Joint Venture Agreement
June 6th, 1995
15010 N.E. 36th Street
Redmond, WA 98052
Heinrich Heine GmbH
D - 76135 Karlsruhe
Sendlinger Stra(Beta)e 6
D - 80331 Munchen
JOINT VENTURE AGREEMENT
This Agreement, made and entered into this 6th day of June 1995, between:
Inc., a corporation duly organized and existing under the laws of
U.S.A., and having its principal place of business at 15010 Northeast 36th
Street, Redmond, WA 98052, U.S.A. (hereinafter referred to as "EBI"),
Handelsgesellschaft Heinrich Heine GmbH, a corporation duly organized and
existing under the laws of Germany, and having its principal place of business
at Windeckstra(Beta)e 15, D - 76135 Karlsruhe (hereinafter referred to as
Sport-Scheck GmbH, a corporation duly organized and existing under the laws of
Germany, being a subsidiary of HEINE and having its principal place of business
at Sendlinger Stra(Beta)e 6, D - 80331 Munchen (hereinafter referred to as
Whereas, EBI is a well reputed seller of outdoor apparels and related goods and
sells its products through catalog and also more than 300 of its own retail
stores in the U.S.A. and Canada and has extensive market information regarding
the manufacture and sale or such apparels and related goods,
Whereas, EBI is interested in establishing its presence in Europe - except UK,
Ireland, France, Spain, Portugal and Italy (the Territory) and is seeking a
German corporation who is capable to expend mail-order business and to open
retail stores and operate them efficiently,
Whereas, HEINE and SPORT-SCHECK are well reputed mail order companies mainly
targeting apparels and have extensive market informations regarding such
apparels in Germany and have a strong intention to expand its business to retail
store operation for the aforesaid products,
Whereas, HEINE and SPORT-SCHECK desire and propose to collaborate with EBI to
establish EBI's brand presence by both catalog and retail store operation in the
Whereas, EBI, HEINE and SPORT-SCHECK desire to form a joint venture company
(hereinafter referred to as "NEWCO") for the import, manufacture and sale of
EBI's products through retail stores (in Germany as a first step) and catalogs
in the Territory subject to the terms and conditions of this Agreement,
Now, therefore, in consideration of the above premises and the mutual covenants
set forth below, the parties hereby agree as follows:
ARTICLE I ESTABLISHMENT OF NEWCO
FORM AND CHARACTERISTICS OF NEWCO
Subject to the terms and conditions contained in this Article I, the parties
hereto shall cause NEWCO to be organized under the laws of Germany as soon as
practicable after this Agreement becomes effective pursuant to Section 5.02
hereof, which NEWCO shall be in the form and shall have the characteristics as
(1) Form: GmbH & Co
(2) Name: Eddie Bauer
(3) Principal place of business: Munchen
(4) Principal objects and purpose:
The import and sale of products developed by EBI for its North American
market; i.e. AKA, Eddie Bauer
and Eddie Bauer
Home through retail store
operation in the Territory excluding Ford Eddie Bauer
Edition vehicles, the
Maxum Sport Runabout Boat and the Eddie Bauer
cosmetic fragrance and such additional products for other similar programs.
NEWCO shall also reserve the rights to develop and manufacture products
specifically for the European market under the license to be granted by EBI
pursuant to the Distribution and Licence Agreement between NEWCO and EBI
referred to in Section 4.03 hereof. The development, manufacture and sale
of such products shall be subject to the prior written approval of EBI. EBI
shall be the owner of all product designs, patents, trademarks and
copyrights developed and/or used by NEWCO.
(5) Authorized capital of GmbH & Co: DM 8,000,000.00
Authorized capital of GmbH: DM 100,000.00
(6) Partnership Agreement/Articles of Association:
Substantially in the form attached hereto as Exhibit A (the translation of
which is attached hereto as Exhibit B for GmbH & Co and Exhibits C + D for
GMBH & CO GMBH
Shareholder Amount Payable Amount Payable Shareholding Ratio
- ----------- -------------- -------------- ------------------
EBI DM3,200,000.00 DM 40,000.00 40%
HEINE DM4,000,000.00 DM 50,000.00 50%
SPORT-SCHECK DM 800,000.00 DM 10,000.00 10%
Total DM8,000,000.00 DM100,000.00 100%
Each party hereto shall at the incorporation of NEWCO subscribe to and fully pay
for in cash its shares by telegraphic transfer remittance to a bank account of
the GmbH & Co and GmbH in Munchen within fifteen (15) days after organization of
All expenses incurred in connection with the incorporation of NEWCO, including
without limitation the legal fees for preparation of the Articles of
Incorporation, registration fees and stamp duties shall be borne by NEWCO.
All parties are bound to incorporate the above mentioned companies (GmbH and
GmbH & Co) and to decide upon the necessary resolutions.
HEINE, SPORT-SCHECK and EBI each may designate a Subsidiary company to become
the shareholder of NEWCO. "Subsidiary" or "Subsidiary Company" means any
corporation, partnership or other entity in which one of the parties owns a
majority vote. In case of any such designation, the original party remains to be
bound by this Agreement. If the other company ceases to be a Subsidiary, the
shares must be retransferred to the original owner.
ARTICLE II ORGANIZATION AND OPERATION
Section 2.01 Managing Directors ("Geschaftsfuhrer"). Managing directors will be
appointed upon mutual consent of the shareholders. The management consists of
two managing directors and one person being granted power of authorized Officer
("Prokura"). The initial managing directors are proposed by HEINE and approved
by the Advisory Board. The managing directors will be appointed and dismissed by
the shareholders meeting. The Advisory Board has the right to conclude, modify
and terminate the employment contracts of the managing directors.
Section 2.02 Advisory Board ("Beirat").
(1) For the present the Advisory Board to be formed by the company will consist
of 5 members to be delegated by the shareholders. HEINE and EBI may
delegate each two members, SPORT-SCHECK may delegate one member.
(2) The chairman of the Advisory Board will be appointed by HEINE, the
vice-chairman by EBI. The chairman or the vice-chairman respectively in
case of prevention will preside the meetings of the Advisory Board and will
sign the minutes of the meeting.
(3) Resolution upon following items can only be passed upon unanimous consent
of the Advisory Board:
- any commitments for real estate,
- annual plan and 5 year plan,
- sales of merchandise by the company through companies (except for
those companies which are included in the annual plan / 5 year plan),
- employment of managing directors.
In case the contracting parties will not come to an agreement the decision
on these points will be adjourned to the next meeting of the Advisory
(4) The Advisory Board will decide on the "Rules of Procedure for Managing
Directors" (Geschaftsfuhrerordnung) including a list of transactions
requiring consent and shall be in charge to give consent to the
transactions as listed in clause 8 of the "Rules of Procedure for Managing
ARTICLE III ACCOUNTING
ACCOUNTING, INSPECTION OF RECORDS, ETC.
(1) Books and Records:
NEWCO shall keep true and accurate books of account and records in
accordance with sound accounting practices and accounting principles
generally accepted in Germany and the Group Accounting Guideline of OTTO
VERSAND. It is understood that all possibilities regarding tax laws will be
made use of.
(2) Periodical Report, Etc.:
The parties hereto shall cause NEWCO to submit to each of the parties
quarterly unaudited financial reports and other periodical reports which
may be reasonably requested by them and shall keep them well informed of
the operations and financial condition of NEWCO.
(3) Inspection of Books and Records:
Each party hereto shall have the right to access and inspect the books of
account and other records of NEWCO and make extracts and copies therefrom
at any reasonable time during business hours of NEWCO.
(4) Audit, Audit Report:
The accounts and records of NEWCO shall be audited by independent public
accountants to be appointed by the shareholders meeting. An audited
financial report (including balance sheet, profit and loss statement and
all notes thereto) shall be submitted to the parties, within 4 months after
the end of each fiscal year.
ARTICLE IV COOPERATION OF PARTIES
Section 4.01 General. The parties hereto shall make all reasonable efforts to
support the supply and maximize the sales of the products by NEWCO.
Section 4.02 Grant of License.
(1) Subject to Section 1.01 (4), for the sale of the products through retail
store operation and catalogs by NEWCO, EBI agrees to grant NEWCO the
exclusive license to use the trademarks and logos of EBI to identify and
sell the products through Eddie Bauer
stores and mail order in the Territory and such other countries as mutually
agreed on by EBI and NEWCO as long as NEWCO exists and EBI is a shareholder
(2) EBI shall provide store operation and mail-order know-how to NEWCO
including but not limited to the following matters, on request through the
activities of EBI's employees in Germany, through the training of employees
of NEWCO in both Germany and Redmond and through the supply of necessary
(i) Store design including drawings, layout planning, display and
furniture and fixtures, etc., to cause NEWCO to be able to express and
realize EBI's total concepts in original features.
(ii) Merchandise assortment know-how.
(iii) Catalogs and promotional materials.
(iv) Advice related to EDP systems including POS software.
(3) EBI agrees to give its assurance to make reasonable efforts to supply all
of NEWCO's requirements of the products upon such terms and conditions as
shall be determined between EBI and NEWCO. In such supply EBI shall assist
NEWCO to buy products on such terms or EBI shall grant NEWCO the "most
favored customer terms" and the right to purchase the products at EBI's
cost price on FOB basis without adding any markup of EBI.
Section 4.03 Distribution and Licence Agreement (as attached)
(1) To implement EBI's cooperation contemplated in Section 4.02, EBI shall and
all parties hereto shall cause NEWCO to enter into a Distribution and
License Agreement (the "Distribution and License Agreement") as attached.
(2) As consideration for this Agreement, HEINE shall pay to EBI, a start-up
expense (and not as an advance) of $1,000,000.00 (US) which shall be paid
within 30 days after the date of execution of this Agreement, earliest as
per July 1, 1995.
(3) In case this Joint Venture Agreement shall be terminated before July 1,
2000, the start-up expense of $1,000,000.00 shall be refunded by EBI to
HEINE pro rata temporis
(e.g.: termination after 2 years - refund: $600,000.00
termination after 3 years - refund: $400,000.00 etc.)
Section 4.04 Financing. At any time the net equity of NEWCO as stated in the
annual financial statements shall not fall short of the highest value of the
- total non-current assets,
- 20% of total assets,
- 10% of annual net sales.
The parties are obliged to pass corresponding shareholders' resolutions and to
pay in corresponding amounts.
To ensure the liquidity of NEWCO in the period of start-up losses, HEINE,
SPORT-SCHECK and EBI will in addition provide NEWCO with liquid funds within the
business year, amounting up to the loss as planned in the official planning
agreed by the Advisory Board. After presentation of the audited annual financial
statements an end-of-year payment will be made, so that this payment together
with all payments made before will cover all losses incurred.
Section 4.05 Services of EBI or HEINE/SPORT-SCHECK Personnel / Other Services.
If NEWCO requests the services of one or more of EBI or HEINE/SPORT-SCHECK
personnel, on either an indefinite or temporary basis, EBI or HEINE/SPORT-SCHECK
so requested shall make its best efforts to provide such personnel upon such
terms and for such period as agreed with NEWCO. The compensation for such
personnel by NEWCO (or reimbursement of employment costs to EBI, HEINE,
SPORT-SCHECK if appropriate) shall be at cost price plus a margin as usual
within the OTTO group. Other services - such as handling, marketing etc. -
requested by NEWCO - shall be decided between the parties concerned at cost
price plus a margin as usual within the OTTO group.
Section 4.06 Non-competition. As long as either party is a shareholder of NEWCO
and for a period of two (2) years after it ceases to be a shareholder of NEWCO,
neither EBI nor HEINE nor SPORT-SCHECK shall directly or indirectly (including
through its Subsidiary Companies or Affiliated Companies) conduct or cooperate
with any third parties in the conduct of marketing of EBI's products or similar
products in the Territory and shall refrain from holding an interest in any
other entity engaged in similar activities in the Territory. As used in this
Agreement, "Affiliated Company" means any corporation, partnership or other
entity in which one of the parties owns a controlling interest.
Section 4.07 Extension of the Territory. The parties hereto agree to seriously
consider whether future stores/mail-order activities projects of EBI's products
in other countries within Europe are appropriate to be conducted through a joint
venture company formed by and among the parties hereto and the parties hereto
shall present those projects to each other for consideration. No obligations
hereunder shall arise unless a mutually acceptable joint venture agreement for
such additional projects is executed by the parties hereto.
ARTICLE V RESTRICTION ON TRANSFER
Section 5.01 General Restriction on Transfer. Except as expressly permitted in
Article I hereof, none of the parties hereto shall sell, transfer, assign,
pledge, encumber or otherwise dispose of the whole or any interest of NEWCO
owned by it, without prior written consent of the other parties. An approval of
the Advisory Board for any transfer of the shares by any party hereto will be
given when such transfer is consented to by the other parties.
Section 5.02 Effective Date.
(1) This Agreement shall become effective with its signature through the
parties and the resolution of the HEINE advisory board approving the
contents of this Agreement.
(2) This Agreement shall remain effective as long as the parties remain the
shareholders of NEWCO.
(3) The company will be dissolved upon unanimous resolution of the
(4) In case of change of the shareholders of any of the parties to this
Agreement, such party shall be obligated to inform the other parties
immediately after conclusion of the corresponding agreement. In this case
the other parties shall be entitled to terminate its participation in the
company. Both contracting parties shall be entitled to terminate the
agreement in case of filing to institute composition proceedings or a
bankruptcy petition over the other parties' assets.
(5) The terminating shareholder shall be obligated to transfer its share to the
limited partner remaining in the company or to a third person named by the
limited partner. In case of transfer to a third party the terminating
shareholder has to make sure that the third person will enter into the
obligations under this Agreement.
(6) The withdrawing shareholder has a claim for remuneration to be determined
according to clause 6 par. 3 of this Agreement.
(7) In case of dissolution of the company the available assets will be
apportioned in proportion to the business shares taking into account the
payment on the shares.
(8) In case of dissolution of the company or in case of termination of the
company the customer addresses and other customer data will proceed to the
assets of HEINE and EDDIE BAUER
and SPORT-SCHECK free of charge.
ARTICLE VI SALE OF BUSINESS SHARES, RIGHT TO PURCHASE AND RIGHT OF PRE-EMPTION
(1) In any case of transfer of business shares or parts of them of the limited
partnership and the general partner's private company limited the
respective disposer has to offer the business shares to be transferred for
sale in writing to the other contracting party at the purchase price as
determined according to paragraph 3. The person entitled to purchase has to
inform the disposer within 3 months after having received the notice
whether it will accept the offer. In case of acceptance of the offer it
will obtain the right to fix the date of transfer of the shares,
notwithstanding the date to be within 12 months after receipt of the notice
of purchase intention.
tioned, he shall be free to dispose of the shares but on the understanding
that the other contracting party has a right of pre-emption (purchase price
as of clause 3). The other contracting party has to be informed in writing
in case of disposal. This party has to state within a period of two weeks
after receipt of the information whether it will exercise its pre-emption
right. When transferring the shares the rights and obligations under these
shares have to be transferred to the acquirer or to be taken over by the
(2) This settlement shall not apply in case of sale to companies which majority
of shares are held by shareholders of Otto-Versand (GmbH & Co) or by a
company in which OTTO VERSAND or one of the companies as mentioned above
are granted an interest in more than 50% of the capital or in the voting
rights. The admission of further shareholders into the circle of the OTTO
VERSAND shareholders shall also not be deemed to be a sale.
(3) In case of taking over of shares of a limited partnership the share in the
company will be valued originating with the cash value which amounts for
the remaining term but at least for the assumed remaining term. As profit
of each of these years the simple average profit of 2 years after deduction
of trade tax before the year of exercising of the option and the prognosis
profit of the year following shall be determined. The deduction of
unaccrued interest on this average profit shall be caused by taking an
interest as a basis, which follows from the interest for 10-years bearer
bonds in the "Handel Banken (ISV)" as published in the "Handelsblatt" plus
an assumed margin of 0.5%; this basic interest increases in a mark-up at
risk of 100%.
The value of the transferred share corresponds to its percentage part in
the business value determined in this way, but at least to the book value
of its nominal capital as of the balance sheet.
The general partner's interest in the private company limited are to be
assigned at the proportionate net assets (nominal capital minus accumulated
ARTICLE VII GENERAL PROVISIONS
Section 7.01 Secrecy. The parties hereto agree to keep strictly confidential and
not to disclose to any third party any technical, financial or marketing
information acquired from the other parties or from NEWCO relating to the
transactions contemplated hereby. The parties further agree to exercise their
best efforts to compliance by their respective employees with the provisions of
this Section 7.01.
The contracting parties will mutually agree on the public relations work
especially at which date and by giving which informations this cooperation will
Section 7.02 Liability. Neither party shall be liable for delays in the
performance of their obligations hereunder due to causes beyond its reasonable
control, including but not limited to Acts of God, strikes, war or inability to
obtain labor or materials.
Section 7.03 Notice.
(1) Any notice, request and other correspondence under and in connection with
this Agreement shall be in the English language and be sent by cable, fax,
telex, registered air mail or personal delivery from one party to the other
party at their respective addresses as specified at the beginning of this
Agreement or at the addresses notified pursuant to paragraph (3) of this
Section 7.03. In the event of notice by cable or telex, the sending party
shall confirm receipt of such notice by telephone.
(2) The notice, request, and other correspondence pursuant to this Section 7.03
shall be deemed validly received by the addressee upon expiration of
forty-eight (48) hours after transmission, in the case of cable or telex,
on the fifteenth (15th) day after mailing in the case of registered air
mail, or, immediately upon delivery to the party in the case of personal
(3) Any party shall, upon a change of its address, notify the other parties of
such change in accordance with the procedures provided for in this Section
Section 7.04 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of Germany; court Hamburg.
Section 7.05 Assignment. Except as expressly provided for herein, none of the
parties shall assign or transfer all or any part of this Agreement or any of its
rights and/or obligations hereunder to any third party without the prior written
consent of all of the other parties.
Section 7.06 No Implied Waivers. The failure of any party at any time to require
performance by the other parties of any provision hereof shall in no way affect
the right to require such performance at any time thereafter. Nor shall the
waiver by any party of a breach of any provision hereof constitute a waiver of
any succeeding breach of the same of any other provision nor constitute a waiver
of the provision itself.
Section 7.07 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto relating to the subject matter contained
herein and merges all prior discussions among the parties and none of the
parties hereto shall be bound by any previous agreement, negotiation, commitment
and writing other than as expressly stated in this Agreement.
This Agreement may not be amended or supplemented in any manner orally or
otherwise except by an instrument in writing signed by a duly authorized
representative of each of the parties hereto.
Section 7.08 Final Provision. In the event any phrase, sentence or paragraph of
this Agreement shall for any reason be held invalid or unenforceable, the
remaining provisions of this Agreement shall be valid and enforced to the
fullest extent permitted by law.
Section 7.09 Relation to the Partnership Agreement/Articles of Association. The
provisions of this Agreement shall overrule the Articles of Association (GmbH)
resp. Partnership Agreement (KG). The parties are obligated not to make use of
an eventually deviating provision of the Articles of Association resp.
Partnership Agreement for their own interests in relation to third parties.
Section 7.10 Term. The Joint Venture agreement shall be valid for the duration
of NEWCO. Its provisions shall apply mutatis mutandis and as far as possible, in
case of liquidation.
In witness whereof, the parties shall have caused this Agreement to be executed
by their duly authorized representatives on the day and year first above
Section 7.11 This Agreement is in the English language only, which language
shall be controlling in all respects. No translation, if any, of this Agreement
into any language shall be of any force of effect in the interpretation of this
Agreement or in a determination of the intent of any of the parties.
Eddie Bauer Inc.
- ------------------------------------- ----------------------------------------
Heinrich Heine GmbH
- ------------------------------------- ----------------------------------------
- ------------------------------------- ----------------------------------------
- A + B (Partnership Agreements)
- C + D (Articles of Association)
- Distribution and License Agreement
EDDIE BAUER GMBH & CO.
Section 1 Firm-name, seat, business year
1. The firm-name of the partnership is Eddie Bauer GmbH & Co.
2. The seat of the partnership is in Munich.
3. The business year runs from 1 March until 28/29 of the following year.
A part business year shall be constituted as from the establishment of
the partnership until 29 February 1996.
Section 2 Object of the partnership
The object of the partnership is the import, production of wholesale and
retail trade (stationary and mail-order trade) in goods of all kinds
(unless a special permit is required therefor), in particular under the
Eddie Bauer brand names.
The partnership may do all business which is directly or indirectly
conducive to this object.
In particular, it may set up branches at home and abroad, take an interest
in other enterprises, acquire or take over the representation of such
Section 3 Term of the partnership
1. The company is established for a five (5) year period. It may be
terminated subject to one year's notice to the end of each business
2. The notice of termination shall be given by registered letter with
3. The partnership will dissolve upon the withdrawal or transfer of
ownership interest or termination of business of one of the limited
Section 4 Partners, capital
1. The personally liable partner is Verwaltung Eddie Bauer GmbH.
2. The personally liable partner does not have a share in the capital and
assets of the company.
3. The partnership capital amounts to
(in words: eight million Deutsche Mark) and shall be paid in by cash
The limited partners are
- Handelsgesellschaft Heinrich Heine GmbH
with a capital contribution to the nominal DM4,000,000.00
- Eddie Bauer Inc. with a capital
contribution to the nominal value of DM3,200,000.00
- Sport-Scheck GmbH with a capital
contribution to the nominal value of DM 800,000.00
Section 5 Management and representation
1. The personally liable partner is exclusively entitled and obligated to
manage the partnership and authorized to represent the partnership.
2. The personally liable partner may be released from the restrictions of
Section 181 BGB (German Civil Code); it is bound by the instructions
of the partners' meeting.
Section 6 Advisory board-duties
1. The partnership has an advisory board. The advisory board does not
have the functions of a supervisory board of a stock corporation. It
is not governed by the provisions of corporation law. If the setting
up of a supervisory board is mandatory under statutory provisions,
this shall be set up in addition to the advisory board and shall not
affect the latters's competence and composition, unless this conflicts
with mandatory provisions of the law. The liability of the members of
the advisory board shall be restricted to the liability for care
exercised by them in their own matters (Section 708 BGB)
2. The duties of the advisory board include the following in particular.
a) rendering of advice to and supervision of the management and, if
necessary, mediation in case of differences of opinion between
the managing directors. The advisory board is entitled to give
instructions to the management in fundamental questions of
b) adoption of the rules of procedure for the management, granting
and refusal of consent to transactions requiring the approval of
the advisory board;
c) adoption of the one-year and five-year plans;
d) auditing of the annual financial statement and submission of
proposals for the appropriation of profits;
e) presentation of documents to the partners' meeting.
3. The advisory board shall represent the partnership vis-a-vis the
managing directors in and out of court. In all declarations having
legal effect vis-a-vis managing directors and in case of contracts
with managing directors the partnership shall be represented by the
respective chairman of the advisory board.
Section 7 Advisory board-composition, convocation and adoption of resolutions
1. The advisory board consist of five members. It shall constitute a
quorum if 3/5 of its members are present or represented.
2. The advisory board has a chairman and vice chairman. The Chairman will
be appointed by Handelsgesellschaft Heinrich Heine GmbH, the Vice
Chairman will be appointed by Eddie Bauer Inc.
3. The meetings of the advisory board shall be convened by the chairman
and chaired by him; if the chairman is prevented, the vice chairman
shall take his place.
4. Meetings of the advisory board shall be convened as often as this
necessary in the interest of the partnership. The chairman or the vice
chairman of the advisory board shall be obligated to convene a meeting
of the advisory board even if only one member of the advisory board so
requests. Meetings of the advisory board shall be convened subject to
14 days' notice, the agenda to be stated.
5. Resolutions of the advisory board will be adopted with the majority of
votes. Minutes shall be taken of meetings and resolutions. They shall
be signed by the chairman and delivered to all members within four
6. In urgent cases, the chairman of the advisory board may have a vote
taken in writing or over the telephone (with a subsequent
confirmation) in writing or over the telephone, provided that the
majority of all members consent to this procedure.
7. The advisory board may lay down rules of procedure for itself.
8. Notwithstanding anything herein to the contrary, Eddie Bauer Inc.
shall have in its sole discretion the absolute right to veto any
action or activity which in its opinion impinges or compromises the
Eddie Bauer name, image or brand equity.
Section 8 Duties of the management towards the advisory board
1. The management is obligated to report to the advisory board regularly
on the trend of business and on all events of special importance.
2. A report shall be given at least once a month on the sales trend and
the fulfillment of the plans. Further, the nature and scope of the
reporting shall be determined by a resolution of the advisory board.
3. The partners' meeting which adopts a resolution concerning the
approval of the annual financial statement shall also adopt
resolutions concerning the discharge of the management and the
advisory board from their duties.
Section 9 Partners' meeting
1. The resolutions of the partners' meeting shall be adopted in principle
in meetings. Written votes shall be admissible if all partners agree
thereto in writing.
2. The partners' meeting shall take place in principle at the seat of the
partnership at least once every business year to approve the annual
financial statement. With the consent of all partners a different
place at which the partners' meeting shall take place may be
3. The partners' meeting shall be convened by the personally liable
partner, the agenda to be stated, by registered letter with 14 days'
notice, which shall begin on the date of receipt.
4. The limited partner may request at any time that a partner' meeting be
5. Each partner may have himself represented by an agent. The agent shall
prove his authority by a written power of attorney.
6. Resolutions of the partners shall be adopted in principle with the
majority of votes in the partner's meeting.
7. The partners' meeting shall adopt resolutions in all matters going
beyond the usual course of business of the partnership, in particular
a) Increases or decreases in the limited partnership capital
b) Amendment of the partnership agreement;
c) dissolution of the partnership;
d) approval of the annual financial statement;
e) discharge of the personally liable partner from its duties;
8. Minutes shall be taken of the partners' meeting and the resolutions
adopted there. These shall be signed by the chairman and delivered to
all partners within 14 days.
Section 10 Annual financial statement
1. The personally liable partner shall prepare the annual financial
statement 3 months after the expiry of a business year at the latest
and submit the same to the partners' meeting for approval.
Beforehand, the annual financial statement shall be audited by an
auditing company which has been appointed by the partners' meeting.
2. In the partners' meeting in which resolutions concerning the annual
financial statement are adopted, resolutions shall also be adopted
concerning the discharge of the personally liable partner from its
duties and the appointment of the auditor for the new business year.
3. Any changes to the annual financial statements owing to an assessment
or an investigation by the tax authorities shall not affect the
validity of the annual financial statements under commercial law. Any
changes are to be taken into account in the first annual financial
statement which is submitted to the partners' meeting for approval
after the carrying out of the assessment or the service of the report
of the investigation by the tax authorities.
Section 11 Distribution of the profit and loss, withdrawals
1. In the relationship of the partners to each other, a distributable
profit shall not be available until the personally liable partner has
been reimbursed for the expenses incurred by it in the interest of the
partnership, including the costs of the management, and until the
partnership capital has been fully conserved.
2. The profit arising according to section 1 shall be distributed among
the partners as follows:
a) To cover the liability risk and as compensation for the
management, the personally liable partner shall receive 15% of
its share capital provided that the profit is sufficient for
b) The limited partners shall receive the profit remaining after the
distribution pursuant to a. above according to the amount of
their capital contributions.
3. The personally liable partner shall not have a share in the loss.
4. The partners' meeting shall decide whether and what profit shares may
be withdrawn and how interest is to be paid on profits not withdrawn.
5. The personally liable partner may withdraw appropriate part amounts to
cover the expenses incurred by it in the interest of the partnership
and costs of the management.
Section 12 Dissolution
If it follows from the annual financial statement that the reserves and the
capital contribution accounts have been used up by losses, the personally
liable partner shall convene a partners' meeting without undue delay, which
shall adopt a resolution concerning the dissolution or continuation of the
partnership. The resolution concerning
the dissolution or continuation of the partnership shall be recorded in
minutes, which shall comply with the provisions of this Partnership
Agreement concerning partners' meetings.
Section 13 Liquidation
1. In the event of liquidation, the personally liable partner shall be
appointed as liquidator.
2. Should the personally liable partner not be available as liquidator,
its managing directors who are in office at the time of the
liquidation of the partnership shall become liquidators.
Section 14 Withdrawal of the general partner
If it is to be expected that the general partner will withdraw from the
partnershop for whatever reasons, the partners' meeting shall appoint
another limited liability company as personally liable partner without
undue delay. If this is not done and if the partnership is therefore
threatened with dissolution owing to the withdrawal of the general partner,
a majority, the capital interests of which together total at least one
fourth of the limited partnership capital, shall be entitled to appoint a
natural or legal person as personally liable partner in the place of the
general partner which is lacking. The other partners shall be obligated in
this case to consent to the appointment and to assist in the applications
for registration in the Commercial Register.
Section 15 Concluding provisions
1. Should a provision of this Agreement conflict with imperative
provisions of the law, it shall be deemed not to have been agreed,
i.e. the invalidity of a provision of this Agreement shall not result
in the invalidity of the Agreement as a whole. The invalid provision
shall be replaced by a new provision which comes as close as possible
to the aim and object of the inapplicable provision.
2. Amendments and supplements to this Agreement must be made in writing
in order to be valid.
3. The courts of Munich shall have jurisdiction.
ARTICLES OF ASSOCIATION
VERWALTUNG EDDIE BAUER GMBH
SECTION 1. FIRM-NAME, SEAT
1. The firm-name of the company is
VERWALTUNG EDDIE BAUER GMBH
2. The seat of the company is in Munich.
SECTION 2. OBJECT OF THE COMPANY
The object of the company is participation in other enterprises, in
particular the assumption of the function as general partner for the
limited partnership Eddie Bauer GmbH & Co in Munich.
SECTION 3. DURATION OF THE COMPANY
The company is of unlimited duration.
SECTION 4. BUSINESS YEAR
The business year of the company runs from 1 March until 28/29 February of
the following year. A part business year shall be constituted as from the
establishment until 29 February 1996.
SECTION 5. SHARE CAPITAL
(1) The share capital of the company amounts to
(in words: one hundred thousand Deutsche Mark).
(2) The shareholders are:
- Eddie Bauer Inc. with DM40,000.00
- Handelsgesellschaft Heinrich Heine mbH with DM50,000.00
- Sport-Scheck GmbH with DM10,000.00
(3) The share capital shall be paid fully before application of the company to
the Commercial Register.
SECTION 6. MANAGEMENT AND REPRESENTATION.
1. The company has one or more managing directors (Geschaftsfuhrer). A
sole managing director shall always represent the company alone. If
there is more than one managing director, the company shall be
represented by two managing directors jointly or by one managing
director jointly with a "Prokurist" (authorized signatory).
2. Managing directors may be released from the restrictions of Section
181 BGB (German Civil Code) by shareholder resolution.
3. The managing directors are bound by the instructions of the
SECTION 7. ASSIGNMENT OF SHARES
The assignment of shares or parts of such requires the written consent of
all shareholders in order to be valid.
SECTION 8. SHAREHOLDER MEETING, SHAREHOLDER RESOLUTIONS
The resolutions of the shareholders are adopted with the majority of votes
in the shareholder meeting. Adoptions may also be adopted in writing if all
shareholders expressly agree thereto, unless this conflicts with imperative
SECTION 9. APPROPRIATION OF THE PROFIT AND LOSS
The provisions of Section 29 GmbH-Gesetz (Act on limited liability
companies), new version, shall apply to the appropriation of the profit and
SECTION 10. ANNOUNCEMENTS
The announcements of the company shall be published in the Federal Gazette.
SECTION 11. COSTS OF FOUNDATION
The costs of this agreement, it's legalization and it's enforcement are to
be borne by the company up to DM4,000,--.
DISTRIBUTION AND LICENSE AGREEMENT (RETAIL/MAIL ORDER)
is concluded between
Eddie Bauer Inc.
15010 Northeast 36th Street
Redmond, WA 98052
- hereinafter referred to as "EDDIE BAUER" -
Eddie Bauer GmbH & Co
- hereinafter referred to as "NEWCO" -
1. SUBJECT MATTER OF AGREEMENT
EDDIE BAUER is a licensor of the Trade Marks EDDIE BAUER, AKA ("ALSO KNOWN
AS") Eddie Bauer and EDDIE BAUER HOME and other Trade Marks, short
particulars of which are set out in Schedule 1 (hereinafter referred to as
"Trade Marks"). EDDIE BAUER offers a range of apparel, apparel accessories
(muffler, ear mufflers, gloves, socks, handkerchiefs, etc.), shoes, bags,
umbrellas, watches and other goods as may be offered from time to time
under or by reference to the Trade Marks (hereinafter referred to as the
"EDDIE BAUER Range") for sale in uniformly equipped shops (hereinafter
referred to as "EDDIE BAUER shops"), in catalogs and other media
(hereinafter referred to as catalogs).
This Agreement is to regulate the basic cooperation taking place between
EDDIE BAUER and NEWCO regarding the EDDIE BAUER Range.
2. NEWCO OBLIGATIONS
2.1.1 General Obligations
The content and presentation of all advertising and mail order
media shall be subject of the prior authorization of EDDIE BAUER.
2.1.2 Items from the EDDIE BAUER Range may only be sold to ultimate
consumers in Europe except UK, Ireland, France, Spain, Portugal
and Italy (the "Territory") and may not be sold outside the
Territory without the prior written consent of EDDIE BAUER.
2.1.3 NEWCO is obliged to use the Trade Mark EDDIE BAUER logo in
respect of the EDDIE BAUER Range in the Territory for the
duration of this Agreement. NEWCO undertakes to use the Trade
Marks upon and in connection with the EDDIE BAUER Range only in a
manner approved (see guidelines) by EDDIE BAUER.
2.1.4 EDDIE BAUER reserves the right to enter the shops and to inspect
all suppliers and manufacturers of products to NEWCO at all times
to inspect in particular whether the EDDIE BAUER marketing
concept is being observed and to inspect merchandise manufactured
and supplied for sale in the EDDIE BAUER shops and catalogues.
NEWCO will ensure that EDDIE BAUER can at any time control
merchandise at the respective supplier.
NEWCO will ensure that all items of the EDDIE BAUER Range are
manufactured by or for it in accordance with the agreed Eddie
Bauer Quality Standards and specifications.
2.1.5 NEWCO will inform EDDIE BAUER at regular intervals of all
2.1.6 NEWCO may appoint its supplier/manufacturer subject to Eddie
Bauer's prior written approval EDDIE BAUER will assist NEWCO to
purchase the products on EDDIE BAUER's first conditions from
EDDIE BAUER supplier/-manufacturers.
With the prior written consent of EDDIE BAUER, NEWCO may appoint
a third party solely as an importer for EDDIE BAUER leather shoes
on behalf of NEWCO.
In case EDDIE BAUER, HEINE or SPORT-SCHECK gets refunds/discounts
(especially volume discounts) from its suppliers for the produced
goods EDDIE BAUER, HEINE or SPORT-SCHECK will pass on these net
refund/discount on a pro rata basis to NEWCO.
2.1.7 NEWCO may not substitute or provide alternatives for items of
the EDDIE BAUER Range.
2.1.8 Within thirty (30) days after issuance, NEWCO will send to EDDIE
BAUER 20 copies of the catalogues and two (2) copies of all
promotional materials it has issued in the Territory which
include the EDDIE BAUER Range.
2.1.9 Packaging and labeling costs will be solely borne by NEWCO.
Labeling on all products will be to EDDIE BAUER specifications.
Any additional labeling or changes in the standard (if not
necessary due to law) EDDIE BAUER labels must be approved by
2.1.10 NEWCO agrees that all items of the EDDIE BAUER Range or
products sold with an EDDIE BAUER trademark or sold through the
EDDIE BAUER shops and through mail order shall meet or exceed all
legally applicable statutes, standards, regulations and
guidelines, especially with respect to health and product safety
(including environmental regulations relating to the production
of all such items and other materials used to advertise, market
and merchandise the items) throughout the Territory.
2.2 NEWCO's Obligations (retail)
2.2.1 NEWCO is entitled to open an unlimited number of EDDIE BAUER
NEWCO agrees that all of the EDDIE BAUER shops will bear the name
"EDDIE BAUER", and be located in the Territory.
2.2.2 NEWCO is obligated to sell the EDDIE BAUER Range exclusively in
the EDDIE BAUER shops. No other products will be sold in the
EDDIE BAUER shops unless specifically approved by EDDIE BAUER.
The guidelines given by EDDIE BAUER for advertising and equipping
of the shops are to be observed.
NEWCO is obligated to resell the EDDIE BAUER Range established by
EDDIE BAUER and is only entitled to reduce the EDDIE BAUER Range
if EDDIE BAUER has given written consent.
2.3 NEWCO Obligations/Presentation of Catalogs
Final catalogue layouts will be submitted to EDDIE BAUER not later
than thirty (30) days before the scheduled press date.
3. EDDIE BAUER OBLIGATIONS
3.1 General Obligations
3.1.1 EDDIE BAUER will offer NEWCO complete collections of the EDDIE
BAUER Range in accordance with NEWCO's annual business plan and
on the time table as attached (Schedule 3). EDDIE BAUER agrees to
make reasonable efforts to support NEWCO's requirements.
The samples of the collections (i.e., an original plus colour
swatches) will be made available by EDDIE BAUER free of charge.
3.1.2 Any photography or other original materials (besides the normal
materials of EDDIE BAUER) created specifically for and ordered by
NEWCO (e.g. signage, graphics, fixtures, real estate build out
materials, etc.) will be furnished by EDDIE BAUER at cost price
plus a margin as usual within the Otto group.
At the written request and reasonable notice of NEWCO, EDDIE
BAUER shall send the qualified and experienced persons of EDDIE
BAUER to the Territory and/or make such persons available to
NEWCO at EDDIE BAUER's Redmond Office to assist and advise NEWCO
and its personnel in manufacture, testing, inspecting, sales, and
maintenance of the EDDIE BAUER Range. NEWCO shall reimburse EDDIE
BAUER for all costs incurred in furnishing any individual to
NEWCO (e.g. all compensation, travel expenses, etc.) plus a
margin as usual within the Otto group. The terms and conditions
on which such persons will be sent to the Territory will be
decided later by mutual agreement.
3.1.3 EDDIE BAUER shall provide NEWCO with technical advisory
services, without any additional charge or royalty, which
services will be made available by telephone conversation, by
telex or facsimile or by other means of communications.
3.2 EDDIE BAUER Obligation (mail order)
3.2.1 NEWCO is to inform EDDIE BAUER of the number of catalogs pages
as agreed to in the annual business plan. At no additional
charge, EDDIE BAUER will provide art direction, concepts,
available photography, and rough layouts, and copies to NEWCO for
use in the production of the layouts for the EDDIE BAUER
catalogs. EDDIE BAUER will also provide final photography.
3.2.2 EDDIE BAUER will provide duplicated original transparencies for
the catalogs and other mail order media at cost ex Redmond.
3.3 EDDIE BAUER Obligation (retail)
3.3.1 Within sixty (60) days after execution of this Agreement, EDDIE
BAUER will provide to NEWCO for its non-exclusive use a complete
set of documents (however, prior to termination of this
Agreement, the use of such documents within the Territory shall
be exclusive to NEWCO) including prototype store designs, working
drawing and a concept manual laying out in detail the standards
and method for operating an EDDIE BAUER shop.
3.3.2 EDDIE BAUER will provide NEWCO with detailed store layouts
(i.e., best-sellers by the door), plan-o-grams, store graphics
and advertising information for each collection of the EDDIE
3.3.3 EDDIE BAUER shall provide store operation know-how to NEWCO
including but not limited to the following matters:
(a) Merchandise assortment know-how.
(b) Promotional materials.
(c) Advice related to EDDIE BAUER systems including POS
4. TRADE MARK / LICENSE / COMPETITION
4.1 EDDIE BAUER is the owner of all EDDIE BAUER trade marks. EDDIE BAUER
grants NEWCO an exclusive license to use the trade mark "EDDIE BAUER"
in association with the EDDIE BAUER Range for the duration of this
Agreement in the Territory.
4.2 For the duration of this Agreement NEWCO shall be the exclusive
distributor in the Territory of EDDIE BAUER merchandise, excluding
Ford Eddie Bauer edition vehicles and the Eddie Bauer Maxum Sport
Runabout Boat and the EDDIE BAUER Adventurer cosmetic fragrance
("Excluded Products"). Furthermore NEWCO may sell EDDIE BAUER
merchandise through OTTO VERSAND group companies (cross selling) via
catalogue, outlet stores as specifically approved in advance by Eddie
4.3 Except for Excluded Products, EDDIE BAUER shall not manufacture,
distribute, or supply during the duration of this Agreement the EDDIE
BAUER Range in the Territory to any other third party.
4.4 EDDIE BAUER is the proprietor of the designs, drawings, patterns,
originals and samples of the EDDIE BAUER Range. The sale of or the use
of copying of the said designs, drawings, patterns, originals, and
samples by NEWCO for any purpose is strictly prohibited. EDDIE BAUER
warrants that the supply of goods does not violate any copyright of a
third party and will indemnify NEWCO for any copyright infringement
action. EDDIE BAUER will also indemnify NEWCO for any damages and
costs awarded against NEWCO, including attorneys' fees, in any
infringement action related to the use of EDDIE BAUER trade marks.
EDDIE BAUER will take all reasonable steps to obtain in all necessary
copyrights licenses and trademarks.
EDDIE BAUER will be promptly notified by NEWCO of any suit or threat
of suit as to which EDDIE BAUER may have obligations under the above
provisions and be given reasonable opportunity to defend the same.
4.5 Inasmuch as NEWCO when selling the EDDIE BAUER Range makes statement
which are inconsistent with product descriptions of EDDIE BAUER, NEWCO
will bear the risk of claims which may be asserted by third parties.
5. REMUNERATION / MODE OF PAYMENT
5.1 Mail order
As payment for all obligations stipulated by this contract, EDDIE
BAUER shall receive remuneration from NEWCO for mail order merchandise
of 5% of NEWCO's net sale (as defined in the 5 years plan) and
exclusive value added taxes.
As payment for all obligations stipulated by this contract, EDDIE
BAUER shall receive remuneration from NEWCO for retail merchandise of
2.5% of NEWCO's in-store net sales for the first three years of
business. After the first year business this percentage shall be
negotiated between the parties by mutual consent based on the
principals as discussed between the parties before (see former drafts
of this agreement).
To 5.1 and 5.2
No royalties are due on overstock sales and inventories that are
transferred to the division within the OTTO VERSAND group which
particularly deals with the liquidation of products or inventories
through disposal catalogues, outlet stores, jobbers and other third
parties, provided that such inventories may only be transferred to
such division after NEWCO has made best efforts to sell as much as
possible through proper sales activities by retail stores or
5.3 NEWCO shall render account of the net-sales in the Territory on a
monthly basis and make estimated royalty payments semi-annually on or
before the tenth (10th) working day of the month following the last
month of each season and will make final seasonal accounting and
payment within thirty (30) days thereafter. Any goods still remaining
after the final seasonal accounting date shall be considered with the
next season's goods.
For the purpose of this Agreement, the parties hereto agree that the
seasons shall end on June 30 and December 31.
EDDIE BAUER reserves the right to seek verification of all sales.
The payment will be effected in U.S. currency.
5.4.a Any tax at source (withholding tax) to be withheld by NEWCO
for the account of EDDIE BAUER under the law on tax on
income will be deductible from the royalty payments provided
EDDIE BAUER receives satisfactory documentations of such
However, insofar as it is possible under double taxation
convention for EDDIE BAUER to grant an exemption from the
tax at source, EDDIE BAUER will apply to the competent Tax
Office in the country of NEWCO for a certificate of
exemption that is required for this.
NEWCO will assist EDDIE BAUER in applying for the exemption.
5.4.b If the remuneration in the country of NEWCO is subject to
turnover taxes, and if in this case EDDIE BAUER is debtor of
turnover taxes, VAT is to be added to the remuneration.
If it is provided for by turnover laws in the country of
NEWCO that the added VAT is not to be paid out to EDDIE
BAUER, added VAT is to be paid over to the inland revenue
office by NEWCO in favour of EDDIE BAUER.
5.5 Newco will provide information on results and experience to
EDDIE BAUER on or before the tenth (10th) business day of
the month for the prior calendar month in addition to a
summary quarterly, seasonal and annual results and
experience. The parties hereto will provide each other with
information as to new market trends in the fashion sector.
6. DELIVERY DATES
EDDIE BAUER will use its best endeavours to adhere to delivery dates as
specified in Schedule 3. EDDIE BAUER shall notify NEWCO immediately of the
extent and duration on any actual or anticipated delays and shall take all
reasonable and appropriate measures to maintain any loss at a minimum and
ensure that delivery is made as soon as possible.
Each party agrees to indemnify, defend, and hold the other party harmless
from its own negligent or willful acts, and those of its agents and
Neither party may assign or subcontract any of its rights or obligations
under this Agreement without the approval of the other party.
9. TERMS OF AGREEMENT
9.1 This Agreement shall become effective with it's signature through the
parties and the resolution of the HEINE advisory board approving the
contents of this Agreement. It shall be binding until termination of
the joint venture Agreement between Handelsgesellschaft Heinrich Heine
GmbH, Sport-Scheck GmbH and EDDIE BAUER Inc.
9.2 Termination of this Agreement shall not relieve any of the parties of
its then outstanding and unfulfilled obligations or liabilities under
this Agreement. Furthermore, NEWCO has the right to sell overstocks
for the time of six (6) months after termination.
9.3 Except as set forth in clause 9.2 on the termination date, all rights
of NEWCO under this Agreement shall terminate, and NEWCO shall cease
to use any of the trade marks, trade names, and symbols which may have
accrued by Agreement, operation of law, or otherwise.
10. GENERAL PROVISIONS
10.1 The place of jurisdiction is Hamburg. German law shall apply.
10.2 No waiver of any breach of this Agreement shall constitute a waiver of
any other breach of the same or other provisions of this Agreement,
and no waiver shall be effective unless made in writing. In the event
that any provisions herein shall be illegal or unenforceable, such
provisions shall be severed and the entire Agreement shall not fail,
but the balance of the Agreement shall continue in full force and
10.3 EDDIE BAUER and NEWCO shall not be liable for delays in the
performance of their obligations hereunder due to causes beyond its
reasonable control, including but not limited to Acts of God, strikes,
war, or inability to obtain labour or materials.
10.4 This Agreement constitutes the entire Agreement between the parties
and regarding the subject matter hereof and supersedes and replaces
any prior agreements between the Parties.
The schedules are an integral part of this Agreement.
For and on behalf of NEWCO For and on behalf of Eddie Bauer Inc.
Date: June 6th 1995 Date: June 6th 1995
Schedule 1: Trademark status report
Schedule 2: Trademark
Schedule 3: time table - to be agreed upon separately by mutual consent
COUNTRY TRADEMARK STATUS DATE NUMBER INTERNATIONAL CLASS
- ------- --------- ------ ---- ------ -------------------
Austria EDDIE BAUER pending 08/31/94 16, 18, 20, 24, 25, 35
Austria EDDIE BAUER GOOSE LOGO pending 08/31/94 25
Austria EDDIE BAUER SIGNATURE LOGO registered 10/31/94 155,082 25
Germany EDDIE BAUER registered 08/05/94 2074047 16, 20, 24, 25
Switzerland EDDIE BAUER registered 04/01/93 409,690 16, 20, 24, 25, 42
EDDIE BAUER SIGNATURE