SECAUCUS, N.J., June 8, 2007 (PRIME NEWSWIRE) -- The Children's Place Retail Stores, Inc. (Nasdaq:PLCE) announced today that it has executed a letter agreement with a subsidiary of The Walt Disney Company (Disney) to resolve assertions by Disney that the Company committed numerous material breaches of its long-term license agreement under which the Company operates the Disney Store retail chain in North America. This letter agreement, which modifies and supplements the license agreement, represents the conclusion of several months of previously disclosed discussions that have been ongoing between the companies.
"We are pleased to have come to an understanding with The Walt Disney Company," said Ezra Dabah, Chief Executive Officer of The Children's Place Retail Stores, Inc. "We are committed to executing on this important remodel program which will contribute to our goal of elevating the guest experience."
Under the letter agreement, the Company has agreed to, among other things, remodel a total of 234 existing Disney Stores into a new store prototype being developed by the Company, by the end of fiscal 2011. The first nine remodels, which will include two stores bearing the "Mickey" format, will be completed during the second half of fiscal 2007. The Company is required to remodel at least 67 additional Disney Stores, 33 of which will be "Mickey" stores, into the new store prototype by the end of fiscal 2008 and to remodel an additional 53, 70 and 35 Disney Stores during fiscal 2009, 2010 and 2011, respectively. In addition, by the end of fiscal 2008, the Company will open at least 18 new Disney Stores using the new store prototype.
In addition, under the terms of the letter agreement, the Company will complete a "maintenance refresh" program in approximately 165 Disney Stores, including the flagship store located on Michigan Avenue in Chicago, by no later than June 30, 2008.
As previously announced, the Company's Board of Directors has committed $175 million of capital to fund the remodel and refresh programs described above between now and the end of fiscal 2011.
The Company and Disney also agreed to make certain other modifications to the provisions of the license agreement, including eliminating the extended royalty abatement for some of the Disney Stores that were identified as "Non-Core Stores" in the license agreement, reducing the restrictions on Disney's ability to grant direct merchandising licenses to other specialty retail store chains, requiring the potential implementation of a differentiated merchandise plan for the Disney Store outlets and modifying the provisions of the license agreement that would apply to a potential wind-down of the Disney Store business following any termination of the license agreement.
If the Company fully complies with the terms of the letter agreement, Disney has agreed to refrain from exercising any rights or remedies that it would have based on the existing breaches of the license agreement that are identified in the letter agreement. However, if the Company violates any of the provisions of the letter agreement, Disney has the right to terminate this forbearance and the letter agreement, in which case Disney would be free to exercise any or all of its rights and remedies under the license agreement, including terminating the Company's license to operate the Disney Stores.
In addition, if the Company breaches any of the provisions of the letter agreement on three or more occasions, Disney can require the Company to make a payment of $18.0 million to Disney.
If the Company violates any of the provisions of the letter agreement on five or more occasions, Disney has the right to terminate the license agreement, without any right on the part of the Company to defend, counterclaim, protest or cure. Disney continues to retain all its other rights and remedies under the license agreement with respect to any other breaches that may occur.
The Children's Place Retail Stores, Inc. is a leading specialty retailer of children's merchandise. The Company designs, contracts to manufacture and sells high-quality, value-priced merchandise under the proprietary "The Children's Place" and licensed "Disney Store" brand names. As of June 2, 2007, the Company owned and operated 876 The Children's Place stores and 328 Disney Stores in North America and The Children's Place online store at www.childrensplace.com.
This press release and above referenced call may contain certain forward-looking statements regarding future circumstances. These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements including, in particular, the risks and uncertainties described in the Company's filings with the Securities and Exchange Commission, as well as the risks and uncertainties relating to the Company's stock option grants and procedures and the recently completed investigation by the special committee of the Company's Board of Directors, the previously announced pending restatement of the Company's historical financial statements, the delays in filing the Company's periodic reports with the Securities and Exchange Commission, the outcome of the informal investigation of the Company being conducted by the Securities and Exchange Commission, potential other governmental proceedings, the shareholder litigation commenced against the Company and certain of its officers and directors, and the potential impact of each of these matters on the Company, as well as matters relating to the Company's discussions with The Walt Disney Company. Actual results, events, and performance may differ. Readers or listeners (on the call) are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.