-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FKkqFbJno9vqR0wXKNq5FgCXu8SDat6jCOQDY+4gDVKKaUVYBcTMafnlE+X+1hnA LGR9CADKSrtjT7yrbYWknQ== 0000950123-04-003661.txt : 20040323 0000950123-04-003661.hdr.sgml : 20040323 20040323160419 ACCESSION NUMBER: 0000950123-04-003661 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20040323 GROUP MEMBERS: MSC ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MAXWELL SHOE CO INC CENTRAL INDEX KEY: 0000918578 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 042599205 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-43801 FILM NUMBER: 04685128 BUSINESS ADDRESS: STREET 1: 101 SPRAGUE ST STREET 2: P O BOX 37 CITY: READVILLE STATE: MA ZIP: 02137 BUSINESS PHONE: 6173645090 MAIL ADDRESS: STREET 1: 101 SPRAGUE STREET STREET 2: P O BOX 37 CITY: READVILLE STATE: MA ZIP: 02137 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JONES APPAREL GROUP INC CENTRAL INDEX KEY: 0000874016 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 060935166 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE STREET 2: KEYSTONE PK CITY: BRISTOL STATE: PA ZIP: 19007 BUSINESS PHONE: 2157854000 MAIL ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE CITY: BRISTOL STATE: PA ZIP: 19007 SC TO-T 1 y95442sctovt.txt SCHEDULE TO - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 MAXWELL SHOE COMPANY INC. (Name of Subject Company (Issuer)) MSC ACQUISITION CORP. JONES APPAREL GROUP, INC. (Names of Filing Persons -- Offerors) CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 577766108 (CUSIP Number of Class of Securities) IRA M. DANSKY, ESQ. JONES APPAREL GROUP, INC. 1411 BROADWAY NEW YORK, NEW YORK 10018 TELEPHONE: (212) 536-9526 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) Copies to: SCOTT A. BARSHAY, ESQ. CRAVATH, SWAINE & MOORE LLP WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NEW YORK 10019 TELEPHONE: (212) 474-1000 - -------------------------------------------------------------------------------- CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- TRANSACTION VALUATION* AMOUNT OF FILING FEE** - -------------------------------------------------------------------------------- $331,929,140 $42,056 - -------------------------------------------------------------------------------- * For purposes of calculating the amount of filing fee only. Based on the offer to purchase 16,596,457 shares of Class A Common Stock, par value $.01 per share, of Maxwell Shoe Company Inc., including the associated preferred stock purchase rights, at a purchase price of $20.00 per share, net to the seller in cash, without interest. Such number represents the total of 14,837,806 shares issued and outstanding as of March 4, 2004 (as reported in Maxwell Shoe Company Inc.'s Quarterly Report on Form 10-Q for Maxwell Shoe Company Inc.'s fiscal quarter ended January 31, 2004), and 1,758,651 shares issuable upon the exercise of stock options outstanding as of February 24, 2004 (as reported in Maxwell Shoe Company Inc.'s Proxy Statement for Maxwell Shoe Company Inc.'s 2004 annual meeting of stockholders). ** The amount of the filing fee is calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended, and equals 0.00012670% of the transaction valuation based on Fee Rate Advisory #7 for Fiscal Year 2004 issued by the Securities and Exchange Commission (the "Commission") on January 26, 2004. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: None Form or Registration No.: Not applicable Filing Party: Not applicable Date Filed: Not applicable [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. [ ] Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] SCHEDULE TO This Tender Offer Statement on Schedule TO ("Schedule TO") relates to the offer by MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation ("Jones"), to purchase (1) all issued and outstanding shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell"), and (2) unless and until validly redeemed by Maxwell's Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights"), at a price of $20.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer to Purchase") dated March 23, 2004, and in the related Letter of Transmittal, copies of which are attached as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively. This Schedule TO is being filed on behalf of Purchaser and Jones. The information set forth in the Offer to Purchase, including Schedule I thereto, is hereby incorporated by reference in answer to Items 1 through 11 of this Schedule TO, and is supplemented by the information specifically provided herein. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. During the last five years, to the best knowledge of Purchaser and Jones, none of the persons listed on Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, Federal or state securities laws, or a finding of violations of such laws. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. Except as described in the Offer to Purchase, during the past two years there have not been any negotiations, transactions or material contacts between Purchaser, Jones or any of Jones's other subsidiaries or, to the best knowledge of Purchaser and Jones, any of the persons listed in Schedule I to the Offer to Purchase, on the one hand, and Maxwell or any of its directors, executive officers or affiliates, on the other hand, that are required to be disclosed pursuant to this item. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. Except as described in the Offer to Purchase, none of Purchaser or Jones or, to the best knowledge of Purchaser and Jones, any of the persons listed in Schedule I to the Offer to Purchase, or any associate or majority-owned subsidiary of Purchaser or Jones or any of the persons listed in Schedule I to the Offer to Purchase, beneficially owns any equity security of Maxwell; and except as described in the Offer to Purchase, none of Purchaser or Jones or, to the best knowledge of Purchaser and Jones, any associate or majority-owned subsidiary of Purchaser and Jones, has effected any transaction in any equity security of Maxwell during the past 60 days. ITEM 12. EXHIBITS. (a)(1)(A) Offer to Purchase, dated March 23, 2004. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (a)(1)(E) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press release issued by Jones Apparel Group, Inc., dated March 23, 2004, announcing the commencement of the Offer. (a)(1)(H) Summary Advertisement published March 23, 2004. (b)(1) Three Year Credit Agreement, dated as of June 10, 2003, by and among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank, National Association, as Administrative Agent, JPMorgan Chase Bank and Citibank, N.A., as Syndication Agents and Fleet National Bank and Bank of America, N.A., as Documentation Agents (incorporated by reference to Exhibit 10.2 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 5, 2003 filed with the Commission on August 14, 2003). (b)(2) Five-Year Credit Agreement, dated as of June 15, 1999, as amended, among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, and Wachovia Bank, National Association (as successor to First Union National Bank), as Administrative Agent, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank) and Citibank, N.A., as Syndication Agents and Bank of America, N.A. (as successor to Nationsbank, N.A.), as Documentation Agent (incorporated by reference to Exhibit 10.2 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 4, 1999 filed with the Commission on August 17, 1999). (b)(3) Waiver and Amendment No. 2 to the Five-Year Credit Agreement, dated as of June 10, 2003, among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, and Wachovia Bank National Association (as successor to First Union National Bank), as Administrative Agent, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank) and Citibank, N.A., as Syndication Agents and Bank of America, N.A. (as successor to Nationsbank, N.A.), as Documentation Agent (incorporated by reference to Exhibit 10.1 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 5, 2003 filed with the Commission on August 14, 2003). (c) Not applicable. (d) License Agreement, dated November 1, 1999, as amended, among Anne Klein, a division of Kasper, Ltd., B.D.S., Inc., Lion Licensing, Ltd. and Maxwell Shoe Company Inc. (Portions deleted pursuant to application for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934). (e) Not applicable. (f) Not applicable. (g) Not applicable. (h) Not applicable. SIGNATURE After due inquiry and to the best of their knowledge and belief, the undersigned hereby certify as of March 23, 2004 that the information set forth in this statement is true, complete and correct. MSC ACQUISITION CORP., By: /s/ Wesley R. Card --------------------------------------- Name: Wesley R. Card Title: Chief Financial Officer and Treasurer JONES APPAREL GROUP, INC., By: /s/ Wesley R. Card --------------------------------------- Name: Wesley R. Card Title: Chief Operating and Financial Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION (a)(1)(A) Offer to Purchase, dated March 23, 2004. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (a)(1)(E) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press release issued by Jones Apparel Group, Inc., dated March 23, 2004, announcing the commencement of the Offer. (a)(1)(H) Summary Advertisement published March 23, 2004. (b)(1) Three Year Credit Agreement, dated as of June 10, 2003, by and among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank, National Association, as Administrative Agent, JPMorgan Chase Bank and Citibank, N.A., as Syndication Agents and Fleet National Bank and Bank of America, N.A., as Documentation Agents (incorporated by reference to Exhibit 10.2 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 5, 2003 filed with the Commission on August 14, 2003). (b)(2) Five-Year Credit Agreement, dated as of June 15, 1999, as amended, among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, and Wachovia Bank, National Association (as successor to First Union National Bank), as Administrative Agent, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank) and Citibank, N.A., as Syndication Agents and Bank of America, N.A. (as successor to Nationsbank, N.A.), as Documentation Agent (incorporated by reference to Exhibit 10.2 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 4, 1999 filed with the Commission on August 17, 1999). (b)(3) Waiver and Amendment No. 2 to the Five-Year Credit Agreement, dated as of June 10, 2003, among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, and Wachovia Bank, National Association (as successor to First Union National Bank), as Administrative Agent, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank) and Citibank, N.A., as Syndication Agents and Bank of America, N.A. (as successor to Nationsbank, N.A.), as Documentation Agent (incorporated by reference to Exhibit 10.1 to Jones Apparel Group, Inc.'s Quarterly Report on Form 10-Q for the six months ended July 5, 2003 filed with the Commission on August 14, 2003). (c) Not applicable. (d) License Agreement, dated November 1, 1999, as amended, among Anne Klein, a division of Kasper A.S.L., B.D.S., Inc., Lion Licensing, Ltd. and Maxwell Shoe Company Inc. (Portions deleted pursuant to application for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934). (e) Not applicable. (f) Not applicable. (g) Not applicable. (h) Not applicable. EX-99.A.1.A 3 y95442exv99waw1wa.txt OFFER TO PURCHASE Exhibit (a)(1)(A) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. AT $20.00 NET PER SHARE BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. --------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. --------------------- THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER A NUMBER OF SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE, TOGETHER WITH THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS (TOGETHER, THE "SHARES"), OF MAXWELL SHOE COMPANY INC. ("MAXWELL") THAT, TOGETHER WITH THE SHARES THEN OWNED BY JONES APPAREL GROUP, INC. ("JONES") AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, MSC ACQUISITION CORP. ("PURCHASER")), WOULD REPRESENT AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS, (2) MAXWELL'S BOARD OF DIRECTORS REDEEMING THE PREFERRED STOCK PURCHASE RIGHTS OR PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE PREFERRED STOCK PURCHASE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED SECOND-STEP MERGER DESCRIBED HEREIN, (3) PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW WILL BE INAPPLICABLE TO THE PROPOSED SECOND-STEP MERGER OR ANY OTHER BUSINESS COMBINATION INVOLVING JONES OR ANY OF ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, PURCHASER) AND MAXWELL AND (4) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER. --------------------- JONES AND PURCHASER ARE SEEKING TO DISCUSS WITH MAXWELL THE ACQUISITION OF MAXWELL BY PURCHASER. JONES AND PURCHASER RESERVE THE RIGHT TO AMEND THE OFFER (INCLUDING, WITHOUT LIMITATION, AMENDING THE NUMBER OF SHARES TO BE PURCHASED AND THE OFFER PRICE) UPON ENTERING INTO A MERGER AGREEMENT WITH MAXWELL, OR TO NEGOTIATE A MERGER AGREEMENT WITH MAXWELL NOT INVOLVING A TENDER OFFER PURSUANT TO WHICH PURCHASER WOULD TERMINATE THE OFFER AND THE SHARES WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED INTO THE CONSIDERATION NEGOTIATED BY JONES, PURCHASER AND MAXWELL. --------------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares (and preferred stock purchase rights, if applicable) should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile), or, in the case of a transfer effected pursuant to the book-entry transfer procedures set forth in "THE OFFER -- Section 3", transmit an Agent's Message (as defined in "THE OFFER -- Section 2"), and any other required documents to the Depositary and either deliver the certificates for such Shares and, if separate, the certificate(s) representing the preferred stock purchase rights to the Depositary along with the Letter of Transmittal (or such facsimile) or deliver such Shares (and preferred stock purchase rights, if applicable) pursuant to the book-entry transfer procedures set forth in "THE OFFER -- Section 3", or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder whose Shares and, if applicable, preferred stock purchase rights, are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares and, if applicable, preferred stock purchase rights. If a Distribution Date (as defined in "THE OFFER -- Section 11") occurs, stockholders will be required to tender one preferred stock purchase right for each Share tendered in order to effect a valid tender of such Share. A stockholder who desires to tender such stockholder's Shares (and preferred stock purchase rights, if applicable) and whose certificates representing such Shares (and preferred stock purchase rights, if applicable) are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis or who cannot cause all required documents to reach the Depositary prior to the Expiration Date (as defined in "THE OFFER -- Section 1") may tender such Shares (and preferred stock purchase rights, if applicable) by following the procedures for guaranteed delivery set forth in "THE OFFER -- Section 3". Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or the Dealer Manager. --------------------- NEITHER THIS OFFER TO PURCHASE NOR THE OFFER REFERRED TO HEREIN CONSTITUTES A SOLICITATION OF PROXIES IN CONNECTION WITH ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON APRIL 8, 2004. NEITHER JONES NOR PURCHASER IS SOLICITING, OR INTENDS TO SOLICIT, PROXIES IN RESPECT OF ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING. IN ADDITION, NEITHER THIS OFFER TO PURCHASE NOR THE OFFER REFERRED TO HEREIN CONSTITUTES A SOLICITATION OF CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION (AS DEFINED IN "INTRODUCTION"). ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). --------------------- The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. March 23, 2004 TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET.......................................... i INTRODUCTION................................................ 1 THE OFFER................................................... 5 1. TERMS OF THE OFFER; EXPIRATION DATE................... 5 2. ACCEPTANCE FOR PAYMENT AND PAYMENT.................... 7 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES AND RIGHTS..................................... 8 4. WITHDRAWAL RIGHTS..................................... 11 5. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE PROPOSED MERGER......................... 12 6. PRICE RANGE OF THE SHARES; DIVIDENDS.................. 13 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS; RIGHTS................................... 14 8. CERTAIN INFORMATION CONCERNING MAXWELL................ 15 9. CERTAIN INFORMATION CONCERNING JONES AND PURCHASER.... 15 10. BACKGROUND OF THE OFFER; TRANSACTIONS WITH MAXWELL.... 16 11. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; THE RIGHTS CONDITION; THE BUSINESS COMBINATION CONDITION; APPRAISAL RIGHTS; "GOING-PRIVATE" TRANSACTIONS........ 24 12. SOURCE AND AMOUNT OF FUNDS............................ 29 13. DIVIDENDS AND DISTRIBUTIONS........................... 30 14. CONDITIONS TO THE OFFER............................... 30 15. CERTAIN LEGAL MATTERS; ANTITRUST; OTHER FOREIGN APPROVALS; STATE TAKEOVER STATUTES.................... 33 16. CERTAIN FEES AND EXPENSES............................. 35 17. MISCELLANEOUS......................................... 36 SOLICITATION OF CONSENTS.................................... 36 INFORMATION CONCERNING PARTICIPANTS......................... 36 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF JONES AND PURCHASER........................ I-1
SUMMARY TERM SHEET MSC Acquisition Corp., an indirect wholly owned subsidiary of Jones, is offering to acquire all the outstanding shares of Class A Common Stock, par value $.01 per share, together with the associated preferred stock purchase rights, of Maxwell at a price of $20.00 per share, net to the seller in cash, without interest. Unless the context otherwise requires, we refer to one share of Maxwell Class A Common Stock, together with the associated preferred stock purchase rights, as a "Share." The following are some of the questions you, as a stockholder of Maxwell, may have and answers to those questions. This summary term sheet is not meant to be a substitute for the information contained in the remainder of this Offer to Purchase and the related Letter of Transmittal, and the information contained in this summary term sheet is qualified in its entirety by the more detailed descriptions and explanations contained in this Offer to Purchase and the related Letter of Transmittal. We urge you to carefully read the entire Offer to Purchase and related Letter of Transmittal prior to making any decision regarding whether to tender your Shares. WHO IS OFFERING TO PURCHASE MY SHARES? Our name is MSC Acquisition Corp. We are a corporation formed in order to make the offer and to take certain other actions in connection therewith. We are an indirect wholly owned subsidiary of Jones, which is a leading designer and marketer of branded apparel, footwear and accessories. See "INTRODUCTION" and "THE OFFER -- Section 9". HOW MANY SHARES ARE YOU SEEKING TO PURCHASE, AT WHAT PRICE, AND DO I HAVE TO PAY ANY BROKERAGE OR SIMILAR FEES TO TENDER? We are offering to purchase all the outstanding Shares at a price of $20.00 per share, net to the seller in cash, without interest. On February 18, 2004, the day Jones informed Maxwell of our proposal to acquire all the outstanding Shares, the last reported sales price of a Share on the Nasdaq National Market System was $17.59, and on March 22, 2004, the last trading day prior to the commencement of the offer, the last reported sales price of a Share on the Nasdaq National Market System was $22.09. If you are the record owner of your Shares and you tender Shares in the offer, you will not have to pay any brokerage or similar fees. However, if you own your Shares through a broker or other nominee, and your broker tenders your Shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See "INTRODUCTION". WHY ARE YOU MAKING THIS OFFER? We are making the offer because we want to acquire control of, and ultimately the entire equity interest in, Maxwell. If the offer is consummated, we intend to consummate a second-step merger with Maxwell in which Maxwell will become an indirect wholly owned subsidiary of Jones and all Shares that are not purchased in the offer will be exchanged for an amount in cash per Share equal to the highest price paid per Share pursuant to the offer. See "INTRODUCTION" and "THE OFFER -- Section 11". ARE YOU TAKING ANY POSITION WITH RESPECT TO THE MATTERS TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS? Maxwell has publicly announced that it is holding its 2004 annual meeting of stockholders on April 8, 2004, to consider certain matters, including, among other things, the election of directors to Maxwell's Board of Directors. We are not taking any position with respect to any of the matters to be considered at the Maxwell annual meeting. Neither this Offer to Purchase nor the offer constitutes a solicitation of proxies in connection with any matter to be considered at the Maxwell annual meeting of stockholders scheduled to be held on April 8, 2004. Jones and we are not soliciting, or intending to solicit, proxies in respect of any matter to be considered at the Maxwell annual meeting. i DO YOU INTEND TO UNDERTAKE A CONSENT SOLICITATION TO REMOVE THE DIRECTORS OF MAXWELL? We have filed a preliminary consent statement with the Securities and Exchange Commission for use in connection with the solicitation of written consents from stockholders of Maxwell to, among other things, remove each member of Maxwell's Board of Directors and elect five of our nominees to serve as directors of Maxwell. Neither this offer to purchase nor the offer constitutes a solicitation of consents in connection with the consent solicitation. Any such solicitation (including the consent solicitation) will be made only pursuant to separate consent solicitation materials complying with the requirements of the rules and regulations of the Securities and Exchange Commission. IF YOU DO UNDERTAKE A CONSENT SOLICITATION, WILL THE GRANTING OF A CONSENT BE A CONDITION TO THE TENDER OF SHARES IN THE OFFER? No. If we undertake a consent solicitation, the granting of a consent to us in connection with our consent solicitation would not be a condition to the tender of Shares in the offer. DO YOU HAVE THE FINANCIAL RESOURCES TO PAY FOR THE SHARES? Yes. We will obtain funds from Jones. Jones has access to sufficient funds to consummate the offer. The offer is not conditioned on either Jones or us obtaining financing. Therefore, we do not think our financial condition is relevant in deciding whether you should tender your Shares in the offer. See "THE OFFER -- Section 12". WHAT ARE THE "PREFERRED STOCK PURCHASE RIGHTS"? The preferred stock purchase rights were issued to all stockholders of Maxwell, but currently are not represented by separate certificates. Instead, they are represented by the certificates for your Shares. Unless the rights are distributed to stockholders, a tender of Shares will include a tender of the associated preferred stock rights. If the rights are distributed, a holder will need to tender one right with each Share tendered. See "THE OFFER -- Section 3" and "THE OFFER -- Section 11". WHAT ARE THE MOST IMPORTANT CONDITIONS TO THE OFFER? The most important conditions to the offer are the following: - Maxwell's stockholders must validly tender and not withdraw before the expiration of the offer a number of Shares that, together with the Shares then owned by Jones and its subsidiaries, would represent at least a majority of the total number of outstanding Shares on a fully diluted basis. - Maxwell's Board of Directors must redeem the preferred stock purchase rights or we must be satisfied, in our sole discretion, that such rights have been invalidated or are otherwise inapplicable to the offer and the proposed second-step merger. - We must be satisfied, in our sole discretion, that Section 203 of the Delaware General Corporation Law will be inapplicable to the proposed second-step merger or any other business combination involving Jones or any of its subsidiaries and Maxwell. - All waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder, must have expired or been terminated. The offer is subject to certain other conditions as well. A more detailed discussion of the conditions to consummation of this offer may be found in "INTRODUCTION", "THE OFFER -- Section 11" and "THE OFFER -- Section 14". HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER INTO THE OFFER? You have until the expiration date of the offer to tender. The offer currently is scheduled to expire at 12:00 Midnight, New York City time, on Monday, April 19, 2004. We currently expect that the offer will be extended until the principal conditions to the offer, which are described above, are satisfied. If the offer is extended, we will issue a press release ii announcing the extension no later than 9:00 a.m., New York City time, on the next business day following the date the offer was scheduled to expire. See "THE OFFER -- Section 1". We may elect to provide a "subsequent offering period" for the offer. A subsequent offering period, if one is included, will be an additional period of time beginning after we have purchased Shares tendered during the offer, during which stockholders may tender, but not withdraw, their Shares and receive the offer consideration. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. HOW DO I ACCEPT THE OFFER AND TENDER MY SHARES? To tender your Shares, you must deliver the certificates representing your Shares, together with a completed Letter of Transmittal and any other documents required by the Letter of Transmittal, to The Bank of New York, the depositary, prior to the expiration of the offer. If your Shares are held in street name (i.e., through a broker, dealer or other nominee), they can be tendered by your nominee through The Depository Trust Company. If you cannot deliver all necessary documents to the depositary in time, you may be able to complete and deliver to the depositary, in lieu of the missing documents, the enclosed Notice of Guaranteed Delivery, provided you are able to comply fully with its terms. See "THE OFFER -- Section 3". IF I ACCEPT THE OFFER, WHEN WILL I BE PAID? If the conditions to the offer are satisfied and we consummate the offer and accept your Shares for payment, you will receive payment for the Shares you tendered as soon as practicable following the expiration of the offer. See "THE OFFER -- Section 2". CAN I WITHDRAW MY PREVIOUSLY TENDERED SHARES? You may withdraw all or a portion of your tendered Shares by delivering written, telegraphic or facsimile notice to the depositary prior to the expiration of the offer. Further, if we have not agreed to accept your Shares for payment within 60 days of the commencement of the offer, you can withdraw them at any time after that 60-day period until we do accept your Shares for payment. Once Shares are accepted for payment, they cannot be withdrawn. The right to withdraw tendered Shares will not apply to any subsequent offering period, if one is included. See "THE OFFER -- Section 4". WHAT DOES MAXWELL'S BOARD OF DIRECTORS THINK OF THIS OFFER? Maxwell's Board of Directors rejected an earlier proposal by Jones to acquire all outstanding Shares for $20.00 per Share in cash. Maxwell's Board of Directors has not approved this offer or otherwise commented on it as of the date of this Offer to Purchase. Within 10 business days after the date of this Offer to Purchase, Maxwell is required by law to publish, send or give to you (and file with the Securities and Exchange Commission) a statement as to whether it recommends acceptance or rejection of the offer, that it has no opinion with respect to the offer or that it is unable to take a position with respect to the offer. IF I DO NOT TENDER BUT THE OFFER IS SUCCESSFUL, WHAT WILL HAPPEN TO MY SHARES? If the offer is successful, we expect to consummate a second-step merger with Maxwell in which Maxwell will become an indirect wholly owned subsidiary of Jones. In the second-step merger, all Shares that were not purchased in the offer will be exchanged for an amount in cash per Share equal to the highest price paid per Share pursuant to the offer. If the proposed second-step merger takes place, stockholders who do not tender in the offer (other than those properly exercising appraisal rights available under Delaware law) will receive the same amount of cash per Share that they would have received had they tendered their Shares in the offer. Therefore, if the proposed second-step merger takes place and you do not properly perfect your available appraisal rights, the only difference between tendering your Shares and not tendering your Shares in the offer is that you will be paid earlier if you tender your Shares. See "INTRODUCTION" and "THE OFFER -- Section 7". The treatment of your Shares if the proposed second-step merger does take place and you properly perfect your appraisal rights is discussed in "THE OFFER -- Section 11". However, if the offer is consummated and the proposed second-step merger does not take place, the number of stockholders and the number of Shares that are still in the hands of the public may be so small that there may no longer iii be an active public trading market (or, possibly, any public trading market) for the Shares. In addition, the Shares may no longer be eligible to be traded on the Nasdaq National Market System or any other securities exchange, and Maxwell may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the Securities and Exchange Commission's rules relating to publicly held companies. See "THE OFFER -- Section 7". WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On March 22, 2004, the last trading day prior to the commencement of the offer, the last reported sales price of a Share on the Nasdaq National Market System was $22.09. On February 18, 2004, the day Jones informed Maxwell of our proposal to acquire all the outstanding Shares, the last reported sales price of a Share on the Nasdaq National Market System was $17.59. Please obtain a recent quotation for your Shares prior to deciding whether or not to tender. See "THE OFFER -- Section 6." ARE APPRAISAL RIGHTS AVAILABLE IN EITHER THE OFFER OR THE PROPOSED SECOND-STEP MERGER? Appraisal rights are not available in the offer. If we consummate the proposed second-step merger on the terms described herein, you will be entitled to appraisal rights in connection with the proposed second-step merger if you do not vote in favor of the proposed second-step merger and you otherwise comply with applicable Delaware law. See "THE OFFER -- Section 11". WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTIONS? The receipt of cash in the offer or the proposed second-step merger in exchange for Shares will be a taxable transaction for U.S. Federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. You should consult your tax advisor about the particular effect the proposed transactions will have on your Shares. See "THE OFFER -- Section 5". WHOM CAN I CALL WITH QUESTIONS? You can call Innisfree M&A Incorporated at (888) 750-5834 (toll-free) or (212) 750-5833 (collect) or Bear, Stearns & Co. Inc. at (888) 235-2327 or (212) 272-2000 with any questions you may have. Innisfree M&A Incorporated is acting as the information agent and Bear, Stearns & Co. Inc. is acting as the dealer manager for the offer. See the back cover of this Offer to Purchase. iv INTRODUCTION To: All Holders of Shares of Class A Common Stock of Maxwell. MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation ("Jones"), hereby offers to purchase (1) all issued and outstanding shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell"), and (2) unless and until validly redeemed by Maxwell's Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, at a price of $20.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Unless the context otherwise requires, all references herein to the "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of Rights pursuant to the Rights Agreement. Tendering stockholders whose Shares are registered in their own name who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions. Stockholders who hold their Shares in street name through a bank, dealer, broker, trust or other nominee should check with such nominee as to whether it will charge any service fees. Except as set forth in Instruction 6 of the Letter of Transmittal, stockholders will not have to pay transfer taxes on the sale of Shares pursuant to the Offer. Any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 included in the Letter of Transmittal may be subject to a required backup Federal income tax withholding of 28% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See "THE OFFER -- Section 5". Purchaser will pay all fees and expenses of Bear, Stearns & Co. Inc. ("Bear Stearns"), as Dealer Manager (the "Dealer Manager"), The Bank of New York, as Depositary (the "Depositary"), and Innisfree M&A Incorporated ("Innisfree"), as Information Agent (the "Information Agent"), incurred in connection with the Offer. See "THE OFFER -- Section 16". The purpose of the Offer is to enable Jones to acquire control of, and ultimately the entire equity interest in, Maxwell. The Offer, as the first step in the acquisition of Maxwell, is intended to facilitate the acquisition of all issued and outstanding Shares. Purchaser currently intends, promptly following consummation of the Offer, to seek to have Maxwell consummate a second-step merger or similar business combination with Purchaser or another direct or indirect wholly owned subsidiary of Jones (the "Proposed Merger"), pursuant to which each then outstanding Share (other than Shares held by Jones or its subsidiaries (including, without limitation, Purchaser) and Shares owned by stockholders who perfect any available appraisal rights under Delaware law) will be converted into the right to receive an amount in cash equal to the highest price paid per Share pursuant to the Offer. Under the Delaware General Corporation Law (the "DGCL") and the New York Business Corporation Law (the "NYBCL") as currently in effect, if Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, Purchaser believes it would be able to approve the Proposed Merger without a vote of Maxwell's Board of Directors or Maxwell's stockholders. If Purchaser does not acquire at least 90% of the outstanding Shares, Purchaser would have to obtain approval from Maxwell's stockholders to effect the Proposed Merger. Notwithstanding the foregoing, certain terms of the Rights and certain provisions of the DGCL may affect the ability of Jones to obtain control of Maxwell and Purchaser's ability to consummate the Proposed Merger. The timing and details of the Proposed Merger will depend on a variety of factors and legal requirements, actions of Maxwell's Board of Directors, the number of Shares, if any, acquired by Purchaser pursuant to the Offer, and whether the Minimum Tender Condition, the Rights Condition, the Business Combination Condition, the HSR Condition (each as defined below) and all other conditions set forth in "THE OFFER -- Section 14" are satisfied or waived. There can be no assurance that the Proposed Merger will be consummated or as to the timing of the Proposed Merger if it is consummated. See "THE OFFER -- Section 11" and "THE OFFER -- Section 14". Jones and Purchaser expect, if necessary, to commence a solicitation of written consents from stockholders of Maxwell (the "Consent Solicitation") for the following purposes: (1) to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and any person elected or appointed to Maxwell's Board of Directors by such directors to fill any vacancy on Maxwell's Board of Directors or any newly-created directorships, (2) to elect five nominees of Purchaser to serve as directors of Maxwell (or, if any such nominee is unable or unwilling to serve as a director of Maxwell, any other person designated as a nominee by the remaining nominee or nominees) (the "Purchaser Nominees") and (3) to repeal each provision of the Maxwell bylaws and amendments thereto, if any, adopted after January 22, 2004 and before the effectiveness of the proposals made pursuant to the Consent Solicitation. Jones and Purchaser have filed a preliminary consent statement with the Securities and Exchange Commission ("SEC") for use in connection with the Consent Solicitation. Jones and Purchaser expect, if necessary, to seek to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and replace them with directors who Jones and Purchaser believe will, in their independent judgment and good faith, (1) consider the Offer and any other alternative proposal and (2) consider, to the extent that it is in the best interest of Maxwell's stockholders, taking action to redeem the Rights (or to amend the Rights Agreement to make the Rights inapplicable to the Offer and the Proposed Merger or any alternative proposal) and to approve the Offer and the Proposed Merger or any alternative proposal for purposes of Section 203 of the DGCL. Subject to their fiduciary duties, the Purchaser Nominees, if elected, are expected to support the Offer and the Proposed Merger and take actions necessary to satisfy the Rights Condition and the Business Combination Condition. NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF PROXIES IN CONNECTION WITH ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON APRIL 8, 2004. NEITHER JONES NOR PURCHASER IS SOLICITING, OR INTENDS TO SOLICIT, PROXIES IN RESPECT OF ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING. IN ADDITION, NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION. ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT. JONES AND PURCHASER ARE SEEKING TO DISCUSS WITH MAXWELL THE ACQUISITION OF MAXWELL BY PURCHASER. JONES AND PURCHASER RESERVE THE RIGHT TO AMEND THE OFFER (INCLUDING, WITHOUT LIMITATION, AMENDING THE NUMBER OF SHARES TO BE PURCHASED AND THE OFFER PRICE) UPON ENTERING INTO A MERGER AGREEMENT WITH MAXWELL, OR TO NEGOTIATE A MERGER AGREEMENT WITH MAXWELL NOT INVOLVING A TENDER OFFER PURSUANT TO WHICH PURCHASER WOULD TERMINATE THE OFFER AND THE SHARES WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED INTO THE CONSIDERATION NEGOTIATED BY JONES, PURCHASER AND MAXWELL. The Offer is subject to the fulfillment of certain conditions, including, without limitation, the following: The Minimum Tender Condition. Consummation of the Offer is conditioned upon there being validly tendered and not withdrawn prior to the Expiration Date (as defined in "THE OFFER -- Section 1") a number of Shares that, together with the Shares then owned by Jones and its subsidiaries (including, without limitation, Purchaser), would represent at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of the purchase of Shares pursuant to the Offer (the "Minimum Tender Condition"). According to Maxwell's Form 10-Q (the "Maxwell 10-Q") for Maxwell's fiscal quarter ended January 31, 2004, as of March 4, 2004, 14,837,806 Shares were issued and outstanding. According to Maxwell's Proxy Statement for Maxwell's 2004 annual meeting of stockholders (the "Maxwell Proxy Statement"), as of February 24, 2004, there were issued and outstanding options to purchase 1,758,651 Shares. Based on Purchaser's examination of Maxwell's publicly filed documents, as of February 24, 2004, there were no other options or any warrants outstanding or rights exercisable for, or securities convertible into, Shares. For purposes of the Offer, "fully diluted basis" assumes that all outstanding stock options are presently exercisable. Based on the foregoing and assuming no Shares have been issued since March 4, 2004 (other than Shares issued pursuant to the exercise of the stock options referred to above), and assuming no options, warrants or rights exercisable 2 for, or securities convertible into, Shares have been issued since February 24, 2004, if 8,298,229 Shares were tendered and not withdrawn prior to the Expiration Date, the Minimum Tender Condition would be satisfied. The Rights Condition. Consummation of the Offer is conditioned upon Maxwell's Board of Directors redeeming the Rights or Purchaser being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger (the "Rights Condition"). See "THE OFFER -- Section 11". The Rights are described in Maxwell's Registration Statement on Form 8-A dated November 6, 1998 (the "Maxwell 8-A"). The terms of the Rights are set forth in the Rights Agreement. According to the Maxwell 8-A, on October 20, 1998, Maxwell's Board of Directors declared a dividend of one Right for each Share outstanding as of November 9, 1998 (and for each Share that becomes outstanding between such date and the Distribution Date (as defined in "THE OFFER -- Section 11")). Each Right entitles the registered holder to purchase from Maxwell one one-thousandth of a share of Maxwell's Series A Junior Participating Preferred Stock (the "Preferred Shares"), at a price of $80 per share (the "Preferred Share Purchase Price"), subject to adjustment. The Rights are transferable only with the Shares until they become exercisable. The Rights will not become exercisable until the Distribution Date and will expire on November 2, 2008 (the "Rights Expiration Date"), unless earlier redeemed by Maxwell as discussed in "THE OFFER -- Section 11". Based on information made publicly available by Maxwell, Purchaser believes that, as of March 22, 2004, the Rights are not exercisable, certificates representing the Rights (the "Rights Certificates") have not been issued and the Rights are evidenced by the certificates representing the Shares (the "Share Certificates"). Purchaser believes that, as a result of the commencement of the Offer, the Distribution Date may occur as early as 10 business days following the date of this Offer to Purchase unless Maxwell's Board of Directors determines to postpone the Distribution Date. See "THE OFFER -- Section 11". UNLESS THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SHARES IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN "THE OFFER -- SECTION 3". IF NO DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS. Purchaser believes that under the circumstances of the Offer, Maxwell's Board of Directors has a fiduciary obligation to redeem the Rights (or amend the Rights Agreement to make the Rights inapplicable to the Offer and the Proposed Merger), and Purchaser hereby requests that Maxwell's Board of Directors do so. However, there can be no assurance that Maxwell's Board of Directors will redeem the Rights or amend the Rights Agreement. Jones and Purchaser expect, if necessary, to seek to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and replace them with directors who Jones and Purchaser believe will consider, to the extent that it is in the best interest of Maxwell's stockholders, taking action to redeem the Rights (or to amend the Rights Agreement to make the Rights inapplicable to the Offer and the Proposed Merger or any alternative proposal). Subject to their fiduciary duties, the Purchaser Nominees, if elected, are expected to support the Offer and the Proposed Merger and take actions necessary to satisfy the Rights Condition. The Business Combination Condition. Consummation of the Offer is conditioned upon Purchaser being satisfied, in its sole discretion, that Section 203 of the DGCL will be inapplicable to the Proposed Merger or any other "business combination" (as defined in Section 203 of the DGCL) involving Jones or any of its subsidiaries (including, without limitation, Purchaser) and Maxwell (the "Business Combination Condition"). Section 203 of the DGCL, in general, prevents an "interested stockholder" (generally, a stockholder and an affiliate or associate thereof owning 15% or more of a corporation's outstanding voting stock) from engaging in a business combination (defined to include a merger or consolidation and certain other transactions) with a Delaware corporation for a period of three years following the time such stockholder became an interested stockholder unless (1) prior to such time the corporation's board of directors approved either the business combination or the transaction which resulted in such stockholder becoming an interested stockholder, (2) upon consummation of the transaction which resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares of stock owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (3) at or subsequent to such time the business 3 combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders (and not by written consent) by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. See "THE OFFER -- Section 11". The Offer is subject to the Business Combination Condition, which will be satisfied if, among other things, (1) prior to the acceptance for payment of Shares pursuant to the Offer, Maxwell's Board of Directors approves the Offer or the Proposed Merger or (2) there are validly tendered prior to the Expiration Date and not withdrawn a number of Shares that, together with the Shares then owned by Purchaser, would represent at least 85% of the Shares outstanding on the date hereof (excluding Shares owned by certain employee stock plans and persons who are directors and also officers of Maxwell). Purchaser believes that under the circumstances of the Offer, Maxwell's Board of Directors has a fiduciary obligation to approve the Offer and take any other action necessary to render Section 203 of the DGCL inapplicable to the Proposed Merger or other business combination with Maxwell, and Purchaser hereby requests that Maxwell's Board of Directors do so. However, there can be no assurance that Maxwell's Board of Directors will grant such approval or take such action. Jones and Purchaser expect, if necessary, to seek to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and replace them with directors who Jones and Purchaser believe will consider, to the extent that it is in the best interest of Maxwell's stockholders, taking action to approve the Offer and the Proposed Merger or any alternative proposal for purposes of Section 203 of the DGCL. Subject to their fiduciary duties, the Purchaser Nominees, if elected, are expected to support the Offer and the Proposed Merger and take actions necessary to satisfy the Business Combination Condition. The HSR Condition. Consummation of the Offer is conditioned upon the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") (the "HSR Condition"). Under the HSR Act, certain acquisition transactions, such as the Offer and the Proposed Merger, may not be consummated until certain information and documentary material have been furnished for review by the Antitrust Division of the Department of Justice and the Federal Trade Commission and certain waiting period requirements have been satisfied. See "THE OFFER -- Section 15". CERTAIN OTHER CONDITIONS TO THE CONSUMMATION OF THE OFFER ARE DISCUSSED IN "THE OFFER -- SECTION 14". PURCHASER RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES AND REGULATIONS OF THE SEC TO AMEND OR WAIVE ANY ONE OR MORE OF THE TERMS AND CONDITIONS OF THE OFFER, INCLUDING, WITHOUT LIMITATION, THE MINIMUM TENDER CONDITION, THE RIGHTS CONDITION AND THE BUSINESS COMBINATION CONDITION. SEE "THE OFFER -- SECTION 1" AND "THE OFFER -- SECTION 14". THE OFFER IS NOT CONDITIONED UPON EITHER JONES OR PURCHASER OBTAINING FINANCING. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SALE OF SHARES PURSUANT TO THE OFFER AND THE CONVERSION OF SHARES PURSUANT TO THE PROPOSED MERGER ARE DISCUSSED IN "THE OFFER -- SECTION 5". NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF PROXIES IN CONNECTION WITH ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON APRIL 8, 2004. NEITHER JONES NOR PURCHASER IS SOLICITING, OR INTENDS TO SOLICIT, PROXIES IN RESPECT OF ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING. IN ADDITION, NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION. ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 4 THE OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered and not withdrawn in accordance with the procedures set forth in "THE OFFER -- Section 4" on or prior to the Expiration Date. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, April 19, 2004, unless and until Purchaser, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, will expire. The Offer is conditioned upon the Minimum Tender Condition, the Rights Condition, the Business Combination Condition, the HSR Condition and all the other conditions set forth in the "THE OFFER -- Section 14". Purchaser reserves the right (but will not be obligated), subject to the applicable rules and regulations of the SEC, to amend or waive the Minimum Tender Condition, the Rights Condition, the Business Combination Condition or any other condition of the Offer. If any of the Minimum Tender Condition, the Rights Condition, the Business Combination Condition or any of the other conditions set forth in "THE OFFER -- Section 14" has not been satisfied by 12:00 Midnight, New York City time, on Monday, April 19, 2004 (or any other time then set as the Expiration Date), Purchaser may elect to: (1) extend the Offer and, subject to applicable withdrawal rights, retain all tendered Shares until the expiration of the Offer, as extended; (2) subject to complying with applicable rules and regulations of the SEC, waive all of the unsatisfied conditions and accept for payment and pay for all Shares tendered and not withdrawn prior to the Expiration Date; or (3) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders. Purchaser expressly reserves the right (but will not be obligated), in its sole discretion, at any time and from time to time, to extend the period during which the Offer is open for any reason by giving oral or written notice of the extension to the Depositary and by making a public announcement of the extension. During any extension, all Shares previously tendered and not withdrawn will remain subject to the Offer and subject to the right of a tendering stockholder to withdraw Shares. Subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, Purchaser expressly reserves the right to: (1) terminate or amend the Offer if any of the conditions referred to in "THE OFFER -- Section 14" has not been satisfied or upon the occurrence of any of the events specified in "THE OFFER -- Section 14"; or (2) waive any condition or otherwise amend the Offer in any respect, in each case, by giving oral or written notice of such termination, waiver or amendment to the Depositary and by making a public announcement thereof, as described below. Purchaser acknowledges that Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer. If Purchaser extends the Offer or if Purchaser is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under "THE OFFER -- Section 4". However, the ability of Purchaser to delay the payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder's offer. Any extension, delay, termination, waiver or amendment of the Offer will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., 5 New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which Purchaser may choose to make any public announcement, subject to applicable law (including, without limitation, Rule 14d-4(d) under the Exchange Act, which requires that material changes be promptly disseminated to holders of Shares in a manner reasonably designed to inform such holders of such change), Purchaser currently intends to make announcements regarding the Offer by issuing a press release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(d)(1), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which an Offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentage of securities sought or a change in any dealer's soliciting fee, will depend upon the facts and circumstances, including, without limitation, the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in any dealer's soliciting fee, a minimum 10-business day period from the date that such notice of such change is first published or sent or given to security holders is required to allow for adequate dissemination to stockholders. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a Federal holiday, and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. If Purchaser decides, in its sole discretion, to increase the consideration offered in the Offer to holders of Shares and if, at the time that notice of the increase is first published, sent or given to holders of Shares, the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that such notice is first so published, sent or given, then the Offer will be extended until at least the expiration of 10 business days from the date the notice of the increase is first published, sent or given to holders of Shares. IF, PRIOR TO THE EXPIRATION DATE, PURCHASER INCREASES THE CONSIDERATION BEING PAID FOR SHARES ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION WILL BE PAID TO ALL STOCKHOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO THE ANNOUNCEMENT OF THE INCREASE IN CONSIDERATION. Pursuant to Rule 14d-11 under the Exchange Act, although Purchaser does not currently intend to do so, Purchaser may, subject to certain conditions, elect to provide a subsequent offering period of from three business days to 20 business days in length following the expiration of the Offer on the Expiration Date and acceptance for payment of the Shares tendered in the Offer (a "Subsequent Offering Period"). A Subsequent Offering Period would be an additional period of time, following the first purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. During a Subsequent Offering Period, tendering stockholders would not have withdrawal rights and Purchaser would promptly purchase and pay for any Shares tendered at the same price paid in the Offer. Rule 14d-11 under the Exchange Act provides that Purchaser may provide a Subsequent Offering Period so long as, among other things, (1) the initial 20-business day period of the Offer has expired, (2) Purchaser offers the same form and amount of consideration for Shares in the Subsequent Offering Period as in the initial Offer, (3) Purchaser immediately accepts and promptly pays for all Shares tendered during the Offer prior to its expiration, (4) Purchaser announces the results of the Offer, including the approximate number and percentage of Shares deposited in the Offer, no later than 9:00 a.m., New York City time, on the next business day after the Expiration Date and immediately begins the Subsequent Offering Period and (5) Purchaser immediately accepts and promptly pays for Shares as they are tendered during the Subsequent Offering Period. If Purchaser elects to include a Subsequent Offering Period, it will notify stockholders of Maxwell consistent with the requirements of the SEC. PURCHASER CURRENTLY DOES NOT INTEND TO INCLUDE A SUBSEQUENT OFFERING PERIOD IN THE OFFER, ALTHOUGH IT RESERVES THE RIGHT TO DO SO IN ITS SOLE DISCRETION. PURSUANT TO RULE 14D-7(A)(2) UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS APPLY TO SHARES TENDERED DURING A SUBSEQUENT OFFERING PERIOD AND NO WITHDRAWAL RIGHTS APPLY DURING THE SUBSEQUENT OFFERING PERIOD WITH RESPECT TO SHARES TENDERED IN THE OFFER AND ACCEPTED FOR PAYMENT. THE SAME CONSIDERATION WILL BE PAID 6 TO STOCKHOLDERS TENDERING SHARES IN THE OFFER OR IN A SUBSEQUENT OFFERING PERIOD, IF ONE IS INCLUDED. A request is being made to Maxwell pursuant to Rule 14d-5 under the Exchange Act for the use of Maxwell's stockholder lists and security position listings for the purpose of disseminating the Offer to stockholders. Upon compliance by Maxwell with this request, this Offer to Purchase, the Letter of Transmittal and all other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Maxwell's stockholders lists, or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares by Purchaser or, if it so elects, the materials will be mailed by Maxwell. A request is also being made to Maxwell pursuant to Section 220(b) of the DGCL to inspect Maxwell's stock ledger, a list of Maxwell's stockholders and Maxwell's other books and records. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if Share Certificates are submitted representing more Shares than are tendered, certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered pursuant to the book-entry transfer procedures set forth in "THE OFFER -- Section 3", such Shares will be credited to an account maintained within the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. In the event separate Rights Certificates are issued, similar action will be taken with respect to unpurchased and untendered Rights. Purchaser reserves the right to transfer or assign to one or more of Purchaser's affiliates, in whole or from time to time in part, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the Offer as so extended or amended), Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered and not withdrawn prior to the Expiration Date as soon as practicable after the Expiration Date. Any determination concerning the satisfaction of the terms and conditions of the Offer shall be within the sole discretion of Purchaser. See "THE OFFER -- Section 14". Purchaser expressly reserves the right, in its sole discretion but subject to the applicable rules of the SEC, to delay acceptance for payment of, and thereby delay payment for, Shares if any of the conditions referred to in "THE OFFER -- Section 14" has not been satisfied or upon the occurrence of any of the events specified in "THE OFFER -- Section 14". In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of: (1) the Share Certificates and, if applicable, the Rights Certificates, or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares and, if applicable, Rights (if such procedure is available), into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in "THE OFFER -- Section 3"; (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer; and (3) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares and, if applicable, Rights, which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. 7 If Rights Certificates have been distributed to holders of Shares, such holders are required to tender Rights Certificates representing a number of Rights equal to the number of Shares being tendered in order to effect a valid tender of such Shares. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering stockholders. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, Purchaser's obligation to make such payment shall be satisfied and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR ANY SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN PAYING SUCH PURCHASE PRICE. Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES AND RIGHTS. Valid Tender of Shares and Rights. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, either (1) on or prior to the Expiration Date, (a) Share Certificates representing tendered Shares (and, prior to the Distribution Date, representing tendered Rights) and, after the Distribution Date, Rights Certificates, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, or such Shares and Rights must be tendered pursuant to the book-entry transfer procedures set forth below and a Book-Entry Confirmation must be received by the Depositary, (b) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer of Shares and Rights, must be received by the Depositary at one of its addresses and (c) any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses or (2) the guaranteed delivery procedures set forth below must be followed. UNLESS THE RIGHTS ARE REDEEMED PRIOR TO THE EXPIRATION DATE, HOLDERS OF SHARES WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. ACCORDINGLY, IF A DISTRIBUTION DATE HAS OCCURRED AND A STOCKHOLDER HAS SOLD ITS RIGHTS SEPARATELY FROM ITS SHARES AND DOES NOT OTHERWISE ACQUIRE RIGHTS, SUCH STOCKHOLDER MAY NOT BE ABLE TO SATISFY THE REQUIREMENTS OF THE OFFER FOR THE TENDER OF SHARES. Separate Delivery of Rights Certificates. If the Distribution Date has not occurred prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date has occurred and Rights Certificates have been distributed to holders of Shares prior to the time a holder's Shares are purchased pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary or, if available, a Book-Entry Confirmation must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time Shares are purchased pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedures described below. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates to the Depositary representing a number of Rights equal to the number of Shares tendered pursuant to the Offer within a period ending on the later of (1) three Nasdaq National Market System ("NASDAQ") trading days after the date of execution of the Notice of Guaranteed Delivery and (2) three business days after the date that Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights prior to accepting the associated Shares for payment pursuant to the Offer if the Distribution Date has occurred prior to the Expiration Date. 8 THE METHOD OF DELIVERY OF SHARES, RIGHTS (IF APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING, WITHOUT LIMITATION, DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will make a request to establish accounts with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures set forth below must be complied with. If the Distribution Date occurs, to the extent that the Rights become eligible for book-entry transfer under procedures established by the Book-Entry Transfer Facility, the Depositary also will make a request to establish an account with respect to the Rights at such Book-Entry Transfer Facility, but no assurance can be given that book-entry delivery of Rights will be available. If book-entry delivery of Rights is available, the foregoing book-entry transfer procedures will also apply to Rights. Otherwise, if Rights Certificates have been issued, a tendering stockholder will be required to tender Rights by means of physical delivery to the Depositary of Rights Certificates (in which event references in this Offer to Purchase to Book-Entry Confirmations with respect to Rights will be inapplicable) or pursuant to the guaranteed delivery procedure set forth below. REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (1) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates or Rights Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or Share Certificates not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered Share Certificates or Rights Certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates and Rights Certificates are forwarded separately to the Depositary, a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, must accompany each such delivery. 9 Guaranteed Delivery. If a stockholder desires to tender Shares and Rights pursuant to the Offer and such stockholder's Share Certificates or, if applicable, Rights Certificates, are not immediately available (including, without limitation, if the Distribution Date has occurred but Rights Certificates have not yet been distributed) or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (3) within (a) in the case of Shares, three NASDAQ trading days after the date of execution of such Notice of Guaranteed Delivery or (b) in the case of Rights, a period ending on the later of (x) three NASDAQ trading days after the date of execution of such Notice of Guaranteed Delivery and (y) three business days after the date Rights Certificates are distributed to stockholders, (i) Share Certificates representing tendered Shares (and, prior to the Distribution Date, representing tendered Rights) and, after the Distribution Date, Rights Certificates, are received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, or such Shares and Rights are tendered pursuant to the book-entry transfer procedures and a Book-Entry Confirmation is received by the Depositary, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer of Shares and Rights, is received by the Depositary at one of such addresses and (iii) any other documents required by the Letter of Transmittal are received by the Depositary at one of such addresses. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram or facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (1) Share Certificates representing tendered Shares (or a Book-Entry Confirmation) and, after the Distribution Date, Rights Certificates (or a Book-Entry Confirmation, if available), (2) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book entry transfer of Shares and Rights and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time, and will depend upon when Share Certificates (and, if applicable, Rights Certificates) representing, or Book-Entry Confirmations of, such Shares (and, if applicable, Rights, if available) are received into the Depositary's account at the Book-Entry Transfer Facility. Backup U.S. Federal Income Tax Withholding. Under the U.S. Federal income tax laws, payments in connection with the Offer and the Proposed Merger may be subject to "backup withholding" at a rate of 28% unless a stockholder that holds Shares (1) provides a correct taxpayer identification number (which, for an individual stockholder, is the stockholder's social security number) and any other required information, or (2) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, and otherwise complies with applicable requirements of the backup withholding rules. A stockholder that does not provide a correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. To prevent backup U.S. Federal income tax withholding on payments with respect to the purchase price of Shares purchased pursuant to the Offer or converted into cash in the Proposed Merger, as the case may be, each stockholder should provide the Depositary with his or her correct taxpayer identification number and certify that he or she is not subject to backup U.S. Federal income tax withholding by completing the Substitute Internal Revenue Service Form W-9 included in the Letter of Transmittal. Noncorporate foreign stockholders should complete and sign an Internal Revenue Service Form W-8BEN, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 of the Letter of Transmittal. Appointment as Proxy. By executing a Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints Wesley R. Card and Ira M. Dansky, or either of them, and any individual designated by either of them or Purchaser, and each of them individually, as such stockholder's attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect 10 to the Shares and Rights tendered by such stockholder and accepted for payment by Purchaser and with respect to any and all Shares, Rights or other securities issued in respect of such Shares or Rights on or after March 22, 2004. All such proxies shall be considered coupled with an interest in the tendered Shares and Rights. Such appointment will be effective when, and only to the extent that Purchaser accepts for payment such Shares and Rights as provided herein. Upon such appointment, all prior proxies and consents given by such stockholder with respect to such Shares (except for any consents issued under the Consent Solicitation) and Rights and other securities will, without further action, be revoked, and no subsequent power of attorney, proxies, consents or revocations may be given (and if given will not be deemed effective). The designees of Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares, Rights and other securities or rights with respect to such Shares, Rights and other securities or rights in respect of any annual, special or adjourned meeting of Maxwell's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. Purchaser reserves the right to require that, in order for Shares and Rights to be validly tendered, immediately upon Purchaser's acceptance for payment of such Shares and Rights, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares, Rights and other securities or rights. See "THE OFFER -- Section 11". The foregoing proxies are effective only upon acceptance for payment of Shares pursuant to the Offer. NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF PROXIES IN CONNECTION WITH ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON APRIL 8, 2004. NEITHER JONES NOR PURCHASER IS SOLICITING, OR INTENDS TO SOLICIT, PROXIES IN RESPECT OF ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING. IN ADDITION, NEITHER THIS OFFER TO PURCHASE NOR THE OFFER CONSTITUTES A SOLICITATION OF CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION. ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT. Determination of Validity. All questions as to the form of documents and validity, eligibility (including, without limitation, as to time of receipt) and acceptance for payment of any tender of Shares (and, if applicable, Rights) will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to waive any defect or irregularity in any tender of Shares (and, if applicable, Rights) of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders without any effect on the rights of such other stockholders. Purchaser's interpretation of the terms and conditions of the Offer (including, without limitation, the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Shares will be deemed to have been validly made until all defects and irregularities with respect to such tender have been cured or waived. None of Purchaser, Jones or any of their affiliates or assigns, if any, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Other Requirements. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares (and, if applicable, Rights) made pursuant to the Offer are irrevocable. Shares and Rights tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided herein, may also be withdrawn at any time after May 21, 2004 (or such later date as may apply in case the Offer is extended). A withdrawal of a Share will also constitute a withdrawal of the associated Right. Rights may not be withdrawn unless the associated Shares are also withdrawn. To be effective, a notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered 11 the Shares or Rights to be withdrawn, the number of Shares or Rights to be withdrawn and the name of the registered holder of the Shares or Rights to be withdrawn, if different from the name of the person who tendered the Shares or Rights. If Share Certificates or Rights Certificates evidencing Shares or Rights to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares and Rights have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares or Rights have been delivered pursuant to the book-entry transfer procedures as set forth in "THE OFFER -- Section 3", any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares or Rights and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of Shares or Rights may not be rescinded. Any Shares or Rights properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures discussed in "THE OFFER -- Section 3". All questions as to the form and validity (including, without limitation, as to time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. None of Purchaser, Jones or any of their affiliates or assigns, if any, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. If Purchaser provides a Subsequent Offering Period following the Offer (as discussed in "THE OFFER -- Section 1"), no withdrawal rights will apply to Shares and Rights tendered during such Subsequent Offering Period or to Shares and Rights tendered in the Offer and accepted for payment. 5. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE PROPOSED MERGER. The receipt of cash pursuant to the Offer or the Proposed Merger will be a taxable transaction for U.S. Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income tax laws. Generally, for U.S. Federal income tax purposes, a tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer or the Proposed Merger and the aggregate adjusted tax basis in the Shares and Rights tendered by the stockholder and purchased pursuant to the Offer or converted into cash in the Proposed Merger, as the case may be. Gain or loss will be calculated separately for each block of Shares and Rights tendered and purchased pursuant to the Offer or converted into cash in the Proposed Merger, as the case may be. If tendered Shares and Rights are held by a tendering stockholder as capital assets, gain or loss recognized by such stockholder will be capital gain or loss, which will be long-term capital gain or loss if such stockholder's holding period for the Shares and Rights exceeds one year. In the case of a tendering noncorporate stockholder, long-term capital gains will be eligible for reduced U.S. Federal income tax rates. A stockholder that receives cash in connection with the exercise of its appraisal rights under the DGCL as described herein under "THE OFFER -- Section 11" will generally recognize a capital gain or loss in the same manner. In addition, the ability to use capital losses to offset ordinary income is limited. The foregoing discussion may not be applicable with respect to Shares and Rights received pursuant to the exercise of employee stock options or otherwise as compensation or with respect to holders of Shares and Rights who are subject to special tax treatment under the Code such as non-U.S. persons, life insurance companies, tax-exempt organizations and financial institutions and may not apply to a holder of Shares and Rights in light of individual circumstances, such as holding Shares as a hedge or as part of a straddle or a hedging, constructive sale, integrated or other risk-reduction transaction. In addition, the foregoing does not address state, local or foreign tax laws that may be applicable. STOCKHOLDERS OF MAXWELL ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE PROPOSED MERGER, INCLUDING, WITHOUT LIMITATION, THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES. 12 Backup Withholding. Certain noncorporate stockholders of Maxwell may be subject to backup withholding at a 28% rate on cash payments received in connection with the Offer and the Proposed Merger (including, without limitation, cash paid in respect of the exercise of appraisal rights). Backup withholding will not apply, however, to a stockholder who (1) furnishes a correct taxpayer identification number and certifies that such stockholder is not subject to backup withholding on the Internal Revenue Service Form W-9 included in the Letter of Transmittal, (2) provides a certification of foreign status on Internal Revenue Service Form W-8BEN or successor form or (3) is otherwise exempt from backup withholding and, when required, demonstrates its exempt status. If a stockholder does not provide a correct taxpayer identification number, such stockholder may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against a stockholder's U.S. Federal income tax liability provided the required information is given to the Internal Revenue Service. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder by filing a U.S. Federal income tax return. Stockholders of Maxwell should consult their own tax advisors as to their qualification for exemption from withholding and the procedure for obtaining the exemption. 6. PRICE RANGE OF THE SHARES; DIVIDENDS. According to the Maxwell Form 10-K for Maxwell's fiscal year ended October 31, 2003 (the "Maxwell 10-K"), the Shares are listed and traded principally on NASDAQ under the symbol "MAXS". The following table sets forth, for the periods indicated, the last reported high and low sales prices for the Shares on NASDAQ as reported in the Maxwell 10-K for Maxwell's fiscal years ended October 31, 2002 and October 31, 2003 and as reported by SunGard PowerData(TM)(Tradeline(R)) for Maxwell's fiscal quarter ended January 31, 2004 and Maxwell's fiscal quarter through March 22, 2004.
LOW HIGH ------ ------ Fiscal Year Ended October 31, 2002 First Quarter (ended January 31, 2002).................... $ 9.00 $11.40 Second Quarter (ended April 30, 2002)..................... 10.33 13.47 Third Quarter (ended July 31, 2002)....................... 10.80 16.37 Fourth Quarter (ended October 31, 2002)................... 9.97 13.35 Fiscal Year Ended October 31, 2003 First Quarter (ended January 31, 2003).................... 10.74 11.81 Second Quarter (ended April 30, 2003)..................... 10.71 12.20 Third Quarter (ended July 31, 2003)....................... 12.20 14.53 Fourth Quarter (ended October 31, 2003)................... 12.89 16.00 Fiscal Year Ending October 31, 2004 First Quarter (ended January 31, 2004).................... 15.12 19.06 Second Quarter (through March 22, 2004)................... 16.70 22.53
On February 18, 2004, the day Jones informed Maxwell of its proposal to acquire all the outstanding Shares, the last reported sales price of a Share on NASDAQ was $17.59, and on March 22, 2004, the last trading day prior to the commencement of the Offer, the last reported sales price of a Share on NASDAQ was $22.09. Stockholders are urged to obtain a current market quotation for the Shares. Purchaser believes, based upon publicly available information, that as of the date of this Offer to Purchase, the Rights are listed on NASDAQ, are attached to the Shares and are not traded separately. As a result, the sale prices per Share set forth above are also the high and low sale prices per Share and associated Right during such periods. Upon the occurrence of the Distribution Date, the Rights are to detach and may trade separately from the Shares. See "THE OFFER -- Section 11". If the Distribution Date occurs and the Rights begin to trade separately from the Shares, stockholders are also urged to obtain a current market quotation for the Rights. Dividends. Maxwell has not paid a dividend during the two years prior to the date of this Offer to Purchase. On April 18, 2002, Maxwell's Board of Directors approved a 3 for 2 stock split. If Purchaser acquires control of Maxwell, 13 Purchaser currently intends that no dividends will be declared on the Shares prior to Purchaser's acquisition of the entire equity interest of Maxwell. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS; RIGHTS. If the Offer is successful and the Proposed Merger is consummated, stockholders who do not tender in the Offer (other than those properly exercising appraisal rights available under Delaware law) will receive the same amount of cash per Share that they would have received had they tendered their Shares in the Offer. Therefore, if the Proposed Merger takes place and a stockholder does not properly perfect its available appraisal rights, the only difference between tendering Shares in the Offer and not tendering Shares in the Offer is that tendering stockholders will be paid earlier. However, if the Offer is consummated and the Proposed Merger does not take place, the number of stockholders and the number of Shares that are still in the hands of the public may be so small that there may no longer be an active public trading market (or, possibly, any public trading market) for the Shares. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether such reduction would cause future market prices to be greater or less than the price paid in the Offer. NASDAQ Listing. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued inclusion in NASDAQ. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the criteria for continued inclusion in NASDAQ, the market for the Shares could be adversely affected. In accordance with NASDAQ's published guidelines, the Shares would not meet the criteria for continued inclusion in NASDAQ if, among other things, the number of outstanding Shares (less any Shares held by officers, directors or 10% beneficial owners) were less than 750,000, the aggregate market value of the publicly held Shares were less than $5,000,000 or there were fewer than two market makers for the Shares. If, as a result of the purchase of the Shares pursuant to the Offer, the Shares no longer meet these standards, the quotations on NASDAQ will be discontinued. In the event the Shares were no longer quoted on NASDAQ, quotations might still be available from other sources. The extent of the public market for the Shares and availability of such quotations would, however, depend upon such factors as the number of holders and/or the aggregate market value of the publicly held Shares at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act and other factors. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of Maxwell to the SEC if the Shares are neither listed on a national securities exchange nor quoted on NASDAQ and there are fewer than 300 record holders of the Shares. The termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by Maxwell to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement to furnish a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions, no longer applicable to Maxwell. See "THE OFFER -- Section 11". In addition, "affiliates" of Maxwell and persons holding "restricted securities" of Maxwell may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. Purchaser intends to seek to cause Maxwell to terminate registration of the Shares under the Exchange Act as soon as practicable after consummation of the Offer pursuant to the requirements for termination of registration of the Shares. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer, it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event the Shares could no longer be used as collateral for loans made by brokers. Rights. Under the terms of the Rights Agreement, as soon as practicable following the Distribution Date, Rights Certificates will be mailed to holders of record of the Shares as of the close of business on the Distribution Date. If the 14 Distribution Date has occurred and the Rights separate from the Shares, the foregoing discussion with respect to the effect of the Offer on the market for the Shares, NASDAQ listing and Exchange Act registration would apply to the Rights in a similar manner. 8. CERTAIN INFORMATION CONCERNING MAXWELL. The information concerning Maxwell contained in this Offer to Purchase has been taken from or based upon publicly available documents and records on file with the SEC and other public sources and is qualified in its entirety by reference thereto. None of Jones, Purchaser, the Dealer Manager, the Information Agent or the Depositary can take responsibility for the accuracy or completeness of the information contained in such documents and records, or for any failure by Maxwell to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Jones, Purchaser, the Dealer Manager, the Information Agent or the Depositary. According to the Maxwell 10-K, Maxwell was incorporated in the Commonwealth of Massachusetts in 1976 and changed its state of incorporation to Delaware in 1994. The principal executive offices of Maxwell are located at 101 Sprague Street, P.O. Box 37, Readville (Boston), Massachusetts 02137 and its telephone number is (617) 364-5090. According to the Maxwell 10-K, Maxwell designs, develops and markets casual and dress footwear for women and children under multiple brand names. According to the Maxwell 10-Q for Maxwell's fiscal quarter ended January 31, 2004, as of March 4, 2004, 14,837,806 Shares were issued and outstanding. According to the Maxwell Proxy Statement, as of February 24, 2004, there were issued and outstanding options to purchase 1,758,651 Shares. Maxwell is subject to the informational filing requirements under the Exchange Act and is required to file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information Maxwell files at the SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at l-800-SEC-0330 for further information on the public reference room. Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The respective SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. 9. CERTAIN INFORMATION CONCERNING JONES AND PURCHASER. Purchaser is an indirect wholly owned subsidiary of Jones organized in 2004 under the laws of the State of New York in order to make the Offer and to take other action in connection therewith. Purchaser has not, and is not expected to, engage in any business other than in connection with its organization, the Offer, the Proposed Merger and, if necessary, to engage in the Consent Solicitation. Purchaser's principal administrative offices and telephone number are the same as those of Jones. Jones was organized in 1975 under the laws of the Commonwealth of Pennsylvania. Jones's principal administrative offices are located at 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007 and telephone number is (215) 785-4000. Jones is a leading designer and marketer of branded apparel, footwear and accessories. Jones is subject to the informational filing requirements under the Exchange Act and is required to file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information Jones files at the SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at l-800-SEC-0330 for further information on the public reference room. Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The respective SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. The name, business address and telephone number, citizenship, present principal occupation and employment history of each of the directors and executive officers of Jones and Purchaser are set forth in Schedule I of this Offer to Purchase. On February 23, 2004, Jones acquired 100 Shares at a price of $18.20 per Share in an open market purchase. On February 24, 2004, Jones acquired 100 Shares at a price of $18.77 per Share in an open market purchase and sold 100 Shares at a price of $17.99 per Share in an open market sale. On March 22, 2004, Jones transferred 50 Shares to Purchaser. 15 10. BACKGROUND OF THE OFFER; TRANSACTIONS WITH MAXWELL. In mid-November 2003, Peter Boneparth, the President and Chief Executive Officer of Jones, contacted Mark J. Cocozza, the Chairman of the Board and Chief Executive Officer of Maxwell, and indicated that Jones was considering pursuing a business combination with Maxwell. Subsequently, Mr. Boneparth and Mr. Cocozza had additional conversations on this subject. On February 17, 2004, Mr. Boneparth contacted Mr. Cocozza to further discuss the possibility of a business combination with Maxwell. During the conversation, Mr. Cocozza requested specifics as to the consideration proposed to be paid by Jones. On February 18, 2004, representatives of Bear Stearns, on behalf of Jones, contacted Mr. Cocozza to inform him that Jones would be interested in acquiring all of the outstanding Shares of Maxwell at a price of $20.00 per Share in cash. Between February 18, 2004 and February 25, 2004, Maxwell failed to respond to the Jones proposal. On February 25, 2004, Mr. Boneparth contacted Mr. Cocozza to inform him that the following letter would be delivered to Mr. Cocozza, which was delivered that morning. February 25, 2004 Mr. Mark J. Cocozza Chairman of the Board, Chief Executive Officer Maxwell Shoe Company Inc. 101 Sprague Street Boston, MA 02137-0037 VIA FAX Dear Mark: As you know from our conversations since mid-November, Jones Apparel Group is very interested in pursuing a business combination with Maxwell. On February 18, 2004, we informed you of Jones's interest in acquiring all of the outstanding shares of Maxwell stock at a price of $20.00 per share in cash. This proposal has been approved by the Jones Board of Directors and is not subject to any financing condition. The purpose of this letter is to confirm our proposal in writing. We believe that our proposal provides an outstanding opportunity for your stockholders to maximize the value of their investment in Maxwell. Our proposal represents a premium of approximately 19% over the closing price for Maxwell shares on February 19, 2004, the day after you were informed of our proposal, and an even greater premium on Maxwell's business when adjusted for your significant cash position. We believe that the proposed transaction can be consummated quickly and trust that you will allow your stockholders the opportunity to directly consider our proposal in a timely manner. We believe that the proposed transaction would be beneficial not only to the Maxwell stockholders but also to other Maxwell constituencies. As you know, we have a high regard for you and your employees and we believe that you and they will be able to make significant contributions to our combined company. We also believe that the proposed transaction will greatly benefit the customers of both Maxwell and Jones. Jones would very much like to move forward with you on a cooperative basis. To that end, we and our advisors are eager to meet with you and your advisors as soon as possible to expeditiously effectuate the proposed transaction. Working together, I do not anticipate any difficulties in finalizing the details, and I am confident we can conclude a definitive agreement very quickly. 16 Since February 19, your stock price has risen over nine percent on higher than average volume. While we are not aware of any leak of our discussions from either of our companies, given the recent trading trends in Maxwell stock we have determined that it is appropriate to publicly announce our proposal and the contents of this letter. I believe our proposal represents an exciting opportunity for the stockholders, employees and customers of Maxwell and will contact you shortly to discuss next steps for proceeding with the proposed transaction. Very truly yours, /s/ PETER BONEPARTH -------------------------------------------- Peter Boneparth Chief Executive Officer Also on February 25, 2004, Jones issued the following press release indicating that it had made a proposal to acquire all of the outstanding Shares of Maxwell at a price of $20.00 per Share in cash. Included within the press release was a copy of the letter described above. News Release For Immediate Release JONES APPAREL GROUP, INC. PROPOSES TO PURCHASE MAXWELL SHOE COMPANY INC. FOR $20 PER SHARE IN CASH * Provides Attractive Premium to Maxwell Shoe Shareholders * Strategically Complements Jones Apparel's Existing Footwear Business * Consolidates the Highly-Recognizable AK Anne Klein Apparel and Footwear Brands NEW YORK, NEW YORK -- February 25, 2004 -- Jones Apparel Group, Inc. (NYSE: JNY) today announced that it has made an all-cash proposal to Maxwell Shoe Company Inc. (Nasdaq: MAXS) to purchase 100% of Maxwell's outstanding common stock for $20 per share, or an aggregate equity value of approximately $300 million. Peter Boneparth, Chief Executive Officer, stated, "Maxwell's portfolio of footwear brands, which includes AK Anne Klein, targets price points from moderate through bridge categories, and provides a perfect complement to our existing footwear business. We also believe there are many strategic benefits to consolidating our AK Anne Klein apparel business with Maxwell's AK Anne Klein footwear business. In addition, this transaction would further broaden our footwear brand portfolio and leverage the infrastructure of our footwear business, creating compelling long-term strategic and financial benefits for our shareholders." AK Anne Klein footwear is under license from Jones Apparel as a result of Jones's acquisition of Kasper A.S.L., Ltd. on December 1, 2003. Mr. Boneparth continued, "The management team of Maxwell Shoe Company has done a wonderful job in building a business, with approximately $225 million in annual net revenues. Our decision to make this proposal represents the continuation of a cooperative dialogue that began during the last quarter of 2003. We believe this is a fair and well-priced proposal that represents an historic high for the stock and significant value for Maxwell Shoe shareholders. We look forward to working constructively with Maxwell's board and management to promptly conclude this transaction." Wesley Card, Chief Operating and Financial Officer, commented, "This transaction meets all of our disciplined acquisition criteria, which include: highly-recognizable brands, diversified distribution channels, excellent management team, and strong financial metrics. We believe our proposal is fairly valued, especially considering Maxwell's large cash position. We anticipate this acquisition to be accretive to our financial results during its first full fiscal year as part of Jones Apparel. It is premature to comment on its impact to our 2004 results given 17 the many uncertainties surrounding timing, non-cash purchase accounting charges and potential non-recurring items. Our strong financial position and liquidity allows us to make this proposal on an all-cash basis." Attached is the full text of the letter delivered earlier today to Mark J. Cocozza, Chairman of the Board and Chief Executive Officer of Maxwell Shoe Company Inc. The Company will host a conference call with management to discuss this strategic opportunity at 11:00 a.m. eastern time today, which is accessible by dialing 412-858-4600 or through a web cast at www.jny.com. A replay of the conference call is available through March 4 by dialing 877-344-7529 -- enter account 928 and conference 338880. Jones Apparel Group, Inc. (www.jny.com), a Fortune 500 Company, is a leading designer and marketer of branded apparel, footwear and accessories. The Company's nationally recognized brands include Jones New York, Polo Jeans Company licensed from Polo Ralph Lauren Corporation, Evan-Picone, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, Napier, Judith Jack, Kasper, Anne Klein, Albert Nipon and LeSuit. The Company also markets costume jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger Corporation and the Givenchy brand licensed from Givenchy Corporation, and footwear and accessories under the ESPRIT brand licensed from Esprit Europe, B.V. Celebrating more than 30 years of service, the Company has built a reputation for excellence in product quality and value, and in operational execution. Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements represent the Company's expectations or beliefs concerning future events that involve risks and uncertainties. Factors that could cause actual results to differ materially include (1) the businesses of Jones Apparel and Maxwell Shoe not being integrated successfully, (2) expected combination benefits from a Jones Apparel/Maxwell Shoe transaction not being realized, (3) the failure of the proposed transaction to occur, or the occurrence of the proposed transaction on terms different than those described, (4) the strength of the economy, (5) the overall level of consumer spending, (6) the performance of the Company's products within the prevailing retail environment, and (7) other factors which are set forth in the Company's 2002 Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise. On February 25, 2004, Maxwell issued a press release requesting that stockholders of Maxwell take no action with respect to the Jones proposal at such time. On February 26, 2004, Maxwell issued a press release indicating that it had retained Gibson, Dunn & Crutcher LLP, as legal counsel, and Lehman Brothers Inc., as financial advisor, in connection with the Jones proposal. Between February 26, 2004 and March 12, 2004, there were several discussions between representatives of Jones and representatives of Maxwell in which the Jones representatives requested that the Maxwell representatives meet with Jones to discuss the Jones proposal. In each case the Maxwell representatives rejected the request of the Jones representatives. On March 12, 2004, Maxwell issued the following press release and Mr. Cocozza delivered the accompanying letter to Mr. Boneparth indicating that Maxwell's Board of Directors had unanimously determined to reject the Jones proposal to acquire all of the outstanding Shares of Maxwell for $20.00 per Share in cash and to refuse to meet with Jones to discuss that proposal. MAXWELL SHOE COMPANY BOARD OF DIRECTORS REJECTS JONES APPAREL GROUP'S UNSOLICITED PROPOSAL HYDE PARK, Mass. -- March 12, 2004 -- Maxwell Shoe Company Inc. (NASDAQ: MAXS) announced today that its Board of Directors has unanimously determined to reject Jones Apparel Group, Inc.'s (NYSE: JNY) unsolicited proposal to acquire all of the outstanding shares of Maxwell Shoe Company common stock for $20.00 per share in cash. After careful consideration, including consultation with independent financial and legal advisors, the Maxwell Shoe Company Board of Directors concluded that Jones's proposal was financially inadequate and not in the 18 best interest of Maxwell Shoe Company stockholders. The Board noted its belief that the proposal significantly undervalues the strength and diversity of Maxwell Shoe Company's portfolio of brands and future growth opportunities, and is not consistent with the Board's objective of enhancing stockholder value. "Maxwell Shoe Company's Board and management are focused on building value for our stockholders and, in our view, Jones's proposal does not recognize the value of our Company. Notably, the marketplace appears to agree," said Mark Cocozza, Maxwell Shoe Company's Chairman and Chief Executive Officer. "Maxwell Shoe Company is one of the industry's leading footwear manufacturers, with an undisputed track record of delivering on its promises. For 17 consecutive quarters, we have either met, or beat expectations, and we expect 2004 to be another year of industry leading performance. Our portfolio of recognized brands covers a wide variety of footwear categories, distribution channels and price points, making Maxwell Shoe Company a destination resource for retailers. We have an exciting future and are committed to building upon our strengths to grow the Company for the benefit of our stockholders," continued Mr. Cocozza. In making its determination to reject Jones's proposal, Maxwell Shoe Company's Board of Directors considered, among other things, that: - The Company's independent financial advisors, Lehman Brothers Inc., issued an opinion stating that Jones's proposal is inadequate to the Company's stockholders from a financial point of view; - The Company's Board of Directors and senior leadership team believe that they can create stockholder value in excess of Jones's proposal through the continued execution of its current strategy; - Jones's proposal price represents a premium of only 8.7% over the $18.40 closing price of Maxwell Shoe Company's common stock the day before Jones publicly announced its proposal on February 25, 2004; - Jones's proposal price is well below the current market price of Maxwell Shoe Company's common stock. As of March 11, 2004, Maxwell Shoe Company's stock price closed at $22.20 per share, over $2.00 per share, or 11%, higher than Jones's proposal; - On March 2, 2004, the Company reported record first quarter net sales and earnings, and increased its guidance for fiscal 2004; and - Jones's proposal does not adequately compensate Maxwell Shoe Company stockholders for transferring control of the Company to Jones, or for the value of the synergies that the Board believes Jones would be likely to realize if a transaction were consummated. The Maxwell Shoe Company Board believes that the Company can create value for its stockholders in excess of Jones's proposal through the continued execution of its strategic plan. Key elements of the plan include: - Growing the Company's Existing Brands. Since implementing its branded footwear strategy over 20 years ago, Maxwell Shoe Company has consistently achieved annual increases in net sales. The Company believes that its talented design team and disciplined operating focus, combined with a unique ability to correctly interpret footwear trends, will provide a powerful platform for continued growth -- leading to stronger relationships with existing customers and new retail opportunities. - Expanding The Company's Portfolio Of Brands. Maxwell Shoe Company has an established track record of integrating and developing footwear brands, as exemplified by the growth in its newest product lines and the growth achieved in its more established brands. To further diversify its brand portfolio and extend its footwear reach, Maxwell Shoe Company will continue to explore license and acquisition opportunities that leverage its core competencies. With its strong balance sheet and financial discipline, Maxwell Shoe Company is well positioned to capture additional growth opportunities as they become available. As previously announced on March 2, 2004, the Company achieved record first-quarter net sales and earnings and increased its guidance for fiscal 2004. In the quarter ending January 31, 2004, net sales increased 17.3%, operating income rose 41.0%, net income grew 35.0% and diluted earnings per share increased 31.0%. Based on this strong performance, the Company raised its fiscal 2004 earnings per share guidance to $1.18 to $1.22, from its previous guidance of $1.02 to $1.06. 19 It also raised its guidance for net sales to $250 million to $255 million, from its previous guidance of $235 million to $240 million. Mr. Cocozza continued, "Our year-end and first quarter results demonstrate that we are executing on our strategies and creating momentum for the company going forward. We believe that our strong brands and proven growth strategies will enable us to deliver value to our stockholders substantially in excess of Jones's proposal." Following is a letter sent today from Maxwell Shoe Company Chairman and Chief Executive Officer Mark Cocozza to Peter Boneparth, President and Chief Executive Officer of Jones Apparel Group. March 12, 2004 Mr. Peter Boneparth President and Chief Executive Officer Jones Apparel Group, Inc. 250 Rittenhouse Circle Bristol, Pennsylvania 19007 Dear Peter: The Board of Directors of Maxwell Shoe Company has met to consider and discuss Jones Apparel Group's proposal to acquire all of the outstanding shares of the Company for $20 per share in cash. After careful consideration, including a thorough review of the proposal with independent financial and legal advisors, the Board has determined to reject your proposal and not to pursue discussions with Jones. Simply put, the Board has unanimously concluded that Jones's proposal is financially inadequate and fails to provide our stockholders with the value they deserve. Jones's proposal significantly undervalues our premier franchise in the footwear industry, does not reflect the true value of our unique market position and business prospects, and is not consistent with the Board's objective of enhancing stockholder value. As you are no doubt aware, 2003 was a banner year for our Company. Sales and earnings were the best in our history. We achieved a 130 basis point increase in operating margins, while continuing to strengthen the balance sheet. Backlog reached an all-time high, reflecting growth in each of our brands and private-label offerings. This performance validates our branded footwear strategy and demonstrates our solid operating skills. Through the hard work of our entire team, the momentum achieved last year continued into the first quarter of 2004, with all five of our brands delivering increased sales and market share gains. The success and popularity of our brands has afforded us new growth opportunities, such as product line extensions and further expansion at retail. As a result of our strong performance and positive backlog, we increased our guidance for Fiscal 2004 sales and earnings and now expect 2004 diluted earnings per share to be in the range of $1.18 to $1.22 -- an increase of over 20% from the record earnings we achieved last year. We are confident in our ability to fully realize the value of Maxwell Shoe Company. We have an outstanding employee base and a trusted and seasoned senior management team, and we are well positioned to generate sustainable earnings and sales growth. As 2004 unfolds, we remain focused on continuing to deliver on our promises to stockholders and customers alike. Sincerely, /s/ MARK COCOZZA ----------------------------------------------------- Mark Cocozza Chairman and Chief Executive Officer 20 Lehman Brothers Inc. is serving as financial advisor to Maxwell Shoe Company and Gibson, Dunn & Crutcher LLP is serving as legal counsel. About Maxwell Shoe Company Maxwell Shoe Company Inc. designs, develops and markets casual and dress footwear for women and children. The Company's brands include AK ANNE KLEIN(R), DOCKERS(R) FOOTWEAR FOR WOMEN, J.G. HOOK, JOAN AND DAVID, CIRCA JOAN & DAVID, MOOTSIES TOOTSIES AND SAM & LIBBY. Forward Looking Statement Certain statements contained in this press release regard matters that are not historical facts and are forward looking statements (as such term is defined in the rules promulgated pursuant to the Securities Act of 1933, as amended). Because such forward looking statements contain risks and uncertainties, actual results may differ materially from those expressed in or implied by such forward looking statements. Factors that could cause actual results to differ materially include, but are not limited to: changing consumer preference, inability to successfully design, develop or market its footwear brands, the inability to successfully re-introduce the Joan & David brand into the market, competition from other footwear manufacturers or retailers, loss of key employees, general economic conditions and adverse factors impacting the retail footwear industry, and the inability by the Company to source its products due to political or economic factors, potential disruption in supply chain or customer purchasing habits due to health concerns relating to severe acute respiratory syndrome or other related illnesses; the imposition of trade or duty restrictions or work stoppages of transportation or other workers who handle or manufacture the Company's goods. The information contained in the press release was accurate only as of the date issued. Investors should not assume that the statements made in this document remain operative at a later time. Maxwell Shoe Company undertakes no obligation to update any information appearing in this release. The Company undertakes no obligation to release publicly the results of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Investors are also directed to other risks discussed in documents filed by the Company with the Securities and Exchange Commission. Company Contact: Contact: Richard J. Bakos Chief Financial Officer Maxwell Shoe Company (617) 333-4007 Investors: Lex Flesher MacKenzie Partners, Inc. (212) 929-5397 Allison Malkin Integrated Corporate Relations (203) 222-9013 Media: Dan Katcher/Barrett Godsey Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449
In the morning of March 12, 2004, Mr. Cocozza telephoned Mr. Boneparth and left a message requesting that Mr. Boneparth return the call that afternoon. Later in the afternoon on March 12, 2004, Mr. Boneparth returned Mr. Cocozza's telephone call. During the conversation, Mr. Cocozza reiterated the decision of Maxwell's Board of Directors contained in Maxwell's press release and accompanying letter to Jones. On March 23, 2004, Purchaser issued the following press release and commenced the Offer: FOR IMMEDIATE RELEASE JONES APPAREL GROUP, INC. Contacts: Wesley R. Card, Chief Operating and Financial Officer Anita Britt, Executive Vice President Finance (215) 785-4000
21 JONES APPAREL GROUP COMMENCES TENDER OFFER FOR MAXWELL SHOE PRELIMINARY CONSENT SOLICITATION DOCUMENTS TO BE FILED WITH THE SEC TODAY NEW YORK, NEW YORK -- March 23, 2004 -- Jones Apparel Group, Inc. (NYSE:JNY) ("Jones") today announced that MSC Acquisition Corp., an indirect wholly owned subsidiary of Jones ("MSC"), commenced a tender offer for all of the outstanding shares of Class A Common Stock of Maxwell Shoe Company Inc. (NasdaqNM:MAXS) ("Maxwell") at a price of $20 per share in cash. Based on the latest publicly available information, as of March 4, 2004, Maxwell had approximately 14.8 million shares of Class A Common Stock outstanding, giving the transaction a total equity value (excluding stock options) of approximately $297 million. Jones also announced that Jones and MSC are filing today with the Securities and Exchange Commission a preliminary consent solicitation statement relating to the solicitation of written consents from Maxwell stockholders to take certain actions to facilitate the tender offer, including nominating five highly qualified individuals to replace the members of Maxwell's Board of Directors. Peter Boneparth, Chief Executive Officer of Jones, stated, "While we still prefer to move forward with Maxwell on a cooperative basis, Maxwell's refusal to meet with us to discuss our proposal has left us no choice but to take our offer directly to Maxwell's stockholders -- the owners of the company. Maxwell's stockholders will now have the opportunity to decide the future of their company for themselves. This offer provides an outstanding opportunity for Maxwell's stockholders to maximize the value of their investment in Maxwell. It represents a premium of approximately 19% over the closing price for Maxwell shares on February 19, 2004, the day after we informed Maxwell of our initial proposal, and an even greater premium on Maxwell's business when adjusted for its significant cash position." The tender offer and withdrawal rights are scheduled to expire at 12:00 Midnight, New York time, on April 19, 2004, unless extended. Following completion of the tender offer, Jones intends to consummate a second-step merger in which all remaining Maxwell stockholders will receive the same cash price paid in the tender offer, subject to any available appraisal rights under Delaware law. The offer is not conditioned upon financing. The tender offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration date of the offer a number of shares of Class A Common Stock, par value $.01 per share, together with the associated preferred stock purchase rights (together, the "shares"), of Maxwell that, together with the shares then owned by Jones and its subsidiaries, would represent at least a majority of the total number of outstanding shares on a fully diluted basis, (2) Maxwell's Board of Directors redeeming the preferred stock purchase rights or MSC being satisfied, in its sole discretion, that the preferred stock purchase rights have been invalidated or are otherwise inapplicable to the offer and the proposed second-step merger described herein, (3) MSC being satisfied, in its sole discretion, that Section 203 of the Delaware General Corporation Law will be inapplicable to the proposed second-step merger or any other business combination involving Jones or any of its subsidiaries and Maxwell and (4) the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. The complete terms and conditions of the tender offer are contained in the Offer to Purchase included in the tender offer statement to be filed today with the Securities and Exchange Commission. Bear, Stearns & Co. Inc. is acting as Dealer Manager for the tender offer and Innisfree M&A Incorporated is acting as Information Agent for the offer. Jones Apparel Group, Inc. (www.jny.com), a Fortune 500 Company, is a leading designer and marketer of branded apparel, footwear and accessories. The Company's nationally recognized brands include Jones New York, Polo Jeans Company licensed from Polo Ralph Lauren Corporation, Evan-Picone, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, Napier, Judith Jack, Kasper, Anne Klein, Albert Nipon and LeSuit. The Company also markets costume jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger Corporation and the Givenchy brand 22 licensed from Givenchy Corporation, and footwear and accessories under the ESPRIT brand licensed from Esprit Europe, B.V. Celebrating more than 30 years of service, the Company has built a reputation for excellence in product quality and value, and in operational execution. Certain statements herein are forward-looking statements. Such forward-looking statements represent the Company's expectations or beliefs concerning future events that involve risks and uncertainties. Factors that could cause actual results to differ materially include (1) the businesses of Jones and Maxwell not being integrated successfully, (2) expected combination benefits from a Jones/Maxwell transaction not being realized, (3) the failure of the proposed transaction to occur, or the occurrence of the proposed transaction on terms different than those described, (4) the strength of the economy, (5) the overall level of consumer spending, (6) the performance of the Company's products within the prevailing retail environment, and (7) other factors which are set forth in the Company's 2003 Form 10-K and in all filings with the Securities and Exchange Commission made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise. This release does not constitute a solicitation of proxies in connection with any matter to be considered at Maxwell's 2004 annual meeting of stockholders. Neither Jones nor MSC is soliciting, or intends to solicit, proxies in respect of any matter to be considered at Maxwell's 2004 annual meeting. Jones is scheduled to present at the Merrill Lynch Retailing Leaders conference today at 8:40 am eastern time. The presentation will be webcast and made available through April 5, and is accessible through the Company's website at www.jny.com. IMPORTANT INFORMATION REGARDING THE TENDER OFFER MSC, a wholly owned subsidiary of Jones, has commenced a tender offer for all the outstanding shares of Class A Common Stock of Maxwell at $20 per share, net to the seller in cash, without interest. The offer currently is scheduled to expire at 12:00 Midnight, New York City time, on April 19, 2004. MSC may extend the offer and currently expects that the offer will be extended until the principal conditions to the offer, which are described in the Offer to Purchase forming part of MSC's tender offer statement, are satisfied. If the offer is extended, MSC will notify the depositary for the offer and issue a press release announcing the extension on or before 9:00 a.m. New York City time on the next business day following the date the offer was scheduled to expire. Investors and security holders are urged to read the disclosure documents that will be filed later today with the Securities and Exchange Commission, including the tender offer statement, regarding the proposed Jones/ Maxwell transaction referenced in the foregoing information, because they will contain important information. Investors and security holders may obtain a free copy of the disclosure documents (when they are available) and other documents filed by Jones with the SEC at the SEC's website at www.sec.gov. In addition, documents filed with the SEC by Jones or MSC may be obtained free of charge from Jones by directing a request to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, Attention: Chief Operating and Financial Officer. IMPORTANT INFORMATION REGARDING THE CONSENT SOLICITATION Investors and security holders are also urged to read the consent solicitation statement relating to the solicitation of consents of Maxwell's stockholders when it becomes available, because it will contain important information. Jones will file a preliminary consent solicitation statement later today with the SEC and will file a definitive consent solicitation statement as soon as practicable thereafter. Investors and security holders may obtain a free copy of the preliminary consent solicitation statement, the definitive consent solicitation statement (when it is available) and other documents that Jones files with the SEC at its web site at www.sec.gov. In addition, documents filed with the SEC by Jones or MSC may be obtained free of charge from Jones by directing a request to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, Attention: Chief Operating and Financial Officer. 23 CERTAIN INFORMATION CONCERNING PARTICIPANTS Jones, MSC and, in each case, certain of its officers, directors and nominees for the directorships of Maxwell, among others, may be deemed to be participants in the solicitation of Maxwell's stockholders. The security holders of Maxwell may obtain information regarding the names, affiliations and interests of individuals who may be participants in the solicitation of Maxwell's stockholders in a Schedule 14A which will be filed with the SEC later today. TRANSACTIONS WITH MAXWELL. Jones Investment Co. Inc. ("JIC"), a wholly owned subsidiary of Jones, and Maxwell are parties to a license agreement granting Maxwell certain exclusive licensed rights to use certain trademarks (consisting of the AK Anne Klein, Kasper, Albert Nipon and other related trademarks, the "Marks") in connection with the manufacture, advertising, promotion, distribution and sale of women's footwear in approved retail channels in the United States and, with respect to licensed products bearing the Kasper and Nipon trademarks, Canada and Puerto Rico. JIC has also granted Maxwell a revocable right to sell licensed products bearing the AK Anne Klein trademark to specified channels and accounts in Canada and Puerto Rico. The license is currently effective until December 31, 2007, but Maxwell has the right, subject to certain conditions in the license agreement, to extend the term of the license agreement to December 31, 2012. Maxwell pays JIC a royalty on all net sales of such footwear licensed under the license agreement and is responsible for a guaranteed minimum royalty payment to JIC during each year of the agreement. Based on information made publicly available by Maxwell, Maxwell's net sales relating to the Marks for Maxwell's fiscal quarter ended January 31, 2004 and for Maxwell's fiscal years ended October 31, 2003 and October 31, 2002 were $17.3 million, $75.1 million and $64.1 million, respectively. The license agreement provides that if Maxwell contemplates the sale or other disposition of a controlling share of its business or assets related to the subject matter of the agreement, including, without limitation, through a sale of stock (but not including (1) a sale or disposition in which Maxwell's management is an equity participant in the acquiring party, (2) sales that occur in the ordinary course of public trading or (3) sales to or other stock distributions through Maxwell's employee benefit plans), JIC may terminate the agreement if it does not approve the proposed transaction and Maxwell nevertheless elects to transfer ownership or control of its business or assets related to the subject matter of the license agreement. Upon such a termination, the parties are to negotiate the timing of such termination. The license agreement provides that the foregoing termination right does not arise if the business or assets sold by Maxwell do not relate to the license agreement and if such sale does not, directly or indirectly, constitute a sale or transfer of the license agreement or Maxwell's rights thereunder or interfere with Maxwell's ability to carry out its material obligations thereunder. Maxwell has filed a redacted version of the license agreement described above as an exhibit to the Maxwell 10-K. A copy of that redacted version is filed as Exhibit (d) to the Schedule TO filed by Jones and Purchaser with the SEC in connection with the Offer on March 23, 2004 pursuant to Rule 14d-3 under the Exchange Act. Reference is made to such Exhibit for a more complete description of the terms and conditions of the license agreement. In the ordinary course of business, certain Jones subsidiaries purchase licensed footwear from Maxwell. 11. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; THE RIGHTS CONDITION; THE BUSINESS COMBINATION CONDITION; APPRAISAL RIGHTS; "GOING-PRIVATE" TRANSACTIONS. General. The purpose of the Offer is to enable Jones to acquire control of, and ultimately the entire equity interest in, Maxwell. Purchaser presently intends, as soon as practicable following consummation of the Offer, to cause the entire Maxwell Board of Directors to be comprised solely of its nominees and to cause Maxwell to consummate the Proposed Merger. Jones and Purchaser currently intend to pursue the Proposed Merger promptly following consummation of the Offer. Jones and Purchaser, however, reserve the right to amend the terms of the Proposed Merger or to pursue an alternative second-step business combination transaction involving Maxwell in which the Shares not owned by Jones or its subsidiaries (including, without limitation, Purchaser) would be converted into or exchanged for cash, shares of Jones common stock and/or other securities or consideration. 24 At the effective time of the Proposed Merger, each Share that is issued and outstanding immediately prior to the effective time of the Proposed Merger (other than Shares owned by Jones or its subsidiaries (including, without limitation, Purchaser) and Shares owned by stockholders who perfect any available appraisal rights under Delaware law) would be converted into the right to receive an amount in cash equal to the highest price paid per Share pursuant to the Offer. If Purchaser acquires Shares pursuant to the Offer and depending upon the number of Shares so acquired and other factors relevant to its equity ownership in Maxwell, Purchaser may, subsequent to the consummation of the Offer, seek to acquire additional Shares through open market purchases, privately negotiated transactions, a tender or exchange offer or other transactions or a combination of the foregoing on such terms and at such prices as it shall determine, which may be different from the price paid in the Offer. Purchaser also reserves the right to dispose of Shares that it has acquired or may acquire. In connection with the Offer, Jones and Purchaser have reviewed, and will continue to review, on the basis of publicly available information, various possible business strategies that they might consider in the event that Purchaser acquires Maxwell. After consummation of the Offer and the Proposed Merger, Jones currently intends to incorporate the product offerings of Maxwell into the product offerings of Jones. If Purchaser acquires Maxwell or otherwise obtains access to the books and records of Maxwell, Jones and Purchaser intend to conduct a detailed review of Maxwell and its assets, financial projections, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such strategies could include, without limitation, changes in Maxwell's business, facility locations, corporate structure, marketing strategies, capitalization, management or dividend policy. After Purchaser acquires Maxwell, it is possible that Jones will cause Maxwell to distribute cash or other assets to Jones and one or more of its subsidiaries. The Proposed Merger. Under the DGCL and the NYBCL as currently in effect, if Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, Purchaser believes it would be able to approve the Proposed Merger without a vote of Maxwell's Board of Directors or Maxwell's stockholders. However, if Purchaser does not acquire at least 90% of the outstanding Shares, then under the DGCL and the NYBCL as currently in effect, the Proposed Merger would require the adoption of a plan of merger by Maxwell's Board of Directors and the approval of the holders of a majority of the outstanding Shares. Purchaser intends to vote all Shares acquired by it in favor of the Proposed Merger, and if Purchaser acquires a majority of the outstanding Shares pursuant to the Offer or otherwise, it would have sufficient Shares to approve such a transaction without the affirmative vote of other stockholders, assuming approval by Maxwell's Board of Directors and satisfaction of the Business Combination Condition. The treatment of Shares for Maxwell's stockholders who properly perfect their appraisal rights if the proposed second-step merger does take place is discussed in "APPRAISAL RIGHTS" below. Notwithstanding the foregoing, certain terms of the Rights and certain provisions of the DGCL may affect the ability of Jones to obtain control of Maxwell and Purchaser's ability to consummate the Proposed Merger. The timing and details of the Proposed Merger will depend on a variety of factors and legal requirements, actions of Maxwell's Board of Directors, the number of Shares, if any, acquired by Purchaser pursuant to the Offer, and whether the Minimum Tender Condition, the Rights Condition, the Business Combination Condition, the HSR Condition and all other conditions set forth in "THE OFFER -- Section 14" are satisfied or waived. There can be no assurance that the Proposed Merger will be consummated or as to the timing of the Proposed Merger if it is consummated. See "THE OFFER -- Section 11" and "THE OFFER -- Section 14". Set forth below are certain factors that may affect the ability of Jones to obtain control of Maxwell and to cause Maxwell to consummate the Proposed Merger. The Rights Condition. Consummation of the Offer is conditioned upon Maxwell's Board of Directors redeeming the Rights, or Purchaser being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger. The following summary is qualified in its entirety by reference to the Rights Agreement. The Rights are described in the Maxwell 8-A. The terms of the Rights are set forth in the Rights Agreement. According to the Maxwell 8-A, on October 20, 1998, Maxwell's Board of Directors declared a dividend of one Right for each Share outstanding as of November 9, 1998 (and for each Share that becomes outstanding between such date and the 25 Distribution Date). Each Right entitles the registered holder to purchase from Maxwell one one-thousandth of a Preferred Share at the Preferred Share Purchase Price, subject to adjustment. The Rights are transferable only with the Shares until they become exercisable. The Rights will not become exercisable until the Distribution Date and will expire on the Rights Expiration Date, unless earlier redeemed by Maxwell. Under the Rights Agreement, the "Distribution Date" will occur upon the earliest of (1) the tenth business day (or such later day as shall be designated by Maxwell's Board of Directors) following the date of the commencement of, or the first public announcement of the intent of any person, other than certain exempt persons, to commence a tender offer or exchange offer, the consummation of which would cause any person to be the beneficial owner of 15% or more of the outstanding Shares (a "15% Stockholder"); (2) the date of the first Flip-In Event (as defined below) and (3) the date of the first Flip-Over Event (as defined below). A "Flip-In Event" means the event whereby a person has become a 15% Stockholder and neither the Redemption Date (as defined below) nor the Rights Expiration Date shall have occurred prior to the tenth business day following the existence of a 15% Stockholder. The "Redemption Date" means the date of the action of Maxwell's Board of Directors authorizing and directing the redemption of the Rights. A "Flip-Over Event" means any event whereby, at any time on or after the date of first public announcement that a person has become a 15% Stockholder (such date, the "15% Ownership Date") and prior to the earlier of the Redemption Date or the Rights Expiration Date, (1) Maxwell shall, directly or indirectly, consolidate with or merge with and into any other person and Maxwell shall not be the continuing or surviving corporation in such consolidation or merger, (2) any person shall, directly or indirectly, consolidate with or merge with and into Maxwell and Maxwell shall be the continuing or surviving corporation in such merger and, in connection with such merger, all or part of the Class A Common Stock of Maxwell shall be changed into or exchanged for stock or other securities of any person or cash or any other property, or (3) Maxwell and/or any one or more of its subsidiaries shall, directly or indirectly, sell or otherwise transfer, in one or more transactions (other than transactions in the ordinary course of business), assets or earning power aggregating more than 50% of the assets or earning power of Maxwell and its subsidiaries (taken as a whole) to any person or persons other than Maxwell or one or more of its wholly owned subsidiaries. The persons described in clauses (1), (2) and (3) above are collectively referred to as the "Surviving Person." The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred only in connection with the transfer of Shares. From and after the Distribution Date, the Rights will separate from the Shares and the Share Certificates. The Rights Agreement further provides that as soon as practicable following the Distribution Date, Rights Certificates will be mailed to holders of record of the Shares as of the close of business on the Distribution Date and from and after the Distribution Date, the Rights will be evidenced solely by such separate Rights Certificates. The Rights Agreement provides that from and after the Distribution Date, each Right (other than those that have become void) will be exercisable to purchase one one-thousandth of a Preferred Share at the Preferred Share Purchase Price, subject to adjustment. The Rights Agreement provides that from and after the close of business following the occurrence of a Flip-In Event, each Right (other than a Right that has become void) will be exercisable to purchase, at the then current exercise price of the Right, Shares having a market value equal to two times the then current exercise price of the Right. The Rights Agreement further provides that, on or after the occurrence of a Flip-Over Event, each Right (other than a Right that has become void) will thereafter be exercisable to purchase, at the then current exercise price of the Right, shares of common stock of the Surviving Person having an aggregate market value equal to two times the then current exercise price of the Right. Upon the occurrence of a Flip-In Event or a Flip-Over Event, any Rights that are or were beneficially owned by any 15% Stockholder immediately become null and void. The Preferred Share Purchase Price payable, and the number of Preferred Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution. Until the earliest of (1) the date of the first Flip-In Event, (2) the date of the first Flip-Over Event and (3) the Rights Expiration Date, Maxwell's Board of Directors may redeem all, but not less than all, Rights at a price of $.001 per Right, as adjusted. 26 From and after the earlier of the date of the first Flip-In Event or the date of the first Flip-Over Event and prior to the earlier of the Redemption Date or the Rights Expiration Date, Maxwell may not (1) issue or sell, or permit any of its subsidiaries to issue or sell, to a 15% Stockholder or the Surviving Person, or any affiliate or associate of a 15% Stockholder (a) any rights, options, warrants or convertible securities on terms similar to, or that materially adversely affect the value of, the Rights or (b) preferred shares, Shares or shares of any other class of capital stock, if such sale is intended to or would materially adversely affect the value of the Rights, or (2) take any other action that is intended to or would materially adversely affect the value of the Rights. Maxwell's Board of Directors may, from time to time, without the approval of any holders of Rights, supplement or amend any provision of the Rights Agreement in any manner, whether or not such supplement or amendment is adverse to any holder of Rights; provided, however, that from and after the earliest of (1) the date of the first Flip-In Event, (2) the date of the first Flip-Over Event, (3) the Redemption Date or (4) the Rights Expiration Date, the Rights Agreement may not be supplemented or amended in any manner that would materially and adversely affect any holder of outstanding Rights other than a 15% Stockholder or the Surviving Person. The Preferred Shares purchasable upon exercise of the Rights will not be redeemable. Each Preferred Share will be entitled to receive dividends, when and if declared, in an amount equal to the greater of (1) $.25 and (2) an aggregate dividend of 1,000 times the dividend declared per Share. In the event of liquidation, the holders of the Preferred Shares will be entitled to a minimum preferential liquidation payment equal to $1,000 per Preferred Share. Each Preferred Share has 1,000 votes per share, and votes together with the Shares. In the event of any merger, consolidation or other transaction in which the Shares are changed or exchanged, each Preferred Share will be entitled to receive 1,000 times the amount received per Share. Because of the nature of the dividend, liquidation and voting rights of the Preferred Shares, the value of the one one-thousandth interest in a Preferred Share purchasable upon exercise of each Right should approximate the value of one Share. Purchaser believes that if the Rights Condition is satisfied, the Rights Agreement will not be an impediment to consummating either the Offer or the Proposed Merger. Jones and Purchaser expect, if necessary, to seek to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and replace them with directors who Jones and Purchaser believe will consider, to the extent that it is in the best interest of Maxwell's stockholders, taking action to redeem the Rights (or to amend the Rights Agreement to make the Rights inapplicable to the Offer and the Proposed Merger or any alternative proposal). Subject to their fiduciary duties, the Purchaser Nominees, if elected, are expected to support the Offer and the Proposed Merger and take actions necessary to satisfy the Rights Condition. The Business Combination Condition. Consummation of the Offer is conditioned upon Purchaser being satisfied, in its sole discretion, that Section 203 of the DGCL ("Section 203") will be inapplicable to the Proposed Merger or any other "business combination" (as defined in Section 203) involving Jones or any of its subsidiaries (including, without limitation, Purchaser) and Maxwell. Section 203 could significantly delay Jones's ability to acquire the entire equity interest in Maxwell. Section 203, in general, prevents an "interested stockholder" (generally, a stockholder and an affiliate or associate thereof owning 15% or more of a corporation's outstanding voting stock) from engaging in a business combination (defined to include a merger or consolidation and certain other transactions) with a Delaware corporation for a period of three years following the time such stockholder became an interested stockholder unless (1) prior to such time the corporation's board of directors approved either the business combination or the transaction which resulted in such stockholder becoming an interested stockholder, (2) upon consummation of the transaction which resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares of stock owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (3) at or subsequent to such time the business combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders (and not by written consent) by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. 27 The provisions of Section 203 do not apply to a Delaware corporation if, among other things, (1) such corporation amends its certificate of incorporation or bylaws to elect not to be governed by Section 203 and such amendment is approved by (in addition to any other required vote) the affirmative vote of a majority of the Shares entitled to vote; provided that such amendment would not be effective until 12 months after its adoption and would not apply to any business combination between such corporation and any person who became an interested stockholder on or prior to the date of such adoption, (2) such corporation does not have a class of voting stock that is listed on a national securities exchange, authorized for quotation on NASDAQ or held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken, directly or indirectly, by an interested stockholder or from a transaction in which a person becomes an interested stockholder, or (3) the business combination is proposed by an interested stockholder prior to the consummation or abandonment of, and subsequent to the earlier of the public announcement or the notice required under Section 203 of, any one of certain proposed transactions which is with or by a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of the corporation's board of directors and is approved or not opposed by a majority of the board of directors then in office who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election to succeed such directors by a majority of such directors. The Offer is subject to the Business Combination Condition, which will be satisfied if, among other things, (1) prior to the acceptance for payment of Shares pursuant to the Offer, Maxwell's Board of Directors approves the Offer or the Proposed Merger or (2) there are validly tendered and not withdrawn prior to the Expiration Date a number of Shares that, together with the Shares then owned by Purchaser, would represent at least 85% of the Shares outstanding on the date hereof (excluding Shares owned by certain employee stock plans and persons who are directors and also officers of Maxwell). Jones and Purchaser expect, if necessary, to seek to remove each member of Maxwell's Board of Directors who is elected at Maxwell's 2004 annual meeting of stockholders to be held on April 8, 2004 and replace them with directors who Jones and Purchaser believe will consider, to the extent that it is in the best interest of Maxwell's stockholders, taking action to approve the Offer and the Proposed Merger or any alternative proposal for purposes of Section 203. Subject to their fiduciary duties, the Purchaser Nominees, if elected, are expected to support the Offer and the Proposed Merger and take actions necessary to satisfy the Business Combination Condition. Appraisal Rights. Stockholders of Maxwell do not have appraisal rights as a result of the Offer. However, if a merger (including, without limitation, the Proposed Merger) involving Maxwell is consummated on the terms currently contemplated, stockholders of Maxwell who have neither voted in favor of the merger nor consented thereto in writing, and who otherwise under the DGCL comply with the applicable statutory procedures, will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of such merger) and to receive payment of such fair value in cash, together with a fair rate of interest, if any (all such Shares collectively, the "Dissenting Shares"). Any such judicial determination of the fair value of the Dissenting Shares could be based upon considerations other than or in addition to the price paid in the Offer and the market value of the Shares. Stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer or the consideration paid in such a merger. Moreover, Purchaser may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Dissenting Shares is less than the price paid in the Offer. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the right to receive the highest price paid per Share pursuant to the Offer. A stockholder may withdraw his demand for appraisal by delivering to Purchaser and Jones a written withdrawal of his demand for appraisal and acceptance of the merger. Failure to follow the requirements of Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. "Going-Private" Transactions. Rule 13e-3 under the Exchange Act is applicable to certain "going-private" transactions and may under certain circumstances be applicable to the Proposed Merger. Purchaser does not believe that Rule 13e-3 will be applicable to the Proposed Merger unless the Proposed Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial 28 information concerning Maxwell and certain information relating to the fairness of the Proposed Merger and the consideration offered to minority stockholders be filed with the SEC and distributed to minority stockholders before the consummation of any such transaction. The foregoing discussion of certain provisions of the DGCL and the Exchange Act is not a complete description of the DGCL or the Exchange Act or such provisions thereof and is qualified in its entirety by reference to the DGCL and the Exchange Act. 12. SOURCE AND AMOUNT OF FUNDS. Purchaser estimates that the total amount of funds required to acquire, pursuant to the Offer, the number of Shares that are outstanding on a fully diluted basis and to pay related fees and expenses, including, without limitation, fees and expenses of professional advisors and printing and mailing costs, will be approximately $336.4 million. See "THE OFFER -- Section 16". Purchaser currently expects to obtain the cash funds required to consummate the Offer through capital contributions or advances made by Jones. Jones currently expects to obtain such cash funds from either cash on hand and/or its existing credit facilities. As of February 28, 2004, Jones had cash on hand of approximately $36.1 million. In addition, as of March 22, 2004, Jones had two credit agreements with several lending institutions providing aggregate borrowing capacity of up to $1.4 billion (the "Senior Credit Facilities"). The Senior Credit Facilities, of which the entire amount is available for letters of credit or cash borrowings, consist of (1) a $700.0 million three-year revolving credit facility, dated as of June 10, 2003 (the "Three-Year Facility"), by and among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank, National Association, as Administrative Agent, JPMorgan Chase Bank and Citibank, N.A., as Syndication Agents and Fleet National Bank and Bank of America, N.A., as Documentation Agents and (2) a $700.0 million five-year revolving credit facility, dated as of June 15, 1999, as amended, (the "Five-Year Facility"), among Jones Apparel Group USA, Inc., the additional obligors referred to therein, the lenders referred to therein, Wachovia Bank, National Association (as successor to First Union National Bank), as Administrative Agent, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank) and Citibank, N.A., as Syndication Agents and Bank of America, N.A. (as successor to Nationsbank, N.A.), as Documentation Agent. As of February 28, 2004, approximately $246.0 million was outstanding under the Three-Year Facility (comprised solely of outstanding letters of credit) and approximately $345.5 million was outstanding under the Five-Year Facility (comprised solely of outstanding loans). The Three-Year Facility expires on June 10, 2006 and the Five-Year Facility expires on June 15, 2004. Each of the Three-Year Facility and the Five-Year Facility bears interest, at the option of the borrower, at (1) the higher of (a) Wachovia Bank, N.A.'s prime rate and (b) the sum of the rate equal to the Federal funds rate plus 1/2 of 1%, plus (2) a margin which fluctuates based on the relevant credit ratings assigned by Moody's and Standard & Poor's from time to time, or (3) a rate based on certain rates offered for U.S. dollar deposits in the Eurodollar interbank market plus a margin which fluctuates based on the relevant credit ratings assigned by Moody's and Standard & Poor's from time to time. The Senior Credit Facilities are unsecured and require Jones and certain of its subsidiaries to satisfy (1) an interest coverage ratio and (2) a net worth maintenance covenant. The Senior Credit Facilities contain, other covenants, including, without limitation, limitations on Jones's and certain of its affiliates' ability to incur additional indebtedness, incur liens, make certain investments, engage in certain mergers, sell assets, pay dividends or make certain payments to affiliates. Each of these covenants is subject to certain exceptions. The Senior Credit Facilities contain representations and warranties customary for credit facilities of their kind, the accuracy of which is a condition to borrowings thereunder. The Senior Credit Facilities do not contain limitations on the ability to use borrowings thereunder in connection with the Offer or the Proposed Merger. Borrowings incurred in connection with the Offer or the Proposed Merger may be refinanced or repaid from funds generated internally by Jones and its affiliates (including, without limitation, after consummation of any merger or other business combination that may be proposed with respect to Maxwell, existing cash balances of, and funds generated by, Maxwell) or other sources, which may include, without limitation, the proceeds of the sale of securities. No decision has been made concerning this matter, and decisions will be made based on Jones's review from time to time of the advisability of selling particular securities as well as on interest rates and other economic conditions. 29 Copies of the Three-Year Facility and the Five-Year Facility are filed as Exhibit (b)(1) and Exhibit (b)(2), respectively, to the Schedule TO filed by Jones and Purchaser with the SEC in connection with the Offer on March 23, 2004 pursuant to Rule 14d-3 under the Exchange Act. Reference is made to such Exhibits for a more complete description of the terms and conditions of the Senior Credit Facilities. THE OFFER IS NOT CONDITIONED ON EITHER JONES OR PURCHASER OBTAINING FINANCING. 13. DIVIDENDS AND DISTRIBUTIONS. If, on or after March 22, 2004, Maxwell (1) splits, combines or otherwise changes the Shares or its capitalization, (2) acquires Shares or otherwise causes a reduction in the number of Shares, (3) issues or sells additional Shares (other than pursuant to the terms of any director or employee stock options outstanding as of February 24, 2004), or any shares of any other class of capital stock or other voting securities or any securities convertible into or exchangeable for, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, or (4) discloses that it has taken any such action, then, without prejudice to Purchaser's rights under "THE OFFER -- Section 14", Purchaser, in its sole discretion, may make such adjustments in the Offer Price and other terms of the Offer and the Proposed Merger as it deems appropriate to reflect such split, combination or other change including, without limitation, the number or type of securities offered to be purchased. If, on or after March 22, 2004, Maxwell declares or pays any dividend on the Shares or other distribution on the Shares, or issues with respect to the Shares any additional Shares, shares of any other class of capital stock, or voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to Purchaser or its nominee or transferee on Maxwell's stock transfer records, then, subject to the provisions of "THE OFFER -- Section 14", (1) the Offer Price may, in the sole discretion of Purchaser, be reduced by the amount of any such cash dividends or cash distributions and (2) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (a) be received and held by the tendering stockholders for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer, or (b) at the direction of Purchaser, be exercised for the benefit of Purchaser, in which case the proceeds of such exercise will promptly be remitted to Purchaser. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by Purchaser in its sole discretion. 14. CONDITIONS TO THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time, in its sole discretion, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of and accordingly the payment for, any tendered Shares, and may terminate the Offer, if, in the sole judgment of Purchaser, (1) at or prior to the Expiration Date, any one or more of the Minimum Tender Condition, the Rights Condition or the Business Combination Condition has not been satisfied, or (2) at any time on or after March 22, 2004, and before the time of payment for any such Shares (whether or not any Shares have theretofore been accepted for payment pursuant to the Offer), any of the following events shall occur or shall be determined by Purchaser to have occurred: (a) there shall be threatened, instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, or by any other person, domestic or foreign, (1)(A) challenging or seeking to make illegal, to delay or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of, or payment for, some or all the Shares by Purchaser, Jones or any other affiliate of Jones or the consummation by Purchaser, Jones or any other affiliate of Jones of the Proposed Merger or any other business combination with Maxwell, (B) seeking to obtain damages in connection therewith or (C) otherwise directly or indirectly relating to the transactions contemplated by the Offer, the Proposed Merger or any such business 30 combination, (2) seeking to restrain or prohibit the full rights of ownership or operation by Purchaser, Jones or any other affiliate of Jones of all or any portion of the business or assets of Maxwell and its subsidiaries or of Jones or its affiliates, or to compel Purchaser, Jones or any other affiliate of Jones to dispose of or hold separate all or any portion of the business or assets of Jones or its affiliates or Maxwell or any of its subsidiaries or seeking to impose any limitation on the ability of Purchaser, Jones or any other affiliate of Jones to conduct their respective businesses or own such assets, (3) seeking to impose or confirm limitations on the ability of Purchaser, Jones or any other affiliate of Jones effectively to exercise full rights of ownership of the Shares or Rights, including, without limitation, the right to vote any Shares acquired by any such person on all matters properly presented to Maxwell's stockholders, (4) seeking to require divestiture by Purchaser, Jones or any other affiliate of Jones of any Shares, (5) seeking any material diminution in the benefits expected to be derived by Purchaser, Jones or any other affiliate of Jones as a result of the transactions contemplated by the Offer or the Proposed Merger or any other business combination with Maxwell, (6) which otherwise, in the sole judgment of Purchaser, might materially adversely affect Purchaser, Jones or any other affiliate of Jones or the value of the Shares or (7) in the sole judgment of Purchaser, materially adversely affecting the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses, franchises, results of operations or prospects of Maxwell or any of its subsidiaries; (b) there shall be any action taken or any statute, rule, regulation, interpretation, judgment, order, decree or injunction proposed, enacted, enforced, promulgated, amended, issued or deemed applicable (1) to Purchaser, Jones or any other affiliate of Jones or (2) to the Offer or the Proposed Merger or other business combination by Purchaser, Jones or any other affiliate of Jones with Maxwell, by any court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, which, in the sole judgment of Purchaser, might directly or indirectly result in any of the consequences referred to in clauses (1) through (7) of paragraph (a) above; (c) any change (or any condition, event or development involving a prospective change) shall have occurred or been threatened in the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses, franchises, results of operations or prospects of Maxwell or any of its subsidiaries which, in the sole judgment of Purchaser, is or may be materially adverse, or Purchaser shall have become aware of any fact which, in the sole judgment of Purchaser, has or may have material adverse significance with respect to either the value of Maxwell or any of its subsidiaries or the value of the Shares to Purchaser, Jones or any other subsidiary of Jones; (d) there shall have occurred (1) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with any such exchange or market not related to market conditions), (2) a declaration of a banking moratorium or any suspension of payments in respect of banks by Federal or state authorities in the United States, (3) any limitation (whether or not mandatory) by any governmental authority or agency on, or other event which, in the sole judgment of Purchaser, might materially adversely affect the extension of credit by banks or other lending institutions, (4) commencement of a war, armed hostilities or the occurrence of any other national or international calamity directly or indirectly involving the United States or any attack on, or outbreak or act of terrorism involving, the United States, (5) a material change in the United States dollar or any other currency exchange rates or a suspension of, or limitation on, the markets therefor, (6) any change in the general political, market, economic or financial conditions in the United States or other jurisdictions in which Maxwell or its subsidiaries do business that could, in the sole judgment of Purchaser, have a material adverse effect on the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses, franchises, results of operations or prospects of Maxwell or any of its subsidiaries or the trading in, or value of, the Shares, (7) any decline in either the Dow Jones Industrial Average, or the Standard & Poor's Index of 500 Industrial Companies or the NASDAQ-100 Index by an amount in excess of 15% measured from the close of business on March 22, 2004 or any material adverse change in the market price in the Shares or (8) in the case of any of the foregoing existing on March 22, 2004, a material acceleration or worsening thereof; (e) Maxwell or any of its subsidiaries shall have (1) split, combined or otherwise changed, or authorized or proposed the split, combination or other change, of the Shares or its capitalization, (2) acquired or otherwise caused a reduction in the number of, or authorized or proposed the acquisition or other reduction in the number of, any presently outstanding Shares or other securities or other equity interests, (3) issued, distributed or sold, or authorized 31 or proposed the issuance, distribution or sale of, additional Shares, other than Shares issued or sold upon the exercise or conversion (in accordance with the publicly disclosed terms thereof) of director or employee stock options outstanding on February 24, 2004, or issued, distributed or sold, or authorized or proposed the issuance, distribution or sale, of shares of any other class of capital stock or other equity interests, other voting securities, debt securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, (4) declared, paid or proposed to declare or pay any dividend or other distribution on any shares of capital stock of Maxwell, (5) altered or proposed to alter any material term of any outstanding security or material contract, permit or license, (6) incurred any debt otherwise than in the ordinary course of business consistent with past practice or any debt containing, in the sole judgment of Purchaser, burdensome covenants or security provisions, (7) authorized, recommended, proposed or entered into an agreement with respect to any merger, consolidation, recapitalization, liquidation, dissolution, business combination, acquisition of assets, disposition of assets, release or relinquishment of any material contractual or other right of Maxwell or any of its subsidiaries or any comparable event not in the ordinary course of business, (8) authorized, recommended, proposed or entered into, or announced its intention to authorize, recommend, propose or enter into, any agreement or arrangement with any person or group that, in Purchaser's sole opinion, could adversely affect either the value of Maxwell or any of its subsidiaries or the value of the Shares to Purchaser, Jones or any other affiliates of Jones, (9) acquired, or authorized, recommended or proposed to acquire, any business or assets material to Maxwell or any of its affiliates (except purchases of inventory in the ordinary course of business consistent with past practice), (10) adopted, established or entered into any new employment, change in control, severance compensation or similar agreement, arrangement or plan with or for one or more of its employees, consultants or directors, or adopted, established or entered into or amended, or made grants or awards pursuant to, any agreements, arrangements or plans so as to provide for increased benefits to one or more employees, consultants or directors, whether or not as a result of or in connection with the transactions contemplated by the Offer or the Proposed Merger, or Purchaser shall have become aware of any such action which was not previously disclosed in publicly available filings, (11) except as may be required by law, taken any action to adopt, establish, terminate or amend any employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended) of Maxwell or any of its subsidiaries, or Purchaser shall have become aware of any such action which was not previously disclosed in publicly available filings or (12) amended or authorized or proposed any amendment to their respective certificate of incorporation or bylaws or similar organizational documents, or Purchaser shall become aware that Maxwell or any of its subsidiaries shall have proposed or adopted any such amendment which shall not have been previously disclosed; (f) a tender or exchange offer for any Shares shall be made or publicly proposed to be made by any other person (including, without limitation, Maxwell or any of its subsidiaries or affiliates) or it shall be publicly disclosed or Purchaser shall otherwise learn that (1) any person, entity (including, without limitation, Maxwell or any of its subsidiaries or affiliates) or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of any class or series of capital stock of Maxwell (including, without limitation, the Shares) through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of more than 5% of any class or series of capital stock of Maxwell (including, without limitation, the Shares) other than acquisitions for bona fide arbitrage purposes only and except as disclosed in a Schedule 13D or Schedule 13G on file with the SEC on the date of this Offer to Purchase, (2) any such person, entity or group, which before the date of this Offer to Purchase, had filed such a Schedule with the SEC has acquired or proposes to acquire, through the acquisition of stock, the formation of a group or otherwise, beneficial ownership of an additional 1% or more of any class or series of capital stock of Maxwell (including, without limitation, the Shares), or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of an additional 1% or more of any class or series of capital stock of Maxwell (including, without limitation, the Shares), (3) any person or group shall enter into a definitive agreement or an agreement in principle or make a proposal with respect to a tender offer or exchange offer or a merger, consolidation or other business combination with or involving Maxwell or any of its subsidiaries, or (4) any person shall file a Notification and Report Form under the HSR Act, or make a public announcement reflecting an intent to acquire Maxwell or any assets or securities of Maxwell or any of its subsidiaries (other than purchases by customers of inventory in the ordinary course of business); (g) Jones, Purchaser or any other affiliate of Jones shall have reached an agreement or understanding with Maxwell providing for termination of the Offer, or Jones, Purchaser or any other Jones affiliate shall have entered 32 into a definitive agreement or announced an agreement in principle with Maxwell providing for a merger or other business combination with Maxwell or the purchase of stock or assets of Maxwell which does not contemplate the Offer; or (h) any waiting periods under the HSR Act applicable to the purchase of the Shares pursuant to the Offer shall not have expired or been terminated, or any other approval, permit, authorization, consent or other action or non-action of any domestic, foreign or supranational governmental, administrative or regulatory agency, authority, tribunal or third party which is necessary to consummate the Offer and the Proposed Merger shall not have been obtained on terms satisfactory to Purchaser, in its sole discretion; which, in the sole judgment of Purchaser in any such case, and regardless of the circumstances (including, without limitation, any action or inaction by Purchaser or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser, in its sole discretion, regardless of the circumstances (including, without limitation, any action or omission by Jones or Purchaser) giving rise to any such conditions or may be waived by Purchaser, in its sole discretion, in whole or in part, at any time and from time to time. The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Purchaser concerning any condition or event described in this Section 14 shall be final and binding upon all parties. 15. CERTAIN LEGAL MATTERS; ANTITRUST; OTHER FOREIGN APPROVALS; STATE TAKEOVER STATUTES. Except as set forth in this Offer to Purchase, based on its review of publicly available filings by Maxwell with the SEC and other publicly available information regarding Maxwell, Purchaser is not aware of any governmental or regulatory licenses or permits that would be material to the business of Maxwell and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares (and the indirect acquisition of the stock of Maxwell's subsidiaries) as contemplated herein, or, except to the extent required by any foreign regulatory authorities, any filings, approvals or other actions by or with any domestic, foreign or supranational governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Shares (or the indirect acquisition of the stock of Maxwell's subsidiaries) by Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, there can be no assurance that any such additional approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to Maxwell's business, or that certain parts of Maxwell's or Jones's business might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or action or in the event that such approvals were not obtained or such actions were not taken. Purchaser's obligation to purchase and pay for Shares is subject to certain conditions which may be applicable under such circumstances. See "INTRODUCTION" and "THE OFFER -- Section 14" for a description of certain conditions to the Offer. Antitrust. Under the HSR Act and the rules and regulations that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated until certain information and documentary material have been furnished for review by the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. A Notification and Report Form with respect to the Offer is expected to be filed by Jones under the HSR Act shortly, and the waiting period with respect to the Offer under the HSR Act will expire at 11:59 p.m., New York City time, on the fifteenth calendar day after such filing, unless terminated prior thereto. Before such time, however, either the FTC or the Antitrust Division may extend the waiting period by requesting additional information or material from Jones. If such request is made, the waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after Jones has substantially complied with such request. The waiting period will not be affected either by the failure of Maxwell (as opposed to Jones) to file a Notification and Report form or to comply with any request for additional information or materials issued by the FTC or the Antitrust Division. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by Purchaser pursuant to the Offer and the Proposed Merger. At any time before or after the 33 purchase of Shares pursuant to the Offer by Purchaser, the Antitrust Division or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including, without limitation, seeking to enjoin the purchase of Shares pursuant to the Offer, the divestiture of Shares purchased pursuant to the Offer or the divestiture of assets of Jones, Purchaser, Maxwell or their respective subsidiaries. Private parties as well as state attorneys general may also bring legal actions under the antitrust laws under certain circumstances. Based upon an examination of information available to Purchaser relating to the businesses in which Jones, Purchaser, Maxwell and their respective subsidiaries are engaged, Purchaser believes that the Offer and the Proposed Merger will not violate antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or the Proposed Merger on antitrust grounds will not be made or that, if such a challenge is made, Purchaser will prevail. See "THE OFFER -- Section 14" for certain conditions to the Offer, including, without limitation, conditions with respect to litigation. Other Foreign Approvals. According to the Maxwell 10-K, Maxwell also conducts business in certain other countries. In connection with the acquisition of the Shares pursuant to the Offer or the Proposed Merger, the laws of other countries and jurisdictions may require the filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. The governments in such countries and jurisdictions might attempt to impose additional conditions on Maxwell's operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Proposed Merger. There can be no assurance that Purchaser will be able to cause Maxwell or its subsidiaries to satisfy or comply with such laws or that compliance or noncompliance will not have adverse consequences for Maxwell or any subsidiary after purchase of the Shares pursuant to the Offer or the Proposed Merger. State Takeover Statutes. A number of states have adopted laws which purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or which have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. In 1982, in EDGAR V. MITE CORP., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of Indiana may, as a matter of corporate law, and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The Indiana law being considered by the Supreme Court in that case was by its terms applicable only to corporations that both had a substantial number of stockholders in Indiana and were incorporated in Indiana. Maxwell's principal place of business is in Massachusetts. Massachusetts has enacted takeover laws that purport to regulate the acquisition of corporations whose principal place of business is in Massachusetts. Chapter 110C of the Massachusetts Corporation-Related Laws ("Chapter 110C") requires a company engaging in a "take-over bid" to make certain filings with the Secretary of the Commonwealth of Massachusetts. In addition, Chapter 110C permits the "target company" (a company organized under the laws of Massachusetts or having its principal place of business in Massachusetts) and its stockholders the opportunity to request a hearing with respect to the take-over bid. A take-over bid generally includes the acquisition of, or the offer to acquire, any equity security of a target company if, after the acquisition, the company engaged in the take-over bid and its associates or affiliates would directly or indirectly be the beneficial owners of more than 10% of any class of issued and outstanding equity securities of the target company. Purchaser believes that Chapter 110C violates Article I, Section 8 of the United States Constitution (the Commerce Clause) and Article VI, Clause 2 of the United States Constitution (the Supremacy Clause). As a result, Purchaser does not intend to comply with the terms of Chapter 110C. Chapter 110E of the Massachusetts Corporation-Related Laws ("Chapter 110E") provides that shares of an "issuing public corporation" acquired by any person in a "control share acquisition" shall not have voting rights unless voting rights are authorized at an annual or special meeting of stockholders of the "issuing public corporation" by the affirmative vote of the holders of a majority of all shares entitled to vote generally in the election of directors, excluding shares held by the acquiring person. A "control share acquisition" generally means the acquisition of beneficial ownership of a number of shares in the "issuing public corporation" within a specified range of voting power. An "issuing public company" generally is a corporation (1) whose shares are publicly traded, (2) which has 200 or more stockholders of record, (3) whose principal executive office is within Massachusetts and (4) in respect to which more than 10% of its 34 stockholders of record reside in Massachusetts or more than 10% of its shares are owned of record by residents of Massachusetts. In order for Chapter 110E to apply to a control share acquisition, the articles or bylaws of the issuing public corporation must provide at the time of the control share acquisition that Chapter 110E will apply to the control share acquisition. The most recent publicly filed certificate of incorporation and bylaws of Maxwell as of the date of this Offer to Purchase do not contain such a provision. In addition, Purchaser does not believe that Maxwell constitutes an "issuing public corporation" because Maxwell has an insufficient number of stockholders of record; according to the Maxwell 10-K, Maxwell had only 21 stockholders of record as of December 24, 2003. Therefore, Purchaser does not believe that Chapter 110E would apply in any way to the Offer or the Proposed Merger. Maxwell, directly or through subsidiaries, conducts business in a number of other states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Proposed Merger and has not complied with any such laws. Should any person seek to apply any such state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Proposed Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Proposed Merger, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer or the Proposed Merger. In such case, Purchaser may not be obligated to accept for payment any Shares tendered. See "THE OFFER -- Section 14". 16. CERTAIN FEES AND EXPENSES. Bear Stearns is acting as the financial advisor to Jones in connection with its effort to enter into a business combination with Maxwell and is acting as the Dealer Manager in connection with the Offer. Bear Stearns will receive customary fees in connection with the engagement. Jones has also agreed to reimburse Bear Stearns (in its capacity as Dealer Manager and financial advisor) for its reasonable out-of-pocket expenses, including the fees of its outside counsel and any other consultant or advisor retained by Bear Stearns, incurred in connection with its engagement, and to indemnify Bear Stearns and certain related persons against certain liabilities and expenses in connection with their engagement, including, without limitation, certain liabilities under the Federal securities laws. Bear Stearns and its affiliates render various investment banking and other advisory services to Jones and its affiliates and are expected to continue to render such services, for which they have received and expect to continue to receive customary compensation from Jones and its affiliates. Michael L. Tarnopol, a Senior Managing Director of Bear Stearns, is a member of the Board of Directors of Jones. In the ordinary course of business, Bear Stearns engages in securities trading, market making and brokerage activities and may, at any time, hold long or short positions and may trade or otherwise effect transactions in securities of Maxwell and/or Jones. Innisfree has been retained by Purchaser as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by email, mail, telephone, facsimile, telegraph and personal interview and may request brokers, dealers, banks, trust companies and other nominee stockholders to forward material relating to the Offer to beneficial owners. Customary compensation will be paid for all such services in addition to reimbursement of reasonable out-of-pocket expenses. Purchaser has agreed to indemnify the Information Agent against certain liabilities and expenses, including liabilities under the Federal securities laws. In addition, The Bank of New York has been retained by Purchaser as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services in connection with the Offer, will be reimbursed for its reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses in connection therewith. Except as set forth above, Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by Purchaser for customary clerical and mailing expenses incurred by them in forwarding materials to their customers. 35 17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares and Rights pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares and Rights in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF JONES OR PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Schedule TO and any amendments thereto, including, without limitation, exhibits, may be examined and copies may be obtained from the offices of the SEC in the same manner as discussed in "THE OFFER -- Section 8" with respect to information concerning Maxwell. SOLICITATION OF CONSENTS As discussed in this Offer to Purchase, Jones and Purchaser have filed a preliminary consent statement with the SEC for use in connection with the solicitation of written consents from stockholders of Maxwell. Jones and Purchaser advise the security holders of Maxwell to read the consent statement when it becomes available, because it will contain important information. Jones and Purchaser expect to file a definitive consent solicitation statement as soon as practicable. The security holders of Maxwell may obtain a free copy of the preliminary consent solicitation statement, the definitive consent solicitation statement (when it is available) and other documents that Jones files with the SEC at its web site at www.sec.gov. In addition, these documents may be obtained free of charge from Jones by directing a request to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, Attention: Chief Operating and Financial Officer. INFORMATION CONCERNING PARTICIPANTS Jones, Purchaser and, in each case, certain of its officers, directors and nominees for the directorships of Maxwell, among others, may be deemed to be participants in the solicitation of Maxwell's shareholders. The security holders of Maxwell may obtain information regarding the names, affiliations and interests of individuals who may be participants in the solicitation of Maxwell's shareholders in a Schedule 14A filed with the SEC on March 23, 2004. MSC Acquisition Corp. March 23, 2004 36 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF JONES AND PURCHASER 1. Directors and Executive Officers of Jones. The following table sets forth the name, present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Jones. The business address and telephone number of each such person is c/o Jones, 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, (215) 785-4000. Each person listed below is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Peter Boneparth (Age, 44)................. Director of Jones since 2001. President and Chief Executive Officer of Jones. Mr. Boneparth was named President of Jones in March 2002 and Chief Executive Officer in May 2002. He also serves as Chief Executive Officer of McNaughton Apparel Group Inc. ("McNaughton"). He has been Chief Executive Officer of McNaughton since June 1999, and had been President of McNaughton from April 1997 until January 2002, and Chief Operating Officer of McNaughton from 1997 until its acquisition by Jones. Prior to that time, Mr. Boneparth was Executive Vice President and Senior Managing Director of Investment Banking for Rodman & Renshaw, Inc., an investment banking firm, from March 1995 to April 1997. Sidney Kimmel (Age, 76)................... Mr. Kimmel has served as Jones's Chairman since 1975 and as its Chief Executive Officer from 1975 to May 2002. Mr. Kimmel founded the Jones Division of W.R. Grace & Co. in 1970. Howard Gittis (Age, 70)................... Director of Jones since 1992. Mr. Gittis has been Vice Chairman and Chief Administrative Officer and a director of MacAndrews & Forbes Holdings Inc., a diversified holding company, and several of its affiliates since July 1985. In addition, Mr. Gittis is a director of Loral Space and Communications Ltd., M&F Worldwide Corp., Panavision Inc., Revlon, Inc., and Scientific Games Corporation. Matthew H. Kamens (Age, 52)............... Director of Jones since 2001. Mr. Kamens is employed by Mr. Kimmel as a lawyer and personal advisor. He is also Of Counsel to the law firm of Wolf, Block, Schorr and Solis-Cohen LLP, where he served as its Chairman from 1995 to 2001. J. Robert Kerrey (Age, 60)................ Director of Jones since 2002. Mr. Kerrey has served as the President of New School University in New York City since January 2001. From 1988 to 2000, he served as United States Senator from Nebraska. During that period, he was a member of numerous congressionally-chartered commissions and Senate committees, including, among others, the Senate Finance and Appropriations Committees and the Senate Select Committee on Intelligence. Prior to that time, he served as Governor of Nebraska from 1982 to 1987. Mr. Kerrey also serves on the Board of Directors of Tenet Healthcare Corporation. Ann N. Reese (Age, 51).................... Director of Jones since 2003. Ms. Reese co-founded the Center for Adoption Policy Studies (the "Center") in New York in 2001 and is currently the Executive Director. Prior to co-founding the Center, Ms. Reese served as a Principal with Clayton, Dubilier & Rice, a private equity investment firm, from 1999 to 2000 and as Executive Vice President and Chief Financial Officer of ITT Corporation from 1995 to 1998. Ms. Reese also serves on the Board of Directors of Xerox Corporation, Kmart Holding Corporation and Jafra Cosmetics International Inc.
I-1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Anthony F. Scarpa (Age, 60)............... Director of Jones since 2001. Mr. Scarpa served as Senior Vice President and Division Executive of J.P. Morgan Chase Bank from 1985 until his retirement in December 2000. Geraldine Stutz (Age, 75)................. Director of Jones since 1991. Ms. Stutz has been a principal partner of GSG Group, a fashion and marketing service, since 1993. Prior to 1993, she was Publisher of Panache Press at Random House, a book publisher. From 1960 until 1986, Ms. Stutz was President of Henri Bendel. Ms. Stutz has served on the Board of Directors of Tiffany & Co., The Theatre Development Fund and The Actors' Fund. Michael L. Tarnopol (Age, 67)............. Director of Jones since 2001. Mr. Tarnopol is a Senior Managing Director, Chairman of the Investment Banking Division and Vice Chairman of the Board of Directors of Bear Stearns. Mr. Tarnopol joined Bear Stearns in 1975, became a partner of Bear Stearns in 1975, and held executive positions in its Mergers and Acquisitions and International departments prior to its conversion from a partnership to a corporation in 1985. Thereafter, he became a Senior Managing Director of Bear Stearns. Anita Britt (Age, 40)..................... Executive Vice President of Finance of Jones. Ms. Britt was named Executive Vice President of Finance of Jones in May 2002. She served as Director of Investor Relations and Financial Planning from 1996 to August 2000, Vice President, Finance and Investor Relations from September 2000 to February 2001 and Senior Vice President, Finance and Investor Relations from March 2001 to April 2002. Rhonda J. Brown (Age, 48)................. President and Chief Executive Officer of Footwear, Accessories and Retail Group of Jones and President and Chief Executive Officer of Nine West Footwear Corporation and Jones Retail Corporation. Ms. Brown joined Jones as President and Chief Executive Officer of Nine West Group Inc. and President and Chief Executive Officer of Jones' Footwear, Accessories and Retail Group in October 2001. Prior to joining Jones, Ms. Brown served as President of Steve Madden, Ltd. from February 2000 to September 2001. Ms. Brown also served as Chief Operating Officer of Steve Madden, Ltd. from July 1996 to January 2001 and as a director of that company from October 1996 to September 2001. Wesley R. Card (Age, 56).................. Chief Operating and Financial Officer of Jones. Mr. Card has been Jones's Chief Financial Officer since 1990. He was also named Chief Operating Officer of Jones in March 2002. Ira M. Dansky (Age, 58)................... Executive Vice President, General Counsel and Secretary of Jones. Mr. Dansky has been Jones's General Counsel since 1996 and Secretary since January 2001. He was elected an Executive Vice President of Jones in March 2002. Patrick M. Farrell (Age, 54).............. Senior Vice President and Corporate Controller of Jones. Mr. Farrell was appointed Vice President and Corporate Controller of Jones in November 1997 and Senior Vice President of Jones in September 1999.
I-2 2. Directors and Executive Officers of Purchaser. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Purchaser are set forth below. The business address of each such director and executive officer is MSC Acquisition Corp. c/o Jones, 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007. All such directors and executive officers listed below are citizens of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Peter Boneparth (Age, 44)................. Chairman of Purchaser's Board of Directors and President of Purchaser since 2004. Additional information is provided above. Wesley R. Card (Age, 56).................. Director, Chief Financial Officer and Treasurer of Purchaser since 2004. Additional information is provided above. Ira M. Dansky (Age, 58)................... Director and Secretary of Purchaser since 2004. Additional information is provided above.
I-3 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and Rights and any other required documents should be sent or delivered by each stockholder of Maxwell or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Hand or Overnight Delivery: Tender & Exchange Department Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Receive and Delivery Window New York, New York 10286-1248 New York, New York 10286
By Facsimile Transmission: (For Eligible Institutions Only) (212) 815-6433 Confirmation Receipt of Facsimile by Telephone Only: (212) 815-6212 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent, and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: (INNISFREE LOGO) 501 Madison Avenue, 20th Floor New York, New York 10022 Banks and Brokers Call Collect: (212) 750-5833 All Others Please Call Toll-free: (888) 750-5834 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, New York 10179 (888) 235-2327 or (212) 272-2000 EX-99.A.1.B 4 y95442exv99waw1wb.txt LETTER OF TRANSMITTAL EXHIBIT(A)(1)(B) LETTER OF TRANSMITTAL TO TENDER SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. AT $20.00 NET PER SHARE PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 23, 2004 BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Hand or Overnight Delivery: By Facsimile Transmission: Tender & Exchange Department Tender & Exchange Department (For Eligible Institutions Only) P.O. Box 11248 101 Barclay Street (212) 815-6433 Church Street Station Receive and Delivery Window Confirmation Receipt of Facsimile New York, New York 10286-1248 New York, New York 10286 By Telephone Only (212) 815-6212
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- ------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------------ NAMES(S) & ADDRESS(ES) OF REGISTERED HOLDERS(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS SHARES TENDERED NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES SHARE REPRESENTED NUMBER CERTIFICATE BY SHARE OF SHARE(S) NUMBER(S)* CERTIFICATE(S) TENDERED** ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Total Shares - ------------------------------------------------------------------------------------------------------------------------------ * Need not be completed if transfer is made by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF RIGHTS TENDERED - ------------------------------------------------------------------------------------------------------------------------------ NAMES(S) & ADDRESS(ES) OF REGISTERED HOLDERS(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS RIGHTS TENDERED NAME(S) APPEAR(S) ON RIGHTS CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF RIGHTS NUMBER CERTIFICATE REPRESENTED BY OF RIGHT(S) NUMBER(S)+* CERTIFICATE(S)* TENDERED** ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Total Shares - ------------------------------------------------------------------------------------------------------------------------------ + If the tendered Rights are represented by separate Rights Certificates, complete the certificate numbers of such Rights Certificates. Stockholders tendering Rights that are not represented by separate certificates will need to submit an additional Letter of Transmittal if Rights Certificates are distributed. * Need not be completed if transfer is made by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Rights described above are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------------
This Letter of Transmittal is to be used either if (a) certificates for Shares and/or Rights (each as defined below) are to be forwarded herewith or (b) unless an Agent's Message (as defined in Instruction 2 below) is utilized, if delivery of Shares and/or Rights is to be made by book-entry transfer to an account maintained by the Depositary (as defined below) at the Book-Entry Transfer Facility (as defined in and pursuant to the procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. IF ANY OF THE CERTIFICATES REPRESENTING SHARES OR RIGHTS THAT YOU OWN HAVE BEEN LOST OR DESTROYED, SEE INSTRUCTION 11. Holders of Shares are required to tender one Right (as defined below) for each Share tendered to effect a valid tender of such Share. Unless and until the Distribution Date (as defined in the Offer to Purchase) occurs, the Rights are represented by and transferred with the Shares. Accordingly, if the Distribution Date does not occur prior to the Expiration Date (as defined in the Offer to Purchase) of the Offer, a tender of Shares also constitutes a tender of the associated Rights. If, however, pursuant to the Rights Agreement (as defined below) or otherwise, the separate certificates ("Rights Certificates") have been distributed by Maxwell (as defined below) to holders of Shares prior to the date of tender pursuant to the Offer (as defined below), Rights Certificates representing a number of Rights equal to the number of Shares being tendered must be delivered to the Depositary in order for such Shares to be validly tendered or, if available, a Book-Entry Confirmation must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time Shares are tendered pursuant to the Offer, a tender of Shares without Rights constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within a period ending on the later of (1) three NASDAQ trading days after the date of execution of the Notice of Guaranteed Delivery and (2) three business days after the date such Rights Certificates are distributed. Purchaser reserves the right to require that it receive such Rights Certificates, or a Book-Entry Confirmation, if available, prior to accepting Shares for payment. Payment for Shares tendered and purchased pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, Rights Certificates, if such certificates have been distributed to holders of Shares. Purchaser will not pay any additional consideration for the Rights tendered pursuant to the Offer. 2 Holders whose certificates for Shares ("Share Certificates") and, if applicable, Rights Certificates, are not immediately available (including, without limitation, if the Distribution Date has occurred but Rights Certificates have not yet been distributed by Maxwell) or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to, their Shares and/or Rights, and all other documents required hereby to the Depositary prior to the Expiration Date must tender their Shares and Rights in accordance with the guaranteed delivery procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase. See Instruction 2. [ ] CHECK HERE IF TENDERED SHARES AND/OR RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution ----------------------------------------------- Account Number at Book-Entry Transfer Facility ------------------------------ Transaction Code Number ----------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES AND/OR RIGHTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY (AS DEFINED IN THE OFFER TO PURCHASE) PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) --------------------------------------------- Date of Execution of Notice of Guaranteed Delivery -------------------------- Name of Institution that Guaranteed Delivery -------------------------------- IF DELIVERED BY BOOK-ENTRY TRANSFER, CHECK BOX: [ ] Name of Tendering Institution ----------------------------------------------- Account Number at Book-Entry Transfer Facility ------------------------------ Transaction Code Number ----------------------------------------------------- 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to MSC Acquisition Corp., a New York corporation (the "Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation, (1) the above described shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell"), and (2) unless and until validly redeemed by the Maxwell Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, at a price of $20.00 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated March 23, 2004 (the "Offer to Purchase") and this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged. Unless the context otherwise requires, all references herein to the "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Upon the terms of the Offer, subject to, and effective upon, acceptance for payment of, and payment for, the Shares and Rights tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares and Rights that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after March 22, 2004) and irrevocably constitutes and appoints The Bank of New York (the "Depositary"), the true and lawful agent and attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of the undersigned's rights with respect to such Shares and Rights (and any such other Shares or securities or rights), (a) to deliver certificates for such Shares and Rights (and any such other Shares or securities or rights) or transfer ownership of such Shares and Rights (and any such other Shares or securities or rights) on the account books maintained by the Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Purchaser, (b) to present such Shares and Rights (and any such other Shares or securities or rights) for transfer on Maxwell's books and (c) to receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and Rights (and any such other Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned understands that, unless the Rights are redeemed prior to the expiration of the Offer, stockholders will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. The undersigned understands that if the Distribution Date has occurred and Rights Certificates have been distributed to holders of Shares prior to the time a holder's Shares are purchased pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares being tendered herewith must be delivered to the Depositary or, if available, a Book-Entry Confirmation must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time Shares are purchased pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedures described below. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered herewith to the Depositary within a period ending on the later of (1) three NASDAQ trading days after the date of execution of the Notice of Guaranteed Delivery and (2) three business days after the date such Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights prior to accepting the associated Shares for payment. Payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, Rights Certificates if such certificates have been distributed to holders of Shares. Purchaser will not pay any additional consideration for the Rights tendered pursuant to the Offer. If, on or after March 22, 2004, Maxwell declares or pays any dividend on the Shares or other distribution on the Shares, or issues with respect to the Shares any additional Shares, shares of any other class of capital stock, or voting 4 securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to Purchaser or its nominee or transferee on Maxwell's stock transfer records, then, subject to the provisions of "THE OFFER -- Section 14" of the Offer to Purchase, (1) the Offer Price may, in the sole discretion of Purchaser, be reduced by the amount of any such cash dividends or cash distributions and (2) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (a) be received and held by the tendering stockholders for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer, or (b) at the direction of Purchaser, be exercised for the benefit of Purchaser, in which case the proceeds of such exercise will promptly be remitted to Purchaser. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by Purchaser in its sole discretion. The undersigned hereby irrevocably appoints Wesley R. Card and Ira M. Dansky, or either of them, and any other individual designated by either of them or Purchaser, and each of them individually, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of Maxwell's stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, the Shares and Rights tendered hereby (and with respect to any and all other Shares or other securities or rights issued in respect thereof on or after March 22, 2004) that have been accepted for payment by Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, Purchaser accepts for payment such Shares and Rights as provided in the Offer to Purchase. This proxy is coupled with an interest in the Shares and Rights tendered hereby and is irrevocable and is granted in consideration of the acceptance for payment of such Shares and Rights in accordance with the terms of the Offer. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the undersigned with respect to such Shares (except for any consents issued under the Consent Solicitation (as defined in the Offer to Purchase)) and Rights (and any such other Shares or securities or rights) will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective) by the undersigned. The undersigned acknowledges that in order for Shares and Rights to be deemed validly tendered, immediately upon the acceptance for payment of such Shares and Rights, Purchaser and Purchaser's designee must be able to exercise full voting and all other rights which inure to a record and beneficial holder with respect to such Shares and Rights. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and Rights (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after March 22, 2004) and, when the same are accepted for payment by Purchaser, Purchaser will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances and the same will not be subject to any adverse claim. The undersigned will, upon request, execute any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and Rights (and any such other Shares or other securities or rights). All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that the valid tender of Shares and Rights pursuant to any of the procedures described in "THE OFFER -- Section 3" of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares and Rights tendered hereby. 5 Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or return any certificates for Shares or Rights not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered" and "Description of Rights Tendered". Similarly, unless otherwise indicated under "Special Delivery Instructions", please mail the check for the purchase price and/or return any certificates for Shares or Rights not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered" and "Description of Rights Tendered". In the event that both the "Special Delivery Instructions" and the "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any certificates for Shares or Rights not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. Please credit any Shares or Rights tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares or Rights from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares or Rights so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares and/or Rights not tendered or not accepted for payment and/or the check for the purchase price of Shares and Rights accepted for payment are/is to be issued in the name of someone other than the undersigned. Issue [ ] Check [ ] Certificate(s) to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- (EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares and/or Rights not tendered or not accepted for payment and/or the check for the purchase price of Shares and/or Rights accepted for payment are/is to be sent to someone other than the undersigned or to the undersigned at an address other than that above. Mail [ ] Check [ ] Certificate(s) to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- (EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) 6 SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Dated ------------------------------ (Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Shares and Rights or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title) ---------------------------------------------------------- Address ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. --------------------------------------------- Employer Identification or Social Security No. ---------------------------------- (SEE SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (IF REQUIRED: SEE INSTRUCTIONS 1 AND 5) Authorized Signature ----------------------------------------------------------- Name --------------------------------------------------------------------------- (PLEASE PRINT) Title -------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. -------------------------------------------- Dated: ------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal if (1) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Instruction, includes any participant in the Book-Entry Transfer Facility's systems whose name appears on a security position listing as the owner of such Shares or Rights) of Shares or Rights tendered herewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on this Letter of Transmittal or (2) such Shares and/or Rights are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (such participant, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by stockholders either if (a) Share Certificates and/or Rights Certificates are to be forwarded herewith or (b) unless an Agent's Message (as defined below) is utilized, if delivery of Shares and/or Rights (if available) is to be made pursuant to the procedures for book-entry transfer set forth in "THE OFFER -- Section 3" of the Offer to Purchase. For a holder validly to tender Shares or Rights pursuant to the Offer, either (1) on or prior to the Expiration Date, (a) Share Certificates representing tendered Shares (and, prior to the Distribution Date, representing tendered Rights) and, after the Distribution Date, Right Certificates must be received by the Depositary at one of its addresses set forth herein, or such Shares and Rights must be tendered pursuant to the book-entry transfer procedures set forth in "THE OFFER -- Section 3" and a Book-Entry Confirmation (as defined in the Offer to Purchase) must be received by the Depositary, (b) this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer of Shares and/or Rights, must be received by the Depositary at one of such addresses and (c) any other documents required by this Letter of Transmittal must be received by the Depositary at one of such addresses or (2) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in "THE OFFER -- Section 3" of the Offer to Purchase. If a Distribution Date has occurred, Rights Certificates, or Book-Entry Confirmation of a transfer of Rights into the Depositary's account at the Book-Entry Transfer Facility, if available (together with, if Rights are forwarded separately from Shares, a properly completed and duly executed Letter of Transmittal with any required signature guarantee, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal), must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date or, if later, within three business days after the date on which such Rights Certificates are distributed. "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares and, if applicable, the Rights that such participant has received and agrees to be bound by the terms of this Letter of Transmittal and that Purchaser may enforce such agreement against such participant. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF APPLICABLE), THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER. SHARES AND RIGHTS WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 8 No alternative, conditional or contingent tenders will be accepted and no fractional Shares or Rights will be purchased. All tendering holders, by execution of this Letter of Transmittal (or a facsimile thereof), waive any right to receive any notice of the acceptance of their Shares and Rights for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares or Rights should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares or Rights evidenced by any certificate submitted are to be tendered, fill in the number of Shares and Rights that are to be tendered in the box entitled "Number of Shares Tendered" and "Number of Rights Tendered", respectively. In any such case, new certificate(s) for the remainder of the Shares or Rights that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the acceptance for payment of, and payment for, the Shares and Rights tendered herewith. All Shares and Rights represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder of the Shares and Rights tendered hereby, the signature must correspond with the name as written on the face of the certificate(s) without any change whatsoever. If any of the Shares or Rights tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares or Rights are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered holder(s) of the Shares or Rights listed and transmitted hereby, no endorsements of certificates or separate stock powers are required with respect to such Shares or Rights unless payment is to be made to, or certificates for Shares or Rights not tendered or accepted for payment are to be issued to, a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If the certificates for Shares or Rights are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or certificates for Shares or Rights not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 1. 6. STOCK TRANSFER TAXES. Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares and Rights to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares and/or Rights not tendered or accepted for payment are to be registered in the name of, any person(s) other than the registered holder(s), or if tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person(s)) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 9 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares or Rights not accepted for payment are to be returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 8. WAIVER OF CONDITIONS. Purchaser reserves the absolute right in its sole discretion to waive any of the specified conditions of the Offer, in whole or in part, at any time and from time to time, in the case of any Shares or Rights tendered. 9. BACKUP WITHHOLDING. In order to avoid backup withholding of U.S. Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares and/or Rights in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 28%. All stockholders surrendering Shares and/or Rights pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to Purchaser and the Depositary). Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the U.S. Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. The stockholder is required to give the Depositary the TIN (i.e., Social Security number or employer identification number) of the record owner of the Shares and Rights. If the Shares or Rights are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 28% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such stockholder if a TIN is provided to the Depositary within 60 days. Certain stockholders (including, among others, all corporations, individual retirement accounts and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to Innisfree M&A Incorporated (the "Information Agent") or to Bear, Stearns & Co. Inc. (the "Dealer Manager") at their respective addresses listed below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent or from brokers, dealers, banks, trust companies or other nominees. 10 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing Shares or Rights has been lost, destroyed or stolen, the stockholder should promptly notify the transfer agent for the Shares, EquiServe Trust Company, N.A., at 1-877-282-1168. The holder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: IN ORDER FOR SHARES TO BE VALIDLY TENDERED PURSUANT TO THE OFFER, (1) ON OR PRIOR TO THE EXPIRATION DATE (A) THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, MUST BE RECEIVED BY THE DEPOSITARY, OR IN THE CASE OF A BOOK-ENTRY TRANSFER OF SHARES, AN AGENT'S MESSAGE MUST BE RECEIVED BY THE DEPOSITARY, (B) ANY OTHER DOCUMENTS REQUIRED BY THIS LETTER OF TRANSMITTAL MUST BE RECEIVED BY THE DEPOSITARY AND (C) EITHER SHARE CERTIFICATES REPRESENTING TENDERED SHARES (AND, PRIOR TO THE DISTRIBUTION DATE, REPRESENTING TENDERED RIGHTS) AND, AFTER THE DISTRIBUTION DATE, RIGHT CERTIFICATES, MUST BE RECEIVED BY THE DEPOSITARY OR SUCH SHARES AND RIGHTS MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER AND A BOOK-ENTRY CONFIRMATION MUST BE RECEIVED BY THE DEPOSITARY, OR (2) THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 11
- ------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: THE BANK OF NEW YORK - ------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number(s) OR FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Employer Identification Number BELOW. --------------------------------------- --------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- CERTIFICATES -- PART 3 -- INTERNAL REVENUE SERVICE Under penalties of perjury, I certify that Awaiting TIN [ ] PART 4 -- Exempt [ ] PAYOR'S REQUEST FOR (1) the number shown on this form is my correct Taxpayer TAXPAYER IDENTIFICATION Identification Number (or I am waiting for a number NUMBER ("TIN") to be issued for me) and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding and (3) I am a U.S. person (including a U.S. resident alien). -------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax returns. However, if after being notified by the IRS that you are subject to backup withholding, you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out such item (2). If you are exempt from backup withholding, check the box in part 4 above. Signature ------------------------------------------ Date -------------------- - -------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number to the Depositary, 28% percent of all reportable payments made to me will be withheld, but will be refunded to me if I provide a certified Taxpayer Identification Number within 60 days. Signature ------------------------------ Date ------------------------- 12 THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) PROPERLY COMPLETED AND DULY EXECUTED, TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, CERTIFICATES FOR SHARES AND/OR RIGHTS AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF MAXWELL OR SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW. 13 THE DEPOSITARY FOR THE OFFER IS: THE BANK OF NEW YORK By Mail: By Hand or Overnight Delivery: Tender & Exchange Department Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Receive and Delivery Window New York, New York New York, New York 10286 10286-1248
By Facsimile Transmission: (For Eligible Institutions Only) (212) 815-6433 Confirmation Receipt of Facsimile by Telephone Only: (212) 815-6212 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Dealer Manager or the Information Agent. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer Is: (INNISFREE LOGO) 501 Madison Avenue, 20th Floor New York, New York 10022 Banks and Brokers Call Collect: (212) 750-5833 All Others Please Call Toll-free: (888) 750-5834 The Dealer Manager for the Offer Is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, New York 10179 (888) 235-2327 or (212) 272-2000 EX-99.A.1.C 5 y95442exv99waw1wc.txt NOTICE OF GUARANTEED DELIVERY EXHIBIT (a)(1)(C) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. As set forth in "THE OFFER -- Section 3" of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if (i) certificates ("Share Certificates") representing shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell"), or if applicable, certificates ("Rights Certificates") for the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, are not immediately available (including, without limitation, if the Distribution Date (as defined in "THE OFFER -- Section 11" of the Offer to Purchase) has occurred, but Rights Certificates have not yet been distributed); (ii) the procedures for book-entry transfer for all required documents cannot be completed on a timely basis or (iii) time will not permit all required documents to reach The Bank of New York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in "THE OFFER -- Section 1" of the Offer to Purchase). Unless the context otherwise requires, all references herein to the "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of Rights pursuant to the Rights Agreement. This form may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution (as defined in "THE OFFER -- Section 3" of the Offer to Purchase). See "THE OFFER -- Section 3" of the Offer to Purchase. The Depositary for the Offer is: THE BANK OF NEW YORK By mail: By hand or overnight delivery: Tender & Exchange Department Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Receive and Delivery Window New York, New York 10286-1248 New York, New York 10286
By facsimile transmission: (For Eligible Institutions Only) (212) 815-6433 Confirmation receipt of facsimile by telephone only: (212) 815-6212 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. Ladies and Gentlemen: The undersigned hereby tenders to MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated March 23, 2004 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares and/or Rights set forth below, all pursuant to the guaranteed delivery procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase. Name(s) of Record Holder(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PLEASE PRINT Address(es) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ZIP CODE Daytime Area Code and Tel. No. - -------------------------------------------------------------------------------- Signature - -------------------------------------------------------------------------------- Number of Shares - -------------------------------------------------------------------------------- Number of Rights - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Certificate Nos. (if available) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Check box if Shares and/or Rights will be tendered by book-entry transfer) [ ] The Depository Trust Company Account Number at Book Entry Transfer Facility Date: ------------------------------ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the certificates representing the Shares and/or Rights tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) with respect to such Shares and, if applicable, such Rights, in any such case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as defined in "THE OFFER -- Section 2" of the Offer to Purchase), and any other required documents, within (a) in the case of Shares three NASDAQ trading days after the date hereof or (b) in the case of the Rights, a period ending on the later of (i) three NASDAQ trading days of the date hereof and (ii) three business days after the date Rights Certificates are distributed to the stockholders by Maxwell. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares and/or Rights to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ZIP CODE Telephone Number ( ) - -------------------------------------------------------------------------------- Authorized Signature ------------------------------------------------------- Please Type or Print Name - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- Dated: - -------------------------------------------------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE. CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A.1.D 6 y95442exv99waw1wd.txt LETTER TO BROKERS EXHIBIT (a)(1)(D) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. AT $20.00 NET PER SHARE BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. March 23, 2004 To Brokers, Dealers, Banks, Trust Companies and other Nominees: We have been engaged by MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation ("Jones"), and Jones to act as Dealer Manager in connection with Purchaser's offer to purchase (1) all issued and outstanding shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell") and (2) unless and until validly redeemed by Maxwell's Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, at a price of $20.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated March 23, 2004 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Unless the context otherwise requires, all references herein to "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Unless the Rights are redeemed prior to the Expiration Date (as defined in "THE OFFER -- Section 1" of the Offer to Purchase), holders of Shares will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. Accordingly, stockholders who sell their Rights separately from their Shares and do not otherwise acquire Rights may not be able to satisfy the requirements of the Offer for the tender of Shares. If the Distribution Date (as defined in "THE OFFER -- Section 11" of the Offer to Purchase) has not occurred prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date has occurred and Rights Certificates (as defined in "INTRODUCTION" of the Offer to Purchase) have been distributed to holders of Shares prior to the time a holder's Shares are purchased pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary (as defined in "INTRODUCTION" of the Offer to Purchase) or, if available, a Book-Entry Confirmation (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time Shares are purchased pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure discussed in "THE OFFER -- Section 3" of the Offer to Purchase. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates to the Depositary representing a number of Rights equal to the number of Shares tendered pursuant to the Offer within a period ending on the later of (1) three NASDAQ trading days after the date of execution of the Notice of Guaranteed Delivery and (2) three business days after the date Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights prior to accepting the associated Shares for payment pursuant to the Offer if the Distribution Date has occurred prior to the Expiration Date. If a stockholder desires to tender Shares and Rights pursuant to the Offer and such stockholder's Share Certificates (as defined in "INTRODUCTION" of the Offer to Purchase) or, if applicable, Rights Certificates are not immediately available (including, without limitation, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed) or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares or Rights may nevertheless be tendered according to the guaranteed delivery procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to the Book-Entry Transfer Facility (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date a number of Shares that, together with the Shares then owned by Jones and its subsidiaries (including, without limitation, Purchaser), would represent at least a majority of the total number of outstanding Shares on a fully diluted basis, (2) Maxwell's Board of Directors redeeming the Rights or Purchaser being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger (as defined in "INTRODUCTION" of the Offer to Purchase), (3) Purchaser being satisfied, in its sole discretion, that Section 203 of the Delaware General Corporation Law will be inapplicable to the Proposed Merger or any other business combination involving Jones or any of its subsidiaries (including, without limitation, Purchaser) and Maxwell and (4) the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares and Rights registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated March 23, 2004; 2. Letter of Transmittal to be used by stockholders of Maxwell in accepting the Offer (facsimile copies of the Letter of Transmittal with original signatures and all required signature guarantees may be used to tender the Shares and Rights); 3. A printed form of letter that may be sent to your clients for whose account you hold Shares and Rights in your name or in the name of a nominee, with space provided for obtaining such client's instructions with regard to the Offer; 4. Notice of Guaranteed Delivery to be used to accept the Offer if Share Certificates, or, if applicable, Rights Certificates are not immediately available (including, without limitation, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed) or if the procedures for book-entry transfer cannot be completed on a timely basis or if time will not permit all required documents to reach the Depositary by the Expiration Date. 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9 included in the Letter of Transmittal; and 6. Return envelope addressed to The Bank of New York, as Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares and Rights accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the Share Certificates and, if applicable, the Rights Certificates, or a timely Book-Entry Confirmation of the book-entry transfer of such Shares and, if applicable, Rights (if such procedure is available), into the Depositary's account at the Book-Entry Transfer Facility, pursuant to the procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) in connection with a book-entry transfer effected pursuant to the procedure set forth in "THE OFFER -- Section 3" of the Offer to Purchase, and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when Share Certificates, Rights Certificates or Book-Entry Confirmations with respect to Shares or, if applicable, Rights, are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR ANY SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN PAYING SUCH PURCHASE PRICE. Neither Purchaser nor Jones will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed by Purchaser upon request for customary mailing and handling expenses incurred by you in forwarding the enclosed Offer materials to your customers. Purchaser will pay or cause to be paid any transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If holders of Shares and Rights wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified under "THE OFFER -- Section 3" of the Offer to Purchase. Questions and requests for additional copies of the enclosed material may be directed to the Information Agent at its address and telephone numbers set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, BEAR, STEARNS & CO. INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF PURCHASER, JONES, MAXWELL, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. EX-99.A.1.E 7 y95442exv99waw1we.txt FORM OF LETTER TO CLIENTS EXHIBIT (a)(1)(E) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. AT $20.00 NET PER SHARE BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. March 23, 2004 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated March 23, 2004 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the Offer by MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation ("Jones"), to purchase (1) all issued and outstanding shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell") and (2) unless and until validly redeemed by Maxwell's Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, at a price of $20.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Unless the context otherwise requires, all references herein to the "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Unless the Rights are redeemed prior to the Expiration Date (as defined below), holders of Shares will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. Accordingly, stockholders who sell their Rights separately from their Shares and do not otherwise acquire Rights may not be able to satisfy the requirements of the Offer for the tender of Shares. If the Distribution Date (as defined in "THE OFFER -- Section 11" of the Offer to Purchase) has not occurred prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date has occurred and Rights Certificates (as defined in "INTRODUCTION" of the Offer to Purchase) have been distributed to holders of Shares prior to the time a holder's Shares are purchased pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary (as defined in "INTRODUCTION" of the Offer to Purchase) or, if available, a Book-Entry Confirmation (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time Shares are purchased pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure discussed in "THE OFFER -- Section 3" of the Offer to Purchase. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates to the Depositary representing a number of Rights equal to the number of Shares tendered pursuant to the Offer within a period ending on the later of (1) three NASDAQ trading days after the date of execution of the Notice of Guaranteed Delivery and (2) three business days after the date Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights prior to accepting the associated Shares for payment pursuant to the Offer if the Distribution Date has occurred prior to the Expiration Date. If a stockholder desires to tender Shares and Rights pursuant to the Offer and such stockholder's Share Certificates (as defined in "INTRODUCTION" of the Offer to Purchase) or, if applicable, Rights Certificates are not immediately available (including, without limitation, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed) or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares or Rights may nevertheless be tendered according to the guaranteed delivery procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to the Book-Entry Transfer Facility (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. WE (OR OUR NOMINEES) ARE THE HOLDER OF RECORD OF SHARES AND RIGHTS HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES AND RIGHTS CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES AND RIGHTS HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to tender any of or all the Shares and Rights held by us for your account pursuant to the terms and conditions set forth in the Offer. Your attention is directed to the following: 1. The offer price is $20.00 per Share, including the associated Right, net to the seller in cash, without interest. 2. The Offer is being made for all issued and outstanding Shares. 3. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004 (THE "EXPIRATION DATE"), UNLESS AND UNTIL PURCHASER, IN ITS SOLE DISCRETION, SHALL HAVE EXTENDED THE PERIOD OF TIME IN WHICH THE OFFER IS OPEN, IN WHICH EVENT THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST TIME AND DATE AT WHICH THE OFFER, AS SO EXTENDED BY PURCHASER, WILL EXPIRE. 4. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date a number of Shares that, together with the Shares then owned by Jones and its subsidiaries (including, without limitation, Purchaser), would represent at least a majority of the total number of outstanding Shares on a fully diluted basis, (2) Maxwell's Board of Directors redeeming the Rights or Purchaser being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger (as defined in "INTRODUCTION" of the Offer to Purchase), (3) Purchaser being satisfied, in its sole discretion, that Section 203 of the Delaware General Corporation Law will be inapplicable to the Proposed Merger or any other business combination involving Jones or any of its subsidiaries (including, without limitation, Purchaser) and Maxwell and (4) the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Depositary or the Information Agent or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares and Rights by Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 28% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 9 of the Letter of Transmittal. If you wish to have us tender any of or all the Shares and Rights held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares and Rights, all such Shares and Rights will be tendered unless otherwise specified on the final page hereof. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE. In all cases, payment for Shares and Rights accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the Share Certificates and, if applicable, the Rights Certificates, or a timely Book-Entry Confirmation of the book-entry transfer of such Shares and, if applicable, Rights (if such procedure is available), into the Depositary's account at the Book-Entry Transfer Facility, pursuant to the procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) in connection with a book-entry transfer effected pursuant to the procedure set forth in "THE OFFER -- Section 3" of the Offer to Purchase, and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when Share Certificates, Rights Certificates or Book-Entry Confirmations with respect to Shares or, if applicable, Rights, are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR ANY SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN PAYING SUCH PURCHASE PRICE. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares and Rights pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares and Rights in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of Purchaser by Bear, Stearns & Co. Inc., the Dealer Manager for the Offer, or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER, THE OFFER TO PURCHASE OF MSC ACQUISITION CORP., A NEW YORK CORPORATION ("PURCHASER"), DATED MARCH 23, 2004 (THE "OFFER TO PURCHASE") AND THE RELATED LETTER OF TRANSMITTAL RELATING THE OFFER BY PURCHASER TO PURCHASE (1) ALL ISSUED AND OUTSTANDING SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "SHARES"), OF MAXWELL SHOE COMPANY INC., A DELAWARE CORPORATION ("MAXWELL"), AND (2) UNLESS AND UNTIL VALIDLY REDEEMED BY MAXWELL'S BOARD OF DIRECTORS, THE ASSOCIATED RIGHTS TO PURCHASE SHARES OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF MAXWELL (THE "RIGHTS") ISSUED PURSUANT TO THE RIGHTS AGREEMENT, DATED AS OF NOVEMBER 2, 1998 (AS AMENDED FROM TIME TO TIME), BY AND BETWEEN MAXWELL AND EQUISERVE TRUST COMPANY, N.A., AS RIGHTS AGENT. THIS WILL INSTRUCT YOU TO TENDER THE NUMBER OF SHARES AND RIGHTS INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED, ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL. -------------------------------------------- Number of Shares and Rights to be Tendered: ------------ ------------ Shares* Rights* --------------------------------------------
SIGN HERE - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please Type or Print Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Type or Print Address(es) - -------------------------------------------------------------------------------- Area Code and Telephone No. - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security No. Dated: - ---------------------------------- - --------------------------- * Unless otherwise indicated, it will be assumed that all your Shares and Rights are to be tendered. EX-99.A.1.F 8 y95442exv99waw1wf.txt GUIDELINES ON SUBSTITUTE FORM W-9 EXHIBIT (a)(1)(F) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- --------------------------------------------------------------- GIVE THE SOCIAL SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: OF -- - --------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under State law 5. Sole proprietorship account The owner(3) - ---------------------------------------------------------------
------------------------------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION NUMBER FOR THIS TYPE OF ACCOUNT: OF -- ------------------------------------------------------------------------------- 6. A valid trust, estate, or pension Legal entity (do not furnish the trust identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title).(4) 7. Corporate account The corporation 8. Association, club, religious, The organization charitable, educational or other tax-exempt organization account 9. Partnership account The partnership 10. A broker or registered nominee The broker or nominee 11. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district or prison) that receives agricultural program payments - ---------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when more than one name is listed, the number will be considered to be that of the first. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 HOW TO OBTAIN A TIN If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service ("IRS") and apply for a number. Forms SS-5 and SS-4 may also be obtained from the IRS Web Site at www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676). PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees exempt from backup withholding on all payments include the following: - An organization exempt from tax under Section 501(a), any IRA, or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2). - The United States or any of its agencies or instrumentalities. - A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. - A foreign government or any of its political subdivisions, agencies, or instrumentalities. - An international organization or any of its agencies or instrumentalities. Other payees that may be exempt from backup withholding include: - A corporation. - A foreign central bank of issue. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A real estate investment trust. - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A common trust fund operated by a bank under Section 584(a). - A financial institution. - A middleman known in the investment community as a nominee or custodian. - A trust exempt from tax under Section 664 or described in Section 4947. PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade of business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. Payments made by certain foreign organizations. Certain payments, other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding under Sections 6041, 6041A(a), 6045 and 6050A. Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM IN PART II, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend, interest or other payments to give their correct taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 28% (or such other rate specified by the Internal Revenue Code) of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.1.G 9 y95442exv99waw1wg.txt PRESS RELEASE EXHIBIT (a)(1)(G) FOR IMMEDIATE RELEASE JONES APPAREL GROUP, INC. Contacts: Wesley R. Card, Chief Operating and Financial Officer Anita Britt, Executive Vice President Finance (215) 785-4000 JONES APPAREL GROUP COMMENCES TENDER OFFER FOR MAXWELL SHOE PRELIMINARY CONSENT SOLICITATION DOCUMENTS TO BE FILED WITH THE SEC TODAY NEW YORK, NEW YORK - March 23, 2004 - Jones Apparel Group, Inc. (NYSE:JNY) ("Jones") today announced that MSC Acquisition Corp., an indirect wholly owned subsidiary of Jones ("MSC"), commenced a tender offer for all of the outstanding shares of Class A Common Stock of Maxwell Shoe Company Inc. (NasdaqNM:MAXS) ("Maxwell") at a price of $20 per share in cash. Based on the latest publicly available information, as of March 4, 2004, Maxwell had approximately 14.8 million shares of Class A Common Stock outstanding, giving the transaction a total equity value (excluding stock options) of approximately $297 million. Jones also announced that Jones and MSC are filing today with the Securities and Exchange Commission a preliminary consent solicitation statement relating to the solicitation of written consents from Maxwell stockholders to take certain actions to facilitate the tender offer, including nominating five highly qualified individuals to replace the members of Maxwell's Board of Directors. Peter Boneparth, Chief Executive Officer of Jones, stated, "While we still prefer to move forward with Maxwell on a cooperative basis, Maxwell's refusal to meet with us to discuss our proposal has left us no choice but to take our offer directly to Maxwell's stockholders - the owners of the company. Maxwell's stockholders will now have the opportunity to decide the future of their company for themselves. This offer provides an outstanding opportunity for Maxwell's stockholders to maximize the value of their investment in Maxwell. It represents a premium of approximately 19% over the closing price for Maxwell shares on February 19, 2004, the day after we informed Maxwell of our initial proposal, and an even greater premium on Maxwell's business when adjusted for its significant cash position." The tender offer and withdrawal rights are scheduled to expire at 12:00 Midnight, New York time, on April 19, 2004, unless extended. Following completion of the tender offer, Jones intends to consummate a second-step merger in which all remaining Maxwell stockholders will receive the same cash price paid in the tender offer, subject to any available appraisal rights under Delaware law. The offer is not conditioned upon financing. The tender offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration date of the offer a number of shares of Class A Common Stock, par value $.01 per share, together with the associated preferred stock purchase rights (together, the "shares"), of Maxwell that, together with the shares then owned by Jones and its subsidiaries, would represent at least a majority of the total number of outstanding shares on a fully diluted basis, (2) Maxwell's Board of Directors redeeming the preferred stock purchase rights or MSC being satisfied, in its sole discretion, that the preferred stock purchase rights have been invalidated or are otherwise inapplicable to the offer and the proposed second-step merger described herein, (3) MSC being satisfied, in its sole discretion, that Section 203 of the Delaware General Corporation Law will be inapplicable to the proposed second-step merger or any other business combination involving Jones or any of its subsidiaries and Maxwell and (4) the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. The complete terms and conditions of the tender offer are contained in the Offer to Purchase included in the tender offer statement to be filed today with the Securities and Exchange Commission. Bear, Stearns & Co. Inc. is acting as Dealer Manager for the tender offer and Innisfree M&A Incorporated is acting as Information Agent for the offer. Jones Apparel Group, Inc. (www.jny.com), a Fortune 500 Company, is a leading designer and marketer of branded apparel, footwear and accessories. The Company's nationally recognized brands include Jones New York, Polo Jeans Company licensed from Polo Ralph Lauren Corporation, Evan-Picone, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, Napier, Judith Jack, Kasper, Anne Klein, Albert Nipon and LeSuit. The Company also markets costume jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger Corporation and the Givenchy brand licensed from Givenchy Corporation, and footwear and accessories under the ESPRIT brand licensed from Esprit Europe, B.V. Celebrating more than 30 years of service, the Company has built a reputation for excellence in product quality and value, and in operational execution. Certain statements herein are forward-looking statements. Such forward-looking statements represent the Company's expectations or beliefs concerning future events that involve risks and uncertainties. Factors that could cause actual results to differ materially include (1) the businesses of Jones and Maxwell not being integrated successfully, (2) expected combination benefits from a Jones/Maxwell transaction not being realized, (3) the failure of the proposed transaction to occur, or the occurrence of the proposed transaction on terms different than those described, (4) the strength of the economy, (5) the overall level of consumer spending, (6) the performance of the Company's products within the prevailing retail environment, and (7) other factors which are set forth in the Company's 2003 Form 10-K and in all filings with the Securities and Exchange Commission made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise. This release does not constitute a solicitation of proxies in connection with any matter to be considered at Maxwell's 2004 annual meeting of stockholders. Neither Jones nor MSC is soliciting, or intends to solicit, proxies in respect of any matter to be considered at Maxwell's 2004 annual meeting. Jones is scheduled to present at the Merrill Lynch Retailing Leaders conference today at 8:40 am eastern time. The presentation will be webcast and made available through April 5, and is accessible through the Company's website at www.jny.com. IMPORTANT INFORMATION REGARDING THE TENDER OFFER MSC, a wholly owned subsidiary of Jones, has commenced a tender offer for all the outstanding shares of Class A Common Stock of Maxwell at $20 per share, net to the seller in cash, without interest. The offer currently is scheduled to expire at 12:00 Midnight, New York City time, on April 19, 2004. MSC may extend the offer and currently expects that the offer will be extended until the principal conditions to the offer, which are described in the Offer to Purchase forming part of MSC's tender offer statement, are satisfied. If the offer is extended, MSC will notify the depositary for the offer and issue a press release announcing the extension on or before 9:00 a.m. New York City time on the next business day following the date the offer was scheduled to expire. Investors and security holders are urged to read the disclosure documents that will be filed later today with the Securities and Exchange Commission, including the tender offer statement, regarding the proposed Jones/Maxwell transaction referenced in the foregoing information, because they will contain important information. Investors and security holders may obtain a free copy of the disclosure documents (when they are available) and other documents filed by Jones with the SEC at the SEC's website at www.sec.gov. In addition, documents filed with the SEC by Jones or MSC may be obtained free of charge from Jones by directing a request to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, Attention: Chief Operating and Financial Officer. IMPORTANT INFORMATION REGARDING THE CONSENT SOLICITATION Investors and security holders are also urged to read the consent solicitation statement relating to the solicitation of consents of Maxwell's stockholders when it becomes available, because it will contain important information. Jones will file a preliminary consent solicitation statement later today with the SEC and will file a definitive consent solicitation statement as soon as practicable thereafter. Investors and security holders may obtain a free copy of the preliminary consent solicitation statement, the definitive consent solicitation statement (when it is available) and other documents that Jones files with the SEC at its web site at www.sec.gov. In addition, documents filed with the SEC by Jones or MSC may be obtained free of charge from Jones by directing a request to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007, Attention: Chief Operating and Financial Officer. CERTAIN INFORMATION CONCERNING PARTICIPANTS Jones, MSC and, in each case, certain of its officers, directors and nominees for the directorships of Maxwell, among others, may be deemed to be participants in the solicitation of Maxwell's stockholders. The security holders of Maxwell may obtain information regarding the names, affiliations and interests of individuals who may be participants in the solicitation of Maxwell's stockholders in a Schedule 14A which will be filed with the SEC later today. EX-99.A.1.H 10 y95442exv99waw1wh.txt SUMMARY ADVERTISEMENT EXHIBIT (a)(1)(H) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES OR RIGHTS. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED MARCH 23, 2004 (THE "OFFER TO PURCHASE") AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SHARES OR RIGHTS IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN ANY JURISDICTION WHERE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED MADE ON BEHALF OF PURCHASER BY BEAR, STEARNS & CO. INC. OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MAXWELL SHOE COMPANY INC. AT $20.00 NET PER SHARE BY MSC ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF JONES APPAREL GROUP, INC. MSC Acquisition Corp., a New York corporation ("Purchaser") and an indirect wholly owned subsidiary of Jones Apparel Group, Inc., a Pennsylvania corporation ("Jones"), is offering to purchase (1) all issued and outstanding shares of Class A Common Stock, par value $.01 per share (the "Shares"), of Maxwell Shoe Company Inc., a Delaware corporation ("Maxwell") and (2) unless and until validly redeemed by Maxwell's Board of Directors, the associated rights to purchase shares of Series A Junior Participating Preferred Stock of Maxwell (the "Rights") issued pursuant to the Rights Agreement, dated as of November 2, 1998 (as amended from time to time, the "Rights Agreement"), by and between Maxwell and EquiServe Trust Company, N.A., as Rights Agent, at a price of $20.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Unless the context otherwise requires, all references herein to the "Shares" shall be deemed to include the associated Rights, and all references herein to the "Rights" shall be deemed to include the benefits that may inure to holders of Rights pursuant to the Rights Agreement. Unless the Rights are redeemed prior to the Expiration Date (as defined herein), holders of Shares will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. Accordingly, stockholders who sell their Rights separately from their Shares and do not otherwise acquire Rights may not be able to satisfy the requirements of the Offer for the tender of Shares. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 2004, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES THAT, TOGETHER WITH THE SHARES THEN OWNED BY JONES AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, PURCHASER), WOULD REPRESENT AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS, (2) MAXWELL'S BOARD OF DIRECTORS REDEEMING THE RIGHTS OR PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER (AS DEFINED HEREIN), (3) PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW WILL BE INAPPLICABLE TO THE PROPOSED MERGER OR ANY OTHER BUSINESS COMBINATION INVOLVING JONES OR ANY OF ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, PURCHASER) AND MAXWELL AND (4) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER. The purpose of the Offer is to enable Jones to acquire control of, and ultimately the entire equity interest in, Maxwell. The Offer, as the first step in the acquisition of Maxwell, is intended to facilitate the acquisition of all issued and outstanding Shares. Purchaser currently intends, promptly following consummation of the Offer, to seek to have Maxwell consummate a second-step merger or similar business combination with Purchaser or another direct or indirect wholly owned subsidiary of Jones (the "Proposed Merger"), pursuant to which each then outstanding Share (other than Shares held by Jones or its subsidiaries (including, without limitation, Purchaser) and Shares owned by stockholders who perfect any available appraisal rights under Delaware law) will be converted into the right to receive an amount in cash equal to the highest price paid per Share pursuant to the Offer. JONES AND PURCHASER ARE SEEKING TO DISCUSS WITH MAXWELL THE ACQUISITION OF MAXWELL BY PURCHASER. JONES AND PURCHASER RESERVE THE RIGHT TO AMEND THE OFFER (INCLUDING, WITHOUT LIMITATION, AMENDING THE NUMBER OF SHARES TO BE PURCHASED AND THE OFFER PRICE) UPON ENTERING INTO A MERGER AGREEMENT WITH MAXWELL, OR TO NEGOTIATE A MERGER AGREEMENT WITH MAXWELL NOT INVOLVING A TENDER OFFER PURSUANT TO WHICH PURCHASER WOULD TERMINATE THE OFFER AND THE SHARES WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED INTO THE CONSIDERATION NEGOTIATED BY JONES, PURCHASER AND MAXWELL. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary for the Offer, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering stockholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares (the "Share Certificates") and, if applicable, certificates representing the Rights ("Rights Certificates"), or timely confirmation of the book-entry transfer of such Shares and, if applicable, Rights into the Depositary's account at the Book-Entry Transfer Facility (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) pursuant to the book-entry transfer procedures discussed in "THE OFFER -- Section 3" of the Offer to Purchase, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in "THE OFFER -- Section 2" of the Offer to Purchase) in connection with a book-entry transfer, and (3) any other documents required by the Letter of Transmittal. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, Purchaser's obligation to make such payment shall be satisfied and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR ANY SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN PAYING SUCH PURCHASE PRICE. Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, April 19, 2004, unless and until Purchaser, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, will expire. Subject to the applicable rules and regulations of the Securities and Exchange Commission, Purchaser expressly reserves the right (but will not be obligated), in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in "THE OFFER -- Section 14" of the Offer to Purchase shall have occurred, to extend the period during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and by making a public announcement of the extension. Under no circumstances will interest be paid on the purchase price to be paid by Purchaser for any Shares, regardless of any extension of the Offer or any delay in paying such purchase price. Any such extension will be followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Purchaser currently has no intention of making available a "subsequent offering period" (within the meaning of Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), but has the right to do so under Rule 14d-11. If Purchaser extends the Offer or if Purchaser is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as discussed in "THE OFFER -- Section 4" of the Offer to Purchase. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if Share Certificates are submitted representing more Shares than are tendered, certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer pursuant to the procedures set forth in "THE OFFER -- Section 3" of the Offer to Purchase, such Shares will be credited to an account maintained within the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. In the event separate Rights Certificates are issued, similar action will be taken with respect to unpurchased and untendered Rights. Except as otherwise provided below, tenders of Shares (and, if applicable, Rights) made pursuant to the Offer are irrevocable. Shares and Rights tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after May 21, 2004 (or such later date as may apply in case the Offer is extended). A withdrawal of a Share will also constitute a withdrawal of the associated Right. Rights may not be withdrawn unless the associated Shares are also withdrawn. To be effective, a notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares or Rights to be withdrawn, the number of Shares or Rights to be withdrawn and the name of the registered holder of the Shares or Rights to be withdrawn, if different from the name of the person who tendered the Shares or Rights. If Share Certificates or Rights Certificates evidencing Shares or Rights to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares and Rights have been tendered by an Eligible Institution (as defined in "THE OFFER -- Section 3" of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares or Rights have been delivered pursuant to the procedures for book-entry transfer as set forth in "THE OFFER -- Section 3" of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares or Rights and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of Shares or Rights may not be rescinded. Any Shares or Rights properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures discussed in "THE OFFER -- Section 3" of the Offer to Purchase. All questions as to the form and validity (including, without limitation, as to time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. A request is being made to Maxwell pursuant to Rule 14d-5 under the Exchange Act for the use of Maxwell's stockholder lists and security position listings for the purpose of disseminating the Offer to stockholders. Upon compliance by Maxwell with this request, the Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Maxwell's stockholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The receipt of cash in the Offer or the Proposed Merger will be a taxable transaction for U.S. Federal income tax purposes under the Internal Revenue Code of 1986, as amended, and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Stockholders should consult their tax advisors about the particular effect the proposed transactions will have on their Shares. The information required to be disclosed by Rule 14d-6(d)(1) under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. NEITHER THIS NOTICE, THE OFFER TO PURCHASE NOR THE OFFER REFERRED TO HEREIN AND THEREIN CONSTITUTES A SOLICITATION OF PROXIES IN CONNECTION WITH ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON APRIL 8, 2004. NEITHER JONES NOR PURCHASER IS SOLICITING, OR INTENDS TO SOLICIT, PROXIES IN RESPECT OF ANY MATTER TO BE CONSIDERED AT MAXWELL'S 2004 ANNUAL MEETING. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT STOCKHOLDERS SHOULD READ BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER. Requests for copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be payable to brokers, dealers or other persons (other than the Dealer Manager and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: (INNISFREE LOGO) 501 Madison Avenue, 20th Floor New York, New York 10022 Banks and Brokers Call Collect: (212) 750-5833 All Others Please Call Toll-free: (888) 750-5834 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 383 Madison Avenue New York, New York 10179 (212) 272-2000 March 23, 2004 EX-99.D 11 y95442exv99wd.txt LICENSE AGREEMENT Exhibit(d) ANNE KLEIN 11 WEST 42ND STREET NEW YORK NY 10036 212 626 6401 FAX 212 626 6014 Maxwell Shoe Company Inc. P.O. Box 37 101 Sprague Street Readville, Massachusetts 02137-0037 Gentlemen: When signed below in the places provided, the following shall constitute the agreement between and among ANNE KLEIN, a Division of Kasper A.S.L., Ltd., B.D.S., Inc. and Maxwell Shoe Company Inc. ("Licensee") with respect to the subject matter hereof. As of July 9, 1999, Kasper A.S.L., Ltd., through Lion Licensing, Ltd., a Delaware corporation ("Lion") a wholly-owned affiliate, became the owner of the ANNE KLEIN trademarks and the ANNE KLEIN license agreements, including the agreement between B.D.S., Inc. (therein referred to as "Licensee" and hereinafter referred to as "Licensor") and Anne Klein Company LLC (as successor by merger with Anne Klein & Company) (referred to therein as "Licensor"), effective as of January 1, 1997, as said agreement has been amended and is in force and effect at the date hereof (the "License Agreement") pursuant to which Licensor has been granted certain rights with respect to Company's Marks (as defined below). For avoidance of doubt, for purposes of this Agreement, the ANNE KLEIN Division of Kasper A.S.L., Ltd. and Lion shall collectively be referred to as "Owner" and Maxwell Shoe Company Inc. shall be referred to as "Licensee". 1. DEFINITIONS. Each of the following terms shall have the meaning given it in this section when used in this Agreement: 1.01. (a) "Company's Marks" shall mean the trademarks "ANNE KLEIN", the Lion Head Design, "ANNE KLEIN II" and "A LINE ANNE KLEIN". (b) "Licensed Marks" shall mean the trademarks "ANNE KLEIN II" and "A LINE ANNE KLEIN" and the "A ANNE KLEIN" logo form of the Licensed Mark "A LINE ANNE KLEIN" which is attached hereto as Schedule 1.01 and made a part hereof. For clarification: the Licensed Mark "A LINE ANNE KLEIN" may be used in such logo form, but it may not be used as a wordmark except in the full "A LINE ANNE KLEIN" form. (c) "Company's Tradename" shall mean the tradename "ANNE KLEIN" or, as applicable in the context, the use of one or both of the Licensed Marks as a tradename. 1.02. (a) "Articles" shall mean all classifications of women's footwear. (b) "Licensed Articles" shall mean all Articles which are manufactured or distributed by or for Licensee from designs delivered or approved hereunder. 1.03. (a) "Net Sales" shall mean the aggregate invoiced amount at the prevailing wholesale price at which Licensee customarily sells such Licensed Articles for all Licensed Articles shipped by Licensee or any of its affiliates ("gross sales"), less the following: (1) included taxes; (2) returns actually received for damaged or defective merchandise or allowances in lieu of returns granted to and actually taken by customers; (3) trade discounts customary in Licensee's industry for prompt payment, but only to the extent such discounts are actually granted by Licensee and taken by Licensee's customers; and (4) markdowns and/or chargebacks, in the amount set forth below, which in accordance with generally accepted accounting principles would normally be treated as deductions from gross sales ("Markdowns"), but not including chargebacks for any shipping errors or administrative charges, advertising, fixture or shop costs or contributions, or for any other similar or dissimilar purpose. No other deduction shall be made, including for any accruals or reserves for returns, or for discounts or allowances, and no deduction shall be taken for uncollectible accounts, bad debts or collection costs incurred by Licensee. No other costs incurred in the manufacturing, advertising, promoting, distributing and selling of Licensed Articles shall be deducted. Except with respect to sales to Licensee's Outlets (as defined below), if a sale, transfer or other disposition is made otherwise than at arm's length, the "Net Sales" of such Licensed Articles shall be deemed to be the "Net Sales" of a corresponding sale at arm's length at the prevailing wholesale price to accounts in Normal Retail Channels (as hereinafter defined) in the United States. For clarification: On aggregate annual gross sales hereunder up to [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission], Markdowns may be deducted in an amount not to exceed [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]; on aggregate annual gross sales hereunder in excess of [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission], Markdowns may be deducted in an amount not to exceed [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]. (b) Without limiting the generality of the foregoing, with respect to Discontinued Goods (as hereinafter defined), "Net Sales" shall mean the aggregate invoiced amount for Discontinued Goods shipped by Licensee or any of its affiliates, less included taxes and returns actually received for damaged or defective merchandise or allowances in lieu of returns granted to and actually taken by customers; provided, however, that for Discontinued Goods in excess of the quantity permitted in Paragraph 2.03(b) below, the "Net Sales" of such Discontinued Goods shall be deemed to be the "Net Sales" of a corresponding sale at arm's length at the prevailing wholesale price to accounts in Normal Retail Channels in the United States except as Owner may from time to time expressly agree otherwise. (c) Notwithstanding the foregoing, if Licensee (or any parent, subsidiary or affiliated company of Licensee) operates outlet stores (hereinafter, "Licensee's 2 Outlets") or sells Licensed Articles through Alternative Distribution Channels (as defined below), then with respect to sales of Licensed Articles by Licensee's Outlets or through said Alternative Distribution Channels, "Net Sales" shall mean the actual aggregate amount received by Licensee's Outlets on account of said sales or by Licensee for sales made directly through Alternative Distribution Channels, as applicable. 1.04. "Territory" shall mean the United States of America but not including its territories and possessions. Upon Licensee's written request, Owner shall grant Licensee permission to distribute Licensed Articles in a particular country (or countries) of the world outside of the Territory, including for this purposes territories and possessions of the United States (hereinafter referred to as the "Foreign Territory"), subject to the terms and conditions set forth in section 18 below, For the avoidance of doubt, distribution of Licensed Articles to "duty-free" shops for sale to international travelers and to airlines and cruise ship lines for on-board sales shall be deemed distribution in a Foreign Territory, also subject to the terms and conditions set forth in Section 18 below. Notwithstanding the generality of the foregoing, at the date of this Agreement, Owner hereby informs Licensee, and Licensee acknowledges, that an agreement is in place between Owner and a third party pursuant to which said third party has the exclusive rights to manufacture, advertise, promote, distribute and sell products, including Articles, bearing Company's Marks in Japan and, therefore, Owner shall not grant any rights hereunder to Licensee with respect to Japan. 1.05. (a) "Normal Retail Channels" shall mean those retail outlets in the Territory, subject to Owner's reasonable approval, whose location, merchandising and overall operations are consistent with the high quality of Licensed Articles and the reputation, image and prestige of the Company's Marks. Without limiting the generality of the foregoing, Owner hereby approves as Normal Retail Channels those retail outlets (other than those identified on Schedule 2.03 to this Agreement) named on Schedule 10.02 and on Schedule 18.06. (b) "Alternative Distribution Channels" shall mean direct mail or television shopping networks or "on-line" or such other means of reaching the ultimate consumer (other than through traditional retail outlets) as may now exist or hereafter be devised. Owner's prior written reasonable approval to use an Alternative Distribution Channel shall be obtained in each instance; provided, however, that neither Licensor nor Licensee shall commence on-line sales or sales via television shopping networks pending Owner's development of an over-all plan with respect to such sales of all products bearing Company's Trademarks. Sales by Licensee to direct mail catalog divisions of traditional retailers shall not be deemed sales through Alternative Distribution Channels. References in this Agreement to Normal Retail Channels shall, unless the context indicates otherwise, also mean approved Alternative Distribution Channels. 1.06. (a) "Contract Year" shall mean the twelve-month period commencing January 1 and ending the next following December 31, provided, 3 however, that the "Initial Contract Year" shall commence on the Effective Date and shall terminate on December 31, 2000. (b) "Accounting Period" shall mean each three-month calendar period ending March 31, June 30, September 30 and December 31, respectively, or such shorter period in which Licensee has rights to distribute Licensed Articles hereunder. Notwithstanding the foregoing, the "Initial Accounting Period" shall mean the period beginning on the Effective Date and ending December 31, 1999. (c) "Effective Date" shall mean July 19, 1999. 1.07. "Discontinued Goods" shall mean only those Licensed Articles which are sold by Licensee at a wholesale price which is at least thirty three and one-third percent (33-1/3%) less than the prevailing wholesale price at which Licensee has customarily sold such Licensed Articles and which are shipped (a) at the end-of-season as closeouts or (b) as damaged goods such as seconds or irregulars labeled as seconds or irregulars. 1.08. "Proprietary Rights" means asserted rights, groundless or not, based upon the law of statutory or common law trademark infringement, dilution, unfair competition, misappropriation, invasion of privacy, or any related legal theory. 2. GRANT. 2.01. (a) (i) Subject to the terms and conditions of this Agreement, Licensor and Owner each hereby grants to Licensee during the Term (as hereinafter defined) the exclusive right only in the Territory to use each Licensed Mark as a trademark only on and in connection with the manufacture, advertising, promotion, distribution and sale in Normal Retail Channels, except as otherwise agreed in paragraph 2.03(b) below, of the Licensed Articles. It is expressly understood and agreed that the manufacturing rights herein granted to Licensee do not include the right to manufacture Licensed Articles for the sole purpose of selling such Licensed Articles as Discontinued Goods; provided, however, that Owner and Licensor acknowledge that Licensee shall not be deemed in breach of this provision if it produces and sells "make-ups" in accordance with paragraph 2.02(c) below. (ii) Licensee acknowledges that the Licensed Marks "ANNE KLEIN II" and "A LINE ANNE KLEIN", which for the purposes of this sub-paragraph 2.01(a)(ii) includes the logo "A Anne Klein" in the form attached hereto as Schedule 1.01, are separate and individual trademarks and that it is the intent of the parties hereto that each Licensed Mark shall be exploited separately from the other hereunder. References in this Agreement to "the Licensed Marks" shall mean each of the Licensed Marks unless the context clearly implies otherwise. (b) Licensee acknowledges that, at the date hereof, Licensor sells Articles bearing the Company's Mark "ANNE KLEIN" which are intended to be sold at retail price points above $95 and, from time to time subject to Owner's approval, Licensor may propose a so-called "fashion" style which by its design and construction is 4 intended to be sold in Licensor's segment of the women's footwear market but at a price below $95 (but not below $80). For purposes of retaining the distinct positions of the Company's Marks in the women's footwear market, Licensee agrees that the Licensed Articles offered hereunder shall be manufactured, advertised, promoted, distributed and sold in a manner appropriate to those categories intended to be sold at retail price points of $45-$80 (to $95 for boots and ankle boots) and the Licensed Articles shall address the career and casual needs of Licensee's target customer. Without limiting the generality of the foregoing, Licensor and Owner agree that if more than ten percent (10%) of Licensor's styles (i.e., number of patterns not sales volume) in any particular Contract Year are intended to be sold at retail price points between $80 and $95, then Licensee's Guaranteed Minimum Royalty (as defined below) for that particular Contract Year shall be reduced by twenty percent (20%). (c) For avoidance of doubt: Owner reserves all rights to Company's Marks, including the Licensed Marks, except those rights specifically granted to Licensor pursuant to the License Agreement and those rights specifically granted herein to Licensee, and Owner may exercise such rights at any time in a manner not inconsistent with the terms of this Agreement. Without limiting the generality of the immediately preceding sentence, Owner's reserved rights include the right to use and to license any of said Marks as part of a new trademark (the "New Trademark") to be used by Owner or its designee (which may or may not be a related company) on or in connection with new product lines (which may include Articles) introduced by Owner or its designee as part of a new business to be conducted by Owner or said designee. Notwithstanding anything in this Agreement to the contrary, during the term of this Agreement Owner shall not, and shall not have any right to, use or license any New Trademark, to be used by Owner or its designee, on or in connection with Articles (but not including athletic or "sport specific" Articles) intended to be sold at retail price points of $45-$80 (to $95 for boots and ankle boots); provided, however, that such limitation is expressly subject to the rights of Licensor pursuant to the License Agreement, including Licensor's right of first refusal with respect to a New Trademark and a New Line (as defined below), as such rights then exist. Accordingly, if, during the Term (as hereinafter defined), Owner desires to market a line of Articles bearing a New Trademark or a line of athletic or "sport specific" Articles (each, a "New Line"), and if Licensor fails to timely exercise its first right and option, Owner shall notify Licensee, in writing, thereof. Licensee shall have the right and option, which option shall be exercised within 45 days after its receipt of Owner's notice, to manufacture, advertise, promote, distribute and sell said New Line pursuant to an agreement, to be negotiated between Owner and Licensee in good faith, in substantially the form of this Agreement and including such additional or different commercially reasonable terms and conditions as may then be agreed between Owner and Licensee (but which shall be no more favorable to Licensee than terms proposed by Owner to Licensor). If Licensee desires to exercise such right and option, Licensee shall notify Owner in writing within forty-five (45) days after its receipt of said notice from Owner. If Licensee fails to exercise its said right and option, Owner may grant a license covering the New Line to any third party on substantially the same material terms and conditions as set forth herein and in Owner's notice free from any claim by Licensee under this Agreement. For 5 clarification: It is understood and agreed that Licensee may market canvas casual woman's footwear under this Agreement so long as such footwear is not of a style generally understood in the women's footwear industry as "athletic" or "sport-specific" footwear. For purposes of this paragraph, without limiting Licensor's rights pursuant to the License Agreement, if during the Term (as defined below) Licensor's rights to utilize the Company's Mark "ANNE KLEIN" expire or otherwise terminate without extension or renewal of such rights, for purposes of this paragraph Company's Mark "ANNE KLEIN" shall be deemed a New Trademark and Licensor's right of first refusal with respect to a New Trademark, as set forth in the License Agreement, shall not apply. (d) Without otherwise limiting Licensor's rights pursuant to the License Agreement or Licensee's rights pursuant to this Agreement, upon the earlier of (i) the expiration or other termination of the License Agreement pursuant to its terms, or (ii) January 1, 2003, Owner and Licensee agree they shall immediately enter into a new direct license agreement regarding the Licensed Marks and Licensed Articles on economic and other terms identical to the terms set forth this Agreement; provided, however, that Licensor shall not be a party to such new direct license agreement. Upon complete execution of such new direct license agreement, said agreement shall be deemed to supersede and replace this Agreement and Licensor acknowledges and agrees that Licensee shall be entitled to the rights granted to Licensee thereunder. It is acknowledged and agreed by all parties hereto that Licensor's rights and obligations under this Agreement shall be deemed automatically (and without further action by any person or party) assigned from Licensor to Owner upon the earlier of the termination of the License Agreement or January 1, 2003. 2.02. (a) All Licensed Articles shall bear the Licensed Marks, except as hereinafter provided or otherwise approved by Owner, and no Licensed Articles shall be sold or otherwise distributed by Licensee under any trademark other than the Licensed Marks including, without limitation, under a private label of Licensee or any customer of Licensee. (b) Licensee shall not use the Licensed Marks on or in connection with Articles or any other product manufactured from designs neither provided nor approved by Owner or on Articles or any other product distributed by any person or entity, including Licensee, as premiums, promotions, give-aways or fund-raisers except with Owner's prior approval as contemplated in paragraph 7.02 below. (c) Except as set forth herein, Licensee shall not manufacture, sell or distribute, or cause the manufacture, sale or distribution of, any products identical to Licensed Articles or of any products identical to Articles manufactured, sold or distributed by Licensor. At Licensee's request to enable it to maintain a steady flow of work for factories with which it does business, Owner and Licensor agree that, notwithstanding the foregoing, Licensee shall be permitted to offer for sale and sell as "make-ups" certain Licensed Articles, subject to the following terms and conditions: 6 (i) Owner shall review at the beginning of each selling season and at such other times as Owner may reasonably request the quantity and styles of Licensed Articles which may be manufactured, offered for sale and sold as "make-ups". (ii) All Licensed Articles sold as "make-ups" shall bear royalties as provided in paragraph 9.01 below. Such royalties shall be computed, accounted for and paid in accordance with this Agreement, provided, on Licensee's statements, Net Sales of "make-ups" shall be shown separately from other sales. (iii) All Licensed Articles manufactured for sale as "make-ups" shall bear the applicable Licensed Mark in the form approved by Owner. (iv) Notwithstanding the generality of the foregoing, Licensee acknowledges that Owner may withdraw the permission to manufacture and sell "make-ups" herein granted at any time; provided, however, in such event the Guaranteed Minimum Royalty for the applicable period shall be reduced by [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] for each year in which such permission is so withdrawn. (d) (i) Except for its licensed use of the Licensed Marks hereunder, Licensee shall not adopt or use any mark, logo, insignia or design that is likely to be confusingly similar to or cause deception or mistake with respect to any of the Licensed Marks. Licensee shall not join any name or logo with the Licensed Marks so as to form a new mark, except with the prior written approval of Owner, nor shall Licensee use any Licensed Marks as part of its corporate name. However, subject to the terms and conditions of this Agreement, Owner hereby grants Licensee the limited, non-exclusive right to use each of the Licensed Marks as part of a name identifying a division of Licensee established solely for the purpose of and in connection with the marketing, distributing, advertising, promotion and sale of Licensed Articles under the terms and conditions set forth in this Agreement and Owner and Licensor agree that Licensee's employees may represent themselves as being representatives of or being from "ANNE KLEIN II Footwear" or "A LINE ANNE KLEIN Footwear" and shall not represent themselves as representing "Anne Klein". To avoid confusion in the retail footwear industry, Owner, Licensor and Licensee shall cooperate to establish guidelines with respect to Licensee's use of the Licensed Marks as a tradename. (ii) For clarification: Licensee acknowledges that the rights granted herein with respect to the Licensed Marks and Company's Tradename are not intended and shall not be construed to grant any rights to use any of the Licensed Marks and/or Company's Tradename as a domain name. In addition, Licensee shall not use Company's Tradename or any Licensed Mark as a service mark on and in connection with Licensee's Outlets or any other retail establishment operated by Licensee directly or through an affiliate (collectively, a "Licensee Store") except pursuant to a separate retail license agreement between Owner and Licensee (a "Licensee retail license"), it being understood that such Licensee retail license shall 7 (A) not require Licensee to pay Owner any separate royalty or other compensation for the right to use the service mark; (B) shall give Owner the right to approve each location for a Licensee Store bearing the service mark; and (C) shall be consistent with other similar agreements Owner has entered with third parties, including Owner's right to reasonably approve the design of such Licensee Store. 2.03. (a) Licensee shall use its best efforts to exploit the rights herein granted throughout the Territory consistent with the high standards and prestige represented by the Licensed Marks. Notwithstanding the foregoing, Licensee shall not sell Licensed Articles for resale except for resale to a consumer for personal use and, except for sales made to or for resale in a Foreign Territory in accordance with Section 18 below, Licensee shall not sell Licensed Articles to any entity which it knows or has reason to believe intends to export Licensed Articles from the Territory. Licensee acknowledges that the Licensed Articles are intended to be of the highest quality in the applicable market segment and marketed in a manner commensurate with Owner's and Licensor's standing and reputation in the women's apparel and footwear industry. Accordingly, and in order to maintain the reputation, image and prestige of Owner, Licensor and the Licensed Marks, Licensee's primary distribution patterns shall consist of Normal Retail Channels and, in the event Licensee sells to a customer not approved by Owner, Owner shall have the right to object, by written notice, to such sales. Upon receipt of such notice, Licensee shall not thereafter accept orders from such customer, but Licensee may fulfill orders accepted prior to Licensee's receipt of Owner's notice. For clarification: Owner acknowledges that Licensee has retained representatives who show the Licensed Articles to customers through regional markets throughout the United States. Licensee hereby expressly agrees to inform its representatives of the foregoing and acknowledges that the acts of said representatives shall be deemed Licensee's acts for all purposes hereunder. Within fifteen (15) business days after Owner's written notice to Licensee that a Licensee's representative has acted in a manner which would constitute a breach of this Agreement, Licensee shall take those steps reasonably necessary to cure said breach. (b) Notwithstanding the foregoing, Licensee may sell Discontinued Goods first, to Licensee's Outlets or, upon Owner's request, to those end-destination outlet stores operated by Owner (directly or through an affiliate) under the name "Anne Klein Outlet" ("Owner's Outlets") (collectively, the "Outlets") to the extent of their requirements (subject to a reasonable assortment being purchased) and, thereafter, to other appropriate retail outlets for Discontinued Goods, subject to Owner's reasonable approval; provided, however, that, in any Contract Year, Licensee's aggregate annual sales of Licensed Articles sold as Discontinued Goods (including, for purposes of this paragraph, Licensed Articles produced and sold as "make-ups") shall not exceed [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of Licensee's aggregate Net Sales of Licensed Articles (except as Owner may expressly agree). Seconds, irregulars and damaged goods shall always be marked as such. Licensee shall advise its buyers of Discontinued Goods (including the Outlets) that Licensee does not have the right to use or to authorize others to use the Licensed Marks in 8 advertising or selling the Discontinued Goods. Attached hereto as Schedule 2.03 is a list of those currently-approved retail outlets to which Licensee may sell Discontinued Goods hereunder. Said Schedule is current as of the Effective Date and may be modified or supplemented from time to time. Without otherwise limiting any provision of this Agreement, Owner and Licensee agree that sales of Licensed Articles to Owner's Outlets shall be at prices equal to twenty-eight percent (28%) above Licensee's respective cost for such Licensed Articles, but not more than the price at which Licensee offers to sell and/or sells the same or similarly styled Licensed Articles to any other customer. 2.04. (a) Owner acknowledges that, at the date hereof, Licensee manufactures and/or markets Articles bearing the trademarks listed on Schedule 2.04, attached hereto and made a part hereof. Licensee may, in its sole and absolute discretion, continue to do so at any time. (b) Licensee acknowledges that Owner has expressed a concern that entry by Licensee into a license with another designer, other than those set forth on Schedule 2.04, of women's clothing items or fashion accessories to manufacture, advertise, promote, distribute and sell Articles at price-points which are equal to or higher than better price-points in the Territory may adversely impact upon or affect the Licensed Marks or their use in connection with the Licensed Articles or Licensee's ability to meet all of its obligations under this Agreement (an "Affect"). Accordingly, in the event that Licensee contemplates entering into such a license, Licensee shall, subject to limits of confidentiality agreements then in effect, promptly consult with Owner and provide Owner with sufficient information concerning the proposed transactions, including the proposed staffing, the anticipated royalty rate and the advertising/exploitation commitments under such license, to enable Owner to make an informed decision whether, in its reasonable commercial judgment, the nature of the proposed license or the parties participating therein would have an Affect. Owner shall promptly inform Licensee if, in Owner's reasonable commercial judgment, the proposed license may have an Affect, stating the reasons for its conclusion, and Licensee shall take Owner's judgment into consideration in deciding whether to proceed with the proposed license; provided, however, that Owner's judgment shall not be binding and its consent or its approval for Licensee to enter into such proposed license shall not in any way be required. 2.05. In the event of any dispute between Licensee and any other licensee of Owner in the Territory with respect to the products covered by their respective licenses, such dispute shall be resolved in good faith by Owner in its reasonable commercial judgment. Without limiting the generality of the foregoing, Licensee acknowledges that Owner may from time-to-time grant another licensee a limited non-exclusive right to produce and distribute Articles bearing the Licensed Marks as so-called "Related Items" (e.g., slippers distributed to said other licensee's buyers of sleepwear) or as "gifts-with-purchase" (e.g., a keychain or a cosmetics bag). In resolving a dispute with respect to the products covered by particular licenses or in conjunction with a grant of rights for Related Items, if appropriate, and without derogating from Licensor's rights pursuant to the License Agreement, if Licensor fails 9 to timely exercise its first right and option, Owner shall notify Licensee and Licensee shall have the right and option to manufacture such product/Related Items pursuant to an agreement of the parties as to price, quality and timing of delivery. The parties shall establish an appropriate procedure to effectuate the option herein given, it being understood that notice and agreement, if oral, shall be promptly confirmed in writing. 3. TERM. 3.01. (a) The term of this Agreement (the "Term") shall commence on the Effective Date and shall continue in full force and effect until December 31, 2002 unless earlier terminated pursuant to the terms and conditions of this Agreement or upon the mutual agreement of Owner and Licensee in a writing signed by both. (b) Licensee shall have the option to extend the Term for two (2) separate five (5) year periods (collectively, the "Extended Term") each on the same terms and conditions set forth herein and subject to the satisfaction of the following conditions: (i) Licensee must at the time of the giving of the notice as provided in the following paragraph then be in compliance with the material terms and conditions herein contained; and (ii) Achievement of Qualifying Sales (as described below) during the final Contract Year of the then concluding Term. (A) With respect to the first Extended Term, Qualifying Sales shall mean Net Sales of Licensed Articles during the third Contract Year (i.e., calendar year ending December 31, 2002) under this Agreement aggregating not less than [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]. The first Extended Term, if any, shall commence on January 1, 2003 and shall expire on December 31, 2007. (B) With respect to the second Extended Term, Qualifying Sales shall mean Net Sales (excluding sales to Outlets) of Licensed Articles during the fifth Contract Year of the first Extended Term (i.e., calendar year ending December 31, 2007) under this Agreement aggregating not less than [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]. The second Extended Term, if any, shall commence on January 1, 2008 and shall expire on December 31, 2012. 10 (C) Owner and Licensee may elect to adopt an alternative Net Sales achievement keyed to a combination of Licensee's actual Net Sales in the first nine months and Licensee's guaranty of Net Sales in the fourth quarter of the applicable Contract Year. Each option granted to Licensee herein shall be exercisable in writing not later than thirty (30) days after Licensee's delivery of statements demonstrating that the Qualifying Sales have been achieved. (D) During the first calendar quarter of the final year of the second Extended Term, either Owner or Licensee may initiate negotiation of the terms and conditions of an agreement to commence following the expiration of said Term, it being acknowledged by each that no commitment is made by either to guarantee that such negotiations shall result in a renewal of this Agreement; provided, however, that the parties agree to conduct such negotiations in good faith but if the parties are unable to reach agreement upon the terms and conditions of a renewal agreement within a reasonable period of time (not to exceed ninety (90) days), Owner may proceed to enter into negotiations with any other party of the terms and conditions of an agreement with respect to the Licensed Marks to commence following the expiration of this Agreement which terms and conditions shall on the whole be no more favorable to said other party than the terms and conditions last offered by Owner to Licensee. (c) References in this Agreement to the Term shall, unless the context indicates otherwise, also mean the Extended Term. In the event that Licensee fails to exercise its option for the first Extended Term, or is not qualified to exercise such option, this Agreement shall expire on December 31, 2002. (d) Without otherwise limiting the generality of the foregoing, Owner acknowledges that Licensee has expressed a concern that in the event Owner acquires a controlling interest in the assets or capital stock of a third party, or a controlling interest in the assets or capital stock of Owner is acquired by a third party, which third party in the fiscal year immediately preceding such acquisition derived revenues from its operation of a women's footwear business in an amount greater than Licensee's revenues from the business conducted by Licensee hereunder during the same period, such transaction may adversely impact upon or affect the Licensee's rights and/or its ability to conduct its business hereunder. Accordingly, in such event, 11 Owner shall notify Licensee, in writing, and provide Licensee with sufficient information concerning the proposed transaction to enable Licensee to make an informed decision whether, in its reasonable commercial judgment, the nature of the proposed transaction will adversely impact Licensee. In such event, Licensee shall advise Owner within 15 days of being notified of such transaction if it chooses to terminate this Agreement due to the proposed transaction and the reasons therefor, it being understood that Licensee's rights to terminate this Agreement and to receive payment hereunder shall not arise prior to closing of the proposed acquisition transaction. If Licensee chooses to so terminate this Agreement, Owner and Licensee shall negotiate in good faith to determine appropriate compensation to be payable by Owner to License on account of such termination taking into account the then current status of this Agreement and Licensee's business hereunder and other similarly relevant matters. 3.02. (a) Time is of the essence with respect to all payments hereunder. If Licensee fails to make any payment in full due hereunder within ten (10) business days of the date such payment becomes due (the "payment grace period"), (i) Licensee shall pay interest on such unpaid sum from the business day following the date of the expiration of the payment grace period until the date of payment in full at a rate equal to the prime rate prevailing in New York, New York at The Chase Manhattan Bank, from time to time during the period of such delinquency, plus two percent (2%) and (ii) if such default continues uncured for five (5) days after the later of 1) the expiration of the payment grace period and 2) written notice from Owner, Owner shall have the right to terminate this Agreement immediately upon further written notice to Licensee. If any payment to be made hereunder shall be due on a day which is not a business day, the due date of such payment shall be extended to the next succeeding business day. (b) If Licensee otherwise fails to perform any other material term, condition, agreement or covenant it is obligated to perform hereunder and (i) such breach is curable but continues uncured for a period of thirty (30) days after Owner gives Licensee written notice thereof; or (ii) if said breach is curable but not within thirty (30) days and all reasonable steps necessary to cure have not been taken within thirty (30) days after Owner gives Licensee written notice of breach, Owner may terminate the Term immediately upon giving notice at any time after said thirtieth (30th) day, without prejudice to any other rights of Owner. (c) If Licensee otherwise fails to perform any other material term, condition, agreement or covenant it is obligated to perform hereunder and such breach is not curable, Owner may terminate this Agreement immediately upon giving notice at any time, without prejudice to any other rights of Owner. (d) Without limiting the generality of the foregoing, if Licensee conducts its business hereunder in a manner which requires Owner to give two (2) or more notices in any consecutive twelve (12) month period pursuant to this Section 3.02 to obtain Licensee's compliance with this Agreement, Owner may elect to terminate this 12 Agreement forthwith and such termination shall be effective immediately upon Owner's giving notice. (e) Owner shall copy Licensor on any notice sent to Licensee pursuant to paragraph 3.02(a) hereunder. 3.03. (a) Owner shall have the right, without prejudice to any other rights which it may have, to terminate the right of Licensee to manufacture, advertise, promote, distribute or sell Licensed Articles bearing a particular Licensed Mark, but only if (i) Owner has complied with its material obligations hereunder; (ii) Licensee shall have failed for a period longer than two consecutive selling seasons to continue the manufacture and sale in commercial quantities of at least fifteen (15) styles of Licensed Articles bearing such particular Licensed Mark; (iii) Owner shall have given written notice to Licensee specifically identifying such failure; and (iv) Licensee shall have failed to remedy such default with respect to such particular Licensed Mark within one hundred twenty (120) days after Licensee's receipt of such written notice, which remedy may be accomplished by manufacturing and selling in commercial quantities at least fifteen (15) styles of Licensed Articles bearing such particular Licensed Mark during any selling season occurring in whole or in pan during such one hundred twenty (120) day period. Thereafter, notwithstanding any contrary provision hereof or implication contained herein, Owner may grant a license covering Licensed Articles under such particular Licensed Mark to Licensor or to any third party and such grant shall not be deemed a violation of or infringement upon any of the rights of Licensee pursuant to the terms of this Agreement. Notwithstanding the foregoing, this Section 3.03(a) shall have no force or effect whatsoever with respect to the Licensed Mark "ANNE KLEIN II" until Owner gives written notice to Licensee that Owner is satisfied with respect to the logo and other matters necessary to Licensee's exploitation of such Licensed Mark, and no selling season that commences prior to or within one hundred twenty (120) days after Licensee's receipt of such notice may be included among such two consecutive selling seasons. Notwithstanding anything to the contrary contained in this Agreement, Owner's right to terminate certain rights of Licensee pursuant to this Section 3.03 shall extend only to the particular Licensed Mark with respect to which a failure shall have occurred pursuant to clause (ii) of the first sentence of this Section 3.03. (b) Commencing January 1, 2003, Owner shall have the right, without prejudice to any other rights which it may have, to terminate the Term of this Agreement if thereafter Licensee shall fail, during any two (2) consecutive Contract Years (a "Target Period") hereunder, to achieve Net Sales in an amount sufficient to allow Licensee to recoup the aggregate Guaranteed Minimum Royalty payable by Licensee during said Target Period. 3.04. Either Licensee or Owner shall have the right to terminate the Term effective immediately upon written notice to the other: (a) If the notified party commences or becomes the subject of any case or proceeding under any applicable federal, state or foreign bankruptcy laws or if a court 13 appoints a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the notified party and any such involuntary proceeding or appointment is not discharged within sixty (60) days; or (b) if the notified party defaults on any material obligation which is secured by a security interest in any Licensed Articles and the secured party accelerates the notified party's obligations to such secured party. 4. DESIGN SERVICES/TECHNICAL ASSISTANCE. 4.01. During each Contract Year, with respect to each Licensed Mark, Licensee shall manufacture, distribute, and sell in each of the usual and customary women's footwear markets (which, at the effective date of this Agreement, are held in February, June, August and December) collections of Licensed Articles in accordance with the designs and specifications delivered or approved by Owner from time to time. The first collection (the "launch") shall be the Spring 2000 collection. 4.02. (a) Licensee, at its expense, shall employ an appropriate staff of designers and merchandisers/product development employees, reasonably acceptable to Owner, to assure that Licensed Articles are consistent in design and quality with the highest quality Articles in the applicable market segment and with Owner's and Licensor's standing and reputation in the women's apparel and footwear industry and with the public. For purposes of retaining the distinct positions of the Company's Marks in the women's footwear market, Owner, Licensor and Licensee agree to establish schedules and procedures ("Licensee's Product Development Calendar") to facilitate an appropriate working relationship with respect to Licensed Articles, including direct interface among Owner and Licensee's design and merchandising staff(s) throughout the product development process with input from Licensor, as Owner deems reasonably necessary. (b) At the beginning of the design phase for each seasonal collection, Licensee shall provide Owner with its merchandising plan for said collection, including a review of the prior season performance, Licensee's assessment of market needs and competitive positioning, including Licensee's identification of prior season Licensor styles (other than carryovers (as defined below)) appropriate for translation to Licensee's market in the upcoming season. Licensee also shall provide Owner with access to its design library/archives, if any, to assist Owner in connection with development of ideas for Licensed Articles. Owner, with input from Licensor as Owner deems reasonably necessary, shall furnish such general assistance, including concept boards (showing trend, silhouettes, color and fabrication) and specifics with respect to those prior season Licensor styles to be translated as Owner, Licensor and Licensee deem reasonably necessary hereunder. Licensee shall consult with Owner concerning materials and fabrications to be used in the manufacture of the Licensed Articles. (c) For each collection of Licensed Articles, Licensee shall prepare and deliver to Licensor and Owner for Owner's approval at such times as the parties shall 14 mutually agree designs for the styles of Licensed Articles proposed to be included in such collection, it being understood and agreed that Licensor's approval rights shall be limited in the manner set forth in paragraph 4.05(a)(ii) below. The various collections of Licensed Articles shall aggregate such number of styles of Articles (which may include styles from prior collections ("carryovers") as well as new styles) as Owner and Licensee shall mutually agree, it being understood and agreed by Licensee that so long as a particular style remains generally available as a Licensed Article (including through EDI or "Quick Response" or other replenishment mechanism) that style shall not be sold as Discontinued Goods (except for seconds/irregulars or discontinued colors or fabrics). For purposes of this paragraph, the term "design" means a designer's sketch showing the suggested style of a Licensed Article and coloration and/or materials and fabrications. Designs submitted by Licensee must be approved by Owner in accordance with paragraph 4.05 herein. (d) Licensee shall identify to Owner (in writing) its requirements for tags, labels and packaging ("Packaging Materials") to be used in connection with Licensed Articles and, at its option, Owner may provide designs and specifications for said Packaging Materials. Whether designs and specifications are provided by Owner or developed by Licensee, Licensee shall produce the Packaging Materials in accordance with designs and specifications approved by Owner, a copy of which will be furnished to Licensor, and such Packaging Materials shall be clearly distinguishable from those used by Licensor. (e) Licensee shall identify to Owner (in writing) its requirements, a copy of which will be furnished to Licensor, for specialized hardware and trim bearing the Licensed Marks or any approved logo ("Trim Materials") to be used in connection with Licensed Articles. Uses of the Licensed Mark or any of Company's Marks as a design element may be proposed by either Owner or Licensee, but all such uses must have Owner's express prior approval, such approval not to be unreasonably withheld. At Owner's option, Owner may provide designs and specifications for said Trim Materials and, whether designs and specifications are provided by Owner or Licensee, Licensee shall produce said Trim Materials in accordance with the designs and specifications approved by Owner, a copy of which will be furnished to Licensor. (f) Before Owner (whether directly or through the Agency (as defined below)) incurs any costs in connection with the development of Packaging Materials and/or Trim Materials exclusively for Licensee, Owner and Licensee shall prepare a budget, pre-approved in writing by Licensee's divisional President, Chief Financial Officer or Executive Vice President, for such development and Licensee shall reimburse Owner in accordance with paragraph 7.02(c) below for its actual out-of-pocket costs incurred in accordance with said budget promptly after receipt of Owner's invoice therefor. Without limiting the generality of the foregoing, if Licensee so requests, Owner agrees that in development of Packaging Materials and/or Trim Materials exclusively for Licensee, Owner will work with Licensee's usual resources for such Materials, it being the parties' intent to obtain the highest quality Materials at the most favorable cost. 15 4.03.(a) Owner and/or Licensor will not be responsible for making samples. However, Licensee agrees that from time to time it may be appropriate for Owner's representative to visit Licensee's factories or undertake other travel with respect to the subject matter hereof, as agreed in writing by the parties in advance and approved (which approval will not be unreasonably withheld or delayed) by Licensee's divisional President, Maxwell Shoe Company's Executive Vice President or Chief Financial Officer ("Reimbursable Travel"), and Licensee agrees to reimburse Owner, up to a maximum of seven thousand five hundred dollars ($7,500.00) per Contract Year, for Licensee's pro rata portion of Owner's expenses incurred with respect to Reimbursable Travel within thirty (30) days after receipt of Owner's invoice for such expenses. (b) All sample Licensed Articles, whether made by Owner, Licensee or under their authority, will be Owner's property and Licensee will surrender these samples to Owner immediately upon the expiration or termination of the Term or sooner if Owner so requests. 4.04.(a) Owner acknowledges that Licensee employs quality standards for Articles manufactured by it and Owner agrees that, in connection with the design and development of Articles, it shall take such standards into account; provided, however, that Licensee shall manufacture Licensed Articles in substantial compliance with Owner's design standards and requirements. In any event, the quality of Licensed Articles shall equal or exceed the quality of similar Articles previously manufactured and sold by Licensee under the "Jones New York" brand. (b) Licensee expressly acknowledges that all Protectible Materials (as defined below) and Trim Materials designed by Owner without material design input from Licensee which are clearly unique or distinctive ("Unique Styles") and all rights therein or thereto are and shall be the property of Owner, it being understood and agreed that designs and Trim Materials which embody Company's Marks or a Company logo shall be designated Unique Styles whether designed by Owner, Licensee or both. All Unique Styles shall be used by Licensee solely in connection with the manufacture, distribution and sale of Licensed Articles in the Territory and pursuant to this Agreement. Owner may use and permit others, including Licensor, to use the Unique Styles in any manner it desires, provided that such use does not conflict with any rights granted to Licensee hereunder and provided further that Owner does not sell or otherwise give any Unique Styles to any other manufacturer of Articles unless the Articles incorporating such Unique Styles are to be sold outside of the Territory. 4.05. Without limiting the generality of the foregoing, so that Owner shall be satisfied that Licensee continuously will be able to meet and maintain the standards and specifications established by Owner for the Licensed Articles: (a) (i) Owner and Licensee shall establish appropriate timetables and procedures under which periodically throughout the development process of Licensed Articles Licensee shall make available to Owner, the styles, designs, materials, 16 fabrications, Trim Materials, Packaging Materials and contents of each collection of all Licensed Articles for Owner's approval as to design interpretation, workmanship and quality and to assure that all Licensed Articles are reasonable facsimiles of designs approved by Owner. Owner shall, at such times throughout the development process as Owner deems appropriate, furnish Licensor with such portion of the items described in the preceding sentence as Owner deems reasonably necessary to facilitate Licensor's participation in the approval process pursuant to paragraph 4.05(a)(ii). (ii) In advance of Licensee's Market opening of each collection Licensee shall make available to Licensor and Owner for Owner's approval samples of each complete collection of Licensed Articles intended to be offered in that Market together with or including the Packaging Materials and collateral selling materials such as photo line lists intended to be used with them. All styles of Licensed Articles shall be subject to Licensor's and Owner's prior review and, in the event of disagreement among Owner, Licensor and Licensee as to inclusion of a particular style in a particular collection, Owner's decision shall prevail. All styles of Licensed Articles shall be subject to Owner's prior approval. (iii) Licensee expressly acknowledges and agrees that if samples are not made available to Licensor and Owner in sufficient time prior to Market opening for Licensee to make changes requested by Owner in unapproved Articles, Owner and Licensee shall agree upon changes to be made prior to commercial production and Licensee shall submit production samples for Owner's approval or Licensee shall remove said unapproved Articles from its collection of Licensed Articles. (b) After Licensor's review and Owner's approval of a collection of Licensed Articles is given, Licensee shall not make any material change in the Licensed Articles or the Packaging Materials for Licensed Articles without Owner's express prior approval, it being the intent of the parties that the Licensed Articles offered for sale and sold in any collection shall be those reviewed by Licensor and approved by Owner for inclusion in said collection. No Licensed Articles shall be manufactured in commercial quantities, sold or distributed by Licensee without Owner's express prior approval. (c) Licensee expressly agrees and acknowledges that Owner's decision to give its approval pursuant to this paragraph 4.05 may be based solely on Owner's subjective standards and may be withheld in its sole and absolute discretion; provided, however, that nothing herein contained shall preclude Licensee from presenting its reasonable business needs to support inclusion of particular styles, it being understood and agreed, however, that Owner shall make the final decision in accordance herewith. For other matters for which Owner's approval is required under this Agreement, Owner's decision to give its approval shall be based upon Owner's commercially reasonable judgment. For purposes of this Agreement, only the President of Owner, or a designated alternate, may give approval on behalf of Owner. 17 (d) An approval given for Licensed Articles to be included in, or Packaging Materials to be used by Licensee with, one collection shall not be construed as approval to include or use said Licensed Articles or Packaging Materials in or with any other collection except as Owner may expressly agree with respect to carryovers. Owner expressly reserves the right to review Licensee's entire line of Licensed Articles from time to time for the purpose of deleting any previously-approved style which Owner deems, in its sole discretion (which shall not be unreasonably applied), no longer appropriate for distribution as a Licensed Article. Following such deletion, Licensee may, for a reasonable period (which shall not exceed six (6) months) to be mutually agreed, fill its existing orders for deleted styles and/or sell off its existing on-hand inventory of deleted styles. (e) With respect to any matter hereunder for which Licensor's review and Owner's approval is required, if Licensee timely submits Licensed Articles and/or Packaging Materials or other materials for which Licensor's review and Owner's approval is required and Owner fails to disapprove any of them within fifteen (15) business days after Licensor's and Owner's receipt thereof (or such longer period as Owner may reasonably request and with which Licensee reasonably agrees), Owner's approval shall be deemed given solely for the use for which approval was sought. 5. CONFIDENTIALITY / DISCLOSURE. 5.01. Licensee, Licensor and Owner each acknowledges that all information relating to the business and operations of the other(s) which it acquires, learns or has learned during or prior to the Term from the other(s) which is not commonly or currently known in the marketplace (the "Confidential Information") is valuable property of the applicable party. Each of the parties acknowledges the need to preserve the confidentiality of such Confidential Information and agrees that, during the Term and after the expiration or other termination thereof, it shall not use or disclose same, except to the extent expressly provided herein or as may be required by law, regulation or judicial order. Each shall take all necessary steps to ensure that use of Confidential Information by it or by its contractors and suppliers (which use shall be solely as necessary for, and in connection with, the manufacture, distribution, sale, advertising and promotion of Licensed Articles) shall preserve such confidentiality in all material respects. Without limiting or impairing any other indemnification provision contained herein, each party hereby agrees to release, defend, hold harmless and indemnify the others against any and all claims, damages, causes of action, judgments, settlements, fines and other costs of any kind (including reasonable attorneys' fees), which may be suffered by the indemnified party as a result of any breach by the breaching party or any of its contractors of the provisions of this paragraph. The provisions of this paragraph and the parties' obligations hereunder shall survive the expiration or termination of the Term. 5.02. Licensor and Licensee each agrees that its press releases and other public announcements related to this Agreement shall, subject to applicable law and applicable disclosure obligations thereunder, be subject to Owner's reasonable prior approval. During the Term, and for three (3) years thereafter, neither Licensor, 18 Licensee nor Owner shall, directly or indirectly, make any public statement that materially adversely affects, disparages or creates any material negative inference as to the reputation, prestige, value, image or impression of the Licensed Marks or the Licensed Articles or any other party's respective officers, directors, affiliates, personnel, products or related companies, by words, actions or other communications. The provisions of this paragraph and the parties' obligations hereunder shall survive the expiration or termination of the Term. 6. MANUFACTURE OF LICENSED ARTICLES; QUALITY CONTROL. 6.01. Licensee agrees that the Licensed Marks have an established prestige and good will and are well recognized by the trade and the public in the Territory, and are of great importance and value to Owner and Licensor. Accordingly, Licensee further agrees that the contents and workmanship of Licensed Articles shall at all times be of the highest quality in the applicable market segment and Licensed Articles shall be distributed, offered for sale and sold with collateral materials, including but not limited to Packaging Materials and Trade Materials (as defined below), appropriate for said highest quality Articles in the applicable market segment and consistent with Owner's and Licensor's standing and reputation in the apparel and footwear industries and with the public as first rate firms. 6.02. (a) In connection with its manufacture of Licensed Articles, Licensee shall assure that, in addition to abiding by the terms of this Agreement, the following conditions are met: (i) Licensed Articles are produced under satisfactory working conditions and in accordance with all applicable laws and regulations (including those regarding wages and hours); and (ii) Convict or forced or child labor shall not be used. (b) In the event Licensee engages a contractor, agent or supplier (hereinafter, "Contractor"), including without limitation an affiliate of Licensee, in connection with the manufacture of the Licensed Articles, of any Protectible Materials (as defined below) and/or of a significant component of the Licensed Articles themselves and/or of any component thereof bearing any of the Licensed Marks, Licensee shall, immediately upon retention of such Contractor, furnish Owner, in writing, with the name and address of the Contractor and a description of the Licensed Articles or components involved. Licensee shall specifically obtain and maintain in its files the Contractor's written agreement (a) to abide by the provisions of this Agreement relating to confidentiality, quality standards and trademark protection (including, without limitation, a prohibition against distribution by the Contractor of any Licensed Articles or Protectible Materials (if any)--including overruns or Articles which are unacceptable because damaged or defective--to any person other than Licensee), (b) to produce Licensed Articles under satisfactory working conditions and in accordance with all applicable laws and regulations (including those regarding wages and hours), (c) to refrain from using convict or forced or child labor and (d) to permit Owner to exercise its rights to obtain current 19 production samples and of inspection set forth in paragraph 6.03 below (together, the "Contract Conditions"). Notwithstanding any contrary provision of paragraph 2.01 above, Owner acknowledges that, due to the particular nature of manufacturing demands associated with Articles, Licensee will utilize independent third parties to (i) serve as agent for Licensee and (ii) manufacture Licensed Articles or Protectible Materials (if applicable) outside of the Territory and Owner agrees that Licensee may do so, subject to prior notice to Owner and to strict compliance with this paragraph 6.02. Licensee shall take all steps necessary to ensure that any subcontractor of any Contractor is subject to the Contract Conditions applicable to Contractors hereunder to the same extent such Contract Conditions are applicable to Contractors. The engagement of a Contractor by Licensee in compliance with the terms of this paragraph 6.02 shall not be deemed a sublicense hereunder and no such Contractor shall acquire any rights with respect to the Licensed Mark or any of the Company's Marks. Attached hereto as Schedule 6.02 is a list of Contractors or Agents (including for this purpose affiliates of Licensee) engaged by Licensee, including the country of manufacture. Said Schedule is current as of the Effective Date and may be modified or supplemented from time to time. 6.03.(a) During the Term, Licensee, periodically, but at least once for each collection and at any other time as requested by Owner, shall submit, free of any charge to Owner, randomly selected then current production samples of each Licensed Article and Packaging Materials so that Owner may be assured of the maintenance of the standards and specifications for each. Owner may, at its election, retain any of such samples for its archival purposes. Owner also shall have the right, upon reasonable advance notice to Licensee, to inspect the manufacturing process for each Licensed Article produced under this Agreement, at whatever place or places they may be manufactured. (b) Notwithstanding any contrary provision herein, if, at any time, any production sample is disapproved by Owner on the grounds that such sample does not materially conform to the approved pre-production sample, Owner shall so advise Licensee and, upon Licensee's receipt of such advice by any means, approval with respect to that Licensed Article shall be deemed revoked. If advice is given orally, it shall be promptly confirmed in writing. Thereafter, except for Licensed Articles previously produced and delivered to Licensee (which may be sold as Discontinued Goods or otherwise as Owner and Licensee shall mutually agree), Licensee shall not manufacture or release that Licensed Article for public distribution until a new approval has been given for that Licensed Article. (c) Prior to the initial production of any stationery, invoices and other similar business papers (collectively, "business documents") bearing the Licensed Marks or Company's Tradename and, thereafter, once during each Contract Year and at any other time upon Owner's reasonable request, Licensee shall furnish Owner with a reasonable number of samples of such business documents for Licensor's review and approval by Owner and its legal counsel. Licensee shall not modify approved business documents except upon approval by Owner and its legal counsel of any such modification. 20 6.04.(a) Each Licensed Article shall be manufactured, packaged, labeled, sold and distributed in accordance with all applicable national, state, provincial, local or other laws and regulations. Owner's approval of any sample shall not be construed to mean that Owner has determined that the sample conforms to the laws or regulations of any jurisdiction referred to above. (b) Licensee shall display, including, without limitation, on all Packaging Materials for each Licensed Article and all business documents, advertising, promotional, publicity and exploitation material relating to it, each Licensed Mark only in such form and manner as is consistent with standards promulgated by Owner from time to time and specifically approved by Owner. Licensee also shall cause to appear on all such items, such legends, markings and notices as either may be required by any law or regulation in the Territory or as Owner reasonably may request. Licensee will acquire no proprietary rights in the Licensed Marks by virtue of such use. Without limiting the generality of the foregoing, Licensee shall not use any tradename or other identifying marking owned by or associated with any department store or other retail establishment, wholesale outlet or other person, firm or corporation on Licensed Articles or containers therefor bearing the Licensed Marks. 7. ADVERTISING; SHOWROOM; MARKETING. 7.01.(a) Prior to the launch of the initial collection of Licensed Articles, which shall be made for the Spring 2000 season, Licensee shall provide for Owner's approval, an introductory marketing plan stating anticipated sales volume, accounts, product positioning (viz. competition), advertising and promotional support and such other relevant information as Owner may reasonably request. Further, in addition to the advertising described below, Owner and Licensee shall endeavor to agree upon the manner and media to be utilized in advertising and promoting and staging the launch (including the portion of the Minimum Advertising Obligation (as defined below) to be expended by Licensee in connection therewith); provided, however, that Owner's decision shall be final. Notwithstanding the generality of the forgoing, Owner and Licensee agree that the initial collection of Licensed Articles shall be supported by a so-called "soft opening" and co-op advertising and that they will seek mutually beneficial ways to formally launch Licensee's Licensed Articles bearing the Licensed Mark "ANNE KLEIN II" at the time Owner launches its apparel collection bearing the Licensed Mark "ANNE KLEIN II" for Fall 2000, it being understood and agreed that Licensee's Image Fund Payment (as defined below) may be used in connection therewith. (b) (i) Licensee acknowledges that, in recognition of the importance of advertising in developing and projecting the image of the Licensed Marks and in enhancing the sales of Licensed Articles, Owner will conduct a program for all products bearing the Company's Marks (the "Image Program"). Owner will develop and control the creative components of all advertising and related promotional material (including all publicity, whether through media placement or "events") to be 21 used in the Image Program. Owner will determine the media to be used for advertisements and the advertising agency(ies) to be used and all national (including for purposes of this paragraph Owner-placed regional and local) advertisements will be placed by Owner. The Image Program shall include all of the activities undertaken by Owner to develop and promote the Company's Marks. (ii) In connection with the Image Program, Licensee shall pay to Owner in each Contract Year an amount equal to [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of Net Sales hereunder for said Contract Year (the "Image Fund Payment"); provided, however, that, the Image Fund Payment for any Contract Year shall be not less than the following amounts (the "Minimum IFP"): For the Initial Contract Year and the second Contract Year (i.e., 2001), the Minimum IFP shall be deemed to be the aggregate amount of [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]; and in each subsequent Contract Year, the Minimum IFP shall be that amount which is [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of the Guaranteed Minimum Royalty (as defined below) payable for said Contract Year. (iii) The Image Fund Payment shall be used by Owner for purposes of national advertising and promoting the Licensed Marks and the Licensed Articles. However, if Owner elects to do brand advertising of a Licensed Mark on television, Owner may apply up to one-half (1/2) of the Image Fund Payment for such purpose. Notwithstanding the generality of the foregoing. if, for a particular season or in a particular Contract Year, Owner elects not to conduct national advertising of the Licensed Marks, in lieu of payment of the Image Fund Payment to Owner, Licensee shall use the Image Fund monies otherwise payable for that season or Contract Year for other advertising and promotion of Licensed Articles, as mutually agreed by Owner and Licensee and which may include costs of creating in-store shops for Licensed Articles. (iv) The Image Fund Payment shall be computed and paid quarterly at the time Licensee renders its statements in accordance with Paragraph 10.01 hereunder. The Image Fund Payment shall be due and payable whether or not a payment of Sales Royalty is due for any particular Accounting Period. The Image Fund Payment shall be in addition to any other monies payable hereunder and shall not be credited against and/or recoupable from Sales Royalties otherwise payable to Owner hereunder. Without otherwise limiting Licensee's obligations hereunder with respect to payment of the Image Fund Payment, it is hereby acknowledged and agreed that there shall be no Image Fund Payment due and payable with respect only to sales of Licensed Articles by Licensee's Outlets. (v) Without limiting the generality of the foregoing, commencing in the first calendar quarter after recoupment/application of the Additional Advance (as defined below), Licensee shall pay an amount equivalent to [confidential portion of material has been so omitted and filed separately with the Securities and Exchange 22 Commission] of the Minimum IFP for the particular Contract Year at the beginning of each calendar quarter . Each such amount paid by Licensee shall be treated as an advance against and deductible from Licensee's next-following Image Fund Payment when it comes due in the ordinary course. 7.02.(a) (i) In addition to its participation in the Image Program, in each Contract Year, Licensee shall fund a budget in an amount not less than [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of its projected Net Sales of Licensed Articles to enable Licensee to conduct other advertising and promotion as it deems appropriate for the successful implementation of its business plan for the sale of Licensed Articles (the "Minimum Advertising Obligation"). Without limiting the generality of the foregoing, co-op advertising by Licensee will satisfy the Minimum Advertising Obligation for the Licensed Articles for each Contract Year . Without otherwise limiting Licensee's obligations hereunder with respect to the Minimum Advertising Obligation, it is hereby acknowledged and agreed that there shall be no obligation to fund the Minimum Advertising Obligation with respect only to sales of Licensed Articles by Licensee's Outlets. (ii) In addition to co-op advertising, if Licensee elects to develop other advertising and marketing plans and programs for Licensed Articles (including but not limited to such items as trade and consumer co-op advertising) such advertising and all marketing plans and programs, including without limitation the creative components of all advertising material (advertising visuals and copy), media selection and schedules and sales promotions (such as, but not limited to, "gifts with purchase") developed by Licensee shall be subject to the prior express written approval of Owner. (iii) With respect to co-op ads, Licensee shall obtain Owner's prior approval of the creative components of any advertising materials Licensee elects to provide to its customers for use in co-op ads, store catalogs and the like. In addition, Owner and Licensee shall jointly develop guidelines with respect to Licensed Articles which Licensee shall furnish to its customers who wish to participate in Licensee's co-op advertising program, but Licensee shall not be deemed to have breached this Agreement if its customers fail to follow such guidelines. (b) The following items shall be considered expenditures which will be included in determining whether Licensee has satisfied the Minimum Advertising Obligation: cooperative advertising; trade advertising; additional related materials, such as printed materials, brochures, post cards and product guides; visual merchandise, such as display materials and point-of-purchase materials; and consumer media/print advertising. For clarification: The cost of printing and producing Packaging Materials and the like shall not be credited against the Minimum Advertising Obligation nor shall any product design expenses incurred by Licensee be credited against the Minimum Advertising Obligation. (c) In order to take advantage of certain expertise, experience and success of the advertising agency or agencies which then are responsible for handling 23 advertisements for Owner in the various countries in the Territory (collectively, including an "in-house" agency or marketing/creative services department (if applicable), the "Agency") in projecting the image of the Licensed Mark, Licensee shall utilize the Agency in connection with the creative development of the creative portion of any consumer and trade advertisements of Licensed Articles other than collateral materials such as trade sell-in presentations and other trade materials and brochures ("Trade Materials"), it being understood and agreed that where practicable commercial implementation of such advertisements may, in Licensee's determination, be undertaken by Licensee, subject to Owner's reasonable approval. Except in circumstances where pooling of advertising buys, in Owner's determination, is practicable, the placement of such advertising will be the responsibility of Licensee, need not be committed through the Agency and may be placed through any other advertising agencies chosen by Licensee, but the schedule for such placement shall be subject to the prior approval of Owner. Prior to commencement of a project hereunder, Owner and Licensee shall prepared a budget, which shall be approved on Licensee's behalf in writing by Licensee's divisional President, Chief Financial Officer or Executive Vice President in his reasonable business judgment, and Licensee shall pay for any material and services supplied by the Agency, in accordance with said pre-approved budget which budget shall include a service fee, which shall not exceed [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of the direct costs thereof, for materials and services provided by or through an "in-house" agency or marketing/creative services department. With respect to all financial arrangements between Licensee and any outside Agency, Licensee will deal directly with the Agency, without any involvement or responsibility on the part of Owner. Notwithstanding anything to the contrary herein, payments made to the Agency for advertising materials and advertising fees during a Contract Year shall be credited against the Minimum Advertising Obligation for such Contract Year. 7.03. Licensee agrees to create a separate division (the "Division") to conduct its business in Licensed Articles pursuant to this Agreement, which Division may share general administration, operations, warehousing and manufacturing facilities and functions with Licensee's other divisions. Licensee shall employ an executive, reasonably acceptable to Owner, to be in charge of and work exclusively for the Division as Marketing and Sales Manager and devote all of his time to the marketing and sale of the Licensed Articles. In addition, Licensee shall maintain an adequate staff, including a sales force and, if applicable, in-store consultants solely for the sale of Licensed Articles and service to Licensee's customers for Licensed Articles. 7.04.(a) During the Term, Licensee shall maintain a separate area of its New York showroom exclusively for the display of Licensed Articles. Said showroom shall be decorated in a manner approved by Owner to be consistent in design and appearance with Owner's designated showroom concept limited to a [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] budget for showroom. Licensee's showroom shall be staffed and maintained in a manner commensurate with the reputation and 24 prestige of the Licensed Marks as a designation for highest quality products. As used in this paragraph 7.04, references to "showroom" shall be deemed to include exhibit facilities maintained by Licensee or its representatives at trade shows where Licensed Articles are shown and/or sold. (b) (i) It is the parties' intent and Licensee agrees that an appropriate element of marketing Licensed Articles shall be the development and installation of in-store shops to house only Licensed Articles ("Shops"). Owner and Licensee shall mutually agree as to those accounts where a Shop will be established (each, a "Key Account"). In those accounts which are not Key Accounts, Licensee will seek a so-called "soft shop" to house the Licensed Articles. As used herein, a "soft shop" means a separate area for Licensed Articles within a larger department for Articles generally, which shall be appropriate in size to carry a representative assortment of Licensed Articles and which shall feature signage and other fixtures or icons bearing the Licensed Marks. (ii) With respect to all material aspects of the design and construction of Shops, including fixtures, furnishings and signage, Licensee shall consult with Owner, it being understood and agreed that signage and any fixtures or icons bearing the Licensed Marks must be approved by Owner in advance of installation. Licensee shall not modify Owner's direction except with Owner's express prior approval which shall not be unreasonably withheld or delayed. Licensee shall, at all times, use diligent efforts to cause each Key Account to maintain its Shops in a clean and attractive condition equal to the standard of competitors' in-store shops, provided, that the failure by a Key Account so to maintain one or more of its Shops shall not constitute a breach of or default under this Agreement by Licensee if, within ten (10) business days after Owner's written notice to Licensee that a Key Account has failed to maintain one or more of its Shops, Licensee has taken those steps reasonably necessary to place pressure on such Key Account to cure said failure. (iii) Licensee shall be responsible for all expenses incurred in carrying out its obligations under this paragraph 7.04(b). If Owner incurs any costs primarily in connection with the foregoing, Licensee shall reimburse Owner for direct expenses, which had been pre-approved in writing by Licensee, promptly after receipt of Owner's invoice therefor. Licensee may, at its election, credit direct costs incurred in carrying out its obligations under this paragraph 7.04(h) against the Minimum Advertising Obligation for the Contract Year in which such costs are incurred. (iv) Licensee acknowledges that Owner may, in its discretion, elect to consult with Licensor concerning matters described in this paragraph 7.04(b); provided, however, that Owner's decision shall prevail. 7.05.(a) Licensee acknowledges the importance to the development of the image and reputation of the Licensed Marks of displaying the full range of products bearing the Licensed Marks. Accordingly, in each season Licensee shall provide representative samples, limited to five (5) units per apparel season, of Licensed Articles to Owner, without charge, for display in the New York showroom 25 maintained by Owner for its apparel bearing the Licensed Marks. Such samples shall be made available to Owner upon Owner's reasonable request, so that the Licensed Articles may be merchandised and shown with the applicable clothing line and with other products bearing the Licensed Marks. Licensee shall also provide to Owner, at Licensee's landed, duty-paid ("LDP") cost, additional samples as may be required for advertising and publicity needs. (b) Upon Owner's request, Licensee shall provide Owner with a reasonable number of Licensed Articles as requested by Owner, for use in connection with its fashion shows, which Licensed Articles shall be from the current collection in process. Licensee acknowledges that some of such shows may take place prior to the commencement of production of such Licensed Articles and that Licensee shall be required to provide pre-production samples. (c) With respect to the samples to be provided hereunder, Licensee has informed Owner that pre-production samples are available only in sample size 6. Accordingly, to the extent that pre-production samples are required in sizes other than size 6 and must be specially manufactured for Owner. Owner shall reimburse Licensee for its direct costs, to a maximum of $100 per pair, for said pre-production samples, it being understood and agreed that samples requested by Owner hereunder and taken from Licensee's production stock shall be provided at Licensee's LDP cost. 8. GUARANTEED MINIMUM ROYALTY/ADDITIONAL ADVANCE. 8.01. In consideration of the license granted hereunder, Licensee shall pay Owner a Guaranteed Minimum Royalty for the Initial and Second Contract Years (i.e., from the Effective Date through 12/31/01) in the aggregate amount of [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission], payable by Licensee as follows: [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] upon complete execution of the Letter of Intent (as defined below) and the balance upon complete execution of this Agreement. With respect to each Contract Year thereafter (i.e., commencing in the Third Contract Year (2002)), Licensee shall pay Owner a Guaranteed Minimum Royalty in an amount equal to [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of the Sales Royalty (as hereinafter defined) earned hereunder for the preceding Contract Year, but not less than [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] (the "Base Amount"). 8.02.(a) The Guaranteed Minimum Royalty payable for each Contract Year, commencing in the Third Contract Year (i.e., starting January 1, 2002), shall, after taking into account all then-available credits for the Additional Advance paid by Licensee in accordance with paragraph 8.04, be paid to Owner in equal quarterly installments on the first business day of each quarter during each such Contract Year. 26 (b) If [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] of the applicable Sales Royalty exceeds the Base Amount, the increase in the amount of the Guaranteed Minimum Royalty to be paid over the Base Amount will be determined at the time Licensee renders its accounting for the just-concluded Contract Year and appropriate adjustments to the amount of the quarterly installments will be made. (c) Payments may be made by check to Owner at 77 Metro Way, Secaucus New Jersey 07094, to the attention of the Chief Financial Officer, or by wire transfer in accordance with the instructions set forth on Schedule 8.02 as said Schedule may be amended in writing by Owner from time to time. 8.03. The Guaranteed Minimum Royalty paid for each Contract Year is nonrefundable but shall be credited against and recouped from the Sales Royalty otherwise payable for that Contract Year, as provided in Section 9 below. 8.04. Upon complete execution of this Agreement, Licensee will pay to Owner for its account an additional payment [of confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] (the "Additional Advance"), which sum shall be applied against Sales Royalties and Image Fund Payments otherwise payable to Owner under this Agreement in such amounts and at such times as Owner and Licensee shall mutually agree. At the expiration or other termination (for reason other than material breach by Licensee) of this Agreement, a portion of the Additional Advance (pro-rated against the Guaranteed Minimum Royalty otherwise payable for the year in which termination occurs) which has not been applied against Sales Royalties and Image Fund Payments otherwise payable (or as Owner and Licensee may otherwise agree) shall be promptly returned to Licensee. 8.05. The provisions of Section 8.01 through and including Section 8.04 shall each be subject to the provisions of Section 2.02(c)(iv). 9. SALES ROYALTY. 9.01. In consideration of the license granted hereunder, in each Contract Year, Owner shall earn a Sales Royalty (the "Sales Royalty Earned") equal to the following percentages of Net Sales hereunder: (a) For Net Sales to and including [Confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] [Confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]. (b) For Net Sales in excess of [Confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] [Confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission]. 27 (c) Notwithstanding any contrary provision hereof, with respect only to Net Sales (as defined in paragraph 1.03(c) above) by Licensee's Outlets, the royalty rate shall be [confidential portion of material has been so omitted and filed separately with the Securities and Exchange Commission] in lieu of any other royalty rate hereunder, it being understood and Licensee acknowledges that, at Licensee's request, Owner has agreed to this reduced royalty to an effective Sales Royalty Earned on Net Sales by Licensee's Outlets approximately equivalent to the Sales Royalty Earned on Net Sales of Discontinued Goods to third parties. 9.02. The Sales Royalty hereunder shall be accounted for and paid quarterly within thirty (30) days after the last business day of each Accounting Period during the Term. The Sales Royalty payable (the "Sales Royalty Payable") for each Accounting Period shall be calculated in accordance with paragraph 10.01 below. 9.03. No payment of Sales Royalty for any Accounting Period shall reduce the Guaranteed Minimum Royalty due to Owner for said Contract Year; provided, however, that if the sum of the Guaranteed Minimum Royalty and any Sales Royalty actually paid to Owner for a particular Contract Year (the "Total Paid Royalty") exceeds the greater of the aggregate Guaranteed Minimum Royalty paid to Owner for said Contract Year and the aggregate Sales Royalty Earned for said Contract Year, then the amount by which the Total Paid Royalty exceeds the greater of the aggregate Guaranteed Minimum Royalty or the aggregate Sales Royalty Earned for said Contract year shall be deemed "Excess Royalty" and Licensee may recoup the amount of the Excess Royalty from the Sales Royalty Payable for any Reporting Period (as defined in Section 10.01) in the next or subsequent Contract Years, notwithstanding any contrary provision of this Agreement. For purposes of this paragraph 9.03, the Initial Contract Year and the second Contract Year shall be treated as a single Contract Year. Except as expressly provided in the immediately preceding sentence, no payment of Sales Royalty for any Contract Year shall reduce the Guaranteed Minimum Royalty or the Sales Royalty due to Owner for any other Contract Year. 9.04. The parties hereto agree that Licensor shall have no right to receive from licensee any payment of Sales Royalty, except pursuant to a final order of a court of competent jurisdiction; provided, however, in no event (whether pursuant to such court order or otherwise) shall Licensee be obligated to pay in excess of the Sales Royalty Payable for any Accounting Period. 10. ACCOUNTING STATEMENTS AND OPERATING REPORTS. 10.01. Licensee shall deliver to Owner at the time each Sales Royalty payment is due, a statement in the form set forth in Schedule 10.01 attached hereto and made a part hereof, signed and certified as accurate by the Chief Financial Officer, Controller or Executive Vice President of Licensee. With respect to each Licensed Mark, the statement shall provide the following information concerning the calculation of the amount payable for the period covered by the statement (the "Reporting Period"): 28 (a) the gross sales of all Licensed Articles shipped during the Reporting Period; (b) the amount of any approved deductions from gross sales including for allowable returns actually received during the Reporting Period, trade discounts actually taken or allowable markdowns and/or chargebacks actually taken during the Reporting Period; (c) the Net Sales for the Reporting Period; (d) the Sales Royalty Earned on said Net Sales for the Reporting Period; and (e) the Sales Royalty Payable for the Reporting Period, which shall be defined to equal the amount, if any, by which the amount calculated pursuant to sub-paragraph (d) of this Section 10.01 exceeds the sum of (x) the Guaranteed Minimum Royalty paid at the commencement of the Reporting Period, (y) any unused portion of the Additional Advance to be applied to the Reporting Period and (z) any unused portion of any Excess Royalty to be applied to the Reporting Period. The amount payable for the Reporting Period shall be the sum of the Sales Royalty Payable and the amount of the Image Fund Payment due hereunder for the Reporting Period. The Image Fund Payment shall be in addition to any other monies payable hereunder and shall not be credited against and/or recoupable from Sales Royalties otherwise payable to Owner hereunder but the Image Fund Payment shall be credited against and recoupable from amounts paid pursuant to Section 8.04. In a supplemental statement for the Reporting Period, Licensee shall show the amount of Net Sales through Normal Retail Channels, the amount of Net Sales of Discontinued Goods, and, by country, the Net Sales made pursuant to a distribution right granted under Section 18 below. The supplemental statement shall also show the calculation of the Sales Royalty on "make-ups". Such statement shall be furnished to Owner irrespective of the quantity of Licensed Articles that have been sold during the Reporting Period. Accounting statements and payments shall be sent to Owner at 77 Metro Way, Secaucus, New Jersey 07094, to the attention of the Chief Financial Officer, with a copy to the President of Owner's Licensing Division at the address set forth in paragraph 17.01 below. Alternatively, payments may be made by wire transfer in accordance with the instructions set forth on Schedule 8.02 as said Schedule may be amended in writing by Owner from time to time. Owner shall promptly provide a copy of each such statement to Licensor. 10.02. During each Contract Year, Licensee shall provide Owner with additional information concerning its business hereunder. Owner intends that this information shall be the basis for its periodic business-review meetings with Licensee. (a) Within forty-five (45) days after the last business day of the second and fourth Accounting Periods of each Contract Year during the Term, Licensee shall 29 deliver to Owner an Operating Report setting forth the following: (i) the total amount spent or committed by Licensee, in addition to the Image Fund Payments, for the advertising and promotion of Licensed Articles during the particular Contract Year through the end of the most recently completed two (2) Accounting Periods indicating the amounts paid for cooperative advertisements separately from other advertising and promotion; (ii) stated separately, by account, those amounts paid for promotions and/or cooperative advertisements; (iii) separately for each Licensed Mark, by account (if available), including accounts in any Foreign Territory where sale of Licensed Articles is permitted in accordance with Section 18 below, Net Sales (in dollars and units), and (iv) separately for each Licensed Mark, Net Sales by style (in dollars, units and average price and accompanied by a photo or line drawing), for the top 20 styles. The Operating Report shall be in the form set forth in Schedule 10.02 attached hereto and made a part hereof, signed and certified as accurate by a duly authorized officer of Licensee. Upon Owner's reasonable request, Licensee shall deliver to Owner, or make available to Owner at Licensee's executive offices, together with the Operating Report, copies (such as tear sheets) of all advertisements relating to the Licensed Marks and Licensed Articles placed by Licensee or on its behalf during the Accounting Periods covered by the report. (b) Not later than October 15th of each Contract Year, Licensee shall furnish Owner its quarterly sales projections for the Licensed Articles for the next Contract Year. Not later than June 15th of each Contract Year, Licensee shall furnish Owner with any revision of its sales projections by quarter, for the current Contract Year. Sales projections shall be accompanied by the assumptions on which such projection is based. (c) Operating Reports and projections shall be sent to Owner to the attention of the President of Owner's Licensing Division, with a copy to Owner's Chief Financial Officer. Owner shall promptly provide a copy of Licensee's projections to Licensor. 10.03. Licensee shall each year provide Owner and Licensor with a copy of its Annual Report as soon as it is available to Licensee's shareholders. 10.04. (a) Receipt by Owner of any of the statements furnished, or of any sums paid, pursuant to this Agreement shall not preclude Owner from questioning their correctness at any time. (b) Licensee shall maintain appropriate books of account in which accurate entries shall be made concerning all transactions within the scope of this Agreement. Licensee acknowledges that it is Owner's policy to conduct audits of its licensees periodically, whether or not Owner has any concern that an audit is necessary. Therefore, during the Term, and for a period of twelve (12) calendar months thereafter, Owner shall have the right, through any of its employees or other authorized representative of its choice, upon reasonable advance notice to Licensee, to examine and copy all or part of these books of account and all other records, documents and material in the possession or under the control of Licensee with 30 respect to the subject matter of this Agreement. Without limiting the generality of the foregoing, Licensee shall maintain supporting customer invoices and such other documents as may be reasonably required to substantiate royalty statements rendered hereunder and to enable Owner to confirm that all Licensed Articles are accounted for, including without limitation for each style of Licensed Article, the quantity of each such style manufactured and sales information indicating by customer and the style number, quantity and invoice price of all Licensed Articles shipped. (c) If Owner and Licensee agree that Licensee's aggregate of payments for any period covered by an audit of Licensee's books and records (the "Audit Period") was less than the amount which should have been paid by a sum equal to or greater than two percent (2%) of the aggregate royalty reported to Owner during the Audit Period or $10,000 per 12-month period encompassed by the Audit Period (whichever is less), Licensee shall reimburse Owner for the cost of such audit. All payments required to be made to eliminate any discrepancy revealed by said audit must be paid within thirty (30) days after Owner's demand therefor, plus interest at the prime rate prevailing from time to time in New York, New York at The Chase Manhattan Bank, plus two percent (2%), on such unpaid royalties from the date(s) said royalties were originally due and payable. Owner shall promptly provide a copy of each such audit report to Licensee and to Licensor. (d) All books of account and records shall be kept available by Licensee for at least four (4) full calendar years after the end of each calendar year of the Term. 11. INTELLECTUAL PROPERTY. 11.01. (a) (i) Licensee shall not question or otherwise challenge, either directly or indirectly, during the Term or after the termination or expiration of the Term, Owner's ownership of the entire right, title and interest (including any and all accompanying goodwill) in and to the Licensed Marks or Company's Tradename, the validity of the License Agreement, the validity of this Agreement or the validity of any registration or application for registration by Owner of the Licensed Marks. Licensee acknowledges and agrees that, to the extent that any goodwill and other rights attach to or arise in connection with the use of the Licensed Marks by Licensee, Licensee hereby assigns any and all such goodwill and rights, at such time as they may be deemed to accrue, to Owner. (ii) Licensee agrees that it will not make application in its own name for registration of the Licensed Marks but Licensee shall promptly supply Owner with all material it may request for such purposes and give Owner its full cooperation in connection therewith. Licensee shall at any time, whether during or after the Term, execute any documents reasonably requested by Owner to confirm Owner's ownership of the Licensed Marks or to record Licensee as a licensee or registered user of the Licensed Marks; provided, however, that in the event of any ambiguity or conflict between any provision of any such document and any provision of this Agreement, this Agreement shall prevail. Without limiting the generality of the foregoing, Licensee shall provide Owner with a duplicate original of each of the first 31 three (3) invoices for shipments for bona fide commercial sale of the Licensed Articles in interstate commerce in the United States. (b) (i) Licensee shall use Licensed Marks strictly in compliance with all applicable legal requirements. Licensee shall not, at any time, do or suffer to be done any act or thing which may in any way adversely affect any rights in and to the Licensed Marks or any registrations thereof or which, directly or indirectly, may reduce the value of the Licensed Marks or detract from their reputation. Licensee shall not, and shall use its best efforts to cause its customers not to, sell, advertise, promote or exploit Licensed Articles in a manner that may reduce the value of Company's Tradename and Company's Marks, including the Licensed Marks or detract from their reputations. (ii) With reference to the Licensed Mark A LINE ANNE KLEIN and the A ANNE KLEIN logo, Licensee may use either Licensed Mark or logo on and in connection with Licensed Articles, but Licensee may not use the abbreviation A LINE alone. With either Licensed Mark, Licensee may use the designation "TM" to indicate that these are trademarks, however, except as Owner may expressly approve in writing, Licensee may not use the trademark registration symbol (R). (c) In the event Owner and Licensee decide to use one or more newly-created names to designate particular styles or attributes unique to Licensed Articles or some of them (hereinafter referred to as "Created Marks"). Owner shall be the owner of all rights in said Created Marks; trademark registrations therefor (if any) shall be in Owner's name; and references in this Agreement to Licensed Marks, including in this Section 11, shall be deemed to include all or any Created Marks, except as expressly stated herein. (i) The decision to adopt a Created Mark and the form of each such Created Mark shall be determined by mutual agreement of Owner and Licensee, but if the parties are unable to agree, Owner's decision shall prevail. (ii) During the Term, before a trademark previously registered to Licensee but not otherwise identified with a Licensee product which is not a Licensed Article is adopted and used as a Created Mark on or with Licensed Articles, Owner and Licensee shall enter into an appropriate agreement confirming that Owner may continue to use and grant others (including a successor licensee) the right to use said proposed Created Mark as a trademark on (or designation for) Licensed Articles following the termination or other expiration of the Term. Such agreement shall contain such terms and conditions as are usual and customary in other similar agreements and appropriate to the circumstances as they then appear. 11.02. It is understood and agreed that nothing in this Agreement will be deemed in any way to constitute an assignment by Owner of Company's Tradename or the Licensed Marks or of any rights therein, or to give Licensee any right, title or interest in or to Company's Tradename or the Licensed Marks (except the right to make use thereof as herein provided) It is further understood and agreed, that, except as expressly stated herein, nothing in this Agreement shall be deemed to derogate 32 from Licensor's rights to use the Company's Tradename "ANNE KLEIN" or the Licensed Marks "ANNE KLEIN" and the Lion Head Design pursuant to and in accordance with the License Agreement; provided that neither Owner nor Licensor shall amend the License Agreement in any manner that would impair any of Licensee's rights hereunder without Licensee's prior consent, which consent may be withheld for any reason. 11.03. Each party to this Agreement, shall promptly notify each other party hereto, in writing, of any actual, suspected or apparent infringement or counterfeit of any of the Licensed Marks or any unfair competition, "passing off' or other violation (collectively "Infringement") of the Licensed Marks that comes to the attention of such party. Licensee will cooperate with Licensor and Owner and, if requested, shall join with Licensor and Owner, in such action as Owner in its discretion may deem advisable, it being understood and agreed that Owner may elect, in its sole discretion, to refrain from taking any action. The proceeds of any settlement of or recovery from any such action after recovery by Owner, Licensor and Licensee of the costs and expenses incurred by each in connection with such action shall be shared by Owner, Licensor (if applicable) and Licensee pro-rata in proportion to the damages suffered by such parties as a result of such violations, it being understood that, in the first instance, Owner shall be responsible for any and all costs and expenses incurred in connection with such action. Any non-monetary rights obtained as a result of any such action shall belong entirely to Owner. Licensee shall have no right to take any action with respect to any Licensed Mark without Owner's prior written approval. 11.04. Any copyright, industrial design right, or design patent which may be created in any sketch, design, advertising, Packaging Materials or the like (hereinafter, collectively, "Protectible Materials") designed or approved by Owner in connection with Licensed Articles shall be the property of Owner. To the extent that any Protectible Material is or contains any content that is eligible for copyright protection pursuant to the Copyright Act of 1976, such Protectible Material or content thereof shall be considered a "work made for hire" (as such term is defined in the Copyright Act of 1976), and all rights with respect thereto shall be automatically assigned to Owner Licensee shall not, at any time, do or suffer to be done any act or thing which may adversely affect any rights of Owner in the Protectible Materials, including, without limitation, filing any application in its name to record any claims to copyrights or design patents in Licensed Articles, and upon Owner's request shall do all things reasonably required by Owner to preserve and protect said rights, including, without limitation, placing an appropriate copyright or industrial design right notice on all Licensed Articles and the Protectible Materials therefor. Licensee shall at any time, whether during or after the Term, execute any documents requested by Owner to confirm Owner's ownership of the Protectible Materials; provided, however, that in the event of any ambiguity or conflict between any provision of any such document and any provision of this Agreement, this Agreement shall prevail. 11.05. With respect to the trademark applications referred to in paragraph 14.01(c)(ii), Owner agrees to file an Allegation of Use (including an 33 Amendment to Allege Use or a Statement of Use, as applicable) within 15 business days of being provided by Licensee with appropriate specimens showing use of the applicable Licensed Mark in commerce on or in connection with footwear and being provided with the dates of first use and first use in commerce. Owner agrees to use commercially reasonable efforts to secure the registration on the Principal Register of the applications referred to in paragraph 14.01(c)(ii). Owner shall promptly provide to Licensee notice of and copies of all documents filed with the Patent and Trademark Office and received from the United States Patent and Trademark Office related to the applications referred to in paragraph 14.01(c)(ii). Owner shall promptly provide to Licensee notice of and copies of all documents (if any) sent to or received from third parties opposing the applications referred to in paragraph 14.01(c)(ii). 12. INDEMNIFICATION; INSURANCE. 12.01. (a) Except for any claim, suit, loss, damage, injuries or expense (including reasonable attorneys' fees) based upon the Proprietary Rights of a third party related to the Licensed Marks, Licensee will indemnify and hold Owner and Licensor as applicable and their respective officers, directors, employers and agents harmless from and against any claim, suit, loss, damage, injuries or expense (including reasonable attorneys' fees) which Owner and/or Licensor may incur or be obligated to pay or for which either may become liable or be compelled to pay in any action, claim or proceeding against it arising out of or in connection with Licensee's performance of this Agreement, including without limitation on account of any alleged defect in any Licensed Article produced by or for Licensee under this Agreement or the manufacture, labeling, sale, distribution or advertisement of any Licensed Article by Licensee in violation of any national, state, provincial, local or other law or regulation. Owner and/or Licensor shall give Licensee prompt notice of any such claim or suit. Licensee shall have the right to undertake and conduct the defense of any suit so brought through counsel of Licensee's choice reasonably acceptable to Owner. Notwithstanding the foregoing, prior to entering into settlement of any such claim or suit which would be reasonably likely to adversely affect the Licensed Marks and/or would be reasonably likely to irreparably damage Owner's goodwill, Licensee shall obtain Owner's written consent to such settlement (which consent shall not be unreasonably withheld or delayed). The provisions of this paragraph and Licensee's obligations hereunder shall survive the expiration or termination of this Agreement. This paragraph 12.01(a) shall apply whether the asserted claims are groundless or otherwise. (b) Except for any claim, suit, loss, damage, injuries or expense (including reasonable attorneys' fees) based upon the Proprietary Rights of a third party related to the Licensed Marks, Licensor will indemnify and hold Owner and Licensee (as applicable) and their respective officers, directors, employees and agents harmless from and against any claim, suit, loss, damage, injuries or expense (including reasonable attorneys' fees) which Owner and/or Licensee may incur or be obligated to pay or for which either may become liable or be compelled to pay in any action, claim or proceeding against it arising out of or in connection with Licensor's performance of the License Agreement, including without limitation on account of 34 any alleged defect in any licensed Article produced by or for Licensor thereunder or the manufacture, labeling, sale, distribution or advertisement of any licensed Article by Licensor in violation of any national, state, provincial, local or other law or regulation. Owner and/or Licensee shall give Licensor prompt notice of any such claim or suit. Licensor shall have the right to undertake and conduct the defense of any suit so brought through counsel of Licensor's choice reasonably acceptable to Owner. Notwithstanding the foregoing, prior to entering into settlement of any such claim or suit which would be reasonably likely to adversely affect the Company's Marks and/or would be reasonably likely to irreparably damage Owner's goodwill, Licensor shall obtain Owner's written consent to such settlement (which consent shall not be unreasonably withheld or delayed). The provisions of this paragraph and Licensor's obligations hereunder shall survive the expiration or termination of this Agreement. This paragraph 12.01(b) shall apply whether the asserted claims are groundless or otherwise. 12.02. Owner shall release, defend, hold harmless and indemnify Licensor and/or Licensee (as applicable) and their respective officers, directors, employees and agents from any claims, suits, losses, damages, injuries, expenses, demands, causes of action, judgments, settlements, fines or other costs, including reasonable attorneys' fees) arising out of or related to an assertion of Proprietary Rights by a third party related to Licensee's use of the Licensed Marks as authorized in this Agreement. Licensor and/or Licensee (as applicable) shall give Owner prompt notice of any such claim or suit. Owner shall have the right to undertake and conduct the defense of any suit so brought through counsel of Owner's choice. The provisions of this paragraph and Owner's obligations hereunder shall survive the expiration or termination of this Agreement. This paragraph 12.02 shall apply whether such asserted rights are groundless or otherwise and shall specifically include, without limitation, any costs of defense related to any assertion of Proprietary Rights. 12.03. Each party to this Agreement shall release, defend, hold harmless and indemnify each other party to this Agreement (as applicable) and the respective officers, directors, employees and agents of such party from any claims, suits, losses, damages, injuries, expenses, demands, causes of action, judgments, settlements, fines or other costs (including reasonable attorneys' fees) arising out of or related to any breach by such party of the representations, warranties, and covenants contained in this Agreement. This Section 12.03 shall not be construed to require indemnification from a non-breaching party. 12.04. (a) At all times during which Licensed Articles are being sold, Licensee shall, at its own expense, procure and maintain in full force and effect with a responsible insurance carrier reasonably acceptable to Owner a public liability insurance policy including products liability coverage with respect to Licensed Articles, as well as contractual liability coverage with respect to this Agreement, with a limit of liability of not less than $3,000,000 per occurrence and $10,000,000 in the aggregate. Said insurance policy shall include Licensor and Owner as additional insureds and shall provide for at least sixty (60) days prior written notice to Owner of the cancellation or substantial modification thereof. Such insurance may be obtained 35 by Licensee in conjunction with a policy of liability insurance which covers products other than Licensed Articles, including any such policies currently owned by Licensee. Without limiting the generality of the foregoing, Licensee's policies of casualty insurance shall provide that the insurance carrier may take no action with respect to Licensed Articles or the Licensed Marks if such action would constitute a breach by Licensee of any of the provisions of this Agreement. Licensee shall deliver a certificate of such insurance to each of Owner and Licensor promptly following complete execution of this Agreement and annually thereafter shall furnish to each of Owner and Licensor evidence of the maintenance of said insurance policy. Nothing contained in this paragraph 12.04 shall be deemed to limit, circumscribe or affect in any way the indemnification provisions of paragraph 12.01 above. (b) In connection with the License Agreement, Licensor has, at its own expense, procured and maintains in full force and effect with a responsible insurance carrier reasonably acceptable to Owner a public liability insurance policy including products liability coverage with respect to Licensor's licensed Articles, as well as contractual liability coverage with respect to the License Agreement. Said insurance policy shall have a limit of liability of not less than $3,000,000, and shall include Licensee, as it does Owner, as an additional insured and provides for at least sixty (60) days prior written notice to Owner of the cancellation or substantial modification thereof. Such insurance may be obtained by Licensor in conjunction with a policy of liability insurance which covers products other than Licensor's licensed Articles, including any such policies currently owned by Licensor. Licensor shall deliver a certificate of such insurance to each of Owner and Licensee promptly following complete execution of this Agreement and annually thereafter shall furnish to each of Owner and Licensee evidence of the maintenance of said insurance policy. Nothing contained in this paragraph 12.04 shall be deemed to limit, circumscribe or affect in any way the indemnification provisions of paragraph 12.01 above. 13. EFFECT OF EXPIRATION OR TERMINATION. 13.01. The termination of this Agreement, for any reason, shall be without prejudice to any other right or remedy Licensor. Owner or Licensee may have -- including without limitation, all rights and remedies which such parties have, or which are granted to them by operation of law, to enjoin the unlawful or unauthorized use of the Licensed Marks, to collect monies payable hereunder and to be compensated for damages for breach of this Agreement -- and such rights and remedies are hereby expressly reserved. The parties acknowledge that they have no adequate remedy hereunder or at law for violation of this Agreement by the other parties and Owner, Licensor or Licensee shall be entitled to injunctive relief or other equitable remedies therefor. 13.02. (a) If either party serves upon the other pursuant to an express provision of this Agreement a notice (the "Termination Notice") that it desires to terminate this Agreement in accordance with the terms hereof or that it desires that the Term shall not be extended, Owner's obligation to submit and/or approve designs pursuant to paragraph 4.02 shall immediately terminate and Licensee shall, within 36 twenty (20) days after month-end after the date of the Termination Notice, deliver to Owner the following: (i) a complete list of Licensee's then-current accounts for Licensed Articles and, for each account, Net Sales for the last-completed Contract Year, (ii) a list of each style, indicating total Net Sales dollars and units for the last-completed Contract Year, as well as Licensee's published list price and suggested retail price, if any; (iii) a list of the "top 20" selling styles for the last-completed Contract Year, and two (2) samples of each. All information shall be stated separately with respect to each of the Licensed Marks. (b) Contemporaneously with the delivery of the information requested in paragraph 13.02(a), Licensee shall also deliver a complete and accurate schedule of Licensee's inventory of Licensed Articles and, to the extent available, related work in process and materials then on hand, in the possession of Contractors and in transit including non-cancelable orders identifiable to Licensed Articles and/or bearing the Licensed Marks (hereinafter referred to as "Inventory"). The Inventory schedule shall be prepared as of the close of business on the date of such Termination Notice or as near thereto as reasonably possible. Except as Owner may otherwise agree, all cancelable orders for Licensed Articles and/or related materials shall promptly be canceled. Owner shall promptly provide a copy of such Inventory Schedule to Licensor. (c) (i) If the date of termination stated in the Termination Notice is not the expiration date contemplated in paragraph 3.01 above, Licensee's rights to manufacture Licensed Articles hereunder shall terminate as of the date of the Termination Notice and, except as Owner may otherwise expressly agree in writing, all cancelable orders for Licensed Articles and/or related materials used to produce Licensed Articles shall promptly be cancelled and no new production shall be started. However, early termination as a result of the Termination Notice shall not preclude Licensee from exercising its right, if any, to continue to sell its remaining Inventory pursuant to paragraph 13.05 below, if the reason for the early termination would not otherwise bar such sell-off. (ii) If the date of termination stated in the Termination Notice is the expiration date contemplated in paragraph 3.01 above, Licensee's rights to manufacture Licensed Articles hereunder shall terminate as of the expiration date. To facilitate the orderly disposition of Licensee's Inventory of Licensed Articles, during the final six (6) months of the Term, Licensee's Inventory of Licensed Articles shall not exceed its Inventory on-hand during the immediately-preceding six (6) months and Licensee shall manufacture and take delivery of only such additional quantity of Licensed Articles as are reasonably necessary to enable Licensee to fill orders from its customers on-hand at the commencement of said six-month period or reasonably expected, based upon Licensee's prior experience. (d) Neither Owner, Licensor nor Licensee shall make any announcement concerning the expiration or termination of this Agreement except as the parties shall mutually agree, except as otherwise required by law. 37 13.03. Notwithstanding the expiration or other termination of the Term, the parties shall not be released from any obligation that accrued prior to the date of expiration or termination and each party shall remain bound by the provisions of this Agreement which by their terms impose upon each party obligations extending beyond the date of expiration or other termination. 13.04. (a) Except as otherwise specifically provided in this section 13, on the expiration or termination of the Term or this Agreement, all of the rights of Licensee under this Agreement to use the Licensed Marks as provided herein shall immediately terminate and shall revert automatically to Owner; all Sales Royalties on sales theretofore made shall become immediately due and they shall be accounted for and paid not later than thirty days after the date of expiration or termination; and Licensee shall discontinue forthwith all use of the Licensed Marks, shall no longer have the right to use the Licensed Marks or any variation or simulation thereof and shall, promptly upon Owner's written request, free of charge, execute any and all documents Owner may deem necessary or desirable to the effect that Licensee no longer has the right to manufacture, advertise, promote and sell Licensed Articles hereunder or to use the Licensed Marks (and if Licensee fails to do so promptly, Owner shall have the right to sign such documents as it deems reasonably necessary on Licensee's behalf). In addition, Licensee shall thereupon destroy, or, if requested by Owner, shall deliver to Owner all samples in its possession and, to the extent not required to sell Licensed Articles in accordance with this Section 13, all labels, tags, packages, advertisements, advertising materials of all kinds and other material in its possession with the Licensed Marks thereon. In addition, an updated Inventory schedule, including the direct cost of each item as shown on Licensee's books, shall be prepared as of the close of business on the date of such expiration or termination and delivered to Owner within twenty (20) days after the end of the month of the date of such expiration or termination. Owner shall promptly provide a copy of such updated Inventory schedule to Licensor. (b) Licensor and/or Owner shall have the option, exercisable by notice in writing delivered to Licensee within thirty (30) days after its receipt of the complete updated Inventory schedule in written form, to purchase all, but only all, of the Inventory not otherwise subject to an open sales order for an amount equal to the cost of the Inventory being purchased if from the current season or its fair market value if from a prior season. In the event such purchase option is exercised, Licensee shall deliver to the purchaser or its designee all of the Inventory referred to therein within fifteen (15) days after the purchaser's said notice of exercise of its option. The purchaser shall pay Licensee for such Inventory at the time of receipt thereof. Licensee's rights with respect to disposal of the Inventory shall not be altered in the event neither Licensor nor Owner exercises its purchase option hereunder. (c) In the event neither Licensor nor Owner exercises its purchase option pursuant to paragraph 13.04(b) and if the Term expires or is terminated by Owner other than for any breach arising from material misuse of the Licensed Marks or any failure to make any payment when due hereunder (whether or not subsequently paid) or pursuant to paragraph 3.04(a) and 3.04(b) above, Licensee (but no other person, 38 including for this purpose any person having a security interest in the Inventory) shall be entitled, for an additional period of six (6) months only (the "sell-off period") on a non-exclusive basis to sell and dispose of its remaining Inventory of Licensed Articles on hand at the expiration or other termination of the Term from, but only from, the final seasonal collection sold hereunder. All sales pursuant to this paragraph shall be made subject to all of the provisions of this Agreement and to an accounting for and the payment of Sales Royalty thereon. Such accounting and payment shall be due in accordance with sections 9 and 10 above, except that accounting and payment shall be made monthly within thirty (30) days after the last business day of each calendar month in the sell-off period, and a final accounting and payment shall be due within thirty (30) days after the close of the said six (6) month period. (d) If, during the sell-off period, Licensee wishes to sell any of its Inventory other than in Normal Retail Channels and Schedule 2.03 stores (including the Outlets), or if Licensee wishes to sell all or substantially all of the Inventory to a single purchaser or group of related purchasers, Licensor and/or Owner shall, in such event, have a right of first refusal with respect to any such sale at a price equal to the price to be paid to Licensee by the proposed purchaser, which right shall be exercisable only by notice in writing delivered to Licensee within seven (7) business days after Licensor and/or Owner receives written notice from Licensee setting forth the cost of the Inventory covered by the proposed sale and all of the pertinent details thereof, including, without limitation, the name of the proposed purchaser and the proposed purchase price. If Licensor and/or Owner does not exercise its rights to purchase hereunder, Licensee may proceed with the proposed sale with the purchaser and at the price offered to Licensor and/or Owner. All sales other than in Normal Retail Channels shall be deemed sales of Discontinued Goods for all purposes hereunder. 13.05. (a) No receiver, liquidator, assignee, trustee or custodian appointed to administer the affairs of Licensee, sheriff or any other officer of the court or official charged with taking custody of Licensee's assets or business shall have the right to continue the performance of this agreement on behalf of Licensee or to exploit or use Company's Tradename and/or the Licensed Marks in any way. (b) Notwithstanding the provisions of paragraph 13.06(a) above, if the Bankruptcy Code or any amendment, supplement or successor thereto (the "Code") permits a trustee in bankruptcy of Licensee (or Licensee, as Debtor-in-Possession) to assume this Agreement and either does so and, thereafter, desires to assign this Agreement to a third person in compliance with the requirements of the Code, the trustee or Licensee as the case may be, shall notify Owner of same in writing. Said notice shall set forth the name and address of the proposed assignee, the proposed consideration for the assignment and all other relevant details thereof. The giving of such notice shall be deemed to constitute the grant to Licensor and/or Owner of an option to have this Agreement assigned to it or to Owner's designee for such consideration, or its equivalent in money, and upon such terms as are specified in the notice. Said option may be exercised only by written notice given to the trustee or 39 Licensee, as the case may be, by Licensor and/or Owner within fifteen (15) days after it either receives the aforesaid notice from such party, or within such shorter period as may be deemed appropriate by the court in the bankruptcy proceeding. If Licensor and/or Owner fails to exercise its said option within the aforestated exercise period, the trustee or Licensee, as the case may be, may complete the assignment referred to in its notice, but only if such assignment is to the entity named in said notice and for consideration and upon the terms specified therein. Nothing contained herein shall be deemed to preclude or impair any rights which Licensor and/or Owner may have as a creditor in any such bankruptcy proceeding. 14. REPRESENTATIONS AND WARRANTIES. 14.01. (a) Owner represents and warrants that (i) it is a corporation incorporated in Delaware and in good standing under the laws of said State and (ii) its wholly-owned affiliate, Lion Licensing, Ltd., a Delaware corporation in good standing under the laws of said State, ("Trademark Owner") is the sole and exclusive owner of the entire right, title and interest in and to the Company's Marks, including the Licensed Marks, and Company's Tradename. (b) Pursuant to an agreement, dated as of July 9, 1999. Trademark Owner has granted to Owner an exclusive license throughout the world to use and to sublicense the use of Company's Marks, including the Licensed Marks, and Company's Tradename (the "Master License"). Accordingly, Owner represents and warrants that it has full right, power and authority to enter into this Agreement and to license the Licensed Marks and Company's Tradename hereunder. (c) In addition, Owner further represents and warrants that: (i) other than those rights reserved by Owner pursuant to paragraph 2.01 and the License Agreement, it has granted no other existing license to use the Licensed Marks on Articles for manufacture, advertising, promotion, distribution or sale in the Territory; (ii) the Licensed Mark "Anne Klein II" has been duly registered under the laws of the United States on the Principal Register with respect to footwear, such registration remains valid and in effect and Trademark Owner is the registrant. To the best of Owner's knowledge, the Licensed Marks "A LINE ANNE KLEIN" and the "A ANNE KLEIN" logo form which is attached hereto as Schedule 1.01 are registrable under the laws of the United States with respect to footwear, and Owner has filed an application to register the Licensed Marks "A LINE ANNE KLEIN" and the "A ANNE KLEIN" logo form on the Principal Register on an intent to use basis with respect to women's footwear; (iii) it has no knowledge or information of any infringement or other violation of its Proprietary Rights in the Licensed Marks; 40 (iv) Licensee's use of the Licensed Marks pursuant to and in accordance with this Agreement will not violate or in any way infringe upon the rights of any third party; (v) the parties signing on Owner's and on Trademark Owner's behalf are each duly authorized to do so; (vi) this Agreement is fully enforceable against Owner and Trademark Owner in accordance with its terms; and (vii) this Agreement will not contravene any other agreement to which Owner or Trademark Owner are parties. (d) Without limiting any provision of this Agreement, Licensee hereby acknowledges and agrees that, where applicable in the context, references in this Agreement to "Owner" shall be deemed to include and/or refer to Trademark Owner. In addition, in the event the Master License is terminated for any reason during the Term, this Agreement nevertheless shall remain in full force and effect and without modification, except that Trademark Owner shall be substituted automatically for Owner for all purposes hereunder, and thereupon, any reference in this Agreement to "Owner" shall be and mean Trademark Owner; provided, however, that Trademark Owner and Owner remain under common ownership, that Trademark Owner remains the owner of Company's Marks and Owner remains liable for its obligations hereunder. 14.02. Licensor represents and warrants: that it is a corporation incorporated in Delaware and in good standing under the laws of said State; that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; that the party signing on its behalf is duly authorized to do so; that this Agreement is fully enforceable against Licensor in accordance with its terms and does not contravene any other agreement to which it is a party; that Licensor has no knowledge or information of any infringing use of the Licensed Marks; that Licensee's use of the Licensed Marks pursuant to and in accordance with this Agreement will not violate or in any way infringe upon the rights of any third party. Licensor further represents and warrants that Daniel L. Schwartz is its sole shareholder. 14.03. Licensee represents and warrants that it is a corporation incorporated in Delaware and in good standing under the laws of said State, that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder and that the party signing on its behalf is duly authorized to do so. This Agreement is frilly enforceable against Licensee in accordance with its terms and does not contravene any other agreement to which it is a party. 14.04. Each of Licensee and Licensor and Owner represents and warrants that it did not engage any broker in connection with this Agreement or the transactions contemplated hereby. 41 15. FORCE MAJEURE. 15.01. No party hereto shall be under any liability hereunder to another on account of any loss, damage or delay occasioned or caused by lockouts, strikes, riots, fires, explosions, blockade, civil commotion, epidemic, insurrection, war or warlike condition, the elements, embargoes, failure or inability to obtain material or transportation facilities, acts of God or the public enemy, compliance with any law, regulation or other governmental order, whether or not valid, or other causes beyond the control of the party affected, whether or not similar to the foregoing; provided, however, that if such condition continues for three (3) months and is not industry-wide but applies only to Licensee and such condition materially impairs Licensee's ability to perform its obligations hereunder in all materials respects, then Owner may terminate the Term on thirty (30) days' written notice which may be given at any time after said three (3) month period; and provided, further, that nothing herein shall at any time excuse any accrued obligation for the payment of money. 16. ASSIGNABILITY. 16.01. (a) The rights granted herein are personal to Licensee, and Licensee may not assign or sublicense any or all of its right or delegate any of its duties under this Agreement to any person other than a wholly-owned affiliate of Licensee (in which case, subject to Licensee guaranteeing such affiliate's obligations hereunder in a writing reasonably satisfactory to Owner), without Owner's express prior approval. Any deliberately attempted assignment, sublicense, or delegation or any one of these purportedly occurring by virtue of the operation of law shall be void and shall constitute grounds for termination of this Agreement which termination shall be effective on the fifteenth (15th) day following the date of Owner's notice. (b) Without limiting the generality of the foregoing, if Licensee contemplates the sale or other disposition of a controlling share of its business or assets related to the subject matter of this Agreement, including without limitation through a sale of stock (but not including (i) a sale or disposition in which Licensee's management is an equity participant in the acquiring party, (ii) such sales as occur in the ordinary course of public trading or (iii) sales to or other stock distribution through Licensee's employee benefit plans), Licensee shall inform Owner as promptly as permitted under applicable securities laws and request Owner's approval to proceed. With its approval request, Licensee shall provide Owner with sufficient information concerning the proposed transaction and/or transferee to enable Owner to make an informed decision whether in its discretion, the nature of the proposed transaction, the parties participating therein or the resulting ownership of Licensee would adversely impact upon or affect the Licensed Marks or their use in connection with the Licensed Articles or Licensee's ability to meet all of its material obligations under this Agreement. Owner shall notify Licensee of its decision within ten (10) business days after it receives all of the information referred to in the preceding sentence or such other additional information as Owner may reasonably request. If Owner approves the proposed transaction, which approval must be in writing, Owner's right to terminate this Agreement pursuant to this paragraph shall not arise. 42 For avoidance of doubt: If Owner fails to approve the proposed transaction and Licensee elects to transfer ownership or control of its business or assets related to the subject matter of this Agreement in the absence of such approval, Owner may elect to terminate this Agreement in accordance with paragraph 16.01(a). Upon such termination, Owner and Licensee shall negotiate in good faith to determine the timing of such termination, taking into account the then current status of this Agreement and Owner's reasonably anticipated royalty income hereunder and other similarly relevant matters, it being understood and agreed by Licensee that Owner may in such case, in its discretion, elect thereafter to offer employment to and employ those persons employed by Licensee in the conduct of its business hereunder as may be reasonably appropriate to enable Owner to continue the conduct of the business conducted by Licensee hereunder prior to such termination. Notwithstanding the foregoing, Owner's right to terminate this Agreement shall not arise if the business or assets sold by Licensee do not relate to this Agreement and if such sale does not, directly or indirectly, constitute a sale or transfer of this Agreement or Licensee's rights hereunder or interfere with Licensee's ability to carry out its material obligations hereunder. 16.02. This Agreement shall inure to the benefit of and shall be binding upon the parties, subject to Licensee's rights pursuant to Section 3.01(e), Owner's successors, transferees and assigns, Licensor's permitted successors, transferees and assigns and Licensee's permitted successors, transferees and assigns. 17. NOTICES. 17.01. Any notice or other communication under this Agreement will be in writing and will be considered given when delivered personally, sent by confirmed telefax or delivered by an overnight courier service (such as Federal Express or DHL) which requires the addressee to acknowledge receipt thereof or by certified mail, return receipt requested, to the parties at the following addresses, or at such other address as a party may specify by notice to the other: To Owner: Anne Klein a Division of Kasper A.S.L., Ltd. 11 West 42nd Street New York, New York 10036 Attention: President, Anne Klein Licensing Division (Fax Number: (212) 626-6014) with a copy to the Senior Vice President and General Counsel of Owner at the same address (Fax number: (212) 626-6354). To Licensor: 43 B.D.S., Inc. 1370 Sixth Avenue New York, New York 10019 Attention: Daniel L. Schwartz With a copy to: Donald J. Bezahler, Esq. Baer Marks & Upham 805 Third Avenue New York, New York 10022 To Licensee: Maxwell Shoe Company. Inc. P.O. Box 37 101 Sprague Street Readville, Massachusetts 02137-0037 Attention: President with a copy to: Jonathan K. Layne, Esq. Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071 18. INTERNATIONAL. Upon Licensee's written request, which must be accompanied by a marketing plan stating, inter alia, anticipated sales volume and accounts (initial and projected) (a "Country Plan"), Owner may elect in its discretion to grant Licensee permission to distribute Licensed Articles in a particular country (or countries) of the world outside of the Territory or to "duty-free" shops for sale to international travelers and to airlines and cruise ship lines for on-board sales (hereinafter referred to as the "Foreign Territory"), subject to the terms and conditions set forth in this section 18. Licensee acknowledges that under the applicable trademark laws of many countries of the world the filing of statutorily-mandated documents is a prerequisite to use of a trademark by any party other than the registered owner. Accordingly, Licensee shall not offer for sale or sell Licensed Articles for resale in any country which requires a document filing until an appropriate document has been filed. With respect to each particular Foreign Territory, if Owner approves Licensee's request to distribute in a said Foreign Territory (an "Approved Foreign Territory"), Licensee shall pay to Owner a fee (the "Foreign Territory Fee") to offset Owner's costs associated with obtaining or maintaining trademark protection for the Licensed Marks in said Approved Foreign Territory or otherwise enabling Licensee to use the Licensed Marks in such country; the Foreign Territory Fee shall initially be Owner's actual costs not to exceed the sum of $2000. The amount of the Foreign Territory Fee paid shall be deemed an advance 44 against royalties otherwise payable by Licensee only with respect to sales of Licensed Articles in or to said Approved Foreign Territory. 18.01. Licensee's right to distribute Licensed Articles in any particular Approved Foreign Territory shall continue only during the Term of this Agreement; provided, however, that Owner reserves the right to and may terminate the distribution permission granted herein with respect to any particular Approved Foreign Territory on ninety (90) days prior written notice which may be given at any time and for any reason, including without limitation, if Licensee shall have failed to continue the sale and/or distribution of Licensed Articles to said particular Approved Foreign Territory in reasonable commercial quantities for a period longer than one selling season. Owner's election to grant permission to distribute in a Foreign Territory shall not be construed to convey any rights in the Licensed Marks in said Approved Foreign Territory, except as expressly set forth in this Section 18. 18.02. (a) Licensee shall account for and pay royalties on Net Sales of Licensed Articles in or to each Approved Foreign Territory in accordance with this Agreement; provided, however, that (i) for purposes of computing the Sales Royalty payable, such Net Sales shall be deemed to be not less than the "Net Sales" of a corresponding sale at the prevailing price as if such sales had been made in Normal Retail Channels in the Territory after deduction of twenty percent (20%) representing import costs not incurred by Licensee and (ii) on Licensee's statements, Net Sales made pursuant to a distribution right granted hereunder shall be shown separately for each Approved Foreign Territory. Notwithstanding the generality of the foregoing, if Licensee's sales to a Foreign Territory are made on an "ex-factory" price basis, then for purposes of royalty reporting said "ex-factory" price shall be deemed "Net Sales" with respect to such Foreign Territory and the Sales Royalty applicable to said sales shall be computed at the rate of six percent (6%) in lieu of the rate provided in paragraph 9.01 above. (b) If Net Sales are stated in a currency other than U.S. Dollars, they shall also be reported to Owner, and the Sales Royalty payable thereon shall be calculated, in the U.S. Dollar equivalent at the selling price of such other currency as reported by The Wall Street Journal at the last business day of the Accounting Period for which such Royalty is payable. In addition, upon Owner's reasonable request, Licensee shall furnish copies of its invoices showing sales in or to any particular Approved Foreign Territory. Without limiting the generality of the foregoing, Licensee shall provide Owner with a duplicate original of each of the first three (3) invoices for bona fide commercial sale of Licensed Articles in or to each Approved Foreign Territory. 18.03. In any particular season, Licensee shall distribute for sale in or to each Approved Foreign Territory, only those Licensed Articles approved by Owner in each case for sale in such season in accordance with this Agreement. All marketing plans and programs, including sales promotions and any advertising use of the Licensed Marks, in connection with Licensed Articles in any Approved Foreign Territory shall comply with the applicable provisions of this Agreement; Licensee will use its reasonable efforts to make copies (such as tear sheets) of any such 45 advertisements available to Owner. If Licensee elects to distribute through a Distributor (as defined below), Distributor's minimum advertising expenditure requirements (to be used for co-op advertising) in a particular Approved Foreign Territory shall be not less than two percent (2%) of wholesale sales, based initially upon the Country Plan for each such country, or such greater percentage as the parties shall agree in the circumstances. 18.04. Owner and Licensee acknowledge that the Licensed Articles are intended to be of the highest quality and marketed in a manner commensurate with Owner's standing and reputation in the apparel industry in the United States. Accordingly, and in order to maintain the reputation, image and prestige of the Licensed Marks, Licensee's primary distribution patterns shall consist of (a) those retail outlets in the particular Approved Foreign Territory previously approved by Owner for the sale of products bearing the Licensed Marks and (b) subject to Owner's reasonable approval, such other retail outlets in the particular Approved Foreign Territory whose location, merchandising and overall operations are consistent with the high quality of Licensed Articles and the reputation, image and prestige of the Licensed Marks. Except as expressly provided in this section 18, Licensee shall not sell Licensed Articles to anyone in an Approved Foreign Territory for resale except resale to a consumer for personal use nor shall Licensee make such sales to any entity which it knows or has reason to believe intends to export such Licensed Articles outside an Approved Foreign Territory. 18.05. If Licensee plans to effect its right to distribute in a particular Approved Foreign Territory through the use of a third party distributor or through an affiliated company (the "Distributor"), Owner's permission (if granted) will be subject to agreement by the Distributor (in writing) to the foregoing and to the following additional terms and conditions: (a) The Distributor's rights will cease immediately upon the expiration or other termination of this Agreement (if not sooner). (b) The Distributor will not manufacture Licensed Articles or affix any markings on the Licensed Articles (including on the packaging therefor, unless such markings are required by law in the particular Approved Foreign Territory and Owner's prior approval has been sought and given). (c) The Distributor acknowledges that Distributor will not acquire any rights in the Licensed Marks as a result of such distribution and that any and all good will and other rights which attach to or arise in connection with the use of the Licensed Marks by the Distributor shall inure to the sole benefit of Owner and shall remain vested therein. (d) The Distributor shall furnish Licensee with sales information sufficient to enable Licensee to comply on a timely basis with its reporting obligations hereunder, including without limitation those reporting obligations described in paragraph 10.01 and 10.02 above. 46 (e) Licensee shall retain the right to sell directly to an Approved Foreign Account (as defined below). (f) Distributor's minimum advertising expenditure requirements (to be used for co-op advertising) shall be not less than two percent (2%) of wholesale sales based initially upon the Country Plan for each particular country of the Distributor's Approved Foreign Territory. 18.06. Without limiting the generality of the foregoing, Owner hereby gives permission to Licensee to distribute Licensed Articles to accounts in Normal Retail Channels in Puerto Rico and in the Dominion of Canada and to those accounts in each Foreign Territory to which Owner has approved the sale of products bearing the Licensed Mark "A LINE ANNE KLEIN" (and the "A ANNE KLEIN logo) (each, an "Approved Foreign Account") as set forth on Schedule 18.06 attached hereto, as it may be modified and supplemented from time to time. Licensee hereby agrees to notify Owner prior to selling any Licensed Articles to an Approved Foreign Account or in or to an Approved Foreign Territory so that proper trademark protection may be timely arranged and to pay the applicable Foreign Territory Fee(s) in accordance with paragraph 18.01 above. For clarification: At the date of this Agreement, Owner has not commenced the sale of products bearing the Licensed Mark "ANNE KLEIN II" and there are no Approved Foreign Accounts with respect thereto. 19. MISCELLANEOUS. 19.01. Nothing herein contained shall be construed to constitute Licensee a partner, franchisee, joint venturer, or agent of Owner or Licensor, and Licensee shall have no power to obligate or bind Owner or Licensor in any manner whatsoever, it being intended by the parties hereto that Licensee's relationship hereunder shall be as an independent contractor responsible for its own actions. No supervision given by or assistance from Owner or Licensor shall be deemed to negate the foregoing. 19.02. No waiver by either party, whether express or implied, of any provision of this Agreement, or of any breach or default thereof, shall constitute a continuing waiver of such provision or of any other provision of this Agreement. 19.03. If any provision or any portion of any provision of this Agreement shall be held to be void or unenforceable, the remaining provisions of this Agreement and the remaining portion of any provision held void or unenforceable in part shall continue in full force and effect. 19.04. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted. If any words or phrases in this Agreement shall have been stricken out or otherwise eliminated, whether or not any other words or phrases have been added, this Agreement shall be construed as if those words or phrases were never included in this Agreement, and no implication or inference shall be drawn from the fact that the words or phrases were so stricken out or otherwise eliminated. 47 19.05. Notwithstanding anything to the contrary contained in this Agreement, Owner shall have the right, exercisable at any time, to negotiate and enter into agreements with third parties located either within or outside of the Territory pursuant to which it may grant a license to use the Licensed Marks in connection with the manufacture, distribution and sale of Articles outside the Territory at any time, or, subject to paragraph 3.01 above, in the Territory, but only if, pursuant to such third party agreements in the Territory, either the Articles are manufactured in the Territory solely for export outside the Territory or the collections of such Articles are not shown for sale in the Territory prior to the expiration or termination date of the Term and the first collection of Articles to be sold thereunder is the collection following the last seasonal collection sold hereunder. Owner shall immediately notify Licensee in writing of its intention to terminate the Term due to Licensee's default and/or the execution of any agreement granting a license to use the Licensed Marks in connection with the sale or manufacture of Articles in the Territory as described in this paragraph 19.05. Without otherwise limiting the foregoing, if, during the Term, Owner desires to grant a license to use the Licensed Marks in connection with the manufacture, distribution and sale of Articles in any country or countries (excluding Japan and Korea) outside the Territory, Owner shall notify Licensee, in writing, thereof, which notice shall include a copy of the license agreement, if any, Owner is prepared to execute and deliver. Licensee shall have the right and option, which option shall be exercised within 45 days after its receipt of Owner's notice, to enter into such an agreement, to be reasonably negotiated between Owner and Licensee in good faith, in substantially the form of this Agreement and including such additional or different commercially reasonable terms and conditions set forth in Owner's notice as are contained in such license agreement, if any. If Licensee desires to exercise such right and option, Licensee shall notify Owner in writing within forty-five (45) days after its receipt of said notice from Owner. If Licensee fails to exercise its said right and option, Licensor may grant a license with respect to the country or countries outside of the Territory identified in Owner's notice to any third party on substantially the same material terms and conditions as set forth herein and in Owner's notice free from any claim by Licensee under this Agreement. 19.06. (a) This agreement shall be deemed entered into in the State of New York and shall be construed in accordance with the internal substantive laws of New York applicable to contracts to be wholly performed therein, and, to the extent applicable, the federal laws of the United States. (b) The parties agree that any action, suit or proceeding based upon any matter, claim or controversy arising hereunder or relating hereto shall be brought solely in the State Courts of or the Federal Court in the State and County of New York; except that in the event any party is sued by a third party or joined in any other Court or in any forum by a third party in respect of any matter which may give rise to a claim hereunder, the parties consent to the jurisdiction of such court or forum over any claim which may be asserted therein between the parties hereto. 48 (i) The parties hereto irrevocably waive any objection to the venue of the above-mentioned courts, including any claim that such action, suit or proceeding has been brought in an inconvenient forum. (ii) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any matter directly or indirectly arising out of, under or in connection with this Agreement. (iii)Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to seek punitive damages in respect of any matter directly or indirectly arising out of, under or in connection with this Agreement. (c) Any process in any action, suit or proceeding arising out of or relating to this Agreement may, among other methods permitted by law, be served upon any party hereto by delivering or mailing the same in accordance with paragraph 17.01 hereof. 19.07. Except as set forth below, this writing sets forth the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous understandings, arrangements or agreements, including without limitation the binding letter of intent, dated as of July 19, 1999 and executed July 30 and July 31, 1999, between the parties hereto (the "Letter of Intent"). No modification, amendment, waiver, termination or discharge of this Agreement shall be binding upon the parties unless confirmed by a written instrument signed by the duly authorized signatory of each. 19.08. The parties agree to implement this Agreement by executing or causing to be executed such additional and subsidiary agreements and other documents as may be necessary or desirable fully to protect the Licensed Marks and effectively to carry out the terms of this Agreement in accordance with applicable laws and regulations. 19.09. This Agreement may be executed in one or more counterparts and in separate counterparts, each of which shall be deemed to be an original copy of this Agreement, and all of which, when taken together shall be deemed to constitute one and the same agreement. The Agreement shall be deemed executed by a party if signed by facsimile signature, provided that an original signature copy shall be promptly provided. [END OF AGREEMENT] 49 Kindly indicate your acceptance of this agreement, intending to be legally bound thereby, by signing below in the place provided. Very truly yours, B.D.S., INC. By: /s/ Daniel L. Schwartz ----------------------------- Date: 11/1//99 ----------------------------- ANNE KLEIN A Division of KASPER A.S.L., LTD. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- LION LICENSING, LTD. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- ACCEPTED AND AGREED: MAXWELL SHOE COMPANY INC. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- Kindly indicate your acceptance of this agreement, intending to be legally bound thereby, by signing below in the place provided. Very truly yours, B.D.S., INC. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- 50 ANNE KLEIN A Division of KASPER A.S.L., LTD. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- LION LICENSING, LTD. By: [ILLEGIBLE] ----------------------------- Date: 11/1/99 ----------------------------- ACCEPTED AND AGREED: MAXWELL SHOE COMPANY INC. By: [ILLEGIBLE] ------------------------------------ Date: 11/1/99 ------------------------------------ Kindly indicate your acceptance of this agreement, intending to be legally bound thereby, by signing below in the place provided. Very truly yours, B.D.S., INC. By: [ILLEGIBLE] ---------------------------- Date: 11/1/99 ---------------------------- ANNE KLEIN A Division of KASPER A.S.L., LTD. By: [ILLEGIBLE] ---------------------------- Date: 11/1/99 ---------------------------- 51 LION LICENSING, LTD. By: [ILLEGIBLE] ---------------------------- Date: 11/1/99 ----------------------------- ACCEPTED AND AGREED: MAXWELL SHOE COMPANY INC. By: [ILLEGIBLE] ------------------------------------ Date: 11/1/99 ------------------------------------ 52 SCHEDULE 1.01 ANNE KLEIN [GRAPHIC] 53 SCHEDULE 2.03 OFF-PRICE STORES ANNE KLEIN OUTLETS ANNIE SEZ BURLINGTON COAT FACTORY CENTURY 21 COHOES FASHIONS DAFFY'S FAMOUS FOOTWEAR FILENE's BASEMENT LOEHMANNS MANDEE MAR MAX - NEWTONS, TJ MAXX, MARSHALLS ROSS STORES S&W LADIES WEAR SAKS OFF 5TH SHOE CARNIVAL STEINMART SYMS 54 SCHEDULE 2.04 A LINE ANNE KLEIN ANNE KLEIN II DOCKERS FOOTWEAR FOR WOMEN MOOTSIES TOOTSIES MOOTSIES TOOTSIES KIDS SAM & LIBBY SAM & LIBBY KIDS JUST LIBBY J. G. HOOK 55 SCHEDULE 6.02 MSC Agents Adventure Footwear Jose Maria Peman 23-2 B 03600 Elda, (Alicante) Spain Adventure -- USA 4995 Northwest 72nd Avenue Miami, Florida 33166 BJ Cal 26400 George Zeiger Drive Suite 104 Beechwood, Ohio 44122 Marlboro Footworks -- China 10F NO. 21 Cheng Men Tou West Road Foshan Guang Dong China Marlboro Footworks -- Taiwan 5F NO. 497, Chung Ming South Road Taichung, Taiwan ROC Marlboro Footworks -- USA 60 Austin Street Newton, Massachusetts 02160 Max Trading Company -- China Chia Ken Village Hon Li Town Dong Guan City Kwang Tung, China Max Trading Company -- Taiwan 6th Floor #186 Ta-Tun 19th Street Taichung, Taiwan ROC 56 Panter SRL Via Campo d'Arrigo 78\88 50131 Firenze, Italy Piessea Via Terere 80/4 Osmannoro S0019 Sest Fiorentino, Italy 57 SCHEDULE 8.02 WIRE TRANSFER INSTRUCTIONS Kasper ASL Ltd Cash Concentration Account for the Benefit of The Chase Manhattan Bank, as Agent Account #020922124 ABA# 021000021 Chase Manhattan Bank New York 1 New York Plaza New York, NY 58 Schedule 10.01 (Company Letter Head) Contract Year: _____________________ [LICENSED MARK] SALES QUARTER ENDED:____________ REPORT Total Quarter Year to Date Gross Sales Subject to Royalty Less: Returns Markdowns Trade Discount Taken ------------------------------------------------- Net Sales Subject to Royalty ================================================= Royalty Percentage Sales Royalty Earned ------------------------------------------------- Less: Minimums and Additional Royalties Paid to Date this Year ---------------------------- Sales Royalty Payable ---------------------------- Image Fund Percentage Net Sales Subject to Royalty ------------------------------------------------- Image Fund Earned ================================================= Less: Image Fund Payments to Date ---------------------------- Net Image Fund Due ---------------------------- THIS QUARTER Normal Retail Channels ============== Discontinued Goods ============== "Make-ups" ============== Foreign (By Country): --------------------- -------------- --------------------- ============== Signature: _________________ Name: _________________ Title: _________________
59 ANNE KLEIN LICENSING Schedule 10.02
PLEASE USE WHOLESALE FIGURES Total Total THAT MATCH YOUR END OF YEAR FINANCIAL STATEMENTS Wholesale Co-op $$$ Store Name Volume Provided - ---------- ------ -------- Independent Department Stores Belk Bergdorf Goodman Boscov's Dayton-Hudsons/MF Dillards/Mercantile Stores Elder Beerman Halls Merchandising Neiman Marcus Nordstrom Rack Room Shoe Show Von Maur Total Independent Department Stores Specialty Stores* Aaron's Bellaqin CWT Daltaro Designer Shoe Warehouse Foxwood Casinos Octavia Shoe Corp. of America Weiss & Newman Total Specialty Stores *Indicate at specialty accounts by name with sales above $50,000. Federated Department Stores Bloomingdales Bon Marche Burdines Macy's East Macy's West
60
PLEASE USE WHOLESALE FIGURES Total Total THAT MATCH YOUR END OF YEAR FINANCIAL STATEMENTS Wholesale Co-op $$$ Store Name Volume Provided Rich's/Lazarus Stern Total Federated May Co. Famous Barr Filene's Foley's Hecht Kaufmann's Lord & Taylor Meier & Frank Robinsons Total May Co. Saks, Inc./Proffit's Carson Pirie Scott Herberger's Mc Raes Parisan Proffits Saks Fifth Avenue Total Proffit's
61 ANNE KLEIN LICENSING Schedule 10.02
PLEASE USE WHOLESALE FIGURES Total Total THAT MATCH YOUR END OF YEAR FINANCIAL STATEMENTS Wholesale Co-op $$$ Store Name Volume Provided - ---------- ------ -------- Frederick Atkins Bon Ton Elder Beerman Gottschalks Harris Jacobsons Liberty House M. Epstein Mc Clures Younkers ZCMI Total Atkins Catalogs Bloomingdale's by Mail Boston Proper Coldwater Creek DM Management Macy's By Mail Mark Fore & Strike Neiman Marcus by Mail Nordstrom.com Norm Thompson Saks Folio Spiegel Total Catalogs Off Price Anne Klein Outlets Annie Sez Burlington Coat Factory Century 21 Cohoes Fashions Daffy's
62
PLEASE USE WHOLESALE FIGURES Total Total THAT MATCH YOUR END OF YEAR FINANCIAL STATEMENTS Wholesale Co-op $$$ Store Name Volume Provided - ---------- ------ -------- Famous Footwear Filene's Basement Loehmanns Mandy Marmax -- Newtons, TJ Max, Marshalls Ross Stores S & W Ladies Wear Saks Off 5th Shoe Carnival Steinmart Syms Total Off-Price Duty Free DFS Australia DFS Canada DFS Guam DFS Hong Kong DFS New Zealand DFS Singapore DFS Taiwan Airlines -- In-Flight Sales Total Duty Free
63 ANNE KLEIN LICENSING Schedule 10.02
PLEASE USE WHOLESALE FIGURES Total Total THAT MATCH YOUR END OF YEAR FINANCIAL STATEMENTS Wholesale Co-op $$$ Store Name Volume Provided - ---------- ------ -------- Duty Paid Stores DFS Hawaii DFS Los Angeles DFS San Francisco Airlines -- In Flight Sales Total Duty Paid International Dianen Tabah Boutique -- Switzerland English Sport Shop -- Bermuda Falabella -- Chile Harrods -- United Klngdom Myur Grace -- Australia Palaccio de Hierro -- Mexico Perl Modos -- South Africa Saga -- Peru SD International -- Kuwai, Saudi Arabia & Jordan Simms Sigal - Canada Sonuta -- Lebanon Takihyo Co. -- Japan Tomen Corp. -- Japan Tyrell Ltd. -- Philippines Total International * In addition to accounts with sales $50,000+, please list all international distributors by name. Military U.S. Army & Air Force U.S. Marine Corps. U.S. Navy Total Military GRANT TOTALS
64 SCHEDULE 18.06 AUSTRALIA: CANADA (cont'd) MYER GRACE NUSHIN BERMUDA: TOCCA FINITA ENGLISH SPORTS WEAR ELSE TONY PLUS CANADA: GIGI SIMMS SIGAL HOLT RENFREW CHILE: EASTONS FALABELLA-SANTIAGO HUDSON BAYS LES AILES DE LA MODES ECUADOR: OGILVY'S SANTA GEMA O'BRIENS BROWNS ENGLAND: FASHION 8 HARRODS MUSKAT & BROWN FOREIGN AFFAIR JAPAN: JUST ELAINES TOMEN APPANAGE PETITE COLLECTION LEBANON: ANIK SONATA JACKIES FINE LINES MIDDLE EAST FILLY & COLT S.D. INTERNATIONAL PAVERA BUGSHAN - SAUDI ARABIA TOFANO'S ZERBAFT - KUWAIT COLLECTION 24 MIJO MEXICO: MARIE & CO. PALACIO DE HIERRO JUNE'S MAGIQUE PERU: BLU'S SAGA MUNROE'S BUCKLANDS PHILIPPINES: OYSTER RUSTAN'S TOWNE SHOPPE MAXI'S SINGAPORE: FISCHER & CO. ISETAN ANDREW'S ELLA'S SOUTH AFRICA: FASHION SHOPPE PERL MODES SWITZERLAND: BIANCA TABBAR 65 KASPER A.S.L., LTD. 11 WEST 42ND STREET, NEW YORK, NY, 10036 LEE S. SPORN SENIOR VICE PRESIDENT, GENERAL COUNSEL & SECRETARY DIRECT DIAL: 212.626.6121 FAX: 212.626.6354 E-FAX: 208.723.5646 INTERNET: LSPORN@KASPERASL.COM Maxwell Shoe Company, Inc. P.O. Box 37 101 Sprague Street Readville, Massachusetts 02137-0037 Gentlemen: This letter, when countersigned on behalf of your company and on behalf of B.D.S., Inc. ("BDS"), will constitute an amendment to the agreement between Anne Klein, a division of Kasper A.S.L., Ltd. ("Anne Klein"), BDS and Maxwell Shoe Company, Inc. ("Maxwell") executed on November 1, 1999 with effect from July 19, 1999 (the "License Agreement"), as follows (all terms used but not defined herein having the respective meanings set forth in the License Agreement): 1. Anne Klein represents and warrants that, by an agreement dated as of January 1, 2002 between BDS and Anne Klein, BDS has waived all rights under the License Agreement and, as a result, shall as of that date be deleted as a party thereto. Pursuant to paragraph 19.07 of the License Agreement, BDS hereby agrees to amend the License Agreement so that effective January 1, 2002 BDS shall have no rights or obligations whatsoever under the License Agreement. Maxwell hereby releases and discharges BDS and its affiliates from any and all claims it may have had or may have against BDS or its affiliates under the License Agreement. BDS hereby releases and discharges Maxwell and its affiliates from any and all claims it may have had or may have against Maxwell or its affiliates under the License Agreement. 2. The definition of Licensed Marks is hereby modified so as to add the trademark "AK ANNE KLEIN". Maxwell may continue to sell its remaining inventory of Licensed Articles bearing the trademarks "Anne Klein II" through June 30, 2003 in accordance with all the terms and conditions set forth in the License Agreement. Anne Klein shall have no obligation to approve any additional styles of Licensed Articles bearing the "Anne Klein II" trademark. 3. Anne Klein and Maxwell further agree to amend the License Agreement so as to provide that, from and after January 1, 2003, (i) the Image Fund Payment set forth in Section 7.01(b)(ii) shall be reduced to one percent (1%) and (ii) the Sales Royalty set forth in paragraph 9.01 shall be increased to six percent (6%). 4. This letter shall not become effective until and unless the United States Bankruptcy Court with jurisdiction of the Chapter 11 debtor case of Kasper A.S.L., Ltd. ("Kasper") approves and enters an order pursuant to the Bankruptcy Code authorizing Kasper to assume the License Agreement, as amended hereby, and all obligations of Kasper and Anne Klein thereunder. Maxwell Shoe Company, Inc. Page 2 3/19/02 Except as expressly set forth herein, the terms and conditions set forth in the License Agreement shall remain in full force and effect. Sincerely, Anne Klein, a division of Kasper A.S.L., Ltd. By: /s/ John D. Idol ---------------------------------------- John D. Idol ACCEPTED AND AGREED: Maxwell Shoe Company Inc. By: /s/ James J. Tinagero ----------------------------- James J. Tinagero COO B.D.S., Inc. By: /s/ Daniel Schwartz ----------------------------- Daniel Schwartz -----END PRIVACY-ENHANCED MESSAGE-----