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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
JULY 15, 1997
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Date of Report
(Date of earliest event reported)
ARIS INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 1-4814 22-1715275
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
475 FIFTH AVENUE, NEW YORK, NEW YORK 10017
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(Address of registrant's principal executive offices)
(212) 686-5050
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1997, Aris Management Corp.("AMC"), an indirect wholly owned
subsidiary of the Registrant, acquired substantially all the assets of Davco
Industries, Inc.("Davco"), a maker of men's and boy's sportswear, activewear,
swimwear and loungewear under the "Perry Ellis", "Perry Ellis America" and
"Jeffrey Banks" labels. The acquisition was implemented on such Closing Date
pursuant to an Asset Purchase Agreement of the same date, between Davco as
Seller, Steven Arnold and Christopher Healy as Shareholders of Seller and AMC as
the Purchaser(the "Asset Purchase Agreement"). Davco's shareholders, Steven
Arnold("SA") and Christopher Healy("CH"), each entered into employment
agreements with AMC to manage the Davco business as owned by AMC. The purchase
price to be paid by AMC for such assets consisted of (a) the issuance by
Registrant to Davco of 3,000,000 shares of the restricted Common Stock of the
Registrant and (b) a contingent cash purchase price to Davco to be computed as
the pre-tax net income of the Davco apparel business as owned by AMC from the
closing date through December 31, 1997 (subject to certain adjustments), but not
to exceed a maximum payment of $3,600,000, such cash amount payable
approximately April, 1998. On the Closing Date, AMC paid to Davco $500,000 as an
advance towards the contingent cash purchase price and agreed to pay an
additional advance following completion of AMC's third fiscal quarter ending
September 30, 1997 equal to twenty-five (25%) of AMC's pre-tax net income from
the Davco apparel business through such date. AMC's source of funds for the cash
payments of the purchase price will be its internally generated funds and
working capital credit lines. AMC is a wholly-owned subsidiary of Europe Craft
Imports, Inc. ("ECI"); ECI is a wholly-owned subsidiary of the Registrant.
Subsequent to the closing of the acquisition, AMC changed its corporate name to
ECI Sportswear, Inc.
Immediately following the issuance of 3,000,000 shares of the Registrant's
Common Stock to Davco, the Registrant will have issued and outstanding
14,852,544 shares of Common Stock, and Davco will be the record owner of(and
Davco, SA and CH as a group will be the beneficial owners of) 3,000,000 of such
shares, corresponding to 20.2% of such class. SA owns 60% of, and CH owns 40%
of, the voting common stock of Davco.
Pursuant to the terms and conditions of the Asset Purchase Agreement, all
3,000,000 of the shares of the Registrant's Common Stock delivered to Davco as
part of the purchase price on the Closing Date (the "Acquired Shares") shall be
subject to the terms, conditions and restrictions of a Shareholders Agreement
entered into on the Closing Date between Davco, SA, CH, AMC, the Registrant,
Apollo Aris Partners, L.P.("Apollo") and Charles S. Ramat ("CSR"), providing
that the Acquired Shares shall be "restricted stock" and that all transfers
thereof must comply with applicable federal and state securities laws, including
Rule 144 under the Securities Act of 1933, as amended("Rule 144"); that in
addition to the limitations on transfer imposed by Rule 144, transfers of
Acquired Shares by Davco, SA or CH shall be limited to Rule 144 "over the
market"
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ordinary brokers transactions ("Rule 144 Brokers Transactions"), limited in
timing and amounts as follows:
o No transfers during the first year following the Closing Date
o In each of the second, third and fourth year following the Closing
Date, each of SA and CH may sell up to 300,000 shares per year in Rule
144 Brokers Transactions.
o Commencing in the fifth year following the Closing Date, each of SA
and CH may sell up to 600,000 shares per year in Rule 144 Brokers
Transactions
and further providing that during the first four years following the Closing
Date, neither Davco, SA nor CH are permitted to engage in any privately
negotiated or block or bulk sales, regardless of amount, without the
Registrant's consent, and are limited to the Rule 144 Brokers Transaction sales
in the amounts set forth above; and commencing in the fifth year following the
Closing Date, Davco, SA and CH may engage in sales which are not Rule 144
Brokers Transactions, for an all-cash purchase price, subject to successive
rights of first refusal, first to the Registrant, and second to Apollo and CSR
(on an equal basis); and further providing that Davco, SA and CH are prohibited
from acquiring any additional shares of the Registrant without the consent of
the Registrant; and further providing that for so long as CSR is Chairman, CEO
or President of the Registrant, Davco, SA and CH agree to vote all of their
shares (on all corporate matters including election of Directors) for the
recommendations, proposals and nominations of the Registrant's Board of
Directors; and further providing that Davco, SA and CH will have certain
"piggyback" registration rights as to the initial 3,000,000 Acquired Shares
issued to them on the Closing Date, to the extent still owned by them at the
time of registration, as set forth in the Shareholders Agreement. These
"piggyback" registration rights will enable Davco, SA and CH to include their
shares in a registration by the Registrant to the same proportionate extent as
if they were parties to the Equity Registration Rights Agreement dated June 30,
1993 between the Registrant and certain shareholders thereof when, as and if the
shares of the Registrant held by the parties to such Equity Registration Rights
Agreement are eligible for inclusion in such registration statement on a
"piggyback" basis.
ITEM 5. OTHER EVENTS
On July 18, 1997, the Registrant and each of BNY Financial Corporation
("BNY") and AIF-II, L.P. ("AIF-II") entered into amendments whereby the
scheduled quarterly interest payments under the Series A Junior Secured Note
Agreement dated June 30,
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1993 between the Registrant and BNY and the Series B Junior Secured Note
Agreement dated June 30, 1993 between the Registrant and AIF-II, originally due
on May 5, 1997 (and previously deferred with the consent of BNY and AIF-II until
July 18, 1997) and on August 4, 1997 were deferred and shall become due on
August 18, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements. All financial statements required to be filed in
connection with this Report will be filed as soon as available.
(b) Exhibits. The following Exhibits are filed as part of this Report:
10.105 Asset Purchase Agreement dated as of July 15, 1997 among Davco
Industries, Inc., as Seller, Steven Arnold and Christopher Healy
as Shareholders of Seller, and Aris Management Corp., as
Purchaser.
10.106 Shareholders Agreement dated as of July 15, 1997 among Davco
Industries, Inc., Steven Arnold, Christopher Healy, Aris
Management Corp., the Registrant, Apollo Aris Partners, L.P. and
Charles S. Ramat.
10.107 Amendment dated July 18, 1997 to Series A Junior Secured Note
Agreement dated as of June 30, 1993 between Registrant and BNY
Financial Corporation.
10.108 Amendment dated July 18, 1997 to Series B Junior Secured Note
Agreement dated as of June 30, 1993 between Registrant and
AIF-II, L.P.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARIS INDUSTRIES, INC.
By: /s/ PAUL SPECTOR
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Paul Spector
Senior Vice President and
Chief Financial Officer
Date: July 28, 1997
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EXHIBIT INDEX
Exhibit No.
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10.105 Asset Purchase Agreement dated as of July 15, 1997 among Davco
Industries, Inc., as Seller, Steven Arnold and Christopher Healy
as Shareholders of Seller, and Aris Management Corp., as
Purchaser.
10.106 Shareholders Agreement dated as of July 15, 1997 among Davco
Industries, Inc., Steven Arnold, Christopher Healy, Aris
Management Corp., the Registrant, Apollo Aris Partners, L.P. and
Charles S. Ramat.
10.107 Amendment dated July 18, 1997 to Series A Junior Secured Note
Agreement dated as of June 30, 1993 between Registrant and BNY
Financial Corporation.
10.108 Amendment dated July 18, 1997 to Series B Junior Secured Note
Agreement dated as of June 30, 1993 between Registrant and
AIF-II, L.P.
EXHIBIT 10.105
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made as of July 15, 1997 (this "Agreement") by and
among DAVCO INDUSTRIES, INC., a New York corporation having its principal office
at 350 Fifth Avenue, New York, New York 10118 (hereinafter referred to as, the
"Seller"), STEVEN ARNOLD, an individual residing at 68 Boulder Ridge Road,
Scarsdale, New York 10583 ("SA"), CHRISTOPHER HEALY, an individual residing at
11 Iron Gate Hill, Westport, Connecticut 06880("CH") (SA and CH being the owners
of all of the outstanding capital stock of the Seller and hereinafter
collectively referred to as, the "Shareholders"), and ARIS MANAGEMENT CORP., a
New York corporation having an address at 475 Fifth Avenue, New York, New York
10017 (hereinafter referred to as, the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Seller is engaged in the business of the design, sourcing,
importation and wholesale sale, merchandising, marketing and distribution of
men's and boy's sportswear, activewear, and loungewear including apparel
products sold pursuant to licenses of the "Perry Ellis", "Perry Ellis America",
"Perry Ellis Portfolio" and "Jeffrey Banks" trademarks(such business
collectively hereinafter referred to as the "Davco Apparel Business") and the
Seller desires to sell, transfer, set over and assign to the Purchaser all of
the assets (except as otherwise provided herein) of the Seller and the goodwill
thereof as a going concern, its corporate and trade names and its trademark
licenses and the Purchaser desires to purchase the same, upon the
representations, warranties, covenants and provisions hereinafter set forth;
WHEREAS, the Purchaser's affiliated corporations are also engaged in the
business of design, sourcing, importation and wholesale sale, merchandising and
distribution of men's apparel and Purchaser and such affiliates will be
benefited by Purchaser's acquisition of Seller's assets and business; and
WHEREAS, the Shareholders are the owners of all of the outstanding capital
stock of the Seller and the Shareholders desire to facilitate the sale of
Seller's assets and other transactions and agreements referred to herein by
joining in the representations, warranties and covenants of the Seller herein.
NOW, THEREFORE, in the consideration of the foregoing and the mutual
agreements and covenants herein contained, and intending to be legally bound
hereby, the parties hereto HEREBY AGREE AS FOLLOWS:
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1. Sale and Purchase of Assets.
(a) Purchased Assets. Subject to the terms and conditions of this
Agreement, and except as provided in Section 1(b) hereof with respect to the
Excluded Assets, at the closing provided for in Section 1(f) hereof, the Seller
shall sell, transfer, convey and assign to the Purchaser, and the Purchaser
shall purchase from Seller all of the Seller's assets, including without
limitation, all of Seller's right, title and interest in and to the Davco
Apparel Business and the goodwill thereof as a going concern and the assets set
forth below in this Section 1.1(a) (all of the foregoing assets of the Seller
purchased by the Purchaser pursuant to this Agreement are collectively referred
to as the "Purchased Assets"). Without limiting the generality of the foregoing,
the Purchased Assets shall be inclusive of all tangible and intangible assets
relating to Seller's activities pursuant to its licenses of the "Perry Ellis",
"Perry Ellis America" and "Jeffrey Banks" trademarks.
(i) all inventory and supplies of Seller on the Closing Date, wherever
located, including those located at Seller's premises or located at or in
transit to or from a supplier or customer of Seller ("Inventory"),
including those set forth on Schedule 1.1;
(ii) all accounts and notes receivable of Seller on the Closing Date
("Accounts Receivable"), including those set forth on Schedule 1.2;
(iii) all open purchase orders, bookings, bids, quotations, and
proposals with customers or potential customers existing on the Closing
Date and all customer deposits and advances existing on the Closing Date
(collectively, "Customer Orders"), including those set forth on Schedule
1.3;
(iv) all deposits and advances with vendors, suppliers and
subcontractors existing on the Closing Date(collectively, "Vendor
Deposits"), including those set forth on Schedule 1.4;
(v) all open purchase orders, contracts, bookings, bids, quotations,
and proposals with vendors, suppliers and subcontractors existing on the
Closing Date (collectively, "Vendor Orders"), including those set forth on
Schedule 1.5;
(vi) all of Seller's rights under open letters of credit issued for
the account of Seller in favor of vendors, suppliers and contractors, or
issued for the account of customers in favor of Seller(collectively, "Open
Letters of Credit"), including those set forth on Schedule 1.6;
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(vii) all of Seller's prepaid expenses of the types set forth on
Schedule 1.7 (collectively, "Prepaid Expenses");
(viii) all of Sellers past and present customer lists and past and
present vendor, sourcing, supplier and subcontractor lists, including those
set forth on Schedule 1.8 (collectively, "Customer and Vendor Lists")
(ix) all of Seller's rights in all corporate and d/b/a names, brand
names, labels, logos, trademarks, trade names, trademark applications,
patents, patent applications, service marks, copyrights, copyright
applications (in each case whether registered or unregistered) applied for
or owned by the Seller, together with the goodwill of the business relating
thereto, including, without limitation, any interest it may have in the
names "Davco", "Davco Industries", "Davco Accessories" and derivations and
variations thereof and other proprietary rights set forth on Schedule 1.9,
and all of Seller's rights in software, product designs, styles, drawings,
artwork, graphics, prototypes, mockups, models, product development
programs and plans, including any stored on a computer system
(collectively, the "Intellectual Property");
(x) Seller's licenses and agreements to manufacture, sell, market,
import or distribute apparel products under trademarks owned by others,
including without limitation, under the "Perry Ellis", "Perry Ellis
America" and "Jeffrey Banks" trademarks and others identified on Schedule
1.10 (collectively, the "Trademark Licenses");
(xi) all the fixtures, leasehold improvements, structures, plant,
machinery, equipment, tools, furniture, pallets, telephones and systems,
computer systems(including software), and other items of personal property
owned or leased by Seller as of the Closing Date, including those set forth
on Schedule 1.11 (collectively, the "Fixed Assets");
(xii) Seller's leases for its office/showroom at 350 Fifth Avenue,
NYC, 64th Floor, and its warehouse at 281 Dogburn Road, West Haven,
Connecticut, and any security deposits relating thereto, more specifically
identified on Schedule 1.12 (collectively, the "Real Property Leases"). The
tenant of record under the Real Property Leases is Davco Accessories,
Inc.("DAC"), but pursuant to Section 5(r) hereof, Seller and Shareholders
have agreed to cause DAC to take such actions as are necessary to assign
such leases to Purchaser;
(xiii) all contracts, agreements (whether oral or written), including,
without limitation, distribution rights, agreements with customers,
vendors, suppliers and subcontractors, sales representatives, advertising
contracts, licenses of software, patents, copyrights, trademarks or other
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intellectual property, the Trademark Licenses, the Real Property Leases and
equipment leases or installment contracts under which Seller has leased or
purchased Fixed Assets, including those set forth on Schedule 1.13
(collectively, the "Contracts");
(xiv) Customer and industry approvals and qualified vendor
certifications, including those set forth on Schedule 1.14 (collectively,
"Customer Certifications").
(xv) Seller's samples, prototypes, sample books, showroom displays,
advertising materials, mockups, brochures, catalogues, including those
under development (collectively, "Marketing Materials").
(xvi) the licenses, permits, certificates of occupancy or use and
other governmental approvals pertaining to the operation of Seller's
business or the use of the property covered by the Real Property Leases or
the Fixed Assets, including those set forth on Schedule 1.15 (collectively,
the "Permits");
(xvii) all rights and claims against third parties in respect of the
Purchased Assets, including without limitation all rights under express or
implied warranties from vendors and suppliers to Seller and all other
claims, rebates, payments from vendors and refunds; provided, however, that
Seller shall retain such rights to the extent related to any Non-Assumed
Liability or Excluded Assets;
(xviii) the books, records, data bases, sales and product records,
business, operational and marketing plans, accounts, correspondence,
employment, payroll, personnel and workers' compensation records,
environmental control records, training and operations manuals and any
other books, records, accounts and information, including any stored on a
computer system or disk and all owned or licensed computer software
(collectively, "Books and Records"); and
(xix) cash on hand and in banking or financial institution accounts,
deposit or concentration accounts, safety deposit boxes, money market
accounts, brokerage accounts and investment accounts on the Closing Date
and all cash equivalents, other than amounts needed to cover checks
outstanding on the Closing Date, including those in the bank and financial
institution accounts set forth on Schedule 1.16 (collectively, "Cash
Accounts"). The amount of the Cash Accounts to be transferred to Purchaser
shall not be credited or deducted from payments made by Purchaser on the
Closing Date, but rather the amount of the Cash Accounts shall be
determined by the Closing Date Audit (as defined below) and, if such audit
has been completed, shall be credited and deducted from the advance
otherwise to be paid to Seller pursuant to Section 3(b)(ii) following
completion of the third quarter of 1997, or
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if such audit is not available, shall be credited and deducted from payment
of the Actual Final Cash Purchase Price (as defined below).
(b) Excluded Assets. Notwithstanding anything contained in Section 1(a)
hereof to the contrary, Seller is not selling, assigning, transferring or
conveying to Purchaser, and there shall be excluded from the transactions
contemplated by this Agreement, the following assets, rights and properties (the
"Excluded Assets"):
(i) Seller's general liability and other insurance obligations,
policies and premiums;
(ii) refunds and rights to refunds for taxes paid;
(iii) Seller's corporate seal, certificate of incorporation, minute
and stock record books, tax returns, documentation necessary for the
preparation of corporate tax and other required tax returns (and the
defense any tax examinations);
(iv) any and all pension, retirement, profit- sharing or other
employee benefit plans of the Seller, including, without limitation, all
employee benefit plans listed on Schedule 5.13 attached hereto;
(v) motor vehicles owned or leased by Seller and rights and
obligations under leases relating thereto;
(vi) all rights and obligations under Seller's license of the "Duck
Head" trademark;
(vii) all rights and obligations under Seller's old showroom lease at
the 47th Floor, 350 Fifth Avenue, NYC, and the sublease thereof; and
(viii) all rights and obligations under Seller's employment agreements
with SA and CH and the shareholders agreement among Seller, SA and CH.
Seller's Duck Head license, old showroom lease and sublease, Seller's
employment and shareholder agreements and other excluded contracts set
forth on Schedule 1.20 are collectively referred to as the "Excluded
Contracts".
(c) Assumption and Satisfaction of Liabilities. At Closing, Seller will
transfer to Purchaser and Purchaser shall assume and shall thereafter pay,
perform and discharge, to the extent not paid, performed and discharged by
Purchaser at the Closing, only the following liabilities and obligations of
Seller, and subject to the further limitations that such
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liabilities and obligations were recorded on the March 31, 1997 Balance Sheet
(as defined herein) of Seller, and have changed since such date only due to the
incurrence of trade debt and borrowings under existing credit lines in the
ordinary course of business and which are recorded on the Estimated Net
Transferred Assets Schedule delivered at the Closing and referred to in Section
3(c) below (collectively, the "Assumed Liabilities"):
(i) Sellers' liabilities and obligations under the Contracts,
Trademark Licenses, Real Property Leases, Customer Orders, Vendor Orders
and Open Letters of Credit arising or requiring performance after the
Closing (other than the Excluded Contracts). The Assumed Liabilities shall
include Contracts expressly disclosed on Schedule 1.13 (other than the
Excluded Contracts), whether or not recorded or in existence on the March
31, 1997 Balance Sheet;
(ii) the trade payables and accrued expenses of Seller existing on the
Closing Date as set forth on Schedule 1.21 hereto, but excluding any
payables or accruals relating to the Excluded Contracts and excluding any
payables or accruals relating to taxes of Seller or
Shareholders (collectively, "Payables and Accrued Expenses"); and
(iii) Seller's obligations due banks and factors set forth on Schedule
1.22 hereto ("Financing Obligations").
(d) Seller's Retention of Non-Assumed Liabilities. Seller and the
Shareholders, jointly and severally, agree to timely pay, perform and discharge
any and all liabilities of Seller of any nature, whether due or to become due,
whether accrued, absolute, contingent or otherwise, whether arising prior to or
after the Closing Date, including without limitation, those arising out of or
relating to the ownership, operation or use by Seller or any other person
(including any predecessor of Seller), prior to the Closing Date, of the
properties, assets or business of Seller (or any other predecessors), except for
the Assumed Liabilities (collectively, the "Non-Assumed Liabilities"). Without
limiting the generality of the foregoing, Seller and Shareholders will retain
liability for:
(i) the Excluded Contracts and the Excluded Assets;
(ii) the existing litigation set forth on Schedule 5.14 hereto; and
(iii) any and all pension, retirement, profit-sharing or other
employee benefit plans of the Seller, including, without limitation, all
employee benefit plans listed on Schedule 5.13 hereto.
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(e) Except as expressly provided herein with respect to the Assumed
Liabilities, neither the Purchaser nor any of its affiliates shall assume or
guarantee any debts, liabilities or obligations whatsoever (whether known or
unknown, due or to become due, accrued, absolute, fixed, contingent, matured or
unmatured, or otherwise) of the Seller or the Shareholders or any of their
affiliates under or by reason of this Agreement. Except for repayment of certain
loans owed by Seller to the Shareholders as described in Section 13(g) of this
Agreement, Purchaser shall have no obligation to assume or make any payments or
assume any liabilities of any nature which may be due or owing from Seller to
the Shareholders or affiliates thereof. Notwithstanding any other provision of
this Agreement, Purchaser shall NOT assume or guarantee any debts, liabilities
or obligations of DAC other than obligations arising after the Closing Date
under the Real Property leases identified on Schedule 1.12 hereto, subject to
the consent of the landlords to the assignment of such leases to Purchaser.
Notwithstanding any other provision of this Agreement, Purchaser shall NOT
assume or guarantee any debts, liabilities or obligations of Davcorp
Enterprises, Inc., a New York corporation ("DEL").
(f) Subject to the terms and conditions of this Agreement, the closing of
the sale and purchase of the Purchased Assets (the "Closing") will take place at
the offices of Herrick, Feinstein LLP, 2 Park Avenue, New York, New York 10016
at 10:00 A.M. on July 15, 1997 or such other date as may be mutually agreed upon
in writing by the Purchaser and the Seller (the "Closing Date"), and shall be
effective at 11:59 PM on the Closing Date.
2. Covenant of Title. The Seller and the Shareholders, jointly and
severally, for themselves and their successors, assigns, heirs, executors,
administrators and distributees, covenant and agree to and with the Purchaser to
warrant and defend against any person, firm, corporation or other entity the
sale and transfer of good and marketable title to the Purchased Assets and
property described herein and each and every part thereof sold, transferred,
assigned and set over hereunder to the Purchaser and its successors and assigns,
free and clear of any security interest, pledge, mortgage, judgment, lien
(including, without limitation, environmental and tax liens), charge, adverse
claim or restriction of any kind (collectively, an "Encumbrance"), other than
this Agreement.
3. Purchase Price and Payment for Purchased Assets.
(a) Consideration.
Subject to the terms and conditions of this Agreement (including, without
limitation, the purchase price adjustments and sets-offs provided for herein),
as consideration for the Purchased Assets, the Purchaser shall pay to the Seller
the
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Stock Purchase Price (as defined herein) and the Actual Final Cash Purchase
Price (as defined herein), in accordance with the terms of this Section 3, and
shall on the Closing, assume the Assumed Liabilities.
(i) The Stock Purchase Price shall be THREE MILLION (3,000,000) shares
of Common Stock, par value $.01 per share of Aris Industries, Inc., a New
York corporation, the ultimate parent corporation of Purchaser ("Aris")
(shares of Aris Common Stock referred to herein as "Aris Common Stock"),
paid on the Closing Date.
(ii) The "Actual Final Cash Purchase Price" shall be equal to the
pre-tax net income of the Davco Apparel Business as owned by Purchaser from
and after the Closing Date and through December 31, 1997 (referred to as
"1997 Post-Closing Davco Net Income"), determined as provided in Section
3(e) below, decreased, on a dollar for dollar basis to reflect (x) any
Excess Closing Date Liabilities (as defined herein), determined as provided
in Section 3(c) below and (y) the aggregate amount of all Indemnification
Claims(as defined in Section 8(c) below) asserted on or prior to payment of
the Actual Final Cash Purchase Price; provided however, that the amount of
the Actual Final Cash Purchase Price shall not exceed a maximum of THREE
MILLION SIX HUNDRED THOUSAND ($3,600,000) DOLLARS, and if the Actual Final
Cash Purchase Price as otherwise determined shall exceed such amount, the
Actual Final Cash Purchase Price shall be deemed reduced to and shall equal
$3,600,000. The Actual Final Cash Purchase Price, less advances thereon
made pursuant to Section 3(b) below, shall be paid within ten (10) days
after Purchaser's and Aris' receipt of Aris' audited financial statements
for calendar year 1997, but not later than April 10, 1998. Purchaser shall
deliver to Seller a certification signed by the Chief Financial Officer of
Aris of the Actual Final Cash Purchase Price by no later than such date.
(iii) Seller and Shareholders covenant and agree that Seller shall
apply all proceeds of the cash portions of purchase price paid pursuant to
this Agreement, to the extent necessary, to pay the creditors of Seller
(other than the Assumed Liabilities).
(b) Advances of Actual Final Cash Purchase Price.
(i) On the Closing Date, Purchaser will advance to Seller FIVE HUNDRED
THOUSAND ($500,000) DOLLARS (which Seller shall allocate to CH), which
advance will be credited against the first dollars owed by Purchaser with
respect to the Actual Final Cash Purchase Price.
(ii) In addition, within ten (10) days after Purchaser's receipt of
its quarterly financial statements for
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the third quarter ending September 30, 1997, Purchaser will advance to
Seller twenty-five (25%) percent of 1997 Post-Closing Davco Net Income for
the period from and after the Closing Date through September 30, 1997 (such
advance reduced by the $500,000 advance provided on the Closing Date). This
additional advance, if any, will also be credited against the first dollars
owed by Purchaser with respect to the Actual Final Cash Purchase Price.
(iii) In the event that the advances and credits provided under
clauses (i) and (ii) are, in the aggregate, in excess of the Actual Final
Cash Purchase Price as finally determined pursuant to Section 3(e) below,
Seller shall remit such excess to Purchaser within ten (10) days of
delivery of such determination.
(c) Excess Closing Date Liabilities and Adjustment to Actual Final Cash
Purchase Price On the Closing Date, Seller shall prepare and deliver to
Purchaser the Estimated Net Transferred Assets Schedule, in the form of Exhibit
3.1 hereto, which shall set forth the estimated amounts, on the Closing Date, of
the Cash Accounts, Accounts Receivable, Vendor Deposits, Inventory, and Fixed
Assets to be transferred to Purchaser ("Tangible Transferred Assets"), and of
the Accounts Payable and Accrued Expenses, Financing Obligations, Shareholder
Loans, and any other accrued liabilities or obligations included in the Assumed
Liabilities ("Tangible Assumed Liabilities"). The excess, if any, of Tangible
Assumed Liabilities over Tangible Transferred Assets, is referred to as "Excess
Closing Date Liabilities." The Estimated Net Transferred Assets Schedule shall
be prepared in accordance with generally accepted accounting principles,
consistent with Seller's financial statements referred to in Section 5(h) below.
The closing of the transactions provided for under this Agreement shall be
subject to Purchaser's acceptance, in its sole discretion, of the Estimated Net
Transferred Assets Schedule and the amount, if any, of Excess Closing Date
Liabilities determined on an estimated basis from such schedule.
In the event that Purchaser proceeds to close the transactions provided for
under this Agreement, Excess Closing Date Liabilities shall be finally
determined pursuant to the Closing Date Audit of Seller referred to in Section
3(d) below and shall be a deduction in the calculation of the Actual Final Cash
Purchase Price. Furthermore, any Excess Closing Date Liabilities(determined on
an estimated basis, from the Estimated Net Transferred Assets Schedule, or, if
available, as finally determined by the Closing Date Audit) shall be deducted
from the advance against the Actual Final Cash Purchase Price which Purchaser
would otherwise be required to make to Seller under Section 3(b)(ii) above
following receipt of Purchaser's third quarter financial statements.
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(d) Closing Date Audit of Seller. As promptly as practicable following the
Closing Date, Seller shall cause Winick, Sanders & Co., its regular independent
certified public accountants (the "Seller's Accountants"), to audit the balance
sheet, results of operations and changes in financial position of Seller as at
and for the period from January 1, 1997 through the close of business on the
Closing Date ("Closing Date Audit") and to deliver to Purchaser and Seller such
financial statements and notes thereto together with the Seller's Accountants'
opinion thereon and the calculation of a Final Net Transferred Assets Schedule
(which shall be in the same form as the Estimated Transferred Net Assets
Schedule) derived from the Closing Date Audit and the Excess Closing Date
Liabilities, if any, calculated from the Final Net Transferred Assets Schedule.
The Closing Date Audit shall be prepared utilizing generally accepted accounting
principles consistently applied. The results of the Closing Date Audit shall be
utilized in determining, on a final basis, the Excess Closing Date Liabilities,
as well as the Cash Accounts to be credited to Purchaser.
(e) Determination of 1997 Post-Closing Davco Net Income. Purchaser shall
cause its regular independent certified public accountants ("Purchaser's
Accountants") to determine the 1997 Post-Closing Davco Net Income, by auditing
Purchaser's net income from the Davco Apparel Business in 1997 from and after
the Closing Date. Such audit shall be prepared utilizing generally accepted
accounting principles consistent with those utilized by Aris' subsidiary, Europe
Craft Imports, Inc.("ECI"). However, for purposes of determining 1997
Post-Closing Davco Net Income for inclusion in determining the Actual Final Cash
Purchase Price:
(i) Purchaser shall be charged only with Purchaser's own financing and
interest charges relating to the Davco Apparel Business and not financing
or interest charges incurred by Aris, ECI or other affiliates of Aris;
(ii) There will be no allocation to Purchaser of corporate or other
overhead or management fees of Aris, ECI or other affiliates of Aris;
(iii) Seller will accrue on the Closing Date up to $12,000 for the
expenses of the Closing Date Audit; such accrual up to $12,000 will be an
Assumed Liability. Purchaser will have no other obligation for Seller's
accounting fees. In computing 1997 Post-Closing Davco Net Income, Purchaser
will be charged with $20,000 of the cost of performing a separate audit of
the Davco Apparel Business (as distinguished from the Aris and ECI audits)
for calendar year 1997.
(iv) The first $35,000 of legal fees paid by Seller to its counsel
relating to the transactions set forth in this Agreement, including
Seller's obligations under Sections
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5(r) and 9(e) hereof (whether such legal fees are incurred before or after
the Closing Date) will not be charged to 1997 Post-Closing Davco Net
Income;
(v) 1997 Post-Closing Davco Net Income will include income from
current activities of the Davco Apparel Business, but to the extent such
activities include "MEMBERS ONLY" products, Purchaser will be charged with
royalties payable to ECI at the same rate as the license arrangement
currently in effect with Seller;
(vi) All bonuses and commissions paid or accrued with respect to
calendar year 1997 by Purchaser (even if paid after December 31, 1997),
including any bonuses and commissions due for services prior to the Closing
Date and paid after the Closing Date (unless such pre-Closing Date bonuses
and commissions are accrued on the Estimated Net Transferred Assets
Schedule), will be charged against 1997 Post-Closing Davco Net Income;
(vii) All refunds, returns, replacements, chargebacks, credits,
allowances and adjustments relating to products sold by Seller or
Purchaser, on or before December 31, 1997 or in inventory of Seller or
Purchaser on or before December 31, 1997, which are paid or credited by
Purchaser, or accrued or charged to Purchaser (unless they relate to
products sold by Seller pre-Closing Date and are accrued on the Estimated
Net Transferred Assets Schedule), will be charged against 1997 Post-Closing
Davco Net Income;
(viii) Income from extraordinary items and sale or disposition of
assets will be excluded;
(ix) With respect to the Chase Manhattan Bank Line of Credit Letter
Agreement ("Bank Line Letter") to be entered into between Chase and
Purchaser on the Closing Date, Chase' legal and other closing fees, bank
examination fees, and administrative fees and charges will NOT be charged
against 1997 Post-Closing Davco Net Income.
(f) Determination of Actual Final Purchase Price and Related Amounts.
Determination of 1997 Post-Closing Davco Net Income and the Actual Final
Purchase Price by Purchaser's Accountants based upon the audit referred to above
shall be final, binding and conclusive on Seller, Shareholders and Purchaser.
4. Provisions Relating to Aris Common Stock
Seller and Shareholders agree that all shares of Aris Common Stock obtained
by the Seller pursuant to this Agreement shall also be subject to the terms,
conditions and restrictions
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of the Shareholders Agreement entered into between Aris, Seller and the
Shareholders and certain other shareholders of Aris on the Closing Date in the
form of Exhibit 3.3 hereto (the "Shareholders Agreement").
5. Representations and Warranties of Seller and Shareholders. The Seller
and the Shareholders, jointly and severally, represent and warrant unto and
covenant with the Purchaser, and such representations, warranties and covenants
are material inducements to the Purchaser entering into this Agreement, as
follows (such representations, warranties and covenants to be true and correct
as of the Closing Date):
(a) Business Names. The Seller is doing business under the name of "DAVCO"
and "DAVCO INDUSTRIES"; neither the Seller, DAC, DEL, the Shareholders nor their
affiliates does business under any other trade or corporate name (except for the
trademarks owned or licensed and set forth in Schedule 1.9). Neither the Seller,
the Shareholders, DEL nor DAC own any federal or state trademark, trade name,
service mark or service name registration for "DAVCO", "DAVCO INDUSTRIES",
"DAVCORP ENTERPRISES" or "DAVCO ACCESSORIES" or derivations or variations
thereof. To the best knowledge of Seller and Shareholders, Seller's use of the
names "DAVCO", "DAVCO INDUSTRIES", "DAVCORP ENTERPRISES" or "DAVCO ACCESSORIES"
does not conflict with the proprietary rights of any other person or entity.
Neither the Seller, the Shareholders, DEL nor DAC has ever received any
notification that use of the names "DAVCO", "DAVCO INDUSTRIES", "DAVCORP
ENTERPRISES" or "DAVCO ACCESSORIES" conflicts with the proprietary rights of any
other person or entity.
(b) Payments to Predecessors. Neither the Seller, the Shareholders, DEL,
DAC nor their affiliates owes any payments to any party with respect to a prior
purchase of any of the Purchased Assets (to be sold, transferred, assigned and
set over to the Purchaser in accordance with the terms and conditions of this
Agreement) or the capital stock or the business or any other assets of the
Seller, DEL, DAC or their affiliates or predecessors.
(c) Corporate Status. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. Seller
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and all writings related hereto. Seller has all necessary power
and authority to carry on its business as now conducted and to own, lease or
operate its properties as and in the manner and in the places where such
business is now conducted and such properties are now owned, leased or operated.
True and correct copies of the Certificate of Incorporation and By-Laws of
Seller as in effect on the date hereof are set forth as Exhibit 5.1 hereto. The
officers and directors of the Seller are:
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Directors: Officers:
--------- ---------
Steven Arnold Steven Arnold, President
Christopher Healy Christopher Healy, Chief Executive Officer
(d) Corporate Structure. The Seller's business and assets, including its
Davco Apparel Business, are owned and operated by the corporate entity of the
Seller directly and exclusively and NOT through (i) a direct or indirect
affiliate, subsidiary, partnership, joint venture, limited liability company or
other entity of any kind, (ii) any stockholder or affiliate thereof or (iii)
DEL, or (iv) DAC, except that DAC is the tenant of record of certain leases
utilized by the Davco Apparel Business identified on Schedule 1.12. Neither the
Seller, DEL, nor DAC has any legal or beneficial interest in any subsidiary,
partnership, joint venture, limited liability company or other entity. The sole
purpose of the Seller is and at all times has been to engage in the Davco
Apparel Business, and the Seller has no assets, properties, liabilities or
obligations other than those relating to said Davco Apparel Business. The sole
purpose of DAC is and at all times has been be the tenant of record under the
Real Property Leases, and DAC has no assets, properties, liabilities or
obligations other than those relating to said Real Property Leases. DAC was
formerly a New York corporation owned by CH which was dissolved by operation of
law in 1991. DEL is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and is owned by CH. DEL is
completely inactive and does not conduct any business. Davco Fashion
Accessories, Inc., a New York corporation ("DFA"), which formerly employed CH,
is totally unrelated to the Davco Apparel Business and none of the Seller, the
Shareholders, DAC, DEL or their affiliates of have any direct or indirect
ownership or interest in DFA nor any obligation for the liabilities of DFA.
(e) Capital Stock. The Seller has 1,000 authorized shares of Common Stock,
without par value, of which 510 shares are issued and outstanding. Of the issued
and outstanding shares, 306 shares are owned by SA and 204 shares are owned by
CH. The Shareholders are the record and beneficial owners of all of the issued
and outstanding shares of capital stock of the Seller set forth above (the
"Shares"), and the Shareholders own the Shares free and clear of all
Encumbrances. There are no subscriptions, options, warrants, calls, contracts,
demands, commitments, convertible securities, shareholders', employment, stock
option, buy-sell or other agreements or arrangements of any kind that directly
or indirectly call for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Seller or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Seller or relate to
the voting or control of such capital stock, securities or rights (other than
the shareholders agreement of
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Seller dated May 6, 1996, a copy of which has been supplied to Purchaser).
(f) Authorization; No Conflicts; Consents. The execution, delivery and
performance by the Seller of this Agreement and all writings relating hereto
have been duly authorized by the unanimous written consent of the board of
directors and the shareholders, respectively, of the Seller and such resolutions
specifically approve the sale by the Seller of substantially all of its assets.
The Shareholders have all requisite power to execute, deliver and perform this
Agreement and all writings related thereto. This Agreement and all writings
relating hereto to be signed by the Seller, DAC, DEL and the Shareholders
constitute valid and binding obligations of the Seller, DAC, DEL and the
Shareholders enforceable in accordance with their respective terms. Neither the
execution and delivery of this Agreement or any writing relating hereto nor the
consummation by the Seller, DAC, DEL or the Shareholders of the transactions
contemplated hereby and thereby will (i) conflict with or result in a breach of
the Certificate of Incorporation or By-Laws of the Seller, DEL or DAC or (ii)
violate or conflict with or constitute a default under any agreement to which
any of the Seller, DEL, DAC, the Shareholders, or the Seller's officers or
directors are a party or which would affect the Purchased Assets to be sold
hereunder. Except as provided in Schedule 5.4 attached hereto, no consent or
approval of, or notification to, any governmental authority or any other person,
firm or entity whatsoever is required in connection with the execution and
delivery by the Seller, DEL, DAC or the Shareholders of this Agreement or any
writing relating hereto or the consummation of the transactions contemplated
hereby or thereby and the Seller and the Shareholders agree that, as a closing
condition to the transactions contemplated by this Agreement, the Seller, DEL,
DAC and the Shareholders shall obtain any necessary consents or approvals prior
to the Closing from any third party with respect to the transactions
contemplated by this Agreement.
(g) Taxes. All federal, state, local and foreign tax returns required to be
filed with respect to Seller or the business and assets of the Seller have been
timely filed (or will be timely filed when due) with the appropriate
governmental agencies, all amounts shown as owing thereon have been paid (or
will be timely paid when due), and there is no claim, proceeding, investigation,
assessment or deficiency pending or threatened with respect to tax obligations
of the Seller, DEL or DAC, nor have the Seller, DEL, DAC, the Shareholders, or
the Seller's officers or directors received any notice thereof. There is no tax
lien or other Encumbrance in favor of any taxing authority affecting any assets
of the Seller, DEL or DAC. The federal, state and local income tax returns of
the Seller. DEL and DAC have never been audited by the Internal Revenue Service
or any other governmental taxing authority, except as set forth
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on Schedule 5.5 hereto. The Seller has for all taxable periods from and after
its incorporation maintained in effect an election to be treated as a small
business corporation ("Subchapter S Election") under Section 1362 of the
Internal Revenue Code and under applicable provisions of New York and
Connecticut law. The Seller and the Shareholders have also delivered to the
Purchaser the federal and state tax returns for the Seller identified on
Schedule 5.5 hereto.
(h) Financial Statements. The Seller and the Shareholders have delivered to
the Purchaser true and complete copies of the financial statements with respect
to the Seller as at and for the years ended December 31, 1995 and December 31,
1996 audited by Winick Sanders & Co. LLP ("Seller's Accountants") and as at and
for the three-month period ended March 31, 1997 reviewed by Seller's Accountants
(collectively, the "Financial Statements"), which Financial Statements are true,
accurate and complete, are in accordance with the books and records of Seller,
and fairly present the financial condition of the Seller as at such dates and
the results of its operations and the changes in its retained earnings and
financial position for the periods then ended, in accordance with generally
accepted accounting principles consistently applied. The balance sheet included
in the March 31, 1997 financial statements of Seller is referred to herein as
the "March 31, 1997 Balance Sheet". The revenues of the Seller reported on all
such Financial Statements reflect payments actually made by bona-fide customers
of the Seller for goods or services delivered in the ordinary course of
business, and consistent with Seller's billing practices during such periods.
The statements of income included in such Financial Statements do not contain
any items of special or non-recurring income or any other income not earned in
the ordinary course of business, except as expressly specified therein. The
books and records of Seller fairly reflect all of the transactions of Seller.
(i) Solvency. Neither the Seller nor either of the Shareholders is
insolvent and the transfer and sale of the Purchased Assets provided for herein
does not constitute a fraudulent conveyance or any violation of creditor's
rights.
(j) No Undisclosed Liabilities. Except as disclosed on Schedule 5.6 hereto,
neither Seller, DEL nor DAC have any liability or obligation of any nature,
whether due or to become due, absolute, contingent or otherwise, except (a) to
the extent fully reflected as a liability on the March 31, 1997 Balance Sheet;
(b) liabilities for trade debt and borrowings under existing credit lines
incurred in the ordinary course of business by Seller since the March 31, 1997
Balance Sheet Date and fully reflected as liabilities on the books of account of
Seller and set forth on the Estimated Net Transferred Asset Schedule delivered
on the Closing Date pursuant to Section 3(c) above, and (c) contractual
obligations arising after the Closing
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Date under the Contracts. Furthermore, the actual amount of the Tangible
Transferred Assets of Seller on the Closing Date shall be not less than the
amount thereof set forth on the Estimated Net Tangible Assets Schedule delivered
on the Closing Date, and the actual amount of the Tangible Assumed Liabilities
of Seller on the Closing Date shall not be in excess of the amount thereof set
forth on the Estimated Net Tangible Assets Schedule delivered on the Closing
Date.
(k) No Changes. Since December 31, 1996, Seller and Shareholders have
conducted the business of Seller only in the ordinary course. Without limiting
the generality of the foregoing sentence, since December 31, 1996, except as set
forth on Schedule 5.7 hereto:
(i) Seller has not conducted any transaction, entered into any
contract, commitment or agreement, or incurred any debt or obligation,
outside the ordinary course of business or in a manner which is not
consistent with Seller's past practice;
(ii) There has been no change in the financial condition, results of
operations, business, assets, liabilities, earning power or prospects of
the Seller in the conduct of its Davco Apparel Business, except changes in
the ordinary course of business as set forth on the Estimated Net
Transferred Assets Schedule, none of which, individually or in the
aggregate, has been or could be materially adverse to Seller or the Davco
Apparel Business or the Purchased Assets being transferred to Purchaser;
(iii) there has been no adverse change or any threat of any adverse
change in the relations of the Seller with, or any loss or threat of loss
of, any vendors, suppliers, contractors, customers, licensors, licensees or
employees of Seller;
(iv) there has been no sale, transfer or disposition of any assets of
Seller except for sales of inventory in the ordinary course of business,
and there has been no purchase of any assets whatsoever other than
purchases of inventory and supplies in the ordinary course of business;
(v) except for borrowing under existing credit agreements set forth on
Schedule 1.22 hereto in the ordinary course of business and borrowings
under the Shareholder Loans referred to in Section 13 below (which would
not increase the aggregate amount of such Shareholder Loans above the
maximum of $785,417), Seller has not incurred any indebtedness for borrowed
money;
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(vi) there has been no transfer, lapse, termination or other
disposition of any Intellectual Property or Trademark License; and
(vii) there has been no damage, destruction or loss, affecting the
assets, properties, business or condition of the Seller, whether or not
covered by insurance.
(l) Payables and Accrued Expenses. The Payables and Accrued Expenses set
forth on Schedule 1.21 delivered on the Closing Date consist solely of trade
payables and accrued expenses incurred by Seller in the ordinary course of its
business to persons or entities which are not affiliated with Seller.
(m) Title to Property. Except as otherwise provided on Schedule 5.8 hereto,
each of the Seller and DAC has good and marketable title to its properties and
assets free and clear of all Encumbrances. All of such Encumbrances set forth on
Schedule 5.8 shall be removed and terminated, at Seller's expense, prior to the
Closing Date (except that those Encumbrances securing the Assumed Liabilities
will be terminated at Purchaser's expense). On the Closing Date, the Seller
shall deliver to the Purchaser good and marketable title to the Purchased Assets
free and clear of all Encumbrances.
(n) Inclusion of Assets. With the exception of the Excluded Assets, the
Purchased Assets transferred from the Seller to the Purchaser shall include all
tangible and intangible assets owned by Seller used or usable in the Davco
Apparel Business, and shall include all assets recorded on the March 31, 1997
balance sheet of Seller, subject only to changes in the ordinary course of
business from such date to the Closing Date reflected on the schedules of such
Purchased Assets (Schedules 1.1 through 1.16) annexed hereto. Except for the
Real Property Leases held of record by DAC, neither DEL nor DAC owns, holds or
possesses any assets used or usable in the Davco Apparel Business.
(o) Contracts. Schedule 1.13 attached hereto lists all Contracts of the
Seller and DAC which will be assigned by the Seller to the Purchaser at the
Closing. The Seller and the Shareholders have delivered to the Purchaser correct
and complete copies of all Contracts and amendments thereof and documentation
relating thereto. Each of the Contracts listed on Schedule 1.13 attached hereto
is in full force and effect and neither the Seller, DAC, the Shareholders or any
other party is in breach or default under the terms of any of the Contracts. The
Seller has fully performed all of its contractual obligations to all contracting
parties with respect to the Contracts. The Seller shall remain responsible for
any warranties, claims, offsets, disputes, or demands for refunds or
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credits from any contracting party with respect to any Contract attributable to
performance, or to products manufactured, sold or delivered, prior to the
Closing Date, or in Seller's Inventory on the Closing Date. Except as set forth
on Schedule 1.13, the Seller has not sublicensed to or from anyone the
performance of any of its contractual responsibilities with respect to any
Contract, except for sourcing of apparel production in the ordinary course of
business. No person or entity (other than the licensor of each Trademark
License) is owed any sales or brokerage commission or royalty with respect to
the Contracts; provided however, that Seller's ordinary sales employees or
representatives may receive commissions on the sale of inventory in the ordinary
course of business. This Agreement shall constitute an assignment of all rights
to such Contracts and renewals thereof. All necessary consents with respect to
the assignment of the Contracts to the Purchaser will have been obtained by the
Seller, DAC and the Shareholders prior to the Closing and as a condition
thereof.
Except for the Contracts listed on Schedule 1.13 hereto, neither the Seller
nor DAC is a party to or bound by any contracts, notes, guarantees, mortgages,
pledges, security agreements, leases or licenses of any kind whatsoever. Without
limiting the generality of the foregoing, except as provided on Schedule 1.22
attached hereto, neither the Seller nor DAC is a party to any loan, promissory
note, credit agreement, factoring arrangement, security interest, pledge, or
mortgage with any bank, financial institution or other entity or person.
Except as set forth on Schedule 1.13, Seller does not have any outstanding
contracts with employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers or advertising or marketing agencies,
that are not cancelable by it on notice of not longer than 30 days and without
liability, penalty or premium.
Except for the Shareholder Loans referred to in Section 13(g), Seller does
not have any outstanding loan to any person or entity.
Seller does not have any power of attorney outstanding or any obligations
or liabilities (whether absolute, accrued, contingent or otherwise), as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any other person or entity (including without
limitation, the Shareholders or any affiliates thereof).
Except as set forth on Schedule 1.13, Seller is not a party to any contract
or commitment for capital expenditures involving more than $10,000 in any
instance.
Seller is not a party to any contract, pledge or commitment for charitable
contributions, any brokerage or finders
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agreement, or any contract with the United States Government or any state or
local government or public authority or any agency thereof.
(p) Intellectual Property; Proprietary Rights. The transfer of the
Purchased Assets of the Seller's Davco Apparel Business shall include all
technological, proprietary and intellectual property rights in and to any
designs, drawings, artwork, styles, samples, mockups, models, prototypes,
inventions, know-how, trade secrets, software or developments relating to the
products or operation of said business (including without limitation, any
patents, copyrights, trademarks, brand names, labels and logos relating thereto)
and none of such rights shall be retained by the Seller, the Shareholders, DAC,
any other personnel of the Seller, or any other person or entity. Except for the
Trademark Licenses set forth on Schedule 1.10, neither the Seller, Shareholders,
DEL or DAC is a party or subject to any trademark, copyright, patent, license,
royalty or proprietary rights agreements and the Seller, Shareholders, DEL and
DAC do not pay any license or royalty fees to any party in connection therewith.
Except as set forth on Schedule 1.10, the Seller has not licensed any of its
Intellectual Property to any other party.
Seller is the sole and exclusive owner (or the exclusive licensee from the
licensors under the Trademark Licenses, or in case of the Limited Products under
the Salant Trademark License, the non-exclusive licensee) of all Intellectual
Property utilized in the conduct of the Davco Apparel Business (including
without limitation, the Intellectual Property set forth on Schedule 1.9).
Schedule 1.9 sets forth all registrations and applications relating to any
Intellectual Property owned or claimed by the Seller. No product made or sold by
Seller infringes any trademark, tradename, copyright, patent, know-how, trade
secret or proprietary right of any other party. No notifications, claims,
actions, suits, arbitrations, inquiries, proceedings or investigations of any
kind have been made or asserted that are currently pending or threatened either
(A) contesting Seller's right to sell, market and distribute its products
utilizing any Intellectual Property, (B) based upon or challenging or seeking to
deny or restrict the use by the Seller of any Intellectual Property or (C)
alleging that any products are being manufactured, sold, provided, licensed or
used by Seller in violation of any proprietary rights of any third party.
Schedule 1.9 contains a brief description of the computer systems utilized
in the Davco Apparel Business, specifying the components of the hardware and
software comprising such system which are respectively owned, leased or licensed
by Seller; all software or other licenses necessary in the operation of such
system are identified on Schedule 1.9. Upon the transfer of the Davco Apparel
Business to Purchaser on
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the Closing Date, Purchaser will be able to continue to utilize Seller's
existing computer systems without interruption.
(q) Trademark Licenses. On the Closing Date, the Seller shall sell,
transfer, set over, assign and deliver to the Purchaser, its successors and
assigns, absolutely and forever, all right, title and interest the Seller has in
and to the Trademark Licenses identified on Schedule 1.10 hereto, including any
and all rights to renewals and extensions thereof. Seller has delivered to
Purchaser a true, accurate and complete copy of each Trademark License,
including all amendments and modifications thereof. Seller has at all times
directly and exclusively conducted the marketing, sale and distribution of
products authorized by the Trademark Licenses and has never granted to any other
person or entity any sub-license, assignment, distributorship,
sub-distributorship, franchise, territory, contract, arrangement, understanding
or other authority, whether oral or in writing, to develop, market, sell or
distribute any products under the Trademark Licenses or bearing the trademarks
or logos licensed under the Trademark Licenses. To the best knowledge of the
Seller and the Shareholders, the rights granted under the Trademark Licenses,
when the same are assigned to Purchaser, will include all rights necessary under
federal and state trademark laws in order for Purchaser to sell, market and
distribute the products covered by the Trademark Licenses without infringement
of the trademark, tradename or proprietary rights of any person. Except as set
forth on Schedule 1.10, all of the Trademark Licenses grant to Seller the
exclusive rights to manufacture, sell, market and distribute the product lines
covered thereby utilizing the applicable trademarks.
No notifications, claims, actions, suits, arbitrations, inquiries,
proceedings or investigations of any kind have been made or asserted that are
currently pending or threatened against the Seller either (A) contesting
Seller's right to sell, market and distribute the products covered by the
Trademark Licenses or to utilize the trademarks and logos licensed under the
Trademark Licenses, (B) based upon or challenging or seeking to deny or restrict
the use by the Seller of any of the trademarks or logos licensed under the
Trademark Licenses or (C) alleging that any products manufactured or sold
pursuant to the Trademark Licenses or trademarks or logos licensed or used
pursuant to the Trademark Licenses, are being manufactured, sold, provided,
licensed or used in violation of any trademarks or any other rights of any third
party.
Seller has, for all periods through the Closing Date, duly paid to the
licensors of each Trademark License, all royalties and advertising payments,
whether characterized as percentage royalties, guaranteed or minimum royalties,
percentage advertising payments, minimum or guaranteed advertising payments, and
all other royalties, fees, penalties,
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interest and charges due, owing or accrued to the licensors under the Trademark
Licenses. Seller has, for all periods through the Closing Date, made all
advertising expenditures required to be made by the terms of each of the
Trademark Licenses.
All of the Trademark Licenses are in full force and effect and no default
(or event which, with the giving of notice or passage of time, would be a
default) has occurred in the observance of any covenant, agreement or obligation
of Seller or any licensor under the Trademark Licenses, and no event or failure
of a condition which could give rise to a right of termination or cancellation
of the Trademark Licenses by the licensor thereof exists or has occurred.
At the Closing and as a condition thereto, the Seller shall assign to the
Purchaser (by executing and delivering to the Purchaser an Assignment of
Trademark License in the form of Exhibit 5.9 attached hereto (the "Trademark
License Assignments")) the Seller's rights to each Trademark License. At or
prior to the Closing and as a condition thereto, the Seller and the Purchaser
shall have received from the licensors of each Trademark License a written
consent to the assignment by the Seller to the Purchaser of the Seller's rights
under the Trademark Licenses and an estoppel certificate in form and substance
reasonably satisfactory to the Purchaser together with the extension of the term
of such licenses and other modifications thereto (and the consent of Salant
Corporation, as applicable) as set forth on Schedule 5.10. All obligations under
such Trademark Licenses accruing prior to the Closing Date are properly
reflected as accrued liabilities on the March 31, 1997 Balance Sheet and on the
Estimated Net Transferred Assets Schedule delivered pursuant to Section 3(c)
above.
(r) Real Property Leases. The Davco Apparel Business is currently conducted
by Seller at only the following two (2) locations, both of which are leased from
third parties unaffiliated with Seller or Shareholders:
(1) 350 Fifth Avenue, NY, NY 10018, Suite 6401
("Showroom Lease")
(2) 281 Dogburn Rd, West Haven Connecticut
("Warehouse Lease")
Such Real Property Leases are further identified on Schedule 1.12. Seller no
longer operates the Davco Apparel Business at or from its former showroom
facilities at the 47th Floor, 350 Fifth Avenue, New York, New York. Neither
Seller, DEL nor DAC own any real property. At the Closing and as a condition
thereto, the Seller and DAC shall assign to the Purchaser (by executing and
delivering to the Purchaser the Assignment of Lease Agreements in the form of
Exhibit 5.11 attached hereto (the "Lease
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Assignments")) the Seller's and DAC's rights to the Showroom Lease and the
Warehouse Lease.
At or prior to the Closing and as a condition thereto, the Seller, DAC and
the Purchaser shall have received from the landlord of the Warehouse Lease a
written consent to the assignment by the Seller and DAC to the Purchaser of the
Seller's and DAC's rights under said lease and an estoppel certificate in form
and substance reasonably satisfactory to the Purchaser; Seller shall bear all
expenses of obtaining such landlord consent.
From and after the Closing, as and when requested by Purchaser, the Seller,
Shareholders and DAC shall cooperate with Purchaser in obtaining from the
landlord of the Showroom Lease a written consent to the assignment by the Seller
and DAC to the Purchaser of the Seller's rights under said lease and an estoppel
certificate in form and substance reasonably satisfactory to the Purchaser;
Seller shall bear all expenses of obtaining such landlord consent.
All obligations under such Real Property Leases accruing prior to the
Closing Date are properly reflected as accrued liabilities on the March 31, 1997
Balance Sheet and on the Estimated Net Transferred Assets Schedule delivered
pursuant to Section 3(c) above. All rights to security deposits under Real
Property Leases assigned to Purchaser, shall be transferred to Purchaser.
The Seller and DAC do not share any space under the Real Property Leases
with any other person or entity; the Real Property Leases have never been sublet
or assigned by Seller or DAC; on the Closing Date, the Leases shall be in full
force and effect; there are no defaults under any Real Property Leases or claims
by the landlords thereof. On the Closing Date, the premises covered by the Real
Property Leases shall not have been damaged or otherwise adversely affected by
any fire or casualty or the exercise of the powers of eminent domain.
The Seller does not have any leases, occupancy agreements or other
arrangements guaranteeing any minimum term or minimum rentals, fees, or charges
for public warehouse space.
(s) Equipment Leases. Certain of Seller's Fixed Assets, including computer
equipment and office copiers are leased in accordance with the equipment leases
described on Schedule 1.11 (the "Equipment Leases"). At the Closing, Seller
shall assign the Equipment Leases to Purchaser (by executing and delivering to
the Purchaser the Assignment of Lease Agreements in the form of Exhibit 14.4
attached hereto (the "Equipment Lease Assignments"). Contingent on obtaining the
lessors' consents to such assignment, Purchaser shall assume obligations under
such leases accruing from and after the Closing Date
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(alternatively, Purchaser may request that, at Purchaser's expense, the
remaining balance of any such obligation shall be paid off at the Closing and,
in such event, Seller shall transfer to the Purchaser at the Closing such
computer and office equipment free and clear of any Encumbrances). From and
after the Closing, as and when requested by Purchaser, the Seller and the
Shareholders shall cooperate with Purchaser in obtaining from the lessors of the
Equipment Leases written consents to the assignment by the Seller to the
Purchaser of the Seller's rights under said leases and estoppel certificates in
form and substance reasonably satisfactory to the Purchaser. All obligations
under such leases accruing prior to the Closing Date are properly reflected as
accrued liabilities on the March 31, 1997 Balance Sheet and on the Estimated Net
Transferred Assets Schedule delivered pursuant to Section 3(c) above. Seller has
made all rental payments due under such leases to date (and through the Closing
Date) and is otherwise in full compliance with the terms and conditions of such
leases. Assignment of such Equipment Leases and/or transfer of equipment shall
include all computer software utilized in connection with such equipment.
(t) Employees, Employment Agreements, etc. Except as set forth on Schedule
5.12, the Seller has no oral or written employment, bonus, performance,
compensation, commission, management, termination, severance, consulting, sales
representative, distributor or similar agreements or understandings or
arrangements with any of its personnel. Except for the Shareholders, as to which
employment agreements will be entered into with Purchaser on the Closing Date,
nothing in this Agreement shall obligate the Purchaser to continue or to employ
or to make severance or termination payments to, any personnel of the Seller's
business. Except for the Shareholders, any other employees of Seller, which in
the sole discretion of Purchaser are continued as employees of Purchaser, will
continue on an "at will" basis. Seller shall have exclusive responsibility for,
and Purchaser shall have no liability for, any obligations with respect to any
employees of Seller terminated by Seller either in advance of, at or subsequent
to the Closing. DEL and DAC have no employees whatsoever.
Seller has paid in full all wages, salaries, commissions, bonuses, vacation
pay, sick pay and other direct and indirect compensation and benefits earned by
all employees, representatives, contractors and agents of Seller through the
Closing Date, as well as all payroll and withholding taxes and all payroll
overheads. There are no bonuses or commissions accrued or payable by Seller with
respect to any fiscal periods ending on or before December 31, 1996 that remain
unpaid on whole or in part, or which are in dispute or the subject of any claim.
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Schedule 5.12 hereto contains a true and complete list of all current
employees, consultants, representatives, agents, and contractors of Seller,
together with job title and description and current compensation rates (salary,
bonus, commission and otherwise).
(u) Labor Relations. There are no collective bargaining agreements or union
agreements to which the Seller, DEL or DAC is a party or is bound or affecting
the business thereof, and there are no pending disputes, strikes, walkouts,
disturbances, slowdowns, grievances, arbitrations, or filings of any actions,
claims, litigation, proceedings, investigations or complaints of unfair labor
practices, harassment, discrimination, wrongful termination, wage or back pay
demands or other employment related difficulties with respect to any employees
of the Seller's, DEL's or DAC's business, and Seller and Shareholders no of know
basis for any of the foregoing. To the best knowledge of Seller and
Shareholders, there have not been any labor organization activities or attempts
to unionize any of Seller's employees since January 1, 1996.
(v) Employee Benefit Plans. Except as set forth on Schedule 5.13 hereto,
the Seller, DEL and DAC are not covered by and do not maintain, participate in,
contribute to, or operate any pension, retirement, profit-sharing, 401(k) or
other employee benefit plan, the Seller, DEL and DAC do not maintain or
contribute to and are not required to contribute to any employee benefit plan
(within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), which is intended to qualify under paragraph
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
Seller, DEL and DAC have not been required to contribute to any employee benefit
plan which is a multi-employer plan (within the meaning of Section 3(37) of
ERISA) in the five years immediately preceding the date hereof. The Seller, DEL
and DAC have no responsibility for and have not assumed any pension-related or
employee benefit plan-related liabilities (including, without limitation,
withdrawal liability) of any other predecessor business or person. With respect
to each and every employee benefit plan of the Seller, DEL and DAC identified on
Schedule 5.13 attached hereto (each, a "Seller Benefit Plan"), each Seller
Benefit Plan conforms to, and its administration is in compliance with,
applicable Federal laws, including, but not limited to, ERISA and the Code.
There are no pending, or threatened or anticipated, claims by, on behalf of, or
against, any Seller Benefit Plan or the Seller, DEL or DAC by any participant or
beneficiary thereunder or any governmental agency.
(w) Litigation, etc. Except as disclosed on Schedule 5.14 hereto, there are
no actions, claims, litigation, disputes, proceedings or investigations
("Claims") pending against the Seller, the Shareholders, DEL, DAC or their
affiliates in any
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court or governmental agency and neither the Seller nor the Shareholders has
knowledge of any such Claims which are threatened. Seller and Shareholder know
of no basis for any Claim to be made against Seller, DEL, DAC, the Davco Apparel
Business, or the Purchased Assets.
(x) Compliance with Law.
(i) Each of the Seller, DEL, DAC and the Davco Apparel Business are in
compliance with all federal, state, local and foreign laws, ordinances and
regulations, including, without limitation, land use and zoning
restrictions, environmental laws and regulations, OSHA laws and
regulations, health and safety codes, labor and employment practices,
immigration, anti-competitive practices, advertising and labeling rules,
customs, tariff and importation rules, registration of trade names used in
textile and apparel merchandising, the Flammable Fabrics Act, the Fair
Packaging and Labeling Act, the Magnuson-Moss Warranty Act, the Consumer
Product Safety Act, the Textile Fiber Products Identification Act, the Fur
Products Labeling Act, the Wool Products Labeling Act, the Federal Trade
Commission's Care Labeling Rule, and Article 12-A of the New York Labor
Law. The Seller has all federal, state and local governmental licenses and
permits necessary for the conduct of its business, all of which are in full
force and effect. The use of all of the Seller's premises for the conduct
of the Davco Apparel Business is permissible under applicable state and
local land use and zoning requirements. There has never been any spill,
discharge, release, contamination or other condition or event involving
"Hazardous Materials" (as defined or promulgated pursuant to applicable
federal, state and local law) at any premises utilized or occupied by
Seller, and none of such locations or facilities have ever been used for
the generation, storage, or use of "Hazardous Materials" (as defined or
promulgated pursuant to applicable federal, state and local law).
(ii) For each apparel merchandising label/trade-mark set forth on
Schedule 1.9, Seller has obtained Registered Identification Numbers from
the Federal Trade Commission, which registrations are identified thereon
and are in full force and effect on the Closing Date. Copies of the same
have been delivered to Purchaser.
(iii) The Seller does not conduct any manufacturing or contracting
activities within the State of New York, nor does it contract with any
other person or entity to perform apparel manufacturing or contracting
within the State of New York, or conducts any other activity or operation
which would require registration under Article 12-A of the New York Labor
Law.
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(iv) Seller has never contracted for, manufactured, imported, sold,
merchandised or distributed, any products manufactured or assembled, in
whole or in part, through the use of forced prison labor or illegal child
labor. Seller has verified, to the best of its ability, that its vendors,
suppliers and production sources have not used forced prison labor or
illegal child labor and has obtained written certifications thereto from
certain vendors, suppliers and production sources which it has delivered to
Purchaser.
(y) Fixed Assets The Seller's Fixed Assets to be transferred to the
Purchaser are in operating condition, working order and repair and are adequate
for the uses to which they are being put. Schedule 1.11 identifies any Fixed
Assets which are not actually owned by Seller but are leased.
(z) Inventory. The Inventory set forth in Seller's Financial Statements and
in Schedule 1.11 consists entirely of finished goods(plus fabric and trim not in
excess of $200,000), and are stated at the lower of cost (first-in, first out
method) or market. Except as set forth on Schedule 1.11, (i) all Inventory to be
transferred to the Purchaser is of merchantable quality usable in the ordinary
course of business of the Seller for sale to Seller's present customer account
base (as set forth in Schedule 1.8, Customer Lists) and meets all requirements
of the Trademark Licenses, (ii) has been produced against specific binding
customer orders (except for items on the Closing Date carried at not more than
$1,250,000 in the aggregate which constitute inventories kept on hand in the
ordinary course of business consistent with past practice), (iii) is for
shipment in the fall/holiday 1997 selling season, and (iv) none of the Inventory
is comprised of chargebacks, returns, or is obsolete, damaged, slow-moving,
below standard quality, irregulars, seconds, clearance, or otherwise not useable
or salable in the ordinary course of business.
The quality and quantity of Inventory included in the Purchased Assets (or
under binding purchase orders to vendors disclosed on Schedule 1.5) is
sufficient to conduct the Davco Apparel Business consistent with past practices
and to satisfy, on a timely basis, all open purchase orders from customers.
(aa) Accounts Receivable. Seller has delivered to Purchaser on Schedule 1.2
an aged list of the Accounts Receivable on the Closing Date. Except as expressly
set forth on Schedule 1.2: All of the Accounts Receivable reflected on the
Financial Statements and on Schedule 1.2 represent amounts due from Seller's
factor with respect to trade accounts receivable sold to Seller's factor without
recourse and within factor-approved credit limits for each account debtor and
were generated as valid receivable claims against third parties not affiliated
with Seller or Shareholders for products actually sold in the ordinary course of
the Davco Apparel Business. Any
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Accounts Receivable which are "house accounts" and due directly from customers
(rather than the factor) are set forth on Schedule 1.2. All Accounts Receivable
are current net of any reserves shown on the March 31, 1997 Balance Sheet (or
the Estimated Net Transferred Assets Schedule, in the case of those existing on
the Closing Date), which reserves are adequate and were calculated consistent
with past practice.
(ab) Customers, Suppliers, Bookings, Purchase Orders, etc.
Schedule 1.3 sets forth a true and accurate list of all customer bookings
and open purchase orders on the Closing Date, all of which are bona-fide orders
for apparel products of the Davco Apparel Business generated in the ordinary
course of business from third parties unaffiliated with Seller or Shareholders,
and are for shipment of products in the fall/holiday 1997 season and the spring
1998 season. All open purchase orders with customers or suppliers are for
specific product lots for the fall/holiday 1997 season and the spring 1998
season and Seller is not a party to any blanket orders or long-term requirements
or supply contracts. Seller has not granted to any supplier or vendor any
exclusive supply relationship or contract with respect to any products of
Seller.
All Vendor Deposits set forth on Schedule 1.4 (i) represent bona-fide
payments in the ordinary course of business, consistent with past practice, to
suppliers of products for which Seller has placed a purchase order identified on
such Schedule for manufacture of products for which Seller has received binding
purchase orders from customers also identified on such schedule (certain Vendor
Deposits not matched against a customer purchaser order are expressly identified
on Schedule 1.4) and (ii) represent 100% dollar for dollar credits against the
contract price to be paid to the suppliers under such purchase orders, which
will be recognized as such by such suppliers.
Schedule 1.8 includes a true and accurate (a) a list of the 50 largest
customers of the Seller in terms of sales during the quarterly periods ended
March 31, 1997 and June 30, 1997, and sales to customers under Seller's Perry
Ellis Trademark Licenses during such periods and for the fiscal years ended
December 31, 1995 and December 31, 1996, showing the approximate total sales by
the Seller to each such customer during such fiscal periods, and (b) a list of
the 10 largest suppliers of the Seller in terms of purchases during the
quarterly periods ended March 31, 1997 and June 30, 1997 and the fiscal years
ended December 31, 1995 and December 31, 1996, showing the approximate total
purchases by the Seller from each such supplier during fiscal periods. Except to
the extent set forth in Schedule 1.8, there has not been any material adverse
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change in the business relationship of the Seller with any customer or supplier
named in Schedule 1.8.
As of the Closing Date, the aggregate of all contracts or commitments for
the purchase of supplies by Seller did not exceed $13,200,000, all of which
orders, contracts and commitments were made in the ordinary course of business.
As of the Closing Date, there were no claims against the Seller to return
in excess of an aggregate of $400,000 of merchandise by reason of alleged
overshipments, defective merchandise or otherwise, or of merchandise in the
hands of customers under an understanding that such merchandise would be
returnable.
Seller is not under any liability or obligation with respect to the return
of inventory or merchandise in the possession of wholesalers, distributors,
retailers or other customers. Neither Seller nor any Shareholder has any
arrangements or agreements with any customer (whether under oral or written
agreement or understanding or custom or practice) to provide refunds, returns,
replacements, chargebacks, credits, allowances, adjustments, or margin
guarantees on products ordered, sold or delivered.
Neither Seller nor any Shareholder has granted to any customer (whether
under oral or written agreement or understanding or custom or practice) barter
credits, or other adjustments enabling any customer to pay Seller consideration
other than cash on standard 30-90 day terms for products ordered. The Seller
invoices customers and sells such invoices to the factor for 100% of the sales
price of products without any deduction for advertising or markdown allowances.
The Company normally grants customers between three (3%) percent and five (5%)
percent as an advertising and/or markdown allowance, such that the customer may
be entitled to deduct such allowance from the price of the invoice.
None of the Seller, DEL, DAC or the Shareholders is restricted by any
non-competition agreement, restrictive covenant or otherwise (except for
restrictions in favor of Purchaser and its affiliates and restrictions under the
Trademark Licenses) from carrying on any aspect of the apparel business anywhere
in the world.
(ac) Letter of Credit, Bonding & Financial Security Arrangements. Schedule
1.6 lists all Letter of Credit arrangements which Seller may have with respect
to purchases of apparel or other products or supplies or components thereof,
setting forth the banks, factors or other lenders relating thereto, any
collateral or guarantees provided therefor and the outstanding balances thereon
as of the latest practicable date. Seller is not in default under any such
Letter of Credit
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arrangements, all of which are in full force and effect. Except for the
provision of Letters of Credit in the ordinary course of overseas purchases,
Seller is not required to provide any bonding or financial security arrangements
in connection with any of its customers or suppliers in the ordinary course of
its business.
(ad) Product Lines. Schedule 5.15 contains a complete and correct list of
all product types and product lines comprising the Davco Apparel Business.
Seller has never been the subject of any product liability, safety, or false,
deceptive or misleading advertising Claims and has never been the subject of any
investigation, proceeding, warning, citation or other Claim by any federal,
state, foreign or local governmental agency. Seller has not initiated any recall
of any of its products or taken any similar action, and neither Seller nor
Shareholders know of any basis for any such action which should have been taken
or may have to be taken in the future. Seller has not engaged in any advertising
practices which are deceptive, misleading, or otherwise in violation of any laws
or regulations.
Each item of merchandise included in the Inventory or which has been sold
or shipped by Seller is safe for its intended uses and conforms with all
requirements of applicable law and regulations and product safety and testing
codes and standards, and contains all required labels, disclosures and warnings,
including without limitation, compliance with the requirements of the Flammable
Fabrics Act, the Fair Packaging and Labeling Act, the Magnuson-Moss Warranty
Act, the Consumer Product Safety Act, the Textile Fiber Products Identification
Act, the Fur Products Labeling Act, the Wool Products Labeling Act and the
Federal Trade Commission's Care Labeling Rule. With regard to items of
merchandise included in the Inventory or which has been sold or shipped by
Seller as to which safety or flammability standards have been issued, Seller has
performed the necessary tests to demonstrate compliance of its products with
such standards and has delivered to Purchaser documentation thereof.
The Seller does not conduct any of its own manufacturing, fabrication,
cutting, dyeing, trim, or other industrial operations whatsoever nor own or
lease any facilities therefor and all products merchandised, distributed or sold
by Seller or included in the Inventory are and were produced under contract by
third parties unaffiliated with Seller or the Shareholders.
(ae) Insurance. The Seller has maintained and will maintain products
liability, general liability and other insurance coverage effective for acts,
omissions or incidents through the Closing Date in such amounts and such types
as are as set forth on Schedule 5.16 hereto.
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(af) Prohibited Payments. None of the Seller, DEL, DAC, the Shareholders,
or the officers, directors, employees, agents or representatives of the Seller
has, directly or indirectly, in material violation of any law, rule, regulation
or ordinance of any federal, state, local or foreign jurisdiction, (i) offered,
paid or given, or agreed to pay or to give, to any person or entity, including
any governmental official, employee, or agent or solicited, received or agreed
to receive from any such person or entity, directly or indirectly, any money or
anything of value (however characterized) for the purpose of or with the intent
of obtaining or maintaining business or otherwise affecting, or in any manner
relating to, the business, assets, condition (financial or otherwise) or
operations of the Seller, DEL or DAC; or (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false entry on the books
and records of the Seller, DEL or DAC for any reason, or made or agreed to make,
a reimbursement of any political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign office,
(ag) Transactions with Affiliates. Except as set forth on Schedule 5.16
annexed hereto, no director, Shareholder or officer of the Seller controls or
during the last three (3) years has controlled, directly or indirectly, any
business, corporate or otherwise, which is or was a party to any agreement,
business arrangement or course of dealing with the Seller or any property or
asset which was the subject of any agreement, business arrangement or course of
dealing with the Seller. Except for the Shareholder Loans and as otherwise set
forth on Schedule 5.16, there are no transactions or agreements between Seller
and any of Seller's Shareholders, directors, officers, employees or affiliates
thereof.
(ah) Brokers. None of the Seller or Shareholders has employed any broker,
finder or investment banker or has incurred or will incur any broker's,
finder's, investment banker's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement.
(ai) Bank Accounts Schedule 1.16 hereto sets forth the name, account
number, signatories, financial institution (with branch, address and contact
person) of all banking or financial institution accounts, deposit or
concentration accounts, safety deposit boxes, money market accounts, brokerage
accounts and investment accounts maintained by Seller, DEL or DAC
(aj) Disclosure. No representation or warranty by Seller or Shareholders
contained this Agreement, and no statement contained in any certificate,
Schedule, Exhibit, list or other writing furnished to Purchaser in connection
with this transaction, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the
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statements contained herein or therein not misleading. All Schedules hereto and
all copies of documents furnished to Purchaser hereunder or in connection with
the transactions contemplated hereby are true and complete. The Seller and the
Shareholders have divulged to the Purchaser, in this Agreement and the Schedules
and Exhibits hereto, all of the facts that have a material bearing in connection
with the purchase and sale of the Purchased Assets and all other transactions
contemplated hereunder.
6. Restrictive Covenants.
(a) In consideration of the payments to be made by the Purchaser pursuant
to Section 3 above and as an inducement and condition for the Purchaser to enter
into this Agreement, the Seller and the Shareholders have agreed to provide
herein restrictive covenants as follows:
The Seller and the Shareholders agree that they will not, for a minimum
period of three (3) years from the Closing Date and, in addition, for each
Shareholder, for so long thereafter as he is employed by the Purchaser (or any
affiliate) including the initial term and any renewal term pursuant to his
Employment Agreement with Purchaser referred to in Section 7(c) herein, directly
or indirectly, for their account or on behalf of any other party or as an
employer, employee, consultant, manager, licensor, licensee, franchisor,
franchisee, sales representative, agent, broker, contractor, stockholder,
director or officer of a corporation, member or manager of a limited liability
company, investor, owner, lender, partner, joint venturer or otherwise:
(i) Engage in or be interested in any aspect of any business
competitive with the business of Purchaser, Aris, ECI, or their
subsidiaries and affiliates (collectively, the "Aris Group"), including
without limitation, the mens' and boys' sportswear, outerwear, activewear
and loungewear apparel businesses, any other apparel product lines or
apparel business lines sold, merchandised, marketed or distributed by the
Aris Group, and any other product or business lines which are licensed by
or to the Aris Group.
(ii) Directly or indirectly for their own account or the benefit of
others solicit, hire or retain any employee, sales representative, agent,
consultant or contractor of the Aris Group, persuade or entice any employee
of the Aris Group to leave the employ of the Aris Group, or
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persuade or entice any sales representative, agent, consultant or
contractor to discontinue their relationship with the Aris Group (the
restriction set forth in this clause (ii) as to employees and sales
representatives and as to the sourcing agents set forth on Schedule 6.1 and
as to any contractors of the Aris Group primarily making outerwear shall
continue for an additional period of one (1) year following the termination
of employment of a Shareholder).
(iii) Disclose or furnish to anyone the names, addresses and
requirements of any of the customers, suppliers, vendors, product sources,
contractors, representatives, distributors, licensors or licensees or of
the Aris Group.
(iv) Molest or interfere with the goodwill and relationship with any
of the customers, suppliers, vendors, product sources, contractors,
representatives, distributors, licensors or licensees of the Aris Group.
(v) Persuade, induce or solicit any of the customers of the Aris Group
to purchase products or services from anyone other than the Aris Group;
(vi) Bid, propose, compete for, enter into, purchase, acquire, obtain
an assignment or sublicense of, or perform, in any capacity, any trademark,
copyright, patent or other proprietary rights license, franchise or
contract for the manufacture, marketing, merchandising, sale or
distribution of products or services in competition with the Aris
Group(including without limitation, any of the product or business lines
referred to in clause(i) above), or interfere with the goodwill and
relationship of the Aris Group with the licensors or licensees for which
the Aris Group obtains or grants trademark licenses (the restriction set
forth in this clause (vi) as to trademark, copyright, patent or other
proprietary rights licenses and franchises shall continue for an additional
period of three (3) years following the termination of employment of a
Shareholder,
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with respect to any trademarks utilized by the Aris Group during such
Shareholder's employment with the Aris Group); or
(vii) register, apply for, purchase, acquire, obtain an assignment or
sublicense of, or utilize any trademark, brand name, style name, logo,
label, copyright, patent or other proprietary right for any product,
service or business line in competition with the Aris Group (including
without limitation, any of the product or business lines referred to in
clause(i) above).
Recognizing that the business of the Aris Group and the sale and distribution of
its products and the licensing of its trademarks and proprietary rights is
conducted on a worldwide basis, the territory of the restrictive covenants set
forth above shall be throughout the world.
As to each Shareholder, all of the restrictive covenants set forth in
Sections 6(a)(i) through 6(a)(vii) set forth above shall continue for an
additional period of one (1) year following the termination of employment of
such Shareholder if Purchaser, in its sole discretion, elects by written notice
within ten(10) days of such termination, to agree to pay to such Shareholder an
amount equal to his "Base Salary" under his Employment Agreement at the rate in
effect prior to such termination in twelve (12) equal monthly installments
during such additional one (1) year period.
The restrictive covenant period shall be extended for any time during which
the restrictive covenant set forth in this Section 6 has been violated. The
Shareholders acknowledge that the restrictive covenant set forth in this Section
6 was a required condition of employment of which they are aware prior to
commencement of employment with Purchaser. During the restrictive covenant
period of this Section 6, Seller, Shareholders, and DAC shall be prohibited from
owning, directly or indirectly, any interests in, or being affiliated with, any
business entity or organization which is engaged in activities restricted by
this Section 6 and the restrictive covenants set forth in this Section 6 shall
also apply to DEL and DAC. The restrictive covenants set forth in this Section 6
shall not preclude Shareholders from owning in the aggregate a passive
investment of not more than one (1%) percent of the outstanding publicly traded
shares of any company whose shares are publicly traded on a national or foreign
securities exchange, the NASDAQ system, or over-the-counter, provided that none
of them exercise any control or influence over the management of such company
and do not serve as officers, directors, employees, consultants or contractors
thereof.
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(b) The Seller, DAC and the Shareholders acknowledge that the success of
the Aris Group (including, after the Closing, the Davco Apparel Business) is
dependent on their relationships with customers, suppliers, vendors, product
sources, contractors, licensors and licensees, as well as the development of
innovative and proprietary product designs, styles, marketing and distribution
programs and business plans, and related cost, pricing, sales and distribution
information as well as their lists and files of such customers, suppliers,
vendors, product sources, contractors, licensors and licensees and their
requirements, and that it is imperative that these be maintained in strict
confidence. Accordingly, in consideration of the payments to be made by the
Purchaser pursuant to Section 3 above and as an inducement and condition for the
Purchaser to enter into this Agreement, Seller, DAC and the Shareholders shall
keep and maintain in strict confidence, not utilize or copy for any purpose
other than in furtherance of the Purchaser's business, and not transfer, divulge
or disclose to any third party other than in furtherance of the Purchaser's
business, all technical and business information of the Aris Group (including
the Davco Apparel Business), including, without limitation, business and
marketing plans, opportunities, programs, channels of distribution, agreements,
know-how, trade secrets, inventions, software, books, records, forms and
manuals, pricing policies, sales and product records, all files, information,
lists and documents relating to the Aris Group's customers, vendors, suppliers,
product sources and subcontractors and their requirements, and financial and
cost information, budgets and projections, information relating to trademark
licenses (and bids and proposals therefor) and terms, conditions and pricing
thereof, and product designs, developments, programs, styles, drawings, artwork,
graphics, prototypes, mockups, models, including any of the foregoing
information stored on a computer system or disk. All of the foregoing are hereby
agreed to be the valuable and confidential trade secrets of the Aris Group and
subject to the restrictions of this Agreement, whether or not otherwise
protectable by patents, copyrights or trademarks. The foregoing confidentiality
restrictions shall be in addition to, and not in limitation of, confidentiality
requirements set forth in the employment agreements which Shareholders shall
enter into with Purchaser on the Closing Date. In the event that an order or a
subpoena issued by a court of competent jurisdiction requires the Seller or the
Shareholders to disclose any of the foregoing, they shall be permitted to comply
with such order, but shall consult with Purchaser in advance so as to enable the
Purchaser to attempt to narrow the scope of such disclosure and/or to challenge
the order of disclosure.
(c) At the Closing, all materials and documentation referred to in Section
6(b) above relating to the Davco Apparel Business, which may be in the
possession of the Seller, DAC, the Shareholders or their affiliates shall be
delivered to the Purchaser.
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(d) In addition to any and all other remedies available at law or equity,
in the event that the Seller, DAC, or the Shareholders shall breach any covenant
in this Section 6, the Seller, DAC and the Shareholders acknowledge and agree
that damages would be difficult to ascertain and Purchaser and the Aris Group
shall be entitled, in addition to any and all other remedies, to an injunction
issued by a court of competent jurisdiction restraining the aforesaid violations
of the Seller, DAC or the Shareholders, without the necessity of posting a bond
or proving special damages.
(e) The provisions of this Section 6 shall apply with respect to the
Purchaser, Aris, ECI and all subsidiary, affiliate and parent corporations and
franchisees or licensees thereof.
7. Provisions Relating to Employees. (a) The Seller and the Shareholders
represent and warrant to the Purchaser that the Seller has paid through the
Closing Date all accrued wages, salary, bonus, commissions, vacation and sick
pay due to be paid or compensated on or before such respective dates for all of
its employees, agents, contractors and sales representatives, including payroll
overheads (i.e., FICA, State tax, Federal tax, disability, workers' compensation
and liability, employee benefit plan contributions and payments), except for
scheduled vacations not yet taken as set forth for specific employees (other
than the Shareholders) on Schedule 7.1 (Purchaser, if it shall hire said
employees, will permit them to take such vacation time after the Closing Date
with pay, but will not make any cash payment if such vacation time is not
actually taken after the Closing Date).
(b) Seller shall be responsible for all payments and liabilities to any
employees of Seller terminated by it and/or not hired by Purchaser.
(c) At the Closing and as a condition thereto, the Purchaser and each of SA
and CH shall enter into the Shareholder Employment Agreements in the form of
Exhibit 7.2 hereto for SA and in the form of Exhibit 7.3 hereto for CH.
(d) The Purchaser shall take all reasonable steps to provide to the
Seller's employees whose employment is continued by the Purchaser after the
Closing the opportunity to participate in the Purchaser's group health insurance
plan generally provided to its employees from time to time (with credit given
for service to Seller in computing any waiting period); provided that the Seller
and the Shareholders have disclosed on Schedule 7.5 hereto a true, correct and
complete list of all pre-existing health conditions or other insurance
difficulties relating to the Seller's employees (including the Shareholders),
together with descriptions and copies of all
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health insurance policies maintained by the Seller and a schedule of premiums
thereon.
(e) As promptly as practicable following the Closing, Seller shall
terminate all of its pension, profit sharing, retirement or other employee
benefit plans at the cost and expense of the Seller and the Shareholders and
shall make all necessary filings with the Internal Revenue Service, Department
of Labor and other governmental agencies, and the Seller and the Shareholders
shall be responsible for the distribution of benefits to the participants and
any necessary funding thereof in compliance with the terms of such Seller
Benefit Plans and applicable law and regulation.
(f) All employees of the Seller that are continued to be employed by the
Purchaser or its affiliates after the Closing of the transactions contemplated
by this Agreement shall be phased into the Aris Industries, Inc. Employee
Savings Plan (401(k) plan) (so long as such plan is maintained by the Aris),
with credit given for service to Seller in computing any waiting period. If
feasible and to the extent permitted by law, such employees may "rollover" their
accounts from Seller's 401(k) plan to the Aris's 401(k) plan.
8. Indemnification. The Seller and the Shareholders further covenant and
agree, as follows:
(a) The Seller and the Shareholders shall, jointly and severally, indemnify
the Purchaser, Aris, ECI and their subsidiaries and affiliates and their
shareholders, officers, directors and their affiliates, and defend and hold each
of them and their respective successors, assigns, heirs and personal
representatives (collectively, the "Indemnitees") harmless of and from: (i) any
and all claims, suits and causes of action arising out of or by reason of any
matter or cause whatsoever, relating to or in connection with or arising out of
the business conducted by the Seller, the Shareholders, DEL or DAC (including
without limitation, the Davco Apparel Business), or in connection with the
Purchased Assets sold hereunder, on or prior to the Closing Date; (ii) any
breach of any obligations, representations, warranties or covenants of the
Seller or the Shareholders contained herein; (iii) any liabilities (other than
the Assumed Liabilities), claims, disputes, suits or causes of action relating
to, or in connection with, any liabilities or obligations of the Seller, DEL,
DAC, the Shareholders or their affiliates which may be asserted against any of
the Indemnitees, by creditors or others; (iv) any liabilities, claims, disputes,
suits or causes of action relating to, or in connection with, the Excluded
Assets, the Excluded Contracts, or the Non-Assumed Liabilities which may be
asserted against any of the Indemnitees; (v) any and all liabilities of the
Seller, DEL, DAC, or the Shareholders on, prior to or after the Closing Date for
any taxes owed to any federal, state, local or foreign
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governmental agency, including, without limitation, sales taxes, franchise
taxes, income taxes, rent taxes, employee withholding and payroll taxes and
customs, importation, duties and tariffs (other than customs, importation,
duties and tariffs included in Open Letters of Credit or Accrued Expenses
included in the Assumed Liabilities), including any such liabilities determined
by any tax audit; (v) any liabilities for wages, salary, bonuses, commissions,
fees, vacation or sick pay and payroll overheads described in Section 7(a)
hereof which were required to have been paid by the Seller, DAC, DEL or the
Shareholders and that may be asserted against any of the Indemnitees; (vi) any
products liability, warranty, safety, advertising or other claims and any
liability relating to the importation, manufacture, sale, or distribution of
products by Seller, Shareholders, DEL or DAC prior to the Closing or included in
the Inventory on the Closing Date; (vii) any claims under any laws or
regulations affecting health, safety, the environment or the regulation of
"Hazardous Materials" (as defined or promulgated pursuant to applicable federal,
state and local law), involving the Seller, the Shareholders, DEL, DAC, any
premises, locations or facilities of the Seller, DEL, DAC or the Purchased
Assets sold to the Purchaser; (viii) funding deficiencies, distributions,
liabilities and claims (including withdrawal liabilities, assessments, excise
and other tax claims) relating to any Seller Benefit Plan, including any such
liabilities determined by an Internal Revenue Service or governmental audit and
any liability relating to termination of any Seller Benefit Plan; (ix) any and
all liabilities, claims, suits or causes of action relating to, or in connection
with, the Excluded Assets; (x) any and all liabilities, claims, suits, causes of
action relating to, or in connection with, the Real Property Leases or the
premises leased thereunder, the Equipment Leases, or the Trademark Licenses
accruing prior to the Closing Date(except for scheduled rental and royalties
under the terms of such agreements for which specific accruals are recorded on
the Estimated Net Tangible Transferred Assets Schedule); (xi) any and all
liabilities, claims, suits, causes of action relating to, or in connection with,
any claims, offsets, disputes, or demands for refunds, credits, chargebacks,
allowances, or returns from any customers for any products sold by Seller prior
to the Closing Date or included in Inventory on the Closing Date; (xii) any
failure of Seller or Shareholders to comply with any bulk sales law; and (xiii)
any and all liabilities, claims, suits, causes of action relating to, or in
connection with, the existing Claims against Seller identified in Schedule 5.14.
Such indemnity shall cover all damages, losses, costs and expenses of the
Indemnitees, including, without limitation, amounts paid in settlement or
satisfaction of claims; judgments; fines; penalties; and reasonable attorneys'
fees and disbursements.
(b) The Seller and the Shareholders shall pay all Federal, state, local and
foreign income tax, gains tax and
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transfer taxes on the sale of the Purchased Assets to the Purchaser; provided,
however, that Purchaser shall pay applicable New York State sales tax on the
Fixed Assets transferred, if any is due.
(c) In the event that the Seller, the Shareholders or their affiliates
shall have breached any of their respective obligations, representations,
warranties or covenants contained in this Agreement, or the Seller or the
Shareholders is obligated to make any indemnification as provided herein, the
Purchaser shall notify the Seller and the Shareholders in writing of any such
claim and the amount and circumstances thereof (each an "Indemnification
Claim"). The Purchaser, after delivery of such written notice and failure of the
Seller or the Shareholders to cure the same to the Purchaser's satisfaction
within ten (10) days of such notice, may offset its and all Indemnitees' damages
and losses (including reasonable attorney fees and disbursements) suffered in
connection with such Indemnification Claim against any obligation of the
Purchaser hereunder to the Seller or Shareholders, including, without
limitation, any payments in respect of the Actual Final Cash Purchase Price to
be made by the Purchaser under Section 3 hereof, which actions for any purposes
hereunder shall not be considered a default under this Agreement.
The assertion by the Purchaser or any other Indemnitee of rights of offset
or any other claims with respect to the Actual Final Purchase Price shall be in
addition to any and all other remedies of such parties and Seller and
Shareholders shall remain responsible for all Indemnification Claims under this
Section 8 which are not actually paid in full as a result of the exercise of
such rights of offset or other claims.
(d) Order of Satisfaction of Indemnification Claims.
(i) All Indemnification Claims made by Purchaser on or prior to the
payment of the Actual Final Cash Purchase Price shall first be satisfied by
deduction of the aggregate amount of such Indemnification Claims from the
1997 Post-Closing Davco Net Income utilized in the computation of the
Actual Final Cash Purchase Price. In the event that Indemnification Claims
made by Purchaser on or prior to the payment of the Actual Final Cash
Purchase Price are not fully recouped by deduction from the 1997
Post-Closing Davco Net Income utilized in the computation of the Actual
Final Cash Purchase Price (in that the aggregate Indemnification Claims
exceed the 1997 Post-Closing Davco Net Income as reduced by Excess Closing
Date Liabilities), Seller and Shareholders shall nevertheless remain
jointly and severally responsible for the deficiency of such
Indemnification Claims, and Purchaser may seek recovery thereof directly
from Seller and Shareholders as provided under clause (ii) below.
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(ii) All Indemnification Claims made by Purchaser on or prior to the
payment of the Actual Final Cash Purchase Price which are not fully
recouped by deduction from 1997 Post-Closing Davco Net Income utilized in
the computation of the Actual Final Cash Purchase Price (in that the
aggregate Indemnification Claims exceed the 1997 Post-Closing Davco Net
Income as reduced by Excess Closing Date Liabilities), and all
Indemnification Claims made by Purchaser after payment of the Actual Final
Cash Purchase Price, shall next be satisfied by Seller and Shareholders'
joint and several obligations for direct cash payment to Purchaser, which
shall be made within ten (10) days written notice of such Indemnification
Claim. In the event that any Indemnification Claim is not fully satisfied
by such cash payment within such ten (10) days period, Seller and
Shareholders shall nevertheless remain jointly and severally responsible
for the deficiency of such Indemnification Claims, and Purchaser may
continue to seek recovery thereof directly from Seller and Shareholders.
(iii) The purpose of this Section 8(d) is merely to specify the
sequence of sources of recovery in which Purchaser may seek satisfaction of
Indemnification Claims, and does not in any way limit Seller and
Shareholder's joint and several obligations for indemnification under this
Agreement.
(iv) Notwithstanding the foregoing, Indemnification Claims for
products liability covered by insurance shall not be deducted in the
calculation of the Actual Final Cash Purchase Price.
(e) With respect to third party claims which are the subject of
indemnification under this Section 8, the Seller and the Shareholders shall have
the right and obligation to defend any such claim at their own expense and with
counsel acceptable to the Purchaser; provided, however, that if the Seller and
the Shareholders fail either to undertake such defense or to procure a
settlement releasing the Indemnitees by written notification to Purchaser within
twenty (20) days after the date of Purchaser's notification of indemnification
claim, or if thereafter, Seller or the Shareholders fail to maintain such
defense to the satisfaction of Purchaser, then the Purchaser shall have the
option, but not the obligation, to defend such claim with any counsel of its
choosing, all at the joint and several expense of the Seller and the
Shareholders. Notwithstanding the foregoing, Purchaser may elect to defend any
such third party claim which is the subject of indemnification with its own
counsel, all at the joint and several expense of the Seller and the
Shareholders. Neither the Seller or the Shareholders, on one hand, nor the
Purchaser, on the other hand, shall enter into a settlement of any such third
party claim without the other party's written consent, which will not be
unreasonably withheld or delayed; provided, however, that the Purchaser shall
have no obligation to consent to any settlement
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unless it provides for a complete release of the Indemnitees with respect to
such third party claim; and further provided, that from and after January 1,
1998, the Purchaser may settle any and all claims (including cost of defense)
which involve a dollar amount of aggregate liability of $25,000 or less.
(f) The Seller, the Shareholders and the Purchaser agree that refunds,
returns, replacements, chargebacks, credits, allowances and adjustments relating
to products sold by Seller prior to the Closing or in the Inventory on the
Closing Date shall be the sole and exclusive responsibility of the Seller, and
shall be subject to indemnification and offset in the same manner as other
claims under this Section 8; provided however, that if any such item has been
charged against 1997 Post-Closing Davco Net Income in computing the Actual Final
Purchase Price pursuant to Section 3(e) above, such item will not also be the
subject of indemnification or offset.
9. Cooperation in Effecting Transition. (a) The Seller and the Shareholders
agree to turn over and make available to the Purchaser all agreements,
accounting and financial records, ledger sheets, open purchase orders, letters
of credit, correspondence with and customers, vendors, suppliers, product
sources and contractors, sales, product, shipping and all other books and
records of the Seller, including, without limitation, those maintained on any
computer system.
(b) The Seller and the Shareholders agree that the Purchaser shall have all
of the Seller's right to use the telephone and fax numbers, E-mail addresses and
web site domain names set forth on Schedule 9.1 hereto.
(c) The Seller and the Shareholders agree to introduce the Purchaser, ECI,
Aris and their representatives to the Seller's customers, vendors, suppliers,
product sources and contractors and licensors under the Trademark Licenses, and
to cooperate in and to effectuate the transition arising from the sale of the
Purchased Assets in any manner reasonably requested by the Purchaser.
(d) The Seller and the Shareholders shall continue to cooperate with the
Purchaser's Accountants before and after the Closing in connection with all
financial reviews and audits of the Purchaser (including certifications relating
to fiscal periods prior to the Closing) and shall deliver any necessary
management representation letters requested by the Purchaser's Accountants.
(e) In the event that a consent to assignment of any Contract has not been
obtained prior to Closing Date, (1) Seller, DAC and Shareholders will continue
to cooperate with Purchaser to obtain such consents after the Closing, all at
the
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sole cost and expense of Seller and (2) Seller, DAC and Shareholders will
cooperate with and implement any arrangement designated by Purchaser for the
administration and operation of such Contract for the benefit and account of
Purchaser from and after the Closing Date.
(f) No announcement, press releases, presentations or interviews regarding
the transactions set forth in this Agreement shall be made either before or
after the Closing Date, except those prepared and approved by Purchaser.
Purchaser shall consult with Shareholders regarding announcement of the
transactions set forth herein.
10. Discontinuance of Tradenames. After the Closing, the Seller and the
Shareholders agree that they and DEL and DAC will immediately discontinue and no
longer use the corporate or trade names of "DAVCO", "DAVCO INDUSTRIES",
"DAVCORP" or "DAVCO ACCESSORIES" or any variation or derivation thereof. At the
Closing, and as a condition thereto, the Seller, DEL and the Shareholders shall
deliver to the Purchaser's counsel for filing an executed Certificate of
Amendment to the Seller's Certificate of Incorporation changing the Seller's
corporate name to "AH EQUITIES, INC."; an executed Certificate of Amendment to
DEL's Certificate of Incorporation changing DEL's name to "AH HOLDINGS, INC.";
and an executed Certificate of Discontinuance of any d/b/a certificate Seller or
DEL may have regarding the any trade name, label, or business name included in
the Intellectual Property transferred to Purchaser, even if dormant.
11. Purchaser's Representations and Warranties. The Purchaser represents
and warrants unto and covenants with the Seller, and such representations,
warranties and covenants are material inducements to the Seller entering into
this Agreement, as follows:
(a) The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. Aris is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. Aris owns, directly or indirectly, all of the shares of
capital stock of Purchaser. The Purchaser has all requisite corporate power and
authority to execute, deliver and perform this Agreement and all writings
related hereto. Aris has all requisite corporate power and authority to issue
and deliver the Aris Common Stock to Seller as required under this Agreement.
The Purchaser and Aris have all necessary power and authority to carry on their
respective business as now conducted and to own, lease or operate their
properties as and in the manner and in the places where such business is now
conducted and such properties are now owned, leased or operated.
(b) The execution, delivery and performance by the Purchaser of this
Agreement and all writings relating hereto
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have been duly authorized by the unanimous written consent of the Board of
Directors and sole shareholder of the Purchaser and the Board of Directors of
Aris. Purchaser is a wholly owned subsidiary of ECI, and ECI is a wholly owned
subsidiary of Aris. This Agreement and all writings relating hereto to be signed
by the Purchaser constitute valid and binding obligations of the Purchaser
enforceable in accordance with their respective terms. Neither the execution and
delivery of this Agreement or any writing relating hereto nor the consummation
by the Purchaser of the transactions contemplated hereby and thereby will (i)
conflict with or result in a breach of the Certificate of Incorporation or
By-Laws of the Purchaser or Aris or (ii) violate or conflict with or constitute
a default under any agreement to which the Purchaser or Aris is a party. Except
as set forth on Schedule 11.1, no consent or approval of or notification to any
governmental authority or any other person, firm or entity whatsoever is
required in connection with the execution and delivery by the Purchaser or Aris
of this Agreement or any writing relating hereto or the consummation of the
transactions contemplated hereby or thereby.
(c) There are no actions or proceedings pending against the Purchaser or
Aris or their affiliates in any court or governmental agency, and neither the
Purchaser nor Aris has knowledge of any such action or proceedings which are
threatened, in each case which would affect the transactions contemplated by
this Agreement.
(d) The Aris Common Stock delivered to Seller at the Closing pursuant to
Section 3 (Stock Purchase Price) will be duly issued, fully paid and
non-assessable. The authorized capital stock of the Aris consists of 50,000,000
shares of Common Stock, par value $.01 per share, of which 11,925,400 shares are
issued and outstanding (prior to the issuance of shares to Seller pursuant to
this Agreement) on the Closing Date, and 10,000,000 shares of Preferred Stock,
par value $.01 per share, of which none are outstanding on the Closing Date. On
the Closing Date, there is also outstanding a warrant issued to Heller
Financial, Inc. to obtain 584,345 shares of Aris Common Stock and an aggregate
of 857,500 options to purchase Aris Common Stock issued to employees and
directors of Aris and its subsidiaries pursuant to Aris' 1993 Stock Incentive
Plan. The Aris 1993 Stock Incentive Plan currently reserves a maximum of
1,200,000 shares of Aris Common Stock for issuance of options, stock and other
rights pursuant to such Plan.
12. Conditions to Purchaser's Obligations. The Purchaser's obligation to
effect the Closing shall be subject to and conditioned upon:
(a) The completion to the satisfaction of the Purchaser and its counsel of
an investigation of the business
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affairs, Purchased Assets and liabilities of the Seller and the Shareholders;
(b) No adverse change having occurred in the financial condition or
business affairs of the Seller, Shareholders or the Purchased Assets between
December 31, 1996 and the Closing Date;
(c) No previously undisclosed material liabilities or commitments of the
Seller or the Shareholders having been discovered;
(d) The Seller and the Shareholders receiving all requisite third party
consents and approvals to the transactions contemplated hereby, including,
without limitation, from each of the parties listed on Schedule 5.4 attached
hereto;
(e) The licensors of the Trademark Licenses(and where applicable, Salant
Corporation) having delivered written consent to Seller and Purchaser of the
assignment of such licenses to Purchaser, the extension of the term of such
licenses and other modifications thereto as set forth on Schedule 5.10 hereto;
(f) The Purchaser and each of SA and CH having entered into their
respective Shareholder Employment Agreements;
(g) The Seller, SA and CH having entered into the Shareholders Agreement
with Aris and certain other parties thereto in the form of Exhibit 3.3 hereto;
(h) All of the representations, warranties and covenants of the Seller, DAC
and the Shareholders being true and correct on the Closing Date;
(i) The Seller, DAC and the Shareholders making all deliveries at the
Closing (including without limitation, those set forth in Section 14 hereof) and
fulfilling all of their obligations hereunder to be fulfilled by the Closing
Date;
(j) No action, proceeding, investigation or litigation shall have been
instituted or threatened against any party hereto which would effect the
transactions contemplated by this Agreement.
(k) Neither the Seller, Shareholders nor DAC shall be the subject of any
proceeding or filing in bankruptcy, insolvency, receivership or reorganization.
(l) The employees of Seller to be hired by Purchaser and designated by the
Purchaser having entered into Purchaser's standard form Employee Non-Disclosure
Agreement.
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(m) All Encumbrances on the Purchased Assets having been terminated.
(n) Seller and Purchaser shall have executed and filed a New York State Tax
Bulk Sale Notice in compliance with the New York Tax Law and ten days shall have
elapsed from such filing.
(o) Purchaser, at its election, shall have conducted and completed a
physical inventory or other inventory review of Seller as of a date in close
proximity to, or immediately preceding, the Closing Date, and be satisfied with
the results thereof.
(p) Seller shall have received written consent from the licensor of its
"Duck Head" license to the termination of the term thereof on or prior to the
Closing Date, on terms and conditions satisfactory to Purchaser.
(q) Purchaser, Aris, and ECI having obtained and implemented financing
arrangements to enable payment to Seller of all amounts in respect of the Actual
Final Cash Purchase Price and advances thereof, repayment of the Shareholder
Loans, assumption of the Assumed Liabilities as well as implementing any other
funding requirements of this Agreement.
13. Conditions to Seller's Obligations. The Seller's obligation to effect
the Closing shall be subject to and conditioned upon:
(a) The Purchaser and the Aris receiving all requisite third party consents
and approvals to the transactions contemplated hereby.
(b) The Purchaser and each of SA and CH having entered into their
respective Shareholder Employment Agreements;
(c) All of the representations, warranties and covenants of the Purchaser
and the Aris being true and correct on the Closing Date;
(d) The Purchaser and the Aris making all deliveries at the Closing
(including without limitation, those set forth in Section 15 hereof) and
fulfilling all of their obligations hereunder to be fulfilled by the Closing
Date;
(e) No action, proceeding, investigation or litigation shall have been
instituted or threatened against any party hereto which would effect the
transactions contemplated by this Agreement.
(f) Purchaser, Aris, and ECI having obtained and implemented financing
arrangements to enable payment to Seller
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of all amounts in respect of the Actual Final Cash Purchase Price and advances
thereof, repayment of the Shareholder Loans, assumption of the Assumed
Liabilities as well as implementing any other funding requirements of this
Agreement.
(g) Purchaser having paid, or caused repayment, of Seller's loans due to
Shareholders, up to a maximum of $785,417, as stated on the March 31, 1997
Balance Sheet.
(h) Purchaser having caused Seller's factor to release to Shareholders the
personal collateral they had provided to secure Seller's obligations to such
factor and to acknowledge that the Shareholders' personal guarantees delivered
to such factor are not applicable to Purchaser's factoring arrangements after
the Closing Date.
14. Seller's Closing Deliveries. On or prior to the Closing Date, the
Seller, DAC and the Shareholders shall deliver, and/or the Purchaser shall have
received, the following:
(a) Appropriate evidence of all necessary corporate action by each of the
Seller and DAC in connection with the transactions contemplated hereby,
including, without limitation, certified copies of unanimous resolutions duly
adopted by the Board of Directors and the Shareholders, as shareholders, of the
Seller, and the Board of Directors and the Shareholders, as the shareholders of
DAC, authorizing the execution, delivery and performance by each of the Seller
and DAC of this Agreement and all writings executed in connection herewith (and
specifically approving the sale by each of the Seller and DAC of substantially
all of its assets), and a certificate as to the incumbency of officers of each
of the Seller and DAC executing any instrument or document delivered in
connection with this Agreement.
(b) A lien search (including UCC, suits and judgements, and federal and
state tax liens) on the Seller, DAC, the Shareholders, recording no Encumbrances
except as permitted by this Agreement.
(c) Corporate and tax certificates of good standing of the Seller in the
State of New York.
(d) A duly executed Shareholders Employment Agreement between each of the
Shareholders and the Purchaser in the form of Exhibit 7.2 attached hereto for SA
and in the form of Exhibit 7.3 attached hereto for CH.
(e) An opinion of Sargent & Sargent, counsel for the Seller, DAC and the
Shareholders, to the effect set forth in Exhibit 14.1 attached hereto.
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(f) All keys, locks, safe combinations, books and records and computer
access codes of the Seller, customer, vendor, contractor, product source and
supplier lists, and other items so as to put the Purchaser into full possession
of the Purchased Assets of the Seller purchased pursuant to this Agreement, into
full possession of the premises under all of the Real Property Leases, and to
obtain full access to Seller's computer systems.
(g) A duly executed Bill of Sale in the form of Exhibit 14.2 attached
hereto.
(h) A duly executed Assignment of Lease in the form of Exhibit 5.11
attached hereto for the Showroom Lease and the Warehouse Lease, together with
consents to assignment and estoppel certificates from the landlords thereof.
(i) Evidence of the Seller, DAC and the Shareholders having received all
requisite third party consents and approvals to the transactions contemplated
hereby, including, without limitation, from each of the parties listed on
Schedule 5.4 attached hereto.
(j) A duly executed Assignment of Trademark License in the form of Exhibit
5.9 hereto for each of the Trademark Licenses, together with duly executed
consents and estoppel certificates from the licensors of the Trademark
Licenses(and Salant Corporation, where applicable) to the assignment thereof
from Seller to Purchaser, together with duly executed extensions, renewals and
modifications thereof in accordance with Schedule 5.10 hereto.
(k) A duly executed Employee Non-Disclosure Agreement on Purchaser's
standard from each employee of Seller designated by Purchaser.
(l) A duly executed Assignment of Trademark in the form of Exhibit 14.3
attached hereto for each trademark owned by Seller and listed on Schedule 1.9
hereto.
(m) Duly executed and delivered UCC-3 termination statements terminating
any security interest in the Purchased Assets.
(n) A duly executed consent by the licensor of Seller's Duck Head license
to the termination of the term thereof on or prior to the Closing Date, in form
and substance satisfactory to Purchaser.
(o) Complete and accurate schedules of the Purchased Assets and Assumed
Liabilities at the Closing Date, in conformity with the requirements of Section
1 of this Agreement.
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(p) Duly executed assignments of the Equipment Leases listed on Schedule
1.11 and (post-closing) consents of the lessors thereof.
(q) Duly executed amendments to Seller's and DEL's Certificate of
Incorporation and d/b/a discontinuance certificates as required by Section 10
hereof.
(r) The Shareholders Agreement in the form of Exhibit 3.3 duly executed by
Seller and Shareholders.
(s) Duly executed SEC Forms 3 and 13D reporting Seller's and Shareholders'
ownership of Aris Common Stock.
(t) An amendment to Seller's shareholders agreement providing that neither
SA nor CH will transfer any shares thereof or of DEL or DAC.
(u) Confirmatory letters from DEL and DAC.
(v) All other releases, consents, agreements and approvals required to be
obtained by the Seller, DAC and the Shareholders to permit the consummation of
the transactions contemplated hereby in accordance with the terms and conditions
of this Agreement and all other documentation required to be delivered at or
prior to the Closing under the terms of this Agreement.
15. Purchaser's Closing Deliveries. On or prior to the Closing Date, the
Purchaser shall deliver, and the Seller or the Shareholders shall have received,
the following:
(a) Appropriate evidence of all necessary corporate action by the Purchaser
and the Aris in connection with the transactions contemplated hereby, including,
without limitation, certified copies of resolutions duly adopted by the Board of
Directors and the sole shareholder of the Purchaser and the Board of Directors
of the Aris approving the transactions contemplated by, and authorizing the
execution, delivery and performance by the Purchaser (and where applicable,
Aris) of this Agreement and all writings executed in connection herewith, and a
certificate as to the incumbency of officers of the Purchaser and the Aris
executing any instrument or other document in connection with this Agreement.
(b) An opinion of Herrick LLP, Feinstein, counsel for the Purchaser and the
Aris to the effect set forth in Exhibit 15.1 hereto.
(c) Payment of the advance against the Actual Final Cash Purchase Price set
forth in Section 3(b)(i) hereof ($500,000) due at the Closing, by bank or
certified check or by wire transfer;
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(d) Payment of the Shareholder Loans due from Seller to Shareholders, up to
a maximum of $785,417, as stated on the March 31, 1997 Balance Sheet, by bank or
certified check or by wire transfer;
(e) Delivery of stock certificates for 3,000,000 shares of Aris Common
Stock as described in Section 3(a)(i)
(f) A duly executed Shareholder's Employment Agreement between the
Shareholders and the Purchaser in the form of Exhibit 7.2 attached hereto for SA
and in the form of Exhibit 7.3 attached hereto for CH.
(g) A duly executed Assignment of Lease in the form of Exhibit 5.11
attached hereto for each of the Showroom Lease and the Warehouse Lease.
(h) A duly executed Assignment of Trademark License in the form of Exhibit
5.9 hereto for each of the Trademark Licenses.
(i) Documentation of Purchaser, Aris, and ECI having obtained and
implemented financing arrangements to enable payment to Seller of all amounts in
respect of the Actual Final Cash Purchase Price and advances thereof, repayment
of the Shareholder Loans, assumption of the Assumed Liabilities as well as
implementing any other funding requirements of this Agreement, including
delivery of the Standby Letter of Credit with respect to payment of the Actual
Final Cash Purchase Price.
(j) A letter from Purchaser acknowledging certain sales activities of
Seller.
16. General Provisions. (a) The parties agree to execute and deliver any
and all other documents and instruments which the Purchaser may require to carry
out the transactions contemplated by this Agreement and to effectively transfer
the Purchased Assets to the Purchaser.
(b) The representations, warranties and covenants herein contained shall be
deemed and construed to be continuing representations, warranties and covenants
and shall survive the execution and delivery of this Agreement and the Closing
of the transactions provided herein. Except as expressly set forth in this
Agreement or the schedules or exhibits hereto or documents required to be
delivered under this Agreement, no representations or warranties are made by any
party hereto or by Aris.
(c) Each of the parties shall indemnify and hold the other parties harmless
from and against all liability, claim, loss, damage or expense, including
reasonable attorneys' fees,
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pertaining to any broker, finder or other person with whom such party has
retained, contracted, or otherwise dealt with.
(d) Notwithstanding any other provisions of this Agreement: (i) each and
every representation, warranty, covenant, indemnity, guaranty and other
obligation of the Seller, DAC or the Shareholders or any of them set forth in
this Agreement or any writing relating hereto shall be deemed a joint and
several liability of the Seller, DAC and the Shareholders; and (ii) the Seller,
DAC and the Shareholders acknowledge and agree that they hereby release, waive
and terminate any and all claims that the Seller, DAC, the Shareholders or their
affiliates may have in connection with or related to the Purchased Assets and
hereby acknowledge and agree that they have no interest in the Purchased Assets
and to the extent that the Seller has any obligation or liability to the
Shareholders, DAC or their affiliates, the Shareholders, DAC and their
affiliates shall only seek to satisfy such obligation or liability from the
Excluded Assets or the proceeds of the purchase price paid to Seller and shall
not seek or have any recourse against the Purchaser, its affiliates or the
Purchased Assets with respect to any such obligation or liability.
(e) Except as otherwise specified in this Agreement, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereunder shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.
(f) Notwithstanding any provision herein to the contrary, any and all
rights under this Agreement afforded to the Purchaser may be enforced on behalf
of the Purchaser by Aris or any of its affiliates.
(g) All notices which are required to be given hereunder shall be sent by
certified mail, return receipt requested, to the Seller and to the Shareholders
at Shareholder's residences set forth above, with a copy to: Sargent & Sargent,
830 Post Road East, Westport, Connecticut 06880, Attention: Thomas Sargent, Esq.
and to the Purchaser or Aris at the Purchaser's address set forth above,
Attention: Charles S. Ramat, President, with a copy to: Herrick, Feinstein LLP,
2 Park Avenue, New York, New York 10016, Attention: Lawrence M. Levinson, Esq.
(h) This Agreement and all other writings executed in connection with this
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. Each party hereto for himself or itself and his or its
successors and assigns hereby consents to personal jurisdiction over him or it
in the courts of the State of New York and of any
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federal court located in such state in connection with any action or proceeding
arising out or related to this Agreement and all other writings executed in
connection with this Agreement. Each party hereto agrees that service of process
upon him or it may be made in any manner permitted by the laws of the State of
New York, and in addition, specifically agrees that service will be deemed
sufficient for personal jurisdiction over him or it if service is made by
registered or certified mail at the address of such party set forth above.
(i) No waiver of any breach of any terms hereof shall be effective unless
made in writing signed by the party against whom enforcement of the waiver is
sought, and no such waiver shall be construed as a waiver of any subsequent
breach of that term or of any other term of the same or different nature.
(j) This instrument(together with the other agreements, documents and
instruments to be entered into between the parties pursuant to this Agreement)
contains the entire agreement of the parties. It may not be changed, modified,
added to or altered orally, but only by an agreement in writing signed by party
to be charged thereby.
(k) This Agreement shall be binding upon the parties hereto and their
heirs, executors, administrators, successors and assigns. This Agreement and the
covenants herein contained may be assigned by the Purchaser to any corporation
controlling, controlled by, or under common control with the Aris, and the
covenants and provisions of this Agreement shall continue and inure to the
benefit of such corporation acquiring the same. Neither the Seller nor the
Shareholders may assign any of its or their rights or obligations under this
Agreement; provided however, that upon the final liquidation and dissolution of
Seller (as evidenced by documentation delivered to Purchaser), Seller shall be
permitted to assign its rights and obligations under this Agreement and the
Shareholders Agreement to the Shareholders, subject to all liabilities and
obligations of Seller and Shareholders to Purchaser (pursuant to documentation
delivered to and satisfactory to Purchaser); but such assignment shall not
modify, reduce, or release any obligation of Seller or Shareholders under this
Agreement(and any documents or instruments delivered hereunder) or the
Shareholders Agreement, all of which shall remain in full force and effect and
enforceable against the Shareholders, notwithstanding the liquidation and
dissolution of Seller and the assignment to the Shareholders. Seller shall not
be permitted to dissolve or liquidate except upon sixty (60) days advance
written notice to Purchaser and the provision of documentation satisfactory to
Purchaser that Seller has paid all of its liabilities and creditors. Seller and
Shareholders covenant and agree with Purchaser that (i) Seller, DEL and DAC will
conduct no business whatsoever other than winding up their affairs, paying their
creditors, and liquidating their assets and (ii) they will not
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issue, sell, transfer, gift, pledge, or encumber any shares of Seller, DEL or
DAC and that the Shareholders will maintain 100% ownership of Seller, DEL and
DAC free and clear of all Encumbrances.
(l) This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
(m) The provisions and covenants set forth in this Agreement are for the
benefit of the parties to this Agreement and Aris and not for the benefit of any
creditor or other person, and no creditor or other person shall have any right
to enforce the provisions and covenants against any party hereto.
(n) If any provision of this Agreement shall be invalid or unenforceable,
in whole or in part, or as to any jurisdiction, such provision shall be deemed
to be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable, or shall be deemed excised from this Agreement,
as the case may require, and this Agreement shall be construed and enforced to
the maximum extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted, or as if such provision had
not been originally incorporated herein, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
DAVCO INDUSTRIES, INC. ARIS MANAGEMENT CORP.
By: /s/ STEVEN ARNOLD By: /s/ CHARLES S. RAMAT
-------------------------------- --------------------------------
Name: Steven Arnold Name: Charles S. Ramat
Title: President Title: Chairman
By: /s/ CHRISTOPHER HEALY
--------------------------------
Name: Christopher Healy
Title: Chief Executive Officer
/s/ STEVEN ARNOLD
--------------------------------
Steven Arnold, Individually
/s/ CHRISTOPHER HEALY
--------------------------------
Christopher Healy,
Individually
Aris by its execution and delivery of this Agreement on the signature line
provided below hereby confirms and agrees that: (i) Aris shall deliver to the
Purchaser on the Closing Date 3,000,000 shares of the Aris Common Stock, duly
and validly issued, fully paid and non-assessable, to enable the Purchaser
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to pay the Stock Purchase Price pursuant to the terms and conditions of Section
3(a)(i) of this Agreement; (ii) all of the representations and warranties of the
Purchaser made in Section 11 of this Agreement with respect to Aris are true and
correct on the date hereof; (iii) Aris acknowledges the provisions of Section
3(e) regarding the limitation on certain charges which may be deducted from the
computation of 1997 Post-Closing Davco Net Income of the Purchaser for the
period from the Closing Date through December 31, 1997 and confirms that Aris
will not allocate any corporate or overhead charges or management fees to
Purchaser during such period and (iv) during the period from and after the
Closing Date through December 31, 1997, neither Aris nor its subsidiaries shall,
except as may be required by their legal or fiduciary responsibilities, take any
actions which would impair the operation in the ordinary course of the Davco
Apparel Business.
ARIS INDUSTRIES, INC.
By: /s/ CHARLES S. RAMAT
---------------------------------
Name: Charles S. Ramat
Title: President
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EXHIBIT 10.106
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT made as of July 15, 1997 (this "Agreement") by and
among DAVCO INDUSTRIES, INC., a New York corporation having its principal office
at 350 Fifth Avenue, New York, New York 10118 (hereinafter referred to as,
"Davco"), STEVEN ARNOLD, an individual residing at 68 Boulder Ridge Road,
Scarsdale, New York 10583 ("SA"), CHRISTOPHER HEALY, an individual residing at
11 Iron Gate Hill, Westport, Connecticut 06880 ("CH") (SA and CH being the
owners of all of the outstanding capital stock of Davco and hereinafter
collectively referred to as, the "Davco Principals"), ARIS MANAGEMENT CORP., a
New York corporation having an address at 475 Fifth Avenue, New York, New York
10017 (hereinafter referred to as "AMC") and ARIS INDUSTRIES, INC., a New York
corporation having an address at 475 Fifth Avenue, New York, New York 10017
(hereinafter referred to as "Aris");
WHEREAS, Davco, the Davco Principals, and AMC (an indirect subsidiary of
Aris) have entered into an Asset Purchase Agreement dated as of July 15, 1997
(the "Asset Purchase Agreement") providing for the sale by Davco to AMC of the
Purchased Assets including the Davco Apparel Business (both as defined in the
Asset Purchase Agreement) and the goodwill thereof as a going concern, its
corporate and trade names and its trademark licenses, and the closing under the
Asset Purchase Agreement has occurred on the date hereof (the "Closing Date");
WHEREAS, the purchase price payable AMC to Davco pursuant to the Asset
Purchase Agreement includes THREE MILLION (3,000,000) shares of the Common
Stock, par value $.01 per share, of Aris ("Aris Common Stock") delivered on the
Closing Date(such shares of Aris Common Stock delivered to Davco pursuant to the
Asset Purchase Agreement referred to herein as the "Shares");
WHEREAS, it is a closing condition under the Asset Purchase Agreement that
Davco and the Davco Principals enter into this Agreement providing for certain
restrictions on the transfer of the Shares; and
WHEREAS, APOLLO ARIS PARTNERS, L.P., a Delaware limited partnership, having
an address c/o Apollo Advisors, L.P., Two Manhattanville Road, Purchase, New
York 10577 (hereinafter referred to as "Apollo") and CHARLES S. RAMAT, an
individual residing at 1185 Park Avenue, New York, New York 10028 ("CSR") are
each shareholders of Aris and shall be the beneficiaries of certain provisions
of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of AMC's entering
into the Asset Purchase Agreement, the mutual agreements and covenants herein
contained, and other good and
<PAGE>
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
HEREBY AGREE AS FOLLOWS:
1. Applicability of Restrictions of this Agreement. The restrictions
and other provisions set forth in this Agreement with respect to the Shares
shall apply to the Shares as held of record and/or beneficially by Davco
and the Davco Principals, and shall continue to apply in full force and
effect notwithstanding any distribution, transfer or assignment of Shares
at any time from Davco to the Davco Principals and notwithstanding the
liquidation, dissolution or winding up of Davco. Davco and the Davco
Principals shall notify Aris in writing at least ten (10) days in advance
of any distribution, transfer or assignment from Davco to any of the Davco
Principals specifying the details of the number of shares being transferred
and the transferee thereof. The restrictions and other provisions set forth
in this Agreement with respect to the Shares shall also apply to all equity
securities of Aris which may be issued, distributed to, or exchanged with
Davco or the Davco Principals, in respect of the Shares, including those
resulting from reclassification, recapitalization, combinations or
exchanges of shares, reorganizations, liquidations, split-ups,
distributions of a dividend payable in stock, changes in par value, or
shares resulting from any merger, consolidation, or sale or exchange of
shares or assets of Aris.
2. Representations, Warranties and Covenants of Davco and Davco
Principals. Davco and the Davco Principals, jointly and severally,
represent and warrant unto and covenant and agree with AMC and Aris, and
such representations, warranties, covenants and agreements are material
inducements to AMC and Aris entering into this Agreement and AMC entering
into the Asset Purchase Agreement:
(a) Davco and the Davco Principals acknowledge and agree that no
assurances or representations are made by AMC or Aris as to the
present or future market value of the Shares of Aris Common Stock
issued to Davco pursuant to the Asset Purchase Agreement. Davco and
the Davco Principals acknowledge their receipt and review of Aris'
Form 10K for the year ended December 31, 1996, its Form 10Q for the
first quarter ended March 31, 1997, and its Form 8K's dated May 5,
1997 and June 18, 1997, all as filed with the Securities and Exchange
Commission ("SEC"). Each of Davco and the Davco Principals, and their
representatives, have been granted the opportunity to ask questions
of, and receive answers from, representatives of Aris concerning the
terms and conditions of the purchase of the Shares and to obtain any
additional information that they deem necessary regarding Aris or the
Shares and each of their knowledge and experience in financial and
business matters is such that he or it is capable of evaluating the
merits and risks
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of the investment in the Shares, or he or it has been advised by a
representative possessing such knowledge and experience. Neither Aris
nor AMC nor their professional advisors have provided or offered to
provide any tax, legal or financial advice to Davco or the Davco
Principals in connection with the Asset Purchase Agreement or their
acquisition of the Shares and they are relying solely on their own
advisors for tax, legal and finance advice relating thereto.
(b) All Shares of Aris Common Stock delivered pursuant to the
Asset Purchase Agreement shall be acquired by Davco and the Davco
Principals for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any intention of
distributing or selling such shares of Aris Common Stock; provided
however, that the foregoing shall not preclude Davco or the Davco
Principals from transferring shares of Aris Common Stock in accordance
with Rule 144 Brokers Transactions (as defined herein) subject to the
limitations as to timing and amounts of Shares set forth in this
Agreement.
(c) The Shares of Aris Common Stock obtained by the Seller
pursuant to this Agreement have not been registered under the
Securities Act of 1993, as amended (the "Securities Act"), shall be
"restricted stock", and even if a sale is otherwise permitted by this
Agreement, the Shares may not be resold without an effective
registration statement under the Securities Act or an exemption
therefrom pursuant to Rule 144 or otherwise and shall be so legended.
Any Transfer of Shares otherwise permitted by this Agreement shall be
made only in full compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC")
thereunder and applicable state securities law and regulations. Any
Transfer(as defined in Section 3 below) of the shares of Aris Common
Stock obtained pursuant to this Agreement shall require an opinion of
counsel of Aris to the effect that the Transfer is in compliance with
the Securities Act (the cost of which shall be paid by Seller); such
opinion shall not be unreasonably withheld or delayed. Davco and the
Davco Principals undertake to file with the SEC and with Aris all
necessary Forms 144, Forms 3, 4 and 5, Forms 13D and other required
reports and filings, and amendments thereof, in connection with any
Transfer of Shares. Davco and the Davco Principals agree that prior to
making any Transfer of the Shares they will give written notice to
Aris describing the manner of such proposed Transfer and the number of
Shares involved. Davco and the Davco Principals agree to furnish any
additional information reasonably requested by Aris to assure
compliance with applicable federal and state securities laws in
connection with any Transfer of Shares.
(d) Davco and the Davco Principals acknowledge that it and they
are familiar with Rule 144, as amended, under the Act, and that they
have been advised that Rule 144 permits,
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only under certain circumstances, the public resale of restricted
securities such as the Shares.
3. No Transfers Except as Permitted by This Agreement. Neither Davco nor
the Davco Principals shall directly or indirectly sell, exchange, transfer,
gift, pledge, hypothecate, grant a security interest in, grant a proxy with
respect to, devise, assign or in any other way dispose of, encumber or grant a
security interest in (hereinafter referred to as a "Transfer"), any of the
Shares, or any interest therein or any certificates representing any such
Shares, nor shall they or any of them attempt to do so, except as permitted by
this Agreement. Any purported Transfer in violation of this Agreement shall be
invalid.
4. Transfers Must Comply With Securities Laws. Any Transfer of Shares
otherwise permitted by this Agreement shall be made only in full compliance with
the Securities Act and applicable and state securities laws and regulations.
5. Legend. So long as this Agreement remains in effect, there shall be
noted conspicuously upon each stock certificate representing Shares (and any
replacement certificate therefor), the following statement:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 as amended ("the Securities
Act") nor under any applicable state securities act and may not be
transferred, offered, sold, pledged or hypothecated except pursuant to (i)
an effective registration statement relating to such stock under the
Securities Act and any applicable state securities act, or (ii) to the
extent applicable, Rule 144 under the Securities Act (or any similar rule
under such act or acts relating to the disposition of securities). An
opinion of counsel satisfactory to the Corporation that Rule 144 is
available and applicable shall be a condition to any proposed transaction
involving such shares.
"The rights to transfer and vote the Shares represented by this
certificate are further restricted by the terms and provisions contained in
a Shareholders Agreement dated July 15, 1997 on file at the offices of the
Corporation."
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6. Additional Transfer Restrictions; Rule 144 Brokers Transactions in
Limited Amounts. Davco and the Davco Shareholders hereby agree that, in addition
to limitations on Transfer imposed by Rule 144 and other applicable federal and
state securities laws and regulations, Transfers of the Shares shall be further
limited to sales which are over the market in "brokers transactions" (as defined
in Rule 144 and attached as Exhibit A hereto) and meeting the manner of sale and
all other requirements of Rule 144 (such sales referred to herein as "Rule 144
Brokers' Transactions"), at the times and in the amounts set forth as follows:
(a) No Transfers may be made during the first year following the
Closing Date.
(b) In each of the second, third and fourth years following the
Closing Date, a maximum of 300,000 of such Shares per year may be sold in
Rule 144 Brokers Transactions for the account of SA (beneficially or of
record) and a maximum of 300,000 of such Shares per year may be sold in
Rule 144 Brokers Transactions for the account of CH (beneficially or of
record).
(c) Commencing in the fifth year following the Closing Date, a maximum
of 600,000 of such Shares per year may be sold in Rule 144 Brokers
Transactions for the account of SA (beneficially or of record) and a
maximum of 600,000 of such Shares per year may be sold in Rule 144 Brokers
Transactions for the account of CH (beneficially or of record).
References herein to the limitation on Shares sold for the account of SA or CH
"beneficially or of record" shall mean shares sold directly by SA or CH if
certificates for Shares are registered in their individual names and shares sold
by Davco (which must be allocated to either SA or CH for this purpose) if
certificates for Shares are registered in Davco's name. In the event Davco, SA
or CH desire to sell any Shares in Rule 144 Brokers Transactions as permitted by
this Section 5, they shall notify Aris in writing at least five (5) days in
advance of the proposed sale, specifying the details as to the transferor, for
whose account such transfer is allocated, and the number of Shares proposed to
be sold.
7. Additional Transfer Restrictions-Private and Other Sales.
(a) During the first four (4) years following the Closing Date,
Transfers of the Shares (other than in Rule 144 Brokers Transactions
subject to the limitation in amounts and timing set forth in Section 5
above) shall NOT be permitted without the advance written consent of Aris
in each case, which it may withhold in its sole discretion. Without
limiting the
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generality of the foregoing, privately negotiated sales, regardless of
amount, and whether or not involving a significant block or bulk of
Shares, or any sales which are the result of solicitation or offers of
or to a purchaser or purchasers by Davco or the Davco Principals,
shall NOT be permitted during the first four (4) years following the
Closing Date.
(b) Commencing in the fifth year following the Closing Date, Transfers
of the Shares (other than in Rule 144 Brokers Transactions subject to the
limitation in amounts and timing set forth in Section 5 above) for an
all-cash purchase price shall only be permitted subject to successive
rights of first refusal of (1) Aris, and (2) Apollo and CSR, in compliance
with the procedures and limitations set forth in Section 6(c) below.
Transfer of Shares other than for an all-cash purchase price shall not be
permitted.
(c) In the event that from and after the completion of four(4) years
from the Closing Date, either Davco or the Davco Principals desire to
Transfer any Shares (other than in Rule 144 Brokers Transactions subject to
the limitation in amounts and timing set forth in Section 5 above) (such
transferor referred to as a "Selling Shareholder") and intends to accept a
bona fide written offer received from a third party unaffiliated with
Davco, the Davco Principals or Aris (including an offer which is the result
of solicitation by the Selling Shareholder) for any of his Shares of Aris
for an all-cash purchase price, then the Selling Shareholder shall promptly
give to Aris, Apollo and CSR written notice thereof, attaching the written
offer of the third party, and setting forth the number of Shares to be
transferred, the cash purchase price per share to be paid by the third
party, the identity of the third party offeror, evidence of the financial
capability of the third party offeror and details as to the transferor and
for whose account the Shares will be sold. Aris shall have the right, by
written notice to the Selling Shareholder, Apollo and CSR within thirty
(30) days thereafter, to purchase any or all the Shares covered by such
offer at same all-cash purchase price per share set forth in the third
party offer. In the event that Aris shall not elect to exercise such right
of first refusal, or shall elect to exercise such right of first refusal
for less than all of the Shares proposed to be transferred, then Apollo and
CSR shall have the right, by written notice given to the Selling
Shareholder and Aris within a further thirty (30) day period, to purchase
any or all the Shares (which Aris has not elected to purchase) covered by
such offer at the same all-cash purchase price per share set forth in the
third party offer. As between Apollo and CSR, they shall have equal rights
to purchase any such Shares available; if either of Apollo or CSR does not
purchase its full portion of the Shares available to be purchased, the
other of Apollo and CSR shall have the right to purchase the balance.
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To the extent that Aris, Apollo and/or CSR elect to exercise their rights
of first refusal to purchase any Shares covered by such third party offer, a
closing for the purchase of such Shares will be held at a time and place
specified by Aris, Apollo and/or CSR, as applicable, within ninety (90) days of
the Selling Shareholder's original notice of proposed transfer, at which time
the purchaser(s) shall tender the cash purchase price for the Shares to be
transferred to them, and the Selling Shareholder shall transfer such Shares to
the purchaser(s), free and clear of all liens, claims and encumbrances
whatsoever, and shall deliver stock certificates and stock powers therefor
endorsed in blank.
Failure to give any notice during said exercise periods shall be deemed to
be an election not to exercise a right of first refusal as to such offer. The
election by Aris, Apollo or CSR not to exercise their right of first refusal as
to any offer shall not affect their right of first refusal as to any subsequent
offer. If Aris, Apollo and CSR, in the aggregate, elect to exercise their rights
of first refusal, as to less than all the Shares offered by the Selling
Shareholder, then the Selling Shareholder may proceed to transfer the balance of
his or its Shares covered by the third party offer within a period of ninety
(90) days after the original notice of the offer and shall provide Aris, Apollo
and CSR with written notification of the completion of such sale; but if such
sale is not consummated within such 90 day period, the Shares covered by the
offer, if subsequently to be transferred by the Selling Shareholder, will be
subject to the right of first refusal provided by this Section 6(c). A Selling
Shareholder may not initiate the procedure to transfer Shares pursuant to this
Section 6(c) by sending notice more frequently than once every six months.
8. Restriction on Acquisitions of Additional Aris Shares Except for the
Shares issued on the Closing Date, neither Davco nor the Davco Principals, nor
any affiliate or family member thereof shall, directly or indirectly, purchase
or acquire any shares of Aris Common Stock or other capital stock, securities or
debt instruments of Aris (or its subsidiaries) of any class, except with the
advance written consent of Aris in each instance.
9. Voting Agreements. For so long as Charles S. Ramat is Chairman, Chief
Executive Officer or President of Aris, Davco and the Davco Principals agree
that upon any matter submitted to or requiring the vote of the holders of Aris
Common Stock (including without limitation, for the election of Directors of
Aris), they will vote all of the shares of Aris Common Stock owned by them or
their affiliates(including without limitation, the Shares) for the
recommendations, proposals and nominations of the Board of Directors of Aris,
and on the Closing Date and from time to time thereafter, Davco and the
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Davco Shareholders shall execute and deliver such proxies and other
documentation to effectuate such obligation.
10. Registration Rights.
(a) Davco and the Davco Principals shall be entitled to certain
"piggyback" registration rights with respect to the Shares to the extent
and in accordance with the terms and procedures set forth in this Section
10; provided, however, that under no circumstances shall they be entitled
to demand registration rights. The Shares owned by Davco and the Davco
Principals which at the time of a registration by Aris may be entitled to
registration rights under this Section 10 are referred to as the "Eligible
Shares"; the Eligible Shares shall be defined to include those specific
Shares issued to Davco and the Davco Principals on the Closing Date
pursuant to the Asset Purchase Agreement which at the time of registration
are still owned by Davco and/or the Davco Principals. Registration rights
granted herein to Davco and the Davco Principals shall not be transferable
or assignable.
(b) Aris shall advise Davco and the Davco Principals by written notice
at least fifteen (15) days prior to the filing by Aris of any underwritten
registration statement under the Securities Act covering Aris Common
Stock(other than on Form S-8 or equivalent successor form) and in which the
"Existing Major Shareholders" (as defined herein) would be eligible to have
their shares of Aris Common Stock included in such registration on a
"piggyback" basis pursuant to the Equity Registration Rights Agreement
dated June 30, 1993 between Aris and the Existing Major Shareholders (the
"Registration Rights Agreement") and will upon the written request of Davco
and the Davco Principals specifying the number of Eligible Shares requested
to be included, include in any such registration statement the requested
Eligible Shares to the same proportionate extent as if Davco and the Davco
Principals were Existing Major Shareholders (to the extent of such
requested Eligible Shares) and the Existing Major Shareholders' shares of
Aris Common Stock were eligible for inclusion in such registration
statement on a "piggyback" basis pursuant to the Registration Rights
Agreement, after giving effect to all adjustments, allocations,
reallocations and limitations provided for in the Registration Rights
Agreement (such portion of the Eligible Shares which may be included in the
proposed registration collectively referred to as the "Registerable
Shares"). The Existing Major Shareholders are defined as Apollo, CSR,
Howard Weingrow, Robert Lifton, James Goren, Alexander Goren, and trusts
affiliated with, or for the benefit of family members of, such persons, who
are parties to the Registration Rights Agreement.
(c) Davco and the Davco Principals shall furnish Aris with appropriate
information in connection with any
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registration of the Registerable Shares as Aris may request. All costs
and expenses of such registration statement covering the Registerable
Shares shall be borne by Aris, except that Davco and the Davco
Principals shall bear the fees of their own counsel, pay any and all
taxes applicable to the sale of the securities sold by the them and
pay any underwriting discounts or commission applicable to any of the
securities sold by them.
(d) Whenever a registration statement relating to any of the
Registerable Shares is filed under the Securities Act, Aris will indemnify
and hold harmless each of Davco and the Davco Principals as a holder of the
Registrable Shares covered by such registration statement to the same
extent (and subject to the same limitations and exclusions) as Aris would
be required to indemnify the Existing Major Shareholders who would be
entitled to participate in such registration on a "piggyback basis"
pursuant to the Registration Rights Agreement, and Davco and the Davco
Principals will indemnify Aris to the same extent (and subject to the same
limitations and exclusions) as the Existing Major Shareholders would be
required to indemnify Aris if they were to participate in such registration
pursuant to the Registration Rights Agreement, in each case under the same
terms, conditions and procedures as set forth in the Registration Rights
Agreement.
(e) The parties hereto acknowledge and agree that the registration
rights granted to Davco and the Davco Principals hereunder shall expire and
shall no longer be exercisable five (5) years from the Closing Date.
(f) Davco and the Davco Principals agree that they will not Transfer
any shares of Aris Common Stock during the five (5) business days prior to,
and during the sixty (60) day period beginning on, the effectiveness of any
registration statement with respect to Aris Common Stock or other
securities of Aris.
11. General Provisions.
(a) This Agreement (together with the Asset Purchase Agreement and the
other documentation executed in connection therewith) contains all of the
terms of the understanding between Davco, the Davco Principals, AMC and
Aris with respect to the subject matter hereof and, except as expressly set
forth herein or therein, no representation has been made by or relied upon
by either party hereto. This Agreement may not be changed or modified
except in a writing signed by the each of the parties hereto.
(b) Each of Davco and the Davco Principals represents and warrants
that he and it is not a party to any agreement, contract or understanding,
which would in any way
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<PAGE>
restrict or prohibit him from undertaking or performing the terms and
conditions of this Agreement.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York. Each party hereto for himself or
itself and his or its successors and assigns hereby consents to personal
jurisdiction over him or it in the courts of the State of New York and of
any federal court located in such state in connection with any action or
proceeding arising out of, or related to, this Agreement. Each party hereto
agrees that service of process upon him or it may be made in any manner
permitted by the laws of the State of New York, and in addition,
specifically agrees that service of will be deemed sufficient for personal
jurisdiction over him or it if service is made by registered or certified
mail at the address of such party set forth above. Each of Davco and the
Davco Principals, for itself, himself its and his heirs, personal
representatives, successors and assigns, agrees that no action, suit or
proceeding of any kind may be brought, and no claim may be asserted
(whether by counter-claim, cross-claim or otherwise) by it, him or them
against Aris or any affiliates thereof with respect to any matter arising
from this Agreement, except in the courts of the State of New York and the
federal courts located in the State of New York.
(d) All notices and other communications hereunder shall be in writing
and deemed to have been duly given if personally delivered or mailed, first
class, postage prepaid, certified mail, return receipt requested, to the
other party hereto at its or his address above written or at such other
address as either of the parties may designate in conformity with the
foregoing. All notices to Aris or AMC shall be sent to Charles S. Ramat,
President of Aris. Copies of all notices to Aris, AMC, Apollo or CSR shall
be sent to Herrick, Feinstein LLP, 2 Park Avenue, New York, New York 10016,
Attention: Lawrence M. Levinson, Esq. Copies of all notices to Davco or the
Davco Principals shall be sent to Sargent & Sargent, 830 Post Road East,
Westport, Connecticut 06880, Att: Thomas Sargent, Esq.
(e) No waiver of any breach of any terms hereof shall be effective
unless made in writing signed by the party against whom enforcement of the
waiver is sought, and no such waiver shall be construed as a waiver of any
subsequent breach of that term or of any other term of the same or
different nature.
(f) This Agreement shall be binding upon the parties hereto and their
heirs, executors, administrators, successors and assigns. Neither Davco nor
the Davco Principals may assign any of its or their rights or obligations
under this Agreement. The liquidation and dissolution of Davco shall not
modify, reduce, or release any obligation of Davco or the Davco
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Principals under this Agreement, all of which shall remain in full force
and effect and enforceable against the Davco Principals, notwithstanding
the liquidation and dissolution of Davco. Davco shall not be permitted to
dissolve or liquidate except pursuant to the procedures set forth in the
Asset Purchase Agreement.
(g) This Agreement may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
(h) The provisions and covenants set forth in this Agreement are for
the benefit of the parties to this Agreement, Apollo and CSR and not for
the benefit of any creditor or other person, and no creditor or other
person shall have any right to enforce the provisions and covenants against
any party hereto.
(i) If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, or as to any jurisdiction, such
provision shall be deemed to be modified or restricted to the extent and in
the manner necessary to render the same valid and enforceable, or shall be
deemed excised from this Agreement, as the case may require, and this
Agreement shall be construed and enforced to the maximum extent permitted
by law as if such provision had been originally incorporated herein as so
modified or restricted, or as if such provision had not been originally
incorporated herein, as the case may be.
(j) Each of the parties hereto shall cooperate and take such actions,
and execute such other documents as may be reasonably requested by the
other in order to carry out the provisions and purposes of this Agreement.
(k) Notwithstanding any other provision of this Agreement, it is
understood and agreed that CSR and Apollo are beneficiaries of certain
obligations of Davco, the Davco Principals and Aris set forth herein, that
CSR and Apollo have countersigned this Agreement solely as beneficiaries of
such obligations and to confirm that they may enforce such obligation
against Davco, the Davco Principals and Aris, and neither CSR
[balance of page intentionally left blank]
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<PAGE>
nor Apollo shall have any obligation to Davco, the Davco Principals or Aris by
reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
DAVCO INDUSTRIES, INC.
By: /s/ STEVEN ARNOLD
------------------------------------
Name: Steven Arnold
Title: President
By: /s/ CHRISTOPHER HEALY
------------------------------------
Name: Christopher Healy
Title: Chief Executive Officer
/s/ STEVEN ARNOLD
------------------------------------
Steven Arnold, Individually
/s/ CHRISTOPHER HEALY
------------------------------------
Christopher Healy, Individually
ARIS MANAGMENT CORP.
By: /s/ CHARLES S. RAMAT
------------------------------------
Name: Charles S. Ramat
Title: Chairman
ARIS INDUSTRIES, INC.
By: /s/ CHARLES S. RAMAT
------------------------------------
Name: Charles S. Ramat
Title: President
APOLLO ARIS PARTNERS, L.P.
(Beneficiary)
By: AIF-II, L.P., its General Partner
By: Apollo Advisors, L.P., its General
Partner
By: Apollo Capital Management, Inc.,
its General Partner
By: /s/ ROBERT A. KATZ
------------------------------------
Robert A. Katz, Vice President
/s/ CHARLES S. RAMAT
------------------------------------
Charles S. Ramat, individually
(Beneficiary)
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EXHIBIT 10.107
ARIS INDUSTRIES, INC.
475 Fifth Avenue
New York, New York 10017
July 18, 1997
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Re: Consent Pursuant to Series A Junior Secured Note Agreement
----------------------------------------------------------
Gentleman:
Reference is made to the Series A Junior Secured Note Agreement dated June
30, 1993 (the "Note Agreement"; terms defined therein being used herein as
therein defined) between BNY Financial Corporation ("BNY") and Aris Industries,
Inc. ("Aris", formerly known as The Marcade Group, Inc.) and the Series A Junior
Secured Note issued pursuant to the Note Agreement by Aris in favor of BNY dated
June 30, 1993 in the original principal amount of $7,000,000 (the "Note").
At the request of Aris, BNY hereby consents to the deferral, until August
18, 1997, of the required payments of the quarterly interest under the Note
originally due May 5, 1997 (and previously deferred with BNY's consent until
July 18, 1997) and August 4, 1997, subject to the following terms and
conditions. The nonpayment of such quarterly interest prior to August 18, 1997
shall not be a Default or Event of Default under the Note Agreement or the Note.
The Note Agreement and the Note are hereby deemed amended to implement the
foregoing.
BNY's forbearance from exercising its rights with respect to such quarterly
interest payment is not, and shall not be deemed to be, a waiver of any other
term, condition, covenant or agreement or any other aspect of the Note Agreement
and/or the Note. The forbearance is therefore limited exclusively to the
specific period of time and circumstances covered by this letter, and this
letter is without prejudice to, and hereby expressly reserves, all other rights
and remedies of BNY.
Very truly yours,
ARIS INDUSTRIES, INC.
By: /s/ PAUL SPECTOR
-------------------------------
Paul Spector,
Senior Vice President
AGREED AND ACCEPTED:
BNY FINANCIAL CORPORATION
By: /s/ SAM CIRELLO
-------------------------------
Sam Cirello,
Senior Vice President
EXHIBIT 10.108
ARIS INDUSTRIES, INC.
475 Fifth Avenue
New York, New York 10017
July 18, 1997
AIF-II, L.P.
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Attention: Robert Katz
Re: Consent Pursuant to Series B Junior Secured Note Agreement
----------------------------------------------------------
Gentleman:
Reference is made to the Series B Junior Secured Note Agreement dated June
30, 1993 (the "Note Agreement"; terms defined therein being used herein as
therein defined) between AIF-II, L.P. ("Apollo") and Aris Industries, Inc.
("Aris", formerly known as The Marcade Group, Inc.) and the Series B Junior
Secured Note issued pursuant to the Note Agreement by Aris in favor of Apollo
dated June 30, 1993 in the original principal amount of $7,500,000 (the "Note").
At the request of Aris, Apollo hereby consents to the deferral, until
August 18, 1997, of the required payments of the quarterly interest under the
Note originally due May 5, 1997 (and previously deferred with Apollo's consent
until July 18, 1997) and August 4, 1997, subject to the following terms and
conditions. The nonpayment of such quarterly interest prior to August 18, 1997
shall NOT be a Default or Event of Default under the Note Agreement or the Note.
The Note Agreement and the Note are hereby deemed amended to implement the
foregoing.
Apollo's forbearance from exercising its rights with respect to such
quarterly interest payment is not, and shall not be deemed to be, a waiver of
any other term, condition, covenant or agreement or any other aspect of the Note
Agreement and/or the Note. The forbearance is therefore limited exclusively to
the specific period of time and circumstances covered by this letter, and this
letter is without prejudice to, and hereby expressly reserves, all other rights
and remedies of Apollo.
AGREED AND ACCEPTED:
Very truly yours,
AIF-II, L.P.
ARIS INDUSTRIES, INC.
By: Apollo Advisors, L.P.,
its General Partner By: /s/ PAUL SPECTOR
-------------------------------
Paul Spector,
By: Apollo Capital Management, Senior Vice-President
Inc., its General Partner
By: /s/ ROBERT A. KATZ
-------------------------------
Robert A. Katz,
Vice President
