no recourse necessary by the LOS Partner or any Affiliate of
the LOS Partner against the Designs Partner or any collateral that may be given
to secure the Guaranteed Obligations prior to proceeding against the Guarantor.
4. Waiver of Acceptance, Etc. To the fullest extent permitted by law,
the Guarantor hereby waives diligence, presentment, protest, notice of dishonor,
demand for payment, extension of time of payment, notice of acceptance of this
Guaranty, nonpayment at maturity and all other notices and demands of any other
kind and all other suretyship defenses. The Guarantor consents to all
forbearances, indulgences and extensions of the time of payment or performance
of the Guaranteed Obligations, to all changes in the terms thereof hereafter
made and to all substitutions for, and exchanges and releases of, all or any
part of any collateral therefor and agrees that the obligations hereunder shall
not be impaired, modified or released or limited thereby; it being the intention
hereof that the Guarantor shall remain liable until the Guaranteed Obligations
have been fully paid and the terms, covenants and conditions thereof have been
fully performed and observed by the Designs Partner, notwithstanding any act,
omission or thing which might otherwise operate as a legal or equitable
discharge of the Guarantor or the Designs Partner. The Guarantor hereby agrees
that no invalidity, lack of genuineness, lack of authority or unenforceability
of any document or agreement or any part thereof shall affect or impair its
liability under this Guaranty. The obligations of the Guarantor hereunder shall
not be affected by any fraudulent, illegal, or improper act by the Designs
Partner, nor by any release, discharge, or invalidation, by operation of law
(including the Federal Bankruptcy Code) or otherwise, of any of the Guaranteed
Obligations.
5. Reliance. The Guarantor acknowledges that the LOS Partner is relying
on this Guaranty in entering into the Distribution Agreement.
6. Termination of Guaranty. This Guaranty shall continue to be
effective until the earlier of: (a) such time as the Guaranteed Obligations have
been paid in full and the terms, covenants and conditions thereof have been
fully performed and observed by the Designs Partner; or (b) the delivery of
written notice of termination dated and signed by a duly authorized officer of
the LOS Partner, which notice of termination includes specific reference to this
provision. Notwithstanding the expiration or earlier termination of this
Guaranty, the Guarantor shall remain liable after the time of such expiration or
termination for all Guaranteed Obligations, accrued or contingent, outstanding
at such time.
7. Costs. In addition to its obligations under Section 1 above, the
Guarantor agrees to pay all costs and expenses reasonably incurred by the LOS
Partner or any Affiliate of the LOS Partner in the enforcement or collection of
any of the Guaranteed Obligations, including reasonable attorneys' fees.
8. No Third Party Beneficiaries. This Guaranty is intended solely for
the benefit of the LOS Partner and its Affiliates. Nothing in this Guaranty
shall be construed to create any duty to, standard of care with reference to,
any liability to, or any right of suit or action in, any person other than the
LOS Partner and its Affiliates.
9. Governing Law. This Guaranty 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.
10. Entire Agreement; Amendment. This Guaranty sets forth the entire
agreement and understanding among the Guarantor, the LOS Partner and the
Affiliates of the LOS Partner concerning the guaranty provided by the Guarantor
hereby to the LOS Partner and its Affiliates, and supersedes all prior
agreements, understandings, discussions and negotiations among the Guarantor,
the LOS Partner and the Affiliates of the LOS Partner concerning the subject
matter of this Guaranty. No such prior agreements, understandings, discussions
or negotiations shall limit, modify, or otherwise affect the provisions hereof.
No provision hereof may be altered, amended, waived, cancelled or modified,
except by a written instrument executed, sealed, and acknowledged by a duly
authorized officer of the LOS Partner.
11. Binding Effect. This instrument shall inure to the benefit of the
LOS Partner and its Affiliates, and their respective successors and assigns,
shall be binding upon the successors and assigns of the Guarantor, and shall
apply to all liabilities of the Designs Partner and any successor to or
affiliate of the Designs Partner by operation of law.
12. Severability. Any determination that any provision hereof is
invalid, illegal, or unenforceable in any respect in any instance shall not
affect the validity, legality, or enforceability of such provision in any other
instance and shall not affect the validity, legality, or enforceability of any
provision contained herein. It is the intention of the Guarantor that the
provisions of the within Guaranty be liberally construed to the end that the LOS
Partner and its Affiliates may be put in as good a position as if the Designs
Partner had promptly, punctually, and faithfully performed all Guaranteed
Obligations and the Guarantor had promptly, punctually, and faithfully performed
hereunder.
13. Waiver; Remedies. No failure or delay on the part of the LOS
Partner or any Affiliate of the LOS Partner in exercising any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein expressly specified are cumulative and
not exclusive of any rights or remedies which the LOS Partner or any Affiliate
of the LOS Partner would otherwise have.
* * * * *
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first written above.
DESIGNS, INC.
By /s/ Joel H. Reichman
________________________
Joel H. Reichman
President
AMENDED AND RESTATED
TRADEMARK LICENSE AGREEMENT
THIS IS AN AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT
made as of this 31st day of October, 1998 (the "Agreement") by and between LEVI
STRAUSS & CO., a Delaware corporation, with its principal office at Levi's
Plaza, 1155 Battery Street, San Francisco, California 94111 (the "LICENSOR") and
DESIGNS, INC., a Delaware corporation, with its principal office at 66 B Street,
Needham, Massachusetts 02494 (the "LICENSEE").
WHEREAS, LICENSOR has, since 1850, been a major producer of
apparel and related products in the United States and elsewhere and owns certain
valuable trademarks in the United States; and
WHEREAS, LICENSEE is the owner of certain retail outlet stores
operating under the "Levi's Outlet by Designs" and "Dockers Outlet by Designs"
names through which it sells exclusively closeouts, seconds and irregular
apparel and related products which have been manufactured by LICENSOR or by
third parties under license from and/or on behalf of LICENSOR; and
WHEREAS, LICENSEE has been selling such products in such
stores subject to a Trademark License Agreement, dated November 15, 1996, which
agreement has been amended by a First Amendment to Trademark License Agreement
dated September 30, 1998 (as amended, the "1996 Agreement"); and
WHEREAS, LICENSEE on September 30, 1998 acquired from a
subsidiary of LICENSOR 16 "Dockers Outlet" outlet stores selling predominantly
Dockers(R) products and nine "Levi's Outlet" outlet stores selling predominantly
Levi's(R) products (collectively, the "Acquired Stores");
WHEREAS, LICENSEE on October 31, 1998 acquired by distribution
from a partnership owned by subsidiaries of LICENSEE and LICENSOR eleven "Levi's
Outlet" stores selling predominantly Levi's(R) products (collectively, the "JV
Stores");
WHEREAS, the parties now wish to amend and restate the 1996
Agreement to reflect the acquisition of the Acquired Stores and the JV Stores
and certain other matters, and to set forth their written agreement on the terms
of the license for all of LICENSEE'S existing and future outlet stores operating
under the "Levi's Outlet by Designs" name and the "Dockers Outlet by Designs"
name;
NOW, THEREFORE, for good and valuable consideration, including
without limitation the mutual promises set forth below, the parties agree as
follows:
1. Grant of License
(a) LICENSOR grants to LICENSEE, subject to
Section 1(i) of this Agreement, an exclusive, royalty-free license to use the
Levi's(R) "Housemark" trademark in the form shown in Exhibit A, which has been
registered in the United States Patent and Trademark Office having Registration
Numbers 849437; 1122468; 1041846 and 1155926, respectively, and any other form
of such trademarks or other trademarks later specified by LICENSOR, and any
subsequent registrations thereof (the "L LICENSED MARKS"), in combination with
"Outlet by DESIGNS" as shown in Exhibit B within the territory described in
Exhibit C (the "TERRITORY"), in connection with the sale of closeouts, seconds,
first quality end-of-season transfers from LICENSEE's other stores and, before
their closure, from Designs/OLS Partnership stores, and irregulars of apparel
and related products manufactured by LICENSOR or by third parties under license
from and/or on behalf of LICENSOR (the "PRODUCTS") on exterior signage, interior
signage, shopping bags, stationery, receipts and PRODUCT tags, in retail outlets
which have been individually pre-approved by LICENSOR as listed in Exhibit E
(the "L STORES"), and which are devoted exclusively to the sale of such PRODUCTS
as contemplated by Sections 2(c) and 3(b).
(b) LICENSOR grants to LICENSEE, subject to
Section 1(i) of this Agreement, an exclusive, royalty-free license to use
Dockers(R) trademarks including the wordmark registered in the United States
Patent and Trademark Office having Registration Numbers 1435757, 1485361 and
1591926, respectively, in the form shown in Exhibit A and any other form of such
trademarks or other trademarks later specified by LICENSOR and any subsequent
registrations thereof (the "D LICENSED MARKS") in combination with "Outlet by
Designs" as shown in Exhibit B within the Territory, in connection with the sale
of PRODUCTS on exterior signage, interior signage, shopping bags, stationery,
receipts and PRODUCT tags in retail outlets which have been individually
pre-approved by LICENSOR as listed in Exhibit E (the "D STORES") and which are
devoted exclusively to the sale of PRODUCTS as contemplated by Sections 2(c)
and 3(b).
(c) In addition to the other rights granted in
this Agreement, with respect to the Acquired Stores only, LICENSEE shall have
the right to maintain the use of those of LICENSOR'S marks and logos being used
in the Acquired Stores at the time of LICENSEE'S acquisition of the Acquired
Stores in the manner, to the extent and for the purposes they were then so used.
Unless otherwise specified by LICENSOR in accordance with, and after the date
of, this Agreement, such uses shall be deemed to be in compliance with
LICENSOR'S trademark use policies, it being understood that LICENSOR and
LICENSEE shall cooperate in rectifying, at LICENSOR'S expense, any uses so
specified by LICENSOR.
(d) The L STORES and the D STORES are referred to
collectively in this Agreement as the "STORES." The L LICENSED MARKS and the D
LICENSED MARKS are referred to collectively in this Agreement as the "LICENSED
MARKS." The combination forms of the LICENSED MARKS and mark "OUTLET BY
DESIGNS," including those shown in Exhibit B, are collectively referred to as
the "COMBINATION MARKS." Although the trademark and name "OUTLET BY DESIGNS" is
incorporated into the permitted combination forms, and must appear in any usage
of the COMBINATION MARKS by LICENSEE, LICENSOR neither claims nor shall obtain
any rights with respect to such trademark and name.
(e) LICENSEE may delete a retail outlet from
Exhibit E by notice to LICENSOR. Except as provided in Section 9: (i) Exhibit E
shall be amended to add a retail outlet only by written agreement of the parties
and (ii) the licenses described in Sections 1(a) and 1(b) are limited to the
STORES operating at the locations set forth in Exhibit E and are not
transferable to any other store without LICENSOR'S prior written consent.
(f) This Agreement does not grant LICENSEE any
rights in any other trademarks, trade names or other proprietary rights of
LICENSOR. Nothing in this Agreement, however, limits any rights of LICENSEE,
including rights granted under such other agreements or licenses as may exist
from time to time, to use the LICENSED MARKS standing alone, or other
appropriate trademarks of LICENSOR, in the same fashion as permitted for use by
other retailers authorized by LICENSOR in conjunction with the promotion of
LICENSOR'S products, which use is consistent with LICENSOR'S policies and
guidelines.
(g) The combination forms of the LICENSED MARKS
and LICENSEE'S tradename and mark "OUTLET BY DESIGNS" shown in Exhibit B are
collectively referred to as the "COMBINATION MARKS." Although the tradename and
mark "OUTLET BY DESIGNS" is incorporated in the permitted combination forms, and
must appear in any usage of the COMBINATION MARKS by LICENSEE, LICENSOR neither
claims nor shall obtain any rights with respect to such terms.
(h) The licenses granted herein constitute both a
right and an obligation to use the COMBINATION MARKS only in the manner
specified in conjunction with the sale of the PRODUCTS through the STORES.
(i) LICENSOR reserves the right to use the
LICENSED MARKS with or without the word "Outlet" in connection with retail
stores operated by LICENSOR or any wholly-owned affiliate of LICENSOR within the
TERRITORY during the term of this Agreement.
2. Use of COMBINATION MARKS. LICENSEE shall use the
COMBINATION MARKS as follows:
(a) LICENSEE shall prominently display the COMBINATION
MARKS in one of the formats attached hereto as Exhibit B, and only in such
format, when referring to the STORES, including on exterior STORE signage,
interior STORE signage, stationery, receipts and PRODUCT tags. The COMBINATION
MARKS shall be used in conformance with LICENSOR'S written policies and
guidelines. In the event that LICENSEE'S lease restrictions or other factors
require LICENSEE'S use of the COMBINATION MARKS in this Agreement in a manner at
variance with the formats shown on Exhibit B or the license granted in this
Agreement, LICENSEE shall obtain LICENSOR'S prior written consent to any such
variance. All existing signage in stores operated by LICENSEE and previously
approved by LICENSOR under the 1991 Agreement or 1996 Agreement is deemed to
conform to LICENSOR'S polices and guidelines as of the date of this Agreement.
(b) Notwithstanding Sections 1 and 2 of this
Agreement, with respect to the Acquired Stores located in Destin, Florida,
LICENSEE may operate those stores as, and on exterior signage identify the
appropriate Acquired Store as, a "Levi's Outlet" (and not as a "Levi's Outlet by
Designs"), and as a "Dockers Outlet" (and not as a "Dockers Outlet by Designs"),
for so long as such is required under the lease relating to that Acquired Store.
LICENSEE shall in each such STORE use the COMBINATION MARKS on interior
STORE signage, stationery, receipts, shopping bags, PRODUCT tags and other uses
as required of it in respect of the other L STORES and D STORES, as appropriate,
and otherwise take appropriate actions, including those described in Section 5
of this Agreement and as otherwise reasonably requested by LICENSOR, to make
clear LICENSEE'S ownership and operation of the store to consumers, vendors and
others who enter, transact with or otherwise interact with that store and its
employees, it being understood that LICENSEE may use up existing stocks of such
items located at the Acquired Stores at the time of their acquisition. LICENSEE
shall use reasonable efforts to obtain a change in the lease restriction as
promptly as possible and in any case as part of a lease amendment or renewal
process.
(c) LICENSEE shall sell PRODUCTS and no other products
in the STORES. It is understood that, except as provided in Section 9(c),
without LICENSOR'S prior written consent, in the STORES identified in Exhibit E
under the heading "Dockers Outlet by Designs (1998)," LICENSEE shall sell only
PRODUCTS bearing the Dockers(R) and Slates(R) trademarks, and that in the STORES
identified in Exhibit E under the heading "Levi's Outlet by Designs (1998),"
LICENSEE shall sell only PRODUCTS bearing the Levi's(R) trademarks.
(d) Subject to Section 1(f), LICENSEE shall not
advertise the existence of STORES or their business except that LICENSEE may
advertise on billboards designed to promote all retail outlet establishments
within the mall in which the STORES are located, which billboards shall be
located within five (5) miles of any such mall and shall advertise at least one
other brand as well as the COMBINATION MARKS. LICENSEE shall also be permitted
to advertise the STORES using flyers and in local newspapers.
3. Exclusivity
(a) Subject to Section 1(i), LICENSOR shall not grant
licenses to third parties to use the LICENSED MARKS to operate stores under the
name "Levi's Outlet," "Dockers Outlet," "Levi's Outlet by ____," or "Dockers
Outlet by _____," or otherwise to incorporate LICENSED MARKS in store name
signage or the store name, in connection with the sale of the PRODUCTS in the
TERRITORY, it being understood that LICENSOR sells PRODUCTS to other accounts
and that those other accounts are entitled to use the LICENSED MARKS in
conjunction with point-of-sale promotion and display of LICENSOR's products at
their stores, which use by others and LICENSEE is contemplated by Section 1(f).
(b) The licenses granted under this Agreement require
LICENSEE to operate the STORES exclusively as outlets for the PRODUCTS. LICENSEE
is expressly prohibited from using the COMBINATION MARKS (i) in stores which
offer products from manufacturers other than or in addition to LICENSOR or
LICENSOR's authorized manufacturer and (ii) in stores not devoted exclusively to
selling the PRODUCTS. No COMBINATION MARKS may be used hereunder in conjunction
with the sale of first quality or in-season goods, except as otherwise permitted
under Section 1.
4. Modifications of COMBINATION MARKS. LICENSEE
understands and agrees that the prior written approval of the LICENSOR is
required if LICENSEE proposes to change in any respect the formats shown in
Exhibit B or previously approved by LICENSOR, or any materials authorized under
Section 2; LICENSEE agrees not to use any altered version of such signage or
materials without LICENSOR'S prior written approval. Any violation of this
Section 4 shall be deemed to constitute a material breach and default of this
Agreement, subject to the provisions of Section 9(c).
5. Point of Sale Notification. LICENSEE shall prominently
display a notice, reasonably satisfactory to LICENSOR, in the interior of each
STORE at all points of sale, which clearly and conspicuously: (i) notifies
customers about the kinds of PRODUCTS sold (i.e., closeouts, seconds and
irregulars manufactured exclusively by or on behalf of LICENSOR); (ii) defines
the terms "closeout", "seconds" and "irregulars" so that customers understand
the quality of the merchandise offered for sale; and (iii) gives the identity of
the company leasing and operating the STORE (i.e., LICENSEE, not LICENSOR) and
the fact that LICENSEE, not LICENSOR, assumes all liabilities associated with
the PRODUCTS and services offered by the STORE, except for liabilities based on
damage or injury caused by the PRODUCTS, taking into account the fact that such
PRODUCTS are closeouts, seconds, irregular apparel and related products. The
current notices used by LICENSEE (to be updated as reasonably requested by
LICENSOR in the future) are attached as Exhibit D. All merchandise offered for
sale in the STORES shall be appropriately labeled as closeouts, seconds or
irregulars, respectively.
6. Other Point of Sale Material. LICENSOR may provide
LICENSEE with additional point of sale displays bearing the COMBINATION MARKS.
LICENSEE may also display its own point of sale materials bearing the
COMBINATION MARKS, provided that such materials conform to LICENSOR'S guidelines
for displaying such materials or, if LICENSEE has not been provided with such
guidelines, then subject to LICENSOR'S prior written approval and quality
control over the display and use of such materials, which approval shall not be
unreasonably withheld or delayed.
7. Right of Inspection. LICENSOR shall have the right
during regular business hours, at its own expense, to inspect any LICENSEE
facility where the COMBINATION MARKS are displayed for the purpose of enabling
LICENSOR to determine whether LICENSEE is adhering to the requirements of this
Agreement.
8. Authorized Outlets. The STORES and their related lease
expiration dates (assuming exercise of all renewal options) are identified on
Exhibit E. Subject to Section 9, upon request by LICENSEE during the term of
this Agreement, additional STORES may be approved by LICENSOR on a case-by-case
basis in LICENSOR'S sole discretion. Such approval shall be in writing and the
additional STORES shall be added to this Agreement only by amending Exhibit E.
9. STORE Upgrades
(a) Between the date of this Agreement and December
31, 2003, LICENSEE will complete a remodel and refurbishment (a "Remodel") of
each STORE identified on Exhibit E under the caption "Levi's Outlet by Designs
(1996)" at a time of LICENSEE'S choosing but on a schedule such that twelve of
such STORES are remodeled in each of 1999, 2000, 2001 and 2002 and eleven of
such STORES are remodeled in 2003. Before the commencement of each such year,
LICENSEE shall identify to LICENSOR the STORES to be remodeled in such year. The
year in which a STORE is to be so Remodeled is hereinafter referred to as the
"Remodel Year" of such STORE.
(b) In lieu of completing a Remodel of any STORE or
any Second Remodel (as defined below) of any STORE, LICENSEE may close such
STORE and substitute therefor a new STORE at a different location in the
TERRITORY selling the PRODUCTS with a visual appearance substantially similar to
the Remodel appearance described in Section 9(c) for the first Remodel or an
appropriate Second Remodel as described below. Upon such substitution, such
substituted STORE shall be deemed a STORE under this Agreement, and LICENSEE
will provide to LICENSOR an appropriately updated version of Exhibit E to this
Agreement identifying such substituted STORE with a license term equivalent to
the license term of the STORE it replaced as if such STORE had been remodeled.
Each such substituted STORE is referred to as a "Substituted STORE."
(c) LICENSEE will ensure that each Remodel and each
Substituted STORE immediately after its substitution will be substantially
similar in visual appearance to the interior of the Acquired STORES, it being
understood that: (i) LICENSEE may bring new design approaches forward for
LICENSOR'S review and approval (not to be unreasonably withheld) and (ii)
Remodels and Substituted STORES may not be two separate STORES but may visually
segment the Levi's(R), Dockers(R) and Slates(R) brands within each STORE.
(d) The license term for each Remodeled STORE will be
the longer of: (a) ten years from the date either (i) a Remodel is completed or
(ii) the Substituted STORE is completed or (b) a period ending on the date of
the original lease expiration date for that STORE as listed on Exhibit E, with
the extensions made in accordance with this Agreement. If LICENSEE fails to
complete satisfactorily a Remodel (or a completion by substitution of a
Substituted STORE) by December 31 of the appropriate Remodel Year, LICENSEE
shall have an additional twelve months to complete satisfactorily such Remodel.
If such Remodel is not completed by the end of such twelve month period,
LICENSOR, at its option on sixty (60) days written notice to LICENSEE, may
unilaterally terminate the license for that STORE.
(e) Not later than a date five years after completion
of the first Remodel (the "Notice Date") for a particular Remodeled STORE or the
completion of a Substituted STORE, LICENSEE may agree by means of a written
notice (the "Second Remodel Notice") to complete a remodel and refurbishment of
such STORE (a "Second Remodel") within twelve (12) months after the Notice Date
and in that notice propose and describe upgrades and changes reasonably
satisfactory to LICENSOR, LICENSOR to so advise LICENSEE within 30 days of
receipt of the notice. If LICENSEE fails to complete satisfactorily a Second
Remodel (including a completion by substitution of a Substituted STORE) twelve
(12) months after its delivery of the Second Remodel Notice, LICENSEE shall
have an additional twelve months to complete satisfactorily such Second Remodel.
If such Second Remodel is not completed by the end of such twelve month period,
then LICENSOR, at its option on sixty (60) days written notice to LICENSEE, may
unilaterally terminate the license for that STORE.
10. Term and Termination
(a) The term of this Agreement shall commence upon
execution by both parties and shall expire on the later to occur of (i)
September 30, 2004 or (ii) the earliest date on which licenses for all the
STORES have expired ("the EXPIRATION DATE") provided that the license for
any STORE (i) shall be for a period co-terminous with the lease term (including
options) set forth in Exhibit E, unless otherwise expressly stated in Exhibit E,
and shall terminate upon expiration of such lease term, and (ii) shall be
extended should LICENSEE complete a Remodel or a Second Remodel as contemplated
by Section 9. If either party wishes to renew this Agreement then such party
shall give notice to the other party not less than 180 (one hundred eighty)
days before the EXPIRATION DATE and the parties shall meet within 90 (ninety)
days after the date of that notice to discuss renewal. Nothing in this Agreement
shall oblige either party to renew this Agreement on any terms.
(b) If at any time LICENSOR or LICENSEE shall: (i)
become bankrupt; (ii) take advantage of any state or federal insolvency law;
(iii) liquidate its business; (iv) cease to function as a going concern; (v)
fail to pay its debts as they come due; or (vi) make any assignment for the
benefit of creditors, the other party, as the case may be, shall have the right
to terminate this Agreement forthwith.
(c) If either party shall cause or permit any
material breach or default of this Agreement, the other party shall have the
right to terminate this Agreement by written notice to the party causing or
permitting the breach or default, and the termination shall be effective one
hundred and twenty (120) days after the giving of such notice, unless prior
thereto the party receiving such notice cures such breach or default. The rights
and remedies provided in this Section 10 shall not be exhaustive and are in
addition to any other rights and remedies provided by law.
(d) Except with respect to a failure to Remodel or
Second Remodel, the consequences of which failure are provided for in Sections
9(d) and 9(e), respectively, any material breach or default committed by
LICENSEE with respect to any STORE shall be deemed a material breach or default
giving rise to LICENSOR'S right to terminate the Agreement with respect to all
STORES, subject to the opportunity to cure such breach under Section 10(c).
(e) Upon termination of this Agreement for any reason,
LICENSEE shall immediately cease and thereafter refrain from all use of the
LICENSED MARKS and shall remove or dispose of all STORE signage and other
materials utilizing the LICENSED MARKS.
(f) Upon termination of the licenses granted under
this Agreement with respect to any STORE, LICENSEE shall cease and thereafter
refrain from using the LICENSED MARKS with respect to such STORE and shall
remove or dispose of all retail outlet store signage for such STORE utilizing
the LICENSED MARKS.
11. Fictitious Names. If LICENSEE is required to file a
statement of fictitious name in a state where it is using the COMBINATION MARKS
on signage on its STORES, LICENSEE shall promptly so inform LICENSOR in writing.
12. LICENSEE'S Representations and Warranties
(a) LICENSEE will affirmatively and conspicuously
display in all its STORES the representation that LICENSEE, not LICENSOR, owns
and operates the STORES and that the relationship between LICENSOR and LICENSEE
is that of a manufacturer and an independent retailer of the PRODUCTS.
(b) LICENSEE represents and warrants that its
promotion and sale of the PRODUCTS in the STORES and its performance of this
Agreement will be in full compliance with fair business practices and all
applicable laws and regulations of the TERRITORY and the United States.
13. LICENSEE'S Indemnification
(a) LICENSEE agrees to defend, indemnify and hold
LICENSOR harmless against any damages, liabilities and expenses LICENSOR may
suffer, including reasonable attorneys' fees and costs of suit, arising from any
breach of any agreement, representation or warranty given herein or from
LICENSEE'S business activities, including, without limitation, from claims based
on personal injury and property damage occurring within or around the STORES and
unauthorized activities with regard to LICENSEE'S use of the COMBINATION MARKS.
The foregoing notwithstanding, LICENSEE'S indemnification does not extend to
liabilities based upon the quality, safety or other properties of the PRODUCTS,
taking into account the fact that such PRODUCTS are closeouts, seconds,
irregular apparel and related products, or upon a claim of trademark
infringement where such infringement arises out of LICENSEE'S use of the
COMBINATION MARKS or LICENSED MARKS as permitted under this Agreement.
(b) LICENSEE'S obligation to indemnify shall not be
effective unless LICENSOR gives LICENSEE prompt notice of any claim which might
trigger such obligation and affords LICENSEE the opportunity to assume the
defense thereof. LICENSEE'S obligation to indemnify shall not be effective in
the event that LICENSOR settles such claim without first obtaining LICENSEE'S
consent thereto.
14. LICENSOR'S Representations and Warranties
(a) LICENSOR represents and warrants: (i) subject only
to Section 1(g) and to other license agreements with third parties, that it owns
all right, title and interest in and to the LICENSED MARKS and (ii) that it has
the full power and authority to grant LICENSEE the rights and licenses granted
under this Agreement.
(b) LICENSOR represents and warrants that its
performance of this Agreement will be in full compliance with all applicable
laws and regulations of the TERRITORY and the United States.
15. LICENSOR'S Indemnification
(a) LICENSOR agrees to defend, indemnify and hold
LICENSEE harmless against any damages, liabilities and expenses LICENSEE may
suffer, including reasonable attorneys' fees and costs of suit, arising from a
claim that the LICENSED MARKS used apart from or incorporated in the COMBINATION
MARKS infringe the trademark rights of a third party within the TERRITORY,
except to the extent such claim results directly or indirectly, in whole or in
part, from some unauthorized action or activity by LICENSEE with respect to the
LICENSED MARKS that is not authorized by LICENSOR.
(b) LICENSOR'S obligation to indemnify shall not be
effective unless LICENSEE gives LICENSOR prompt notice of any claim which might
trigger such obligation and affords LICENSOR the opportunity to assume the
defense thereof. LICENSOR'S obligation to indemnify shall not be effective in
the event that LICENSEE settles such claim without first obtaining LICENSOR'S
consent thereto.
16. Rights in LICENSED MARKS. LICENSEE recognizes that
there is great value to LICENSOR in the LICENSED MARKS and the goodwill
associated therewith. LICENSEE agrees that nothing contained in this Agreement
or in any prior agreement or in any prior conduct of LICENSOR or LICENSEE gives
LICENSEE any interest or property rights in the LICENSED MARKS or in any other
mark or trade name of LICENSOR except the right to use the LICENSED MARKS as
specifically set forth in this Agreement or such a prior agreement during the
term thereof. LICENSEE agrees that all uses by LICENSEE of the LICENSED MARKS
shall inure to the benefit of LICENSOR. Except for the rights expressly granted
in this Agreement, LICENSEE agrees that it will not, during the term of this
Agreement or thereafter, directly or indirectly, assert any interest in, right
of use or other rights in the LICENSED MARKS or in any other mark or in any
trade name of LICENSOR. LICENSEE agrees to assist LICENSOR in all reasonable
respects requested by LICENSOR, and at LICENSOR'S expense, in the establishment,
renewal, protection and enforcement of LICENSOR'S rights in the LICENSED MARKS.
LICENSOR acknowledges that all rights to trademarks "Designs," "Outlet by
Designs" and "BTC" are the property of LICENSEE and agrees not to adopt or
attempt to register those marks or any trademark confusingly similar thereto.
17. Terms Governing Purchase and Transfer of Merchandise
(a) PRODUCTS may be purchased directly from LICENSOR
or from stores owned by third parties who are approved by LICENSOR on a
case-by-case basis, which approval shall not be unreasonably withheld or
delayed. Terms of such purchases from LICENSOR shall be negotiated separately
and in writing by LICENSEE and LICENSOR.
(b) LICENSEE acknowledges that its access to PRODUCTS
for STORES shall be strictly on an "as available" basis; to the extent PRODUCTS
are made available to those companies operating outlet stores under a trademark
license from LICENSOR ("Outlet Operators"), then, from the date of this
Agreement until September 30, 2004, LICENSOR will, for those PRODUCTS, allocate
those PRODUCTS to those Outlet Operators on the basis of the number of outlet
stores ("doors") operated by such Outlet Operators that carry the relevant
LICENSOR brand at that time. Nothing in this Agreement or any other agreement
between LICENSOR and LICENSEE shall be deemed to constitute a guarantee of
PRODUCT availability.
(c) LICENSEE warrants that it will dispose of its own
closeouts of LICENSOR'S products by transferring them from its first quality
stores or any other retail store in which LICENSEE has a controlling interest
or is a joint venturer to its STORES licensed under this Agreement.
18. Injunctive Relief. Any breach by LICENSEE of this
Agreement which involves LICENSEE'S misuse of the LICENSED MARKS or any other of
LICENSEE's trademarks would result in irreparable injury to LICENSOR and
therefore, in addition to all other remedies provided at law or in equity,
including, without limitation, remedies provided under The Uniform Trade Secret
Act, California Civil Code Sections 3426 et. seq., LICENSOR shall be entitled to
seek a temporary restraining order and a permanent injunction to prevent the
continuance of such breach. No notice shall be required in order to obtain such
injunctive relief. In the event that LICENSOR seeks an injunction hereunder,
LICENSEE hereby waives any requirement that LICENSOR post a bond or any other
security. LICENSEE shall likewise be entitled to seek a temporary restraining
order and a permanent injunction in accordance with all the provisions of this
Section 18, if LICENSOR misuses LICENSEE'S trademarks "Designs," "Outlet by
Designs" or "BTC."
19. No Assignment or Sublicense. LICENSEE may not assign,
sublicense or otherwise transfer any of its rights or obligations hereunder
absent the prior written approval of LICENSOR. For purpose of this Section 19,
an assignment, sublicense or other transfer shall include: (i) any direct or
indirect assignment, sublicense or other transfer, in whole or in part, of any
of LICENSEE'S rights or obligations under this Agreement; (ii) any direct or
indirect transfer of any of the assets with which the COMBINATION MARKS are
being used (including the STORES or their leases but excluding disposal of
obsolete signage and displays in the ordinary course of business); (iii) any
direct or indirect transfer of control of LICENSEE; or (iv) any transfer of any
interest, direct or indirect, in LICENSEE or its assets, to a competitor of
LICENSOR (provided that the ordinary purchase of LICENSEE'S shares in a
publicly-traded market for such shares, if any, shall not constitute a sale to a
competitor for purposes of this Section 19(iv)). Any attempt to assign,
sublicense or otherwise transfer any of LICENSEE'S rights or obligations without
the prior written consent of LICENSOR shall be void and shall be deemed to be a
material breach of this Agreement.
20. Notices. All demands and requests required or permitted
by this Agreement shall be given in writing and delivered by U.S. mail or
overnight courier, postage prepaid, or by facsimile transmission. All such
notices shall be deemed effective upon deposit in the U.S. mail, upon delivery
to an overnight courier, or upon confirmation of fax transmission. All such
notices shall be addressed as follows:
if to LICENSOR:
Levi Strauss & Co.
Levi's Plaza
1155 Battery Street
San Francisco, California 94111
Attention: Vice President, Customer Relations
with a copy to:
General Counsel/Outlets
1155 Battery Street
San Francisco, California 94111
if to LICENSEE:
Executive Vice President and General Counsel
DESIGNS, INC.
66 B Street
Needham, Massachusetts, 02494
with a copy to:
President
DESIGNS, INC.
66 B Street
Needham, Massachusetts, 02494
21. No Agency. Nothing in this Agreement shall be construed
so as to constitute either party the agent, partner or joint venturer of or with
the other for any purpose whatsoever. Neither party shall have the right or
authority to pledge the credit of or to represent itself as agent of or as
authorized to assume or create any obligation of any kind, expressed or implied
on behalf of the other party in any respect whatsoever. At all times, LICENSEE
shall maintain such notices and make other arrangements in its STORES as may be
reasonably necessary to enable its customers to understand that the STORES are
owned and operated by LICENSEE, not LICENSOR.
22. Governing Law; Jurisdiction. The validity,
construction, performance, enforcement, termination and effect of this Agreement
shall be governed by and construed under and in accordance with the laws of the
State of California applicable to agreements made and to be wholly performed in
that state. The parties irrevocably consent to the non-exclusive jurisdiction of
the state courts of California and of any federal courts located in the Northern
District of California and in Massachusetts, in connection with any action or
proceeding respecting this Agreement or the rights and obligations set forth in
this Agreement.
23. Severability. Should any part or provision of this
Agreement be held unenforceable or in conflict with applicable law, such part or
provision shall be severed from this Agreement in such jurisdiction to the
extent necessary to make this Agreement enforceable and the validity of the
remaining parts or provisions shall remain in full force and effect. In
addition, in such event the parties shall discuss such changes as may be
necessary to preserve the original intent of this Agreement and, if the parties
cannot agree on changes within 30 days, then either party shall have the option
to terminate this Agreement by notice to the other.
24. Entire Agreement. This Agreement constitutes the sole
and entire understanding between the parties relating to the use of the
COMBINATION MARKS and it replaces any prior agreement, whether written, oral,
express, implied or derived from conduct between the parties relating thereto,
including without limitation the 1996 Agreement and the letter, dated September
30, 1998, relating to STORE refurbishment.
25. Amendment of Agreement. This Agreement may not be
amended, altered or modified except in writing signed by both LICENSEE and
LICENSOR.
26. Binding Effect. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, heirs, administrators, executors,
successors and assigns.
27. Waiver. No failure on the part of either party to
exercise, and no delay in exercising, any right or remedy under this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right or remedy under this Agreement preclude any other or further exercise
or the exercise of any other right or remedy granted here or by law.
28. Survival. The terms of Sections 10(e), 10(f), 13(a),
13(b), 15(a), 16, 18, 20, 21, 22, 23, 24 and 25 shall survive the termination of
this Agreement and shall continue to bind the parties thereafter.
IN WITNESS WHEREOF, the parties have executed this Agreement
by their respective officers hereunto duly authorized as of the day and year
first above written.
LEVI STRAUSS & CO. DESIGNS, INC.
By: /s/ Albert F. Moreno By: /s/ Joel H. Reichman
Albert F. Moreno Joel H. Reichman
Senior Vice President President and
Chief Executive Officer
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This First Amendment to Amended and Restated Loan and Security
Agreement is made as of this 29th day of September, 1998 by and between
BankBoston Retail Finance Inc. (in such capacity, the "Agent"), as
Agent for the Lenders party to a certain Amended and Restated Loan and
Security Agreement dated as of June 4, 1998,
the Lenders party thereto, and
Designs, Inc. (the "Borrower"), a Delaware corporation with its
principal executive offices at 66 B Street, Needham, Massachusetts
02194
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
W I T N E S S E T H:
WHEREAS, on June 4, 1998, the Agent, the Lenders and the Borrower
entered in a certain Amended and Restated Loan and Security Agreement (the
"Agreement"); and
WHEREAS, the Borrower desires to acquire twenty-five retail store
leases and certain personal property associated therewith from Levi's Only
Stores, Inc., which acquisition requires the consent of the Agent and the
Lenders pursuant to Section 4-19 of the Agreement; and
WHEREAS, the Agent, the Lenders and the Borrower desire to consent to
the aforesaid acquisition and to modify certain of the provisions of the
Agreement as set forth herein.
NOW, THEREFORE, it is hereby agreed among the Agent, the Lenders and
the Borrowers as follows:
1. Capitalized Terms. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the
Agreement.
2. Amendments to Article 1. The provisions of Article 1 of the
Agreement are hereby amended
(a) by adding the following new definitions:
"Acceptable LOS Inventory": Inventory acquired by the
Borrower upon consummation of the LOS Acquisition which
otherwise constitutes Acceptable Inventory.
"LOS Acquisition": The acquisition by the Borrower of
twenty-five retail store leases and certain personal
property associated therewith from Levi's Only
Stores, Inc., for an aggregate price not to exceed
$12,000,000.00 and otherwise on terms and conditions
acceptable to the Agent.
"LOS Inventory Advance Rate": Forty-five percent (45%) or
such other percentage as the Agent may hereafter establish.
"LOS Inventory": Inventory acquired by the Borrower upon
the consummation of the LOS Acquisition.
(b) by deleting the definition of "Commitment" in its entirety
and substituting the following in its stead:
"Commitment": Subject to Section 2-20, as follows:
---------------- ------------------ ---------------------
Lender Dollar Commitment Commitment Percentage
---------------- ------------------ ---------------------
BankBoston Retail $35,000,000.00 70%
Finance Inc.
----------------- ------------------ ---------------------
Norwest Business $15,000,000.00 30%
Credit, Inc.
----------------- ------------------ ---------------------
3. Amendments to Article 2 The provisions of Section 2-1 of the
Agreement are hereby amended by adding the following at the
end of Section 2-1(b)(ii)(A) thereof:
,plus unless and until the Agent notifies the
Borrower that LOS Inventory is deemed Acceptable
Inventory, the LOS Inventory Advance Rate of the Cost
of Acceptable LOS Inventory.
4. Amendments to Article 4. The provisions of Article 4 of the Loan
Agreement are hereby amended by
(a) effective upon consummation of the LOS Acquisition, deleting
the number "$10,000,000.00" appearing in the third line of
Section 4-18(b)and substituting the number "$5,000,000.00"
in its stead.
(b) effective upon consummation of the LOS Acquisition, deleting
the number "$5,000,000.00" appearing in the second proviso
to Section 4-18(b)and substituting the number
"$2,500,000.00" in its stead.
(c) effective upon consummation of the LOS Acquisition, deleting
the number "Fifteen Million Dollars ($15,000,000.00)"
appearing in Section 4-19(b) and substituting the number
"Nine Million Dollars ($9,000,000.00)" in its stead.
(d) effective upon consummation of the LOS Acquisition, deleting
the number "Ten Million Dollars ($10,000,000.00)" appearing
in Section 4-19(c) and substituting the number "Five
Million Dollars ($5,000,000.00)" in its stead.
(e) effective upon consummation of the LOS Acquisition,
deleting the number "$5,000,000.00" appearing in the
proviso to Section 4-19(c) and substituting the
number "$2,500,000.00" in its stead.
The LOS Acquisition shall not be included in the calculation of the
Borrower's compliance with any of the sections described in this Paragraph 4.
5. Consent to LOS Acquisition. Notwithstanding the provisions of
Section 4-19(c) which limit the amount of cash consideration
payable in connection with any Permitted Acquisition, the
Agent and the Lenders hereby consent to the consummation of
the LOS Acquisition and waive any Events of Default which
otherwise would have been occasioned thereby under Section
4-19(c).
6. Ratification of Loan Documents. Except as provided herein, all
terms and conditions of the Agreement on the other Loan
Documents remain in full force and effect.
7. Miscellaneous.
(a) This First Amendment to Amended and Restated Loan and
Security Agreement may be executed in several counterparts
and by each party on a separate counterpart, each of which
when so executed and delivered shall be an original, and all
of which together shall constitute one instrument.
(b) This First Amendment to Amended and Restated Loan
and Security Agreement expresses the entire understanding of
the parties with respect to the transactions contemplated
hereby. No prior negotiations or discussions shall limit,
modify, or otherwise affect the provisions hereof.
(c) Any determination that any provision of this
First Amendment or any application hereof is invalid, illegal
or unenforceable in any respect and in any instance shall not
affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality or
enforceability of any other provisions of this First Amendment
to Amended and Restated Loan and Security Agreement.
(e) The Borrower shall pay on demand all costs and
expenses of the Agent and each Lender, including, without
limitation, reasonable attorneys' fees in connection with the
preparation, negotiation, execution and delivery of this First
Amendment to Amended and Restated Loan and Security Agreement.
(f) The Borrower warrants and represents that the
Borrower has consulted with independent legal counsel of the
Borrower's selection in connection with this First Amendment
and is not relying on any representations or warranties of the
Agent or any Lender or their respective counsel in entering
into this First Amendment.
IN WITNESS WHEREOF, the parties have hereunto caused this First
Amendment to be executed and their seals to be hereto affixed as of the date
first above written.
AGENT
BANKBOSTON RETAIL FINANCE INC.
By: /s/ Michael L. Pizette
Name: Michael L. Pizette
Title: Managing Director
LENDERS
BANKBOSTON RETAIL FINANCE INC.
By: /s/ Michael L. Pizette
Name: Michael L. Pizette
Title: Managing Director
NORWEST BUSINESS CREDIT, INC.
By: /s/ Scott Fiore
Name: Scott Fiore
Title: Assistant Vice President
BORROWER
DESIGNS, INC.
By: /s/ Joel H. Reichman
Name: Joel H. Reichman
Title: President & CEO
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amendment to Amended and Restated Loan and Security
Agreement is made as of the 31st day of October, 1998 by and between
BankBoston Retail Finance Inc. (in such capacity, the "Agent"), as
Agent for the Lenders party to a certain Amended and Restated Loan
and Security Agreement dated as of June 4, 1998,
the Lenders party thereto, and
Designs, Inc. (the "Borrower"), a Delaware corporation with its
principal executive offices at 66 B Street, Needham, Massachusetts
02194
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
W I T N E S S E T H:
WHEREAS, on June 4, 1998, the Agent, the Lenders and the Borrower
entered in a certain Amended and Restated Loan and Security Agreement (as
amended and in effect, the "Agreement"); and
WHEREAS, the Borrower desires to amend and terminate the Joint Venture,
to acquire certain of the assets of the Joint Venture, and to assume certain of
the liabilities of the Joint Venture, all of which requires the consent of the
Agent and the Lenders pursuant to the Agreement; and
WHEREAS, the Agent, the Lenders and the Borrower desire to consent to
the aforesaid transaction and to modify certain of the provisions of the
Agreement as set forth herein.
NOW, THEREFORE, it is hereby agreed among the Agent, the Lenders and
the Borrowers as follows:
1. Capitalized Terms. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the
Agreement.
2. Amendments to Article 1. The provisions of Article 1 of the Agreement
are hereby amended
(a) by adding the following new definitions:
"Joint Venture Distribution Agreement": The Amendment and
Distribution Agreement dated as of October 31, 1998 by and among
Designs JV Corp., LDJV Inc. and The Designs/OLS Partnership.
"JV Acquisition": The transactions described in the Joint Venture
Distribution Agreement, including, without limitation, the
acquisition by the Borrower of eleven (11) retail store leases
and certain personal property associated therewith from the Joint
Venture pursuant to the Joint Venture Distribution Agreement.
(b) by amending the following definitions, effective upon the
dissolution of the Joint Venture (in accordance with the
provisions of Section 6.1 of the Joint Venture Distribution
Agreement):
(i) the definition of "Affiliate" by deleting the proviso
thereto in its entirety.
(ii) the definition of "ERISA Affiliate" by deleting the
words "(other than the Joint Venture)" therefrom.
(iii) the definition of "Guarantors" by deleting the words
"the Joint Venture and" in the parenthetical thereto.
(iv) the definition of "Indebtedness" by deleting the words
"(other than the Joint Venture)" therefrom.
(v) the definition of "Permitted Acquisition" by deleting
the words "(other than the Joint Venture)" from
subparagraph (A) thereof.
(vi) the definition of "Related Entity" by deleting the
words " but excluding, in any event, the Joint Venture"
therefrom.
(vii) the definition of "Tangible Net Worth" to read as
follows:
"Tangible Net Worth": The result, on the day
on which compliance with any financial
performance covenant applicable to
Tangible Net Worth is being determined,
of (a) the difference between (i) the
Obligors' assets and (ii) the Obligors'
liabilities, respectively, minus (b) the
aggregate of those of the Obligors'
assets as may be deemed intangible in
accordance with GAAP, all of the
foregoing as would be reflected on a
balance sheet prepared in accordance
with the requirements of Section 5-1 hereof.
(c) by deleting the number "$300,000.00" appearing in clause (i) of
the definition of "Availability Reserves" and substituting the
number "$400,000.00" in its stead.
3. Amendments to Article 4. The provisions of Article 4 of the Loan
Agreement are hereby amended by
(a) adding the following new subparagraph to Section 4-7:
(d) Indebtedness assumed pursuant to the
Joint Venture Distribution Agreement
(including, without limitation, any guaranty
of the indemnities furnished thereunder).
(b) by deleting the provisions of subparagraph 4-18(c)(i) in their
entirety and substituting the words "Intentionally Omitted" in
their stead.
(c) deleting the provisions of clause (B)(including the first
proviso thereto) in Section 4-20(c) of the Agreement.
(d) adding the words "in accordance with the Joint Venture
Distribution Agreement" at the end of the first sentence of
Section 4-21(a).
(e) adding the following at the end of Section 4-21(b):
, other than in accordance with the Joint Venture
Distribution Agreement.
(f) adding the following new subsection to Section 4-21:
(c) The Borrower shall not, and shall not
permit, any material change or amendment to
the Joint Venture Distribution Agreement.
(g) adding the following at the end of Section 4-22:
,other than as contemplated in the Joint Venture
Distribution Agreement.
4. Amendments to Article 5. The provisions of Article 5 of the
Loan Agreement are hereby amended by deleting the number
"$50,000.00" appearing in Section 5-11(f)(i) and substituting
the number "$65,000.00" in its stead.
5. Amendments to Article 10. The provisions of Article 10 of the Loan
Agreement are hereby amended by
(a) adding the following at the end of Section 10-7 thereof:
(except that possible terminations of
Capital Leases by virtue of the consummation
of the JV Acquisition shall not constitute
an Event of Default hereunder unless the
subject lessor actually terminates its
Capital Lease and the Borrower fails to
repay the amounts due thereunder within
three (3) Business Days thereafter).
(b) adding the following at the end of Section 10-17 thereof:
(except that any default arising thereunder
by virtue of the consummation of the JV
Acquisition shall not constitute an Event of
Default hereunder unless the lessor declares
a default thereunder and the Borrower fails
to repay the amounts due thereunder within
three (3) Business Days thereafter).
(c) deleting the provisions of Section 10-19 in their entirety.
6. Amendments to Exhibits.
(a) The following Exhibits to the Agreement are hereby deleted in
their entirety and new Exhibits in the form annexed hereto
substituted in their stead:
(i) Exhibit 4-3
(ii) Exhibit 4-5
(b) The provisions of Exhibit 5-13(a) are hereby amended by deleting
(i) the Minimum Tangible Net Worth required for the Fiscal
Quarter ending October, 1998 (i.e. $51,000,000.00) and
substituting $57,000,000.00 in its stead; and
(ii) the Minimum Tangible Net Worth required for the Fiscal
Quarter ending January, 1999 and each fiscal quarter ending
thereafter (i.e. $48,000,000.00) and substituting "(x)
$56,000,000.00, plus (y) an amount equal to the difference
between the "Final Outlet Assets Value" as determined under
Section 2.3 of the Joint Venture Distribution Agreement
and $6,000,000.00 (but in no event less than zero)" in its
stead.
7. Consent to JV Acquisition. The Agent and the Lenders hereby consent to
the consummation of the JV Acquisition and the execution and
performance of the Joint Venture Distribution Agreement and waive any
Events of Default which otherwise would have been occasioned thereby.
8. Ratification of Loan Documents. Except as provided herein, all terms
and conditions of the Agreement on the other Loan Documents remain in
full force and effect.
9. Miscellaneous.
(a) The Borrower and the Lender acknowledge that:
(i) the Inventory acquired by the Borrower in the JV
Acquisition and the LOS Inventory constitutes "Acceptable
Inventory"; and
(ii) the notification by the Borrower of its intent to close
the locations set forth in EXHIBIT 4-5 under the caption
"Stores Planned for Closure" satisfies the notice
requirements of Section 4-5(d) of the Agreement.
(b) This Second Amendment to Amended and Restated Loan and
Security Agreement may be executed in several counterparts and by
each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which
together shall constitute one instrument.
(c) This Second Amendment to Amended and Restated Loan and
Security Agreement expresses the entire understanding of the parties
with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect
the provisions hereof.
(d) Any determination that any provision of this Second
Amendment or any application hereof is invalid, illegal or
unenforceable in any respect and in any instance shall not affect the
validity, legality, or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other
provisions of this Second Amendment to Amended and Restated Loan and
Security Agreement.
(e) The Borrower shall pay on demand all costs and expenses of
the Agent and each Lender, including, without limitation, reasonable
attorneys' fees in connection with the preparation, negotiation,
execution and delivery of this Second Amendment to Amended and
Restated Loan and Security Agreement.
(f) The Borrower warrants and represents that the Borrower has
consulted with independent legal counsel of the Borrower's selection
in connection with this Second Amendment and is not relying on any
representations or warranties of the Agent or any Lender or their
respective counsel in entering into this Second Amendment.
IN WITNESS WHEREOF, the parties have hereunto caused this Second
Amendment to be executed and their seals to be hereto affixed as of the date
first above written.
AGENT
BANKBOSTON RETAIL FINANCE INC.
By: /s/ Michael L. Pizette
Name: Michael L. Pizette
Title: Director
LENDERS
BANKBOSTON RETAIL FINANCE INC.
By: /s/ Michael L. Pizette
Name: Michael L. Pizette
Title: Director
NORWEST BUSINESS CREDIT, INC.
By: /s/ Scott Fiore
Name: Scott Fiore
Title: Assistant Vice President
BORROWER
DESIGNS, INC.
By: /s/ Carolyn R. Faulkner
Name: Carolyn R. Faulkner
Title: Chief Financial Officer
341050.4