<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MAY 5, 1997 (APRIL 14, 1997)
MAXWELL SHOE COMPANY INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-24026 04-2599205
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
101 SPRAGUE STREET 02137
P.O. BOX 37 (ZIP CODE)
HYDE PARK (BOSTON), MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 364-5090
NONE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
As previously reported, Maxwell Shoe Company Inc. (the "Registrant")
announced on April 14, 1997 the consummation of a joint venture between itself,
certain affiliates of the Registrant and The Butler Group Inc., a wholly-owned
subsidiary of General Electric Capital Corporation. Attached as Exhibits to this
Form 8-K are certain of the principal documents to which the Registrant is a
party relating to the joint venture.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
The following exhibits are filed with this report on Form 8-K:
Exhibit No. Description
----------- -----------
10.1 Contribution Agreement dated as of April 14, 1997 by and
among The Butler Group Inc., Maxwell Shoe Company Inc. and
Maxwell Retail Inc.
10.2 Operating Agreement of SLJ Retail LLC dated as of April 14,
1997 by and between The Butler Group Inc. and Maxwell
Retail Inc.
10.3 Option Agreement dated as of April 14, 1997 by and among
The Butler Group Inc., Maxwell Shoe Company Inc., Maxwell
Retail Inc. and SLJ Retail LLC
10.4 Services Agreement dated as of April 14, 1997 by and
between Maxwell Shoe Company Inc. and SLJ Retail LLC
10.5 Non-Compete Agreement dated as of April 14, 1997 by and
among SLJ Retail LLC, Maxwell Shoe Company Inc., Maxwell V.
Blum, Betty Ann Blum, Marjorie W. Blum, Mark J. Cocozza,
David Andelman, as trustee of the Eleanor S. Blum Trust,
Maxwell Retail Inc. and Sprague Company
10.6 Retail Opportunity Agreement dated as of April 14, 1997 by
and among SLJ Retail LLC, Maxwell Shoe Company Inc.,
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, David
Andelman, as trustee of the Eleanor S. Blum Trust, Maxwell
Retail Inc. and Sprague Company
10.7 Registration Rights Agreement dated as of April 14, 1997 by
and among Maxwell Shoe Company Inc., The Butler Group Inc.,
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark J.
Cocozza and
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David Andelman, as trustee of the Eleanor S. Blum Trust
10.8 Second Amendment to License Agreement dated as of April 14,
1997 by and between Maxwell Shoe Company Inc. and Jones
Investment Co., Inc.
10.9 Trademark Sublicense Agreement dated as of April 14, 1997
by and between Maxwell Shoe Company Inc. and SLJ Retail LLC
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MAXWELL SHOE COMPANY INC.
Date: May 2, 1997 By: /s/ Richard J. Bakos
------------------------------
Richard J. Bakos
Chief Financial Officer
4
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Contribution Agreement dated as of April 14, 1997 by and
among The Butler Group Inc., Maxwell Shoe Company Inc. and
Maxwell Retail Inc.
10.2 Operating Agreement of SLJ Retail LLC dated as of April 14,
1997 by and between The Butler Group Inc. and Maxwell Retail
Inc.
10.3 Option Agreement dated as of April 14, 1997 by and among The
Butler Group Inc., Maxwell Shoe Company Inc., Maxwell Retail
Inc. and SLJ Retail LLC
10.4 Services Agreement dated as of April 14, 1997 by and between
Maxwell Shoe Company Inc. and SLJ Retail LLC
10.5 Non-Compete Agreement dated as of April 14, 1997 by and among
SLJ Retail LLC, Maxwell Shoe Company Inc., Maxwell V. Blum,
Betty Ann Blum, Marjorie W. Blum, Mark J. Cocozza, David
Andelman, as trustee of the Eleanor S. Blum Trust, Maxwell
Retail Inc. and Sprague Company
10.6 Retail Opportunity Agreement dated as of April 14, 1997 by
and among SLJ Retail LLC, Maxwell Shoe Company Inc., Maxwell
V. Blum, Betty Ann Blum, Marjorie W. Blum, David Andelman, as
trustee of the Eleanor S. Blum Trust, Maxwell Retail Inc. and
Sprague Company
10.7 Registration Rights Agreement dated as of April 14, 1997 by
and among Maxwell Shoe Company Inc., The Butler Group Inc.,
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark J.
Cocozza and David Andelman, as trustee of the Eleanor S. Blum
Trust
10.8 Second Amendment to License Agreement dated as of April 14,
1997 by and between Maxwell Shoe Company Inc. and Jones
Investment Co., Inc.
10.9 Trademark Sublicense Agreement dated as of April 14, 1997 by
and between Maxwell Shoe Company Inc. and SLJ Retail LLC
5
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EXHIBIT 10.1
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
BY AND AMONG
THE BUTLER GROUP INC.,
MAXWELL SHOE COMPANY INC.
AND
MAXWELL RETAIL INC.
APRIL 14, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION
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<S> <C>
1.1 Definitions............................................................. 1
-----------
1.2 Rules of Construction................................................... 10
---------------------
ARTICLE II FORMATION OF THE COMPANY;CLOSING; STORE TRANSFER CLOSINGS
2.1 Formation of the Company............................................... 10
------------------------
2.2 Actions to be Taken at the Closing..................................... 11
----------------------------------
2.3 Actions to be Taken at Each Store Transfer Closing..................... 13
--------------------------------------------------
2.4 Additional Actions to be Taken on the Store Register Transfer Date..... 15
------------------------------------------------------------------
2.5 No Assumption of Liabilities; Pro-Ration of Expenses................... 15
----------------------------------------------------
2.6 Closing Dates and Place................................................ 16
-----------------------
2.7 Further Assurances..................................................... 16
------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUTLER
3.1 Organization........................................................... 16
------------
3.2 Authority.............................................................. 16
---------
3.3 Title to Headquarters Assets and Store Assets.......................... 17
---------------------------------------------
3.4 Absence of Restrictions and Conflicts.................................. 17
-------------------------------------
3.5 Governmental Consents.................................................. 18
---------------------
3.6 Litigation............................................................. 18
----------
3.7 Compliance with Laws................................................... 18
---------------------
3.8 Butler Employees; Union Contracts...................................... 18
---------------------------------
3.9 Headquarters Lease, Headquarters Telephone Lease,
-------------------------------------------------
Store Leases and Store Register Agreements............................ 18
-------------------------------------------
3.10 No Brokers............................................................. 19
----------
3.11 No Misrepresentations.................................................. 19
---------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAXWELL AND MAXWELL RETAIL
4.1 Organization........................................................... 19
------------
4.2 Authority.............................................................. 20
---------
4.3 Absence of Restrictions and Conflicts.................................. 21
-------------------------------------
4.4 Governmental Consents.................................................. 21
---------------------
4.5 Litigation............................................................. 21
----------
4.6 Compliance with Laws................................................... 21
--------------------
4.7 Certain Maxwell Agreements............................................. 22
--------------------------
</TABLE>
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<S> <C>
4.8 Trademarks............................................................. 23
----------
4.9 Restrictions on Imports................................................ 24
-----------------------
4.10 Competing Interests.................................................... 24
-------------------
4.11 No Brokers............................................................. 24
----------
4.12 No Misrepresentations.................................................. 24
---------------------
ARTICLE V COVENANTS AND AGREEMENTS
5.1 Preservation of Assets by Butler....................................... 24
--------------------------------
5.2 Payment of Taxes by Butler............................................. 25
--------------------------
5.3 Negotiation of Senior Credit Agreement and
------------------------------------------
Subordinated Note Purchase Agreement................................... 25
------------------------------------
5.4 Preservation of Relationships by Maxwell............................... 25
----------------------------------------
5.5 Landlords' Consents.................................................... 26
-------------------
5.6 Store Conversion Activities by Butler.................................. 26
-------------------------------------
5.7 Store Conversion Activities by Maxwell................................. 27
--------------------------------------
5.8 Development of MIS System.............................................. 27
-------------------------
5.9 Initial Sourcing of S&L/JNY Products................................... 28
------------------------------------
5.10 Maxwell Services....................................................... 28
----------------
5.11 Trademarks............................................................. 28
----------
5.12 Employment and Benefit Matters......................................... 28
------------------------------
5.13 Access and Information................................................. 30
----------------------
5.14 Supplemental Disclosure................................................ 31
-----------------------
5.15 Governmental Filings................................................... 31
--------------------
5.16 Fulfillment of Conditions by Butler.................................... 31
-----------------------------------
5.17 Fulfillment of Conditions by Maxwell and Maxwell Retail................ 31
-------------------------------------------------------
5.18 Maxwell Subsidiaries; Liens............................................ 32
---------------------------
5.19 Publicity.............................................................. 32
---------
5.20 Transaction Costs...................................................... 32
-----------------
ARTICLE VI CLOSING CONDITIONS
6.1 Conditions Precedent to the Closing.................................... 33
-----------------------------------
6.2 Conditions Precedent to Each Store Transfer Closing.................... 36
---------------------------------------------------
6.3 Additional Conditions Precedent on the Store Register Transfer Date.... 37
-------------------------------------------------------------------
ARTICLE VII INDEMNIFICATION
7.1 Indemnification of Maxwell, Maxwell Retail and the
--------------------------------------------------
Company by Butler...................................................... 38
-----------------
7.2 Indemnification of Butler and the Company by
--------------------------------------------
Maxwell and Maxwell Retail............................................. 38
--------------------------
7.3 Indemnification of Butler by the Company............................... 39
----------------------------------------
7.4 Indemnification Procedures............................................. 39
--------------------------
</TABLE>
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7.5 Survival............................................................... 40
--------
7.6 Limitations............................................................ 40
-----------
ARTICLE VIII MISCELLANEOUS
8.1 Termination; Breakup Arrangements...................................... 40
---------------------------------
8.2 Assignment............................................................. 41
----------
8.3 Notices................................................................ 41
-------
8.4 Binding Effect......................................................... 42
--------------
8.5 No Third Party Beneficiary............................................. 42
--------------------------
8.6 Waiver................................................................. 42
------
iii
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<PAGE>
Table of Schedules and Exhibits
-------------------------------
Schedule 1.1A - Description of Store FF&E
Schedule 1.1B - List of Stores
Schedule 2.3 - Store Transfer Closings
Schedule 3.3 - Certain Liens
Schedule 3.6 - Butler Litigation
Schedule 4.3 - Maxwell Restrictions and Conflicts
Schedule 4.5 - Maxwell Litigation
Schedule 4.7 - Certain Maxwell Agreements
Schedule 4.8A - Sam & Libby Domestic Trademarks
Schedule 4.8B - Sam & Libby Foreign Trademarks
Schedule 5.8 - Target Dates for Implementing MIS System
Exhibit A - Form of Certificate of Formation
Exhibit B - Form of Company Registration Rights Agreement
Exhibit C - Form of GE Capital Guaranty
Exhibit D - Form of Jones New York Trademark Sublicense
Exhibit E - Form of Maxwell Registration Rights Agreement
Exhibit F - Form of Non-Compete Agreement
Exhibit G - Form of Operating Agreement
Exhibit H - Form of Option Agreement
Exhibit I - Form of Retail Opportunity Agreement
Exhibit J - Form of Sam & Libby Trademark License
Exhibit K - Form of Services Agreement
Exhibit L - Form of Transitional Services Agreement
Exhibit M - Form of Opinion of Gibson, Dunn & Crutcher LLP
Exhibit N - Form of Opinion of Browdy and Neimark
Exhibit O - Form of Opinion of King & Spalding
Exhibit P - Form of Second Amendment to the Jones New York License
Agreement
Exhibit Q - Form of Acknowledgment from Mark J. Cocozza
iv
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered into as of April 14, 1997
by and among THE BUTLER GROUP INC., a Delaware corporation ("Butler"), MAXWELL
------
SHOE COMPANY INC., a Delaware corporation ("Maxwell"), and MAXWELL RETAIL INC.,
-------
a Delaware corporation ("Maxwell Retail").
--------------
RECITALS
A. Maxwell designs, develops and markets moderately priced casual and dress
footwear for women and children under the Sam & Libby,(R) Just Libby(R) and
Jones New York(R) brand names, among others. Butler operates a number of
women's retail footwear stores under the Dolcis(R) brand name, primarily in
California, Texas, the Southeast and the East. Maxwell desires to enter the
women's retail footwear business utilizing the Sam & Libby,(R) Just Libby(R)
and Jones New York(R) brand names and Butler desires to reposition its
existing retail footwear business.
B. Butler and Maxwell intend to realize these mutual goals by organizing a
limited liability company to engage in the business of owning and operating Mall
Specialty Footwear Stores and Retail Outlet Footwear Stores for the sale of
women's footwear and accessories, utilizing certain of Butler's retail store
locations and the Sam & Libby,(R) Just Libby(R) and Jones New York(R)
brand names on the terms, and subject to the conditions, set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated to the contrary:
"Affiliate" means, as to any Person, (i) any other Person that, directly or
---------
indirectly, controls, is controlled by or is under common control with such
Person; (ii) any Person who is a director and executive officer of such other
Person; and (iii) any trust or similar arrangement for the benefit of such other
Person. For purposes of this definition, (x) the term "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to vote securities having five per cent (5%) or more of
the voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or
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otherwise (other than solely by virtue of being outside directors); and (y)
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, David Andelman, as Trustee of
the Eleanor S. Blum Trust and Mark J. Cocozza shall be deemed to be Affiliates
of Maxwell, Maxwell Retail and the Company as of the Agreement Date.
"Agreement" means this Contribution Agreement, together with all Schedules
---------
and Exhibits attached hereto, as the same may be amended, modified, supplemented
or restated from time to time.
"Agreement Date" means the date on which this Agreement is executed by the
--------------
parties hereto, as set forth above.
"Assumed Liabilities" means, (i) with respect to the Headquarters Assets to
-------------------
be assigned and delivered by Butler to the Company pursuant to Section 2.3(a)
--------------
hereof, all liabilities and obligations of Butler of any kind or nature
whatsoever with respect to the occupancy and operation of the Headquarters
Premises accruing from and after the Closing Date with respect to the
Headquarters Premises, including all liabilities and obligations of Butler
accruing from and after the Closing Date with respect to the Headquarters Lease
and the Headquarters Telephone Lease; (ii) with respect to each Store to be
assigned and delivered by Butler to the Company pursuant to Section 2.3(a)
--------------
hereof, all liabilities and obligations of Butler of any kind or nature
whatsoever with respect to the occupancy and operation of such Store accruing
from and after the Store Transfer Closing Date with respect to such Store,
including all liabilities and obligations of Butler accruing from and after each
such Store Transfer Closing Date with respect to the applicable Store Lease; and
(iii) with respect to the Store Register Agreements to be assigned and delivered
by Butler to the Company pursuant to Section 2.4(a) hereof, all liabilities and
--------------
obligations of Butler of any kind or nature whatsoever accruing from and after
the Store Register Transfer Date with respect to the Store Register Agreements;
but excluding in the case of clause (i) or (ii) above any liability or
obligation to any employee of Butler accruing prior to such effective date, if
any, on which such employee becomes an employee of the Company pursuant to
Section 5.12 hereof, other than as specifically set forth in Section 5.12(h).
- ------------ ---------------
"Bank of Boston" means The First National Bank of Boston.
--------------
"Budget" has the meaning set forth in the Operating Agreement.
------
"Butler Documents" means this Agreement, the Certificate of Formation, the
----------------
Operating Agreement, the Transitional Services Agreement, the documents and
instruments contemplated by Sections 2.2(a), 2.3(a) and 2.4(a) hereof and all
--------------- ------ ------
other agreements and instruments required to be executed and delivered by Butler
under Articles II and VI.
----------- --
"Buying Agent" means Universal Max Trading and such other buying agents as
------------
shall be selected by Maxwell for the sourcing of S&L/JNY Products under the
Services Agreement.
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"Certificate of Formation" means the Certificate of Formation of the
------------------------
Company, substantially in the form of Exhibit A hereto.
---------
"Closing" means the consummation of the transactions contemplated to occur
-------
pursuant to Section 2.2 hereof.
-----------
"Closing Date" means the date on which the conditions set forth in Section
------------ -------
6.1 hereof are first satisfied, or such later date as shall be agreed to by
- ---
Butler and Maxwell.
"Company" means SLJ Retail LLC, a limited liability company to be formed by
-------
Butler and Maxwell Retail under the laws of the State of Delaware.
"Company Documents" means the Maxwell/Company Documents, the Option
-----------------
Agreement, the Transitional Services Agreement and all other agreements and
instruments required to be executed and delivered by the Company under Articles
--------
II and VI.
- -- --
"Company Registration Rights Agreement" means the Registration Rights
-------------------------------------
Agreement to be entered into on the Closing Date among Butler, Maxwell Retail
and the Company pursuant to Section 2.2 of this Agreement, substantially in the
-----------
form attached as Exhibit B hereto.
---------
"Employment Agreement" means an employment agreement to be entered into
--------------------
pursuant to Section 5.12(a) hereof with the president of the Company in form and
---------------
substance acceptable to Butler, Maxwell and such employee.
"Employment Laws" means federal, state or local laws regulating the
---------------
employment relationship between an employer and an employee, including, without
limitation, Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination In Employment Act, as amended, the Americans With Disabilities
Act, the Equal Pay Act, the Civil Rights Act of 1866, as amended, the National
Labor Relations Act, as amended, the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, the Worker Adjustment and Retraining Act and all
applicable state and local laws prohibiting discrimination in employment.
"Factories" means the factories used by Maxwell or its Buying Agents to
---------
manufacture S&L/JNY Products sourced on behalf of the Company under the Services
Agreement.
"Former Butler Employee" has the meaning set forth in Section 5.12(e).
---------------------- ---------------
"GE Capital" means General Electric Capital Corporation, a New York
----------
corporation.
"GE Capital Guaranty" means the guaranty of the Senior Term Loan to be
-------------------
issued on the Closing Date by GE Capital, substantially in the form attached as
Exhibit C hereto.
- ---------
"GE Capital Reimbursement and Security Agreement" means the reimbursement
-----------------------------------------------
and security agreement to be entered into on the Closing Date between the
Company and GE Capital
3
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pursuant to which the Company will agree to reimburse GE Capital for any payment
made by GE Capital pursuant to the GE Capital Guaranty and to provide to GE
Capital certain security for such reimbursement obligations, on such terms and
conditions as shall be agreed to by GE Capital, the Company and the Senior
Agent.
"Governmental Body" means any governmental or quasi-governmental agency,
-----------------
authority, commission, board or other body.
"Headquarters Assets" means, collectively, the Headquarters Lease, the
-------------------
Headquarters Telephone Lease, the Headquarters FF&E and the Headquarters Related
Assets.
"Headquarters FF&E" means all of the furniture, fixtures and equipment
-----------------
owned by Butler and located at the Headquarters Premises as of the Agreement
Date.
"Headquarters Landlord's Consent" means the written consent of the landlord
-------------------------------
under the Headquarters Lease, in form and substance satisfactory to Butler and
Maxwell, to (i) the assignment of the Headquarters Lease to the Company pursuant
to Section 2.2(c) hereof, (ii) the release of Butler from any further liability
--------------
under the Headquarters Lease from and after the Closing Date, upon the
assumption by the Company of such liability; (iii) the subleasing by the Company
of such portion of the premises leased under the Headquarters Lease as shall not
be required by the Company for the conduct of its business; (iv) the letter of
credit substitution contemplated by Section 2.2(e)(xii) hereof; and (v) such
-------------------
other matters as shall be necessary or advisable in connection with the
consummation of the transactions contemplated hereby and the assignment and
delivery of the Headquarters Lease by Butler to the Company at the Closing.
"Headquarters Lease" means the Office/Warehouse Lease dated as of June 19,
------------------
1995 between Butler, as tenant, and Rockdale Industries, Inc., as landlord, with
respect to the Headquarters Premises.
"Headquarters Premises" means the premises utilized by Butler as its
---------------------
corporate headquarters as of the Agreement Date, located at 400 Technology
Court, Suite F, Smyrna, Georgia 30082 and leased by Butler pursuant to the
Headquarters Lease.
"Headquarters Related Assets" means all of Butler's books, records, files,
---------------------------
ledgers, disks and other data relating to the Headquarters Lease, the
Headquarters Telephone Lease and the Headquarters FF&E.
"Headquarters Telephone Lease" means the Master Equipment Lease Agreement
----------------------------
#620-000-4146-000 between Butler and Siemens, including Leasing Schedule #620-
0004147-000 thereto, with respect to the Rolm 9200 Model 230 telephone system
utilized by Butler at the Headquarters Premises.
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"Headquarters Telephone Lessor's Consent" means the written consent of
---------------------------------------
Siemens, in form and substance satisfactory to Butler and Maxwell, to (i) the
assignment of the Headquarters Telephone Lease to the Company pursuant to
Section 2.2(c) hereof; and (ii) the release of Butler from any further liability
- --------------
under the Headquarters Telephone Lease from and after the Closing Date, upon the
assumption by the Company of such liability.
"Immediate Family" means, as to any natural Person, the spouse, children,
----------------
parents, brothers and sisters of such Person, their respective spouses,
children, parents, brothers and sisters, and any trust or similar arrangement
for the benefit of any of the foregoing.
"Indemnified Losses" has the meaning set forth in Section 7.1.
------------------ -----------
"Indemnified Person" has the meaning set forth in Section 7.3.
------------------ -----------
"Indemnifying Party" has the meaning set forth in Section 7.3.
------------------ -----------
"Inter-Pacific Products" means (i) men's, women's and children's slippers
----------------------
intended for indoor and outdoor use and (ii) jellies, aqua socks, injection
molded slides and style 1892A and EVA sandals for beach and street wear to be
sold at a net price of $10.00 (wholesale) or less per pair, the rights to which
are licensed under the License Agreement dated January 8, 1997 between Maxwell
and Inter-Pacific Trading Corporation, a California corporation.
"Jones" means Jones Investment Co., Inc., a Delaware corporation.
-----
"Jones New York Trademark License" means the License Agreement dated July
--------------------------------
1, 1993 between Maxwell and Jones, as amended by the First Amendment to License
Agreement dated October 2, 1995 between Maxwell and Jones and the Second
Amendment to License Agreement between Maxwell and Jones referred to in Section
-------
6.1(c)(iv) hereof.
- ----------
"Jones New York Trademark Sublicense" means the Trademark Sublicense
-----------------------------------
Agreement to be entered into on the Closing Date between Maxwell and the
Company, and consented to by Jones, substantially in the form attached as
Exhibit D hereto.
- ---------
"Jones New York Trademarks" means the trademarks, trade names, service
-------------------------
marks, logos and common law and similar rights owned by Jones, used and/or
registered in the United States and worldwide, and licensed to Maxwell pursuant
to the Jones New York Trademark License.
"Liens" means liens, mortgages, security interests, encumbrances or third
-----
party claims of any nature.
"Mall Anchor Stores" means department or general merchandise stores serving
------------------
as anchor stores in enclosed regional shopping malls (such as the department
stores operated by Federated Department Stores, Inc. as of the date of this
Agreement and the department or general
5
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merchandise stores operated under the Marshalls, T.J. Maxx, Filene's Basement,
Ross Stores and Loehmann's names as of the date of this Agreement).
"Mall Specialty Footwear Stores" means retail stores (excluding Mall Anchor
------------------------------
Stores) which specialize in selling first-quality women's footwear and
accessories and which are located in enclosed regional shopping malls (such as
the stores operated under the 9 West, Kenneth Cole and Rack Room names as of the
date of this Agreement).
"Manager" means Maxwell Retail, in its capacity as limited liability
-------
company manager of the Company pursuant to the Operating Agreement.
"Maxwell/Company Documents" means the Jones New York Trademark Sublicense,
-------------------------
the Services Agreement, the Non-Compete Agreement, the Retail Opportunity
Agreement and the Sam & Libby Trademark License.
"Maxwell Documents" means this Agreement, the Operating Agreement, the
-----------------
Certificate of Formation, the Maxwell/Company Documents, the Maxwell
Registration Rights Agreement, the Option Agreement and all other agreements and
instruments required to be executed and delivered by Maxwell or any of its
Affiliates under Articles II and IV.
----------- --
"Maxwell Registration Rights Agreement" means the Registration Rights
-------------------------------------
Agreement to be entered into on the Closing Date among Butler, Maxwell and
certain Affiliates of Maxwell, substantially in the form attached as Exhibit E
---------
hereto.
"Member Units" has the meaning set forth in the Operating Agreement.
------------
"MIS System" has the meaning set forth in Section 5.8(a).
---------- --------------
"Non-Compete Agreement" means the Non-Compete Agreement to be entered into
---------------------
on the Closing Date among Maxwell, certain Affiliates of Maxwell and the
Company, substantially in the form attached as Exhibit F hereto.
---------
"Operating Agreement" means the Operating Agreement with respect to the
-------------------
Company to be entered into on the Closing Date between Butler and Maxwell
Retail, substantially in the form attached as Exhibit G hereto.
---------
"Option Agreement" means the Option Agreement to be entered into on the
----------------
Closing Date among Butler, Maxwell, Maxwell Retail and the Company,
substantially in the form attached as Exhibit H hereto.
---------
"Percentage Interest" has the meaning set forth in the Operating Agreement.
-------------------
6
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"Person" means an individual, corporation, partnership, limited liability
------
company, joint venture, trust, estate, unincorporated organization, association,
Governmental Body or other entity.
"Required Members" has the meaning set forth in the Operating Agreement.
----------------
"Retail Outlet Footwear Stores" means retail stores which specialize in
-----------------------------
selling women's footwear and accessories and which are located in outlet malls
or centers.
"Retail Opportunity Agreement" means the Retail Opportunity Agreement to be
----------------------------
entered into on the Closing Date among Maxwell, certain Affiliates of Maxwell
and the Company, substantially in the form attached as Exhibit I hereto.
---------
"S&L/JNY Products" means women's footwear products bearing the brand names,
----------------
or intended to be sold at wholesale or retail under the brand names, "Sam &
Libby," "Just Libby" and "Jones New York;" provided, however, that S&L/JNY
-------- -------
Products shall not include Inter-Pacific Products.
"S&L/JNY Retail Store Concepts" has the meaning set forth in Section 5.7.
----------------------------- -----------
"Sam & Libby Domestic Trademarks" means the trademarks, trade names,
-------------------------------
service marks, logos and common law and similar rights owned by Sprague, used
and/or registered in the United States for footwear and described on Schedule
--------
4.8A hereto.
- ----
"Sam & Libby Foreign Trademarks" means the trademarks, trade names, service
------------------------------
marks, logos and common law and similar rights owned by Sprague, used and/or
registered worldwide (other than in the United States) for footwear and
described on Schedule 4.8B hereto.
-------------
"Sam & Libby Trademarks" means, collectively, the Sam & Libby Domestic
----------------------
Trademarks and the Sam & Libby Foreign Trademarks.
"Sam & Libby Trademark License" means the Retail License Agreement with
-----------------------------
respect to the Sam & Libby Trademarks to be entered into on the Closing Date
between Sprague and the Company, substantially in the form attached as Exhibit J
---------
hereto.
"Security Deposits" means security or other deposits paid by Butler prior
-----------------
to the Agreement Date in respect of any of the Headquarters Assets or the Store
Assets, including any such deposits paid to utility companies in respect of the
Headquarters Premises or any of the Stores, or paid to the landlords under the
Headquarters Lease or any of the Store Leases.
"Senior Agent" means Bank of Boston, in its capacity as Agent under the
------------
Senior Credit Agreement.
7
<PAGE>
"Senior Credit Agreement" means the Credit Agreement to be entered into on
-----------------------
the Closing Date among the Company, the Senior Lenders and the Senior Agent,
pursuant to which the Senior Lenders will make available to the Company a
revolving line of credit and letter of credit facility of not less than
$16,500,000 and a term loan of not less than $16,000,000, on such terms and
conditions as shall be agreed to by the Senior Agent, Butler and Maxwell.
"Senior Lenders" means the lenders from time to time party to the Senior
--------------
Credit Agreement.
"Senior Revolving Loan" means the $16,500,000 revolving credit facility
---------------------
referred to in the definition of Senior Credit Agreement.
"Senior Term Loan" means the $16,000,000 term loan referred to in the
----------------
definition of "Senior Credit Agreement."
"Services Agreement" means the Services Agreement to be entered into on the
------------------
Closing Date between Maxwell and the Company, substantially in the form attached
as Exhibit K hereto.
---------
"Siemens" means Siemens Credit Corporation.
-------
"Sprague" means Sprague Company, a Delaware corporation and a wholly-owned
-------
subsidiary of Maxwell.
"Store Assets" means, collectively, the Store Leases, the Store Register
------------
Agreements, the Store FF&E and the Store Related Assets.
"Store FF&E" means all leasehold improvements to the Stores, together with
----------
that portion of the furniture, fixtures and equipment owned by Butler and
located at the Stores as of the Agreement Date as has been designated by Maxwell
for conveyance by Butler to the Company at the Store Transfer Closings, as more
particularly described on Schedule 1.1A hereto.
-------------
"Store Landlord's Consent" means, with respect to each Store Lease to be
------------------------
assigned and transferred by Butler to the Company on a Store Transfer Closing
Date pursuant to Section 2.3(a) hereof, the written consent of the landlord
--------------
under such Store Lease, in form and substance satisfactory to Butler and
Maxwell, to (i) the assignment of such Store Lease to the Company, (ii) the
release of Butler from any further liability under such Store Lease from and
after the applicable Store Transfer Closing Date, upon the assumption by the
Company of such liability; (iii) the liquidation of Butler's inventory and store
fixtures (other than Store FF&E) on the premises of such Store and the removal
of any remaining inventory and store fixtures (other than Store FF&E) from such
Store; (iv) the change in concept and name of such Store from "Dolcis" to "Sam &
Libby" and/or "Jones New York"; (v) the construction of such improvements to
such Store as are specified by the Manager in connection with such change of
concept and name, (vi) the closing of such Store during the construction of the
contemplated improvements; and (vii)
8
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such other matters as shall be necessary or advisable in connection with the
consummation of the transactions contemplated hereby and the assignment and
delivery of such Store by Butler to the Company at such Store Transfer Closing.
"Store Leases" means the lease agreements (including all amendments
------------
thereto) with respect to the Stores.
"Store Register Agreements" means, collectively, the following agreements
-------------------------
with respect to the Compuregister model 10 cash registers used in the Stores and
the related Compaq computer hardware and STR software: (i) the Master Agreement
(Lease No. 841903) dated as of June 27, 1994 between Butler and GE Capital,
together with Equipment Schedules No. 01, 02, 03 (CHG1) and 04 thereto and the
respective Purchase Options attached thereto; (ii) the Software License
Agreement dated as of June 29, 1994 between Butler and STR relating to the
INSTORELINK(TM) Software System for Retailers; and (iii) the Software License
Agreement dated as of June 29, 1994 between Butler and STR relating to the
INSTOREPLUS(TM) Software System for Retailers.
"Store Register Consents" means the written consent of each of the GE
-----------------------
Rental/Lease unit of GE Capital and STR to (i) the assignment of the Store
Register Agreements to the Company pursuant to Section 2.4 hereof; and (ii) the
-----------
release of Butler from any further liability under the Store Register Agreements
from and after the Store Register Transfer Date, upon the assumption by the
Company of such liability.
"Store Register Transfer Date" means the Store Transfer Closing Date
----------------------------
nearest to August 1, 1997.
"Store Related Assets" means all of Butler's books, records, files,
--------------------
ledgers, disks and other data relating to the Store Leases, the Store Register
Agreements and the Store FF&E.
"Store Reopening Date" means the date on which each Store is scheduled to
--------------------
reopen under the S&L/JNY Retail Store Concepts in accordance with Section 5.7(a)
--------------
hereof, but in no event later than eight weeks following the Store Transfer
Closing Date with respect to such Store (or the actual date of the contribution
of such Store by Butler to the Company pursuant to the proviso to Section 2.3(a)
--------------
hereof, if later).
"Store Transfer Closings" means the consummation of the transactions
-----------------------
contemplated to occur pursuant to Section 2.3 hereof.
-----------
"Store Transfer Closing Dates" means the respective dates set forth on
----------------------------
Schedule 2.3 or such other dates as shall be agreed to by Butler and Maxwell.
- ------------
9
<PAGE>
"Stores" means the 129 retail footwear store locations specified on
------
Schedule 1.1B hereto and operated by Butler as of the Agreement Date, or such
- -------------
lesser number of such store locations as shall be agreed to by Butler and
Maxwell.
"STR" means STR, Inc., an Ohio corporation.
---
"Subordinated Note Purchase Agreement" means the Subordinated Note Purchase
------------------------------------
Agreement to be entered into on the Closing Date between the Company and Butler,
pursuant to which Butler will agree to purchase the Subordinated Notes from the
Company on such terms and conditions as shall be agreed to by Butler, Maxwell
and the Senior Agent.
"Subordinated Notes" means the $12,500,000 in principal amount of 8%
------------------
Subordinated Notes to be issued by the Company on and after the Closing Date
pursuant to the Subordinated Note Purchase Agreement.
"Trademark Licenses" means, collectively, the Jones New York Trademark
------------------
Sublicense and the Sam & Libby Trademark License.
"Trademarks" means, collectively, the Jones New York Trademarks and the Sam
----------
& Libby Trademarks.
"Transitional Services Agreement" means the Transitional Services Agreement
-------------------------------
to be entered into on the Closing Date between Butler and the Company,
substantially in the form attached as Exhibit L hereto.
---------
"Union Contract" means the Labor Agreement dated as of January 31, 1993 and
--------------
executed on May 18, 1993, by and between Butler and Retail, Wholesale and
Department Store Union, as amended by an Amendment Agreement dated February 28,
1996, with respect to certain of Butler's warehouse employees.
"USPTO" means the United States Patent and Trademark Office and any
-----
successor thereto.
1.2 Rules of Construction.
---------------------
(a) All article, section and paragraph titles and captions in this
Agreement are for convenience only, will not be deemed part of this Agreement,
and in no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Articles," "Sections," "Exhibits" and "Schedules" are to
-------- -------- -------- ---------
Articles, Sections, Exhibits and Schedules of or to this Agreement; and
(b) Whenever the context may require, any pronoun used in this
Agreement includes the corresponding masculine, feminine or neuter forms, and
the singular form of nouns, pronouns
10
<PAGE>
and verbs include the plural and vice versa. The locative adverbs "hereof,"
"herein," "hereafter," etc. refer to this Agreement as a whole.
ARTICLE II
FORMATION OF THE COMPANY;
CLOSING; STORE TRANSFER CLOSINGS
2.1 Formation of the Company. At or before the Closing, Butler and
------------------------
Maxwell Retail will form the Company by executing the Certificate of Formation
and filing the Certificate of Formation with the Secretary of State of Delaware.
2.2 Actions to be Taken at the Closing. At the Closing:
----------------------------------
(a) Actions of Butler and Maxwell Retail. Butler and Maxwell Retail
------------------------------------
will enter into the Operating Agreement.
(b) Actions of Maxwell. Maxwell will:
------------------
(i) contribute, transfer and deliver to the Company the Jones
New York Trademark Sublicense and the Services Agreement, duly executed by
Maxwell, the Non-Compete Agreement and the Retail Opportunity Agreement,
duly executed by Maxwell and certain of its Affiliates, and the Sam & Libby
Trademark License, duly executed by Sprague; and
(ii) deliver to Butler the Maxwell Registration Rights Agreement,
duly executed by Maxwell and certain of its Affiliates, and the Option
Agreement, duly executed by Maxwell, Maxwell Retail and the Company.
(c) Actions of Butler. Butler will:
-----------------
(i) execute and deliver to Maxwell, Maxwell Retail and the
Company, as appropriate, the Maxwell Registration Rights Agreement, the
Company Registration Rights Agreement, the Option Agreement and the
Transitional Services Agreement;
(ii) execute and deliver the Subordinated Note Purchase
Agreement;
(iii) purchase that principal amount of Subordinated Notes from
the Company as is provided in paragraph (e)(viii) below, on the terms and
subject to the conditions set forth in the Subordinated Note Purchase
Agreement and this Agreement;
(iv) arrange for GE Capital to issue the GE Capital Guaranty and
execute and deliver the GE Capital Reimbursement and Security Agreement;
11
<PAGE>
(v) contribute, transfer and deliver to the Company the
Headquarters Assets;
(vi) execute and deliver a lease assignment, in form and
substance reasonably acceptable to Butler, Maxwell and Maxwell Retail and
accompanied by the Headquarters Landlord's Consent, assigning the
Headquarters Lease to the Company;
(vii) execute and deliver a lease assignment, in form and
substance reasonably acceptable to Butler, Maxwell and Maxwell Retail and
accompanied by the Headquarters Telephone Lessor's Consent, assigning the
Headquarters Telephone Lease to the Company;
(viii) execute and deliver a bill of sale, in form and substance
reasonably acceptable to Butler, Maxwell and Maxwell Retail, conveying the
Headquarters FF&E and Headquarters Related Assets to the Company; and
(ix) assign and convey to the Company all of its right, title and
interest in and to the MIS System developed by Butler pursuant to Section
-------
5.8 hereof and to all of the S&L/JNY Products purchased or ordered by
---
Butler pursuant to Section 5.9 hereof.
-----------
(d) Actions of the Manager. Maxwell Retail, in its capacity as Manager,
----------------------
will obtain and deliver to the Company (A) certificates of qualification issued
by the Secretary of State of Georgia and the Secretary of State or other public
official of each other State or jurisdiction in which the transactions
contemplated by this Agreement make such qualification necessary or advisable as
of the Closing Date, to the effect that the Company is duly authorized,
qualified or licensed to transact business in such state or jurisdiction; (B)
good standing certificates from the Secretary of State of Georgia and the
Secretary of State or other public official of each such State or jurisdiction,
to the effect that the Company is in good standing in such state or
jurisdiction; (C) copies of fictitious name certificates or affidavits, duly
filed with the Clerk of Superior Court of Cobb County, Georgia and the Secretary
of State or other public official of any other State or jurisdiction in which
the Company transacts business in any name other than its limited liability
company name and in which such filing is necessary or advisable as of the
Closing Date; and (D) such other permits, licenses, etc. from Governmental
Bodies as are necessary or advisable as of the Closing Date in order to permit
the Company to conduct the business contemplated to be conducted by it from and
after the Closing Date and prior to the initial Store Transfer Closing Date;
(e) Actions of the Company. Maxwell Retail, in its capacity as Manager,
----------------------
will cause the Company to:
(i) execute and deliver the Maxwell/Company Documents, the
Transitional Services Agreement and the Company Registration Rights
Agreement, all on the terms and subject to the conditions set forth in this
Agreement;
12
<PAGE>
(ii) issue to Butler and Maxwell Retail the respective Member
Units in the Company provided for in Section 4.2(b) of the Operating
--------------
Agreement;
(iii) execute and deliver the Senior Credit Agreement;
(iv) fulfill all conditions precedent to closing under the Senior
Credit Agreement (other than those to be satisfied by Butler pursuant to
paragraphs (a) or (c) above);
(v) execute and deliver the Subordinated Note Purchase
Agreement;
(vi) fulfill all conditions precedent to closing under the
Subordinated Note Purchase Agreement;
(vii) execute and deliver the GE Capital Reimbursement and
Security Agreement and comply with all covenants and agreements to be
complied with on the part of the Company thereunder on the Closing Date;
(viii) issue Subordinated Notes under the Subordinated Note
Purchase Agreement in an aggregate principal amount not less than
$3,000,000 (and such additional amount in increments of $250,000 as the
Manager deems necessary or appropriate), and use the proceeds thereof for
the purposes set forth in the Subordinated Note Purchase Agreement and in
Section 5.20(b) of this Agreement;
---------------
(ix) accept the Headquarters Assets and assume all of the Assumed
Liabilities with respect to the Headquarters Assets by the execution and
delivery of assumption agreements in form and substance reasonably
acceptable to Butler, Maxwell and Maxwell Retail;
(x) pay to Butler the amounts of the Security Deposits
previously paid by Butler to the landlord under the Headquarters Lease and
to any utility company in respect of the Headquarters Premises, to the
extent that the Company is credited with the amount of such Security
Deposits and such Security Deposits are not refunded to Butler;
(xi) assume all obligations of Butler and Maxwell as are
contemplated by Section 5.20(b) hereof; and
---------------
(xii) arrange for Bank of Boston, as issuing bank, to issue
pursuant to the Senior Credit Agreement (i) a letter of credit in the
amount of $320,000 and available for drawing by the landlord under the
Headquarters Lease, in substitution for the letter of credit deposited by
Butler in accordance with paragraph 16 of the Special Stipulations attached
as Exhibit "C" to the Headquarters Lease; and (ii) letters of credit in
such
13
<PAGE>
amounts as shall equal the respective amounts then available for drawing
under the letters of credit opened by NationsBank for the account of Butler
pursuant to Section 5.9 hereof, available for drawing by Butler in the
-----------
event that Butler is called upon to reimburse NationsBank for any drafts
under such letters of credit.
2.3 Actions to be Taken at Each Store Transfer Closing. At each of the
--------------------------------------------------
Store Transfer Closings:
(a) Actions of Butler. Butler will:
-----------------
(i) contribute, transfer and deliver to the Company the Store
Leases and the Store FF&E with respect to those Stores to be transferred
and delivered by Butler to the Company on such Store Transfer Closing Date,
as set forth on Schedule 2.3 hereto ;
------------
(ii) execute and deliver lease assignments, in form and substance
reasonably acceptable to Butler, Maxwell and Maxwell Retail, assigning the
applicable Store Leases to the Company, accompanied by the Store Landlords'
Consents applicable to each such Store Lease; and
(iii) execute and deliver a bill of sale, in form and substance
reasonably acceptable to Butler, Maxwell and Maxwell Retail, conveying the
applicable Store FF&E to the Company;
provided, however, that if the condition set forth in Section 6.2(c)(v) hereof
- -------- ------- -----------------
cannot be satisfied with respect to any Store on or prior to the Store Transfer
Closing Date with respect to such Store, then the Store Transfer Closing shall
proceed with respect to all Stores as to which such condition and all other
conditions set forth in Section 6.2 have been satisfied and the transfer and
-----------
delivery of the Store Assets with respect to such Store shall be postponed until
such succeeding Store Transfer Closing Date as the parties may agree; provided
--------
that, if such conditions have not been satisfied with respect to any Store or
Stores on or before thirty days after such Store Transfer Closing Date, then
Butler's obligations under Section 5.5 and this paragraph (a), Maxwell's
-----------
obligations under Section 5.5 and Maxwell Retail's obligations under paragraph
-----------
(c) below shall terminate on such date with respect to such Store or Stores, and
such Store or Stores shall no longer be deemed to be "Stores" for any purpose of
this Agreement, unless Butler and Maxwell otherwise agree.
(b) Actions of the Manager. Maxwell Retail, in its capacity as Manager,
----------------------
will deliver to the Company (A) certificates of qualification issued by the
Secretary of State or other public official of each State or other jurisdiction
in which the transactions contemplated by this Agreement make such qualification
necessary or advisable as of such Store Transfer Closing Date, to the effect
that the Company is duly authorized, qualified or licensed to transact business
in such state or jurisdiction; (B) good standing certificates from each such
Secretary of State or other public official, to the effect that the Company is
in good standing in such State or
14
<PAGE>
jurisdiction; (C) copies of fictitious name certificates or affidavits, duly
filed with the Secretary or other public official of any State or jurisdiction
in which the Company transacts business in any name other than its limited
liability company name and in which such filing is necessary or advisable as of
such Store Transfer Date; and (D) such other permits, licenses, etc. from
Governmental Bodies as are necessary or advisable as of such Store Transfer
Closing Date in order to permit the Company to conduct the business contemplated
to be conducted by it from and after such Store Transfer Date;
(c) Actions of the Company. Maxwell Retail, in its capacity as Manager,
----------------------
will cause the Company to:
(i) accept the Store Leases and the Store FF&E and assume all of
the Assumed Liabilities with respect to the Store Leases and the Store FF&E
by the execution and delivery of assumption agreements in form and
substance reasonably acceptable to Butler, Maxwell and Maxwell Retail,
assuming all Assumed Liabilities of Butler with respect to the applicable
Store Leases and Store FF&E; and
(ii) pay to Butler the amounts of any Security Deposits
previously paid by Butler to any of the landlords under such Store Leases
and to any utility company in respect of such Stores, to the extent that
the Company is credited with the amount of such Security Deposits and such
Security Deposits are not refunded to Butler.
2.4 Additional Actions to be Taken on the Store Register Transfer Date.
------------------------------------------------------------------
On the Store Register Transfer Date, in addition to the actions to be taken
pursuant to Section 2.3:
-----------
(a) Actions of Butler. Butler will:
-----------------
(i) contribute, transfer and deliver to the Company the Store
Register Agreements and the Store Related Assets;
(ii) execute and deliver assignments, in form and substance
reasonably acceptable to Butler, Maxwell and Maxwell Retail, assigning all
of the Store Register Agreements to the Company, accompanied by the Store
Register Consents; and
(iii) execute and deliver a bill of sale, in form and substance
reasonably acceptable to Butler, Maxwell and Maxwell Retail, conveying the
Store Related Assets to the Company;
(b) Actions of the Company. Maxwell Retail, in its capacity as Manager,
----------------------
will cause the Company to accept the Store Register Agreements and Store Related
Assets and assume all of the Assumed Liabilities with respect to the Store
Register Agreements and Store Related Assets by the execution and delivery of
assumption agreements in form and substance reasonably
15
<PAGE>
acceptable to Butler, Maxwell and Maxwell Retail, assuming all Assumed
Liabilities of Butler with respect to the Store Register Agreements and Store
Related Assets so assigned.
2.5 No Assumption of Liabilities; Pro-Ration of Expenses. Except as
----------------------------------------------------
specifically provided in Sections 2.2, 2.3, 2.4 and 5.20(b) hereof, the Company
------------ --- --- -------
will not assume any liabilities of Butler or Maxwell of any kind. The Company
will not assume the liabilities of any other Person without the written consent
of the Required Members. All liabilities of Butler that are assumed by the
Company pursuant to Section 2.2(e)(ix) will be assumed as of April 4, 1997,
------------------
provided that the Closing Date is not later than April 30, 1997, all liabilities
of Butler that are assumed by the Company pursuant to Sections 2.3(c)(i) and
------------------
2.4(b) hereof will be assumed as of the pertinent Store Transfer Closing Date
- ------
and all such liabilities will be pro-rated between Butler and the Company as of
each such date. In the event that Butler has prepaid any amount of such assumed
liabilities attributable to a period after the Closing Date or the pertinent
Store Transfer Closing Date or that, after such assumption, the Company pays any
liability of Butler attributable to a period before the Closing Date, then
Butler shall pay to the Company, or the Company shall pay to Butler, the net
amount owed to the other in order to effect such pro-ration.
2.6 Closing Dates and Place. The Closing will take place on the Closing
-----------------------
Date and each Store Transfer Closing will take place on the applicable Store
Transfer Closing Date; in each case at the offices of King & Spalding, 191
Peachtree Street, Atlanta, Georgia 30303-1763, or at such other place as the
parties may agree.
2.7 Further Assurances. At and after the Closing and each of the Store
------------------
Transfer Closings, and without further consideration, Butler and Maxwell will
execute and deliver to the Company such further instruments of assignment,
conveyance and transfer as either party or the Company may reasonably request in
order more effectively to assign, convey and transfer to the Company the assets
and agreements contemplated to be assigned hereby, and Maxwell Retail, in its
capacity as Manager, will cause the Company to execute and deliver to Butler
such further instruments of assumption as Butler may reasonably request in order
more effectively to assume the liabilities contemplated to be assumed hereby.
Additionally, at the request of the Company, Butler will use reasonable efforts,
at no expense to Butler, to cooperate with the Company in the transfer to the
Company of any service or other contracts to which Butler is a party as of the
Closing Date, to the extent that such contracts are no longer necessary to the
conduct of Butler's business and would be useful in the conduct of the Company's
business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUTLER
Butler represents and warrants to Maxwell and Maxwell Retail as follows:
III.1 Organization. Butler is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power to own its
16
<PAGE>
properties and to conduct its business as presently conducted. Butler is duly
authorized, qualified or licensed to transact business and is in good standing
as a foreign corporation in the State of Georgia and in each other State or
jurisdiction in which the transactions contemplated by this Agreement make such
qualification necessary or advisable.
3.2 Authority. Butler has all requisite corporate power and authority
---------
to execute, deliver and perform under this Agreement and each of the other
Butler Documents. The execution, delivery and performance by Butler of each
Butler Document have been duly authorized by all necessary action, corporate or
otherwise, on the part of Butler. This Agreement has been, and at the Closing
and each Store Transfer Closing the other Butler Documents to be executed and
delivered on the respective dates thereof will be, duly executed and delivered
by Butler. This Agreement is, and upon execution and delivery by Butler at the
Closing and each Store Transfer Closing, each of the other Butler Documents to
be executed and delivered on the respective dates thereof will be, a legal,
valid and binding agreement of Butler enforceable against Butler in accordance
with their respective terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally and to general principles of equity regardless
whether enforcement is considered in a proceeding at law or in equity.
3.3 Title to Headquarters Assets and Store Assets. The execution and
---------------------------------------------
delivery by Butler of the Butler Documents to be executed and delivered at the
Closing pursuant to Section 2.2(c) will convey to and vest in the Company all
--------------
right, title and interest of the lessee under the Headquarters Lease and the
Headquarters Telephone Lease, good and marketable title to the Headquarters FF&E
and all right, title and interest of Butler in and to the Headquarters Related
Assets, free and clear of any Liens created by Butler or arising out of the
ownership of the Headquarters Assets by Butler and, to Butler's knowledge, any
other Liens (except as set forth below); the execution and delivery by Butler of
the Butler Documents to be executed and delivered at each Store Transfer Closing
pursuant to Section 2.3(a) will convey to and vest in the Company all right,
--------------
title and interest of the lessee under each of the Store Leases to be assigned
and conveyed at such Store Transfer Closing and good and marketable title to the
Store FF&E to be assigned and conveyed at such Store Transfer Closing; and the
execution and delivery by Butler of the Butler Documents to be executed and
delivered at the third Store Transfer Closing pursuant to Section 2.4(a) will
--------------
convey to and vest in the Company all right, title and interest of the lessee or
licensee under each of the Store Register Agreements and all right, title and
interest of Butler in and to the Store Related Assets; in each case free and
clear of any Liens created by Butler or arising out of the ownership of the
Store Assets by Butler and, to Butler's knowledge, any other Liens; in each case
except for (i) Liens for current taxes payable by Butler and not yet past due;
(ii) statutory, contractual or possessory Liens in favor of the landlords party
to the Headquarters Lease and the Store Leases; (iii) Liens in favor of GE
Capital and STR with respect to the Store Register Agreements; (iv) Liens in
favor of Siemens with respect to the Headquarters Telephone Lease; (v) Liens
created by the Company or arising out of the ownership of the Headquarters
Assets or the Store Assets by the Company; and (vi) Liens disclosed on Schedule
--------
3.3.
- ---
17
<PAGE>
3.4 Absence of Restrictions and Conflicts. Subject to the obtaining of
-------------------------------------
the Headquarters Landlord's Consent and the Headquarters Telephone Lessor's
Consent contemplated by Section 6.1(c) hereof, the Store Landlords' Consents
--------------
contemplated by Section 6.2(c) hereof and the Store Register Consents
--------------
contemplated by Section 6.3(c) hereof, the execution, delivery and performance
--------------
of this Agreement and the other Butler Documents, the consummation of the
transactions contemplated by this Agreement and the other Butler Documents and
the compliance by Butler with the terms and conditions of this Agreement and the
other Butler Documents do not and will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of any obligation under, (a) any term or provision of the
certificate of incorporation or bylaws of Butler, (b) any term or provision of
any material agreement to which Butler is a party, including, without
limitation, the Headquarters Lease, the Headquarters Telephone Lease or any of
the Store Leases or Store Register Agreements, (c) any judgment, decree or order
of any court or Governmental Body to which Butler is a party or by which Butler,
any of the Headquarters Assets or any of the Store Assets is bound or (d) any
statute, law, rule or regulation applicable to Butler, the Headquarters Assets
or the Store Assets.
3.5 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
Governmental Body is required on the part of Butler in connection with the
transactions contemplated by this Agreement.
3.6 Litigation. Except as described in Schedule 3.6, there are not
---------- ------------
currently pending (or, to the knowledge of Butler, threatened in writing) any
lawsuits, administrative proceedings or reviews, or formal or informal
complaints or investigations by any Person against or relating to (i) Butler or
any of the officers of Butler (in their capacities as such); or (ii) the
Headquarters Assets or the Store Assets; in each case that, if resolved
adversely to Butler, would have a materially adverse effect on Butler's
financial condition, on Butler's ability to consummate the transactions
contemplated by this Agreement or on Butler's ability to perform in all material
respects its obligations under any of the Butler Documents. Butler is not
subject to or bound by any currently existing judgment, order, writ, injunction
or decree.
3.7 Compliance with Laws. Butler's use of the Headquarters Assets and
--------------------
the Store Assets complies in all material respects with, and is not in violation
or contravention in any material respect of, any applicable statutes, laws,
ordinances, decrees, orders, rules and regulations of any Governmental Body,
except for such violations or contraventions, if any, as would not have a
materially adverse effect on Butler's financial condition, on Butler's ability
to consummate the transactions contemplated by this Agreement or on Butler's
ability to perform in all material respects its obligations under any of the
Butler Documents.
3.8 Butler Employees; Union Contracts.
---------------------------------
18
<PAGE>
(a) Butler has provided to Maxwell a list of all employees of Butler as
of the Agreement Date, including date of employment, current title or position
and current compensation.
(b) Other than the Union Contract, Butler has no collective bargaining,
union or labor agreements, contracts or other arrangements with any group of
employees, labor union or employee representative and does not know of any
organization effort currently being made or threatened by or on behalf of any
labor union with respect to employees of Butler.
3.9 Headquarters Lease, Headquarters Telephone Lease, Store Leases and
------------------------------------------------------------------
Store Register Agreements. Butler has delivered to Maxwell a copy of the
- -------------------------
Headquarters Lease, the Headquarters Telephone Lease, each Store Lease and each
Store Register Agreement and (i) the Headquarters Lease, the Headquarters
Telephone Lease, each Store Lease and each Store Register Agreement is valid,
binding and in full force and effect and enforceable against Butler in
accordance with its terms subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and to general principles of equity regardless whether
enforcement is considered in a proceeding at law or in equity; (ii) other than
payment arrearages that will have been cured prior to the Closing Date and each
Store Transfer Closing Date with respect to the applicable leases to be
contributed and assigned to the Company on each such date, Butler has performed
all of its material obligations under the Headquarters Lease, the Headquarters
Telephone Lease, each Store Lease and each Store Register Agreement; (iii) other
than such payment arrearages, to Butler's knowledge there exists no material
breach or default (or event that with notice or lapse of time would constitute a
material breach or default) on Butler's part under the Headquarters Lease, the
Headquarters Telephone Lease, any Store Lease or any Store Register Agreement;
and (iv) no consent of any Person is required in connection with the assignments
of the Headquarters Lease, the Headquarters Telephone Lease, the Store Leases
and the Store Register Agreements contemplated by this Agreement except the
Headquarters Landlord's Consent and the Headquarters Telephone Lessor's Consent
contemplated by Section 6.1(c) hereof, the Store Landlords' Consents
--------------
contemplated by Section 6.2(c) hereof and the Store Register Consents
--------------
contemplated by Section 6.3(c) hereof.
--------------
3.10 No Brokers. Butler has not incurred and will not incur any
----------
liability for brokerage fees or agents' commissions in connection with this
Agreement or the transactions contemplated hereby.
3.11 No Misrepresentations. The representations, warranties and
---------------------
statements made by Butler in or pursuant to this Agreement (including the
Schedules hereto) are true, complete and correct in all material respects and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make any such representation, warranty or statement,
under the circumstances in which it is made, not materially misleading.
19
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MAXWELL AND MAXWELL RETAIL
Maxwell and Maxwell Retail jointly and severally represent and warrant to
Butler as follows:
4.1 Organization.
------------
(a) Each of Maxwell, Maxwell Retail and Sprague is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power to own its properties and to
conduct its business as presently conducted. Sprague is a wholly-owned
subsidiary of Maxwell and Maxwell Retail is a wholly-owned subsidiary of
Sprague. Each of Maxwell, Maxwell Retail and Sprague is duly authorized,
qualified or licensed to transact business and is in good standing as a foreign
corporation in the Commonwealth of Massachusetts and is duly authorized,
qualified or licensed to transact business and is in good standing as a foreign
corporation in each other State or jurisdiction in which the transactions
contemplated by this Agreement make such qualification necessary or advisable;
and, at the Closing Date and for so long thereafter as Maxwell Retail serves as
Manager under the Operating Agreement, Maxwell Retail will be duly authorized,
qualified or licensed to transact business and in good standing as a foreign
corporation in the State of Georgia and in each other State or jurisdiction in
which the transactions contemplated by this Agreement and the Operating
Agreement (including, without limitation, Maxwell Retail's duties in its
capacity as Manager under the Operating Agreement) make such qualification
necessary or advisable.
(b) The Company is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power to own its properties and to conduct its business as
presently conducted and as presently anticipated to be conducted by the
Contribution Agreement and the Operating Agreement. The Company is duly
authorized, qualified or licensed to transact business and is in good standing
as a foreign corporation in the States of Georgia and Massachusetts and each
other State or jurisdiction in which the transactions contemplated by the
Contribution Agreement and the Operating Agreement make such qualification
necessary or advisable.
4.2 Authority.
---------
(a) Each of Maxwell, Maxwell Retail and Sprague has all requisite
corporate power and authority to execute, deliver and perform under this
Agreement and the other Maxwell Documents to which it is a party. The execution,
delivery and performance by Maxwell, Maxwell Retail and Sprague of each Maxwell
Document to which it is a party have been duly
20
<PAGE>
authorized by all necessary action, corporate or otherwise, on the part of
Maxwell, Maxwell Retail and Sprague, respectively. This Agreement has been, and
at the Closing and each Store Transfer Closing the other Maxwell Documents to be
executed and delivered on the respective dates thereof will be, duly executed
and delivered by Maxwell, Maxwell Retail, Sprague and each other Affiliate of
Maxwell party thereto, to the extent that each is a party thereto. This
Agreement is, and upon execution and delivery by Maxwell, Maxwell Retail,
Sprague and each other Affiliate of Maxwell party thereto at the Closing and
each Store Transfer Closing, each of the other Maxwell Documents to be executed
and delivered on the respective dates thereof will be, a legal, valid and
binding agreement of Maxwell, Maxwell Retail, Sprague and each other Affiliate
of Maxwell party thereto, enforceable against each of Maxwell, Maxwell Retail,
Sprague and each other Affiliate of Maxwell party thereto in accordance with
their respective terms, to the extent that each is a party thereto, subject as
to enforcement to bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally and to general
principles of equity regardless whether enforcement is considered in a
proceeding at law or in equity.
(b) The Company has all requisite power and authority to execute,
deliver and perform under the Company Documents. The execution, delivery and
performance by the Company of each Company Document to which it is a party have
been duly authorized by all necessary action, corporate or otherwise, on the
part of the Company. At the Closing and each Store Transfer Closing the Company
Documents to be executed and delivered on the respective dates thereof will be
duly executed and delivered by the Company. Upon the execution and delivery by
the Company thereto at the Closing and each Store Transfer Closing, each of the
Company Documents to be executed and delivered on the respective dates thereof
will be, a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with their respective terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally and to general
principles of equity regardless whether enforcement is considered in a
proceeding at law or in equity.
4.3 Absence of Restrictions and Conflicts. Except as described in
-------------------------------------
Schedule 4.3, the execution, delivery and performance of this Agreement and the
- ------------
other Maxwell Documents by Maxwell, Maxwell Retail and Sprague, the consummation
of the transactions contemplated by this Agreement and the other Maxwell
Documents and the compliance by Maxwell, Maxwell Retail and Sprague with the
terms and conditions of this Agreement and the other Maxwell Documents, to the
extent that each is a party thereto, do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (a) any term or provision of
the certificate of incorporation or bylaws of Maxwell, Maxwell Retail or
Sprague, respectively, (b) any term or provision of any material agreement to
which Maxwell, Maxwell Retail or Sprague is a party, including, without
limitation, the Jones New York Trademark License or any other agreement with
respect to the Trademarks, (c) any judgment, decree or order of any court or
Governmental Body to which Maxwell, Maxwell Retail
21
<PAGE>
or Sprague, respectively, is a party or by which Maxwell, Maxwell Retail or
Sprague, respectively, or any of their respective material properties relating
to or to be used in connection with the transactions contemplated by the Maxwell
Documents is bound or (d) any statute, law, rule or regulation applicable to
Maxwell, Maxwell Retail or Sprague, respectively, or to any of such properties.
4.4 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
Governmental Body is required on the part of Maxwell, Maxwell Retail or Sprague
in connection with the transactions contemplated by this Agreement or the other
Maxwell Documents.
4.5 Litigation. Except as described in Schedule 4.5, there are not
---------- ------------
currently pending (or, to the knowledge of Maxwell or Maxwell Retail, threatened
in writing) any lawsuits, administrative proceedings or reviews, or formal or
informal complaints or investigations by any Person against or relating to (i)
Maxwell, Maxwell Retail or Sprague or any of their respective officers (in their
capacities as such); (ii) the Trademarks, to the extent that Maxwell, Maxwell
Retail or Sprague is a party thereto or otherwise has actual knowledge thereof,
or (iii) S&L/JNY Products or Maxwell's activities in sourcing S&L/JNY Products
for its own account and on behalf of the Company; in each case that, if resolved
adversely to Maxwell, Maxwell Retail or Sprague, would have a materially adverse
effect on the financial condition of any of Maxwell, Maxwell Retail or Sprague,
on Maxwell's or Maxwell Retail's ability to consummate the transactions
contemplated by this Agreement or on their abilities to perform in all material
respects their respective obligations under any of the Maxwell Documents.
Neither Maxwell, Maxwell Retail nor Sprague is subject to or bound by any
currently existing judgment, order, writ, injunction or decree.
4.6 Compliance with Laws. Maxwell, Maxwell Retail, Sprague, the S&L/JNY
--------------------
Products, Maxwell's sourcing of S&L/JNY Products for its own account, on behalf
of Butler pursuant to Section 5.9 hereof and on behalf of the Company pursuant
-----------
to the Services Agreement, Maxwell's sublicensing of the Jones New York
Trademarks under the Jones New York Trademark Sublicense, Maxwell Retail's
serving as Manager under the Operating Agreement and Sprague's licensing of the
Sam & Libby Trademarks under the Sam & Libby Trademark License comply in all
material respects with, and are not in violation or contravention in any
material respect of, any applicable statute, law, ordinance, decree, order, rule
or regulation of any Governmental Body, including, without limitation, all
foreign, federal, state and local laws relating to foreign corrupt practices, to
the collection and payment of taxes, and to employment and labor matters, except
for such violations or contraventions, if any, as would not have a materially
adverse effect on the financial condition of any of Maxwell, Maxwell Retail or
Sprague, on Maxwell's or Maxwell Retail's respective abilities to consummate the
transactions contemplated by this Agreement or on their respective abilities to
perform in all material respects their obligations under any of the Maxwell
Documents.
4.7 Certain Maxwell Agreements.
--------------------------
22
<PAGE>
(a) Schedule 4.7 lists each written agreement and arrangement
------------
(including all amendments thereto) to which Maxwell or any of its Affiliates is
a party or a beneficiary or by which Maxwell or any of its Affiliates is bound
evidencing or relating to (i) any purchasing, brokerage or manufacturing
agreements or arrangements with Factories, Buying Agents or other Persons
pursuant to which Maxwell or any of its Affiliates is entitled or obligated to
acquire S&L/JNY Products having an aggregate purchase price (at first cost) of
$2,500,000 or greater from or through a third party (other than routine purchase
orders for purchases from such third parties); (ii) any supply, distribution,
sales or other agreements pursuant to which Maxwell or any of its Affiliates
distributes or sells S&L/JNY Products having an aggregate purchase price (at
first cost) of $2,500,000 or greater to any third party (other than routine
purchase orders for purchases by such third parties); (iii) any agreement
currently in effect with or for the benefit of any Affiliate of Maxwell or any
member of the Immediate Family of an Affiliate of Maxwell relating to S&L/JNY
Products; (iv) any agreement or arrangement pursuant to which Maxwell or any of
its Affiliates has agreed not to compete with any other Person (other than
Maxwell or its Affiliates); and (v) any agreement or arrangement pursuant to
which Maxwell has agreed to register its stock of any class with the Securities
and Exchange Commission.
(b) Maxwell has delivered to Butler a complete copy of each agreement
listed on Schedule 4.7, together with any amendments or modifications thereto.
------------
Except as described in Schedule 4.7, (i) each such agreement or arrangement is
------------
valid, binding and in full force and effect and enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights generally
and to general principles of equity regardless whether enforcement is considered
in a proceeding at law or in equity; (ii) Maxwell and its Affiliates and, to the
knowledge of Maxwell, each other party to such agreement or arrangement, has
performed all of its material obligations thereunder; and (iii) there has been
no termination or, to the knowledge of Maxwell, any threatened termination
thereof.
4.8 Trademarks.
----------
(a) Schedule 4.8A includes a schedule of all of the Sam & Libby
-------------
Domestic Trademarks, their registrations owned or utilized by Sprague and
pending applications therefor, together with the current status and a brief
description of each; and Schedule 4.8B includes a schedule of all of the Sam &
-------------
Libby Foreign Trademarks, their registrations conveyed to Sprague by Sam &
Libby, Inc., together with the current status (to Maxwell's and Maxwell Retail's
knowledge) and a brief description of each.
(b) Each of the representations and warranties set forth in Section 7.1
of the Retail License Agreement with respect to the Sam & Libby Trademarks is
true and correct.
(c) Maxwell has the full and unrestricted right pursuant to the Jones
New York Trademark License to use the Jones New York Trademarks in the
geographical area consisting of
23
<PAGE>
the United States, its territories and possessions and Canada and, subject to
termination by Jones, worldwide in other jurisdictions. Maxwell's rights under
the Jones New York Trademark License are free and clear of any Liens created by
Maxwell or arising out of the business conducted by Maxwell and, to Maxwell's
knowledge, any other Liens except for (i) Liens for current taxes payable by
Maxwell or Sprague and not yet past due; and (ii) Liens created by the Company
or arising out of the business conducted by the Company. To Maxwell's knowledge,
the Jones New York Trademarks are valid, enforceable and subsisting, and have
not been abandoned or canceled and have not expired. Maxwell has full rights
under the Jones New York Trademark License to utilize the Jones New York
Trademarks, and has the power, right and authority under the Jones New York
Trademark License, as amended on the basis contemplated by Section 6.1(c)(iv)
------------------
hereof, to sublicense to the Company all of the Jones New York Trademarks for
use in the Company's business pursuant to, and on the terms and conditions of,
the Jones New York Trademark Sublicense, without any infringement of the rights
of others.
(d) Maxwell has not received any communications from any Person
alleging that, nor is it otherwise aware that, Maxwell has infringed upon or, by
conducting its respective business as currently conducted or by its sublicensing
of the Jones New York Trademarks to the Company pursuant to the Jones New York
Trademark Sublicense for use in the Company's business as now contemplated to be
conducted, would infringe upon any intellectual property right of any other
Person. Maxwell is not aware of any infringement of the Jones New York
Trademarks by third parties and Maxwell will notify Jones of any infringement of
the Jones New York Trademarks by third parties on the basis set forth in Section
7.4 of the Jones New York Trademark License. None of the Jones New York
Trademarks is the subject of, or will be affected by, any existing action,
proceeding, claim, demand or judgment to which Maxwell is a party or of which it
is otherwise aware, the outcome of which could impair the Company's ability to
use the Jones New York Trademarks in an unrestricted fashion, (including,
without limitation, the sublicensing of the Jones New York Trademarks to the
Company by Maxwell under the Jones New York Trademark Sublicense). Except for
the Jones New York Trademark Sublicense and the Jones New York Trademark
License, neither Maxwell nor any of its Affiliates is a party to any license,
agreement or arrangement, whether as licensor, licensee, franchisor, franchisee
or otherwise, with respect to the Jones New York Trademarks.
(e) The Sam & Libby Domestic Trademarks and the Jones New York
Trademarks constitute all of the trademarks, trade names, service marks, logos
and common law and similar rights necessary for or to be used in the Company's
business of selling S&L/JNY Products in Mall Specialty Footwear Stores and
Retail Outlet Footwear Stores in the United States as now contemplated to be
conducted.
4.9 Restrictions on Imports. The information set forth under the
-----------------------
caption "Restrictions on Imports" in Maxwell's Annual Report on Form 10-K for
its fiscal year ending October 31, 1996 remains true and correct in all material
respects as of the Agreement Date.
24
<PAGE>
4.10 Competing Interests. Except for investments constituting less than
-------------------
1% of the issued and outstanding capital stock of a publicly traded corporation,
neither Maxwell nor any Affiliate of Maxwell directly or indirectly (through any
member of the Immediate Family of such Affiliate or otherwise) owns an interest
in or has any investment in: (i) any Mall Specialty Footwear Store, Retail
Outlet Footwear Store or other Person that would be a competitor of the Company
upon the consummation of the transactions contemplated by this Agreement; (ii)
any customer of Maxwell; (iii) any Buying Agent, Factory or other supplier of
Maxwell or of the Company; or (iv) any other Person that otherwise has or, upon
consummation of the transactions contemplated by this Agreement, will have,
competing interests or material business dealings with the Company.
4.11 No Brokers. Neither Maxwell nor Maxwell Retail has incurred or will
----------
incur any liability for brokerage fees or agents' commissions in connection with
this Agreement or the transactions contemplated hereby.
4.12 No Misrepresentations. The representations, warranties and
---------------------
statements made by Maxwell and Maxwell Retail in or pursuant to this Agreement
(including the Schedules hereto) are true, complete and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make any such representation, warranty or
statement, under the circumstances in which it is made, not misleading.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Preservation of Assets by Butler.
--------------------------------
(a) Prior to the Closing Date, Butler will: (i) maintain the
Headquarters Lease in full force and effect; (ii) maintain the Headquarters
Telephone Lease in full force and effect; (iii) maintain the Headquarters FF&E
in substantially the same condition as on the Agreement Date, reasonable wear
and tear excepted; (iv) maintain in full force and effect insurance policies
with respect to the Headquarters Premises and the Headquarters FF&E providing
substantially the same coverage as is maintained on the Agreement Date; and (v)
maintain the Headquarters Related Assets in its customary manner, consistent
with past practices.
(b) Prior to each Store Transfer Closing Date, Butler will, with
respect to the Store Assets to be transferred and delivered to the Company on
such Store Transfer Closing Date: (i) maintain the Store Leases in full force
and effect; (ii) maintain the Store FF&E in substantially the same condition as
on the Agreement Date, reasonable wear and tear excepted; and (iii) maintain in
full force and effect insurance policies with respect to the Stores and the
Store FF&E providing substantially the same coverage as is maintained on the
Agreement Date; and, prior to the Store Register Transfer Date, Butler will (i)
maintain the Store Register Agreements
25
<PAGE>
in full force and effect; and (ii) maintain the Store Related Assets in its
customary manner, consistent with past practices.
5.2 Payment of Taxes by Butler. Butler will pay prior to the
--------------------------
delinquency thereof all taxes payable by Butler that would otherwise constitute
a Lien on any of the Headquarters Assets or Store Assets after the contribution
thereof to the Company pursuant to Article II of this Agreement, other than
----------
taxes the payment of which is being actively contested by Butler, in good faith,
and as to which Butler maintains adequate reserves and will retain
responsibility for payment.
5.3 Negotiation of Senior Credit Agreement and Subordinated Note
------------------------------------------------------------
Purchase Agreement.
- ------------------
(a) Butler and Maxwell will negotiate in good faith with each other and
with the Senior Agent with respect to the definitive terms and conditions of the
Senior Credit Agreement, the GE Capital Reimbursement and Security Agreement,
the Subordinated Note Purchase Agreement and all other documents, instruments
and agreements to be executed and delivered pursuant thereto or in connection
therewith (including, without limitation, any intercreditor or subordination
agreement that the Senior Agent reasonably deems to be necessary or desirable in
connection therewith), and Butler will arrange for GE Capital to participate in
such good faith negotiations, to the extent that they relate to the Senior Term
Loan, the GE Capital Guaranty, the GE Capital Reimbursement and Security
Agreement and all other documents, instruments and agreements to be executed and
delivered pursuant thereto or in connection therewith (including, without
limitation, any such intercreditor or subordination agreement).
(b) Prior to the Closing Date, Butler and Maxwell will each advance one-
half of the amount of any underwriting deposit or commitment fee required to be
paid to the Senior Lenders in respect of the Senior Credit Agreement.
5.4 Preservation of Relationships by Maxwell. Prior to the Closing
----------------------------------------
Date, Maxwell will use its best efforts to preserve its relationships with (a)
the Buying Agents and Factories through which it currently sources S&L/JNY
Products for resale in the conduct of its own wholesale footwear business, so as
to enable Maxwell to make the benefit of those relationships available to the
Company on the basis contemplated under the Services Agreement; and (b) Bank of
Boston, so as to enable the Company to negotiate favorable terms under the
Senior Credit Agreement.
5.5 Landlords' Consents.
-------------------
(a) Until the Closing Date, Butler will use all reasonable efforts
(subject to the provisions of paragraph (d) below) to obtain the Headquarters
Landlord's Consent.
26
<PAGE>
(b) Until the last Store Transfer Closing Date (and thereafter to the
extent contemplated by the proviso to Section 2.3(a)), Butler will use all
reasonable efforts (subject to the provisions of paragraph (d) below) to obtain
Store Landlords' Consents in respect of each of the Store Leases on or before
the Store Transfer Closing Date with respect to such Store Lease.
(c) Maxwell will have the right to participate in such efforts and to
engage a consultant of its choosing to advise it in connection with such
participation, and Butler will cooperate with Maxwell and Maxwell's consultant
in all reasonable respects relating to Butler's undertakings under paragraphs
(a) and (b) of this Section 5.5.
-----------
(d) Maxwell will bear all expenses incurred by it in connection with
its rights and obligations under this Section 5.5 (including any expense
-----------
associated with the retaining by Maxwell of the consultant contemplated by
paragraph (c) above). Butler will bear all expenses incurred by it in connection
with its obligations under this Section 5.5, will pay all state and local
-----------
transfer taxes payable in respect of the assignment of the Store Leases and, if
necessary to obtain the consent of any of such landlords, will pay or reimburse
to the respective landlords under the Headquarters Lease and the Store Leases
all reasonable fees, costs and expenses incurred by such landlords in connection
with the granting of the Headquarters Landlord's Consent and the Store
Landlords' Consents contemplated thereby, provided that the amount of any such
--------
transfer taxes, together with any such reasonable fees, costs and expenses
reimbursable to such landlords, does not exceed $1,000 with respect to the
Headquarters Lease, $1,000 with respect to any Store Lease or $100,000 in the
aggregate as to all such Store Leases.
5.6 Store Conversion Activities by Butler. Butler will retain
-------------------------------------
possession of each of the Stores from the Agreement Date until the Store
Transfer Closing Date for such Store (as set forth on Schedule 2.3), and
------------
thereafter to the extent contemplated by the proviso to Section 2.3(a) hereof.
--------------
Prior to each such Store Transfer Closing Date, Butler and its agents will
conduct liquidation sales (to the extent permitted by the Store Leases and the
Store Landlords' Consents) and otherwise take such actions as shall be necessary
to remove all existing inventory from each such Store; to liquidate or otherwise
remove all other personal property of Butler (other than Store FF&E and cash
registers and related computer hardware subject to Store Register Agreements)
from each such Store; and to prepare each Store for assignment and delivery of
possession to the Company on a "broom clean" basis; in each case on the relevant
Store Transfer Closing Date.
5.7 Store Conversion Activities by Maxwell.
--------------------------------------
(a) Maxwell will (i) engage on behalf of the Company a firm of retail
store design consultants reasonably acceptable to Maxwell to assist Maxwell in
designing the Sam & Libby and Jones New York retail specialty store concepts to
be utilized in the conduct of the Company's business (the "S&L/JNY Retail Store
--------------------
Concepts"); (ii) obtain estimates from one or more building contractors
- --------
reasonably acceptable to Maxwell for the remodeling of each of the Stores to
incorporate the S&L/JNY Retail Store Concepts; (iii) work with its design
consultants to revise
27
<PAGE>
the S&L/JNY Retail Store Concepts as necessary in the event that the estimated
construction costs exceed the amounts reflected in the Budget or, alternatively,
recommend revisions to the Budget in accordance with Section 7.6(b) of the
Operating Agreement so as to reflect such excess costs; (iv) cause the Company,
on or after the Closing Date, to enter into fixed price construction contracts
with the building contractors selected by Maxwell for the remodeling of the
Stores so as to incorporate the S&L/JNY Retail Store Concepts; (v) cause such
building contractors to commence such construction on or as soon as is
practicable after the Store Transfer Closing Date for each of the Stores; and
(vi) monitor the progress of such construction and otherwise use its best
efforts to cause each of the Stores to reopen under the S&L/JNY Retail Store
Concepts on or before the Store Reopening Date for each such Store;
(b) Prior to the Closing Date, Maxwell will advance the amount of any
fee, retainer or other sum required to be paid to the design consultants
contemplated by clause (i) of paragraph (a) above.
5.8 Development of MIS System.
-------------------------
(a) Butler will retain Lake West Group as management information
consultants to advise Butler and Maxwell with respect to the development and
implementation of a merchandising and financial management information system
("MIS System") to be used by the Company in the conduct of its business. This
----------
MIS System will replace in its entirety the MIS System used by Butler in the
conduct of its business (other than the point of sale inventory system provided
under the Store Register Agreements), and Butler will not contribute or assign
to the Company any hardware, software or data comprising Butler's current MIS
System (other than through the assignment of the Store Register Agreements).
Working with such consultant, Butler will select vendors mutually acceptable to
Butler and Maxwell for the hardware and software components of such MIS System
and will enter into purchase contracts and license agreements for the hardware
and software components of such MIS System with the goal of making such MIS
System available to the Company on the timetable set forth on Schedule 5.8.
------------
Maxwell and Maxwell Retail acknowledge, however, that Butler does not represent,
warrant or covenant that such MIS System can be made available to the Company on
such timetable.
(b) Prior to the Closing Date, Butler will advance the amount of any
deposit, fee or expense reimbursement required to be paid to the management
information consultants and the equipment and software vendors contemplated by
paragraph (a) above.
5.9 Initial Sourcing of S&L/JNY Products.
------------------------------------
(a) Prior to the Closing Date, Butler will place purchase orders for
approximately 900,000 pairs of S&L/JNY Products for delivery during the period
May 30 to September 30, 1997 and Butler will open letters of credit in an amount
and payable on the terms specified in such purchase orders not later than 45
days before the shipment of S&L/JNY Products pursuant to each such purchase
order. Prior to the Closing Date, Maxwell will serve as sourcing manager
28
<PAGE>
for Butler in accordance with the Sourcing Manager Agreement dated as of
February 13, 1997 between Maxwell and Butler, will notify Butler in writing in
advance of submitting any purchase order for S&L/JNY Products on behalf of the
Company, specifying the S&L/JNY Products to be ordered pursuant to such purchase
order, the price payable for such S&L/JNY Products under such purchase order and
the identity of the Factory manufacturing such S&L/JNY Products and the Buying
Agent, if any, through which such purchase order is to be submitted, and will
obtain the written consent of Butler's footwear buyer, general merchandise
manager and chief financial officer to each such purchase order before
submitting it. Maxwell agrees that all such purchase orders placed by Maxwell on
behalf of Butler shall be placed with the same Factories, and on the same terms
and conditions (including shipment dates and cost for similar quantities so
ordered), as purchase orders from time to time placed by Maxwell for its own
wholesale business for the same or similar product.
(b) Prior to the Closing Date, Butler will be fully responsible for the
payment of all sums due in respect of the letters of credit opened by it under
paragraph (a) above.
5.10 Maxwell Services. Prior to the Closing Date, Maxwell will undertake
----------------
such activities as are reasonably necessary to permit it, from and after the
Closing Date, to perform on behalf of the Company the services contemplated by
the Services Agreement.
5.11 Trademarks. Prior to the Closing Date, Maxwell will (a) cause
----------
Sprague to preserve the Sam & Libby Domestic Trademarks as trademarks or
servicemarks registered under the laws of the United States and process all
documents with the USPTO as are reasonably necessary to preserve the
registrations thereof, and not abandon any of such registrations; (b) comply in
all material respects with the Jones New York Trademark License.
5.12 Employment and Benefit Matters.
------------------------------
(a) President. Maxwell will commence an executive search to identify
---------
and recruit one or more highly qualified individuals not presently employed by
Butler or Maxwell, and satisfactory to both Butler and Maxwell, as candidates to
serve as president of the Company. If deemed necessary by Maxwell, such search
will include the engaging of a reputable executive search firm reasonably
satisfactory to Maxwell. Butler and Maxwell will cooperate in good faith,
working with any such executive search firm, to interview such candidates and to
offer employment to, and to negotiate mutually acceptable terms of employment
with, one of such candidates, and will use all reasonable efforts to cause the
Company to enter into an Employment Agreement with such candidate incorporating
such terms of employment as soon as is reasonably possible, but with the goal of
entering into an Employment Agreement by May 1, 1997. Butler acknowledges,
however, that Maxwell and Maxwell Retail do not represent, warrant or covenant
that an Employment Agreement can be entered into by that date.
(b) Headquarters Employees of Butler. On or before April 15, 1997 (or
--------------------------------
the next succeeding pay period of Butler, if the Closing Date occurs after April
11, 1997), but in any event
29
<PAGE>
effective as of April 4, 1997 (provided that the Closing Date is not later than
April 30, 1997), Maxwell Retail will cause the Company to offer employment with
the Company to substantially all employees of Butler who are employed at the
Headquarters Premises (including senior management employees other than Douglas
P. Haensel, but excluding district managers) for such positions with the
Company, and on such terms of employment (subject to the provisions of this
Section 5.12), as are mutually agreeable to the Company and each such employee.
- ------------
Prior to such effective date, Butler shall be solely responsible for the payment
of all wages, bonuses, employment taxes, insurance, benefits and other expenses
relating to the employment by it of such employees and, after such effective
date, the Company shall be responsible for payment of such expenses. To the
extent that Butler pays any such expense attributable to any period after such
effective date, or the Company pays any such expense attributable to any period
before such effective date, Butler will reimburse the Company, or Maxwell Retail
will cause the Company to reimburse Butler, as appropriate, within five business
days after a request made by the other for such reimbursement.
(c) Other Employees of Butler. Butler will continue to employ its
-------------------------
district managers until May 11, 1997 and will continue to employ all of its
store-level employees until the Store Transfer Closing Date with respect to the
Store in which each such employee works, in each case subject to earlier
termination by such employees for any reason or by Butler pursuant to Butler's
customary policies. During such periods, Butler shall be solely responsible for
the payment of all wages, bonuses, employment taxes, insurance, benefits and
other expenses relating to the employment by it of such employees. Effective May
11, 1997, Maxwell Retail will cause the Company to offer employment to
substantially all of Butler's district managers, on such terms of employment
(subject to the provisions of this Section 5.12), as are mutually acceptable to
------------
the Company and such district managers. At such time as the store-level
employees' employment with Butler terminates, the Company may (but shall have no
obligation to) offer employment to any such employee on such terms of employment
(subject to the provisions of this Section 5.12) as the Company deems
------------
appropriate. It is not contemplated that the Company will offer employment to
any of the warehouse employees of Butler, but that Butler will provide
warehousing services to the Company on the basis, and for the period,
contemplated by the Transitional Services Agreement.
(d) Other Employees of the Company. Maxwell Retail will cause the
------------------------------
Company to recruit and employ such additional employees (other than the chief
executive officer provided for in paragraph (a) above and the current employees
of Butler provided for in paragraphs (b) and (c) above), as shall reasonably be
necessary for the Company to commence its operations and to conduct its business
on an efficient and effective basis, on such terms of employment as the Company
deems appropriate.
(e) Company Group Health Plan. As of the Closing Date, Maxwell Retail
-------------------------
will cause the Company to sponsor or otherwise make available to its employees a
group health plan (the "Company Health Plan") providing medical and dental
-------------------
benefit coverage. The Company Health Plan shall provide coverage to each
employee of Butler who becomes an employee of the
30
<PAGE>
Company (a "Former Butler Employee") and his or her dependents immediately upon
----------------------
employment with the Company, without regard to any preexisting condition
exclusion or limitation. Any expenses incurred by a Former Butler Employee that
would have been applied towards satisfaction of such employee's (or his or her
dependents') copayment or deductible under the medical and dental benefit
coverage offered by Butler under its group health plan in effect on the
Agreement Date, as described in The Butler Group Inc. Summary Plan Description
Master Health Plan and The Butler Group Inc. Summary Plan Description Master
Dental Plan, will be applied towards satisfaction of such employee's (or such
dependents') copayment or deductible under the Company Health Plan for the
calendar year in which such employee is first employed by the Company.
(f) Company Retirement Plan. As of the Closing Date, Maxwell Retail
-----------------------
will cause the Company to sponsor or otherwise make available to Former Butler
Employees a qualified defined contribution retirement plan (the "Company
-------
Retirement Plan") and shall cause the Company Retirement Plan to accept a plan
- ---------------
to plan transfer of assets and liabilities of the Butler 401(k) plan
attributable to Former Butler Employees, including plan loans, in accordance
with such terms and conditions of transfer as are mutually acceptable to the
Company and Butler.
(g) Prior Service Credit. Maxwell Retail will cause any employee
--------------------
benefit plan offered by the Company, including, without limitation, the Company
Retirement Plan, to provide that employment with Butler shall be treated as
employment by the Company for eligibility and vesting purposes under the plan.
(h) Accrued Vacation. Maxwell Retail will cause the Company to assume, as
----------------
of the Closing Date (or, if later, the effective date of any Former Butler
Employee's employment by the Company), all liability of Butler to Former Butler
Employees as of such date for accrued but unused vacation days with respect to
Butler's fiscal year beginning February 2, 1997, and will either make available
to such Former Butler Employees all vacation days not yet taken as of such date
during the Company's fiscal year ending January 31, 1998 or pay to them the cash
value of all unused vacation days at the conclusion of such fiscal year.
5.13 Access and Information. Prior to the Closing and each Store
----------------------
Transfer Closing:
(a) Butler will permit Maxwell and its representatives to have
reasonable access to Butler's directors, officers, employees, agents, assets and
properties and all relevant books, records and documents of or relating to the
transactions contemplated hereby during normal business hours and will furnish
to Maxwell such information, financial records and other documents relating to
Butler and its operations and business and relevant to the transactions
contemplated hereby as Maxwell may reasonably request.
(b) Maxwell will permit Butler and its representatives to have
reasonable access to Maxwell's directors, officers, employees, agents, assets
and properties and all relevant books, records and documents of or relating to
the transactions contemplated hereby during normal
31
<PAGE>
business hours and will furnish to Butler such information, financial records
and other documents relating to Maxwell and its operations and business and
relevant to the transactions contemplated hereby as Butler may reasonably
request.
(c) Each of Butler, Maxwell and Maxwell Retail agrees that it will hold
in confidence all information furnished to it pursuant to this Section 5.13,
------------
unless otherwise required by law.
5.14 Supplemental Disclosure. Butler, Maxwell and Maxwell Retail will
-----------------------
promptly supplement or amend each of the Schedules hereto with respect to any
matter that arises or is discovered prior to the Closing or any Store Transfer
Closing that, if existing or known at the date hereof, would have been required
to be set forth or listed in the Schedules hereto; provided, that, for purposes
-------- ----
of determining the rights and obligations of the parties under Articles VI or
-----------
VII hereof, any such supplemental or amended disclosure will not be deemed to
- ---
have been disclosed to any party unless the other parties otherwise expressly
consent in writing.
5.15 Governmental Filings. Butler and Maxwell will each furnish to the
--------------------
other all information concerning it as is required for inclusion in any
application or filing made by the other to any Governmental Body in connection
with the transactions contemplated by this Agreement.
5.16 Fulfillment of Conditions by Butler. Butler agrees not to take any
-----------------------------------
action that would cause the conditions precedent to the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled,
including without limitation by taking or causing to be taken any action that
would cause the representations and warranties made by Butler herein not to be
true and correct in all material respects as of the Closing Date or any Store
Transfer Closing Date. Butler will take all reasonable steps within its power
and consistent with the terms and conditions of this Agreement to cause to be
fulfilled the conditions precedent to the obligations of Maxwell, Maxwell Retail
and Butler to consummate the transactions contemplated hereby that are dependent
on the actions of Butler.
5.17 Fulfillment of Conditions by Maxwell and Maxwell Retail. Maxwell
-------------------------------------------------------
and Maxwell Retail agree not to take any action that would cause the conditions
precedent to the obligations of the parties to effect the transactions
contemplated hereby not to be fulfilled, including without limitation by taking
or causing to be taken any action that would cause the representations and
warranties made by Maxwell and Maxwell Retail herein not to be true and correct
in any material respects as of the Closing Date or any Store Transfer Closing
Date. Maxwell and Maxwell Retail will take all reasonable steps within its power
and consistent with the terms and conditions of this Agreement to cause to be
fulfilled the conditions precedent to the obligations of Butler, Maxwell and
Maxwell Retail to consummate the transactions contemplated hereby that are
dependent on the actions of Maxwell and Maxwell Retail.
5.18 Maxwell Subsidiaries; Liens. Maxwell agrees that, for so long as
---------------------------
Maxwell Retail serves as Manager under the Operating Agreement and for so long
as the Option Agreement and
32
<PAGE>
the Sam & Libby Trademark License are in effect, it will cause Maxwell Retail
and Sprague to maintain their separate corporate existences; will maintain
Maxwell Retail and Sprague as wholly-owned subsidiaries of Maxwell; will neither
cause nor permit Liens to exist on the capital stock or assets of Maxwell Retail
or Sprague, including, without limitation, the Sam & Libby Trademarks (other
than Liens for current taxes not yet past due and, with respect to the
Trademarks, other than Liens subordinated to the rights of the Company under the
Trademark Licenses pursuant to an agreement in which the holder of any such Lien
agrees to recognize all such rights and not to take any action that would
disturb any of such rights); and will cause Maxwell Retail to perform all of its
obligations under the Operating Agreement and the Option Agreement and will
cause Sprague to perform all of its obligations under the Sam & Libby Trademark
License.
5.19 Publicity. Butler, Maxwell and Maxwell Retail will cooperate with
---------
each other in the development and distribution of all news releases and other
public disclosures relating to the transactions contemplated by this Agreement.
Neither Butler, Maxwell, Maxwell Retail or the Company will issue or make, or
allow to have issued or made, any press release or public announcement
concerning the transactions contemplated by this Agreement without the advance
approval in writing of the form and substance thereof by the other parties,
unless otherwise required by law.
5.20 Transaction Costs.
-----------------
(a) The expenses contemplated by Section 5.5(d) will be paid by Maxwell
--------------
and Butler, respectively, on the basis set forth therein. Prior to the Closing
Date, the expenses contemplated by Sections 5.3(b), 5.7(b), 5.8(b) and 5.9(b)
--------------- ------ ------ ------
will be paid by the parties specified therein, subject to the provisions of
those Sections and to the provisions of this Section 5.20.
------------
(b) On the Closing Date, Maxwell Retail will cause the Company to (i)
assume all obligations of Butler and Maxwell contemplated by Section 5.3 hereof;
-----------
(ii) assume all obligations of Maxwell with respect to the retail store design
consultants retained by Maxwell pursuant to Section 5.7 hereof; (iii) assume all
-----------
obligations of Butler with respect to the MIS System developed by Butler
pursuant to Section 5.8 hereof, including without limitation all consulting
-----------
agreements, purchase contracts and license agreements entered into by Butler
pursuant to Section 5.8 hereof; and (iv) assume all obligations of Butler with
-----------
respect to the S&L/JNY Products ordered by Butler pursuant to Section 5.9 hereof
-----------
(including, without limitation, all financing costs actually paid or payable to
NationsBank in respect of the letters of credit opened by Butler in connection
with such purchase orders). To the extent that Butler or Maxwell have incurred
expenses prior to the Closing Date in respect of the obligations so assumed,
Maxwell Retail will cause the Company to reimburse Butler and Maxwell for such
expenses within five business days after the Closing Date.
(c) In the event that this Agreement is terminated prior to the Closing
Date pursuant to Section 8.1(a) hereof, Butler will bear all of the expenses
--------------
contemplated by Section 5.8(b) and
33
<PAGE>
5.9(b) and each party shall pay to the other such amount as is necessary so that
- ------
each party bears one-half of the expenses contemplated by Sections 5.3(b) and
---------------
5.7(b), upon presentation of paid invoices or other evidence of the payment of
- ------
such expenses.
(d) Except as set forth in paragraphs (a), (b) and (c) above, each
party will pay all fees, costs and expenses incurred by it in connection with
the preparation, negotiation, execution and performance of this Agreement or any
of the transactions contemplated by this Agreement, including, without
limitation, all fees and expenses of attorneys, accountants and consultants
retained by each party and all due diligence expense incurred by each party.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions Precedent to the Closing.
-----------------------------------
(a) Conditions to the Obligations of Butler. The obligations of Butler
---------------------------------------
under Section 2.2 of this Agreement are subject to the satisfaction at or prior
-----------
to the Closing Date of the following conditions, but compliance with any such
conditions may be waived by Butler in writing:
(i) All representations and warranties of Maxwell and Maxwell
Retail contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties were made on and as of the
Closing Date;
(ii) Maxwell and Maxwell Retail shall have performed and complied
with all the covenants and agreements and satisfied the conditions required
by this Agreement to be performed, complied with or satisfied by it on or
prior to the Closing Date, including without limitation the taking of all
actions required to be taken by Maxwell and Maxwell Retail and the delivery
of all items required to be delivered by Maxwell and Maxwell Retail
pursuant to Section 2.2 and Article V;
----------- ---------
(iii) Maxwell and Maxwell Retail shall have delivered to Butler a
closing certificate, dated the Closing Date and generally to the effect set
forth in clauses (i) and (ii) above;
(iv) Maxwell, Maxwell Retail and Sprague shall have delivered to
Butler a certificate of their respective secretaries with respect to
corporate resolutions adopted by their respective boards of directors
authorizing, and the incumbency of their respective officers executing, the
Maxwell Documents, together with copies of the corporate resolutions and
other documents referred to therein;
34
<PAGE>
(v) Maxwell and Maxwell Retail shall have delivered to Butler a
copy of the certificate of incorporation of each of Maxwell, Maxwell Retail
and Sprague, together with all amendments thereto, duly certified by the
Secretary of State of Delaware, and good standing certificates with respect
to Maxwell, issued as of a current date by the Secretaries of State of
Delaware and Massachusetts; Maxwell Retail, issued as of a current date by
the Secretaries of State of Delaware, Massachusetts and Georgia; and
Sprague issued as of a current date by the Secretaries of State of Delaware
and Massachusetts; and
(vi) Maxwell and Maxwell Retail shall have delivered to Butler a
legal opinion of their counsel, Gibson, Dunn & Crutcher LLP, substantially
in the form of Exhibit M hereto, and a legal opinion of their special
---------
trademark counsel, Browdy & Neimark, substantially in the form of Exhibit N
---------
hereto.
(b) Conditions to the Obligations of Maxwell and Maxwell Retail. The
-----------------------------------------------------------
obligations of Maxwell and Maxwell Retail under Section 2.2 of this Agreement
-----------
are subject to the satisfaction on or prior to the Closing Date of the following
conditions, but compliance with any such conditions may be waived by Maxwell and
Maxwell Retail in writing:
(i) All representations and warranties of Butler contained in
this Agreement shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though such representations and
warranties were made on and as of the Closing Date;
(ii) Butler shall have performed and complied with the covenants
and agreements and satisfied the conditions required by this Agreement to
be performed, complied with or satisfied by it on or prior to the Closing
Date, including without limitation the taking of all actions required to be
taken by Butler and the delivery of all items required to be delivered by
Butler pursuant to Section 2.2 and Article 5;
----------- ---------
(iii) Butler shall have delivered to Maxwell and Maxwell Retail a
closing certificate, dated the Closing Date and generally to the effect set
forth in clauses (i) and (ii) above;
(iv) Butler shall have delivered to Maxwell and Maxwell Retail a
certificate of its secretary with respect to corporate resolutions adopted
by its board of directors authorizing, and the incumbency of its officers
executing, the Butler Documents, together with copies of the corporate
resolutions and other documents referred to therein;
(v) Butler shall have delivered to Maxwell and Maxwell Retail a
copy of its certificate of incorporation, together with all amendments
thereto, duly certified by the Secretary of State of Delaware, and good
standing certificates with respect to Butler, issued as of a current date
by the Secretaries of State of Delaware and Georgia; and
35
<PAGE>
(vi) Butler shall have delivered to Maxwell and Maxwell Retail a
legal opinion of its counsel, King & Spalding, substantially in the form of
Exhibit O hereto.
---------
(c) Conditions to the Obligations of Butler, Maxwell and Maxwell
------------------------------------------------------------
Retail. The obligations of each of Butler, Maxwell and Maxwell Retail under
- ------
Section 2.2 of this Agreement are subject to the satisfaction on or prior to the
- -----------
Closing Date of the following conditions, but compliance with any such
conditions may be jointly waived by Butler, Maxwell and Maxwell Retail in
writing:
(i) All necessary consents, approvals, orders or authorizations
of Governmental Bodies shall have been obtained and all necessary notices
to Governmental Bodies shall have been given;
(ii) There shall be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against Butler,
Maxwell, Maxwell Retail, Sprague or the Company to restrain or prohibit or
obtain damages or other relief with respect to this Agreement or the
consummation of the transactions contemplated hereby;
(iii) Maxwell shall have obtained and delivered to the Company the
consent from Bank of Boston, Maxwell's lender, necessary to reconcile the
conflict noted on Schedule 4.3.
------------
(iv) Maxwell shall have obtained and delivered to the Company a
Second Amendment to the Jones New York License Agreement, substantially in
the form of Exhibit P hereto, together with the consent of Jones to the
---------
Jones New York Trademark Sublicense;
(v) Maxwell shall have obtained and delivered to the Company an
agreement from Bank of Boston of the kind contemplated by Section 5.18
------------
hereof with respect to any Liens that Bank of Boston might now or hereafter
have with respect to the Trademarks;
(vi) Butler shall have obtained and delivered to the Company the
Headquarters Telephone Lessor's Consent;
(vii) Butler shall have obtained and delivered to the Company the
Headquarters Landlord's Consent;
(viii) Maxwell shall have obtained and delivered to the Company an
acknowledgment from Mark J. Cocozza in substantially the form of Exhibit Q
---------
hereto;
36
<PAGE>
(ix) Butler shall have obtained and delivered to the Company
Store Landlords' Consents with respect to not less than 120 of the Stores;
and
(x) The Senior Lenders and the Senior Agent shall have entered
into the Senior Credit Agreement and any and all other documents
contemplated thereby to be entered into by the Senior Lenders or the Senior
Agent; shall have accepted the GE Capital Guaranty; Bank of Boston shall
have issued the letters of credit contemplated by Section 2.2(e)(xi); the
------------------
Senior Lenders shall be prepared to issue other letters of credit, subject
to no conditions other than customary conditions relating to the absence of
defaults and accuracy of representations and warranties; and the Senior
Lenders shall be prepared to make the Senior Revolving Loan and Senior Term
Loan, subject to no conditions other than the funding in full of the
Subordinated Loan and customary conditions relating to the absence of
defaults and accuracy of representations and warranties.
6.2 Conditions Precedent to Each Store Transfer Closing.
---------------------------------------------------
(a) Conditions to the Obligations of Butler. The obligations of Butler
---------------------------------------
under Section 2.3(a) of this Agreement are subject to the satisfaction on or
--------------
prior to each Store Transfer Closing Date of the following conditions, but
compliance with any such conditions may be waived by Butler in writing:
(i) Maxwell and Maxwell Retail shall have performed and complied
with all the covenants and agreements and satisfied the conditions required
by this Agreement to be performed, complied with or satisfied by each of
them on or prior to such Store Transfer Closing Date, including without
limitation the taking of all actions required to be taken by Maxwell and
Maxwell Retail and the delivery of all items required to be delivered by
Maxwell and Maxwell Retail pursuant to Section 2.3 and Article V; and
----------- ---------
(ii) Maxwell and Maxwell Retail shall have delivered to Butler a
closing certificate, dated such Store Transfer Closing Date and generally
to the effect set forth in clause (i) above.
(b) Conditions to the Obligations of Maxwell and Maxwell Retail. The
-----------------------------------------------------------
obligations of Maxwell and Maxwell Retail under Sections 2.3(b) and (c) of this
--------------- ---
Agreement are subject to the satisfaction on or prior to each Store Transfer
Closing Date of the following conditions, but compliance with any such
conditions may be waived by Maxwell and Maxwell Retail in writing:
(i) Butler shall have performed and complied with all the
covenants and agreements and satisfied the conditions required by this
Agreement to be performed, complied with or satisfied by it on or prior to
such Store Transfer Closing Date, including without limitation the taking
of all actions required to be taken by Butler and the delivery of all items
required to be delivered by Butler pursuant to Section 2.3 and Article V;
----------- ---------
and
37
<PAGE>
(ii) Butler shall have delivered to Maxwell and Maxwell Retail a
closing certificate, dated such Store Transfer Closing Date and generally
to the effect set forth in clause (i) above.
(c) Conditions to Obligations of Butler, Maxwell and Maxwell Retail.
---------------------------------------------------------------
The obligations of Butler, Maxwell and Maxwell Retail under Section 2.3 of this
-----------
Agreement are subject to the satisfaction on or prior to each Store Closing Date
of the following conditions, but compliance with any such conditions may be
waived by Butler, Maxwell and Maxwell Retail in writing:
(i) Each of the conditions set forth in Section 6.1 above shall
-----------
have been satisfied or waived, and the Closing shall have occurred on the
Closing Date;
(ii) All necessary consents, approvals, orders or authorizations
of Governmental Bodies shall have been obtained and all necessary notices
to Governmental Bodies shall have been given;
(iii) There shall be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against Butler,
Maxwell, Maxwell Retail or the Company to restrain or prohibit or obtain
damages or other relief with respect to this Agreement or the consummation
of the transactions contemplated hereby;
(iv) No default or event of default shall have occurred and be
continuing under the Senior Credit Agreement or the Subordinated Note
Purchase Agreement;
(v) The Company shall have delivered to Butler and Maxwell
Retail a certificate, dated such Store Transfer Closing Date and generally
to the effect set forth in clause (iv) above; and
(vi) Butler shall have obtained and delivered to the Company a
Store Landlord's Consent from each landlord under the Store Leases to be
assigned by Butler to the Company at such Store Transfer Closing.
6.3 Additional Conditions Precedent on the Store Register Transfer
--------------------------------------------------------------
Date.
- ----
(a) Conditions to the Obligations of Butler. The obligations of Butler
---------------------------------------
under Section 2.4(a) of this Agreement are subject to the satisfaction on or
--------------
prior to the Store Register Transfer Date of the condition that Maxwell and
Maxwell Retail shall have taken all actions required to be taken by Maxwell and
Maxwell Retail and delivered all items required to be delivered by Maxwell and
Maxwell Retail pursuant to Section 2.4(b), but compliance with such condition
--------------
may be waived by Butler in writing.
38
<PAGE>
(b) Conditions to the Obligations of Maxwell and Maxwell Retail. The
-----------------------------------------------------------
obligations of Maxwell and Maxwell Retail under Section 2.4(b) of this Agreement
--------------
are subject to the satisfaction on or prior to the Store Register Transfer Date
of the condition that Butler shall have taken all actions required to be taken
by Butler and delivered all items required to be delivered by Butler pursuant to
Section 2.4(a), but compliance with such condition may be waived by Maxwell and
- --------------
Maxwell Retail in writing.
(c) Conditions to Obligations of Butler, Maxwell and Maxwell Retail.
---------------------------------------------------------------
The obligations of Butler, Maxwell and Maxwell Retail under Section 2.4 of this
-----------
Agreement are subject to the satisfaction on or prior to the Store Register
Transfer Date of the following conditions, but compliance with such conditions
may be waived by Butler, Maxwell and Maxwell Retail in writing:
(i) Each of the conditions set forth in Section 6.2 above shall
-----------
have been satisfied with respect to the Store Register Transfer Date; and
(ii) Butler shall have obtained and delivered to the Company each
of the Store Register Consents.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Maxwell, Maxwell Retail and the Company by
-------------------------------------------------------------
Butler. Butler shall indemnify and hold Maxwell, Maxwell Retail, the Company and
- ------
their respective Affiliates, members, directors, officers, employees and agents
harmless from any and all liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all court costs and reasonable attorneys'
fees (collectively, "Indemnified Losses") that any of the foregoing may suffer
------------------
or incur as a result of or relating to: (a) the inaccuracy of any of the
representations and warranties made by Butler in this Agreement; (b) the breach
of any of the covenants and agreements made by Butler in this Agreement; (c) the
failure of Butler, its officers or employees to comply with any Employment Laws
(other than a failure to comply with any actual or alleged severance pay
program, practice or plan, except to the extent specifically provided in clause
(d) below) with respect to (i) a Former Butler Employee at any time during the
period that such individual is an employee of Butler, or (ii) a Former Butler
Employee while such Former Butler Employee is providing services to Butler under
the direction and control of Butler pursuant to the Transitional Services
Agreement, in each case including, without limitation, any Indemnified Losses
arising under any theory of joint employer status, alter ego or successor
----- ---
employer status; and (d) with respect only to the 23 Former Butler Employees of
Butler previously identified by Butler and Maxwell, the failure of Butler to
comply with any actual or alleged severance pay program, practice or plan of
Butler; provided, however, that Butler shall not be required by virtue of this
-------- -------
Section 7.1 to indemnify any officer or employee of the Company who is a Former
- -----------
Butler Employee with respect to any matter specified in clauses (c) and (d)
hereof.
39
<PAGE>
7.2 Indemnification of Butler and the Company by Maxwell and Maxwell
----------------------------------------------------------------
Retail. Maxwell and Maxwell Retail shall jointly and severally indemnify and
- ------
hold Butler, the Company and their respective Affiliates, members, directors,
officers, employees and agents harmless from any and all Indemnified Losses that
any of the foregoing may suffer or incur as a result of or relating to: (a) the
inaccuracy of any of the representations and warranties made by Maxwell or
Maxwell Retail in this Agreement; or (b) the breach of any of the covenants and
agreements made by Maxwell or Maxwell Retail in this Agreement.
7.3 Indemnification of Butler by the Company. Maxwell Retail shall
----------------------------------------
cause the Company to indemnify and hold Butler, its Affiliates, directors,
officers, employees and agents harmless from any and all Indemnified Losses that
any of the foregoing may suffer or incur as a result of or relating to the
failure of the Company, the Manager or their respective officers or employees to
comply with any Employment Laws with respect to (i) a Former Butler Employee
during the period that such individual is an employee of the Company, or (ii) a
current Butler employee during any time while such employee is providing
services to the Company under the direction and control of the Company pursuant
to the Transitional Services Agreement, in each case including, without
limitation, any Indemnified Losses arising under any theory of joint employer
status, alter ego or successor employer status.
----- ---
7.4 Indemnification Procedures.
--------------------------
(a) A Person entitled to indemnification pursuant to Sections 7.1, 7.2
------------ ---
or 7.3 (an "Indemnified Person") shall give prompt notice to the party from whom
--- ------------------
such indemnification is sought (the "Indemnifying Party") of the assertion of
------------------
any claim, or the commencement of any action, suit or proceeding, by a third
party in respect of which indemnity may be sought hereunder (a "Third Party
-----------
Claim") and will give the Indemnifying Party such information with respect
- -----
thereto as the Indemnifying Party may reasonably request. The Indemnifying Party
shall have the right, exercisable by written notice to the Indemnified Person
within fifteen (15) days after receipt of notice from the Indemnified Person of
the commencement of or assertion of any Third Party Claim, to assume the defense
of such Third Party Claim with counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Person, provided that such Indemnifying
Party thereafter prosecutes such defense with reasonable diligence and in a
professional manner. Any Indemnified Person shall have the right to employ
counsel in any such proceeding separate from that employed by the Indemnifying
Party on behalf of the Indemnified Person or Persons against whom such Third
Party Claim has been made, but the fees and expenses of such separate counsel
shall be solely at the expense of such Indemnified Person.
(b) The Indemnifying Party, if it shall have assumed the defense of any
Third Party Claim, shall have the right to consent to the entry of judgment with
respect to, or otherwise settle, such Third Party Claim provided that the
Indemnified Person shall have consented thereto, which consent shall not be
unreasonably withheld. In the event that any Indemnified Person withholds such
consent for any reason, the liability of the Indemnifying Party under this
Article VII with
- -----------
40
<PAGE>
respect to such Third Party Claim shall not exceed the amount of the proposed
judgment or settlement for which such consent was sought.
(c) The parties hereto shall cooperate in all reasonable respects in
the defense of any such Third Party Claim and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may reasonably be requested by any other party
hereto in connection therewith.
7.5 Survival. The representations and warranties of Butler, Maxwell and
--------
Maxwell Retail made in or pursuant to this Agreement will survive the execution
and delivery of this Agreement, the Closing and each Store Transfer Closing and
thereafter through and including the last day of the Company's fiscal year
ending on January 30, 1999.
7.6 Limitations. Notwithstanding anything to the contrary set forth in
-----------
this Article 7, (a) the rights of the parties under Sections 7.1 and 7.2 (but
--------- ------------ ---
not 7.3) shall terminate on January 31, 1999 as to any claim for indemnification
---
not asserted in writing before such date; and (b) from and after the Closing
Date the recourse of each party with respect to any claim for indemnification
shall be limited solely to, and any judgment shall be enforced solely against,
the Member Interest held by the other party or its Affiliates, and not to or
against any other assets of such other party; provided, however, that each party
-----------------
hereto shall be fully liable (without regard to the limitation set forth in this
Section 7.6(b)) at law and in equity for damages resulting from (i) the wilful
- --------------
breach of any representation, warranty or covenants made by it herein or in the
other Butler Documents or Maxwell Documents to which it is a party, or (ii)
fraud, bad faith or willful misconduct on its part hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination; Breakup Arrangements.
---------------------------------
(a) This Agreement and the transactions contemplated hereby may be
terminated and abandoned at any time prior to the Closing (i) by mutual written
consent of Butler and Maxwell; or (ii) by either Butler or Maxwell if a
condition to performance by the terminating party hereunder at the Closing has
not been satisfied or waived prior to April 30, 1997.
(b) In the event of the termination of this Agreement pursuant to
paragraph (a) above:
(i) the obligations of Butler, Maxwell and Maxwell Retail under
Section 5.20 and Article VII will survive such termination;
------------ -----------
(ii) Butler will retain, and Butler and Maxwell Retail will cause
the Company to assign to Butler, any and all rights to the MIS System being
developed for use by the
41
<PAGE>
Company pursuant to Section 5.8(a); and Butler will assume any obligations
--------------
of the Company to the consultant and hardware and software vendors
referenced in Section 5.8(b) with respect to such MIS System;
--------------
(iii) Butler will retain all rights to the inventory purchased or
ordered by Butler pursuant to Section 5.9(a); and Butler will relabel at
--------------
its expense all such inventory (or at its option may pay to the Factories
such reasonable additional sum as the Factories shall request to relabel
such inventory) from the "Sam & Libby," "Just Libby" or "Jones New York"
brands to such other brand or brands as Butler shall specify; and
(iv) Butler will not, for a period of two years after such
termination, source new inventory from the Factories used by Maxwell to
manufacture S&L/JNY Products ordered by Butler in accordance with Section
-------
5.9 hereof, provided that Maxwell has identified such Factories and Butler
--- --------
has specifically consented to the purchase orders specifying such Factories
on the basis contemplated by Section 5.9 (but the provisions of this clause
-----------
(iv) shall not apply with respect to any Factories that have previously
been used by Butler or Butler's buying agents to manufacture Dolcis or
other inventory).
8.2 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations of the parties hereunder can be assigned or delegated by Butler,
on the one hand, or by Maxwell and Maxwell Retail, on the other, without the
prior written consent of the other party or parties; provided, however, that (i)
-------- -------
Butler may assign and delegate any of its rights, interests, duties or
obligations hereunder to its parent company in conjunction with its liquidation
for corporate or federal income tax purposes, as may any such assignee of Butler
or assignee of such an assignee, and the assignor in any such assignment and
delegation shall be relieved of any further liability hereunder upon the
assumption of such liability by an assignee permitted hereunder; and (ii)
Maxwell may delegate to Sprague those duties or obligations which, by the
express terms of this Agreement, Maxwell is to cause Sprague to perform.
8.3 Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
-------
8.3):
- ---
If to Butler:
------------
c/o GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
42
<PAGE>
With copies to:
--------------
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
If to Maxwell or Maxwell Retail:
-------------------------------
Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
8.4 Binding Effect. This Agreement will be binding upon and inure to
--------------
the benefit of the parties hereto and their successors, legal representatives,
and permitted assigns.
8.5 No Third Party Beneficiary. This Agreement is made solely and
--------------------------
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns
43
<PAGE>
subject to the express provisions hereof relating to successors and assigns, and
(except as specifically set forth in Article VII) no other Person whatsoever
-----------
will have any rights, interest, or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party beneficiary or
otherwise.
8.6 Waiver. No failure by any party to insist upon the strict
------
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof will constitute
a waiver of any such breach or any other covenant, duty, agreement, or
condition.
8.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
8.8 Entire Agreement. This Agreement and the documents contemplated hereby
----------------
contain the entire understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof (including,
without limitation, the letter agreements between Butler and Maxwell dated
December 23, 1996 and February 13, 1997). This Agreement cannot be modified or
amended except in writing signed by the party against whom enforcement is
sought. The Exhibits and Schedules to this Agreement are incorporated by
reference into and made a part of this Agreement for all purposes.
8.9 Governing Law. Any action that Maxwell Retail is to cause the Company
-------------
to take pursuant to any provision of this Agreement will be deemed to be taken
by the Company under the Operating Agreement and all rights, duties and
responsibilities of the parties with respect thereto will be governed by and
construed and interpreted in accordance with the Operating Agreement (including
Section 13.12 thereof). In all other respects, this Agreement will be governed
by and construed and interpreted in accordance with the laws of the State of New
York applicable to contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
THE BUTLER GROUP INC.
By: /s/ Douglas P. Haensel
----------------------------
Douglas P. Haensel
Executive Vice President
MAXWELL SHOE COMPANY INC.
By: /s/ James J. Tinagero
-----------------------------
James J. Tinagero
Executive Vice President
MAXWELL RETAIL INC.
By: /s/ James J. Tinagero
-----------------------------
James J. Tinagero
Chairman
44
<PAGE>
EXHIBIT 10.2
-------------------------------------------------------------------
OPERATING AGREEMENT
OF
SLJ RETAIL LLC
APRIL 14, 1997
- -------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions................................................. 1
-----------
1.2 Rules of Construction....................................... 11
---------------------
ARTICLE II ORGANIZATIONAL MATTERS
2.1 Formation................................................. 11
---------
2.2 Name...................................................... 12
----
2.3 Registered Agent and Office............................... 12
---------------------------
2.4 Principal Place of Business............................... 12
---------------------------
2.5 Term...................................................... 12
----
2.6 Ownership................................................. 12
---------
2.7 Relationship Among Members................................ 12
--------------------------
2.8 Independent Activities of Members......................... 12
---------------------------------
2.9 No Individual Authority................................... 12
-----------------------
2.10 Qualification in Other Jurisdictions...................... 12
------------------------------------
ARTICLE III PURPOSE
3.1 Purposes and Scope.......................................... 13
------------------
3.2 Powers of the Company....................................... 13
---------------------
ARTICLE IV CAPITAL CONTRIBUTIONS AND LOANS
4.1 Initial Capital Contributions.............................. 13
-----------------------------
4.2 Member Interests; Member Units; Percentage Interests....... 14
----------------------------------------------------
4.3 Additional Capital Contributions........................... 15
--------------------------------
4.4 Limitations on Capital Contributions and Loans............. 15
----------------------------------------------
ARTICLE V CAPITAL ACCOUNTS AND ALLOCATIONS
5.1 Capital Accounts........................................... 15
----------------
5.2 Interest................................................... 16
--------
5.3 Allocation of Profits and Losses........................... 16
--------------------------------
5.4 Special Allocations........................................ 18
-------------------
5.5 Curative Allocations....................................... 19
--------------------
5.6 Other Allocation Rules..................................... 19
----------------------
</TABLE>
ARTICLE VI DISTRIBUTIONS
i
<PAGE>
<TABLE>
<S> <C>
6.1 Distributions.............................................. 20
-------------
6.2 Amounts Withheld........................................... 21
----------------
6.3 Tax Distributions.......................................... 21
-----------------
ARTICLE VII MANAGEMENT OF THE COMPANY
7.1 Appointment of Manager.................................... 21
----------------------
7.2 Management Services....................................... 22
-------------------
7.3 Rights, Obligations and Duties of the Manager............. 22
---------------------------------------------
7.4 Officers.................................................. 22
--------
7.5 Significant Operating Decisions........................... 23
-------------------------------
7.6 Budgets................................................... 26
-------
7.7 Reliance by Third Parties................................. 27
-------------------------
7.8 Compensation of Manager................................... 27
-----------------------
7.9 Company Funds............................................. 27
-------------
7.10 Duties and Responsibilities............................... 27
---------------------------
7.11 Indemnification........................................... 27
---------------
7.12 Liability of the Manager and the Members.................. 29
----------------------------------------
7.13 Right of the Butler Member or the Advisory Board
------------------------------------------------
to Remove Manager......................................... 30
-----------------
7.14 Advisory Board............................................ 30
--------------
ARTICLE VIII RIGHTS AND OBLIGATIONS OF MEMBERS
8.1 Management of Business..................................... 32
----------------------
8.2 Return of Capital.......................................... 32
-----------------
8.3 Partition.................................................. 32
---------
8.4 Resignation................................................ 32
-----------
8.5 Proxies.................................................... 32
-------
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting..................................... 33
----------------------
9.2 Reports.................................................... 33
-------
9.3 Notices from Senior Lender................................. 33
--------------------------
ARTICLE X TAX MATTERS
10.1 Preparation of Tax Returns................................ 34
--------------------------
10.2 Tax Status; Elections..................................... 34
---------------------
10.3 Tax Controversies......................................... 34
-----------------
10.4 Organizational Expenses................................... 35
-----------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI PLEDGE AND TRANSFER RESTRICTIONS;CERTAIN RIGHTS;
ADMISSION OF SUCCESSOR MEMBERS
11.1 Pledge and Transfer Restrictions......................... 35
--------------------------------
11.2 Transfers by Maxwell Retail.............................. 35
---------------------------
11.3 Transfers by Butler...................................... 35
-------------------
11.4 First Refusal Rights..................................... 35
--------------------
11.5 Tag Along Rights......................................... 36
----------------
11.6 Take Along Rights........................................ 37
-----------------
11.7 Closing of Permitted Transfers........................... 38
------------------------------
11.8 Rights of Assignee....................................... 39
------------------
11.9 Admission as a Successor Member.......................... 39
-------------------------------
11.10 Distributions and Allocations in Respect of
-------------------------------------------
Transferred Member Interests............................. 40
----------------------------
ARTICLE XII DISSOLUTION AND LIQUIDATION
12.1 No Dissolution............................................ 40
--------------
12.2 Events Causing Dissolution................................ 40
--------------------------
12.3 Continuation of the Company............................... 41
---------------------------
12.4 Liquidation............................................... 41
-----------
12.5 Reserves.................................................. 42
--------
12.6 Distributions in Kind..................................... 42
---------------------
12.7 Filing of Certificate of Cancellation..................... 43
-------------------------------------
12.8 Return of Capital......................................... 43
-----------------
ARTICLE XIII GENERAL PROVISIONS
13.1 Amendment................................................ 43
---------
13.2 Further Action........................................... 43
--------------
13.3 Invalidity of Provisions................................. 43
------------------------
13.4 Notices.................................................. 43
-------
13.5 Binding Effect........................................... 45
--------------
13.6 Integration.............................................. 45
-----------
13.7 No Third Party Beneficiary............................... 45
--------------------------
13.8 Waiver................................................... 45
------
13.9 Counterparts............................................. 45
------------
13.10 Entire Agreement......................................... 45
----------------
13.11 Governing Law............................................ 45
-------------
</TABLE>
iii
<PAGE>
OPERATING AGREEMENT
OF
SLJ RETAIL LLC
THIS OPERATING AGREEMENT OF SLJ RETAIL LLC is made and entered into as of
April 14, 1997 by and between THE BUTLER GROUP INC., a Delaware corporation, and
MAXWELL RETAIL INC., a Delaware corporation, as Members, together with any other
Person who becomes a Member as provided herein.
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1.1 Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated to the contrary:
"Advisory Board" has the meaning set forth in Section 7.14(a).
-------------- ---------------
"Affiliate" has the meaning set forth in the Contribution Agreement.
---------
"Agreement" means this Operating Agreement, as it may be amended, modified,
---------
supplemented or restated from time to time.
"Available Cash" of the Company means, at any time, all cash funds of the
--------------
Company on hand or available for borrowing under the Senior Revolving Loan
after: (i) payment of all expenses of the Company that are due and payable as of
such time; (ii) provision for payment of all expenses of the Company that are
anticipated to become due and payable within thirty days following such time;
and (iii) provision for adequate reserves (working capital and/or capital), as
determined by the Manager.
"Book Value" means, for any asset, the asset's adjusted basis for federal
----------
income tax purposes, except as follows:
(a) The initial Book Value of any asset contributed by a Member to the
Company will be the gross fair market value of such asset on the date of
contribution, as reasonably determined by the Manager (with the consent of the
Required Members).
(b) The Book Values of all Company assets will be adjusted to equal their
respective gross fair market values, as determined by the Manager (with the
consent of the Required Members), as of the following times: (i) the acquisition
of an additional interest in the Company by any new or existing Member in
exchange for more than a de minimis Capital Contribution if the Manager (with
-- -------
the consent of the Required Members) reasonably determines that such
<PAGE>
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; (ii) the distribution by the Company to
a Member of more than a de minimis amount of Company property as consideration
-- -------
for an interest in the Company if the Manager (with the consent of the Required
Members) reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Members in the Company; and
(iii) the liquidation of the Company within the meaning of Tax Regulations
Section 1.704-1(b)(2)(ii)(g). Notwithstanding the foregoing, absent the consent
of the Required Members (which consent may be given or withheld for any reason
or no reason) the Book Values of Company assets shall not be adjusted upon the
exercise of the Butler Exchange Rights or the Maxwell Option Rights.
(c) The Book Value of any Company asset distributed to any Member will be
adjusted to equal the gross fair market value of such asset on the date of
distribution, as reasonably determined by the Manager (with the consent of the
Required Members).
(d) The Book Value of Company assets will be increased (or decreased) to
reflect any adjustment to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Tax Regulations Section 1.704-1(b)(2)(iv)(m), paragraph (f) of the definition of
Profits and Losses and Section 5.4(d); provided that Book Value will not be
-------------- --------
adjusted pursuant to this paragraph (d) to the extent the Manager (with the
consent of the Required Members) determines that an adjustment pursuant to
paragraph (b) is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this paragraph (d).
"Budget" has the meaning set forth in Section 7.6(a).
------ --------------
"Business Day" means any day that is not a Saturday or Sunday or a day on
------------
which banks are required or permitted to be closed in the States of New York or
Massachusetts.
"Butler" means The Butler Group Inc., a Delaware corporation, and its
------
successors and assigns pursuant to any Transfer permitted hereunder.
"Butler Cashout Event" means the later to occur of (a) the release by the
--------------------
Senior Agent of the GE Capital Guaranty; and (b) either (i) the payment in full
of the Subordinated Notes; or (ii) the closing of the first exercise by Butler
of its rights under Section 2.2 of the Option Agreement.
"Butler Exchange Rights" means the right of Butler to exchange the 4,500
----------------------
Class A Member Units initially issued to it hereunder, together with the entire
principal amount of the Subordinated Loan, for 4,500 Class B Member Units
pursuant to Section 2.1 of the Option Agreement.
2
<PAGE>
"Butler Member" means, at any time, (a) Butler, if Butler is a Member at
-------------
such time, and (b) if Butler is not a Member at such time, any transferee
pursuant to any Transfer permitted hereunder of all of the Member Units
originally held by Butler hereunder or issued upon the exercise of the Butler
Exchange Rights.
"Capital Account" means, with respect to any Member, the capital account
---------------
maintained for such Member in accordance with the following provisions:
(a) Such Capital Account will be increased by such Member's Capital
Contributions, such Member's allocable share of Profits and any items in the
nature of income or gain that are specifically allocated to such Member pursuant
to Sections 5.4 and 5.5, and the amount of any Company liabilities assumed by
------------ ---
such Member or which are secured by any property distributed to such Member.
(b) Such Capital Account will be decreased by the cash amount or Book Value
of any property distributed to such Member pursuant to this Agreement, such
Member's allocable share of Losses and any items in the nature of deductions or
losses that are specially allocated to such Member pursuant to Sections 5.4 and
------------
5.5, and the amount of any liabilities of the Member assumed by the Company or
- ---
for the satisfaction of which recourse may be made to any property contributed
by such Member to the Company.
(c) In the event all or a portion of a Member Interest is Transferred in
accordance with the terms of this Agreement, the transferee will succeed to the
Capital Account of the transferor to the extent it relates to the Transferred
Member Interest; provided that if the Transfer causes a termination of the
--------
Company under Code Section 708(b)(1)(B), the assets of the Company will be
deemed to have been distributed in liquidation of the Company to the Members
(including the transferee of the Member Interest) pursuant to Sections 12.4 and
-------------
12.6 of this Agreement and recontributed by such Members and transferees in
- ----
reconstitution of the Company, or the assets of the Company will be deemed to
have been transferred to a new partnership the interests in which will be deemed
to have been distributed to the Members (including the transferee of the Member
Interest) pursuant to Sections 12.4 and 12.6, in either case as required by then
------------- ----
applicable Tax Regulations. Such deemed liquidation and reconstitution will not
cause the Company to be dissolved or reconstituted for purposes other than
maintenance of the Capital Accounts and federal income tax purposes, unless
otherwise provided in Article XII.
-----------
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are generally intended to comply
with Tax Regulations Section 1.704-1(b) and will be interpreted and applied in a
manner consistent with such Tax Regulations. If the Manager (with the consent
of the Required Members) determines that it is prudent to modify the manner in
which the Capital Accounts, or any increases or decreases to the Capital
Accounts, are computed in order to comply with such Tax Regulations, the Manager
may authorize such modifications, provided that it is not likely to have a
material effect on the
3
<PAGE>
amounts distributable to any Person pursuant to Section 12.4 upon the
------------
dissolution of the Company, nor a material effect on the amounts of taxable
income, gain, deduction, or loss allocable to the Members. The Manager may also
(with the consent of the Required Members) (i) many any adjustments that are
necessary or approopriate to maintain equality between the Capital Accounts of
the Members and the amount of capital reflected on the Company's balance sheet,
as computed for book purposes, in accordance with Tax Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) manke any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Tax
Regulations Section 1.704-1(b).
"Capital Contribution" means, with respect to any Member, the amount of
--------------------
money and the initial Book Value of any property (other than money) contributed
to the Company with respect to the Member Interest held by such Member,
including the principal amount of the Subordinated Notes delivered by Butler to
the Company upon the exercise of the Butler Exchange Rights pursuant to Section
-------
2.1 of the Option Agreement and the Capital Contribution made by Maxwell Retail
- ---
upon the exercise of the Maxwell Option Rights pursuant to Section 3.1 of the
-----------
Option Agreement.
"Certificate of Formation" means the Certificate of Formation filed with
------------------------
the Office of the Secretary of State of Delaware pursuant to Section 2.1 of the
Contribution Agreement, as it may be amended or restated from time to time.
"Change of Control" means, as to Maxwell, that any Person other than
-----------------
Maxwell V. Blum, any other Affiliate of Maxwell as of the date of this Agreement
or any member or members of the Immediate Family of any of the foregoing
acquires (i) 50% or more of the common stock of all classes of Maxwell or (ii)
common stock of any class or classes of Maxwell having the voting power
necessary to elect a majority of the members of the board of directors of
Maxwell.
"Class A Member Interests" has the meaning set forth in Section 4.2(a).
------------------------ --------------
"Class A Member Unit Equalization Amount" means the amount at any time from
---------------------------------------
and after the exercise of the Butler Exchange Rights equal to (a) the product of
(i) $12,500,000, multiplied by (ii) that fraction the numerator of which is the
---------- --
number of outstanding Class B Member Units and the denominator of which is
4,500, multiplied by (iii) that fraction the numerator of which is the number of
---------- --
outstanding Class A Member Units and the denominator of which is the number of
outstanding Class B Member Units, minus (b) the amount of any distributions
-----
previously made in respect of the Class A Member Units pursuant to Section
-------
6.1(a)(ii).
- ----------
"Class A Member Units" has the meaning set forth in Section 4.2(a).
-------------------- --------------
"Class B Member Interests" has the meaning set forth in Section 4.2(a).
------------------------ --------------
4
<PAGE>
"Class B Member Unit Preferred Amount" means the amount at any time from
------------------------------------
and after the exercise of the Butler Exchange Rights equal to (a) the product of
(i) $12,500,000, multiplied by (ii) that fraction the numerator of which is the
---------- --
number of outstanding Class B Member Units and the denominator of which is
4,500, minus (b) the amount of any distributions previously made in respect of
-----
the Class B Member Units pursuant to Section 6.1(a)(i).
-----------------
"Class B Member Units" has the meaning set forth in Section 4.2(a).
-------------------- --------------
"Closing Date" has the meaning set forth in the Contribution Agreement.
------------
"Code" means the Internal Revenue Code of 1986, as amended and in effect
----
from time to time. All references herein to the Code will include any
corresponding provision or provisions of succeeding law.
"Company" means SLJ Retail LLC, the limited liability company formed by the
-------
filing of the Certificate of Formation.
"Company Minimum Gain" has the meaning set forth in Tax Regulations Section
--------------------
1.704-2(b)(2) with respect to "partnership minimum gain."
"Company Nonrecourse Deductions" has the meaning set forth in Tax
------------------------------
Regulations Section 1.704-2(b)(1) with respect to "nonrecourse deductions."
"Contribution Agreement" means the Contribution Agreement dated of even
----------------------
date herewith among Butler, Maxwell and Maxwell Retail, as it may be amended,
modified, supplemented or restated from time to time.
"Cumulative Net Profits" means, with respect to any Member for any period,
----------------------
the excess (if any) of the cumulative Profits allocated to such Member during
such period pursuant to Sections 5.3(a)(iv)-(v) over the cumulative Losses
-----------------------
allocated to such Member during such period pursuant to Section 5.3(b), in each
--------------
case taking into account only those items necessary to compute the regular
federal taxable income or loss of such Member for such period.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C.
------------
(S) 18-101, et seq., as amended from time to time.
-- ---
"Depreciation" means, for each Tax Year, an amount equal to the
------------
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Tax Year, except that if the Book Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such Tax Year, Depreciation shall be an amount which bears the same ratio to
such beginning Book Value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such Tax Year bears to such beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal
-------- -------
income tax purposes of an asset at the beginning of such Tax Year is zero,
Depreciation shall be determined with reference to such
5
<PAGE>
beginning Book Value using any reasonable method selected by the Manager (with
the consent of the Required Members).
"Employment Agreement" has the meaning set forth in the Contribution
--------------------
Agreement.
"Federal Tax Rate" means, as of any relevant date, the highest marginal
----------------
federal income tax rate applicable to corporations on such date.
"First Refusal Offer" has the meaning set forth in Section 11.4(a).
------------------- ---------------
"First Refusal/Tag Along Notice" has the meaning set forth in Section
------------------------------ -------
11.4(a).
- -------
"Fiscal Year" means the twelve-month accounting period of the Company for
-----------
financial accounting purposes ending on the last Saturday in January of each
year; provided that the initial Fiscal Year of the Company will be the period
--------
beginning on the Closing Date and ending on January 31, 1998, and the last
Fiscal Year of the Company (if not a full Fiscal Year) will be the period
beginning on the day following the end of the penultimate Fiscal Year of the
Company and ending on the date the final liquidation of the Company is
completed.
"GAAP" means generally accepted accounting principles in the United States
----
of America as from time to time in effect, applied on a consistent basis with
those accounting principles applied at prior dates or for prior periods.
"GE Capital" means General Electric Capital Corporation, a New York
----------
corporation.
"GE Capital Guaranty" has the meaning set forth in the Contribution
-------------------
Agreement.
"GE Capital Reimbursement and Security Agreement" has the meaning set forth
-----------------------------------------------
in the Contribution Agreement.
"GE Integrity Policies" means the policies set forth in the booklet
---------------------
entitled "Integrity -- the Spirit & the Letter of Our Commitment" (CI-18 REV.
6195) and any superseding policy statements from time to time furnished to the
Manager by GE Capital with respect to policies on key integrity issues adopted
by General Electric Company and having application to its subsidiaries and
Affiliates.
"Governmental Body" means any governmental or quasi-governmental agency,
-----------------
authority, commission, board or other body.
"Immediate Family" has the meaning set forth in the Contribution Agreement.
----------------
"Indemnitee" has the meaning set forth in Section 7.11.
---------- ------------
6
<PAGE>
"Lien" has the meaning set forth in the Contribution Agreement.
----
"Liquidator" has the meaning set forth in Section 12.4.
---------- ------------
"Losses" has the meaning set forth in the definition of "Profits" and
------
"Losses."
"Mall Specialty Footwear Stores" has the meaning set forth in the
------------------------------
Contribution Agreement.
"Manager" has the meaning set forth in Section 7.1.
------- -----------
"Maxwell" means Maxwell Shoe Company Inc., a Delaware corporation.
-------
"Maxwell/Company Documents" has the meaning set forth in the Contribution
-------------------------
Agreement.
"Maxwell Default" means (i) the Bankruptcy or dissolution of Maxwell or
---------------
Maxwell Retail, (ii) a breach or default on the part of Maxwell Retail in any
material respect in the performance of any of its material covenants,
agreements, duties or responsibilities as Manager under this Agreement, or (iii)
a breach or default on the part of Maxwell or any of its Affiliates in any
material respect in any of their respective material representations or
warranties set forth in, or in the performance of any of their respective
material covenants, agreements, duties or responsibilities under, any of the
Maxwell Documents. For the purposes hereof, "Bankruptcy" means (i) the
inability of Maxwell or Maxwell Retail generally to pay its debts as such debts
become due, or an admission in writing by Maxwell or Maxwell Retail of its
inability to pay its debts generally or a general assignment by Maxwell or
Maxwell Retail for the benefit of creditors; (ii) the filing of any petition or
answer by Maxwell or Maxwell Retail seeking to adjudicate itself as bankrupt or
insolvent, or seeking for itself any liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of Maxwell or Maxwell
Retail or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking, consenting to, or acquiescing
in the entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for Maxwell or Maxwell Retail or for any
substantial part of its property; (iii) the taking of any corporate action by
Maxwell or Maxwell Retail to authorize any of the actions set forth in clauses
(i) or (ii) above; (iv) without the consent or acquiescence of Maxwell or
Maxwell Retail, the entering of an order for relief or approving a petition for
relief or reorganization or any other petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or other
similar relief under any present or future bankruptcy, insolvency or similar
statute, law or regulation, or the filing of any such petition against Maxwell
or Maxwell Retail, or (v) without the consent or acquiescence of Maxwell or
Maxwell Retail, the entering of an order appointing a trustee, custodian,
receiver or liquidator of Maxwell or Maxwell Retail or of all or any substantial
part of the property of Maxwell or Maxwell Retail.
7
<PAGE>
"Maxwell Member" means, at any time, (a) Maxwell Retail, if Maxwell Retail
--------------
is a Member at such time, and (b) if Maxwell Retail is not a Member at such
time, any transferee pursuant to any Transfer permitted hereunder of all of the
Member Units originally held by Maxwell Retail hereunder or issued upon the
exercise of the Maxwell Option Rights.
"Maxwell Option Rights" has the meaning set forth in the Option Agreement.
---------------------
"Maxwell Retail" means Maxwell Retail Inc., a Delaware corporation, and its
--------------
successors and assigns pursuant to any Transfer permitted hereunder.
"Member Interest" means the interest of a Member in the Company including,
---------------
without limitation, such Member's right (a) to a distributive share of the
Profits, Losses and other items of income, gain, loss, deduction and credit of
the Company, (b) to a distributive share of the assets of the Company, and (c)
to vote on or to consent or withhold consent on certain matters as described in
this Agreement, each in accordance with its Percentage Interest.
"Member Nonrecourse Deductions" has the meaning set forth in Tax
-----------------------------
Regulations Section 1.704-2(i)(1) and (2) with respect to "partner nonrecourse
deductions."
"Member Units" means mathematical units of ownership evidencing the Member
------------
Interests in the Company. As of the Closing Date, 8,825 Member Units shall be
held by the Members and an additional 1,175 Member Units shall be issuable upon
the exercise of the Maxwell Option Rights, all as more fully set forth in
Section 4.2.
- -----------
"Members" means Butler, Maxwell Retail, and each other Person who has been
-------
admitted as a Member in the Company in accordance with Section 11.9 of this
------------
Agreement and whose admission has been reflected on the books and records of the
Company.
"Non-Compete Agreement" has the meaning set forth in the Contribution
---------------------
Agreement.
"Notice of Acceptance" has the meaning set forth in Section 11.4(b).
-------------------- ---------------
"Notified Member" has the meaning set forth in Section 11.4(a).
--------------- ---------------
"Offer Price" has the meaning set forth in Section 11.4(a).
----------- ---------------
"Officers" has the meaning set forth in Section 7.4(a).
-------- --------------
"Option Agreement" has the meaning set forth in the Contribution Agreement.
----------------
"Percentage Interest" means, at any time, that percentage interest in the
-------------------
Company from time to time represented by any Member's Member Interest,
determined by dividing the number of Member Units held by such Member at such
time by the total number of Member Units held by all Members at such time. The
Percentage Interest of a Member shall be adjusted from time
8
<PAGE>
to time to reflect any change in the number of Member Units held by such Member
or in the total number of Member Units held by all Members. After any such
adjustment, the Percentage Interest of such Member, as adjusted, shall
constitute the Percentage Interest of such Member for all purposes under this
Agreement.
"Person" means an individual, corporation, partnership, limited liability
------
company, joint venture, trust, estate, unincorporated organization, association,
Governmental Body or other entity.
"Pledge" means, with respect to all or any aspect of a Member Interest, a
------
pledge, encumbrance, hypothecation or similar disposition in connection with the
granting of a Lien to secure an obligation of the pledgor, an Affiliate of the
pledgor or a member of the Immediate Family of an Affiliate of the pledgor
(other than a Transfer).
"Profits" and "Losses" mean, for each Tax Year or other period, an amount
------- ------
equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) will be included in taxable income or loss), with the
following adjustments (without duplication):
(a) Income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits and Losses pursuant to this
definition will be added to such taxable income or loss.
(b) Any expenditures of the Company described in Code Section 705(a)(2)(B),
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Tax Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits and Losses pursuant to this definition will be subtracted from such
taxable income or loss.
(c) If the Book Value of any Company asset is adjusted pursuant to
paragraphs (b) or (c) of the definition thereof, the amount of such adjustment
will be taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits and Losses.
(d) Gain or loss resulting from any disposition of property with respect to
which gain or loss is recognized for federal income tax purposes will be
computed by reference to the Book Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Value.
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Tax Year, computed in
accordance with the definition of Depreciation.
9
<PAGE>
(f) To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Section 734(b) is required, pursuant to Tax Regulations
Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a Member's
Member Interest in the Company, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses.
(g) Notwithstanding any other provision of this definition, any items that
are specially allocated pursuant to Sections 5.4 or 5.5 will not be taken into
------------ ---
account in computing Profits and Losses.
"Purchase Price" has the meaning set forth in Section 11.7.
-------------- ------------
"Required Members" means those Members that include both (a) Members
----------------
collectively holding 75% or more of the Percentage Interests, and (b) unless and
until a Butler Cashout Event shall have occurred, the Butler Member.
"Retail Outlet Footwear Stores" has the meaning set forth in the
-----------------------------
Contribution Agreement.
"Retail Opportunity Agreement" has the meaning set forth in the
----------------------------
Contribution Agreement.
"Senior Credit Agreement" has the meaning set forth in the Contribution
-----------------------
Agreement.
"Senior Lenders" has the meaning set forth in the Contribution Agreement.
--------------
"Senior Revolving Loan" means the $16,500,000 revolving loan facility to be
---------------------
made available by the Senior Lenders to the Company pursuant to the Senior
Credit Agreement.
"Senior Term Loan" means the $16,000,000 term loan to be made by the Senior
----------------
Lenders to the Company pursuant to the Senior Credit Agreement.
"Services Agreement" has the meaning set forth in the Contribution
------------------
Agreement.
"Settlement Notice" has the meaning set forth in Section 7.11(c).
----------------- ---------------
"Store Transfer Closing Date" has the meaning set forth in the Contribution
---------------------------
Agreement.
"Subordinated Loan" means the purchase by Butler of the Subordinated Notes.
-----------------
"Subordinated Note Purchase Agreement" has the meaning set forth in the
------------------------------------
Contribution Agreement.
10
<PAGE>
"Subordinated Notes" means the $12,500,000 in principal amount of the
------------------
Company's 8% Subordinated Notes purchased by Butler pursuant to the Subordinated
Note Purchase Agreement.
"Tag Along Offer" has the meaning set forth in Section 11.5(a).
--------------- ---------------
"Take Along Notice" has the meaning set forth in Section 11.6(a).
----------------- ---------------
"Take Along Right" has the meaning set forth in Section 11.6(a).
---------------- ---------------
"Tax Regulations" means the Income Tax Regulations (including Temporary
---------------
Regulations) promulgated under the Code, as amended and in effect (including
corresponding provisions of any succeeding Tax Regulations).
"Tax Regulatory Allocations" has the meaning set forth in Section 5.5.
-------------------------- -----------
"Tax Year" means the twelve-month accounting period of the Company for
--------
federal and state income tax purposes ending on December 31 of each year or such
other accounting period as the Company is required to use under Section 706(b)
of the Code; provided that the initial Tax Year of the Company will be the
--------
period beginning on the Closing Date and ending on December 31, 1997, and the
last Tax Year of the Company (if not a full twelve-month accounting period) will
be the period beginning on the day following the end of the penultimate Tax Year
of the Company and ending on the date the final liquidation of the Company is
completed.
"Third Party" means any Person other than (i) the Company, (ii) a Member,
-----------
(iii) the Manager, (iv) any Affiliate of any of the foregoing, (v) any member of
the Immediate Family of any of the foregoing or (vi) any officer, director,
shareholder, partner or member of any of the foregoing.
"Third Party Offer" means a bona fide offer made in writing by any Third
----------------- ---- ----
Party to Butler or Maxwell Retail to purchase Member Units from such Member on
an arm's length basis for cash.
"Transfer" means, with respect to all or any aspect of a Member Interest, a
--------
sale, assignment, gift, contribution, exchange or any other disposition (other
than a Pledge).
"Transferring Member" has the meaning set forth in Section 11.4(a).
------------------- ---------------
"Transitional Services Agreement" has the meaning set forth in the
-------------------------------
Contribution Agreement.
1.2 Rules of Construction.
---------------------
11
<PAGE>
(a) All article, section and paragraph titles and captions in this
Agreement are for convenience only, will not be deemed part of this Agreement,
and in no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Articles," "Sections" and "Exhibits" are to Articles, Sections
-------- -------- --------
and Exhibits of or to this Agreement.
(b) Whenever the context may require, any pronoun used in this Agreement
includes the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs includes the plural and vice versa. The
---- -----
locative adverbs "hereof," "herein," "hereafter," etc. refer to this Agreement
as a whole.
ARTICLE II
ORGANIZATIONAL MATTERS
----------------------
2.1 Formation. The Members have formed the Company as a limited liability
---------
company pursuant to the provisions of the Delaware Act. The Members are
entering into this Agreement in order to set forth the rights and obligations of
the Members with respect to the Company and certain related matters. Except as
expressly provided herein or in the Contribution Agreement to the contrary, the
rights and obligations of the Members and the administration and dissolution of
the Company will be governed by the Delaware Act.
2.2 Name. The name of the Company is "SLJ Retail LLC."
----
2.3 Registered Agent and Office. The registered agent and office of the
---------------------------
Company in the State of Delaware shall be Corporation Service Company, 1013
Centre Road, Wilmington, Delaware 19805. The Manager may change the registered
office or registered agent from time to time.
2.4 Principal Place of Business. The principal place of business of the
---------------------------
Company shall be at 400 Technology Court, Suite F, Smyrna, Georgia 30082, or at
such other place in the United States as the Manager may from time to time
designate.
2.5 Term. The Company commenced its existence on March 7, 1997, the date
----
of the filing of the Certificate of Formation with the Office of the Secretary
of State of the State of Delaware, and will continue in existence until the
close of business on January 31, 2047, or until the earlier dissolution of the
Company in accordance with the provisions of Article XII.
-----------
2.6 Ownership. The interest of each Member in the Company will be
---------
personal property for all purposes. All property and interests in property,
real or personal, owned by the Company will be deemed owned by the Company as an
entity, and no Member (as such) will have any ownership of such property or
interest therein except by having an ownership interest in the Company as a
Member.
12
<PAGE>
2.7 Relationship Among Members. The relationship among the Members
--------------------------
provided for in this Agreement is limited to the conduct of the business of the
Company as a limited liability company in accordance with the terms of the
Delaware Act and this Agreement. Nothing contained in this Agreement will be
construed to create a partnership (other than for tax purposes) between or among
the Members or, except as otherwise expressly provided in this Agreement, to
authorize any Member to act as agent for another Member.
2.8 Independent Activities of Members. Except as otherwise provided in
---------------------------------
the Non-Compete Agreement and the Retail Opportunity Agreement with respect to
Maxwell and certain of its Affiliates, each Member and its Affiliates may have
business interests and engage in business activities in addition to those
relating to the Company, and no other provision of this Agreement will be deemed
to prohibit a Member or any of its Affiliates from conducting such other
businesses and activities.
2.9 No Individual Authority. No Member, acting alone, will have any
-----------------------
authority to act for, or to undertake or assume any obligation or liability on
behalf of, any other Member or the Company, except as otherwise expressly
provided in this Agreement.
2.10 Qualification in Other Jurisdictions. The Manager shall cause the
------------------------------------
Company to be qualified or registered as a foreign limited liability company
authorized to transact business in all jurisdictions in which such qualification
or registration is necessary or advisable, and shall cause the Company to
register all trade names or fictitious names in or under which it conducts
business (including, without limitation, the names "Sam & Libby" and "Jones New
York") in all jurisdictions in which the Company conducts business under such
names and in which such registration is necessary or advisable. The Manager, as
an "authorized person" within the meaning of the Delaware Act, may execute,
deliver and file any certificates, affidavits and registrations (and any
amendments and/or restatements thereof) necessary for the Company so to do.
ARTICLE III
PURPOSE
-------
3.1 Purposes and Scope. Subject to the provisions of this Agreement, the
------------------
purposes of the Company are: (a) to engage in the business of selling women's
footwear and accessories in Mall Specialty Footwear Stores and Retail Outlet
Footwear Stores; (b) to borrow money and issue evidences of indebtedness in
furtherance of any or all of the objectives of the Company's business, and to
secure the same by mortgage, pledge or other Liens; and (c) to do any and all
other acts or things which may be desirable, expedient, convenient, incidental
or necessary to carry on the business of the Company as herein contemplated.
13
<PAGE>
3.2 Powers of the Company. The Company shall have the power and authority
---------------------
to take any and all actions necessary, proper, advisable, incidental or
convenient to or for the furtherance of the purposes set forth in Section 3.1,
-----------
as determined by the Manager in accordance with the terms and conditions of this
Agreement
ARTICLE IV
CAPITAL CONTRIBUTIONS AND LOANS
-------------------------------
4.1 Initial Capital Contributions. Pursuant to the Contribution
-----------------------------
Agreement:
(a) Maxwell Retail has contributed the property described in Section
2.2(b)(i) of the Contribution Agreement on the date of this Agreement; and
(b) Butler has contributed the property described in Section 2.2(c)(v) of
the Contribution Agreement on the date of this Agreement and has agreed to
contribute the property described in Section 2.3(a)(i) of the Contribution
Agreement on each Store Transfer Closing Date and to contribute the property
described in Section 2.4(a)(i) of the Contribution Agreement on the third Store
Transfer Closing Date; provided, however, that Butler's agreement to contribute
-------- -------
the property described in Sections 2.3(a)(i) and 2.4(a)(i) of the Contribution
Agreement is subject to the fulfillment of the conditions precedent set forth in
Section 6.2 of the Contribution Agreement.
Such contributions of property and agreements to contribute property shall
constitute Capital Contributions made as of the Closing Date by Maxwell Retail
and Butler, respectively, and no adjustment to such Capital Contributions shall
be made in the event that Butler does not contribute any of the property
contemplated by Sections 2.3(a)(i) and 2.4(a)(i) of the Contribution Agreement
by virtue of the failure to occur of any of the conditions precedent set forth
in Section 6.2 of the Contribution Agreement.
4.2 Member Interests; Member Units; Percentage Interests.
----------------------------------------------------
(a) The Member Interests shall be divided into Class A Member Interests
("Class A Member Interests") and Class B Member Interests ("Class B Member
- -------------------------- --------------
Interests"), which shall be evidenced by Member Units designated as Class A
- ---------
Member Units ("Class A Member Units") and Class B Member Units ("Class B Member
-------------------- --------------
Units"), respectively. Class A Member Interests and Class B Member Interests
- -----
shall be identical in all respects as to rights, powers and duties of a Member
hereunder or under the Delaware Act (including, without limitation, the right to
receive distributions pursuant to Article VI hereof and to exercise any right to
----------
vote or to consent or withhold consent as to any matter provided herein), except
that the Class B Member Units shall be entitled to the priority in allocation of
Profits provided in Section 5.3(a) hereof and the priority in respect of
--------------
distributions provided in Section 6.1 hereof.
-----------
14
<PAGE>
(b) In consideration of the Capital Contributions referred to in Section
-------
4.1, on the Closing Date the Members will be deemed to hold the number of Class
- ---
A Member Units set forth below, respectively evidencing the following Percentage
Interests as of the Closing Date:
<TABLE>
<CAPTION>
Name of No. of Class A Percentage
Member Member Units Issued Interest
- ------- ------------------- -----------
<S> <C> <C>
Butler 4,500 50.9915%
Maxwell Retail 4,325 49.0085%
----- --------
Totals: 8,825 100.0000%
</TABLE>
No adjustment to the number of Class A Member Units held by Butler shall be made
in the event that Butler does not contribute any of the property contemplated by
Sections 2.3(a)(i) and 2.4(a)(i) of the Contribution Agreement by virtue of the
failure to occur of any of the conditions precedent set forth in Section 6.2 of
the Contribution Agreement.
(c) The 4,500 Class A Member Units of Butler are exchangeable for 4,500
Class B Member Units upon the exercise of the Butler Exchange Rights, and an
additional 1,175 Class A Member Units are issuable to Maxwell Retail upon the
exercise of the Maxwell Option Rights. Thus, assuming the exercise of the
Butler Exchange Rights and the Maxwell Option Rights (and assuming that no
Transfers or further issuances of Member Units occur), the following Member
Units would be held by Butler and Maxwell Retail as of the date of the second
such exercise, respectively evidencing the following Percentage Interests as of
such date:
<TABLE>
<CAPTION>
Name of Class of No. of Member Percentage
Member Member Units Units Issued Interest
- ------- ------------ ------------- -----------
<S> <C> <C> <C>
Butler Class B 4,500 45.00%
Maxwell Retail Class A 5,500 55.00%
----- ------
Totals: 10,000 100.00%
</TABLE>
(d) Except as provided in paragraphs (b) and (c) above, no additional
Member Interests or Member Units, or options to purchase or acquire Member
Interests or Member Units, or securities convertible into or exchangeable for
Member Interests or Member Units, will be offered, issued or sold by the Company
without the express written consent of each Member.
4.3 Additional Capital Contributions. Except as required by the Option
--------------------------------
Agreement and the Contribution Agreement, no Member shall be required to make
any additional Capital Contribution to the Company.
15
<PAGE>
4.4 Limitations on Capital Contributions and Loans. Except with the
----------------------------------------------
consent of all Members and except for the exercise by Butler of the Butler
Exchange Rights and the exercise by Maxwell Retail of the Maxwell Option Rights,
the Company will not accept any additional Capital Contribution. Except for the
Subordinated Loan, no Member (nor any Affiliate thereof) may make a loan to the
Company unless each other Member is afforded the opportunity (pro rata, in
--- ----
accordance with its Percentage Interest) to participate in making such loan on
the same terms as the other Members. Loans by a Member to the Company shall not
be considered Capital Contributions.
ARTICLE V
CAPITAL ACCOUNTS AND ALLOCATIONS
--------------------------------
5.1 Capital Accounts. For purposes of maintaining Capital Accounts in
----------------
accordance with Code Section 704(b) and the Tax Regulations thereunder:
(a) Maintenance of Capital Accounts. The Company will maintain for each
-------------------------------
Member a separate Capital Account in accordance with this Agreement, which will
control the division of assets upon liquidation of the Company as provided in
Section 12.4(d).
- ---------------
(b) Negative Capital Accounts. If any Member has a deficit balance in its
-------------------------
Capital Account, such Member shall have no obligation to restore such negative
balance or to make any Capital Contribution to the Company by reason thereof,
and such negative balance shall not be considered an asset of the Company or of
any Member.
(c) Initial Capital Accounts. The Members agree that the initial Capital
------------------------
Account of each Member after giving effect to the initial Capital Contributions
provided for in Section 4.1 shall be as follows:
-----------
<TABLE>
<CAPTION>
Member Capital Account
------ ---------------
<S> <C>
Butler $3,600,000
Maxwell Retail $3,460,000
==========
Total: $7,060,000
</TABLE>
(d) Allocation of Initial Capital Contributions Among Contributed Property.
----------------------------------------------------------------------
The Members agree that (i) the aggregate net value of the property contributed
to the Company by each Member pursuant to Section 4.1 hereof is equal to the
-----------
initial Capital Account of such Member after giving effect to such Capital
Contribution, as set forth in paragraph (c) above, and (ii) such aggregate net
value shall be allocated among the property contributed to the Company by each
Member as set forth on the schedule attached as Exhibit A hereto.
---------
16
<PAGE>
(e) Effect of Exercise of Maxwell Option Rights. The increase in Maxwell
-------------------------------------------
Retail's Capital Account upon the exercise of the Maxwell Option Rights shall be
limited to the cash contributed by Maxwell Retail upon the exercise of such
rights.
5.2 Interest. No interest will be paid by the Company on Capital
--------
Contributions or on balances in Capital Accounts.
5.3 Allocation of Profits and Losses.
--------------------------------
(a) Allocation of Profits Generally. After giving effect to the
-------------------------------
allocations set forth in Sections 5.4 and 5.5, and after giving effect to any
------------ ---
distributions of cash or property, Profits for any Tax Year (or other period)
will be allocated to the Members in the following order of priority:
(i) First, to all of the Members in proportion to and to the extent
of the excess, if any, of (i) the cumulative Losses allocated to each such
Member pursuant to Section 5.3(b)(ii) hereof for all prior Tax Years (or
------------------
other periods), over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.3(a)(i) for all prior Tax Years (or other
-----------------
periods);
(ii) Second, to all of the Members in proportion to and to the extent
of the excess, if any, of (i) the cumulative Losses allocated to each such
Member pursuant to Section 5.3(b)(i) hereof for all prior Tax Years (or
-----------------
other periods), over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.3(a)(ii) for all prior Tax Years (or other
------------------
periods), such amounts to be allocated in a manner that first offsets the
Losses allocated in clauses (C), (B) and (A) of Section 5.3(b)(i), in that
-----------------
order;
(iii) Third, if Class B Member Units are then outstanding, to the
Members holding Class B Member Units in proportion to their respective
holdings of Class B Member Units until the Capital Accounts of such Members
are equal to the Class B Member Unit Preferred Amount;
(iv) Fourth, if Class B Member Units are then outstanding, to the
Members holding Class A Member Units in proportion to their respective
holdings of Class A Member Units until the Capital Accounts of such Members
are equal to the Class A Member Unit Equalization Amount; and
(v) The balance, if any, to all of the Members in proportion to their
respective Percentage Interests.
(b) Allocation of Losses Generally.
------------------------------
17
<PAGE>
(i) After giving effect to the allocations set forth in Sections 5.4
------------
and 5.5, and subject to the limitation set forth in Sections 5.3(b)(ii),
--- -------------------
Losses for any Tax Year shall be allocated to the Members in the following
order of priority:
(A) First, to the Members in proportion to and to the extent of
the excess, if any, of (1) the cumulative Profits allocated to each
such Member pursuant to Section 5.3(a)(v) hereof for all prior Tax
-----------------
Years, over (2) the cumulative Losses allocated to such Member
pursuant to this Section 5.3(b)(i)(A) for all prior Tax Years;
--------------------
(B) Second, to the Members in proportion to and to the extent of
the excess, if any, of (1) the cumulative Profits allocated to each
such Member pursuant to Section 5.3(a)(iv) hereof for all prior Tax
------------------
Years, over (2) the cumulative Losses allocated to such Member
pursuant to this Section 5.3(b)(i)(B) for all prior Tax Years; and
--------------------
(C) The balance, if any, to all of the Members in proportion to
their respective Percentage Interests.
(ii) The Losses allocated pursuant to Section 5.3(b)(i) to any Member
-----------------
for any Tax Year will not exceed the maximum amount of Losses that may be
allocated to such Member without exceeding the amount prescribed by
applicable Tax Regulations. If no other Member may receive an additional
allocation of Losses pursuant to the preceding sentence of this Section
-------
5.3(b)(ii), such additional Losses not allocated pursuant to Section
---------- -------
5.3(b)(i) or the preceding sentence will be allocated to the Members in
---------
proportion to their Percentage Interests.
5.4 Special Allocations. Notwithstanding any provision of Section 5.3(a)
------------------- --------------
or (b), the following special allocations shall be made in the following order:
---
(a) Minimum Gain Chargeback - Company Nonrecourse Liabilities. If there is
---------------------------------------------------------
a net decrease in Company Minimum Gain during any Tax Year, certain items of
income and gain will be allocated (on a gross basis) to the Members in
accordance with the rules described in Tax Regulations Section 1.704-2(f) and -
2(j)(1)(i) and (iii), subject to the exemptions set forth in Tax Regulations
Section 1.704-2(f)(2), (3), (4) and (5). This Section 5.4(a) is intended to
--------------
comply with the minimum gain chargeback requirement set forth in Tax Regulations
Section 1.704-2(f) relating to Company nonrecourse liabilities (as defined in
Tax Regulations Section 1.704-2(b)(3)) and will be so interpreted.
(b) Minimum Gain Chargeback -- Member Nonrecourse Debt. If there is a net
--------------------------------------------------
decrease in Company Minimum Gain during any Tax Year, certain items of income
and gain will be allocated (on a gross basis) as quickly as possible to those
Members who had a share of the Company Minimum Gain (determined pursuant to
Section 1.704-2(i)(5) of the Tax Regulations)
18
<PAGE>
in accordance with the rules described in Tax Regulations Section 1.704-2(i)(4),
(j)(2)(ii) and (iii). This Section 5.4(b) is intended to comply with the minimum
-----------
gain chargeback requirement set forth in Tax Regulations Section 1.704-2(i)(4)
relating to partner nonrecourse debt (as defined in Tax Regulations Section
1.704-2(b)(4) and will be so interpreted.
(c) Qualified Income Offset. If, after applying Sections 5.4(a) and (b),
----------------------- --------------- ---
any Member has an Adjusted Capital Account Deficit, items of Company income and
gain will be specifically allocated (on a gross basis) to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the Tax
Regulations, the Adjusted Capital Account Deficit of such Member as quickly as
possible. This Section 5.4(c) is intended to comply with the "qualified income
--------------
offset" requirement set forth in Tax Regulations Section 1.704-1(b)(2)(ii)(d)
and will be so interpreted.
(d) Optional Basis Adjustments. To the extent an adjustment to the
--------------------------
adjusted tax basis of any Company asset pursuant to Code Sections 734(b) or
743(b) is required pursuant to Tax Regulations Section 1.704-1(b)(2)(iv)(m) to
be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts will be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss will be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Tax Regulations.
(e) Company Nonrecourse Deduction. Company Nonrecourse Deductions for any
-----------------------------
Tax Year will be specially allocated among the Members in proportion to their
Percentage Interests.
(f) Member Nonrecourse Deduction. Member Nonrecourse Deductions will be
----------------------------
allocated pursuant to Tax Regulations Section 1.704-2(b)(4) and (i)(l) to the
Member who bears the economic risk of loss with respect to the deductions.
(g) Tax Allocations; Code Section 704(c). In accordance with Code Section
------------------------------------
704(c) and the Tax Regulations thereunder, income, gain, loss and deductions
with respect to any property contributed to the capital of the Company will,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its Book Value.
5.5 Curative Allocations. The allocations set forth in Sections
-------------------- --------
5.3(b)(ii) and 5.4(a) through (f) the "Tax Regulatory Allocations") are intended
- ---------- ------ --- --------------------------
to comply with certain requirements of the Tax Regulations. It is the intent of
the Members that, to the extent possible, all Tax Regulatory Allocations will be
offset either with other Tax Regulatory Allocations or with special allocations
of other items of Company income, gain, loss, or deduction pursuant to this
Section 5.5. Therefore, notwithstanding any other provisions of this Article V
- ----------- ---------
(other than the Tax Regulatory Allocations), the Manager will make such
offsetting special allocations of
19
<PAGE>
Company income, gain, loss, or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Tax Regulatory Allocations were not
part of this Agreement and all Company items were allocated pursuant to Sections
--------
5.3(a) and 5.3(b)(i). In making allocations under this Section 5.5, the Manager
- ------ --------- -----------
will take into account future Tax Regulatory Allocation under Section 5.4(a) and
--------------
5.4(b) that, although not yet made, are likely to offset other Tax Regulatory
- ------
Allocations previously made under Sections 5.4(e) and 5.4(f). Any income, gain,
--------------- ------
loss or deduction realized by the Company as a direct or indirect result of the
issuance of an interest in the Company to a Member ("Issuance Items") shall be
--------------
allocated among the Members so that, to the maximum extent possible, the net
amount of such Issuance Items, together with all other allocations under this
Agreement and the income, gain, loss or deduction realized by such Member as a
result of such issuance and any corresponding adjustments, shall equal the net
amount that would have been realized by and/or allocated to such Member if the
Issuance Items had not been realized.
5.6 Other Allocation Rules.
----------------------
(a) For purposes of determining the Profits, Losses, or any other item
allocable to any period, Profits, Losses, and any such other item will be
determined on a daily, monthly, or other basis, as determined by the Manager
(with the consent of the Required Members) using any permissible method under
Code Section 706 and the Tax Regulations thereunder.
(b) For federal income tax purposes, every item of income, gain, loss, and
deduction will be allocated among the Members in accordance with the allocations
under Sections 5.3, 5.4, 5.5 and 5.6.
------------------------------
(c) The Members are aware of the income tax consequences of the allocations
made by this Article V and agree to be bound by the provisions of this Article V
--------- ---------
in reporting their shares of the Company income and loss for income tax
purposes.
(d) It is intended that the allocations in Sections 5.3, 5.4 and 5.5 effect
-------------------------
an allocation for federal income tax purposes consistent with Code Section 704
and comply with any limitations or restrictions therein. The Manager (with the
consent of the Required Members) may alter the allocations pursuant to this
Article V in any manner consistent with Code Section 704 and to amend the
- ---------
provisions of this Agreement as appropriate to comply with the Tax Regulations
promulgated under Code Section 704, if, in the opinion of counsel, such an
amendment is advisable to reflect allocations among the Members consistent with
those Tax Regulations, and any such allocation will not have a material effect
on the distributions which would otherwise be made pursuant to Sections 6.1,
------------
6.3, 12.4 or 12.6.
- --- ---- ----
(e) The Members agree that their Percentage Interests represent their
respective interests in Company profits for purposes of allocating excess
nonrecourse liabilities (as defined in Tax Regulations Section 1.752-3(a)(3))
pursuant to Tax Regulations Section 1.752-3(a)(3).
20
<PAGE>
ARTICLE VI
DISTRIBUTIONS
-------------
6.1 Distributions.
-------------
(a) The Manager shall review the Company's accounts at the end of each
fiscal quarter to determine whether distributions are appropriate. Subject to
Section 6.1(b), Section 6.3 and (S)18-607(a) of the Delaware Act, the Manager
- -------------- -----------
(with the consent of the Required Members) shall make such distributions of
Available Cash to the Members as it may determine (with the consent of the
Required Members) or as may be requested by the Required Members, in the
following order of priority:
(i) First, if Class B Member Units are then outstanding, to the Members
holding Class B Member Units in proportion to their respective holdings of Class
B Member Units until the Class B Member Unit Preferred Amount is reduced to
zero;
(ii) Second, if Class B Member Units are then outstanding, to the Members
holding Class A Member Units in proportion to their respective holdings of Class
A Member Units until the Class A Member Unit Equalization Amount is reduced to
zero; and
(iii) Finally, to all of the Members in proportion to their respective
Percentage Interests.
(b) Notwithstanding any provision of Section 6.1(a) to the contrary, (i)
--------------
Available Cash that is derived from a transaction that occurs in connection with
the dissolution, termination and liquidation of the Company shall be distributed
to the Members in accordance with Article XII; and (ii) no distribution shall be
-----------
made pursuant to Section 6.1(a) to the extent that (A) such distribution is
--------------
prohibited by the Senior Credit Agreement, unless such distribution is approved
by the Senior Agent, or (B) such distribution is prohibited by the Subordinated
Note Purchase Agreement, unless such distribution is approved by the Butler
Member.
6.2 Amounts Withheld. Each Member authorizes the Company to withhold and
----------------
pay any withholding or other taxes payable by the Company with respect to such
Member as a result of such Member's participation in the Company. If the
Company is required to withhold or pay any such taxes, such Member will be
deemed for all purposes of this Agreement to have received a payment from the
Company at the time of such withholding or payment, which will be deemed to be a
distribution with respect to such Member's Member Interest. To the extent a
Member receiving a deemed distribution under this Section 6.2 would not
-----------
otherwise be entitled to such distribution during the Tax Year, such Member
shall contribute to the Company in cash the amount of such deemed distribution
which is in excess of the distribution the Member would have otherwise been
entitled to for such Tax Year (but shall receive no credit for such
21
<PAGE>
contribution in circumstances in which Percentage Interests are redetermined.)
Any withholding authorized by this Section 6.2 will be made at the maximum
-----------
applicable statutory rate under the applicable tax law unless the Manager has
received an opinion of counsel or other evidence satisfactory to the Manager to
the effect that a lower rate is applicable or that no withholding is applicable.
6.3 Tax Distributions.
-----------------
(a) Subject to Section 6.3(b), the Manager shall cause the Company to
--------------
distribute to each Member with respect to each Tax Year an amount equal to the
product of (i) the excess of (A) the Cumulative Net Profits allocated to such
Member for the period consisting of all Tax Years from and after the inception
of the Company (including such Tax Year), over (B) the Cumulative Net Profits
allocated to such Member for the period consisting of all Tax Years from and
after the inception of the Company (excluding such Tax Year), multiplied by (ii)
---------- --
the Federal Tax Rate in effect during the Tax Year to which such distribution
relates. The Manager shall make such distributions on an annual basis, promptly
following the filing of the Company's federal income tax return.
(b) Notwithstanding any provision of Section 6.3(a) to the contrary, no
--------------
distribution shall be made pursuant to Section 6.3(a) to the extent that there
--------------
is not sufficient Available Cash to make such distribution, unless such
distribution is approved by the Required Members.
ARTICLE VII
-----------
MANAGEMENT OF THE COMPANY
-------------------------
7.1 Appointment of Manager. The Members hereby designate and appoint
----------------------
Maxwell Retail as the limited liability company manager of the Company (the
"Manager"). Maxwell Retail (and any successor thereto) shall continue to serve
- --------
as the Manager until the earliest of (a) such Person resigning as Manager, (b)
such Person no longer being a Member, (c) the removal of such Person as Manager
upon the unanimous vote of the Members (with or without cause), or (d) the
removal of such Person as Manager pursuant to Section 7.13 hereof. Upon removal
------------
or resignation of a Person as Manager (other than pursuant to Section 7.13
------------
hereof), the Required Members shall appoint another Manager.
7.2 Management Services. Concurrently with the execution and delivery of
-------------------
this Agreement, the Company has entered into a Services Agreement with Maxwell
pursuant to which Maxwell will provide certain management services to the
Company and the Manager as more fully set forth therein.
7.3 Rights, Obligations and Duties of the Manager. Subject to Sections
--------------------------------------------- --------
7.5 and 7.6 and the other provisions of this Agreement requiring the consent in
- --- ---
certain instances of the Required Members or all of the Members, the Manager
will conduct, direct and exercise control
22
<PAGE>
over all activities of the Company, and all management powers over the business
and affairs of the Company will be exclusively vested in the Manager. In
addition to the powers now or hereafter granted to a manager of a limited
liability company under the Delaware Act or that are granted to the Manager
under any provision of this Agreement, but subject to Sections 7.5 and 7.6 and
------------ ---
the other provisions of this Agreement requiring the consent in certain
instances of the Butler Member, the Required Members or all of the Members, the
Manager will have full power and authority to do all things reasonably deemed
necessary or desirable by it to conduct the business of the Company. Without
limiting the generality of the foregoing, the Manager shall have the right to
direct the sourcing of S&L/JNY Products (either pursuant to the Services
Agreement or directly by the Company), and to select counsel and independent
accountants to be engaged by the Company.
7.4 Officers.
--------
(a) The officers of the Company shall consist of a Chairman, President,
Vice President-Finance and Chief Financial Officer and Secretary, and any other
officer as determined by the Manager (the "Officers"). The Officers shall be
--------
appointed by, and shall exercise such powers and perform such duties as are
prescribed by, the Manager, including powers and duties set forth in this
Agreement which are to be performed by the Manager in its capacity as such. The
Officers need not be employees of the Company and, in the case of any Officer
who is an employee of Maxwell, Butler or any of their respective Affiliates,
shall not be an employee of the Company or compensated in any respect by the
Company. Any number of offices may be held by the same individual, as the
Manager may determine, except that no individual may simultaneously hold the
offices of President and Secretary. The Officers shall hold office for the term
for which they were appointed and until their successors are appointed and
qualified; provided, however, that any Officer may be removed with or without
-------- -------
cause at any time by the Manager.
(b) Notwithstanding any provision of this Agreement to the contrary, (i) as
between or among the Members, any act or omission by an Officer shall be
attributed to, and be considered as an act or omission by, the Manager, (ii) no
Officer may take any action which the Manager cannot take, and (iii) the Manager
cannot assign or delegate to an Officer any rights or obligations it has under
this Agreement which are not held by it in its capacity as Manager, but are held
by it in its capacity as a Member (including, without limitation, rights and
obligations under Article XI).
----------
(c) The initial officers of the Company shall be as follows:
Name Title
---- -----
James J. Tinagero Chairman
Douglas P. Haensel Vice President-Finance and
Chief Financial Officer
Robert M. Saul Secretary
23
<PAGE>
The office of President shall be vacant until the Employment Agreement has been
executed and the Manager has appointed such Officer to such position.
7.5 Significant Operating Decisions. Notwithstanding any provision
-------------------------------
of this Agreement to the contrary, in addition to the making of any other
decision or the taking of any other action under this Agreement that
specifically requires the approval of the Required Members or that is to be made
by the Required Members or by another Member or Members other than the Manager,
neither the Manager nor any Officer will have the authority to cause the Company
to approve, act on or effect:
(a) the sale of all or substantially all of the business or assets of
the Company, whether by merger, consolidation, sale of assets or otherwise
(other than pursuant to a sale of Member Interests on the basis contemplated by
Article XI hereof or by Section 2.2 of the Option Agreement), or the acquisition
- ----------
of any other Person or an operating business unit of any other Person, whether
by merger, consolidation, purchase of equity interests or the acquisition of all
or substantially all of the business or assets of such Person or operating
business unit, unless any such matter is approved by the Required Members;
(b) any matter with respect to a Budget, unless such matter is
approved pursuant to the procedures set forth in Section 7.6; or
-----------
(c) Any matter described in clauses (i)-(xix) below, inclusive, at any
time before the occurrence of a Butler Cashout Event, unless such matter is
approved by the Butler Member:
(i) the sale of (A) inventory of the Company, other than sales at
retail in the ordinary course of the Company's business through Mall
Specialty Footwear Stores or Retail Outlet Footwear Stores and sales of
close-out merchandise to Third Parties in the ordinary course of the
Company's business; or (B) any other asset of the Company if the fair
value, purchase price or consideration therefor is in excess of $250,000;
(ii) the granting of a security interest, mortgage or Lien on any
assets of the Company (other than (A) to secure the Senior Revolving Loan
and the Senior Term Loan; (B) to secure the GE Capital Guaranty; or (C) to
secure the deferred purchase price of furniture, fixtures or equipment the
acquisition of which is in the ordinary course of the Company's business,
is provided for in the Budget for the Fiscal Year in question and is
permitted by the terms of the Senior Credit Agreement, the GE Capital
Reimbursement and Security Agreement and the Subordinated Note Purchase
Agreement);
(iii) the making of any distribution by the Company to the Members
(other than to the extent permitted by Section 6.3);
-----------
24
<PAGE>
(iv) the incurrence by the Company of total store and administrative
expenses in any fiscal quarter in excess of 125% of the amount provided in
the Budget for such fiscal quarter;
(v) the making by the Company of any capital expenditure that would
cause the Company's total capital expenditures for any Fiscal Year to
exceed 120% of the capital expenditures provided in the Budget for such
Fiscal Year;
(vi) the entering into by the Company of any contract or agreement,
or any modification thereof or amendment thereto, if the obligations of the
Company incurred pursuant to such contract or agreement (or the increase in
such obligations pursuant to such modification or amendment) could
reasonably be expected to exceed $250,000, other than (A) purchase orders
for inventory in the ordinary course of business, (B) leases for Mall
Specialty Footwear Stores or Retail Outlet Footwear Stores provided for in
the Company's Budget; or (C) contracts or agreements for other capital
expenditures provided for in the Budget or otherwise permitted by clause
(v) above;
(vii) the incurrence by the Company of any loan (other than the
Senior Revolving Loan, the Senior Term Loan and the Subordinated Loan), or
the entering into by the Company of any material modification, amendment,
supplement, extension or replacement of the Senior Revolving Loan, the
Senior Term Loan or the Senior Credit Agreement;
(viii) the taking by the Company of any action in violation of this
Agreement or any of the Maxwell/Company Documents (including any action
under this Agreement which requires the consent of other Members), or the
failure of the Company to take any material action required by this
Agreement or any of the Maxwell/Company Documents;
(ix) the termination by the Company of, or the amending, modifying or
waiving by the Company of any provision of, any of the Maxwell/Company
Documents or the consenting to by the Company of any non-performance on the
part of Maxwell or any of its Affiliates party to any of the
Maxwell/Company Documents;
(x) (A) the entering into by the Company of any contract or agreement
(other than the Maxwell/Company Documents) with Maxwell, any Affiliate of
Maxwell or any member of the Immediate Family of any Affiliate of Maxwell;
(B) the termination of, or the amending, modifying or waiving of any
provision of, any such contract or agreement approved pursuant to this
Section 7.5(c)(x); or (C) the entering into or implementation of any
-----------------
transaction (other than a transaction that is specifically contemplated by
the Maxwell/Company Documents) between the Company and Maxwell, any
Affiliate of Maxwell or any member of the Immediate Family of any Affiliate
of Maxwell (whether or not evidenced by a contract or agreement),
including, without limitation, (x) the selling through the Company's Retail
Outlet Footwear Stores of any inventory owned by
25
<PAGE>
Maxwell, any Affiliate of Maxwell (other than the Company) or any member of
the Immediate Family of any Affiliate of Maxwell, or (y) the sourcing of
any S&L/JNY Products from Factories or through Buying Agents in which
Maxwell, any Affiliate of Maxwell or any member of the Immediate Family of
any Affiliate of Maxwell owns any interest or has any investment; provided,
--------
however, that Maxwell may, without the consent of the Butler Member, sell
-------
S&L/JNY Products to the Company at an aggregate purchase price not to
exceed $1,500,000 during any Fiscal Year for resale in Mall Specialty
Footwear Stores and at an aggregate purchase price not to exceed $500,000
during any Fiscal Year for resale through Retail Outlet Footwear Stores, at
a purchase price in each such transaction not to exceed Maxwell's landed
cost for such S&L/JNY Products plus a fair and reasonable warehousing
charge (not to exceed fifty cents per pair) consented to by the Butler
Member, and with the consent in each instance (including as to purchase
price) of the president, chief financial officer and general merchandising
manager of the Company;
(xi) the contribution of any of the Company's assets to a
partnership, corporation or other entity in return for an interest in such
partnership, corporation or entity;
(xii) the taking of any action which would make it impossible to
carry on the ordinary business of the Company;
(xii) the execution or delivery of any assignment for the benefit of
creditors of the Company;
(xiv) the filing of any voluntary petition, or the acquiescence in
any involuntary petition, in bankruptcy or receivership with respect to the
Company or its property;
(xv) the employment of any employee of the Company having
compensation in excess of $150,000 annually, or the entering into of any
employment agreement with any employee of the Company (other than any
Employment Agreement approved by Maxwell and Butler in accordance with
Section 5.12(a) of the Contribution Agreement);
(xvi) the failure of the Company to make any payment required to be
made pursuant to the Subordinated Note Purchase Agreement unless the terms
of the subordination agreement entered into between Butler and the Senior
Lender prohibit the Company from making such payment;
(xvii) the Company's engaging in any business or activity that is not
consistent with the purposes of the Company set forth in Section 3.2 hereof
-----------
or the making of any material change in the nature of the Company's
business;
26
<PAGE>
(xviii) the changing of the accounting principles utilized by the
Company or the application thereof in any manner not mandated by GAAP; or
(xix) the acquisition of any real property, or the leasing of any
real property (other than Mall Specialty Footwear Stores or Retail Outlet
Footwear Stores) that constitutes 40% or more of the square footage of any
standalone facility, without performing environmental due diligence
(including obtaining a "Phase I" environmental report) reasonably
satisfactory to Butler.
7.6 Budgets.
-------
(a) The Manager shall prepare a budget for the Company for each Fiscal
Year, which shall include the projected sales, cost of goods sold, gross
profits, store expenses, administrative expenses, marketing expenses, operating
EBITDA, non-recurring expenses, depreciation, amortization, interest expense and
net income for such Fiscal Year, together with a projected balance sheet, cash
flow statement, statement of Capital Accounts and such other statements or
information for such Fiscal Year as shall reasonably be requested by any Member,
in each case on an annual, quarterly and monthly basis (a "Budget"). The
------
Members have adopted and approved the initial Budget for the period beginning on
the Closing Date and ending on January 31, 1998, which Budget is attached hereto
as Exhibit B. For each Fiscal Year thereafter, not later than the June 1 prior
---------
to the beginning of such Fiscal Year, the Manager shall prepare or cause to be
prepared and delivered to each other Member a proposed Budget recommended by the
Manager. Before the occurrence of a Butler Cashout Event, (i) no Budget (other
than the initial Budget attached hereto as Exhibit B) shall be effective until
---------
such Budget has been approved by the Butler Member; and (ii) if, by the August 1
prior to the beginning of any Fiscal Year, the Budget proposed for such Fiscal
Year has not been approved by the Butler Member, then the Manager shall not
expend any funds in respect of such Fiscal Year in excess of the amounts set
forth in the Budget for the immediately preceding Fiscal Year unless such
expenditure has been approved by the Butler Member; provided, however, that the
-------- -------
Manager shall be permitted to pay any amounts due in respect of the Senior
Revolving Loan, the Senior Term Loan, the Subordinated Loan, fees due under the
Services Agreement and the Transitional Services Agreement, rent and other
charges due under leases, taxes, utilities, insurance premiums and other
obligations necessary to the continued operations of the Company without having
to obtain the consent of the Butler Member, even if they exceed the amounts
otherwise permitted above.
(b) The Manager shall have the right from time to time during each Fiscal
Year to submit to the Members proposed modifications to the Budget for that
Fiscal Year. The Members shall promptly consider such proposed modifications
and, before the occurrence of a Butler Cashout Event, (i) the Butler Member
shall have the right to reject or approve the same or to propose such revisions
thereto as the Butler Member may deem reasonably necessary or proper; and (ii)
if a modification in the Budget is approved by the Butler Member, then,
thereafter, the Budget as modified shall constitute the Budget for the remaining
portion of the Fiscal Year.
27
<PAGE>
7.7 Reliance by Third Parties. Notwithstanding any other provision of
-------------------------
this Agreement to the contrary, no Person, including any lender to the Company,
any purchaser of property from the Company or any other Person dealing with the
Company, will be required to verify any representation made by the Manager as to
its authority to encumber, sell or otherwise use any assets or properties of the
Company, and any such lender, purchaser or other Person will be entitled to rely
exclusively on any such representation and will be entitled to deal with the
Manager as if it were the sole party in interest therein, both legally and
beneficially.
7.8 Compensation of Manager. The Manager will not be compensated by the
-----------------------
Company for the performance of its duties and obligations as Manager hereunder.
7.9 Company Funds. The funds of the Company will be deposited in such
-------------
account or accounts maintained in the name of the Company with such bank or
banks as are designated by the Manager. All withdrawals from or charges against
such accounts will be made by the Manager or any Officer. Funds of the Company
may be invested as determined by the Manager in accordance with the terms and
provisions of this Agreement; provided, however, that at all times the Manager
-------- -------
shall maintain books of account that show the amount of funds of the Company on
deposit in each such account and interest accrued with respect to such funds as
are credited to the Company.
7.10 Duties and Responsibilities. The Manager will manage the Company and
---------------------------
its business and affairs in accordance with the terms of this Agreement to the
best of its ability, and will use its good faith efforts to carry out the
business of the Company. In performing its duties and responsibilities under
this Agreement, the Manager will act honestly, in good faith and in the best
interests of the Company and will comply (and will cause the Company to comply)
with all applicable requirements of law. For so long as any Member having a
Percentage Interest of 10% or more is an Affiliate of GE Capital, the Manager
will comply (and will cause the Company to comply and use its best efforts to
cause each of the Officers and employees of the Company to comply) in all
respects with the GE Integrity Policies and, at all times thereafter, the
Manager will comply (and will cause the Company to comply and use its best
efforts to cause each of the Officers and employees of the Company to comply)
with a code of conduct established by the Company substantially similar to the
GE Integrity Policies.
7.11 Indemnification. Without duplication as to any matter indemnified
---------------
against by the Company pursuant to Section 7.3 of the Contribution Agreement,
and except as to any matter for which the Company is entitled to be indemnified
pursuant to Sections 7.1 or 7.3 of the Contribution Agreement, the Company shall
indemnify and hold harmless (i) the Manager, (ii) each of the Members, (iii) the
officers, directors and employees of the Manager, each of the Members and the
Company, and (iv) each member of the Advisory Board (individually, an
"Indemnitee"), as follows:
- -----------
(a) In any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, and to
which an Indemnitee was or is a
28
<PAGE>
party or is threatened to be made a party by reason of any act performed or
omitted to be performed in the name of or on behalf of the Company in connection
with the Company's business, the Company will indemnify such Indemnitee against
reasonable attorneys' fees, judgments, fines, penalties, including excise and
similar taxes, statements, and reasonable expenses actually incurred by such
Indemnitee in connection with the defense and/or settlement of such action,
suit, or proceeding, if such Indemnitee acted in good faith, within such
Indemnitee's scope of authority, without gross negligence or willful misconduct,
and in a manner reasonably believed by such Indemnitee to be in the best
interests of the Company, and in the case of a criminal action or proceeding, if
such Indemnitee had no reason to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that the
Indemnitee had reasonable cause to believe that his conduct was unlawful. In no
event, however, will indemnification ever be made in relation to a proceeding
between the Members, in relation to a proceeding in which the Indemnitee has
been found liable for or convicted of fraud or a criminal act or for grossly
negligent, willful, or intentional misconduct in the Indemnitee's performance of
its duty to the Company or in relation to a proceeding which arises out of a
material violation by the Indemnitee of the terms and provisions of this
Agreement.
(b) If a claim or assertion of liability is made or asserted by a Third
Party against an Indemnitee, which, if prevailed upon by any such Third Party,
would result in such Indemnitee being entitled to indemnification pursuant to
this Section 7.11, the Indemnitee will forthwith give to the Company written
------------
notice of the claims or assertion of liability and request the Company to defend
the same. Failure to so notify the Company will not relieve the Company of any
liability which the Company might have to the Indemnitee except to the extent
that such failure actually prejudices the Company's position. The Company will
have the obligation to defend against such claim or assertion (only if the
Indemnitee is entitled to indemnification pursuant to this Section 7.11), and
------------
the Company will give written notice of the Indemnitee of acceptance of the
defense of such claim and the name of the counsel selected by the Company in
such defense and also will be entitled at its option (and at its own expense) to
employ separate counsel for such defense.
(c) No Indemnitee will be entitled to indemnification under this Section
-------
7.11 if it has entered into any settlement or compromise of any claim giving
- ----
rise to any indemnifiable loss without the written consent of the Company and
the Required Members. If a bona fide settlement offer is made with respect to a
---- ----
claim and the Company (with the consent of the Required Members) desires to
accept and agree to such offer, the Company will give notice to the Indemnitee
to that effect (a "Settlement Notice"). If the Indemnitee fails to consent to
-----------------
the settlement offer within ten (10) calendar days after receipt of the
Settlement Notice, then the Indemnitee will be deemed to have rejected such
settlement offer and will be responsible for continuing the defense of such
claim and, in such event, the maximum liability of the Company
29
<PAGE>
as to such claim will not exceed the amount of such settlement offer plus any
and all reasonable costs and expenses paid or incurred by the Indemnitee up to
the date of the Settlement Notice and which are otherwise the responsibility of
the Company pursuant to this Section 7.11.
------------
(d) Any Indemnification permitted under this Section 7.11 will be made only
------------
out of the assets of the Company and no Member will be obligated to contribute
to the capital of, or lend funds to, the Company to enable the Company to
provide such indemnification.
(e) The indemnification provided by this Section 7.11 will be in addition
------------
to any other rights to which each Indemnitee may be entitled under any agreement
or vote of the Required Members, as a matter of law or otherwise, as to action
in the Indemnitee's capacity as the Manager, Officer, Member, director, officer
or employee of the Manager and/or the Members, or as a member of the Advisory
Board, and will continue as to an Indemnitee who has ceased to serve in such
capacity, and will inure to the benefit of the heirs, successors, assigns,
administrators and personal representatives of the Indemnitee.
(f) The Company shall purchase and maintain insurance on behalf of the
Indemnitees unless the failure to purchase such insurance has been approved by
the Required Members.
(g) In no event may an Indemnitee subject a Member to personal liability by
reason of the indemnification provisions of this Agreement. In addition, the
Members acknowledge and agree that the Members, the Officers, the officers,
directors and employees of the Members, and the members of the Advisory Board
are listed as Indemnitees pursuant to this Section 7.11 because of the
------------
possibility that such Persons, in their capacity as Members (or officers,
directors, or employees thereof), Officers or members of the Advisory Board may
be named as a defendant in any suit involving the Company or its activities.
(h) The provisions of this Section 7.11 are for the benefit of the
------------
Indemnitees and the heirs, successors, assigns, administrators, and personal
representatives of the Indemnitees and will not be deemed to create any rights
for the benefit of any other Persons.
7.12 Liability of the Manager and the Members.
----------------------------------------
(a) Subject to the provisions of this Agreement, neither the Manager, the
Members nor the respective stockholders, directors, officers, employees or
agents of the Manager or the Members will be liable to the Company or to the
other Members for errors in judgment or for any acts or omissions that do not
constitute: (i) gross negligence; (ii) fraud; (iii) willful or wanton
misconduct; or (iv) material violations of this Agreement.
(b) Each Member may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its directors, officers, employees, agents or
representatives.
30
<PAGE>
7.13 Right of the Butler Member or the Advisory Board to Remove Manager.
------------------------------------------------------------------
In the event of a Maxwell Default or a Change of Control of Maxwell at any time
prior to the occurrence of a Butler Cashout Event, the Butler Member shall have
the right to remove the Manager and, upon such removal, to appoint another
Person (which may be the Butler Member or any Affiliate thereof) to serve as the
Manager of the Company subject to all of the terms and conditions of this
Agreement. In the event of the occurrence of an "Event of Default" under the
Senior Credit Agreement (i.e., a default that continues uncured after any
----
applicable notice and cure periods), the Advisory Board shall have the right,
upon the request of the Butler Member made at any time on or after the third
anniversary of the Closing Date, to remove the Manager and, upon such removal,
to appoint another Person (which may be the Butler Member or any Affiliate
thereof or as the Advisory Board may otherwise determine) to serve as the
Manager of the Company subject to all of the terms and conditions of this
Agreement.
7.14 Advisory Board.
--------------
(a) The Company shall have an advisory board (the "Advisory Board")
--------------
comprised of seven members, the purpose of which shall be to provide a forum for
(i) the exchange of information and ideas relating to the Company's business,
(ii) the review of the Company's Budget, the Company's financial and operating
performance and the conformity of such performance to the Budget, (iii) the
providing of advice to the Manager and the Members concerning the Company's
strategic planning and corporate finance alternatives, and (iv) the providing of
input to the Manager in connection with the exercise of its duties and
responsibilities hereunder. Additionally, the Advisory Board, by the vote of
not less than a majority of its members, shall have the power and authority to
exercise the right to remove and replace the Manager provided under Section 7.13
------------
above.
(b) The Maxwell Member shall be entitled to designate two individuals to
serve as members of the Advisory Board (the "Maxwell Advisory Board Members"),
------------------------------
the Butler Member shall be entitled to designate two individuals to serve as
members of the Advisory Board (the "Butler Advisory Board Members") and the
-----------------------------
Maxwell Advisory Board Members and the Butler Advisory Board Members shall be
entitled by unanimous action to designate three individuals to serve as members
of the Advisory Board (the "Independent Advisory Board Members").
----------------------------------
(c) The Maxwell Advisory Board Members shall be officers or directors of
the Maxwell Member or of an Affiliate of the Maxwell Member, and the Butler
Advisory Board Members shall be officers or directors of the Butler Member or of
an Affiliate of the Butler Member. The Independent Advisory Board Members shall
not be officers or directors of the Butler Member, the Maxwell Member or their
respective Affiliates, and it is anticipated that such members would be highly
respected individuals active in (or retired from) the retail or fashion
industries or otherwise having financial or operating experience that would
benefit the Company.
(d) Each member of the Advisory Board shall be elected for a one-year term,
which term shall automatically be extended for successive one-year terms,
subject in each case to earlier
31
<PAGE>
resignation or removal as set forth below. Any member of the Advisory Board may
resign as a member thereof at any time. The Maxwell Member shall have the right
at any time to remove from the Advisory Board any Maxwell Advisory Board Member
and, upon any such member's resignation or removal, to designate a new Maxwell
Advisory Board Member to serve in such member's place on the Advisory Board. The
Butler Member shall have the right at any time to remove from the Advisory Board
any Butler Advisory Board Member and, upon any such member's resignation or
removal, to designate a new Butler Advisory Board Member to serve in such
member's place on the Advisory Board. The Independent Advisory Board Members may
be removed from the Advisory Board only by the unanimous action of the Maxwell
Advisory Board Members and the Butler Advisory Board Members and, upon any such
Independent Advisory Board Member's resignation or removal, the designation of
any new member to serve as an Independent Advisory Board Member in such member's
place shall be made in accordance with paragraph (b) above. Each such new member
shall serve for the balance of the removed or resigned member's term, and
thereafter for successive renewal terms, subject to this paragraph (d).
(e) To the extent that any member of the Advisory Board is compensated for,
or is reimbursed for expenses incurred in connection with, his or her service on
the Advisory Board, such member shall be paid by the party (i.e., the Maxwell
----
Member or the Butler Member) that designated such member and, in the case of the
Independent Advisory Board Members, shall be paid by the Company.
(f) Meetings of the Advisory Board shall be held at the principal office of
the Company or as is otherwise agreed to by a majority of the members of the
Advisory Board. Unless otherwise agreed by the Required Members, the Advisory
Board shall have regular meetings on not less than a monthly basis for the first
twelve months after the date of this Agreement, and on not less than a quarterly
basis thereafter, and may have such special meetings as from time to time may be
called by either the Maxwell Member, the Butler Member or by any four members of
the Advisory Board. Notice of the time and place of such meetings shall be given
to each member of the Advisory Board by telephone, telecopy, mail or courier
delivery at least five days before each regular meeting and at least two days
before each special meeting. Any member of the Advisory Board may waive such
notice (either before or after any meeting), and shall be deemed to have waived
such notice if such member is present at such meeting (without objecting to the
lack of any required notice). Members of the Advisory Board may participate in
a meeting of the Advisory Board in person or by means of telephone conference,
video conference or similar communications equipment. A majority of the members
of the Advisory Board shall constitute a quorum at any such meeting provided
that such a majority includes at least one member designated by the Butler
Member and one member designated by the Maxwell Member. Notwithstanding the
foregoing, in the case of a meeting called for the purpose contemplated by the
second sentence of Section 7.14(a), if a member designated by the Maxwell Member
---------------
fails to attend three consecutive meetings called for such purpose, then a
majority of the members of the Advisory Board shall constitute a quorum at any
such meeting
32
<PAGE>
called for such purpose irrespective of whether a member designated by the
Maxwell Member is in attendance.
(g) Except as specifically set forth in this Section 7.14, the Advisory
------------
Board shall conduct its affairs in such manner and by such procedures as a
majority of its members deems appropriate.
(h) The Advisory Board shall take no part in the control or management of
the Company's affairs except as specifically set forth in Section 7.13, nor
------------
shall the Advisory Board have any power or authority to act for or on behalf of
the Company, all of which power and authority shall be vested solely in the
Manager, the Required Members and the Members, as more fully set forth in this
Agreement. The members of the Advisory Board shall be entitled to the benefits
of the indemnification provisions of Sections 7.11 and 13.2 hereof.
------------- ----
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF MEMBERS
---------------------------------
8.1 Management of Business. No Member (in its capacity as a Member) will
----------------------
take part in the control of the Company's business, transact any business in the
Company's name or have the power to sign documents for or otherwise bind the
Company other than as specifically set forth in this Agreement.
8.2 Return of Capital. No Member will be entitled to the withdrawal or
-----------------
return of its Capital Contribution except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination of the Company
may be considered as such by law and then only to the extent provided for in
this Agreement.
8.3 Partition. Each Member waives any and all rights that it may have to
---------
maintain an action for partition of the Company's property.
8.4 Resignation. A Member may not resign from the Company prior to the
-----------
dissolution and winding up of the Company except upon the assignment of its
Member Interest in accordance with the provisions of Article XI of this
Agreement. A resigning Member shall not be entitled to receive any distribution
and shall not otherwise be entitled to receive the fair value of its Member
Interest, except as otherwise expressly provided in this Agreement.
8.5 Proxies. Each Member shall have the right to grant proxies to any
-------
other Person, pursuant to which such Member may constitute and appoint such
Person as its true and lawful attorney, for it and in its name, place and stead,
with full power of substitution to vote as its proxy all Member Interests of
such Member in the Company at any and all meetings, regular or special, of the
Members, or any adjournments thereof, which may be held during the term of such
proxy, and to exercise any and all rights accruing to such Member as the owner
or holder of
33
<PAGE>
such Member Interests in the Company pursuant to this Agreement or by virtue of
the laws of the State of Delaware, giving and granting to its said attorneys all
the powers the undersigned would possess if personally present at such meeting
or exercising any such right. Without limiting the generality of the foregoing,
each Member may grant to any Person through a proxy the power to execute written
consents in lieu of any such meeting, to participate in any such meeting held by
telephone or video conference, to grant or withhold any consent or approval
contemplated by this Agreement or to exercise or decline to exercise any and all
other rights to grant or withhold any consent or approval (including, without
limitation, any and all rights to grant or withhold any consent or approval
contemplated by Article XI of this Agreement).
----------
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
--------------------------------------
9.1 Records and Accounting. The Manager will keep or cause to be kept
----------------------
appropriate books and records with respect to the Company's business, which will
at all times be kept at the principal office of the Company. Each Member will
have access to such books and records at all reasonable times. The books of the
Company will be maintained for financial reporting purposes on the accrual basis
in accordance with GAAP.
9.2 Reports.
-------
(a) The Manager will prepare and deliver to each Member, at the Company's
expense, not later than 120 days following the end of each Fiscal Year, a
balance sheet, statement of income, statement of Members' Capital Accounts and
statement of source and application of funds of the Company, as at the end of
such Fiscal Year and for the Fiscal Year then ended, in each case (commencing
with the second such Fiscal Year) setting forth in comparative form the figures
for the preceding Fiscal Year and certified without qualification by the
Company's independent accountants, along with the Manager's discussion and
analysis of variances, all in reasonable detail.
(b) Not later than thirty days after the last day of each fiscal month, the
Manager will prepare and deliver to each Member, at the Company's expense, a
balance sheet, statement of income, a statement of Members' Capital Accounts and
statement of source and application of funds of the Company for such month and
for the Fiscal Year to date, in each case with comparisons to the Budget for
such month and Fiscal Year to date period and (commencing with the second such
Fiscal Year) with comparative statements for the corresponding periods of the
prior Fiscal Year.
(c) At the request of any Member and at the Company's expense, the Manager
will additionally cause to be provided to the Members (i) an annual analysis
detailing the components, and changes therein, of each Member's Capital Account,
and (ii) an annual analysis
34
<PAGE>
detailing all allocations of Profit, Loss and other items of income, gain, loss
and deduction, and (iii) such other reports, information or analysis that any
Member may reasonably request.
9.3 Notices from Senior Lender. Within one Business Day after receiving
--------------------------
any material notice, document or other correspondence from the Senior Lender
with respect to the Senior Revolver Loan or the Senior Term Loan, the Manager
shall deliver a copy of such notice, document or correspondence to each Member.
ARTICLE X
TAX MATTERS
-----------
10.1 Preparation of Tax Returns. The Manager will arrange for the
--------------------------
preparation and timely filing of all returns necessary for federal, state and
local income tax purposes. The Manager shall submit the returns to each Member
for review and approval no later than fifteen days prior to the due date of the
returns, after giving effect to any extensions of time. If any Member objects
to any item on a return, resolution of the items objected to shall be made by
the Required Members. The classification, realization and recognition of
income, gains, losses, deductions and other items will be based on the method of
accounting for federal income tax purposes determined by the Manager.
10.2 Tax Status; Elections. As provided in Tax Regulations Section
---------------------
301.7701-3, the Company will elect to be classified as a partnership for federal
income tax purposes and, where permitted, will elect to be classified as a
partnership for state and local tax purposes. The Manager (with the consent of
the Required Members) will determine whether to make any other election
available to the Company under the Code.
10.3 Tax Controversies.
-----------------
(a) Subject to the provisions hereof (including Section 10.3(b) below), the
---------------
Manager is designated as the "tax matters partner" (as defined in Section 6231
of the Code) and is authorized and required to represent the Company, at the
Company's expense, in connection with all examinations of the Company's affairs
by tax authorities, including resulting administrative and judicial proceedings,
and to expend Company funds for professional services and costs associated
therewith. Each Member agrees to cooperate with the Manager in connection with
such proceedings. The Manager will give all Members prompt notice of any
communications from the Internal Revenue Service, or other taxing authorities,
or any actions it proposes to take as "tax matters partner."
(b) Notwithstanding anything to the contrary in this Agreement, the tax
matters partner will have no authority without first obtaining the approval of
the Required Members to:
35
<PAGE>
(i) enter into a settlement agreement with the Internal Revenue
Service that purports to bind Members other than the tax matters partner;
(ii) file a petition as contemplated in Code Section 6226(a) or 6228;
(iii) intervene in any action as contemplated in Code Section
6226(b)(5);
(iv) file any request contemplated in Code Section 6227(b); or
(v) enter into an agreement extending the period of limitations as
contemplated in Code Section 6229(b)(1)(B).
Notwithstanding the withdrawal of a Member from the Company or the dissolution
of the Company, the provisions of this Section 10.3 will survive and remain
------------
binding upon each Member until the statute of limitations has run for the
assessment of federal, state and local taxes with respect to the last taxable
year in which such Member held an interest in the Company.
10.4 Organizational Expenses. The Company will elect to deduct expenses
-----------------------
incurred in organizing the Company ratably over a sixty-month period as provided
in Section 709 of the Code.
ARTICLE XI
PLEDGE AND TRANSFER RESTRICTIONS;
CERTAIN RIGHTS; ADMISSION OF SUCCESSOR MEMBERS
----------------------------------------------
11.1 Pledge and Transfer Restrictions. No Member Interest (including the
--------------------------------
economic attributes associated therewith) shall be Pledged or Transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article XI. Any Pledge, Transfer, or purported Pledge or Transfer of
----------
any Member Interest not made in accordance with this Article XI shall be null
----------
and void.
11.2 Transfers by Maxwell Retail. Except as set forth in Sections 11.4,
--------------------------- -------------
11.5 and 11.6, Maxwell Retail may not Pledge or Transfer its Member Interest, in
- ---- ----
whole or in part, without the consent of the Butler Member, which consent may be
withheld in the sole and unreasonable discretion of the Butler Member; provided,
--------
however, that Maxwell Retail may Transfer all (but not less than all) of its
- -------
Member Interest to Maxwell, to any wholly-owned subsidiary of Maxwell or to any
other Person all of the equity interests in which are owned, directly or
indirectly, by Maxwell.
11.3 Transfers by Butler. Except as set forth in the proviso below, in
-------------------
Sections 11.4, 11.5 and 11.6 of this Agreement and in Section 2.1 of the Option
- ------------- ---- ----
Agreement, and except in an
36
<PAGE>
underwritten public offering pursuant to the Company Registration Rights
Agreement, Butler may not Pledge or Transfer its Member Interest, in whole or in
part, without the consent of the Maxwell Member, which consent may be withheld
in the sole and unreasonable discretion of the Maxwell Member; provided,
--------
however, that Butler may Transfer all (but not less than all) of its Member
- -------
Interest to GE Capital, to any wholly-owned subsidiary of GE Capital or to any
other Person all of the equity interests in which are owned, directly or
indirectly, by GE Capital.
11.4 First Refusal Rights.
--------------------
(a) If any Member (in either case, a "Transferring Member") proposes to
-------------------
Transfer all (but not less than all) of the Member Interests then owned by it to
a Third Party pursuant to a Third Party Offer, then such Transferring Member
shall first give a written notice (a "First Refusal/Tag Along Notice") to the
------------------------------
Maxwell Member, in the case of a notice given by the Butler Member, or to the
Butler Member, in the case of a notice given by the Maxwell Member (the
recipient of such notice in either case, the "Notified Member"), specifying (i)
---------------
the identity of the Third Party making such Third Party Offer, (ii) the price
per Member Unit offered to such Transferring Member pursuant to such Third Party
Offer (the "Offer Price"), and (iii) any other terms and conditions of such
-----------
Third Party Offer, and containing (in addition to the Tag Along Offer referred
to in Section 11.5(a) hereof) an irrevocable offer (a "First Refusal Offer"),
--------------- -------------------
open to acceptance for a period of thirty days after the date such First
Refusal/Tag Along Notice is given, to sell to the Notified Member all (but not
less than all) of its Member Interests at the Offer Price and on the other terms
and conditions of the Third Party Offer. The First Refusal/Tag Along Notice
shall be accompanied by copies of all letters of intent, term sheets or other
documents setting forth the proposed terms and conditions of such Third Party
Offer.
(b) The Notified Member may accept such First Refusal Offer by giving a
written notice of such acceptance (a "Notice of Acceptance") to the
--------------------
Transferring Member within thirty days after the date the First Refusal/Tag
Along Notice is given. If such a Notice of Acceptance is given, the closing of
the Transfer of the Transferring Member's Member Interests to such Notified
Member pursuant to the First Refusal Offer shall take place in accordance with
the provisions of Section 11.7 hereof.
------------
(c) If, at the end of the thirtieth day after the First Refusal/Tag Along
Notice is given, the Notified Member has not delivered a Notice of Acceptance of
the First Refusal Offer contained in such notice, then the First Refusal Rights
shall terminate with respect to the Transferring Member's Member Interests,
subject to the provisions of Section 11.5 hereof.
------------
(d) Transfers of Member Interests for property, services or other non-cash
consideration are not permitted pursuant to this Section 11.4. In no event
------------
shall Butler or Maxwell Retail solicit or accept any Third Party Offer that does
not provide for the rights set forth in this Section 11.4.
------------
11.5 Tag Along Rights.
----------------
37
<PAGE>
(a) Any First Refusal/Tag Along Notice given pursuant to Section 11.4(a)
---------------
hereof shall also contain (in addition to the First Refusal Offer), an
irrevocable offer (a "Tag Along Offer"), open to acceptance for a period of
---------------
thirty days after the date such First Refusal/Tag Along Notice is given, to
permit the Notified Member, in lieu of accepting the First Refusal Offer
pursuant to Section 11.4(b), to sell to the Third Party pursuant to the Third
---------------
Party Offer all (but not less than all) of the Member Interests then held by the
Notified Member, at the Offer Price and on the other terms and conditions of the
Third Party Offer.
(b) The Notified Member may accept such Tag Along Offer by giving a Notice
of Acceptance to the Transferring Member within thirty days after the date the
First Refusal/Tag Along Notice is given. If such a Notice of Acceptance is
given, the closing of the purchase by the Third Party of the Member Interests of
the Transferring Member and the Notified Member pursuant to the Third Party
Offer shall take place in accordance with the provisions of Section 11.7 hereof.
------------
(c) If, at the end of the thirtieth day after the First Refusal/Tag Along
Notice is given, the Notified Member has not delivered a Notice of Acceptance of
either the First Refusal Offer or the Tag Along Offer contained in such First
Refusal/Tag Along Notice, then the Transferring Member shall have ninety days in
which to Transfer all (but not less than all) of the Transferring Member's
Member Interests to the Third Party at a price not greater than the Offer Price
and on terms no more favorable to the Transferring Member than those contained
in the Third Party Offer to which the First Refusal/Tag Along Notice relates.
(d) Promptly after any Transfer of a Transferring Member's Member Interests
to a Third Party pursuant to paragraph (c) above, the Transferring Member shall
notify the Notified Member thereof and shall furnish such evidence of the
completion of such Transfer, the time of completion of such Transfer and the
terms and conditions thereof as the Notified Member may request. If, at the end
of the ninety-day period provided for in paragraph (c) above, the Transferring
Member has not completed the Transfer of all of its Member Interests to such
Third Party, the Transferring Member shall no longer be permitted to Transfer
such Member Interests without again complying with Section 11.4 and this Section
------------ -------
11.5 in their entirety. If the Transferring Member determines at any time
- ----
within such ninety-day period that it cannot complete within such period the
Transfer of its Member Interests on the terms and conditions (including the
Offer Price) of the Third Party Offer, the Transferring Member may recommence
the procedures set forth in Section 11.4 and this Section 11.5 in their entirety
------------ ------------
with respect to any revised Third Party Offer, without waiting for the
expiration of such ninety-day period, by delivering a new First Refusal/Tag
Along Notice to the Notified Member.
(e) Transfers of Member Interests for property, services or other non-cash
consideration are not permitted pursuant to this Section 11.5. In no event
------------
shall Butler or Maxwell Retail solicit or accept any Third Party Offer that does
not provide for the rights set forth in this Section 11.5.
------------
38
<PAGE>
11.6 Take Along Rights.
-----------------
(a) If (i) a Transferring Member has given a First Refusal/Tag Along Notice
with respect to all of the Member Interests owned by it and has complied with
Sections 11.4 and 11.5 hereof, and (ii) the Notified Member has not given a
- ------------- ----
Notice of Acceptance with respect to the First Refusal Offer or the Tag Along
Offer, then the Transferring Member shall have the right (the "Take Along
----------
Right"), at its option, to require the Notified Member to sell all (but not less
than all) of the Member Interests held by the Notified Member to the Third Party
at the Offer Price and on the other terms and conditions of the Third Party
Offer, by giving a written notice of such election (a "Take Along Notice") to
-----------------
the Notified Member within thirty days after the last date for delivery of a
Notice of Acceptance pursuant to Sections 11.4(b) and 11.5(b) hereof.
---------------- -------
(b) If such a Take Along Notice is given, the closing of the purchase by
the Third Party of the Member Interests of the Transferring Member and the
Notified Member pursuant to the Third Party Offer shall take place in accordance
with the provisions of Section 11.7 hereof.
------------
(c) Transfers of Member Interests for property, services or other non-cash
consideration are not permitted pursuant to this Section 11.6. In no event
------------
shall Butler or Maxwell Retail solicit or accept any Third Party Offer that does
not provide for the rights set forth in this Section 11.6.
------------
11.7 Closing of Permitted Transfers.
------------------------------
(a) As soon as is reasonably practical following the Transferring Member's
receipt of a Notice of Acceptance of a Tag Along Offer pursuant to Section
-------
11.5(b) hereof or the Transferring Member's giving of a Take Along Notice
- -------
pursuant to Section 11.6(a) hereof, the Transferring Member shall deliver to the
---------------
Notified Member drafts of all definitive documents reasonably required to be
executed in connection with such proposed Transfer and the Notified Member shall
have the right to participate in good faith in the negotiation of such
documents. The obligation of the Notified Member to consummate the transactions
contemplated by the Third Party Offer shall be conditioned only upon (i) the
negotiation and execution of such definitive documents, having terms and
conditions consistent with the Third Party Offer and otherwise reasonably
acceptable to each of the parties thereto, and (ii) the consummation of such
transaction by the Transferring Member. The Notified Member shall cause a
representative that is duly authorized to execute documents and to act on behalf
of the Notified Member to attend the closing of such Transfer and to take such
actions as are reasonably requested by the Transferring Member or the Third
Party in connection therewith.
(b) The closing of the Transfers provided for in Sections 11.4(b), 11.5(b)
---------------- -------
and 11.6(b) hereof shall take place on the date (not later than ninety days
-------
following the date on which either the Notice of Acceptance referred to in
Sections 11.4(b) or 11.5(b) or the Take Along Notice referred to in Section
- ---------------- ------- -------
11.6(b) is given) agreed upon by the Transferring Member, the Notified
39
<PAGE>
Member and, except for the purposes of Section 11.4(b), the Third Party (or if
---------------
such day is not a Business Day, on the next succeeding Business Day), at the
principal office of the Company (or at such other place as the Transferring
Member, the Notified Member and, except for the purposes of Section 11.4(b), the
---------------
Third Party shall agree).
(c) On the date of closing of any Transfer of Member Interests by a
Transferring Member to the Notified Member pursuant to Section 11.4(b), the
---------------
Transferring Member shall assign to the Notified Member the Member Interests
being Transferred pursuant to such Section and, on the date of closing of any
Transfer of Member Interests by a Transferring Member and the Notified Member to
a Third Party pursuant to Sections 11.5(b) and 11.6(b), the Transferring Member
---------------- -------
and the Notified Member shall assign to the Third Party the Member Interests
being Transferred pursuant to such Sections, in each case against delivery of
the aggregate Offer Price for such Member Interests (the "Purchase Price"),
--------------
either by (i) wire transfer of the Purchase Price to an account in a bank
located in the United States designated by the transferring Member for such
purpose, or (ii) delivery to the transferring Member of an official bank check
drawn on a member of the New York Clearing House, payable to the order of the
transferring Member in the amount of the Purchase Price. Such Transfer shall,
in the case of a Transfer pursuant to Section 11.4, be made without any
------------
representation or warranty whatsoever (other than to the effect that the
transferring Member has good title to such Member Interests, free and clear of
Liens, and has all requisite power and authority to assign such Member Interests
to the transferee pursuant to Section 11.4 hereof); and, in the case of a
------------
Transfer pursuant to Sections 11.5 or 11.6, shall be made upon reasonable and
------------- ----
customary representations, warranties and indemnities for a transaction of such
type.
11.8 Rights of Assignee.
------------------
(a) Except as provided in this Article XI and as required by operation of
----------
law, the Company will not be obligated for any purpose whatsoever to recognize
the Transfer by any Member of a Member Interest unless such Transfer is made in
accordance with the terms of this Agreement. A transferee or assignee of a
Member's Member Interest or a Person acquiring a Member Interest pursuant to any
foreclosure made upon any permitted Pledge of such Member Interest, will be
entitled only to receive the distributive share of the Company's Profits, Losses
and other items of income, gain, losses, deductions and credit and the
distributions of cash and/or property attributable to such transferred Member
Interest.
(b) Any Transfer of a Member Interest must be in writing, may not
contravene any of the provisions of this Agreement, and must be executed by the
transferor and delivered to the Company and recorded on the books of the
Company. Any Transfer which contravenes any of the provisions of this Agreement
will be of no force and effect and will not be recognized by the Company.
(c) A transferee of a Member Interest who is not admitted as a Member
pursuant to Section 11.9 will have no right to require any information or
------------
account of the Company's
40
<PAGE>
transactions or to inspect the Company books or to vote, but will only be
entitled to receive the allocations and distributions to which its transferor
would otherwise be entitled under this Agreement.
(d) Any transferee who does not become a Member and desires to make a
further transfer of such Member Interest will be subject to all of the
provisions of this Article XI to the same extent and in the same manner as any
----------
Member desiring to transfer its Member Interest.
11.9 Admission as a Successor Member.
-------------------------------
(a) Conditions of Admission. Subject to the other provisions of this
-----------------------
Article XI, a transferee of a Member Interest will be admitted as a Member only
- ----------
if the following conditions are satisfied:
(i) The transferee accepts and agrees to be bound by the terms and
provisions of this Agreement as a Member with respect to the Member
Interest so transferred;
(ii) A counterpart of this Agreement and such other documents or
instruments as the Manager may reasonably require is executed by the
transferee to evidence such acceptance and agreement;
(iii) The transferee pays or reimburses the Company for all
reasonable legal fees, filing and publication costs incurred by the
Company in connection with the admission of the transferee as a Member
with respect to the Member Interest so transferred; and
(iv) If the transferee is not an individual, the transferee provides
the Company with evidence satisfactory to counsel for the Company of the
authority of such transferee to become a Member under the terms and
provisions of this Agreement.
(b) Filings. The Manager will make all official filings and publications
-------
as promptly as practicable after the satisfaction by the transferee of the
conditions contained in this Article XI to the admission of such transferee as a
----------
Member.
11.10 Distributions and Allocations in Respect of Transferred Member
--------------------------------------------------------------
Interests. If any Member Interest is Transferred during any Tax Year in
- ---------
compliance with the provisions of this Article XI, Profits, Losses and all other
----------
items attributable to the transferred (or adjusted) interest for such period
will be divided and allocated between the affected Persons by taking into
account their varying interests during the period in accordance with Code
Section 706(d), using any conventions permitted by law and selected by the
Manager (with the consent of the Required Members). All distributions on or
before the date of such Transfer will be made to the transferor. Solely for
purposes of making such allocations and distributions in the case of a Transfer,
the Company will recognize such Transfer not later than the end of the calendar
month during which
41
<PAGE>
it is given notice of such Transfer. Neither the Company nor the Manager will
incur any liability for making allocations and distributions in accordance with
the provisions of this Section 11.10, whether or not the Manager or the Company
-------------
has knowledge of any Transfer of any interest.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
---------------------------
12.1 No Dissolution. The Company shall not be dissolved by the admission
--------------
of Members in accordance with the terms of this Agreement or, except as provided
in Section 12.2, by any event which terminates the continued membership of a
------------
Member in the Company, so long as the Company at all times has at least one
Member. Upon the occurrence of any such event, the business of the Company
shall be continued without dissolution.
12.2 Events Causing Dissolution. The Company shall be dissolved and its
--------------------------
affairs shall be wound up upon the occurrence of any of the following events:
(a) the expiration of the term of the Company, as provided in Section 2.5;
-----------
(b) the bankruptcy or dissolution of a Member, or the occurrence of any
other event under the Delaware Act that terminates the continued membership of a
Member;
(c) the entry of a decree of judicial dissolution under Section 18-802 of
the Delaware Act;
(d) the completion of the sale of all or substantially all of the assets of
the Company;
(e) the termination of the Contribution Agreement pursuant to Section
8.1(a) thereof at any time prior to the Closing Date; or
(f) the unanimous written consent of the Members to dissolve the Company.
12.3 Continuation of the Company. Upon the occurrence of an event
---------------------------
described in Section 12.2(a), (b) or (e) only, the Company may be reconstituted
--------------- --- ---
if (i) in the case of an event described in Section 12.2(a) or (e), all of the
--------------- ---
Members unanimously elect to continue the Company within ninety days after such
event, or (ii) in the case of an event described in Section 12.2(b), the
---------------
remaining Members at the time of such event unanimously elect to continue the
Company within ninety days after such event. If no election to continue the
Company is made within ninety days after such event, the Company will conduct
only those activities necessary to wind up its affairs. If such an election to
continue the Company is made, then:
(a) the Company will be deemed to be reconstituted and will continue unless
and until dissolved in accordance with this Article XII; and
-----------
42
<PAGE>
(b) all necessary steps will be taken to amend or restate this Agreement
and, if the Certificate of Formation has been canceled, then a new certificate
of formation (or similar certificate) shall be filed in accordance with the
Delaware Act.
12.4 Liquidation.
-----------
(a) Upon dissolution of the Company, the Manager will be the liquidating
trustee (the "Liquidator") of the Company, unless the Manager is otherwise
----------
unable to serve in such capacity, in which case a Liquidator will be selected by
the Required Members.
(b) The Liquidator will agree not to resign at any time without fifteen
days' prior written notice. A Liquidator other than the Manager may be removed
at any time, with or without cause, by notice of removal approved by the
Required Members. Upon dissolution, removal or resignation of a Liquidator, a
successor and substitute Liquidator (who will succeed to all rights, powers and
duties of the original Liquidator) will, within thirty days thereafter, be
approved by the Required Members. The right to appoint a successor or substitute
Liquidator in the manner provided herein will be recurring and continuing for so
long as the functions and services of the Liquidator are authorized to continue
under the provisions hereof, and every reference herein to a Liquidator will be
deemed to refer also to any such successor or substitute Liquidator appointed in
the manner herein provided.
(c) Except as expressly provided in this Article XII, the Liquidator will
-----------
have and may exercise, without further authorization or consent of any of the
Members, all of the powers conferred upon the Manager and the Required Members
under the terms of this Agreement to the extent necessary or desirable in the
good faith judgment of the Liquidator to complete the winding up and liquidation
of the Company as provided for herein.
(d) Except as provided in Section 12.6 below and in Section 8.1(b) of the
------------
Contribution Agreement, the Liquidator will liquidate the assets of the Company,
and, after making all allocations and distributions otherwise required by this
Agreement, will apply and distribute the proceeds of such liquidation in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
(i) First, to creditors of the Company (including Members) in the
order of priority provided by law, including the escrowing of a reserve of
cash or other assets of the Company for contingent liabilities in an amount
determined by the Liquidator to be appropriate for such purposes; and
(ii) Second, to the Members in accordance with the positive balances
in their respective Capital Accounts.
43
<PAGE>
12.5 Reserves. After all the assets of the Company have been distributed,
--------
the Company will terminate; provided that, if at any time thereafter any funds
in any reserve referred to in Section 12.4(d)(i) are released because the need
------------------
for such reserve has ended, such funds will be distributed to the Members in the
same manner as if such distribution had been made pursuant to Section
-------
12.4(d)(ii).
- -----------
12.6 Distributions in Kind. Notwithstanding the provisions of Section
-------
12.4 that require liquidation of the Company's assets, but subject to the order
- ----
of priorities set forth therein, if on dissolution of the Company the Liquidator
determines that an immediate sale of part or all of the Company's assets would
be impractical or would cause undue loss to the Members, the Liquidator may
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Company (other than those to Members). The
Liquidator may distribute to the Members, in lieu of cash, such Company assets
as the Liquidator deems not suitable for liquidation. Any distributions in kind
will be subject to such conditions relating to the disposition and management
thereof as the Liquidator deems reasonable and equitable. The Liquidator will
value any property distributed in kind based upon such property's fair market
value as determined using such reasonable method of valuation as it may adopt.
The fair market value of such property will be the gross fair market value of
such property for purposes of making the adjustments required by paragraph (b)
of the definition of "Book Value" and paragraph (c) of the definition of
"Profits and Losses."
12.7 Filing of Certificate of Cancellation. Upon the completion of the
-------------------------------------
distribution of the Company's property as provided in Sections 12.4, 12.5 and
------------- ----
12.6, the Liquidator (or the Members if necessary) will cause the Certificate of
- ----
Formation to be canceled and will take such other actions as may be necessary to
terminate the existence of the Company.
12.8 Return of Capital. No Member will be personally liable for the
-----------------
return of the Capital Contributions of the Members, or any portion thereof, it
being expressly understood that any such return will be made solely from the
Company's assets.
ARTICLE XIII
GENERAL PROVISIONS
------------------
13.1 Amendment. An amendment to this Agreement may be adopted only if
---------
unanimously approved in writing by all Members. Notwithstanding the foregoing,
the Manager shall have the authority, acting alone, to amend this Agreement
solely to reflect the admission of successor Members provided that the
conditions of Section 11.9 have been met.
------------
13.2 Further Action. The parties will execute and deliver all documents,
--------------
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
44
<PAGE>
13.3 Invalidity of Provisions. If any provision of this Agreement is
------------------------
declared or found to be illegal, unenforceable or void, in whole or in part,
then the parties will be relieved of all obligations arising under such
provision, but only to the extent that it is illegal, unenforceable or void, it
being the intent and agreement of the parties that this Agreement be deemed
amended by modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
13.4 Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
-------
13.4):
- ----
If to Butler:
------------
c/o GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
With copies to:
--------------
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
If to Maxwell Retail:
--------------------
Maxwell Retail Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
45
<PAGE>
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
If to the Manager:
-----------------
To Maxwell Retail, as provided above, or
as shall be specified by any successor
Manager hereunder by notice give in
accordance with this Section 13.4.
------------
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
13.5 Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives and
permitted assigns.
13.6 Integration. This Agreement constitutes the entire agreement among
-----------
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.
13.7 No Third Party Beneficiary. This Agreement is made solely and
--------------------------
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and (except as specifically set forth in
Sections 7.11 and 13.2) no other Person whatsoever will have any rights,
- ------------- ----
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
13.8 Waiver. No failure by any party to insist upon the strict
------
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof will constitute
waiver of any such breach or any other covenant, duty, agreement, or condition.
46
<PAGE>
13.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
13.10 Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be modified or
amended except in writing signed by the party against whom enforcement is
sought.
13.11 Governing Law. This Agreement will be construed and interpreted in
-------------
accordance with and governed by the Delaware Act with respect to all matters
subject thereto, and otherwise will be governed by and construed and interpreted
in accordance with the laws of the State of New York applicable to contracts
made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
THE BUTLER GROUP INC.
By: /s/ Douglas P Haensel
__________________________________
Douglas P. Haensel
Executive Vice President
MAXWELL RETAIL INC., individually
and in its capacity as Manager
By: /s/ James J. Tinagero
__________________________________
James J. Tinagero
Chairman
47
<PAGE>
Exhibit A
---------
Schedule of Net Values of Contributed Property
----------------------------------------------
<TABLE>
<CAPTION>
Property Net Value
----------- ---------
<S> <C>
A. Maxwell Retail Inc.
-------------------
1. The Sam & Libby Trademark License $3,460,000
=========
Total: $3,460,000
B. The Butler Group Inc.
---------------------
1. The Headquarters Assets $ 0
2. The Store FF&E $3,600,000
3. The Store Leases $ 0
4. All other Store Assets $ 0
==========
Total: $3,600,000
</TABLE>
48
<PAGE>
Exhibit B
---------
Approved Budget for First Fiscal Year
-------------------------------------
49
<PAGE>
EXHIBIT 10.3
OPTION AGREEMENT
THIS OPTION AGREEMENT is made and entered into as of April 14, 1997 by and
among THE BUTLER GROUP INC., a Delaware corporation ("Butler"), MAXWELL SHOE
------
COMPANY INC., a Delaware corporation ("Maxwell"), MAXWELL RETAIL INC., a
-------
Delaware corporation ("Maxwell Retail"), and SLJ RETAIL LLC, a Delaware limited
--------------
liability company (the "Company").
-------
RECITALS
--------
A. Butler, Maxwell and Maxwell Retail are parties to the Contribution
Agreement and Butler and Maxwell Retail are parties to the Operating Agreement
(as such terms are defined below).
B. Pursuant to the Contribution Agreement and in connection with the
transactions contemplated by the Operating Agreement, the parties wish to enter
into this Agreement, setting forth their mutual understandings and agreements
with respect to the matters set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1.1 Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated to the contrary:
"Aggregate Put Price" has the meaning set forth in Section 2.2(a).
------------------- --------------
"Agreement" means this Option Agreement, as it may be amended, modified,
---------
supplemented or restated from time to time.
"Business Day" means any day that is not a Saturday or Sunday or a day on
------------
which banks are required or permitted to be closed in the States of New York or
Massachusetts.
"Butler" means The Butler Group Inc., a Delaware corporation, and its
------
successors and assigns pursuant to any Transfer permitted under the Operating
Agreement.
"Butler Exchange Rights" has the meaning set forth in Section 2.1.
---------------------- -----------
"Capital Contribution" has the meaning set forth in the Operating
--------------------
Agreement.
<PAGE>
"Class A Member Interests" has the meaning set forth in the Operating
------------------------
Agreement.
"Class A Member Units" has the meaning set forth in the Operating
--------------------
Agreement.
"Class B Member Interests" has the meaning set forth in the Operating
------------------------
Agreement.
"Class B Member Units" has the meaning set forth in the Operating
--------------------
Agreement.
"Code" has the meaning set forth in the Operating Agreement.
----
"Company" means SLJ Retail LLC, the limited liability company formed
-------
pursuant to the Operating Agreement.
"Contribution Agreement" means the Contribution Agreement dated of even
----------------------
date herewith among Butler, Maxwell and Maxwell Retail, as it may be amended,
modified, supplemented or restated from time to time.
"Current Market Price" means, in respect of any share of Maxwell Common
--------------------
Stock on any date, the average of the daily market prices for the ninety
consecutive trading days immediately preceding such date. The daily market
price for each such trading day shall be (i) the last sale price on such day on
the principal stock exchange on which the Maxwell Common Stock is then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on such
day as officially quoted on any such exchange, or (iii) if the Maxwell Common
Stock is not then listed or admitted to trading on any stock exchange, the last
sale price on such day as reported in the NASD Automated Quotations System, or
if the Maxwell Common Stock is not on the National Market List, the average of
the last reported closing bid and asked prices on such day in the over-the-
counter market, as furnished by the National Quotation Bureau, Inc., or if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
if there is no such firm, as furnished by any member of the NASD selected
mutually by Butler and Maxwell or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by
Butler and one of which shall be selected by Maxwell.
"Formula Value" means, at any date, the amount equal to the product of (a)
-------------
seven and 2/10 (7.2) multiplied by (b) the sum of (i) the Company's net income
---------- --
(without any provision for federal and state income taxes) for the most recent
period of twelve consecutive fiscal months of the Company ending on or after the
first anniversary of the date of this Agreement and on or before the date of
determination, plus (ii) depreciation and amortization during such period with
----
respect to assets contributed to the Company by or on behalf of the Members
pursuant to the Contribution Agreement (but not assets acquired by the Company
otherwise), to the extent deducted in determining such net income, in each case
determined in accordance with GAAP.
<PAGE>
"GAAP" means generally accepted accounting principles in the United States
----
of America as from time to time in effect, applied on a consistent basis with
those accounting principles applied at prior dates or for prior periods.
"Governmental Body" means any governmental or quasi-governmental agency,
-----------------
authority, commission, board or other body.
"Lien" has the meaning set forth in the Contribution Agreement.
----
"Manager" has the meaning set forth in the Operating Agreement.
-------
"Maxwell" means Maxwell Shoe Company Inc., a Delaware corporation.
-------
"Maxwell Common Stock" means the Class A Common Stock, par value $.01 per
--------------------
share, of Maxwell, as it exists on the date of this Agreement, and any capital
stock of Maxwell into which such Class A Common Stock may hereafter be changed.
"Maxwell Option Rights" has the meaning set forth in Section 3.1.
--------------------- -----------
"Maxwell Registration Rights Agreement" has the meaning set forth in the
-------------------------------------
Contribution Agreement.
"Maxwell Retail" means Maxwell Retail Inc., a Delaware corporation, and its
--------------
successors and assigns pursuant to any Transfer permitted under the Operating
Agreement.
"Member Interest" has the meaning set forth in the Operating Agreement.
---------------
"Member Units" has the meaning set forth in the Operating Agreement.
------------
"NASD" means the National Association of Securities Dealers, Inc., or any
----
successor corporation thereto.
"Notice of Objection" has the meaning set forth in Section 2.2(g).
------------------- --------------
"Person" means an individual, corporation, partnership, limited liability
------
company, joint venture, trust, estate, unincorporated organization, association,
Governmental Body or other entity.
"Put Exercise Notice" has the meaning set forth in Section 2.2(a).
------------------- --------------
"Put Price Per Member Unit" means, in respect of any Class B Member Unit as
-------------------------
of the date of any Put Exercise Notice, the quotient of (a) the Formula Value of
the Company as of such date (determined on the basis set forth in the definition
thereof, without giving effect to any
3
<PAGE>
discount for (i) the fact that the Class B Member Units may constitute a
minority interest, or (ii) any restrictions on the transferability of the Class
B Member Units, or (iii) the absence of a public market for the Class B Member
Units) divided by (b) the total number of Class A Member Units and Class B
------- --
Member Units held as of such date or deemed to be held as of such date in
accordance with Sections 2.4 and 3.2(a).
------------ ------
"Put Price Notice" has the meaning set forth in Section 2.2(b).
---------------- ---------------
"Subordinated Notes" has the meaning set forth in the Contribution
------------------
Agreement.
"Transfer" has the meaning set forth in the Operating Agreement.
--------
1.2 Rules of Construction.
---------------------
(a) All article, section and paragraph titles and captions in this
Agreement are for convenience only, will not be deemed part of this Agreement,
and in no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Articles," "Sections" and "Exhibits" are to Articles, Sections
-------- -------- --------
and Exhibits of or to this Agreement.
(b) Whenever the context may require, any pronoun used in this Agreement
includes the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs includes the plural and vice versa. The
---- -----
locative adverbs "hereof," "herein," "hereafter," etc. refer to this Agreement
as a whole.
(c) All accounting terms used in this Agreement and not specifically
defined in Section 1.1 of this Agreement shall be construed in conformity with
-----------
GAAP. In the event that GAAP changes during the term of this Agreement such
that the defined terms set forth in Section 1.1 or any other accounting terms
-----------
used herein would then be calculated in a different manner, then (i) the parties
hereto agree to amend this Agreement in such respects as are necessary to
conform the defined terms set forth in Section 1.1 or any other accounting terms
-----------
used herein so that the criteria for the computations contemplated by Section
-------
2.2(g) of this Agreement are substantially the same as were effective prior to
- -------
such change in GAAP, and (ii) until the parties so amend this Agreement, the
defined terms set forth in Section 1.1 or any other accounting terms used
-----------
herein and the application of such terms pursuant to Section 2.2(g) shall be
--------------
construed in conformity with GAAP as in effect immediately prior to such change.
ARTICLE II
BUTLER'S OPTION RIGHTS
----------------------
2.1 Butler's Exchange Option.
------------------------
4
<PAGE>
(a) Butler shall have the right (the "Butler Exchange Rights"), exercisable
----------------------
at any time on or prior to the fifth anniversary of the date of this Agreement,
by giving written notice of such exercise to the Company with a copy thereof to
Maxwell and the Manager, to exchange (i) all (but not less than all) of the
4,500 Class A Member Units issued to it pursuant to Section 4.2(b) of the
Operating Agreement, together with all (but not less than all) of the
$12,500,000 in principal amount of the Subordinated Notes, for (ii) 4,500 Class
B Member Units of the Company.
(b) The closing of the Butler Exchange Rights pursuant to paragraph (a)
above shall take place concurrently with the closing of the transactions
contemplated by Section 3.2(b) hereof if the Butler Exchange Rights are deemed
--------------
to be exercised on the basis contemplated by Section 3.2(a) hereof, and
--------------
otherwise shall take place on the date (not later than thirty days following the
date that Butler's notice is given pursuant to paragraph (a) above) agreed upon
by the Company and Butler (or, if such day is not a Business Day, on the next
succeeding Business Day), at the principal place of business of the Company (or
at such other place as Butler and the Company shall agree).
(c) On the date of closing of the Butler Exchange Rights pursuant to
paragraph (b) above, (i) Butler shall deliver the Subordinated Notes to the
Company for cancellation and, upon such delivery, Butler shall be deemed to hold
4,500 Class B Member Units in lieu of the 4,500 Class A Member Units issued to
it pursuant to Section 4.2(b) of the Operating Agreement and such Class B
Member Units, together with any other Member Units then held by Butler, shall
evidence Butler's aggregate Member Interest in the Company, and (ii) the Company
shall pay to Butler the amount of any accrued but unpaid interest on the
Subordinated Notes through and including such date.
2.2 Butler's Put Option.
-------------------
(a) At any time or times from and after the exercise by Butler of the
Butler Exchange Rights, through and including the seventh anniversary of the
date of this Agreement, Butler shall have the right, by giving written notice of
such exercise to Maxwell with a copy thereof to the Manager (a "Put Exercise
------------
Notice"), to require Maxwell to purchase from Butler, on the date and in the
- ------
manner set forth in paragraphs (d) and (e) below, those Class B Member Units of
Butler as are designated in such Put Exercise Notice for an aggregate purchase
price (the "Aggregate Put Price") equal to the product of (i) the number of
-------------------
Class B Member Units designated in the Put Exercise Notice, multiplied by (ii)
---------- --
the Put Price Per Member Unit as of the date of such Put Exercise Notice,
determined on the basis set forth in paragraphs (b) and (g) below. Any such
notice may be given concurrently with any notice with respect to the exercise of
the Butler Exchange Rights given pursuant to Section 2.1(a) hereof and, in such
--------------
event, shall apply to the Class B Member Units to be issued to Butler pursuant
to such notice. Butler may exercise the rights set forth in this paragraph (a)
on not more than three occasions.
5
<PAGE>
(b) Promptly upon receiving a Put Exercise Notice given pursuant to
paragraph (a) above, the Manager shall cause the Company to take all necessary
or appropriate actions to cause the Put Price Per Member Unit and the Aggregate
Put Price to be determined in accordance with paragraph (g) hereof and shall, in
any event, within thirty days after the date the Put Exercise Notice is
received, give Butler written notice (a "Put Price Notice") of the amount of
----------------
such Put Price Per Member Unit and Aggregate Put Price as so determined,
accompanied by (i) a statement, in reasonable detail, setting forth the basis on
which such Put Price Per Member Unit and Aggregate Put Price were so determined,
and (ii) a certification of the independent accountants making such
determination, as to the accuracy of such statement. The Aggregate Put Price,
as so determined, shall be payable at closing in accordance with paragraph (e)
below.
(c) Nothing contained in this Section 2.2 shall preclude the rescission by
-----------
Butler of any Put Exercise Notice at any time before the consummation of the
purchase of the Class B Member Units contemplated thereby by giving written
notice of such rescission to Maxwell but, in the event of such a rescission, (i)
Maxwell Retail shall have the right to rescind any exercise by it of the Maxwell
Option Rights pursuant to Section 2.4 hereof, (ii) such Put Exercise Notice
-----------
shall count as one of the three Put Exercise Notices permitted by paragraph (a)
hereof and (iii) Butler shall reimburse the Company's reasonable out-of-pocket
expenses incurred pursuant to paragraph (g) hereof.
(d) The purchase of the Class B Member Units provided for in paragraph (a)
hereof shall be consummated on the date (not later than thirty days following
the date established for determination of the Put Price Per Member Unit and the
Aggregate Put Price pursuant to paragraph (b) hereof) agreed upon by Maxwell and
Butler (or if such day is not a Business Day, on the next succeeding Business
Day), at the principal office of the Company (or at such other place as Butler
and Maxwell shall agree).
(e) On the date of any purchase of Class B Member Units by Maxwell pursuant
to this Section 2.2, (i) Butler shall assign to Maxwell the Class B Member
-----------
Units being purchased by Maxwell hereunder, without any representation or
warranty whatsoever (other than to the effect that Butler has good title to such
Class B Member Units, free and clear of Liens, and has all requisite power and
authority to assign such Class B Member Units to Maxwell hereunder), and (ii)
Maxwell shall deliver to Butler the Aggregate Put Price for such Class B Member
Units, at the option of Maxwell, either by (A) wire transfer of the Aggregate
Put Price to an account in a bank located in the United States designated by
Butler for such purpose, (B) delivery to Butler of an official bank check drawn
on a member of the New York Clearing House, payable to the order of Butler in
the amount of the Aggregate Put Price, or (C) the issuance by Maxwell to Butler
of that number of shares of Maxwell Common Stock (rounded up to the next whole
number of shares), having a value equal to the Aggregate Put Price based on the
Current Market Price of such shares of Maxwell Common Stock as of the date the
Put Exercise Notice is given, determined on the basis set forth in paragraph (g)
below. Upon such assignment of Class B Member Units to Maxwell, such Class B
Member Units shall automatically, without further action on the part of any
party, be converted into the same number of Class A Member Units.
6
<PAGE>
(f) Any purchase by Maxwell of Class B Member Units pursuant to this
Section 2.1 which is delayed past the date specified in paragraph (d) above by
- -----------
(i) the failure of the Company to determine the Put Price Per Member Unit or the
Aggregate Put Price within the time period required in paragraph (b) above, or
(ii) an objection by Butler to any determination by the Company of the Put Price
Per Member Unit or the Aggregate Put Price pursuant to paragraph (g) below,
shall be consummated within thirty days after the resolution of such objection
pursuant to paragraph (g) below, and the Aggregate Put Price shall bear interest
at the rate of eight percent (8%) per annum, calculated daily on the basis of a
360-day year and actual days elapsed, for the period beginning sixty days after
the date the Put Exercise Notice is given and ending on the date of payment in
full of the Aggregate Put Price pursuant to paragraph (e) above.
(g) The determination of the Formula Value, Put Price Per Member Unit,
Aggregate Put Price and Current Market Price of each share of Maxwell Common
Stock shall be made by the firm of independent accountants then retained by the
Company, at the sole expense of the Company. Butler shall have the right at any
time to object to the Formula Value, Put Price Per Member Unit, Aggregate Put
Price and Current Market Price so determined by giving written notice (a "Notice
------
of Objection") to Maxwell with a copy thereof to the Manager, specifying the
- ------------
nature of its objection, within fifteen days following receipt of the Company's
Put Price Notice pursuant to paragraph (b) hereof and, unless such objection is
resolved by agreement of the Company, Maxwell and Butler within fifteen days
following the date such Notice of Objection is given, Maxwell and Butler shall
each have the right to subject the disputed determination to separate firms of
independent accountants of recognized national standing for a joint resolution
of the objection of Butler (neither of which shall be the firm of independent
accountants regularly retained by the Company). If such firms cannot jointly
resolve the objection of Butler, then, unless otherwise directed by agreement of
Maxwell and Butler, such firms shall choose another firm of independent
accountants of recognized national standing, which firm shall resolve such
objection. In such case, the determination of the Formula Value, Put Price Per
Member Unit, Aggregate Put Price and Current Market Price so made shall be
conclusive and binding on Butler, Maxwell and all Persons claiming under or
through either of them. The cost of the independent accountants selected by
Maxwell shall be borne solely by Maxwell, the cost of the independent
accountants selected by Butler shall be borne solely by Butler, and the cost of
any independent accountants chosen by Maxwell's and Butler's independent
accountants to resolve any objection shall be borne one-half each by Butler and
Maxwell.
2.3 Butler Registration Rights with Respect to Maxwell Common Stock. In
---------------------------------------------------------------
the event that Maxwell elects to issue shares of Maxwell Common Stock to Butler
pursuant to Section 2.2(e) above:
--------------
(a) Butler will have those registration rights with respect to such shares
of Maxwell Common Stock as are more fully set forth in the Maxwell Registration
Rights Agreement; and
7
<PAGE>
(b) in order to permit Butler the opportunity to exercise the registration
rights provided for in the Maxwell Registration Rights Agreement, Maxwell agrees
that it will not, at any time during the "Lockout Period" (as defined below),
directly or indirectly, without the prior written consent of Butler, offer,
sell, offer to sell, contract to sell, grant any option to purchase or otherwise
sell or dispose (or announce any offer, sale, offer of sale, contract of sale,
grant of any option to purchase or other sale or disposition) of any shares of
Maxwell Common Stock or any securities convertible into, or exchangeable or
exercisable for, Maxwell Common Stock or other capital stock of Maxwell, except
for grants of or issuances pursuant to the exercise of employee stock options.
For the purposes of this paragraph (b), the term "Lockout Period" means the
period commencing on the date of receipt of a Put Exercise Notice pursuant to
Section 2.2(a) hereof and continuing until the date of consummation of the
- --------------
purchase of Class B Member Units contemplated thereby pursuant to Section
-------
2.2(d)hereof and, in the event that Maxwell issues shares of Maxwell Common
- ------
Stock in payment of the Aggregate Put Price for such Class B Member Units
pursuant to Section 2.2(e) hereof, continuing for an additional period
--------------
of ninety days thereafter.
2.4 Maxwell Retail's Rights Upon Exercise of the Butler Put Rights. In
--------------------------------------------------------------
the event that Butler gives a Put Exercise Notice to Maxwell pursuant to Section
-------
2.2(a) hereof, Maxwell Retail shall have the right at any time within fifteen
- ------
days following the date such notice is given to exercise the Maxwell Option
Rights pursuant to Section 3.1, provided that such rights are then exercisable
----------- --------
in accordance with Section 3.1. In the event that Maxwell Retail exercises
-----------
the Maxwell Option Rights within the fifteen day period permitted by this
Section 2.4, the Class A Member Units that Maxwell Retail is entitled to
- ------------
acquire upon the exercise thereof shall be deemed to be outstanding on the date
of the Put Exercise Notice for the purposes of the computation of the Put Price
Per Member Unit as of such date.
2.5 Assignments by Maxwell. Maxwell may assign to Maxwell Retail the
----------------------
right to purchase the Class B Member Units that are the subject of a Put
Exercise Notice given by Butler pursuant to Section 2.2 above, but no such
-----------
assignment shall relieve Maxwell of its obligation to deliver the consideration
specified in Section 2.2(e)(ii) unless and until Maxwell Retail shall have
------------------
performed such obligation.
ARTICLE III
MAXWELL RETAIL'S OPTION RIGHTS
------------------------------
3.1 Maxwell Retail's Option to Acquire Additional Class A Member Units.
------------------------------------------------------------------
(a) Maxwell Retail shall have the right (the "Maxwell Option Rights"),
---------------------
exercisable at any time prior to February 1, 2000 by giving written notice of
such exercise to the Company with a copy thereof to Butler, to acquire that
additional Class A Member Interest in the Company as is evidenced by 1,175 Class
A Member Units, upon the delivery to the Company of an additional Capital
Contribution equal to $1,000 ; provided, however, in the event (i) the Maxwell
-------- -------
Option
8
<PAGE>
Rights have not been exercised, and (ii) notwithstanding such non-exercise, GAAP
would require Maxwell to consolidate for financial reporting purposes Maxwell's
results of operations with the results of operations of the Company, then
Maxwell Retail shall only have the right to acquire the aforementioned
additional Class A Member Interest in the event the Company has earned net
income (as determined by GAAP) for at least one quarter. Notwithstanding any
other provision of this Section 3.1, in the event GAAP would require Maxwell
-----------
to include in its consolidated statements of income losses in an amount greater
than $250,000 which are attributable to or derived from its ownership of Class A
Member Interests, then the Maxwell Option Rights shall automatically be deemed
to be of no effect and shall be void.
(b) The closing of the Maxwell Option Rights pursuant to paragraph (a)
above shall take place concurrently with the closing of the transactions
contemplated by Section 2.2 hereof if the Maxwell Option Rights are exercised
------------
on the basis contemplated by Section 2.4 hereof, and otherwise shall take
-----------
place on the date (not later than thirty days following the date that Maxwell
Retail's notice is given pursuant to paragraph (a) above) agreed upon by the
Company and Maxwell Retail (or, if such day is not a Business Day, on the next
succeeding Business Day), at the principal place of business of the Company (or
at such other place as Maxwell Retail and the Company shall agree).
(c) On the date of closing of the Maxwell Option Rights pursuant to
paragraph (b) above, Maxwell Retail shall make the Capital Contribution
specified in paragraph (a) above and, upon the making of such Capital
Contribution, Maxwell Retail shall be deemed to hold 1,175 additional Class A
Member Units and such Class A Member Units, together with any other Class A
Member Units then held by Maxwell Retail, shall evidence Maxwell Retail's
aggregate Member Interest in the Company.
3.2 Maxwell Retail's Right to Require Exercise of Butler Exchange Rights.
--------------------------------------------------------------------
(a) In the event that Maxwell Retail exercises the Maxwell Option Rights
pursuant to Section 3.1(a) hereof, Maxwell Retail shall have the further
--------------
right, provided that the Formula Value as of the date of such exercise is not
--------
less than $57,000,000 (determined on the basis set forth in Section 2.2(g),
--------------
to require that Butler exercise the Butler Exchange Rights by giving written
notice of such election to Butler concurrently with its notice given pursuant
to Section 3.1(a). Upon receipt of such notice, Butler shall be deemed to
--------------
have exercised the Butler Exchange Rights in accordance with the terms and
conditions of Section 2.1 hereof.
-----------
(b) In the event that Maxwell Retail exercises its right to require Butler
to exercise the Butler Exchange Rights pursuant to paragraph (a) hereof, then
the closing of the Butler Exchange Rights shall take place concurrently with the
closing of the Maxwell Option Rights in accordance with Section 3.1(b) hereof.
--------------
In the event that the transactions contemplated by Section 3.1 hereof fail to
-----------
close for any reason within the respective time periods provided in Section
-------
3.1(b), then, at the election of Butler, Butler may rescind its deemed
- ------
exercise of the Butler Exchange Rights pursuant to this Section 3.2 by giving
-----------
written notice of such rescission to Maxwell Retail.
9
<PAGE>
(c) If Butler is required to exercise the Butler Exchange Rights pursuant
to this Section 3.2, then the Company shall be obligated to pay to Butler, in
-----------
order to compensate Butler for the loss of interest income on the Subordinated
Notes and its rights as a creditor of the Company, an early exchange fee equal
to the product of (i) $1,000,000 multiplied by (ii) that fraction, the numerator
-------------
of which is the total number of days then remaining from the date of such
exchange until the stated maturity of the Subordinated Notes and the denominator
of which is 360, and Maxwell Retail, in its capacity as Manager, shall cause the
Company to pay to Butler the amount of such early exchange fee, together with
any accrued but unpaid interest on the Subordinated Notes through and including
the date of exchange, concurrently with, and as a condition to, the closing of
the Butler Exchange Rights pursuant to this Section 3.2. The early exchange
-----------
fee shall be treated as a guaranteed payment pursuant to Section 707(a) of the
Code.
ARTICLE IV
GENERAL PROVISIONS
------------------
4.1 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder can be assigned or delegated by Butler, Maxwell,
Maxwell Retail or the Company without the prior written consent of the others;
provided, however, that Maxwell may assign and delegate any of its rights,
- -------- -------
interests or obligations under Section 2.2 hereof to the extent provided in
-----------
Section 2.5 hereof; and Butler and Maxwell Retail may assign and delegate any
- -----------
of their respective rights, interests or obligations hereunder to any transferee
of such party's Member Interest in a Transfer permitted under the Operating
Agreement.
4.2 Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
-------
4.2):
- ----
If to Butler:
------------
c/o GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
With copies to:
--------------
General Electric Capital Corporation
260 Long Ridge Road
10
<PAGE>
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
If to Maxwell or Maxwell Retail:
-------------------------------
101 Sprague Street
Hyde Park, Massachusetts 02137
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
If to the Manager:
-----------------
To Maxwell Retail, as provided above, or
as shall be specified by any successor
Manager hereunder by notice give in
accordance with this Section 4.2.
-----------
If to the Company:
-----------------
SLJ Retail LLC
400 Technology Court
Suite F
Smyrna, Georgia 30082
Attention: President
11
<PAGE>
Facsimile: (770) 801-0075
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
4.3 Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
4.4 No Third Party Beneficiary. This Agreement is made solely and
--------------------------
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other Person whatsoever will have any
rights, interest, or claims hereunder or be entitled to any benefits under or on
account of this Agreement as a third party beneficiary or otherwise.
4.5 Waiver. No failure by any party to insist upon the strict performance
------
of any covenant, duty, agreement, or condition of this Agreement or to
exercise any right or remedy consequent upon a breach thereof will
constitute waiver of any such breach or any other covenant, duty,
agreement, or condition.
4.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
4.7 Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be modified or
amended except in writing signed by the party against whom enforcement is
sought.
4.8 Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
4.9 Section 754 Election. Notwithstanding anything contained in the
--------------------
Operating Agreement to the contrary, Maxwell Retail, as Manager, shall be
entitled to cause the Company
12
<PAGE>
to make an election pursuant to Section 754 of the Code following the
acquisition by Maxwell or Maxwell Retail of all or any part of Butler's Member
Interest pursuant to Section 2.2 of this Agreement. Such election shall not
-----------
be revoked without the written consent of Maxwell or Maxwell Retail.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
THE BUTLER GROUP INC.
/s/ Douglas P. Haensel
By:__________________________________
Douglas P. Haensel
Executive Vice President
MAXWELL SHOE COMPANY INC.
/s/ James J. Tinagero
By:__________________________________
James J. Tinagero
Executive Vice President
MAXWELL RETAIL INC., individually
and as Manager
/s/ James J. Tinagero
By:__________________________________
James J. Tinagero
Chairman
SLJ RETAIL LLC
By: MAXWELL RETAIL INC., its Manager
/s/ James J. Tinagero
By:__________________________________
James J. Tinagero
Chairman
13
<PAGE>
EXHIBIT 10.4
SERVICES AGREEMENT
THIS SERVICES AGREEMENT is made and entered into as of April 14, 1997 by
and between MAXWELL SHOE COMPANY INC., a Delaware corporation ("Maxwell"), and
-------
SLJ RETAIL LLC, a Delaware limited liability company ( the "Company").
-------
RECITALS
--------
A. The Butler Group Inc., a Delaware corporation ("Butler"), Maxwell and
------
Maxwell Retail Inc., a Delaware corporation, are parties to a Contribution
Agreement dated of even date herewith (the "Contribution Agreement"), pursuant
----------------------
to which the Company has been formed.
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Contribution Agreement, Maxwell has agreed with Butler
to enter into this Agreement with the Company, providing for certain services to
be performed by Maxwell on behalf of the Company, supplementing and enabling the
fulfillment by Maxwell Retail of its duties and responsibilities as Manager of
the Company, under and subject to all of the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Maxwell's Agreement to Provide Management Services. The Company
--------------------------------------------------
hereby engages Maxwell, and Maxwell hereby accepts such engagement, solely as an
independent contractor, to provide the following management services to the
Company and the Manager during the Term (as defined in Section 5 below):
---------
(a) General Management Support to the Company. Maxwell will provide such
-----------------------------------------
general management support services to the Company as the Manager may at any
time request in connection with the conduct of the business of the Company,
including, without limitation, providing to the Company the benefit of Maxwell's
experience and contacts in the women's footwear industry; providing to the
Company the benefit of the personal involvement of Maxwell's senior management
team to assist the Company in developing a long-term financial strategic plan
for the Company and to provide insight and supervision at the senior management
level and for the day-to-day business activities of the Company; assisting the
Company in coordinating legal and accounting matters with professional firms
selected by the Manager for use by the Company and providing such other ongoing
general management services as the Company shall request.
<PAGE>
(b) General Management Support to the Manager. Maxwell will provide such
-----------------------------------------
general management support services to the Manager as the Manager may at any
time request in connection with the performance of its duties and
responsibilities as Manager under the Operating Agreement, including, without
limitation, providing to the Manager the means to perform any of such duties and
responsibilities that the Manager is unable to perform by virtue of limitations
on the Manager's own personnel.
(c) Retail Advertising Services. Maxwell will recommend and will assist
---------------------------
the Company in coordinating with an advertising agency to the Company that
Maxwell believes to be qualified to develop and implement a retail advertising
and promotion campaign for the S&L/JNY Products to be sold by the Company under
the S&L/JNY Retail Store Concepts, including, without limitation, such local
media advertising, point of sale and direct mail advertising and promotions as
Maxwell believes to be reasonably necessary or appropriate in connection with
the business to be conducted by the Company. The Company acknowledges that the
advertising agency so recommended by Maxwell may also represent Maxwell in
connection with Maxwell's wholesale and cooperative advertising. If such agency
also represents Maxwell, Maxwell agrees to instruct such agency to account and
bill separately for the Company's retail advertising campaign and Maxwell's
ongoing wholesale and cooperative advertising campaign and, where shared
economies are created, to allocate expenses between Maxwell and the Company on a
reasonable basis.
(d) Accessory Products. Maxwell will advise the Company of any license
------------------
entered into by Sprague for the licensing of products (other than women's
footwear) to be sold at wholesale, utilizing the Sam & Libby Trademarks and of a
type that are suitable for sale by the Company as accessories in its Mall
Specialty Footwear Stores or Retail Outlet Footwear Stores ("Accessory
---------
Products"). If the Company desires to sell any of such Accessory Products
- --------
through its Mall Specialty Footwear Stores or Retail Outlet Footwear Stores,
Maxwell will use reasonable efforts to introduce the Company to the licensee
under such license (a "Licensee"), and to assist the Company in arranging for
--------
the purchase by the Company of Accessory Products from such Licensee. In the
event that the Company purchases Accessory Products from any such Licensee,
Maxwell agrees that it will (or will cause Sprague to) rebate to the Company the
amount of any royalty paid by such Licensee to Maxwell or Sprague with respect
to Accessory Products purchased by the Company from such Licensee less any out
----
of pocket expenses incurred by Maxwell in connection with the licensing of the
Sam & Libby Trademarks for such Accessory Products.
(e) Other Services. Maxwell will provide to the Company and the Manager
--------------
such other services as the Company or the Manager may at any time reasonably
request and which Maxwell at the time is reasonably able to perform in
connection with the Company's conduct of its business and the Manager's
discharge of its duties and responsibilities as Manager.
2
<PAGE>
2. Maxwell's Agreement to Provide Sourcing Services. The Company hereby
------------------------------------------------
engages Maxwell, and Maxwell hereby accepts such engagement, solely as an
independent contractor, to provide the following sourcing services to the
Company during the Term:
(a) Sourcing Manager. Maxwell will serve as sourcing manager to provide,
----------------
at the request of the Company, for the sourcing and purchase of up to the
Company's requirements of S&L/JNY Products manufactured in Brazil, Italy, the
People's Republic of China, Spain and any other country from which Maxwell
sources products from time to time in the conduct of its own wholesale footwear
business, either through the Buying Agents, or directly with the Factories, as
Maxwell shall determine in its discretion. The services to be provided by
Maxwell under this Section 2 are non-exclusive, and the Company shall retain the
---------
right to source S&L/JNY Products for its own account from factories, buying
agents and selling agents that Maxwell does not utilize in sourcing product for
its own wholesale footwear business and, in such instances, Maxwell shall not
have any duties or responsibilities under this Section 2 with respect to such
---------
S&L/JNY Products.
(b) Specific Duties. In fulfilling its duties and responsibilities under
---------------
paragraph (a) hereof, Maxwell will, among such other actions as shall reasonably
be necessary or appropriate, (i) design S&L/JNY Products to be sold by the
Company in Specialty Retail Footwear Stores and Retail Outlet Footwear Stores
(some of which will be unique to the Company's retail footwear business and some
of which may also be utilized by Maxwell in Maxwell's wholesale footwear
business); (ii) designate Factories deemed by Maxwell in its discretion to be
appropriate to manufacture S&L/JNY Products, as well as appropriate Buying
Agents to facilitate the purchase and delivery of such S&L/JNY Products; (iii)
negotiate on behalf of the Company with Factories and Selling Agents the design
and quality specifications, price, payment and delivery terms (consistent with
paragraph (d) below) for the purchase by the Company of S&L/JNY Products; (iv)
deliver purchase orders on behalf of the Company to Factories, Buying Agents or
Selling Agents, as appropriate, specifying the appropriate design and quality
specifications, price, payment and delivery terms; and (v) negotiate with
Factories on behalf of the Company to achieve reasonable adjustments with
respect to any claims made by the Company with respect to any S&L/JNY Products
that fail to meet the design and quality specifications, delivery dates or other
terms set forth in the Company's purchase orders and to seek resolution of any
such claims that cannot satisfactorily be resolved through negotiation.
(c) Supervisory Duties. In addition to the duties set forth in paragraph
------------------
(b) above, Maxwell will take such actions as shall reasonably be necessary or
appropriate to ensure that the Factories or Buying Agents, as appropriate, (i)
inspect such samples of S&L/JNY Products sourced by Maxwell pursuant to this
Section 2 as are reasonably necessary to ensure that (A) such S&L/JNY Products
- ---------
conform to the design and quality specifications in the Company's purchase
orders; (B) meet the requirements of all United States Government laws and
regulations; (C) are packaged, labeled and invoiced in accordance with the
instructions in the corresponding purchase orders and trade letters of credit
covering such purchase orders; and (D) are packaged in a manner that will allow
for safe transportation to the Company's stores or
3
<PAGE>
warehouse; (ii) arrange for proper transportation of such S&L/JNY Products from
the Factories directly to the Company or to the Company's freight forwarder in
the nearest foreign port of embarkation; and (iii) assist in the preparation and
forwarding of commercial invoices, packing lists, manufacturers' certificates
and other documents required by the Company or by the trade letters of credit
covering such purchase orders.
(d) Terms. Maxwell agrees that it will arrange for all S&L/JNY Products
-----
sourced by Maxwell on behalf of the Company under this Section 2 to be invoiced
---------
by the Factories at a price to the Company equal to the lowest price (including
commissions to Buying Agents) at which S&L/JNY Products of comparable quality,
for comparable quantities, at comparable times and on comparable payment terms
are purchased by Maxwell for its own use in its wholesale footwear business.
(e) Responsibility for Payment. Each purchase order submitted by the
--------------------------
Company (or submitted by Maxwell on behalf of the Company) pursuant to this
Section 2 will constitute a contract of purchase and sale directly between the
- ---------
Company, on the one hand, and the Factory on the other, and the Company shall be
solely responsible for all payments due under each such purchase order
including, but not limited to, the purchase price for the S&L/JNY Products
ordered thereunder and any customs duties, taxes, freight charges, commissions
payable to Buying Agents or other amounts payable in respect of such purchase
order.
(f) Audit Rights. Maxwell shall prepare and maintain, and shall cause the
------------
Company to prepare and maintain, books of account and records in detail
sufficient to verify Maxwell's compliance with the provisions of the first
sentence of paragraph (d) above and Maxwell shall, on not less than a quarterly
basis during the term of this Agreement, provide to the Company and Butler
evidence of such compliance, in form and substance reasonably satisfactory to
Butler. Additionally, the Company and Butler, acting through such
representatives as either of them shall designate, shall have the right
throughout the term of this Agreement and for ninety days thereafter, upon at
least five days' prior written or oral notice, during regular business hours, to
audit the books of account and records of Maxwell and to examine all other
documents and materials in Maxwell's possession or control relating to this
Agreement and Maxwell's performance hereunder. Maxwell shall maintain such
books of account, records, documents and materials available for any such audit
and inspection for at least one year after the end of each fiscal year of
Maxwell or, in the case of the most recent fiscal year of Maxwell ending prior
to the termination of this Agreement, for at least ninety days after the
termination of this Agreement. Any audit and inspection performed by the
Company or Butler under this paragraph (f) shall be solely at the expense of the
party performing the same unless such audit and inspection discloses any
material non-compliance by Maxwell with the terms and conditions of paragraph
(d) above, in which case Maxwell shall promptly reimburse the cost and expense
of such audit and inspection to the party incurring the same.
3. Involvement by Maxwell Senior Management. The Company acknowledges
----------------------------------------
and agrees that neither Maxwell nor any of Maxwell's officers or employees shall
be required to
4
<PAGE>
devote full time and efforts to the duties of Maxwell specified in this
Agreement, but instead shall devote only so much of their time and efforts as
are reasonably necessary in the performance of the duties and responsibilities
of Maxwell hereunder. Notwithstanding the foregoing, unless otherwise consented
to by the Required Members, (a) Maxwell V. Blum and Mark J. Cocozza will each
devote not less than 25% of his time to the business of the Company at all times
during the Term, (b) James J. Tinagero will devote all or substantially all of
his time to the business of the Company until the Company has employed a new
chief executive officer as contemplated by Section 5.12(a) of the Contribution
Agreement and such amount of his time as shall reasonably be necessary
thereafter, and (c) such other senior managers of Maxwell and other employees of
Maxwell shall devote such of their time as shall reasonably be necessary to
furnish the services contemplated by Sections 1 and 2 hereof at all
-------- - -
times during the Term; provided, however, that Maxwell may substitute for the
-------- -------
officers of Maxwell specifically named in clauses (a) and (b) hereof the
officers of Maxwell succeeding to their respective duties upon the death,
disability, retirement or separation from employment of such officers for any
other reason.
4. Fees for Services; Expenses.
---------------------------
(a) In consideration of the services to be provided to the Company pursuant
to Sections 1 and 2 of this Agreement, the Company will pay to Maxwell a fee in
---------- -
the amount of $500,000 per annum during the Term, payable quarterly in arrears
in installments of $125,000 on each March 31, June 30, September 30 and December
31 (or, if different, on the date that corresponds to the last day of each
fiscal quarter of the Company) during the Term (each such date, a "Payment
-------
Date") and pro-rated for the actual number of days in any period less than a
- ----
full fiscal quarter; provided, however, that (i) any such installment that is
-------- -------
otherwise due and payable on any such Payment Date after the Closing Date and
prior to the first anniversary of the Closing Date shall be deferred until and
shall be due and payable on the first anniversary of the Closing Date; (ii) the
obligation of the Company to pay such fee shall be deferred to the same extent
as the obligation of the Company to pay interest on the Subordinated Loan is
deferred pursuant to any subordination or intercreditor agreement entered into
between Butler and the Senior Lender; and (iii) in the event that the interest
on the Subordinated Loan is paid in part, but not in whole, such fee shall be
paid only on a pro-rata basis, to the same extent as the proportionate amount of
--------
interest so paid on the Subordinated Loan. In furtherance of clause (ii) above,
Maxwell acknowledges that the fee provided for in this Section 4(a) is subject
to the terms of the Intercreditor and Subordination Agreement, dated of even
date herewith, among the Company, Maxwell and The First National Bank of Boston,
as Agent.
(b) Except as specifically set forth in Sections 5.3(b) and 5.7(b) of the
Contribution Agreement, Maxwell shall not be obligated to make any advance to or
for the account of the Company or to pay any sums or to incur any liability or
obligation for the account of the Company in connection with the services to be
provided by Maxwell under this Agreement.
5
<PAGE>
(c) The Company agrees to reimburse Maxwell for the travel and lodging
expenses incurred by James J. Tinagero after the Closing Date in connection with
the performance by Maxwell of its duties under Sections 1 and 2 of this
-------- - -
Agreement and to reimburse Maxwell for any incremental design expenses incurred
by Maxwell under Section 2(b)(i) hereof in designing S&L/JNY Products that are
---------------
unique to the Company's retail footwear business (and that are not also utilized
by Maxwell in Maxwell's wholesale footwear business). All other expenses
incurred by Maxwell in the performance of its duties under this Agreement shall
be solely for the account of Maxwell, it being understood and agreed that the
fees payable by the Company to Maxwell pursuant to Section (a) above are
-----------
intended to compensate Maxwell for any such expenses incurred hereunder.
5. Term. This Agreement shall be effective from its date of execution,
----
as set forth above, and thereafter shall remain in effect for a term of five
years (the "Term"), unless earlier terminated as provided in Section 9.
---- ---------
6. Status of Relationship. Maxwell's relationship with the Company under
----------------------
this Agreement shall be solely that of an independent contractor, and nothing
contained in this Agreement shall be deemed or construed (i) to create a
partnership or joint venture between the Company and Maxwell, (ii) to cause
Maxwell to be responsible in any way for the debts, liabilities or obligations
of the Company or any other party, or (iii) to give Maxwell the authority to
bind or act for the Company in any respect, except as specifically set forth
herein.
7. Code of Conduct. In performing its duties and responsibilities under
---------------
this Agreement, Maxwell will at all times act honestly, in good faith and in the
best interests of the Company and will comply with all applicable requirements
of law. For so long as any Member having a Percentage Interest of 10% or more
is an Affiliate of GE Capital, Maxwell will comply in all respects with the GE
Integrity Policies (as defined in the Operating Agreement) and, at all times
thereafter, Maxwell will comply with a code of conduct established by the
Company substantially similar to the GE Integrity Policies. Additionally, in
its dealings with Factories and Buying Agents pursuant to Section 2 of this
---------
Agreement, Maxwell will use reasonable efforts to require that Factories located
in China provide a manufacturer's certificate substantially similar to that
customarily provided to Butler prior to the Closing Date, at the time of each
shipment of S&L/JNY Products.
8. Relationship with Factories and Buying Agents. Maxwell represents and
---------------------------------------------
warrants to the Company that (a) all of its dealings with the Factories, Selling
Agents and Buying Agents pursuant to Section 2 of this Agreement are and will
---------
during the term of this Agreement be conducted entirely on an arms-length basis;
(b) at all times during the term of this Agreement it has and will have no
ownership interest in, or any control of, or any financial interest in, any of
the Factories producing S&L/JNY Products purchased through Maxwell hereunder, or
any of the Buying Agents through whom any such orders are placed; and (c) it
will not be paid any commissions with respect to the transactions contemplated
hereby, and will not share in any such
6
<PAGE>
commissions or other sums payable to any Factories, Selling Agents or Buying
Agent in connection with the S&L/JNY Products purchased by the Company under
Section 2 hereof.
- ---------
9. Termination.
-----------
(a) Termination by Mutual Agreement. This Agreement may be terminated at
-------------------------------
any time by the mutual agreement of Maxwell and the Company.
(b) Termination by Maxwell or the Company. Either Maxwell or the Company
-------------------------------------
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 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; (ii) the other party ceases, or admits its intention to cease,
the conduct of its business in the ordinary course; (iii) Maxwell Retail no
longer serves as Manager of the Company pursuant to the Operating Agreement; or
(iv) the Company has commenced liquidation or dissolution proceedings.
10. General Provisions.
------------------
(a) Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder can be assigned or delegated by Maxwell or the Company
without the prior written consent of the other.
(b) Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as
any party may provide to the other parties by notice in accordance with this
Section 10):
- -----------
If to Maxwell:
-------------
Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
(or, if by mail, P. O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
7
<PAGE>
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
If to the Company:
-----------------
SLJ Retail LLC
400 Technology Court
Suite F
Smyrna, Georgia 30082
Attention: President
Facsimile: (770) 801-0075
With copies to:
--------------
GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
and
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
8
<PAGE>
(c) Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
(d) Third Party Beneficiaries. This Agreement is made solely and
-------------------------
specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns subject to the
express provisions hereof relating to successors and assigns. Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
(e) Waiver. No failure by any party to insist upon the strict performance
------
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute waiver of
any such breach or any other covenant, duty, agreement, or condition.
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
(g) Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be terminated,
modified or amended by the Company except in accordance with Section 7.5 of the
Operating Agreement, and then only in writing signed by the party against whom
enforcement is sought.
(h) Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
MAXWELL SHOE COMPANY INC.
/s/ James J. Tinagero
By:________________________
James J. Tinagero
Executive Vice President
9
<PAGE>
SLJ RETAIL LLC
By: MAXWELL RETAIL INC., its Manager
By:/s/ James J. Tinagero
________________________________
James J. Tinagero
Chairman
10
<PAGE>
EXHIBIT 10.5
NON-COMPETE AGREEMENT
THIS NON-COMPETE AGREEMENT is made and entered into as of April 14, 1997 by
and among SLJ RETAIL LLC, a Delaware limited liability company (the "Company"),
-------
MAXWELL SHOE COMPANY INC., a Delaware corporation ("Maxwell"), each of MAXWELL
-------
V. BLUM, BETTY ANN BLUM, MARJORIE W. BLUM, MARK J. COCOZZA and DAVID ANDELMAN,
AS TRUSTEE OF THE ELEANOR S. BLUM TRUST (individually, a "Maxwell Control
---------------
Shareholder" and collectively, the "Maxwell Control Shareholders"), MAXWELL
- ----------- ----------------------------
RETAIL INC., a Delaware corporation ("Maxwell Retail"), and SPRAGUE COMPANY, a
--------------
Delaware corporation ("Sprague").
-------
RECITALS
--------
A. The Butler Group Inc., a Delaware corporation ("Butler"), Maxwell and
------
Maxwell Retail are parties to a Contribution Agreement dated of even date
herewith (the "Contribution Agreement"), pursuant to which the Company has been
----------------------
formed.
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Contribution Agreement, Maxwell has agreed with Butler
to enter into this Agreement with the Company, and to cause the Maxwell Control
Shareholders, as the controlling shareholders of Maxwell, and Maxwell Retail and
Sprague, as the wholly-owned subsidiaries of Maxwell, to enter into this
Agreement with the Company, providing that Maxwell, the Maxwell Control
Shareholders, Maxwell Retail and Sprague (collectively, the "Maxwell Parties")
---------------
shall not engage in certain activities in competition with the Company, under
and subject to all of the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Definitions; Rules of Construction.
-----------------------------------
(a) Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated:
"Closeout Merchandise" means merchandise that remains on hand at the end of
--------------------
a fashion season and that Maxwell has determined should be closed out, marked
down and disposed of, provided that Maxwell has notified the Company (with a
copy to Butler) of its intent to sell such merchandise as closeout merchandise
and the Company (with the concurrence of the Required Members) has consented to
the characterization of such merchandise as "Closeout Merchandise" for the
purposes of this Agreement.
<PAGE>
"Company Activities" means (i) as of the date hereof, the business of
------------------
selling S&L/JNY Products in Mall Specialty Footwear Stores and, provided that
the Company opens five or more Retail Outlet Footwear Stores within three years
after the Closing Date, in Retail Outlet Footwear Stores, and (ii) as of any
subsequent date, such business together with any Retail Opportunity actually
undertaken by the Company as of such date and referred to the Company or
required to be referred to the Company pursuant to the Retail Opportunity
Agreement.
"Company Products" means (i) as of the date hereof, S&L/JNY Products, and
----------------
(ii) as of any subsequent date, such products together with any other Retail
Footwear Products sold by the Company pursuant to any Retail Opportunity
actually undertaken by the Company as of such date and referred to the Company
or required to be referred to the Company pursuant to the Retail Opportunity
Agreement.
"Confidential Information" means any data or information, other than Trade
------------------------
Secrets, relating to the Company Activities which is valuable information to the
Company and not generally known to competitors of the Company.
"Mall Anchor Stores" means department or general merchandise stores serving
------------------
as anchor stores in enclosed regional shopping malls (such as the department
stores operated by Federated Department Stores, Inc. as of the date of this
Agreement and the department or general merchandise stores operated under the
Marshalls, T.J. Maxx, Filene's Basement, Ross Stores or Loehmann's names as of
the date of this Agreement).
"Mall Discount Footwear Stores" means retail stores (excluding Mall Anchor
-----------------------------
Stores) which specialize in selling close-out, off-price, second quality or
discounted footwear and accessories and which are located in enclosed regional
shopping malls (such as the stores operated under the Famous Footwear, Payless
Shoe Source and Shoe Department names as of the date of this Agreement).
"Mall Specialty Apparel Stores" means retail stores (excluding Mall Anchor
-----------------------------
Stores) which specialize in selling first-quality apparel and accessories and
which are located in enclosed regional shopping malls (such as the stores
operated under the GAP, Limited and Banana Republic names as of the date of this
Agreement).
"Mall Specialty Footwear Stores" means retail stores (excluding Mall Anchor
------------------------------
Stores) which specialize in selling first-quality footwear and accessories and
which are located in enclosed regional shopping malls (such as the stores
operated under the 9 West, Kenneth Cole and Rack Room names as of the date of
this Agreement).
"Maxwell Entities" means any entity (other than the Company) that is
----------------
controlled, directly or indirectly, by one or more of the Maxwell Parties.
-2-
<PAGE>
"Maxwell Parties" has the meaning set forth in the Recitals to this
---------------
Agreement.
"Non-compete Period" means the period commencing on the date hereof and
------------------
ending on the earliest to occur of (i) the termination of the Sam & Libby
Trademark License (or, if Sprague does not exercise the option set forth in
Section 8.4 thereof to purchase all of the "Termination Inventory" (as defined
therein), six months after the expiration of Sprague's option to purchase such
Termination Inventory); (ii) the date when neither Butler nor any other
Affiliate of GE Capital holds any Member Interest in the Company; or (iii) the
tenth anniversary of the date of this Agreement;
"Retail Footwear Products" means men's, women's or children's footwear
------------------------
products intended for retail (and not wholesale) sale.
"Retail Opportunity" has the meaning set forth in the Retail Opportunity
------------------
Agreement.
"Retail Outlet Apparel Stores" means retail stores which specialize in
----------------------------
selling off-price, second quality or close-out apparel and accessories and which
are located in outlet malls or centers.
"Retail Outlet Footwear Stores" means retail stores which specialize in
-----------------------------
selling women's footwear and accessories and which are located in outlet malls
or centers.
"Territory" has the meaning set forth in the Sam & Libby Trademark License.
---------
"Trade Secret" means information relating to the Company Activities,
------------
including but not limited to technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data or plans, product plans, lists of suppliers, or other information
similar to any of the foregoing, which derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other Persons who can derive economic value
from its disclosure or use. For purposes of this Agreement, "Trade Secret"
shall include any such information developed for the Company by any of the
Maxwell Parties pursuant to any of the Maxwell Documents but shall not include
information that the Maxwell Parties can show, by competent proof, (i) became
generally known to the public through no act or omission of any Maxwell Party,
or (ii) was disclosed by a third party having a bona fide right both to possess
---- ----
the information and to disclose the information.
(b) Rules of Construction.
---------------------
(i) All section and paragraph titles and captions in this Agreement
are for convenience only, will not be deemed part of this Agreement, and in
no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Sections" are to Sections of this Agreement.
--------
-3-
<PAGE>
(ii) Whenever the context may require, any pronoun used in this
Agreement includes the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs includes the plural and
vice versa. The locative adverbs "hereof," "herein," "hereafter," etc.
---- -----
refer to this Agreement as a whole.
2. Confidential Information. Each of the Maxwell Parties agrees that ,
------------------------
during the Non-compete Period, it will hold in confidence all Confidential
Information, and will not disclose, publish or make use of any Confidential
Information without the prior written consent of the Required Members (except
that Maxwell may make use of Confidential Information which has been developed
by it or to which it otherwise has rights in connection with any business in
which Maxwell is then engaged in compliance with the terms of this Agreement and
may disclose Confidential Information to the extent required by applicable legal
requirements).
3. Trade Secrets. Each of the Maxwell Parties agrees that, at all time s
-------------
after the date hereof, it will hold in confidence all Trade Secrets, and will
not disclose, publish or make use of any Trade Secrets without the prior written
consent of the Required Members (except that Maxwell may make use of Trade
Secrets which have been developed by it or to which it otherwise has rights in
connection with any business in which Maxwell is then engaged in compliance with
the terms of this Agreement and may disclose Trade Secrets to the extent
required by applicable legal requirements).
4. Covenant Not to Compete.
-----------------------
(a) The Maxwell Parties acknowledge that (i) the Company has the right to
engage in, and proposes to engage in, the Company Activities throughout the
Territory at all times during the Non-compete Period; (ii) the interests of the
Company and its Members in conducting the Company Activities would not be
adequately protected unless the covenant not to compete agreed to herein by each
of the Maxwell Parties covers all Company Activities and the entire Territory at
all times during the Non-compete Period; and (iii) the execution and delivery of
this Agreement by the Maxwell Parties is a fundamental economic element of the
agreements between the Maxwell Parties on the one hand, and Butler, on the
other, with respect to the formation of the Company and the other matters set
forth in the Contribution Agreement; and (iv) Butler would not have entered into
the Contribution Agreement or consummated the transactions contemplated thereby,
other than in reliance on the protection of the economic interests of the
Company provided by this Agreement.
(b) Each of the Maxwell Parties agrees that, at all times during the Non-
compete Period, it will not, and will neither cause nor permit any Maxwell
Entity to, in any manner, directly or indirectly (through any member of the
Immediate Family of such Maxwell Party or otherwise):
(i) engage in the Company Activities in the Territory;
-4-
<PAGE>
(ii) have any equity interest in, make any loan to or for the benefit
of, or render services (of the types set forth in the Services Agreement or
the Operating Agreement, or of any other type) to, any Person or business
which engages in the Company Activities in the Territory (other than
investments constituting less than one percent of the issued and
outstanding capital stock or corporate bonds of a publicly traded
corporation); or
(iii) sell Company Products, for resale at retail, to any Mall
Specialty Apparel Store, Mall Specialty Footwear Store or Mall Discount
Footwear Store; provided that Company Products consisting of Closeout
--------
Merchandise may be sold to Famous Footwear and Rack Room for so long as
such Company Products are not resold by either of them at retail in malls
in which the Company has Mall Specialty Footwear Stores.
Notwithstanding clause (iii) above, in the event that (x) any wholesale customer
of Maxwell sells Company Products in any Mall Specialty Apparel Store, Mall
Specialty Footwear Store or Mall Discount Footwear Store, or (y) Famous Footwear
or Rack Room offers Company Products for retail sale in any mall in which the
Company has a Mall Speciality Footwear Store, in either case in violation of its
agreement with any Maxwell Party or Maxwell Entity not to do so or contrary to
Maxwell's understanding as to where such Company Products would be sold, then
neither Maxwell nor any Maxwell Party shall be deemed to be in breach of its
obligations under clause (iii) above unless such event continues uncured for 30
days or more after receipt by such Maxwell Party of written notice thereof from
the Company or Butler.
5. Blue-Penciling. If any of the restrictions set forth in Section 4
-------------- ---------
hereof shall, for any reason, be held by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, such
restrictions shall be construed so as thereafter to be limited or reduced to the
extent necessary so as to be enforceable in accordance with applicable law as it
shall then appear (it being understood that, by the execution and delivery of
this Agreement, each of the Maxwell Parties confirms that it regards all such
restrictions to be reasonable, necessary and fully compatible with its
respective rights and interests).
6. Equitable Remedies; Consent to Jurisdiction.
-------------------------------------------
(a) It is expressly understood and acknowledged by each of the Maxwell
Parties that any breach or threatened breach of this Agreement cannot be
remedied solely by the recovery of damages and that, in the event of a breach or
threatened breach hereof by any of the Maxwell Parties, the Company or any third
party beneficiary of the Company's rights hereunder may pursue both injunctive
relief and any and all other remedies available at law or in equity for any such
breach or threatened breach, including the recovery of damages and reasonable
attorneys' fees and costs.
-5-
<PAGE>
(b) THE MAXWELL PARTIES AGREE THAT ANY ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT MAY BE BROUGHT BY THE COMPANY OR ANY THIRD PARTY BENEFICIARY
OF THE COMPANY'S RIGHTS HEREUNDER IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY ITS
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE MAXWELL PARTIES
IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE MAXWELL PARTIES WAIVES ANY OBJECTION TO
JURISDICTION OR VENUE (INCLUDING ANY OBJECTION BASED ON THE GROUNDS OF FORUM NON
---------
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
- ----------
ACTION OR PROCEEDING IN SUCH JURISDICTION. EACH OF THE MAXWELL PARTIES HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY ANY OF THE COURTS REFERENCED
IN THIS PARAGRAPH (b) IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, IN
ACCORDANCE WITH SECTION 8 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON THE
---------
EARLIER OF (i) THE DATE FIVE (5) CALENDAR DAYS AFTER SUCH MAILING OR (ii) ANY
EARLIER DATE PERMITTED BY APPLICABLE LAW.
7. Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder can be assigned or delegated by any Maxwell Party,
without the prior written consent of the Company, or by the Company, without the
prior written consent of Maxwell.
8. Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
-------
8):
- -
If to any Maxwell Party:
-----------------------
c/o Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
-6-
<PAGE>
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
If to the Company:
-----------------
400 Technology Court
Suite F
Smyrna, Georgia 30082
Attention: President
Facsimile: (770) 801-0075
With copies to:
--------------
GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
and
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
9. Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
-7-
<PAGE>
10. Third Party Beneficiaries. This Agreement is made solely and
-------------------------
specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns (subject to the
express provisions hereof relating to successors and assigns). Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
11. Waiver. No failure by any party to insist upon the strict performance
------
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute waiver of
any such breach or any other covenant, duty, agreement, or condition.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
13. Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be modified or
amended except in accordance with Section 7.5 of the Operating Agreement, and
then only in writing signed by the party against whom enforcement is sought.
14. Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
SLJ RETAIL LLC
By: MAXWELL RETAIL INC., its Manager
By:/s/ James J. Tinagero
_______________________________
James J. Tinagero
Chairman
-8-
<PAGE>
MAXWELL SHOE COMPANY INC.
By:/s/ James J. Tinagero
__________________________________
James J. Tinagero
Executive Vice President
/s/ Maxwell V. Blum
_____________________________________
Maxwell V. Blum
/s/ Betty Ann Blum
_____________________________________
Betty Ann Blum
/s/ Marjorie W. Blum
_____________________________________
Marjorie W. Blum
/s/ Mark J. Cocozza
_____________________________________
Mark J. Cocozza
/s/ David Andelman
_____________________________________
David Andelman, as Trustee of the
Eleanor S. Blum Trust Fund of the
Maxwell V. Blum Irrevocable Trust
dated 12/23/80
MAXWELL RETAIL INC.
By:/s/ James J. Tinagero
__________________________________
James J. Tinagero
-9-
<PAGE>
Chairman
SPRAGUE COMPANY
/s/ James J. Tinagero
By:__________________________________
James J. Tinagero
Chief Financial Officer
-10-
<PAGE>
EXHIBIT 10.6
RETAIL OPPORTUNITY AGREEMENT
THIS RETAIL OPPORTUNITY AGREEMENT is made and entered into as of April 14,
1997 by and among SLJ RETAIL LLC, a Delaware limited liability company (the
"Company"), MAXWELL SHOE COMPANY INC., a Delaware corporation ("Maxwell"), each
- -------- -------
of MAXWELL V. BLUM, BETTY ANN BLUM, MARJORIE W. BLUM and DAVID ANDELMAN, AS
TRUSTEE OF THE ELEANOR S. BLUM TRUST (individually, a "Maxwell Control
---------------
Shareholder" and collectively, the "Maxwell Control Shareholders"), MAXWELL
- ----------- ----------------------------
RETAIL INC., a Delaware corporation ("Maxwell Retail"), and SPRAGUE COMPANY, a
--------------
Delaware corporation ("Sprague").
-------
RECITALS
--------
A. The Butler Group Inc., a Delaware corporation ("Butler"), Maxwell and
------
Maxwell Retail are parties to a Contribution Agreement dated of even date
herewith (the "Contribution Agreement"), pursuant to which the Company has been
----------------------
formed.
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Contribution Agreement, Maxwell has agreed with Butler
to enter into this Agreement with the Company, and to cause the Maxwell Control
Shareholders, as the controlling shareholders of Maxwell, and Maxwell Retail and
Sprague, as the wholly-owned subsidiaries of Maxwell, to enter into this
Agreement with the Company, providing that Maxwell, the Maxwell Control
Shareholders, Maxwell Retail and Sprague (collectively, the "Maxwell Parties")
---------------
will refer to the Company certain opportunities to engage in the retail footwear
business, on a first refusal basis, under and subject to all of the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Definitions; Rules of Construction.
----------------------------------
(a) Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated:
"Advisory Board" has the meaning set forth in the Operating Agreement.
--------------
"Butler Member" has the meaning set forth in the Operating Agreement.
-------------
<PAGE>
"First Refusal Notice" has the meaning set forth in Section 2(b).
-------------------- ------------
"First Refusal Right" has the meaning set forth in Section 2(a).
------------------- ------------
"Maxwell Entities" means any entity (other than the Company) that is
----------------
controlled, directly or indirectly, by one or more of the Maxwell Parties.
"Maxwell Parties" has the meaning set forth in the Recitals to this
---------------
Agreement.
"Maxwell Retail Opportunity" has the meaning set forth in Section 2(a).
-------------------------- ------------
"Retail Footwear Products" means men's, women's or children's footwear
------------------------
products intended for retail (and not wholesale) sale.
"Retail Footwear Trademarks" means trademarks, trade names, service marks,
--------------------------
logos and similar rights for use in connection with the sale of Retail Footwear
Products in Mall Specialty Footwear Stores and Retail Outlet Footwear Stores.
"Retail Opportunity" means any and all of the following: (i) concepts,
------------------
ideas and/or designs for Mall Specialty Footwear Stores and Retail Outlet
Footwear Stores (other than the S&L/JNY Retail Store Concepts), (ii) concepts,
ideas and/or designs for Retail Footwear Products to be sold in Mall Speciality
Retail Stores (other than S&L/JNY Products), (iii) Retail Footwear Trademarks
(other than the Sam & Libby Trademarks and the Jones New York Trademarks), (iv)
licensing or other intellectual property rights with respect to any matter
described in clauses (i), (ii) or (iii); and (v) premises available for lease or
purchase as Mall Specialty Footwear Stores or Retail Outlet Footwear Stores
(other than the Stores).
"Third Party Retail Opportunity" has the meaning set forth in Section 2(a).
------------------------------ ------------
(b) Rules of Construction.
---------------------
(i) All section and paragraph titles and captions in this Agreement
are for convenience only, will not be deemed part of this Agreement, and in
no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Sections" are to Sections of this Agreement.
--------
(ii) Whenever the context may require, any pronoun used in this
Agreement includes the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs includes the plural and
vice versa. The locative adverbs "hereof," "herein," "hereafter," etc.
---- -----
refer to this Agreement as a whole.
2. Right of First Refusal on Retail Opportunities.
----------------------------------------------
<PAGE>
(a) Each Maxwell Party agrees that it will, and that it will cause each of
its Maxwell Entities to, prior to acquiring, licensing, leasing or commercially
exploiting a Retail Opportunity for its own account, offer the Company a right
of first refusal ("First Refusal Right") to acquire, license or lease (as
-------------------
appropriate), and commercially exploit, (i) each such Retail Opportunity now
held or hereafter developed by such Maxwell Party or its Maxwell Entity (a
"Maxwell Retail Opportunity"), and (ii) each such Retail Opportunity hereafter
- ---------------------------
offered or made available to such Maxwell Party by a Person other than a Maxwell
Party or its Maxwell Entity (a "Third Party Retail Opportunity").
------------------------------
(b) Each Maxwell Party shall give the Company prompt written notice ("First
-----
Refusal Notice") of any such Retail Opportunity that it proposes to acquire,
- --------------
license, lease or commercially exploit for its own account, with a copy thereof
to the Butler Member, offering such Retail Opportunity to the Company and
containing a detailed description of the Retail Opportunity so offered and, as
to Third Party Retail Opportunities, including a copy of any term sheet, letter
of intent or other document under which the Third Party Retail Opportunity has
been offered or made available to such Maxwell Party or its Maxwell Entities.
(c) The Company shall be deemed to have declined each First Refusal Right
offered to it pursuant to this Section 2 unless, within thirty days after
---------
receipt by the Company and the Butler Member of such First Refusal Notice, the
Butler Member gives written notice to the Company, with a copy thereof to
Maxwell, to the effect that the Butler Member desires that the Company accept
such First Refusal Right. If the Butler Member gives such a notice, then the
Butler Member, the Maxwell Parties and the Company, in consultation with the
Advisory Board, will, for a period not to exceed ninety days after receipt by
the Company and the Butler Member of such First Refusal Notice (the "Feasibility
-----------
Review Period"), review the feasibility and desirability of the commercial
- -------------
exploitation by the Company of such Retail Opportunity, including, without
limitation, the Company's ability to obtain any financing necessary to acquire
and exploit such Retail Opportunity. If, within the Feasibility Review Period,
the Company determines that it desires to acquire and exploit such Retail
Opportunity and that the acquisition and exploitation of such Retail Opportunity
by the Company is feasible, the Company shall give written notice to Maxwell
that it accepts such First Refusal Right and the closing of the transfer and
assignment of such Retail Opportunity to the Company shall take place as soon as
is reasonably possible thereafter in accordance with the provisions of paragraph
(d) below.
(d) At the closing contemplated by paragraph (c) above, the Maxwell Parties
will take, and will cause their respective Maxwell Entities to take, all such
actions as shall reasonably be necessary so that: (i) Maxwell Retail
Opportunities consisting of concepts, ideas and/or designs for Mall Specialty
Footwear Stores, Retail Outlet Footwear Stores or Retail Footwear Products, or
intellectual property rights relating thereto, shall be assigned to the Company
or otherwise made available for retail use by the Company without any charge or
fee (other than the reimbursement to the Maxwell Parties of their reasonable
out-of-pocket expenses incurred in developing such Maxwell Retail
Opportunities); (ii) Maxwell Retail Opportunities consisting of Retail Footwear
Trademarks or intellectual property rights relating thereto shall be licensed to
3
<PAGE>
the Company on then-prevailing market terms and conditions (as determined in
good faith negotiations between the Maxwell Parties and the Butler Member);
(iii) Maxwell Retail Opportunities consisting of premises for Mall Specialty
Footwear Stores or Retail Outlet Footwear Stores shall be leased to or purchased
by the Company on then-prevailing market terms and conditions (as determined in
good faith negotiations between the Maxwell Parties and the Butler Member); (iv)
all Third Party Retail Opportunities shall be offered or made available to the
Company on the same terms and conditions on which they have been offered or made
available to one or more of the Maxwell Parties or their respective Maxwell
Entities; and (v) each Maxwell Party shall enter into, and shall use its best
efforts to cause each other Person offering a Third Party Retail Opportunity to
enter into, such written agreements as shall be reasonably necessary or
appropriate to accomplish the foregoing.
(e) No Maxwell Party shall have the right to utilize, implement, transfer
or commercially exploit in any manner any Maxwell Retail Opportunity, or accept
or acquire any Third Party Retail Opportunity, unless and until either (i) such
Retail Opportunity has been offered to the Company pursuant to a First Refusal
Notice and the Company is deemed to have declined such First Refusal Right on
the basis contemplated by Section 2(c) or, (ii) the Company has failed to accept
------------
such Retail Opportunity within the Feasibility Review Period contemplated by
Section 2(c); provided, however, that any of the Maxwell Parties may accept or
- ------------ -------- -------
acquire any Third Party Retail Opportunity that it reasonably believes would no
longer be available to it after the expiration of the time periods contemplated
by Section 2(c) hereof, provided that such Maxwell Party immediately offers the
------------
Company a First Refusal Right with respect to such Retail Opportunity, as a
Maxwell Retail Opportunity, in accordance with the provisions of this Section 2.
---------
(f) Each Maxwell Party acknowledges and agrees that, upon the closing of
the transfer or assignment of a Retail Opportunity to the Company pursuant to
Section 2(d), such Retail Opportunity and all activities of the Company in
- ------------
commercially exploiting such Retail Opportunity shall become part of the
"Company Activities," as defined in and for all purposes of the Non-Compete
Agreement.
3. Further Assurances. Each Maxwell Party shall, and shall cause its
------------------
Maxwell Entities to, take all actions necessary, proper or advisable in order
for such Maxwell Party to perform its obligations hereunder and to consummate
and make effective all transactions contemplated by this Agreement.
4. Termination. This Agreement shall automatically terminate, without
-----------
notice, immediately upon the earlier to occur of (i) the expiration of the
"Non-compete Period" (as defined in the Non-Compete Agreement); (ii) the date
when neither Butler nor any other Affiliate of GE Capital holds Member Interests
in the Company aggregating ten percent or more of all of the Member Interests in
the Company (computed on a fully-diluted basis); or (iii) the date when Maxwell
Retail no longer serves as Manager under the Operating Agreement.
4
<PAGE>
5. Equitable Remedies; Consent to Jurisdiction.
-------------------------------------------
(a) It is expressly understood and acknowledged by each of the Maxwell
Parties that any breach or threatened breach of this Agreement cannot be
remedied solely by the recovery of damages and that, in the event of a breach or
threatened breach hereof by any of the Maxwell Parties, the Company or any third
party beneficiary of the Company's rights hereunder may pursue both injunctive
relief and any and all other remedies available at law or in equity for any such
breach or threatened breach, including the recovery of damages and reasonable
attorneys' fees and costs.
(b) THE MAXWELL PARTIES AGREE THAT ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT MAY BE BROUGHT BY THE COMPANY OR ANY THIRD PARTY BENEFICIARY OF
THE COMPANY'S RIGHTS HEREUNDER IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY ITS
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE MAXWELL PARTIES
IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE MAXWELL PARTIES WAIVES ANY OBJECTION TO
JURISDICTION OR VENUE (INCLUDING ANY OBJECTION BASED ON THE GROUNDS OF FORUM NON
---------
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
- ----------
ACTION OR PROCEEDING IN SUCH JURISDICTION. EACH OF THE MAXWELL PARTIES HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY ANY OF THE COURTS REFERENCED
IN THIS PARAGRAPH (b) IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, IN
ACCORDANCE WITH SECTION 7 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON THE
---------
EARLIER OF (i) THE DATE FIVE (5) CALENDAR DAYS AFTER SUCH MAILING OR (ii) ANY
EARLIER DATE PERMITTED BY APPLICABLE LAW.
6. Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder can be assigned or delegated by any Maxwell Party,
without the prior written consent of the Company, or by the Company, without the
prior written consent of Maxwell.
7. Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this
Section 7):
- ---------
If to any Maxwell Party:
-----------------------
c/o Maxwell Shoe Company Inc.
5
<PAGE>
101 Sprague Street
Hyde Park, Massachusetts 02136
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: James J. Tinagero
Facsimile: (617) 364-9058
With a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-7520
If to the Company:
-----------------
400 Technology Court
Suite F
Smyrna, Georgia 30082
Attention: President
Facsimile: (770) 801-0075
With copies to:
---------------
GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
and
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
6
<PAGE>
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
If to the Butler Member:
------------------------
GE Capital Equity Capital Group, Inc.
c/o GE Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
and
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
8. Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
9. Third Party Beneficiaries. This Agreement is made solely and
-------------------------
specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns (subject to the
express provisions hereof relating to successors and assigns). Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
7
<PAGE>
10. Waiver. No failure by any party to insist upon the strict
------
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof will constitute
waiver of any such breach or any other covenant, duty, agreement, or condition.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
12. Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be modified or
amended except in accordance with Section 7.5 of the Operating Agreement, and
then only in writing signed by the party against whom enforcement is sought.
13. Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
SLJ RETAIL LLC
By: MAXWELL RETAIL INC., its Manager
By:/s/ James J. Tinagero
________________________________
James J. Tinagero
Chairman
MAXWELL SHOE COMPANY INC.
By:/s/ James J. Tinagero
________________________________
James J. Tinagero
Executive Vice President
8
<PAGE>
/s/ Maxwell V. Blum
________________________________________
Maxwell V. Blum
/s/ Betty Ann Blum
________________________________________
Betty Ann Blum
/s/ Marjorie W. Blum
________________________________________
Marjorie W. Blum
/s/ David Andelman
________________________________________
David Andelman, as Trustee of the
Eleanor S. Blum Trust Fund of the
Maxwell V. Blum Irrevocable Trust
dated 12/23/80
MAXWELL RETAIL INC.
By: /s/ James J. Tinagero
__________________________________
James J. Tinagero
Chairman
SPRAGUE COMPANY
By: /s/ James J. Tinagero
__________________________________
James J. Tinagero
Chief Financial Officer
9
<PAGE>
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
---------
into as of April 14, 1997 by and among MAXWELL SHOE COMPANY INC., a Delaware
corporation ("Maxwell"), THE BUTLER GROUP INC., a Delaware corporation
-------
("Butler"), and each of MAXWELL V. BLUM, BETTY ANN BLUM, MARJORIE W. BLUM, MARK
------
J. COCOZZA AND DAVID ANDELMAN, AS TRUSTEE OF THE ELEANOR S. BLUM TRUST
(individually, a "Holder" and collectively, the "Holders").
------ -------
RECITALS
--------
A. Butler, Maxwell and Maxwell Retail Inc., a Delaware corporation
("Maxwell Retail"), are parties to a Contribution Agreement dated of even date
- ----------------
herewith (the "Contribution Agreement") pursuant to which, among other things,
----------------------
Maxwell Retail and Butler have formed SLJ Retail LLC, a Delaware limited
liability company (the "Company").
-------
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Option Agreement, Butler has the right to require
Maxwell to purchase certain Class B Member Units of the Company held by Butler,
and Maxwell may pay the purchase price for such Class B Member Units, at
Maxwell's option, either in cash or by the issuance by Maxwell to Butler of that
number of shares of Maxwell's Class A Common Stock, $.01 Par value (the "Class A
-------
Stock"), determined in accordance with the provisions of the Option Agreement.
- -----
D. Pursuant to the Contribution Agreement, Maxwell has agreed to grant to
Butler certain registration rights with respect to any shares of Maxwell's Class
A Stock issued by Maxwell to Butler pursuant to the Option Agreement (the
"Registrable Shares").
- -------------------
E. The Holders other than Mr. Cocozza own shares of Maxwell's Class B
Common Stock, $.01 par value (the "Class B Stock").
-------------
F. The Holders other than Mr. Andelman, as Trustee of the Eleanor S. Blum
Trust, own or hold options to acquire shares of Class A Stock (together with the
Class B Stock, the "Common Stock").
------------
G. Maxwell and the Holders are party to a Registration Rights Agreement
dated as of May 18, 1994 (the "Holders' Registration Rights Agreement"),
--------------------------------------
granting certain registration rights to the Holders with respect to Common Stock
held by them (the "Holders' Registrable Shares").
---------------------------
<PAGE>
H. Maxwell has further agreed to obtain the agreement of the Holders as
to certain matters affecting the priority of the respective registration rights
granted to Butler pursuant to this Agreement and to the Holders pursuant to the
Holders' Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements contained herein, the parties agree as follows:
SECTION 1. Demand Registration Rights. In the event that Maxwell
--------------------------
issues Registrable Shares to Butler pursuant to the provisions of Section 2.2 of
the Option Agreement:
(a) On not more than one occasion, upon the written request of Butler,
Maxwell shall prepare and file, promptly after such request, and thereafter use
its best efforts to cause to become effective, a registration statement (the
"Demand Registration Statement") under and complying with the Securities Act of
- ------------------------------
1933, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Act"), covering such number of Registrable Shares as shall
---
be specified in Butler's request (such registration hereinafter referred to as
the "Demand Registration"); provided, however, that Maxwell shall not be
------------------- -------- -------
obligated to file the Demand Registration Statement within ninety days of the
closing of an underwritten primary offering of Maxwell. Butler's request shall
also specify the intended method of distribution of the Registrable Shares.
Promptly after receiving a request for the Demand Registration, Maxwell shall
provide written notice of the Demand Registration to the Holders, who will have
ten business days after the receipt of such notice in which to inform Maxwell in
writing of their intention to have Holder's Registrable Shares included in the
Demand Registration in accordance with Section 3 of the Holders' Registration
Rights Agreement (but subject to the provisions of paragraph (b) below). The
Demand Registration Statement shall be on the Securities and Exchange Commission
(the "Commission") registration statement form selected by Maxwell and which
----------
Maxwell shall then be eligible to use to effect the Demand Registration.
(b) If the offering of the Registrable Shares is underwritten and the
managing underwriter determines and advises Butler that the inclusion in the
Demand Registration Statement of all or a portion of the Holders' Registrable
Shares sought to be included by the Holders would, in the opinion of the
managing underwriter, (x) interfere with the successful marketing of the
offering or (y) adversely affect the price of the offering, then there shall be
included in such Demand Registration Statement only that number of Holders'
Registrable Shares, if any, as the managing underwriter shall deem advisable,
and such number of Holders' Registrable Shares shall be allocated pro rata among
--- ----
the Holders on the basis of the number of Holders' Registrable Shares requested
to be included by such Holders;
(c) Maxwell may delay the filing of the Demand Registration Statement for a
reasonable period not to exceed 180 days if, in the good faith judgment of the
Board of Directors of Maxwell, (i) Maxwell would be required to include in the
Demand Registration Statement material business information which at that time
cannot be publicly disclosed without material disruption of a major corporate
development or transaction then pending or in progress or
-2-
<PAGE>
without other material adverse consequence or (ii) the filing of the Demand
Registration Statement would have a material adverse effect on a significant
financing transaction, business combination or acquisition or other significant
matter that is pending or proposed, in connection with which Maxwell is or is
expected to be a party (it being understood that the exercise by the Holders of
their rights under the Holders' Registration Rights Agreement would not be
grounds for delay under this clause (ii)); provided, however, that Maxwell
-------- -------
shall promptly make such filing after the earlier of (x) the end of such 180-day
period and (y) the date as of which the conditions that delayed such filing no
longer exist. In the event of any delay in the filing of the Demand Registration
Statement, Butler shall have the right to withdraw its request for registration,
and such withdrawn request shall not be considered the Demand Registration
pursuant to Section 1(a).
------------
(d) If (i) the effective date of the Demand Registration Statement would
otherwise be forty-five calendar days after, but prior to ninety calendar days
after, the end of Maxwell's fiscal year, and (ii) the Act requires Maxwell to
include audited financials (as of the end of such fiscal year) or the Act
permits the use of, and Butler has requested that the Demand Registration
Statement include, audited financials (as of the end of such fiscal year),
Maxwell may delay the filing of the Demand Registration Statement for such
period as is reasonably necessary to include therein its audited financial
statements for such fiscal year.
(e) Until the earlier of (i) sixty days after the effective date of the
Demand Registration Statement, or (ii) the period necessary to complete the
marketing of Registrable Shares after the effective date of the Demand
Registration Statement, except for registrations on Commission Form S-8 or Form
S-4 (or the then equivalent forms), Maxwell shall not register under the Act an
offering of shares of Common Stock or any other equity securities of Maxwell for
sale to the public for the account of Maxwell, the Holders and/or other third
parties.
SECTION 2. Preparation and Filing Pursuant to Demand. So long as
-----------------------------------------
Maxwell is under an obligation pursuant to the provisions of Section 1, Maxwell
---------
shall:
(a) prepare and file with the Commission such amendments and supplements to
the Demand Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Demand Registration Statement
effective for such period as shall be necessary to complete the marketing of
Registrable Shares included therein, but in no event for more than sixty
consecutive days after the effective date of the Demand Registration Statement;
(b) furnish to Butler such number of copies of a prospectus, including,
without limitation, a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Butler may reasonably
request in order to facilitate the public sale or other disposition of such
Registrable Shares;
(c) use its best efforts to register or qualify Registrable Shares covered
by the Demand Registration Statement under the securities or blue sky laws of
such jurisdictions within
-3-
<PAGE>
the United States as Butler may reasonably request(provided, however, that
Maxwell shall not be required to consent to general service of process for all
purposes in any jurisdiction where it is not then qualified or to qualify in any
jurisdiction in which it is not then qualified) and to do any and all other acts
or things that may be necessary or advisable to enable Butler to consummate the
public sale or other disposition in such jurisdiction of Registrable Shares;
(d) promptly notify Butler, at any time when a prospectus relating to
Registrable Shares being distributed is required to be delivered under the Act,
of the happening of any event as a result of which the prospectus included in
the Demand Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made or then existing and, at
the request of Butler, promptly prepare, file with the Commission and furnish to
Butler a reasonable number of copies of a supplement to, or an amendment of,
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of Registrable Shares, such prospectus shall not include an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(e) use its best efforts to furnish, at the request of Butler or any
underwriter or any distributor of Registrable Shares, an opinion of legal
counsel to Maxwell (covering such matters as are typically covered by opinions
of issuer's counsel in underwritten offerings under the Act and similar in form
and substance to those furnished in connection with prior offerings of the Class
A Stock), as Butler or the managing underwriter of any distribution of
Registrable Shares reasonably requests.
SECTION 3. Piggyback Registration Rights.
-----------------------------
(a) If Maxwell intends to register under the Act any shares of Common Stock
for public sale, including without limitation any registration pursuant to its
obligations under Section 1 of the Holders' Registration Rights Agreement,
Maxwell shall give Butler fifteen business days prior written notice of the
proposed registration. Butler shall then have ten business days to inform
Maxwell of Butler's desire to have all or a portion of the Registrable Shares
included in the registration statement covering such shares (a "Piggyback
---------
Registration Statement") (such registration hereinafter referred to as a
- ----------------------
"Piggyback Registration"), and any participation of Butler and the Holders
- -----------------------
therein shall be subject to the following limitations and exceptions:
(i) Maxwell shall have no obligation to include any of Butler's
Registrable Shares in a Piggyback Registration Statement for an
underwritten offering unless Butler (x) agrees that such Registrable Shares
shall be included in the underwriting on the same terms and conditions
applicable to the other Class A Stock included in such Registration
Statement and (y) completes and executes all questionnaires, powers of
attorney,
-4-
<PAGE>
indemnities, underwriting agreements and other documents reasonably
requested under the terms of the underwriting;
(ii) if the offering is underwritten and the managing underwriter
determines and advises Maxwell that the inclusion in the Piggyback
Registration Statement of all or a portion of the Registrable Shares sought
to be included by Butler, together with all or a portion of the Holders'
Registrable Shares sought to be included by the Holders, would, in the
opinion of the managing underwriter, (x) interfere with the successful
marketing of the offering or (y) adversely affect the price of the
offering, then there shall be included in such Piggyback Registration
Statement only that number of Registrable Shares and Holders' Registrable
Shares, if any, as the managing underwriter shall deem advisable, and in
allocating such number of Registrable Shares and Holders' Registrable
Shares between Butler, on the one hand, and the Holders, on the other hand,
(A) there shall first be included in the Piggyback Registration
Statement all of the Registrable Shares requested to be included by
Butler or such lesser number of the Registrable Shares as the managing
underwriter shall deem advisable, with priority over any of the
Holders' Registrable Shares requested to be included by such Holders;
and
(B) thereafter, to the extent the managing underwriter shall deem
advisable, there may be included in the Piggyback Registration
Statement any of the Holders' Registrable Shares requested to be
included by such Holders; and
(iii) Maxwell shall have no obligation to include any Registrable
Shares in the Piggyback Registration Statement if (x) the shares of Class A
Stock are being registered pursuant to Commission Form S-8 or equivalent
form, or (y) the shares of Class A Stock being registered are to be used to
consummate an acquisition or are related to obligations assumed in
connection with an acquisition.
(b) If any of the Registrable Shares are included in a Piggyback
Registration, Maxwell shall comply with the requirements of Sections 2(b) and
-------------
2(d) with respect to such Piggyback Registration.
- ----
(c) Maxwell may abandon a Piggyback Registration at any time pursuant to a
resolution duly adopted by Maxwell's Board of Directors.
SECTION 4. Standstill Obligations of Butler. Butler shall agree, if
--------------------------------
requested by the managing underwriter of the Demand Registration or a Piggyback
Registration in order to facilitate the distribution of the Common Stock
proposed to be sold pursuant thereto, not to sell or otherwise transfer any of
Butler's remaining shares of Common Stock in the public market for a period not
to exceed 180 days after the effective date of the applicable Registration
Statement.
-5-
<PAGE>
SECTION 5. Expenses. In connection with any Demand Registration
--------
Statement or Piggyback Registration Statement, all expenses incurred by Maxwell
in complying with its obligations hereunder, including, without limitation, all
registration and filing fees, fees and expenses of complying with securities and
blue sky laws, listing fees, printing expenses and fees and disbursements of
accountants and counsel shall be paid by Maxwell; provided, however, that Butler
-------- -------
shall pay all underwriting discounts and selling commissions applicable to the
included Registrable Shares. In addition, the reasonable fees and disbursements
of one special counsel to Butler and the Holders shall be paid by Maxwell in
connection with each Demand Registration Statement or Piggyback Registration
Statement.
SECTION 6. Provision of Information. In connection with any
------------------------
registration pursuant to this Agreement, Butler will furnish to Maxwell in
writing such information regarding Butler, its Common Stock holdings and the
facts regarding the proposed sale or distribution of Registrable Shares and such
documents as Maxwell shall reasonably request and as shall be required in
connection with the actions to be taken by Maxwell pursuant to this Agreement.
SECTION 7. Indemnification.
---------------
(a) In the event of any registration of any Registrable Shares under the
Act pursuant to this Agreement, Maxwell shall indemnify and hold harmless
Butler, each underwriter of Registrable Shares, if any, acting on behalf of
Butler, each broker or any other person acting on behalf of Butler, each officer
and director, if any, of any of the foregoing persons and each other person, if
any, who controls any of the foregoing persons, within the meaning of the Act,
against any losses, claims, damages or liabilities, joint or several, to which
any of the foregoing persons may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which Registrable Shares are registered under the Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any documents prepared and/or furnished by Maxwell incident to the
registration of any Registrable Shares or (ii) the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and shall reimburse Butler, the underwriter, broker or other
person acting on behalf of Butler, each such officer or director, and each such
controlling person for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that Maxwell shall not be liable
-------- -------
in any such case to Butler, any underwriter of Registrable Shares, if any,
acting on behalf of Butler, any broker or any other person acting on behalf of
Butler, any officer or director, if any, of any of the foregoing persons or any
other person, if any, who controls any of the foregoing persons, within the
meaning of the Act to the extent that any loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from such Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement or any document incident
to the registration if such untrue statement
-6-
<PAGE>
or alleged untrue statement or omission was made in reliance upon or in
conformity with written information furnished to Maxwell specifically for use in
the preparation thereof by Butler or such other person seeking indemnification.
(b) Butler shall indemnify and hold harmless (in the same manner and to
same extent as set forth in Section 7(a)) Maxwell, each director of Maxwell,
------------
each officer of Maxwell who shall sign such Registration Statement and any
person who controls Maxwell within the meaning of the Act, with respect to any
untrue statement or alleged untrue statement in or omission from such
Registration Statement, preliminary prospectus or final prospectus contained
therein, amendment or supplement thereto or any document incident to the
registration, if such untrue statement or alleged untrue statement or omission
was made in reliance upon, and in conformity with, written information furnished
to Maxwell by Butler (or any person acting on Butler's behalf) specifically for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document; provided that the maximum
--------
amount of liability in respect of such indemnification shall be limited to an
amount equal to the net proceeds actually received by Butler from the sale of
Registrable Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 7, the indemnified party will, if a claim in respect
---------
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of the action. The failure to so notify the
indemnifying party shall relieve the indemnifying party of its obligation under
this Section 7 to the extent such failure has materially prejudiced the
---------
indemnifying party. The indemnifying party will be entitled to participate in,
and to assume the defense of, any such action brought against such indemnified
party, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
-------- -------
concluded that there may be one or more legal defenses available to such
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to defend diligently, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party and such indemnifying party shall reimburse
such indemnified party and any person controlling such indemnified party for
that portion of the reasonable fees and expenses of any counsel retained by the
indemnified party that are reasonably related to the matters covered by the
indemnity agreement provided in this Section 7. If the indemnifying party is
---------
prohibited from assuming the defense of an action as a result of the preceding
sentence, then the indemnified party may not settle such action without the
prior written consent of the indemnifying party. The indemnified parties shall
be kept fully informed of such action, suit or proceeding at all stages thereof
whether or not they are
-7-
<PAGE>
represented. The parties hereto agree to render to each other such assistance as
they may reasonably require of each other in order to ensure the proper and
adequate defenses of any such action, suit or proceeding.
(d) If the indemnification provided for in this Section 7 shall for any
---------
reason be unavailable to any indemnified party in respect of any loss, claim,
damage or liability, or action referred to herein, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand or the indemnified party on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement or omission of a material fact relates to information supplied
by the indemnifying party on the one hand or the indemnified party on the other,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this paragraph
(d) shall be deemed to include, for purposes of this paragraph (d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnifying party shall not make any settlement of any claims
indemnified against hereunder without the written consent of the indemnified
party, which consent shall not be unreasonably withheld; provided, however, that
-------- -------
the indemnifying party may settle any claim without the consent of the
indemnified party if (i) such settlement makes no admission or acknowledgment of
liability or culpability with respect to the indemnified party, (ii) includes a
complete release of the indemnified party, and (iii) does not require the
indemnified party to make any payment or forego or take any action.
SECTION 8. Limitations on Registration Rights of Others. Maxwell
---------------------------------------------
represents and warrants to Butler that, other than pursuant to this Agreement,
the Holders' Registration Rights Agreement, and the Stock Option and
Registration Rights Agreement dated as of January 26, 1994, between Maxwell and
Mark J. Cocozza, it has not granted to any individual or entity the right to
request or require Maxwell to register any securities issued by Maxwell.
Maxwell also covenants and agrees with Butler that, from and after the date
hereof, Maxwell will not, without the prior written consent of Butler, enter
into any agreement with any holder or prospective holder of any securities of
Maxwell which allows such holder or prospective holder to require Maxwell to
effect a registration of such securities or to include such securities in any
registration filed under Sections 1 or 3 hereof, except for (i) agreements under
-------- - -
which such rights are expressly subject and subordinated to the rights of
registration granted to Butler pursuant to this
-8-
<PAGE>
Agreement and (ii) agreements to effect registrations on Form S-8 of securities
issued by Maxwell upon the exercise of stock options (including, but not limited
to, the options granted to Mr. Cocozza pursuant to the Stock Option and
Registration Rights Agreement dated as of January 26, 1994 between Maxwell and
Mr. Cocozza).
SECTION 9. Notices. Any notice, demand, request, consent or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (i) when personally delivered or delivered by telex (with
correct answer-back received) or telecopy on a business day during normal
business hours at the address or number designated below or (ii) on the business
day following the date of mailing by overnight courier, fully prepaid, addressed
to such address, whichever shall first occur. The addresses for such
communications shall be:
If to Maxwell: Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
(or, if by mail, P.O. Box 37
Readville, Massachusetts 02137)
Attention: President
Facsimile: (617) 364-9058
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Ave.
Los Angeles, California 90071-3197
Attention: Jonathan K. Layne, Esq.
Facsimile:(213) 229-7520
If to Butler: c/o GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: William R. Kraus
Facsimile: (203) 357-3945
With copies to: General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel -- Equity Capital Group
Facsimile: (203) 357-3047
and
King & Spalding
-9-
<PAGE>
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Facsimile: (404) 572-5149
Any party hereto may from time to time change its address for notices under this
Section 9 by giving at least ten days' notice of such changed address to the
- ---------
other parties hereto.
SECTION 10. Binding Agreement. This Agreement shall be binding upon,
-----------------
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, including any successor to or assignee of the rights of
Butler permitted under Section 11.3 of the Operating Agreement and any purchaser
of any Registrable Shares, but this Agreement shall terminate as to any
Registrable Shares sold in a distribution thereof pursuant to a Demand
Registration or a Piggyback Registration pursuant to this Agreement.
SECTION 11. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed in that State.
SECTION 12. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
SECTION 13. Amendment. This Agreement may not be amended or modified
---------
except by an instrument in writing signed by the parties hereto.
SECTION 14. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among Maxwell, Butler and, to the extent provided in Sections 1(b),
-------------
3(a)(ii) and 8, the Holders, with respect to the subject matter hereof and
- -------- -
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
MAXWELL SHOE COMPANY INC.
By:/s/ James J. Tinagero
__________________________________
James J. Tinagero
Executive Vice President
-10-
<PAGE>
THE BUTLER GROUP INC.
By:/s/ Douglas P. Haensel
___________________________________
Douglas P. Haensel
Executive Vice President
HOLDERS:
/s/ Maxwell V. Blum
______________________________________
Maxwell V. Blum
/s/ Betty Ann Blum
______________________________________
Betty Ann Blum
/s/ Marjorie W. Blum
______________________________________
Marjorie W. Blum
/s/ Mark J. Cocozza
______________________________________
Mark J. Cocozza
/s/ David Andelman
______________________________________
David Andelman, as Trustee of the
Eleanor S. Blum Trust Fund of the
Maxwell V. Blum Irrevocable Trust
dated 12/23/80
-11-
<PAGE>
EXHIBIT 10.8
SECOND AMENDMENT TO LICENSE AGREEMENT
-------------------------------------
AMENDMENT to License Agreement, made as of the 14th day of April, 1997, by
and between JONES INVESTMENT CO., INC. ("Jones"), a Delaware corporation, and
MAXWELL SHOE COMPANY INC. ("Licensee"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Jones and Licensee are parties to a certain License Agreement
dated as of the 1st day of July, 1993, as amended by First Amendment to License
Agreement dated as of the 2nd day of October, 1995 ("Agreement"); and
WHEREAS, Jones and Licensee are now desirous of amending the Agreement; and
WHEREAS, all terms used but not otherwise defined herein shall have the
meanings given to them in the Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and their
mutual promises, the parties hereby amend the Agreement, effective as of the
date first above written, as follows:
1. Paragraph 1.1 is amended in its entirety to read in full as follows:
"1.1(a) Retail Annual Period. The period from commencement of the term of
---------------------
the Trademark Sublicense Agreement through January 31, 1998 and each consecutive
twelve (12) month period thereafter during the Term.
1.1(b) Wholesale Annual Period. The period from commencement of the Term
------------------------
through December 31, 1994 and each consecutive twelve (12) month period
thereafter during the Term."
2. Paragraph 1.7 is amended in its entirety to read in full as follows:
"1.7 (a) Wholesale Net Sales. The invoiced amount of Jones
--------------------
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 Jones Merchandise.
(b) Retail Net Sales. The total dollar amount of retail sales
-----------------
of SLJ Retail LLC, a Delaware limited liability company ("SLJ Retail"), of Jones
Merchandise during any Retail Annual Period, net of returns, discounts and
allowances, and excluding sales taxes."
1
<PAGE>
3. Paragraph 2.1 is amended in its entirety to read in full as follows:
"2.1 Grant of License. Jones hereby grants to Licensee an exclusive
-----------------
license throughout the Territory to use the Marks in connection with (a) the
manufacture, advertising, merchandising, promotion, sale and distribution of
Jones Merchandise approved by Jones, and (b) any retail store operation,
including placement of the Marks on signs, packaging, store fronts and retail
store advertising, as approved by Jones, owned or operated by SLJ Retail, all in
accordance with the terms of this Agreement. The license granted herein extends
only to the Merchandise, Territory and retail and other uses expressly provided
for in this Agreement, and Licensee shall not use or attempt to use the Marks on
any other products or goods in any other area or any other manner whatsoever.
Notwithstanding the above, (A) the Territory for purposes of Paragraph 2.1(b)
shall only include the United States, and (B) Jones and Licensee agree that
Jones may sell women's footwear bearing the Marks for retail sale in retail
stores which Jones or any affiliate of Jones owns and which specialize in
selling women's apparel, footwear and accessories and which are located in
outlet malls or centers; however, Jones and its affiliates may not sell such
footwear to retail stores (excluding mall anchor stores) which specialize in
selling first-quality footwear and accessories and which are located in enclosed
regional shopping malls."
4. Paragraph 2.2 is amended in its entirety to read in full as follows:
"2.2 Distribution Channels. Licensee acknowledges that Jones has
----------------------
established a reputation for unique high quality fashionable merchandise sold in
high quality and high fashion stores, and that Jones maintains a marketing
strategy of retaining and projecting to consumers that reputation and ambience
for its products. Accordingly, in order to protect Jones' marketing strategy,
goodwill and prestige and reputation, Jones Merchandise shall be sold only in
better department stores, better specialty stores and SLJ Retail stores in
accordance with Jones' marketing strategy for sales of "Jones New York" product,
and the license granted under this Agreement extends only to the use of the
Marks in connection with the manufacture, advertising, merchandising, promotion,
sale and distribution of Jones merchandise for sale to customers in such better
department stores, better specialty stores and SLJ Retail stores, the locations
of which shall be reasonably approved by Jones."
5. Subparagraph 3.1.1 is amended in its entirety to read in full as
follows:
"3.1.1(a) In consideration of the license granted and the services to
be performed by Jones under this Agreement and subject to Guaranteed Minimums,
Licensee shall pay to Jones Royalties equal to: (a) five (5%) percent of
Wholesale Net Sales of Jones Merchandise for Wholesale Net Sales of $30,000,000
or less during any Wholesale Annual Period, and (b) four (4%) percent of
Wholesale Net Sales of Jones Merchandise in excess of $30,000,000 during any
Wholesale Annual Period, all in accordance with all the terms and conditions of
this Agreement."
6. Subparagraph 3.1.1(b) is added as follows:
"3.1.1(b) In consideration of the license granted and the services to
be performed by Jones under this Agreement, Licensee shall pay to Jones
Royalties equal to (a) two
2
<PAGE>
and one-half (2.5%) percent of Retail Net Sales of Jones Merchandise from the
commencement of this Second Amendment to License Agreement through and including
January 31, 1998, and (b) three (3%) percent of Retail Net Sales of Jones
Merchandise thereafter, all in accordance with all the terms and conditions of
this Agreement; provided, however, in the event that Licensee sublicenses its
rights to utilize the Marks for retail sale purposes to SLJ Retail, with Jones'
consent, then SLJ Retail shall be directly responsible for the payment of the
Royalties payable to Jones pursuant to this subparagraph 3.1.1(b)."
7. Subparagraph 3.1.2 is amended by inserting the following before the word
"Licensee": "Subject to the provisions of subparagraph 3.1.1(b),".
8. Paragraph 3.2 is amended so that in every instance where the words
"Annual Period" appear, the word "Wholesale" is inserted before the words
"Annual Period".
9. Paragraph 3.4 is amended by inserting the word "Wholesale" before the
words "Annual Period".
10. Paragraph 3.6 is added as follows:
"3.6 Payments, Reports and Audit for Retail Operations. Jones shall
--------------------------------------------------
have all of the rights to receive payments and reports from and to conduct
audits of SLJ Retail as provided in Paragraphs 3.2, 3.3 and 3.4 of the Trademark
Sublicense Agreement dated as of April , 1997 between Licensee and SLJ Retail
(the "Trademark Sublicense Agreement"), attached hereto as Exhibit A. The
parties agree that with respect to any payment, reporting or other obligations
to Jones arising from the retail sale license granted under Paragraph 2.1(b)
hereof, an Annual Period shall end on January 31 to coincide with the fiscal
year of SLJ Retail."
11. Subparagraphs 4.6.1 and 4.6.2 are amended so that in every instance
where the words "Net Sales" appear, the word "Wholesale" is inserted before the
words "Net Sales", and in every instance where the words "Annual Period" appear,
the word "Wholesale" is inserted before the words "Annual Period".
12. Subparagraph 8.2.1 is amended by replacing "four (4) years" with "one
(1) year" and replacing "December 31, 2000" with "December 31, 1997" and by
inserting the word "Wholesale" before the words "Annual Period".
13. Subparagraph 8.2.2 is amended in its entirety to read as follows:
"8.2.2 Second Renewal Term. Jones hereby grants Licensee an option,
--------------------
and Licensee hereby exercises such option in full, to renew this Agreement for a
second renewal term ("Second Renewal Term") of five (5) years, commencing on
January 1, 1998 and ending on December 31, 2002, subject to earlier termination
as provided in this Agreement. In connection therewith, Licensee represents and
warrants to Jones that Wholesale Net Sales for the twelve (12) month period
ending July 31, 1997 shall exceed $20,000,000."
14. Subparagraphs 8.2.3, 8.2.4 and 8.2.5 are added as follows:
3
<PAGE>
"8.2.3. Third Renewal Term. If Licensee has not defaulted or
-------------------
materially breached any of the terms of this Agreement, has complied with its
obligations under this Agreement in all material respects (without regard to
whether Jones has given any notices of default or failure to comply), and if
Wholesale Net Sales for the twelve (12) month period ending July 31, 2002
exceeded $30,000,000, Licensee shall have the option (conditioned upon the
receipt by Jones of the reports, required pursuant to Paragraphs 3.3 and 3.4
hereof, and the results contained therein), exercisable by written notice given
to Jones not later than five (5) months prior to the expiration of the Second
Renewal Term, to renew this Agreement for a third renewal term ("Third Renewal
Term") of five (5) years, commencing on January 1, 2003 and ending on December
31, 2007, subject to earlier termination as provided in this Agreement.
8.2.4 Fourth Renewal Term. If Licensee has not defaulted or
--------------------
materially breached any of the terms of this Agreement, has complied with its
obligations under this Agreement in all material respects (without regard to
whether Jones has given any notices of default or failure to comply), and if
Wholesale Net Sales for the twelve (12) month period ending July 31, 2007
exceeded $40,000,000, Licensee shall have the option (conditioned upon the
receipt by Jones of the reports, required pursuant to Paragraphs 3.3 and 3.4
hereof, and the results contained therein), exercisable by written notice given
to Jones not later than five (5) months prior to the expiration of the Third
Renewal Term, to renew this Agreement for a fourth renewal term ("Fourth Renewal
Term") of five (5) years, commencing on January 1, 2008 and ending on December
31, 2012, subject to earlier termination as provided in this Agreement.
8.2.5 Fifth Renewal Term. If Licensee has not defaulted or
-------------------
materially breached any of the terms of this Agreement, has complied with its
obligations under this Agreement in all material respects (without regard to
whether Jones has given any notices of default or failure to comply), and if
Wholesale Net Sales for the twelve (12) month period ending July 31, 2012
exceeded $50,000,000, Licensee shall have the option (conditioned upon the
receipt by Jones of the reports, required pursuant to Paragraphs 3.3 and 3.4
hereof, and the results contained therein), exercisable by written notice given
to Jones not later than five (5) months prior to the expiration of the Fourth
Renewal Term, to renew this Agreement for a fifth renewal term ("Fifth Renewal
Term") of five (5) years, commencing on January 1, 2013 and ending on December
31, 2017, subject to earlier termination as provided in this Agreement."
15. Subparagraph 8.3.1 is amended in its entirety to read in full as
follows:
"8.3.1(a) Jones may terminate this Agreement, effective immediately
upon giving Licensee written notice of termination, if (i) Licensee fails to
make any payment due to Jones which Licensee is required to make under this
Agreement when such payment is due and continues such failure uncured for
fifteen (15) days after written notice thereof from Jones to Licensee, (ii)
Licensee fails two (2) or more times during any Wholesale Annual Period during
the Term to make any payment due to Jones which Licensee is required to make
within fifteen (15) days after such payment is due, without regard to any notice
of such failure from Jones, (iii) Licensee abandons the Marks, 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, or (v) Licensee defaults on any
obligations secured by a security interest in or other lien or encumbrance on
Jones Merchandise.
4
<PAGE>
8.3.1(b) In addition, Jones may terminate the license granted pursuant
to Paragraph 2.1(b) hereof (but not the license granted pursuant to Paragraph
2.1(a) or any other provisions of this Agreement) if an entity or person other
than Licensee (or an affiliate of Licensee) serves as the managing member of SLJ
Retail (the date on which such entity or person first becomes the managing
member, the "Maxwell Termination Date"). In such event, Jones agrees that, if it
consents to a replacement managing member prior to the Maxwell Termination Date,
it shall not act under this Paragraph 8.3.1(b) to terminate the license granted
pursuant to Paragraph 2.1(b) hereof until the expiration of ninety (90) days
after the Maxwell Termination Date. Thereafter, Jones may exercise its right
under this Paragraph 8.3.1(b) to terminate the license granted pursuant to
Paragraph 2.1(b) hereof in accordance with the terms hereof. Jones may exercise
its right under this Paragraph 8.3.1(b) to terminate the license granted
pursuant to Paragraph 2.1(b) hereof by giving written notice of termination to
Licensee and SLJ Retail, which termination shall be effective thirty (30) days
from the date Jones provides Licensee and SLJ Retail with written notice of such
termination. Licensee agrees to provide Jones with prompt notice in the event
Licensee is no longer serving as managing member of SLJ Retail. Notwithstanding
the foregoing, Jones may not terminate this Agreement with respect to Licensee's
rights to use the Marks in connection with Licensee's wholesale business if
there is a default in payment of Royalties based upon Retail Net Sales payable
by SLJ Retail pursuant to subparagraph 3.1.1(b) hereof, in which case Jones may
terminate this Agreement only with respect to the rights of Licensee granted
under Paragraph 2.1(b) of this Agreement in accordance with the terms of this
subparagraph."
16. The following sentence is added at the end of Paragraph 8.7:
"Jones shall not, however, have the right to grant subsequent licenses
to use the Marks in connection with the rights of Licensee granted under
Paragraph 2.1(a) of this Agreement upon the termination of this Agreement based
solely upon a default in connection with any of the rights granted to Licensee
under Paragraph 2.1(b)."
17. Subparagraph 9.3.2(a) is amended in its entirety to read in full as
follows:
"9.3.2 (a) This Agreement is personal to Licensee and Licensee may
not, without the prior written consent of Jones, 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 (i) 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, (ii) merge with a
newly formed corporation, with no liabilities, solely for the purpose of
reincorporation and (iii) assign and sublicense retail license rights hereunder
to SLJ Retail as contemplated by the Trademark Sublicense Agreement, attached
hereto as Exhibit A, and Jones hereby acknowledges and consents to the terms of
such sublicense."
Except as expressly amended hereby, the Agreement shall remain unchanged
and in full force and effect.
5
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this Amendment to
Agreement by officers thereunto duly authorized as of the day and year first
above written.
JONES INVESTMENT CO., INC.
By: /s/ Norman J. Shuman
---------------------------------------------
Norman J. Shuman
Vice President
MAXWELL SHOE COMPANY INC.
By: /s/ Maxwell V. Blum
---------------------------------------------
Maxwell V. Blum
Chairman of the Board and
Chief Executive Officer
6
<PAGE>
EXHIBIT A
---------
TRADEMARK SUBLICENSE AGREEMENT BETWEEN
MAXWELL SHOE COMPANY INC. AND SLJ RETAIL LLC
7
<PAGE>
EXHIBIT 10.9
TRADEMARK SUBLICENSE AGREEMENT
------------------------------
THIS TRADEMARK SUBLICENSE AGREEMENT made this 14th day of April, 1997 by
and between MAXWELL SHOE COMPANY INC. ("Maxwell"), a Delaware corporation, and
SLJ RETAIL LLC, a Delaware limited liability company (the "Company")
RECITALS:
---------
A. Jones Investment Co., Inc. ("Jones") is the owner and registrant of the
trademarks and subsisting registrations for the trademarks "Jones New York" and
"Jones New York Sport", registered in the United States Patent and Trademark
Office and the Registrar of Trademarks of Canada.
B. Maxwell and Jones are parties to a License Agreement dated as of July 1,
1993, as amended by First Amendment to License Agreement dated as of October 2,
1995 and Second Amendment to License Agreement dated as of April 14, 1997 (the
"Jones New York Trademark License"), pursuant to which Jones has granted a
license to Maxwell to use Jones' trademarks "Jones New York" and "Jones New York
Sport" in connection with such goods as are identified therein and has permitted
Maxwell to grant the sublicense under 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 January
-------------
31, 1998 and each consecutive twelve (12) month period thereafter during the
Term.
1.2 Approval or Approved. The approval by Maxwell of one or more designs,
--------------------
samples, items of Signage and 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. Maxwell shall be deemed to have Approved
any item submitted to it by the Company for Approval under the terms of this
Agreement, if Maxwell fails to approve, disapprove or otherwise definitively
respond to the submission in writing within fourteen (14) days after receipt of
the items submitted. The Company acknowledges that Jones has certain approval
rights under this Agreement and hereby consents to such rights.
1.3 Contribution Agreement. The Contribution Agreement dated as of April ,
----------------------
1997, by and among The Butler Group, Inc., a Delaware corporation, Maxwell and
Maxwell Retail Inc.,
<PAGE>
a Delaware corporation ("Maxwell Retail"). Capitalized terms used in this
Agreement and not otherwise defined herein will have the definitions set forth
in the Contribution Agreement, unless otherwise clearly indicated to the
contrary herein.
1.4 Jones New York Trademarks. Jones' trademarks "Jones New York" and
-------------------------
"Jones New York Sport", individually or collectively, as the case may be.
1.5 Jones Products. The items of women's footwear merchandise bearing,
--------------
incorporating or embodying the Jones New York Trademarks and intended for use in
the conduct of the Company's retail women's footwear business.
1.6 Net Sales. Retail sales of Jones Products generated by the Retail
---------
Stores, less returns and allowances and sales taxes.
1.7 Required Members. Required Members has the meaning set forth in the
----------------
Operating Agreement.
1.8 Retail Stores. Collectively, Mall Specialty Footwear Stores and
-------------
Retail Outlet Footwear Stores.
1.9 Signage and Packaging. All signs, tags, labels, cartons or containers
---------------------
and packing or wrapping material used or to be used by the Company in connection
with the merchandising and retail sale by the Company of Jones Products in the
Retail Stores.
1.10 Royalties. The royalties to be paid by the Company directly to Jones
---------
for or in connection with the sublicense to use the Jones New York Trademarks
granted under this Agreement, provided for in Article III and all other
applicable portions of this Agreement.
1.11 Term. The Initial Term and any renewal term of this Agreement,
----
provided for and defined in Article VIII, taken collectively.
1.12 Termination Inventory. The inventory provided of Jones Products and
---------------------
of Signage and Packaging and advertising and promotional material on hand at the
time of the termination of this Agreement.
1.13 Termination Inventory Schedule. The written schedule provided for in
------------------------------
Paragraph 8.5 of the Termination Inventory.
1.14 Territory. The geographical area consisting of the United States.
---------
II. SUBLICENSE
----------
2.1 Grant of Sublicense. Maxwell hereby grants to the Company a
-------------------
sublicense throughout the Territory to use the Jones New York Trademarks in
connection with the manufacturing, advertising, merchandising, promotion and
retail sale of Jones Products in Retail Stores operated by the Company in the
Territory. The sublicense granted herein extends only to
2
<PAGE>
the Jones Products and Signage and Packaging of Jones Products in the Retail
Stores in the Territory and uses expressly provided for in this Agreement, and
the Company shall not use or attempt to use the Jones New York Trademarks on any
other products or goods in any other area or any other manner whatsoever. The
Company and Maxwell acknowledge that the rights of the Company to utilize the
Jones New York Trademarks shall be no greater than those rights granted to
Maxwell to utilize the Jones New York Trademarks pursuant to the Jones New York
Trademark License. The Company agrees the women's footwear it sells in the
Retail Stores it operates under the "Jones New York" name ("Jones New York
Stores") pursuant to the terms of this Agreement shall be Jones Products. In
addition, should the Company sell non-footwear merchandise in Jones New York
Stores, the Company agrees to use its best efforts to purchase non-footwear
merchandise bearing the Jones New York Trademarks, provided such non-footwear
merchandise is available under the Jones New York Trademarks. Jones shall
Approve any non-Jones New York Trademark branded merchandise which the Company
sells in the Jones New York Stores. In any event, no less than eighty-five (85%)
percent of the Company's Net Sales derived from each Jones New York Store during
any Annual Period shall relate to merchandise which bears the Jones New York
Trademarks.
2.2 Resolution of Conflicts. The Company recognizes that Jones has
-----------------------
granted, and may in the future grant, licenses to other parties to use the Jones
New York Trademarks in connection with the retail sale of wearing apparel,
accessories or related items. If the Company or any other licensee of the Jones
New York Trademarks under any other such license notifies Jones 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,
Jones shall endeavor to deal with the issue by discussions with authorized
representatives of the affected parties, and the Company shall cooperate in all
reasonable respects in any such efforts. Jones may at any time determine
finally to resolve any such conflict by written notice of its determination and
resolution to the affected licensee, and all such determinations shall be final
and binding upon the Company.
2.3 Reservation of Rights. Maxwell reserves all rights it has pursuant to
---------------------
the Jones New York Trademark License, as amended, except as specifically granted
and sublicensed to the Company under this Agreement.
III. ROYALTIES
---------
3.1 Percentage Royalty.
-------------------
3.1.1 In consideration of the sublicense granted and the services to
be performed by Maxwell under this Agreement and subject to Guaranteed Minimums,
the Company shall pay directly to Jones Royalties equal to (a) two and one-half
(2.5%) percent of Net Sales of Jones Products from the commencement of this
Agreement through and including January 31, 1998, and (b) three (3%) percent of
the Net Sales of all Jones Products thereafter, all in accordance with all the
terms and conditions of this Agreement. In order to secure the Royalty payment
obligations of the Company under this Agreement, the Company agrees to open a
clean irrevocable letter of credit in favor of Jones issued by a bank or other
financial institution reasonably acceptable to Jones in an amount equal to
$350,000 no later than the first opening of a Jones New York Store.
3
<PAGE>
3.1.2 The Company shall be obligated to pay and account for Royalties
for all Jones Products sold, even if the Jones Products improperly bear the
Jones New York Trademarks 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's right to terminate this Agreement or to exercise any
other right or remedy that Maxwell may have as a result of the breach of this
Agreement by such transactions.
3.2 Payment and Periodic Reports. Royalties shall be paid, without set-
----------------------------
off or deduction for any reason, and accounted for monthly, commencing with a
report for the month ending July 31, 1997, within twenty-five (25) days after
the end of each month. At the time each Royalty payment is due, the Company
shall deliver to Jones a statement signed and certified as accurate by the
Company's chief financial officer or by another officer or official of the
Company, approved by Jones in advance in writing, accounting for the Net Sales
and Royalties for the applicable month. Such statement shall show the total
amount of gross sales of all Jones Products sold during the month; 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 month; and such other information as Jones
may reasonably require. Jones may, at any time, provide the Company with a
standardized form for accounting for Royalties and the Company shall use any
such form for the statements under this paragraph. The statements provided for
in this paragraph shall be furnished to Jones whether or not the Company has
sold any Jones Products during the month for which the statement is due. The
Company shall provide to Maxwell a copy of any report delivered to Jones
pursuant to this paragraph.
3.3 Annual Reports. Not later than forty-five (45) days after the end of
--------------
each Company fiscal year, the Company shall deliver to Jones a statement, signed
and certified by the Company's then regularly engaged independent certified
public accountant (or, if the Company has no such regular engagement, by a
reputable independent certified public accountant) stating for the Annual Period
the information required in the monthly statement under Paragraph 3.2 and such
other information as Jones may reasonably request within a reasonable time prior
to the date on which the statement is due. The Company shall provide to Maxwell
a copy of any report delivered to Jones pursuant to this paragraph.
3.4 Books and Records and Audit.
----------------------------
3.4.1 The Company 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 shall at least be in
sufficient detail to permit Jones to monitor compliance by the Company with all
of its obligations under this Agreement. Jones 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, to audit such books of account and records and to examine all other
documents and materials in the Company's possession or control relating to this
Agreement and the Company's performance hereunder. The Company shall maintain
such books of account, records and documents and material available for Jones
for at least two (2)
4
<PAGE>
years after the termination of this Agreement. Except as provided in
subparagraph 3.4.2, any audit under this paragraph shall be at Jones' expense.
3.4.2 If any audit of the Company's books and records by Jones under
subparagraph 3.4.1 discloses that the payments made by the Company to Jones
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, the Company 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 Jones. If an audit shows that the amount paid by the Company
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) percentage points
above such Prime Rate and the Company shall, in addition, reimburse Jones for
all reasonable costs of the audit within thirty (30) days after demand by Jones.
IV. PERFORMANCE
-----------
4.1 Performance Standards.
----------------------
4.1.1 Throughout the Term, the Company shall use all reasonable
efforts and cause its officers, employees, agents and contractors to use their
reasonable efforts to sell at retail the Jones Products, promote business for
the Jones Products and enhance the value and reputation of the Jones New York
Trademarks, consistent with good business practices and the high standards and
prestige represented by the Jones New York Trademarks.
4.1.2 In the use of the Jones New York Trademarks and all other
aspects of the performance of this Agreement, the Company 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 sale,
labeling, Signage and Packaging and advertising of Jones Products sold within
the Territory.
4.2 Abandonment. If the Company shall fail to use the Jones New York
-----------
Trademarks in the retail sale of Jones Products within any period of six (6)
consecutive months or if the Company shall, with the consent of the Required
Members, determine or state its intention to cease so to use the Jones New York
Trademarks, the Company shall be deemed to have abandoned the use of the Jones
New York Trademarks, and Maxwell or Jones may at any time thereafter terminate
this Agreement by written notice under subparagraph 8.2.1. The parties
acknowledge that the abandonment of the use of the Jones New York Trademarks by
the Company will irreparably damage the Company's capacity to use the Jones New
York Trademarks under the terms of this Agreement and, for purposes of
termination under Article VIII, abandonment of the use of the Jones New York
Trademarks under this paragraph shall be deemed not curable.
4.3. Quality.
-------
5
<PAGE>
4.3.1 The Signage and Packaging and sales and promotional materials
for the Jones Products shall at all times be of high quality, and the Jones
Products shall at all times be promoted in a manner appropriate for the high
quality of the Jones Products.
4.3.2 Maxwell and Jones and their duly authorized representatives
shall have the right, during normal business hours upon reasonable advance
notice, to inspect any facility used by the Company in connection with the
retail sale or production of Signage and Packaging or advertising or promotional
material in order for Maxwell and Jones to monitor the quality of the Jones
Products and Signage and Packaging and promotional materials and the Company's
compliance with all other terms of this Agreement which relate to such
manufacture and production.
4.4 Approvals. The Company shall not in any aspect of its performance
---------
under this Agreement use any items of Signage and Packaging or advertising or
promotional materials for Jones Products which both Maxwell and Jones have not
Approved to the extent required under the terms of this Agreement. Maxwell's or
Jones' Approval or disapproval of any item or matter for purposes of this
Agreement may be based solely on Maxwell's or Jones' subjective standards and
Approval may be given or withheld in either Maxwell's or Jones' sole discretion,
provided that Maxwell and Jones shall each act in good faith.
V. DESIGNS AND PACKAGING
---------------------
5.1 Designs. Maxwell, Jones and the Company shall cooperate in such
-------
manner as the Company may reasonably request in the development and creation of
Signage and Packaging and advertising and promotional materials relating to the
retail sale of Jones Products. All designs, styles, patterns, photographs or
written ideas for Jones Products provided by Maxwell to the Company for purposes
of this Agreement shall be the exclusive property of Maxwell, and the Company
shall not use any of the foregoing except for the retail sale and advertising
and promotion of Jones Products in accordance with the terms of this Agreement.
5.2 Signage and Packaging. The Company shall submit to Maxwell and Jones
---------------------
for Approval samples of all tags, labels and other items of Signage, Packaging
and store design concepts within a reasonable time prior to the commencement of
the production and utilization of such items for use with Jones Products.
Maxwell shall not unreasonably require the Company materially to change labels,
tags or other significant items or Signage and Packaging from collection to
collection.
5.3 Continuing Inspection. Upon Maxwell's or Jones' request at any time
---------------------
and from time to time, the Company shall submit to Maxwell and Jones a
reasonable number of production samples of items of Signage and Packaging
material in order for Maxwell and Jones to monitor production in accordance with
Maxwell's and Jones' Approvals, quality standards and other requirements of this
Agreement. If Maxwell or Jones notifies the Company in writing of the
disapproval of any such production sample, the Company shall immediately take
such action as may be necessary for the item to meet Maxwell's or Jones'
Approval and cease production and
6
<PAGE>
distribution and sale of the item pending Approval. Neither Maxwell nor Jones
shall unreasonably disapprove any production sample under this paragraph.
VI. TRADEMARK AND TRADEMARK PROTECTION
----------------------------------
6.1 Ownership.
----------
6.1.1 The Company acknowledges that Jones is the owner of all right,
title and interest in and to the Jones New York Trademarks in any form or
embodiment and is also the owner of the good will attached or which shall become
attached to the Jones New York Trademarks in connection with the business and
goods in relation to which the same has, is or shall be used. Sales by the
Company shall be deemed to have been made for purposes of trademark
registration, and all uses of the Jones New York Trademarks by the Company shall
inure to the benefit of Jones.
6.1.2 At Maxwell's request, the Company shall execute any documents,
including registered users agreements, required of Maxwell by Jones under the
terms of the Jones New York Trademark License to confirm Jones' ownership of all
rights in and to the Jones New York Trademarks in the Territory and the
respective rights of Maxwell and the Company under this Agreement. The Company
shall cooperate in all reasonable respects with Maxwell in connection with
Maxwell's obligations under the Jones New York Trademark License relating to the
filing and prosecution by Jones of applications in Jones' name relating to the
use of the Jones New York Trademarks for Jones Products in the Territory.
6.1.3 The Company shall never challenge or encourage anyone to
challenge Jones' ownership or the validity of the Jones New York Trademarks or
any application for registration thereof or any trademark, copyright or other
registration thereof or any rights of Jones therein.
6.2 No Adverse Acts. The Company shall not, at any time or in any manner,
---------------
engage in any activity or do or permit any act within its control which may in
any way adversely affect any rights of Jones or Maxwell to the Jones New York
Trademarks or any registrations or applications for registration thereof or
which may directly or indirectly reduce the value of the Jones New York
Trademarks or derogate or detract from their repute.
6.3 No Secondary Jones New York Trademarks. The Company shall not use any
--------------------------------------
other trade names, trademarks or other designations (other than the Company's
own limited liability company name or trade name), except as shall be Approved
by Maxwell and Jones, in connection with the Jones New York Trademarks in any
advertising, publicity, labeling, Signage and Packaging or printed matter
utilized by the Company in connection with the Jones Products. Except as shall
be Approved by Maxwell and Jones, the Company shall not join the Jones New York
Trademarks with any other names or marks to form a new mark and shall not itself
use the Jones New York Trademarks as a corporate name or trade name or in any
other manner other than in connection with the retail sale and promotion of
Jones Products under this Agreement. Notwithstanding the foregoing, the Company
may, subject to the provisions of Paragraph 1.2,
7
<PAGE>
place the words "Marketed by SLJ" on any trade advertisement regarding the Jones
Products and on business cards, stationery and invoices of the Company.
6.4 Trademark Notices. The Company shall cause the designation "R" to
-----------------
appear immediately after, on the upper right, of the Jones New York Trademarks
on all Signage and Packaging and advertising and promotional material and shall,
in addition, cause to appear on all Signage and Packaging and advertising and
promotional materials and on all forms, invoices, stationery, business cards and
other documents and materials of any kind bearing the Jones New York Trademarks
such designations, legend, or markings or notices as may be necessary, or as
Maxwell may reasonably require, to give notice of the status of the Jones New
York Trademarks.
6.5 Copyrights. Any copyright relating to Jones Products that may be
----------
created by statute, common law or otherwise in any design, sketch, print,
Signage and Packaging or similar matter created by the Company shall be the sole
property of Jones. The Company shall take such action as may be necessary or as
Jones may reasonably require, at Jones' expense, to confirm, preserve or protect
such copyright, including placing of copyright notices on the appropriate items.
The Company shall not claim for itself or for any party other than Jones'
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 represents and warrants to the Company that Maxwell has
the full right, power and authority to enter into this Agreement and to grant
the rights, sublicenses and privileges granted by Maxwell hereunder to the
Company and to perform all of Maxwell's obligations hereunder.
7.1.2 The Company represents to Maxwell that the Company has the full
right, power and authority to enter into this Agreement and to perform all of
its obligations hereunder.
7.2 Indemnification by Jones. Jones shall indemnify, defend and hold
------------------------
harmless the Company 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 that the Company's use of the Jones New York Trademarks
in accordance with the terms of this Agreement constitutes an infringement of
any trademark rights of any third party within the Territory, upon the Company
giving Jones prompt written notice and authority and an opportunity to undertake
and fully conduct the defense thereof and out of the breach by Jones of any
provision of this Agreement or of any of Jones' duties hereunder or the acts or
omissions of Jones or any of its servants, agents, employees or contractors in
connection with the performance of this Agreement.
7.3 Indemnification by the Company and Insurance.
---------------------------------------------
7.3.1 The Company shall indemnify, defend and hold harmless Maxwell
and Jones from and against any and all claims, causes of action, suits, damages
and expenses (including reasonable attorneys' fees) which Maxwell or Jones may
incur or for which it may
8
<PAGE>
become liable or required to pay by reason of any defect or alleged defect in
any Jones Products, except for defects attributable to designs or patterns
supplied or created by Maxwell; the breach by the Company of any provision of
this Agreement or of any of the Company's duties hereunder; or the acts or
omissions of the Company or of any of its servants, agents, employees or
contractors in connection with the performance of this Agreement (excluding
matters covered by Paragraph 7.2).
7.3.2 The Company shall, at its own expense, obtain and maintain
throughout the Term in full force and effect with an insurance carrier
reasonably acceptable to Maxwell and Jones, (i) 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 Jones Products or out of the use or
condition of an item of Jones Products, and (ii) general liability insurance for
each Jones New York Store location in an amount of not less than $1,000,000.
Such insurance policy shall name Maxwell and Jones as co-insureds and shall
provide for at least thirty (30) days advance written notice to Maxwell and
Jones before cancellation or substantial modification. The Company shall
promptly deliver a certificate of such insurance to Maxwell and Jones and, if
Maxwell or Jones 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 the Company under
subparagraph 7.3.1.
7.4 Infringements. The Company shall promptly notify Maxwell and Jones in
-------------
writing of any known or suspected infringements of any of the Jones New York
Trademarks or of any copyright or other rights or property of Maxwell or Jones,
promptly after the same comes to the Company's attention. Jones 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. The Company shall cooperate in any action or
proceeding by Jones at Jones' expense with respect to an infringement or
suspected infringement in such manner as Jones may reasonably request.
VIII. TERM AND TERMINATION
--------------------
8.1 Term. Subject to Maxwell's rights under the Jones New York Trademark
----
License, the initial term of this Agreement (the "Initial Term") shall begin
upon execution of this Agreement and end on December 31, 2002, subject to
earlier termination as provided in this Agreement. In addition, the Term of this
Agreement shall be extended automatically, and without any further action by
either the Company or Maxwell, in the event (and for the same period of time)
Maxwell exercises any renewal option pursuant to the Jones New York Trademark
License.
8.2 Termination.
------------
8.2.1 Maxwell or Jones may terminate this Agreement, effective
immediately upon giving the Company written notice of termination, if (i) the
Company fails to make any payment due to Jones under this Agreement when such
payment is due and continues such failure uncured for fifteen (15) days after
written notice thereof from Jones to the Company, (ii) the
9
<PAGE>
Company fails two (2) or more times during any Annual Period during the Term to
make any payment due to Jones within fifteen (15) days after such payment is
due, without regard to any notice of such failure from Jones, (iii) the Company
abandons the Jones New York Trademarks, as provided in Paragraph 4.2, (iv) the
Company has commenced liquidation or dissolution proceedings, (v) the Company
ceases, or with the consent of the Required Members admits its intention to
cease, the retail sale of Jones Products or the conduct of its business in the
ordinary course, (vi) the Jones New York Trademark License is terminated for any
reason, (vii) the Company 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; consents 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 (viii) the Company defaults on
any obligation secured by a security interest in or other lien or encumbrance
upon the Jones Products, such default continues beyond any period of grace
provided in the document or instrument under which such obligation arose and the
secured party takes any action to commence exercising default remedies with
respect to the Jones Products.
8.2.2 Either Maxwell or the Company with the consent of the Required
Members 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 8.2.1, 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; consents 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.
8.3 Termination of Rights.
----------------------
8.3.1 Upon the expiration or termination of this Agreement pursuant
to Paragraph 8.2 above, (i) all rights of the Company under this Agreement shall
terminate and automatically revert to Maxwell, (ii) the Company shall
immediately discontinue all use of the Jones New York Trademarks and shall no
longer have any right to use the Jones New York Trademarks or any variation or
simulation thereof in any manner or for any purpose whatsoever, except as
provided in Paragraph 8.5 hereof, (iii) the Company shall transfer to Maxwell by
such documentation as Maxwell may require all registrations, filings,
trademarks, copyrights and other rights with regard to the Jones New York
Trademarks which the Company may have possessed at any time and (iv) subject to
the provisions of Paragraph 8.5 concerning the sale of Termination Inventory,
the Company shall deliver to Maxwell, without charge, all sketches, samples,
designs or other matters relating to Jones Products and all Jones Products,
Signage and Packaging materials and advertising and promotional materials
bearing the Jones New York Trademarks in any form.
10
<PAGE>
8.3.2 Upon the expiration or termination of this Agreement under
Paragraph 8.2, no trustee in bankruptcy, assignee for the benefit of creditors,
custodian, receiver, sheriff or court officer or other successors to the Company
or its assets or business shall have any right to continue this Agreement or to
use or exploit the Jones New York Trademarks in any manner whatever.
8.3.3 In the event that under the United States Bankruptcy Code or
any amendment or successor thereto (collectively the "Bankruptcy Code"), a
trustee in bankruptcy of the Company or the Company, as bankruptcy debtor,
assumes this Agreement and thereafter proposes to assign this Agreement by an
assignment which fulfills the applicable requirements of the Bankruptcy Code,
the trustee or the Company shall notify Maxwell and Jones 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 to have this Agreement assigned to Maxwell or to its designee
for the consideration (or its reasonable equivalent in money) and under the
other material terms in the notice. Maxwell may exercise the option and accept
the offer by giving the trustee or the Company, as appropriate, written notice
of exercise and acceptance within twenty (20) days after Maxwell receives the
notice from the trustee or the Company. If Maxwell fails to give notice and
exercise the option within such twenty (20) day period, such failure shall be
considered an offer to Jones to have this Agreement assigned to Jones or to its
designee for the consideration (or its reasonable equivalent in money) and under
the other material terms in the trustee's notice. Jones may exercise the option
and accept the offer by giving the trustee or the Company, as appropriate,
written notice of exercise and acceptance within twenty (20) days after Maxwell
fails to exercise its option. If Jones fails to give notice and exercise the
option within such twenty (20) day period, the trustee or the Company may
complete the proposed assignment, but only to the party and for the
consideration and under the terms described in the notice.
8.4 Termination Inventory. (a) Within fifteen (15) days after the
---------------------
expiration or termination of this Agreement, the Company shall prepare and
deliver to Maxwell a written inventory, including a complete and accurate
schedule (the "Termination Inventory Schedule") as of the date of expiration or
termination, of all Jones Products on hand or subject to non-cancelable orders
and all Signage and Packaging materials, advertising and promotional materials
and other documents or items that bear the Jones New York Trademarks in any form
in the Company's possession or control or in the process of manufacture for the
Company (the "Termination Inventory"). Maxwell shall have the option to purchase
all or any portion of the items in the Termination Inventory consisting of Jones
Products for a purchase price as the Company (with the consent of the Required
Members) and Maxwell shall negotiate in good faith and to purchase those items
in the Termination Inventory consisting of Signage and Packaging materials set
forth in such notice for a purchase price equal to such price as the Company
(with the consent of the Required Members) and Maxwell shall negotiate in good
faith. If Maxwell elects to exercise such option, then the Company shall deliver
to Maxwell the items in the Termination Inventory to be purchased, within five
(5) days after receipt of Maxwell's notice exercising its option to purchase,
or, if later, within five (5) days after the Company (with the consent of the
Required Members) and Maxwell have agreed upon a purchase price, and Maxwell
11
<PAGE>
shall pay the purchase price in cash within thirty (30) days after receipt of
all items of the Termination Inventory purchased.
(b) If Maxwell does not exercise its option under Paragraph 8.4(a) to
purchase the Termination Inventory within ten (10) days after receipt of the
Termination Inventory Schedule or exercises its option as to a portion of the
Termination Inventory, or if the Company (with the consent of the Required
Members) and Maxwell are unable to agree upon a purchase price for the items in
Termination Inventory to be purchased within fifteen (15) days after the
Company's receipt of Maxwell's notice, then, for a period of twelve (12) months
thereafter (or such shorter period as the Company and Maxwell may agree) (such
12 month or shorter period being referred to as the "Orderly Liquidation
Period"), the Company may sell Jones Products in the Termination Inventory, on a
non-exclusive basis, in accordance with all the terms of this Agreement.
Royalties for such sales shall be paid and accounted for by the Company within
thirty (30) days after the end of the Orderly Liquidation Period. In such
event, the Company and Maxwell agree that Maxwell shall supervise and manage the
disposition of the Termination Inventory irrespective of whether Maxwell is the
managing member of the Company at such time.
(c) If any Termination Inventory remains unsold after the expiration of the
Orderly Liquidation Period, Maxwell shall have the right and the obligation to
purchase such remaining Termination Inventory at a price equal to sixty (60%)
percent of the capitalized cost of such Termination Inventory to the Company,
determined in accordance with generally accepted accounting principles. The
Company shall deliver to Maxwell the remaining items in Termination Inventory to
be purchased within five (5) days after the end of the Orderly Liquidation
Period and Maxwell shall pay the purchase price therefor in cash within thirty
(30) days after receipt of all items of the Termination Inventory.
(d) The Company shall cause any of its lenders that have a security
interest in or other lien or encumbrance upon any Jones Products, to secure
obligations owing by the Company to such lender, to agree that it will not
foreclose upon its security interest in such Jones Products, and thereby take
ownership thereof or cause such Jones Products to be sold in connection
therewith, so long as Termination Inventory is being disposed of in accordance
with this Paragraph 8.4 and until and unless Maxwell fails to comply with its
obligations set forth in Paragraph 8.4(b) and (c).
8.5 Reservation of Rights. Notwithstanding any termination of this
---------------------
Agreement, each party 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 either
party in any manner from enforcing any other rights or remedies.
8.6 Consent by Licensor. Jones, by its consent hereto, agrees that
-------------------
Maxwell and the Company shall have the right to dispose of the Termination
Inventory in the manner provided in this Article VIII notwithstanding any
termination of the Jones New York Trademark License in accordance with the terms
thereof at any time prior to the purchase of Termination Inventory by Maxwell
pursuant to Paragraph 8.5(c).
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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
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 (i)
disclosure to the parties' attorneys, accountants and other advisors in a
confidential relationship with such party, (ii) disclosures required by law or
judicial process or in response to any summons or subpoena or in connection with
any litigation or (iii) 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 New York, New York 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 State of New York
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 Jones New York Trademarks 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 may assign this Agreement to a wholly-owned subsidiary
of Maxwell that is the successor to the Jones New York Trademark License, if the
successor assumes all of Maxwell's responsibilities, obligations and liabilities
hereunder.
9.3.2 This Agreement is personal to the Company, and the Company may
not, without the prior written consent of Maxwell, assign, sublicense or
otherwise transfer all or any portion of this Agreement or any rights or
obligations hereunder, whether voluntarily,
13
<PAGE>
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, the Company may assign this Agreement and the
rights hereunder to another entity provided that such entity is controlled by
the same parties which controlled the Company before such assignment and
provided that the Company and its successor/assignee remain liable for all of
its obligations under this Agreement.
9.4 Applicable Law. New York law shall govern the validity, construction,
--------------
interpretation and effect of this Agreement.
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,
neither party shall have authority to bind or obligate or to incur any
indebtedness for the other, 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 relating to the subject matter hereof, 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:
14
<PAGE>
If to Maxwell: Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
or, if by mail,
P.O. Box 37
Readville, Massachusetts 02137-0037
Attn: James J. Tinagero
Fax: (617) 364-9058
with a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attn: Jonathan K. Layne, Esq.
Fax: (213) 229-7520
If to the Company: SLJ Retail LLC
400 Technology Court, Suite F
Smyrna, Georgia 30082
Attn: President
Fax: (770) 801-0075
with copies to: GE Capital Equity Capital Group, Inc.
260 Long Ridge Road
Stamford, Connecticut 06927
Attn: William R. Kraus
Fax: (203) 357-3945
and
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attn: Counsel -- Equity Capital Group
Fax: (203) 357-3047
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: John Hays Mershon, Esq.
Fax: (404) 572-5149
If to Jones: Jones Investment Co., Inc.
P.O. Box 2105
Wilmington, Delaware 19899
15
<PAGE>
Attn: Norman J. Shuman
Fax: (302) 658-0468
with a copy to: Jones Apparel Group, Inc.
1411 Broadway
New York, New York 10018
Attn: Herbert J. Goodfriend, Esq.
Fax: (212) 921-5370
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 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. Such execution may be evidenced by
the execution and delivery of signature pages by either party by facsimile
transmission to the other, provided that the original executed signature pages
are contemporaneously delivered by such party to a reputable overnight courier
service for delivery to the other party.
9.13 Third Party Beneficiaries. This Agreement is made solely and
-------------------------
specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns (subject to the
express provisions hereof relating to successors and assigns). Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
16
<PAGE>
IN WITNESS WHEREOF, the parties, each by their duly authorized
representative, have executed this Trademark Sublicense Agreement as of the date
first above written.
MAXWELL SHOE COMPANY INC.
By: /s/ Maxwell V. Blum
--------------------------------
Maxwell V. Blum
Chairman of the Board and
Chief Executive Officer
SLJ RETAIL LLC
By: MAXWELL RETAIL INC., its Manager
By: /s/ James J. Tinagero
---------------------------
Name: James J. Tinagero
Title: Chairman
Jones Investment Co., Inc. hereby consents to the execution by Maxwell of this
Trademark Sublicense Agreement and agrees to each of the terms hereof.
JONES INVESTMENT CO., INC.
By: /s/ Norman J. Shuman
--------------------------
Name: Norman J. Shuman
Title: Vice President
17
