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Transition Services Agreement

Transition Agreement

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 This Transition Agreement involves

Arizona Mail Order Company, Inc | Crosstown Traders, Inc | Norm Thompson Outfitters, Inc | Orchard Brands Corporation

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Governing Law: New York     Date: 9/19/2008
Industry: Retail (Apparel)     Law Firm: Kirkland Ellis     Sector: Services

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THIS TRANSITION SERVICES AGREEMENT (this “ Agreement ”)   is made   and   entered into as of __________ ___, 2008, by and between Charming Shoppes of Delaware, Inc., a Pennsylvania corporation (“ Charming ”), and Arizona Mail Order Company, Inc, a Delaware corporation (“ AMO ”).  Charming and AMO are at times referred to herein individually as a “ Party ” and collectively as the “ Parties ”.


WHEREAS, Crosstown Traders, Inc., a Delaware corporation (“ Seller ”) and Norm Thompson Outfitters, Inc. (“ NTO ”) have entered into that certain Stock Purchase Agreement dated August 25, 2008, as amended on September ___, 2008 (the “ Purchase Agreement ”), pursuant to which NTO has agreed to purchase all of the issued and outstanding stock of AMO and its subsidiaries as more fully described in the Purchase Agreement;


WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Purchase Agreement; and


WHEREAS, as a condition to the Seller and NTO’s obligation to consummate the transactions contemplated by the Purchase Agreement, the Parties have entered into this Agreement pursuant to which each Party will make available to the other Party certain transition services for the time periods specified herein.


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:






1.01   Transition Services .  Upon the terms and subject to the conditions set forth in this Agreement, each Party (in such capacity, the “ Provider ”) will provide to the other Party (in such capacity, the “ Recipient ”) for the use in the businesses of the Recipient and its Affiliates each of the services listed in Appendix A , which is attached to and made part of this Agreement (hereinafter referred to individually as a “ Transition Service ”, and collectively as the “ Transition Services ”), during the time period for each Transition Service set forth on Appendix A (hereinafter referred to as the “ Time Periods ” for all of the Transition Services, and the “ Time Period ” for each Transition Service).


1.02   Personnel .  In providing the Transition Services, the Provider, as it deems necessary or appropriate in its sole discretion, may (a) use such personnel of the Provider or its Affiliates and/or (b) employ the services of other third parties (each such third party, a “ Subcontractor ”) to the extent such Subcontractor’s services are routinely used to provide similar services to the Provider’s business or are reasonably necessary for the efficient performance of any of such Transition Services. The Provider shall retain responsibility for the provision of such Transition Services to the Recipient.  If the Provider elects to commence the provision of specified Transition Services hereunder through a Subcontractor that is not engaged with respect to the Transition Services in question by the Provider as of the date hereof, then the Recipient shall have the right to terminate such specified Transition Services on 20 days prior written notice to the Provider and to engage such Subcontractor to perform such specified Transition Services







directly for the Recipient and the Recipient shall have no further liability or obligation to the Provider with respect to such terminated Transition Services.


1.03   Level of Transition Services .


(a)   The Provider shall perform the Transition Services exercising the same degree of care as it exercises in performing the same or similar services for its own account, with priority equal to that provided to its own businesses or those of any of its Affiliates.  Subject to the obligations under this Agreement (including, without limitation, the other provisions of this Section 1.03(a)), the Provider shall be responsible for the proper   management of and control over the provision of the Transition Services (including, without limitation, the determination or designation at any time of the equipment, employees and other resources of the Provider to be used in connection with the provision of the Transition Services), it being expressly acknowledged and agreed that the Parties shall in good faith and shall reasonably cooperate in the cost-effective transition of each Party’s business units to stand alone functionality and, in the case of AMO, the integration of AMO and its business with the businesses operated by AMO and its Affiliates.  Accordingly, the Recipient may from time to time request that the Provider implement plans, procedures and other processes relating to the provision of Transition Services which it in good faith believes will help achieve such objectives and/or facilitate and expedite the Recipient's transition to stand-alone functionality as well as such other plans, procedures and other processes which it in good faith believes will improve the operational efficiency of the Recipient's business.  The Provider shall consider in good faith and implement any such commercially reasonable plans, procedures and other processes requested by the Recipient, so long as the Recipient agrees to bear capital expenditures and incremental management expenses that the Parties mutually agree will be required to be made in connection therewith.


(b)   As more specifically set forth in Appendix A attached hereto, it is the intention of the parties that the Recipient’s use of any Transition Service shall not be higher than the level of use required by the affected business unit prior to the Closing Date.  In no event shall the Recipient be entitled to any new service (other than any additional services mutually agreed by the Parties in a separate writing) or to increase its use of any of the Transition Services above the level of use prior to the date hereof without the prior written consent of the Provider.


(c)   In connection with the provision of Transition Services and subject to Section 5.01 hereof, the Provider may undertake periodic maintenance and other temporary shutdowns of its information technology system, processing center equipment, call center services or other system related to any Transition Service as needed and in accordance with its own practices and procedures (but not more frequently than one (1) four (4) hour period per month) so long as the Provider makes commercially reasonable efforts to minimize any disruption to the Recipient’s business as a result thereof. The Provider shall give notice to the Recipient at least 72 hours prior to any scheduled maintenance (and such notice shall provide the estimated time such system is to be shut down for maintenance) and will make commercially reasonable efforts to give notice to the Recipient 24 hours prior to any non-scheduled temporary shutdowns but in any event will give notice as soon as is practicable.  Notice under this subsection shall be given pursuant to Section 6.04 herein.  


(d)   The Parties acknowledge that the intent of this Agreement is to provide for the orderly and efficient transition of each Party’s respective business units to stand-alone functionality and that the Parties are not in the business of providing the Transition Services to third parties.  Accordingly, each Party agrees to use commercially reasonable efforts to make a transition of each such Transition Service to its own internal organization (or any other third party suppliers for the Transition Services) as promptly as practicable within (or at the conclusion of) the Time Period applicable to such Transition







Service and shall take such commercially reasonable actions (e.g., providing the other Party reasonable access to operational information) in furtherance of the foregoing.  Each Party shall assist the other Party’s efforts by (i) collaborating on changes to operating procedure and third party providers (e.g. shipping contracts), (ii) dedicating sufficient resources (including, without limitation, personnel and materials) that are needed for the transition of each Transition Service to a stand-alone functionality (which shall include, without limitation, the transition from the Provider’s distribution centers and call center to the Recipient’s distribution centers and call center), and (iii) other mutually agreeable practices before termination of the Transition Service.


(e)   If a Transition Service expires or is terminated pursuant to this Agreement, but information  or other support related to such service is still required to perform another Transition Service that continues, provision of the continuing Transition Service will be contingent upon the Recipient providing the information and support needed from the expired or terminated service to provide the Transition Service that continues.


1.04   Limitation of Liability and Warranty .


(a)   In the absence of gross negligence or reckless or willful misconduct on the Provider’s part, subject to the indemnity provisions of Article 5 of this Agreement, the Provider shall not be liable for any claims, liabilities, damages, losses, costs, expenses (including, but not limited to, settlements, judgments, court costs and reasonable attorneys’ fees), fines and penalties incurred by the Recipient, arising out of any actual or alleged injury, loss or damage of any nature whatsoever by the Recipient in the Provider’s providing or failing to provide the Transition Services to the Recipient.  Notwithstanding anything to the contrary contained herein, in the event the Provider commits an error with respect to or incorrectly performs or fails to perform any Transition Service, at the Recipient’s request, the Provider shall use reasonable best efforts to correct such error, re-perform or perform such Transition Service.


(b)   In no event shall the Provider be liable for any damages caused by the Recipient’s failure to perform the Recipient’s responsibilities hereunder.  The Provider will not be liable to the Recipient for any act or omission of any other entity that is not an Affiliate or Subcontractor of the Provider furnishing any Transition Service (other than due to a default or breach by the Provider or any of its Affiliates or Subcontractors of any agreement between the Provider or any of its Affiliates or Subcontractors and such third party).




1.05   Obligation to Continue to Use Services .


(a)   Unless terminated pursuant to this Agreement, the Provider shall provide, and the Recipient shall purchase, the Transition Services for the Time Periods as is specified with respect to the applicable Transition Service on Appendix A .  The Recipient may terminate any of the Transition Services that the Provider is providing to the Recipient by giving the Provider prior written notice of its







desire to terminate such Transition Services in accordance with the termination notice periods specified in Appendix A .  Notwithstanding anything to the contrary contained in this Agreement, if the Recipient is able to procure from a third-party source services similar to, and in substitution for, any particular Transition Service (a “ Third Party Service ”) the Recipient shall have the right to terminate such Transition Service upon the provision of written notice of termination to the Provider as set forth in Appendix A and shall thereupon utilize the services of such third-party provider for such Third Party Service in lieu of the particular Transition Service so terminated without liability or obligation to the Recipient, including quarterly true-up amounts set forth on Appendix A (other than the obligation to compensate the Provider for services performed prior to the effective date of termination).   In the event that the Recipient requires the provision of a Transition Service (other than the Transition Service so terminated and replaced with such Third Party Service) in order to facilitate its utilization of and migration to a Third Party Service, the Provider agrees to provide such Transition Service as promptly as is commercially reasonable following the Recipient’s request therefor and shall use commercially reasonable means to prioritize the same so as to expedite the Recipient’s utilization of and migration to such Third Party Service.


(b)   If any Transition Service is terminated by the Recipient, the Recipient may not elect to reinstitute such Transition Service.


1.06   Provider Access .  To the extent reasonably required for the Provider’s personnel to perform the Transition Services, the Recipient shall provide the Provider’s personnel with access to its equipment, office space, plants, telecommunications and computer equipment and systems, and any other areas and equipment; provided that such access shall not include the use thereof in the provision of any Transition Service.


1.07   Title to Assets; Methods, etc; Ownership of Products .


(a)   All procedures, methods, systems, strategies, tools, equipment, facilities and other resources used by Provider in connection with the provision of Transition Services hereunder (including all intellectual property rights whether existing or created in connection with the provision of the Transition Services or otherwise) shall remain the property of Provider and shall at all times be under the sole direction and control of Provider.


(b)   Notwithstanding any other provision of this Agreement, and except as otherwise expressly provided in Appendix A or in a separate written agreement that is not, by its terms, superseded by this Agreement, title to all products or other materials that are transported, shipped, warehoused or otherwise held in the custody of Provider on behalf of Recipient shall at all times remain with Recipient, and Recipient shall at all times be the owner of record of such products or other materials, and, subject to Section 5.01, shall be solely responsible for any matters arising from or relating to such products or other materials.


1.08   Review Meetings .  The Parties shall hold review meetings (“ Review Meetings ”) at least bi-weekly or as otherwise mutually agreed by the Parties (in each case, at mutually acceptable dates, times and locations) at which representatives of Charming and AMO shall review and discuss any operational, strategic or other issues raised by any participant with respect to the provision of the Transition Services.  The Parties intend that the information exchanged at such Review Meetings shall be in addition to ongoing communication between representatives of Charming and AMO with respect to the provision of Transition Services hereunder.











2.01   Consideration .


(a)   As consideration for the Transition Services, the Recipient shall pay to the Provider the amount specified for each Transition Service as set forth in Appendix A ; provided, however, if a Subcontractor delivers invoices to Recipient (rather than to the Provider) for Transition Services rendered under this Agreement, Recipient shall pay such Subcontractor directly and the Recipient shall have no further liability or obligation to the Provider with respect to the payment for the Transition Services covered thereby.  In such event, the Recipient shall notify Provider that such invoices have been paid directly by Recipient.   Upon the termination of any Transition Service in accordance with this Agreement, the compensation to be paid under this Section 2.01 shall no longer include the amount specified for such terminated Transition Service.


(b)   If the amount to be paid for any Transition Service is described in Appendix A as “Cost”, “ Cost ” shall mean the Provider’s direct out-of-pocket cash cost to provide that Transition Service (i.e., direct labor costs, travel and related costs and any direct third-party costs) and a reasonable and fairly allocated portion of costs and expenses incurred by Provider and its Affiliates (so long as such allocation is consistent with historical practice set forth in Charming’s P/L Statement reviewed by AMO and its representatives) in providing such Transition Service (including without limitation service-specific overhead costs, rents, maintenance and utilities).  Such Cost shall be sufficient to permit the Provider to receive full reimbursement of its Costs in connection with the provision of the Transition Services but shall not contain any profit-margin or premium.  The Parties acknowledge and agree that, subject to the foregoing, (i) the Provider shall bear any and all costs required to permit Provider to provide any such Transition Services (e.g., the cost of obtaining any third party consent required to enable Provider to provide any such Transition Service to Recipient) and any and all costs of any kind or nature incurred by Provider in connection with ceasing to provide any Transition Service, and (ii) notwithstanding any provision in this Agreement to the contrary,   in no event will any amendment, restatement or other modification of any contract between Provider and any third party enable Provider to receive additional compensation for any Transition Service to be provided under this Agreement (it being agreed that if the Provider is required to pay additional costs to a third party with respect to a Transition Service pursuant to any such amendment, restatement or other modification of any contracts, and Appendix A provides for such costs to be pas

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