LIMITED LIABILITY COMPANY AGREEMENT
OF
BET STUDIO LLC
a Delaware Limited Liability Company
Adopted as of April 11, 1997
LIMITED LIABILITY COMPANY AGREEMENT
OF
BET STUDIO LLC
A DELAWARE LIMITED LIABILITY COMPANY
This Limited Liability Company Agreement of BET STUDIO LLC, a Delaware
limited liability company (the "Company"), dated as of April 11, 1997 (this
"Agreement"), is entered into, executed and agreed to, for good and valuable
consideration, by and among the Members (as defined below).
WHEREAS, G-III Leather Fashions, Inc. ("G-III"), a New York corporation,
and Black Entertainment Television, Inc. ("BET"), a Delaware corporation, (G-III
and BET being referred to collectively as the "Parties") desire to form a joint
venture in the form of a Delaware Limited Liability Company to produce
BET-branded apparel and accessories that will cater to the African-American and
urban consumer.
NOW, THEREFORE, in consideration of the mutual promises of the Parties,
and of good and valuable consideration, the receipt of which are hereby
acknowledged, it is mutually agreed by and among the Parties as follows:
ARTICLE I
CONSTRUCTION AND DEFINITIONS
1.1 CONSTRUCTION. Words used in this Agreement, regardless of the number
or gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context shall require.
1.2 REFERENCES. As used in this Agreement, unless expressly stated
otherwise, references to "including" mean "including, without limitation."
Unless otherwise specified, all references in this Agreement to Articles,
Sections, Exhibits, Schedules or paragraphs, are deemed references to the
corresponding Articles, Sections, Exhibits, Schedules or paragraphs in this
Agreement.
1.3 HEADINGS. The headings of the Articles, Sections, Schedules and
Exhibits of this Agreement are included for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction or
interpretation hereof.
1.4 DEFINITIONS. Terms used herein, but not otherwise defined herein,
shall have the following meanings:
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with any other Person. For the
purposes of this definition, "control" means the power to direct the management
and affairs of a Person or to vote 20 percent or more of securities or other
equity interests having ordinary voting power of a Person;
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"Act" means the Delaware Limited Liability Company Act, 6 Del. C. 'SS'
18-101, et seq., and any successor statute, as amended from time to time;
"Agreement" has the meaning given that term in the introductory
paragraph hereof;
"Board of Managers" shall mean those representatives of the Parties
selected to manage the business and affairs of the Company (also referred to as
the "Board");
"Business Affairs Services" shall have the meaning given that term in
Section 7.1;
"Business Day" means any day other than a Saturday, a Sunday or a
holiday on which national banking associations in the State of New York
generally will not send wire transfers;
"Capital Account" shall have the meaning given that term in Section 4.5;
"Capital Contribution" means, with respect to any Member, the aggregate
amount of cash and the agreed fair market value or other binding obligations to
contribute cash or property or perform services or any other valuable
consideration, if any, transferred to the Company by such Member in accordance
with Article IV hereof.;
"Certificate" shall have the meaning given that term in Section 2.1;
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time;
"Company" means BET STUDIO LLC, a Delaware limited liability company;
"Covered Person" means any Member, Manager, Affiliate of a Member, or
any officers, directors, shareholders, partners, employees, representatives,
advisors or agents of a Member or their respective Affiliates or any officers,
employees, representatives, advisors or agents of the Company;
"Default Interest Rate" means a rate per annum equal to the lesser of
(a) a varying rate per annum that is equal to the interest rate published by the
WALL STREET JOURNAL in its "Money Rates" (or equivalent) section from time to
time as the prime rate, with adjustments in that varying rate to be made on the
same date as the publication date of any change in that rate plus 2 percent, and
(b) the maximum rate permitted by applicable law;
"Dispose," "Disposing" or "Disposition" means a sale, assignment,
transfer, lease, exchange, or other disposition (including dispositions by
operation of law), or the acts thereof;
"Fiscal Year" means the period commencing on the date hereof and ending
on January 31, 1998, and each 12-month period thereafter;
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"General Interest Rate" means a rate per annum equal to the lesser of
(a) a varying rate per annum that is equal to the interest rate published by the
WALL STREET JOURNAL in its "Money Rates" (or equivalent) section from time to
time as the prime rate, with adjustments in that varying rate to be made on the
same date as the effective date of any change in that rate, and (b) the maximum
rate permitted by applicable law;
"Investment" means any share purchase, capital contribution or loan to,
or advance (other than advances in the ordinary course of business) to, any
Person other than a Controlled Affiliate of the Company;
"Lending Member" shall have the meaning given that term in Section 4.4;
"Licensed Marks" shall have the meaning given the term in Section 2.5;
"Manager" shall mean any member of the Board of Managers;
"Member" means any Person who has been admitted to the Company as a
member in accordance with this Agreement, but does not include any Person who
has ceased to be a Member in the Company, or, if other than an individual, been
dissolved;
"Membership Interest" means the interest of a Member in the Company,
including its Capital Account and its rights to a share of the profits and
losses of the Company, to receive distributions (liquidating or otherwise),
information and the right to consent to or approve actions by the Company;
"Person" means any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization;
"Products" shall have meaning given the term at Section 2.5;
"Securities Act" means the Securities Act of 1933, as amended;
"Sharing Ratio" with respect to any Member means the fraction (expressed
as a percentage), as set forth on Exhibit A opposite such Member's name;
"Third Person" means a Person other than a Member, or any of their
Affiliates;
"Treas. Reg." refers to those regulations promulgated by the U.S.
Department of the Treasury pursuant to authority of the Code or any revenue law
of the United States; and
"Unanimous Approval" means the unanimous approval or consent of all
Members or Managers.
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ARTICLE II
ORGANIZATION
2.1 FORMATION. If not already accomplished before the date hereof, the
Members shall promptly file the Certificate of Formation (the "Certificate") in
accordance with the Act. The Members hereby agree to continue the Company as a
limited liability company under and pursuant to the Act and agree that the
rights, duties and liabilities of the Members shall be as provided in the Act,
except as otherwise provided herein.
2.2 QUALIFICATION IN OTHER JURISDICTIONS. The Board of Managers shall
cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business in which such qualification, formation or
registration is required or desirable. The Board of Managers shall execute,
deliver and file, or cause the execution, delivery or filing of, any
certificates (and any amendments or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
2.3 NAME. The name of the Company is "BET STUDIO LLC," and all Company
business may be conducted in that name or any other name that complies with
applicable law as the Board of Managers may select from time to time.
2.4 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED
STATES; OTHER OFFICES. The registered office of the Company and the name and
address of the registered agent of the Company in the State of Delaware required
by the Act shall be at c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, DE 19801 or any other office (which need
not be a place of business of the Company) as the Board of Managers may
designate from time to time in the manner provided by law. The principal office
of the Company in the United States shall be at 345 West 37th Street, New York,
New York, or any such other place as the Board of Managers may designate from
time to time, which need not be in the State of Delaware, and the Company shall
maintain records there as required by the Act. The Company may have such other
offices as the Board of Managers may designate from time to time.
2.5 PURPOSES. The purposes for which the Company is organized are to,
including without limitation, manufacture, distribute and sell men's, women's
and children's apparel and accessories (the "Products") bearing the marks "Black
Entertainment Television," "BET" and other marks utilized by BET or its
affiliates (the "Licensed Marks"), or other marks developed by the Company, and
to transact any or all lawful business for which limited liability companies may
be organized under the Act.
2.6 TERM. The initial term of the Company commenced on April 10, 1997,
the date the Certificate was filed with the Secretary of State of the State of
Delaware and shall continue until April 11, 2007, unless (i) such term shall be
extended by mutual agreement of the Parties or (ii) the Company shall be
dissolved before such date in accordance with the provisions of this Agreement.
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ARTICLE III
MEMBERS; MEMBERSHIP INTERESTS;
DISPOSITIONS OF MEMBERSHIP INTERESTS
3.1 MEMBERS. The Members of the Company are the entities set forth on
Exhibit A, each of which has, as of the date hereof, the Sharing Ratio and
Capital Account balance stated thereon.
3.2 RESTRICTIONS ON THE DISPOSITION OF A MEMBERSHIP INTEREST. No
Membership Interest may be disposed or transferred, in whole or part, unless the
terms and conditions of this Section 3.2 have been satisfied. Any disposition or
transfer or reported disposition or transfer not made in accordance with this
Section 3.2 will be null and void. Anything in this Agreement to the contrary
notwithstanding, no Person who is an assignee or transferee of a Membership
Interest shall be admitted to the Company as a substitute Member absent the
Unanimous Approval of the Board of Managers. Anything in this Agreement to the
contrary notwithstanding, no Member may dispose of one or more Membership
Interests or interests in his Sharing Ratio without the unanimous prior written
consent of the Board of Managers, which consent will be given in its sole and
absolute discretion.
ARTICLE IV
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
4.1 INITIAL CONTRIBUTIONS OF MEMBERS. Contemporaneously with the
execution of this Agreement, the Members shall make an initial Capital
Contribution as set forth on Exhibit A, and the Sharing Ratios and initial
Capital Contribution of the Members shall be as provided in Exhibit A.
4.2 ADDITIONAL CONTEMPLATED CONTRIBUTIONS. The Members agree to provide
additional Capital Contributions in an amount up to $1,000,000 each, at such
time or times on a pari passu basis as shall be determined by G-III, in
consultation with BET, in connection with G-III's provision of Business Affairs
Services (as hereinafter defined). Exhibit A shall be amended from time to time
to reflect any additional Capital Contributions made by the Members. Except as
set forth in this Section 4.2, no Member shall be required or permitted to make
any additional Capital Contributions unless approved by the Board.
4.3 RETURN OF CONTRIBUTIONS. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions.
4.4 OTHER OBLIGATIONS OF MEMBERS. Each Member agrees that it will cause
to be issued one or more letters of credit in an aggregate amount equal to 50%
of the amount determined by the Board to be necessary to support the business of
the Company. If the Company does not have sufficient cash to pay its
obligations, a Member ("Lending Member") that may agree to do so, with the
Unanimous Approval
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of the Board of Managers, may advance all or part of the needed funds to or on
behalf of the Company. An advance described in this Section 4.4 constitutes a
loan from the Member to the Company, which shall bear interest at the General
Interest Rate from the date of the advance until the date of payment, shall
contain such other terms and conditions as approved by the Board and shall not
be deemed a Capital Contribution.
4.5 CAPITAL ACCOUNTS. A separate "Capital Account" (herein so called)
shall be maintained for each Member for the full term of the Agreement in
accordance with the capital accounting rules of Treas. Reg. 'SS'
1.704-1(b)(2)(iv). Each Member shall have only one Capital Account, regardless
of the number or classes of Membership Interests in the Company owned by such
Member and regardless of the time or manner in which such interests were
acquired by such Member. Pursuant to the basic rules of Treas. Reg. 'SS'
1.704-1(b)(2)(iv), the balance of each Member's Capital Account shall be:
(a) Increased by the amount of money contributed by such Member
(or such Member's predecessor-in-interest) to the capital of the Company
and decreased by the amount of money distributed to such Member (or such
Member's predecessor-in-interest);
(b) Increased by the fair market value (determined without regard
to Section 7701(g) of the Code) of each property contributed by such
Member (or such Member's predecessor-in-interest) to the capital of the
Company (net of liabilities secured by such property that the Company is
considered to assume or take subject to under Section 752 of the Code)
and decreased by the fair market value (determined without regard to
Section 7701(g) of the Code) of each property distributed to such Member
(or such Member's predecessor-in-interest) by the Company (net of
liabilities secured by such property that such Member is considered to
assume or take subject to under Section 752 of the Code);
(c) Increased by the amount of each item of Company profit
allocated to such Member (or such Member's predecessor-in-interest);
(d) Decreased by the amount of each item of Company loss
allocated to such Member (or such Member's predecessor-in-interest); and
(e) Otherwise adjusted in accordance with the other capital
account maintenance rules of Treas. Reg. 'SS' 1.704-1(b)(2)(iv).
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS. (a) Except as otherwise provided herein or unless
another allocation is required by Section 704(b) of the Code and Treas. Reg. ss.
1.704-1(b) (including, but not limited to, minimum gain chargebacks, qualified
income offsets, and nonrecourse deductions), for purposes of determining the
Members' Capital Accounts, all items of income, gain, loss, deduction and credit
shall be allocated among the
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Members pro rata in accordance with their Sharing Ratios in effect for the
period during which such items accrue. For purposes of computing the amount of
each item of income, gain, deduction or loss, the determination, recognition and
classification of such item shall be the same as its determination, recognition
and classification for federal income tax purposes, unless otherwise required by
Section 704(b) of the Code.
(b) Except to the extent such item is subject to allocation under
Section 704(c) of the Code or Section 704(c) principles as contemplated under
Section 704(b) of the Code, each item of income, gain, loss, deduction and
credit, as determined for federal and other income tax purposes, shall be
allocated in the same manner as such item was allocated under Section 5.1(a),
above.
(c) All items of income, gain, loss, deduction and credit allocable to
any Membership Interest that may have been transferred shall be allocated
between the transferor and the transferee based on the portion of the calendar
year during which each was recognized as owning that Membership Interest,
without regard to the results of Company operations during any particular
portion of that calendar year and without regard to whether cash distributions
were made to the transferor or the transferee during that calendar year;
provided, however, that this allocation must be made in accordance with a method
permissible under Section 706 of the Code and the regulations thereunder.
5.2 DISTRIBUTIONS. From time to time (but at least once each Fiscal
Year) the Board of Managers shall determine in its reasonable judgment to what
extent (if any) the Company's cash on hand exceeds its current and anticipated
needs, including for operating expenses, debt service, acquisitions and a
reasonable contingency reserve. If the Board of Managers determines that an
excess exists, the Board of Managers shall direct the Company to make a
distribution to the Members, in accordance with their Sharing Ratios, in an
amount in cash equal to that excess.
ARTICLE VI
MANAGEMENT
6.1. BOARD OF MANAGERS. (a) Except as provided in Article VII hereof,
the business and affairs of the Company shall be managed under the direction of
the Board of Managers (the "Board"), and the Board shall have all power and
authority to manage, and direct the management and the business and affairs of,
the Company. Any power not delegated pursuant to a policy of delegation adopted
by the Board shall remain with the Board. Approval by or action taken by the
Board in accordance with this Agreement shall constitute approval or action by
the Company and shall be binding on the Members.
(b) The Board shall at all times consist of six members
(individually referred to as a "Manager"), three of whom shall be appointed by
G-III and three of whom shall be appointed by BET. Each Manager shall serve
until the earlier of his replacement by election, resignation, removal, death,
or inability to serve. Any Manager may resign at any time upon written notice to
the Company. Vacancies on the Board
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shall be filled by the Member that appointed the Manager previously holding the
position which is then vacant. Appointment of a Manager by a Member shall be
effective upon receipt of notice by the Company.
(c) The Board shall be headed by two co-chairpersons, one
appointed by G-III and one appointed by BET. The initial co-chairpersons shall
be Morris Goldfarb and Robert L. Johnson.
6.2. NOTICE OF BOARD OF MANAGERS MEETINGS; LOCATION; WAIVER OF NOTICE.
Regular meetings of the Board shall be held at such times and places as may be
fixed by the Board. Special meetings of the Board may be called by the Company
upon seven days' prior written notice, which notice shall identify the purpose
of the special meeting and the business to be transacted; provided that the
failure to identify specifically an action to be taken or business to be
transacted shall not invalidate any action taken or any business transacted at a
special meeting. Notice of meetings may be waived before or after a meeting by a
written waiver of notice signed by the Manager entitled to notice. A Manager's
attendance at a meeting shall constitute waiver of notice unless the Manager
states at the beginning of the meeting his objection to the transaction of
business because the meeting was not lawfully called or convened. Meetings may
be held by telephone.
6.3. QUORUM; APPROVALS; PROXIES; WRITTEN ACTION. The presence in person
or by proxy of at least two Managers appointed by each Member shall constitute a
quorum for the transaction of business at a Board meeting. The unanimous vote of
all Managers present at a duly constituted meeting shall be required for the
Board to act and shall constitute approval by the Board. Each Member of the
Board may vote by delivering his proxy to another Manager. The Board may act
without a meeting if the action taken is approved in advance in writing by the
unanimous consent of all Managers. The Board shall cause written minutes to be
prepared of all action taken by the Board and shall cause a copy thereof to be
delivered to each Manager within 15 days thereafter.
6.4. AUTHORITY OF THE BOARD OF MANAGERS. Unless otherwise provided for
in this Agreement, the Board, by its own action or by action of a subcommittee
of the Board, but not by delegation to officers or other employees of the
Company, shall, in addition to any other power granted to it in this Agreement,
have the right, power and authority to take the following actions and no such
action will be taken without the Unanimous Approval of the Board:
(a) making overall policy decisions with respect to the business
and affairs of the Company;
(b) approving the annual budget and strategic plan for the
Company, and the annual marketing plan for the Company, and any material
amendments and supplements thereto;
(c) approving any contract, agreement and commitment with a value
in excess of $25,000 or a non-cancellable term longer than six (6)
months (or a
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group of related contracts, agreements and commitments with an aggregate
value in excess of $25,000);
(d) approving the choice of bank depositories, and approving
arrangements relating to signatories on bank accounts;
(e) approving the choice of the Company's attorneys, independent
accountants, and any other consultants, including but not limited to
market consultants, leasing agents, management agents, and advertising
and public relations agents, where it is contemplated that such
consultants will provide services with a value in excess of $25,000, or
for a period longer than six (6) months;
(f) approving all contracts that are proposed to be entered into
between the Company and any Member or affiliate of a Member, including
any lending arrangements between the Company and any Member;
(g) approving any change of the Company's fiscal year;
(h) approving all distributions to the Members;
(i) approving the conveyance, sale, transfer, assignment, pledge,
encumbrance, or disposal of, or the granting of a security interest in,
any assets of the Company;
(j) approving the conversion of the Company into another entity
or its merger or consolidation with another Person;
(k) approving the acquisition of any business or a business
division from any person whether by asset purchase, stock purchase,
merger or other business combination;
(l) approving the transfer of any assets of the Company, or any
interest therein, other than in the ordinary course of business, the
fair market value of which may reasonably be expected to exceed $10,000;
(m) the incurring of indebtedness by the Company or the loaning
of any sum or any other extension of credit, other than trade
receivables, by the Company to any Person in an amount in excess of
$10,000 or for a period in excess of six (6) months;
(n) the guarantee by the Company of any indebtedness of any other
person in any amount in excess of $10,000 or for a period in excess of
six (6) months, or the guarantee of any contractual obligations of any
other person with a value in excess of $10,000 or for a period in excess
of six (6) months;
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(o) the entrance by the Company into any real estate lease with a
value in excess of $10,000 or a term greater than six (6) months, or the
acquisition by the Company of any real estate with a value in excess of
$25,000;
(p) the authorization of any Member to act for or to assume any
obligation or responsibility on behalf of the Company;
(q) the employment, appointment and removal of any senior manager
of the Company who will be involved in the day to day management of the
business of the Company, and who will receive compensation in excess of
$100,000 per year;
(r) any other disbursement or expense in excess of $10,000 not in
the ordinary course of the Company's business;
(s) any change in accounting principles used by the Company,
except to the extent required by generally accepted accounting
principles;
(t) approving any tax elections of the Company; and
(u) the conduct of litigation to which the Company is a party.
6.5. SUBCOMMITTEES. The Board may designate one or more subcommittees.
Each subcommittee shall be composed of such number of Managers as the Board may
determine, including at least one Manager appointed by each Member. Any
subcommittee, to the extent provided by the Board, shall have and may exercise
all the power and authority of the Board. The provisions of Sections 6.2 and 6.3
shall apply to any meeting of any subcommittee of the Board, except that a
quorum shall only require the presence of at least one Manager appointed by each
Member.
6.6. NO INDIVIDUAL AUTHORITY. Except as otherwise expressly provided in
this Agreement, no Member, acting alone, shall have any authority to act for, or
undertake or assume any obligation or responsibility on behalf of, the other
Member or the Company.
6.7. OFFICERS. (a) The Board shall appoint and or hire the officers of
the Company. The officers shall report to the Board, manage the day-to-day
affairs of the Company, carry out the directions of the Board and effectuate the
business plan as set forth in the annual budget and strategic plan of the
Company.
(b) Duties and Powers of President- The president shall be the chief
executive officer of the Company, shall have general and active management of
the business of the Company and shall see that all orders and resolutions of the
Members and Board are carried into effect. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the Company,
except where required or permitted by law to be otherwise signed and executed,
and except where the signing
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and execution thereof shall be expressly delegated by the Board to some other
officer or agent of the Company.
(c) Duties and Powers of Vice-Presidents - The executive vice-president
and any vice-presidents shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president and shall perform
such other duties and have such other powers as the Board may from time to time
prescribe.
(d) Duties and Powers of Secretary - The secretary shall attend all
meetings of the Board and Members, and shall record all the proceedings of the
meetings in a book to be kept for that purpose. The secretary shall give, or
cause to be given, notice of all meetings of the Board and Members and special
meetings of the Board and Members, and shall perform such other duties as may be
prescribed by the Board or president, under whose supervision the secretary
shall be. The secretary shall have custody of the seal and the secretary shall
have authority to affix the same to any instrument requiring it and, when so
affixed, it may be attested by his or her signature. The Board may give general
authority to any other officer to affix the seal of the Company and to attest
the affixing by his or her signature.
(e) Duties and Powers of Treasurer - The treasurer shall have the
custody of the funds and securities of the Company, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Company, and shall deposit all moneys and other valuable effects in the name and
to the credit of the Company in such depositories as may be designated by the
President or Board. The treasurer shall disburse the funds of the Company as may
be ordered by the President or Board, taking proper vouchers for such
disbursements, and shall render to the president an account of all his or her
transactions as treasurer and of the financial condition of the Company.
(f) The Board shall unanimously approve of and appoint a president,
treasurer, a secretary, and a vice president with such duties as may be
established by the Board and established herein.
6.8. BANK ACCOUNTS. The Company shall maintain bank accounts in such
banks as the Board may designate exclusively for the deposit and disbursement of
all funds of the Company. All funds of the Company shall be promptly deposited
in such accounts. The Board from time to time shall authorize signatories for
such accounts.
ARTICLE VII
CERTAIN RESPONSIBILITIES OF THE PARTIES
7.1 MANAGEMENT SERVICES PROVIDED BY G-III. (a) G-III shall be
responsible for managing the business affairs of the Company. In managing the
business affairs of the Company, G-III shall be required to: (i) provide all
accounting, credit, collections, accounts payable, accounts receivable, cash
management, systems administration, management information systems, human
resources, import/export and other "back office" services (collectively, the
"Business Affairs Services") required by the Company;
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and (ii) make available such G-III personnel as shall be reasonably necessary to
provide the Business Affairs Services.
(b) G-III is entitled to receive a fee (the "Management Fee") from the
Company in an amount equal to six percent (6%) of the net sales (determined in
accordance with generally accepted accounting principles) of the Company for
providing the Business Affairs Services; provided, however, that if the
Allocable Expenses (as hereinafter defined) in connection with G-III's providing
the Business Affairs Services to the Company during any Annual Period (as
hereinafter defined) during the term of this Agreement shall be an amount less
than six percent (6%) of net sales during such Annual Period, G-III shall repay
such deficiency to the Company within thirty days of the determination of such
amount. For the purposes of this Section 7.1, (i) "Allocable Expenses" shall be
based on G-III's costs for providing Business Affairs Services to all of its
divisions, including the Company, and the Allocable Expenses to the Company
shall be determined in accordance with G-III's accounting and allocation
procedures utilized in preparing internal financial statements for G-III's
divisions and (ii) "Annual Period" shall mean the period from the date hereof
through January 31, 1999 and each twelve-month period thereafter; provided,
however, that if this Agreement terminates on a date other than January 31, the
final Annual Period shall end on such date of termination. The Company shall pay
the Management Fee to G-III on a quarterly basis within thirty (30) days after
the end of each fiscal quarter of the Company based on the net sales of the
Company for that quarter.
7.2 DISTRIBUTION SERVICES PROVIDED BY G-III. G-III shall be responsible
for distributing the Products of the Company.
7.3 LICENSE FROM BET. BET shall grant to the Company an exclusive
license to manufacture and distribute Products utilizing the Licensed Marks.
ARTICLE VIII
LIABILITY AND EXCULPATION
8.1 LIABILITY. Except as otherwise provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Covered
Person.
8.2 EXCULPATION.
(a) No Covered Person shall be liable to the Company or any other
Covered Person under any theory of law, including tort, contract or
otherwise, including a Covered Person's own negligence, for any loss,
damage or claim incurred by reason of any act or omission (including
decisions to vote for or against any matter) performed or omitted by
such Covered Person in good faith on behalf of the Company and in a
manner reasonably believed to be within the scope of authority conferred
on such Covered Person by this Agreement, except
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that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence or willful
misconduct.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any Person
as to matters the Covered Person reasonably believes are within such
other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Company, including
information, opinions, reports or statements as to the value and amount
of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which distributions
to Members might properly be paid.
8.3 DUTIES AND LIABILITIES OF COVERED PERSONS.
(a) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to
the Company or to any other Covered Person arising under this Agreement,
a Covered Person acting under this Agreement shall not be liable to the
Company or to any other Covered Person for actions (including decisions
to vote for or against any matter) taken by it in good faith reliance on
the provisions of this Agreement. The provisions of this Agreement, to
the extent that they restrict the duties and liabilities of a Covered
Person otherwise existing at law or in equity, are agreed by the parties
hereto to replace such other duties and liabilities of such Covered
Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between Covered Persons, or (ii)
whenever this Agreement or any other agreement contemplated herein or
therein provides that a Covered Person shall act in a manner that is, or
provides terms that are, fair and reasonable to the Company or any
Member, the Covered Person shall disclose such conflict or action to the
Board and shall resolve such conflict of interest (subject to any Member
or Board approvals required pursuant to this Agreement), taking such
action or providing such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Covered Person, the
resolution, action or term so made, taken or provided by the Covered
Person shall not constitute a breach of this Agreement or any other
agreement contemplated herein or of any duty or obligation of the
Covered Person at law or in equity or otherwise.
(c) Whenever in this Agreement a Covered Person is permitted or
required to make a decision (i) in its "discretion" or under a grant of
similar authority or latitude, the Covered Person shall be entitled to
consider only such interests and factors as it desires, including its
own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting
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the Company or any other Person, or (ii) in its "good faith" or under
another express standard, the Covered Person shall act under such
express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. To the fullest extent permitted by applicable law,
a Covered Person shall be entitled to indemnification from the Company for any
loss, damage or claim incurred by such Covered Person (i) by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement or (ii) by reason
of being a Member, a Manager, an Affiliate of a Member, an officer, director,
shareholder, partner, employee, representative, advisor or agent of a Member or
its Affiliate, or an officer, employee, representative, advisor or agent of the
Company, except that no Covered Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Covered Person by reason
of gross negligence, willful misconduct or breach of fiduciary duty with respect
to such acts or omissions; provided, however, that any indemnity under this
Section 9.1 shall be provided out of and to the extent of Company assets only,
and no Covered Person shall have any personal liability on account thereof.
9.2 EXPENSES. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Covered Person in defending any
claim, demand, action, suit or proceeding for which indemnity is sought under
this Agreement shall, from time to time, be advanced by the Company prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Company of an undertaking by or on behalf of the Covered Person to repay
such amount if it shall be determined that the Covered Person is not entitled to
be indemnified as authorized in Section 9.1 hereof.
9.3 INSURANCE. The Company may purchase and maintain insurance, to the
extent and in such amounts as the Board shall deem reasonable, on behalf of
Covered Persons and such other Persons as the Board shall determine, against any
liability that may be asserted against or expenses that may be incurred by any
such Person in connection with the activities of the Company or such
indemnities, regardless of whether the Company would have the power to indemnify
such Person against such liability under the provisions of this Agreement. The
Company may enter into indemnity contracts with Covered Persons and adopt
written procedures pursuant to which arrangements are made for the advancement
of expenses and the funding of obligations under Section 9.2 hereof and
containing such other procedures regarding indemnification as are appropriate.
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ARTICLE X
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS. At all times during the
continuance of the Company, the Company shall maintain, at its principal place
of business, or at some other location chosen by the Board, such records as are
required under the Act, under this Agreement or by the Board in its sole and
absolute discretion. Such records of the Company, together with a copy of this
Agreement and of the Certificate, shall at all times be maintained at the
principal place of business of the Company or some other location chosen by the
Board and shall be open to inspection and examination at reasonable times by
each Member and its duly authorized representative for any purpose reasonably
related to such Member's interest as a Member of the Company.
10.2 AUDITING AND DISCREPANCIES.
(a) From time to time, any Member may, at its own cost and
expense, audit, or employ certified public accountants to audit, the
books and records of the Company. In addition, BET shall have the right
to audit the determination of Allocable Expenses to the Company. Any
such audit shall be conducted on at least five (5) business days' notice
during normal business hours of the Company and shall be conducted to
minimize any interference with the Company's or G-III's business
operations.
(b) The auditors of the Company (the "Auditors") shall be chosen
by the Board.
10.3 ACCOUNTS. The Company shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Board determines.
The Company's funds shall not be commingled with the funds of any Member;
however, Company funds may be invested in a manner the same as or similar to the
Members' investment of their own funds or investments by their Affiliates.
ARTICLE XI
EARLY TERMINATION OF THIS AGREEMENT
11.1 TERMINATION OF EITHER PARTY. If the Company shall report a net loss
(as determined by the Auditors in accordance with generally accepted accounting
principles consistently applied), with respect to its Fiscal Year ending January
31, 2001, either BET or G-III shall have the right to terminate this Agreement
and dissolve the Company on six months' notice given to the other Party no later
than July 31, 2001.
11.2 TERMINATION BY BET. BET shall have the right to terminate this
Agreement as of January 31, 2002 on at least six months' notice to G-III. If BET
shall so elect to terminate this Agreement, it shall pay to G-III no later than
April 30, 2002 an amount equal to the product of (a) .501, (b) ten (10) and (c)
the income before taxes
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of the Company for the fiscal year ending January 31, 2002 as determined by the
Auditors in accordance with generally accepted accounting principles
consistently applied.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 DISSOLUTION. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the expiration of the term of the Company, as provided in
Section 2.6 hereof;
(b) a termination of this Agreement pursuant to Article XI
hereof;
(c) entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act;
(d) complete liquidation or dissolution of any Member, but, in
the case of such complete liquidation or dissolution, such liquidated
and dissolved, Member shall remain fully and entirely liable to the
Company and any other Member for any and all of the liabilities of such
liquidated and dissolved Member; and
(e) an event requiring dissolution under the Act.
12.2 LIQUIDATION. On dissolution of the Company, the Members shall
designate a person to act as a liquidator. The liquidator shall proceed
diligently to wind up the affairs of the Company and make final distributions as
provided herein and in the Act. The costs of liquidation shall be borne as a
Company expense. Until final distribution, the liquidator shall continue to
operate and manage the Company properties with all of the power and authority of
the Board and the Members. The steps to be accomplished by the liquidator are as
follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be
made by a recognized firm of certified public accountants of the
Company's assets, liabilities, and operations through the last day of
the calendar month in which the dissolution occurs or the final
liquidation is completed, as applicable;
(b) the liquidator shall cause any notice required by the Act to
be mailed to each known creditor of and claimant against the Company;
(c) the liquidator shall pay, satisfy or discharge from Company
funds all of the debts, liabilities and obligations of the Company
(including all expenses incurred in liquidation and any advances
described in Section 4.4 or otherwise make adequate provision for
payment and discharge thereof (including the
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establishment of a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may reasonably determine);
and
(d) all remaining assets of the Company shall be distributed to
the Members as follows:
(i) the liquidator may sell any or all Company property,
including to Members, and any resulting gain or loss from each
sale shall be computed and allocated to the Capital Accounts of
the Members;
(ii) with respect to all Company property that has not
been sold, the fair market value of that property shall be
determined and the Capital Accounts of the Members shall be
adjusted to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in property that has not been
reflected in the Capital Accounts previously would be allocated
among the Members if there were a taxable disposition of that
property for the fair market value of that property on the date
of distribution; and
(iii) Company property shall be distributed among the
Members in accordance with the positive Capital Account balances
of the Members, as determined after taking into account all
Capital Account adjustments for the Fiscal Year during which the
liquidation of the Company occurs (other than those made by
reason of this Section 12.2(d)(iii)); and those distributions
shall be made by the end of the Fiscal Year during which the
liquidation of the Company occurs (or, if later, 90 days after
the date of the liquidation).
All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses and liabilities shall be allocated to the distributee pursuant
to this Section 12.2.
12.3 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the contrary
contained in this Agreement, no Member shall be required to restore to the
Company or pay to any other Member any deficit that may exist in the Capital
Account of such Member upon dissolution and liquidation of the Company.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES.
(a) Any notice, request, instruction or other document to be
given hereunder by a Person to the another Person shall be in writing
and delivered personally, via facsimile transmission (with receipt
confirmed), by recognized courier service (with receipt confirmed), or
by registered or certified United
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States mail, postage prepaid to the addresses of the Members set forth
on Exhibit A or at the other address for the Person as shall be
specified by like notice. Any notice that is delivered personally in the
manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by the party (or its
agent for notices hereunder). Any notice that is addressed and mailed in
the manner herein provided shall be conclusively presumed to have been
duly given to the party to which it is addressed at the close of
business, local time of the recipient, on the tenth day after the day it
is so placed in the mail. Any notice that is sent by facsimile
transmission shall be deemed to have been duly given to the party to
which it is addressed upon telephonic confirmation of the same as
provided herein or upon confirmation of receipt by facsimile
retransmission of such notice, or a written statement acknowledging
receipt. Any notice that is sent by recognized courier service shall be
deemed to have been duly given to the party to which it is addressed
upon confirmation of delivery in writing by the delivery service.
[shorten this]
(b) Whenever any notice is required to be given by law or this
Agreement, a written waiver thereof, signed by the Person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
13.2 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. Each of the Members
hereby represents and warrants as follows:
(a) it is duly organized and validly existing in good standing
under the laws of its state of incorporation and it has taken all
required action to authorize the execution, delivery and performance of
this Agreement;
(b) it has the full right, power and authority to enter into this
Agreement and perform all its obligations hereunder; and
(c) upon execution and delivery, this Agreement will constitute
such Member's legal, valid and binding obligation enforceable against
such Member in accordance with its terms, except as the enforceability
of such terms may be limited by bankruptcy, insolvency, moratorium or
other laws relating to or affecting creditors' rights generally or by
the exercise of judicial discretion in accordance with general equitable
principles.
13.3 AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified from time to time only by a written instrument executed by a Majority.
13.4 BINDING EFFECT. This Agreement is binding on and inures to the
benefit of the Members and their respective legal representatives, successors
and assigns.
13.5 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
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GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER
JURISDICTION.
13.6 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
13.7 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any right
it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
13.8 CONFIDENTIALITY. Any dissemination of confidential information or
any disclosure or announcements public or private regarding the existence or
terms of this Agreement is subject to approval of both parties except that
either Party may disclose such information or make a public announcement (with
prior notice to the other party) if required by a valid, binding and
non-appealable court order or applicable securities laws.
13.9 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing
this Agreement, each Member acknowledges that it has actual notice of (a) all of
the provisions of this Agreement, including the restrictions on the transfer of
Membership Interests set forth in Article III, and (b) all of the provisions of
the Certificate. Each Member hereby agrees that this Agreement constitutes
adequate notice of all such provisions.
13.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
13.11 ENTIRE AGREEMENT. Except for the Licensing Agreement, this
instrument contains all of the understandings and agreements of whatsoever kind
and nature existing between the parties hereto with respect to this Agreement
and the rights, interests, understandings, agreements and obligations of the
respective parties pertaining to the Company.
13.12 ARBITRATION. Any controversy, dispute or claim arising out of or
relating to any issue related to the provisions of this Agreement, which
include, but are not limited to, the determination of Allocable Expenses to the
Company and the determination of any amount payable to G-III pursuant to Section
11.2, shall be submitted to binding and final arbitration before a single
arbitrator of the American Arbitration Association ("AAA") in New York, New
York. Each party shall bear the fees and expenses of any counsel, accountant or
other experts or advisors which it retains, except that all fees and expenses of
the AAA and its arbitrator, and all fees and expenses incurred in the
arbitration proceeding at the direction of the arbitrator, shall be borne
equally by the parties.
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IN WITNESS WHEREOF, the Members have executed this Agreement as
of the date first set forth above.
MEMBERS:
G-III LEATHER FASHIONS, INC.
___________________________________
Morris Goldfarb
Chief Executive Officer
BLACK ENTERTAINMENT TELEVISION,
INC.
___________________________________
Robert L. Johnson
Chairman, Founder and
Chief Executive Officer
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EXHIBIT A
CAPITAL SHARING
CONTRIBUTION RATIO
------------ -----
G-III Leather Fashions, Inc. $1,000,000 50.1%
512 Seventh Avenue
New York, New York 10018
Attention: Morris Goldfarb
Fax No.: 212-719-0971
Black Entertainment Television, Inc. $1,000,000 49.9%
One BET Plaza
1900 W. Place NE
Washington, DC 20018
Attention: Robert Johnson
Fax No.: 202-608-2504
Total $2,000,000 100%
========== ====
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