================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for use by Commission only
(as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ARIS INDUSTRIES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ARIS INDUSTRIES, INC.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:__________________
2) Aggregate number of securities to which transaction
applies:_________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 ( Set forth the amount on which the
filing fee is calculated and state how it was
determined):_______________________________________
4) Proposed maximum aggregate value of
transaction:________________________
5) Total to be paid:_____________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement
No.:___________________________
3) Filing Party:________________________________________________________
4) Date Filed:_________________________________________________________
================================================================================
<PAGE>
ARIS INDUSTRIES, INC.
475 FIFTH AVENUE
NEW YORK, NEW YORK 10017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY JULY 9, 1998
----------------------------------
To the Stockholders of Aris Industries, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(the "Annual Meeting") of Aris Industries, Inc. ("Aris") will be held on
Thursday, July 9, 1998, at 10:00 A.M., New York City time, at Chase Manhattan
Bank, 270 Park Avenue, 11th Floor, Conference Room "C", New York, New York, for
the following purposes:
1. Re-electing the current five members of the Board of Directors
for an additional one year term;
2. Ratifying the appointment of Deloitte & Touche LLP as
independent auditors for Aris for the fiscal year ending December 31st, 1998;
3. Ratifying the amendment of the Aris 1993 Stock Incentive Plan
to increase the shares reserved for grants and awards under such plan from
1,200,000 to 3,500,000 (such Plan, as amended, is attached as Exhibit I to the
accompanying Proxy Statement).
4. Ratifying the grant of 750,000 stock options (subject to
achievement of vesting requirements) under the Aris 1993 Stock Incentive Plan to
Charles S. Ramat, Chairman, President and Chief Executive Officer of Aris.
5. Transacting such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors of Aris has fixed the close of business on
Monday, June 1, 1998 as the record date for the determination of the
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
Stockholders, whether or not they expect to attend the Annual
Meeting personally, are requested to complete, date, sign and return the
enclosed proxy in the accompanying envelope, which requires no postage.
By Order of the Board of Directors,
Paul Spector
Secretary
New York, New York
June 1, 1998
IMPORTANT - PLEASE SIGN AND MAIL YOUR PROXY PROMPTLY.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AND VOTED AT THE
ANNUAL MEETING, PLEASE SIGN, DATE AND RETURN
THE PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
ARIS INDUSTRIES, INC.
475 FIFTH AVENUE
NEW YORK, NEW YORK 10017
------------------
PROXY STATEMENT
JUNE 1, 1998
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JULY 9, 1998
GENERAL INFORMATION
This Proxy Statement is being furnished to holders of common
stock, par value $0.01 per share (the "Common Stock"), of Aris Industries, Inc.,
a New York corporation (the "Company" or "Aris") in connection with the
solicitation of proxies by the Company to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") scheduled to be held on Thursday, July 9,
1998 at 10:00 A.M., New York City time, at Chase Manhattan Bank, 270 Park
Avenue, 11th Floor, Conference Room "C", New York, New York, and at any and all
adjournments thereof. This Proxy Statement, the enclosed Notice of Annual
Meeting of Stockholders and the enclosed form of proxy are first being mailed or
given on or about Monday, June 1, 1998 to holders of record of the Company's
Common Stock as of the close of business on Monday, June 1, 1998.
Stockholders of the Company are cordially invited to attend the
Annual Meeting. Whether or not you expect to attend the Annual Meeting, it is
important that you complete the enclosed proxy card and sign, date and return it
as promptly as possible in the envelope enclosed for that purpose. Stockholders
giving a proxy may revoke it by notice in writing delivered to the Secretary of
the Company or by delivering a later dated proxy to the Secretary of the
Company, in either case, at any time before it is exercised. Execution of a
proxy will not in any way affect a stockholder's right to attend the Annual
Meeting and vote in person. Stockholders who wish to vote in person at the
Annual Meeting despite execution of a proxy, should contact the Secretary of the
Company.
The solicitation of proxies being made hereby is made by the
Company, and the cost of soliciting proxies and the cost of the Annual Meeting
will be borne by the Company. In addition to the solicitation of proxies by
mail, proxies may be solicited by personal interview, telephone and similar
means by directors, officers or employees of the Company, none of whom will be
specially compensated for such activities. The Company also intends to request
that brokers, banks and other nominees solicit proxies from their principals,
and the Company will, upon request, pay such brokers', banks' and other
nominees' reasonable expenses incurred by them for such activities.
The Company's principal executive offices are located at 475
Fifth Avenue, New York, New York 10017 and its telephone number is (212)
686-5050.
VOTING RIGHTS
Each share of Common Stock is entitled to one vote on all matters
to be voted upon at the Annual Meeting. There is no cumulative voting. The
presence in person or by proxy of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting constitutes a
quorum for the transaction of business. On matters brought before the Annual
Meeting as to which a choice has been specified by stockholders on the proxy,
the shares will be voted accordingly. If no choice is so specified, the shares
will be voted FOR the election of the five nominees for the Board of Directors
listed in this Proxy Statement, FOR the ratification of the appointment of
Deloitte & Touche LLP as independent auditors for the Company for its fiscal
year ending December 31, 1998, FOR the ratification of the Amendment of the Aris
1993 Stock Incentive Plan to increase the number of shares reserved for grants
and awards under such Plan from 1,200,000 to 3,500,000, and FOR the ratification
of the grant of 750,000 stock options under the Aris 1993 Stock Incentive Plan
to Charles S. Ramat, Chairman, President and Chief Executive Officer of Aris.
Other business, if any, brought before the Annual Meeting shall be voted FOR or
AGAINST by the persons designated to vote the proxies as they, in their
discretion, determine.
The Company will appoint inspectors of election which will tally
votes of those attending the Annual Meeting or voting by proxy. Abstentions and
non-votes will not be counted towards the requirement of a plurality or a
majority of those votes present.
-2-
<PAGE>
Only stockholders of record as of the close of business on
Monday, June 1, 1998 are entitled to vote at the Annual Meeting. At that date,
the Company had outstanding and entitled to vote 14,906,711 shares of Common
Stock held by approximately 4,253 stockholders of record. For information
regarding the current ownership of the Common Stock by its principal
stockholders and management, see "Security Ownership of Certain Beneficial
Owners and Management" herein.
The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 as filed with the Securities and Exchange Commission
(the "SEC"), is enclosed herewith as the Company's Annual Report to Stockholders
for such fiscal year.
ELECTION OF DIRECTORS
Aris' Board of Directors (the "Board" or the "Board of
Directors") consists of five members. Directors are elected by the vote of the
Company's stockholders at the Company's Annual Meeting of Stockholders to serve
until the next Annual Meeting of Stockholders and until their respective
successors are elected and qualify, provided that vacancies occurring in the
Board of Directors may be filled by vote of the directors.
The names, principal occupations (currently and for at least the
preceding five years) and other information concerning nominees proposed for
election to the Board of Directors are presented below. All of the nominees for
the office of director are currently directors of Aris and each has served
continuously since the year indicated. Proxies will be voted for all such
nominees, unless marked to the contrary.
Aris believes that each nominee will serve as a director, but
should any such nominee be unable to serve as a director or withdraws from
nomination, proxies will be voted for the election of such substitute nominee as
the Board of Directors may propose.
NOMINEES FOR ELECTION AS DIRECTORS
CHARLES S. RAMAT, 47, has been a Director and President of the
Company since December 1986, Chairman of the Board of Directors and Chief
Executive Officer since August 1991 and Assistant Secretary since January 1988.
Mr. Ramat has also been Chairman of the Board and Chief Executive Officer of ECI
since December, 1995 and Chairman of the Board and Chief Executive Officer of
ECI Sportswear since July, 1997. Mr. Ramat is the brother-in-law of David N.
Schreiber.
JOHN J. HANNAN, 45, has been a Director of the Company since June
1993. Mr. Hannan is one of the founding principals of Apollo Advisors, L.P.
which acts as managing general partner of Apollo Investment Fund, L.P., AIF II,
L.P. and Apollo Investment Fund III, L.P., private securities investment funds,
of Apollo Real Estate Advisors, L.P. which acts as managing general partner of
the Apollo Real Estate Investment Funds, and of Lion Advisors, L.P., which acts
as financial advisor to and representative for certain institutional investors
with respect to securities investments. Mr. Hannan is also a director of
Converse, Inc., Florsheim Group, Inc., and of United Auto Group, Inc.
EDWARD M. YORKE, 39, has been a Director of the Company since
June 1993. Mr. Yorke is an officer of Apollo Advisors, L.P. and of Lion
Advisors, L.P., with which he has been associated since 1992. From 1990 to 1992,
Mr. Yorke was a vice president in the high yield capital markets group of BT
Securities Corp. Mr. Yorke is also a director of Salant Corporation and
Telemundo Group, Inc.
ROBERT A. KATZ, 31, has been a Director of the Company since June
1993. Mr. Katz is an officer of Apollo Advisors, L.P. and of Lion Advisors,
L.P., with which he has been associated with since 1990. Mr. Katz is also a
director of Salant Corporation, Vail Resorts, Inc., Alliance Imaging, Inc.
and MTL, Inc.
DAVID N. SCHREIBER, 54, has been a Director of the Company since
December 1986. Mr. Schreiber is currently the Vice President of A.H. Schreiber
Co. Inc., a manufacturer of women's and children's swim wear and intimate
apparel, a position he has held since prior to 1988. Mr. Schreiber served as
Chairman of the Board of Directors of Servtex from May 1991 to November 1992 and
as Vice President from 1987 to 1991. Mr. Schreiber is Mr. Ramat's
brother-in-law.
On June 30, 1993, a New Shareholders Agreement was entered into
among Apollo Aris Partners, L.P. ("Apollo") and the previous management
shareholders of the Company (consisting of Alexander M. Goren, James G. Goren,
certain entities affiliated with the Gorens, Robert K. Lifton, Charles S. Ramat,
Howard L. Weingrow and
-3-
<PAGE>
the trustees of certain trusts for the benefit of Mr. Ramat's children)
providing that from and after June 30, 1993, the shareholder parties thereto
agree to vote their shares such that the prior management shareholders will be
entitled to elect one member of the Board of Directors, who shall be Charles S.
Ramat, as long as Mr. Ramat's Executive Employment Agreement with the Company
(entitling him to be elected a Director of the Company) is in effect. Pursuant
to the Company's Plan of Reorganization effective June 30, 1993, Charles S.
Ramat, David N. Schreiber and three additional Directors designated by Apollo
(John J. Hannan, Edward M. Yorke and Robert Katz) were elected to the Board of
Directors of Aris.
On July 15, 1997, the closing date of the Company's acquisition
of the assets of Davco Industries, Inc. ("Davco"), the Company, Davco, the
shareholders of Davco (Steven Arnold and Christopher Healy), Apollo, and Charles
S. Ramat entered into a shareholders agreement with respect to the 3,000,000
shares of the Company's Common Stock delivered to Davco as part of the purchase
price of the acquisition (the "Davco Shareholders Agreement"). The Davco
Shareholders Agreement provides that so long as Mr. Ramat is Chairman, Chief
Executive Officer or President of the Company, Davco and Messrs. Arnold and
Healy agree to vote all of their shares of the Company, on all corporate matters
including the election of Directors, for the recommendations, proposals and
nominations of the Board of Directors of the Company.
THE BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR"
EACH OF THE NOMINEES LISTED ABOVE. ASSUMING THE PRESENCE OF A QUORUM, THE
AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST IS NECESSARY FOR THE ELECTION
OF DIRECTORS.
OTHER INFORMATION REGARDING THE DIRECTORS
The Board held four meetings during the fiscal year ended
December 31, 1997 (the "1997 Fiscal Year"). During the 1997 Fiscal Year, none of
the incumbent directors attended fewer than 75 percent of the aggregate number
of meetings held by (i) the Board during the period for which he served as a
director, and (ii) the Committees of which he was a member during the period for
which he served on these Committees.
During the 1997 Fiscal Year, each director (other than Mr. Ramat)
received director's fees at the rate of $18,000 per annum. Each of these
directors will be entitled to receive director's fees of $18,000 per annum for
the 1998 fiscal year and are entitled to receive reimbursement for expenses
incurred in attending meetings of the Board or committees thereof on which they
serve. In addition, outside directors (Mr. Schreiber) are entitled to receive
$500 per meeting of the committees of the Board to which they are assigned (Mr.
Schreiber is a member of the Audit Committee). Mr. Ramat receives no additional
compensation for service as a director.
The Board has established two standing committees to assist it in
the discharge of its responsibilities. The Board's Audit Committee consists of
Messrs. Katz and Schreiber. The Audit Committee is charged with reviewing
matters relating to the annual report prepared by the Company's independent
auditors, reviewing interim financial statements and evaluating internal
controls and systems established by the Company. The Audit Committee has met
once during the 1997 Fiscal Year. The Board's Compensation and Stock Option
Committee consists of Messrs. Hannan, Yorke and Katz. The Compensation and Stock
Option Committee is charged with reviewing and making determinations with
respect to compensation to be paid to officers and other employees of the
Company and with administering and making determinations under the Company's
1993 Stock Incentive Plan. The Compensation and Stock Option Committee met four
times during the 1997 Fiscal Year. The Board does not have a standing nominating
committee.
-4-
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information with respect
to the executive officers of Aris:
Officer of
Name Age Positions and Offices Aris Since
---- --- --------------------- ----------
Charles S. Ramat 47 Chairman of the Board, President, December
Chief Executive Officer and 1986
Assistant Secretary of the
Company and Chairman of the
Board, Chief Executive Officer
and Assistant Secretary of its
wholly owned subsidiary Europe
Craft Imports, Inc. ("ECI") and
its indirect wholly owned
subsidiary, ECI Sportswear, Inc.
("ECI Sportswear")
Paul Spector 56 Senior Vice President, Chief December
Financial Officer, Treasurer and 1986
Secretary
Vincent F. Caputo 44 Vice President, Assistant Treasurer May 1992
and Assistant Secretary
Each of the executive officers of Aris was elected at a meeting
of the Board of Directors and will serve until the next Annual Meeting of the
Board of Directors or until his successor has been duly elected and qualified,
provided, however, that Mr. Ramat's term of office is set forth in his Executive
Employment Agreement with the Company (see "Executive Compensation -- Employment
Agreements").
Mr. Ramat has been President of the Company since December 1986,
Chairman of the Board of Directors and Chief Executive Officer since August 1991
and Assistant Secretary since January 1988. Mr. Ramat has also been Chairman of
the Board and Chief Executive Officer of ECI since December, 1995 and Chairman
of the Board and Chief Executive Officer of ECI Sportswear since July 1997. Mr.
Ramat is the brother-in-law of David N. Schreiber. Mr. Ramat has served as a
director of the Company since December 1986.
Mr. Spector has been Senior Vice President and Chief Financial
Officer since May 1992 and Treasurer and Secretary of the Company since August
1991. From 1986 until May 1992, Mr. Spector was Vice President of the Company
and from 1983 until August 1991 Mr. Spector was Controller of the Company.
Mr. Caputo has been Vice President, Assistant Treasurer and
Assistant Secretary of the Company since May 1992. From April 1988 until May
1992, Mr. Caputo was Director of Taxes for the Company. From January 1986 until
March 1988, Mr. Caputo was the Corporate Tax Manager for Automatic Data
Processing, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth the beneficial ownership of the
Company's Common Stock on May 1, 1998, by certain holders. Those holders are
persons who either (i) are beneficial owners of 5% or more of the Company's
Common Stock, or (ii) are officers or directors of the Company. This information
is based on the Company's current information concerning the ownership of its
securities.
As a result of the agreements relating, among other things, to
the nomination and election of directors and the acquisition and disposition of
Common Stock of the Company set forth in the New Shareholders Agreement and
Equity Registration Rights Agreement, entered into June 30, 1993, Apollo Aris
and the Non-Apollo Subject Shareholders referred to therein (each a "Non-Apollo
Subject Shareholder" and collectively the "Non-Apollo Subject Shareholders") may
be deemed to constitute a "group" within the meaning of Section 13(d)(3) under
the Securities Exchange Act of 1934, as amended. As such, the Non-Apollo Subject
Shareholders and Apollo Aris may be deemed to have shared voting and dispositive
power over all of the 9,111,039 shares of Common Stock owned in
-5-
<PAGE>
the aggregate by the Non-Apollo Subject Shareholders and Apollo Aris on June 30,
1993, or 76.6% of the total number of shares of Common Stock then outstanding.
Reference is made to such statements on Schedule 13D as have been or may be
filed with the Securities and Exchange Commission by Apollo Aris and the
Non-Apollo Subject Shareholders regarding such parties and their respective
ownership of Common Stock.
<TABLE>
<CAPTION>
=====================================================================================
Name and Address Shares of Common Stock Percent
of Beneficial Owner (1) of Class
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Apollo Aris Partners, L.P. 5,804,820 (2)(3) 38.9%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
- -------------------------------------------------------------------------------------
Davco Industries, Inc. 3,000,000 (4) 20.1%
(name changed to AH Equities, Inc.)
Steven Arnold
Christopher Healy
c/o Sargent & Sargent
830 Post Road East
Westport, Connecticut 06880
- -------------------------------------------------------------------------------------
Chase Manhattan Bank 833,973 5.6%
350 Fifth Avenue
New York, New York 10018
- -------------------------------------------------------------------------------------
Robert K. Lifton 702,355 (2) 4.7%
805 Third Avenue
New York, New York 10022
- -------------------------------------------------------------------------------------
=====================================================================================
Name and Address Shares of Common Stock Percent
of Beneficial Owner (1) of Class
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Howard L. Weingrow 702,469 (2) 4.7%
805 Third Avenue
New York, New York 10022
- -------------------------------------------------------------------------------------
Charles S. Ramat 1,047,465 (2)(5)(7) 7.0%
475 Fifth Avenue
New York, New York 10017
- -------------------------------------------------------------------------------------
James G. and Alexander M. Goren 1,199,627 (2)(6) 8.1%
805 Third Avenue
New York, New York 10022
- -------------------------------------------------------------------------------------
David N. Schreiber 115,135 (5)(7) 0.8%
c/o A.H. Schreiber & Co, Inc.
460 West 34th Street, 10th Floor
New York, New York 10001
- -------------------------------------------------------------------------------------
Paul Spector 55,000 (7) 0.4%
475 Fifth Avenue
New York, New York 10017
- -------------------------------------------------------------------------------------
Vincent Caputo 5,000 (7) 0.1%
475 Fifth Avenue
New York, New York 10017
- -------------------------------------------------------------------------------------
All persons who are officers 1,222,599 (8) 8.2%
or directors of the Company,
as a group (seven persons)
=====================================================================================
</TABLE>
(1) Except as noted in these footnotes or as otherwise stated above, each
person has sole voting and investment power.
-6-
<PAGE>
(2) These and certain related persons are parties to the New Shareholders
Agreement, described below, containing certain voting and other
arrangements as to shares covered thereby.
(3) This table does not reflect any beneficial ownership by Messrs. Yorke,
Katz or Hannan, directors of the Company associated with Apollo Aris.
Such persons do not directly own any shares of Common Stock, and such
persons disclaim beneficial ownership of all shares held by Apollo
Aris Partners, L.P.
(4) These shares are held of record by Davco Industries, Inc. ("Davco"),
whose name was changed to AH Equities, Inc., and were issued to Davco
on July 15, 1997 as a component of the purchase price for the
Company's acquisition of the assets of Davco. Steven Arnold is the 60%
shareholder, and Christopher Healy is the 40% shareholder, of Davco
and Messrs. Arnold and Healy are parties to the Davco Shareholders
Agreement containing certain voting and other arrangements covering
these shares described below.
(5) With respect to 105,135 of the shares listed next to Mr. Schreiber's
name: Mr. Schreiber is co-trustee, with Ora Ramat, the wife of Charles
S. Ramat, of three trusts for the benefit of three children of Mr. and
Mrs. Ramat that own these shares. Mr. Schreiber and Mrs. Ramat
disclaim beneficial ownership of these shares. These shares are not
included in the number of shares listed next to Mr. Ramat's name.
(6) James and Alexander Goren are brothers. These shares are beneficially
owned as follows: James Goren individually owns 267,857 shares of
Common Stock. Alexander Goren, individually owns 327,381 shares of
Common Stock. 476,191 shares are owned by MGI Associates, L.P., a
Delaware limited partnership, of which James Goren is the managing
general partner and Alexander Goren is a general partner, and over
which shares James Goren has full voting and dispositive power. 9,151
shares are owned by Goren Brothers, a New York general partnership of
which the Gorens are the only partners. 119,048 shares are held in two
trusts for the children of Alexander Goren, of which trusts the Gorens
are co-trustees.
(7) Includes options to purchase the following numbers of shares of Common
Stock of the Company under the 1993 Stock Incentive Plan which became
exercisable on or prior to December 31, 1997: Charles S. Ramat
(400,000), David N. Schreiber (10,000), Paul Spector (55,000) and
Vincent Caputo (5,000).
(8) These shares are attributed to Messrs. Ramat, Schreiber, Spector and
Caputo.
On September 30, 1996, in connection with an amendment to the
Company's loan agreement with its former lender, Heller Financial, Inc.
(`Heller") resulting in forgiveness of certain indebtedness of the Company to
Heller, the Company issued to Heller a warrant, exercisable for nominal
consideration until September 30, 2006, to obtain 584,345 shares of the
Company's Common Stock (equal to approximately 3.9% of the Company's outstanding
Common Stock on May 1, 1998).
EXECUTIVE COMPENSATION
The following table presents certain specific information
regarding the compensation of the Chief Executive Officer of the Company and the
only other executive officers of the Company.
-7-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
=========================================================================================================
Long-Term All Other
Annual Compensation Compensation Compensation
- ---------------------------------------------------------------------------------------------------------
Securities
Name and Principal Fiscal Underlying Stock
Position Year (1) Salary ($) Bonus ($) Options (#)
-------- -------- ---------- --------- -----------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles S. Ramat, 1997 $562,754 $227,871(2) 750,000(3) $ 46,649(10)
President, 1996 $500,207 $759,949(5) 152,500(6) 1,500(4)
Chairman and Chief 1995 $531,093 -0- 400,000(7) 136,919(8)(9)
Executive Officer of the
Company and Chairman and
Chief Executive Officer
of Europe Craft Imports,
Inc. and ECI Sportswear,
Inc.
- ---------------------------------------------------------------------------------------------------------
Paul Spector, Senior Vice 1997 $140,000 $ 30,500 15,000(3) $ -0-
President and Chief 1996 125,000 -0- 15,000(6) 1,500(4)
Financial Officer 1995 125,000 -0- 50,000(7) 1,500(9)
- ---------------------------------------------------------------------------------------------------------
Vincent Caputo, 1997 $ 75,000 $ -0- -0- $ -0-
Vice President, Assistant 1996 72,500 -0- 5,000(6) 753(4)
Treasurer & Assistant 1995 72,500 -0- 5,000(7) 675(9)
Secy.
=========================================================================================================
</TABLE>
(1) In this Summary Compensation Table, the 1997 fiscal year consists of
the twelve months ended December 31, 1997; the 1996 fiscal year
consists of the eleven months ended December 31, 1996; and the 1995
fiscal year consists of the twelve months ended January 28, 1995.
(2) Includes monthly installments paid during fiscal 1997 of the one-time
non-recurring success bonus earned for the 1996 fiscal year with
respect to the sale of Aris' Perry Manufacturing Co. subsidiary on
September 30, 1996. Also includes Mr. Ramat's bonus for services on
behalf of ECI for the 1997 fiscal year.
(3) These options were granted on August 28, 1997 under the Company's 1993
Incentive Stock Option Plan and shall vest eight years from the date
of grant, subject to accelerated vesting in the event of certain
refinancings of the Company's secured indebtedness. See "Stock Option
Plan and Stock Options" below.
(4) Includes amounts paid as matching contributions by the Company under
its 401(K) Plan.
(5) Includes one-time non-recurring success bonus earned for the 1996
fiscal year with respect to the sale of Aris' Perry Manufacturing Co.
subsidiary on September 30, 1996, 50% of which is to be paid in cash
upon completion of such fiscal year, with the other 50% to be paid in
36 equal monthly installments, commencing after completion of the 1996
fiscal year. Also includes Mr. Ramat's bonus for services on behalf of
ECI for the twelve month period February 4, 1996 through January 31,
1997.
(6) These options were granted in December, 1996 under the Company's 1993
Stock Incentive Plan with respect to shares of the Company's Common
Stock and vest in three equal annual installments.
(7) These options were granted on August 2, 1993 under the Company's 1993
Stock Incentive Plan with respect to shares of the Company's Common
Stock, and have vested in three equal annual installments. On June 26,
1995, all options outstanding on such date under the Company's 1993
Stock Incentive Plan (including these options) were repriced to have
an exercise price of fifty cents (the market price on such date),
rather than two dollars, per share. Pursuant to SEC regulations, the
repriced options are required to be reported as a grant in fiscal year
1995 (during which they were repriced) for purposes of this Summary
Compensation Table, even though they are the same options granted in
fiscal year 1993. The total number of such options originally granted
on August 2, 1993 held by Charles S. Ramat is 400,000, by Paul Spector
is 50,000, and by Vincent Caputo is 5,000.
(8) Includes $135,419 paid in the 1995 fiscal year to Mr. Ramat with
respect to performance compensation in connection with the
effectiveness of the Company's 1993 Plan of Reorganization, which Mr.
Ramat received in 24 equal monthly installments, without interest,
commencing on June 30, 1993.
-8-
<PAGE>
(9) Includes amounts paid as matching contributions by the Company under
its 401(k) Plan, which were $1,500 for Mr. Ramat, $1,500 for Mr.
Spector and $675 for Mr. Caputo in fiscal 1995.
(10) Includes portion of bonus (50%) earned for the 1994 fiscal year, which
pursuant to Mr. Ramat's Executive Employment Agreement with the
Company, was paid three years after completion of such fiscal year
(that is, during 1997) contingent on the market value of the Company's
Common Stock at such later time. See "Employment Agreements".
STOCK OPTION PLAN AND STOCK OPTIONS
1993 STOCK INCENTIVE PLAN
Pursuant to the Company's Plan of Reorganization, on June 30,
1993, a new 1993 Stock Incentive Plan was adopted by the Company (the "1993
Stock Incentive Plan"). The 1993 Stock Incentive Plan authorizes the Company's
Board of Directors (or a committee thereof), to award to employees and directors
of, and consultants to, the Company and its subsidiaries (i) options to acquire
Common Stock of the Company at prices determined when the options are granted,
(ii) stock appreciation rights (entitling the holder to a payment equal to the
appreciation in market value of a specified number of shares of Common Stock
over a specified period), (iii) restricted shares of Common Stock whose vesting
is subject to terms and conditions specified at the time of grant, and (iv)
performance shares of Common Stock that are granted upon achievement of
specified performance goals. Options granted pursuant to the 1993 Stock
Incentive Plan may be either "incentive stock options" within the meaning of
Section 422A of the United States Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified options. As originally adopted on June 30, 1993, a
maximum of 1,200,000 shares of Common Stock can be covered by awards under the
1993 Stock Incentive Plan. On August 28, 1997, the Board of Directors of the
Company approved an amendment to the 1993 Stock Incentive Plan to increase to
2,500,000 the maximum number of shares of Common Stock which can be covered by
awards under the Plan; on April 6, 1998, the Board of Directors of the Company
approved a further amendment to the 1993 Stock Incentive Plan to increase to
3,500,000 the maximum number of shares of Common Stock which can be covered by
awards under the Plan. The amendment increasing such maximum to 3,500,000 shares
is being submitted to the stockholders of the Company for ratification at the
Annual Meeting of Stockholders to be held June 9, 1998.
The 1993 Stock Incentive Plan provides that any shares subject to
an option under the Plan which terminate, are canceled or expire without being
exercised may again be subjected to an option under that plan, subject to the
earlier termination of that plan.
As at December 31, 1997, 1,695,000 options (excluding expired
options and exercised options) had been granted and were outstanding under 1993
Stock Incentive Plan. 835,000 of the outstanding options provide for vesting in
three equal annual installments from the date of grant; as at December 31, 1997,
a total of 584,997 of these options were exercisable. 860,000 of the outstanding
options provide for vesting eight years from the date of grant on August 28,
1997, subject to accelerated vesting on certain refinancings of the Company's
indebtedness; as at December 31, 1997, none of these were exercisable. At such
date, there were 26 eligible participants with options outstanding under the
1993 Stock Incentive Plan. During the first four months of 1998, an additional
1,030,000 options were granted to employees who were not executive officers or
directors of the Company; none of such options are currently exercisable.
According, as of May 1, 1998, 2,723,333 options (excluding expired options and
exercised options) had been granted and were outstanding under the 1993 Stock
Incentive Plan, and as of that date, there were 28 eligible participants with
options outstanding under such Plan.
During the twelve month period ended December 31, 1997, the only
options granted to Directors of the Company were those granted to Charles S.
Ramat, the Chairman, President and Chief Executive Officer of the Company and
Chairman and Chief Executive Officer of ECI and ECI Sportswear, on the terms set
forth below under "Option Grants". The only options held by Directors which were
exercised during the fiscal year ended December 31, 1997 were 50,833 options
exercised by Mr. Ramat at an exercise price of $0.10 per share. See "Option
Exercises" set forth below.
OPTION GRANTS
On August 28, 1997, the Company granted to employees of the
Company and its subsidiaries, a total of 860,000 options (subject to achievement
of vesting requirements) under the 1993 Stock Incentive Plan at an exercise
price of
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<PAGE>
$1.00 per share. Of this amount, 750,000 were granted to Charles S. Ramat,
Chairman, President and Chief Executive Officer of the Company and Chairman and
Chief Executive Officer of ECI and ECI Sportswear; 15,000 were granted to Paul
Spector, Senior Vice President and Chief Financial Officer of the Company, and
95,000 were granted to other employees of the Company and its subsidiaries, in
each case subject to achievement of vesting requirements. Mr. Ramat's options
were granted to him in consideration for, among other things, his consent to the
extension of the term of his Executive Employment Agreement with the Company for
three (3) additional years through June 30, 2001 and his agreement to eliminate
the Aris-level excess cash flow annual bonus which he otherwise would have
earned for fiscal years commencing January 1, 1997 and thereafter. All of such
options shall vest eight (8) years from the date of grant, provided that the
optionee has been continuously employed by the Company during such period, but a
portion of such options shall obtain accelerated vesting on the occurrence of
the "Refinancing Date" (as defined herein) on or before December 31, 2000,
depending on whether the Refinancing Date occurs during fiscal years 1998, 1999
or 2000. The Refinancing Date shall be the date upon which the Company's debt
obligations to Heller Financial, Inc., BNY Financial Corporation, and AIF-II,
L.P., pursuant to their respective secured note agreements with Aris dated June
30, 1993, each as amended, are fully paid and satisfied in cash.
In the event that the Refinancing Date occurs during calendar
year 1998, all 750,000 of such options granted to Mr. Ramat will obtain
accelerated vesting. In the event that the Refinancing Date occurs during
calendar year 1999, 500,000 of such options granted to Mr. Ramat will obtain
accelerated vesting. In the event that the Refinancing Date occurs during
calendar year 2000, 250,000 of such options granted to Mr. Ramat will obtain
accelerated vesting. In the event that the Refinancing Date occurs on or before
December 31, 2000, all of such options granted to the other employees of the
Company or its subsidiaries will obtain accelerated vesting. In the event that
the Refinancing Date occurs during calendar year 2001 or thereafter, none of
such options granted to Mr. Ramat or the other employees of the Company or its
subsidiaries will obtain accelerated vesting. The Refinancing Date has not
occurred and none of such options granted to Mr. Ramat or other employees have
vested.
All options which obtain accelerated vesting as described above,
shall vest as follows: (i) one-third on the later to occur of the Refinancing
Date and August 28, 1998 (the first anniversary of the date of grant); (ii)
one-third on the later to occur of the Refinancing Date and August 28, 1999 (the
second anniversary of the date of grant); and (iii) one-third on the later to
occur of the Refinancing Date and August 28, 2000 (the third anniversary of the
date of grant). By way of example, if the Refinancing Date occurred on November
1, 1999, 500,000 of such options granted to Mr. Ramat would obtain accelerated
vesting, of which 333,333 would vest on the Refinancing Date on November 1, 1999
(the later to occur of the Refinancing Date and August 28, 1998 and August 28,
1999, the first and second anniversaries of the date of grant), and the balance
of 166,667 would vest on August 28, 2000(the later to occur of the Refinancing
Date and August 28, 2000, the third anniversary of the date of grant).
292,500 of the options granted to Mr. Ramat on August 28, 1997
were provided from the unused balance of the 1,200,000 shares initially reserved
under Aris' 1993 Stock Incentive Plan, and the remainder of 457,500 of the
options granted to Mr. Ramat and 110,000 options granted to other employees of
the Company on August 28, 1997 and the 1,030,000 options granted to other
employees of the Company during the first four months of 1998, were provided by
the amendment to the 1993 Stock Incentive Plan to increase to 3,500,000 the
maximum number of reserved shares as described above. Such increase in reserved
shares as well as the grant of options to Mr. Ramat are being submitted to the
stockholders of the Company for ratification at the Annual Meeting of
Shareholders to be held July 9, 1998.
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<PAGE>
The following table sets forth option grants made during the 1997
Fiscal Year to executive officers of the Company. All options referred to below
were granted under the 1993 Stock Incentive Plan.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
<CAPTION>
% of Total Exercise Potential Realizable Value
Number of Options or at Assumed Annual Rates
Securities Granted to Exercise Market of Stock Price
Underlying Employees in or Base Price on Appreciation For Option Term
Options Fiscal Price Date of Expiration ----------------------------
Name Granted(#) Year ($/SH) Grant Date 5%($) 10%($)
- ---- ---------- ------------ -------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles S. 750,000 82.4% $1.00 $1.00 8/28/2007 $471,750 $1,195,425
Ramat(1)
Paul Spector(1) 15,000 1.6% $1.00 $1.00 8/28/2007 $ 9,435 $ 23,408
</TABLE>
- ----------
(1) See discussion above in "Option Grants" as to accelerated vesting on
certain refinancings of the Company's secured indebtedness.
EXERCISED/UNEXERCISED STOCK OPTIONS
The following table sets forth the December 31, 1997 fiscal
year-end value of unexercised options held by the executive officers of the
Company on an aggregated basis. The only exercises of stock options by any of
the executive officers of the Company during the twelve months ended December
31, 1997 were options for 50,833 shares exercised by Mr. Ramat at an exercise
price of $0.10 per share. All options referred to below were granted under the
1993 Stock Incentive Plan.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
-----------------------------------------------
<CAPTION>
Shares Number of Securities
Acquired Value Underlying Unexercised Value of Unexercised
on Exercise Realized Options at FY-End (#) In-the-Money Options at FY-End($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- ------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Charles S. 50,833 $65,605 400,000/851,667 $350,000 / $410,875
Ramat
Paul Spector 0 0 55,000/25,000 $50,125 / $18,375
Vincent Caputo 0 0 6,666/3,333 $6,500 / $4,250
</TABLE>
EMPLOYMENT AGREEMENTS.
Charles S. Ramat is employed pursuant to the Executive Employment
Agreement between him and the Company dated as of February 1, 1988, as amended
("Ramat Agreement"), pursuant to which Mr. Ramat serves as the Company's
Chairman of the Board, President and Chief Executive Officer, and will continue
to be nominated to serve on the Company's Board of Directors.
On October 3, 1995, the Ramat Agreement was amended to extend the
term of Mr. Ramat's employment for the period through June 30, 1998. On August
28, 1997, the Ramat Agreement was amended to extend the term of Mr. Ramat's
employment for the period through June 30, 2001. This term will be further
extended on a year-to-year basis unless terminated by either party by notice
given not less than 60 days prior to the end of the then-current employment
term.
Commencing June 30, 1993, Mr. Ramat is entitled to receive a base
salary of $500,000 per year (subject to an annual increase in an amount equal to
the proportionate annual increase in the Consumer Price Index - All Items),
which annual increases resulted in a base salary at the rate of $562,754 per
annum during the twelve months ended December 31, 1997.
On August 28, 1997, the Ramat Agreement was amended, in favor of
the Company, to eliminate the Aris-level excess cash flow annual bonus which Mr.
Ramat otherwise would have earned for fiscal years commencing January 1, 1997
and thereafter. During fiscal year 1997, Mr. Ramat was paid the deferred portion
of such Aris-level annual bonus
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<PAGE>
earned in the fiscal year ending January 29, 1994 and during the first quarter
of 1998, Mr. Ramat was paid the deferred portion of such Aris-level bonus earned
in the fiscal year ended January 28, 1995. There was no Aris-level annual bonus
earned for fiscal years ended February 3, 1996 or December 31, 1996, other than
with respect to the Perry Sale (described below).
On September 30, 1996, the Company sold 100% of the stock of
Perry, for which Mr. Ramat earned a bonus based on the excess cash flow bonus
formula in the Ramat Agreement. One half of such bonus was paid following
completion of the fiscal year ended December 31, 1996, and the balance of such
bonus relating to the Perry Sale shall be paid in 36 equal consecutive monthly
installments, without interest, commencing after the filing of the Company's
Annual Report on Form 10-K for such fiscal year. If Mr. Ramat dies or becomes
totally disabled, the Ramat Agreement is terminated by the Company without cause
or there is a sale or liquidation of all or substantially all of the operating
assets of the Company (the Company's Ohio real estate interests are not
considered operating assets for this purpose), then the entire remaining amount
of all bonus payments relating to the Perry Sale shall be accelerated and paid
in full in a lump sum to Mr. Ramat.
On December 5, 1995, Mr. Ramat assumed the duties of Chairman and
Chief Executive Officer of ECI, in addition to his duties in such positions with
the Company. On December 18, 1996, the Company determined that for the fiscal
year commencing January 1, 1997, Mr. Ramat would be paid a bonus for his
services on behalf of ECI calculated as the sum of the following percentages of
net income of ECI computed prior to the provisions for taxes, for payment
of management fees to the Company, or for payment of any bonuses to ECI
executives: 5.25% of such income in excess of $1,000,000 and up to $2,000,000;
10.5% of such income in excess of $2,000,000 and up to $3,000,000; 7% of such
income in excess of $3,000,000 and up to $4,000,000; and 8.75% of such income in
excess of $4,000,000 and up to $5,000,000. Such ECI bonus was paid to Mr. Ramat
following receipt of the audited financial statements for the 1997 fiscal year.
The Company amended the Ramat Agreement on August 28, 1997 to
provide that for the fiscal year commencing January 1, 1998, and each subsequent
fiscal year during the term of the Ramat Agreement, Mr. Ramat will be provided
with a cash bonus based upon achievement of performance targets of the Company
and its subsidiaries set annually in advance of each such fiscal year by mutual
agreement, which bonus programs shall each become an addendum to the Ramat
Agreement. Such an addendum was entered into between the Company and Mr. Ramat
to confirm that for the fiscal year commencing January 1, 1998, Mr. Ramat's cash
bonus shall be computed as the sum of the following percentages of the combined
net income of ECI and ECI Sportswear, computed prior to the provisions for
taxes, for payment of management fees to the Company, or for payment of any
bonuses to executives: 10% of such income in excess of $4,500,000 and up to
$6,000,000 and 20% of such income in excess of $6,000,000 and up to $8,000,000.
Such cash bonus will be paid to Mr. Ramat following receipt of the audited
financial statements for the 1998 fiscal year.
Since the Aris-level excess cash flow bonuses have been
eliminated for the 1997, 1998 and all subsequent fiscal years, there is no
duplication of bonuses by reason of the bonuses provided to Mr. Ramat based on
the net income of ECI and ECI Sportswear.
Mr. Ramat is also entitled to participate, at the Company's
expense, in all insurance and medical plans of the Company available to its
employees, is entitled to reimbursement for business and entertainment expenses
and is entitled to a monthly allowance towards a leased automobile.
In the event of Mr. Ramat's death or total disability, he will be
entitled to a death or disability benefit equal to 150% of his annual base
salary in effect on the date of death or certification of disability, and if a
"change in control" (as defined in the Ramat Agreement) occurs, Mr. Ramat will
have the right to terminate the Ramat Agreement, in which event he will entitled
to receive a lump sum severance payment in an amount equal to 299% of his
average annual compensation (including bonus, other than bonus relating to a
Perry Sale) from the Company for the preceding five calendar years. Mr. Ramat
will also be entitled to receive such severance payment if he is terminated by
the Company without cause. On October 3, 1995, the Ramat Agreement was amended
to clarify the definition of "change in control" to include, among other events,
the sale or liquidation of the stock, assets or business of both Perry and ECI,
unless at such time the Company had acquired another operating subsidiary with a
net worth and net income not less than that of ECI at such time and which
undertakes the same contractual obligations that Perry and ECI have to Mr.
Ramat.
The Ramat Agreement is subject, at the Company's option, to
termination only for cause upon 90 days' written notice if Mr. Ramat has been
convicted for any material act of fraud, misappropriation, embezzlement,
disloyalty,
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<PAGE>
dishonesty or breach of trust against the Company or any of its subsidiaries or
affiliated companies. Notwithstanding such termination, the Company will remain
obligated to pay Mr. Ramat his annual base salary through the date of
termination.
The Ramat Agreement provides for indemnification by the Company
for all claims relating to Mr. Ramat's service as an officer and director of the
Company, and for advancement of expenses, except in those circumstances where
indemnification would be precluded by Section 721 of the New York Business
Corporation Law ("BCL") and requires that during the term of his employment
thereunder, (a) the Company's Certificate of Incorporation and/or By-Laws (as
required by law) must contain the provisions required by the BCL to provide for
indemnification of officers and directors to the fullest extent set forth in BCL
Section 721 and to provide for the limitation of liability of directors to the
fullest extent set forth in Section 402(b) of the BCL, and (b) the Company must
maintain in full force and effect directors and officers liability insurance, to
the extent available, providing coverage comparable to the insurance policy the
Company had in effect on August 2, 1991.
On December 18, 1996, the Company entered into an agreement with
Mr. Ramat, providing that with respect to 152,500 options granted to him in
December, 1996 under the Company's 1993 Stock Incentive Plan, in the event that
the Ramat Agreement is not renewed upon any expiration of its term, or if Mr.
Ramat is terminated by the Company without cause (as defined in the Ramat
Agreement), then all of such options would immediately vest and become
exercisable, and the term for exercise of such options shall be one year after
the date of such non-renewal or termination. On August 28, 1997, the Company
amended the Ramat Agreement to provide for the grant of 750,000 options (subject
to achievement of vesting requirements) to Mr. Ramat under the 1993 Stock
Incentive Plan as described above in "Stock Option Plan and Stock Options". Such
options were granted to Mr. Ramat in consideration for, among other things, his
consent to the extension of the term of the Ramat Agreement for three additional
years through June 30, 2001 and his agreement to eliminate the Aris-level excess
cash flow annual bonus he otherwise would have earned for fiscal years
commencing January 1, 1997 and thereafter. The amendment provided that with
respect to such 750,000 options granted to Mr. Ramat, in the event that the
Ramat Agreement is not renewed upon the expiration of its term, or if Mr. Ramat
is terminated by the Company without cause (as defined in the Ramat Agreement),
then all of such options which have obtained accelerated vesting because the
Refinancing Date has occurred prior to the non-renewal or termination date,
would immediately vest and become exercisable (regardless of whether the first,
second or third anniversary of the date of grant had occurred), and the term for
exercise of such options shall be one year after the date of such non-renewal or
termination.
Mr. Paul Spector, the Company's Senior Vice President and Chief
Financial Officer, is contractually entitled to a severance payment if he is
terminated by the Company for reasons other than cause. The severance payment
will equal one-half of Mr. Spector's annual salary at the time of termination.
401(K) PLAN
The Company has no pension plan but affords its executive
officers the opportunity to participate in a 401(k) Plan established for all of
the Company's employees, for which the Company may make a discretionary matching
contribution of up to 25% of a maximum of four percent (4%) of salary (up to
$150,000) contributed by the employee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Stock Option
Committee are Messrs. Hannan, Yorke and Katz, none of whom were (i) during the
twelve months ended December 31, 1997, an officer of the Company or any of its
subsidiaries or (ii) formerly an officer of the Company or any of its
subsidiaries. Messrs. Hannan, Yorke and Katz may be considered executive
officers of Apollo Advisors, L.P., the general partner of AIF-II, a holder of
secured indebtedness of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
One report for one transaction due January 10, 1998 was
inadvertently filed later in that same month with respect to Charles S. Ramat
due to the attorney's EDGAR software difficulties.
-13-
<PAGE>
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation of the Chief Executive Officer. The compensation of
Charles S. Ramat, Chairman, President and Chief Executive Officer of Aris and
Chairman and Chief Executive Officer of ECI and ECI Sportswear, is specified by
the contractual terms of his Executive Employment Agreement with the Company
dated February 1, 1988, as amended (the "Ramat Agreement"). See "Executive
Compensation - Employment Agreements". This Agreement, which has been in effect
for more than ten years, provided for a base salary (with annual cost of living
increases) and an Aris-level excess cash flow annual bonus.
On August 28, 1997, upon the recommendation of the Stock Option
and Compensation Committee and approval by the Board of Directors, the Company
entered into the Eighth Amendment (the "Eighth Amendment") to the Ramat
Agreement. The Eighth Amendment, in summary, provides for the extension of Mr.
Ramat's term of employment from June 30, 1998 to June 30, 2001; for the
elimination of the existing provisions for an Aris level excess cash flow annual
bonus earned for fiscal year 1997 and thereafter; for the provision of annual
cash bonuses based on achievement of performance targets of Aris and its
subsidiaries to be set annually in advance of each fiscal year by mutual
agreement; and for the grant (subject to achievement of vesting requirements) on
the date of the Eighth Amendment of 750,000 options under Aris' 1993 Stock
Incentive Plan to Mr. Ramat and up to 150,000 options under such Plan to other
employees of Aris and its subsidiaries, all such options at an exercise price of
$1.00 per share and vesting eight (8) years from the date of grant, provided
that the optionee has been continuously employed by Aris or its subsidiaries
during such period (See "Executive Compensation - Employment Agreements; and
"Executive Compensation - Stock Option Plan and Stock Options").
On December 5, 1995, Mr. Ramat assumed the duties of Chairman and
Chief Executive Officer of ECI, in addition to his duties in such positions at
Aris and on July 15, 1997, upon ECI Sportswear's acquisition of the business of
Davco Industries, Inc., Mr. Ramat also assumed the position of Chairman and
Chief Executive Officer of ECI Sportswear. No increases in base salary or other
salaried compensation were provided to Mr. Ramat for services on behalf of these
operating subsidiaries of the Company. The bonuses provided to Mr. Ramat based
on achievement of performance targets, were for the fiscal years ending December
31, 1997 and 1998 established by the Stock Option and Compensation Committee at
the commencement of such fiscal years as a percentage of the projected targets
of net income of the operating subsidiaries of the Company in existence at such
time, computed prior to provision for taxes, for payment of management fees to
the Company or for payment of any bonuses to executives, under the business
plans of such subsidiaries prepared at the commencement of such fiscal years.
The Stock Option and Compensation Committee selected the use of such
performance-based bonuses to enable a direct tie to the net income of such
operating subsidiaries during each such fiscal year of Mr. Ramat's employment.
Since Mr. Ramat's Aris-level excess cash flow bonuses have been eliminated for
the 1997, 1998 and all subsequent fiscal years, there is no duplication of
bonuses by reason of the performance bonuses based on net income of the
operating subsidiaries of the Company.
All or a portion of the options granted pursuant to the Eighth
Amendment shall obtain accelerated vesting on the occurrence of the refinancing
of Aris' debt obligations to Heller Financial, Inc., BNY Financial Corporation,
and AIF-II, L.P. on or prior to December 31, 2000, and were granted in
consideration for, among other things, Mr. Ramat's consent to the extension of
the term of the Ramat Agreement for three (3) additional years through June 30,
2001, and his agreement to eliminate the Aris-level excess cash flow annual
bonus which he otherwise would have earned for fiscal years commencing January
1, 1997. By entering into the Eighth Amendment, Mr. Ramat gave up several other
components of compensation from Aris. See "Ratification of the Grant of Stock
Options to Charles S. Ramat, Chairman, President, and Chief Executive Officer of
Aris" for a more extensive discussion of the terms and conditions of the options
granted to Mr. Ramat pursuant to the Eighth Amendment, the determinations of the
Stock Option and Compensation Committee and Board of Directors of the Company in
making such grant, and the components of compensation given up by Mr. Ramat upon
entering to the Eighth Amendment and receiving such options.
In setting the terms and conditions of the Eighth Amendment and
Mr. Ramat's compensation and grant of stock options, the Stock Option and
Compensation Committee reviewed CEO compensation and programs in other
comparable publicly traded companies as well as market trends in CEO
compensation.
Compensation of other Executive Officers of the Company. The
Stock Option and Compensation Committee's compensation policy with regard to
other executive officers reflects an annual evaluation, with the input of the
Company's Chief Executive Officer, of their performance in relation to the
overall operating results of the Company and its operating subsidiaries. For the
fiscal year ended December 31, 1997, Paul Spector, Senior Vice President, Chief
Financial Officer and Secretary, was granted an increase in base salary and a
performance bonus to reflect the
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<PAGE>
improved operating results of the Company for such fiscal year and his efforts
in the implementation of the Company's acquisition of the business of Davco
Industries, Inc. completed July 15, 1997. For the fiscal year ended December 31,
1997, Vincent Caputo, Vice President, Assistant Treasurer, and Assistant
Secretary received a salary increase to reflect the improved operating results
of the Company for such fiscal year.
John Hannan
Robert A. Katz
Edward M. Yorke
PERFORMANCE GRAPH
The following table compares the cumulative total shareholder
return on Aris Common Stock with the cumulative total shareholder returns of (x)
the S&P 500 Textile-apparel Manufacturers index and (y) Wilshire 5000 index from
December, 1992 to December, 1997. The return on the indices is calculated
assuming the investment of $100 on December 31, 1992 and the reinvestment of
dividends.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SHAREHOLDER RETURN DECEMBER, 1992 TO DECEMBER, 1997
--GRAPHICAL REPRESENTATION OF DATA TABLE BELOW--
<S> <C> <C> <C> <C> <C> <C>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
ARIS 100.00 74.00 41.00 3.30 18.90 75.90
WILSHIRE 5000 100.00 108.58 105.84 141.19 167.71 216.70
S&P TEXTILE 100.00 74.11 70.99 78.03 102.59 110.37
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NEW SHAREHOLDERS AGREEMENT
Pursuant to the New Shareholders Agreement, Apollo Aris and the
Non-Apollo Subject Shareholders have agreed that, if any such party shall have
nominated any individual for election as a director of the Registrant pursuant
to such shareholder's rights under the Registrant's Certificate of Incorporation
and/or By-Laws, each of Apollo Aris and the Non-Apollo Subject Shareholders will
vote in favor of the election of each such nominee (or, if there are no such
nominees, in favor of the candidates nominated by a majority of the Board of
Directors) all shares of Common Stock over which such person has voting power;
provided, that each of Apollo Aris and the Non-Apollo Subject
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<PAGE>
Shareholders have agreed to vote in favor of the election of Charles S. Ramat
(the Chairman of the Board, President and Chief Executive Officer of the
Company) as a director at such times as Mr. Ramat is nominated as a director and
entitled to be so nominated pursuant to any agreement between the Company and
Mr. Ramat. Pursuant to the Company's Restated Certificate of Incorporation and
By-Laws, only a shareholder that owns, or together with its affiliates owns,
shares of Common Stock possessing a majority of the voting power of the
outstanding Common Stock is entitled to nominate candidates for election as
directors.
The New Shareholders Agreement provides that each Non-Apollo
Subject Shareholder is required to obtain the consent of Apollo Aris (or its
successor or their designees) to transfer shares of Common Stock owned by such
Non-Apollo Subject Shareholder, other than transfers of shares received pursuant
to an employee stock option or purchase plan, transfers to certain persons
affiliated with or otherwise related to the Non-Apollo Subject Shareholder,
transfers by a Non-Apollo Subject Shareholder's estate, transfers pursuant to
the Equity Registration Rights Agreement, and transfers not exceeding an annual
aggregate of 10% of the shares of Common Stock owned by such Non-Apollo Subject
Shareholder on the Effective Date. Pursuant to the New Shareholders Agreement,
Apollo Aris is required to allow the Non-Apollo Subject Shareholders to
participate in any private sale to a non-affiliate of an annual aggregate of
more than 10% of the shares of Common Stock owned by Apollo Aris on June 30,
1993.
The New Shareholders Agreement requires that the Non-Apollo
Subject Shareholders must obtain the consent of Apollo Aris (or its successor or
their designees) prior to the acquisition of additional shares of Common Stock,
other than shares acquired pursuant to an employee stock option or stock
purchase plan, and shares that (when aggregated with shares acquired pursuant to
such employee stock plans or acquired by certain persons affiliated with or
otherwise related to a Non-Apollo Subject Shareholder that are not parties to
the New Shareholders Agreement) do not exceed an annual aggregate of 10% of the
shares of Common Stock owned by such Non-Apollo Subject Shareholder on June 30,
1993.
The New Shareholders Agreement will terminate on the earliest to
occur of (i) June 30, 2000, (ii) in certain circumstances, upon the election of
the Non-Apollo Subject Shareholders following the transfer by Apollo Aris
resulting in the occurrence of certain reductions in Apollo Aris's ownership
interest in the Company, (iii) the end of the first fiscal year of the Company
for which the total amount of NOL carryforwards available for later taxable
years is less than $2.5 million, and (iv), as to Apollo Aris and any Non-Apollo
Subject Shareholder, the date on which such party owns shares equal to less than
10% of the shares of Common Stock owned by such party on June 30, 1993. In
addition, Apollo Aris may terminate the New Shareholders Agreement with respect
to any Non-Apollo Subject Shareholders who are not "affiliates" of the
Registrant within the meaning of Rule 144(a)(1) under the Securities Act of
1933, as amended.
Messrs. Hannan, Yorke and Katz, Directors of the Company, may be
considered executive officers of Apollo Advisors, L.P., the general partner of
Apollo Aris, L.P. and of AIF-II. AIF-II is a holder of secured indebtedness of
the Company.
EQUITY REGISTRATION RIGHTS AGREEMENT
Pursuant to the Equity Registration Rights Agreement, any party
that owns, or together with its affiliates owns, 25% or more of the shares of
Common Stock subject to such agreement is entitled to require the Company to
register under the Securities Act of 1933, as amended, the offer and sale of
Common Stock owned by such person. Each of Apollo Aris and the Non-Apollo
Subject Shareholders is entitled to have shares of Common Stock owned by such
person included in any such registration statement initiated by a party to the
Equity Registration Rights Agreement or by the Company. The Equity Registration
Rights Agreement also provides that Apollo Aris is required to allow the
Non-Apollo Subject Shareholders to participate in a non-underwritten public
offering in which Apollo Aris sells an annual aggregate of more than 10% of the
shares of Common Stock owned by Apollo Aris on June 30, 1993.
Pursuant to a letter agreement dated October 29, 1992, the
Company, ECI and Above the Belt, Inc. (a discontinued operating subsidiary),
have agreed, subject to certain exceptions, to indemnify each of Apollo
Advisors, its partners and certain other related persons from and against all
losses, claims, liabilities, damages, costs and expenses or actions in respect
thereof arising out of any actual or threatened claim against such party by a
person other than the Company related to or arising out of or in connection
with, among other things, the Plan or any actions taken by any indemnified party
pursuant thereto or the transactions contemplated thereby.
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<PAGE>
DIRECTOR'S INDEMNIFICATION AGREEMENTS
On June 30, 1993, the Company entered into separate
Indemnification Agreements with each new and continuing member of its Board of
Directors which provide such Directors with contractual indemnification to the
fullest extent permitted by law, and for the advancement of legal fees and other
expenses, and require the Company to use its best efforts to maintain designated
director and officer liability insurance coverage.
AGREEMENTS WITH AFFILIATES OF PRIOR ECI MANAGEMENT
ECI leases approximately 29,600 square feet of office space in
New Jersey from a partnership, some of whose partners are former officers and/or
directors of ECI (but not of the Company). Such lease was in effect when the
Company acquired ECI in 1987.
In March 1996, ECI entered into a sublease of approximately
120,000 square feet of warehouse space in New Jersey (adjacent to ECI's offices)
of which the ground lessee is the same New Jersey partnership, some of whose
partners are former officers and/or directors of ECI (but not of the Company).
DAVCO SHAREHOLDERS AGREEMENT
Effective July 15, 1997, ECI Sportswear, Inc. ("ECI Sportswear"),
an indirect wholly owned subsidiary of the Company, acquired substantially all
of the assets of Davco Industries, Inc. ("Davco"). The aggregate purchase price
paid by ECI Sportswear for such assets of $4,373,000 consisted of (a) the
issuance to Davco of 3,000,000 shares of restricted Common Stock of the Company
valued at $720,000 and (b) a contingent cash purchase price computed as the
pre-tax net income of the Davco apparel business as owned by ECI Sportswear 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
subsequent to issuance of the Company's December 31, 1997 audited financial
statements included in this Report on Form 10K. On the closing date, ECI
Sportswear paid to Davco $500,000 as an advance towards the contingent cash
purchase price and ECI Sportswear paid an additional advance of $81,000
following completion of ECI Sportswear's third fiscal quarter ending September
30, 1997. The contingent cash purchase price payable to Davco, derived from the
Company's audited financial statements, was $3,483,000. On April 10, 1998, the
Company paid $2,660,000 in respect of the contingent purchase price for the
acquisition of assets of Davco, after deducting advances previously paid of
$581,000 and reserves for purchase price adjustments of $242,000.
On July 15, 1997, 3,000,000 shares of the Company's Common Stock
were issued to Davco as part of the purchase price for the acquisition of its
business (the "Acquired Shares"), and Davco became the record owner (and Davco
and its shareholders, Steven Arnold and Christopher Healy as a group, became the
beneficial owners of) such Acquired Shares. Steven Arnold is the 60%
shareholder, and Christopher Healy is the 40% shareholder, of Davco. All of the
Acquired Shares are subject to the terms, conditions and restrictions of a
Shareholders Agreement (the "Davco Shareholders Agreement") entered into on such
date between Davco, the shareholders of Davco (Steven Arnold and Christopher
Healy), the Company, Apollo Aris Partners, L.P. ("Apollo") and Charles S. Ramat,
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, Steven Arnold or Christopher Healy shall be limited
to Rule 144 "over the market" ordinary brokers transactions ("Rule 144 Brokers
Transactions"), limited in timing and amounts such that (1) No transfers would
be permitted during the first year following the closing date of the
acquisition, (2) in each of the second, third and fourth year following the
Closing Date, each of Steven Arnold and Christopher Healy may sell up to 300,000
shares per year in Rule 144 Brokers Transactions, and (3) commencing in the
fifth year following the closing date, each of Steven Arnold and Christopher
Healy 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, Steven Arnold nor Christopher Healy are permitted to engage
in any privately negotiated or block or bulk sales, regardless of amount,
without the Company'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, Steven Arnold and Christopher Healy 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
Company, and second to Apollo and Charles S. Ramat (on an equal basis); and
further providing that Davco, Messrs. Arnold and Healy are prohibited from
acquiring any additional shares of the Company without the consent of the
Company; and further providing that for so long as Mr. Ramat is Chairman, Chief
Executive Officer or President of the Company,
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<PAGE>
Davco, Steven Arnold and Christopher Healy agree to vote all of their shares (on
all corporate matters including election of Directors) for the recommendations,
proposals and nominations of the Company's Board of Directors; and further
providing that Davco, Messrs. Arnold and Healy will have certain "piggyback"
registration rights as to the Acquired Shares, to the extent still owned by them
at the time of registration. These "piggyback" registration rights will enable
Davco, Messrs. Arnold and Healy to include their shares in a registration by the
Company to the same proportionate extent as if they were parties to the Equity
Registration Rights Agreement referred to above when, as and if the shares of
the Company held by the parties to such Equity Registration Rights Agreement are
eligible for inclusion in such registration statement on a "piggyback" basis.
On the July 15, 1997 closing date of the Davco acquisition, each
of Steven Arnold and Christopher Healy entered into employment agreements with
ECI Sportswear for a term through September 30, 2000 to manage the Davco
business as owned by ECI Sportswear.
AGREEMENTS RELATING TO GRANT OF STOCK OPTIONS
In the August 28, 1997 amendment to the Ramat Agreement, the
Company agreed to call and hold a Shareholder's Meeting subsequent to the date
that the Company's 1997 audited financial statements become available, for the
purpose of approving an amendment to Aris' 1993 Stock Incentive Plan to increase
the number of shares reserved for issuance under such Plan from 1,200,000 shares
to 2,500,000 shares as well as ratifying the grant of options to Mr. Ramat on
August 28, 1997 referred to above in "Executive Compensation - Stock Option Plan
and Stock Options", with the Board of Directors of the Company to recommend to
the shareholders the approval of such amendment and ratification, and with the
Company to use its best efforts to obtain such shareholder approval, and
following such shareholder approval and ratification, to prepare, file and
distribute an amended Form S-8 Registration Statement covering the increased
number of 2,500,000 shares reserved for issuance under Aris' 1993 Stock
Incentive Plan. On the same date, Apollo, Davco, and Steven Arnold and
Christopher Healy (the shareholders of Davco) each executed letter agreements in
favor of the Company and Charles S. Ramat, consenting to such amendment of the
1993 Stock Incentive Plan and such grant of options to Mr. Ramat and other
employees of the Company and its subsidiaries, and agreeing to vote, at any
annual or special meeting of shareholders of the Company, all shares of the
Company owned or controlled by them in favor of such amendment to the 1993 Stock
Incentive Plan and ratification of such grant of options to Mr. Ramat and the
other employees of the Company and its subsidiaries. Such agreements by Apollo,
Davco, Steven Arnold and Christopher Healy were amended on May 20, 1998 to
confirm that those commitments would also apply to the amendment of the 1993
Stock Incentive Plan to increase the maximum number of shares reserved for
grants thereunder to 3,500,000 (rather than 2,500,000).
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent certified public accountants,
currently serve as independent auditors for Aris. Deloitte & Touche LLP and its
predecessors have served as independent auditors for Aris for many years.
Upon the recommendation of the Audit Committee, the Board of
Directors has appointed Deloitte & Touche to serve as Aris' independent auditors
to audit its books and accounts for its fiscal year ending December 31, 1998.
Such appointment is conditioned upon ratification by the stockholders, and the
matter will be presented at the Annual Meeting. If the stockholders do not
ratify the appointment, the selection will be reconsidered by the Board of
Directors of Aris.
A representative of Deloitte & Touche LLP will be present at the
Annual Meeting. The representative will have an opportunity to make a statement
if he desires to do so and will be available to respond to appropriate
questions.
THE BOARD RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE BOARD'S SELECTION OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. ASSUMING THE PRESENCE OF
QUORUM, THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS NECESSARY FOR
SUCH RATIFICATION.
RATIFICATION OF AMENDMENT OF ARIS 1993
STOCK INCENTIVE PLAN TO PROVIDE FOR
GRANTS COVERING A MAXIMUM OF 3,500,000 SHARES
Pursuant to the Company's Plan of Reorganization, on June 30,
1993, a new 1993 Stock Incentive Plan was adopted by the Company (the "1993
Stock Incentive Plan"). The 1993 Stock Incentive Plan authorizes the
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<PAGE>
Company's Board of Directors (or a committee thereof), to award to employees and
directors of, and consultants to, the Company and its subsidiaries (i) options
to acquire Common Stock of the Company at prices determined when the options are
granted, (ii) stock appreciation rights (entitling the holder to a payment equal
to the appreciation in market value of a specified number of shares of Common
Stock over a specified period), (iii) restricted shares of Common Stock whose
vesting is subject to terms and conditions specified at the time of grant, and
(iv) performance shares of Common Stock that are granted upon achievement of
specified performance goals. Options granted pursuant to the 1993 Stock
Incentive Plan may be either "incentive stock options" within the meaning of
Section 422A of the United States Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified options.
As originally adopted on June 30, 1993, a maximum of 1,200,000
shares of Common Stock can be covered by awards under the 1993 Stock Incentive
Plan. On August 28, 1997, the Board of Directors of the Company approved an
amendment to the 1993 Stock Incentive Plan to increase to 2,500,000 the maximum
number of shares of Common Stock which can be covered by awards under the Plan;
on April 6, 1998, the Board of Directors of the Company approved a further
amendment to the 1993 Stock Incentive Plan to increase to 3,500,000 the maximum
number of shares of Common Stock can be covered by awards under the Plan. The
amendment increasing such maximum to 3,500,000 shares is being submitted to the
stockholders of the Company for ratification at the Annual Meeting of
Stockholders to be held July 9, 1998.
The increase in the number of shares reserved under the 1993
Stock Incentive Plan will cover the grant of 750,000 options on August 28, 1997
to Charles S. Ramat, Chairman, President and Chief Executive Officer of Aris;
the grant of 110,000 options on August 28, 1997 to other employees of Aris and
its subsidiaries; the grant of 1,030,000 options during the first four months of
1998 to other employees of Aris and its subsidiaries who are not executive
officers or directors of the Company; and the grant of options at future times,
which may be in connection with acquisitions, to recruit or maintain additional
key employees, and to provide incentives to employees of an expanding number of
operating subsidiaries.
The ability of the Company to grant stock options under the 1993
Stock Incentive Plan is a key element of the Company's attempts to recruit and
retain capable and talented executive, administrative, design, sales and other
personnel of the Company and its operating subsidiaries.
In accordance with the requirements of the 1993 Stock Incentive
Plan for amendment thereof, the amendment of the Plan to increase the maximum
number of shares received under the Plan to 3,500,000 is being submitted to the
stockholders of the Company for ratification at the Annual Meeting of
Stockholders of the Company.
THE BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR"
THE RATIFICATION OF THE AMENDMENT OF THE 1993 STOCK INCENTIVE PLAN TO PROVIDE
FOR GRANTS COVERING A MAXIMUM OF 3,500,000 SHARES. The full text of the Plan,
including such amendment, is set forth as Exhibit I to this Proxy Statement. The
principal features of the Plan are described below. The affirmative vote of the
holders of a majority of all outstanding shares entitled to vote thereon is
necessary for such ratification.
The Plan is administered by the Stock Option and Compensation
Committee of the Board of Directors, currently consisting of John J. Hannan,
Edward M. Yorke, and Robert A. Katz, which committee determines those
individuals who will receive options, the vesting dates and other terms and
conditions of vesting, following which the options or rights may become
partially or fully exercisable, the expiration date of the options, the number
of shares of Common Stock that may be purchased under each option and the option
exercise price.
The per share exercise price of the Common Stock subject to an
incentive stock option may not be less than the fair market value of the Common
Stock on the date the option is granted. The per share exercise price of the
Common Stock subject to a non-qualified option may be established by the Stock
Option and Compensation Committee, except that the Company will not grant
non-qualified options at an exercise price of less than 50% of the fair market
value of the Common Stock on the date the option is granted. No person who owns,
directly or indirectly, at the time of the granting of an incentive stock option
to him, 10% or more of the total combined voting power of all classes of stock
of the Company (a "10% Stockholder") will be eligible to receive any incentive
stock options under the Plan unless the option price is at least 110% of the
fair market value of the Common Stock subject to the option, determined on the
date of grant.
No stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and, during the lifetime of an
optionee, the option will be exercisable only by him or by his legal guardian or
legal
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<PAGE>
representative. In the event of termination of employment other than by death or
for cause the optionee will have three months after such termination during
which he can exercise the option, but the Stock Option and Compensation
Committee may extend this time period in setting the terms and conditions of a
grant of particular options. Upon termination of employment of an optionee by
reason of death, his option remains exercisable for one year thereafter to the
extent it was exercisable on the date of such termination.
No options under the Plan are permitted to be granted after the
tenth anniversary of the effective date of the Plan. All options granted under
the Plan cannot be exercised more than 10 years from the date of grant except
that options issued to a 10% Stockholder are limited to five year terms. All
options granted under the Plan provide for the payment of the exercise price in
cash or, with the approval of the Compensation Committee, by delivery to the
Company of shares of Common Stock already owned by the optionee having a fair
market value equal to the exercise price of the options being exercised, or by a
combination of those methods of payment. Although the holders of options must
pay to the Company the exercise price of any option granted under the Plan, no
cash consideration is paid to the Company for the grant of the option.
The 1993 Stock Incentive Plan provides that any shares subject to
an option under the Plan which terminate, are canceled or expire without being
exercised may again be subjected to an option under that plan, subject to the
earlier termination of that plan.
The Stock Option and Compensation Committee may also grant stock
appreciation rights, restricted shares of Common Stock and performance shares of
Common Stock under the Plan (each as described above); none of these have been
granted to date.
The Board of Directors of the Company may at any time amend,
modify, suspend or terminate the Plan, but except in the case of adjustments in
connection with changes in shares due to stock dividends, stock splits or
combinations or exchanges of shares, or otherwise, the Board may not, without
further approval of the shareholders, (a) increase the maximum number of shares
for which stock options, stock appreciation rights, restricted shares or
performance shares may be granted under the Plan, or (b) change the class of
persons eligible to receive such grants under the Plan.
The market price per share of the Common Stock of the Company
underlying the stock options which can be granted under the Plan, as of May 7,
1998, was a High of 1 5/8 and a Low of 1 1/2.
As of May 1, 1998, there were approximately 127 full-time
employees of the Company, plus one non-employee member of the Board of
Directors, who are eligible to be selected for grants under the 1993 Stock
Incentive Plan in the discretion of the Stock Option and Compensation Committee
and the Board of Directors. Incentive stock options may be granted only to
employees of the Company, while non-qualified stock options and other grants
under the 1993 Stock Incentive Plan may be issued to directors and consultants,
as well as to employees of the Company. As of May 1, 1998, the total number of
options granted under the 1993 Stock Incentive Plan was 2,723,333 held by 28
individuals. See "Executive Compensation - Stock Option Plan and Stock Options"
for additional information as to outstanding grants of stock options under the
Plan.
The federal income tax consequences of the issuance and exercise
of stock options under the 1993 Stock Incentive Plan to the recipient and to the
Company may be summarized as follows:
If an option qualifies as an "incentive stock option" under the
Code, (i) there is no federal income tax on the recipient at the time of grant,
(ii) there is no federal income tax on the recipient at the time of exercise;
and (iii) federal capital gains tax is imposed on the recipient at the time of
sale of the shares acquired under the option, on the spread between the exercise
price and the sale price. The Company is not entitled to any deduction, nor does
it receive taxable income, on the grant or exercise of an incentive stock
option. To maintain qualification as an incentive stock option, the shares
acquired upon exercise of the option cannot be sold until the later to occur of
(a) two years from the date of grant and (b) one year from the date of exercise.
If the shares acquired upon exercise of the option are sold prior to these
holding periods, the options fail to qualify as incentive stock options.
Furthermore, to qualify as an incentive stock option, the holder must be an
employee of the Company or its subsidiaries for the entire period from grant to
within three (3) months before exercise.
If an option is a non-qualified option, or if it is an incentive
stock option which fails to maintain such status as required by the Code, (i)
the spread between the exercise price and the market price on the date of
exercise will be taxed for federal income tax purposes as ordinary income to the
recipient and deductible compensation expense to the
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<PAGE>
Company; and (ii) federal capital gains tax is imposed on the recipient at the
time of the sale of the shares acquired under the option, on the spread between
the market price on the date of exercise and the sale price.
The federal income tax rate applicable to capital gains resulting
from the sale of shares acquired under the option will depend on how long the
shares have been held by the recipient before the sale. The foregoing
description of federal income tax consequences does not purport to be a complete
discussion of all tax consequences to recipients of stock options under the 1993
Stock Incentive Plan; particular recipients of options may not qualify for tax
advantages in all circumstances, and each recipient must consult with his own
tax advisor to determine the specific tax consequences applicable to him.
Options for shares of Common Stock of the Company which have been
granted as of May 1, 1998 under the Aris 1993 Stock Incentive Plan to the
following persons are separately stated as follows:
<TABLE>
<CAPTION>
================================================================================================================
Option Grants Total
Option Grants Covered by Increase Number of Option
Covered by Initial to 3,500,000 Grants
1,200,000 Maximum Maximum Shares for Shares of
Individual or Group Granted Options for Common Shares Reserved Reserved under the Common Stock
Stock under the Aris 1993 Stock Incentive Plan under the Plan Plan Under the Plan
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles S. Ramat, Chairman, President and Chief 794,167 457,500 1,251,667
Executive Officer and Assistant Secretary of
Aris and Chairman, Chief Executive Officer and
Assistant Secretary of ECI and ECI Sportswear,
Member of Board of Directors and Nominee for
Re-Election as a Director (1)
- ----------------------------------------------------------------------------------------------------------------
Paul Spector, Senior Vice President, Chief 65,000 15,000 80,000
Financial Officer and Secretary
- ----------------------------------------------------------------------------------------------------------------
Vincent Caputo, Vice President, Assistant 8,333 -0- 8,333
Treasurer and Assistant Secretary
- ----------------------------------------------------------------------------------------------------------------
David N. Schreiber, Member of Board of 10,000 -0- 10,000
Directors and Nominee for Re-Election as a
Director
- ----------------------------------------------------------------------------------------------------------------
All Current Executive Officers as a Group (2) 867,500 472,500 1,340,000
- ----------------------------------------------------------------------------------------------------------------
All Current Directors who are Not Executive 10,000 -0- 10,000
Officers as a Group (3)
- ----------------------------------------------------------------------------------------------------------------
Athanasios Nastos (Recipient of five (5%) -0- 1,000,000 1,000,000
percent or more of stock options authorized
under the Plan; an employee of a subsidiary of
the Company but not an executive officer or
director of the Company)
- ----------------------------------------------------------------------------------------------------------------
Current Employees, including all current 248,333 1,125,000 1,373,333
officers who are not executive officers, as a
Group
================================================================================================================
</TABLE>
(1) The aggregate number of options granted to Mr. Ramat constitutes five (5%)
percent or more of stock options authorized under the 1993 Stock Incentive
Plan.
(2) Includes Charles S. Ramat, Paul Spector and Vincent Caputo.
(3) Includes David N. Schreiber. No options have ever been granted to John J.
Hannan, Edward M. Yorke or Robert A. Katz.
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<PAGE>
RATIFICATION OF GRANT OF STOCK OPTIONS TO
CHARLES S. RAMAT, CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER OF ARIS
On August 28, 1997, the Company entered into the Eighth
Amendment (the "Eighth Amendment") to its Senior Executive Employment Agreement
dated February 1, 1988, as previously amended, with Charles S. Ramat, Chairman,
President and Chief Executive Officer of Aris (the "Ramat Agreement"). The
Eighth Amendment, in summary, provides for the extension of Mr. Ramat's term of
employment from June 30, 1998 to June 30, 2001; for the elimination of the
existing provisions for an Aris level excess cash flow annual bonus earned for
fiscal year 1997 and thereafter; for the provision of annual cash bonuses based
on achievement of performance targets of Aris and its subsidiaries to be set
annually in advance of each fiscal year by mutual agreement; and for the grant
(subject to achievement of vesting requirements) on the date of the Eighth
Amendment of 750,000 options under Aris' 1993 Stock Incentive Plan to Mr. Ramat
and up to 150,000 options under such Plan to other employees of Aris and its
subsidiaries, all such options at an exercise price of $1.00 per share and
vesting eight (8) years from the date of grant, provided that the optionee has
been continuously employed by Aris or its subsidiaries during such period (See
"Executive Compensation - Employment Agreements; and "Executive Compensation -
Stock Option Plan and Stock Options").
All or a portion of the options granted pursuant to the Eighth
Amendment shall obtain accelerated vesting on the occurrence of the "Refinancing
Date" (as defined herein) on or before December 31, 2000 (depending on whether
the Refinancing Date occurs during fiscal years 1998, 1999 or 2000). The
Refinancing Date shall be the date upon which Aris' debt obligations to Heller
Financial, Inc. ("Heller"), BNY Financial Corporation ("BNY"), and AIF-II, L.P.
(an affiliate of Apollo Advisors, L.P. and Apollo Aris Partners, L.P.,
"AIF-II"), pursuant to their respective secured note agreements with Aris dated
June 30, 1993, each as amended, are fully paid and satisfied in cash. In the
event that the Refinancing Date occurs during calendar year 1998, all 750,000 of
such options granted to Mr. Ramat will obtain accelerated vesting. In the event
that the Refinancing Date occurs during calendar year 1999, 500,000 of such
options granted to Mr. Ramat will obtain accelerated vesting. In the event that
the Refinancing Date occurs during calendar year 2000, 250,000 of such options
granted to Mr. Ramat will obtain accelerated vesting. In the event that the
Refinancing Date occurs on or before December 31, 2000, all of such options
granted to the other employees of Aris or its subsidiaries will obtain
accelerated vesting. In the event that the Refinancing Date occurs during
calendar year 2001 or thereafter, none of such options granted to Mr. Ramat or
the other employees of Aris or its subsidiaries will obtain accelerated vesting.
The Refinancing Date has not occurred and none of such options granted to Mr.
Ramat or other employees have vested.
On the date of the Eighth Amendment (August 28, 1997), the
principal amount of Aris' debt obligations (inclusive of accrued interest
through January 31, 1998 to be paid in kind and added to principal) were
$1,000,000 to Heller, $8,042,000 to BNY and $10,002,000 to Apollo, for an
aggregate of $19,044,000. On January 29, 1998, the Company repaid in full its
debt obligations to Heller, leaving an aggregate of $18,029,000 of debt
obligations remaining to BNY and Apollo.
The Eighth Amendment provides that all options which obtain
accelerated vesting as described above shall vest as follows: (i) one-third on
the later to occur of the Refinancing Date and the first anniversary of the date
of grant; (ii) one-third on the later to occur of the Refinancing Date and the
second anniversary of the date of grant; and (iii) one-third on the later to
occur of the Refinancing Date and the third anniversary of the date of grant. By
way of example, if the Refinancing Date occurred on November 1, 1999, 500,000 of
such options granted to Mr. Ramat would obtain accelerated vesting, of which
333,333 would vest on the Refinancing Date on November 1, 1999(the later to
occur of the Refinancing Date and the first and second anniversaries of the date
of grant), and the balance of 166,667 would vest on August 28, 2000(the later to
occur of the Refinancing Date and the third anniversary of the date of grant).
The exercise price of $1.00 per share reflects the "market price"
on the date of grant of such options, August 28, 1997, which has been selected
as the date upon which Aris' Stock Option and Compensation Committee initially
determined to grant such options.
The Stock Option and Compensation Committee of the Board of
Directors determined the terms and conditions of the grant of stock options to
Mr. Ramat pursuant to the Eighth Amendment, which was then ratified by the full
Board of Directors of the Company. In making this determination, the Stock
Option and Compensation Committee and the full Board of Directors noted that Mr.
Ramat, as President of Aris since 1986, as Chairman and CEO of Aris
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<PAGE>
since 1991, as Chairman and CEO of Europe Craft Imports, Inc, Aris' largest
operating subsidiary, since December, 1995, and as Chairman and CEO of ECI
Sportswear, Inc. since its acquisition of the assets of Davco Industries in
July, 1997, has orchestrated and managed Aris' development and operation, and in
their view, was indispensable to the continued success of Aris. Therefore, Aris
had a strong interest in obtaining a renewal and extension of Mr. Ramat's
Employment Agreement, the current term of which would have expired on June 30,
1998, and Aris' Stock Option and Compensation Committee believed that
appropriate incentive compensation should be provided to induce Mr. Ramat to
agree to such extension, and furthermore, that the use of stock options as a
primary component of his compensation package enables a direct tie to the
financial performance of Aris during Mr. Ramat's extended employment term. The
other components of compensation in the Eighth Amendment - base salary at the
same rate as in effect with cost of living increases, and annual cash bonuses
based on achievement of performance targets determined annually - are
continuations of what was already the Ramat Agreement.
Mr. Ramat's options were granted to him pursuant to the Eighth
Amendment in consideration for, among other things, his consent to the extension
of the term of the Ramat Agreement for three(3) additional years through June
30, 2001, and his agreement to eliminate the Aris-level excess cash flow annual
bonus which he otherwise would have earned for fiscal years commencing January
1, 1997. By entering into the Eighth Amendment, Mr. Ramat "gave up" several
components of compensation from Aris, as follows:
* The Aris-level annual bonus based on a percentage of excess cash flow
of Aris, which had been in Mr. Ramat's Employment Agreement since
1988, was eliminated for fiscal years starting in 1997.
* Mr. Ramat will not be paid a success fee for orchestrating,
negotiating and implementing the refinancing of the Heller, BNY and
AIF-II debt, which is a condition to the vesting and exercisability of
the options granted under the Eighth Amendment. Such a refinancing is
likely to require substantial efforts by Mr. Ramat. At the time of the
grant of options to Mr. Ramat under the Eighth Amendment, Aris had
three separate debt obligations, to Heller, BNY and AIF-II
respectively. Mr. Ramat was able to implement the Company's repayment
of all remaining debt obligations to Heller on January 29, 1998 out of
the Company's internally generated funds due to its successful
operating results during the 1997 fiscal year. Both remaining
components of Aris level debt (to BNY and AIF-II) would have to be
simultaneously refinanced, since the terms of the such debt require
pro-rata payments to both parties if there is any prepayment of one of
the debtholders.
* Mr. Ramat will not be paid a success fee for Aris' acquisition of
Davco Industries, Inc. on July 15, 1997, even though he located the
target company and structured and negotiated the transaction on terms
which enabled Aris to use its stock for the purchase price (and
thereby avoid significant acquisition debt). In effect, Mr. Ramat
performed the functions that an investment banker to Aris would
otherwise have performed. Aris did not utilize, and saved the fees
which would otherwise have been paid to, a financial
advisor/investment banker for this transaction.
* Mr. Ramat will not be paid a success fee for orchestrating,
negotiating and implementing on September 12, 1997 the amendments to
Aris' note agreements with BNY and Apollo which enabled the payment
in-kind of interest under such debt obligations to BNY of $1,042,000
accrued during the period February 1, 1996 through January 31, 1998
and to AIF-II of $2,502,000 accrued during the period November 1, 1995
through January 31, 1998 and the deferral of such payments in cash
until November 3, 2002 and the rescheduling over five years of a
principal payment of $300,000 to BNY otherwise due on November 3,
1997. Such amendments, achieved under Mr. Ramat's direction,
significantly improved Aris' liquidity position, and had such
amendments not been achieved, the Company might have been in default
of its loan obligations to BNY, AIF-II and Heller.
* Mr. Ramat's base salary is not being increased (other than contractual
Consumer Price Index cost of living adjustments), even though he
serves as CEO at the Aris corporate level and at Aris' two operating
subsidiaries, Europe Craft Imports, Inc., and ECI Sportswear, Inc.,
where he is intensively involved in day to day operations.
The refinancing of Aris' debt to Heller, BNY and AIF-II should
benefit Aris, and not just AIF-II and such other lenders. The Aris level debt to
AIF-II, BNY and Heller is the historical legacy of debt incurred in the 1980s by
Aris as well as the investment to enable the Aris' 1993 Plan of Reorganization.
At this point, such existing debt is not providing proceeds for Aris' corporate
expansion or other corporate purposes, but is a substantial burden on Aris
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<PAGE>
since the significant portion of Aris' net cash flow upstreamed from its
existing operating subsidiaries is needed to service such debt. The need to
service the existing Aris level debt and upstream most subsidiary income from
its existing subsidiaries reduces flexibility at the subsidiary level. The
AIF-II debt, in particular, is at the relatively high interest rate of 13% per
annum. A refinancing of such Aris level debt, possibly in a larger amount with
more extended payment schedules, might enable Aris to obtain proceeds for
acquisitions, funding of marketing programs, and other corporate and operating
subsidiary development. Furthermore, a refinancing of the Aris level debt (at
the time of the Eighth Amendment, held by three different parties, and now held
by two remaining parties, with cross- default provisions, conflicting
restrictions on payment and prepayment, and conflicting interests), could lead
to a consolidation into a single class of debt enabling much more effective
management of Aris' finances. The Eighth Amendment provides for the accelerated
vesting of all or a portion of the options granted to Mr. Ramat depending on
whether the Refinancing Date occurs in calendar years 1998, 1999 or 2000, such
that there is a direct impact on Mr. Ramat of the timing of Aris' ability to
implement such refinancing and the success of Mr. Ramat's effort in this regard.
Paul Spector, Senior Vice President, Chief Financial Officer, and
Secretary of the Company, was granted, on August 28, 1997, 15,000 of the options
that were allocated on such date to employees of Aris and its subsidiaries other
than Mr. Ramat.
THE BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR"
THE RATIFICATION OF THE GRANT OF 750,000 OPTIONS UNDER THE ARIS 1993 STOCK
INCENTIVE PLAN TO CHARLES S. RAMAT, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF ARIS.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal of a stockholder to be presented at the Annual
Meeting of Stockholders in 1999 must be received by the Secretary of Aris at its
principal offices, prior to 5:00 p.m., New York City time, on January 15, 1999,
in order to be considered for inclusion in s 1999 proxy materials. Any such
proposal must be in writing and signed by the stockholder.
OTHER MATTERS
Management knows of no other matters that will be presented at
the Annual Meeting. If any other matters arise at the Annual Meeting, it is
intended that the shares represented by the proxies in the accompanying form
will be voted in accordance with the judgment of the persons named in the proxy.
Aris' Annual Report on Form 10-K Report for the fiscal year ended
December 31, 1997 as filed with the SEC is attached hereto as Aris' Annual
Report to Stockholders for such fiscal year. Stockholders may receive, without
charge, an additional copy of such report by writing to Secretary, Aris
Industries, Inc., 475 Fifth Avenue, New York, New York 10017.
By Order of the Board of Directors,
Paul Spector
Secretary
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EXHIBIT I
ARIS INDUSTRIES, INC.
1993 STOCK INCENTIVE PLAN
As Amended Through April 6, 1998
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TABLE OF CONTENTS
PAGE
----
ARTICLE I. GENERAL .................................................. I-1
1.1 Purpose .................................................. I-1
1.2 Administration ........................................... I-1
1.3 Persons Eligible for Awards .............................. I-1
1.4 Types of Awards Under Plan ............................... I-1
1.5 Shares Available for Awards .............................. I-2
1.6 Definitions of Certain Terms ............................. I-2
ARTICLE II. AWARDS UNDER THE PLAN .................................... I-3
2.1 Agreements Evidencing Awards ............................. I-3
2.2 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights .................... I-3
2.3 Exercise of Options and Stock Appreciation Rights ........ I-4
2.4 Termination of Employment; Death ......................... I-5
2.5 Grant of Restricted Stock ................................ I-6
2.6 Grant of Performance Shares .............................. I-6
ARTICLE III. MISCELLANEOUS ............................................ I-7
3.1 Amendment of the Plan; Modification of Awards ............ I-7
3.2 Restrictions ............................................. I-7
3.3 Nonassignability ......................................... I-7
3.4 Requirement of Notification of Election Under
Section 83(b) of the Code ............................... I-7
3.5 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code ............. I-8
3.6 Withholding Taxes ........................................ I-8
3.7 Change in Control ........................................ I-8
3.8 Right of Discharge Reserved .............................. I-9
3.9 Nature of Payments ....................................... I-9
3.10 Non-Uniform Determinations ............................... I-9
3.11 Other Payments or Awards ................................. I-9
3.12 Section Headings ......................................... I-9
3.13 Effective Date and Term of Plan .......................... I-9
3.14 Governing Law ............................................ I-10
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ARTICLE I.
GENERAL
1.1 Purpose
The purpose of Aris Industries, Inc. 1993 Stock Incentive Plan (the "Plan")
is to provide for employees and directors of, and consultants to, Aris
Industries, Inc. (the "Company") and its subsidiaries (the Company and its
subsidiaries being referred to herein as the "Employers") an incentive (a) to
enter into and remain in the service of the Employers, (b) to enhance the
long-term performance of the Employers, and (c) to acquire a proprietary
interest in the success of the Employers.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the
Compensation and Stock Option Committee (the "Committee") of the board of
directors of the Company (the "Board"), which shall consist of not less than
three directors and to which the Board shall grant power to authorize the
issuance of the Company's capital stock pursuant to awards granted under the
Plan. The members of the Committee shall be appointed by, and serve at the
pleasure of, the Board. To the extent required for transactions under the Plan
to qualify for the exemptions available under Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), no
person may serve on the Committee if, during the year preceding such service,
such person was granted or awarded equity securities of the Company (including
options to acquire such securities) under the Plan or any other plan of the
Company or any affiliate thereof.
1.2.2 The Committee shall have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2. 1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority of
its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.5 Notwithstanding anything to the contrary contained herein: (a) until
the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, resolve to administer the Plan. In either of the
foregoing events, the term "Committee" as used herein shall be deemed to mean
the Board.
1.3 Persons Eligible for Awards
1.3.1 Awards under the Plan may be made to such employees and directors of
the Employers and to such consultants to the Employers (collectively, "key
persons") as the Committee shall in its sole discretion select.
1.3.2 The Committee may grant awards under the Plan in substitution for
stock based awards held by employees of another corporation who become employees
of an Employer as the result of a merger or consolidation of such other
corporation with such Employer, or of the acquisition by such Employer of
property or stock of such other corporation. Such substitute awards shall be
granted on such terms and conditions as the Committee deems appropriate.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) nonqualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, and (f) performance shares,
all as more fully set forth in Article II. The term "award" means any of the
foregoing. No incentive stock option may be granted to a person who is not an
employee of an Employer on the date of grant.
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1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the Company, par value
$0.01 per share ("Common Stock"), with respect to which awards may be granted
pursuant to the Plan shall be 3,500,000 shares. Such shares may be authorized
but unissued Common Stock or authorized and issued Common Stock held in the
Company's treasury or acquired by the Company for the purposes of the Plan. The
Committee may direct that any stock certificate evidencing shares issued
pursuant to the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares pursuant to the Plan.
1.5.2 If there is any change in the outstanding shares of Common Stock by
reason of a stock dividend or distribution, stock split-up, recapitalization,
combination or exchange of shares, then (a) the number of shares available for
issuance both in the aggregate and under each outstanding award shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in the total number of shares of Common Stock outstanding, and (b)
the purchase price per share under outstanding awards shall be proportionately
reduced in the case of an increase in the number of shares and shall be
proportionately increased in the case of a reduction in the number of shares. If
the Company pays an extraordinary dividend in cash or property, or there occurs
any merger, consolidation or other event affecting the Common Stock, the number
of shares of Common Stock available for issuance both in the aggregate and under
each outstanding award, and the purchase price per share under outstanding
awards, shall be equitably adjusted by the Committee. After any adjustment made
pursuant to this Section 1.5.2, the number of shares subject to each outstanding
award shall be rounded to the nearest whole number.
1.5.3 The following shares of Common Stock shall again become available for
awards under the Plan: any shares subject to an award under the Plan that remain
unissued upon the cancellation or termination of such award for any reason
whatsoever; any shares of restricted stock forfeited pursuant to Section 2.5.7,
provided that any dividends paid on such shares are also forfeited pursuant to
Section 2.5.7; and any shares in respect of which a stock appreciation right is
settled for cash. Except as provided in this Section 1.5 and in Section 2.2.8,
there shall be no limit on the number or the value of the shares of Common Stock
issuable to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The termination of a grantee's employment shall be deemed to be a
dismissal for "Cause" if the Committee determines that it is based on any of the
following occurrences that is directly harmful to the business or reputation of
the Company: the grantee's conviction of a felony or failure to contest the
prosecution of a felony, or the grantee's proven fraud or defalcation; provided,
however, that in making any such determination, the Committee shall afford the
grantee an opportunity to be heard by the Committee.
1.6.2 The "Fair Market Value" of a share of Common Stock on any day shall
be determined as follows:
(a) If the principal market for the Common Stock (the "Market") is a
national securities exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market, the last
sale price or, if no reported sales take place on the applicable date, the
average of the high bid and low asked price of Common Stock as reported for
such Market on such date or, if no such quotation is made on such date, on
the next preceding day on which there were quotations, provided that such
quotations shall have been made within the ten (10) business days preceding
the applicable date;
(b) If the Market is the NASDAQ National List, the NASDAQ Supplemental
List or another market, the average of the high bid and low asked price for
Common Stock on the applicable date, or, if no such quotations shall have
been made on such date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made within the
ten (10) business days preceding the applicable date; or
(c) In the event that neither paragraph (a) nor (b) shall apply, the
Fair Market Value of a share of Common Stock on any day shall be reasonably
determined by the Committee.
1.6.3 The term "incentive stock option" means an option that is intended to
qualify for special federal income tax treatment pursuant to sections 421 and
422 of the Internal Revenue Code of 1986 (the "Code"), as now constituted or
subsequently amended, or pursuant to a successor provision of the Code, and
which is so designated in the applicable Plan Agreement. Any option that is not
specifically designated as an incentive stock option shall under no
circumstances be considered an incentive stock option. Any option that is not an
incentive stock option is referred to herein as a "nonqualified stock option."
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<PAGE>
1.6.4 The term "employment" means, in the case of a grantee of an award
under the Plan who is not an employee of an Employer, the grantee's association
with an Employer as a director, consultant or otherwise.
1.6.5 A grantee who is an employee shall be deemed to have a "termination
of employment" upon ceasing to be employed by all Employers or by a corporation
assuming awards in a transaction to which section 425(a) of the Code applies.
The Committee may in its discretion determine (a) whether any leave of absence
constitutes a termination of employment for purposes of the Plan, (b) the
impact, if any, of any such leave of absence on awards theretofore made under
the Plan, and (c) when a change in a non-employee's association with an Employer
constitutes a termination of employment for purposes of the Plan. In the event
that the termination of a grantee's employment is a dismissal for Cause, the
Committee may deem the date of termination to be the date of the action that
constitutes Cause.
1.6.6 The terms "parent corporation" and "subsidiary corporation" have the
meanings given them in section 425(e) and (f) of the Code, respectively.
ARTICLE II.
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan shall be evidenced by a written agreement
("Plan Agreement") which shall contain such provisions as the Committee may in
its sole discretion deem necessary or desirable. By accepting an award pursuant
to the Plan, a grantee thereby agrees that the award shall be subject to all of
the terms and provisions of the Plan and the applicable Plan Agreement.
2.2 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent
Rights
2.2.1 The Committee may grant incentive stock options and nonqualified
stock options (collectively, "options") to purchase shares of Common Stock from
the Company, to such key persons, and in such amounts and subject to such terms
and conditions, as the Committee shall determine in its sole discretion, subject
to the provisions of the Plan.
2.2.2 The Committee may grant stock appreciation rights to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall determine in its sole discretion, subject to the provisions of
the Plan. The terms of a stock appreciation right may provide that it shall be
automatically exercised for a cash payment upon the happening of a specified
event that is outside the control of the grantee, and that it shall not be
exercisable otherwise. Stock appreciation rights may be granted in connection
with all or any part of, or independently of, any option granted under the Plan.
A stock appreciation right granted in connection with a nonqualified stock
option may be granted at or after the time of grant of such option. A stock
appreciation right granted in connection with an incentive stock option may be
granted only at the time of grant of such option.
2.2.3 The grantee of a stock appreciation right shall have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to receive
from the Company an amount equal to (a) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise of the stock appreciation right
over (b) the Fair Market Value of a share of Common Stock on the date of grant
(or over the option exercise price if the stock appreciation right is granted in
connection with an option), multiplied by (c) the number of shares with respect
to which the stock appreciation right is exercised. Payment upon exercise of a
stock appreciation right shall be in cash or in shares of Common Stock (valued
at their Fair Market Value on the date of exercise of the stock appreciation
right) or both, all as the Committee shall determine in its sole discretion.
Upon the exercise of a stock appreciation right granted in connection with an
option, the number of shares subject to the option shall be reduced by the
number of shares with respect to which the stock appreciation right is
exercised. Upon the exercise of an option in connection with which a stock
appreciation right has been granted, the number of shares subject to the stock
appreciation right shall be reduced by the number of shares with respect to
which the option is exercised.
2.2.4 Each Plan Agreement with respect to an option shall set forth the
amount (the "option exercise price") payable by the grantee to the Company upon
exercise of the option evidenced thereby. The option exercise price per share
shall be determined by the Committee in its sole discretion; provided, however,
that the option exercise price of
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an incentive stock option shall be at least 100% of the Fair Market Value of a
share of Common Stock on the date the option is granted, and provided further
that in no event shall the option exercise price be less than the par value of a
share of Common Stock.
2.2.5 Each Plan Agreement with respect to an option or stock appreciation
right shall set forth the periods during which the award evidenced thereby shall
be exercisable, whether in whole or in part. Such periods shall be determined by
the Committee in its sole discretion; provided, however, that no incentive stock
option (or a stock appreciation right granted in connection with an incentive
stock option) shall be exercisable more than 10 years after the date of grant,
and provided further that except as and to the extent that the Committee may
otherwise provide pursuant to Section 3.1.3 or 3.7, no option or stock
appreciation right shall be exercisable prior to the first anniversary of the
date of grant.
2.2.6 The Committee may in its sole discretion include in any Plan
Agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.3.5(b), delivers shares of Common Stock in partial or full
payment of the exercise price of the original option. The additional option
shall be for a number of shares of Common Stock equal to the number thus
delivered, shall have an exercise price equal to the Fair Market Value of a
share of Common Stock on the date of exercise of the original option, and shall
have an expiration date no later than the expiration date of the original
option. In the event that a Plan Agreement provides for the grant of an
additional option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.3.5(b) in payment of such exercise price shall have been held for at
least six months.
2.2.7 The Committee may in its sole discretion include in any Plan
Agreement with respect to an option, stock appreciation right or performance
shares a dividend equivalent right entitling the grantee to receive amounts
equal to the ordinary dividends that would be paid, during the time such award
is outstanding and unexercised, on the shares of Common Stock covered by such
award if such shares were then outstanding. In the event such a provision is
included in a Plan Agreement, the Committee shall determine whether such
payments shall be made in cash or in shares of Common Stock, whether they shall
be conditioned upon the exercise of the award to which they relate, the time or
times at which they shall be made, and such other terms and conditions as the
Committee shall deem appropriate.
2.2.8 To the extent that the aggregate Fair Market Value (determined as of
the time the option is granted) of the stock with respect to which incentive
stock options are first exercisable by any employee during any calendar year
shall exceed $100,000, or such higher amount as may be permitted from time to
time under section 422 of the Code, such options shall be treated as
nonqualified stock options. In applying this provision, there shall be taken
into account solely incentive stock options granted after December 31, 1986 to
the employee under this Plan and under all other plans of the Company and any
subsidiary thereof.
2.2.9 Notwithstanding the provisions of Sections 2.2.4 and 2.2.5, an
incentive stock option may not be granted under the Plan to an individual who,
at the time the option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of his employer corporation
or of its parent or subsidiary corporations (as such ownership may be determined
for purposes of section 422(b)(6) of the Code) unless (a) at the time such
incentive stock option is granted the option exercise price is at least 110% of
the Fair Market Value of the shares subject thereto and (b) the incentive stock
option by its terms is not exercisable after the expiration of 5 years from the
date it is granted.
2.3 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or stock
appreciation right granted under the Plan shall be exercisable as follows:
2.3.1 Unless the Committee in its discretion provides otherwise in the
applicable Plan Agreement, an option or stock appreciation right shall become
exercisable in three substantially equal installments, the first of which shall
become exercisable on the first anniversary of the date of grant and the
remaining two of which shall become exercisable, respectively, on the second and
third anniversaries of the date of grant.
2.3.2 Unless the Committee in its discretion provides otherwise in the
applicable Plan Agreement, once an installment becomes exercisable, it shall
remain exercisable until expiration, cancellation or termination of the award.
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2.3.3 Unless the Committee in its discretion provides otherwise in the
applicable Plan Agreement, an option or stock appreciation right may be
exercised from time to time as to all or part of the shares as to which such
award is then exercisable. A stock appreciation right granted in connection with
an option may be exercised at any time when, and to the same extent that, the
related option may be exercised.
2.3.4 An option or stock appreciation right shall be exercised by the
filing of a written notice with the Company, on such form and in such manner as
the Committee shall in its sole discretion prescribe. In the case of a grantee
of a stock appreciation right whose transactions in Common Stock are subject to
Section 16(b) of the 1934 Act, an election to exercise the stock appreciation
right in whole or in part shall, to the extent required to conform to applicable
interpretations of Rule 16b-3, occur no sooner than six months after the grant
thereof, and shall be made irrevocably at least six months prior to such
exercise unless both the election and the exercise are made in a single "window
period" of 10 business days beginning on the third day following release of the
Company's quarterly or annual summary statement of sales and earnings.
2.3.5 Any written notice of exercise of an option shall be accompanied by
payment for the shares being purchased. Such payment shall be made: (a) by
certified or official bank check (or the equivalent thereof acceptable to the
Company) for the full option exercise price; or (b) with the consent of the
Committee, by delivery of shares of Common Stock having a Fair Market Value
(determined as of the exercise date) equal to all or part of the option exercise
price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by
law, by such other provision as the Committee may from time to time prescribe,
including, without limitation, by a loan from the Company on such terms as the
Committee shall determine.
2.3.6 Promptly after receiving payment of the full option exercise price,
or after receiving notice of the exercise of a stock appreciation right for
which payment will be made partly or entirely in shares, the Company shall,
subject to the provisions of Section 3.2, deliver to the grantee or to such
other person as may then have the right to exercise the award, a certificate or
certificates for the shares of Common Stock for which the award has been
exercised. If the method of payment employed upon option exercise so requires,
and if applicable law permits, an optionee may direct the Company to deliver the
certificate(s) to the optionee's stockbroker.
2.3.7 No grantee of an option or stock appreciation right (or other person
having the right to exercise such award) shall have any of the rights of a
stockholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.2, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
2.4 Termination of Employment; Death
2.4.1 Except to the extent otherwise provided in Section 2.4.2 or 2.4.3 or
in the applicable Plan Agreement, all options and stock appreciation rights not
theretofore exercised shall terminate upon termination of the grantee's
employment for any reason (including death).
2.4.2 If a grantee's employment terminates for any reason other than death
or dismissal for Cause, the grantee may exercise any outstanding option or stock
appreciation right only on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within three
months after employment terminates but in no event after the expiration date of
the award as set forth in the Plan Agreement.
2.4.3 If a grantee dies while employed by an Employer, or after employment
termination but during the period in which the grantee's awards are exercisable
pursuant to Section 2.4.2, any outstanding option or stock appreciation right
shall be exercisable on the following terms and conditions: (a) exercise may be
made only to the extent that the grantee was entitled to exercise the award on
the date of death (taking into account any acceleration of exercisability by the
Committee acting pursuant to its authority under Section 3.1.3); and (b)
exercise must occur by the earlier of the first anniversary of the grantee's
death or the expiration date of the award. Any such exercise of an award
following a grantee's death shall be made only by the grantee's executor or
administrator, unless the grantee's will specifically disposes of such award, in
which case such exercise shall be made only by the recipient of such specific
disposition. If a grantee's personal representative or the recipient of a
specific disposition under the grantee's will shall be entitled to exercise any
award pursuant to the preceding sentence, such representative or recipient shall
be bound by all the terms
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and conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.2 and 3.7 hereof.
2.5 Grant of Restricted Stock
2.5.1 The Committee may grant restricted shares of Common Stock to such key
persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its sole discretion, subject to the provisions of
the Plan. Restricted stock awards may be made independently of or in connection
with any other award under the Plan. A grantee of a restricted stock award shall
have no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a Plan Agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.5.2 Promptly after a grantee accepts a restricted stock award, the
Company shall issue to the grantee a certificate or certificates for the shares
of Common Stock covered by the award. Upon the issuance of such certificate(s),
the grantee shall have the rights of a stockholder with respect to the
restricted stock, subject also to the nontransferability restrictions and
Company repurchase rights described in Sections 2.5.4 and 2.5.5, subject also in
the Committee's discretion
to a requirement that any dividends paid on such shares shall be held in escrow
until all restrictions on such shares have lapsed, and subject also to any other
restrictions and conditions contained in the applicable Plan Agreement.
2.5.3 Unless the Committee shall otherwise determine, any certificate
issued evidencing shares of restricted stock shall remain in the possession of
the Company until such shares are free of any restrictions specified in the
applicable Plan Agreement.
2.5.4 Shares of restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
in this Plan or the applicable Plan Agreement. The Committee at the time of
grant shall specify the date or dates (which may depend upon or be related to
the attainment of performance goals and other conditions) on which the
nontransferability of the restricted stock shall lapse.
2.5.5 During the 120 days following termination of the grantee's employment
for any reason, the Company shall have the right to require the return of any
shares to which restrictions on transferability apply, in exchange for which the
Company shall repay to the grantee (or the grantee's estate) any amount paid by
the grantee for such shares. In the event that the Company requires such a
return of shares, it shall also have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement
under which such dividends are held, or otherwise.
2.6 Grant of Performance Shares
2.6.1 The Committee may grant performance share awards to such key persons,
and in such amounts and subject to such terms and conditions, as the Committee
shall in its sole discretion determine, subject to the provisions of the Plan.
Such an award shall entitle the grantee to acquire shares of Common Stock, or to
be paid the value thereof in cash, as the Committee shall determine, if
specified performance goals are met. Performance shares may be awarded
independently of or in connection with any other award under the Plan. A grantee
shall have no rights with respect to a performance share award unless such
grantee accepts the award by executing a Plan Agreement at such time and in such
form as the Committee shall determine.
2.6.2 The grantee of a performance share award will have the rights of a
shareholder only as to shares for which a certificate has been issued pursuant
to the award and not with respect to any other shares subject to the award.
2.6.3 Except as may otherwise be provided by the Committee at anytime prior
to termination of employment, the rights of a grantee of a performance share
award shall automatically terminate upon the grantee's termination of employment
for any reason.
2.6.4 At the discretion of the Committee, the applicable Plan Agreement may
set out the procedures to be followed in exercising a performance share award or
it may provide that such exercise shall be made automatically after satisfaction
of the applicable performance goals.
2.6.5 Except as otherwise specified by the Committee, (a) a performance
share award granted in tandem with an option may be exercised only while the
option is exercisable, (b) the exercise of a performance share award granted in
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tandem with any other award shall reduce the number of shares subject to such
other award in the manner specified in the applicable Plan Agreement, and (c)
the exercise of any award granted in tandem with a performance share award shall
reduce the number of shares subject to the latter in the manner specified in the
applicable Plan Agreement.
ARTICLE III.
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue, revise or amend
the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee (or,
upon the grantee's death, the person having the right to exercise the award).
3.1.2 Shareholder approval shall be required with respect to any amendment
which: (a) increases the aggregate number of shares which may be issued pursuant
to incentive stock options or changes the class of employees eligible to receive
such options; or (b) materially increases the benefits under the Plan to persons
whose transactions in Common Stock are subject to Section 16(b) of the 1934 Act,
materially increases the number of shares which may be issued to such persons,
or materially modifies the eligibility requirements affecting such persons.
3.1.3 The Committee may amend any outstanding Plan Agreement, including,
without limitation, by amendment which would (a) accelerate the time or times at
which the award becomes unrestricted or may be exercised, or (b) waive or amend
any goals, restrictions or conditions set forth in the Agreement, or (c) extend
the scheduled expiration date of the award. However, any such amendment (other
than an amendment pursuant to Section 3.7.2) that materially impairs the rights
or materially increases the obligations of a grantee under an outstanding award
shall be made only with the consent of the grantee or the grantee's legal
representative (or, upon the grantee's death, the person having the right to
exercise the award).
3.2 Restrictions
3.2.1 If the Committee shall at anytime determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.2.2 The term "Consent" as used herein with respect to any Plan Action
means (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (b) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of a Plan Action by any governmental or other regulatory bodies.
3.3 Nonassignability
No award or right granted to any person under the Plan or under any Plan
Agreement shall be assignable or transferable other than by will or by the laws
of descent and distribution. All rights granted under the Plan or any Plan
Agreement shall be exercisable during the life of the grantee only by the
grantee or the grantee's legal representative.
3.4 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in section 83(b)), such grantee shall notify the Company
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Code section 83(b).
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3.5 Requirement of Notification Upon Disqualifying Disposition Under Section
421(b) of the Code
Each Plan Agreement with respect to an incentive stock option shall require
the grantee to notify the Company of any disposition of shares of Common Stock
issued pursuant to the exercise of such option under the circumstances described
in section 421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition.
3.6 Withholding Taxes
3.6.1 Whenever cash is to be paid pursuant to an award under the Plan, the
Company shall be entitled to deduct therefrom an amount sufficient in its
opinion to satisfy all federal, state and other governmental tax withholding
requirements related to such payment.
3.6.2 Whenever shares of Common Stock are to be delivered pursuant to an
award under the Plan, the Company shall be entitled to require as a condition of
delivery that the grantee remit to the Company an amount sufficient in the
opinion of the Company to satisfy all federal, state and other governmental tax
withholding requirements related thereto. With the approval of the Committee,
which it shall have sole discretion to grant, the grantee may satisfy the
foregoing condition by electing to have the Company withhold from delivery
shares having a value equal to the amount of tax to be withheld. Such shares
shall be valued at their Fair Market Value on the date as of which the amount of
tax to be withheld is determined (the "Tax Date"). Fractional share amounts
shall be settled in cash. Such a withholding election may be made with respect
to all or any portion of the shares to be delivered pursuant to an award. To the
extent required for such a withholding of stock to qualify for the exemption
available under Rule 16b-3, such an election by a grantee whose transactions in
Common Stock are subject to Section 16(b) of the 1934 Act shall be: (a) subject
to the approval of the Committee in its sole discretion; (b) irrevocable; (c)
made no sooner than six months after the grant of the award with respect to
which the election is made; and (d) made at least six months prior to the Tax
Date unless such withholding election is in connection with exercise of an
option and both the election and the exercise occur prior to the Tax Date in a
"window period" of 10 business days beginning on the third day following release
of the Company's quarterly or annual summary statement of sales and earnings.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "Change In Control" shall be
deemed to have occurred upon the happening of any of the following events: (a)
any "person," including a "group," as such terms are defined in Sections 13(d)
and 14(d) of the 1934 Act and the rules promulgated thereunder, becomes the
beneficial owner, directly or indirectly, whether by purchase or acquisition or
agreement to act in concert or otherwise, of 30% or more of the outstanding
shares of Common Stock of the Company and Apollo Related Accounts are
collectively the beneficial owner of less than 30% of such shares; (b) a cash
tender or exchange offer for 50% or more of the outstanding shares of Common
Stock of the Company is commenced other than by the Company; (c) the
shareholders of the Company approve an agreement to merge the company with or
consolidate it into another corporation such that the Company is not the
surviving entity, liquidate the Company, or sell all or substantially all of the
assets of the Company; or (d) two or more directors are elected to the Board
without having previously been nominated and approved (x) by the members of the
Board incumbent on the day immediately preceding such election or (y) by one or
more Apollo Related Accounts exercising rights of a majority shareholder under
the Certificate of Incorporation and/or By-laws of the Company. For purposes of
this Section 3.7. 1, "Apollo Related Accounts" are:
(i) Apollo Advisors, L.P. (a limited partnership the general partner
of which is Apollo Capital Management, Inc.) and its successors, and
(ii) any investment fund, investment amount or investment entity whose
investing manager or general partner, or any controlling principal thereof,
at the time this definition is applied, is Apollo Advisors, L.P. (or its
successors) or a person directly or indirectly controlling or controlled by
or under common control with Apollo Advisors, L.P. (or its successors),
provided that any investment in the Company's securities or acquisition of
control of the Company by such investment fund, investment account or
investment entity is made at the direction of Apollo Advisors, L.P. (or its
successors) or a person directly or indirectly controlling or controlled by
or under common control with Apollo Advisors, L.P. (or its successors).
For purposes of this definition, "control", when used with respect to any
person, means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have the
correlative meanings.
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3.7.2 Upon the happening of a Change in Control:
(a) notwithstanding any other provision of this Plan, any option or
stock appreciation right then outstanding whose date of grant was at least
one year prior to the date of the Change in Control shall become fully
vested and immediately exercisable;
(b) to the extent permitted by law, the Committee may, in its sole
discretion, amend any Plan Agreement in such manner as it deems
appropriate, including, without limitation, by amendments that advance the
dates upon which any or all outstanding shares of restricted stock shall
become free of restrictions or upon which any or all outstanding
performance share awards shall become payable, or that advance the dates
upon which any or all outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action referred to
in Section 3.7.2(b) may be made conditional upon the consummation of the
applicable Change in Control transaction.
3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any grantee
the right to continue in the employ of an Employer or affect any right which an
Employer may have to terminate such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of Common Stock
under the Plan shall be in consideration of services performed for one or more
Employers by the grantee.
3.9.2 All such grants and issuances shall constitute a special incentive
payment to the grantee and shall not be taken into account in computing the
amount of salary or compensation of the grantee for the purpose of determining
any benefits under any pension, retirement, profit-sharing, bonus, life
insurance or other benefit plan of any Employer or under any agreement between
an Employer and the grantee, unless such plan or agreement specifically provides
otherwise.
3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Plan agreements, as to (a) the
persons to receive awards under the Plan, (b) the terms and provisions of awards
under the Plan, and (c) the treatment of leaves of absence pursuant to Section
1.6.5.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict any Employer from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 Section Headings
The section headings contained herein are for the purpose of convenience
only and are not intended to define or limit the contents of said sections.
3.13 Effective Date and Term of Plan
3.13.1 The Company was the debtor and debtor in possession in a Chapter 11
proceeding before the United States Bankruptcy Court for the Southern District
of New York (Case No. 92B45993); the Plan was included as part of the Plan of
Reorganization of the Company submitted to such Court, and the Plan became
effective, and was deemed approved by the shareholders of the Company, on June
30, 1993, the Effective Date of such Plan of Reorganization.
3.13.2 Unless sooner terminated by the Board, the provisions of the Plan
respecting the grant of incentive stock options shall terminate on the tenth
anniversary of the date determined pursuant to Section 3.13.1., and no incentive
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stock option awards shall thereafter be made under the Plan. All such awards
made under the Plan prior to its termination shall remain in effect until such
awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
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ARIS INDUSTRIES, INC.
475 FIFTH AVENUE
NEW YORK, NEW YORK 10017
PROXY
The undersigned Stockholder hereby appoints Charles S. Ramat and Robert A.
Katz, and each or any of them, proxies for the undersigned, with full power of
substitution, to appear and vote all of the shares of stock of Aris Industries,
Inc., a New York corporation (the "Company"), which the undersigned would be
entitled to vote if personally present, and otherwise act with the same force
and effect as the undersigned, at the Annual Meeting of Stockholders of the
Company to be held at Chase Manhattan Bank, 270 Park Avenue, 11th Floor,
Conference Room "C", New York, New York on Thursday, July 9, 1998, 10:00 A.M.
and at any adjournments thereof, and to take action on the proposals set forth
below and any other business that may lawfully come before the meeting. Unless a
contrary direction is indicated, this proxy will be voted "FOR" the proposals
set forth below. If specific instructions are indicated, this proxy will be
voted in accordance therewith. In his discretion, each proxy is authorized to
vote upon such other business as may properly come before the meeting or any
adjournments or postponements thereof. The Board of Directors does not presently
know of any other matters coming before the meeting. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS SET FORTH BELOW. THIS PROXY IS BEING
SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby revokes any proxies heretofore given to vote or act
in respect of any shares of Stock of the Company and acknowledges receipt of the
Notice of Annual Meeting of Shareholders. This proxy is revocable; however, it
will remain valid until canceled by a writing delivered to the Secretary of Aris
Industries, Inc. The shares represented by this proxy will be voted as directed
by the Stockholder herein. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE VOTED "FOR" THE PROPOSALS SET FORTH BELOW.
-----------
SEE REVERSE
SIDE
-----------
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please mark your votes as in this example.
-----
X
-----
1. Election of Directors
FOR ALL NOMINEES LISTED AT RIGHT
(EXCEPT AS MARKED TO THE CONTRARY BELOW)
|_|
WITHHOLD AUTHORITY TO VOTE FOR ALL
NOMINEES LISTED AT RIGHT
|_|
NOMINEES:
Charles S. Ramat
John J. Hannan
Edward M. Yorke
Robert A. Katz
David N. Schreiber
INSTRUCTIONS: To withhold authority to vote
for any individual nomineee, write that nominee's
name in the space provided below:
- -------------------------------------------------
2. Ratification of the selection of Deloitte & Touch, LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998.
|_| For |_| Against |_| Abstain
3. Ratification of the amendment of the Aris Industries, Inc. 1993 Stock
Incentive Plan to increase the maximum shares reserved for grants and
awards under such Plan from 1,200,000 to 3,500,000 shares.
|_| For |_| Against |_| Abstain
4. Ratification of the grant of 750,000 options (subject to achievement of
vesting requirements) under the Aris 1993 Stock Incentive Plan to Charles
S. Ramat, Chairman, President and Chief Executive Officer of Aris.
|_| For |_| Against |_| Abstain
5. In the discretion of the proxies, upon all other matters coming before the
meeting.
SIGNATURE(S)_________________________________ DATED: ____________________, 1998
(NOTE: Please sign exactly as your names appear on the stock certificate, and
when signing as attorney, executor, administrator, trustee or guardian, give
full title as such. If the signer is a corporation, sign the full corporate
name by duly authorized officer.)
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