EXHIBIT 10.4
SERVICES AGREEMENT
THIS SERVICES AGREEMENT is made and entered into as of April 14, 1997 by
and between XXXXXXX SHOE COMPANY INC., a Delaware corporation ("Xxxxxxx"), and
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SLJ RETAIL LLC, a Delaware limited liability company ( the "Company").
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RECITALS
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A. The Xxxxxx Group Inc., a Delaware corporation ("Xxxxxx"), Xxxxxxx and
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Xxxxxxx Retail Inc., a Delaware corporation, are parties to a Contribution
Agreement dated of even date herewith (the "Contribution Agreement"), pursuant
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to which the Company has been formed.
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Contribution Agreement, Xxxxxxx has agreed with Xxxxxx
to enter into this Agreement with the Company, providing for certain services to
be performed by Xxxxxxx on behalf of the Company, supplementing and enabling the
fulfillment by Xxxxxxx Retail of its duties and responsibilities as Manager of
the Company, under and subject to all of the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Xxxxxxx'x Agreement to Provide Management Services. The Company
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hereby engages Xxxxxxx, and Xxxxxxx hereby accepts such engagement, solely as an
independent contractor, to provide the following management services to the
Company and the Manager during the Term (as defined in Section 5 below):
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(a) General Management Support to the Company. Xxxxxxx will provide such
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general management support services to the Company as the Manager may at any
time request in connection with the conduct of the business of the Company,
including, without limitation, providing to the Company the benefit of Xxxxxxx'x
experience and contacts in the women's footwear industry; providing to the
Company the benefit of the personal involvement of Xxxxxxx'x senior management
team to assist the Company in developing a long-term financial strategic plan
for the Company and to provide insight and supervision at the senior management
level and for the day-to-day business activities of the Company; assisting the
Company in coordinating legal and accounting matters with professional firms
selected by the Manager for use by the Company and providing such other ongoing
general management services as the Company shall request.
(b) General Management Support to the Manager. Xxxxxxx will provide such
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general management support services to the Manager as the Manager may at any
time request in connection with the performance of its duties and
responsibilities as Manager under the Operating Agreement, including, without
limitation, providing to the Manager the means to perform any of such duties and
responsibilities that the Manager is unable to perform by virtue of limitations
on the Manager's own personnel.
(c) Retail Advertising Services. Xxxxxxx will recommend and will assist
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the Company in coordinating with an advertising agency to the Company that
Xxxxxxx believes to be qualified to develop and implement a retail advertising
and promotion campaign for the S&L/JNY Products to be sold by the Company under
the S&L/JNY Retail Store Concepts, including, without limitation, such local
media advertising, point of sale and direct mail advertising and promotions as
Xxxxxxx believes to be reasonably necessary or appropriate in connection with
the business to be conducted by the Company. The Company acknowledges that the
advertising agency so recommended by Xxxxxxx may also represent Xxxxxxx in
connection with Xxxxxxx'x wholesale and cooperative advertising. If such agency
also represents Xxxxxxx, Xxxxxxx agrees to instruct such agency to account and
xxxx separately for the Company's retail advertising campaign and Xxxxxxx'x
ongoing wholesale and cooperative advertising campaign and, where shared
economies are created, to allocate expenses between Xxxxxxx and the Company on a
reasonable basis.
(d) Accessory Products. Xxxxxxx will advise the Company of any license
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entered into by Xxxxxxx for the licensing of products (other than women's
footwear) to be sold at wholesale, utilizing the Xxx & Xxxxx Trademarks and of a
type that are suitable for sale by the Company as accessories in its Mall
Specialty Footwear Stores or Retail Outlet Footwear Stores ("Accessory
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Products"). If the Company desires to sell any of such Accessory Products
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through its Mall Specialty Footwear Stores or Retail Outlet Footwear Stores,
Xxxxxxx will use reasonable efforts to introduce the Company to the licensee
under such license (a "Licensee"), and to assist the Company in arranging for
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the purchase by the Company of Accessory Products from such Licensee. In the
event that the Company purchases Accessory Products from any such Licensee,
Xxxxxxx agrees that it will (or will cause Xxxxxxx to) rebate to the Company the
amount of any royalty paid by such Licensee to Xxxxxxx or Xxxxxxx with respect
to Accessory Products purchased by the Company from such Licensee less any out
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of pocket expenses incurred by Xxxxxxx in connection with the licensing of the
Xxx & Xxxxx Trademarks for such Accessory Products.
(e) Other Services. Xxxxxxx will provide to the Company and the Manager
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such other services as the Company or the Manager may at any time reasonably
request and which Xxxxxxx at the time is reasonably able to perform in
connection with the Company's conduct of its business and the Manager's
discharge of its duties and responsibilities as Manager.
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2. Xxxxxxx'x Agreement to Provide Sourcing Services. The Company hereby
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engages Xxxxxxx, and Xxxxxxx hereby accepts such engagement, solely as an
independent contractor, to provide the following sourcing services to the
Company during the Term:
(a) Sourcing Manager. Xxxxxxx will serve as sourcing manager to provide,
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at the request of the Company, for the sourcing and purchase of up to the
Company's requirements of S&L/JNY Products manufactured in Brazil, Italy, the
People's Republic of China, Spain and any other country from which Xxxxxxx
sources products from time to time in the conduct of its own wholesale footwear
business, either through the Buying Agents, or directly with the Factories, as
Xxxxxxx shall determine in its discretion. The services to be provided by
Xxxxxxx under this Section 2 are non-exclusive, and the Company shall retain the
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right to source S&L/JNY Products for its own account from factories, buying
agents and selling agents that Xxxxxxx does not utilize in sourcing product for
its own wholesale footwear business and, in such instances, Xxxxxxx shall not
have any duties or responsibilities under this Section 2 with respect to such
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S&L/JNY Products.
(b) Specific Duties. In fulfilling its duties and responsibilities under
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paragraph (a) hereof, Xxxxxxx will, among such other actions as shall reasonably
be necessary or appropriate, (i) design S&L/JNY Products to be sold by the
Company in Specialty Retail Footwear Stores and Retail Outlet Footwear Stores
(some of which will be unique to the Company's retail footwear business and some
of which may also be utilized by Xxxxxxx in Xxxxxxx'x wholesale footwear
business); (ii) designate Factories deemed by Xxxxxxx in its discretion to be
appropriate to manufacture S&L/JNY Products, as well as appropriate Buying
Agents to facilitate the purchase and delivery of such S&L/JNY Products; (iii)
negotiate on behalf of the Company with Factories and Selling Agents the design
and quality specifications, price, payment and delivery terms (consistent with
paragraph (d) below) for the purchase by the Company of S&L/JNY Products; (iv)
deliver purchase orders on behalf of the Company to Factories, Buying Agents or
Selling Agents, as appropriate, specifying the appropriate design and quality
specifications, price, payment and delivery terms; and (v) negotiate with
Factories on behalf of the Company to achieve reasonable adjustments with
respect to any claims made by the Company with respect to any S&L/JNY Products
that fail to meet the design and quality specifications, delivery dates or other
terms set forth in the Company's purchase orders and to seek resolution of any
such claims that cannot satisfactorily be resolved through negotiation.
(c) Supervisory Duties. In addition to the duties set forth in paragraph
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(b) above, Xxxxxxx will take such actions as shall reasonably be necessary or
appropriate to ensure that the Factories or Buying Agents, as appropriate, (i)
inspect such samples of S&L/JNY Products sourced by Xxxxxxx pursuant to this
Section 2 as are reasonably necessary to ensure that (A) such S&L/JNY Products
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conform to the design and quality specifications in the Company's purchase
orders; (B) meet the requirements of all United States Government laws and
regulations; (C) are packaged, labeled and invoiced in accordance with the
instructions in the corresponding purchase orders and trade letters of credit
covering such purchase orders; and (D) are packaged in a manner that will allow
for safe transportation to the Company's stores or
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warehouse; (ii) arrange for proper transportation of such S&L/JNY Products from
the Factories directly to the Company or to the Company's freight forwarder in
the nearest foreign port of embarkation; and (iii) assist in the preparation and
forwarding of commercial invoices, packing lists, manufacturers' certificates
and other documents required by the Company or by the trade letters of credit
covering such purchase orders.
(d) Terms. Xxxxxxx agrees that it will arrange for all S&L/JNY Products
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sourced by Xxxxxxx on behalf of the Company under this Section 2 to be invoiced
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by the Factories at a price to the Company equal to the lowest price (including
commissions to Buying Agents) at which S&L/JNY Products of comparable quality,
for comparable quantities, at comparable times and on comparable payment terms
are purchased by Xxxxxxx for its own use in its wholesale footwear business.
(e) Responsibility for Payment. Each purchase order submitted by the
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Company (or submitted by Xxxxxxx on behalf of the Company) pursuant to this
Section 2 will constitute a contract of purchase and sale directly between the
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Company, on the one hand, and the Factory on the other, and the Company shall be
solely responsible for all payments due under each such purchase order
including, but not limited to, the purchase price for the S&L/JNY Products
ordered thereunder and any customs duties, taxes, freight charges, commissions
payable to Buying Agents or other amounts payable in respect of such purchase
order.
(f) Audit Rights. Xxxxxxx shall prepare and maintain, and shall cause the
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Company to prepare and maintain, books of account and records in detail
sufficient to verify Xxxxxxx'x compliance with the provisions of the first
sentence of paragraph (d) above and Xxxxxxx shall, on not less than a quarterly
basis during the term of this Agreement, provide to the Company and Xxxxxx
evidence of such compliance, in form and substance reasonably satisfactory to
Xxxxxx. Additionally, the Company and Xxxxxx, acting through such
representatives as either of them shall designate, shall have the right
throughout the term of this Agreement and for ninety days thereafter, upon at
least five days' prior written or oral notice, during regular business hours, to
audit the books of account and records of Xxxxxxx and to examine all other
documents and materials in Xxxxxxx'x possession or control relating to this
Agreement and Xxxxxxx'x performance hereunder. Xxxxxxx shall maintain such
books of account, records, documents and materials available for any such audit
and inspection for at least one year after the end of each fiscal year of
Xxxxxxx or, in the case of the most recent fiscal year of Xxxxxxx ending prior
to the termination of this Agreement, for at least ninety days after the
termination of this Agreement. Any audit and inspection performed by the
Company or Xxxxxx under this paragraph (f) shall be solely at the expense of the
party performing the same unless such audit and inspection discloses any
material non-compliance by Xxxxxxx with the terms and conditions of paragraph
(d) above, in which case Xxxxxxx shall promptly reimburse the cost and expense
of such audit and inspection to the party incurring the same.
3. Involvement by Xxxxxxx Senior Management. The Company acknowledges
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and agrees that neither Xxxxxxx nor any of Xxxxxxx'x officers or employees shall
be required to
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devote full time and efforts to the duties of Xxxxxxx specified in this
Agreement, but instead shall devote only so much of their time and efforts as
are reasonably necessary in the performance of the duties and responsibilities
of Xxxxxxx hereunder. Notwithstanding the foregoing, unless otherwise consented
to by the Required Members, (a) Xxxxxxx X. Xxxx and Xxxx X. Xxxxxxx will each
devote not less than 25% of his time to the business of the Company at all times
during the Term, (b) Xxxxx X. Xxxxxxxx will devote all or substantially all of
his time to the business of the Company until the Company has employed a new
chief executive officer as contemplated by Section 5.12(a) of the Contribution
Agreement and such amount of his time as shall reasonably be necessary
thereafter, and (c) such other senior managers of Xxxxxxx and other employees of
Xxxxxxx shall devote such of their time as shall reasonably be necessary to
furnish the services contemplated by Sections 1 and 2 hereof at all
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times during the Term; provided, however, that Xxxxxxx may substitute for the
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officers of Xxxxxxx specifically named in clauses (a) and (b) hereof the
officers of Xxxxxxx succeeding to their respective duties upon the death,
disability, retirement or separation from employment of such officers for any
other reason.
4. Fees for Services; Expenses.
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(a) In consideration of the services to be provided to the Company pursuant
to Sections 1 and 2 of this Agreement, the Company will pay to Xxxxxxx a fee in
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the amount of $500,000 per annum during the Term, payable quarterly in arrears
in installments of $125,000 on each March 31, June 30, September 30 and December
31 (or, if different, on the date that corresponds to the last day of each
fiscal quarter of the Company) during the Term (each such date, a "Payment
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Date") and pro-rated for the actual number of days in any period less than a
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full fiscal quarter; provided, however, that (i) any such installment that is
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otherwise due and payable on any such Payment Date after the Closing Date and
prior to the first anniversary of the Closing Date shall be deferred until and
shall be due and payable on the first anniversary of the Closing Date; (ii) the
obligation of the Company to pay such fee shall be deferred to the same extent
as the obligation of the Company to pay interest on the Subordinated Loan is
deferred pursuant to any subordination or intercreditor agreement entered into
between Xxxxxx and the Senior Lender; and (iii) in the event that the interest
on the Subordinated Loan is paid in part, but not in whole, such fee shall be
paid only on a pro-rata basis, to the same extent as the proportionate amount of
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interest so paid on the Subordinated Loan. In furtherance of clause (ii) above,
Xxxxxxx acknowledges that the fee provided for in this Section 4(a) is subject
to the terms of the Intercreditor and Subordination Agreement, dated of even
date herewith, among the Company, Xxxxxxx and The First National Bank of Boston,
as Agent.
(b) Except as specifically set forth in Sections 5.3(b) and 5.7(b) of the
Contribution Agreement, Xxxxxxx shall not be obligated to make any advance to or
for the account of the Company or to pay any sums or to incur any liability or
obligation for the account of the Company in connection with the services to be
provided by Xxxxxxx under this Agreement.
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(c) The Company agrees to reimburse Xxxxxxx for the travel and lodging
expenses incurred by Xxxxx X. Xxxxxxxx after the Closing Date in connection with
the performance by Xxxxxxx of its duties under Sections 1 and 2 of this
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Agreement and to reimburse Xxxxxxx for any incremental design expenses incurred
by Xxxxxxx under Section 2(b)(i) hereof in designing S&L/JNY Products that are
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unique to the Company's retail footwear business (and that are not also utilized
by Xxxxxxx in Xxxxxxx'x wholesale footwear business). All other expenses
incurred by Xxxxxxx in the performance of its duties under this Agreement shall
be solely for the account of Xxxxxxx, it being understood and agreed that the
fees payable by the Company to Xxxxxxx pursuant to Section (a) above are
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intended to compensate Xxxxxxx for any such expenses incurred hereunder.
5. Term. This Agreement shall be effective from its date of execution,
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as set forth above, and thereafter shall remain in effect for a term of five
years (the "Term"), unless earlier terminated as provided in Section 9.
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6. Status of Relationship. Xxxxxxx'x relationship with the Company under
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this Agreement shall be solely that of an independent contractor, and nothing
contained in this Agreement shall be deemed or construed (i) to create a
partnership or joint venture between the Company and Xxxxxxx, (ii) to cause
Xxxxxxx to be responsible in any way for the debts, liabilities or obligations
of the Company or any other party, or (iii) to give Xxxxxxx the authority to
bind or act for the Company in any respect, except as specifically set forth
herein.
7. Code of Conduct. In performing its duties and responsibilities under
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this Agreement, Xxxxxxx will at all times act honestly, in good faith and in the
best interests of the Company and will comply with all applicable requirements
of law. For so long as any Member having a Percentage Interest of 10% or more
is an Affiliate of GE Capital, Xxxxxxx will comply in all respects with the GE
Integrity Policies (as defined in the Operating Agreement) and, at all times
thereafter, Xxxxxxx will comply with a code of conduct established by the
Company substantially similar to the GE Integrity Policies. Additionally, in
its dealings with Factories and Buying Agents pursuant to Section 2 of this
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Agreement, Xxxxxxx will use reasonable efforts to require that Factories located
in China provide a manufacturer's certificate substantially similar to that
customarily provided to Xxxxxx prior to the Closing Date, at the time of each
shipment of S&L/JNY Products.
8. Relationship with Factories and Buying Agents. Xxxxxxx represents and
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warrants to the Company that (a) all of its dealings with the Factories, Selling
Agents and Buying Agents pursuant to Section 2 of this Agreement are and will
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during the term of this Agreement be conducted entirely on an arms-length basis;
(b) at all times during the term of this Agreement it has and will have no
ownership interest in, or any control of, or any financial interest in, any of
the Factories producing S&L/JNY Products purchased through Xxxxxxx hereunder, or
any of the Buying Agents through whom any such orders are placed; and (c) it
will not be paid any commissions with respect to the transactions contemplated
hereby, and will not share in any such
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commissions or other sums payable to any Factories, Selling Agents or Buying
Agent in connection with the S&L/JNY Products purchased by the Company under
Section 2 hereof.
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9. Termination.
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(a) Termination by Mutual Agreement. This Agreement may be terminated at
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any time by the mutual agreement of Xxxxxxx and the Company.
(b) Termination by Xxxxxxx or the Company. Either Xxxxxxx or the Company
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may terminate this Agreement, effective immediately upon giving the other party
written notice of termination, if (i) the other party breaches or fails to
perform any of the material terms or provisions of this Agreement in any
material respect and such breach or failure is not curable or, if curable, is
not cured within thirty (30) days after written notice thereof from the non-
breaching party; (ii) the other party ceases, or admits its intention to cease,
the conduct of its business in the ordinary course; (iii) Xxxxxxx Retail no
longer serves as Manager of the Company pursuant to the Operating Agreement; or
(iv) the Company has commenced liquidation or dissolution proceedings.
10. General Provisions.
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(a) Assignment. Neither this Agreement nor any of the rights, interests
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or obligations hereunder can be assigned or delegated by Xxxxxxx or the Company
without the prior written consent of the other.
(b) Notices. All notices that are required or may be given pursuant to
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this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as
any party may provide to the other parties by notice in accordance with this
Section 10):
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If to Xxxxxxx:
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Xxxxxxx Shoe Company Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxxxxx 00000
(or, if by mail, P. O. Box 37
Readville, Massachusetts 02137)
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
With a copy to:
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Xxxxxx, Xxxx & Xxxxxxxx LLP
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000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company:
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SLJ Retail LLC
000 Xxxxxxxxxx Xxxxx
Xxxxx X
Xxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
With copies to:
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GE Capital Equity Capital Group, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
and
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Counsel -- Equity Capital Group
Facsimile: (000) 000-0000
and
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx Xxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
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(c) Binding Effect. This Agreement will be binding upon and inure to the
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benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
(d) Third Party Beneficiaries. This Agreement is made solely and
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specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns subject to the
express provisions hereof relating to successors and assigns. Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
(e) Waiver. No failure by any party to insist upon the strict performance
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of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute waiver of
any such breach or any other covenant, duty, agreement, or condition.
(f) Counterparts. This Agreement may be executed in one or more
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counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
(g) Entire Agreement. This Agreement contains the entire understanding of
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the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be terminated,
modified or amended by the Company except in accordance with Section 7.5 of the
Operating Agreement, and then only in writing signed by the party against whom
enforcement is sought.
(h) Governing Law. This Agreement will be governed by and construed and
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interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
XXXXXXX SHOE COMPANY INC.
/s/ Xxxxx X. Xxxxxxxx
By:________________________
Xxxxx X. Xxxxxxxx
Executive Vice President
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SLJ RETAIL LLC
By: XXXXXXX RETAIL INC., its Manager
By:/s/ Xxxxx X. Xxxxxxxx
________________________________
Xxxxx X. Xxxxxxxx
Chairman
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