<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 8, 1999
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MAXWELL SHOE COMPANY INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-24026 04-2599205
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
</TABLE>
<TABLE>
<S> <C>
101 Sprague Street
P.O. Box 37 02137
Readville (Boston), MA (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (617) 364-5090
None
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On June 10, 1999, Maxwell Shoe Company Inc. (the "Company") entered into an
arm's length agreement (the "Agreement") with Jones Apparel Group, Inc. and
Jones Investment Co., Inc. (collectively, "Jones") pursuant to which the Company
is selling to Jones, for $25 million in cash payable at the closing (expected to
occur in early July 1999), the Company's rights as licensee to manufacture and
sell apparel bearing Jones' trademarks. A copy of the Agreement is attached
hereto as Exhibit 10.1.
Item 5. Other Events.
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On April 8, 1999, the Company entered into an agreement to amend its
Employment Agreement with Mark J. Cocozza. A copy of such agreement is attached
hereto as Exhibit 99.1.
On April 8, 1999, the Company entered into an agreement to amend its
Employment Agreement with James J. Tinagero. A copy of such agreement is
attached hereto as Exhibit 99.2.
On April 8, 1999, the Company entered into a Change of Control Severance
Agreement with Richard J. Bakos. A copy of such agreement is attached hereto as
Exhibit 99.3.
Item 7. Other Events.
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Pursuant to General Instruction F of Form 8-K, the following documents are
incorporated by reference herein and attached as exhibits hereto (except as
otherwise indicated):
Exhibits:
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10.1 Agreement, dated as of June 10, 1999 by and among the Company, Jones
Apparel Group, Inc. and Jones Investment Co., Inc.
99.1 Agreement to amend Employment Agreement dated as of April 8, 1999
between the Company and Mark J. Cocozza.
99.2 Agreement to amend Employment Agreement dated as of April 8, 1999
between the Company and James J. Tinagero.
99.3 Change of Control Severance Agreement dated as of April 8, 1999
between the Company and Richard J. Bakos.
1
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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.
Date: June 14, 1999 MAXWELL SHOE COMPANY INC.
By: /s/ Richard J. Bakos
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Richard J. Bakos
Vice President and
Chief Financial Officer
2
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EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Agreement, dated as of June 10, 1999 by and among the Company, Jones
Apparel Group, Inc. and Jones Investment Co., Inc.
99.1 Agreement to amend Employment Agreement dated as of April 8, 1999
between the Company and Mark J. Cocozza.
99.2 Agreement to amend Employment Agreement dated as of April 8, 1999
between the Company and James J. Tinagero.
99.3 Change of Control Severance Agreement dated as of April 8, 1999
between the Company and Richard J. Bakos.
</TABLE>
<PAGE>
EXHIBIT 10.1
CONFORMED COPY
AGREEMENT dated as of June 10, 1999 (this "Agreement"), by
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and between JONES INVESTMENT CO., INC., a Delaware corporation
(the "Company"), JONES APPAREL GROUP, INC., a Pennsylvania
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corporation ("JNY"), and MAXWELL SHOE COMPANY INC., a Delaware
corporation
("Maxwell").
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WHEREAS, pursuant to the License Agreement dated as of July 1, 1993,
as amended by the First Amendment to License Agreement dated as of October 2,
1995, the Second Amendment to License Agreement dated as of April 14, 1997, the
Third Amendment to License Agreement dated as of March 16, 1998, and a letter
dated February 22, 1999, from the Company to Maxwell (the "License Agreement"),
-----------------
the Company granted a license to Maxwell to use the Marks (such term and each
other capitalized term used but not defined herein having the meaning given to
it in the License Agreement) in connection with, among other things, the
manufacture, sale and distribution of women's footwear; and
WHEREAS, on the terms and subject to the conditions set forth herein,
Maxwell desires to sell and assign to the Company, and the Company desires to
purchase and assume from Maxwell, certain of the assets of Maxwell (including
all its rights, title and interest under the License Agreement, except as
provided in this Agreement) used in connection with the manufacture,
advertising, merchandising, promotion, sale and distribution of Jones
Merchandise (the "Business").
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Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
Purchase and Sale of Acquired Assets
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SECTION 1.1. Purchase and Sale. On the terms and subject to the
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conditions of this Agreement, at the Closing (as defined in Section 2.1),
Maxwell shall sell, assign, transfer, convey and deliver to the Company, and the
Company shall purchase and assume from Maxwell, all the rights, title and
interest as of the Closing of Maxwell in the Acquired Assets (as defined in
Section 1.2(a)), for an aggregate purchase price of $25,000,000 (the "Purchase
--------
Price"), payable as set forth in Section 2.2. The purchase
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and sale of the Acquired Assets is referred to in this Agreement as the
"Acquisition".
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SECTION 1.2. Acquired Assets and Excluded Assets. (a) The term
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"Acquired Assets" means all the rights, title and interest of Maxwell or any of
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its subsidiaries of whatever kind and nature, tangible or intangible, on the
Closing Date (as defined in Section 2.1) in the following assets, other than the
Excluded Assets (as defined in Section 1.2(b)):
(i) the License Agreement;
(ii) all copyrights, copyright registrations, sketches, samples,
designs and all rights to any of the foregoing, of Maxwell or any of its
subsidiaries that are used, or have been used, primarily in connection with
the Business;
(iii) all Packaging materials bearing the Marks in any form or that are
used, held for use or intended to be used primarily in connection with the
Business;
(iv) all guarantees, warranties, indemnities and similar rights in
favor of Maxwell or any of its subsidiaries in respect of any Acquired
Asset or any asset referred to in Section 1.3 of this Agreement; and
(v) all customer and supplier lists and customer and supplier
correspondence since January 1, 1999 which in in any way amends or modifies
the terms of any Purchase Order or Sales Order (each as defined in Section
1.3(a)(i)) of Maxwell or any of its subsidiaries that are used, held for
use or intended to be used primarily in, or that arise primarily out of,
the conduct or operation of the Business.
(b) The term "Excluded Assets" means:
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(i) all rights of Maxwell or any of its subsidiaries under this
Agreement, the other agreements and instruments executed and delivered in
connection with this Agreement (the "Ancillary Agreements") and the License
--------------------
Agreement (to the extent such rights under the License Agreement are
retained pursuant to the terms of this Agreement or the License Agreement);
(ii) all records prepared solely for the purpose of the Acquisition;
(iii) all books of account, ledgers, general, financial and accounting
records and files, billing records, sales advertising and promotional
literature,
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3
manuals (in all cases, in any form or medium), of Maxwell or any of its
subsidiaries; and
(iv) all other assets of Maxwell or any of its subsidiaries.
SECTION 1.3. Other Transactions. (a) On the terms and subject to
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the conditions of this Agreement, at the Closing, Maxwell shall sell, assign,
transfer, convey and deliver to the Company, and the Company shall purchase and
assume from Maxwell, all the rights, title and interest of Maxwell of whatever
kind and nature, tangible or intangible, on the Closing Date in the following
assets:
(i) all purchase orders ("Purchase Orders") submitted by Maxwell or
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any of its subsidiaries for raw materials, supplies and other items
intended to be used in connection with the Business which have not been
delivered to Maxwell's Warehouse in Brockton, Massachusetts (the
"Warehouse"), prior to the Closing Date, and all sales orders ("Sales
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Orders" and, together with Purchase Orders, the "Acquired Orders")
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submitted to Maxwell or any of its subsidiaries with respect to the
Business, which sales orders have not been fulfilled and shipped from the
Warehouse prior to the Closing Date; and
(ii) (A) 56,242 pairs of shoes identified on Schedule A hereto and (B)
all raw materials, work-in-progress, finished goods, supplies and other
inventories (the items set forth in clauses (A) and (B) of this Section
1.3(a)(ii) are referred to herein collectively as the "Acquired Inventory")
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of Maxwell or any of its subsidiaries that: (1) are used, held for use or
intended to be used in connection with the Business; (2) were delivered to
the Warehouse on or after the date hereof and prior to the Closing Date;
and (3) are held in the Warehouse on the Closing Date.
(b) On the date hereof, Maxwell shall have delivered to the Company
true and complete copies of:
(i) all Purchase Orders submitted to Maxwell or any of its
subsidiaries as of the date that is two business days prior to the date
hereof (information on all such Purchase Orders are attached hereto, in a
form satisfactory to the Company, as Schedule B);
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4
(ii) all Sales Orders submitted by Maxwell or any of its subsidiaries
as of the date that is two business days prior to the date hereof (copies
of all such Sales Orders are attached hereto, in a form satisfactory to the
Company, as Schedule C); and
(iii) all contracts, agreements or other arrangements as of the date
hereof (or, if any such contract, agreement or arrangement is not in
writing, a true and complete summary thereof) (collectively, "Specified
---------
Customer Contracts") between Maxwell or any of its subsidiaries and each
------------------
customer of the Business relating to the granting by Maxwell of product
return credits or mark-down allowances in any form with respect to all
Jones Merchandise (copies or summaries, as applicable, of all such
Specified Customer Contracts are attached hereto, in a form satisfactory to
the Company, as Schedule D).
(c)(i) The consideration to be paid by the Company to Maxwell for any
item of Acquired Inventory shall be an amount (the "Standard Cost") equal to the
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amount paid by Maxwell to the person that originally manufactured such item,
together with all applicable import duties, agent's commissions, sample expense
and freight charges incurred by Maxwell with respect to the transportation and
delivery of such item to the Warehouse. The aggregate amount of consideration
to be paid by the Company to Maxwell with respect to the Acquired Inventory
shall be referred to as the "Inventory Amount".
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(ii) On the date that is two business days prior to the Closing Date,
Maxwell shall give written notice to the Company, specifically identifying the
items constituting the Acquired Inventory and the Standard Cost of each such
item.
(d) Within two business days after the Closing Date, the Company
shall, at its cost and expense, load and transport the Acquired Inventory from
the Warehouse.
SECTION 1.4. Assumed Liabilities. (a) On the terms and subject to
--------------------
the conditions of this Agreement, the Company shall assume, effective as of the
Closing, and from and after the Closing the Company shall pay, perform and
discharge when due, all liabilities, obligations and commitments of Maxwell and
its subsidiaries under the Acquired Orders, including all commissions to sales
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5
representatives who are not employed by Maxwell or any of its subsidiaries, and
all commissions and overrides to employees of Maxwell or any of its subsidiaries
who are hired by the Company or any of its affiliates within one year after the
Closing Date, in each case solely with respect to reconfirmed and shipped Sales
Orders and payable pursuant to the terms of any agreement between Maxwell or any
of its subsidiaries and each such representative or employee (true and complete
copies of all such agreements are attached hereto as Schedule E) and all
commissions to agents with respect to all Purchase Orders (collectively, the
"Assumed Liabilities"). The term "Assumed Liabilities" shall also include the
- --------------------
liabilities, obligations and commitments of the Company set forth in the
following four sentences. With respect to each Purchase Order, the Company
either will, with the consent of the supplier thereunder: (a) cause the items
covered by the Purchase Order to be shipped to the Company, at the Company's
sole cost and expense, and substitute a letter of credit against the Company's
account in place of the existing letter of credit against Maxwell's account
(which Maxwell letter of credit will be immediately canceled and returned to
Maxwell), or (b) permit the items covered by the Purchase Order to be shipped to
the Warehouse and make payment to Maxwell in accordance with the following
sentence. Upon receipt at the Warehouse of items covered by a Purchase Order,
Maxwell promptly shall segregate such items and give written notice to the
Company of the arrival of such items, which notice will identify such items and
state Maxwell's Standard Cost for such items. Not later than five business days
after the giving of such notice, the Company shall pay to Maxwell, in
immediately available funds, an amount equal to Maxwell's aggregate Standard
Cost for such items, and, against such payment, the Company shall forthwith be
permitted to load and transport, at its sole cost and expense, such items from
the Warehouse. From and after the date of the giving of such notice, any loss
or damage to such items from fire, casualty or any other occurrence shall be the
sole responsibility of the Company, whether or not such items have been loaded
or transported from the Warehouse.
(b) Notwithstanding any other provision of this Agreement or any
Ancillary Agreement, the Company shall not assume any liability, obligation or
commitment of Maxwell (including the Specified Customer Contracts) not described
in Section 1.4(a), all of which shall be retained and to the extent arising out
of the Business, shall be paid, performed and discharged when due by Maxwell
unless a good faith
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6
dispute exists with respect to such liability, obligation or commitment
(collectively, the "Excluded Liabilities").
--------------------
SECTION 1.5. No Liens. The Company shall acquire all rights, title
---------
and interest in the Acquired Assets, the Acquired Orders and the Acquired
Inventory free and clear of all liabilities, obligations and commitments of
Maxwell and its subsidiaries, other than (in the case of Acquired Orders and
Acquired Inventory) the Assumed Liabilities, and free and clear of all Liens (as
defined in Section 3.4).
SECTION 1.6. Effect of Purchase and Sale. (a) On the terms and
----------------------------
subject to the conditions of this Agreement, the Company and Maxwell hereby
agree that, effective as of the Closing, (i) subject to Section 1.6(b), the
License Agreement shall terminate and be of no further effect, (ii) each party
hereto shall release and discharge the other party from any and all obligations,
covenants and agreements arising out of, under or pursuant to, the License
Agreement, (iii) subject to Sections 1.4(a), 1.6(b) and 5.6, Maxwell shall cease
to have any right, title or interest that it may have, or to which it may be
entitled, in, to or under the License Agreement, the Acquired Assets or the
assets referred to in Section 1.3 and (iv) subject to Section 1.6(b), the
Company shall cease to have any right, title or interest that it may have, or to
which it may be entitled, in, to or under the License Agreement.
(b) Notwithstanding the provisions of Section 1.6(a) or any other
provision of this Agreement, the provisions of the following sections of the
License Agreement shall remain in full force and effect following the Closing
and the Company and Maxwell shall remain subject to their respective obligations
set forth therein: (i) Sections 3.1 and 3.3 (without reference to Section 3.2)
with respect to the obligation of Maxwell to pay to the Company Royalties (A) in
an aggregate amount (the "Initial Royalties Amount") equal to five percent of
------------------------
Net Sales of all Jones Merchandise for the period commencing on January 1, 1999,
and ending on June 30, 1999, and (B) in an aggregate amount (the "Subsequent
----------
Royalties Amount") equal to five percent of Net Sales of all Jones Merchandise
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for the period commencing on July 1, 1999, and ending on the Closing Date (it
being understood and agreed that Maxwell shall have no obligation to pay to the
Company any Royalties on Net Sales of Jones Merchandise sold by Maxwell or any
of its subsidiaries after the Closing Date); (ii) Section 4.6, with respect to
the obligation of Maxwell to pay to the Company
<PAGE>
7
an amount equal to two percent of the amount (the "Advertising Amount") of the
------------------
aggregate Net Sales for the period commencing on January 1, 1999, and ending on
the last day of the month ending immediately before the Closing Date; provided,
--------
however, that Maxwell shall not have any obligation under the License Agreement
- -------
to make the payments described in Section 4.6 thereof to the Company for the
Annual Period ended December 31, 1998; and (iii) Sections 7.2, 7.3.1 and 9.1.
ARTICLE II
The Closing
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SECTION 2.1. Closing Date. The closing of the Acquisition and the
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other transactions described in Section 1.3 (the "Closing") shall take place at
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the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York
10019, at 10:00 a.m. on a business day to be reasonably agreed upon between the
parties hereto, which shall not be more than 10 days following the satisfaction
(or, to the extent permitted, the waiver) of the conditions set forth in Section
6.1, or, if on such day any condition set forth in Section 6.2 or 6.3 has not
been satisfied (or, to the extent permitted, waived by the party entitled to the
benefit thereof), on the second business day after all the conditions set forth
in Article VI have been satisfied (or, to the extent permitted, waived by the
parties entitled to the benefits thereof). The date on which the Closing occurs
is referred to in this Agreement as the "Closing Date". The Closing shall be
------------
deemed to be effective at 12:01 a.m., New York City time, on the Closing Date.
SECTION 2.2. Transactions To Be Effected at the Closing. At the
-------------------------------------------
Closing:
(a) Maxwell shall deliver to the Company (i) payment, by wire transfer
to a bank designated in writing by the Company (such designation to be made at
least two business days prior to the Closing Date), of immediately available
funds in an amount equal to the sum of the Advertising Amount and the Initial
Royalties Amount, (ii) such appropriately executed assignments and other
instruments of transfer relating to the Acquired Assets and the Acquired Orders
and the Acquired Inventory to be assumed by the Company on the Closing Date
pursuant to Section 1.3(a), in each case in form and substance
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8
reasonably satisfactory to the Company and its counsel and (iii) such other
documents as the Company or its counsel may reasonably request to demonstrate
satisfaction of the conditions and compliance with the covenants set forth in
this Agreement; and
(b) the Company shall deliver to Maxwell (i) payment, by wire transfer
to a bank account designated in writing by Maxwell (such designation to be made
at least two business days prior to the Closing Date), of immediately available
funds in an amount equal to the sum of the Purchase Price and the Inventory
Amount and (ii) such documents as Maxwell or its counsel may reasonably request
to demonstrate satisfaction of the conditions and compliance with the covenants
set forth in this Agreement.
SECTION 2.3. Subsequent Royalties Amount. On August 13, 1999, Maxwell
----------------------------
shall deliver to the Company payment, by wire transfer to a bank designated in
writing by the Company (such designation to be made by at least August 11,
1999), of immediately available funds in an amount equal to the Subsequent
Royalties Amount.
SECTION 2.4. Risk of Loss. Until the Closing, any loss of or damage
-------------
to the Acquired Assets from fire, casualty or any other occurrence as and to the
extent not covered by insurance payable to the Company shall be the sole
responsibility of Maxwell. From and after the Closing, any such loss or damage
shall be the sole responsibility of the Company, whether or not the Acquired
Assets have been loaded or transported from the Warehouse pursuant to Section
1.3(d).
ARTICLE III
Representations and Warranties of Maxwell.
------------------------------------------
Maxwell hereby represents and warrants to the Company, with respect to
Sections 3.1, 3.2, 3.3, 3.4, 3,5(b), 3.5(c), 3.6, 3.7, 3.8 and 3.9, as of the
date of this Agreement, and, with respect to Sections 3.1, 3.2, 3.3, 3.4,
3.5(a), 3.5(c), 3.8 (with respect to representations and warranties made as of
the Closing Date) and 3.9, as of the Closing Date, as follows:
SECTION 3.1. Organization, Standing and Power. Each of Maxwell and
---------------------------------
its subsidiaries is duly organized,
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9
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has full corporate power and authority and possesses
all material permits, authorizations and approvals necessary to enable it to
conduct the Business.
SECTION 3.2. Authority; Execution and Delivery; Enforceability.
--------------------------------------------------
Maxwell has full power and authority to execute this Agreement and the Ancillary
Agreements to which it is, or is specified to be, a party and to consummate the
Acquisition and the other transactions contemplated hereby and thereby. The
execution and delivery by Maxwell of this Agreement and the Ancillary Agreements
to which it is, or is specified to be, a party and the consummation by Maxwell
of the Acquisition and the other transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action. Maxwell has duly
executed and delivered this Agreement and prior to the Closing Maxwell will have
duly executed and delivered each Ancillary Agreement to which it is, or is
specified to be, a party, and this Agreement constitutes, and each Ancillary
Agreement to which it is, or is specified to be, a party will after the Closing
constitute, its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3.3. No Conflicts; Consents. The execution and delivery by
-----------------------
Maxwell of this Agreement do not, the execution and delivery by Maxwell of each
Ancillary Agreement to which it is, or is specified to be, a party will not, and
the consummation of the Acquisition and the other transactions contemplated
hereby and thereby and compliance by Maxwell with the terms hereof and thereof,
as applicable, will not conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancelation or acceleration of any material obligation or
to loss of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of Maxwell or any of its
subsidiaries under, any provision of (a) the certificate of incorporation or by-
laws of Maxwell or any of its subsidiaries, (b) any material contract (other
than any Sales Order) to which Maxwell or any of its subsidiaries is a party or
by which any of their respective properties or assets is bound or (c) any
judgment, order or decree ("Judgment") or statute, law, ordinance, rule or
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regulation
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10
("Applicable Law") applicable to Maxwell or any of its subsidiaries
--------------
or their respective properties or assets. No material consent, approval,
license, permit, order or authorization ("Consent") of, or registration,
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declaration or filing with, any Federal, state, local or foreign government or
any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required to be obtained or made by or with respect to
-------------------
Maxwell or any of its subsidiaries in connection with the execution, delivery
and performance of this Agreement or any Ancillary Agreement or the consummation
of the Acquisition or the other transactions contemplated hereby and thereby,
other than (i) filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and (ii) such filings under the Securities
-------
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby.
SECTION 3.4. Acquired Assets. Maxwell has good and valid title to
----------------
all the Acquired Assets, the Acquired Inventory and the Acquired Orders (except
to the extent items of such Acquired Inventory and Acquired Orders become such
between the date hereof and the Closing Date, in which event the representation
and warranty contained in this Section 3.4 shall be true and correct with
respect to such items only as of the Closing Date), in each case free and clear
of all liens, security interests, charges, covenants, options, claims,
restrictions or encumbrances of any kind (collectively, "Liens").
-----
SECTION 3.5. Acquired Orders; Acquired Inventory; Specified Customer
-------------------------------------------------------
Contracts. (a) The Acquired Orders will represent all the purchase orders and
- ----------
sales orders to which Maxwell or any of its subsidiaries is a party with respect
to the Business on the Closing Date.
(b) Attached as Schedule B hereto are true and complete copies of all
Purchase Orders as of the date that is two business days prior to the date
hereof. Attached as Schedule C hereto are true and complete copies of all Sales
Orders as of the date that is two business days prior to the date hereof.
Attached as Schedule D hereto are true and complete copies of all Specified
Customer Contracts as of the date hereof.
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11
(c) Each item of Acquired Inventory (a) is free of any material
defect or deficiency and (b) is in good, usable and currently marketable
condition in the ordinary course of the Business (subject, in the case of raw
materials and work-in-process, to the completion of the production process).
SECTION 3.6. Absence of Changes or Events. (a) Since October 31,
-----------------------------
1998 through the date hereof, Maxwell has caused the Business to be conducted in
the ordinary course and in substantially the same manner as previously conducted
and has made all reasonable efforts consistent with past practices to preserve
the relationships of the Business with customers, suppliers and others with whom
the Business deals.
(b) Since October 31, 1998 through the date hereof, each of Maxwell
and its subsidiaries has continued all pricing, sales, receivables and payables
practices of the Business substantially in accordance with their past practices
and, with respect to the Business, has not engaged in (i) any trade loading
practices or any other promotional sales or discount activity with any customers
or distributors with the effect of accelerating to pre-Closing periods sales to
the trade or otherwise that would otherwise be expected (based on recent past
practice) to occur in post-Closing periods or (ii) any other promotional sales,
discount activity or inventory overstocking or understocking in a manner outside
the ordinary course of business or contrary to their past practices.
SECTION 3.7. Effect of Acquisition. To the actual knowledge of
----------------------
senior management of Maxwell or any of its subsidiaries, from March 2, 1999
through the date hereof, no customer of the Business has informed Maxwell or any
of its subsidiaries that it is discontinuing or phasing out any Jones
Merchandise because of the Acquisition or the consummation of any other
transaction contemplated hereby.
SECTION 3.8. Disclosure. The representations and warranties of
-----------
Maxwell or any of its subsidiaries contained in this Agreement and in the
Ancillary Agreements and the statements contained in the documents, certificates
and Schedules furnished or to be furnished by or on behalf of Maxwell or any of
its subsidiaries to the Company or any of its representatives pursuant to this
Agreement (including any document listed on Schedule F hereto that has been
provided by Maxwell to the Company), taken as a whole, do
<PAGE>
12
not contain and will not contain any untrue statement of a material fact, and do
not omit and will not omit to state any material fact necessary, in light of the
circumstances under which they were or will be made, in order to make the
statements herein or therein, taken as a whole, not materially misleading or
necessary in order to fully and fairly provide the material information required
to be provided in such documents, certificates or Schedules, taken as a whole.
SECTION 3.9. Conduct of The Business. The Business is being
------------------------
conducted and has been conducted solely by Maxwell and it is not being nor has
it been conducted through any subsidiaries or affiliates of Maxwell.
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to Maxwell, as of the date
of this Agreement and as of the Closing Date, as follows:
SECTION 4.1. Organization. The Company is duly organized, validly
-------------
existing and in good standing under the laws of the jurisdiction in which it is
organized.
SECTION 4.2. Authority; Execution and Delivery; and Enforceability.
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The Company has full power and authority to execute this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and to
consummate the Acquisition and the other transactions contemplated hereby and
thereby. The execution and delivery by the Company of this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and the
consummation by the Company of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. The Company has duly executed and delivered this Agreement
and prior to the Closing will have duly executed and delivered each Ancillary
Agreement to which it is, or is specified to be, a party, and this Agreement
constitutes, and each Ancillary Agreement to which it is, or is specified to be,
a party will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
<PAGE>
13
SECTION 4.3. No Conflicts; Consents. The execution and delivery by
-----------------------
the Company of this Agreement do not, the execution and delivery by the Company
of each Ancillary Agreement to which it is, or is specified to be, a party will
not, and the consummation of the Acquisition and the other transactions
contemplated hereby and thereby and compliance by the Company with the terms
hereof and thereof will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any material
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, any provision of (a) the certificate of incorporation or by-
laws of the Company or any of its subsidiaries, (b) any contract to which the
Company or any of its subsidiaries is a party or by which any of their
respective properties or assets is bound or (c) any Judgment or Applicable Law
applicable to the Company or any of its subsidiaries or their respective
properties or assets. No Consent of or registration, declaration or filing with
any Governmental Entity is required to be obtained or made by or with respect to
the Company or any of its subsidiaries in connection with the execution,
delivery and performance of this Agreement or any Ancillary Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby
and thereby, other than compliance with and filings under the HSR Act.
ARTICLE V
Covenants
---------
SECTION 5.1. Covenants of Maxwell Relating to Conduct of Business. (a)
-----------------------------------------------------
It is the understanding of the parties hereto that the public announcement of
this Agreement and the transactions contemplated hereby may have an adverse
effect on potential sales efforts with respect to Jones Merchandise and on
efforts to preserve the relationships of the Business with customers, suppliers,
distributors and others with whom the Business deals, between the date of such
announcement and the Closing Date. Accordingly, Maxwell's duties and
obligations to the Company with respect to the conduct of the Business between
the date hereof and the Closing Date shall be limited to the following:
<PAGE>
14
(i) Maxwell shall not, and shall instruct its employees not to, make
derogatory statements to customers, suppliers, distributors or others with
whom the Business deals, with respect to the quality, stylishness,
attractiveness or marketability of shoes bearing the Marks or with respect
to JNY, its affiliates or Nine West Group Inc.;
(ii) Maxwell shall use all reasonably efforts, in accordance with its
past practices, with respect to the maintenance and custody of the Acquired
Inventory, corporate documents and other items to be delivered to the
Company at the Closing;
(iii) Maxwell shall not, nor shall it permit any of its subsidiaries,
to enter into or execute any purchase orders for raw materials, supplies or
other items intended to be used in connection with the Business;
(iv) Maxwell shall inform any person who submits a sales order to
Maxwell or any of its subsidiaries for Jones Merchandise that such order
will be immediately forwarded to and fulfilled by the Company or its
affiliates, and Maxwell shall promptly forward such order to the Company or
to such affiliate of the Company as the Company shall designate by notice
to Maxwell; provided, however, that Maxwell shall have no obligation under
-------- -------
this Agreement to attempt to generate sales orders for Jones Merchandise,
and the failure of Maxwell to secure such sales orders between the date
hereof and the Closing Date shall not constitute or be evidence of a breach
of this Agreement by Maxwell; and
(v) Maxwell shall perform its other duties and obligations under this
Section 5.1.
(b) From the date of this Agreement to the Closing, Maxwell shall
not, nor shall it permit any of its subsidiaries to, take any action that would,
or that could reasonably be expected to, result in any of the conditions to the
purchase, sale, assumption or assignment of the Acquired Assets, the Acquired
Inventory and the Acquired Orders set forth in Article VI not being satisfied.
(c) From the date of this Agreement to the Closing, with respect to
the Business Maxwell shall not, nor shall it permit any of its subsidiaries to,
engage in (i) any trade loading practices or any other promotional
<PAGE>
15
sales or discount activity with any customers or distributors with the effect of
accelerating to pre-Closing periods sales to the trade or otherwise that would
otherwise be expected (based on recent past practice) to occur in post-Closing
periods or (ii) any other promotional sales or discount activity in a manner
outside the ordinary course of business or contrary to generally accepted
industry practices.
(d) From the date of this Agreement until the Closing, Maxwell shall,
and shall cause its subsidiaries to, (i) make its employees reasonably available
to the Company and its affiliates and use reasonable efforts to cause its
employees to reasonably cooperate with and to reasonably assist the Company and
its affiliates in connection with any sales or marketing efforts relating to the
Business during such period and (ii) at the Company's expense, take any other
action reasonably requested by the Company or any of its affiliates with a view
towards creating an orderly transfer of the Acquired Assets, the Acquired Orders
and the Acquired Inventory from Maxwell and its subsidiaries to the Company.
(e) From the date of this Agreement to the Closing, Maxwell shall
promptly advise the Company in writing of the occurrence of any matter or event
that is material to the Business of which Maxwell has actual knowledge.
SECTION 5.2. Confidentiality. Each of the parties hereto
----------------
acknowledges that the information provided or to be provided to it in connection
with the transactions contemplated by this Agreement is subject to the terms of
confidentiality agreements dated March 2, 1999, and May 7, 1999, between the
Company and Maxwell, the terms of which are incorporated herein by reference.
SECTION 5.3. Reasonable Best Efforts. On the terms and subject to
------------------------
the conditions of this Agreement, each of the parties hereto shall use its
reasonable best efforts to cause the Closing to occur, including using its
reasonable best efforts to obtain all material consents, permits, authorizations
and approvals of, and to make all necessary filings, notifications or
registrations with, all Governmental Entities which are necessary for the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, each of the parties hereto shall use
its
<PAGE>
16
reasonable best efforts to cause the Closing to occur on or prior to July 9,
1999.
SECTION 5.4. Antitrust Matters. Without limiting the generality of
------------------
Section 5.3, each of the parties hereto shall (a) as promptly as practicable,
but in no event later than June 14, 1999, make any filing required under the HSR
Act with respect to the transactions contemplated by this Agreement, (b) as
promptly as practicable, make or cause their affiliates to make any filing or
notice required under any other antitrust or competition law or regulation
applicable to this Agreement or the transactions contemplated hereby and (c)
promptly provide any supplemental information requested in connection with the
HSR Act or such other antitrust or competition laws or regulations as promptly
as practicable after such request is made. Each of the parties hereto shall,
and shall cause their affiliates to, furnish to the other such information and
assistance as the other may reasonably request in connection with its
preparation of any filing or submission which is necessary under the HSR Act or
such other antitrust or competition laws or regulations or which is otherwise
requested by any Governmental Entity in the course of any review of the
transactions contemplated by this Agreement. Each of the parties hereto shall
keep each other apprised of the status of any communications with, and inquiries
or requests for additional information from, any Governmental Entity. Without
limiting the generality of Section 5.3, each of the parties hereto shall use its
reasonable best efforts to obtain any clearance or approvals required under the
HSR Act or such other antitrust or competition laws or regulations for the
consummation of the transactions contemplated by this Agreement.
SECTION 5.5. Publicity. No public release or announcement concerning
----------
the Acquisition and the other transactions contemplated hereby shall be issued
by either party hereto or any of its affiliates or any other representative
without the prior consent of the other party, other than such release or
announcement which may be required by law or the rules or regulations of any
United States securities exchange, in which case the party required to make the
release or announcement shall allow the other party reasonable time to comment
on such release or announcement in advance of such issuance.
<PAGE>
17
SECTION 5.6. Maxwell Sale Period; Company Option to Purchase
-----------------------------------------------
Inventory. (a) Within 180 days following the Closing Date (the "Sale Period"),
- ---------- -----------
Maxwell and its subsidiaries may sell any Inventory that was not acquired by the
Company on the Closing Date only to retail stores that are described in the
footwear and apparel business as "off-price retailers"; provided, however, that
-------- -------
neither Maxwell nor any of its subsidiaries shall sell any such Inventory to
better department stores (including any department store listed on Schedule G
hereto). Following the Sale Period, neither Maxwell nor any of its subsidiaries
shall sell any Inventory to any person.
(b) The Company may purchase from Maxwell or any of its subsidiaries
from time to time after the date hereof any complete styles (all colors and all
pairs) of Inventory at a price equal to the Standard Cost of any such Inventory
that is not sold by Maxwell or any of its subsidiaries to any person other than
the Company pursuant to Section 5.6(a).
SECTION 5.7. No Solicitation. (a) For a period ending two years
----------------
after the Closing Date, Maxwell shall not, and shall not permit any of its
subsidiaries to, directly or indirectly, recruit, hire or otherwise seek to
induce any employee of the Company or any of its subsidiaries to terminate such
employee's employment or to violate any agreement with the business of the
Company and its subsidiaries.
(b) Prior to the issuance of a press release by each of the Company
and Maxwell in connection with this Agreement, the Company shall not, and shall
not permit any of its subsidiaries to, directly or indirectly, recruit, hire or
otherwise seek to induce any employee of Maxwell's Jones Division to terminate
such employee's employment or to violate any agreement with the business of
Maxwell's Jones Division. After the issuance of a press release by each of the
Company and Maxwell in connection with this Agreement, the Company may hire any
employee of Maxwell's Jones Division; provided that such employment shall not
--------
commence until the Closing Date.
SECTION 5.8. Spring 2000 Collection. On or after the Closing Date,
-----------------------
Maxwell shall deliver to the Company all Spring 2000 samples of Jones
Merchandise owned or held by Maxwell or any of its subsidiaries, at no expense
or cost to the Company.
<PAGE>
18
SECTION 5.9. License Agreement. Except as provided in Section 1.4(a)
------------------
or 5.6, Maxwell agrees that, effective as of the Closing, it shall (a)
discontinue all use of the Marks, and agrees that it shall no longer have any
right to use the Marks or any variation or simulation thereof in any manner or
for any purposes whatsoever, and (b) comply in all respects with all covenants,
agreements and obligations that would be imposed upon Maxwell, or to which
Maxwell would be subject, under the License Agreement if the License Agreement
expired or had been terminated for any reason whichsoever.
SECTION 5.10. Acquired Orders; Specified Customer Contracts. (a)
----------------------------------------------
Within two business days prior to the Closing Date, Maxwell agrees to deliver to
the Company true and complete copies of:
(i) all Purchase Orders submitted by Maxwell or any of its
subsidiaries during the period commencing on the business day immediately
preceding the date hereof and ending on the date that is two business days
prior to the Closing Date;
(ii) all Sales Orders submitted to Maxwell or any of its subsidiaries
during the period commencing on the business day immediately preceding the
date hereof and ending on the date that is two business days prior to the
Closing Date; and
(iii) all Specified Customer Contracts entered into by Maxwell or any
of its subsidiaries during the period commencing on the date hereof and
ending on the date that is two business days prior to the Closing Date.
(b) From and after the date hereof, Maxwell shall, and shall cause its
subsidiaries to, comply in all respects with all the terms, provisions,
agreements, covenants and obligations under each Specified Customer Contract.
SECTION 5.11. Further Assurances. From time to time after the
-------------------
Closing, and for no further consideration, each of the parties hereto shall, and
shall cause its subsidiaries to, execute, acknowledge and deliver such
assignments, transfers, consents and other documents and instruments and take
such other actions as may reasonably be requested to more effectively convey to,
transfer to or vest in the Company or its subsidiaries the Acquired Assets
<PAGE>
19
contemplated by this Agreement to be transferred on the Closing Date.
SECTION 5.12. Like-Kind Exchange. The Company shall take any action
-------------------
reasonably requested by Maxwell to cause the transfer of all or a portion of the
Acquired Assets (as determined by Maxwell) by Maxwell to the Company (or a
wholly owned subsidiary of the Company, if requested by Maxwell) to qualify for
nonrecognition treatment pursuant to Section 1031 of the Internal Revenue Code
of 1986, as amended, and the regulations thereunder (and corresponding
provisions of applicable state, local and foreign law); provided that Maxwell
--------
shall indemnify the Company (or any such subsidiary) and its officers,
directors, employees, agents and representatives against, and agrees to hold
them harmless from, any Loss, as incurred, for or on account of or arising from,
in connection with or otherwise with respect to, compliance by the Company with
this Section 5.12.
SECTION 5.13. Collection of Receivables. (a) From and after the
--------------------------
Closing, Maxwell or the Company may retain for its own account any payment
received by it that by its terms (typically, by identification of the invoice(s)
being paid) is expressly intended to be for its own account.
(b) From and after the Closing, with respect to any payment received
by Maxwell or the Company that by its terms is not expressly intended to be for
the account of the recipient thereof, such recipient shall request the relevant
account debtor to determine whether such payment is for the account of Maxwell
or the Company. If the account debtor determines that such payment is not for
the account of the recipient thereof, the recipient shall promptly pay over to
the other person the amount of such payment due to it.
(c) Each of Maxwell and the Company agrees to cooperate with each
other with respect to the foregoing provisions of this Section 5.13.
SECTION 5.14. Information. The Company agrees to provide Maxwell
------------
with information on a monthly basis which will enable Maxwell to calculate the
amount of any sales commission it may be required to pay with respect to any
Sales Orders.
<PAGE>
20
SECTION 5.15. Payment of Sales Commissions to Maxwell. With respect
----------------------------------------
to any sales commission otherwise due and payable directly to any third party
sales representative or any former employee of Maxwell or any of its
subsidiaries who has received an advance payment against such commission from
Maxwell or any of its subsidiaries at the time such sales commission is
scheduled to be paid to such representative or former employee, the Company
agrees, upon the advice of Maxwell, to pay all or a portion of such sales
commission to Maxwell up to the amount of such advance payment; provided that
--------
Maxwell shall indemnify the Company and its officers, directors, employees,
agents and representatives against, and agrees to hold them harmless from, any
Loss, as incurred, for or on account of or arising from, in connection with or
otherwise with respect to, compliance by the Company with this Section 5.15.
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.1. Conditions to Each Party's Obligation. The obligation
--------------------------------------
of each party hereto to consummate the transactions to occur on the Closing Date
is subject to the satisfaction or waiver on or prior to the Closing of the
following conditions:
(a) HSR Act. Any waiting period applicable to the consummation of
--------
the Acquisition under the HSR Act shall have expired or been terminated.
(b) Nine West Merger. The merger of Nine West Group Inc., a Delaware
-----------------
corporation, with and into Jill Acquisition Sub Inc., a Delaware corporation
that is a wholly owned subsidiary of JNY, shall have been consummated.
<PAGE>
21
SECTION 6.2. Conditions to Obligation of the Company. The obligation
----------------------------------------
of the Company to consummate the transactions to occur on the Closing Date is
subject to the satisfaction (or waiver by the Company) on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Maxwell made in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, as of the date hereof and as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). The Company shall have
received a certificate dated the Closing Date and signed by an authorized
officer of Maxwell confirming the foregoing.
(b) Performance of Obligations of Maxwell. Maxwell shall have
--------------------------------------
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Maxwell
by the time of the Closing. The Company shall have received a certificate dated
the Closing Date and signed by an authorized officer of Maxwell confirming the
foregoing.
(c) Consents. The Company shall have received all material written
---------
consents from all third parties necessary or appropriate to effect the
Acquisition (other than with respect to any Acquired Order).
(d) Other Documents. Maxwell shall have furnished to the Company
----------------
such other documents relating to this Agreement or the transactions contemplated
hereby as the Company or its counsel may reasonably request.
SECTION 6.3. Conditions to Obligation of Maxwell. The obligation of
------------------------------------
Maxwell to consummate the transactions to occur on the Closing Date is subject
to the satisfaction (or waiver by Maxwell) on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of the Company made in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be true
<PAGE>
22
and correct in all material respects, as of the date hereof and as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). Maxwell shall have received
a certificate dated the Closing Date and signed by an authorized officer of the
Company confirming the foregoing.
(b) Performance of Obligations of the Company. The Company shall
------------------------------------------
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by the
Company by the time of the Closing. Maxwell shall have received a certificate
dated the Closing Date and signed by an authorized officer of the Company
confirming the foregoing.
(c) Other Documents. The Company shall have furnished to Maxwell
----------------
such other documents relating to this Agreement or the transactions contemplated
hereby as Maxwell or its counsel may reasonably request.
SECTION 6.4. Frustration of Closing Conditions. Neither the Company
----------------------------------
nor Maxwell may rely on the failure of any condition set forth in this Article
VI to be satisfied if such failure was caused by such party's failure to act in
good faith or to use its reasonable best efforts to cause the Closing to occur,
as required by Section 5.3.
ARTICLE VII
Termination
-----------
SECTION 7.1. This Agreement may be terminated at any time prior to
the Closing by either the Company or Maxwell if the Closing shall not have been
consummated on or before July 31, 1999, unless the failure to consummate the
Closing prior to such date is the result of a material breach of this Agreement
by the party seeking to terminate this Agreement.
SECTION 7.2. Effect of Termination. In the event of a termination of
----------------------
this Agreement by either the Company or Maxwell as provided in Section 7.1, this
Agreement shall
<PAGE>
23
forthwith become void and there shall be no liability or obligation on the part
of the Company or Maxwell or their respective directors or officers, except with
respect to any breach of any representation, warranty, covenant or agreement
contained in this Agreement prior to such termination and except that Section
5.2 shall continue in effect.
ARTICLE VIII
Indemnification
---------------
SECTION 8.1. Indemnification by Maxwell. Maxwell shall indemnify the
---------------------------
Company and its affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives against, and hold them
harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) ("Losses"), as incurred (payable promptly
------
upon written request), arising from, in connection with or otherwise with
respect to:
(a) any breach of any representation or warranty of Maxwell contained
in this Agreement, in any Ancillary Agreement or in any document delivered
in connection herewith;
(b) any breach of any covenant of Maxwell contained in this Agreement
or in any Ancillary Agreement; and
(c) any Excluded Liability;
provided, however, that Maxwell shall have no obligation under this Section 8.1
- -------- -------
unless and until the aggregate amount of Losses so incurred exceeds $125,000,
whereupon Maxwell shall be liable to indemnify all Losses over $125,000.
SECTION 8.2. Indemnification by the Company. The Company shall
-------------------------------
indemnify Maxwell and its affiliates and each of their respective officers,
directors, employees, stockholders, agents and representatives against, and
agrees to hold them harmless from, any Loss, as incurred (payable promptly upon
written request), for or on account of or arising from or in connection with or
otherwise with respect to:
<PAGE>
24
(a) any breach of any representation or warranty of the Company
contained in this Agreement, or in any Ancillary Agreement or in any
document delivered in connection herewith;
(b) any breach of any covenant of the Company contained in this
Agreement or in any Ancillary Agreement; and
(c) any Assumed Liability;
provided, however, that the Company shall have no obligation under this Section
- -------- -------
8.2 unless and until the aggregate amount of Losses so incurred exceeds
$125,000, whereupon the Company shall be liable to indemnify all Losses over
$125,000.
SECTION 8.3. Calculation of Losses. The amount of any Loss for which
----------------------
indemnification is provided under this Article VIII shall be net of any amounts
actually recovered by the indemnified party under insurance policies with
respect to such Loss and shall be (a) increased to take account of any net tax
cost incurred by the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (b) reduced to take
account of any net tax benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. In computing the amount of any such
tax cost or tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Loss.
SECTION 8.4. Termination of Indemnification. The obligations to
-------------------------------
indemnify and hold harmless any party, (a) pursuant to Section 8.1(a)(i) or
8.2(a) shall terminate when the applicable representation or warranty terminates
pursuant to Section 8.6 and (b) pursuant to the other clauses of Sections 8.1
and 8.2 shall not terminate; provided, however, that such obligations to
-------- -------
indemnify and hold harmless shall not terminate with respect to any item as to
which the person to be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice of such claim
(stating in reasonable detail the basis of such claim) pursuant to Section 8.5
to the party to be providing the indemnification.
<PAGE>
25
SECTION 8.5. Procedures. (a) Third Party Claims. In order for a
----------- -------------------
party (the "indemnified party"), to be entitled to any indemnification provided
-----------------
for under this Agreement in respect of, arising out of or involving a claim made
by any person against the indemnified party (a "Third Party Claim"), such
-----------------
indemnified party must notify the indemnifying party in writing (and in
reasonable detail) of the Third Party Claim within 10 business days after
receipt by such indemnified party of notice of the Third Party Claim; provided,
--------
however, that failure to give such notification shall not affect the
- -------
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually and materially prejudiced as a result of such failure.
Thereafter, the indemnified party shall deliver to the indemnifying party,
within five business days after the indemnified party's receipt thereof, copies
of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
(b) Assumption. If a Third Party Claim is made against an
-----------
indemnified party, the indemnifying party shall be entitled to participate in
the defense thereof and, if it so chooses and acknowledges in writing its
liability to indemnify the indemnified party for the amounts, if any, awarded to
the claimant pursuant to such Third Party Claim, or agreed to be paid to the
claimant pursuant to a settlement of such Third Party Claim, to assume the
defense thereof with counsel selected by the indemnifying party; provided,
--------
however, that such counsel is not reasonably objected to by the indemnified
- -------
party. Should the indemnifying party so elect to assume the defense of a Third
Party Claim, the indemnifying party shall not be liable to the indemnified party
for any legal expenses subsequently incurred by the indemnified party in
connection with the defense thereof. If the indemnifying party assumes such
defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel (not reasonably objected to by the
indemnifying party), at its own expense, separate from the counsel employed by
the indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
indemnified parties shall cooperate in the defense or prosecution
<PAGE>
26
thereof. Such cooperation shall include the retention and (upon the indemnifying
party's request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party assumes the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld). If the
indemnifying party assumes the defense of a Third Party Claim, the indemnified
party shall agree to any settlement, compromise or discharge of a Third Party
Claim that the indemnifying party may recommend and that by its terms obligates
the indemnifying party to pay the full amount of the liability in connection
with such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and that would not otherwise adversely
affect the indemnified party. Notwithstanding the foregoing, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief or relief for other than
money damages against the indemnified party that the indemnified party
reasonably determines, after conferring with its outside counsel, cannot be
separated from any related claim for money damages. If such equitable relief or
other relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the defense of
the portion relating to money damages.
(c) Other Claims. In the event any indemnified party should have a
-------------
claim against any indemnifying party under Section 8.1 or 8.2 that does not
involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. Subject to Sections
8.4 and 8.6, the failure by any indemnified party so to notify the indemnifying
party shall not relieve the indemnifying party from any liability that it may
have to such indemnified party under Section 8.1 or 8.2, except to the extent
that the indemnifying party demonstrates that it has been
<PAGE>
27
materially prejudiced by such failure. If the indemnifying party does not notify
the indemnified party within 10 calendar days following its receipt of such
notice that the indemnifying party disputes its liability to the indemnified
party under Section 8.1 or 8.2, such claim specified by the indemnified party in
such notice shall be conclusively deemed a liability of the indemnifying party
under Section 8.1 or 8.2 and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined.
SECTION 8.6. Survival of Representations. The representations,
----------------------------
warranties, covenants and agreements contained in this Agreement and in any
document delivered in connection herewith shall survive the Closing solely for
purposes of this Article VIII and shall terminate at the close of business at
the end of the eighteenth month following the Closing Date.
SECTION 8.7. Limitation on Indemnification. The maximum aggregate
------------------------------
liability of Maxwell or the Company under Section 8.1 or Section 8.2,
respectively, shall in no event exceed $5,000,000.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.1. No Third Party Beneficiaries. Except as provided in
-----------------------------
Article VIII, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such
permitted assigns, any legal or equitable rights hereunder, whether as third
party beneficiaries or otherwise.
<PAGE>
28
SECTION 9.2. Notices. All notices or other communications required
--------
or permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by facsimile or sent, postage prepaid, by registered, certified or
express mail or reputable overnight courier service and shall be deemed given
when so delivered by hand or facsimile, or if mailed, three days after mailing
(one business day in the case of express mail or overnight courier service), as
follows (or at such other address for a party as shall be specified by notice
given in accordance with this Section 9.2):
(a) if to the Company,
Jones Investment Co., Inc.
200 West 9th Street Plaza
Suite 200
Wilmington, Delaware 19801
Attention: Vice President
Facsimile: (302) 777-4886
with copies to:
Jones Apparel Group, Inc.
1411 Broadway
New York, New York 10018
Attention: Ira M. Dansky, Esq.
Facsimile: (212) 921-5370
(ii) if to Maxwell,
Maxwell Shoe Company Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
Attention: Mark J. Cocozza
Facsimile: (617) 361-8032
with copies to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan K. Layne, Esq.
Facsimile: (213) 229-6141
<PAGE>
29
SECTION 9.3. Entire Agreement. This Agreement, including the
-----------------
schedules, exhibits, annexes and attachments thereto, together with the
Ancillary Agreements and the Confidentiality Agreement, contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior or contemporaneous
agreements and understandings relating to such subject matter.
SECTION 9.4. Enforcement. The parties hereto agree that irreparable
------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State of New York or in any New York state court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 9.5. Assignment. Neither this Agreement nor any rights or
-----------
obligations hereunder may be assigned or otherwise transferred by either party
hereto (including by operation of law) without the prior written consent of the
other party, except that the Company may assign or transfer, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to any of its affiliates. Any purported assignment or transfer in
violation of this Section 9.5 shall be null and void and of no effect.
SECTION 9.6. Expenses. Whether or not the Acquisition is
---------
consummated, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fees or expenses.
SECTION 9.7. Amendments. No amendment to this Agreement shall be
-----------
effective unless it shall be in writing and signed by each of the parties
hereto.
SECTION 9.8. Waivers. No failure or delay of any party in exercising
--------
any right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise
<PAGE>
30
thereof or the exercise of any other right or power. The rights and remedies of
the parties under this Agreement are cumulative and are not exclusive of any
rights or remedies which they would otherwise have under this Agreement. This
Agreement (or any provision hereof) may not be waived except pursuant to a
writing executed by the waiving party.
SECTION 9.9. Exhibits and Schedules; Interpretation. (a) The
---------------------------------------
headings contained in this Agreement or in any Exhibit or Schedule hereto and in
the table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Any matter set forth in any provision, subprovision, section or subsection of
any Schedule shall, unless the context otherwise manifestly requires, be deemed
set forth for all purposes of the Schedules. All Exhibits and Schedules annexed
to this Agreement or referred to herein are hereby incorporated in and made a
part of this Agreement as if set forth in full herein. Any capitalized terms
used in any Schedule or Exhibit to this Agreement but not otherwise defined
herein, shall have the meaning as defined in this Agreement or in the Licence
Agreement. When a reference is made in this Agreement to a Section, Article,
Exhibit or Schedule, such reference shall be to a Section or Article of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. For all
purposes hereof, the terms "include", "includes" and "including" shall be deemed
followed by the words "without limitation".
(b) For all purposes hereof:
"affiliate" of any person means another person that directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, joint venture, Governmental Entity or other entity.
"subsidiary" of any person means another person, an amount of the
----------
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) and which is
<PAGE>
31
owned directly or indirectly by such first person or by another subsidiary of
such person.
SECTION 9.10. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties hereto and delivered to the other party.
SECTION 9.11. Severability. If any provision of this Agreement or
-------------
the application of any such provision to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision thereof.
SECTION 9.12. Consent to Jurisdiction. Each of the parties hereto
------------------------
irrevocably submits to, and agrees to cause its subsidiaries to irrevocably
submit to, the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and each agrees that no such action, suit or proceeding relating to this
Agreement shall be brought by it or any of its Affiliates except in such
courts). Each of the parties hereto further agrees, and agrees to cause its
subsidiaries to agree, that service of any process, summons, notice or document
by U.S. registered mail to such person's respective address set forth above
shall be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction as
set forth above in the immediately preceding sentence. Each of the parties
hereto irrevocably and unconditionally waives (and agrees not to plead or
claim), and agrees to cause its subsidiaries to irrevocably and unconditionally
waive (and not to plead or claim), any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Supreme Court of the State of New York, New York
County, or (b) the United States District Court for the Southern District of New
York or that any such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum.
<PAGE>
32
SECTION 9.13. Governing Law. This Agreement shall be governed by,
--------------
and construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State.
SECTION 9.14. Waiver of Jury Trial. Each of the parties hereto
---------------------
hereby waives, and agrees to cause each of its Affiliates to waive, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this Agreement. Each of the parties hereto (a) certifies
that no representative of any other party has represented, expressly or
otherwise, that such other party would not, in the event of litigation, seek to
enforce the foregoing waiver and (b) acknowledges that it and the other parties
thereto have been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications in this Section 9.14.
<PAGE>
33
SECTION 9.15. Permitted Communications. After the date hereof, the
-------------------------
Company shall be permitted to contact (a) any member of senior management of
Maxwell's Jones Division and (b) any retail customer of Maxwell's Jones
Division, in each case, regarding the subject matter of this Agreement and the
transactions contemplated hereby.
SECTION 9.16. Maxwell Employees. Notwithstanding any other provision
------------------
of this Agreement, Maxwell shall have the right without any liability to the
Company (or any of its affiliates or any Indemnified Party) at any time to
terminate the employment of, or transfer to another Maxwell division, any
employee of Maxwell, including any employee of the Jones New York division of
Maxwell.
SECTION 9.17. JNY Guaranty. JNY hereby unconditionally guarantees
-------------
the performance by the Company (or its assignee or transferee, as applicable) of
all of the Company's (or its assignee or transferee, as applicable) obligations
pursuant to this Agreement and the Ancillary Agreements.
IN WITNESS WHEREOF, the Company, JNY and Maxwell have duly executed
this Agreement as of the date first written above.
JONES INVESTMENT CO., INC.,
by
/s/ Ira M. Dansky
--------------------
Name: Ira M. Dansky
Title: President
<PAGE>
34
JONES APPAREL GROUP, INC.,
/s/ Ira M. Dansky
--------------------
Name: Ira M. Dansky
Title: General Counsel
MAXWELL SHOE COMPANY INC.,
/s/ James J. Tinagero
---------------------
Name: James J. Tinagero
Title: Executive Vice
President
<PAGE>
EXHIBIT 99.1
AGREEMENT TO AMEND EMPLOYMENT AGREEMENT
---------------------------------------
This Agreement to amend Employment Agreement is made as of the 8th day of
April 1999 (the "Effective Date"), by and between Mark J. Cocozza (the
"Employee") and Maxwell Shoe Company Inc., a Delaware corporation (the
"Company").
WHEREAS, the Employee and the Company are currently parties to a certain
employment agreement dated as of April 27, 1998 (the "Employment Agreement");
and
WHEREAS, the Board of Directors of the Company (the "Board") deems it to be
in the best interests of the Company to amend the Employment Agreement and has
approved on April 8, 1999 certain amendments to the Employment Agreement; and
WHEREAS, the Employee and the Company each wishes to amend the Employment
Agreement to incorporate the amendments approved by the Board; and
WHEREAS, the Employee and the Company each agrees that the terms and
conditions of the Employment Agreement shall remain in full force and effect
except as such terms and conditions may be amended herein; and
WHEREAS, the Employee wishes to continue his employment by the Company and
to commit himself to serve the Company on the terms provided in the Employment
Agreement and as amended by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
acknowledge and agree that the Employment Agreement is amended and modified as
follows:
1. Section 1.05 of the Employment Agreement is hereby amended by deleting
the word "or" before sub-Section 1.05(f) and adding the following to the end of
Section 1.05:
"; or (g) requires the Employee to be regularly based at any office or
location that is more than 50 miles from the Company's current headquarters in
Hyde Park (Boston), MA."
2. Section 4.03 of the Employment Agreement is hereby amended such that
all references to the term "one-year" in such Section shall be changed to the
term "two-year." Section 4.03 of the Employment Agreement is further amended by
replacing in its entirety the second sentence of such Section with the
following:
"If during the two-year period following a Change of Control the Employee's
employment is terminated by the Company without Cause, the Employee (or the
Employee's beneficiary designated pursuant to Section 1.03 hereof if the
Employee is deceased at the time of payment) shall receive such compensation as
is provided to the Employee pursuant to subsections (b) and (c) of this Section
4.03."
<PAGE>
3. Sub-Section 4.03(b) of the Employment Agreement is hereby amended by
deleting the last sentence of such sub-Section in its entirety and replacing it
with the following:
"In the event that any amount or benefit that may be paid or otherwise
provided to or in respect of the Employee by or on behalf of the Company or any
affiliate, whether pursuant to this Agreement or otherwise (collectively,
"Covered Payments"), is or may become subject to the tax imposed under Code
Section 4999 ("Excise Tax"), the Company will pay to the Employee a
"Reimbursement Amount" equal to the total of: (A) any Excise Tax on the Covered
Payments, plus (B) any Federal, state, and local income taxes, employment and
excise taxes (including the Excise Tax) on the Reimbursement Amount, plus (C)
the product of any deductions disallowed for Federal, state or local income tax
purposes because of the inclusion of the Reimbursement Amount in the Employee's
adjusted gross income multiplied by the Employee's combined Federal, state, and
local income tax rate for the calendar year in which the Reimbursement Amount is
includible in the Employee's taxable income, plus (D) any interest, penalties or
additions to tax imposed under applicable law in connection with the Excise Tax
or the Reimbursement Amount. For purposes of this Section 4.03(b), the Employee
will be deemed to pay (Y) Federal income taxes at the highest applicable
marginal rate of Federal income taxation applicable to individuals for the
calendar year in which the Reimbursement Amount is includible in the Employee's
taxable income and (Z) any applicable state and local income taxes at the
highest applicable marginal rate of taxation applicable to individuals for the
calendar year in which such Reimbursement Amount is includible in the Employee's
taxable income, net of the maximum reduction in Federal income taxes which could
be obtained from the deduction of such state or local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount of
the Employee's adjusted gross income). The payment of a Reimbursement Amount
under this sub-Section 4.03(b) shall not be conditioned upon the Employee's
termination of employment. Notwithstanding the foregoing provisions of this
sub-Section 4.03(b), if it shall be determined that, absent this sentence, the
Employee is entitled to a Reimbursement Amount, but that the portion of the
Covered Payments that would be treated as "parachute payments" under Code
Section 280G ("Covered Parachute Payments") does not exceed 120% of the greatest
amount of Covered Parachute Payments that could be paid to the Employee such
that the receipt of such Covered Parachute Payments would not give rise to any
Excise Tax (the "Safe Harbor Amount"), then no Reimbursement Amount shall be
paid to the Employee (unless for any reason Employee is determined to be subject
to the Excise Tax after application of the balance of this sentence) and the
Covered Parachute Payments payable under this Agreement shall be reduced so that
the Covered Parachute Payments, in the aggregate, are reduced to the Safe Harbor
Amount. For purposes of reducing the Covered Parachute Payments to the Safe
Harbor Amount, only amounts payable under this Agreement shall be reduced. If
the reduction of the amounts payable under this Agreement would not result in a
reduction of the Covered Parachute Payments to the Safe Harbor Amount, no
amounts payable under this Agreement or otherwise shall be reduced pursuant to
this Section 4.03(b). The Company shall notify the Employee of any intent to
reduce the amount of any Covered Payments in accordance with this sub-Section
4.03(b) (which notice, if practicable, shall be given prior to the occurrence of
an event that would give rise to a Covered Parachute Payment), and Employee
shall have the right to designate which of the Covered Payments shall be reduced
and to what extent, provided that the Employee may not so elect to the extent
that, in the determination of counsel to the Company, such election would cause
the Employee to be subject to the Excise Tax."
2
<PAGE>
4. The following provisions are added to the Employment Agreement as a new
sub-Section 4.03(c):
"If during the two-year period following a Change of Control the Employee's
employment is terminated by the Company without Cause, for three years after the
termination date, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) if the Employee's
employment had not been terminated (and at a cost to the Employee no greater
than the cost to the Employee under such plans, programs, practices and
policies) or, if more favorable to the Employee, as in effect generally at any
time thereafter with respect to other peer employees of the Company and its
affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Employee with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Employee at the time of a Change of Control;
provided, however, that if the Employee becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility."
5. This Agreement (i) shall be binding upon the parties hereto and their
respective successors, agents, representatives, assigns, officers, directors and
employees; (ii) may not be amended or modified except in writing; (iii)
represents the entire understanding between the parties with respect to the
subject matter hereof; and (iv) may be executed in separate counterparts, each
of which shall be deemed an original but all such counterparts shall together
constitute one and the same instrument. Except for the foregoing, the
provisions of the Employment Agreement shall govern the subject matter hereof;
provided that, in the event of any conflict between the Employment Agreement and
this Agreement, the provisions of this Agreement shall govern.
Upon execution below by both parties, this Agreement will enter into full
force and effect as of April 8, 1999.
MAXWELL SHOE COMPANY INC. EMPLOYEE
By: /s/ James J. Tinagero /s/ Mark J. Cocozza
-------------------------- ---------------------------
James J. Tinagero Mark J. Cocozza
Executive Vice President
3
<PAGE>
EXHIBIT 99.2
AGREEMENT TO AMEND EMPLOYMENT AGREEMENT
---------------------------------------
This Agreement to amend Employment Agreement is made as of the 8th day of
April 1999 (the "Effective Date"), by and between James J. Tinagero (the
"Employee") and Maxwell Shoe Company Inc., a Delaware corporation (the
"Company").
WHEREAS, the Employee and the Company are currently parties to a certain
employment agreement dated as of April 27, 1998 (the "Employment Agreement");
and
WHEREAS, the Board of Directors of the Company (the "Board") deems it to be
in the best interests of the Company to amend the Employment Agreement and has
approved on April 8, 1999 certain amendments to the Employment Agreement; and
WHEREAS, the Employee and the Company each wishes to amend the Employment
Agreement to incorporate the amendments approved by the Board; and
WHEREAS, the Employee and the Company each agrees that the terms and
conditions of the Employment Agreement shall remain in full force and effect
except as such terms and conditions may be amended herein; and
WHEREAS, the Employee wishes to continue his employment by the Company and
to commit himself to serve the Company on the terms provided in the Employment
Agreement and as amended by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
acknowledge and agree that the Employment Agreement is amended and modified as
follows:
1. Section 1.05 of the Employment Agreement is hereby amended by deleting
the word "or" before sub-Section 1.05(f) and adding the following to the end of
Section 1.05:
"; or (g) requires the Employee to be regularly based at any office or
location that is more than 50 miles from the Company's current headquarters in
Hyde Park (Boston), MA."
2. Section 4.03 of the Employment Agreement is hereby amended such that
all references to the term "one-year" in such Section shall be changed to the
term "two-year." Section 4.03 of the Employment Agreement is further amended by
replacing in its entirety the second sentence of such Section with the
following:
"If during the two-year period following a Change of Control the Employee's
employment is terminated by the Company without Cause, the Employee (or the
Employee's beneficiary designated pursuant to Section 1.03 hereof if the
Employee is deceased at the time of payment) shall receive such compensation as
is provided to the Employee pursuant to subsections (b) and (c) of this Section
4.03."
<PAGE>
3. Sub-Section 4.03(b) of the Employment Agreement is hereby replaced in
its entirety by the following:
"If the Employee becomes entitled to receive compensation pursuant to this
Section 4.03, then, in addition to any payments to which the Employee is
entitled under Section 4.01 hereof, the Employee shall receive within thirty
(30) days of the termination of his employment a lump-sum payment equal to three
(3) times the Employee's average annual total compensation (including, for
purposes of computing total compensation under this Section 4.03, the amount of
any bonus and employee benefits accrued during the relevant period) earned
during the five-year period immediately preceding the effective date of the
Change of Control or such shorter period during which the Employee may have been
employed by the Company. In the event that any amount or benefit that may be
paid or otherwise provided to or in respect of the Employee by or on behalf of
the Company or any affiliate, whether pursuant to this Agreement or otherwise
(collectively, "Covered Payments"), is or may become subject to the tax imposed
under Code Section 4999 ("Excise Tax"), the Company will pay to the Employee a
"Reimbursement Amount" equal to the total of: (A) any Excise Tax on the Covered
Payments, plus (B) any Federal, state, and local income taxes, employment and
excise taxes (including the Excise Tax) on the Reimbursement Amount, plus (C)
the product of any deductions disallowed for Federal, state or local income tax
purposes because of the inclusion of the Reimbursement Amount in the Employee's
adjusted gross income multiplied by the Employee's combined Federal, state, and
local income tax rate for the calendar year in which the Reimbursement Amount is
includible in the Employee's taxable income, plus (D) any interest, penalties or
additions to tax imposed under applicable law in connection with the Excise Tax
or the Reimbursement Amount. For purposes of this Section 4.03(b), the Employee
will be deemed to pay (Y) Federal income taxes at the highest applicable
marginal rate of Federal income taxation applicable to individuals for the
calendar year in which the Reimbursement Amount is includible in the Employee's
taxable income and (Z) any applicable state and local income taxes at the
highest applicable marginal rate of taxation applicable to individuals for the
calendar year in which such Reimbursement Amount is includible in the Employee's
taxable income, net of the maximum reduction in Federal income taxes which could
be obtained from the deduction of such state or local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount of
the Employee's adjusted gross income). The payment of a Reimbursement Amount
under this sub-Section 4.03(b) shall not be conditioned upon the Employee's
termination of employment. Notwithstanding the foregoing provisions of this
sub-Section 4.03(b), if it shall be determined that, absent this sentence, the
Employee is entitled to a Reimbursement Amount, but that the portion of the
Covered Payments that would be treated as "parachute payments" under Code
Section 280G ("Covered Parachute Payments") does not exceed 120% of the greatest
amount of Covered Parachute Payments that could be paid to the Employee such
that the receipt of such Covered Parachute Payments would not give rise to any
Excise Tax (the "Safe Harbor Amount"), then no Reimbursement Amount shall be
paid to the Employee (unless for any reason Employee is determined to be subject
to the Excise Tax after application of the balance of this sentence) and the
Covered Parachute Payments payable under this Agreement shall be reduced so that
the Covered Parachute Payments, in the aggregate, are reduced to the Safe Harbor
Amount. For purposes of reducing the Covered Parachute Payments to the Safe
Harbor Amount, only amounts payable under this Agreement shall be reduced. If
the reduction of the amounts payable under this Agreement would not result in a
reduction of the Covered Parachute Payments to the Safe Harbor Amount, no
amounts payable under this Agreement or otherwise shall be reduced
2
<PAGE>
pursuant to this Section 4.03(b). The Company shall notify the Employee of any
intent to reduce the amount of any Covered Payments in accordance with this sub-
Section 4.03(b) (which notice, if practicable, shall be given prior to the
occurrence of an event that would give rise to a Covered Parachute Payment), and
Employee shall have the right to designate which of the Covered Payments shall
be reduced and to what extent, provided that the Employee may not so elect to
the extent that, in the determination of counsel to the Company, such election
would cause the Employee to be subject to the Excise Tax."
4. The following provisions are added to the Employment Agreement as a new
sub-Section 4.03(c):
"If during the two-year period following a Change of Control the Employee's
employment is terminated by the Company without Cause, for three years after the
termination date, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) if the Employee's
employment had not been terminated (and at a cost to the Employee no greater
than the cost to the Employee under such plans, programs, practices and
policies) or, if more favorable to the Employee, as in effect generally at any
time thereafter with respect to other peer employees of the Company and its
affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Employee with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Employee at the time of a Change of Control;
provided, however, that if the Employee becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility."
5. This Agreement (i) shall be binding upon the parties hereto and their
respective successors, agents, representatives, assigns, officers, directors and
employees; (ii) may not be amended or modified except in writing; (iii)
represents the entire understanding between the parties with respect to the
subject matter hereof; and (iv) may be executed in separate counterparts, each
of which shall be deemed an original but all such counterparts shall together
constitute one and the same instrument. Except for the foregoing, the
provisions of the Employment Agreement shall govern the subject matter hereof;
provided that, in the event of any conflict between the Employment Agreement and
this Agreement, the provisions of this Agreement shall govern.
3
<PAGE>
Upon execution below by both parties, this Agreement will enter into full
force and effect as of April 8, 1999.
MAXWELL SHOE COMPANY INC. EMPLOYEE
By: /s/ Mark J. Cocozza /s/ James J. Tinagero
--------------------------- ---------------------------
Mark J. Cocozza James J. Tinagero
Chairman and Chief
Executive Officer
4
<PAGE>
EXHIBIT 99.3
CHANGE OF CONTROL SEVERANCE AGREEMENT
-------------------------------------
This Change of Control Severance Agreement is entered into this 8th day of
April, 1999 between Maxwell Shoe Company Inc., a Delaware corporation (the
"Company"), and Richard J. Bakos (the "Employee").
R E C I T A L S
- - - - - - - -
The Company considers it essential and in the best interest of its
stockholders to foster the continuous employment of key management personnel.
The Company further recognizes that, as in the case of many publicly held
corporations, the possibility of a change of control of the Company may exist
and that such possibility, and the uncertainty and questions which it may raise
among management, may create concerns for, and the distraction of, management
personnel and may even result in departures which might have otherwise not have
taken place, all to the detriment of the Company and its stockholders. The
Company now desires to take steps to reinforce and encourage the continued
attention and dedication of members of the Company's management, including the
Employee, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a Change of
Control (as defined in Section 3) of the Company.
A G R E E M E N T
- - - - - - - - -
1. Payment of Severance Benefits Upon Change of Control. In the event of
----------------------------------------------------
a Change of Control of the Company during the two-year period from the date of
this Agreement, the Employee shall be entitled to the benefits set forth in
Section 2 (the "Severance Benefits"), but only if:
(a) Employee's employment by the Company or the successor owner of its
business is terminated by the Company or such successor without Cause (as
defined in Section 4) during the two years after the occurrence of the
Change of Control; or
(b) the Employee terminates his employment with the Company or its
successor for Good Reason (as defined in Section 5) during the two years
after the occurrence of the Change of Control.
A termination of the Employee's employment coupled with an offer of
employment by an Affiliate of the Company will not constitute a termination of
employment for purposes of this Agreement unless the terms of employment offered
would constitute Good Reason for the Employee to terminate his employment if
they were imposed by the Company and then only if the Employee does not accept
the offer. An "Affiliate" of the Company is an entity controlling, controlled
by or under common control with the Company as defined in Rule 405 of the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
<PAGE>
The effective date of any termination of employment referred to in (a)
above shall be the date specified by the Company or the successor owner of its
business, and the effective date of any termination of employment referred to in
(b) above shall be the date specified in the notice of termination delivered
pursuant to Section 5 or, if no date is specified in the notice, the date
specified by the Employee orally or, if no such date is specified orally, the
date the Employee ceases working for the Company or the successor owner of its
business on a full time basis.
2. Definition of Severance Benefits.
--------------------------------
2.1 Amount of Benefits. Except as provided in Section 2.2, the Severance
------------------
Benefits referred to in Section 1 shall include and be limited to a lump sum
payment equal to two (2) times the Employee's average annual total compensation
(including, for purposes of computing total compensation under this Section 2.1,
the amount of any bonus and employee benefits accrued during the relevant
period) earned during the five-year period immediately preceding the effective
date of the Change of Control. Payment of the Severance Benefits shall be made
within thirty (30) days after the effective date of the termination of the
Employee's employment.
Notwithstanding the above, in the case of a termination of employment prior
to the occurrence of a Change of Control, the Company shall have no obligation
to pay or provide any Severance Benefits.
2.2 Excise Tax. In the event that any amount or benefit that may be paid
----------
or otherwise provided to or in respect of the Employee by or on behalf of the
Company or any Affiliate, whether pursuant to this Agreement or otherwise
(collectively, "Covered Payments"), is or may become subject to the tax imposed
under Internal Revenue Code ("Code") Section 4999 ("Excise Tax"), the Company
will pay to the Employee a "Reimbursement Amount" equal to the total of: (A) any
Excise Tax on the Covered Payments, plus (B) any Federal, state, and local
income taxes, employment and excise taxes (including the Excise Tax) on the
Reimbursement Amount, plus (C) the product of any deductions disallowed for
Federal, state or local income tax purposes because of the inclusion of the
Reimbursement Amount in the Employee's adjusted gross income multiplied by the
Employee's combined Federal, state, and local income tax rate for the calendar
year in which the Reimbursement Amount is includible in the Employee's taxable
income, plus (D) any interest, penalties or additions to tax imposed under
applicable law in connection with the Excise Tax or the Reimbursement Amount.
For purposes of this Section 2.2, the Employee will be deemed to pay (Y) Federal
income taxes at the highest applicable marginal rate of Federal income taxation
applicable to individuals for the calendar year in which the Reimbursement
Amount is includible in the Employee's taxable income and (Z) any applicable
state and local income taxes at the highest applicable marginal rate of taxation
applicable to individuals for the calendar year in which such Reimbursement
Amount is includible in the Employee's taxable income, net of the maximum
reduction in Federal income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of the Employee's adjusted gross
income). The payment of a Reimbursement Amount under this Section 2.2 shall not
be conditioned upon the Employee's termination of employment. Notwithstanding
the foregoing provisions of this Section 2.2, if it shall be determined that,
absent this sentence, the Employee is entitled to a Reimbursement Amount, but
that the portion of the Covered Payments that would be treated as "parachute
payments" under Code Section 280G ("Covered Parachute Payments") does not exceed
120% of the greatest amount of Covered Parachute Payments that could be paid
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to the Employee such that the receipt of such Covered Parachute Payments would
not give rise to any Excise Tax (the "Safe Harbor Amount"), then no
Reimbursement Amount shall be paid to the Employee (unless for any reason
Employee is determined to be subject to the Excise Tax after application of the
balance of this sentence) and the Covered Parachute Payments payable under this
Agreement shall be reduced so that the Covered Parachute Payments, in the
aggregate, are reduced to the Safe Harbor Amount. For purposes of reducing the
Covered Parachute Payments to the Safe Harbor Amount, only amounts payable under
this Agreement shall be reduced. If the reduction of the amounts payable under
this Agreement would not result in a reduction of the Covered Parachute Payments
to the Safe Harbor Amount, no amounts payable under this Agreement or otherwise
shall be reduced pursuant to this Section 2.2. The Company shall notify the
Employee of any intent to reduce the amount of any Covered Payments in
accordance with this Section 2.2 (which notice, if practicable, shall be given
prior to the occurrence of an event that would give rise to a Covered Parachute
Payment), and Employee shall have the right to designate which of the Covered
Payments shall be reduced and to what extent, provided that the Employee may not
so elect to the extent that, in the determination of counsel to the Company,
such election would cause the Employee to be subject to the Excise Tax.
3. Definition of Change of Control. For purposes of this Agreement, a
-------------------------------
Change of Control shall mean the occurrence of one or more of the following
three events:
(a) any one beneficial stockholder or affiliated group of beneficial
stockholders becomes at any time the beneficial holder of twenty-five
percent (25%) or more of the aggregate voting power of the issued and
outstanding securities of the Company with rights to vote for the
election of directors of the Company;
(b) at any time after any "reorganization" involving the Company, as
such term is defined in section 368 of the Code, or any other type of
reorganization, recapitalization, merger, consolidation or sale of
assets involving the Company, or a contested election of a Company
director, or any combination of the foregoing, the individuals who
were directors of the Company immediately prior thereto shall cease to
constitute a majority of the Board of Directors of the Company; or
(c) at any time after a tender offer or exchange offer for voting
securities of the Company (other than by the Company), the individuals
who were directors of the Company immediately prior thereto shall
cease to constitute a majority of the Board of Directors of the
Company.
4. Definition of Termination for Cause. The Employee's employment shall
-----------------------------------
be deemed to have been terminated for "Cause" if such employment terminates as a
result of:
(a) the Employee committing fraud, misappropriation or embezzlement in
the performance of duties as an employee of the Company;
(b) the Employee's conviction of a felony involving a crime of moral
turpitude;
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(c) the Employee's willful disregard of any written directive of the
Board of Directors of the Company that is not inconsistent with the
Company's Certificate of Incorporation, by-laws or applicable law;
(d) an act of the Employee constituting willful material breach by the
Employee of any material provision of this Agreement; or
(e) the Employee willfully engaging in any business activity that
materially conflicts with the Employee's duties owed to the Company.
5. Definition of "Good Reason." For purposes of this Agreement the
----------------------------
Employee shall be deemed to have terminated his employment for "Good Reason" if
such a termination results from the Company's:
(a) failure to maintain the Employee at the position or positions in which
he currently serves at the Company;
(b) engagement in conduct that, against the Employee's volition, would
cause the Employee to commit fraudulent acts or would expose the Employee to
criminal liability;
(c) reduction or attempts to reduce the Employee's annual compensation
from the rate existing on the date hereof;
(d) removal or attempts to remove from the Employee a title or an office;
(e) change or attempts to change significantly the Employee's
responsibilities and/or duties which constitutes a demotion in the judgment of
the Employee (such judgment being exercised in good faith); or
(f) requirement of the Employee to be regularly based at any office or
location that is more than 50 miles from the Company's current headquarters in
Hyde Park (Boston), Massachusetts.
Notwithstanding the foregoing, none of the events referred to in (a)
through (f) above shall constitute Good Reason unless the Employee gives written
notice to the Company of his election to terminate his employment for such
reason within 90 days after he becomes aware of the existence of facts or
circumstances constituting Good Reason. Such notice shall set forth in
reasonable detail the facts and circumstances constituting the Good Reason and,
if the Good Reason is a curable condition, shall provide the Company with 30
days to cure such condition. The notice shall also specify the date when the
termination of employment is to become effective (if the Good Reason is not
curable or is curable but not cured within the 30 days), which date shall be not
less than 60 days and not more than 180 days from the date the notice is given.
6. Employment At Will. The employment relationship contemplated by this
------------------
Agreement is an at will relationship under which either the Employee or the
Company has the right at any time to terminate the employment relationship with
or without Cause or Good Reason and without notice, subject only to the payment
of the Severance Benefits set forth in
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Section 2 to the extent that they become payable under the terms of this
Agreement. Nothing in this Agreement is intended to create a term of employment
for a period of years or otherwise.
7. Mitigation. The Employee shall not be required to mitigate the amount
----------
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any Severance Benefit provided for in this
Agreement be reduced by any compensation earned by Employee as a result of
employment by another employer.
8. Assumption of Agreement. The Company will require any successor
-----------------------
(whether by purchase of assets, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform all of the obligations of the Company under this
Agreement (including the obligation to cause any subsequent successor to also
assume the obligations of this Agreement) unless such assumption occurs by
operation of law.
9. Assignment and Successors in Interest. This Agreement is personal to
-------------------------------------
the Employee and is not assignable by him. This Agreement shall inure to the
benefit of and be enforceable by the Employee and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees, and is binding upon the successors and assigns of the
Company.
10. Withholding Taxes. Any payments provided for hereunder shall be paid
-----------------
net of any applicable withholding required under federal, state or local law.
11. Notice. Any notice required or permitted to be given hereunder shall
------
be effective when received and shall be sufficient if in writing and if
personally delivered or sent by certified or registered mail, return receipt
requested, to the party to receive such notice at its or his address set forth
below or at such other address as a party may by notice specify to the other.
If to the Company: If to the Employee:
Maxwell Shoe Company Inc. Richard J. Bakos
101 Sprague Street 1059 Grove Street
P.O. Box 37 Framingham, MA 01701
Readville (Boston), MA 02137
Attn: Mark J. Cocozza,
Chairman
With a copy to:
Jonathan K. Layne, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
12. Governing Law. This Agreement shall be construed in accordance with
-------------
and governed for all purposes by the laws of The Commonwealth of Massachusetts.
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13. Interpretation. In case any one or more of the provisions contained in
--------------
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
14. Arbitration of Disputes. Any controversy or claim arising out of, or
-----------------------
relating to, any provision of this Agreement shall be settled by binding
arbitration in accordance with the laws of The Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Company, one by the
Employee, and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators, which shall be as provided in this
Section 14. Judgment on the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
15. Legal Fees. Any legal expenses incurred by either party to this
----------
Agreement in enforcing its or his rights hereunder (including any legal expenses
incurred with respect to any arbitration proceeding pursuant to Section 14
hereof) shall be borne and paid solely by such party. Notwithstanding the
foregoing or anything to the contrary contained in this Agreement, no provision
of this Agreement shall be construed as a limitation on or waiver of any rights
that one party to this Agreement may have to be reimbursed by the other party to
this Agreement for such first party's attorneys' fees pursuant to any statute or
other applicable law.
16. Entire Agreement. This Agreement sets forth the entire agreement of the
----------------
parties with respect to the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, commitments,
communications, representations, or warranties, whether oral or written except
that nothing in this Agreement shall amend or supersede any employment or stock
option agreement in effect on the date hereof.
17. Amendment and Waiver. This Agreement may not be amended, supplemented
--------------------
or waived except by a writing signed by the party against which such amendment,
supplement or waiver is to be enforced. The waiver by any party of a breach of
any provision of this Agreement shall not operate to waive, or be construed as a
waiver of, any other breach of that provision nor as a waiver of any breach of
another provision.
18. Counterparts. This Agreement may be executed in two counterparts each
------------
of which shall be deemed an original but both of which together shall constitute
one and the same instrument.
Upon execution below by both parties, this Agreement will enter into full
force and effect as of April 8, 1999.
MAXWELL SHOE COMPANY INC.
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By: /s/ Mark J. Cocozza /s/ Richard J. Bakos
-------------------------- ------------------------
Mark J. Cocozza Richard J. Bakos
President
1059 Grove St.
------------------------
Framingham, MA 01701
------------------------
(Address)
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