<PAGE>
 
                                                                    EXHIBIT 10.4
                      LIMITED LIABILITY COMPANY AGREEMENT

                                      FOR

                          AMEN WARDY HOME STORES, LLC



          THIS OPERATING AGREEMENT (this "Agreement") is made and entered into
this 5th day of August, 1997, among ST. JOHN KNITS, INC., a California
corporation ("St. John"), AWH DIRECT, LLC, a Colorado limited liability company
("Amen Wardy LLC") (St. John and Amen Wardy LLC are hereinafter collectively
referred to as the "Founding Members"), AMEN WARDY, SR., AMEN WARDY, JR., AMEN
WARDY HOME, INC., a Colorado corporation ("Amen Wardy Inc."), BOB HIGHTOWER
(Amen Wardy, Jr., Amen Wardy, Sr. and Bob Hightower are parties only to Sections
8.1, 8.2, 12.1, 12.2, 13.1, 13.2, 13.3, 13.5 and 13.14 hereof and Amen Wardy
Inc. is a party only to Sections 12.1, 12.2, 13.1, 13.5 and 13.14 hereof) and
AMEN WARDY HOME STORES, LLC (the "Company").


                                R E C I T A L S
                                ---------------


          WHEREAS, the Founding Members have caused the Company to be formed
subject to the provisions of the Delaware Limited Liability Act (the "Act") for
the purpose of forming a business venture among the Founding Members; and

          WHEREAS, the Founding Members and the Company desire to enter into
this Agreement, which sets forth certain agreements with respect to the conduct
of the affairs of the Company and the Members' respective rights and obligations
with regard to their Interests in the Company;


                               A G R E E M E N T
                               -----------------


          In consideration of the mutual promises contained herein and intending
to be legally bound, the parties hereto agree and certify as follows:
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                                   ARTICLE I

                                ORGANIZATION OF
                         THE LIMITED LIABILITY COMPANY

          1.1  Formation.  The Company has been formed as a limited liability
               ---------                                                     
company subject to the provisions of the Act upon the terms, provisions and
conditions set forth in this Agreement.

          1.2  Filing.  In connection with the execution of this Agreement, a
               ------                                                        
Certificate of Formation that complies with the requirements of the Act has been
properly filed with the Delaware Secretary of State.  The Members shall execute
such further documents (including amendments to the Certificate of Formation)
and take such further action as is appropriate to comply with the requirements
of law for the formation or operation of a limited liability company in Delaware
and in all states and counties where the Company may conduct its business.

          1.3  Name.  The name of the Company is "Amen Wardy Home Stores, LLC".
               ----                                   

          1.4  Registered Office, Registered Agent.  The name and business
               -----------------------------------                        
address of the registered agent for service of process on the Company in the
State of Delaware are Paracorp Incorporated, 15 East North Street, Dover,
Delaware, 19901, or such other qualified person as the Board may designate from
time to time and its business address.

          1.5  Registered Office in Delaware.  The location of the registered
               -----------------------------                                 
office of the Company in the State of Delaware shall be Paracorp Incorporated,
15 East North Street, Dover, Delaware, 19901, or at such other place as the
Board from time to time may select.

          1.6  Business Purpose.  The Company may carry on any lawful business,
               ----------------                                                
purpose or activity with the exception of the business of granting policies of
insurance, or assuming insurance risks or banking.

          1.7  Term.  The term of the Company shall continue until the
               ----                                                   
bankruptcy or dissolution of a Member or the occurrence of any other event
identified in Article X hereof which terminates the continued membership of a
              ---------                                                      
Member in the Company (unless the business of the Company is continued by the
unanimous consent of the remaining Members within 90 days following the
occurrence of any such event).  The Company shall be dissolved and its affairs
wound up in accordance with Article X hereof.
                            ---------        

          1.8  Intent.  It is the intent of the Members that the Company be
               ------                                                      
operated in a manner consistent with its treatment as a "partnership" for
federal and state income tax purposes.  It is also the intent of the Members
that the Company not be operated or treated as a "partnership" for purposes of
Section 303 of the Federal Bankruptcy Code.  Neither the

                                       2
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Company nor any Member shall take any action inconsistent with the express
intent of the parties hereto as set forth in this Section 1.8.
                                                  ----------- 

          1.9  Definitions.  Capitalized terms used in this Agreement that are
               -----------                                                    
not otherwise defined herein shall have, if applicable, (i) the meanings
ascribed to such terms in Exhibit A attached hereto with respect to general
terms used herein or (ii)  the meanings ascribed to such terms in Exhibit B
attached hereto with respect to tax terms used herein.


                                  ARTICLE II

                     OWNERSHIP AND CAPITAL CONTRIBUTIONS;
                         CAPITAL ACCOUNTS; FINANCINGS

          2.1  Membership and Percentage Interests.  The names, addresses, and
               -----------------------------------                            
Percentage Interests of the Members are as follows:

          Name and Address                       Percentage Interest
          ----------------                       -------------------

          St. John Knits, Inc.                            51%
          17422 Derian Avenue
          Irvine, California  92713

          Amen Wardy LLC                                  49%
          405 East Cooper Avenue
          Aspen, Colorado 81611


          2.2  Capital Contributions.  On the date of this Agreement, St. John
               ---------------------                                          
shall contribute $500,000 to the Company.  As of the date of this Agreement,
Amen Wardy LLC has not made and shall have no obligation to make any Capital
Contributions to the Company.  The Founding Members may, from time to time,
agree to increase the level of Capital Contributions required of each Member;
provided, however, that any additional Capital Contributions made by any Member
of the Company shall not change the Percentage Interests of the Members as set
forth in Section 2.1 hereof.  Except as otherwise provided herein, no Founding
Member shall be obligated to make any additional Capital Contributions to the
Company.

          2.3  Loans to the Company.  On the date of this Agreement, St. John
               --------------------                                          
shall make a loan to the Company in the amount of $1.5 million (the "St. John
Loan"), which shall be evidenced by a promissory note from the Company to St.
John (the "St. John Note").  In the event that the Board determines that further
funds are required by the Company, St. John shall make additional loans to the
Company; provided, however, that in no event shall St. John be obligated to make
additional loans to the Company if St. John has made loans and/or Capital
Contributions to the Company which in the aggregate amount to

                                       3
<PAGE>
 
$5 million.  All loans made by St. John to the Company shall be evidenced by a
promissory note from the Company to St. John in the form of Exhibit C attached
hereto (the "Form of Promissory Note").  The approval of four-fifths (4/5) of
all Managing Directors of the Company is required for the Company to change the
terms and conditions of the Form of Promissory Note.  St. John may make
additional loans to the Company from time to time.  Any loan, including, but not
limited to, the St. John Loan, made by St. John or any other Member of the
Company shall not (i) be treated as a Capital Contribution but shall be a debt
due from the Company, unless otherwise agreed by the Members, and (ii) change
the Percentage Interests of the Members as set forth in Section 2.1 hereto.
Except as otherwise provided herein, no Member shall be obligated to make any
loan or advance to the Company.

          2.4  Capital Accounts.
               ---------------- 

          (a)  A capital account ("Capital Account") shall be maintained for
each Member. The Capital Account of each Member shall be credited with the
amount of their respective Capital Contributions. Thereafter, each Member's
Capital Account shall be (a) credited with such Member's share of Profits, any
individual items of income and gain allocated to such Member pursuant to the
provisions of Article III hereof, and the amount of additional cash, or the
              -----------                                                  
value of any asset (net of any liabilities assumed by the Company and
liabilities to which the asset is subject) contributed to the Company by such
Member, and (b) debited with the Member's share of Losses, any individual items
of deduction and loss allocated to such Member pursuant to the provisions of
Article III hereof, the amount of any cash distributed to such Member and the
-----------                                                                  
value of any asset distributed to such Member (net of any liabilities assumed by
the Member and liabilities to which the asset is subject).

          (b)  No Member shall be personally liable for or be required to
restore any deficit Capital Account balance.

          2.5  Other Matters.
               ------------- 

          (a)  Except as otherwise provided in or contemplated by this
Agreement, no Member shall demand or receive a return of or interest on its
Capital Contributions or withdraw from the Company without the consent of all
Members.  Under circumstances requiring a return of any Capital Contributions,
no Member shall have the right to receive property other than cash except as may
be specifically provided herein.

          (b)  No Member shall receive any interest, salary, compensation, draw
or reimbursement with respect to its Capital Contributions or its Capital
Account, or for services rendered or expenses incurred on behalf of the Company
or otherwise in its capacity as a Member, except as otherwise provided in or
contemplated by this Agreement or as may otherwise be authorized by the Board.

                                       4
<PAGE>
 
                                  ARTICLE III

                       ALLOCATIONS OF PROFITS AND LOSSES

          3.1  Profits.  After giving effect to the allocations set forth in
               -------                                                      
Sections 3.3 through 3.5 hereof, Profits for any Fiscal Year (as defined in
------------------------                                                   
Exhibit A attached hereto) shall be allocated among the Members in proportion to
their Percentage Interests.

          3.2  Losses.  After giving effect to the allocations set forth in
               ------                                                      
Sections 3.3 through 3.5 hereof, Losses for any Fiscal Year shall be allocated
------------------------                                                      
first to St. John to the extent of its Capital Contributions, and then among the
Members in proportion to their Percentage Interests.

          3.3  Allocation In the Event of Section 754 Election.  To the extent
               -----------------------------------------------                
an adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of that adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset), and such gain or
loss shall be specially allocated to the Members in the manner consistent with
the manner in which their Capital Accounts are required to be adjusted pursuant
to that Treasury Regulation.

          3.4  Regulatory and Curative Allocations.
               ----------------------------------- 

          (a)  Company Minimum Gain Chargeback.  Except as otherwise provided in
Section 1.704-2(f) of the Treasury Regulations, notwithstanding any other
provision of this Agreement, if there is a net decrease in Company Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, for subsequent
Fiscal Years) in an amount equal to the portion of that Member's share of the
net decrease in Company Minimum Gain during such year that is allocable to the
disposition of any Company assets subject to one or more Nonrecourse Liabilities
of the Company.  Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto.  The items to be so allocated shall be determined in
accordance with Treasury Regulation Section 1.704-2(j)(2)(i).  Any Member's
share of any net decrease in Company Minimum Gain shall be determined in
accordance with Treasury Regulation Section 1.704-2(g).  This section is
intended to comply with the minimum gain chargeback requirement in the Treasury
Regulations and shall be interpreted consistently therewith.

          (b)  Member Minimum Gain Chargeback.  Notwithstanding any other
provision of this Agreement except Section 3.4(a), if there is a net decrease in
                                   --------------                               
Member Minimum Gain attributable to Member Nonrecourse Debt during any Fiscal
Year, each Member who has a share of the Member Minimum Gain attributable to
such Member Nonrecourse Debt shall be specially allocated items of Company
income and gain for such

                                       5
<PAGE>
 
year (and, if necessary, subsequent years) in an amount equal to the portion of
such Member's share of the net decrease of Member Minimum Gain.  Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto.  The items to
be so allocated shall be determined in accordance with Treasury Regulation
Section 1.704-2(j)(2)(ii).  Any Member's share of the net decrease in Member
Minimum Gain shall be determined in accordance with Treasury Regulation Section
1.704-2(i)(5).  This section is intended to comply with the minimum gain
chargeback requirements in the Treasury Regulations and shall be interpreted
consistently therewith.

          (c)  Qualified Income Offset.  In the event any Member unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulation paragraph (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d), items of
Company income and gain shall be specially allocated to the Members in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of that Member as quickly as
possible.

          (d)  Gross Income Allocation.  In the event that any Member has a
deficit Capital Account at the end of any Company Fiscal Year that is in excess
of the sum of (i) the amount that such Member is obligated to restore and (ii)
the amount that the Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury Regulation Sections 1.704-2(g)(1) and (i)(5),
that Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 3.4(d) shall be made only if and to the extent that
                 --------------                                             
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Article III have been made as if Section
                                                                        -------
3.4(c) and 3.4(d) were not in the Agreement.
-----------------                           

          (e)  Nonrecourse Deductions.  Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in accordance with their
Percentage Interests.  The amount of Nonrecourse Deductions for a Fiscal Year
shall equal the excess, if any, of the net increase, if any, in the amount of
Company Minimum Gain during that Fiscal Year over the aggregate amount of any
distributions during that Fiscal Year of proceeds of a Nonrecourse Liability (as
that term is defined in Treasury Regulation Section 1.704-2(b)(3)) that are
allocable to an increase in Company Minimum Gain, determined according to the
provisions of Treasury Regulation Section 1.704-2(d).

          (f)  Member Nonrecourse Deductions.  Any Member Nonrecourse Deductions
for any Fiscal Year shall be specially allocated to the Member who bears
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i).  The amount of Member Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a Fiscal Year equals the excess, if
any, of the net increase, if any, in the amount of Member Minimum Gain
attributable to such Member Nonrecourse Debt during that Fiscal Year over the
aggregate amount of any distributions during that Fiscal Year to the

                                       6
<PAGE>
 
Member that bears the economic risk of loss for such Member Nonrecourse Debt to
the extent such distributions are from the proceeds of such Member Nonrecourse
Debt and are allocable to an increase in Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Treasury Regulation
Section 1.704-2(i)(1).

          (g)  Curative Allocations.  The allocations set forth in Sections
                                                                   --------
3.4(a)-(f) (the "Regulatory Allocations") are intended to comply with certain
----------                                                                   
requirements of Treasury Regulation Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provision of this Article III (other than the
                                            -----------                
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating other items of income, gain, loss and deduction among the Members
so that, to the extent possible, the net amount of such allocation of other
items and the Regulatory Allocations to each Member should be equal to the net
amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.  This Section 3.4(g) is intended to minimize to
                                    --------------                           
the extent possible and to the extent necessary any economic distortions which
may result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith.

          3.5  Allocations for Tax Purposes.
               ---------------------------- 

          (a)  Contributed Property.  In accordance with Code Section 704(c) and
the Treasury Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the Company shall, solely for tax
purposes, be allocated among the Members so that a contributing Member, to the
maximum extent possible, recognizes the variation, if any, between the Adjusted
Basis and the initial Gross Asset Value of the property contributed by that
Member.  Unless the Members otherwise agree, allocations pursuant to this
Section 3.5(a) shall use the "remedial allocation method" as set forth in
--------------                                                           
Treasury Regulation Section 1.704-3(d) or any successor provision thereto.

          (b)  Adjusted Property.  In the event the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (ii) of the definition of Gross
Asset Value, subsequent allocations of income, gain, loss and deduction with
respect to that asset shall take into account any variation between the Gross
Asset Value of that asset before such adjustment and its Gross Asset Value after
such adjustment in the same manner as the variation between Adjusted Basis and
Gross Asset Value is taken into account under Section 3.5(a) hereof with respect
                                              --------------                    
to contributed property, and such variation shall be allocated in accordance
with the principles of Treasury Regulation Section 1.704-1(b)(2)(iv)(f).

          (c)  Recapture of Deductions and Credits.  If any "recapture" of
deductions or credits previously claimed by the Company is required under the
Code upon the sale or other taxable disposition of any Company property, those
recaptured deductions or credits shall, to the extent possible, be allocated to
the Members pro rata in the same manner that the deductions and credits giving
rise to the recapture items were originally allocated using the "first-in,
first-out" method of accounting; provided, however, that this Section 3.5(c)
                                                              --------------
shall only affect the characterization of income allocated among the Members for
tax purposes.

                                       7
<PAGE>
 
          (d)  Limited Application.  Allocations pursuant to this Section 3.5 
                                                                  ----------- 
are solely for purposes of federal, state and local taxes and shall not affect
or in any way be taken into account in computing any Member's Capital Account or
share of Profits, Losses, other items or distributions pursuant to any provision
of this Agreement.

          (e)  Allocation of Excess Nonrecourse Liabilities.  All "excess
nonrecourse liabilities," as such term is defined in Treasury Regulation Section
1.752-3(a)(3), shall be allocated to the Members in accordance with their
Percentage Interests.

          3.6  Other Allocation Rules.
               ---------------------- 

          (a)  The Members are aware of the income tax consequences of the
allocations made by this Article III and the economic impact of the allocations
                         -----------                                           
on the amounts receivable by them under the Agreement.  The Members hereby agree
to be bound by the provisions of this Article III in reporting their share of
                                      -----------                            
Company income and loss for income tax purposes.

          (b)  For purposes of determining the Profits, Losses, or any other
items allocable to any period, Profits, Losses, and any such other items shall
be determined on a daily, monthly or other basis, as determined by the Board
using any permissible method under Code Section 706 and the Treasury Regulations
thereunder.


                                  ARTICLE IV

                                 DISTRIBUTIONS

          4.1  Distributions of Distributable Cash.  The Board shall from time
               -----------------------------------                            
to time determine to what extent, if any, Company funds shall be available for
distribution to the Members.  Such funds, if any, shall be payable from time to
time at the discretion of the Board.  The Members acknowledge and agree that
Company funds may be retained in the Company for the purpose of payment of all
expenditures in connection with the business of the Company, including, but not
limited to, the principal and interest on all loans, payment of all expenses of
operation, and the maintenance of reserves for managerial, promotional, all
other operational expenses relating to the Company and for minimization of
future Company borrowings.  Whether or not there exist Company funds in excess
of amounts needed to pay such expenditures shall be a matter to be decided
solely by the Board, and no Member may at any time demand that the Company make
distributions to such Member.  When the Board determines that cash on hand or in
bank accounts of the Company that is attributable to operating revenues (the
"Distributable Cash") is to be distributed to the Members, such Distributable
Cash shall be distributed in proportion to their Percentage Interests; provided,
however, that no distributions of Distributable Cash shall be made to any Member
of the Company until and unless all payments and other obligations of the
Company now or hereafter existing under the St. John Loan and any other loan
made by St. John to

                                       8
<PAGE>
 
the Company pursuant to Section 2.3 hereof, whether for principal, interest,
                        -----------                                         
fees, expenses, or otherwise, shall be satisfied in full by the Company.

          4.2  Mandatory Tax Distributions.  Notwithstanding anything to the
               ---------------------------                                  
contrary above, and as advances to distributions otherwise made pursuant to
Section 4.1, in order to allow Members to pay taxes on their allocable share of
-----------                                                                    
taxable income of the Company, the Board shall cause the Company to distribute,
not later than March 31 of each year, an amount equal to the excess, if any, of
(i) the product of the taxable income of the Company, determined on a cumulative
basis for all years (through and including the immediately preceding tax year)
of the Company multiplied by the maximum effective combined federal and state
rate over (ii) all amounts previously distributed pursuant to this Section 4.2.
                                                                   -----------  
The percentage referred to in clause (i) above shall be increased or decreased
from time to time by the increase or decrease in the maximum tax rate imposed on
individual taxpayers on ordinary income under the Code.

          4.3  Amounts Withheld.  All amounts (if any) withheld pursuant to the
               ----------------                                                
Code or any provision of any state or local tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated as
amounts distributed to the Members pursuant to this Article IV for all purposes
under this Agreement.  The Company shall withhold from distributions, or with
respect to allocations, to the Members and to pay over to any federal, state, or
local government any amounts required to be so withheld pursuant to the Code or
any provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld.

          4.4  Exculpation.  Each Member shall look solely to the assets of the
               -----------                                                     
Company for all distributions with respect to the Company, for the repayment of
any loans to the Company and for the return of its Capital Contributions thereto
and its share of Profits or Losses thereof, and shall have no recourse therefor
(upon dissolution or otherwise) against any Member.


                                   ARTICLE V

                                  MANAGEMENT

          5.1  Board of Managing Directors.  The Company shall at all times have
               ---------------------------                                      
a Board of Managing Directors (the "Board") composed of individuals selected by
the Members as provided herein.  The management of the Company shall be vested
solely in the Board of Managing Directors and officers ("Officers") of the
Company.  The business and affairs of the Company shall be managed by or under
the direction of the Board. Each Member shall cause its designees on the Board
to comply with the terms of this Agreement to be performed by such persons in
such capacities.

                                       9
<PAGE>
 
               (a)  Number of Managing Directors.  The Board shall consist of
     five (5) managing directors (individually, a "Managing Director" and
     collectively, "Managing Directors").

               (b)  Designation of Managing Directors. As of the date hereof and
     subject to Section 5.1(c) hereof, the Managing Directors shall consist of
                --------------                                                
     Robert Gray, Marie Gray and Kelly Gray, as St. John Managing Directors, and
     Amen Wardy, Sr. and Amen Wardy, Jr., as Amen Wardy LLC Managing Directors.
     Thereafter, as long as St. John or an Affiliate (as defined in Exhibit A)
     of St. John (a "St. John Affiliate") is a Member of the Company, St. John
     or such St. John Affiliate shall be entitled to designate three (3)
     Managing Directors to the Board, and, as long as Amen Wardy LLC or an
     Affiliate (as defined in Exhibit A) of Amen Wardy LLC (an "Amen Wardy LLC
     Affiliate") is a Member of the Company, Amen Wardy LLC or such Amen Wardy
     LLC Affiliate shall be entitled to designate two (2) Managing Directors to
     the Board; provided, however, that if the Percentage Interest of Amen Wardy
     LLC or an Amen Wardy LLC Affiliate exceeds fifty percent (50%) of the
     Company, Amen Wardy LLC or such Amen Wardy LLC Affiliate shall have the
     right to designate three (3) Managing Directors to the Board and St. John
     or such St. John Affiliate shall have the right to designate two (2)
     Managing Directors to the Board.  St. John Managing Directors shall be
     executives, officers or directors of St. John.  Each Managing Director
     shall serve for a term of one year and until his or her successor is
     designated.  Managing Directors shall be eligible to serve successive
     terms.  If at any time a Founding Member ceases to be a Member of the
     Company, unless by virtue of a Permitted Transfer (as defined in Exhibit A)
     to an Affiliate of such Founding Member, (i) the Managing Directors who had
     been designated by such Founding Member shall thereupon cease to be
     Managing Directors of the Company unless subsequently designated pursuant
     to the terms of this Agreement and (ii) the remaining Founding Member shall
     thereafter have the right to designate all Managing Directors to the Board.

               (c)  Removal of Managing Directors; Vacancies.  A Founding Member
     may at any time remove any Managing Director designated by such Founding
     Member (a "Founders Director"), with or without cause.  In the event a
     vacancy occurs on the Board as a result of the retirement, removal,
     resignation or death of a Founders Director, such vacancy shall be filled
     by a person designated by the Founding Member the retirement, removal,
     resignation or death of whose designee created the vacancy.

               (d)  Meetings of Managing Directors  (i) Regular meetings of the
     Board shall be held on such basis as the Board may determine.  Special
     meetings of the Board may be called by any two (2) Managing Directors
     acting together upon not less than five (5) days written notice delivered
     to each of the Managing Directors and specifying the nature of any business
     to be transacted at such meeting.  The presence of four (4) Managing
     Directors shall constitute a quorum for the transaction of business at any
     meeting of the Board; provided, however, that if St. John or a St.

                                       10
<PAGE>
 
     John Affiliate is a Member of the Company, there must be present at such
     meeting at least two (2) St. John Managing Directors.

               (e)  The Board may make use of telephones and other electronic
     devices to hold meetings, provided that each Managing Director
     simultaneously participates with all of the other Managing Directors with
     respect to all discussions and votes of the Board.  The Board may act
     without a meeting if the action taken is reduced to writing and approved
     and signed in advance by four-fifths (4/5) of the Managing Directors of the
     Company.  Written minutes shall be taken at each meeting of the Board.
     However, any action taken or matter agreed upon by the Board shall be
     deemed final, whether or not written minutes are ever prepared or
     finalized.

               (f)  Vote Required for Action; Authority.  Except as otherwise
     provided in this Agreement, each Managing Director shall be entitled to
     vote on all matters brought before the Board for action, and the vote of a
     majority of the Managing Directors present at a meeting at which a quorum
     is present shall be the act of the Board.  Acts of the Board shall be
     binding upon the Company; provided, however, that Managing Directors shall
     have no authority to bind the Company except through acts of the Board.

               (g)  Supermajority Voting Provisions. The approval of four-fifths
     (4/5) of all of the Managing Directors of the Company is required for the
     Company to (i) carry on any business other than the Business Activities, or
     (ii) change the name of the Company.

               (h)  Additional Supermajority Voting Provisions.  If (x) neither
     Robert Gray, Marie Gray nor Kelly Gray are directors or executive officers
     of St. John and (y) the Percentage Interest of Amen Wardy LLC together with
     all Amen Wardy LLC Affiliates is less than 50% of the Company, then the
     approval of four-fifths (4/5) of all of the Managing Directors of the
     Company is required for the Company to (i) carry on any business other than
     the Business Activities, (ii) change the name of the Company, (iii) develop
     new product lines for the Company, (iv) appoint or remove Officers, (v)
     enter into any transaction with Affiliates of the Company, (vi) enter into
     leases for new retail stores, (vii) enter into material agreements with
     vendors or customers of the Company or materially amend such agreements,
     (viii) agree to sell, exchange or otherwise transfer all or any material
     portion of the Company's assets, (ix) to merge, reorganize or consolidate,
     (x) to enter into any agreement to permit the use of the Amen Wardy Name
     (as defined in Section 13.1 hereof), (xi) encumber all or substantially all
                    ------------                                                
     of the assets of the Company, and (xii) make a distribution of
     Distributable Cash pursuant to Section 4.1 hereof.
                                    -----------        

          5.2  Officers.  The day-to-day management of the Company shall be
               --------                                                    
vested in the Officers, who shall be appointed by the Board. Officers shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.   Except as determined by the Board, Officers shall not have
the authority to bind the Company.

                                       11
<PAGE>
 
               (a)  The Board shall appoint the Chief Executive Officer of the
     Company, who shall serve at the pleasure of the Board.   As of the date
     hereof and until his death, removal, resignation or inability to serve, the
     Chief Executive Officer of the Company shall be Amen Wardy, Jr.  As of the
     date hereof and until or unless the Board determines otherwise, Amen Wardy,
     Jr. shall receive for his services as the Chief Executive Officer of the
     Company an annual salary of $100,000.

               (b)  The Board shall appoint the Chief Financial Officer of the
     Company, who shall serve at the pleasure of the Board. As of the date
     hereof and until his death, removal, resignation or inability to serve, the
     Chief Financial Officer of the Company shall be Roger Ruppert.

               (c)  The Board may appoint such other Officers at any time,
     including, but not limited to, a President, Secretary and Treasurer.  Any
     individual may hold any number of offices.  The Board shall have the power
     to remove, with or without cause, any Officer appointed by it, including,
     but not limited to, the Chief Executive Officer and Chief Financial
     Officer.  Any Officer may resign at any time by giving written notice to
     the Company and the resignation shall take effect on the giving of the
     notice or at any later time specified in the notice.  Each Officer shall
     serve until his resignation, removal, death or inability to serve.  A
     vacancy in any office shall be filled by the Board.  Officers shall serve
     at the pleasure of the Board, subject to all rights, if any, of an Officer
     under any contract of employment.   Officers of the Company shall perform
     their duties in good faith, in a manner they reasonably believe to be in
     the best interest of the Company, and with such care as an ordinarily
     prudent person in a like position would use under similar circumstances.  A
     person who so performs his or her duties shall not have any liability by
     reason of being or having been an Officer of the Company.

          5.3  Warranted Reliance by Managing Directors and Officers on Others.
               ---------------------------------------------------------------  
In exercising their authority and performing their duties under this Agreement,
the Managing Directors and the Officers shall be entitled to rely on
information, opinions, reports, or statements of the following persons or groups
unless they have actual knowledge concerning the matter in question that would
cause such reliance to be unwarranted:

               (a)  one or more employees or other agents of the Company or in
     subordinates whom the Managing Director or Officer reasonably believes to
     be reliable and competent in the matters presented; and

               (b)  any attorney, public accountant, or other person as to
     matters which the Managing Director or Officer reasonably believes to be
     within such person's professional or expert competence.

                                       12
<PAGE>
 
                                  ARTICLE VI

                                  THE MEMBERS

          6.1  Authority.  Except as otherwise provided in this Agreement,
               ---------                                                  
Members shall not have the authority to bind the Company.

          6.2  Rights and Obligations of Members.
               --------------------------------- 

          (a)  Limitation of Liability.  Each Member's liability for the debts
and obligations of the Company shall be limited as set forth in the Act.
Without limiting the generality of the foregoing, as to any third party, a
deficit Capital Account balance of a Member shall not be deemed to be a
liability of such Member nor an asset or property of the Company.

          (b)  Duties.  The duties and obligations of each Member as a Member of
the Company to the Company and to the other Members shall be limited to those
set forth in this Agreement.  The Company and the Members disclaim all other
duties and obligations as may be owed to one another (whether at law or in
equity), and no Member shall be liable to the Company or to the other Members
for monetary damages on account of any breach or alleged breach of such other
duties or obligations.


                                  ARTICLE VII

                            TRANSFERS OF INTERESTS

          7.1  Prohibited Transfers.
               -------------------- 

          (a)  No Member shall directly or indirectly sell, exchange, assign,
dispose of, encumber, pledge, mortgage, hypothecate or otherwise transfer in any
way its Interest (or any portion thereof) in the Company or its interest in this
Agreement, or enter into any agreement or commitment to do any of the same,
without the prior written approval and consent of all of the other Members or
pursuant to Section 7.2(a) of this Agreement, and any attempt to do so shall be
null and void.  Notwithstanding any other provision contained in this Agreement,
no Member shall enter into or give its approval or consent to any of the
aforementioned transactions unless the proposed transferee of the subject
Interest enters into an agreement with the Company and each continuing Member
whereby such proposed transferee shall be made a party to and be bound by the
terms of this Agreement (with appropriate modifications as required by the
identity of the transferee to give full effect to the provisions of this
Agreement).

          (b)  Notwithstanding any other provisions contained in this Agreement,
no Member may directly or indirectly sell, exchange, assign, dispose of,
encumber, pledge, mortgage, hypothecate or otherwise transfer in any way its
Interest in the Company if:

                                       13
<PAGE>
 
          (i)    as a result thereof, the Company or any non-selling Founding
     Member may, without its prior approval, become subject to any governmental
     controls or regulations that may materially restrict the business
     operations of the Company or such Member and to which it was not subject
     prior to any proposed sale, exchange, assignment, pledge, mortgage,
     hypothecation or other transfer;

          (ii)   as a result thereof, the Company or any non-selling Founding
     Member may, without its prior approval, become subject to any additional
     material tax liability to which it was not theretofore subject; or

          (iii)  the transaction is not permitted by any law or term of any
     mortgage, agreement or document to which the Company or the selling Member
     is a party or by which it is bound, unless any permit, approval, consent or
     waiver required has been obtained and is in effect, or if acceleration of
     any debt of the Company (including, without limitation, any mortgage on any
     property owned by the Company) will occur as a result of any such
     transaction;

and any transaction which would cause such result shall be null and void.

          (c)  Notwithstanding Sections 7.1(a) and (b) of this Agreement,
changes in the stock ownership of St. John shall not be deemed a prohibited
transfer hereunder.

          7.2  Permitted Transfers.
               ------------------- 

          (a)  Transfers to Affiliates. St. John may transfer all or part of its
Interest in the Company to any Affiliate of St. John and Amen Wardy LLC may
transfer all or part of its Interest in the Company to any Affiliate of Amen
Wardy LLC; provided, however, that contemporaneously with such transfer by St.
John or Amen Wardy LLC:

          (i)  the transferee shall enter into an agreement with the remaining
     Members and the Company containing terms substantially similar to the terms
     hereof (with appropriate modifications as required by the identity of the
     transferee to give full effect of the provisions of this Agreement) or
     whereby such transferee shall be made a party to and be bound by the terms
     of this Agreement; and

          (ii) the transferee and the transferring Member shall agree in writing
     with the Company and the remaining Members that they will remain Affiliates
     as contemplated in this Section for so long as the transferee is a Member.

          (b)  Admission of Permitted Transferee as a Member.  Notwithstanding
the provisions of Section 7.2(a), a Permitted Transferee of an Interest shall be
admitted as a Member in the Company only upon a majority vote of the Members,
excluding for this purpose, however, the transferring Member.  The rights of a
Permitted Transferee who is not admitted as a Member shall be limited to the
right to receive allocations and distributions from the Company with respect to
the Interest transferred, as provided by this Agreement.

                                       14
<PAGE>
 
The transferee of such Interest shall not be a Member with respect to such
Interest, and, without limiting the foregoing, shall not have the right to
designate Managing Directors, inspect the Company's books or otherwise exercise
the rights of a Member hereunder or under the Act unless and until it is
admitted as a Member in accordance with this Agreement and the Act.  The
provisions in this Section 7.2(b) shall be in effect only for so long as the
                   --------------                                           
states in which the Company is currently doing business or anticipates doing
business require such provisions in order for the Company to receive partnership
tax treatment under the laws of such states.

          (c)  Effect of Permitted Transfer on Company.  The Members intend that
the Permitted Transfer of an Interest in the Company shall not cause the
dissolution of the Company.

          (d)  Distribution Among Members.  Upon the occurrence of a Permitted
Transfer of an Interest pursuant to Section 7.2(a) during any Fiscal Year,
                                    --------------                        
Profits, Losses, each item thereof, and all other items attributable to such
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Board.  All distributions on or
before the date of a Permitted Transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee.  Solely for purposes
of making such allocations and distributions, the Company shall recognize a
Permitted Transfer upon the Board's receipt of written notice stating the date
such Interest was transferred and such other information as the Board may
reasonably require.  The Board and the Company shall incur no liability for
making allocations and distributions in accordance with the provisions of this
paragraph, whether or not the Board or the Company has knowledge of any transfer
of ownership of any Interest in the Company.

          (e)  Special Basis Adjustment.  In connection with any Permitted
Transfer of a Company Interest, the Board shall cause the Company, at the
written request of the transferor or the transferee, on behalf of the Company
and at the time and in the manner provided in Treasury Regulations Section
1.754-1(b), to make an election to adjust the basis of the Company's property in
the manner provided in Sections 734(b) and 743(b) of the Code, and such
transferee shall pay all costs incurred by the Company in connection therewith,
including, without limitation, reasonable attorneys' and accountants' fees.


                                 ARTICLE VIII

                  PROPRIETARY INFORMATION; RELATED ACTIVITIES


          8.1  Proprietary Information.  Except to the extent disclosure is
               -----------------------                                     
required by law, legal process or formal demand of a governmental entity or to
the extent such information becomes lawfully and without breach of this
Agreement within the public

                                       15
<PAGE>
 
domain, the Members and all signatories hereto shall not use or disclose to any
person any trade secrets, technical information, processes, know-how, financial
or business data or other proprietary information relating to or in the
possession of the Company (collectively, "Proprietary Information") for any
purpose which does not relate to the Company and its efforts to engage in the
Business Activities; provided, however, that Proprietary Information does not
include any trade secrets, technical information, processes, know-how, financial
or business data relating to (i) the Amen Wardy home furnishing store as
currently operated in all material respects in Aspen, Colorado (the "Aspen
Store"), (ii) that certain Product Design and Development Agreement, dated as of
the date hereof, among St. John, Amen Wardy, Sr. and Amen Wardy, Jr., and (iii)
that certain Consulting Agreement, dated the date hereof, between St. John and
Amen Wardy, Jr.

          8.2  Related Activities.
               ------------------ 

          (a)  For so long as Amen Wardy LLC (together with all Amen Wardy LLC
Affiliates) is a Member of the Company, Amen Wardy LLC and each Amen Wardy
Affiliate shall not (other than through the Company), directly or indirectly
through any Amen Wardy LLC Affiliate, engage or otherwise participate in any
material respect in any Business Activities (as defined in Exhibit A), unless

          (i)  Amen Wardy LLC shall have fully disclosed to the Board the nature
     and location of the proposed Business Activities, including all interests
     (financial or otherwise) of Amen Wardy LLC and other parties therein; and

          (ii) Amen Wardy LLC shall have received approval to engage or
     otherwise participate in the Business Activities from a majority of the
     Board, excluding for this purpose, however, any Managing Directors which
     may have been designated by Amen Wardy LLC.

Notwithstanding the foregoing, nothing in this Section 8.2(a) shall apply to or
                                               --------------                  
prevent Amen Wardy LLC or any Amen Wardy LLC Affiliate from (i) operating the
Aspen Store as currently operated in all material respects in Aspen, Colorado,
(ii) performing their duties under that certain Product Design and Development
Agreement, dated as of the date hereof, among St. John, Amen Wardy, Sr. and Amen
Wardy, Jr. or (iii) performing their duties under that certain Consulting
Agreement, dated the date hereof, between St. John and Amen Wardy, Jr.

          (b)  For so long as St. John (together with all St. John Affiliates)
is a Member of the Company, St. John shall not (other than through the Company),
directly or indirectly through any St. John Affiliate, engage or otherwise
participate in any material respect in any Business Activities, unless

          (i)  St. John shall have, to the extent permitted by law, fully
     disclosed to the Board the nature and location of the proposed Business
     Activities, including all interests (financial or otherwise) of St. John
     and the other parties therein; and

                                       16
<PAGE>
 
          (ii) St. John shall have received approval to engage or otherwise
     participate in the Business Activities from a majority of the Board,
     excluding for this purpose, however, any Managing Directors which may have
     been designated or nominated by St. John.

Notwithstanding the foregoing, nothing in this Section 8.2(b) shall apply to or
                                               --------------                  
prevent St. John or any St. John Affiliate from developing, marketing and
distributing its own line of home furnishing products and gifts and performing
other related tasks as contemplated by that certain Product Design and
Development Agreement, dated as of the date hereof, among St. John, Amen Wardy,
Sr. and Amen Wardy, Jr. and that certain Consulting Agreement, dated the date
hereof, between St. John and Amen Wardy, Jr.

          (c)  Notwithstanding the provisions of Sections 8.2(a) and 8.2(b), no
                                                 --------------------------    
Member shall be required to comply with such provisions with respect to any
investment of up to five percent (5%) of the securities of any corporation,
limited liability company or limited partnership which is registered on a
national or international securities exchange or admitted to trading privileges
thereon or actively traded in a generally-recognized over-the-counter market,
provided that such Member does not exercise control over or direct, through such
equity interest or otherwise, the management and policies of such corporation or
partnership.


                                  ARTICLE IX

                                  ACCOUNTING

          9.1  Books of Account; Audits.
               ------------------------ 

          (a)  The books of account of the Company shall be kept and maintained
at all times at the Company's principal executive offices located in Orange
County, California.  Such books of account shall be maintained on an accrual
basis in accordance with GAAP, consistently applied, employing standards,
procedures and forms conforming to established practice in the United States.

          (b)  At the end of each accounting period, the books and records of
the Company shall be audited by a firm of independent accountants at the
Company's expense.

          9.2  Fiscal Year.  The Fiscal Year of the Company shall be a 52-53
               -----------                                                  
week fiscal year whereby the fiscal year ends on the Sunday nearest to October
31.

          9.3  Tax Returns; Information.  The Chief Financial Officer shall
               ------------------------                                    
arrange for the preparation and timely filing of all income and other tax and
informational returns of the Company.  As soon as practicable (but in no event
more than 90 days) after the end of each Fiscal Year, the Chief Financial
Officer shall cause the Company's accountants to prepare and submit to the Board
for its review and approval the Company's tax returns.  The

                                       17
<PAGE>
 
Chief Financial Officer shall furnish to each Member a copy of each approved
return, together with any schedules or other information which each Member may
require in connection with such Member's own tax affairs.

          9.4  Tax Matters Member.  St. John is specially authorized and
               ------------------                                       
appointed to act as the "Tax Matters Member" under the Code and in any similar
capacity under state or local law.  The Tax Matters Member agrees to promptly
notify the other Members upon the receipt of any correspondence from any
federal, state or local tax authorities, or making any elections under the tax
laws, relating to any examination of the Company's affairs.  The Tax Matters
Member shall be prohibited from entering into any settlement or arrangement on
behalf of the Company with respect to any federal, state or local tax
authorities without the express written approval of the Members, which approval
shall not be unreasonably withheld.  The Tax Matters Member may retain, at the
Company's expense, such outside counsel, accountants and other professional
consultants as it may reasonably deem necessary in the course of fulfilling its
obligations as Tax Matters Member.


                                   ARTICLE X

                          DISSOLUTION AND TERMINATION

          10.1  Liquidating Events.  The Company shall dissolve and commence
                ------------------                                          
winding up and liquidating upon the first to occur of the following
("Liquidating Events"):

          (a)   The sale of all or substantially all of the assets of the
Company;

          (b)   The unanimous written agreement of all Members to dissolve, wind
up, and liquidate the Company;

          (c)   The death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event which terminates a
Member's continued membership in the Company, unless the business of the Company
is continued by the unanimous written consent of the remaining Members within 90
days of the occurrence of any such event;

          (d)   The happening of any other event that makes it unlawful or
impossible to carry on the business of the Company; and

          (e)   January 1, 2043.

          The Members hereby agree that the Company shall not dissolve prior to
the occurrence of a Liquidating Event.  If it is determined, by a court of
competent jurisdiction, that the Company has dissolved prior to the occurrence
of a Liquidating Event, the Members hereby agree to continue the business of the
Company without a winding up or liquidation.

                                       18
<PAGE>
 
          10.2  Bankruptcy.  For purposes of this Agreement, the "bankruptcy" of
                ----------                                                      
a Member shall mean the occurrence of any of the following:  (a) any
governmental authority, or any court at the instance thereof, shall take
possession of any substantial part of the property of that Member or shall
assume control over, the affairs or operations thereof, or a receiver or trustee
shall be appointed, or a writ, order, attachment or garnishment shall be issued
with respect to any substantial part thereof, and such possession, assumption of
control, appointment, writ or order shall continue for a period of 90
consecutive days; or (b) a Member shall admit in writing of its inability to pay
its debts when due for purposes of Section 303 of the Bankruptcy Code, or make
an assignment for the benefit of creditors; or apply for or consent to the
appointment of any receiver, trustee or similar officer or for all or any
substantial part of its property; or shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debts, dissolution, liquidation, or similar
proceeding under the laws of any jurisdiction; or (c) a receiver, trustee or
similar officer shall be appointed for such Member or with respect to all or any
substantial part of its property without the application or consent of that
Member, and such appointment shall continue undischarged or unstayed for a
period of 90 consecutive days or any bankruptcy, insolvency, reorganization,
arrangements, readjustment of debt, dissolution, liquidation or similar
proceedings shall be instituted (by petition, application or otherwise) against
that Member and shall remain undismissed for a period of 90 consecutive days.

          10.3  Procedure.
                --------- 

          (a)   In the event of the dissolution of the Company for any reason,
the Members shall commence to wind up the affairs of the Company and to
liquidate the Company's investments; provided that if a Member is in bankruptcy
or dissolved, the other Member ("Winding-Up Member") shall commence to wind up
the affairs of the Company and such Winding-Up Member shall have full right and
unlimited discretion to determine in good faith the time, manner and terms of
any sale or sales of the property or other assets pursuant to such liquidation
having due regard to the activity and condition of the relevant market and
general financial and economic conditions.  The Members shall continue to share
profits, losses and distributions during the period of liquidation in the same
manner and proportion as though the Company had not dissolved.

          (b)   Following the payment of all expenses of liquidation, and
subject to the right of the Members or the Winding-Up Member, as the case may
be, to set up such cash reserves as and for so long as they or it may deem
reasonably necessary in good faith for any contingent or unforeseen liabilities
or obligations of the Company, the proceeds of the liquidation and any other
funds of the Company shall be distributed in the following order of priority:

          (i)   First, to the payment and discharge of all of the Company's
     debts and liabilities to creditors, in the order of priority as provided by
     law, including unpaid principal and interest under the St. John Loan and
     any other loans or advances made

                                       19
<PAGE>
 
     by Members to the Company, except to those to the Members in respect of
     their Capital Accounts;

          (ii)   Second, 100% to St. John until it has received an amount which
     equals its capital contribution to the Company previously made pursuant to
     Section 2.2 hereof but not returned to St. John; and
     -----------                                         

          (iii)  Thereafter, to the Members, in proportion to their Percentage
     Interests.

          (c)    No Member shall have any right to demand or receive property
other than cash upon dissolution and termination of the Company.

          (d)    Upon the completion of the liquidation of the Company and the
distribution of all Company funds, the Company shall terminate and the Members
or the Winding-Up Member, as the case may be, shall have the authority to
execute and record a certificate of cancellation of the Company, as well as any
and all other documents required to effectuate the dissolution and termination
of the Company.

          10.4   Deemed Distribution and Recontribution.  Notwithstanding any
                 --------------------------------------                      
other provisions of this Article X, in the event the Company is liquidated
                         ---------                                        
within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g) but no
Liquidating Event has occurred, the Property shall not be liquidated, the
Company's liabilities shall not be paid or discharged, and the Company's affairs
shall not be wound up.  Instead, the Company shall be deemed to have distributed
the Property in kind to the Members, who shall be deemed to have assumed and
taken subject to all Company liabilities, all in accordance with their
respective Capital Accounts.  Immediately thereafter, the Members shall be
deemed to have recontributed the Property in kind to the Company, which shall be
deemed to have assumed and taken subject to all such liabilities.

          10.5   Rights of Members.  Except as otherwise provided in this
                 -----------------                                       
Agreement, (a) each Member shall look solely to the assets of the Company for
the return of its Capital Contributions, and (b) no Member shall have priority
over any other Member as to the return of its Capital Contributions,
distributions, or allocations as a Member.

          10.6   Notices of Dissolution.  In the event a Liquidating Event 
                 ----------------------   
occurs or an event occurs that would, but for provisions of Section 10.1 hereof,
                                                            ------------ 
result in a dissolution of the Company, the Chief Executive Officer shall,
within 30 days thereafter, (a) provide written notice thereof to each of the
Members and to all other parties with whom the Company regularly conducts
business (as determined in the discretion of the Chief Executive Officer), and
(b) comply, in a timely manner, with all filing and notice requirements under
the Act or any other applicable law.

          10.7   Reasonable Time for Winding Up.  A reasonable time shall be
                 ------------------------------                             
allowed for the orderly winding up of the business and affairs of the Company
and the liquidation of its assets in order to minimize any losses that might
otherwise result from such winding up.

                                       20
<PAGE>
 
          10.8  Covenant Not to Withdraw or Dissolve.  Except as otherwise
                ------------------------------------                      
expressly required or permitted hereby, each Member hereby covenants and agrees
not to (a) take any action to file a certificate of dissolution or its
equivalent with respect to itself, (b) take any action that would cause a
bankruptcy of such Member, (c) withdraw or attempt to withdraw from the Company,
(d) exercise any power under the Act to dissolve the Company, (e) transfer all
or any portion of its Interest in the Company (other than to a Permitted
Transferee), (f) petition for judicial dissolution of the Company or subject the
Company or the Property to the authority or jurisdiction of any court of
bankruptcy, insolvency, receivership or other similar proceeding, (g) demand a
return of such Member's Capital Contributions or Profits (or a bond or other
security for the return of such Capital Contributions or Profits) without the
unanimous consent of the Members or (h) pledge, encumber or hypothecate its
Interest in the Company.


          10.9  No Deficit Restoration.  No Member shall be personally liable 
                ----------------------      
for a deficit Capital Account balance of that Member, it being expressly
understood that the distribution of liquidation proceeds shall be made solely
from existing Company assets.


                                  ARTICLE XI

                                INDEMNIFICATION

          11.1  Mandatory Indemnification.  The Company shall, to the extent of
                -------------------------                                      
its existing capital, its assets and, if insured for such purposes, its
insurance coverage for such purposes, indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a Managing
Director, Member, Officer, employee or agent of the Company, or by reason of the
fact that such person at the request of the Company is or was serving as a
manager, director, officer, employee or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise,
against all expenses, including, without limitation, attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding (the "Indemnified
Costs"), if such person, in relation to the facts, events and circumstances on
which such action, suit or proceeding is based, acted in good faith and in a
manner that such person reasonably believed to be in or not opposed to the best
interests of the Company.  Notwithstanding anything to the contrary provided in
this Section 11.1, the Company shall not indemnify any person for any
     ------------                                                    
Indemnified Costs (i) for which payment is actually made to such person under a
valid and collectible insurance policy, except for any excess beyond the amount
of payment under the policy, (ii) resulting from the person's conduct which is
finally adjudged by a court of competent jurisdiction to have been willful
misconduct, knowingly fraudulent or deliberately dishonest, or (iii) if a court
of competent jurisdiction shall finally determine that such payment is unlawful.

                                       21
<PAGE>
 
          11.2  Indemnification:  Authorization and Scope.  The expenses
                -----------------------------------------               
incurred by the indemnified person in connection with any threatened, pending or
completed action, suit or proceeding shall be paid promptly by the Company in
advance of the final disposition of the matter at the written request of the
indemnified person; provided, however, that such person shall have first
delivered to the Company a written undertaking to repay promptly any such
advances if it is determined by a court of competent jurisdiction that such
person is not entitled to indemnification from the Company under this Agreement
or otherwise.  Notwithstanding anything to the contrary provided in this
Agreement, the Company's indemnity obligations hereunder shall be limited to the
Company's capital and assets and insurance existing as of the date on which the
Company receives a demand for indemnity.  In furtherance of such indemnity
obligations, no Member shall be required to contribute any additional capital to
the Company or otherwise to fund the Company's indemnity obligations under this
Article XII.
----------- 

          11.3  Maintenance of Insurance or Other Financial Arrangements.  In
                --------------------------------------------------------     
compliance with applicable law, the Company (acting with the approval of its
Board) may purchase and maintain insurance or make other financial arrangements
on behalf of any person who is or was a Managing Director, Member, Officer,
employee or agent of the Company, or at the request of the Company is or was
serving as a manager, director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, for any liability asserted against such person and liability and
expenses incurred by such person in such person's capacity as a Managing
Director, Member, Officer, employee or agent, or arising out of such person's
status as such, whether or not the Company has the authority to indemnify such
person against such liability and expenses.

          11.4  Rights Non-Exclusive.  The indemnification rights set forth in
                --------------------                                          
this Section shall be in addition to, and shall not be exclusive of, any other
rights to which such persons may be entitled by contract or otherwise under
applicable law.


                                  ARTICLE XII

                           SALE OF CATALOG BUSINESS


          12.1  Sale of Catalog Business.  Amen Wardy Inc., Amen Wardy, Sr., Bob
                ------------------------                                        
Hightower, and Amen Wardy, Jr. each hereby immediately and irrevocably sells,
assigns and conveys to the Company all rights with respect to the catalog
business operated in connection with the Aspen Store (the "Catalog Business")
along with certain other assets related to the Catalog Business, including, but
not limited to, good will, manufacturing sources and information, customer lists
and other know-how.  Amen Wardy, Jr. shall implement the Catalog Business for
the Company.  St. John shall set the margins and prices of products sold through
the Catalog Business and use its reasonable and prudent efforts to support the
Catalog Business for the Company.

                                       22
<PAGE>
 
          12.2  Catalog Sales Fee.
                ----------------- 

          (a)   In consideration for the sale and assignment of the Catalog
Business and the implementation of the Catalog Business for the Company, the
Company shall pay to Amen Wardy Inc. and Amen Wardy, Jr. a sales fee of two
percent (2%) of the Net Catalog Sales (the "Catalog Sales Fee").  Net Catalog
Sales means the price charged to customers for the products sold through the
Catalog Business, less customary trade discounts, return rebates and federal
excise taxes.

          (b)   The Catalog Sales Fee shall commence on the first commercial
catalog sale by the Company under the Catalog Business and shall continue for so
long as Amen Wardy, Jr. is an Officer of the Company and the Company makes
commercial catalog sales.  If Amen Wardy, Jr. is no longer an Officer of the
Company, (i) the payment of the Catalog Sales Fee to Amen Wardy, Jr. and Amen
Wardy Inc. shall terminate upon the earlier of (a) five years from the date Amen
Wardy, Jr. ceases to be an Officer of the Company and (b)  the date after the
date Amen Wardy, Jr. ceases to be an Officer of the Company when the period of
time measured by Amen Wardy, Jr.'s tenure as an Officer of the Company elapses,
and (ii) the Catalog Sales Fee payable by the Company to Amen Wardy, Jr. and
Amen Wardy Inc. after the date Amen Wardy, Jr. is no longer an Officer of the
Company shall not exceed (x) $1 million in any fiscal year, and (y) $5 million
in the aggregate.  In the event the Catalog Sales Fee exceeds $1 million in any
fiscal year after the date Amen Wardy, Jr. is no longer an Officer of the
Company, neither Amen Wardy, Jr. nor Amen Wardy Inc. shall be entitled to
receive any of such excess amounts in any subsequent fiscal year.

          (c)   The Company shall keep complete and accurate records in
accordance with GAAP on Net Catalog Sales by the Company. On or before the
sixtieth (60th) day after the end of each fiscal quarter of the Company in which
a commercial catalog sale by the Company occurs, the Company shall furnish Amen
Wardy Inc. and Amen Wardy, Jr. with a written report setting forth the Net
Catalog Sales during such fiscal quarter, together with a calculation of the
Catalog Sales Fee due on reported catalog sales. Such report shall be
accompanied by any Catalog Sales Fee payment shown thereon to be due.  The
Company shall provide Amen Wardy Inc. and Amen Wardy, Jr. such records as Amen
Wardy Inc. and Amen Wardy, Jr. shall reasonably request to enable them to review
the calculation of Net Catalog Sales.

          (d)   If Amen Wardy, Jr. or Amen Wardy Inc. fails to notify the
Company in writing, within (30) business days following the delivery of the
written report setting forth the calculation of the Catalog Sales Fee due, of
any objections to such calculation, their failure to so timely object shall
constitute approval of such calculation.  If Amen Wardy, Jr. and/or Amen Wardy
Inc. timely objects, Amen Wardy, Jr. and/or Amen Wardy Inc. and the Company
shall use their best efforts to resolve any differences with respect to such
calculations. In the event the Company and Amen Wardy, Jr. and/or Amen Wardy
Inc. are unable to reach an agreement and Amen Wardy, Jr. is no longer an
Officer of the Company, Amen Wardy Jr. and/or Amen Wardy Inc. shall have the
right to cause an independent accounting firm mutually acceptable to both
parties (the "Reviewer") to perform a review

                                       23
<PAGE>
 
(the "Review") of the calculations to resolve such dispute.  Amen Wardy, Jr.
and/or Amen Wardy Inc. may cause only one Review in each of the Company's fiscal
years during the term of the payment of the Catalog Sales Fee; provided, however
that any one such Review may address the calculations of the Catalog Sales Fee
(i) which have been set forth in the written reports delivered by the Company to
Amen Wardy, Jr. and Amen Wardy Inc. during the twelve months preceding the date
of such Review and (ii) which have not been subject to a prior Review.  Such
firm shall act as arbitrator, and its conclusions shall be conclusive hereunder,
absent fraud or manifest error.  Any upward adjustment to the Catalog Sales Fee
due pursuant to this Section 12.2 shall be paid promptly by the Company to Amen
                     ------------                                              
Wardy, Jr. and Amen Wardy Inc. and any downward adjustment to such fee shall be
paid promptly by Amen Wardy, Jr. and Amen Wardy Inc. to the Company.  Amen
Wardy, Jr. and Amen Wardy Inc. shall pay all of the fees and expenses in
connection with the Review, unless the Catalog Sales Fee due to Amen Wardy, Jr.
and Amen Wardy Inc. is adjusted upward by at least 5% as a result of the Review,
in which case the Company shall pay all such fees and expenses.

                                 ARTICLE XIII

                                 MISCELLANEOUS

          13.1  Intellectual Property of the Company.  The name "Amen Wardy Home
                ------------------------------------                            
Stores" shall be the sole property of the Company.  Except as provided in
Section 5.1(h)(x) hereof, any agreement including, without limitation, any
-----------------                                                         
rights under trademark (including, but not limited to, the name "Amen Wardy Home
Stores"), copyright, patent, trade secrets, know-how or other proprietary
rights, to permit the use of any intellectual property of the Company by
assignment, license or otherwise shall be made by a vote of the majority of the
Board of Managing Directors.   Amen Wardy, Sr., Amen Wardy, Jr. and Amen Wardy
Inc. each hereby immediately and irrevocably sells, assigns and conveys to the
Company manufacturing sources and information, customer lists and other know-how
related to the Aspen Store and certain trademarks; provided, however that Amen
Wardy, Sr., Amen Wardy, Jr. and Amen Wardy, Inc. reserve the right to use such
manufacturing sources and customer lists in connection with the Aspen Store as
currently operated in all material respects.  In connection with such
assignment, and with the sale and assignment of the Catalog Business as set
forth in Article XII hereto, Amen Wardy, Sr., Amen Wardy, Jr. and Amen Wardy
Inc. each hereby immediately and irrevocably sells,  assigns and conveys to the
Company (i) all right and title worldwide to the trademark "Amen Wardy" and the
right to use the name "Amen Wardy", "Amen", "A. Wardy", "Wardy", "A. Wardy Jr.",
"A. Wardy Sr." or any combination of such names and/or initials (the "Amen Wardy
Name") in association with home furnishing products or gifts and (ii) the right
to register as a trademark in any and all jurisdictions the Amen Wardy Name in
association with home furnishing products or gifts each in accordance with the
Assignments and/or Consents attached hereto as Exhibits D-1, E-1, E-2, F-1 and
F-2.  Amen Wardy, Sr., Amen Wardy, Jr. and Amen Wardy Inc. each agree that
neither Amen Wardy, Sr., Amen Wardy, Jr. nor Amen Wardy Inc. shall use the Amen
Wardy Name for any purpose related to home furnishing products and gifts as
further described in Schedule 13 hereto; provided, however, that Amen Wardy,

                                       24
<PAGE>
 
Sr., Amen Wardy, Jr. and Amen Wardy Inc. may use the Amen Wardy Name only in
Aspen, Colorado and then only in connection with the Aspen Store as currently
operated in all material respects.  If the Aspen Store is sold by Amen Wardy
Inc. as a going concern, upon the written request of Amen Wardy Inc., the
Company shall license the purchaser of the Aspen Store to use the trademark
"Amen Wardy" within the geographic area of Aspen, Colorado and solely in
connection with the Aspen Store as currently operated in all material respects,
royalty free and under usual and customary terms as mutually agreed upon by the
parties.

          13.2  Right of First Refusal.  The parties understand and agree that
                ----------------------                                        
St. John is entering into this Agreement in order to do business solely with
Amen Wardy, Sr., Amen Wardy, Jr. and Bob Hightower.  The parties further
understand and agree that it is their intent that the Interest of Amen Wardy LLC
or any Amen Wardy LLC Affiliate in the Company shall at all times be owned and
controlled, directly or indirectly, by one or more of Amen Wardy, Sr., Amen
Wardy, Jr. and/or Bob Hightower.  To these ends, Amen Wardy, Sr., Bob Hightower
and Amen Wardy, Jr. shall not transfer their ownership interests in Amen Wardy
LLC except pursuant to this Section 13.2.
                            ------------ 

          (a)   In the event (i) Amen Wardy LLC, any member of Amen Wardy LLC,
any entity which has been admitted as a Permitted Transferee of Amen Wardy LLC
pursuant to Section 7.2 hereof, or any owner of such Permitted Transferee (the
            -----------                                                       
"Amen Wardy Offerees") receives a bona fide offer from a third party and agrees
to enter a transaction  with such third party which would likely result in an
Amen Wardy Change of Control Event (as defined in Exhibit A) or (ii) any of such
Amen Wardy Offerees desires to enter into a transaction with a third party which
may result in an Amen Wardy Change of Control Event (collectively, the "Offered
Transactions" and individually, an "Offered Transaction"), then such Amen Wardy
Offeree shall, within three business days thereof, deliver to St. John written
notice (the "Option Notice") setting forth in detail the circumstances of such
transaction.  Within 30 days after receipt of the Option Notice by St. John, St.
John may elect to enter into the Offered Transaction upon economic terms and
conditions similar in all material respects to such terms and conditions
provided in the Option Notice.  If St. John does not elect to enter into the
Offered Transaction within the 30-day period, the Amen Wardy Offeree may, within
90 days after the expiration of such 30-day period, consummate the Offered
Transaction with the third party, but only upon the terms and conditions
described in the Option Notice and only if such third party shall agree in
writing to be subject to restrictions similar to those restrictions contained in
Sections 7.1, 7.2 and 13.2 hereof (with appropriate modifications as required by
--------------------------                                                      
the identity of the third party to give effect to the provisions of this
Agreement).  If the Offered Transaction is not consummated by the Amen Wardy
Offeree during such 90-day period, then such transaction shall again become
subject to this Section 13.2.
                ------------ 

          (b)   In the event of (i) an involuntary transfer, bequest, devise or
gift of (x) Amen Wardy, Jr.'s, Amen Wardy, Sr.'s or Bob Hightower's ownership
interests in Amen Wardy LLC, or (y) any Amen Wardy LLC Affiliate's ownership
interest in any other Amen Wardy LLC Affiliate that owns, either directly or
indirectly, an Interest in the Company, or

                                       25
<PAGE>
 
(ii) the appointment of a trustee, conservator, guardian or other similar
official to manage the affairs of Amen Wardy, Sr., Amen Wardy, Jr., Bob
Hightower, or any other Amen Wardy LLC Affiliate if such Amen Wardy LLC
Affiliate owns, either directly or indirectly, an Interest in the Company and
such trustee, conservator, guardian or similar official is not dismissed or
discharged within sixty (60) days of such appointment (collectively, the
"Transfer Events" and individually, a "Transfer Event"), then Amen Wardy LLC,
within three business days thereof, shall deliver to St. John written notice
(the "Transfer Event Notice") setting forth in detail the circumstances of such
Transfer Event.  Within 45 days after receipt of the Transfer Event Notice by
St. John, St. John may elect to purchase the entire Interest of Amen Wardy LLC
and any Amen Wardy LLC Affiliate in the Company at the then fair market value of
such Interest, without regard to minority, transferability or other discount, as
determined in writing by a neutral third party mutually acceptable to St. John
and Amen Wardy LLC (the "Appraiser").  If St. John makes an election to purchase
the Interest of Amen Wardy LLC or any Amen Wardy LLC Affiliate within such 45-
day period, St. John shall purchase such Interest within ten business days of
the written determination of fair market value of such Interest by the
Appraiser.  Notwithstanding the foregoing, St. John shall not have the right to
purchase the Interest of Amen Wardy LLC or any Amen Wardy LLC Affiliate under
this Section 13.2(b) in the event of an involuntary transfer, bequest, devise or
     ---------------                                                            
gift as described in Section 13.2(b)(i) herein if (a) such transfer, bequest,
devise or gift is made solely to an Amen Wardy LLC Affiliate, (b) after such
transfer, bequest, devise or gift, Amen Wardy, Jr., Amen Wardy, Sr. and/or Bob
Hightower own, either individually or collectively and either directly or
indirectly, at least 80% of the Interest of Amen Wardy LLC or any Amen Wardy LLC
affiliate in the Company, and (c) such transferee, legatee, devisee or donee, as
the case may be, shall agree in writing to be subject to restrictions similar to
those contained in Sections 7.1, 7.2 and 13.2 hereof (with appropriate
                   --------------------------                         
modifications as required by the identity of the transferee to give effect to
the provisions of this Agreement).

          (c)   The rights of first refusal contained in this Section 13.2 shall
                                                              ------------      
terminate upon the closing of the first underwritten public offering pursuant to
an effective registration statement under the Securities Act of 1933, as amended
covering the offering and sale of securities of the Company.

          13.3  Ownership of Amen Wardy LLC.  As of the date hereof, Amen Wardy,
                ---------------------------                                     
Jr., Amen Wardy, Sr. and Bob Hightower each jointly and severally represent,
warrant, covenant and agree that Amen Wardy, Jr. owns a 50% membership interest
and Amen Wardy, Sr. and Bob Hightower own a 50% membership interest in Amen
Wardy LLC.

          13.4  Services by St. John.  St. John hereby agrees that any service
                --------------------                                          
St. John performs for the Company while St. John is a Member of the Company
shall be at St. John's direct cost, unless otherwise agreed to by all of the
Members.  Nothing contained in this Section 13.4 shall obligate St. John to
                                    ------------                           
perform services for the Company.

                                       26
<PAGE>
 
          13.5   Amendments; Waivers.  This Agreement and any Exhibit attached
                 -------------------                                          
hereto may be amended only by an agreement in writing of all Members; provided,
however that the written consent of Amen Wardy, Sr., Amen Wardy, Jr. and Bob
Hightower is required to amend Sections 8.1, 8.2, 12.1, 12.2, 13.1, 13.2, 13.3,
13.5 and 13.14 hereof and the written consent of Amen Wardy Inc. is required to
amend Sections 12.1, 12.2, 13.1, 13.5 and 13.14 hereof.  No waiver of any
provision or default under, nor consent to any exception to, the terms of this
Agreement or any agreement contemplated hereby shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.

          13.6   Further Assurances.  Each party agrees that it will from time 
                 ------------------   
to time, upon the reasonable request of another party, execute such documents
and instruments and take such further action as may be required to accomplish
the purposes of this Agreement consistent with the terms hereof.

          13.7   Successors and Assigns.  All of the terms and provisions of 
                 ----------------------   
this Agreement shall be binding upon the Members and their respective successors
and assigns, but shall inure to the benefit of and be enforceable by the
successors and assigns of any Member only to the extent that they are permitted
successors and assigns (including Permitted Transferees) pursuant to the terms
hereof.  No party may assign its rights hereunder except as herein expressly
permitted.

          13.8   Entire Agreement.  This Agreement, together with all exhibits 
                 ----------------   
and schedules hereto, constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein and therein.

          13.9   Rights of Members Independent.  The rights available to the
                 -----------------------------                              
Members under this Agreement and at law shall be deemed to be several and not
dependent on each other and each such right accordingly shall be construed as
complete in itself and not by reference to any other such right.  Any one or
more and/or any combination of such rights may be exercised by a Member and/or
the Company from time to time and no such exercise shall exhaust the rights or
preclude another Member from exercising any one or more of such rights or
combination thereof from time to time thereafter or simultaneously.

          13.10  Governing Law.  This Agreement, and the legal relations between
                 -------------                                                  
the parties, shall be governed by and construed in accordance with the laws of
the State of California and any court action arising out of this Agreement shall
be brought in any court of competent jurisdiction within the State of
California, County of Orange.

          13.11  Headings.  The descriptive headings of the Articles, Sections
                 --------                                                     
and subsections of this Agreement are for convenience only and do not constitute
a part of this Agreement.

                                       27
<PAGE>
 
          13.12  Counterparts.  This Agreement and any amendment hereto or any
                 ------------                                                 
other agreement (or document) delivered pursuant hereto may be executed in one
or more counterparts and by different parties in separate counterparts.  All of
such counterparts shall constitute one and the same agreement (or other
document) and shall become effective (unless otherwise provided therein) when
one or more counterparts have been signed by each party and delivered to the
other party.

          13.13  Notices.  Any notice or other communication hereunder must be
                 -------                                                      
given in writing and (a) delivered in person, (b) transmitted by telex, telefax
or telecommunications mechanism, provided that any notice so given is also
mailed as provided in clause (c), or (c) mailed by certified or registered mail,
postage prepaid, receipt requested as follows:

          IF ST. JOHN, ADDRESSED TO:

          St. John Knits, Inc.
          17422 Derian Avenue
          Irvine, California  92713
          Telecopy:  (714) 223-3272
          Attn:  Mr. Robert Gray

          WITH A COPY TO:

          O'Melveny & Myers LLP
          610 Newport Center Drive, Suite 1700
          Newport Beach, California  92660-6429
          Telecopy:  (714) 669-6994
          Attn:  David A. Krinsky, Esq.

          IF TO THE COMPANY, ADDRESSED TO:

          Amen Wardy Home Stores, LLC
          17422 Derian Avenue
          Irvine, California  92713
          Telecopy:  (714) 223-3272
          Attn:  Chief Executive Officer

          IF TO AMEN WARDY LLC, AMEN WARDY, SR., BOB HIGHTOWER OR AMEN WARDY
          INC., ADDRESSED TO:

          AWH Direct, LLC, Amen Wardy Sr., Bob Hightower
           or Amen Wardy Home, Inc.
          210 South Galena
          Aspen, Colorado 81611
          Telecopy:  (970) 920-9163
          Attn:  Amen Wardy, Sr.

                                       28
<PAGE>
 
          WITH COPIES TO:

          The Busch Firm
          2532 Dupont Drive
          Irvine, California 92612-1254
          Telecopy:  (714) 474-7732
          Attn:  George Mulcaire, Esq.

          IF TO AMEN WARDY, JR., ADDRESSED TO:

          Amen Wardy, Jr.
          290 Magnolia Street
          Costa Mesa, California 92627
          Telecopy:  (714) 631-6699

          WITH COPIES TO:

          The Busch Firm
          2532 Dupont Drive
          Irvine, California 92612-1254
          Telecopy:  (714) 474-7732
          Attn:  George Mulcaire, Esq.

or to such other address or to such other person as either party shall have last
designated by such notice to the other party.  Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 3.13 and an appropriate answerback is received or, if transmitted after
------------                                                                   
4:00 p.m. local time on a business day in the jurisdiction to which such notice
is sent or at any time on a day that is not a business day in the jurisdiction
to which such notice is sent, then on the immediately following business day,
(ii) if given by mail, on the first business day in the jurisdiction to which
such notice is sent following the date three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, on the business day when actually received
at such address or, if not received on a business day, on the business day
immediately following such actual receipt.

          13.14  Representation By Counsel; Interpretation.  The Members and all
                 -----------------------------------------                      
signatories hereto acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement.  Accordingly, any rule of law, including but not
limited to Section 1654 of the California Civil Code, or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.

                                       29
<PAGE>
 
          13.15  Severability.  If any provision of this Agreement is determined
                 ------------                                                   
to be invalid, illegal or unenforceable by any governmental entity, the
remaining provisions of this Agreement, to the extent permitted by law shall
remain in full force and effect provided that the essential terms and conditions
of this Agreement for all parties remain valid, binding and enforceable.

          13.16  Meaning of Certain Terms.  The phrase "as currently operated in
                 ------------------------                                       
all material respects" as used in this Agreement to describe the Aspen Store is
intended by the parties to prohibit the Aspen Store from competing (to the
extent provided herein) with the Company through the marketing, sale, exchange
or distribution of home furnishing products and gifts (as defined in Schedule 13
hereto) in any location in the world, and to third parties located anywhere in
the world, other than in Aspen, Colorado; provided, however, that the Aspen
Store may ship goods to customers outside of Aspen, Colorado provided such
customers purchased such goods in the Aspen Store in Aspen, Colorado.  The
parties do not intend that such phrase restrict Amen Wardy in the day-to-day
operations of the Aspen Store, including the determination of the products sold
in the Aspen Store, the location of the Aspen Store in Aspen, Colorado, the
design of the Aspen Store, the business hours of the Aspen Store and the persons
employed by the Aspen Store, unless such day-to-day operations allow the Aspen
Store to compete with the Company anywhere in the world other than in Aspen,
Colorado.

                           [Signatures on Next Page]

                                       30
<PAGE>
 
          IN WITNESS WHEREOF, each of the parties hereto has caused this
  Agreement to be executed by its duly authorized officers as of the day and
  year first above written.

                                       ST. JOHN KNITS, INC.,  
                                       a California corporation
                                                               
                                                               
                                       By:       /s/ Robert E. Gray
                                              ----------------------------------
                                              Robert E. Gray     
                                              Chairman of the Board and Chief 
                                              Executive Officer
                                              
                                              
                                              
                                       AWH DIRECT, LLC,
                                       a Colorado limited liability company
                                                                           
                                                                           
                                       By:       /s/ Amen Wardy, Jr.       
                                              ----------------------------------
                                              Amen Wardy, Jr.  
                                              Its:             
                                                             
                                                     
                                       AMEN WARDY HOME STORES, LLC,
                                       a Delaware limited liability company
                                                                           
                                                                           
                                       By:       /s/ Amen Wardy, Jr.       
                                              ----------------------------------
                                            Amen Wardy, Jr.      
                                            Chief Executive Officer
                                                                   
                                                                   
                                                                   
                                            /s/ Amen Wardy, Sr.    
                                       -----------------------------------------
                                       Amen Wardy, Sr.    
                                                          
                                                          
                                                          
                                            /s/ Amen Wardy, Jr.
                                       -----------------------------------------
                                       Amen Wardy, Jr.  

                    [Signatures continue on the next page]

                                      S-1
<PAGE>
 
                                            /s/ Bob Hightower
                                       -----------------------------------------
                                       Bob Hightower



                                       AMEN WARDY HOME, INC.,
                                       a Colorado corporation


                                       By:       /s/ Amen Wardy, Sr.
                                              ----------------------------------
                                              Amen Wardy, Sr.
                                              Its:

                                      S-2
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                              GENERAL DEFINITIONS

          As used in this Agreement and the Exhibits attached to this Agreement,
the following definitions shall apply.

          "Act" means the Delaware Limited Liability Act as in effect on the
date hereof and as may be amended from time to time.

          "Affiliate" means an individual, corporation, partnership, limited
liability company, trust or other entity or organization (a "Person") that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, a specified Person, subject to
the last sentence of this paragraph. For purposes of this definition,
"controls," "is controlled by," or "is under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person or entity, whether through the ownership
of voting securities, by contract or otherwise. For purposes of this Agreement,
the following individuals and entities are deemed to be the only Affiliates of
Amen Wardy LLC: (i) Amen Wardy, Sr., (ii) Amen Wardy, Jr., (iii) Bob Hightower
or (iv) any corporation, partnership, limited liability company or other entity
of which 80% or more of the total voting power of such entity is directly or
indirectly owned by any one or a combination of Amen Wardy, Sr., Amen Wardy, Jr.
and Bob Hightower.

          An "Amen Wardy Change of Control Event" means (i) a transaction or
series of transactions which result in one or more "persons" (as that term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than an Amen Wardy LLC Affiliate, becoming
in the aggregate after the date hereof the "beneficial owner" or "beneficial
owners" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Amen Wardy LLC, any entity which has been admitted
as a Permitted Transferee of Amen Wardy LLC pursuant to Section 7.2 hereof or
                                                        ----------- 
any transferee under Section 13 hereof (collectively, the "Amen Wardy Entities" 
                     ---------- 
and individually, an "Amen Wardy Entity") representing 20% or more of the total
voting power represented by such Amen Wardy Entity's then outstanding voting
securities, (ii) a merger, reorganization or consolidation or other business
combination or similar transaction involving an Amen Wardy Entity and any other
limited liability company, corporation or other entity, other than a merger,
reorganization, consolidation or other business combination or similar
transaction which would result in the voting securities of such Amen Wardy
Entity outstanding immediately prior to such transaction continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the total voting power represented by the
voting securities of such Amen Wardy Entity or the surviving entity, as the case
may be, outstanding immediately after such transaction, (iii) the liquidation or
dissolution of an Amen Wardy Entity, unless 80% or more of the assets of such
entity are distributed solely to an Amen Wardy Affiliate or Amen Wardy
Affiliates, (iv) the sale or disposition by an Amen Wardy Entity (in one
transaction or

                                      A-1
<PAGE>
 
a series of transactions) of all or substantially all of such Amen Wardy
Entity's assets or (v) any transaction or series of transactions that result in
Amen Wardy, Sr., Amen Wardy, Jr. and/or Bob Hightower owning, either directly or
indirectly, less than 80% of the Interest of Amen Wardy LLC or any Amen Wardy
LLC Affiliate in the Company. Notwithstanding the foregoing, an Amen Wardy
Change of Control Event shall not include the sale of the Aspen Store as a going
concern or a Permitted Transfer to an Amen Wardy LLC Affiliate pursuant to
Section 7.2 hereof.
-----------        

          "Amen Wardy LLC Managing Directors" means the Managing Directors
designated by Amen Wardy in accordance with Sections 5.1(b) and (c) hereof.
                                            -----------------------        

          "Business Activities" means the development, design, operation or
management of retail home furnishing stores. Business Activities shall not
include the operation or management of the Aspen Store as currently operated in
all material respects.

          "Capital Contributions" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any property (other than money),
net of liabilities assumed or taken subject to by the Company, contributed to
the Company with respect to the Interest held by such Member pursuant to the
terms of this Agreement.

          "Code" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of succeeding law.)

          "Fiscal Year" means (i) the period commencing on the effective date of
this Agreement and ending on November 2, 1997 (ii) any subsequent 52-53 week
fiscal year ending on the Sunday nearest to October 31, or (iii) any portion of
the period described in clause (ii) for which the Company is required to
allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Article III hereof.
                      -----------        

          "GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time. 

          "Interest" shall mean the entire interest of a Member in the Company,
including all of such Member's rights, powers and privileges under this
Agreement and the Act.

          "Member" means any Person that executes this Agreement as a Member,
and any other Person admitted to the Company as an additional or substituted
Member, that has not made a disposition of such Person's entire Interest.

          "Percentage Interest" means, with respect to any Member, the
Percentage Interest set forth opposite such Member's name in Section 2.1.  In 
                                                             -----------
the event any Interest in the Company is transferred in accordance with the
provisions of Section 7.2(a) of this Agreement, the Permitted Transferee of
              --------------
such Interest shall succeed to the Percentage Interest of the transferor to the
extent it relates to the transferred Interest.

                                      A-2
<PAGE>
 
          "Permitted Transfer" means a transfer of an Interest in accordance
with Section 7.2(a) hereof.
     --------------------- 

          "St. John Managing Directors" means the Managing Directors designated
by St. John in accordance with Section 5.1(b) and (c) hereof.
                               ----------------------        


                                      A-3
<PAGE>
 
                                   EXHIBIT B
                                   ---------

                                TAX DEFINITIONS


          "Adjusted Basis" shall have the meaning given such term in Section
1011 of the Code.

          "Adjusted Capital Account Deficit" means the deficit balance, if any,
in such Member's Capital Account at the end of any Fiscal Year, with the
following adjustments:

          (i)    credit to such Capital Account any amount that such Member is
     obligated to restore under Treasury Regulations Section 1.704-
     1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to
     last sentences of the Treasury Regulations Sections 1.704-2(g)(1) and
     1.704-2(i)(5) after taking into account thereunder any changes during such
     year in Company Minimum Gain and in the minimum gain attributable to any
     Member Nonrecourse Debt; and

          (ii)   debit to such Capital Account the items described in Treasury
     Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and
shall be interpreted consistently therewith.

          "Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with Section 2.4 of this
Agreement.

          "Capital Contributions" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any property (other than money),
net of liabilities assumed or taken subject to by the Company, contributed to
the Company with respect to the Interest held by such Member pursuant to the
terms of this Agreement.


          "Code" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of succeeding law.)


          "Company Minimum Gain" has the meaning of "partnership minimum gain"
set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).  It is
further understood that Company Minimum Gain shall be determined in a manner
consistent with the rules of Regulations Section 1.702-2(b)(2) including,
without limitation, the requirement that if the adjusted Gross Asset Value of
property subject to one or more Nonrecourse Liabilities differs from its
adjusted tax basis, Company Minimum Gain shall be determined with reference to
such Gross Asset Value.

                                      B-1
<PAGE>
 
          "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its Adjusted Basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning Adjusted Basis; provided, however, that if the
Adjusted Basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Chief Financial Officer.

          "Economic Risk of Loss" means the determination of whether a Member
bears the economic risk of loss with respect to any partnership liability made
in accordance with Treasury Regulations Section 1.752-2 (without regard to
whether that Section otherwise applies to such liability).

          "Gross Asset Value" means, with respect to any asset, the asset's
Adjusted Basis for federal income tax purposes, except as follows:

          (i)    The initial Gross Asset Value of any asset contributed by a
     Member to the Company shall be the gross fair market value of such asset,
     as determined by the Members;

          (ii)   The Gross Asset Values of all Company assets shall be adjusted
     to equal their respective gross fair market values, as determined by the
     Chief Financial Officer, as of the following times: (a) the acquisition of
     an additional interest in the Company by any new or existing Member in
     exchange for more than a de minimis Capital Contribution; (b) the
                              ----------                              
     distribution by the Company to a Member of more than a de minimis amount of
                                                            ----------          
     Property as consideration for an interest in the Company; and (c) the
     liquidation of the Company within the meaning of Treasury Regulations
     Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant
                               -                                               
     to clauses (a) and (b) above shall be made only if the Chief Financial
     Officer reasonably determines that such adjustments are necessary or
     appropriate to reflect the relative economic interests of the Members in
     the Company;

          (iii)  The Gross Asset Value of any Company asset distributed to any
     Member shall be adjusted to equal the gross fair market value of such asset
     on the date of distribution as determined by the distributee and the Chief
     Financial Officer, provided that if the Chief Financial Officer is an
     employee or an Affiliate of the distributee, the determination of the fair
     market value of the distributed asset shall require the consent of a
     majority of the other Members; and

                                      B-2
<PAGE>
 
          (iv)   The Gross Asset Values of Company assets shall be increased (or
     decreased) to reflect any adjustments to the adjusted basis of such assets
     pursuant to Code Section 734(b) or Code Section 743(b), but only to the
     extent that such adjustments are taken into account in determining Capital
     Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and
     subsection (vi) in the definition of "Profits" and "Losses" below and
     Section 3.3 hereof; provided, however, that Gross Asset Values shall not be
     adjusted pursuant to this subsection to the extent the Chief Financial
     Officer determines that an adjustment pursuant to subsection (ii) of this
     definition is necessary or appropriate in connection with a transaction
     that would otherwise result in an adjustment pursuant to this subsection
     (iv).

          If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subsections(i), (ii) or (iv) of this definition of Gross Asset
Value, such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Profits
and Losses.

          "Member Minimum Gain" has the meaning of "partner nonrecourse debt
minimum gain" set forth in Treasury Regulations Section 1.704-2(i).  It is
further understood that the determination of Member Minimum Gain and the net
increase or decrease in Member Minimum Gain shall be made in the same manner as
required for such determination of Company Minimum Gain under Treasury
Regulations Sections 1.704-2(d) and -2(g)(3).

          "Member Nonrecourse Debt" has the meaning of "partner nonrecourse
debt" set forth in Section 1.704-2(b)(4) of the Treasury Regulations.

          "Member Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations.

          "Member Nonrecourse Deductions" has the meaning of "partner
nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Treasury Regulations.

          "Nonrecourse Debt" means any Company liability that is considered to
be nonrecourse for purposes of Treasury Regulation Section 1.1001-1 (without
regard to whether such liability is a recourse liability under Treasury
Regulations Section 1.752-2, and any Company liability for which the creditor's
right to repayment is limited to one or more assets of the Company.

          "Nonrecourse Deductions" has the meaning set forth in Section 1.704-
2(b)(1) of the Treasury Regulations.

                                      B-3
<PAGE>
 
          "Nonrecourse Liability" has the meaning set forth in Section 1.704-
2(b)(3) of the Treasury Regulations.

          "Profits" and "Losses" mean, for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

          (i)    any depreciation, amortization and/or cost recovery deductions
     with respect to any asset shall be deemed to be equal to the Depreciation
     available with respect to such asset;

          (ii)   any income or gain of the Company that is exempt from federal
     income tax and not otherwise taken into account in computing Profits or
     Losses shall be added to such taxable income or loss;

          (iii)  any expenditures of the Company described in Code Section
     705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
     to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
     taken into account in computing Profits or Losses, shall be subtracted from
     such taxable income or loss;

          (iv)   in the event the Gross Asset Value of any Company asset is
     adjusted pursuant to subsection (ii) or (iii) or the definition of Gross
     Asset Value above, the amount of such adjustment shall be taken into
     account as gain or loss from the disposition of such asset for purposes of
     computing Profits or Losses;

          (v)    gain or loss resulting from any disposition of Company assets
     with respect to which gain or loss is recognized for federal income tax
     purposes shall be computed with reference to the Gross Asset Value of the
     asset disposed of, notwithstanding that the adjusted tax basis of such
     asset differs from its Gross Asset Value;

          (vi)   to the extent an adjustment to the adjusted tax basis of any
     Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
     required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4)
                                                                         -  - 
     to be taken into account in determining Capital Accounts as a result of a
     distribution other than in liquidation of a Member's interest in the
     Company, the amount of such adjustment shall be treated as an item of gain
     (if the adjustment increases the basis of the asset) or loss (if the
     adjustment decreases the basis of the asset) from the disposition of the
     asset and shall be taken into account for purposes of computing Profits or
     Losses; and

                                      B-4
<PAGE>
 
          (vii)  any items of income, gain, loss or deduction which are
     individually allocated pursuant to the provisions of Article III hereof
     shall not be taken into account in computing Profits and Losses for any
     taxable year.

          "Section 704(c) Property" means (1) each item of Company property
which is contributed to the Company and to which section 704(c) of the Code or
Section 1.704-3(a)(3) of the Regulations applies, and (2) each item of Company
property which, as contemplated by Section 1.704-1(b)(4)(i) and other analogous
provisions of the Regulations, is governed by the principles of Section 704(c)
of the Code (or principles analogous to the principles contained in section
704(c) of the Code).

          "Tax Depreciation" means depreciation, accelerated cost recovery, or
modified cost recovery, and any other amortization, deductions allowed or
allowable with respect to any Company Property for federal income tax purposes.

          "Tax Matters Member" means the "tax matters member" as defined in
Section 9.4 and in Code Section 6231(a)(7).
-----------                                

          "United States Taxable Income" means taxable income for United States
federal income tax purposes as shown on Form K-1 for any tax year.

                                      B-5
<PAGE>
 
                                   EXHIBIT C
                                   ---------

                            FORM OF PROMISSORY NOTE

$___________                                                Irvine, California

                                                         ________________, _____

          FOR VALUE RECEIVED, Amen Wardy Home Stores, LLC, a Delaware limited
liability company (the "BORROWER"), promises to pay to St. John Knits, Inc., a
California corporation ("HOLDER"), at its place of business located at 17422
Derian Avenue, Irvine, California 92713 or such other place as may be designated
in writing by Holder, the principal amount of _______________________________
($_________) with interest on the principal amount at the rate of 8.5% per annum
(the "NOTE").  Principal and interest shall be due and payable three (3) years
from the date hereof.

          Interest only payments under this Note shall be payable every six (6)
months, beginning on the date hereof and continuing semiannually thereafter
through __________, ______, on which date the principal, any unpaid interest and
all other sums due hereunder this Note shall be paid in full.

          Borrower may prepay without penalty this Note in full at any time
together with any interest due up to the date of payment.  Borrower shall be in
default of this Note if any payment of principal or interest is not made within
10 days after receipt of written notice by such Borrower that such payment is
due.  Upon the occurrence of a default, all principal, interest, and any other
sums due in accordance with the terms of this Note shall, at Holder's option, be
immediately due and payable.

          This Note shall be binding on Borrower, its representatives and
successors and shall inure to the benefit of and shall be enforceable by Holder,
its successors and assigns.  This Note may not be changed, modified, amended, or
terminated orally, but the foregoing may be done in writing by authorized
representatives of the parties.  If Holder shall institute legal action to
enforce payment hereof, Borrower agrees, in addition to any other payments
required hereunder, to pay all reasonable expenses of collection, including
attorneys' fees.  This Note shall be governed by and construed in accordance
with the laws of the State of California.

          IN WITNESS THEREOF, Borrower has caused this Note to be executed and
delivered as of the date first above written.

                                       AMEN WARDY HOME STORES, LLC,
                                       a Delaware limited liability company

                                       By: _______________________________
                                       Name: _____________________________
                                       Title: ____________________________ 

                                      C-1
<PAGE>
 
                                  EXHIBIT D-1
                                  -----------


               TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION


     WHEREAS,  pursuant to that certain Operating Agreement, dated concurrently
herewith, by and between Amen Wardy Home, Inc., a Colorado corporation
("Assignor"), Amen Wardy Home Stores, LLC ("Assignee") and certain other
parties, Assignor has assigned, sold and conveyed certain assets related to its
Aspen store and catalog business including the good will related thereto and its
manufacturing sources and information, customer lists and other know-how related
thereto;

     WHEREAS, Assignor has adopted, used, is using and is the owner of the
trademarks and corresponding U.S. Trademark Registrations listed in Attachment A
hereto (the "Marks");

     WHEREAS, Assignee desires to acquire the trademarks and the registrations
thereof;

     WHEREAS, Assignee desires to obtain the worldwide right to use and register
the name and likeness of Assignor in connection with the advertisement,
promotion and sale of all products and services generally described in
Attachment B hereto (the "Products and Services"); and

     WHEREAS, Assignor has the authority to grant the worldwide right to use and
register Assignor's name, likeness, and endorsement to Assignee in connection
with the advertisement, promotion and sale of the Products and Services and
desires to do so;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the premises
and of the mutual promises and conditions herein contained, the parties do
hereby agree as follows:

     Assignor hereby sells, assigns and transfers to Assignee, its successors
and assigns, absolutely and forever, the entire worldwide right, title and
interest, whether statutory or at common law, in and to the Marks, together with
the goodwill of the business symbolized by the Marks and all registrations
therefor, in the United States of America, its territories and possessions and
all other countries in which the Marks are or may be used, together with all
causes of action for any and all previously occurring infringements of the
rights being assigned and the right to receive and retain the proceeds relating
to those infringements.

     Assignor shall execute, without incurring any material cost to such
Assignor, any further documents and do such other acts as may be reasonably
necessary and proper to vest full title in and to the Marks in Assignee in any
jurisdiction Assignee may desire.

                                      D-1
<PAGE>
 
     Assignor hereby consents to the use and registration by Assignee of
Assignor's name, in whole or in part, as a trademark or service mark for the
Products and Services.

     Assignor shall execute any further documents and do such other acts as may
be necessary and proper to: (i) register Assignor's name, in whole or in part,
as a trademark or service mark for the Products and Services in any jurisdiction
Assignee may desire ("Name Marks"), and (ii) vest full title in and to the Name
Marks in Assignee.

                                      D-2
<PAGE>
 
     IN WITNESS WHEREOF, Assignor has caused this assignment, consent and grant
to be duly executed in a manner appropriate thereto as of the ____ day of
__________, 1997.

                                       ________________________________
                                       Name:

                                       ________________________________
                                       Title:                          

                                       ________________________________



STATE OF TEXAS               )

COUNTY OF _________________  )



     Before me, _______________________, a Notary Public, on this day personally
appeared _______________, known to me (or proved to me on the oath of
____________) to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed.

     Given under my hand and seal of office this ___ day of ____________, 1997.




_______________________________ (Seal)
(Notary Public Signature)

                                      D-3
<PAGE>
 
       ATTACHMENT A TO TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION

               U.S. REGISTERED TRADEMARKS/COMMON LAW TRADEMARKS

<TABLE>
<CAPTION>
Trademark                    Serial No.                    Registration Date
-------------                ----------                    -----------------
<S>                          <C>                           <C>              
                                                                            
Amen Wardy                   73-561,727                    June 17, 1986    
                                                                            
Amen Wardy                   73-561,940                    July 15, 1986     
</TABLE>

                                      D-4
<PAGE>
 
       ATTACHMENT B TO TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION

                             PRODUCTS AND SERVICES



     Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                      D-5
<PAGE>
 
                                  EXHIBIT E-1
                                  -----------


               TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION


     WHEREAS, Amen Wardy, Sr. ("Assignor") has the authority to grant the
worldwide right to use and register Assignor's name, likeness, and endorsement
to Assignee in connection with the advertisement, promotion and sale of all
products and services generally described in Attachment A hereto (the "Products
and Services");

     WHEREAS, Amen Wardy Home Stores, LLC, a Delaware limited liability company
("Assignee") desires to obtain the worldwide right to use and register the name
and likeness of Assignor in connection with the advertisement, promotion and
sale of the Products and Services and desires to do so; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the premises
and of the mutual promises and conditions herein contained, the parties do
hereby agree as follows:

     Assignor hereby grants to Assignee, its successors and assigns, absolutely
and forever, the worldwide right to use Assignor's name, in whole or in part, in
connection with the advertisement, promotion and sale of the Products and
Services in the United States of America, its territories and possessions and
all other countries in which the trademarks may be used.

     Assignor shall execute any further documents and do such other acts as may
be necessary and proper to give effect to the foregoing.

     Assignor hereby consents to the use and registration by Assignee of
Assignor's name, in whole or in part, as a trademark or service mark for the
Products and Services.

     Assignor shall execute, without incurring any material cost to such
Assignor, any further documents and do such other acts as may be reasonably
necessary and proper to: (i) register Assignor's name, in whole or in part, as a
trademark or service mark for the Products and Services in any jurisdiction
Assignee may desire ("Name Marks"), and (ii) vest full title in and to the Name
Marks in Assignee.

                                     E-1-1
<PAGE>
 
     IN WITNESS WHEREOF, Assignor has caused this assignment, consent and grant
to be duly executed in a manner appropriate thereto as of the ____ day of
__________, 1997.


                                       ________________________________
                                       Name:

                                       ________________________________
                                       Title:

                                       ________________________________


STATE OF TEXAS                )

COUNTY OF _________________   )



          Before me, _______________________, a Notary Public, on this day
personally appeared _______________, known to me (or proved to me on the oath of
____________) to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed.

          Given under my hand and seal of office this ___ day of ____________,
1997.



_______________________________ (Seal)
(Notary Public Signature)

                                     E-1-2
<PAGE>
 
       ATTACHMENT A TO TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION

                             PRODUCTS AND SERVICES



     Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                     E-1-3
<PAGE>
 
                                  EXHIBIT E-2
                                  -----------

                          GRANT OF RIGHT OF PUBLICITY


     WHEREAS, Amen Wardy, Sr., ("Assignor") has the authority to grant the
worldwide right to use Assignor's name, likeness, and endorsement to Assignee in
connection with the advertisement, promotion and sale of all products and
services generally described in Attachment A hereto (the "Products and
Services") and desires to do so;

     WHEREAS, Amen Wardy Home Stores, LLC, a Delaware limited liability company
("Assignee") desires to obtain the worldwide right to use the name, likeness and
endorsement of Assignor in connection with the advertisement, promotion and sale
of the Products and Services; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the premises
and of the mutual promises and conditions herein contained, the parties do
hereby agree as follows:

     Assignor, hereby grants to Assignee the exclusive, worldwide and perpetual
right to use Assignor's name, likeness, and endorsements on and in connection
with the distribution, advertisement, promotion and sale of the Products and
Services in any marketing area in which Assignee now and hereafter does
business.

     IN WITNESS WHEREOF, Assignor has caused this assignment, consent and grant
to be duly executed in a manner appropriate thereto as of the ____ day of
__________, 1997.


                                       ________________________________
                                       Name:                           

                                       ________________________________
                                       Title:                          

                                       ________________________________ 

                                     E-2-1
<PAGE>
 
STATE OF TEXAS                )

COUNTY OF _________________   )



          Before me, _______________________, a Notary Public, on this day
personally appeared _______________, known to me (or proved to me on the oath of
____________) to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed.

          Given under my hand and seal of office this ___ day of ____________,
1997.



_______________________________ (Seal)
(Notary Public Signature)

                                     E-2-2
<PAGE>
 
                  ATTACHMENT A TO GRANT OF RIGHT OF PUBLICITY

                             PRODUCTS AND SERVICES


     Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                     E-2-3
<PAGE>
 
                                  EXHIBIT F-1
                                  -----------

               TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION


     WHEREAS, Amen Wardy, Jr. ("Assignor") has the authority to grant the
worldwide right to use and register Assignor's name, likeness, and endorsement
to Assignee in connection with the advertisement, promotion and sale of all
products and services generally described in Attachment A hereto (the "Products
and Services");

     WHEREAS, Amen Wardy Home Stores, LLC, a Delaware limited liability company
("Assignee") desires to obtain the worldwide right to use and register the name
and likeness of Assignor in connection with the advertisement, promotion and
sale of the Products and Services and desires to do so; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the premises
and of the mutual promises and conditions herein contained, the parties do
hereby agree as follows:

     Assignor hereby grants to Assignee, its successors and assigns, absolutely
and forever, the worldwide right to use Assignor's name, in whole or in part, in
connection with the advertisement, promotion and sale of the Products and
Services in the United States of America, its territories and possessions and
all other countries in which the trademarks may be used.

     Assignor shall execute any further documents and do such other acts as may
be necessary and proper to give effect to the foregoing.

     Assignor hereby consents to the use and registration by Assignee of
Assignor's name, in whole or in part, as a trademark or service mark for the
Products and Services.

     Assignor shall execute, without incurring any material cost to such
Assignor, any further documents and do such other acts as may be reasonably
necessary and proper to: (i) register Assignor's name, in whole or in part, as a
trademark or service mark for the Products and Services in any jurisdiction
Assignee may desire ("Name Marks"), and (ii) vest full title in and to the Name
Marks in Assignee.

                                     F-1-1
<PAGE>
 
     IN WITNESS WHEREOF, Assignor has caused this assignment, consent and grant
to be duly executed in a manner appropriate thereto as of the ____ day of
__________, 1997.


                                       ________________________________
                                       Name:                           

                                       ________________________________
                                       Title:                          

                                       ________________________________ 



STATE OF CALIFORNIA           )

COUNTY OF __________________  )



          On ___________, 19___, before me, ____________________, a Notary
Public in and for said State, personally appeared
_______________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

          WITNESS my hand and official seal.



Signature  ________________________________ (Seal)

                                     F-1-2
<PAGE>
 
       ATTACHMENT A TO TRADEMARK ASSIGNMENT AND CONSENT TO REGISTRATION

                             PRODUCTS AND SERVICES



     Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                     F-1-3
<PAGE>
 
                                  EXHIBIT F-2
                                  -----------

                          GRANT OF RIGHT OF PUBLICITY


     WHEREAS, Amen Wardy, Jr., ("Assignor") has the authority to grant the
worldwide right to use Assignor's name, likeness, and endorsement to Assignee in
connection with the advertisement, promotion and sale of all products and
services generally described in Attachment A hereto (the "Products and
Services") and desires to do so;

     WHEREAS, Amen Wardy Home Stores, LLC, a Delaware limited liability company
("Assignee") desires to obtain the worldwide right to use the name, likeness and
endorsement of Assignor in connection with the advertisement, promotion and sale
of the Products and Services; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the premises
and of the mutual promises and conditions herein contained, the parties do
hereby agree as follows:

     Assignor, hereby grants to Assignee the exclusive, worldwide and perpetual
right to use Assignor's name, likeness, and endorsements on and in connection
with the distribution, advertisement, promotion and sale of the Products and
Services in any marketing area in which Assignee now and hereafter does
business.

     IN WITNESS WHEREOF, Assignor has caused this assignment, consent and grant
to be duly executed in a manner appropriate thereto as of the ____ day of
__________, 1997.


                                       ________________________________
                                       Name:                           

                                       ________________________________
                                       Title:                          

                                       ________________________________ 

                                     F-2-1
<PAGE>
 
STATE OF CALIFORNIA           )

COUNTY OF _________________   )



          On ___________, 19___, before me, ____________________, a Notary
Public in and for said State, personally appeared
_______________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

          WITNESS my hand and official seal.



Signature  ________________________________ (Seal)

                                     F-2-2
<PAGE>
 
                  ATTACHMENT A TO GRANT OF RIGHT OF PUBLICITY

                             PRODUCTS AND SERVICES



         Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                     F-2-3
<PAGE>
 
                                  SCHEDULE 13

                      HOME FURNISHING PRODUCTS AND GIFTS



          Any and all home furnishing products and services, including, without
limitation, all types of window coverings, wall coverings, paints, floor
coverings, furniture, linens, art objects, accent pieces, architectural
treatments, china, dishware, flatware, stemware, cookware, bed and bath items
and home accessories.

                                 Schedule 13-1