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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-24026
MAXWELL SHOE COMPANY INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2599205
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF NUMBER)
INCORPORATION OR ORGANIZATION)
101 SPRAGUE STREET, P.O. BOX 37 HYDE
PARK
02137
(BOSTON), MA
(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(617) 364-5090
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
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NONE NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK,
PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Class A Common Stock of the registrant
held by non-affiliates of the registrant on January 15, 1997 based on the
closing price of the Class A Common Stock on the NASDAQ National Market System
on such date was $21,146,875.
The number of shares of the registrant's Class A Common Stock outstanding at
January 15, 1997 was 2,525,000 shares. The number of shares of the
registrant's Class B Common Stock outstanding at January 15, 1997 was
5,063,317 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the registrant's 1997 Annual
Stockholders Meeting are incorporated by reference into Part III herein.
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MAXWELL SHOE COMPANY INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
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CAPTION PAGE
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PART I
Item 1. Business............................................................................... 3
Item 2. Properties............................................................................. 11
Item 3. Legal Proceedings...................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.................................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 12
Item 6. Selected Financial Data................................................................ 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 14
Item 8. Consolidated Financial Statements and Supplementary Data............................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 30
PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 30
Item 11. Executive Compensation................................................................. 30
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 30
Item 13. Certain Relationships and Related Transactions......................................... 30
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on Form 8-K.......... 31
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PART I
ITEM I. BUSINESS
GENERAL
Maxwell Shoe Company designs, develops and markets moderately priced casual
and dress footwear for women under the Mootsies Tootsies brand name as well as
for children under the Mootsies Kids brand name. The Company entered the
"better" women's footwear market segments through an exclusive license
agreement to design, develop and market casual and dress footwear under the
Jones New York and Jones New York Sport brand names. On August 20, 1996 the
Company purchased the worldwide trademarks and tradenames from Sam & Libby,
Inc. for the following brand names: Sam & Libby, Just Libby, Jeff & Kristi,
New Nineties. The Company intends to ship Sam & Libby and Just Libby women's
and Sam & Libby children's product starting in the first quarter of fiscal
1997. In addition, the Company designs and develops private label footwear for
selected retailers under the retailers' own brand names. The Company also
sells footwear close-outs that it purchases at volume discounts from other
manufacturers.
The Company differentiates itself from its competitors through its ability
to design, develop and market value priced footwear that reflects current
fashion trends. Retail prices for Mootsies Tootsies generally range from $25
to $40 and Mootsies Kids retail prices generally range from $20 to $40. Jones
New York Sport footwear generally retails from $45 to $75, while Jones New
York footwear generally retails between $65 and $80. Retail prices for Sam &
Libby and Just Libby women's footwear are expected to range from $35 to $70
and Sam & Libby kids retail prices will range from $25 to $50. Substantially
all of the Company's products are manufactured overseas by independent
factories. The Company sells its footwear primarily to department stores and
specialty stores in the United States as well as through national catalog
retailers and cable television consumer shopping channels.
The Company's net sales increased from $101.9 million in fiscal 1995 to
$104.3 million in fiscal 1996. The Company's success is largely a result of
its ability to design, develop and market footwear with contemporary styles at
affordable prices. Through advertising, promotion and packaging, the Company
has built consumer and retail recognition for the Mootsies Tootsies brand
name. Based on its knowledge of the industry, management believes that
Mootsies Tootsies is currently one of the largest selling brands in the
moderately priced segment of the women's casual and dress footwear industry.
The Company entered a new market segment by leveraging its existing resources
and the brand recognition for Mootsies Tootsies to introduce its Mootsies Kids
line in 1991. The Company expanded the branded product offering through the
introduction of the Jones New York (in 1994) and Jones New York Sport (in
1995) footwear brands. Both are intended to capitalize on the strong brand
name recognition and reputation for quality and style enjoyed by Jones New
York in the better segments of the women's apparel industry. The Company has
continued its brand expansion through the acquisition of the Sam & Libby
worldwide trademarks and tradenames in 1996.
The Company competes primarily in the women's casual and dress footwear
market. Both the "moderate" segment of this market, in which the Company's
Mootsies Tootsies line competes, and the "better" segment of this market, in
which the Company's Jones New York footwear line competes, are characterized
by an emphasis on contemporary fashion and style. The Company believes that
there has been a shift in the "moderate" segment of women's casual and dress
footwear market toward value priced footwear. The Company has positioned its
Mootsies Tootsies line to take advantage of this shift by designing,
developing and marketing value priced footwear that reflects current fashion
trends. The Company believes that the "better" segment of this market has been
affected to a lesser extent by this shift, as these consumers have remained
interested in higher quality and brand name products. The Company seeks to
appeal to these consumers with its Jones New York footwear line by
capitalizing on the strong brand name recognition and reputation for quality
and style enjoyed by Jones New York in the "better" segments of the women's
apparel industry. Jones New York Sport, which includes styles for weekend and
casual wear, competes in the better segment. The Company believes the Sam &
Libby line of upper moderate footwear will be price positioned between the
Mootsies Tootsies and Jones New York Sport lines.
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BUSINESS STRATEGY
The Company's strategy is to increase its share of the casual and dress
footwear market by expanding penetration in the segments for its established
brands and by developing new products targeted at other segments of the
market. In addition, the Company will continue to exploit growth through
acquisition or licensing of incremental brands. The Company seeks to provide
quality products with the best value in each market segment in which the
Company competes. Key elements in the Company's strategy are the following:
. Capitalize on Consolidating Footwear Industry. The Company intends to
capitalize on the recent consolidation in the footwear industry where
more brands are being controlled by fewer companies and where retailers
are generally purchasing footwear merchandise from a reduced number of
manufacturers. The Company will execute this strategy by maintaining a
portfolio of brands which appeal to different market segments of the
footwear industry.
. New Brands. The Company intends to continue to develop new brands that
target segments of the women's and children's footwear market that the
Company does not currently serve. Management believes that new brands
will enable the Company to increase its sales by satisfying the needs of
a broader range of consumers. The Company will seek to sell these new
brands through the Company's existing customers as well as develop new
customers for these brands. The acquisition of the Sam & Libby brand
represents the Company's most recent effort to expand into new market
segments. The Company intends to pursue entering other segments of the
market through acquisition and the development or licensing of new
brands. The Company believes it is well positioned to pursue and
consummate this strategy due to its relatively strong and unencumbered
balance sheet.
. Management Structure. The Company has restructured to strengthen its
management to run efficiently as a multibranded footwear company. Each
brand is managed by a divisional executive who is responsible for the
sales, product development, merchandising, marketing and advertising of
their respective brand. This divisional structure and focus, which
provides the Company with what it believes to be a competitive advantage,
enables the Company to execute its merchandising strategy in a timely and
cost effective manner.
. Broaden Acceptance of Existing Brands/Increase Brand Awareness. The
Company seeks to increase sales of the Mootsies Tootsies brand by
expanding the appeal of the brand to a broader group of retail consumers
interested in quality footwear at affordable prices. The Company's
efforts in this direction include the development of a broader range of
styles and the use of innovative packaging and advertising. Management
believes that the value priced segment of the footwear industry served by
the Mootsies Tootsies brand presents continued growth opportunities. The
Company seeks to increase sales of the Mootsies Kids brand by leveraging
off of the brand recognition of Mootsies Tootsies, as well as by
developing more styles and working to expand the customer base for this
brand of footwear. The Company seeks to increase sales of its Jones New
York and Jones New York Sport footwear capitalizing on the strong brand
recognition and reputation for quality and style enjoyed by Jones New
York women's apparel. The Company believes each of its brands has
potential to further increase its market share in their existing
category.
. Expand Private Label Business. The Company entered the private label
footwear market in order to leverage its competitive strengths and
existing infrastructure by providing selected retailers with private
label products for sale under their own house brands. This enables the
Company to sell products to new customers as well as strengthens the
Company's relationship with certain of its existing customers.
. Provide Customer Support. The Company supports its customers by
maintaining an in-stock inventory position for selected styles in order
to minimize the time necessary to fill customers' orders. In addition,
the Company provides its customers with electronic data interchange (EDI)
capability (see "Distribution"), co-op advertising and point of sale
displays and assists them in evaluating which products are likely to
appeal to their retail customers.
. Maintain Manufacturing Relationships. The Company believes that one of
the elements of its success is its strong relationships with buying
agents and overseas manufacturers capable of meeting the
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Company's requirements for quality and price on a timely basis. The
Company has developed an exclusive relationship with a buying agent
(Universal Max Trading) to source and oversee manufacturing in the Orient.
Universal Max Trading has recently opened a manufacturing facility which
will improve the Company's product development capabilities. The Company
will seek to develop similar exclusive relationships in other areas of the
world, each capable of manufacturing quality products. The Company
continues to work with buying agents with access to numerous manufacturing
facilities in order to maximize the Company's sourcing flexibility.
PRODUCT LINES
The Company's products consist of six lines of brand name footwear as well as
private label footwear for selected retailers for sale under their own house
brands. Each of the branded product lines is targeted to appeal to a different
market segment of the footwear industry. The characteristics of the product
lines sold by the Company are summarized in the following table:
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MOOTSIES MOOTSIES SAM & LIBBY JONES NEW JONES NEW PRIVATE
TOOTSIES KIDS SAM & LIBBY KIDS YORK YORK SPORT LABEL
------------ ------------ ----------- ----------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Style................... Contemporary Contemporary Updated Updated Contemporary Classic Casual All
Industry Segment........ Moderate Moderate Upper Upper Better Better Budget-
Moderate Moderate Moderate
General Retail Price
Range:
Shoes.................. $25-$40 $20-$35 $35-$50 $25-$45 $65-$80 $45-$75 $12-$20
Boots.................. $35-$65 $30-$40 $45-$70 $35-$55 $60-$85 $25-$30
</TABLE>
Mootsies Tootsies
The Mootsies Tootsies brand line provides consumers with a wide selection of
footwear with contemporary styles and quality at affordable prices primarily
targeted at women ages 18 to 34. The line includes approximately 30 new styles
each spring and fall season, as well as a number of core styles that are
updated periodically based on fashion trends. The line principally consists of
casual shoes, dress shoes, boots and sandals. Styles are available in a wide
variety of colors and materials, including leather, suede leather and fabric.
All footwear in the line is designed to have soft construction for comfort.
Mootsies Tootsies accounted for a majority of the Company's total sales during
fiscal 1996.
Mootsies Kids
The Mootsies Kids brand line is targeted at girls in the misses market (ages
8 to 12) who desire contemporary footwear. The line consists of approximately
20 new styles each spring and fall that, in many cases, represent a miniature
version of the Mootsies Tootsies line. The children's line is focused on casual
shoes, party shoes, boots and sandals.
Sam & Libby
The Sam & Libby line is updated casual and dress footwear targeted for female
fashion customers, ages 18-45. The lines will contain approximately 30 styles
per season, consisting of casual shoes, dress shoes, boots and sandals. The
introduction of the Sam & Libby brand with its trademarks registered in over 20
countries will allow the Company to begin international development and growth.
The Company's expansion to overseas markets will be a long term effort. The Sam
& Libby kids line is geared toward girls ages 8 to 14 and it is targeted
towards the updated more fashion conscious girl. The line will have
approximately 20 styles each season often similar to the Sam & Libby women's
styles. The children's line is focused on dress shoes, casual shoes, casual
athletic, boots and sandals.
Jones New York
The Jones New York footwear line focuses on contemporary quality footwear
targeted at career oriented women 30 years and older. The line capitalizes on
the name recognition and reputation enjoyed by the Jones
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New York apparel line produced by the Company's licensor and is designed to
complement Jones New York apparel. The Company's Jones New York footwear line
consists of approximately 25 styles per season with all leather uppers and
soles.
Jones New York Sport
The Jones New York Sport line appeals to the Jones New York casual
sportswear customer by providing leisure footwear to the career oriented
women. The line contains approximately 20 styles per season.
Private Label Products
In response to the growing demand among retailers for footwear to market
under their own brand names, the Company designs and sources private label
women's and children's footwear for selected retailers. The Company's private
label business has minimal overhead and capital requirements primarily because
the Company utilizes its existing branded product styles (thereby incurring no
additional product development costs) and because the Company does not incur
any costs related to purchasing, importing, shipping or warehousing of
inventory, all of which costs are borne by the retailer.
The following table sets forth the percentage of the Company's sales
generated by each of its major product categories for the periods indicated:
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YEAR END OCTOBER 31,
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CATEGORY 1994 1995 1996
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Women's............................................ 83.8% 83.0% 85.4%
Children's......................................... 15.1 16.3 14.2
Other.............................................. 1.1 .7 .4
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Total.............................................. 100.0% 100.0% 100.0%
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CLOSE-OUT BUSINESS
The Company sells certain product styles that it purchases at volume
discounts from other footwear manufacturers. These products, which are
typically either slow-moving or factory seconds, are sold to discount
retailers. At times the Company holds close-out products in inventory until
the next fashion season.
DESIGN AND PRODUCT DEVELOPMENT
The Company seeks to identify fashion trends and to translate such trends
into contemporary footwear appealing to its target market segments'
requirements for style, quality, fit and price. The Company believes that its
philosophy of marketing contemporary styles that appeal to a broad audience
rather than "fashion forward" styles reduces the risks associated with
changing fashion trends.
Each of the Company's product lines is built separately using a team concept
that includes design staff, sales staff and management to design footwear that
appeals to the characteristics of that line's market segment. The designers
research and confirm market trends by (i) traveling extensively to fashion
markets in the United States and Europe, (ii) attending trade shows and (iii)
subscribing to fashion and color information services. In addition, product
development efforts benefit from interaction with retailers, who provide
information on current retail selling trends, and the Company's buying agents,
who provide information on industry trends. The designers for the Jones New
York and Jones New York Sport lines also meet with the Jones New York apparel
group to exchange product and fashion concepts. Each line initially consists
of between 100 and 200 prototypes each season from which the design team
selects the styles that it believes will satisfy the target market segment's
requirements for style, quality, fit and price. Each line is further refined
following presentations at industry shows.
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The Company conducts market research through discussions with retailers and
the Company's independent sales representatives, analysis of competitors'
products and commissioned market studies.
MARKETING AND CUSTOMER SUPPORT
Each branded product line has its own organization that includes a
divisional executive who oversees all aspects of selling the line and works
with a network of independent sales representatives located throughout the
United States. Certain of the independent sales representatives sell only the
Company's brands. The rest of the independent sales representatives sell
brands that do not compete directly with the Company's brands. The Company
develops spring and fall product lines for each of its brands. Each line is
first introduced at industry trade shows prior to on-site sales visits by the
independent sales representatives and the Company's divisional head
responsible for the line. In addition, the Company maintains showrooms in New
York and Boston where buyers view products and place orders. The Company's
products are distributed primarily in the United States. The Company also
sells to independent wholesale distributors in Canada and Japan.
In fiscal 1996, the Company sold products to approximately 1,200 accounts
with over 3,000 retail locations. The Mootsies Tootsies retailers, which
market moderately priced apparel merchandise, include the Federated Department
Stores (Stern's and Rich's), the Mercantile Stores (McAlpin's, Joslin's and
Gayfer's) and Belks. The Jones New York and Jones New York Sport footwear
lines are distributed to those retailers who typically market merchandise at
higher retail price points. These include Macy's, May Co. (Lord & Taylor),
Burdines, Dayton Hudson, and Bloomingdale's. The Company also markets its
branded products through national catalog retailers such as Spiegel and
Chadwicks of Boston and through home shopping clubs such as QVC and HSN.
The Company believes that the reputation and relationships it has
established among retailers for its existing products will also be useful in
the future to distribute new brands that it may develop or acquire to fill
other niches in the women's footwear market.
The Company supports its customers through a variety of programs, including
its in-stock inventory position for selected styles, the availability of
electronic data interchange (EDI), co-op advertising and point of sale
displays. In addition, the Company assists its customers in evaluating which
products are more likely to appeal to their retail customers. Customers may
return defective products in quantities of more than six pairs for full
credit. Customer allowances are based on the Company's ability to meet the
particular customer's objectives and specifications.
ADVERTISING AND PROMOTION
The Company works closely with its retailers in promoting its brands through
its own and cooperative national consumer print advertising, in-store
merchandising, point of sale promotions, in-store events, distinctive
packaging and active solicitation of fashion editorial space.
Print advertisements for Mootsies Tootsies are designed to build brand
awareness, rather than market a particular footwear product, by linking the
brand to a consumer's lifestyle. The ads run in fashion/lifestyle publications
such as Glamour, Seventeen, and Cosmopolitan as well as in general interest
publications like People. Utilizing the print media, the Company seeks to
reach a large percentage of its target audience, women ages 18 to 34, with a
number of advertisements each selling season. The Company's print advertising
campaign for its Jones New York and Jones New York Sport footwear is intended
to build rapid consumer awareness and acceptance of the footwear by taking
advantage of the recognition of the Jones New York apparel name. In addition,
the Company has gained additional media attention through fashion editorial
publications.
The Company also participates with its retail customers in cooperative
advertising programs intended to take the brand awareness created by the
national print advertising and channel it to local retailers where consumers
can buy the Company's brands. This includes local advertising (radio,
television, and newspaper) as well as Company participation in major catalogs
for retailers such as Spiegel. The Company's co-op efforts are intended
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to maximize advertising resources by having its retailers share in the cost of
promoting the Company's brands. Also the Company believes that co-op
advertising encourages the retailer to merchandise the brand properly and sell
it aggressively on the sales floor.
The Company uses point-of-sale advertising to further promote its products
in the store. Point-of-sale used by the Company includes packaging, point-of-
sale displays, counter cards, banners, and other visual merchandising
techniques. These materials mirror the look and feel of the national print
advertising in order to reinforce brand image at the point-of-sale. Management
believes these efforts stimulate impulse sales and repeat purchases.
MANUFACTURING
Mootsies Tootsies, Mootsies Kids, Sam & Libby and Jones New York Sport
footwear are manufactured primarily in the People's Republic of China and
Brazil because of the ability of the suppliers in these countries to
manufacture quality products at affordable prices. The Jones New York footwear
brand is manufactured in Spain because Spanish suppliers can meet the
Company's quality requirements and the Spanish reputation for quality footwear
is consistent with the Jones New York image.
The Company does not have contracts with any of the factories that produce
its footwear. The Company relies on its relationships with buying agents who
are responsible for securing raw materials, selecting manufacturers,
monitoring the manufacturing process, inspecting finished goods and
coordinating shipments to the Company. These agents work regularly with
numerous factories with the capacity to meet the Company's product
specifications for quality, fit, volume and price. By using buying agents
rather than manufacturing products itself, the Company is able to maximize
production flexibility while avoiding significant capital expenditures, work-
in-process inventory and costs of managing a production work force. To date,
the Company has not encountered significant delivery or quality problems. The
Company works with buying agents with access to numerous manufacturing
facilities in order to maximize the Company's sourcing flexibility. The
Company believes it has built strong relationships with the agents and
manufacturing facilities over time and through volume of business. Management
believes that its buying agents do not represent other direct competitor
branded footwear lines. The Company pays its buying agents a percentage of the
order price of products shipped to the Company. The Company manufactures none
of its products and does not own any manufacturing facilities or equipment.
Prior to the start of production, the Company submits specifications for
products to the buying agent, who then provides a confirmation sample of each
style for inspection by the Company. During production, the Company makes
periodic reviews of products at the factory in addition to inspections
conducted by the buying agent. The Company also inspects products upon receipt
at its warehouse.
The Company maintains an in-stock position for selected styles of its
footwear in order to minimize purchasing costs and the time necessary to fill
customer orders. In order to maintain an in-stock position, the Company places
orders for selected footwear with its manufacturers prior to the time the
Company has received customers' orders for such footwear. In order to reduce
the risk of overstocking, the Company seeks to assess demand for its products
by soliciting input from its customers and monitoring retail sell-through
throughout the selling season.
The Company believes that its ability to satisfy customer order demands is
enhanced by designing its products to use common elements in raw materials,
lasts and dies. Whenever possible, the Company seeks to use factories that
have previously produced the Company's footwear because the Company believes
that this enhances continuity and quality while holding down production costs.
The Company protects itself against currency fluctuations by purchasing
products in U.S. dollars from the People's Republic of China and Brazil. In
order to assure the price of products from Spain, the Company buys
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forward exchange contracts for Spanish pesetas in connection with the
placement of orders for products. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital
Resources."
DISTRIBUTION
Following manufacture, the Company's products are packaged in retail boxes
bearing bar codes and shipped to the Company's warehouse facilities in Boston,
Massachusetts. When an order is received, it is filled in the warehouse and
shipped to the customer by whatever means the customer requests, usually by
common carrier.
The Company has an electronic data interchange (EDI) system to which some of
the Company's larger customers are linked. This system allows these customers
to automatically place orders with the Company, thereby eliminating the time
involved in transmitting and imputing orders. The Company is working to add
more of its customers to the system and to expand system capability to include
direct billing, payment and shipping information.
RESTRICTIONS ON IMPORTS
The Company's operations are subject to compliance with relevant laws and
regulations enforced by the United States Customs Service and to the customary
risks of doing business abroad, including fluctuation in the value of
currencies, increases in customs duties and related fees resulting from
position changes by the United States Customs Service, import controls and
trade barriers (including the unilateral imposition of import quotas),
restrictions on the transfer of funds, work stoppages and, in certain parts of
the world, political instability causing disruption of trade. These factors
have not had a material adverse impact upon the Company's operations to date.
Imports into the United States are also affected by the cost of
transportation, the imposition of import duties, and increased competition
from greater production demands abroad. The United States or the countries in
which the Company's products are manufactured may, from time to time, impose
new quotas, duties, tariffs or other restrictions, or adjust presently
prevailing quotas, duty or tariff levels, which could affect the Company's
operations and its ability to import products at current or increased levels.
The Company cannot predict the likelihood or frequency of any such events
occurring.
The Company's use of common elements in raw materials, lasts and dyes give
the Company the flexibility to duplicate sourcing in various countries in
order to reduce the risk that the Company may not be able to obtain products
from a particular country.
The Company's imported products are subject to United States customs duties
and, in the ordinary course of its business, the Company may, from time to
time, be subject to claims for duties and other charges. United States customs
duties currently are between 8.5% and 10.0% of the customs value of footwear
made principally of leather and between 6.0% and 48.0% of the customs value on
synthetic textile footwear, as classified pursuant to the Harmonized Tariff
Schedule of the United States.
For the fiscal year ended October 31, 1996, approximately 65% of the
Company's footwear was imported from the People's Republic of China ("China").
As discussed below, continued importation of these products could be affected
by trade issues that presently impact U.S.-China relations.
In 1995, following negotiations with the United States Trade Representative
("USTR"), the Chinese government agreed to take specific enforcement measures
against the piracy of computer software and compact discs and to make other
long standing changes to ensure the effective protection of intellectual
property rights pursuant to a previous memorandum of understanding executed
with the U.S. government. Subsequently, in early 1996, USTR threatened trade
sanctions against China for its alleged failure to live up to its enforcement
commitments. This trade dispute was resolved in June 1996 when USTR announced
that, based on the enforcement measures the Chinese government had taken and
would take in the future, it was satisfied that China was complying with its
obligations and the threat of trade sanctions was withdrawn. USTR continues to
monitor
9
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the Chinese government's implementation of its intellectual property
enforcement obligations, however, and the failure to meet those obligations in
the future could result in trade sanctions, including retaliatory tariffs,
that might affect the Company's imports of footwear from China.
From time to time there have been other trade disputes with China, involving
such things as market access, textile quotes, automotive industry policies,
and agricultural products. These and other such matters could also present
problems in the future that might lead to trade sanctions affecting the
Company's imports of footwear.
Imports from China continue to enter the United States on a conditional
most-favored nation ("MFN") basis. Pursuant to MFN, products imported by the
Company from China currently receive the lower tariff rates made available to
most of the United States' major trading partners. In the case of China,
however, this MFN treatment is made possible under the Trade Act of 1974 by
virtue of certain Presidential findings that waive restrictions that would
otherwise render China ineligible for MFN treatment. The President has waived
these restrictions each year since 1979. There can be no assurance that China
will continue to enjoy MFN status in the future. If goods manufactured in
China enter the United States without the benefit of MFN treatment, such goods
will be subject to significantly higher duty rates, ranging between 20% and
66% of customs value. Any such increased duties or tariffs could significantly
increase the cost or reduce the supply of goods from China.
BACKLOG
At October 31, 1994, 1995, and 1996, the Company had unfilled customer
orders of $40.1 million, $38.1 million and $50.0 million, respectively. The
backlog at a particular time is affected by a number of factors, including
seasonality and the scheduling of manufacturing and shipment of products.
Orders generally may be canceled by customers without financial penalty.
Accordingly, a comparison of backlog from period to period is not necessarily
meaningful and may not be indicative of eventual actual shipments to
customers. To date, the Company has not experienced material returns of its
products or material cancellations of orders. The Company expects that
substantially all of its backlog as of October 31, 1996 will be filled during
fiscal 1997.
JONES NEW YORK LICENSE AGREEMENT
In July 1993, the Company entered into a License Agreement with Jones
Investment Co., Inc. under which the Company has the exclusive right to use
the Jones New York and Jones New York Sport names in connection with the
development, manufacturing and marketing of women's footwear (other than
performance athletic shoes and bedroom slippers). The License Agreement covers
the United States (including its territories) and Canada. While the original
License Agreement expired in December 1996, the Company, on April 23, 1996
exercised an option to renew the Agreement for an additional four years
through December 2000. On October 2, 1995, a first amendment to the License
Agreement was signed, which provides the Company a second renewal option for
the five year period January 2001 to December 2005. The Company's second
renewal option is subject to certain conditions including, among others, the
condition that at the time of renewal net sales of Jones New York footwear
during 2000 appear likely to equal or exceed a specified amount. The License
Agreement requires the Company to pay an annual royalty equal to the greater
of (i) 5% of net sales of Jones New York and Jones New York Sport footwear or
(ii) a specified amount that escalates over the term of the License Agreement.
During the first renewal term (1997-2000) and the second renewal term (2001-
2005) of the License Agreement, the aggregate minimum royalty payments will be
approximately $3.4 million and $6.3 million, respectively. The License
Agreement also requires the Company to spend a specified minimum amount each
year on advertising the Jones New York and Jones New York Sport footwear
lines, which obligation may be satisfied through cooperative advertising. The
License Agreement prohibits the Company from manufacturing, selling,
distributing or promoting any merchandise that would compete both as to style
and price with the Jones New York and Jones New York Sport footwear lines. A
breach by the Company of its obligations under the License Agreement would
permit the licensor to terminate the License Agreement. The License Agreement
could also be terminated by the licensor if there is a change in control of
the Company.
10
<PAGE>
TRADEMARKS
Mootsies Tootsies and Mootsies Kids are registered trademarks of the Company
in the United States. In addition, these trademarks have been registered in
Canada, Japan and Taiwan and trademark registration applications are pending
in several other countries. The Company's United States trademark registration
for Mootsies Tootsies expires in 2000 and the registration for Mootsies Kids
expires in 2003 and both are renewable.
Jones New York and Jones New York Sport are registered trademarks of Jones
Investment Co., Inc. in the United States. Under the License Agreement, Jones
Investment Co., Inc. has the sole right to defend against any infringement of
these trademarks.
Sam & Libby, Just Libby, New Nineties and Jeff & Kristi are registered
trademarks of Sprague Company, a wholly-owned subsidiary of the Company. These
trademarks were acquired by the Company in August 1996 from Sam & Libby, Inc.
and are registered trademarks in the United States (see Note 1 of "Notes to
Consolidated Financial Statements"). In addition, the Sam & Libby and Just
Libby trademarks are registered in over 20 countries worldwide. Sprague's
United States trademark registration of Sam & Libby expires in 2001 and the
registration of Just Libby expires in 2005 and both are renewable. In January
1997, the Company entered into a license agreement with Inter-Pacific
Corporation, a 40 year old California based seller and distributor of men's,
women's and children's footwear to license the Sam & Libby trademarks for
slippers and E.V.A. sandals, pursuant to which the Company will receive
royalty and other revenues. The agreement requires the licensee to pay the
Company certain annual minimum payments and is subject to renewal options
through the year 2003.
COMPETITION
The women's fashion footwear market is highly competitive. The Company's
products compete against other branded footwear and, in the case of Mootsies
Tootsies, against private label footwear sold by many large retailers,
including some of the Company's customers. Many of the Company's competitors
have substantially greater financial, distribution and marketing resources, as
well as greater brand awareness than the Company. In addition, the general
availability of offshore manufacturing capacity allows easy access by new
market entrants. The Company believes its ability to compete successfully is
based on its ability to design, develop and market value priced footwear that
reflects current fashion trends.
EMPLOYEES
At October 31, 1996, the Company employed 90 people, including officers,
administrative, selling, and warehouse personnel. None of the Company's
employees are represented by a union. The Company considers its relationship
with its employees to be good.
ITEM 2. PROPERTIES
The Company's headquarters, which includes approximately 10,000 square feet
of office space and 130,000 square feet of warehouse space, is located in
Boston, Massachusetts. This facility is leased by the Company under a lease
that expires in 2001. The Company also leases a 64,000 square foot warehouse
located near its headquarters in Westwood, Massachusetts. This lease expires
in 1998, subject to a three-year renewal option. The Company also leases a
4,000 square foot showroom in New York City under a lease that expires in
2001. The Company believes that these facilities are adequate for its current
needs and that it will be able to obtain additional space at a reasonable cost
if it is required in the future.
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on
its business or operations.
11
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock began trading May 12, 1994 on the
National Market System maintained by the National Association of Securities
Dealers upon completion of the Company's initial public offering. Per share
stock prices (in dollars) for the quarterly periods during 1995 and 1996 as
reported by NASDAQ were as follows:
<TABLE>
<CAPTION>
1995 JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
---- ----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Low............................. 7 8 1/2 5 3 3/4
High............................ 11 11 1/2 9 1/2 7 1/2
<CAPTION>
1996 JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
---- ----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Low............................. 4 3/4 4 1/2 5 6 1/8
High............................ 7 6 7 3/8 6 3/4
</TABLE>
The Class A Common Stock is listed on the automatic quotation system of the
National Association of Securities Dealers under the symbol MAXS.
The number of stockholders of record of the Class A Common Stock on October
31, 1996 was 30. However, based on available information, the Company believes
that the total number of Class A Common stockholders, including beneficial
stockholders, is approximately 1,350.
There is currently no established public trading market for the Company's
Class B Common Stock. The number of stockholders of record of the Class B
Common Stock on October 31, 1996 was 4.
DIVIDEND POLICY
The Company does not anticipate paying cash dividends on its Common Stock in
the foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among
other things, future earnings, operations, capital requirements, the general
financial condition of the Company and general business conditions.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data with respect to the Company's
statements of income for the years ended October 31, 1994, 1995 and 1996 and
with respect to the Company's balance sheets as of October 31, 1995 and 1996
are derived from the Company's consolidated financial statements, which appear
elsewhere in this report and which have been audited by Ernst & Young LLP,
independent auditors. The following selected financial data with respect to
the Company's statements of income for the years ended October 31, 1992 and
1993 and with respect to the Company's balance sheets as of October 31, 1992,
1993 and 1994 are derived from the Company's consolidated financial
statements, which have been audited by Ernst & Young LLP, independent
auditors, and which are not included herein. The data should be read in
conjunction with the consolidated financial statements, related notes and
other financial information included herein.
12
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................ $50,345 $79,049 $100,931 $101,870 $104,337
Cost of sales.................... 36,789 56,297 72,117 77,912 79,915
------- ------- -------- -------- --------
Gross profit..................... 13,556 22,752 28,814 23,958 24,422
Selling expenses................. 3,164 5,258 5,518 4,777 5,314
General and administrative ex-
penses.......................... 4,015 4,062 5,796 6,954 7,986
Officers' compensation(1)(2)..... 4,505 8,370 12,381 1,850 2,113
------- ------- -------- -------- --------
Operating income................. 1,872 5,062 5,119 10,377 9,009
Interest expense................. 542 609 662 255 38
Other expenses (income), net..... 25 62 (101) 399 (579)
------- ------- -------- -------- --------
Income before income taxes....... 1,305 4,391 4,558 9,723 9,550
Income taxes..................... 116 400 1,709 3,889 3,629
------- ------- -------- -------- --------
Net income....................... $ 1,189 $ 3,991 $ 2,849 $ 5,834 $ 5,921
======= ======= ======== ======== ========
Net income per share
(Supplemental pro forma in
1994)(3)........................ $ 1.10 $ .70 $ .72
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $11,100 $15,967 $28,770 $35,097 $35,523
Total assets.......................... 21,383 27,926 36,621 39,979 46,920
Total debt (including current
maturities).......................... 6,725 8,279 123 787 610
Total stockholders' equity............ $10,632 $14,623 $29,850 $35,684 $41,605
</TABLE>
(1) Operating results for fiscal 1992, 1993, and 1994 were significantly
affected by officers' compensation expense, which totaled $4,505, $8,370
and $12,381, respectively. Operating income before officers' compensation
for fiscal 1992, 1993 and 1994 was $6,377, $13,432 and $17,500,
respectively.
(2) Includes a $7,000 one-time compensation expense incurred in the first
quarter of fiscal 1994 in connection with the grant of an option to the
Company's President to purchase 888,412 shares of Class A Common Stock,
which option was granted in exchange for the termination of a pre-existing
deferred compensation arrangement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) Supplemental pro forma net income per share for fiscal 1994 is based upon
5,213,317 shares of Class B Common Stock outstanding during the year
increased by (i) the assumed issuance of 765,644 shares, using the
treasury stock method and the average stock price during the period, upon
the exercise of an option granted to the Company's President to purchase
888,412 shares of Class A Common Stock, (ii) 1,187,500 shares, the
weighted average Class A shares issued and outstanding during the year,
(iii) 938,173 shares, the assumed weighted average Class A shares required
to repay the $20,227 of S Corporation Dividend, and (iv) 249,444 shares,
weighted average number of Class A shares (an assumed price, net of
offering expenses, of $10.78 per share), that would be necessary to repay
indebtedness to certain officers as if the initial public offering had
occurred at the beginning of the fiscal 1994. The total number of shares
used for the supplemental pro forma net income per share calculation is
8,354,078 for fiscal 1994. In computing the supplemental pro forma net
income per share, the historical income statement data for fiscal 1994 is
revised to assume that the Company had (i) paid annual officers'
compensation aggregation $1,800 (the compensation that was paid between
the completion of the Company's initial public offering and the end of
Fiscal 1994 on an annualized basis), (ii) been treated as a C Corporation
rather than an S Corporation for income tax purposes, with an assumed
effective income tax rate of 40%, and (iii) net income was increased by
$132, to reflect the net reduction of interest expense after giving effect
to the assumed repayment of certain debt outstanding during the fiscal
year and after related tax effect.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Form 10-K regard matters that are not
historical facts and are forward looking statements (as such term is defined
in the rules promulgated pursuant to the Securities Act of 1933, as amended
(the "Securities Act")). Because such forward looking statements include risks
and uncertainties, actual results may differ materially from those expressed
in or implied by such forward looking statements. Factors that could cause
actual results to differ materially include, but are not limited to: changing
consumer preferences, competition from other footwear manufacturers, loss of
key employees, general economic conditions and adverse factors impacting the
retail footwear industry, and the inability by the Company to source its
products due to political or economic factors or the imposition of trade or
duty restrictions. The Company undertakes no obligation to release publicly
the results of 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.
RESULTS OF OPERATIONS
The following table sets forth net sales by product line or category of
business:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mootsies Tootsies..................... $ 75.5 74.8% $ 65.6 64.4% $ 60.8 58.3%
Jones New York Footwear............... 7.4 7.4 17.2 16.9 24.0 23.0
Private Label Footwear................ 11.0 10.9 12.9 12.7 14.5 13.9
Closeout.............................. 7.0 6.9 6.2 6.0 5.0 4.8
------ ----- ------ ----- ------ -----
$100.9 100.0% $101.9 100.0% $104.3 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
Fiscal 1996 Compared to 1995
Net sales were $104.3 million in fiscal 1996 compared to $101.9 million in
fiscal 1995, an increase of 2.4%. Net sales for the Jones New York footwear
lines of business in fiscal 1996 increased 139.1% over fiscal 1995 net sales.
Private label net sales in fiscal 1996 increased 13.5% over fiscal 1995 net
sales. These net sales increases were offset by a 7.4% decrease in Mootsies
Tootsies net sales for fiscal 1996 from fiscal 1995. The average selling price
per pair of shoes sold increased 2.3% in fiscal 1996 over the fiscal 1995
average selling price per pair.
Gross profit was $24.4 million in fiscal 1996 compared to $24.0 million in
fiscal 1995. Gross margin was substantially unchanged from fiscal 1995 to
1996.
Selling expenses were $5.3 million in fiscal 1996 compared to $4.8 million
in fiscal 1995. As a percentage of net sales, selling expenses increased to
5.1% in fiscal 1996 from 4.7% in fiscal 1995 due to expenses associated with
launching the Company's Sam & Libby brand and increased advertising expense.
General and administrative expenses were $8.0 million in fiscal 1996 compared
to $7.0 million in fiscal 1995, an increase of 14.8%. As a percentage of
sales, general and administrative expenses increased to 7.7% in fiscal 1996
from 6.8% in fiscal 1995. The increase in expense was due to the higher
salaries and corresponding fringe benefit increase added as a result of new
personnel associated with launching the Company's Sam & Libby brand and
administrative charges which are volume related.
Interest expense was less than $0.1 million in fiscal 1996 compared to $0.3
million in fiscal 1995. This decrease was due to the Company being able to
rely on cash provided by operating activities to fund its working capital
requirements throughout the year.
Other income was $0.6 million for the fiscal year ended October 31, 1996
compared to other expense of $0.4 million for the same period in the prior
year. In 1996 this income was comprised principally of gains and
14
<PAGE>
losses from forward exchange contracts entered into in anticipation of future
purchases of inventory denominated in foreign currencies and interest income.
During fiscal year 1995 expenses of approximately $0.3 million were recognized
as non recurring costs arising from terminated discussions relating to the
possible sale of the Company.
Fiscal 1995 Compared to 1994
Net sales were $101.9 million in fiscal 1995 compared to $100.9 million in
fiscal 1994. Net sales for the Jones New York footwear lines of business in
fiscal 1995 increased 132.1% over fiscal 1994 net sales. Private label net
sales in fiscal 1995 increased 16.9% over fiscal 1994 net sales. These net
sales increases were offset by a 13.1% decrease in Mootsies Tootsies net sales
for fiscal 1995 from fiscal 1994. The average selling price per pair of shoes
sold increased 4.8% in fiscal 1995 over the fiscal 1994 average selling price
per pair. This was the result of higher average priced per pair Jones New York
footwear gaining a larger part of the Company's overall mix of sales.
Gross profit was $24.0 million in fiscal 1995 compared to $28.8 million in
fiscal 1994. The decrease in gross margin was due to the soft retail
environment. As a percentage of net sales the gross margins of all lines of
business were lower in fiscal 1995 as compared to fiscal 1994. The Company
pursued an aggressive inventory reduction program in the fourth fiscal quarter
of 1995 which also had an adverse effect on gross margins.
Selling expenses were $4.8 million in fiscal 1995 compared to $5.5 million
in fiscal 1994. As a percentage of sales, selling expenses decreased to 4.7%
in fiscal 1995 from 5.5% in fiscal 1994 due to reduced advertising expense and
a decrease in the share of net sales through commission sales representatives.
General and administrative expenses were $7.0 million in fiscal 1995 compared
to $5.8 million in fiscal 1994, an increase of 20.0%. As a percentage of
sales, general and administrative expenses increased to 6.8% in fiscal 1995
from 5.7% in fiscal 1994. The increase in expense was due to the higher
salaries and corresponding fringe benefit increase added as a result of new
personnel relating to the Jones New York footwear line, additional expenses
incurred as a public company and administrative charges which are volume
related.
As a result of the above, operating income before officers' compensation was
$12.2 million or 12.0% of sales in fiscal 1995 compared to $17.5 million or
17.3% of sales in fiscal 1994. Officers' compensation was $1.9 million in
fiscal 1995 compared to $12.4 million in fiscal 1994. The decrease was due
primarily to a $7.0 million one-time compensation expense incurred in the
first quarter of fiscal 1994 relating to the grant of a stock option to the
Company's President, which option was granted in exchange for the termination
of a pre-existing deferred compensation arrangement, and reduced officers'
compensation.
Interest expense was $0.3 million in fiscal 1995 compared to $0.7 million in
fiscal 1994. The decrease was due to the Company's ability to pay down all of
its debt at the end of fiscal 1995, as well as lower levels of debt throughout
fiscal 1995.
Other expenses (income) were $0.4 million for the fiscal year ended October
31, 1995 compared to ($0.1 million) for the same period in the prior year. In
1994 this expense was comprised principally of gains and losses from forward
exchange contracts entered into in anticipation of future purchases of
inventory denominated in foreign currencies. During fiscal year 1995 expenses
of approximately $0.3 million were recognized as non recurring costs arising
from terminated discussions relating to the possible sale of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily upon internally generated cash flows from
operations, borrowings under its revolving credit facility, and borrowings
from stockholders (when the Company was privately held) to finance its
operations and expansion. Cash provided by operating activities totaled
approximately $4.3 million in fiscal 1994, $5.7 million in fiscal 1995 and
$9.5 million in fiscal 1996. Prior to the Company's May 1994 initial public
offering, the Company, as an S Corporation, paid a higher level of
compensation to its executive officers than the Company has after the
offering. At October 31, 1996, working capital was $35.5 million as compared
to
15
<PAGE>
$35.1 million at October 31, 1995. Working capital may vary from time to time
as a result of seasonal requirements, the timing of early factory shipments
and the Company's in-stock position, which requires increased inventories, and
the timing of accounts receivable collections.
In fiscal year 1996, cash provided by operations was $9.5 million as
compared to cash provided by operations in fiscal 1995 of $5.7 million. The
increase of cash provided was due to reductions in accounts receivable and
prepaid expense balances and increases in accrued expenses. Other than the
acquisition of the rights to the Sam & Libby and certain related trademarks
and tradenames in fiscal 1996, investing activities over the same period have
been limited to modest capital expenditures. Financing activities for fiscal
years 1994 and 1995 consisted principally of short term bank borrowings to
finance build-up of inventory, lease financing for certain equipment, and
loans from officers for general working capital purposes. Although the Company
has available greater maximum borrowing levels under its bank credit line each
year since 1993 due to growth in inventory, average annual borrowings declined
in 1996 from 1995.
The Company currently has a $25.0 million revolving credit facility,
renewable under certain conditions annually, which is secured by substantially
all of the assets of the Company. A portion of the revolving credit facility
can be utilized to issue letters of credit to guarantee payment of the
Company's purchases of footwear manufactured overseas. Amounts available under
the revolving credit facility are based on eligible accounts receivable,
inventory, and a portion of the open letters of credit. As of October 31,
1996, there were no outstanding borrowings and outstanding letters of credit
were $9.6 million and $13.7 million was available for future borrowings.
Capital expenditures, which have been for equipment and leasehold
improvements, were minimal in fiscal 1996. The Company utilizes operating
leases for substantially all of its management information systems and related
equipment.
The Company regularly enters into forward exchange contracts in anticipation
of future purchases of inventory denominated in foreign currency, principally
the Spanish peseta. At October 31, 1996, forward exchange contracts totaling
$0.5 million were outstanding with settlement dates ranging from November 4,
1996 through December 31, 1996. As of the date of this Form 10-K Annual
Report, future inventory purchases required sufficient foreign currency to
meet these commitments.
The Company anticipates that it will be able to satisfy its cash
requirements for fiscal 1997 including its expected growth, primarily with
cash flow from operations, supplemented by borrowings under its revolving
credit facility.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's revenues or
profitability.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements required in response to this section
are submitted as part of Item 14(a) of this Report.
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and
Stockholders
Maxwell Shoe Company Inc.
We have audited the accompanying consolidated balance sheets of Maxwell Shoe
Company Inc. as of October 31, 1995 and 1996, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended October 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Maxwell Shoe Company Inc. at October 31, 1995 and 1996, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended October 31, 1996 in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Boston, Massachusetts
December 17, 1996
17
<PAGE>
MAXWELL SHOE COMPANY INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------
1995 1996
------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 6,685 $10,393
Accounts receivable, trade (net of allowance for doubtful
accounts and discounts of $853 in 1995, $730 in 1996)....... 17,834 16,853
Inventory, net............................................... 12,394 12,175
Prepaid expenses............................................. 833 127
Deferred taxes............................................... 1,041 821
------- -------
Total current assets........................................... 38,787 40,369
Property and equipment, net.................................... 1,180 1,039
Trademarks..................................................... -- 5,500
Other assets................................................... 12 12
------- -------
$39,979 $46,920
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 928 $ 880
Accrued expenses............................................. 2,509 3,300
Income taxes payable......................................... -- 433
Deferred taxes............................................... 71 91
Current portion of capital lease obligation.................. 182 142
------- -------
Total current liabilities...................................... 3,690 4,846
Capital lease obligation....................................... 605 469
Stockholders' equity:
Preferred stock, par value $.01, 1,000 shares authorized,
none outstanding............................................ -- --
Class A common stock, par value $.01, 20,000 shares
authorized, 2,525 outstanding............................... 25 25
Class B common stock, par value $.01,10,000 shares
authorized, 5,063 shares outstanding........................ 51 51
Additional paid-in capital................................... 27,312 27,312
Retained earnings............................................ 8,296 14,217
------- -------
Total stockholders' equity..................................... 35,684 41,605
------- -------
$39,979 $46,920
======= =======
</TABLE>
See accompanying notes.
18
<PAGE>
MAXWELL SHOE COMPANY INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $100,931 $101,870 $104,337
Cost of sales.................................... 72,117 77,912 79,915
-------- -------- --------
Gross profit..................................... 28,814 23,958 24,422
Operating expenses:
Selling........................................ 5,518 4,777 5,314
General and administrative..................... 5,796 6,954 7,986
Officers compensation.......................... 12,381 1,850 2,113
-------- -------- --------
23,695 13,581 15,413
-------- -------- --------
Operating income................................. 5,119 10,377 9,009
Other expenses (income):
Interest--bank borrowings...................... 421 255 38
Interest--officers notes....................... 241 -- --
Other, net..................................... (101) 399 (579)
-------- -------- --------
561 654 (541)
-------- -------- --------
Income before income taxes....................... 4,558 9,723 9,550
Income taxes..................................... 1,709 3,889 3,629
-------- -------- --------
Net income....................................... $ 2,849 $ 5,834 $ 5,921
======== ======== ========
Net income per share (supplemental pro forma in
1994)........................................... $ 1.10 $ .70 $ .72
======== ======== ========
Shares used to compute net income per share
(supplemental pro forma in 1994)................ 8,354 8,311 8,261
======== ======== ========
</TABLE>
See accompanying notes
19
<PAGE>
MAXWELL SHOE COMPANY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
1994 1995 1996
-------- ------- -------
<S> <C> <C> <C>
Operating activities
Net income........................................ $ 2,849 $ 5,834 $ 5,921
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization................... 138 213 242
Compensation expense related to stock option
grant.......................................... 7,000 -- --
Deferred income taxes........................... (817) (153) 240
Deferred compensation, net of payments.......... (1,691) -- --
Doubtful accounts provision..................... -- 150 50
Changes in operating assets and liabilities:
Accounts receivable........................... (3,775) (1,571) 931
Inventory..................................... (1,936) 4,157 219
Prepaid expenses.............................. (674) (2) 706
Other assets.................................. 84 -- --
Accounts payable.............................. 641 (1,768) (48)
Income taxes payable.......................... 272 (306) 433
Accrued expenses.............................. 2,161 (897) 791
-------- ------- -------
Net cash provided by operating activities......... 4,252 5,657 9,485
Investing activities
Purchase of trademark............................. -- -- (5,500)
Purchases of property and equipment............... (885) (144) (101)
-------- ------- -------
Net cash used by investing activities............. (885) (144) (5,601)
Financing activities
Proceeds of notes payable to officers............. 1,585 -- --
Repayments of notes payable to officers........... (5,003) -- --
Net proceeds (repayments) on bank borrowings...... (4,771) -- --
Distributions to stockholders..................... (20,227) -- --
Payments on capital lease obligation.............. (44) (163) (176)
Proceeds from lease financing..................... -- 717 --
Net proceeds of stock offering.................... 25,605 -- --
-------- ------- -------
Net cash provided (used) by financing activities.. (2,855) 554 (176)
-------- ------- -------
Net increase in cash and cash equivalents......... 512 6,067 3,708
Cash and cash equivalents at beginning of year.... 106 618 6,685
-------- ------- -------
Cash and cash equivalents at end of year.......... $ 618 $ 6,685 $10,393
======== ======= =======
Interest paid..................................... $ 662 $ 255 $ 38
======== ======= =======
Income taxes paid................................. $ 2,363 $ 4,975 $ 2,380
======== ======= =======
</TABLE>
See accompanying notes.
20
<PAGE>
MAXWELL SHOE COMPANY INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------- --------------
NUMBER NUMBER ADDITIONAL
OF OF PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31,
1993................... -- -- 5,213 $52 $ 458 $ 14,113 $ 14,623
Net income for 1994... 2,849 2,849
Dividends paid........ (5,727) (14,500) (20,227)
Compensation expense
related to stock
option grant......... 7,000 7,000
Net proceeds of common
stock offering....... 2,375 $ 24 25,581 25,605
----- ---- ----- --- -------- -------- --------
Balance at October 31,
1994................... 2,375 24 5,213 52 27,312 2,462 29,850
Net income for 1995... 5,834 5,834
Shares converted...... 150 1 (150) (1) --
----- ---- ----- --- -------- -------- --------
Balance at October 31,
1995................... 2,525 25 5,063 51 27,312 8,296 35,684
Net income for 1996... 5,921 5,921
----- ---- ----- --- -------- -------- --------
Balance at October 31,
1996................... 2,525 $ 25 5,063 $51 $ 27,312 $ 14,217 $ 41,605
===== ==== ===== === ======== ======== ========
</TABLE>
See accompanying notes.
21
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
OCTOBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All intercompany accounts and transactions
have been eliminated in consolidation.
Concentration of Credit Risk
The Company sells footwear for women and children to retailers located
throughout the United States, Canada and Japan. The Company performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral. Credit losses have been within or below management's
expectations. In fiscal 1994, 1995 and 1996 one customer accounted for
approximately 10%, 14%, and 15% respectively, of net sales. During 1996, this
one customer was acquired by another customer of the Company. Had these two
customers been treated as one account for fiscal years 1994, 1995 and 1996,
they would have accounted for approximately 14%, 18%, and 22% respectively, of
net sales.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Recognition of Revenue
Sales are recognized upon shipment of products.
Cash and Cash Equivalents
Cash, checking accounts and all highly-liquid debt instruments with original
maturities three months or less are deemed to be cash and cash equivalents.
Inventory
Inventory is valued at the lower of cost or market, using the first-in,
first-out method. Market is determined by net realizable value.
Long Term Assets
Property and equipment are stated at cost. Depreciation is provided using
both straight line and accelerated methods over the estimated useful lives of
these assets or the lease term, if shorter. The estimated useful lives of
these assets are as follows:
<TABLE>
<CAPTION>
ASSET USEFUL LIFE
----- -----------
<S> <C>
Furniture and fixtures...................................... 5 Years
Warehouse equipment......................................... 7 Years
Leasehold improvements...................................... 7 Years
Computer equipment.......................................... 5 Years
</TABLE>
22
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
In August 1996, the Company acquired the rights to the Sam & Libby and
certain related trademarks and tradenames for $5.5 million cash. The
trademarks and tradenames will be amortized on a straight line basis over 15
years, their estimated useful lives. Amortization will begin in 1997 when sale
of product with the trademark names will commence.
Operating Expenses
General and administrative expenses include the cost of warehousing and
shipping operations.
Income Taxes
Prior to May 15, 1994, the stockholders of the Company had elected
Subchapter S Corporation status under the Internal Revenue Code. As a result,
the Company's taxable income was reported on the tax returns of the Company's
stockholders. Consequently, no federal income tax was provided for in the
accompanying consolidated financial statements prior to May 15, 1994. A
provision for state income taxes was recorded to reflect corporate level
income taxes imposed on the Company by certain states.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 109 ("FAS 109"), "Accounting for Income
Taxes." The Company adopted the provisions of the new standard in its
consolidated financial statements effective May 15, 1994. Prior year
consolidated financial statements were not restated (see Note 9).
Under FAS 109, the liability method is used in accounting for income taxes.
Deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and law that will be in effect when
the differences reverse. Deferred tax assets may be reduced by a valuation
allowance to reflect the uncertainty associated with their ultimate
realization.
Forward Exchange Contracts
The Company uses forward exchange contracts to manage its foreign currency
exposure. Realized and unrealized gains and losses on contracts that hedge
anticipated cash flows are determined by comparison of contract values to
current market values upon execution of a contract (realized) and at each
balance sheet date for open contracts (unrealized). Resulting gains and losses
are recognized in other income and expense ($120 gain in 1994, $41 loss in
1995, $275 gain in 1996).
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and, accordingly, recognizes no compensation expense for
the stock option grants.
Accounting Pronouncements
In March 1995 Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" (FAS 121) was issued. Given the nature and amount of long-
lived assets included in the balance sheet, the Company does not expect that
FAS 121 will have any significant impact on the consolidated financial
statements when required to be adopted in fiscal 1997.
23
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
In October 1995, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 "Accounting for Stock-Based Compensation" (FAS 123). The
Company will adopt FAS 123 in fiscal 1997, however, it will continue to follow
APB 25 and related Interpretations in accounting for its employee stock
options. Therefore, adoption of FAS 123 will not have an impact on the
consolidated financial statements upon adoption.
2. UNAUDITED 1994 SUPPLEMENTAL PRO FORMA NET INCOME PER SHARE
In computing the supplemental pro forma net income per share, the historical
income statement data for fiscal 1994 is revised to assume that the Company
had (i) paid annual officers' compensation aggregation $1,800 (the
compensation that was paid between the completion of the Company's initial
public offering and the end of Fiscal 1994 on an annualized basis), (ii) been
treated as a C Corporation rather than an S Corporation for income tax
purposes, with an assumed effective income tax rate of 40%, and (iii) net
income was increased by $132, to reflect the net reduction of interest expense
after giving effect to the assumed repayment of certain debt outstanding
during the fiscal year and after related tax effect.
Supplemental pro forma net income per share for fiscal 1994 is based upon
5,213,317 shares of Class B Common Stock outstanding during the year increased
by (i) the assumed issuance of 765,644 shares, using the treasury stock method
and the average stock price during the period, upon the exercise of an option
granted to the Company's President to purchase 888,412 shares of Class A
Common Stock, (ii) 1,187,500 shares, the weighted average Class A shares
issued and outstanding during the year, (iii) 938,173 shares, the assumed
weighted average Class A shares required to repay the $20,227 of S Corporation
Dividend and (iv) 249,444 shares, weighted average number of Class A Shares
(an assumed price, net of offering expenses, of $10.78 per share), that would
be necessary to repay indebtedness to certain officers as if the initial
public offering had occurred at the beginning of the fiscal 1994. The total
numbers of shares used for the supplemental pro forma net income per share
calculation is 8,354,078 for fiscal 1994.
3. RELATED PARTY TRANSACTIONS
One of the principal stockholders and another officer of the Company had
owned a chain of six retail stores that purchase footwear from the Company.
Their ownership position in these stores was sold during fiscal 1996. Total
sales (and cost of sales) to these stores in fiscal 1994 and 1995, and while
they had an ownership position in 1996 were $368 ($256), $365 ($229), and $237
($173) respectively. Trade receivables owed by these stores at October 31,
1994, and 1995 were $110, and $162 respectively. In addition, the Company has
provided administrative services to these stores. Fees for such services, as
negotiated between the parties, totaled $11, $25, and $19 in fiscal 1994,
1995, and 1996 respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Furniture and fixtures........................................ $ 515 $ 523
Warehouse equipment........................................... 1,275 1,275
Leasehold improvements........................................ 378 398
Computer equipment............................................ 212 285
Other......................................................... 4 4
------ ------
2,384 2,485
Less accumulated depreciation................................. 1,204 1,446
------ ------
Property and equipment, net................................... $1,180 $1,039
====== ======
</TABLE>
24
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
At October 31, 1995 and 1996, property and equipment included assets
recorded under capital leases of $1,047. Accumulated depreciation of such
assets was $305 and $468 at October 31, 1995, and 1996 respectively.
Depreciation expense, including amortization of assets recorded under capital
leases, for the years ended October 31, 1994, 1995 and 1996 amounted to $138,
$213 and $242 respectively.
5. BANK BORROWINGS
The Company has a revolving line of credit pursuant to a loan agreement with
Bank of Boston. The loan agreement provides that the bank will both advance
funds directly to the Company and issue letters of credit on behalf of the
Company. The total credit line available shall not exceed an amount which is
the lesser of (i) an amount determined under a formula based upon qualified
accounts receivable and inventory balances, or (ii) $25,000.
Direct borrowings bear interest at the bank's base rate. At October 31,
1996, the Company had outstanding letters of credit totaling $9.6 million for
the purchase of inventory and approximately $13.7 million available under the
line of credit. The line of credit is secured by substantially all of the
Company's assets.
6. ACCRUED EXPENSES
Accrued expenses consist of the following at October 31:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Inventory purchases........................................... $1,474 $1,149
Compensation.................................................. 474 1,455
Employee benefit plan contribution............................ 128 142
Other......................................................... 433 554
------ ------
$2,509 $3,300
====== ======
</TABLE>
7. DEFERRED COMPENSATION
The Company had a deferred compensation agreement with a key employee which
was terminated effective May 18, 1994 (see Note 8). As of November 1, 1991,
the agreement provided that the Company accrue 13% of "adjusted income," as
defined. The agreement also provided for payment of such deferred compensation
at the discretion of the Board of Directors. Deferred compensation expense
included in the accompanying statement of income for fiscal year 1994 was
$780.
8. STOCKHOLDERS' EQUITY
Preferred Stock
The Company's Charter authorizes the issuance of 1,000,000 shares of
preferred stock. The Company's Charter provides that the Board of Directors of
the Company may authorize the issuance of one or more series of preferred
stock having such rights, including voting, conversion and redemption rights,
and such preferences, including dividend and liquidation preferences, as the
Board may determine without any further action by the stockholders of the
Company. There are no shares of preferred stock currently outstanding.
Common Stock
Each share of Class B Common Stock is freely convertible into one share of
Class A Common Stock at the option of the Class B stockholders. Holders of
Class A Common Stock are entitled to one vote for each share
25
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
held of record, and holders of Class B Common Stock are entitled to ten votes
for each share held of record. The Class A Common Stock and the Class B Common
Stock vote together as a single class on all matters submitted to a vote of
stockholders (including the election of directors), except that, in the case
of a proposed amendment to the Company's Certificate of Incorporation that
would alter the powers, preferences or special rights of either the Class A
Common Stock or the Class B Common Stock, the class of Common Stock to be
altered shall vote on the amendment as a separate class. Shares of Common
Stock do not have cumulative voting rights with respect to the election of
directors.
On January 25, 1994 the Company declared a $14,500 dividend payable to the
holders of Class B Common Stock. Prior to the completion of the initial public
offering of the Company's Class A Common Stock, the Company declared an
additional dividend to the Class B common stockholders in an aggregate amount
of $5,727. The Company paid the first dividend by borrowing $14,500 under a
proposed short-term bank facility, which was then funded with a portion of the
net proceeds from the Company's initial public offering. The second dividend
of $5,727 was also funded with a portion of the net proceeds from the initial
public offering.
On January 26, 1994, in consideration for the termination of a deferred
compensation agreement, the Board of Directors approved a non-transferable
stock option grant to the President for the purchase of 888,412 shares of
Class A Common Stock at an exercise price of $1.50 per share. As a result, in
1994 the Company recognized $7,000 of compensation expense representing the
excess of the deemed value for accounting purposes of the stock option over
the aggregate exercise price of such option.
On January 30, 1994, the Board of Directors adopted and approved the 1994
Stock Incentive Plan (the Plan) which allows the grants of incentive stock
options and other awards. The Board of Directors has reserved 750,000 shares
of Class A Common Stock for issuance upon exercise of options or grants of
other awards under the Plan.
The following table reflects all option activity under the Plan from
inception to October 31, 1996:
<TABLE>
<CAPTION>
OUTSTANDING PRICE PER SHARE
----------- ---------------
<S> <C> <C>
Granted.......................................... 104,700 $10.38
-------
Balance, October 31, 1994........................ 104,700 $10.38
Granted.......................................... 198,000 $ 9.00
Canceled......................................... (8,450) $ 9.00 - $10.38
-------
Balance, October 31, 1995........................ 294,250 $ 9.00 - $10.38
Granted.......................................... 382,500 $ 5.00 - $ 6.25
Canceled......................................... (5,900) $ 9.00 - $10.38
-------
Balance, October 31, 1996........................ 670,850 $ 5.00 - $10.38
=======
</TABLE>
Except for options granted to non-employee directors which vest immediately,
options generally vest annually over a four year period. At October 31, 1996,
117,839 options were exercisable under the Plan.
In addition, in December 1996, 64,500 options which were granted to certain
employees in December 1994, at a per share exercise price of $9.00, were
canceled, and 64,500 new options were granted to the same employees at a per
share exercise price of $6.50 (the closing price per share of the Company's
Class A Common Stock on the date of grant).
26
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES
Since 1986, the Company had been an S Corporation for federal and certain
state income tax purposes. As an S Corporation, the Company generally was not
responsible for the payment of income taxes. Instead, the stockholders were
taxed on the Company's taxable income at the stockholders' individual federal
and state income tax rates. In May, 1994, the Company terminated its status as
an S Corporation and, accordingly, the Company is subject to federal and state
income taxes.
In addition, in fiscal 1994 the Company adopted FAS 109 and recorded a net
deferred tax asset for the cumulative temporary differences between financial
reporting and tax reporting of $1,899, which increased fiscal 1994 net income
by the same amount. The deferred tax asset was based on the cumulative
temporary differences at the date of termination of S Corporation status.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of October 31 were as
follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Stock option compensation................................ $ 2,800 $ 2,800
Inventory reserve........................................ 524 376
Allowance for doubtful accounts.......................... 359 292
Inventory capitalization................................. 158 153
------- -------
3,841 3,621
Valuation allowance for deferred tax assets................ (2,800) (2,800)
------- -------
Total deferred tax assets.................................. 1,041 821
Deferred tax liabilities:
Depreciation............................................. 71 91
------- -------
Total deferred tax liabilities............................. 71 91
------- -------
Net deferred tax assets.................................... $ 970 $ 730
======= =======
</TABLE>
FAS 109 requires a Company to recognize a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. The stock option compensation, discussed in Note 8, will be
deductible for tax reporting only upon the exercise of the option. The
ultimate amount of the compensation deduction cannot be determined currently
as it is not certain when, if ever, the holder of the option will ultimately
exercise the option, or the value of the tax deduction that the Company would
realize.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................. $1,830 $3,183 $3,011
State............................................... 696 859 378
------ ------ ------
Total current......................................... 2,526 4,042 3,389
====== ====== ======
Deferred:
Federal............................................. (695) (130) 204
State............................................... (122) (23) 36
------ ------ ------
Total deferred........................................ (817) (153) 240
------ ------ ------
$1,709 $3,889 $3,629
====== ====== ======
</TABLE>
27
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the effective income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate......................................... 34% 34% 34%
Previously unrecognized S Corporation tax benefits.......... (3) -- --
State income taxes, net of federal tax benefit.............. 6 6 4
--- --- ---
Effective tax rate.......................................... 37% 40% 38%
=== === ===
</TABLE>
10. PROFIT-SHARING PLAN
The Company has a contributory 401(k) profit-sharing plan covering
substantially all employees. The plan requires the Company to match 100% of
employee contributions up to 2% of total employee compensation. The plan also
allows for additional discretionary Company contributions. Total plan expense
amounted to $201, $156 and $200 respectively for fiscal years 1994, 1995 and
1996 respectively.
11. COMMITMENTS
The Company leases equipment and office and warehouse space under long-term
non-cancelable operating leases which expire at various dates through October
31, 2002. These leases require the Company to pay the real estate taxes on the
real property. The Company also leases equipment under capital leases.
At October 31, 1996, future minimum payments under such leases were as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997...................................................... $ 168 $ 773
1998...................................................... 151 718
1999...................................................... 150 510
2000...................................................... 142 490
2001...................................................... 124 490
Later years............................................... -- 60
----- ------
Total minimum lease payments.............................. 735 $3,041
======
Amounts representing interest............................. (124)
-----
Capital lease obligation (including current portion)...... $ 611
=====
</TABLE>
The Company is a licensee under a certain agreement which allows for the
manufacture and sale of various items of footwear. The agreement requires the
payment of royalties on qualified product sales and generally guarantee minimum
royalty payments regardless of sales volumes. The Company had an option to
renew this license through December 31, 2000. This option was exercised on
April 23, 1996 and requires an additional minimum royalty commitment of $3,400.
On October 2, 1995, a first amendment to this license agreement was executed,
adding a second renewal option for the five year period January, 2001 to
December, 2005. This second renewal option period requires a minimum royalty
commitment of $6,250.
The Company has entered into forward exchange contracts in anticipation of
future purchases of inventory denominated in foreign currency, principally the
Spanish peseta. At October 31, 1996, forward exchange contracts totaling $0.5
million were outstanding with settlement dates ranging from November 4, 1996
through December 31, 1996. Maximum risk of loss on these contracts is the
amount of the difference between the spot
28
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
rate at the date of contract delivery and the contracted rate. The Company
expects that future inventory purchases will require sufficient foreign
currency to meet these commitments.
12. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly results for the fiscal
years ended October 31, 1995 and October 31, 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Fiscal 1995
Net sales....................... $21,825 $24,188 $28,557 $27,300
Gross profit.................... 5,974 6,471 6,879 4,634
Net income...................... 1,577 1,894 1,725 638
Earnings per share.............. $ .19 $ .23 $ .21 $ .08
======= ======= ======= =======
Fiscal 1996
Net sales....................... $23,705 $26,774 $30,222 $23,636
Gross profit.................... 5,821 5,917 7,009 5,675
Net income...................... 1,452 1,530 1,920 1,019
Earnings per share.............. $ .18 $ .19 $ .23 $ .12
======= ======= ======= =======
</TABLE>
29
<PAGE>
MAXWELL SHOE COMPANY INC.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held March 20, 1997
to be filed with the Securities and Exchange Commission within 120 days after
October 31, 1996 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held March 20, 1997
to be filed with the Securities and Exchange Commission within 120 days after
October 31, 1996 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held March 20, 1997
to be filed with the Securities and Exchange Commission within 120 days after
October 31, 1996 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held March 20, 1997
to be filed with the Securities and Exchange Commission within 120 days after
October 31, 1996 and is incorporated herein by reference.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) Consolidated Financial Statements:
The following consolidated financial statements of the Company are
included in response to Item 8 of this report.
<TABLE>
<CAPTION>
PAGE REFERENCE
FORM 10-K
--------------
<S> <C>
Report of Independent Auditors............................ 17
Consolidated Balance Sheets as of October 31, 1995 and
1996..................................................... 18
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1996............... 19
Consolidated Statements of Cash Flows for each of the
three years in the period ended October 31, 1996......... 20
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended October
31, 1996................................................. 21
Notes to Consolidated Financial Statements................ 22
(a)(2) Consolidated Financial Statements:
Schedule II--Valuation and qualifying accounts for the
years ended October 31, 1994, 1995 and 1996.............. 35
</TABLE>
Schedules other than those listed above have been omitted since they are
either not required, not applicable, or the information is otherwise
included.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of fiscal
1996.
(c) Exhibits
<TABLE>
<C> <S>
3.1 Certificate of Incorporation of Maxwell Shoe Company Inc.
(incorporated by reference to exhibit 3.1 to the registrant's Form S-
1 Registration Statement No. 33-74768)
3.2 Bylaws of Maxwell Shoe Company Inc., as amended (incorporated by
reference to exhibit 3.2 to the registrant's Form S-1 Registration
Statement No. 33-74768)
4.1 Specimen Maxwell Shoe Company Inc. Class A Common Stock Certificate
(incorporated by reference to exhibit 4.1 to the registrant's Form
10-K for the fiscal year ended October 31, 1994)
4.2 Specimen Maxwell Shoe Company Inc. Class B Common Stock Certificate
(incorporated by reference to exhibit 4.2 to the registrant's Form
10-K for the fiscal year ended October 31, 1994)
10.1 1994 Stock Incentive Plan (incorporated by reference to exhibit 10.1
to the registrant's Form S-1 Registration Statement No. 33-74768)
10.2.1 Form of Employee Nonqualified Stock Option Agreement pursuant to 1994
Stock Incentive Plan (incorporated by reference to exhibit 10.2.1 to
the registrant's Form S-1 Registration Statement No. 33-74768)
10.2.2 Form of Employee Incentive Stock Option Agreement pursuant to 1994
Stock Incentive Plan (incorporated by reference to exhibit 10.2.2 to
the registrant's Form S-1 Registration Statement No 33-74768)
</TABLE>
31
<PAGE>
<TABLE>
<C> <S>
10.2.3 Form of Nonemployee Director Stock Option Agreement pursuant to 1994
Stock Incentive Plan (incorporated by reference to exhibit 10.2.3 to
the registrant's Form S-1 Registration Statement No. 33-74768)
10.3 Form of Restricted Stock Agreement pursuant to 1994 Stock Incentive
Plan (incorporated by reference to exhibit 10.3 to the registrant's
Form S-1 Registration Statement No. 33-74768)
10.4 Form of Indemnity Agreement between Maxwell Shoe Company Inc. and
each of its directors and executive officers (incorporated by
reference to exhibit 10.4 to the registrant's Form S-1 Registration
Statement No. 33-74768)
10.5 Form of Tax Indemnification Agreement between Maxwell Shoe Company
Inc. and each of Maxwell V. Blum, Eleanor S. Blum, Betty Ann Blum and
Marjorie Blum (incorporated by reference to exhibit 10.5 to the
registrant's Form S-1 Registration Statement No. 33-74768)
10.6 Agreement and Plan of Merger of Maxwell Shoe Co., Inc., a
Massachusetts corporation, with and into Maxwell Shoe Company Inc., a
Delaware corporation (incorporated by reference to exhibit 10.6 to
the registrant's Form S-1 Registration Statement No. 33-74678)
10.7 Lease dated as of May 15, 1991 by and between George Shapiro, Arthur
S. Goldberg and Sidney Shapiro, Trustees of the Shapiro Properties
Realty Trust, as lessor, and Maxwell Shoe Co., Inc., as lessee
(incorporated by reference to exhibit 10.7 to the registrant's Form
S-1 Registration Statement No. 33-74768)
10.8 Lease dated as of November 17, 1993 by and between Trustees of
Bradshaw Westwood Trust, as landlord, and Maxwell Shoe Co., Inc., as
tenant (incorporated by reference to exhibit 10.8 to the registrant's
Form S-1 Registration Statement No. 33-74768)
10.9 Agreement of Lease between Anon Realty Associates, L.P., as successor
lessor to 1414 Americas Company and Maxwell Shoe Co., Inc., as lessee
(incorporated by reference to exhibit 10.9 to the registrant's Form
S-1 Registration Statement No. 33-74768)
10.10 Loan and Security Agreement dated May 30, 1991 between Maxwell Shoe
Co., Inc. and The First Bank of Boston, as amended March 11, 1993,
June 22, 1993, and August 31, 1993 (incorporated by reference to
exhibit 10.10 to the registrant's Form S-1 Registration Statement No.
33-74768)
10.11 Promissory Note dated March 11, 1993 issued by Maxwell Shoe Co., Inc.
to The First National Bank of Boston (incorporated by reference to
exhibit 10.11 to the registrant's Form S-1 Registration Statement No.
33-74768)
10.12 License Agreement dated July 1, 1993 between Jones Investment Co.,
Inc. and Maxwell Shoe Co., Inc. (incorporated by reference to exhibit
10.12 to the registrant's Form S-1 Registration Statement No. 33-
74768)
10.13 Form of Registration Rights Agreement between Maxwell Shoe Company
Inc. on the one hand and Maxwell V. Blum, Betty A. Blum, Marjorie
Blum, Mark J. Cocozza, and Joseph Aborn, as trustee of the Eleanor S.
Blum Trust (incorporated by reference to exhibit 10.13 to the
registrant's Form S-1 Registration Statement No. 33-74768)
10.14 Employment Agreement dated as of January 26, 1994 between Maxwell
Shoe Co., Inc. and Mark J. Cocozza (incorporated by reference to
exhibit 10.14 to the registrant's Form S-1 Registration Statement No.
33-74768)
10.15 Stock Option and Registration Rights Agreement dated as of January
26, 1994 between Maxwell Shoe Co., Inc. and Mark J. Cocozza
(incorporated by reference to exhibit 10.15 to the registrant's Form
S-1 Registration Statement No. 33-74768)
10.16 Deferred Incentive Compensation Agreement dated October 31, 1988
between Maxwell Shoe Co., Inc. and Mark J. Cocozza, as amended
(incorporated by reference to exhibit 10.16 to the registrant's Form
S-1 Registration Statement No. 33-74768)
</TABLE>
32
<PAGE>
<TABLE>
<C> <S>
10.17 Master Lease Agreement dated as of July 18, 1994 between Maxwell Shoe
Company Inc. and BancBoston Leasing Inc. (incorporated by reference to
exhibit 10.23 to the registrant's Form 10-K for the fiscal year ended
October 31, 1994)
10.18 Assumption Agreement dated July 7, 1995 between BancBoston Leasing
Inc. and Maxwell Shoe Company Inc. (incorporated by reference to
exhibit 10.24 to the registrant's Form 10-K for the fiscal year ended
October 31, 1995)
10.19 Letter Agreement dated January 25, 1995 between Legas Realty Corp., as
successor lessor to S.L. Green Properties Inc., as successor to Anon
Realty Associates, L.P., and Maxwell Shoe Company Inc. (incorporated
by reference to exhibit 10.25 to the registrant's Form 10-K for the
fiscal year ended October 31, 1995)
10.20 First Amendment to License Agreement dated October 2, 1995 between
Jones Investment Co., Inc., and Maxwell Shoe Company Inc.
(incorporated by reference to exhibit 10.26 to the registrant's Form
10-K for the fiscal year ended October 31, 1995)
10.21 Trademark and Intellectual Property Rights Purchase and Sale Agreement
dated July 2, 1996 between Sam & Libby, Inc. and Maxwell Shoe Company
Inc.
10.22 License Agreement dated January 8, 1997 between Inter-Pacific Trading
Corporation d/b/a Inter-Pacific Corporation and Maxwell Shoe Company
Inc.
21 Subsidiaries of Maxwell Shoe Company Inc.
23 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
33
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Maxwell Shoe Company Inc.
/s/ Mark J. Cocozza
By __________________________________
MARK J. COCOZZA, PRESIDENT AND
CHIEF OPERATING OFFICER
JANUARY 27, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Maxwell V. Blum Chairman of the January 27, 1997
- ------------------------------------- Board and Chief
MAXWELL V. BLUM Executive Officer
(Principal
Executive Officer)
/s/ Mark J. Cocozza President and Chief January 27, 1997
- ------------------------------------- Operating Officer
MARK J. COCOZZA
/s/ James J. Tinagero Executive Vice January 27, 1997
- ------------------------------------- President
JAMES J. TINAGERO (Principal
Financial Officer)
/s/ Richard J. Bakos Vice President January 27, 1997
- ------------------------------------- Finance and Chief
RICHARD J. BAKOS Financial Officer
(Principal
Accounting Officer)
/s/ Betty Ann Blum Executive Vice January 27, 1997
- ------------------------------------- President and
BETTY ANN BLUM Director
/s/ Marjorie W. Blum Vice President Sales January 27, 1997
- ------------------------------------- and Secretary and
MARJORIE W. BLUM Director
/s/ Stephen A. Fine Director January 27, 1997
- -------------------------------------
STEPHEN A. FINE
/s/ Jonathan K. Layne Director January 27, 1997
- -------------------------------------
JONATHAN K. LAYNE
/s/ Malcolm L. Sherman Director January 27, 1997
- -------------------------------------
MALCOLM L. SHERMAN
34
<PAGE>
MAXWELL SHOE COMPANY INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended October 31, 1994
Allowance for doubtful
accounts..................... $702 $-- $(99) $801
Year ended October 31, 1995
Allowance for doubtful
accounts..................... $801 $150 $ 98 $853
Year End October 31, 1996
Allowance for doubtful
accounts..................... $853 $ 50 $173 $730
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries.
35
<PAGE>
EXHIBIT 10.21
TRADEMARK AND INTELLECTUAL PROPERTY RIGHTS
------------------------------------------
PURCHASE AND SALE AGREEMENT
---------------------------
This TRADEMARK AND INTELLECTUAL PROPERTY RIGHTS PURCHASE AND SALE AGREEMENT
(this "Agreement") is made and entered into as of this 2nd day of July, 1996 by
and among SAM & LIBBY, INC., a California corporation ("Seller"), and with
respect to those sections of this Agreement referenced below the signatures of
each of the Shareholders (as defined below) on the signature page of this
Agreement, SAMUEL L. EDELMAN, individually and as trustee of any and all trusts
for which he serves as trustee which may hold shares of Seller's capital stock
and have voting rights of such stock, LOUISE B. EDELMAN, individually and as
trustee of any and all trusts for which she serves as trustee which may hold
shares of Seller's capital stock and have voting rights of such stock, and
STUART L. KREISLER individually (collectively, the "Shareholders"), and MAXWELL
SHOE COMPANY INC., a Delaware corporation ("Buyer").
RECITALS:
A. Seller is the owner of each of those certain trademarks, trade names,
service marks, logos and common law and similar rights used and/or registered in
the United States and worldwide (the "Trademarks"), as identified on Exhibit A
attached hereto.
B. Subject to the terms and conditions set forth herein, Seller desires to
sell to Buyer ownership rights to each of the Trademarks and all rights
associated therewith and Buyer desires to acquire the same.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto covenant and agree as follows:
1. Agreement to Sell and Purchase. On the terms and subject to the
------------------------------
conditions set forth in this Agreement, on the Closing Date (as defined below)
the Seller shall convey, transfer, assign, sell and deliver to Buyer, and Buyer
shall acquire, accept and purchase, all right, title, benefit and interest in
and to the Trademarks together with the goodwill symbolized by and associated
with the Trademarks.
2. Consideration to be Paid by Buyer. The purchase price for the
---------------------------------
Trademarks shall be $5.5 million cash (the "Purchase Price"). Buyer agrees to
pay: (i) on or before July 8, 1996 the amount of $200,000 (the "Initial
Payment"), to be held in escrow until the Closing (as defined below) by a third
person mutually satisfactory to Buyer and Seller; and (ii) at Closing (as
defined below) the amount of $5.1 million, with the remaining $200,000 of the
Purchase Price (the "Balance Payment") to be paid on April 30, 1997, such
Balance Payment to be made only if all of Seller's and all of the Shareholders'
material obligations under this Agreement have been satisfied in full. In the
event Buyer does not deliver the Initial Payment into an escrow account on or
<PAGE>
before July 8, 1996, Buyer shall deliver the Initial Payment to Seller in full
in cash on or before July 10, 1996.
3. No Assumption of Liabilities. Buyer and Seller hereby acknowledge and
----------------------------
agree that Buyer shall not assume or be obligated to perform any liabilities or
obligations of Seller, or any related or affiliated party, whether express,
implied, fixed, accrued, contingent, liquidated or unliquidated, known or
unknown, whether presently in existence or arising hereafter.
4. Closing. The closing of the transactions herein contemplated shall,
-------
unless another date, time or place is agreed to in writing by the parties
hereto, take place at the offices of Gibson, Dunn & Crutcher LLP, 200 Park
Avenue, New York, New York, no later than two business days after the
shareholder meeting referred to in Section 10.1 below, but in no event later
than September 4, 1996 (the "'Closing" or "Closing Date"), if all conditions to
closing shall have been fulfilled on or before such date.
5. Method of Payment. All funds to be delivered to Seller at Closing
-----------------
shall be delivered by wire transfer in immediately available funds to an account
of Bank of New York Financial Corporation, or its applicable affiliate ("Bank of
New York"), for the benefit of Seller, which account shall be designated by
Seller in writing at least two business days prior to the Closing Date. The
Balance Payment to be delivered to Seller on April 30, 1997 shall be delivered
by wire transfer in immediately available funds to an account of Bank of New
York for the benefit of Seller, which account shall be designated by Seller in
writing at least two business day prior to April 30, 1997.
6. Representations and Warranties of Seller. Seller represents and
----------------------------------------
warrants to Buyer that:
6.1 Organization and Good Standing. Seller is duly organized,
------------------------------
validly existing and in good standing under the laws of the State of California
and is qualified to do business in all jurisdictions where Seller's operations
require same which would have a material impact on any of the Transactions (as
defined below).
6.2 Authorization of Agreement. Subject to obtaining any required
--------------------------
approval of the holders of the shares of capital stock of Seller, Seller has,
and has obtained, all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. Subject to
obtaining any required approval of the holders of capital stock of Seller, this
Agreement and all other agreements and instruments to be executed by Seller in
connection herewith have been (or upon execution will have been) duly executed
and delivered by Seller, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid and binding obligations of Seller, enforceable against
Seller in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance, moratorium or other laws relating to or affecting the rights of
creditors generally.
6.3 Title to Trademarks. Except as set forth on Schedule 6.3, Seller
-------------------
has full and unrestricted title in all jurisdictions as set forth on Exhibit A
to each of the Trademarks, free
2
<PAGE>
and clear of any liens, mortgages, encumbrances, security interests or third
party claims of any kind ("Liens") and at Closing Buyer shall own in fee
undisputed and unrestricted title to the Trademarks, free and clear of any and
all Liens.
6.4 Agreement Not in Breach of Other Instruments. Subject to the
--------------------------------------------
consent of Bank of New York, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default under, or conflict with, any material agreement,
indenture or other instrument to which Seller is a party or by which it is
bound, Seller's Articles of Incorporation or bylaws, any judgment, decree, order
or award of any court, governmental body or arbitrator, or any law, rule or
regulation applicable to Seller or the Trademarks.
6.5 Consents of Third Parties and Regulatory Approval. Except for
-------------------------------------------------
the consent of Bank of New York, and the approval by Seller's shareholders, no
consents of any third parties are required to consummate the transactions
contemplated by this Agreement. No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
part of Seller for the consummation by it of the transactions contemplated by
this Agreement.
6.6 The Trademarks. Exhibit A to this Agreement is a schedule of all
--------------
the Trademarks, their registrations owned or utilized by Seller, and pending
applications therefor, or in which Seller has any rights or licenses worldwide,
together with the current status and a brief description of each. All
Trademarks, registrations and applications listed on Exhibit A to this Agreement
are valid, enforceable and subsisting, and have not been abandoned or canceled
and have not expired. Seller has full title and ownership in and rights to
utilize all the Trademarks necessary for or used in its business as now or
previously conducted without any infringement of the rights of others. Seller
has not received any communications nor is it aware of any entity alleging that
Seller has infringed upon or, by conducting its business as currently conducted,
would infringe upon, nor is Seller aware that by conducting Seller's business
Seller would infringe upon any intellectual property right of any other person
or entity. Seller is not aware of any infringement of the Trademarks by third
parties and Seller has used and uses its commercially reasonable best efforts to
prevent any infringement of the Trademarks by third parties. None of the
Trademarks is the subject of, or will be affected by, any existing action,
proceeding, claim, demand or judgment to which Seller is a party or of which it
is aware, the outcome of which could impair Buyer's ability to use the
Trademarks in an unrestricted fashion. Except as set forth in Exhibit A and
Schedule 6.3 and except as contemplated by Section 9.1 of this Agreement, Seller
is not a party to any license, agreement or arrangement, whether as licensor,
licensee, franchisor, franchisee or otherwise, with respect to the Trademarks or
applications for them. Seller owns or holds adequate licenses or other rights
to use all of the Trademarks necessary for its business as now conducted by
Seller, and that use does not, and will not violate any rights of others.
Seller has the power, right and authority to sell to Buyer all of the Trademarks
and all such licenses or other rights.
6.7 Disclosure. The information provided by Seller in this Agreement
----------
does not and will not, to Seller's knowledge, contain an untrue statement of a
material fact or omit to state
3
<PAGE>
a material fact required to be stated herein or therein or necessary to make the
statements and facts contained herein or therein, in light of the circumstances
under which they are made, not false or misleading. Copies of all documents
heretofore or hereafter delivered or made available by Seller to Buyer pursuant
hereto were or will be, to Seller's knowledge, complete and accurate records of
such documents.
7. Representation and Warranty of the Shareholders. Each of the
-----------------------------------------------
Shareholders represents and warrants to Buyer that:
7.1 Ability to Vote Stock Without Restriction. Such Shareholder has
-----------------------------------------
the absolute right or obligation, without any restrictions whatsoever, as of the
date hereof, and will have such right or obligation at the shareholder meeting
referenced in Section 10.1 below, to vote the number of shares of capital stock
of Seller held by such Shareholder, as set forth below such Shareholder's
signature on the signature page of this Agreement, in favor of the Transactions,
as defined below. Each such Shareholder's shares of capital stock of Seller are
not subject to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding which prohibits such vote, including
any such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting of such Shareholder's shares, except as
contemplated by Section 10.5 of this Agreement.
8. Representations and Warranties of Buyer. Buyer represents and warrants
---------------------------------------
to Seller that:
8.1 Organization and Good Standing. Buyer is duly organized, validly
------------------------------
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in all jurisdictions where Buyer's operations require
same.
8.2 Authorization of Agreement. Buyer has all requisite corporate
--------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement and all other agreements
herein contemplated to be executed by Buyer in connection herewith have been (or
upon execution will have been) duly executed and delivered by Buyer, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) legal, valid and binding
obligations of Buyer.
9. Certain Understandings and Agreements of the Parties.
----------------------------------------------------
9.1 License to Seller.
-----------------
(a) On the Closing Date, Buyer agrees to license to Seller, for
the consideration of $1.00 payable to Buyer at Closing, the Trademarks
listed in Exhibit B to this Agreement (the "License") for the sole
purpose to allow Seller to: (i) sell its existing inventory as listed
in Exhibit C to this Agreement (the "Inventory"); and (ii) fill its
customer orders outstanding as of the Closing Date and as shown in
Exhibit D to this Agreement from those purchase orders as shown in
Exhibit C to this Agreement. The License shall be effective for the
period commencing from the Closing Date through and including April
30, 1997. In the
4
<PAGE>
event Seller has not sold and shipped the Inventory to independent
third parties on or before April 30, 1997, Seller agrees to remove or
cause to be completely illegible any and all Trademarks from or on the
remaining Inventory. Seller agrees that the quality of any and all
goods and products Seller may manufacture pursuant to this Section
9.1(a) shall be the same or at least as good as the quality of similar
goods and products manufactured by Seller prior and up to the date
hereof.
(b) Buyer and Seller agree that any proceeds derived from
Seller's sale of the Inventory and from the filling of outstanding
orders pursuant to Section 9.1(a) above shall belong to Seller.
(c) Seller shall provide to Buyer within 15 days after the end of
each month a written report containing inventory of footwear held or
owned by Seller containing any Trademarks (by units and cost),
inventory received during the month, shipments made by Seller of any
such footwear during the prior month, to whom such footwear was sold
and the prices for which such footwear was sold.
9.2 Manufacture and Importation of Goods. Except as set forth in
------------------------------------
Section 9.1(a), Seller agrees that after the Closing Date, it will not import
nor manufacture domestically, nor market, sell or distribute, any goods or other
products which bear, mention or note any of the Trademarks on such goods or
products.
9.3 Las Vegas Shoe Show. Buyer agrees to reimburse Seller, on the
-------------------
Closing Date, the amount of $11,500, which represents the amount Seller has paid
as a deposit for reservation of show space (the "Show Space") at the Western
Shoe Association show in Las Vegas, Nevada in August 1996 (the "WSA Show"). In
the event the Show Space may not be rented by Buyer, Seller agrees to act as
Buyer's agent for purposes of renting the Show Space at the WSA Show for Buyer's
use. In any event, Buyer and Seller agree that Buyer shall have use of and
entitlement to the Show Space without interference by Seller at the WSA Show.
9.4 Prototype Samples Expense. Buyer agrees to reimburse Seller at
-------------------------
Closing for Seller's Spring 1997 prototype samples expense which have been
invoiced and paid by Seller in an amount not to exceed $17,000.
9.5 Advertising and Point-of-Purchase Materials. Buyer and Seller
-------------------------------------------
agree that all advertising, in-store point-of-purchase and promotional materials
and displays located in all retail customer locations and Seller-owned retail
locations shall belong solely to Buyer as of the Closing Date. In addition,
Seller agrees to sell to Buyer at the Closing, at Buyer's option, point of
purchase items, if Buyer desires to purchase such items, located in Seller's
warehouse in Harrisburg, Pennsylvania, on which items any of the Trademarks
appear, for a purchase price equivalent to 50% of Seller's cost of such items.
9.6 Publicity. Buyer, on the one hand, and Seller and the
---------
Shareholders, on the other hand, agree that until Closing, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
either party without the prior consent of the other party (which consent shall
not be unreasonably withheld), except as such release or
5
<PAGE>
announcement may be required by law or the rules or regulations of any United
States or foreign securities exchange, in which case the party required to make
the release or announcement shall allow the other party reasonable time to
comment on such release or announcement in advance of such issuance.
9.7 Consent of Bank of New York. Between the date hereof and the
---------------------------
Closing Date, Seller shall use all reasonable efforts to obtain the written
consent of Bank of New York to all the transactions contemplated by this
Agreement.
9.8 Recording of Buyer's Ownership Interest in Trademarks. Buyer
-----------------------------------------------------
shall assume all obligations and bear all costs associated with recording its
ownership interest in the Trademarks. Seller shall execute and deliver to
Buyer, at Buyer's expense, such instruments of sale, transfer, conveyance,
assignment and delivery in recordable form, and consents, assurances, powers of
attorney and other instruments as may be reasonably requested by counsel for
Buyer in order to record with any government authority the transfer of ownership
in the Trademarks from Seller to Buyer and to reflect termination of Seller's
interest in the Trademarks, and Seller shall cause to be executed and delivered
to Buyer, at Seller's cost, such releases and third party consents as may be
reasonably necessary to deliver to Buyer all right, title and interest of Seller
in and to the Trademarks free and clear of all Liens.
9.9 Further Assurances. From time to time after the Closing, Seller
------------------
will execute and deliver to Buyer such instruments of sale, transfer,
conveyance, assignment and delivery, consents, assurances, powers of attorney
and other instruments as may be reasonably requested by counsel for Buyer in
order to vest in Buyer all right, title and interest of Seller in and to the
Trademarks free and clear of all Liens and otherwise in order to carry out the
purpose and intent of this Agreement.
9.10 Use of Certain Names. Each of Buyer and Seller agrees that
--------------------
after July 25, 1996, neither will in any way utilize or display either of the
names "Sam Edelman" or "Libby Edelman," or any names similar to such names, in
or on any product of Buyer or Seller. Each of Samuel L. Edelman and Louise B.
Edelman agree not to use either of the names "Sam Edelman" or "Libby Edelman,"
or any names similar to such names, appearing in or on any footwear product or
apparel product for three years from July 25, 1996.
9.11 Removal of Trade Names and Trademarks. Except as authorized by
-------------------------------------
Section 9.1(a), Seller agrees to remove or cease to use, within one week of the
Closing Date, any and all of the Trademarks which appear: (i) on all showrooms
wherever located; (ii) in Seller's retail store located in Vacaville,
California; and (iii) on all letterhead, business cards, billing statements,
invoices and all other documents of any nature (except for stock certificates
outstanding as of the Closing Date). Seller further agrees to remove on or
before December 31, 1996, any and all of the Trademarks which appear in Seller's
retail store located in the Beverly Center shopping center in Los Angeles,
California (the "Beverly Center Store"). Seller also agrees to refrain from
answering telephones with the name of any of the Trademarks or otherwise holding
itself out as in any way associated with the Trademarks.
6
<PAGE>
9.12 Seller's Sales Representatives and Employees. Buyer and Seller
--------------------------------------------
agree that from the date hereof, Buyer shall have the right to communicate with
and solicit Seller's sales representatives and Seller's employees to discuss the
possibility of such persons being employed by or representing Buyer.
9.13 Reimbursement for Sales Commissions. Buyer agrees to reimburse
-----------------------------------
Seller, at the Closing, an aggregate amount of $35,000 for sales commissions
Seller has paid to its independent sales representatives during the month of
June 1996.
9.14 Survival of Representations and Warranties. Buyer, Seller and
------------------------------------------
the Shareholders agree that the respective representations and warranties
contained in this Agreement shall terminate on the second anniversary of the
Closing Date.
10. Covenants.
---------
10.1 Shareholder Meeting and Board Recommendation. Seller shall
--------------------------------------------
schedule a meeting of its shareholders to be held no later than August 30, 1996,
for the purpose of approving the transactions contemplated by this Agreement
(the "Transactions"), and Seller's Board of Directors shall file with the
Securities and Exchange Commission (the "SEC"), and shall solicit proxies
through, a proxy statement, a preliminary filing of which shall be filed with
the SEC on or before July 19, 1996, and which shall be mailed to Seller's
shareholders as soon as possible after completion of SEC review and Seller's
responses thereto, if any, of the preliminary proxy statement, and which proxy
statement shall recommend to Seller's shareholders approval of the Transactions.
10.2 Maintenance of Business. During the period from the date hereof
-----------------------
to the Closing Date, Seller will carry on its business in the ordinary course
and in substantially the same manner as it has prior to the date of this
Agreement and agrees not to enter into any material agreements with respect to
the Trademarks or take any other significant actions with respect to the
Trademarks without the prior written consent of Buyer.
10.3 Other Discussions. From and after the date of this Agreement
-----------------
until the Closing or this Agreement is terminated in accordance with its terms,
neither Seller nor any of its officers, directors, agents or representatives
(including the Shareholders) will initiate discussions, solicit or negotiate
(including providing any non-public information concerning its business), or
authorize any person or entity to discuss, solicit or negotiate on its or their
behalf, with any other party concerning the possible sale or disposition of all
or substantially all of Seller's business, assets or capital stock or the
Trademarks. Seller will immediately notify Buyer, however, if any offer is
received from a potential purchaser or of any discussions with a potential
purchaser regarding the Trademarks or the capital stock of Seller or any of its
assets outside the ordinary course.
10.4 Best Efforts. Each party will use its reasonable best efforts
------------
to cause all conditions to the Closing to be satisfied as soon as practicable.
Each party shall use its reasonable best efforts to obtain any consents
necessary or desirable in connection with the consummation of
7
<PAGE>
the transactions contemplated by this Agreement, and in particular Seller shall
use all reasonable efforts to obtain the consent of Bank of New York.
10.5 Shareholder Vote. Each of the Shareholders, individually and in
----------------
all other capacities, as Trustee or otherwise, agrees to vote all of the shares
of capital stock of Seller held of record or beneficially by them in favor of
the Transactions. Seller will provide to all holders of its capital stock
entitled to vote upon or consent to the Transactions such information as is
necessary to satisfy all requirements of applicable federal and state securities
laws and California corporate law in connection with the submission of the
Transactions to such shareholders for their approval. This Section 10.5 shall
constitute the written instructions by each of the Shareholders to each of the
other Shareholders to vote their respective shares of capital stock of Seller in
favor of the Transactions as required or contemplated by any agreements by and
among or between the Shareholders.
10.6 Additional Share Issuances. Seller agrees that it shall not
--------------------------
issue any capital stock or securities convertible into capital stock ("Seller's
Securities") between the date hereof and the Closing Date if the issuance of
such Seller's Securities would cause the aggregate number of shares of capital
stock of Seller held by the Shareholders (without including the affirmative vote
of shares of Seller's capital stock not held by the Shareholders (other than
those shareholders of Seller referred to in Section 10.9 below)) to represent
less than the requisite number of voting securities of Seller required to
approve the Transactions under applicable law at the shareholder meeting
referred to in Section 10.1 above.
10.7 Transfer of Shares by Shareholders. Each of the Shareholders
----------------------------------
individually and in all other capacities, as trustee or otherwise, agrees that
he or she will not sell or otherwise transfer any of the shares of Seller's
capital stock held by him or her between the date hereof and the Closing Date
unless the purchaser or transferee of such shares agrees in writing, in a form
reasonably satisfactory to Buyer and its counsel, to vote all of such shares of
capital stock of Seller in favor of the Transactions at the shareholder meeting
referred to in Section 10.1 above.
10.8 Access to Information. Buyer will have reasonable access to the
---------------------
facilities, employees and records of Seller; provided, however, in no event
shall such access be permitted to interfere with the day to day operations of
Seller.
10.9 Agreement to Vote Shares by Shareholders Receiving Seller's
-----------------------------------------------------------
Stock in Exchange for Debt of Seller. Seller agrees to provide to Buyer, no
- ------------------------------------
later than July 9, 1996, in a form reasonably satisfactory to Buyer and Buyer's
counsel, a written agreement from those holders of Seller's capital stock whose
shares are necessary, when aggregated with the Shareholders' shares, to
constitute the requisite number of voting securities of Seller required to
approve the Transactions under applicable law, to the effect that such holders
will vote in favor of and will approve the Transactions at the shareholder
meeting referred to in Section 10.1 above. It is contemplated that the
agreement referred to in the previous sentence will be executed and delivered by
persons who have recently or will become shareholders of Seller by virtue of
their exchanging debt obligations owed to them by Seller for Seller's common
stock.
8
<PAGE>
11. Conditions to Closing.
---------------------
11.1 The obligations of Buyer and Seller to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Closing, of all of the following conditions:
(a) No Action or Proceeding. No claim, action, suit,
-----------------------
investigation or other proceeding shall be pending or threatened
before any court or governmental agency which presents a substantial
risk of the restraint or prohibition of the Transactions or the
obtaining of material damages or other relief in connection therewith.
(b) Compliance with Law. There shall have been obtained all
-------------------
permits, approvals and consents of all governmental bodies or agencies
which counsel for Buyer or for Seller may reasonably deem necessary or
appropriate so that consummation of the Transactions will be in
compliance with applicable laws.
11.2 The obligations of Buyer to consummate the transactions
contemplated hereby shall be subject to the fulfillment, at or prior to
Closing, of all of the following conditions (any one or more of which
conditions may be waived within the sole and absolute discretion of Buyer,
provided, however, that no such waiver of any condition constitutes a
waiver by Buyer of any of its other rights or remedies, at law or equity,
in the event Seller or any of the Shareholders breaches this Agreement):
(a) Bank of New York Consent. The consent of Bank of New York
------------------------
shall have been obtained in written instruments reasonably
satisfactory to Buyer.
(b) Removal of Liens Filed or Recorded Against Seller. Any and
-------------------------------------------------
all documents recorded or filed against Seller or the Trademarks
pursuant to the terms of the documents of Bank of New York reflecting
Seller as debtor or reflecting Liens placed on or against the
Trademarks shall be terminated or modified to delete any reference to
Seller or the Trademarks, effective as of the Closing Date.
(c) Secretary's Certificate. Buyer shall have received from the
-----------------------
Secretary of Seller a certificate, dated the Closing Date, to the
effect that resolutions of Seller's Board of Directors authorizing the
Transactions have been duly and validly adopted and remain in full
force, and certifying as to the incumbency of the officer of Seller
executing this Agreement.
(d) Shareholder Approval. Seller shall have received the valid
--------------------
approval by Seller's shareholders of the Transactions.
(e) Board of Directors Approval. Buyer's Board of Directors
---------------------------
shall have approved the Transactions.
9
<PAGE>
(f) Change in Names. Seller shall have prepared and delivered to
---------------
Buyer for filing with the appropriate governmental or other
authorities the necessary documents and instruments with instructions
permitting Buyer to file such documents and instruments in order to
change the names of the following corporations or entities: Sam &
Libby, Inc., Sam & Libby (HK) Limited, Sam & Libby Brazil and Sam &
Libby Outlets, Inc. such that the new names of such corporations or
entities shall not resemble the current names or contain in any way
any of the Trademarks as listed in Exhibit A to this Agreement.
(g) Agreements Not to Compete. Each of Samuel L. Edelman and
-------------------------
Louise B. Edelman shall have entered into non-compete agreements,
substantially in the form of Exhibit E to this Agreement (each a "Non-
Compete Agreement"), with Buyer, which agreements shall provide, among
other things, that each of Samuel L. Edelman and Louise B. Edelman's
ability to participate actively in the branded footwear business from
the date hereof through December 31, 1996 shall be restricted to
certain conditions enumerated therein.
(h) Opinion of Seller's Trademark Counsel. Buyer shall receive
-------------------------------------
at the Closing an opinion of Peter M. Eichler of the law firm Troop
Meisinger Steuber & Pasich, LLP, special trademark counsel to Seller,
that Seller owns all right, title and interest in and to the
Trademarks as described in Exhibit A to this Agreement, that such
counsel is not aware of any claim to the contrary or any challenge by
any person or entity to the rights of Seller with respect to the
foregoing and that upon consummation of the Transactions Buyer shall
own and be vested with all right, title and interest in and to the
Trademarks, free and clear of all Liens.
(i) Opinion of Seller's Counsel. Buyer shall receive at the
---------------------------
Closing:
(x) an opinion of Wilson, Sonsini, Goodrich & Rosati,
corporate counsel to Seller, in form and substance satisfactory
to counsel for Buyer, to the effect that: (A) Seller is a
corporation duly incorporated and validly existing in good
standing under the laws of the State of California; (B) Seller
has the requisite corporate power and authority to enter into and
carry out the Transactions; (C) the execution and delivery by
Seller of this Agreement, and the performance by Seller of its
obligations under this Agreement, have been duly authorized by
all necessary corporate action on the part of Seller; and (D) the
execution, delivery or performance of this Agreement by Seller
will not (1) conflict with or violate the Articles of
Incorporation or the Bylaws of Seller; (2) conflict with, result
in a material breach of or a material default under any material
agreements of Seller known to such counsel; or (3) violate or
contravene any United States federal or California state law,
statute, rule or regulation applicable to Seller or result in or
require the creation or imposition of any lien on any properties
or revenues of Seller; and
10
<PAGE>
(y) an opinion of Kaufmann, Feiner, Yamin, Gildin & Robbins
LLP, counsel to Seller, in form and substance satisfactory to
counsel for Buyer, to the effect that: (A) this Agreement
constitutes a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium or
other laws relating to or affecting the rights of creditors
generally or by general principles of equity, whether considered
in a proceeding in equity or at law; and (B) the execution,
delivery or performance of this Agreement by Seller will not: (1)
conflict with, result in a material breach of or a material
default under any material agreements of Seller known to such
counsel; or (2) violate or contravene any United States federal
or New York state law, statute, rule or regulation applicable to
Seller or result in or require the creation or imposition of any
lien on any properties or revenues of Seller.
(j) Representations and Warranties of Seller True. Each of the
---------------------------------------------
representations and warranties of Seller contained in this Agreement
or in any document delivered pursuant hereto shall be true and correct
in all material respects on the Closing Date with the same effect as
if made on the Closing Date.
(k) Representation and Warranty of Shareholders True. The
------------------------------------------------
representation and warranty of each of the Shareholders contained in
Section 7.1 shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date.
(l) Delivery of Trademark Assignments. Seller shall have
---------------------------------
delivered to Buyer in recordable form assignments of the Trademarks,
which assignments shall have been executed and acknowledged by Seller,
as well as any and all other documents and instruments reasonably
necessary to transfer title and interest in and to the Trademarks,
free and clear of all Liens, to Buyer and to consummate the
transactions contemplated herein.
(m) Agreement to Vote Shares. Buyer shall have received, no
------------------------
later than July 9, 1996, the agreements required by Section 10.9
above.
11.3 The obligations of Seller to consummate the transactions
contemplated hereby shall be subject to the fulfillment, at or prior to
Closing, of all of the following conditions (any one or more of which
conditions may be waived within the sole and absolute discretion of Seller,
provided, however, that no such waiver of any condition constitutes a
waiver by Seller of any of its other rights or remedies, at law or equity,
in the event Buyer breaches this Agreement):
(a) Representations and Warranties True. Each of the
-----------------------------------
representations and warranties of Buyer contained in this Agreement or
in any document delivered
11
<PAGE>
pursuant hereto shall be true and correct in all material respects on
the Closing Date with the same effect as if made on the Closing Date.
12. Indemnification. For purposes of this Section 12, "Affiliate" of a
---------------
party shall mean a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such party.
12.1 Indemnification by Seller.
-------------------------
(a) Seller shall, for a period of two years from and including the
date hereof, indemnify and hold harmless Buyer and each of its Affiliates,
directors, officers, employees, attorneys, agents and representatives
(collectively, the "Affiliated Parties") in respect of any and all claims,
losses, damages, liabilities, declines in value, penalties, interest, costs and
expenses (including, without limitation, any attorneys', accountants' and
consultants' reasonable fees and other expenses) reasonably incurred by Buyer or
its respective Affiliated Parties, together with interest on cash disbursements
in connection therewith, at an annual rate equal to the prime rate as reported
by the Bank of Boston (the "Prime Rate") then in effect, from the date such cash
disbursements were made by Buyer or any of its Affiliated Parties until paid by
Seller, in connection with each and all of the following:
(i) Any breach of any representation or warranty made by Seller in
this Agreement or pursuant hereto, which relates to, is associated with or
arises from any matter related to those Trademarks relating to footwear or
apparel (the "Footwear and Apparel Trademarks");
(ii) Any misrepresentation contained in any written statement or
certificate furnished by Seller pursuant to this Agreement, which relates to, is
associated with or arises from any matter related to the Footwear and Apparel
Trademarks; or
(iii) Any breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other instrument delivered in connection with
this Agreement, which relates to, is associated with or arises from any matter
related to the Footwear and Apparel Trademarks.
(b) Seller shall, for a period of two years from and including the
date hereof, indemnify and hold harmless Buyer and each of its Affiliates,
directors, officers, employees, attorneys, agents and representatives
(collectively, the "Affiliated Parties") in respect of any and all costs and
expenses actually expended (including, without limitation, any reasonable
attorneys' fees and such other reasonable and necessary costs and expenses),
excluding any and all incidental and/or consequential damages of any nature,
together with interest on cash disbursements in connection therewith, at an
annual rate equal to the Prime Rate then in effect, from the date such cash
disbursements were made by Buyer or any of its Affiliated Parties until paid by
Seller, incurred by Buyer or its respective Affiliated Parties, arising out of
all claims, losses, damages, liabilities, penalties and interest, excluding any
and all incidental and/or consequential damages of any nature, in connection
with each and all of the following (except to the extent covered by Section
12.1(a) above):
12
<PAGE>
(i) Any breach of any representation or warranty made by Seller in
this Agreement or pursuant hereto;
(ii) Any misrepresentation contained in any written statement or
certificate furnished by Seller pursuant to this Agreement; or
(iii) Any breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other instrument delivered in connection with
this Agreement.
(c) No claim, demand, suit or cause of action shall be brought
against Seller under this Section 12.1 unless and until the aggregate amount of
claims against Seller under this Agreement exceeds $50,000, in which event Buyer
shall be entitled to indemnification from Seller for all claims hereunder
relating back to the first dollar, provided further, however, that Seller's
liability shall in no event exceed the Purchase Price.
(d) As used in this Section 12.1, any reference to Trademarks
relating to apparel shall only mean junior sportswear apparel as previously
marketed by Seller.
12.2 Indemnification by Shareholders. Each Shareholder shall, for a
-------------------------------
period of two years from and including the date hereof, indemnify and hold
harmless Buyer and each of its Affiliates, directors, officers, employees,
attorneys, agents and representatives (collectively, the "Affiliated Parties")
in respect of any and all costs and expenses actually expended (including,
without limitation, any reasonable attorneys' fees and such other reasonable and
necessary costs and expenses), excluding any and all incidental and/or
consequential damages of any nature, together with interest on cash
disbursements in connection therewith, at an annual rate equal to the Prime Rate
then in effect, from the date that such cash disbursements were made by Buyer or
any of its Affiliated Parties, until paid by such Shareholder, incurred by Buyer
or its respective Affiliated Parties, arising out of all claims, losses,
damages, liabilities, penalties and interest, excluding any and all incidental
and/or consequential damages of any nature, in connection with each and all of
the following:
(a) Any breach of Section 7.1 of this Agreement by such Shareholder;
(b) Any breach of Sections 9.6 (in his or her individual capacity),
10.3 (in his or her individual capacity), 10.5 or 10.7 of this Agreement by such
Shareholder; or
(c) As to Samuel L. Edelman and Louise B. Edelman only, any breach
of Section 9.10 of this Agreement.
No claim, demand, suit or cause of action shall be brought against
such Shareholder under this Section 12.2 unless and until the aggregate amount
of claims against all Shareholders under this Agreement and the Non-Compete
Agreements exceeds $50,000, in which event Buyer shall be entitled to
indemnification from such Shareholder for all claims hereunder relating back to
the first dollar, provided, however, that the Shareholders' aggregate liability
with respect to breaches of Sections 7.1, 9.10, 10.5 and 10.7 shall in no event
exceed the Purchase Price, and provided, further, the Shareholders' aggregate
liability with respect to breaches of Sections 9.6 and 10.3 shall in no event
exceed $1,000,000.
13
<PAGE>
12.3 Indemnification by Buyer. Buyer shall, for a period of two
------------------------
years from and including the date hereof, indemnify and hold harmless Seller and
each of its Affiliates, directors, officers, employees, attorneys, agents and
representatives (collectively, the "Affiliated Parties") in respect of any and
all costs and expenses actually expended (including, without limitation, any
reasonable attorneys' fees and such other reasonable and necessary costs and
expenses), excluding any and all incidental and/or consequential damages of any
nature, together with interest on cash disbursements in connection therewith, at
an annual rate equal to the Prime Rate then in effect, from the date that such
cash disbursements were made by Seller or any of its Affiliated Parties, until
paid by Buyer, incurred by Seller or its respective Affiliated Parties, arising
out of all claims, losses, damages, liabilities, penalties and interest,
excluding any and all incidental and/or consequential damages of any nature, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by Buyer in
this Agreement or pursuant hereto;
(b) Any breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any other instrument contemplated by this
Agreement; or
(c) Any misrepresentation contained in any statement or certificate
furnished by Buyer pursuant to this Agreement or in connection with the
Transactions.
No claim, demand, suit or cause of action shall be brought against
Buyer under this Section 12.3 unless and until the aggregate amount of claims
against Buyer under this Agreement exceeds $50,000, in which event Seller shall
be entitled to indemnification from Buyer for all claims hereunder relating back
to the first dollar, provided further, however, that Buyer's liability shall in
no event exceed the Purchase Price.
12.4 Maximum Damages. Buyer, Shareholders and Seller agree that:
---------------
(a) Subject to the provisions of Section 12.2 with respect to lower
maximum amounts of damages, damages in the aggregate to be paid by Seller and/or
any one or more Shareholders in any capacity, as the case may be, to Buyer under
Sections 12.1 and/or 12.2 hereof and under Section 2 of the Non-Compete
Agreement shall in no event exceed Five Million Five Hundred Thousand Dollars
($5,500,000) for any and all claims under this Agreement of any and all natures,
so that the maximum amount which shall be paid to Buyer from Seller and all
Shareholders under Sections 12.1 and 12.2 in any capacity and pursuant to this
Agreement and all Non-Compete Agreements shall not exceed Five Million Five
Hundred Thousand Dollars ($5,500,000).
(b) Any sums paid to Buyer under the provisions of Section 2 of the Non-
Compete Agreement shall be applied to reduce the maximum amount of liability of
Seller and/or any one or more Shareholders in any capacity, as the case may be,
under Sections 12.1 and/or 12.2 hereof, as the case may be;
(c) Any sums paid by Seller and/or any one or more Shareholders in any
capacity, as the case may be, to Buyer under Section 12.1 and/or 12.2 of this
Agreement shall be applied to reduce the maximum liability under Section 2 of
the Non-Compete Agreement; and
14
<PAGE>
(d) Damages to be paid by Buyer to Seller under Section 12.3 hereof shall,
in the aggregate, in no event exceed Five Million Five Hundred Thousand Dollars
($5,500,000) for any and all claims under this Agreement of any and all natures.
13. Miscellaneous.
-------------
13.1 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed given on the
next business day if delivered personally or by telecopier (with a confirming
copy sent via Federal Express or other international courier) to the parties,
their successors in interest or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to Buyer: Maxwell Shoe Company Inc.
----------- 101 Sprague Street
Hyde Park (Boston), Massachusetts 02136
Attention: Mark J. Cocozza, President
Facsimile: (617) 364-9058
Telephone: (617) 333-4028
With a concurrent copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
Telephone: (213) 229-7141
If to Seller: Sam & Libby, Inc.
------------ 58 West 40th Street
New York, New York 10018
Attention: Kenneth Sitomer,
Chief Operating Officer and Chief Financial
Officer
Facsimile: (212) 944-4837
Telephone: (212) 782-4830
15
<PAGE>
With a concurrent copy to: Kaufmann, Feiner, Yamin, Gildin & Robbins LLP
777 3rd Avenue, 24th Floor
New York, New York 10017
Attention: Michael Yamin, Esq.
Facsimile: (212) 755-3174
Telephone: (212) 755-3100
and
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven L. Berson, Esq.
Facsimile: (415) 493-6811
Telephone: (415) 493-9300
If to Shareholders: Sam Edelman
------------------ 212 Mount Holly Road
Katonah, New York 10536
Facsimile: (914) 232-7901
Telephone: (914) 232-6690
With a concurrent copy to: Kaufmann, Feiner, Yamin, Gildin & Robbins LLP
777 3rd Avenue, 24th Floor
New York, New York 10017
Attention: Michael Yamin, Esq.
Facsimile: (212) 755-3174
Telephone: (212) 755-3100
and
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven L. Berson, Esq.
Facsimile: (415) 493-6811
Telephone: (415) 493-9300
13.2 Assignability and Parties in Interest.
-------------------------------------
(a) This Agreement shall not be assignable by either Buyer or Seller
except that Buyer may assign its rights hereunder to, and have its obligations
hereunder assumed by, a wholly-owned subsidiary of Buyer without releasing
Buyer. This Agreement shall inure to the benefit of and be binding upon Buyer
and Seller and their respective permitted successors and assigns.
16
<PAGE>
(b) This Agreement shall inure to the benefit of and be binding upon
each of the Shareholders and their respective permitted successors and assigns.
13.3 Counterparts; Fax. This Agreement may be executed by fax and
-----------------
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
13.4 Financing. The transactions contemplated by this Agreement are
---------
not subject to any financing contingency on the part of Buyer.
13.5 Certain Taxes. Except for those costs specifically noted in
-------------
Section 9.8, all sales, value added, use, transfer, registration, stamp and
similar taxes imposed in connection with the sale of the Trademarks shall be
borne by Seller.
13.6 Complete Agreement. This Agreement, together with all Schedules
------------------
and Exhibits A, B, C, D and E hereto, and any documents delivered or to be
delivered pursuant to this Agreement contain or will contain the entire
agreement among the parties hereto with respect to the transactions contemplated
herein and shall supersede all previous oral and written and all contemporaneous
oral negotiations, commitments and understandings.
13.7 Modifications, Amendments and Waivers. None of the terms or
-------------------------------------
provisions of this Agreement may be modified, amended or waived, except by a
written instrument executed by the parties.
13.8 Interpretation. The headings contained in this Agreement are
--------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.9 Severability. Any provision of this Agreement which is invalid,
------------
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
13.10 Expenses. Buyer, on the one hand, and Seller and the
--------
Shareholders, on the other hand, will pay their own costs and expenses related
to the negotiation, preparation and execution of this Agreement and the
transactions contemplated thereby, including, but not limited to, any fairness
opinion Seller may receive in connection with the Transactions.
13.11 Termination by Mutual Consent. At any time prior to the
-----------------------------
Closing, this Agreement may be terminated by the mutual written consent of the
parties.
13.12 Injunctive Relief.
-----------------
(a) The parties acknowledge and agree that monetary damages are
inadequate and insufficient to fully recompense Buyer for any breaches of this
Agreement by Seller or the Shareholders, and therefore, the parties stipulate
that Buyer shall be entitled to injunctive relief, specific performance and/or
any other appropriate remedy for any breaches by Seller or the
17
<PAGE>
Shareholders of this Agreement, including, but not limited to, breaches of
Sections 9.1, 9.2, 9.5, 9.10, 9.11 and 10.5 of this Agreement.
(b) The parties acknowledge and agree that monetary damages are
inadequate and insufficient to fully recompense Seller for a breach of Sections
9.1(a) and/or 9.10 of this Agreement by Buyer, and therefore, Buyer and Seller
stipulate that Seller shall be entitled to injunctive relief, specific
performance and/or any other appropriate remedy for a breach by Buyer of
Sections 9.1(a) and/or 9.10 of this Agreement.
13.13 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the internal law, and not the law
pertaining to conflicts or choice of law, of the State of New York.
13.14 Arbitration. Any controversy, dispute or claim based upon,
-----------
arising out of, in connection with, or in relation to, the Transactions, or
based upon any interpretation of, this Agreement, shall be settled, at the
written request of any party, by final and binding arbitration conducted in the
city of New York, New York. The arbitration shall be conducted by
JAMS/Endispute, in accordance with its then existing rules for commercial
arbitration. Judgment upon any award rendered by the arbitrator shall be final
and binding with no rights of appeal and may be entered by any State or Federal
court having jurisdiction thereof. The parties further intend that this
arbitration provision shall have the effect of a waiver by all parties to a jury
trial. The arbitration shall be conducted by a single arbitrator. The
arbitrator shall be chosen by mutual consent of the parties from a list of
available arbitrators provided by JAMS/Endispute within ten (10) days of receipt
of the list. If the parties cannot reasonably agree upon an arbitrator within
the ten (10) day period, each party shall select within ten (10) days an
arbitrator from the list provided by JAMS/Endispute. The two arbitrators
selected will then select a third arbitrator within fifteen (15) days, who will
become the sole arbitrator for such controversy, dispute or claim. The
arbitrator shall have the power to award Buyer injunctive relief against Seller
or any of the Shareholders, pursuant to Section 13.12 of this Agreement or
otherwise, in the event this Agreement is breached by any such entity or person.
The arbitrator shall award to the prevailing party with respect to any matter
submitted to arbitration hereunder all reasonable attorneys fees, all expert
fees and expenses and all costs as may be incurred in connection with either
obtaining or collecting any judgment and/or arbitration award, in addition to
any other relief to which that party may be entitled.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.
BUYER
-----
MAXWELL SHOE COMPANY INC., a
Delaware corporation
By:
---------------------------------
Name: Mark J. Cocozza
Title: President and Chief Operating Officer
SELLER
------
SAM & LIBBY, INC., a California corporation
By:
---------------------------------
Name: Kenneth Sitomer
Title: Chief Operating Officer and
Chief Financial Officer
THE SHAREHOLDERS:
----------------
------------------------------------
Samuel L. Edelman, individually and as
trustee, if applicable (as to Sections
7.1, 9.6, 9.10, 9.14, 10.3, 10.5, 10.7,
11.2(g), 11.2(k), 12.2, 12.4, 13.2(b),
13.10, 13.12(a) and 13.14 of this
Agreement)
(5,102,822 Shares held as community
property with Louise B. Edelman)
------------------------------------
Louise B. Edelman, individually and as
trustee, if applicable (as to Sections
7.1, 9.6, 9.10, 9.14, 10.3, 10.5, 10.7,
11.2(g), 11.2(k), 12.2, 12.4, 13.2(b),
13.10, 13.12(a) and 13.14 of this
Agreement)
(5,102,822 Shares held as community
property with Samuel L. Edelman)
19
<PAGE>
------------------------------------
Stuart L. Kreisler individually (as to
Sections 7.1, 9.6, 9.14, 10.3, 10.5,
10.7, 11.2(k), 12.2, 12.4, 13.2(b),
13.10, 13.12(a) and 13.14 of this
Agreement)
(1,158,000 Shares)
20
<PAGE>
EXHIBIT A
---------
TRADEMARKS
----------
21
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SAM & LIBBY
31-May-96 TRADEMARK STATUS REPORT
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1000 Registered
AR Argentina 1414122 29-Jan-93
25 29-Jan-03 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1001 Registered 538679 24-Jul-90
AU Australia A538679 24-Jul-90
25 24-JuI-97 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Block Type) 75115-1002 Registered
AT Austria 132865 05-Oct-90
3, 14, 18, 25 05-Oct-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF LEATHER,
AND GOODS MADE OF THESE MATERIALS AND
NOT INCLUDED IN OTHER CLASSES; ANIMAL
SKINS, HIDES; TRUNKS AND TRAVELLING
BAGS; UMBRELLAS, PARASOLS AND WALKING
STICKS; WHIPS, HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Block Type) 75115-1003 Registered 13773 04-Dec-89
BS Bahama Islands 13773 04-Dec-89
25 04-Dec-03 CLOTHING, FOOTWEAR, HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 1
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Block Type) 75115-1005 Registered 484690 25-Jul-90
BX Benelux 484690 25-Jul-90
3, 14, 18, 25 25-Jul-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES, JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF LEATHER,
AND GOODS MADE OF THESE MATERIALS AND
NOT INCLUDED IN OTHER CLASSES; ANIMAL
SKINS, HIDES; TRUNKS AND TRAVELLING
BAGS; UMBRELLAS, PARASOLS AND WALKING
STICKS; WHIPS, HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY Label 75115-1004 Registered 451789 05-Aug-88
BX Benelux 451789 05-Aug-88
25 05-Aug-98 SHOES
SAM & LIBBY (Plain Block Type) 75115-1006 Registered 20892 18-May-90
BM Bermuda 20892 18-May-90
25 18-May-97 SHOES, BOOTS, SANDALS AND SLIPPERS
JUST LIBBY 75115-1079 Pending 817786384 14-Apr-94
BR Brazil
25.10, 25.20, 25.60 CLOTHING, FOOTWEAR, HEADGEAR.
SAM & LIBBY 75115-1097 Lapsed 816623708
BR Brazil
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1098 Registered
BR Brazil 814023185 28-May-91
25.10, 25.20, 25.60 28-May-01 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1008 Registered
BN Brunei 22556 25-Mar-93
25 25-Mar-00 CLOTHING, FOOTWEAR AND HEADGEAR, AND
ALL OTHER GOODS IN INTERNATIONAL CLASS
25, ESPECIALLY SHOES, BOOTS, SANDALS
AND SLIPPERS
SAM & LIBBY 75115-1009 Registered 19485 01-Aug-90
BG Bulgaria 19485 01-Aug-90
25 01-Aug-00 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIZZY (Plain Block Type) 75115-1012 Registered
CA Canada 382906 12-Apr-91
12-Apr-06 FOOTWEAR, NAMELY, SHOES, BOOTS,
SLIPPERS, RUNNING SHOES, FOOTBALL
SHOES, JOGGING SHOES, CLOGGS, SANDALS,
THONGS, PUMPS, SLIP-ONS, BOOTS, RUBBER
BOOTS, VINYL BOOTS, OVERBOOTS,
OVERSHOES, TOE RUBBERS, HUNTING BOOTS
AND SNOWMOBILE BOOTS
JUST LIBBY 75115-1080 Pending 300998 07-Mar-95
CL Chile
25 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Block Type) 75115-1013 Registered
CL Chile 366417 26-Mar-91
25 26-Mar-01 CLOTHING, SHOES, SANDALS, BOOTS, AND
ALL OTHER GOODS IN THE CLASS
SAM & LIBBY (Plain Block Type) 75115-1014 Registered
CN China 569171 19-Oct-91
25 19-Oct-01 CLOTHING AND FOOTWEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
NEW NINETIES Advertised 724188 8-Mar-93 FOOTWEAR OF ALL KINDS, NAMELY, SHOES,
CA Canada SLIPPERS, BOOTS, SANDALS, RUNNING
25 SHOES, FOOTBALL SHOES, JOGGING SHOES,
CLOGS, THONGS, PUMPS, SLIPONS, RUBBER
BOOTS, VINYL BOOTS, OVER BOOTS, OVER
SHOES, TOE RUBBERS, HUNTING BOOTS,
SNOWMOBILE BOOTS
SAM & LIBBY Registered 660938 27-Jun-90 WEARING APPAREL AND ACCESSORIES OF
CA Canada ALL KINDS EXCLUDING FOOTWEAR, NAMELY
25 DRESSES, SKIRTS, VESTS, VESTEES,
SWEATERS, SWEATSHIRTS, BLOUSES,
SHIRTS, JERSEYS, T-SHIRTS, SHELLS,
TUNICS, LOUNGEWEAR, SLACKS, JEANS,
SHORTS
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 3 A
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Block Type) 75115-1015 Registered
CN China 524942 01-Jun-91
25 (Na 40) 31-May-01 CLOTHING FOR MEN, WOMEN AND CHILDREN
SAM & LIBBY 75115-1096 Pending UNASSIGNED 07-Sep-95
CR Costa Rica
25 CLOTHING, FOOTWEAR, HEADGEAR.
SAM & LIBBY 75115-1019 Registered 171280 25-Jul-90
CZ Czech Republic 171280 25-Jul-90
3, 14, 18, 25 25-Jul-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Block Type) 75115-1020 Registered
DK Denmark 05.257-1992 19-Jun-92
3, 14, 18, 25 19-Jun-02 3 - TOILETRIES AND COSMETICS,
EXCLUDING CLEANING PREPARATIONS, IN
INTERNATIONAL CLASS 3
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - HANDBAGS, TRAVELLING BAGS AND
TRUNKS, PURSES FOR MEN, WOMEN AND
CHILDREN, IN INTERNATIONAL CLASS 18
25 - CLOTHING, FOOTWEAR, HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1021 Registered 3793/90 24-Jul-90
Fl Finland 128335 05-Oct-93
3, 14, 18, 25 05-Oct-03 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY ( Plain Blk Type) 75115-1022 Registered 1699628 06-Feb-91
FR France 1699628 06-Feb-91
3, 14, 18, 25 06-Feb-01 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
Sam & Libby Registered 946117 25 - CLOTHING
FR France 1604391
25
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 5
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1094 Registered DDW6334216Wz 21-Aug-90
DE Germany (Fed. Republic of) DD653826 05-May-94
3, 14, 16, 18, 25 21-Aug-00 3 - WASHING AND BLEACHING
PREPARATIONS; CLEANING, POLISHING,
DEGREASING PREPARATIONS AND ABRASIVES;
SOAPS, PERFUMERIES, ESSENTIAL OILS,
PREPARATIONS FOR BODY AND BEAUTY CARE,
HAIR LOTIONS; DENTIFRICES; TOILET AND
COSMETIC ARTICLES
14 - PRECIOUS METALS AND ITS ALLOYS;
GOODS MADE OF PRECIOUS METALS OR ITS
ALLOYS OR COATED THEREWITH, NAMELY,
HANDICRAFT ARTICLES, ORNAMENTAL
ARTICLES, TABLE WARE (EXCEPT TABLE
CUTLERY), EPERGNES, ASH TRAYS, BOXES
FOR CIGARS AND CIGARETTES, CIGAR AND
CIGARETTE HOLDERS; JEWELRY, PRECIOUS
STONES; HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
16 - PAPER, CARDBOARD; GOODS MADE OF
PAPER AND CARDBOARD NAMELY, PAPER
TOWELS, TABLE NAPKINS, FILTER PAPER,
PACKET HANDKERCHIEFS, HYGIENIC PAPER,
BABIES' DIAPERS, CASES AND BAGS FOR
PACKAGING; PRINTED MATTER; BOOKBINDING
ARTICLES, NAMELY BOOKBINDING CORDS,
BOOKBINDING CLOTH AND OTHER TEXTILES
FOR BOOKBINDING; PHOTOGRAPHS,
STATIONERY, NOTEBOOKS; ADHESIVES FOR
PAPER AND STATIONERY OR FOR HOUSEHOLD
PURPOSES; ARTISTS' MATERIALS, NAMELY
ARTICLES FOR DRAWING, PAINTING AND
MODELING; PAINT BRUSHES; TYPEWRITERS,
OFFICE REQUISITES, NAMELY NON-
ELECTRICAL OFFICE DEVICES;
INSTRUCTIONAL AND TEACHING MATERIAL
(EXCEPT APPARATUS) IN FORM OF PRINTED
MATTER, GAMES, FLORAL OR ANIMAL
SPECIMENS, GEOLOGICAL MODELS AND
PREPARATIONS, GLOBES, DRAWING
INSTRUMENTS FOR BLACKBOARDS; PLASTICS
MATERIALS FOR PACKAGING, NAMELY
ENVELOPES, BAGS AND FOILS; PLAYING
CARDS; PRINTERS' TYPE; PRINTING BLOCKS
18 - LEATHER AND LEATHER IMITATION;
GOODS MADE OF LEATHER AND LEATHER
IMITATIONS, NAMELY BAGS AND OTHER
CASES NOT ADAPTED TO THE PRODUCT THEY
ARE INTENDED TO CONTAIN, AS WELL AS
SMALL ARTICLES OF LEATHER, IN
PARTICULAR PURSES, POCKET WALLETS, KEY
CASES, SPORTS BAGS; HANDBAGS, ANIMAL
SKINS AND HIDES; TRUNKS AND TRAVELLING
BAGS; UMBRELLAS, PARASOLS AND WALKING
STICKS; WHIPS, HARNESS AND SADDLERY
25 - SHOEWEAR, ARTICLES OF CLOTHING
AND HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 6
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Bik Type) 75115-1024 Registered 1185486 25-Jul-90
DE Germany (Fed. Republic of) 1185486 25-Jul-90
3, 14, 18, 25 25-Jul-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS, DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25- CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY Label 75115-1025 Registered 1141670 02-Aug-88
DE Germany (Fed. Republic of) 1141670 02-Aug-88
25 02-Aug-98 SHOES, BOOTS, SANDALS, SPORTS SHOES,
PARTS OF SHOE-WARE, NAMELY SOLES,
HEELS
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1027 Registered 101896 04-Dec-90
GR Greece 101896 17-Mar-94
3, 14, 18, 25 04-Dec-00 3 - TOILETRIES AND COSMETICS;
BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, HAIR LOTION;
DENTIFRICES AND ESPECIALLY TOILETRIES
14 - JEWELRY; PRECIOUS METALS AND
THEIR ALLOYS AND GOODS IN PRECIOUS
METALS COATED THEREWITH (EXCEPT
CUTLERY, FORKS AND SPOONS); PRECIOUS
STONES; HOROLOGICAL AND OTHER
CHRONOMETRIC INSTRUMENTS
18 - HANDBAGS, POCKET BOOKS, LUGGAGE;
LEATHER AND IMITATIONS OF LEATHER, AND
ARTICLES MADE FROM THESE MATERIALS AND
NOT INCLUDED IN OTHER CLASSES; SKINS,
HIDES; TRUNKS AND TRAVELLING BAGS;
UMBRELLAS, PARASOLS AND WALKING
STICKS; WHIPS, HARNESS AND SADDLERY
25 - CLOTHING, INCLUDING BOOTS, SHOES
AND SLIPPERS
SAM & LIBBY 75115-1081 Pending 3425 17-May-95
GT Guatemala
25 CLOTHING, FOOTWEAR, HEADGEAR.
SAM & LIBBY 75115-1029 Registered 730/1993 17-Nov-90
HK Hong Kong 730/1993 17-Nov-90 HANDBAGS, GYM BAGS, PURSES, WALLETS,
18 17-Nov-97 BRIEFCASES, LUGGAGE, ITEMS MADE OF
LEATHER AND OF IMITATION LEATHER,
ANIMAL SKINS, HIDES; TRUNKS AND
TRAVELLING BAGS; UMBRELLAS, PARASOLS
AND WALKING STICKS; WHIPS, HARNESS AND
SADDLERY, IN INTERNATIONAL CLASS 18
SAM & LIBBY 75115-1030 Registered 1187/1993 24-Jul-90
HK Hong Kong 1187/1993 24-Jul-90
25 24-Jul-97 CLOTHING, FOOTWEAR, HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 8
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1028 Registered 2199/1992 19-Nov-90
HK Hong Kong 2199/1992 19-Nov-90
14 19-Nov-97 JEWELRY, WATCHES
SAM & LIBBY (Plain Blk Type) 75115-1031 Registered 130764 26-Jul-90
HU Hungary 130764 26-Jul-90
3, 14, 18, 25 26-Jul-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1095 Registered 308134 27-Apr-93
ID Indonesia 308134 12-Jul-94
25 27-Oct-02 CLOTHING, FOOTWEAR AND HEADGEAR,
INCLUDING SHOES, BOOTS, SANDAL AND
SLIPPER, SOCKS AND STOCKING, SHIRTS,
SKIRTS, UNDERWEAR, SCARFS, GLOVES
SAM & LIBBY 75115-1032 Registered 140849 23-Nov-89
REGISTRATION MAY BE CANCELLED IF NOT
USED FOR A PERIOD OF 5 YEARS
IE Ireland (Republic of) 140849 23-Nov-89
25 23-Nov-96 CLOTHING, FOOTWEAR, HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 9
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1034 Registered 574523 24-Mar-89
IT Italy 574523 24-Mar-89
3,14, 18,25 24-Mar-99 3- BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNDS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1035 Registered 67478/1990 13-Jun-95
JP Japan 2465018 30-Oct-92
25(Na 17) 30-Oct-02 CLOTHING, FABRIC APPAREL ACCESSORIES,
BEDDING IN JAPANESE CLASS 17
(INTERNATIONAL CLASS 25)
SAM & LIBBY 75115-1036 Renewed 67479/1990 13-Jun-90
JP Japan 2451969 30-Sep-92
Na 21 30-Sep-02 PERSONAL ACCESSORIES, BUTTONS, BAGS,
POUCHES, JEWELS, AND THEIR IMITATIONS,
ARTIFICIAL FLOWERS, TOILETRY ARTICLES
SAM & LIBBY Label (Ambersand) 75115-1037 Registered
JP Japan 2309382 31-May-91
25 (Na 22) 28-Feb-01 LEATHER SHOES, BOOTS, SANDALS, AND
ALL OTHER GOODS IN JAPANESE CLASS 22
(INTERNATIONAL CLASS 25)
SAM & LIBBY 75115-1039 Registered
KR Korea (South) 250037 19-Sep-92
25 (Na 27) 18-Sep-02 CLOTHING, FOOTWEAR, HEADGEAR
</TABLE>
- --------------------------------------------------------------------------------
SAM & LIBBY 10
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1040 Registered
KR Korea (South) 233562 04-Mar-92
14 (Na 44) 04-Mar-02 DIAMONDS AND FORTY-NINE (49) OTHER
ITEMS IN THE KOREAN CLASS 44
SAM & LIBBY (Plain Blk Type) 75115-1042 Registered 93-036799 31-Jul-95
KR Korea (South) 318885 31-Jul-95
25 31-Jul-05 PANTS, SKIRTS, BLOUSES, EVENING DRESS,
ONE PIECE, TWO PIECE, BLOUSON,
CHEMISE, PETTICOAT, CAMISOLE
SAM & LIBBY 75115-1082 Pending 93/03176 10-May-93
MY Malaysia
25 SHOES, BOOTS, SANDALS AND SLIPPERS;
CLOTHING AND HEADGEAR
SAM & LIBBY (Plain Blk Type) 75115-1044 Registered 400179 29-Jul-90
MX Mexico 400179 29-Jul-90
25 29-Jul-00 CLOTHING, INCLUDING BOOTS, SHOES AND
SLIPPERS
SAM & LIBBY 75115-1083 Pending 226016 31-Mar-93
NZ New Zealand
25 ALL GOODS IN THIS CLASS INCLUDING
SHOES, BOOTS, SANDALS, AND SLIPPERS
SAM & LIBBY 75115-1084 Pending 226017 31-Mar-93
NZ New Zealand
42 SERVICES IN THIS CLASS INCLUDING
RETAIL STORE SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 11
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1045 Registered
NO Norway 151572 23-Jul-92
3, 14, 18, 25 23-Jul-02 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR
COATED THEREWITH, NOT INCLUDED IN
OTHER CLASSES; JEWELRY, PRECIOUS
STONES; HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25- CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Blk Type) 75115-1046 Renewed
PE Peru 90898 06-May-91
25 06-May-06 CLOTHING AND FOOTWEAR AND ALL OTHER
GOODS IN THE CLASS
SAM & LIBBY 75115-1085 Pending 86996 22-Jul-93
PH Philippines
25 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1086 Registered 86995 22-Jul-93
PH Philippines 61021 22-Jun-95
42 22-Jun-15 RETAIL STORE SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 12
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1047 Registered 67564 25-Jul-90
PL Poland 67564 25-Jul-90
3, 14, 18, 25 25-Jul-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR
COATED THEREWITH, NOT INCLUDED IN
OTHER CLASSES; JEWELRY, PRECIOUS
STONES; HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25- CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1048 Registered 266206 27-Jul-90
PT Portugal 266206 06-Nov-92
25 06-Nov-02 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1050 Registered
PO Puerto Rico 32130 04-Mar-93
18 04-Mar-03 LEATHERWARE, INCLUDING PURSES,
WALLETS, LUGGAGE, HANDBAGS, ALL
PURPOSE TOTES, GYM BAGS IN
INTERNATIONAL CLASS 18
SAM & LIBBY 75115-1051 Registered
PO Puerto Rico 32127 04-Mar-93
25 04-Mar-03 CLOTHING FOR MEN, WOMEN, AND
CHILDREN, NAMELY T-SHIRTS,
SWEATSHIRTS, JERSEYS, SHORTS,
JOGGING SUITS, SWEAT PANTS, JACKETS,
HATS, CAPS, SCARVES, GLOVES, HOSIERY,
NECKTIES, PAJAMAS, ROBES, NIGHT
SHIRTS, THERMAL UNDERWEAR, HEADBANDS,
WRIST BANDS, SWIM SUITS, SWIM TRUNKS,
SKIRTS, SHIRTS, SLACKS, TROUSERS,
PANTS, JEANS, COATS, SWEATERS,
LEOTARDS, LEGWARMERS, STOCKINGS,
SOCKS, PANTYHOSE, TIGHTS, LEGGINGS,
UNDERWEAR; FOOTWEAR, INCLUDING SHOES,
BOOTS, AND SANDALS IN INTERNATIONAL
CLASS 25
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 13
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1052 Registered
PO Puerto Rico 30292 10-Jan-92
25 (Na 39) 10-Jan-02 SHOES, SANDALS, OUTERWEAR,
UNDERGARMENTS AND JACKETS, IN PUERTO
RICAN CLASS 39
SAM & LIBBY 75115-1053 Registered 22764 24-Oct-90
RO Romania 17528 25-Oct-90
3, 14, 18, 25 24-Oct-00 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25- CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Blk Type) 75115-1076 Registered 90401 21-Dec-89
RU Russian Federation 90401 21-Dec-89
25 21-Dec-99 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1054 Registered B661 7/90 24-Sep-90
SG Singapore B6617/90 24-Sep-90
25 24-Sep-97 SHIRTS, JACKETS, TROUSERS, SKIRTS,
BLOUSES, DRESSES, SWEATERS, VESTS,
UNDERPANTS, SHORTS; ARTICLES OF SPORTS
CLOTHING, HATS AND HEADGEAR;
NECKTIES, SCARVES, JEANS, CAPS,
GLOVES, BELTS, APRONS, SWIMWEAR;
SLEEPING GARMENTS, FOOTWEAR; ALL
INCLUDED IN INTERNATIONAL CLASS 25;
BUT NOT INCLUDING ARTICLES OF
CLOTHING FOR CHILDREN
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 14
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1055 Rejected 1782/93 11-Mar-93
SG Singapore
42
SAM & LIBBY Label 75115-1056 Registered 88/6653 03-Aug-88
ZA South Africa 88/6653 03-Aug-88
25 03-Aug-98 ARTICLES OF CLOTHING; FOOTWEAR
SAM & LIBBY (Plain Blk Type) 75115-1057 Registered 1304811 05-Jun-90
ES Spain 1304811 07-Sep-95
25 05-Jun-00 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY 75115-1059 Registered
SE Sweden 252760 22-Oct-93
3, 14, 18, 25 22-Oct-03 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25- CLOTHING, FOOTWEAR, HEADGEAR
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 15
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- --------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY (Plain Block Type) 75115-1061 Registered 385054 20-Jul-90
CH Switzerland 385054 20-Jul-90
3, 14, 18, 25 20-Jul-10 3 - BLEACHING PREPARATIONS AND OTHER
SUBSTANCES FOR LAUNDRY USE; CLEANING,
POLISHING, SCOURING AND ABRASIVE
PREPARATIONS, SOAPS; PERFUMERY,
ESSENTIAL OILS, COSMETICS, HAIR
LOTIONS; DENTIFRICES.
14 - PRECIOUS METALS AND THEIR ALLOYS
AND GOODS IN PRECIOUS METALS OR COATED
THEREWITH, NOT INCLUDED IN OTHER
CLASSES; JEWELRY, PRECIOUS STONES;
HOROLOGICAL AND CHRONOMETRIC
INSTRUMENTS
18 - LEATHER AND IMITATIONS OF
LEATHER, AND GOODS MADE OF THESE
MATERIALS AND NOT INCLUDED IN OTHER
CLASSES; ANIMAL SKINS, HIDES; TRUNKS
AND TRAVELLING BAGS; UMBRELLAS,
PARASOLS AND WALKING STICKS; WHIPS,
HARNESS AND SADDLERY.
25 - CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Block Type) 75115-1016 Registered
TW Taiwan 526205 16-Jun-91
14 (Na 56) 16-Jun-01 JEWELRY, PRECIOUS METAL, DIAMONDS,
PEARLS, JADE, CORAL, ROCK CRYSTAL,
CORNELIAN, PRECIOUS STONES, AND
IMITIATIONS THEREOF
SAM & LIBBY (Plain Block Type) 75115-1017 Registered
TW Taiwan 527393 01-Jul-91
18 (Na 43) 30-Jun-01 HANDBAGS, GYM BAGS, PURSES, WALLETS,
LUGGAGE, BRIEF CASES, BOOK SATCHELS,
ATTACHE CASES, SUITCASES, TRAVELLING
BAGS, IN INTERNATIONAL CLASS 18
(TAIWANESE CLASS 43)
SAM & LIBBY Logo 75115-1018 Registered
TW Taiwan 434895 16-Mar-89
25 (Na 4l) 15-Mar-99 BOOTS AND SHOES IN TAIWANESE CLASS 41
(INTERNATIONAL CLASS 25)
SAM & LIBBY (Plain Block Type) 75115-1062 Registered 206292 28-Aug-90
TH Thailand 206292 28-Aug-90
25 (Na 38) 28-Aug-00 FOOTWEAR, CLOTHING AND ALL OTHER GOODS
IN THAI CLASS 38 (INTERNATIONAL CLASS
25)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 16
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date Remarks
- ---------------------- ---------- ------ ---------- ----------- -------
Country Reg Number Reg Date Owner
- ------- ---------- -------- -----
Class(es) Renewal Due Goods/Services
- ---------- ----------- --------------
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SAM & LIBBY 75115-1063 Registered 137486 02-Jul-92
TR Turkey 137486 02-Jul-92
25 02-Jul-02 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Blk Type) 75115-1026 Renewed 1376905 14-Mar-89
GB United Kingdom 1376905 14-Mar-89
25 14-Mar-06 SHIRTS, JACKETS, TROUSERS, SKIRTS,
BLOUSES, DRESSES, SWEATERS, VESTS,
UNDERPANTS, SHORTS; ARTICLES OF
SPORTS CLOTHING, HATS AND HEADGEAR;
NECKTIES, SCARVES, JEANS, CAPS,
GLOVES, BELTS, APRONS, SWIMWEAR;
SLEEPING GARMENTS; FOOTWEAR; BUT NOT
INCLUDING ARTICLES OF CLOTHING FOR
CHILDREN
JEFF & KRISTI (Plain Blk Type) 75115-1064 Registered
US United States 1651564 23-Jul-91
25 23-Jul-01 FOOTWEAR
JUST LIBBY 75115-1088 Registered 74/802109 29-Jun-92 DIVISIONAL OF USSN: 74/289265, Filed:
US United States 1897026 6/29/92
30-May-95
25 30-May-05 FOOTWEAR NAMELY, SHOES, ATHLETIC
SHOES, SLIPPERS, BOOTS AND LIBBY
SANDALS
LIBBY 75115-1091 Registered
US United States 1792712 14-Sep-93
25 14-Sep-03 FOOTWEAR
NEW NINETIES 75115-1067 Registered
US United States 1765307
25 13-Apr-93
13-Apr-03 FOOTWEAR
JUST LIBBY Pending 74/584466
US UNITED STATES 12-Oct-94 LEATHER AND IMITATIONS OF LEATHER AND
NOT INCLUDED IN OTHER CLASSES, NAMELY
LUGGAGE, HANDBAGS, PURSES, WALLETS,
ALL-PURPOSE TOTE BAGS, ALL-PURPOSE
SPORTS BAGS, BACKPACKS, AND UMBRELLAS
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 17
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date
- ---------------------- ---------- ------ ---------- -----------
Country Reg Number Reg Date
- ------- ---------- --------
Class(es) Renewal Due
- --------- -----------
=============================================================================================
<S> <C> <C> <C> <C>
SAM & LIBBY 75115-1092 Registered
US United States 1772454 18-May-93
25 18-May-03
SAM & LIBBY 75115-1093 Abandoned 74/08249 01-Sep-90
US United States
25
SAM & LIBBY (Plain Blk Type) 75115-1068 Registered 74/181392 15-Jun-91
US United States
18
SAM & LIBBY (Plain Blk Type) 75115-1071 Cancelled
US United States 1533259 04-Apr-89
25 04-Apr-09
SAM & LIBBY (Plain Blk Type) 75115-1070 Registered
US United States 1778203 22-Jun-93
42 22-Jun-03
SAM & LIBBY Logo 75115-1089 Registered 74/085091 06-Aug-90
US United States 1896946 30-May-95
18 30-May-05
- ---------------------------------------------------------------------------------------------
<CAPTION>
=============================================================================================================
Trademark/Service Mark Remarks
- ---------------------- -------
Country Owner
- ------- -----
Class(es) Goods/Services
- --------- --------------
=============================================================================================================
<S> <C>
SAM & LIBBY
US United States
25 CLOTHING, NAMELY, T-SHIRTS, SWEAT SHIRTS, JERSEYS, SHORTS,
JOGGING SUITS, SWEAT PANTS, JACKETS, HATS, CAPS, SCARVES,
FOOTWEAR, NIGHT-SHIRTS, SKIRTS, SHIRTS, SLACKS, TROUSERS, PANTS,
JEANS, COATS, SWEATERS, LEOTARDS, LEG WARMERS, TIGHTS, BELTS,
SHOES, TENNIS SHOES, BOOTS, SANDALS AND RAINWEAR
SAM & LIBBY
US United States
25 GLOVES, HOSIERY, NECKTIES, PAJAMAS, ROBES, NIGHTGOWNS,
UNDERWEAR, HEADBANDS, WRISTBANDS, SWIMSUITS, SWIM TRUNKS,
STOCKINGS, SOCKS, PANTYHOSE, SLIPPERS
SAM & LIBBY (Plain Blk Type)
US United States
18 ARTICLES MADE OF LEATHER AND IMITATION OF LEATHER AND NOT
INCLUDED IN OTHER CLASSES; NAMELY, LUGGAGE, HANDBAGS, PURSES,
WALLETS, TOTE BAGS, GYM BAGS, ALL PURPOSE SPORTS BAGS, FANNY PACKS
AND BACKPACKS
SAM & LIBBY (Plain Blk Type)
US United States
25 LADIES' SHOES, NAMELY SHOES, BOOTS AND SANDALS, IN
INTERNATIONAL CLASS 25
SAM & LIBBY (Plain Blk Type)
US United States
42 RETAIL STORES FEATURING SHOES, CLOTHING AND ACCESSORIES, IN
INTERNATIONAL CLASS 42
SAM & LIBBY Logo
US United States
18 ARTICLES MADE FROM LEATHER AND IMITATIONS OF LEATHER AND NOT
INCLUDED IN OTHER CLASSES; NAMELY, LUGGAGE, HANDBAGS,
PURSES, WALLETS, ALL-PURPOSE TOTE BAGS, ALL-PURPOSE SPORT BAGS,
BACKPACKS
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 18
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date
- ---------------------- ---------- ------ ---------- -----------
Country Reg Number Reg Date
- ------- ---------- --------
Class(es) Renewal Due
- --------- -----------
=============================================================================================
<S> <C> <C> <C> <C>
SAM & LIBBY Logo 75115-1090 Abandoned 74/085090 06-Aug-90
US United States
25
SAM & LIBBY Logo (Ampersand) 75115-1074 Registered
US United States 1646905 04-Jun-91
25 04-Jun-01
SAM & LIBBY Logo (Twisted....) 75115-1073 Registered
US United States 1786205 03-Aug-93
25 03-Aug-03
JUST LIBBY 75115-1087 Pending 276110 08-Mar-95
UY Uruguay
25
SAM & LIBBY (Plain Blk Type) 75115-1075 Registered
UY Uruguay 237392 06-Mar-91
25 06-Mar-01
SAM & LIBBY (Plain Blk Type) 75115-1077 Pending 242/91 08-Jan-91
VE Venezuela
25
- ---------------------------------------------------------------------------------------------
<CAPTION>
=======================================================================================================================
Trademark/Service Mark Remarks
- ---------------------- -------
Country Owner
- ------- -----
Class(es) Goods/Services
- --------- --------------
=======================================================================================================================
<S> <C>
SAM & LIBBY Logo
US United States
25 GLOVES, HOSlERY, NECKTIES, PAJAMAS, ROBES, NIGHTGOWNS,
UNDERWEAR, HEADBANDS, WRISTBANDS, SWIMSUITS, SWIM TRUNKS,
STOCKINGS, SOCKS, PANTYHOSE, SLIPPERS
SAM & LIBBY Logo (Ampersand)
US United States
25 FOOTWEAR
SAM & LIBBY Logo (Twisted.... SAM & LIBBY Logo (Twisted Ampersand)
US United States
25 CLOTHING, NAMELY, T-SHIRTS, SWEAT SHIRTS, JERSEYS, SHORTS,
JOGGING SUITS, SWEAT PANTS, JACKETS, HATS, CAPS, SCARVES,
FOOTWEAR, NIGHTSHIRTS, SKIRTS, SHIRTS, SLACKS, TROUSERS,
PANTS, JEANS, COATS, SWEATERS, LEOTARDS, LEG WARMERS, BELTS,
TIGHTS, SHOES, TENNIS SHOES, BOOTS, SANDALS AND RAINWEAR, IN
INTERNATIONAL CLASS 25
JUST LIBBY
UY Uruguay
25 CLOTHING, FOOTWEAR, HEADGEAR.
SAM & LIBBY (Plain Blk Type)
UY Uruguay
25 CLOTHING, FOOTWEAR, HEADGEAR
SAM & LIBBY (Plain Blk Type)
VE Venezuela
25 CLOTHING, FOOTWEAR, HEADGEAR
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 19
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
Trademark/Service Mark CaseNumber Status App Number Filing Date
- ---------------------- ---------- ------ ---------- -----------
Country Reg Number Reg Date
- ------- ---------- --------
Class(es) Renewal Due
- --------- -----------
=============================================================================================
<S> <C> <C> <C> <C>
SAM & LIBBY (Plain Blk Type) 75115-1078 Registered 36510 24-Jul-90
YU Yugoslavia 36510 24-Jul-90
3, 14, 18, 25 24-Jul-00
- ---------------------------------------------------------------------------------------------
<CAPTION>
======================================================================================================================
Trademark/Service Mark Remarks
- ---------------------- -------
Country Owner
- ------- -----
Class(es) Goods/Services
- --------- --------------
======================================================================================================================
<S> <C>
SAM & LIBBY (Plain Blk Type)
YU Yugoslavia
3, 14, 18, 25 3 - BLEACHING PREPARATIONS AND OTHER SUBSTANCES FOR LAUNDRY
USE; CLEANING, POLISHING, SCOURING AND ABRASIVE
PREPARATIONS; SOAPS; PERFUMERY, ESSENTIAL OILS, COSMETICS,
HAIR LOTIONS, DENTIFRICES; TOILETRIES AND COSMETICS
14 - JEWELRY, PRECIOUS STONES; PRECIOUS METALS AND THEIR
ALLOYS AND GOODS IN PRECIOUS METALS OR COATED THEREWITH,
NOT INCLUDED IN OTHER CLASSES (EXCEPT CUTLERY, FORKS AND
SPOONS); HOROLOGICAL AND OTHER CHRONOMETRIC INSTRUMENTS
18 - HANDBAGS, POCKET BOOKS, LUGGAGE, LEATHER AND IMITATIONS
OF LEATHER, AND ARTICLES MADE FROM THESE MATERIALS AND NOT
INCLUDED IN OTHER CLASSES; SKINS, HIDES; TRUNKS AND TRAVELLING
BAGS; UMBRELLAS, PARASOLS AND WALKING STICKS; WHIPS, HARNESS
AND SADDLERY
25 - CLOTHING, INCLUDING BOOTS, FOOTWEAR AND SLIPPERS
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SAM & LIBBY 20
<PAGE>
EXHIBIT B
---------
TRADEMARKS SUBJECT TO LICENSE TO SELLER
---------------------------------------
1) Sam & Libby
2) Just Libby
3) Sam & Libby Kids
<PAGE>
EXHIBIT C
---------
(AS UPDATED TO THE CLOSING DATE PURSUANT TO SECTION 9.1(c) OF THIS AGREEMENT)
SELLER'S INVENTORY AND OPEN PURCHASE ORDERS
-------------------------------------------
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION> AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C>
DIVISION: SAM & LIBBY
SEASON: SPRING 94
DOUBLE VISION 13
KENYA 1
LOCKET 14
LAY UP 6
MAJUTE 10
PAJUTE 16
SLAM DUNK 50
SUPER WRAP 12
--------------------------
122 0
DIVISION: SAM & LIBBY
SEASON: FALL 94
BOB N' WEAVE 15
BOW BALLET 172
DOUBLE CROSS 1
EMERALD 95
GHILLIE WHITE 2
HOLY TUXEDO 109
HUEY 144
HEY JANE 3
HEY JUTE 366
LASSO 31
LOUIE 59
MA JUTE 337
MALLARD II 3
MALLARD 1285
PUPPY LUG 35
SOCK HOP 264
SNEAK ATTACK 74
SEEING DOUBLE 1
SPEAK NO EVIL 84
STRIP SEARCH 90
--------------------------
3170 0
DIVISION: SAM & LIBBY
SEASON: SPRING 95
BOW BALLET 2599
CAREN 51
CHELSEA 121
HEY JUTE IR 24
</TABLE>
PAGE:1
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
HEY JANE 20
HEY JUTE 4838
JACKIE 81
JUST DUCKY 1251
KATIE 24
LADY JANE 377
LAY UP II 34
MARIA 2
MADONNA 6
MAGGIE 102
MISCELLANEOUS 5
MAJUTE 468
OH SO COCO 4
PENNY LANE 20
PENNY LUG 1352
PENNY 20
PLATOON 313
SOUTH BEACH 12
SISTER JANE 8
STRING TIE 24
TIME SQUARE 163
-----------------------
11919 0
DIVISION: SAM & LIBBY
SEASON: FALL 95
ANNIE 1337
BOOM 11
BOW BALLET 36
CHELSEA 16047
CROSS COUNTRY 393
GATOR 72
HEY JUTE II 72
HEY JUTE 4990
ICE TEA 3643
ISABEL 334
LADY JANE 134
MAGGIE 11
MISCELLANEOUS 14
MAJUTE 406
MARY JANE 3
DI LUG 11
PENNY LANE 267
</TABLE>
PAGE:2
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTlON STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
PENNY LUG 879
PENNY TOO 103
PENNY 35
RODEO 7
SAMPLE 198
SISTER JANE 401
STEAL 69
TIME SQUARE II 24
TIME SQUARE 1478
WORKER 175
YOU WHO 12
--------------------------
31162 0
DIVISION: SAM & LIBBY
SEASON: SPRING 96
BARRIE 197
BOW BALLET 10419
CHELSEA 1358
CINDY 447
FRANKIE 985
HEY JANE 22660
HEY JUTE 16576
JACKIE 3923
JOHNY 2206
MAJUTE 9078
POGO 120
RUBIS 20
SKIPPER 15780
SOUTH BEACH
SUPREME 3826
STRIP THONG 3634
TIME SQUARE 19127
--------------------------
110356 0
DIVISION: SAM & LIBBY
SEASON: FALL 96
ABBY 9904 9928 LA
BOW BALLET 24510 4200 4200 SS
CAROLINA 2712 2712 PF
CARRIE 4560 4584 LA
INGRID 39 1088 1152 LA
</TABLE>
PAGE:3
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
LASSO 147 60172 60172 LA
SALLY ANNE 4712 4736 LA
SERENA 5840 5840 PF
STEFANIE 7608 7632 LA
STELLA 10336 0360 LA
SVELTE 38 1128 1192 LA
SEAL 2016 SB
--------------------------------------
24734 112260 114524
DIVISION: JUST LIBBY
SEASON: SPRING 94
GARBO 15
IN THE RAW 3
MISCELLANEOUS 12
-----------------------------
30 0
DIVISION: JUST LIBBY
SEASON: FALL 94
CARLA 12
CRISP 1
MISCELLANEOUS 12
MONA II 12
YVE 11
-----------------------------
48 0
DIVISION: JUST LIBBY
SEASON: SPRING 95
BIMINI 30
CARLA 236
COCONUT GROVE 626
CROSS OVER 3
GABBY 115
IN CAGE 36
JETT 9
JUST A QUARTER 16
MOONLIGHT 4
OCEAN DRIVE 12
ROX 9
SPIDER WEB 11
TROPEZ 1
YAKA 1
</TABLE>
PAGE:4
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
----------------------------
<S> <C> <C> <C>
1109 0
DIVISION: JUST LIBBY
SEASON: FALL 95
CABRA 110
DADDYS GIRL 52
GABBY 31
JONES 36
MAX 48
MCDOUGAL 13
MOCK ME 716
MOMMYS GIRL 24
PARK 11
TWO KOOL 7
WRAP 22
----------------------------
1070 0
DIVISION: JUST LIBBY
SEASON: SPRING 96
CHAMBER 45
CARLYLE 9
GOALIE 2260
MAXWELL 22
SCORE 1434
STEFANO 40
SYMPHONY 82
----------------------------
3852 40
DIVISION: JUST LIBBY
SEASON: FALL 96
ALTO 84
CAROLINE 5272 5272 PF
CARLYLE 4188 4244 LA
CROSBY 10740 11136 PO
KATHY 11520 11520 PF
ROCKET 7004 7004 BF
SABRINA 13340 12668 PF
SCUFFO 2244
SANDRINE 4164 4164 PF
STEFANO 8604 8664 LA
</TABLE>
PAGE:5
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
VERONICA 240
WILLIAM 384 516 PO
--------------------------------------
2568 65216 65188
DIVISION: SAM & LIBBY KIDS
SEASON: SPRING 94
GOIN OUT 36
MISCELLANEOUS 108
SPOIL ME 26
-----------------------------
170 0
DIVISION: SAM & LIBBY KIDS
SEASON: FALL 94
BO PEEP 36
BALLET 540
DOUBLE CROSS 5
DOROTHY 15
HO BOW 40
LASSO 1
SOCK HOP 18
-----------------------------
655 0
DIVISION: KIDS-SAM & LIBBY
SEASON: SPRING 95
BO PEEP 50
BALLET 121 432
DOROTHY 6
HEY JUTE 210
JELLY FISH 30
MARRY ME 46
MADONNA 65
MERRY POPPINS 208
STRAP TEASE 29
WORKER 22
WRAP IT UP 18
-----------------------------
805 432
DIVISION: SAM & LIBBY KIDS
SEASON: FALL 95
ANNIE 33
</TABLE>
PAGE:6
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
BALLET 4
CROSS COUNTRY 140
HEY JUTE 12
JENNA 30
LASSO 33
MARRY ME 18
MAGGIE 36
MISCELLANEOUS 9
MAJUTE 53
MARY LUG 129
MUNK 18
PENNY LUG 863
PUPPY LUG 18
TIME SQUARE 18
WORKER 32
--------------------------
1446 0
DIVISION: SAM & LIBBY KIDS
SEASON: SPRING 96
BEAU-T 32
BELLE 390
BIRCH 18
BALLET 80
BARRIE 78
HEY JUTE 266
HEY JUTE 8204
JACKING 145
LIL FISH 46
MARY LUG 550
SKIPPER 358
--------------------------
10167 0
DIVISION: SAM & LIBBY KIDS
SEASON: FALL 96
ABC 28992 28992 LA
AUDREY 6354 6354 LA
BALLET 15932 49284 49284 BC
BALLET TEEN 6192 6192 BC
BUMPER 1800 1800 LA
BUMPER TEEN 960 960 LA
BAND BOX TEEN 1920 1920 LA
</TABLE>
PAGE:7
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
BAND BOX 12906 12906 LA
BOSS 29 53004 53052 LA
BARRIE 13356 13356 LA
BOOTIE BRAND II 4812 4812 LA
BOOTIE BRAND 13956 13956 LA
COOL CAT TEEN 840 840 LA
COOL CAT 1578 1578 LA
CARLYLE TEEN 522 522 LA
CARLYLE 9480 9582 LA
CROSS COUNTRY 8412 8412 LA
DAISY 15 32976 32976 LO
FUNK TEEN 3768 3768 LA
FUNK 3750 3750 LA
GO GO II 2808 2808 LA
GO GO 5436 5436 LA
GOING UP TEEN 1920 1920 LA
GOING UP 91 19530 19530 LA
GROOVE 18 318 LO
HI KICK 7902 7902 LA
JACKIE 12
KATRINA 9648 9648 LA
KATRINA II 19842 19842 LA
LIL BALLET 760 1736 1736 BC
MIST 18 30 30 LO
MOVE 35 20700 20700 LO
MARTINA 26 5418 5472 LA
MARY LUG TEEN 10998 11010 LA
MARY LUG 123 87774 87486 LA
OCEAN 16806 16806 LO
OX-LUG TEEN 3774 3774 LA
OX-LUG 16554 16590 LA
PENNY LUG 265 11748 11748 LA
PLAIN PENNY 1800 1800 LA
PLAIN PENNYTEEN 3228 3228 LA
PUPPY LUG 8388 8928 LA
RAVE 15 13080 13068 LO
ROSEBUD
SLEEP IN 15210 15210 BC
SPUNK 27 12168 12240 LA
SWEETHEART MID 18 12600 12600 LO
THUMPER TEEN 720 720 LA
THUMPER 1020 1020 LA
TANGERINE TEEN 3774 3774 LA
</TABLE>
PAGE:8
<PAGE>
EXHIBIT "C"
SAM & LIBBY REVISED: 6/26/96
SUMMARY OF INVENTORY AND FACTORY ORDERS
<TABLE>
<CAPTION>
AVAIL OPEN
STYLE DESCRIPTION STOCK FACTORY FACTORY
(ON HAND INVENTORY)
<S> <C> <C> <C>
TANGERINE 26 14586 14586 LA
WORKER 13620 13620 LA
ZIP LUG 468 486 LA
----------------------------------------- ----------
17410 598148 599048 0
0
-----------------------------------------
GRAND TOTAL 220793 776096 778760
=========================================
</TABLE>
FACTORY LEGEND
BC=BRAHA CHINA PF=PACIFIC FOOTWEAR
LA=LANE JNTL BF=BOTAS FOX SA
LO=LEIF J. OSTBERG PO=CORP PONS ADJ BY LOUGHAN 6/25/96
PER BOUGHT VS SOLD ANALYSIS REPORT, FACTORY ORDER STATUS @ 6/18/96
PAGE:9
<PAGE>
EXHIBIT D
---------
(AS UPDATED TO THE CLOSING DATE PURSUANT TO SECTION 9.1(c) OF THIS AGREEMENT)
OPEN CUSTOMER ORDERS
--------------------
<PAGE>
KIDSORDS.XLS
EXHIBIT "D"
<TABLE>
<CAPTION>
OPEN ORDER (BY CUSTOMER/STYLE) AS OF: June 26, 1996
SAM & LIBBY KIDS
ACCOUNT STYLE PAIRS $ $ SUB-TTL.
================================================================================
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Mercantile abc 396 $4.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mercantile abc 396 $4.3
- --------------------------------------------------------------------------------
bootie brand 348 $5.3
- --------------------------------------------------------------------------------
carlyle 378 $6.7
- --------------------------------------------------------------------------------
go go 180 $3.0
- --------------------------------------------------------------------------------
martina 396 $5.7
- --------------------------------------------------------------------------------
spunk 666 $9.7 $34.7
- --------------------------------------------------------------------------------
Belk abc 144 $1.8
- --------------------------------------------------------------------------------
audrey 486 $7.2
- --------------------------------------------------------------------------------
band box 270 $4.0
- --------------------------------------------------------------------------------
bootie brand 168 $2.5
- --------------------------------------------------------------------------------
boss 4686 $46.4
- --------------------------------------------------------------------------------
carlyle 18 $0.3
- --------------------------------------------------------------------------------
daisy 360 $5.4
- --------------------------------------------------------------------------------
go go 18 $0.3
- --------------------------------------------------------------------------------
going up 3132 $56.0
- --------------------------------------------------------------------------------
katrina 72 $1.1
- --------------------------------------------------------------------------------
mary lug 4680 $60.3
- --------------------------------------------------------------------------------
mist 126 $2.0
- --------------------------------------------------------------------------------
move 378 $5.6
- --------------------------------------------------------------------------------
ocean 72 $1.1
- --------------------------------------------------------------------------------
penny lug 126 $1.5
- --------------------------------------------------------------------------------
puppy lug 792 $11.8
- --------------------------------------------------------------------------------
rosebud 18 $0.0
- --------------------------------------------------------------------------------
sleep in 36 $0.4
- --------------------------------------------------------------------------------
spunk 18 $0.3
- --------------------------------------------------------------------------------
sweetheart mid 18 $0.3 $208.3
- --------------------------------------------------------------------------------
Bob's abc 24 $0.3
- --------------------------------------------------------------------------------
bootie brand 24 $0.4
- --------------------------------------------------------------------------------
boss 1242 $12.3
- --------------------------------------------------------------------------------
carlyle 36 $0.6
- --------------------------------------------------------------------------------
cross country 840 $14.2
- --------------------------------------------------------------------------------
daisy 720 $10.8
- --------------------------------------------------------------------------------
going up 36 $0.4
- --------------------------------------------------------------------------------
mary lug 2046 $28.4
- --------------------------------------------------------------------------------
move 990 $14.8
- --------------------------------------------------------------------------------
ox lug 840 $11.6
- --------------------------------------------------------------------------------
penny lug 840 $11.6
- --------------------------------------------------------------------------------
sleep in 2214 $30.7
- --------------------------------------------------------------------------------
spunk 2086 $32.5
- --------------------------------------------------------------------------------
tangerine 36 $0.5 $169.1
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
KIDSORDS.XLS
EXHIBIT "D"
<TABLE>
<CAPTION>
OPEN ORDER (BY CUSTOMER/STYLE) AS OF: June 26, 1996
SAM & LIBBY KIDS
ACCOUNT STYLE PAIRS $ $ SUB-TTL.
================================================================================
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Mercantile abc 396 $4.3
- --------------------------------------------------------------------------------
Famous Footwear go go II 2796 $36.3
- --------------------------------------------------------------------------------
katrina II 10104 $121.2 $157.5
- --------------------------------------------------------------------------------
J.C. Penney abc 21168 $273.0
- --------------------------------------------------------------------------------
ballet 49284 $487.9
- --------------------------------------------------------------------------------
ballet teen 6192 $61.3
- --------------------------------------------------------------------------------
band box 5904 $87.9
- --------------------------------------------------------------------------------
band box teen 1920 $29.4
- --------------------------------------------------------------------------------
barrie 13356 $199.0
- --------------------------------------------------------------------------------
bootie brand 9108 $135.7
- --------------------------------------------------------------------------------
carlyle 1746 $31.2
- --------------------------------------------------------------------------------
carlyle teen 522 $9.3
- --------------------------------------------------------------------------------
cross country 6768 $121.1
- --------------------------------------------------------------------------------
funk teen 2268 $40.5
- --------------------------------------------------------------------------------
going up 5904 $76.1
- --------------------------------------------------------------------------------
going up teen 1920 $24.7
- --------------------------------------------------------------------------------
hi kick 2808 $53.0
- --------------------------------------------------------------------------------
katrina 4392 $61.4
- --------------------------------------------------------------------------------
katrina II 7200 $100.8
- --------------------------------------------------------------------------------
lil ballet 3472 $34.3
- --------------------------------------------------------------------------------
mary lug 18090 $233.3
- --------------------------------------------------------------------------------
mary lug teen 5898 $76.0
- --------------------------------------------------------------------------------
ox lug 11718 $174.6
- --------------------------------------------------------------------------------
ox lug teen 3774 $56.2
- --------------------------------------------------------------------------------
plain penny teen 2268 $40.6
- --------------------------------------------------------------------------------
rave 13356 $239.0
- --------------------------------------------------------------------------------
tangerine 11718 $174.6
- --------------------------------------------------------------------------------
tangerine teen 3774 $56.2 $2,877.1
- --------------------------------------------------------------------------------
Kohl's abc 3528 $41.9
- --------------------------------------------------------------------------------
mary lug 3276 $37.6
- --------------------------------------------------------------------------------
mary lug teen 900 $10.3
- --------------------------------------------------------------------------------
move 420 $5.8
- --------------------------------------------------------------------------------
ocean 228 $3.3
- --------------------------------------------------------------------------------
penny lug 2376 $27.3
- --------------------------------------------------------------------------------
rave 252 $4.0
- --------------------------------------------------------------------------------
tangerine 2724 $35.1
- --------------------------------------------------------------------------------
worker 8532 $81.0 $246.3
- --------------------------------------------------------------------------------
Marshall's band box 2430 $24.3
- --------------------------------------------------------------------------------
bootie brand 4800 $43.2
- --------------------------------------------------------------------------------
boss 5400 $45.9
- --------------------------------------------------------------------------------
daisy 12492 $145.5
- --------------------------------------------------------------------------------
katrina II 2484 $24.8
- --------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
KIDSORDS.XLS
EXHIBIT "D"
<TABLE>
<CAPTION>
OPEN ORDER (BY CUSTOMER/STYLE) AS OF: June 26, 1996
SAM & LIBBY KIDS
ACCOUNT STYLE PAIRS $ $ SUB-TTL.
================================================================================
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Mercantile abc 396 $4.3
- --------------------------------------------------------------------------------
mary lug 14400 $122.4
- --------------------------------------------------------------------------------
move 9395 $109.4
- --------------------------------------------------------------------------------
ocean 9324 $113.2
- --------------------------------------------------------------------------------
sweetheart mid. 5994 $69.8 $698.5
- --------------------------------------------------------------------------------
Newton Buying Corp. daisy 5004 $58.1
- --------------------------------------------------------------------------------
move . 3690 $42.8
- --------------------------------------------------------------------------------
ocean 11538 $140.1
- --------------------------------------------------------------------------------
sweetheart mid. 5922 $68.9 $309.9
- --------------------------------------------------------------------------------
Parisian boss 8400 $79.8
- --------------------------------------------------------------------------------
carlyle 846 $15.1
- --------------------------------------------------------------------------------
penny lug 1512 $19.4 $114.3
- --------------------------------------------------------------------------------
Rack Room band box 3000 $38.7
- --------------------------------------------------------------------------------
mary lug 3600 $46.4
- --------------------------------------------------------------------------------
penny lug 2400 $30.9
- --------------------------------------------------------------------------------
puppy lug 3120 $46.4 $162.4
- --------------------------------------------------------------------------------
SCOA abc 252 $3.2
- --------------------------------------------------------------------------------
bootie brand 192 $2.8
- --------------------------------------------------------------------------------
boss 7938 $75.4
- --------------------------------------------------------------------------------
mary lug 630 $8.1
- --------------------------------------------------------------------------------
puppy lug 558 $8.3
- --------------------------------------------------------------------------------
rave 18 $0.3
- --------------------------------------------------------------------------------
tangerine 378 $5.6 $103.7
- --------------------------------------------------------------------------------
Shoe Show boss 6564 $63.4
- --------------------------------------------------------------------------------
going up 3120 $31.2
- --------------------------------------------------------------------------------
mist 552 $8.0
- --------------------------------------------------------------------------------
sleep in 288 $3.0 $105.6
- --------------------------------------------------------------------------------
SRI boss 3600 $35.6
- --------------------------------------------------------------------------------
carlyle 864 $15.0
- --------------------------------------------------------------------------------
daisy 12 $0.2
- --------------------------------------------------------------------------------
spunk 3300 $49.1
- --------------------------------------------------------------------------------
tangerine 1848 $27.5 $127.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Independents assorted 97668 $1,340.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL 425485 $5,314.8 $5,314.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(Note: numbers in thousands, except pairs.)
source: Order Summary Profit Analysis 06/26/96
Page 3
<PAGE>
<TABLE>
<CAPTION>
ORDERS.XLS
- --------------------------------------------------------------------------------
OPEN ORDER (BY CUSTOMER/STYLE) EXHIBIT "D"
- --------------------------------------------------------------------------------
SAM & LIBBY WOMEN'S AS OF: June 25, 1996
- --------------------------------------------------------------------------------
ACCOUNT STYLE PAIRS $ $ SUB-TTL.
================================================================================
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Belk lasso 16160 161.6 161.6
- --------------------------------------------------------------------------------
Bloomingdales caroline 864 19.4
- --------------------------------------------------------------------------------
kathy 324 7.1 26.5
- --------------------------------------------------------------------------------
Bon Ton lasso 4548 49.7
- --------------------------------------------------------------------------------
alto 312 9.3
- --------------------------------------------------------------------------------
carlyle 960 21.6
- --------------------------------------------------------------------------------
sabrina 4000 90.0
- --------------------------------------------------------------------------------
william 312 9.3 179.9
- --------------------------------------------------------------------------------
Burdines kathy 1704 38.3 38.3
- --------------------------------------------------------------------------------
Deb Shops lasso 2700 27.0 27.0
- --------------------------------------------------------------------------------
Famous Footwear serena 2400 40.5 40.5
- --------------------------------------------------------------------------------
Filenes crosby 480 15.3
- --------------------------------------------------------------------------------
william 480 13.9 29.2
- --------------------------------------------------------------------------------
Gadzooks carlyle 2232 47.4 47.4
- --------------------------------------------------------------------------------
Hamricks ingrid 900 12.5
- --------------------------------------------------------------------------------
lasso 900 9.8
- --------------------------------------------------------------------------------
stella 900 12.1
- --------------------------------------------------------------------------------
svelte 900 12.5 46.9
- --------------------------------------------------------------------------------
Houser abby 880 11.8
- --------------------------------------------------------------------------------
sally anne 264 3.5
- --------------------------------------------------------------------------------
stella 880 11.8 27.1
- --------------------------------------------------------------------------------
Kohl's kathy 648 12.8
- --------------------------------------------------------------------------------
sandrine 204 3.4
- --------------------------------------------------------------------------------
serena 3396 57.3
- --------------------------------------------------------------------------------
stefanie 7608 128.5 202.0
- --------------------------------------------------------------------------------
Macy's East alto 480 14.3
- --------------------------------------------------------------------------------
crosby 4835 154.7
- --------------------------------------------------------------------------------
kathy 6444 71.3
- --------------------------------------------------------------------------------
rocket 60 1.8
- --------------------------------------------------------------------------------
william 240 7.0 249.1
- --------------------------------------------------------------------------------
Macy's West crosby 5352 173.9
- --------------------------------------------------------------------------------
kathy 660 13.0
- --------------------------------------------------------------------------------
sandrine 3136 70.5
- --------------------------------------------------------------------------------
stefano 144 3.2 260.6
- --------------------------------------------------------------------------------
Mercantile lasso 20720 223.0 223.0
- --------------------------------------------------------------------------------
Peebles caroline 828 18.6
- --------------------------------------------------------------------------------
lasso 1608 17.5
- --------------------------------------------------------------------------------
sabrina 1308 27.6
- --------------------------------------------------------------------------------
stefano 816 18.3 82.0
- --------------------------------------------------------------------------------
QVC carlyle 1200 27.0
- --------------------------------------------------------------------------------
caroline 1056 23.7
- --------------------------------------------------------------------------------
kathy 1344 30.2
- --------------------------------------------------------------------------------
lasso 7716 84.1
- --------------------------------------------------------------------------------
rocket 360 14.3
- --------------------------------------------------------------------------------
sabrina 1080 24.3
- --------------------------------------------------------------------------------
stefano 1200 27.0 230.6
- --------------------------------------------------------------------------------
Rack Room abby 8200 110.7
- --------------------------------------------------------------------------------
sally anne 3920 52.9
- --------------------------------------------------------------------------------
stella 8040 108.5 272.1
- --------------------------------------------------------------------------------
Spiegel stefano 3444 80.0 80.0
- --------------------------------------------------------------------------------
SRI carrie 4560 77.0 77.0
- --------------------------------------------------------------------------------
The Bon Marche alto 144 4.3
- --------------------------------------------------------------------------------
crosby 72 2.3
- --------------------------------------------------------------------------------
rocket 984 30.9
- --------------------------------------------------------------------------------
william 72 2.1 39.6
- --------------------------------------------------------------------------------
Independents assorted 22473 274.1 274.1
- --------------------------------------------------------------------------------
================================================================================
TOTAL 167452 2,614.5 2,614.5
================================================================================
</TABLE>
(Note: numbers in thousands, except pairs.)
source: Order Summary Profit Analysis 06/25/96
Page 1
<PAGE>
EXHIBIT E
---------
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (this "Agreement") is made and entered into
as of this ____ day of ____________, 1996 between SAMUEL L. EDELMAN
("Shareholder") and MAXWELL SHOE COMPANY INC., a Delaware corporation ("Buyer").
RECITALS
--------
A. On July 2, 1996, Sam & Libby, Inc., a California corporation
("Seller"), Buyer, Louise B. Edelman, Stuart L. Kreisler and Shareholder entered
into a Trademark and Intellectual Property Rights Purchase and Sale Agreement
(the "Purchase Agreement") whereby Buyer agreed, among other things, to purchase
from Seller the Trademarks (as defined in the Purchase Agreement) of Seller.
B. This Agreement is the Non-Competition Agreement referred to in Section
11.2(g) of the Purchase Agreement, and, pursuant thereto, must be entered into
by the parties hereto as a condition to the consummation of the transactions
contemplated by the Purchase Agreement. The execution and performance of this
Agreement is substantial inducement to Buyer to enter into and consummate the
transactions contemplated by the Purchase Agreement.
C. Seller, in connection with the Purchase Agreement, shall receive
payment as consideration for the covenants contained herein and Shareholder is
willing to refrain from competing with Buyer as provided herein.
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto covenant and agree as follows:
All Capitalized terms not defined herein shall have the meaning set forth
in the Purchase Agreement.
1. Covenant Not to Compete.
-----------------------
(a) Without the prior written consent of Buyer and except as
contemplated by Section 9.1(a) of the Purchase Agreement, Shareholder will
not, directly or indirectly (whether through any partnership of which
Shareholder is a member, through any trust in which Shareholder is a
beneficiary or trustee, or through a corporation or other association in
which Shareholder has any interest, legal or equitable, or in any other
capacity whatsoever), actively participate in any branded footwear business
competitive with Buyer's business, as described in Buyer's Form 10-K for
the fiscal year ended October 31, 1995, including, without limitation, any
business of the type or types conducted by Seller at any time during the
two-year period preceding the date hereof or
<PAGE>
under development by Seller on the date hereof in any county or any other
political subdivision of any state of the United States of America or of
any other country in the world listed in Schedule 1 hereto, which list
includes all jurisdictions where Seller conducted any branded footwear
business at any time during the two-year period preceding the date hereof,
except that Shareholder may purchase up to 5% of the capital stock of a
publicly held company. This covenant not to compete shall extend for a
period from the date hereof through December 31, 1996.
(b) Except as contemplated by Section 9.1(a) of the Purchase
Agreement, Shareholder agrees not to utilize or display in any way either
of the names "Sam Edelman" or "Libby Edelman," or any names similar to such
names, appearing in or on any footwear product or apparel product for three
years from July 25, 1996.
(c) Any provision of this Agreement which is invalid, illegal,
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of
this Agreement invalid, illegal or unenforceable in any other jurisdiction.
The parties hereto agree that the duration and area for which the covenant
not to compete set forth in this Agreement is to be effective are
reasonable. In the event that any court determines that the time period or
the area, or both of them, are unreasonable and that such covenant is to
that extent unenforceable, the parties hereto agree that the covenant shall
remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable.
2. Remedies. In the event of any breach by Shareholder of any covenant
--------
or other provision contained herein, Buyer shall be entitled to recover from
Shareholder, in addition to monetary damages as set forth below, specific
performance and injunctive relief, in addition to any other remedies available
to Buyer at law or equity. Shareholder recognizes and agrees that the violation
of the provisions of this Agreement cannot be reasonably or adequately
compensated in damages and that, in addition to any other relief to which Buyer
may be entitled by reason of such violation, it shall also be entitled to
permanent and temporary injunctive and equitable relief. In the event of any
breach by Shareholder of any covenant or other provision contained herein, Buyer
shall be entitled to recover from Shareholder, with respect to any monetary
damages, any and all costs and expenses actually expended (including, without
limitation, any reasonable attorneys' fees and such other reasonable and
necessary costs and expenses), excluding any and all incidental and/or
consequential damages of any nature, together with interest on cash
disbursements in connection therewith, at an annual rate equal to the Prime Rate
(as defined in the Purchase Agreement) then in effect, from the date that such
cash disbursements were made by Buyer or any of its Affiliated Parties (as
defined in the Purchase Agreement), until paid by Shareholder, incurred by Buyer
or its respective Affiliated Parties, arising out of all claims, losses,
damages, liabilities, penalties and interest, excluding any and all incidental
and/or consequential damages of any nature.
No claim, demand, suit or cause of action shall be brought against
Shareholder under this
<PAGE>
Section 2 and under the Purchase Agreement exceeds $50,000, in which
event Buyer shall be entitled to monetary damages from Shareholder for all
claims hereunder relating back to the first dollar, provided, however, that
Shareholder's aggregate liability shall in no event exceed the Purchase Price
(as defined in the Purchase Agreement), and provided, further, however, that (a)
any sums paid to Buyer under Section 12.1 and/or 12.2 of the Purchase Agreement
by Seller and/or any one or more Shareholders in any capacity, as the case may
be, shall be applied to reduce the maximum liability under this Section 2 and
(b) any sums paid to Buyer under this Agreement shall be applied to reduce the
maximum amount of liability of Seller and/or any one or more Shareholders in any
capacity, as the case may be, under Section 12.1 and/or 12.2 of the Purchase
Agreement, so that the maximum amount which shall be paid to Buyer from Seller
and all Shareholders in any capacity and pursuant to the Purchase Agreement and
all Non-Competition Agreements shall not exceed Five Million Five Hundred
Thousand Dollars ($5,500,000).
3. Miscellaneous.
-------------
3.1 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed given on the
next business day if delivered personally or by telecopier (with a confirming
copy sent via Federal Express or other international courier) to the parties,
their successors in interest or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to Buyer: Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park (Boston), Massachusetts 02136
Attention: Mark J. Cocozza, President
Facsimile: (617) 364-9058
Telephone: (617) 333-4028
With a concurrent copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
Telephone: (213) 229-7141
If to Shareholder: Samuel L. Edelman
212 Mount Holly Road
Katonah, New York 10536
Facsimile: (914) 232-7901
Telephone: (914) 232-6690
<PAGE>
With a concurrent copy to: Kaufmann, Feiner, Yamin, Gildin & Robbins LLP
777 3rd Avenue, 24th Floor
New York, New York 10017
Attention: Michael Yamin, Esq.
Facsimile: (212) 755-3174
Telephone: (212) 755-3100
and
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven L. Berson, Esq.
Facsimile: (415) 493-6811
Telephone: (415) 493-9300
3.2 Assignability and Parties in Interest. This Agreement shall not
-------------------------------------
be assignable by either of the parties hereto except that Buyer may assign its
rights hereunder to, and have its obligations hereunder assumed by, a wholly-
owned subsidiary of Buyer without releasing Buyer. This Agreement shall inure to
the benefit of and be binding upon Buyer and Shareholder and their respective
permitted successors and assigns.
3.3 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the internal law, and not the law
pertaining to conflicts or choice of law, of the State of New York.
3.4 Counterparts; Fax. This Agreement may be executed by fax and
-----------------
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
3.5 Complete Agreement. Except for the Purchase Agreement and the
------------------
documents delivered or to be delivered pursuant to the Purchase Agreement, this
Agreement contains or will contain the entire agreement between the parties
hereto with respect to the transactions contemplated herein and shall supersede
all previous oral and written and all contemporaneous oral negotiations,
commitments and understandings.
3.6 Termination. Anything herein to the contrary notwithstanding,
-----------
this Agreement may be terminated by mutual written consent of Buyer and
Shareholder at any time.
3.7 Modifications, Amendments and Waivers. None of the terms or
-------------------------------------
provisions of this Agreement may be modified, amended or waived, except by a
written instrument executed by the parties.
3.8 Interpretation. The headings contained in this Agreement are
--------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
BUYER: MAXWELL SHOE COMPANY INC.
-----
By:
--------------------------------
Name: Mark J. Cocozza
Title: President and Chief Operating
Officer
SHAREHOLDER:
------------ -----------------------------------
Samuel L. Edelman
<PAGE>
SCHEDULE 6.3
------------
A. LIENS ON THE TRADEMARKS
----------------------------
B. RESTRICTIONS ON SELLER'S RIGHT TO USE THE TRADEMARKS
---------------------------------------------------------
<PAGE>
A. LIENS ON THE TRADEMARKS
<TABLE>
<CAPTION>
STATE/COUNTY FILE NUMBER SECURED PARTY STATUS
------------ ----------- ------------- ------
<S> <C> <C> <C>
1 California 9515960735 BNY Financial Corporation Filed 6/6/95; Active
2 California 94043728 BNY Financial Corporation Filed 3/10/94; Active
3 California 94043729 BNY Financial Corporation Filed 3/10/94; Active
4 New York (state) 046013 BNY Financial Corporation Filed 3/10/94; Active
5 New York (state) 107989 BNY Financial Corporation Filed 5/26/95; Active
6 New York County 95PN27440 BNY Financial Corporation Filed 6/25/95; Active
7 New York County 94PN11279 BNY Financial Corporation Filed 3/9/94; Active
8 Pennsylvania 24391740 BNY Financial Corporation Filed 6/20/95; Active
9 Pennsylvania 22901743 BNY Financial Corporation Filed 3/10/94; Active
10 Dauphin County, Pennsylvania 436 BNY Financial Corporation Filed 3/18/94; Active
</TABLE>
B. RESTRICTIONS ON SELLER'S RIGHT TO USE THE TRADEMARKS
Seller does not have the right to use the name "Sam & Libby" as a
trademark in Canada.
<PAGE>
EXHIBIT 10.22
LICENSE AGREEMENT
-----------------
THIS AGREEMENT made this 8th day of January, 1997 by and among Maxwell Shoe
Company Inc., a Delaware corporation ("Maxwell Shoe Company") and Sprague
Company, a Delaware corporation and a wholly-owned subsidiary of Maxwell Shoe
Company (together with Maxwell Shoe Company, "Maxwell Shoe"), on the one hand,
and Inter-Pacific Trading Corporation d/b/a Inter-Pacific Corporation
("Licensee"), a California corporation, on the other hand.
W I T N E S S E T H:
Maxwell Shoe is the owner and registrant of certain trademarks and
subsisting registrations for the mark "Sam & Libby", registered in the United
States Patent and Trademark Office (the "Mark").
Licensee is engaged in the sale and distribution of men's, women's and
children's footwear, and Licensee desires to obtain from Maxwell Shoe a license
to use the Mark in connection with certain goods under and subject to all of the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing and
of the mutual covenants contained herein, and intending to be legally bound
hereby, agree as follows:
I. Definitions
-----------
As used in this Agreement, the following terms and phrases shall have the
following meanings:
1.1 Annual Period. The period from commencement of the Term through May
-------------
31, 1998, and each consecutive twelve (12) month period thereafter during the
Term.
1.2 Approval or Approved. The approval by Maxwell Shoe of one or more
--------------------
designs, samples, items of Packaging, advertising or promotional materials or
other items for which approval is required under this Agreement, in writing in a
document which identifies the item or items approved and is signed by an
authorized representative of Maxwell Shoe. Maxwell Shoe shall be deemed to have
Approved any item submitted to it by Licensee for Approval under the terms of
this Agreement, if Maxwell Shoe fails to approve, disapprove or otherwise
definitively respond to the submission in writing within seven (7) days after
receipt of the items submitted.
1.3 Guaranteed Minimums. The guaranteed minimum Royalties payable by
-------------------
Licensee under Paragraph 3.2.
1.4 Mark. Maxwell Shoe's trademark "Sam & Libby".
----
<PAGE>
1.5 Maxwell Shoe Merchandise. Any and all items of Merchandise which in
------------------------
any manner bear, incorporate or embody the Mark or any design, pattern, sketch
or written idea supplied by Maxwell Shoe.
1.6 Merchandise. The items of merchandise covered by the license granted
-----------
under this Agreement include only (i) men's, women's and children's slippers
intended for indoor and outdoor use ("Slippers"), and (ii) jellies, aqua socks,
injection molded slides and style 1892A and EVA sandals for beach and street
wear ("Sandals").
1.7 Net Sales. The invoiced amount of Maxwell Shoe Merchandise billed or
---------
shipped by Licensee, less actual trade discounts, returns and allowances and
sales tax, if any, with no deduction made for other discounts or uncollectible
accounts or for any cost incurred by Licensee in the manufacture, sale,
distribution, or exploitation of the Maxwell Shoe Merchandise. In the event of
sales by Licensee of Maxwell Shoe Merchandise to outlet stores or other
purchasers under Licensee's direct or indirect control, Net Sales shall be
calculated on the basis of a sales price and invoiced amount that Licensee would
charge to an unrelated third party in an arms-length transaction, regardless of
the price actually charged or invoiced.
1.8 Packaging. All tags, labels, cartons or containers and packing or
---------
wrapping material used or to be used by Licensee in connection with Maxwell Shoe
Merchandise.
1.9 Royalties. The royalties to be paid by Licensee to Maxwell Shoe for
---------
or in connection with the license to use the Mark granted under this Agreement,
provided for in Article III and all other applicable portions of this Agreement.
1.10 Term. The Initial and Renewal Term, if any, of this Agreement,
----
provided for and defined in Article VIII, taken collectively.
1.11 Termination Inventory. The inventory provided for in Paragraph 8.5
---------------------
of Maxwell Shoe Merchandise finished products and work in process and of
Packaging and advertising and promotional material on hand at the time of the
termination of this Agreement.
1.12 Territory. The geographical area consisting of the United States,
---------
its territories and possessions (the "Territory").
II. License
-------
2.1 Grant of License. Maxwell Shoe hereby grants to Licensee an exclusive
----------------
license throughout the Territory to use the Mark in connection with the
manufacture, advertising, merchandising, promotion, sale and distribution of
Maxwell Shoe Merchandise approved by Maxwell Shoe, in accordance with the terms
of this Agreement. The license granted herein extends only to the Merchandise,
Territory and uses expressly provided for in this Agreement, and Licensee shall
not use or attempt to use the Mark on any other products or goods in any other
area or any other manner whatsoever.
2
<PAGE>
2.2 Distribution Channels. Licensee acknowledges that Maxwell Shoe has
---------------------
established a reputation for unique high quality fashionable merchandise sold in
high quality and high fashion stores, and that Maxwell Shoe maintains a
marketing strategy of retaining and projecting to consumers that reputation and
ambiance for its products. Accordingly, in order to protect Maxwell Shoe's
marketing strategy, goodwill and prestige and reputation, Maxwell Shoe
Merchandise shall be sold only in those department stores, specialty stores and
other stores which are consistent with Maxwell Shoe's marketing strategy for
sales of "Sam & Libby" product; therefore, the license granted under this
Agreement extends only to the use of the Mark in connection with the
manufacture, advertising, merchandising, promotion, sale and distribution of
Maxwell Shoe merchandise for sale to customers in those department stores,
specialty stores and other stores as Maxwell Shoe, in its sole and absolute
discretion, shall approve in writing. Notwithstanding the previous sentence,
Licensee acknowledges and agrees that injection molded slides and style 1892A
shall be sold only to T.J. Maxx, Marshall's and Ross Stores.
2.3 Prohibition on Exports. Licensee shall not export Maxwell Shoe
----------------------
Merchandise from the Territory to any area outside of the Territory and shall
not sell or distribute Maxwell Shoe Merchandise to any person or entity that
Licensee knows or has reason to know intends so to export Maxwell Shoe
Merchandise.
2.4 Resolution of Conflicts. Licensee recognizes that Maxwell Shoe has
-----------------------
granted, and may in the future grant, licenses to other parties to use the Mark
or one or more of Maxwell Shoe's other trademarks in connection with the
manufacture, promotion and distribution of footwear, wearing apparel,
accessories or related items. If Licensee or the licensee under any other such
license notifies Maxwell Shoe of an existing or potential conflict in the
definition of the merchandise covered by, or the rights of the licensee under,
their respective licenses and license agreements, Maxwell Shoe shall endeavor to
deal with the issue by discussions with authorized representatives of the
affected parties, and Licensee shall fully cooperate in any such efforts.
Maxwell Shoe may at any time determine finally to resolve any such conflict by
written notice of its determination and resolution to the affected licensees.
2.5 Reservation of Rights. Maxwell Shoe reserves all rights to the Mark
---------------------
including, without limitation, all rights to use the Mark and to grant others
the right to use the Mark in any area and with regard to any product, except for
the right to use the Mark in the Territory for Slippers to be sold at any price
or for Sandals to be sold at a net price of $10.00 (wholesale) or less per pair.
In addition to those rights specified in the previous sentence, the parties
acknowledge and agree that Maxwell Shoe has the right to sell EVA sandals which
bear, embody or incorporate the Mark at a net price above $10.00 (wholesale) per
pair to any retail establishment in which Maxwell Shoe has an economic interest.
2.6 Maximum Net Price At Wholesale. In no event shall Licensee sell any
------------------------------
Maxwell Shoe Merchandise, except Slippers, at a net price exceeding $10.00
(wholesale) per pair of such Merchandise.
3
<PAGE>
III. Royalties
---------
3.1 Percentage Royalty.
------------------
3.1.1 In consideration of the license granted and the services to be
performed by Maxwell Shoe under this Agreement and subject to Guaranteed
Minimums, Licensee shall pay to Maxwell Shoe Royalties equal to five and one-
half (5 1/2%) percent of the Net Sales of all Maxwell Shoe Merchandise, in
accordance with all the terms and conditions of this Agreement; provided,
--------
however, that if Net Sales of Maxwell Shoe Merchandise by Licensee pursuant to
- -------
this Agreement exceed $9,000,000 in the aggregate, Licensee shall pay to Maxwell
Shoe Royalties equal to five (5%) percent of Net Sales exceeding $9,000,000, if
any.
3.1.2 Licensee shall be obligated to pay and account for Royalties
for all Maxwell Shoe Merchandise billed or shipped, even if the Merchandise
improperly bears the Mark or the applicable transaction is otherwise in breach
or violation of the terms of this Agreement; provided that this subparagraph
3.1.2 shall not be considered to authorize such transactions and that the
payment or obligation to pay Royalties for such transactions shall not in any
manner limit Maxwell Shoe's right to terminate this Agreement or to exercise any
other right or remedy that Maxwell Shoe may have as a result of the breach of
this Agreement by such transactions.
3.2 Guaranteed Minimum Royalties.
----------------------------
3.2.1 Notwithstanding the amount of Royalties computed and payable
under Paragraph 3.1, the Guaranteed Minimum Royalties to be paid from Licensee
to Maxwell Shoe for each Annual Period during the Term shall be as follows:
First Annual Period: $ 110,000
Second Annual Period: $ 165,000
Third Annual Period: $ 220,000
Fourth Annual Period: $ 250,000
Fifth Annual Period: $ 250,000
Sixth Annual Period: $ 250,000
3.2.2 Guaranteed Minimums for each Annual Period shall be paid as
follows:
$50,000 contemporaneously with the execution of this Agreement;
$50,000 on or before January 1, 1998;
$50,000 on or before May 31, 1998; and
equal installments on the first day of each quarter thereafter
during the Term.
The aggregate payments of $150,000 set for above for the First Annual Period
include a payment of $40,000 against advertising payment obligations pursuant to
Paragraph 4.6.
4
<PAGE>
For purposes of computation of Royalties, Guaranteed Minimum payments shall
be considered as advances against Royalties otherwise payable in the same Annual
Period, but Guaranteed Minimums shall not be carried forward to any subsequent
Annual Period and shall not, under any circumstances, be repayable or refundable
to Licensee.
In addition, payment of Royalties pursuant to Paragraph 3.3 (or for the
First Annual Period, payment of Royalties pursuant to Paragraph 3.3 and
advertising pursuant to Paragraph 4.6) shall be credited against the Guaranteed
Minimums otherwise then due.
3.3 Payment and Periodic Reports. Royalties shall be paid, without set-
----------------------------
off or deduction for any reason, and accounted for quarterly, commencing with a
report for the quarter ending March 31, 1997, within thirty (30) days after the
end of each quarter, provided however, that after the calendar quarter ending
March 31, 1998, Royalties shall be paid, without set off or deduction for any
reason, and accounted for, for the two months ending May 31, 1998 on or before
June 30, 1998; and thereafter, Royalties shall be paid, without set off or
deduction for any reason, and accounted for quarterly, commencing with a report
for the three months ending August 31, 1998, within thirty (30) days after the
end of each three month period. At the time each Royalty payment is due,
Licensee shall deliver to Maxwell Shoe a statement signed and certified as
accurate by Licensee's chief financial officer or by another responsible officer
of Licensee, accounting for the Net Sales and Royalties for the applicable
quarter. Such statement shall show the total amount of gross sales of all
Merchandise billed or shipped during the quarter; an itemized list of any
amounts which may, under this Agreement, be deducted from gross sales for
computing Net Sales; a computation of the amount of Royalties payable on account
of the Net Sales for the quarter; a computation of the amount payable by
Licensee to Maxwell Shoe under Paragraph 4.6 (advertising) during the quarter;
and such other information including, without limitation, Net Sales for each
item of Merchandise and/or Mark on a customer-by-customer basis, and customer
and financial information and reports as Maxwell Shoe may reasonably require.
Maxwell Shoe may, at any time, provide Licensee with a standardized form for
accounting for Royalties and Licensee shall use any such form for the statements
under this paragraph. The statements provided for in this paragraph shall be
furnished to Maxwell Shoe whether or not Licensee has sold, shipped or billed
any Maxwell Shoe Merchandise during the quarter for which the statement is due.
3.4 Annual Reports. Not later than forty-five (45) days after the end of
--------------
each Annual Period, Licensee shall deliver to Maxwell Shoe a statement, signed
and certified by Licensee's then regularly engaged independent certified public
accountant (or, if Licensee has no such regular engagement, by a reputable
independent certified public accountant) stating for the Annual Period the
information required in the quarterly statement under Paragraph 3.3 and such
other information as Maxwell Shoe may reasonably request within a reasonable
time prior to the date on which the statement is due.
3.5 Books and Records and Audit.
---------------------------
3.5.1 Licensee shall prepare and maintain, in accordance with
generally accepted accounting principles consistently applied, complete and
accurate books of accounts and records covering all transactions arising out of
or relating to this Agreement, which books and records
5
<PAGE>
shall at least be in sufficient detail to permit Maxwell Shoe to monitor
compliance by Licensee with all of its obligations under this Agreement. Maxwell
Shoe and its duly authorized representatives shall have the right, upon five (5)
days prior written or oral notice, during regular business hours, throughout the
Term and for two (2) years thereafter (the "Audit Period"), to audit such books
of account and records and to examine all other documents and materials in
Licensee's possession or control relating to this Agreement and Licensee's
performance hereunder not more than one time each year for the duration of the
Audit Period. Licensee shall maintain such books of account, records and
documents and material available for Licensee for at least two (2) years after
the termination of this Agreement. Except as provided in subparagraph 3.5.2, any
audit under this paragraph shall be at Maxwell Shoe's expense.
3.5.2 If any audit of Licensee's books and records by Maxwell Shoe
under subparagraph 3.5.1 discloses that the payments made by Licensee to Maxwell
Shoe during the period covered by the audit were up to four (4%) percent less
than the payments that should have been made under this Agreement, Licensee
shall pay the deficiency, plus interest at a rate equal to two (2%) percent
above the rate announced by Citibank as its "Prime Rate", within fourteen (14)
days after demand therefor by Maxwell Shoe. If an audit shows that the amount
paid by Licensee was more than four (4%) percent less than the amount which
should have been paid, the interest payable shall be at a rate of five (5%)
percent above such Prime Rate and Licensee shall, in addition, reimburse Maxwell
Shoe for all reasonable costs of the audit within thirty (30) days after demand
by Maxwell Shoe.
IV. Performance
-----------
4.1 Performance Standards.
---------------------
4.1.1 Throughout the Term, Licensee shall use all reasonable effort
and cause its officers, employees, agents and contractors to use their
reasonable efforts to sell Maxwell Shoe Merchandise, promote business for
Maxwell Shoe Merchandise and enhance the value and reputation of the Mark,
consistent with good business practices and the high standards and prestige
represented by the Mark.
4.1.2 In the use of the Mark and all other aspects of the performance
of this Agreement, Licensee shall at all times comply in all material respects
with all applicable laws and regulations including, without limitation, all laws
and regulations related to the manufacture, sale, labeling, packaging,
distribution and advertising of Maxwell Shoe Merchandise sold within the
Territory.
4.2 Abandonment. If Licensee shall fail to use the Mark in the
-----------
manufacture, sale or distribution of Maxwell Shoe Merchandise within any period
of six (6) months or if Licensee shall determine or state its intention to cease
so to use the Mark, Licensee shall be deemed to have abandoned the use of the
Mark, and Maxwell Shoe may at any time thereafter terminate this Agreement by
written notice under Paragraph 8.3.1. The parties acknowledge that the
abandonment of the use of the Mark by Licensee will irreparably damage
Licensee's capacity to use the Mark under the terms of this Agreement and, for
purposes of termination under Article
6
<PAGE>
VIII, abandonment of the use of the Mark under this paragraph shall be
considered a breach or violation of this Agreement which is not curable.
4.3 Restriction on Other Marks. During the Term, Licensee shall not
--------------------------
manufacture, sell, distribute or promote or enter into any license or other
agreement to manufacture, sell, distribute or promote any product or category of
products included in the Merchandise bearing any trademark, trade name or other
mark, except the Mark in accordance with this Agreement, if such merchandise
would be, in price range and style, in direct competition with Maxwell Shoe
Merchandise; provided, however, whether or not such merchandise is similar in
price range and style to Maxwell Shoe Merchandise it shall not be considered to
be in direct competition with Maxwell Shoe Merchandise, if it bears as a
trademark, trade name or other mark only Licensee's private or house brands
(which include, without limitation, Laguna, Barely Legal, Rio Sunwear, Meadow
Brook, Footwarmers, Sunsurfer, Sweet Steps and Torlisi) or any other trademark,
trade name or other mark which is not considered by Maxwell Shoe to be a
national brand.
4.4 Restrictions on Promotionals. Licensee shall not, without the prior
----------------------------
written consent of Maxwell Shoe (which consent shall not be unreasonably
withheld), give away any Maxwell Shoe Merchandise or market, sell or distribute
any Maxwell Shoe Merchandise as a premium or in connection with any tie-in or
promotional campaign for any product or products (except Maxwell Shoe
Merchandise).
4.5. Quality.
-------
4.5.1 The materials and workmanship of, and Packaging and sales and
promotional materials for, the Maxwell Shoe Merchandise shall at all times be of
high quality, and the Maxwell Shoe Merchandise shall at all times be designed,
manufactured, distributed and promoted in a manner appropriate for the high
quality of such Maxwell Shoe Merchandise.
4.5.2 Maxwell Shoe and its duly authorized representative shall have
the right, during normal business hours upon reasonable advance notice, to
inspect any facility used by Licensee in connection with the manufacture of
Maxwell Shoe Merchandise or the manufacture or production of Packaging or
advertising or promotional material in order for Maxwell Shoe to monitor the
quality of the Maxwell Shoe Merchandise and Packaging and promotional materials
and Licensee's compliance with all other terms of this Agreement which relate to
such manufacture and production.
4.6 Advertising. Licensee shall on a quarterly basis (and subject to the
-----------
same payment and other requirements of Paragraphs 3.3, 3.4 and 3.5), during each
Annual Period, pay directly to Maxwell Shoe two (2%) percent of the amount of
the aggregate Net Sales for the Annual Period for Maxwell Shoe advertising and
promoting Maxwell Shoe Merchandise in communications media, national consumer
publications, trade press and store promotional mailings or advertising
campaigns. Notwithstanding the prior sentence, Maxwell Shoe shall be under no
obligation to provide specific advertising or expend any sums advertising or
promoting the Maxwell Shoe Merchandise during any Annual Period. In the event
Maxwell Shoe does not expend any sums on advertising or promoting the Maxwell
Shoe Merchandise during any Annual Period, then the amounts set forth in the
first sentence of this Paragraph 4.6 shall nevertheless be
7
<PAGE>
paid in full and on a timely basis by Licensee to Maxwell Shoe and such amount
shall be considered additional Royalties payable under Paragraph 3.1. In
addition, Licensee shall comply with any reasonable guidelines established by
Maxwell Shoe for Licensee conducting its own advertising activities and
expenditures in promoting Maxwell Shoe Merchandise.
4.7 Approvals. Licensee shall not in any aspect of its performance under
---------
this Agreement use any materials, designs, styles, fits or workmanship for
Maxwell Shoe Merchandise or use any items of Packaging or advertising or
promotional materials for Maxwell Shoe Merchandise which Maxwell Shoe has not
Approved under the terms of this Agreement. Maxwell Shoe's Approval or
disapproval of any item or matter for purposes of this Agreement may be based
solely on Maxwell Shoe's subjective standards and Approval may be given or
withheld in Maxwell Shoe's sole discretion, provided that Maxwell Shoe shall act
in good faith.
V. Designs, Samples and Packaging
------------------------------
5.1 Designs. Maxwell Shoe and Licensee shall cooperate in such manner as
-------
Maxwell Shoe may reasonably approve in the development and creation of designs,
styles and design and style ideas for each collection of Maxwell Shoe
Merchandise. All designs, styles, patterns, photographs or written ideas for
Maxwell Shoe Merchandise provided by Maxwell Shoe to Licensee for purposes of
this Agreement shall be the exclusive property of Maxwell Shoe, and Licensee
shall not use any of the foregoing except for the manufacture, distribution and
sale and advertising and promotion of Maxwell Shoe Merchandise in accordance
with the terms of this Agreement.
All designs, styles, patterns, photographs or written ideas for Maxwell
Shoe Merchandise provided by Licensee for purposes of this Agreement shall be
the exclusive property of Licensee.
5.2 Samples. Licensee shall submit to Maxwell Shoe, free of charge,
-------
samples of each item of Maxwell Shoe Merchandise within a reasonable time prior
to the commencement of production of the item for sale and distribution, but not
later than ten (10) days prior to the scheduled first showing of the collection
of Maxwell Shoe Merchandise which includes the item. Licensee may, after the
production and distribution of the first collection of Maxwell Shoe Merchandise
under this Agreement, suggest procedures for submitting representative samples,
subject to continuing inspections under Paragraph 5.4, and Maxwell Shoe shall
consider and respond to any such request in good faith but shall not be required
to approve any such procedures. Licensee may not sell or distribute any item of
Maxwell Shoe Merchandise unless Maxwell Shoe has Approved the sample for the
item in advance. In furtherance of the foregoing, Licensee shall provide to
Maxwell Shoe, on an annual basis, a schedule reflecting the dates of collection
showings with an indication as to when the Maxwell Shoe Merchandise scheduled to
be shown will be available for inspection by Maxwell Shoe prior thereto.
5.3 Packaging. To the extent reasonably feasible, the samples provided
---------
under Paragraph 5.2 shall include all tags, labels and other items of Packaging
that relate to, or that Licensee intends to use with, the item submitted as a
sample. Licensee shall submit to Maxwell Shoe for Approval samples of all other
items of Packaging within a reasonable time prior to the
8
<PAGE>
commencement of the production of such items for use with Maxwell Shoe
Merchandise. Maxwell Shoe shall not unreasonably require Licensee materially to
change labels, tags or other significant items or Packaging from collection to
collection.
5.4 Continuing Inspection. Upon Maxwell Shoe's request at any time and
---------------------
from time to time, Licensee shall submit to Maxwell Shoe a reasonable number of
production samples of items of Maxwell Shoe Merchandise or Packaging material in
order for Maxwell Shoe to monitor production in accordance with Maxwell Shoe's
Approvals, quality standards and other requirements of this Agreement. If
Maxwell Shoe notifies Licensee in writing of the disapproval of any production
sample, Licensee shall immediately take such action as may be necessary for the
item to meet Maxwell Shoe's Approval and cease production and distribution and
sale of the item pending Approval. Maxwell Shoe shall not unreasonably
disapprove any production sample under this paragraph.
VI. Trademark and Trademark Protection
----------------------------------
6.1 Ownership.
---------
6.1.1 Licensee acknowledges that as between Maxwell Shoe and
Licensee, and Maxwell Shoe represents and warrants to Licensee that, Maxwell
Shoe is the owner of all right, title and interest in and to the Mark in any
form or embodiment and is also the owner of the good will attached or which
shall become attached to the Mark in connection with the business and goods in
relation to which the same has, is or shall be used. Sales by Licensee shall be
deemed to have been made for purposes of trademark registration, and all uses of
the Mark by Licensee shall inure to the benefit of Maxwell Shoe.
6.1.2 At Maxwell Shoe's request, Licensee shall execute any
documents, including registered users agreements, reasonably required by Maxwell
Shoe to confirm Maxwell Shoe's ownership of all rights in and to the Mark in the
Territory and the respective rights of Maxwell Shoe and Licensee under this
Agreement. Licensee shall cooperate with Maxwell Shoe at Maxwell Shoe's expense
in connection with the filing and prosecution by Maxwell Shoe of applications in
Maxwell Shoe's name relating to the use of the Mark for Merchandise in the
Territory.
6.1.3 Licensee shall never challenge or encourage anyone to challenge
Maxwell Shoe's ownership or the validity of the Mark or any application for
registration thereof or any trademark, copyright or other registration thereof
or any rights of Maxwell Shoe therein.
6.2 No Adverse Acts. Licensee shall not, at any time or in any manner,
---------------
engage in any activity or do or permit any act which may in any way adversely
affect any rights of Maxwell Shoe to the Mark or any registrations or
applications for registration thereof or which may directly or indirectly reduce
the value of the Mark or derogate or detract from their repute.
6.3 No Secondary Mark. Licensee shall not use any other trade names,
-----------------
trademarks or other designations (including, without limitation, Licensee's own
corporate name or trade name) in connection with the Mark in any advertising,
publicity, labeling, Packaging or printed matter
9
<PAGE>
(except invoices) utilized by Licensee in connection with Maxwell Shoe
Merchandise. Licensee shall not join the Mark with any other names or marks to
form a new mark and shall not itself use the Mark as a corporate name or trade
name or in any other manner other than in connection with the manufacture,
distribution, sale and promotion of Maxwell Shoe Merchandise under this
Agreement. Notwithstanding the foregoing, Licensee may, subject to the
provisions of Paragraph 1.2, place the words "Marketed by Inter-Pacific
Corporation" on any trade advertisement regarding the Maxwell Shoe Merchandise
and on business cards and stationery of Licensee.
6.4 Trademark Notices. Licensee shall cause the designation "R" to appear
-----------------
immediately after, on the upper right, of the Mark on all Packaging and
advertising and promotional material and shall, in addition, cause to appear on
all Packaging and advertising and promotional materials and on all forms,
invoices, stationery, business cards and other documents and materials of any
kind bearing the Mark such designations, legend, or markings or notices as may
be necessary, or as Maxwell Shoe may require, to give notice of the status of
the Mark and Maxwell Shoe's rights and interests therein.
6.5 Copyrights. Any copyright relating to Maxwell Shoe Merchandise that
----------
may be created by statute, common law or otherwise in any design, sketch, print,
Packaging or similar matter created by Maxwell Shoe shall be the sole property
of Maxwell Shoe. Licensee shall take such action as may be necessary or as
Maxwell Shoe may require, at Maxwell Shoe's expense, to confirm, preserve or
protect such copyright, including placing of copyright notices on the
appropriate items. Licensee shall not claim for itself or for any party other
than Maxwell Shoe's copyrights in any such items and shall not file or attempt
to file any copyright registrations therefor.
VII. Warranties, Indemnification and Infringement
--------------------------------------------
7.1 Warranties.
----------
7.1.1 Maxwell Shoe represents and warrants to Licensee that Maxwell
Shoe has the full right, power and authority to enter into this Agreement and to
grant the rights, licenses and privileges granted by Maxwell Shoe hereunder to
Licensee and to perform all of Maxwell Shoe's obligations hereunder.
7.1.2 Licensee represents to Maxwell Shoe that Licensee has the full
right, power and authority to enter into this Agreement and to perform all of
its obligations hereunder.
7.2 Indemnification by Maxwell Shoe. Maxwell Shoe shall indemnify, defend
-------------------------------
and hold harmless Licensee from and against any and all claims, causes of
actions, suits, damages and expenses (including reasonable attorneys' fees and
expenses) arising out of any claim (i) that Licensee's use of the Mark in
accordance with the terms of this Agreement constitutes an infringement of any
trademark rights of any third party within the Territory or (ii) relating to
defects attributable to designs or patterns supplied or created by Maxwell Shoe,
upon Licensee giving Maxwell Shoe prompt written notice and authority and an
opportunity to undertake and
10
<PAGE>
fully conduct the defense thereof, with counsel reasonably satisfactory to
Licensee, and out of the breach by Maxwell Shoe of any provision of this
Agreement or of any of Maxwell Shoe's duties hereunder or the acts or omissions
of Maxwell Shoe or any of its servants, agents, employees or contractors in
connection with the performance of this Agreement.
7.3 Indemnification by Licensee and Insurance.
-----------------------------------------
7.3.1 Licensee shall indemnify, defend and hold harmless Maxwell Shoe
from and against any and all claims, causes of action, suits, damages and
expenses (including reasonable attorneys' fees) which Maxwell Shoe may incur or
for which it may become liable or required to pay by reason of any defect or
alleged defect in any Maxwell Shoe Merchandise, except for defects attributable
to designs or patterns supplied or created by Maxwell Shoe; the breach by
Licensee of any provision of this Agreement or of any of Licensee's duties
hereunder; or the acts or omissions of Licensee or of any of its servants,
agents, employees or contractors in connection with the performance of this
Agreement (excluding matters specifically covered by Paragraph 7.2).
7.3.2 Licensee shall, at its own expense, obtain and maintain
throughout the Term in full force and effect with an insurance carrier
reasonably acceptable to Maxwell Shoe, products liability insurance with a limit
of liability of not less than $1,000,000 insuring against, without limitation,
all damages, profits, interest, attorneys' fees, costs and expenses arising out
of any suit or legal proceeding, claim or demand resulting from a defect or
alleged defect in any item of Maxwell Shoe Merchandise or out of the use or
condition of an item of Maxwell Shoe Merchandise. Such insurance policy shall
name Maxwell Shoe as an additional insured and shall provide for at least thirty
(30) days advance written notice to Maxwell Shoe before cancellation or
substantial modification. Licensee shall promptly deliver a certificate of such
insurance to Maxwell Shoe and, if Maxwell Shoe so requests, a copy of the policy
for such insurance. The obligation of this subparagraph with respect to
insurance shall not be deemed to limit in any manner the indemnification
obligations of Licensee under subparagraph 7.3.1.
7.4 Infringements. Licensee shall promptly notify Maxwell Shoe in writing
-------------
of any known or suspected infringements of the Mark or of any copyright or other
rights or property of Maxwell Shoe, promptly after the same comes to Licensee's
attention. Maxwell Shoe shall have the sole and exclusive right to take action
or institute proceedings with respect to such infringement, and shall proceed as
it may, in its sole discretion, deem appropriate or desirable. Licensee shall
cooperate in any action or proceeding by Maxwell Shoe at Maxwell Shoe's expense
with respect to an infringement or suspected infringement in such manner as
Maxwell Shoe may reasonably request.
VIII. Term and Termination
--------------------
8.1 Initial Term. The initial term of this Agreement ("the Initial Term")
------------
shall begin on January 8, 1997 and end on May 31, 2000, subject to earlier
termination as provided in this Agreement and to renewal as provided in
Paragraph 8.2.
11
<PAGE>
8.2 Renewal of License.
------------------
8.2.1 Renewal Term. If Licensee is not in default of any of the
------------
terms of this Agreement, has complied with its obligations under this Agreement
in all material respects (without regard to whether Maxwell Shoe has given any
notices of default or failure to comply) and if it reasonably appears that Net
Sales for the last Annual Period of the Initial Term will exceed $4,000,000,
Licensee shall have the option, exercisable by written notice given to Maxwell
Shoe not later than six (6) months prior to the expiration of the Initial Term,
to renew this Agreement in accordance with the terms set forth herein for a
renewal term ("Renewal Term") of three (3) years, beginning on June 1, 2000 and
ending on May 31, 2003, subject to earlier termination as provided in this
Agreement.
8.3 Termination.
-----------
8.3.1 Maxwell Shoe may terminate this Agreement, effective
immediately upon giving Licensee written notice of termination, if (i) Licensee
fails to make any payment due to Maxwell Shoe under this Agreement when such
payment is due and continues such failure uncured for fifteen (15) days after
written notice thereof from Maxwell Shoe to Licensee, (ii) Licensee fails two
(2) or more times during any Annual Period during the Term to make any payment
due to Maxwell Shoe within fifteen (15) days after such payment is due, without
regard to any notice of such failure from Maxwell Shoe, (iii) Licensee abandons
the Mark, as provided in Paragraph 4.2, (iv) the beneficial ownership of
Licensee changes in a manner so as to change the actual control of Licensee,
except that a change resulting in actual control of Licensee by Frank Arnstein,
Chief Executive Officer of Licensee, shall not result in the termination of this
Agreement under this paragraph 8.3.1, or (v) Licensee defaults on any
obligations secured by a security interest in or other lien or encumbrance on
Maxwell Shoe Merchandise.
8.3.2 Either Maxwell Shoe or Licensee may terminate this Agreement,
effective immediately upon giving the other party written notice of termination,
if (i) the other party breaches or fails to perform any of the material terms or
provisions of this Agreement in a manner not provided for in subparagraph 8.3.1,
in any material respect and such breach or failure is not curable or, if
curable, is not cured within thirty (30) days after written notice thereof from
the non-breaching party, or (ii) the other party files a voluntary petition or
proceeding in bankruptcy or under any federal or state bankruptcy or insolvency
or other law for the relief of debtors; consent to the appointment of a
receiver, custodian or liquidator for a portion of its business or property; has
filed against it and not dismissed within forty-five (45) days an involuntary
proceeding under any federal or state bankruptcy or insolvency or other law for
the relief of debtors or for the appointment of a receiver, custodian or
liquidator; makes an assignment for the benefit of its creditors; or ceases, or
admits its intention to cease, the manufacture, sale or distribution of Maxwell
Shoe Merchandise or the conduct of its business in the ordinary course.
8.4 Termination of Rights.
---------------------
8.4.1 Upon the expiration or termination of this Agreement for any
reason whatever, all rights of Licensee under this Agreement shall terminate and
automatically revert to Maxwell Shoe. Licensee shall immediately discontinue
all use of the Mark and shall no longer
12
<PAGE>
have any right to use the Mark or any variation or simulation thereof in any
manner or for any purpose whatsoever, except as provided in Paragraph 8.6
hereof. Licensee shall transfer to Maxwell Shoe by such documentation as Maxwell
Shoe may require all registrations, filings, trademarks, copyrights and other
rights with regard to the Mark which Licensee may have possessed at any time.
Subject to the provisions of Paragraph 8.6 concerning the sale of Termination
Inventory and further subject to Licensee's ownership rights as set forth in
Paragraph 5.1 hereof, Licensee shall deliver to Maxwell Shoe, without charge,
all sketches, samples, designs or other matters relating to Maxwell Shoe
Merchandise and all Merchandise, Packaging materials and advertising and
promotional materials bearing the Mark in any form.
8.4.2 Upon termination or expiration of this Agreement for any
reason, including termination under Paragraph 8.3.2(ii), no trustee in
bankruptcy, assignee for the benefit of creditors, custodian, receiver, sheriff
or court officer or other successors to Licensee or its assets or business shall
have any right to continue this Agreement or to use or exploit the Mark in any
manner whatever.
8.4.3 Notwithstanding the provisions of subparagraph 8.4.2, in the
event that under the United States Bankruptcy Code or any amendment or successor
thereto (collectively the "Bankruptcy Code"), the trustee in bankruptcy of
Licensee or Licensee, as bankruptcy debtor, is permitted to and does assume this
Agreement and thereafter proposes to assign this Agreement by an assignment
which fulfills the applicable requirements of the Bankruptcy Code, the trustee
or Licensee shall notify Maxwell Shoe of the proposed assignment in advance, in
writing, setting forth the name and address of the proposed assignee, the
proposed consideration for the assignment and all other material terms and
details of the proposal. Such notice shall be considered an offer to Maxwell
Shoe to have this Agreement assigned to Maxwell Shoe or to its designee for the
consideration (or its reasonable equivalent in money) and under the other
material terms in the notice. Maxwell Shoe may exercise the option and accept
the offer by giving the trustee or Licensee, as appropriate, written notice of
exercise and acceptance within twenty (20) days after Maxwell Shoe receives the
notice from the trustee or Licensee. If Maxwell Shoe fails to give notice and
exercise the option within such twenty (20) day period, the trustee or Licensee
may complete the proposed assignment, but only to the party and for the
consideration and under the terms described in the notice.
8.5 Termination Inventory. Within thirty (30) days after the expiration
---------------------
or termination of this Agreement, Licensee shall prepare and deliver to Maxwell
Shoe a written Termination Inventory, including a complete and accurate schedule
as of the date of expiration or termination of all completed Maxwell Shoe
Merchandise on hand; work in process relating to Maxwell Shoe Merchandise on
hand, including uncut piece goods and products and materials in the process of
manufacture; and all Packaging materials, advertising and promotional materials
and other documents or items that bear the Mark or Maxwell Shoe's name in any
form in Licensee's possession or control or in the process of manufacture for
Licensee. Maxwell Shoe shall have the option, exercisable within ten (10) days
after receipt of the Termination Inventory, to purchase all or any portion of
the items in the Termination Inventory, except for that inventory necessary for
Licensee to fill existing orders, which inventory shall be identified as such on
the written Termination Inventory provided by Licensee to Maxwell Shoe pursuant
to this paragraph, for a purchase price equal to Licensee's cost. Licensee
shall deliver to Maxwell Shoe the items in the
13
<PAGE>
Termination Inventory to be purchased, within five (5) days after receipt of
Maxwell Shoe's notice exercising its option to purchase, and Maxwell Shoe shall
pay the purchase price within thirty (30) days after receipt of all items of the
Termination Inventory purchased.
8.6 Termination Inventory Sales. For a period of six (6) months after the
---------------------------
expiration of Maxwell Shoe's option to purchase Termination Inventory under
Paragraph 8.5, Licensee may sell finished Maxwell Shoe Merchandise in the
remaining Termination Inventory or finished Maxwell Shoe Merchandise completed
from work in process in the remaining Termination Inventory, on a non-exclusive
basis, in accordance with all of the terms of this Agreement. Royalties for all
such sales shall be paid and accounted for by Licensee within thirty (30) days
after the end of such six (6) month period. Any items in the Termination
Inventory not sold and remaining after the selling period provided for in this
paragraph shall be delivered to Maxwell Shoe, disposed of or destroyed in
accordance with Maxwell Shoe's instructions.
8.7 Subsequent License. Immediately upon the expiration or termination of
------------------
this Agreement for any reason, Maxwell Shoe shall have the free and unrestricted
right to grant other parties one or more licenses to use the Mark in connection
with the manufacture, sale and distribution or advertising and promotion of
Merchandise in the Territory or to enter into such other transactions as it
desires for the use of the Mark with Merchandise or in any other manner, without
any obligation of any kind to Licensee. The right of Licensee to sell items of
Termination Inventory under Paragraph 8.6 is non-exclusive only and shall not in
any manner limit Maxwell Shoe's rights to enter into other licenses or
transactions.
8.8 Reservation of Rights. Notwithstanding any termination of this
---------------------
Agreement, Maxwell Shoe shall have and hereby reserves all rights and remedies
which are granted or available to it under this Agreement or applicable law, and
termination shall not be deemed to be an exclusive remedy or to limit Maxwell
Shoe in any manner from enforcing any other rights or remedies.
IX. General Terms
-------------
9.1 Confidentiality. The parties acknowledge that all information and
---------------
data which the parties have learned or will learn in connection with this
License Agreement and activities and transactions hereunder concerning the
business and operation of the parties and all tangible manifestations of such
information and data including, without limitation, designs, patterns, sketches,
business and marketing plans, customer lists, and financial and operating
reports constitute valuable proprietary confidential information and trade
secrets of the parties, and the parties shall not disclose any such data or
information or use any such data or information for themselves or any other
person or entity, except for the proper and authorized performance of this
Agreement in accordance with all of the terms hereof.
9.2 Arbitration.
-----------
9.2.1 Subject to the provisions of subparagraph 9.2.2, all disputes
arising under this Agreement or the obligations of the parties hereunder shall
be submitted to arbitration in
14
<PAGE>
Boston, Massachusetts before a panel of three arbitrators, in accordance with
the then prevailing Rules for Commercial Arbitration of the American Arbitration
Association. The arbitrators in any such arbitration shall award costs to the
prevailing party and may, but shall not be required to, award reasonable
attorneys' fees. The decision of the arbitrators shall be final and binding on
all parties, except that the arbitrators shall have no power to vary the terms
of this Agreement. Judgment on the arbitrators' award may be entered in any
court in the States of Massachusetts, California or in any other court of
competent jurisdiction.
9.2.2 The parties acknowledge that a breach of this Agreement
involving the improper or unauthorized use of the Mark or other matters may give
rise to irreparable harm pending the outcome of arbitration under subparagraph
9.2.1. Accordingly and notwithstanding the provisions of subparagraph 9.2.1,
either party may, upon a breach or threatened breach of this Agreement, bring an
action in a court of competent jurisdiction and apply therein for temporary or
preliminary injunctive or other equitable relief, pending resort to, and a
decision in, arbitration under subparagraph 9.2.1. If otherwise appropriate
under applicable law, a court may entertain any such action and grant injunctive
or equitable relief, and the provisions of subparagraph 9.2.1 providing for
arbitration shall not be construed to prevent the action or relief.
9.3 Assignability.
-------------
9.3.1 Maxwell Shoe may assign this Agreement to a successor to all or
substantially all of its business or the portion of its business which utilizes
the Mark, if the successor assumes all of Maxwell Shoe's responsibilities,
obligations and liabilities hereunder. Maxwell Shoe may, in addition, assign
the right to receive payments, but not any obligations, under this Agreement to
a financial or similar institution for purposes of financing, so long as Maxwell
Shoe remains responsible for all of its obligations hereunder.
9.3.2 (a) This Agreement is personal to Licensee, and Licensee may
not, without the prior written consent of Maxwell Shoe, assign, sublicense or
otherwise transfer all or any portion of this Agreement or any rights or
obligations hereunder, whether voluntarily, involuntarily, by operation of law
or otherwise, and any such attempted assignment or other transfer shall be null
and void and of no effect. Notwithstanding the foregoing, Licensee may assign
this Agreement and the rights hereunder to another corporation provided that
such assignee corporation is controlled by the same parties which controlled
Licensee before such assignment and provided that Licensee and its
successor/assignee remain liable for all of its obligations under this
Agreement.
(b) Licensee shall have the right to have Maxwell Shoe
Merchandise, or any portion thereof, manufactured anywhere in or outside the
Territory by a third party for Licensee's account provided that the manufacture
of such Maxwell Shoe Merchandise complies with all provisions of this Agreement.
9.4 Applicable Law. Delaware law shall govern the validity, construction,
--------------
interpretation and effect of this Agreement.
15
<PAGE>
9.5 No Agency. Nothing contained in this Agreement shall be deemed or
---------
construed as constituting the parties hereto as partners or joint venturers or
either party as an agent of the other and, without limiting the foregoing,
Licensee shall have no authority to bind or obligate or to incur any
indebtedness for Maxwell Shoe, and no such authority shall be implied.
9.6 Finder's and Broker's Fees. The parties hereby represent and warrant
--------------------------
to each other that each owes no finder's or broker's fees in connection with
this Agreement and that neither has procured same for that purpose.
9.7 Failure to Exercise Rights. The failure of either party to act or
--------------------------
exercise any right under this Agreement, upon the breach of any of the terms
hereof, or otherwise, shall not be construed as a waiver of such breach or as
preventing either party from thereafter enforcing strict compliance with any and
all of the terms hereof.
9.8 Severability. If any provision of this Agreement shall be held to be
------------
invalid or unenforceable, such provision shall be considered severable, and the
remaining provisions of this Agreement shall continue in full force and effect
and shall be valid and enforceable to the fullest extent permitted by law.
9.9 Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties, no other representations or covenants having induced either
party to execute this Agreement. This Agreement and obligations and duties
under this Agreement may not be amended or modified in any manner, in whole or
in part, except by a written agreement or amendment or modification duly
executed by the party to be charged.
9.10 Headings. The Article and paragraph headings of this Agreement are
--------
for convenience of reference only and do not form a part of the covenants, terms
or conditions of this Agreement or give full notice thereof.
9.11 Notices. All notices, reports, statements, exercises of options or
-------
other communications required or permitted under this Agreement shall be in
writing and shall be sufficiently given only if personally delivered; mailed by
registered or certified mail, return receipt requested; sent by overnight
express courier, with written receipt of delivery; or transmitted by telecopier
and confirmed by first class mail within twenty-four (24) hours. All notices
shall be sent or delivered to the following addresses or to such other addresses
as either party may, by notice direct:
If to Maxwell Shoe: Maxwell Shoe Company Inc.
P.O. Box 37
Readville, Massachusetts 02137-0037
Attn: Maxwell V. Blum, Chairman
with a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attn: Jonathan K. Layne
16
<PAGE>
If to Licensee: Inter-Pacific Corporation
2257 Colby Avenue
Los Angeles, California 90064
Attn: Arnold Greene, National Director of Sales
with a copy to: Greenberg Glusker Fields Claman & Machtinger LLP
1900 Avenue of the Stars, Suite 2200
Los Angeles, California 90067
Attn: Bernard Shearer
Notices given by mail shall be deemed given on the second business day after the
date on which they are mailed. All other notices shall be deemed as given on
receipt.
9.12 Counterpart; Fax. This Agreement may be executed by fax and
----------------
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
17
<PAGE>
IN WITNESS WHEREOF, the parties, each by their duly authorized
representative, have executed this License Agreement as of the date first above
written.
MAXWELL SHOE COMPANY INC.
By: /s/ Maxwell V. Blum
---------------------
Maxwell V. Blum
Chairman and Chief Executive Officer
SPRAGUE COMPANY
By: /s/ Maxwell V. Blum
---------------------
Maxwell V. Blum
Chairman
INTER-PACIFIC TRADING CORPORATION
By: /s/ Frank Arnstein
---------------------
Name: Frank Arnstein
Title: Pres.
18
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF MAXWELL SHOE COMPANY INC.
Sprague Company
101 Sprague Street
P.O. Box 37
Readville (Boston), Mass. 02137
State or other jurisdiction of incorporation or organization - Delaware
Ownership by Maxwell Shoe Company Inc.-100%
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-83438) pertaining to the 1994 Stock Incentive Plan of
Maxwell Shoe Company Inc. of our report dated December 17, 1996, with respect to
the consolidated financial statements of Maxwell Shoe Company Inc. included in
the Annual Report (Form 10-K) for the year ended October 31, 1996.
Our audits also included the consolidated financial statement schedule
of Maxwell Shoe Company Inc. listed in Item 14(a)(2). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the consolidated financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 10,393
<SECURITIES> 0
<RECEIVABLES> 17,583
<ALLOWANCES> 730
<INVENTORY> 12,175
<CURRENT-ASSETS> 40,369
<PP&E> 2,485
<DEPRECIATION> 1,446
<TOTAL-ASSETS> 46,920
<CURRENT-LIABILITIES> 4,846
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 41,529
<TOTAL-LIABILITY-AND-EQUITY> 46,920
<SALES> 104,337
<TOTAL-REVENUES> 104,337
<CGS> 79,915
<TOTAL-COSTS> 79,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 9,550
<INCOME-TAX> 3,629
<INCOME-CONTINUING> 5,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,921
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
