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As filed with the Securities and Exchange Commission on May 24, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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AMENDMENT NO. 1
TO
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FOOTSTAR, INC.
(Formerly named "Footwear Group, Inc.")
(Exact name of registrant as specified in its charter)
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DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
933 MACARTHUR BOULEVARD
MAHWAH, NEW JERSEY
(Address of Principal 07430
executive offices) (Zip Code)
(201) 934-2000
(Registrant's telephone number, including area code)
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
Common Stock, par value $.01 per share The New York Stock Exchange, Inc.
Securities to be registered pursuant to Section 12(g) of the Act:
None
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This Amendment No. 1 to Registration Statement on Form 10 is being
filed with the Securities and Exchange Commission in order to include
Exhibit 10.1 thereto. The Information Statement that forms a part of this
Amendment No. 1 is identical to the Information Statement included in the
Registration Statement filed with the Securities and Exchange Commission on
March 27, 1996, which Information Statement is not separately included in
this Amendment No. 1.
Exhibit
Number Description
- ------- -----------
2.1 Distribution Agreement, dated as of , 1996, between
Melville Corporation ("Melville") and the Registrant.*
3.1 Amended and Restated Articles of Incorporation of the
Registrant.*
3.2 Amended and Restated Bylaws of the Registrant.*
10.1 Master Agreement, dated as of June 9, 1995, between Kmart
Corporation and the Registrant, as amended.** Application
for confidential treatment with respect to certain portions of
this Exhibit has been made to the Securities and Exchange
Commission.
10.2 Tax Sharing Agreement, dated as of , 1996, between
Melville and the Registrant.*
10.3 1996 Incentive Compensation Plan of Registrant.*
10.4 1996 Non-Employee Director Stock Plan of Registrant.*
10.5 Form of Executive Employment Agreement.*
10.6 Supplemental Executive Retirement Plan of Registrant.*
21.1 Subsidiaries of the Registrant.*
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* To be filed by amendment.
** Filed herewith.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
FOOTWEAR GROUP, INC.
By: /s/ Carlos Alberini
-------------------------------
Name: Carlos Alberini
Title: Chief Financial Officer
Date: May 24, 1996
EXHIBIT 10.1
Blank space in this Exhibit surrounded by brackets ("[ ]") indicates
confidential material that has been omitted from this Exhibit and that is
the subject of a Confidential Treatment Application and that has been filed
separately with the Securities and Exchange Commission.
EXECUTION COPY
MASTER AGREEMENT
This Master Agreement ("Agreement") is made and entered into as of
June 9, 1995 and effective as of July 1, 1995 (the "Effective Date") by and
between KMART CORPORATION, a corporation organized and existing under the laws
of the State of Michigan with a principal address at 3100 West Big Beaver
Road, Troy, Michigan 48084 ("Kmart" or "Licensor") and MELVILLE CORPORATION, a
corporation organized and existing under the laws of the State of New York
with a principal address at One Theall Road, Rye, New York 10580 ("Melville").
All capitalized terms used herein which are not otherwise defined, shall have
the meaning set forth in Article II.
WHEREAS, Kmart or its licensees operate large discount stores
under the trade names and service marks KMART and SUPER KMART CENTER in the
United States of America and its territories and possessions, Canada, Puerto
Rico, Australia, New Zealand, the Czech Republic, Slovakia, Mexico and
Singapore;
WHEREAS, under a certain License Agreement dated October 30, 1991
by and between Kmart and Kmart Properties, Inc., a corporation organized and
existing under the laws of the State of Michigan with a principal address at
3250 West Big Beaver Road, Suite 226, Troy, Michigan 48084 ("KPI"), KPI has
granted to Kmart the exclusive right, license and privilege to use the Marks
in the Territory, including the right to sublicense use of the Marks within
the Territory, subject to KPI's written consent and control;
WHEREAS, Kmart and Melville have entered into a series of
agreements governing the formation and capitalization of Meldisco Corporations
which operate Footwear Departments within Stores in the Territory, all as more
specifically described in Exhibit A (collectively, the "Melville Agreements");
WHEREAS, pursuant to the Melville Agreements, Kmart has entered
into license agreements with Meldisco Corporations granting them the right
to operate Footwear Departments in the Stores in the Territory and with the
consent of KPI, to use the Marks in the advertising and promotion of such
Footwear Departments (collectively, the "Meldisco License Agreements");
WHEREAS, the parties desire that the Meldisco Corporations
continue to operate Footwear Departments in Stores in the Territory;
NOW THEREFORE, in consideration of the mutual promises,
undertakings and covenants herein, and for other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree:
ARTICLE I
PURPOSES OF THE AGREEMENT
1.1 Purpose. The purpose of this Agreement is to establish uniform
terms and conditions and uniform procedures for the operation of Footwear
Departments in the Stores in the Territory. This Agreement supersedes the
Melville Agreements and the same are hereby terminated as of the Effective
Date hereof. This Agreement also modifies the terms and conditions of all
Meldisco License Agreements which are in force and effect as of the Effective
Date, and establishes a new standard form of Meldisco License Agreement for
use and execution upon and after the Effective Date. Any terms and conditions
in any existing Meldisco License Agreement which conflict with the terms and
conditions hereof shall be null and void and of no further force and effect.
The standard form of Meldisco License Agreement to be executed by Licensor and
each Meldisco Corporation that will operate a Footwear Department, from the
Effective Date forward is attached and incorporated herein as Exhibit B.
1.2 Structure. Except as set forth below, each Footwear Department
licensed under this Agreement shall be operated by a separate Meldisco
Corporation, 51% of the stock of which shall be owned by Melville directly or
by another corporation in which Melville has a direct or indirect majority
stock ownership interest (a "Melville Group Member") and 49% of the stock of
which shall be owned by Licensor directly or by another corporation in which
Licensor has a direct or indirect majority stock ownership interest. In
connection with the issuance of the stock of each such Meldisco Corporation,
the parties shall execute a Shareholders' Agreement in the form of Exhibit C,
attached and incorporated herein. As an exception to this structure, the
Meldisco Corporations, identified in Exhibit D, attached and incorporated
herein, shall be wholly-owned by Melville or a Melville Group Member. If any
of these Meldisco Corporations is operating within a Store which is closed and
relocated nearby, the successor Store shall be operated by a wholly-owned
Meldisco Corporation as well, provided that the total number thereof shall not
exceed the total number identified on Exhibit D.
ARTICLE II
TERMS AND DEFINITIONS
For purposes of this Agreement and all Meldisco License Agreements, the
following terms shall have the meanings expressed after each term:
"Business Day" shall mean a day, excepting Saturday, upon which banks
in Detroit are open for business.
"Dividends" shall have the meaning set forth in Article 6.1(b)(v).
"Excluded Footwear" shall mean:
(a) sports shoes with cleat attachments affixed
to the soles or bowling shoes, ice
skates, roller skates, in-line skates,
football shoes, golf shoes and track
shoes (not including non-cleated running
or jogging shoes or shoes with cleat
attachments molded to the soles or to the
shoes);
(b) waders and hip boots;
(c) ski boots;
(d) all knit and crib booties (sizes 0-5);
(e) slipper socks without licensed character
designs;
(f) slippers and/or slipper socks which are
packaged, attached to and sold as a unit
with sleepwear or robes; and
(g) waterproofing preparations for athletic,
hunting, fishing and recreational
footwear and sold in Licensor's sporting
goods departments.
"Fees" shall mean collectively the "[ ] Fee," [ ]
"[ ] Fee," [ ], "Employee Discount Fee," and
"[ ] Fee" as further defined in Article 6.1(b),
together with all other fees or payments due Licensor
hereunder.
"Footwear shall mean the area within Store(s) in the Territory
Department(s)" designated by Licensor where Licensees shall conduct
retail sales of Licensed Footwear.
"Gross Sales" when used with respect to Licensees, shall mean the
total revenues generated by retail sales by Licensees
of Licensed Footwear in the Footwear Departments, and
when used with respect to Licensor shall mean the
total revenues generated by retail sales in the
subject departments in the Stores, in either case,
whether for cash, credit or deferred payment, without
diminution for credit losses, except that the
following shall be excluded in calculating Gross
Sales: (a) the amounts allowed for goods subsequently
returned for refund or credit; and (b) sales, use or
excise taxes passed on to the customer, excluding,
without limitation, any withholding taxes.
"Licensed Footwear" shall mean any footwear except Excluded Footwear and
shall also mean shoe care items (including, without
limitation, laces, polishes, waxes, oils, dyes,
brushes, daubers, shoe trees, shoe cleaning and
waterproofing preparations, heel plates or taps and
gift kits containing any of the foregoing) which
Licensees are permitted hereunder to sell in the
Footwear Departments.
"Licensee(s)" shall mean Meldisco Corporation(s) formed for the
purpose of operating a Footwear Department(s) in
Store(s).
"Licensor" shall mean Kmart Corporation.
"Marks" shall mean the trademarks and service marks KMART and
SUPER KMART CENTER, in block letters or design format,
and any service mark adopted in the future that
incorporates the mark KMART in whole or in part,
together with registrations therefor, all as more
specifically described in Exhibit E, attached and
incorporated herein.
"Materials" shall mean interior store signs, print and broadcast
advertising pieces, store employee manuals and
employee uniforms and badges on or in connection with
which Licensee(s) may use the Marks as permitted
hereunder.
"Meldisco" shall mean the Meldisco division of Melville.
"Meldisco shall mean the corporation(s) owned jointly by
Corporation(s)" Melville, or a Melville Group Member, and Licensor to
operate the Footwear Department(s), or in the case of
the companies set forth in Exhibit D, the
corporation(s) wholly-owned by Melville or a Melville
Group Member, and formed for the same purpose.
"Meldisco License shall have the meaning set forth in the preamble to
Agreement(s)" this Agreement.
"Performance shall mean either of the following aggregate
Standards" performance standards:
(a) [ ] Performance Standard. Licensees
[ ] of all Footwear Departments in the
aggregate shall for any [ ] of Licensor's
[ ] fiscal years equal at least either
(1) [ ] of Licensor's [ ]
in Stores with Footwear Departments
(other than footwear) during the
same time period of [ ] of all
Stores with Footwear Departments in
the aggregate, or
(2) [ ] of Licensor's [ ]
during the same period in all Stores
with Footwear Departments in the
aggregate, [ ]. Licensor shall
make available to Melville or its
designated certified public
accountant any and all records
reasonably necessary to the
verification of such sales.
(b) [ ] Performance Standard. The
total [ ] as a percentage
of [ ] all Footwear Departments
in the aggregate for any [ ] fiscal
years either
(1) shall not [ ] previous
year at a rate which is [ ]
in Licensor's [ ] from all
Stores with Footwear Departments in
the aggregate for Licensor's
corresponding fiscal year, or
(2) shall [ ] of Licensees
[ ] all Footwear Departments
in the aggregate for said year. For
purposes of this standard (i)
Licensor's corresponding fiscal year
shall be that year [ ]
(ii) any Store open less than the full
applicable fiscal year, and the
Footwear Department in such Store
shall be excluded, and (iii) any
Footwear Department [ ], shall be
excluded. Licensor's [ ] from all
Stores shall not [ ]. All
figures will be expressed as a
percentage of [ ] measured to the
nearest [ ] and shall be calculated
using U.S. generally accepted
accounting principles consistently
applied; [ ].
"Services" shall mean each Licensee's services relating to the
operation of the applicable Footwear Department,
including, stocking, supplying and processing returns
of Licensed Footwear.
"Store(s)" shall mean discount retail outlet(s) consisting
(currently) of approximately 30,000 to 120,000 square
feet of gross indoor floor space operated by Licensor
under the service mark KMART (or some other service
mark incorporating KMART in whole or in part or under
which the Stores are operated) and primarily devoted
to the sale of a broad assortment of general
merchandise, or a discount retail outlet consisting
(currently) of approximately 120,000 to 250,000
square feet of gross indoor floor space operated by
Licensor under the service mark SUPER KMART CENTER (or
some other service mark incorporating KMART in whole
or in part or under which the Stores are operated) and
devoted to the sale of a broad assortment of general
merchandise as well as a broad assortment of fresh
foods and grocery products.
"Term" shall mean the period commencing on the Effective Date
and continuing until this Agreement expires or is
terminated as set forth in Article 4.
"Territory" shall mean the United States of America, its
territories and possessions, including Puerto Rico,
Guam and the U.S. Virgin Islands (the "U.S.A.").
"Weekly Sales shall have the meaning set forth in Article 6.2.
Remittance"
ARTICLE III
LICENSE
3.1 Grant of License.
Licensor grants to each Licensee and each Licensee accepts from
Licensor, for the Term and any renewal Term only, upon the terms and
conditions specified herein, the non-transferable exclusive right and license
in the Territory only, to operate a Footwear Department in the applicable
Store, and the non-transferable and non-exclusive right to use the Marks on
and in connection with the operation of the applicable Footwear Department and
on and in connection with authorized Materials only, if and only if, such use
complies with the terms and conditions of this Agreement, including, without
limitation, Licensor's quality standards as set forth herein and the
authorization and approval process set forth below. All use of the Marks by
Licensee as permitted hereunder shall conform to the requirements of Exhibit E
and to the quality control requirements of the License Agreement between
Licensor and KPI. Licensor shall be entitled to change Exhibit E by giving
Meldisco not less than 30 days advance written notice of any such change;
however, to the extent any Licensee cannot reasonably change any use of the
Marks on authorized Materials by the end of such 30 day period, Licensor shall
reasonably extend such date until any such Licensee(s) can comply with such
new requirements. Licensor may notify Meldisco in writing of any uses of the
Marks by any Licensee(s) which are not in accordance with Exhibit E and
Licensee(s) shall promptly make any required change. No other, further or
different license is granted or implied and no assignment of any right or
interest in the Marks is made or intended herein. In particular, no license
is granted to permit any third party to use the Marks, and each Licensee may
only use the Marks on or in connection with the Materials. Licensor and KPI
represent, warrant and agree that Licensor is and shall be authorized to grant
each Licensee such right to use the Marks during the Term and any renewal Term
of this Agreement.
3.2 Certain Restrictions. The parties acknowledge that the success of
each Footwear Department is dependent upon, among other things, the applicable
Licensee's compliance with common standards hereinafter referred to as "Rules
and Regulations" for the conduct of the business (set forth in Exhibit F,
attached and incorporated herein), as established from time to time by
Licensor.
3.3 Other Merchandise and Activities. Each Licensee shall have the
right to sell only the Licensed Footwear specified in this Agreement, and
shall sell or furnish no other merchandise or services without the prior
written permission of Licensor's headquarters. Each Licensee shall promptly
remove from sale any merchandise not within the definition of "Licensed
Footwear" contained in this Agreement. Each Licensee shall retain title to
Licensee's merchandise until sale. Licensor shall not be responsible for any
loss or damage to any of Licensee's merchandise, including while it is on
Store premises or in transit to or from Store premises or otherwise. Further,
no Licensee shall conduct promotions (philanthropic or otherwise) in the
Stores or which require the use of Licensor's resources or the services of
Licensor's employees without obtaining Licensor's prior written approval.
3.4 Marking, Samples and Inspection.
(a) Licensee agrees that on each item of Materials which use the Marks
it shall mark such Materials in a manner complying with the provisions of
Exhibit E.
(b) In advance of the first purchase or production by Meldisco and/or
any Licensee of each type of Material or the first use, publication or
broadcast by Meldisco and/or any Licensee of each particular item of Material
on or in connection with which any Mark is used, whichever is earlier,
Meldisco and/or the applicable Licensee shall furnish to Licensor for its
approval a sample thereof, including the trademark or copyright notice thereon
and any other label or marking. Licensor shall use its best efforts to
communicate its approval or disapproval as soon as practicable after receiving
any such sample. In no event, however, shall Licensee use the Material until
written approval of the subject sample is granted by Licensor. Meldisco
and/or each applicable Licensee specifically agrees to amend to the
satisfaction of Licensor any Material which is not approved by Licensor. A
further sample shall be provided to Licensor for its approval if any
subsequent change is made in any approved Material.
(c) To assure compliance with KPI's and Licensor's standards and
instructions relating to any Licensed Footwear and/or Materials bearing the
Marks, Licensor, at its expense, directly or through representatives, may
inspect the Footwear Departments in Stores and may inspect and/or test such
Licensed Footwear and Materials from time to time. Further, KPI and/or
Licensor may periodically request from Licensee samples of such Licensed
Footwear and/or Materials. Licensee shall cooperate and aid Licensor in
making such inspections or tests and in furnishing such samples.
3.5 Authority. Each Licensee shall conduct its sales exclusively and
solely on the designated Footwear Department premises of the Stores. Neither
Melville, Meldisco nor any Licensee shall pledge, incur any obligation or
liability, hire any employees, nor purchase any merchandise or services in or
under the name of the Licensor or KPI, it being understood that no party to
this Agreement or any Meldisco License Agreement shall act as the agent,
servant or employer of the other party.
3.6 No Challenge. Licensor represents and warrants that it or KPI has
the exclusive right, title and interest in and to the Marks in the Territory
and has the right to license the Marks to Melville, Meldisco and Licensees as
provided in this Agreement. Based on such representation and warranty,
Melville, Meldisco and each Licensee respectively acknowledge the exclusive
right, title and interest of Licensor and KPI in and to the Marks Melville,
Meldisco and each Licensee respectively agree not to attack or impair or
challenge said right, title or interest or any of Licensor's or KPI's
registrations therefor, nor assist anyone else in doing so; and each Licensee
agrees not to apply to register the Marks or any confusingly similar service
marks, trademarks, trade names, trade dress, copyrights, industrial models or
designs, or any derivations thereof, during the Term or forever thereafter,
anywhere in the world. Any and all use of and goodwill associated with the
Marks shall inure to the benefit of Licensor and KPI.
3.7 Business Planning. Meldisco and Licensor shall meet and consult
with each other at least once each Fiscal Year in good faith to discuss the
annual business plan for the operation of the Footwear Departments. Meldisco
shall at such time present its annual business plan to Licensor. Among
others, one goal of such consultations shall be to discuss increasing the
amount of name brand footwear being sold in the Footwear Departments.
Licensor shall share those aspects of its own business plan for the operation
of the Stores which affect or interact with the operation of the Footwear
Departments.
ARTICLE IV
TERM AND TERMINATION
4.1 Term.
(a) This Agreement shall remain in effect for a Term of seventeen years
commencing as of the Effective Date and expiring July 1, 2012, unless earlier
terminated as set forth herein. All current and future Meldisco License
Agreements shall be coterminous with this Agreement. Article 4.2(b) and (c)
below set forth the procedure for winding down and ceasing all Footwear
Department operations if this Agreement expires or is terminated as set forth
herein.
(b) This Agreement and any existing Meldisco License Agreement
(collectively called the "Agreements" in this Article 4.1(b)) shall be
renewed, terminated or extended at the end of the Term, or any subsequent
renewal Term(s), as applicable, according to the following:
(1) At least 4 years prior to the end of the applicable Term or
renewal Term, either party may give the other party written notice of
its intent to either renew the Agreements ("Renewal Notice") or to
terminate the Agreements ("Termination Notice") at the end of the
applicable Term or renewal Term.
(2) If either party gives Renewal Notice to the other, the
Agreements shall renew for a 15 year renewal Term commencing on the day
following the end of the applicable Term or renewal Term, unless, within
60 days of receipt of Renewal Notice, the receiving party responds with
written notice of its intent to terminate the Agreements (in which
latter case the Agreements shall terminate at the end of the applicable
Term or renewal Term).
(3) If either party gives Termination Notice to the other, the
Agreements shall terminate at the end of the applicable Term or Renewal
Term.
(4) If neither party gives the other Renewal Notice or
Termination Notice, the applicable Term or renewal Term shall be
extended for a period ending on the date 4 years following either
party's written notice to the other of its intent to terminate.
4.2 Termination.
(a) During the Term and any renewal Term, this Agreement and the
Meldisco License Agreements may only be terminated:
(i) upon 6 months written notice by Licensor to Meldisco, with
respect to any Store(s) with a Footwear Department which ceases
to operate and be open for business to the public, provided,
however, that as to any such Store(s) in relation to which
Licensor has not made a determination or is otherwise not yet
aware at least six months prior to the time such Store(s) shall
cease to operate and be open for business, then upon such notice
as soon thereafter as is reasonably practical but in no event
less than 60 days ;
(ii) upon 30 days written notice by Licensor or Meldisco to the
other, with respect to any affected Store, in the event any
Footwear Department premises become unfit for use and occupancy
by reason of material damage or destruction, or as a result of
condemnation;
(iii) upon written notice and subject to Article 4.2(b) below,
if the other party shall fail to make any material payments when
due or to deliver any material accounting reports as required
hereunder or in the event of a material breach or material
failure of any covenant, representation or warranty of the other
party set forth herein, including, without limitation, any
Licensee's material failure to follow Licensor's instructions
regarding the nature and quality of the Services or Materials
and/or appropriate use of the Marks, or material failure to
comply with the Rules and Regulations established by Licensor
for the conduct of the business within the applicable Store(s);
provided, however, the party charged with the breach or failure
shall have the opportunity to cure said breach or failure within
60 days of receipt of written notice from the charging party
(the "Notice Period"). For purposes of this paragraph any
material breach or material failure by Licensee shall mean by
all Licensees when viewed as a group. If the breach or failure
is not cured to the satisfaction of the charging party within
the Notice Period, the charging party shall be entitled to
exercise any remedies it may have hereunder or under applicable
law, including but not limited to termination of this Agreement,
provided, however, that if such material breach or failure is
capable of being cured but is only incapable, by reason of its
nature, of being cured within the Notice Period, the charging
party shall delay exercising such remedies so long as the party
charged with the breach shall have begun in good faith to cure
such breach within the Notice Period and shall thereafter
proceed diligently to complete the cure of the breach and such
breach shall be cured within a reasonable time period; but in no
event shall such time period be longer than 180 days from the
date of first notice to the party charged with such breach;
(iv) upon 30 days written notice by one party to the other, if
Licensor or Melville shall fail to pay its debts or obligations
when due, or shall make any assignment for the benefit of
creditors, or shall file, or have passed any resolution for its
voluntary liquidation, or have filed against it any petition for
protection or relief from creditors or any petition in
bankruptcy, or be adjudicated bankrupt or insolvent, or if any
receiver or judicial manager is appointed for its business or
property (provided such resolution is not rescinded or such
proceeding or petition is not dismissed during the cure period
described in Article 4.2(a)(iii) above);
(v) at the option of the non-selling or non-transferring party,
upon 30 days written notice by one party to the other, in the
event of a sale or transfer of a majority of the outstanding
shares of the other party to a single person or entity or to
an affiliated group under common control; or
(vi) upon written notice and subject to Article 4.2(c) below,
in the event that the Licensees fail to achieve the Performance
Standards.
(b) If this Agreement is terminated with respect to any Store(s) under
Article 4.2(a)(i) or (ii), or Article 5.1, the applicable Licensee(s) shall
remove all fixtures, furnishings, equipment or other property belonging to
Licensee(s) and surrender occupancy and possession of the applicable Footwear
Department premises in the same condition as received, ordinary wear and tear
excepted, by the date specified in the written notice of termination. Any
Licensee's property remaining on any such premises after the date specified in
the written notice of termination, through no fault of Licensor, shall become
the property of Licensor. Meldisco shall reimburse Licensor for the
reasonable cost of removal or disposal of such property within 30 days of
receipt of an invoice setting forth such charges, and shall pay Licensor all
Fees accruing hereunder or under any Meldisco License Agreements through such
termination date.
(c) If this Agreement is terminated under Article 4.2(a)(iii) (subject
to applicable cure provisions) or (vi), all Licensees shall remove all
fixtures, furnishings, equipment or other property belonging to Licensees and
surrender occupancy and possession of all Footwear Department premises in the
same condition as received, ordinary wear and tear excepted, within one year
of receipt of notice of the applicable notice of termination, or with respect
to Article 4.2(a)(iii), upon expiration of the applicable cure period,
whichever is later. Any Licensee's property remaining on any such premises
one year after such termination, through no fault of Licensor, shall become
the property of Licensor. Meldisco shall reimburse Licensor for the
reasonable cost of removal or disposal of such property within 30 days of
receipt of an invoice setting forth such charges and shall pay Licensor all
Fees accruing hereunder or under the Meldisco License Agreements through such
termination date.
(d) If this Agreement is terminated under Article 4.2(a)(iv) or (v) or
upon expiration of the Term or any renewal Term hereof, all Licensees shall
remove all fixtures, furnishings, equipment or other property belonging to
Licensees and surrender occupancy and possession of all Footwear Department
premises in the same condition as received, ordinary wear and tear excepted.
Any Licensee's property remaining on any such premises 30 days after such
termination or expiration, through no fault of Licensor, shall become the
property of Licensor. Meldisco shall reimburse Licensor for the reasonable
cost of removal or disposal of such property within 30 days of receipt of an
invoice setting forth such charges, and shall pay Licensor all Fees accruing
hereunder or under the Meldisco License Agreements through such expiration or
termination date.
ARTICLE V
FOOTWEAR DEPARTMENTS
5.1 Footwear Departments. The area to be occupied by each Licensee
within each Store shall be defined by computer aided drawings produced by
Licensor's Store Planning Department. Licensor may at any time and from time
to time change the location and size of a Footwear Department within a
Store, in which event, Licensor shall pay all cost and expense of moving the
Footwear Department, and applicable Fees shall be adjusted to reflect any
change in the size of the Footwear Department as appropriate. Should any
Licensee not consent to the relocation or change in size of any such Footwear
Department, it may terminate the Meldisco License Agreement as to such
Footwear Department by immediately giving Licensor written notice of its
intention so to do. Termination shall become effective 30 days after Licensor
receives such written notice unless the Licensee and Licensor otherwise
mutually agree upon a location or size.
ARTICLE VI
FEES
6.1 Fees.
(a) All Fees and other amounts due and owing from one party to the
other hereunder or under any Meldisco License Agreement shall be paid in U.S
Dollars in immediately available funds and shall be calculated and reported on
a per Footwear Department basis. Fees provided for herein shall first accrue
with respect to a given Footwear Department as of the date when a given Store
is open for sales to the public. Within 60 days after the end of Meldisco's
fiscal year, Meldisco shall furnish a sworn statement setting forth the Gross
Sales for all Footwear Departments for such fiscal year and the [ ]
of all Footwear Departments for purposes of determining whether the
Performance Standards have been met.
(b) Each Licensee shall pay Fees at the following rates and upon the
following terms and conditions during the Term and any renewal Term:
(i) [ ] Fees and [ ] Fees. Each [ ]
during the Term and any renewal Term with respect to each
Footwear Department, in consideration of the license granted to
each Licensee hereunder, each Licensee shall pay
"[ ] Fees" to Licensor at the rate of [ ] of the
[ ]. Licensor shall be responsible for remitting a
portion of such [ ] Fees in an amount equal to at least
[ ] to KPI. During each of Licensor's
fiscal years during the Term and any renewal Terms, the
fiscal year total of each Licensee's [ ] Fees
payments to Licensor shall be [ ] Fee"
[ ] of [ ] comprising the
Footwear Department on the last day of such fiscal year.
Within [ ] following the last day of each of Licensor's
fiscal years during the Term and any renewal Term, Licensor
shall compute and notify Meldisco of the amount of [ ]
due, if any, from any Licensee, and any such Licensee shall pay
such amount in full within [ ] of receipt of such notice.
(a) The parties acknowledge that a portion of the [ ]
Fees in an amount equal to [ ] is intended
as Licensee's share of advertising costs for the
Footwear Departments. Licensor agrees that the amount
expended for advertising the Footwear Departments shall bear
a reasonable relation to the amounts contributed by the
Licensee as part of the [ ] Fee. In the event such
advertising expenditure becomes impractical or
inappropriate, the [ ] Fees shall be adjusted as
agreed in writing by the parties to reflect the advertising
needs of the Footwear Departments.
(ii) [ ] Fee. Once each fiscal year during the Term and
any renewal term, Licensee shall pay an "[ ] Fee" to
Licensor. All figures for computing the [ ] Fee shall
conform with and be based on each Licensees' internal records
for reporting to management consistently applied (and such
method of reporting is not to be changed for purposes of this
Agreement): [ ]. The [ ] Fee for each fiscal year
shall be due and payable within [ ] following the final
close of each Licensee's books for the fiscal year or, in any
event, within 90 days following the end of its fiscal year (it
being understood that each Licensee shall make every effort to
pay such [ ] Fee within [ ] following the end of
its fiscal year). Each Licensee shall furnish a [ ]
at the close of each fiscal year and Licensor shall have the
right to examine each Licensee's books and records supporting
such statements, as further described below in Article VII.
(a) The [ ] Fee for each Licensee which is a Meldisco
Corporation wholly-owned by Melville, or a Melville Group
Member, (as identified in Exhibit D) shall be equal to
[ ] for each fiscal year.
(b) The [ ] Fee for each Licensee which is a Meldisco
Corporation jointly owned by Melville or a Melville Group
Member and Licensor, shall be equal to [ ].
(iii) [ ] Fees. A "[ ]
Fee" based upon [ ] of each Footwear
Department shall be [ ] from the
applicable [ ] made in the [ ]
each of Licensor's accounting periods, to defray the actual
cost of [ ] used "in common" and of [ ] used
within the Footwear Department, [ ].
The amount of such [ ] Fee shall be equitably
adjusted, not more often than once per year, and not
retroactively, in accordance with the formula set forth in
Exhibit G. The [ ] Fee for each Footwear
Department effective, on a pro-rated basis, as
of the Effective Date, shall be as follows:
[
]
(iv) Employee Discount Fee. Each week Licensor shall deduct
from the Weekly Sales Remittance for each Footwear Department an
"Employee Discount Fee" representing an estimate of the 10%
employee discount given to Meldisco employees on their purchases
in the Stores, computed according to the following formula:
[ ]
(v) Dividends. Once each fiscal year during the Term and any
renewal Term, under the same procedures as set forth for the
[ ] Fee above in Article 6.1(b)(ii) above,
each Licensee which is a Meldisco Corporation owned jointly
by Melville or a Melville Group Member and Licensor shall
issue and pay Dividends to Licensor in an amount that shall
be determined by multiplying Licensor's percentage ownership
in such corporation [ ].
(vi) [ ] Fee. Once each fiscal year during the Term and
any renewal Term, to reimburse Licensor for the cost of
[ ] in the Footwear Department of each
new Store which has its first grand opening and in which such
[ ] in such fiscal year, each Licensee
shall owe, [ ]. This amount may be equitably
adjusted on an annual, prospective basis to reflect increases
or decreases in Licensor's costs of [ ].
6.2 Weekly Sales Remittance and Fee Statements. Once each week
Licensor shall furnish to Licensee a "Statement of Fees" with respect to each
Footwear Department in each Store. Such Statement shall set forth the
applicable Fees and any deductions or set-offs taken by Licensor as set forth
herein. Such Statement of Fees may be based on estimates at the time of
opening of each Store, provided that Licensor shall, as promptly as possible
thereafter, furnish a corrected Statement of Fees, which shall retroactively
replace the estimated Statement of Fees. As of the date of this Agreement,
Licensor's "week" for accounting purposes (called the "accounting week" in
this subsection) begins on Thursday and ends on Wednesday. Beginning on the
Effective Date, Licensor shall remit to Meldisco, as agent for each Licensee,
its Weekly Sales Remittance which shall mean the cash sales receipts for the
Footwear Departments for each accounting week less the deductions set forth
below, on the Wednesday immediately following the last day of each accounting
week. Beginning on the fifth anniversary date of this Agreement, Licensor
shall remit the Weekly Sales Remittance by the Monday immediately following
the last day of each accounting week. Beginning on the tenth anniversary date
of this Agreement, Licensor shall make all reasonable efforts to remit the
Weekly Sales Remittance by the Friday immediately following the last day of
each accounting week. If Licensor changes its accounting week, the aforesaid
schedule shall be adjusted so that Licensee receives all such remittances
within the same number of days following the end of Licensor's accounting
week. Licensor shall deduct from each such Weekly Sales Remittance the
[ ] Fees, [ ] Fee, Employee Discount Fee and [ ] Fee
and any other charges (other than [ ] Fees) and advances incurred by
Licensor on behalf of the Licensees, as may be due at the time of such
remittances.
ARTICLE VII
BOOKS AND AUDITS
7.1. Books. Meldisco shall keep full, true and accurate books of
account containing all particulars which may be necessary for the purpose of
disclosing and determining the computation of the Fees due and payable to
Licensor hereunder or under any Meldisco License Agreement. Such books of
account shall be kept at Meldisco's principal place of business and maintained
by Meldisco, as agent for each Licensee, for a period of at least three years
following the end of the subject year during the Term and any renewal Term and
after termination of this Agreement. All of the information within such books
and records which is relevant for purposes of determining the computation and
amount of the Fees shall be available for inspection by Licensor or its
designated certified public accountant, including, without limitation, the
cost of goods sold in the Footwear Departments and the costs of landing and
distributing such goods.
7.2 Audits. During the Term and any renewal Term and for a period of
one year after termination of this Agreement, Licensor or its designated
independent certified public accountant, upon reasonable notice to Meldisco
and during normal business hours, may audit all profit and loss statements and
other statements of account, records and reports provided for in this
Agreement at least once each fiscal year. Meldisco shall make available to
Licensor or said certified public accountant for the purposes of this
paragraph any and all records reasonably necessary to the verification of such
reports. Any error(s) discovered by such audit shall be corrected by Meldisco
within ten (10) business days after having been notified of such error.
The expense of any and all such audits and verification shall be borne by
Licensor.
ARTICLE VIII
TAXES
8.1 Taxes. Each Licensee shall pay all occupational fees, taxes,
licenses and permits required in connection with or incident to its operation
of the applicable Footwear Department, and shall pay all taxes levied on its
personal property, payrolls or income.
ARTICLE IX
FOOTWEAR DEPARTMENT EMPLOYEES
9.1 Employer Action. Personnel working in each Footwear Department
shall be employees of each Licensee and each Licensee shall exercise control
over such employees, including hiring, firing, promoting, determining wages
and work procedures and the like ("Employer Action"), which control shall be
at each Licensee's direction subject to (i) any applicable employment or union
contracts, (ii) Licensor's Rules and Regulations and (iii) applicable laws.
Each Licensee shall be responsible for all Employer Actions and shall
reimburse, indemnify, defend and hold Licensor and its subsidiaries and
affiliates and their respective officers, directors and employees harmless
from and against any and all loss, damage, cost, expense or penalty, or any
claim or action therefor, arising out of any such Employer Action.
ARTICLE X
FURNITURE AND FIXTURES
10.1 Furniture and Fixtures. Licensor shall provide and install at its
initial expense (and shall maintain and update) all shelving, counters,
display cases and other trade fixtures which shall be agreed upon by Meldisco,
as agent for each Licensee, and Licensor as necessary for the proper conduct
of the Footwear Departments by the Licensee in the Stores. Each Licensee may
furnish and install at its expense in the applicable Footwear Department such
other furniture, furnishings and equipment as it may desire, subject to the
prior written approval of Licensor. No electrical equipment may be installed
or maintained by any Licensee which may interfere with the operation of
radios, televisions or other appliances or communications or security systems
sold or in use in the Stores and Licensee shall promptly correct or remove
the cause of such interference at its expense. Licensee agrees to submit for
prior approval by Licensor all proposed signs and sign fixtures. Licensee
agrees to follow Licensor's instructions as to such signs and sign fixtures.
ARTICLE XI
ADVERTISING
11.1 Advertising. Licensor shall have the sole and exclusive control
over all advertising and promotions relating to all business conducted on the
Store premises, including on and in connection with the Footwear Departments.
Neither Meldisco nor any Licensee may engage in advertising or promotional
activity of any Footwear Department or any business conducted on Store
premises without the prior review and written approval of Licensor's
headquarters. The [ ] Fees shall include a fee for advertising as
provided for in Article 6.1 [ ] above.
ARTICLE XII
CASH REGISTERS, UTILITIES AND TELEPHONE
12.1 Cash Registers. Licensor shall provide at its expense all cash
registers necessary for the operation of each Store and all cash in registers
shall be at the risk of Licensor. Licensor shall permit Licensee and/or
Meldisco, upon reasonable notice and during normal business hours, to take
readings for a Licensee from such registers.
12.2 Utilities. Licensor shall provide at its expense utilities
consisting of light, heat, power, gas, water and air conditioning as it may
deem necessary, but shall not be responsible for any loss or damage of any
nature resulting from the interruption or failure of such utilities.
12.3 Telephones. Licensor shall provide at its expense telephone
service and facilities for incoming calls under the general business listing
of "Kmart Store No. _____" or the like. No Licensee shall maintain any
separate voice telephone lines or telephone listings.
ARTICLE XIII
RULES AND REGULATIONS
13.1 Rules and Regulations. Licensor shall from time to time, for the
benefit of the common enterprise, establish, amend, modify or revise uniform
Rules and Regulations consistent with this Agreement which shall govern but
not be limited to the following subjects: order and appearance of the Store,
methods for handling of cash and cash registers, credit, will-call and layaway
sales, payments made by Licensor for account of Licensees, refunds, pricing
policies, inventory requirements, disposal of old merchandise, overlap in
merchandise carried by various licensees, products liability insurance,
receiving of merchandise and store security. Licensor agrees to furnish
Meldisco with a written copy of such Rules and Regulations and each Licensee
agrees that it and its employees and agents shall comply with such Rules and
Regulations. The current version of the Rules and Regulations is set forth at
Exhibit F.
ARTICLE XIV
CONFIDENTIAL INFORMATION
14.1 Confidential Information. Meldisco and each Licensee acknowledges
that in the course of performing this Agreement and the Meldisco License
Agreements, each may learn and Licensor may disclose to each of them certain
confidential information and data concerning sales within Stores, new
locations of Stores or relating to business plans or retailing and
merchandising strategies for Stores as a whole or for departments within the
Stores including [ ], "Departmental Sales by
Stores Size Report", "Flash Sales Reports" and "Customer Traffic Reports",
which information and data is not in the public domain or otherwise available
from third parties except on a confidential basis (collectively, the
"Confidential Information"). Licensor acknowledges that as a result of, or in
connection with this Agreement, it may learn and Licensee or Melville may
disclose to Licensor certain Confidential Information. During the Term, any
renewal Term and for a period of three years thereafter, neither Licensor,
any Licensee nor Meldisco shall disclose any of the other parties'
Confidential Information to third parties or to affiliate, subsidiary or
parent companies or their respective officers, directors, employees or
representatives, except as mutually agreed upon in writing by Meldisco and
Licensor's headquarters. Further, all Confidential Information shall
remain the sole and exclusive property of the party from whom it has
emanated.
ARTICLE XV
INDEMNIFICATION
15.1 General; Insurance. Meldisco and/or Licensee shall reimburse,
indemnify, defend and hold harmless Licensor and its subsidiaries and
affiliates and their respective officers, directors and employees, from and
against any and all damage, loss, cost, expense or penalty, or any claim or
action therefor, by or on behalf of any person, arising out of the performance
or failure to perform under this Agreement or any Meldisco License Agreement
by any Licensee, Meldisco Corporation, Meldisco or Melville, including, but
not limited to, personal injury and death claims, false labeling or failure to
correctly label any merchandise under any statutory obligation or rules and
regulations having the force of law, and all claims of employees or agents of
any Licensee, Meldisco Corporation, Meldisco or Melville whether for injury,
death, compensation, social security, pension, unemployment compensation, etc.
Licensor agrees to obtain and keep in force appropriate insurance for
Licensee and Licensor for liabilities for personal injuries (including death)
and property damage arising out of or relating to the use of the Footwear
Department premises with limits of not less than $5,000,000 for injury to one
person and $5,000,000 for injury to more than one person and not less than
$5,000,000 for property damage, and at Licensor's option Licensor may self
insure all or any portion of these limits. Each Licensee agrees to maintain
appropriate workers' compensation and employer's liability insurance as
required by all applicable federal, state or other laws, and, at Licensor's
option, to name Licensor as an "alternate employer" on such policies.
Melville agrees to obtain and keep in force appropriate insurance for claims
against Licensor, Licensees and Meldisco for personal injury (including death)
and property damage arising out of or relating to the goods and services
provided pursuant to this Agreement and any Meldisco License Agreement (other
than for liabilities for which Licensor has agreed to insure in this Section
15.1), with the same limits and self insurance options as agreed to above by
Licensor. Licensee or Licensor, as the case may be, shall provide evidence of
all of the aforesaid insurance at the request of the other party, and shall
name the other party as an additional insured on such policies.
15.2 Intellectual Property Indemnification. Meldisco and/or Licensee
shall reimburse, indemnify, defend and hold harmless Licensor and its
subsidiaries and affiliates and their respective officers, directors and
employees from and against all third-party claims asserted against Licensor
alleging that any Licensed Footwear, Services, trade fixtures, furnishings,
merchandise, advertisements or promotions furnished by Meldisco or any
Licensee under this Agreement infringe any patent, copyright, trademark, trade
dress, design or other proprietary right or constitute a misuse of any trade
secret information or violate any third party contractual right, and shall
pay all losses, costs, attorneys fees, expenses, settlement payments, fines and
damages arising in connection with any such claims. Licensor agrees to timely
advise Meldisco of any such lawsuit, claim or proceeding and to cooperate with
Meldisco and/or Licensee in the defense or settlement of such lawsuit, claim
or proceeding. Meldisco and/or Licensee shall keep Licensor advised at all
times concerning the handling of such matters and shall furnish for
Licensor's prior review and approval all proposed settlement, release or
similar documents or agreements disposing of a given matter if such matter
involves Licensor or affects its interests.
ARTICLE XVI
NO ASSIGNMENT OR SUBLICENSE
16.1 No Assignment or Sublicense. Neither party shall assign or
sublicense its rights and/or duties under this Agreement without the prior
written consent of the other party given at the other party's sole option,
except that either party may assign its rights, but not its duties under this
Agreement to a subsidiary or affiliate which is and shall remain wholly
controlled by or under common control with such party, upon written notice to
the other party. Any other attempted assignment or sublicense shall be void.
ARTICLE XVII
MISCELLANEOUS
17.1 Maintenance of Premises and Security Service. Licensor shall
maintain and provide janitor service at its cost for the Footwear Departments.
Each Licensee shall be responsible for janitor service in any storage area
occupied by it under this Agreement. Licensor may from time to time provide
such security service as it may deem necessary.
17.2 Credit Sales. Licensor may provide credit facilities consisting
of credit card, debit card or deferred payment plans for the sale of
Licensees' goods. No Licensee may install or promote its own credit card,
debit card or deferred payment plans without prior written approval of
Licensor's headquarters.
17.3 Memberships in Trade Organizations and Charitable Contributions.
Licensor shall establish common standards for participation in trade
organizations and charitable contributions.
17.4 Risk of Loss, Damage, Destruction or Disappearance of Property.
The risk of loss, damage, destruction or disappearance of any property on the
Store premises, as between Licensor and any Licensee, shall be exclusively
that of the party having title to such property. Further, each Licensee
relieves Licensor, and Licensor relieves each Licensee, of liability for any
loss caused by fire or explosion arising out of any act of omission or
commission, negligent or otherwise, of the agents, servants or employees of
the other party.
17.5 Rights and Remedies. The rights and remedies given herein are not
exclusive, but are cumulative, and are in addition to all rights and remedies
allowed by law, except that neither party shall be liable to the other party
for incidental, consequential, punitive or exemplary damages arising in
connection with this Agreement or the performance, omission of performance or
termination hereof, even if the said party has been advised of the possibility
of such damages and without regard to the nature of the claim or the
underlying theory or cause of action (whether in contract, tort or otherwise).
17.6 Independent Contractor. Neither party is nor shall be the agent
of the other party in any matter. Each party is and at all times shall be an
independent contractor in the performance of this Agreement, and neither
party is authorized to bind the other party to any agreement or contract, in
any manner, with any third party. The parties do not intend this Agreement to
constitute a joint venture, partnership or lease and nothing herein shall be
construed to create such a relationship. Subject to the provisions hereof,
this Agreement shall bind the successors and permitted assigns of the parties.
17.7 CHOICE OF MICHIGAN LAW AND FORUM. THIS AGREEMENT AND ALL MELDISCO
LICENSE AGREEMENTS, AND ALL ASPECTS OF THE BUSINESS RELATIONSHIP BETWEEN
LICENSOR AND MELVILLE, MELDISCO AND EACH LICENSEE SHALL BE DEEMED TO HAVE BEEN
EXECUTED AND DELIVERED IN TROY, MICHIGAN, AND SHALL BE CONSTRUED, INTERPRETED
AND ENFORCED UNDER AND IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
MICHIGAN. MELVILLE, MELDISCO AND EACH LICENSEE AGREES TO EXERCISE ANY RIGHT
OR REMEDY IN CONNECTION WITH THIS AGREEMENT AND ANY MELDISCO LICENSE
AGREEMENTS, OR OTHERWISE ARISING OUT OF SAID BUSINESS RELATIONSHIP(S),
EXCLUSIVELY IN, AND HEREBY SUBMITS TO THE JURISDICTION OF, THE STATE OF
MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED STATES DISTRICT
COURT AT DETROIT, MICHIGAN.
17.8 Waiver. Silence, acquiescence or inaction shall not be deemed a
waiver of any right. A waiver shall only be effective if it is in writing and
signed by an authorized officer of the party to be charged. Any such waiver
shall not be construed as a continuing waiver or as a waiver of any other
breach of a same or similar nature.
17.9 Severability. In the event that any part or portion of this
Agreement shall be deemed to be invalid or illegal, then such invalid or
illegal portion shall, so far as possible, not affect the validity or legality
of the remainder of this Agreement. Further, the parties agree that they
shall attempt to arrive at a modification of any illegal or invalid part so as
to render the same legal and valid and within the keeping of the original
tenor and spirit of the Agreement.
17.10 Entire and Exclusive Agreement. This Agreement, the Exhibits
hereto and the Meldisco License Agreements shall constitute the entire
exclusive agreement between the parties with respect to operation of the
Footwear Departments and use and licensing of the Licensed Property in the
Territory, and shall supersede all prior negotiations, understandings and
agreements, if any, between the parties, whether oral or written. Except as
otherwise provided herein, this Agreement may only be amended or modified by
written instrument signed by authorized officers of the parties.
17.11 Headings for Convenience Only. The headings, titles or captions
used in this Agreement are provided solely for the convenience of the parties
and shall not be considered relevant in any construction of this Agreement or
be interpreted to define, expand or limit the provisions of this Agreement.
17.12 Authority. Each party represents, covenants and warrants that it
has the full legal right, power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated herein.
17.13 Notices. Any notices should be delivered by certified mail
return receipt request or a nationally recognized overnight delivery service
and addressed if to Melville, Meldisco or any Licensee to:
President
Meldisco, division of Melville Corporation
933 MacArthur Boulevard
Mahwah, New Jersey 07430
and
President
Melville Corporation
One Theall Road
Rye, New York 10580
and if to Licensor to: General Counsel
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
IN WITNESS WHEREOF, the parties by their duly authorized officers set
their hands as follows:
Melville Corporation Kmart Corporation
By: /s/ J.M. Robinson By: /s/ Kenneth W. Watson
------------------ -----------------------
J.M. Robinson Kenneth W. Watson
Title: Vice President Title: Executive Vice
President, Marketing
and Product Development
Date: June 9, 1995 Date: June 9, 1995
Kmart Properties, Inc., with
respect to Article 3.1
By: /s/ Gerald T. Tschura
-----------------------
Gerald T. Tschura
Title: Vice President, Treasurer
and Legal Counsel
Date: June 9, 1995
AGREEMENT
Agreement dated and effective as of March 25, 1996 among Kmart
Corporation, a Michigan corporation ("Kmart"), Melville Corporation, a New
York corporation ("Melville"), Kmart Properties, Inc., a Michigan
corporation ("KPI"), and Footwear Group, Inc., a Delaware corporation
("Footwear Holding Company").
Whereas, Kmart and Melville are parties to a Master Agreement
dated as of June 9, 1995 (the "Master Agreement") which relates to the
operation by the Meldisco Corporations of Footwear Departments in Kmart Stores
(all as more fully described in the Master Agreement);
Whereas, Melville's relationship with Kmart to date has been
conducted through Melville's Meldisco division ("Meldisco") and such
relationship has been conducted on a day-to-day basis primarily between Kmart
and Meldisco's management team;
Whereas, Melville is currently intending to distribute pro rata
to Melville's shareholders (the "Transaction") all outstanding shares of
capital stock of Footwear Holding Company which is a wholly-owned subsidiary
of Melville and which as of the date of consummation of the Transaction will
be the ultimate parent company of the Meldisco Corporations; and
Whereas, in view of the fact that upon consummation of the
Transaction, Footwear Holding Company will no longer be owned by Melville but
will become a publicly held company, Kmart is willing to consent to the
assignment of the Master Agreement to Footwear Holding Company and to release
Melville from the Master Agreement subject to the terms and conditions hereof
and provided that as of the date of the Transaction Footwear Holding Company
continues to own, directly or indirectly, 51% or 100%, as applicable, of the
issued and outstanding shares of each of the Meldisco Corporations and that
further transfer of such shares, except as provided in Section 11 below, is
subject to Kmart's prior written consent.
Now therefore, the parties agree as follows:
Section 1. Defined Terms. Capitalized terms used herein and
not otherwise defined herein shall have the meanings set forth in the Master
Agreement.
Section 2. Assignment by Melville. Melville hereby assigns
and transfers to Footwear Holding Company, Melville's rights and obligations
under the Master Agreement, any Meldisco License Agreement or any agreement
contemplated thereby or entered into in connection therewith (each, a "Subject
Agreement") and Footwear Holding Company accepts such assignment and transfer.
Kmart and KPI hereby consent to the Transaction and to the foregoing
assignment and transfer subject to the terms and conditions hereof and
provided that as of the date of the Transaction Footwear Holding Company
continues to own, directly or indirectly, 51% or 100%, as applicable, of the
issued and outstanding shares of each of the Meldisco Corporations and that
any future transfers of such shares, except as provided in Section 11 below
is, subject to Kmart's prior written consent.
Section 3. Replacement of Melville as a Party. Upon the
execution of this Agreement, each reference to "Melville", "Melville
Corporation" and "Melville Group Member" in each Subject Agreement shall be
deemed a reference to, and shall be deemed replaced by, "Footwear Holding
Company", "Footwear Holding Company" and "Footwear Group Member," respectively.
Section 4. Footwear Holding Company Agreement to be Bound;
Release of Melville. Footwear Holding Company, including each Footwear Group
Member, as applicable, hereby agrees to be bound by the Master Agreement and
all subject Agreements as if it were a signatory to each such agreement and
Melville shall cease to be a party to the Master Agreement or any other
Subject Agreement and Melville shall be released from, and shall have no
further liability or responsibility under, any and all such Subject Agreements.
Section 5. Distribution of Retained Earnings. Within fifteen
(15) days following the execution of this Agreement by Kmart and KPI, the
parties agree that any retained earnings of the Meldisco Corporations as of
December 31, 1995, shall be distributed as dividends pro rata to the
shareholders of record as of the date of this Agreement.
Section 6. Dividends. The parties further agree that Article
6.1(b)(v) of the Master Agreement shall be revised in its entirety to provide
as follows: "Once each fiscal year during the Term and any renewal Term,
under the same procedures as set forth in Article 6.1(b)(ii) above, each
Licensee which is a Meldisco Corporation owned jointly by Footwear Holding
Company or a Footwear Group Member and Licensor shall issue and pay dividends
in an amount that shall be determined by multiplying each party's percentage
ownership in such Meldisco Corporation by [ ].
Section 7. Right to Borrow. The parties further agree that
the following Article shall be added to the Master Agreement as follows:
"Within fifteen (15) days after the end of each fiscal month of the Meldisco
Corporations, an officer of the Meldisco Corporations shall furnish to
Licensor a statement (the "Cash Balance Statement") certifying the aggregate
cash balance of all of the Meldisco Corporations as of the end of the
preceding month. If such cash balance equals or exceeds one (1) million
dollars, 49% of such balance shall immediately be available for borrowing by
Licensor at an interest rate equal to 100 basis points over the thirty (30)
day LIBOR rate. Interest shall accrue daily on any outstanding loan balance
and any accrued interest shall be due and payable the earlier of each March
31, June 30, September 30 and December 31 or the date any outstanding loan
balance is due, in immediately available funds, provided Licensor receives
written notice of the amount of interest due and payable at least ten (10)
days prior to each such payment date. Any outstanding loan balance as of the
date amounts are payable under [ ] the Master Agreement, shall be
due and payable in immediately available funds no later than such date;
provided, however, in the event any "Cash Balance Statement" shows a negative
cash balance, any outstanding loan balance shall become due and payable in
immediately available funds within five (5) days after Licensor's receipt of
such statement.
Section 8. Further Assurances. The parties hereto shall use
reasonable best efforts to do all things and take all actions, and shall
execute or enter into such further agreements and instruments, as are
necessary to implement the agreements and transactions set forth herein or
contemplated hereby.
Section 9. Effect on Master Agreement. Except as provided
herein, the Master Agreement shall remain unchanged and shall stay in full
force and effect.
Section 10. Governing Law; Jurisdiction. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of Michigan and in connection herewith the parties agree to submit to the
jurisdiction of the State of Michigan Courts of Oakland County, Michigan or
the United States District Court at Detroit, Michigan.
Section 11. Assignability. Neither party shall assign its
rights or obligations under this Agreement without the prior written consent
of the other party, except that Footwear Holding Company may assign its rights
but not its obligations to an affiliate which is the ultimate parent company
of the Meldisco Corporations so long as such affiliate executes an instrument
agreeing to be bound by the Master Agreement and this Agreement and remains
wholly controlled by or under common control of Footwear Holding Company.
Section 12. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the undersigned parties have duly executed
this Agreement.
Kmart Corporation Melville Corporation
By: /s/ Marty E. Welch By: /s/ Carlos Alberini
------------------------------- ----------------------------
Name: Marty E. Welch Name: Carlos Alberini
Title: Senior Vice President Title: Vice President
Chief Financial Officer and Acting CFO
Kmart Properties, Inc. Footwear Group, Inc.
By: /s/ Gerald T. Tschura By: /s/J.M. Robinson
-------------------------------- --------------------------
Name: Gerald T. Tschura Name: J.M. Robinson
Title: Vice President, Treasurer Title: Chairman
and Legal Counsel
