xXXxX*s Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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CONFIDENTIAL
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June 1, 1998
American Retail Enterprises, L.P.
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being entered into in
connection with the Asset Purchase Agreement entered into as of the date hereof
between xXXxX*s Inc., a Delaware corporation ("Parent"), Screeem! Inc., a
Delaware corporation ("Purchaser"), American Retail Enterprises, L.P., a New
York limited partnership (the "Company") and the other signatory parties named
therein (as the same may be amended from to time, the "Purchase Agreement").
Capitalized terms used herein but not defined shall have the respective meanings
given to such terms in the Purchase Agreement. Except as expressly set forth
herein, the Purchase Agreement remains in full force and effect. This Agreement
shall be deemed to be a Seller's Document and a Purchaser's Document for
purposes of the Purchase Agreement.
As a material inducement to each party to the Purchase Agreement, the
parties hereto hereby agree as follows:
1. (a) In the event that any consent for the assignment (which consent need
not include a consent to convert a XXXX COUNTRY store to a SCREEEM! store) of a
Lease Agreement with respect to Purchased Store is not obtained at or prior to
the Closing (such store being an "Excluded Store"), then, notwithstanding
anything contained in the Purchase Agreement, Seller's Documents or Purchaser's
Documents or in any exhibit or schedule thereto, at and as of the Closing: (i)
the Lease Agreement with respect to such Excluded Store and the assets located
in such Excluded Store and otherwise constituting Purchased Assets shall be
excluded from the Purchased Assets and shall be deemed to be Excluded Assets;
(ii) the Lease Agreement with respect to such Excluded Store shall not be deemed
to be a Purchased Contract, and no Liabilities arising under such Lease
Agreement shall be deemed to be Assumed Liabilities; (iii) the aggregate
Purchase Price shall be adjusted downwards by that amount set forth on Schedule
I hereto, such reduction in Purchase Price to be allocated pro rata among the
Cash Consideration, the Basic Shares and the Additional Shares to be delivered
at Closing; and (iv) the Excluded Store shall not be deemed to be a Purchased
Store.
(b) If the required consent with respect to an Excluded Store is
obtained within 120 days of the Closing Date, such Excluded Store will be sold
to Buyer for that amount set forth on Schedule I hereto, allocated pro rata
(proportionate to the Purchase Price) among the Cash Consideration, the Basic
Shares and the Additional Shares, but otherwise subject to the same terms and
conditions as the sale of the Purchased Assets under the Purchase Agreement.
Without limiting the foregoing, at and as of the closing of such sale (the
"Subsequent Closing Date"): (i) the Lease Agreement with respect to such
Excluded Store and all assets located in such Excluded Store at the Subsequent
Closing Date shall be deemed to be Purchased Assets and shall not be deemed to
be Excluded Assets; (ii) the Lease Agreement with respect to such Excluded Store
and any debts, claims, Liabilities, obligations and expenses as may arise with
respect to periods from and after the Subsequent Closing under such Lease
Agreement shall be assumed by Purchaser and such Lease Agreement shall be deemed
to be a Purchased Contract; and (iii) the Excluded Store shall be deemed to be a
Purchased Store. Any Subsequent Closing shall be held within ten (10) Business
Days of the obtaining of the applicable consent. Any purchase price payable at a
Subsequent Closing shall be subject to the same adjustments set forth in Section
3.2 of the Purchase Agreement with respect to the net assets acquired at such
Subsequent Closing except that all references therein to the Closing or the
Closing Date shall be deemed to refer to the Subsequent and the Subsequent
Closing Date.
2. (a) The Companies shall use best commercial efforts (which for purposes
of this provision only, shall mean that the Companies shall be required to make
payments to landlords of up to, but not more than (i) $500,000 in the aggregate
to obtain Assignment Consents (as defined below) and Use Change Consents (as
defined below) with respect to 20 (but not less than 20) Purchased Stores, and
(ii) $1,000,000 in the aggregate to obtain Assignment Consents and Use Change
Consents with respect to 24 (but not less than 24) Purchased Stores, and the
Companies shall not be obligated to spend any additional funds to obtain such
consents) to obtain landlord consents to (x) the assignment of the Lease
Agreements to the Purchaser ("Assignment Consents") and (y) change in permitted
use by Purchaser of XXXX COUNTRY stores to SCREEEM! stores ("Use Change
Consents"). Notwithstanding anything in the foregoing to the contrary, the
Companies shall have no obligation to spend money to obtain Use Change Consents
with respect to: (A) the Purchased Stores located in the Smithhaven and
Xxxxxxxxx Xxxxxx malls and (B) three other Purchased Stores.
(b) In the event the Companies spend more than $500,000 in the
aggregate to obtain Assignment Consents and Use Change Consents at or prior to
the Closing, Purchaser and Parent shall reimburse the Company at Closing the
amount of such excess above $500,000 (up to a maximum aggregate reimbursement of
$500,000) and the Purchase Price shall be reduced (by means of delivery of fewer
Additional Shares than would otherwise be determined pursuant to Section 3.1(c)
of the Purchase Agreement, valued at the Issue Price) on a dollar-for-dollar
basis (determined by deducting the amount of such reimbursement from the amount
referenced in Section 3.1(c) of the Purchase Agreement) by such amount in excess
of $500,000 (not to exceed $500,000).
3. Entire Agreement. This Agreement sets forth the parties' final and
entire agreement with respect to its subject matter and supersedes any and all
prior understandings and agreements, whether written or oral, all of which are
merged herein. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by a written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, change or waiver is sought.
4. Assignment; Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns;
provided, however, that neither this Agreement nor any right or obligation
hereunder may be assigned or transferred by any party without the
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consent of the others, except that Purchaser may assign its rights hereunder
and/or delegate its obligations hereunder to any other Affiliate of Parent so
long as Parent remains liable hereunder.
5. Severability. If any provision of this Agreement shall be held by any
court of competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be illegal, invalid or unenforceable, and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
6. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York (without
reference to its rules governing conflicts of law or any rule of construction
against the drafting party (all parties being deemed to have negotiated and
written this Agreement jointly)).
7. Forum; Jurisdiction. In the event any party to this Agreement commences
any litigation, proceeding or other legal action in connection with or relating
to this Agreement, any of Seller's Documents or any of Purchaser's Document's,
or any matters described or contemplated herein or therein, with respect to any
matters described or contemplated herein or therein, the parties hereto hereby
agree: (a) under all circumstances absolutely and irrevocably to institute any
litigation, proceeding or other legal action in a court of competent
jurisdiction located within the Borough of Manhattan, City and State of New
York, whether a state or federal court; (b) that in the event of any such
litigation, proceeding or action, such parties will consent and submit to
personal jurisdiction in any such court and to service of process as permitted
by applicable law or by mail to the addresses provided in accordance with
Section 15.3 of the Purchase Agreement (which service shall be binding and
effective for all purposes); (c) to waive to the fullest extent permitted by law
any objection that they may now or hereafter have to such venue or to the
convenience of any such forum; and (d) EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY SUCH LITIGATION, PROCEEDING OR ACTION.
8. If any Purchased Stores become Excluded Stores hereunder, with respect
to the period from and after the Closing and to the earlier of (a) the
Subsequent Closing of the 24th Purchased Store or (b) 120 days from the Closing,
the Companies shall perform the covenants set forth in Sections 7.1, 7.2, 7.5,
7.7, 7.9 and 7.10 of the Purchase Agreement as applied to the Excluded Stores as
if the Closing had not occurred.
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If you are in agreement with the foregoing, kindly sign and return to me
the enclosed copy of this letter.
Very Truly Yours,
SCREEEM! INC.
xXXxX*s Inc.
By:___________________________
Xxxx X. Xxxxxxx
Senior Vice President--
Development & Legal Affairs
Confirmed and Agreed to:
AMERICAN RETAIL ENTERPRISES, L.P.
(for itself and as agent for the Companies)
By: LANDMARK PANTS CORP.
its general partner
By:______________________
Xxxxxxx Xxxxxx
Vice President
By:______________________
Xxxx Xxxxxxxx
Vice President
By: THE PANTS SET, INC.
its general partner
By:______________________
Xxxxxxx Xxxxxx
President
By:______________________
Xxxx Xxxxxxxx
Vice President
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SCHEDULE I
The amount of Purchase Price deducted as a result of a failure to obtain consent
to assignment will be as follows
For the first such Excluded Store: 90% of 1/24 of the Purchase Price
For the second such Excluded Store: 85% of 1/24 of the Purchase Price
For the third such Excluded Store: 80% of 1/24 of the Purchase Price
For the fourth such Excluded Store: 75% of 1/24 of the Purchase Price
For the fifth such Excluded Store: 70% of 1/24 of the Purchase Price
For the sixth such Excluded Store: 65% of 1/24 of the Purchase Price
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