SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
February 26. 1999
Date of Report
(Date of earliest event reported)
ARIS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New York 1-4814 22-1715275
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
475 Fifth Avenue. New York. New York 10017
(Address of registrant's principal executive offices)
(212) 686-5050
(Registrant's telephone number, including area code)
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Items 2 and 5. Change of Control: Other Events.
On February 26, 1999, Aris Industries, Inc., a New York corporation (the
"Company"), The Simon Group, L.L.C., a New York limited liability company
("Simon") controlled by Arnold Simon, invested $20,000,000 into the Company in
exchange for 24,107,145 shares of common stock of the Company ("Common Stock")
and 2,093,790 shares of Series A Preferred Stock (which shares shall be
convertible into 20,937,900 shares of Common Stock) pursuant to the terms and
conditions of the Securities Purchase Agreement, dated as of February 26, 1999
(the "Purchase Agreement"), between the Company, Apollo Aris Partners, L.P., a
Delaware limited partnership ("AAP"), AIF-II, L.P., a Delaware limited
partnership ("AIF", and collectively with AAP, "Apollo"), Simon and Arnold
Simon. The Securities Purchase Agreement was signed and closed on the same date.
At the closing of the Purchase Agreement (the "Closing"), the Company
redeemed from AIF the Series B Junior Secured Note of the Company held by AIF
with a total outstanding balance of $10.7 million in exchange for $4,000,000 in
cash plus 5,892,856 shares of Common Stock and 512,113 shares of Series A
Preferred Stock (which shares shall be convertible into 5,121,130 shares of
Common Stock).
Following the Closing, Simon and Apollo will own approximately 63.4% and
23.7%, respectively, of the issued and outstanding Common Stock (including the
shares of Common Stock to be issued upon the conversion of the Series A
Preferred Stock).
Charles S. Ramat and Robert Katz will continue as directors of the Company
and four designees nominated by the Purchaser (Arnold Simon, Debra Simon, David
Fidlon and Howard Schneider) were elected by the Board, replacing David
Schreiber, Ed Yorke and John Hannan, who resigned as of the closing. The terms
of office of Debra Simon and Howard Schneider will commence on the expiration of
ten days from the mailing to the shareholders of the Company of an information
statement pursuant to Rule 14f-1 of the Securities and Exchange Commission,
which the Company intends to mail on or about March 3, 1999.
At the Closing, the Company, Simon, Apollo and Charles S. Ramat entered
into a Shareholders Agreement, pursuant to which, among other things, the
parties agreed to certain limitations on sales of the Common Stock and Series A
Preferred Stock held by such shareholders and to vote for the directors of the
Company nominated by the Investor, provided that such nominations must include
(A) one director designated by Apollo, so long as it continues to own a
specified number of shares, and (B) Charles S. Ramat, if at such time Mr. Ramat
is entitled, pursuant to an Employment Agreement with the Company, to be
nominated as a Director of the Company. The Company and such parties also
entered into an Equity Registration Rights Agreement, pursuant to which the
Company granted registration rights with respect to the Common Stock and Series
A Preferred Stock (and the Common Stock issuable upon the conversion of such
preferred stock) held by such shareholders.
Effective as of the Closing, Arnold Simon became Chairman and Chief
Executive Officer of the Company and Charles S. Ramat continued as President of
the Company.
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At the Closing, the Company and Charles S. Ramat entered into a Retention
Agreement setting forth further amendments to Mr. Ramat's Senior Executive
Employment Agreement with the Company.
For the terms and conditions of the Purchase Agreement, the Shareholders
Agreement, the Equity Registration Rights Agreement and the Retention Agreement
with Charles Ramat, reference is made to such documents attached hereto as
Exhibits 10.111-10.114. All statements made herein concerning the foregoing
agreements are qualified by reference to such Exhibits.
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) 10.111 Securities Purchase Agreement, dated as of February 26,
1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF-II, L.P., The Simon Group, L.L.C. and Arnold
Simon.
10.112 Shareholders Agreement, dated as of February 26, 1999,
between Aris Industries, Inc., Apollo Aris Partners, L.P.,
AIF-II, L.P.,The Simon Group, L.L.C. and Charles S. Ramat.
10.113 Equity Registration Rights Agreement, dated as of February
26, 1999, between Aris Industries, Inc., Apollo Aris
Partners, L.P., AIF-II, L.P., The Simon Group, L.L.C. and
Charles S. Ramat.
10.114 Retention Agreement dated as of February 26, 1999 by and
between Aris Industries, Inc. and Charles S. Ramat.
10.115 Aris Press Release dated February 26, 1999
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARIS INDUSTRIES, INC.
By: /s/ Paul Spector
----------------------------
Paul Spector
Senior Vice President and
Chief Financial Officer
Date: February 26, 1999
3
SECURITIES
PURCHASE
AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.................................................2
SECTION 1.1 Definitions.................................................2
ARTICLE II PURCHASE OF SECURITIES; PAYMENT OF SPECIFIED
INDEBTEDNESS................................................4
SECTION 2.1 Purchase of Securities; Redemption of Specified
Indebtedness; the Closing...................................4
ARTICLE IIII REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............5
SECTION 3.1 Corporate Existence and Power...............................5
SECTION 3.2 Subsidiaries................................................6
SECTION 3.3 Corporate Authority.........................................6
SECTION 3.4 Binding Effect..............................................6
SECTION 3.5 No Required Consents, etc...................................6
SECTION 3.6 No Conflicting Agreements, etc..............................6
SECTION 3.7 Litigation; No Violation of Government Orders or Laws.......7
SECTION 3.8 Capitalization..............................................7
SECTION 3.9 Capital Stock...............................................8
SECTION 3.10 SEC Documents...............................................8
SECTION 3.11 Material Agreements.........................................9
SECTION 3.12 Tax Matters................................................10
SECTION 3.13 Compliance.................................................12
SECTION 3.14 Offering Exemption.........................................12
SECTION 3.15 Employee Benefit Plans.....................................12
SECTION 3.16 Insurance..................................................14
SECTION 3.17 Intellectual Property and Related Contracts................15
SECTION 3.18 Absence of Undisclosed Liabilities.........................16
SECTION 3.19 Changes....................................................16
SECTION 3.20 Labor Matters..............................................17
SECTION 3.21 Environmental Matters......................................17
SECTION 3.22 Employment Agreements......................................17
SECTION 3.23 Change of Control Provisions...............................17
SECTION 3.24 State Takeover Statutes....................................18
SECTION 3.25 Brokers....................................................18
SECTION 3.26 Accounts Receivable........................................18
SECTION 3.27 Inventory..................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SIMON AND AIF............18
SECTION 4.1 Organization, Existence, Qualification and Authority
of Simon and AIF ..........................................18
SECTION 4.2 No Breach or Default.......................................19
SECTION 4.3 Purchase for Own Account...................................19
SECTION 4.4 Investor Sophistication....................................19
SECTION 4.5 Brokers....................................................20
SECTION 4.6 Ownership of AIF Note......................................20
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Page
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF APOLLO ARIS
PARTNERS, LP...............................................20
SECTION 5.1 Organization, Existence, Qualification and Authority
of AAP.....................................................20
SECTION 5.2 No Breach or Default.......................................20
SECTION 5.3 Ownership of Shares........................................20
ARTICLE VI ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE SIMON GROUP, L.L.C..................................21
SECTION 6.1 Control of Group; Simon Ownership..........................21
SECTION 6.2 Investor Sophistication....................................21
SECTION 6.3 Funding of Purchase Price..................................21
ARTICLE VII CONDITIONS PRECEDENT TO CLOSING............................21
SECTION 7.1 Conditions Precedent to Obligations of Simon and AIF.......21
SECTION 7.2 Conditions Precedent to Obligations of the Company.........25
ARTICLE VIII COVENANTS RELATING TO CONDUCT OF BUSINESS..................28
SECTION 8.1 Conduct of Businesses Prior to the Effective Time..........28
SECTION 8.2 Forbearance................................................28
ARTICLE IX ADDITIONAL AGREEMENTS......................................30
SECTION 9.1 Access to Information......................................30
SECTION 9.2 Legal Conditions to Transactions...........................32
SECTION 9.3 Further Assurances.........................................32
SECTION 9.4 Advice of Changes..........................................32
SECTION 9.5 Series A Preferred Stock Designation.......................32
SECTION 9.6 1999 Shareholders Meeting and Related Matters..............33
SECTION 9.7 Transaction Expenses.......................................33
SECTION 9.8 Standstill Provisions......................................34
SECTION 9.9 AIF Note Agreement and Debt Registration Rights
Agreement Termination......................................34
SECTION 9.10 Public Announcements.......................................34
SECTION 9.11 Transfer and Similar Taxes.................................34
SECTION 9.12 Closing Covenant...........................................34
SECTION 9.13 Obligations of Arnold Simon................................34
SECTION 9.14 Rule 14f-1 Compliance......................................35
SECTION 9.15 Directors and Officers Liability Insurance.................35
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Page
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ARTICLE X MISCELLANEOUS..............................................35
SECTION 10.1 Indemnification and Related Provisions.....................35
SECTION 10.2 Termination and Amendment..................................39
SECTION 10.3 Entire Agreement; Survival of Provisions...................40
SECTION 10.4 Communications.............................................41
SECTION 10.5 Execution in Counterparts..................................41
SECTION 10.6 Binding Effect; Assignment.................................41
SECTION 10.7 Governing Law..............................................41
SECTION 10.8 Severability of Provisions.................................41
SECTION 10.9 Headings...................................................41
SECTION 10.10 Waiver of Jury Trial.......................................41
SECTION 10.11 Absence of Third Party Beneficiary Rights..................42
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<PAGE>
INDEX OF EXHIBITS AND SCHEDULES TO
SECURITIES PURCHASE AGREEMENT
EXHIBITS
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Exhibit A - Certificate of Amendment designating Series A Preferred Stock
Exhibit B - New Shareholders Agreement
Exhibit C - New Equity Registration Rights Agreement
Exhibit D - Opinion of Herrick, Feinstein LLP
Exhibit E - Opinion of Shapiro, Forman & Allen, LLP
SCHEDULES
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Schedule 3.1 - Incorporation and Qualification
Schedule 3.2 - Subsidiaries
Schedule 3.5 - Required Consents and Approvals
Schedule 3.6 - Conflicting Agreements
Schedule 3.7 - Litigation
Schedule 3.8 - Capitalization; Stock Options
Schedule 3.10 - SEC Documents
Schedule 3.11 - Material Agreements
Schedule 3.12 - Tax Matters
Schedule 3.13 - Compliance with Law; Governmental Permits
Schedule 3.15 - Employee Benefit Plans
Schedule 3.16 - Insurance
Schedule 3.17 - Intellectual Property
Schedule 3.18 - Liabilities
Schedule 3.19 - Changes
Schedule 3.20 - Labor; Collective Bargaining
Schedule 3.22 - Employment Agreements
Schedule 3.23 - Employees - Change of Control
Schedule 3.25 - Brokers relating to the Company
Schedule 3.26 - Accounts Receivable
Schedule 3.27 - Inventory
Schedule 4.2A - Consents and Approvals relating to Simon
Schedule 4.2B - Consents and Approvals relating to AIF
Schedule 4.5A - Brokers relating to Simon
Schedule 4.5B - Brokers relating to AIF
Schedule 5.2 - Consents and Approvals relating to AAP
Schedule 6.3 - Simon Fund Account
Schedule 7.1 - Directors to be Appointed on the Closing Date
Schedule 8.2 - Exceptions to Conduct of Business and Forbearance
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of February 26, 1999 (the
"Agreement"), between Aris Industries, Inc., a New York corporation (the
"Company"), Apollo Aris Partners, L.P., a Delaware limited partnership ("AAP"),
AIF-II, L.P., a Delaware limited partnership ("AIF" and together with AAP,
"Apollo"), The Simon Group, L.L.C., a New York limited liability company
("Simon"), and Arnold Simon, individually ("Arnold Simon").
WHEREAS, AAP holds 5,804,820 shares of the Company's Common Stock, par
value $0.01 per share ("Common Stock");
WHEREAS, on June 30, 1993, the Company entered into a Series B Junior
Secured Note Agreement with AIF (the "AIF Note Agreement"), pursuant to which
AIF received a $7.5 million principal amount note with a final maturity date of
November 3, 2002 (the "AIF Note"), with the total of original principal,
interest paid in kind and added to principal, and accrued and unpaid interest
("Total Indebtedness") under the AIF Note, as at January 31, 1999 equal to
$10,657,999;
WHEREAS, Simon desires to purchase from the Company certain shares of Aris
Common Stock and the parties hereto desire to facilitate transactions whereby
Simon would make such equity investment in the Company and whereby the AIF Note,
including all accrued interest thereon, would be converted to equity in part and
exchanged in part for cash, all on the terms and conditions set forth herein;
WHEREAS, as of the date hereof the Company, Simon, AIF, AAP and Charles S.
Ramat ("Ramat"), President of the Company, are entering into a Shareholders
Agreement, a copy of which is attached hereto as Exhibit B, pursuant to which,
among other things, the parties thereto have agreed to (i) vote their shares of
Common Stock and Series A Preferred Stock (as defined herein) in the manner set
forth therein and (ii) to certain limitations on sales of such shares;
WHEREAS, Simon, AIF and AAP have agreed to vote their respective shares of
Common Stock in favor of the matters set forth in Section 9.6 hereof;
WHEREAS, it is intended that the following transactions would occur on the
Closing Date of this Agreement, in accordance with the terms and conditions set
forth herein:
(a) Simon will invest in the Company $20,000,000 in cash for a total of
45,045,045 shares of Common Stock and Common Stock Equivalents (as defined
herein), at a price of $0.444 per share of Common Stock (the "Simon Stock
Purchase");
(b) Thereafter, the AIF Note, together with accrued interest thereon, will
be redeemed by the Company in exchange for $4,000,000 in cash plus the issuance
to AIF of 11,013,986 shares of Common Stock and Common Stock Equivalents (with a
fair market value of $0.444 per share of Common Stock).
(c) To the extent that the shares of Common Stock to be issued to Simon and
AIF pursuant to this Agreement exceed the number of shares of Common Stock
authorized for issuance pursuant to the Certificate of Incorporation of the
Company in effect on the date hereof, shares of Series A Preferred Stock of the
Company, par value $0.01 per share ("Series A Preferred Stock"), will be issued
on the Closing Date to Simon and AIF pro-rata (such shares of Series A Preferred
<PAGE>
Stock will be mandatorily convertible into the applicable number of shares of
Common Stock to which Simon and AIF are respectively entitled upon the filing of
an amendment to the Certificate of Incorporation of the Company increasing
authorized common shares after approval of such amendment by the shareholders of
the Company).
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement, and unless the context
clearly requires a different meaning, the following terms have the meanings
indicated:
"Act" means the Securities Act of 1933, as amended, or any successor act or
statute regulating the transactions contemplated hereby that were formerly
regulated under the Act that may be enacted after the date hereof, and the rules
and regulations promulgated thereunder.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the 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 meanings correlative to the foregoing.
"Agreement" means this Agreement, as the same may be amended, supplemented
or modified in accordance with the terms hereof.
"Apollo" means AIF and AAP, collectively.
"Apollo Related Account" means Apollo Investment Fund, L.P., Apollo
Advisors, L.P. (a limited partnership whose general partner is Apollo Capital
Management, Inc.) or any investment fund, investment account or investment
entity whose investing manager, investment advisor or general partner, or any
principal thereof, is Apollo Advisors, L.P. or an Affiliate of Apollo Investment
Fund, L.P. or Apollo Advisors, L.P.
"Basic Agreements" means, collectively, this Agreement, the New
Shareholders Agreement, the New Equity Registration Rights Agreement, and all
other instruments, agreements and written contractual obligations executed
pursuant to or in connection with such agreements and documents.
"Certificates" means certificates or other instruments evidencing the
shares of Common Stock and the Series A Preferred Stock being purchased hereby.
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<PAGE>
"Closing" has the meaning provided therefor in Section 2.1 of this
Agreement.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Act.
"Common Stock" means the Common Stock, $.01 par value, of the Company.
"Common Stock Equivalents" means the number of shares of Common Stock which
a holder of shares of Series A Preferred Stock would receive upon the conversion
of such holder's shares of Series A Preferred Stock.
"Company" means Aris Industries, Inc., a New York corporation.
"GAAP" shall mean United States Generally Accepted Accounting Principles.
"New Equity Registration Rights Agreement" means the Equity Registration
Rights Agreement, substantially in the form of Exhibit C hereto, among Apollo,
Simon, Ramat and the Company, as the same may be amended, supplemented or
modified from time to time.
"New Shareholders Agreement" means the Shareholders Agreement,
substantially in the form of Exhibit B hereto, among Apollo, Simon, Ramat and
the Company, as the same may be amended, supplemented or modified from time to
time.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
unincorporated organization or government or other agency or political
subdivision thereof.
"Restated By-Laws" means the Restated By-Laws of the Company in effect on
the date hereof.
"Restated Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company in effect on the date hereof.
"Series A Preferred Stock" means the Series A Preferred Stock of the
Company, par value $.01 per share, which shares are automatically and
mandatorily convertible, upon the filing of an amendment to the Certificate of
Incorporation of the Company authorizing sufficient shares of Common Stock into
which such Series A Preferred Stock are convertible, into shares of Common Stock
at the rate of ten (10) shares of Common Stock for each Series A Preferred
Share, such that each share of Series A Preferred Stock is equal to ten (10)
Common Stock Equivalents, and having such rights, preferences and limitations as
are set forth in the Certificate of Amendment designating such series attached
as Exhibit A hereto.
"Significant Subsidiaries" shall mean Europe Craft Imports, Inc., a New
Jersey corporation ("ECI"), and its wholly-owned subsidiary, ECI Sportswear,
Inc., a New York corporation ("ECI Sportswear").
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<PAGE>
"Shares" shall mean the shares of Common Stock and Series A Preferred Stock
to be issued to Simon and AIF hereunder.
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the outstanding capital stock or equity interest having voting power
in ordinary circumstances to elect directors of such corporation or other entity
shall at the time be held, directly or indirectly, by the Company, by the
Company and any one or more Subsidiaries thereof or by one or more Subsidiaries
of the Company.
"Taxes" shall mean all taxes, charges, fees, duties, levies, or other
similar assessments imposed by any federal, state, local or foreign taxing
Governmental Authority, including, but not limited to, income, gross receipts,
excise, property, sales, gain, use, license, capital stock, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest or
penalties attributable thereto.
"Tax Return" shall mean any return, report or information return (including
any related or supporting information) required to be filed with any taxing
authority with respect to Taxes.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
PURCHASE OF SECURITIES; PAYMENT OF SPECIFIED INDEBTEDNESS
SECTION 2.1 Purchase of Securities; Redemption of Specified Indebtedness;
the Closing. Subject to the terms and conditions herein set forth,
(a) Simon Stock Purchase. At the Closing, the Company shall sell to Simon,
and Simon shall purchase from the Company an aggregate of 45,045,045 shares of
Common Stock and Common Stock Equivalents at a price of $0.444 per share, or an
aggregate purchase price of $20,000,000 (the "Simon Purchase Price"), with such
issuance to be comprised of 24,107,145 shares of Common Stock and 2,093,790
shares of Series A Preferred Stock (which shares of Series A Preferred Stock
shall be equivalent to 20,937,900 Common Stock Equivalents).
(b) Redemption of AIF Specified Indebtedness. At the Closing, the Company
shall redeem the AIF Note, including all of the accrued interest thereon, in
exchange for $4,000,000 in cash plus an aggregate of 11,013,986 shares of Common
Stock and Common Stock Equivalents, with such issuance of shares to be comprised
of 5,892,856 shares of Common Stock and 512,113 shares of Series A Preferred
Stock (which shares of Series A Preferred Stock shall be equivalent to 5,121,130
Common Stock Equivalents), with a fair market value of $0.444 per share of
Common Stock. AIF agrees that after such redemption of the AIF Note, the Company
shall have no further
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obligations to AIF with respect to the AIF Note or the Total Indebtedness. The
Company and AIF agree that the amount received by AIF in exchange for the AIF
Note shall be applied first towards principal on the AIF Note and then to
accrued and unpaid interest.
(c) The sale and purchase of Shares by Simon and the exchange of the AIF
Note will take place at a closing (the "Closing") at the offices of Herrick,
Feinstein LLP, 2 Park Avenue, New York, New York, within five (5) Business Days
after the satisfaction of all closing conditions set forth in Article VII below,
or such later date as the Company, Simon and AIF may mutually agree. The date on
which the Closing occurs is referred to herein as the "Closing Date".
On the Closing Date, Simon shall wire transfer an amount in cash equal to
the Simon Purchase Price to an account or accounts specified by the Company.
Delivery of the Shares to be purchased by Simon pursuant to this Agreement for
the Simon Purchase Price shall be made at the Closing by the Company delivering
to Simon Certificates for such Shares, registered in the name of Simon.
Delivery of Certificates for the Shares issued in respect of the exchange
of the AIF Note, registered in the name of AIF, shall be made at the Closing by
the Company, against surrender by AIF to the Company of the AIF Note, endorsed
in blank or in favor of the Company.
AIF and Simon acknowledge and agree that each Certificate shall be
imprinted with customary legends to reflect the applicability of Federal and
state securities laws limitations on the transfer of the Shares and the
limitations on the transfer thereof contained in the New Shareholders Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Simon that:
SECTION 3.1 Corporate Existence and Power. Each of the Company and its
Significant Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and is
duly qualified to do business as a foreign corporation in each additional
jurisdiction where the failure to so qualify would have a material adverse
effect on (i) the assets, liabilities, cash flows, financial condition, results
of operations, or business of the Company and its Subsidiaries taken as a whole
or (ii) the ability of the Company to consummate the transactions contemplated
hereby (collectively, a "Material Adverse Effect"). The jurisdiction of
incorporation of the Company and its Significant Subsidiaries and each
jurisdiction in which they are respectively qualified to do business as a
foreign corporation are set forth on Schedule 3.1 hereto. Each of the Company
and its Significant Subsidiaries has all requisite power and authority
(corporate and otherwise) to own its properties and to carry on its business as
now being conducted and is duly licensed or qualified and in good standing as a
foreign corporation in each jurisdiction in which it is required to be so
licensed or so qualified, and, in the case of the
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Company, to execute, deliver and perform its obligations under each Basic
Agreement to which it is a party and to consummate the respective transactions
contemplated hereby and thereby.
The Company has provided to Simon true, correct and complete copies of the
Articles of Incorporation and bylaws of the Company and the Significant
Subsidiaries, in each case as amended and as in effect on the date hereof, and
has previously made available to Simon the complete corporate minute books of
the Company and its Significant Subsidiaries.
SECTION 3.2 Subsidiaries. As of the date hereof, except as set forth on
Schedule 3.2 hereto (i) the Company does not have any equity or other ownership
interest (direct or indirect) , whether by means of share purchase, capital,
equity or similar contribution, loan, advance, time deposit or otherwise, in any
Person other than the Subsidiaries listed on Schedule 3.2 hereto, (ii) all
outstanding shares of capital stock of each such Subsidiary held by the Company
have been duly and validly issued and are fully paid and non-assessable, (iii)
the Company and each such Subsidiary own all of the issued and outstanding
capital stock of each of its Subsidiaries (except as noted on Schedule 3.2
hereto) and each has good title to all of the shares of capital stock it owns of
each of its Subsidiaries, free and clear in each case of any lien, claim, charge
or encumbrance, (iv) neither any of such shares nor any unissued or treasury
shares of capital stock of any such Subsidiary are subject to any option,
warrant, right to call, preemptive right, repurchase, put obligation or
commitment of any kind or character and (v) each Subsidiary is in good standing
and has paid all franchise and similar Taxes required to be paid prior to the
date hereof.
SECTION 3.3 Corporate Authority. The execution, delivery and performance by
the Company of each Basic Agreement and the issuance of the shares of Common
Stock and Series A Preferred Stock to Simon and AIF pursuant to this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company.
SECTION 3.4 Binding Effect. This Agreement has been, and each of the other
Basic Agreements to which the Company is a party will be as of the Closing Date,
duly executed and delivered by the Company, and (assuming due execution and
delivery by Simon, AIF and AAP), this Agreement constitutes, and each of the
other Basic Agreements to which the Company is a party, when executed and
delivered, will constitute, a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
SECTION 3.5 No Required Consents, etc. Other than in connection with
satisfaction of conditions precedent to the Closing Date and as set forth in
Schedule 3.5 hereto, and as provided in Section 9.6 hereof, no consent, approval
or authorization of or declaration, registration or filing with any governmental
body, office or agency or any nongovernmental Person, including, without
limitation, any creditor or shareholder of the Company or its Subsidiaries, is
required to be obtained or made by the Company or its Subsidiaries in connection
with the execution, delivery and performance of the Basic Agreements or the
transactions contemplated hereby or thereby or as a condition to the legality,
validity or enforceability of the Basic Agreements other than those which, if
not obtained or made, would not have a Material Adverse Effect.
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<PAGE>
SECTION 3.6 No Conflicting Agreements, etc. Except as set forth on Schedule
3.6 hereto, neither the execution and delivery of the Basic Agreements nor the
consummation hereof or thereof, or compliance with the terms and provisions
hereof or thereof, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute (or with notice or lapse of time
would constitute) a default under, or result in any violation of, or give rise
to any right of termination, cancellation or acceleration under, the certificate
of incorporation and by-laws (or similar organizational documents) of the
Company and its Significant Subsidiaries, any contract, agreement, mortgage,
bond, note, credit agreement, indenture, license, lease, instrument, order,
statute, law, rule or regulation to which the Company or any of its Subsidiaries
is subject or by which any of their respective businesses, properties or assets
may be bound, or result in the creation of any lien, claim, charge or
encumbrance (collectively, "Lien") on any properties or assets of the Company or
its Subsidiaries other than those which would not have a Material Adverse
Effect. The Shareholders Agreement dated June 30, 1993 between the Company,
Apollo and the Non-Apollo Subject Shareholders named therein will terminate on
the Closing Date in accordance with its terms due to the change of ownership of
the Company resulting from the purchase of Shares by Simon.
SECTION 3.7 Litigation; No Violation of Government Orders or Laws. Except
as set forth in Schedule 3.7 hereto, no actions, suits or proceedings are
pending or, to the knowledge of the Company, threatened nor is there any
investigation pending or, to the knowledge of the Company, threatened against or
affecting any of the Company or its Subsidiaries which seeks to enjoin, or
otherwise prevent the consummation of, any of the transactions contemplated by
the Basic Agreements or to recover any damages or obtain any relief as a result
of any of the transactions contemplated hereby in any court or before any
arbitrator of any kind or before or by any governmental body, office or agency
other than those which would not have a Material Adverse Effect. Except as set
forth in Schedule 3.7, there are no pending or, to the knowledge of the Company,
threatened investigations, by any Federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality
(each, a "Governmental Entity") with respect to the Company or any of its
Subsidiaries or with respect to the activities of any officer or director of the
Company in his capacity as such (an "Investigation"), other than Investigations
which, if the resolution thereof were adverse, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 3.7, (i) there are no actions or proceedings pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries before any court or before any administrative agency, whether
Federal, state, local or foreign, which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect, (ii) there are no
outstanding domestic or foreign judgments, decrees or orders against the Company
or any of its Subsidiaries that would reasonably be expected to have a Material
Adverse Effect, (iii) to the knowledge of the Company, neither the Company nor
any of its Subsidiaries is in violation of, and none of them has received any
claim or notice that it is in violation of, any Federal, state, local or foreign
laws, statutes, rules, regulations (collectively, "Laws") or orders promulgated
or judgments entered by any Governmental Entity, which violations would
reasonably be expected to have a Material Adverse Effect; and (iv) there are no
actions pending or, to the knowledge of the Company, threatened against the
directors or any director of the Company alleging a breach of such directors' or
director's fiduciary duties.
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SECTION 3.8 Capitalization. The Company's entire authorized capital stock
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock. On the date of this Agreement, prior to the consummation of the
transactions contemplated hereby, there are (a) 14,956,369 shares of Common
Stock issued and outstanding, (b) 2,403,178 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants and options referred to in
clauses (ii) and (iii) in the following sentence, (c) no shares reflected on the
books and records of the Company as treasury shares, and (d) no shares of
preferred stock issued or outstanding. All of the outstanding shares of Common
Stock are duly authorized and validly issued, fully paid, nonassessable and were
not issued in violation of any preemptive rights. Except for (i) the shares of
Common Stock and Series A Preferred Stock to be issued pursuant to this
Agreement, (ii) the 584,345 shares of Common Stock issuable upon exercise of the
Warrant granted to Heller Financial, Inc. on September 30, 1996 (the "Heller
Warrant"), (iii) the shares of Common Stock that may be issued pursuant to and
in accordance with the terms and conditions of the Aris Industries, Inc. 1993
Stock Incentive Plan (the "1993 Stock Incentive Plan") and stock options granted
prior to the date hereof thereunder, (iv) the shares of Common Stock that may be
issued pursuant to 1,000,000 stock options to be granted to Ramat, (v) any
rights of any party pursuant to the New Shareholders Agreement, and (vi) rights
set forth on Schedule 3.8 hereto, there will, on the Closing Date, be no
outstanding options, warrants, rights to subscribe to, calls or commitments
relating to, or securities or rights convertible into, or exercisable for,
shares of capital stock of the Company, or contracts, commitments or
arrangements obligating the Company to issue additional shares of its capital
stock or options, warrants or rights to purchase or acquire any shares of its
capital stock. The Company and its shareholders have authorized the 1993 Stock
Incentive Plan and the reservation of 3,500,000 shares of Common Stock for
grants and awards thereunder. The number of options granted and outstanding
under the 1993 Stock Incentive Plan and the holders thereof, as of the date of
this Agreement, are set forth on Schedule 3.8 hereto, all of which will, in
accordance with the terms of the 1993 Stock Incentive Plan, become vested and
exercisable as a result of the consummation of the transactions contemplated
hereby.
SECTION 3.9 Capital Stock. When issued, sold or converted, as applicable,
and delivered in accordance with this Agreement, the Common Stock and Series A
Preferred Stock issued hereunder will be duly authorized, validly issued and
outstanding, fully paid for and non-assessable, and not subject to preemptive or
any other similar rights of the stockholders of the Company or others.
SECTION 3.10 SEC Documents. (a) The Company has delivered to the Purchasers
true and complete copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (the "1997 Annual Report"); its Quarterly Report on Form
10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and September
30, 1998; its Proxy Statement dated June 1, 1998, and its Registration Statement
on Form S-8 dated September 15, 1998 (collectively, "SEC Documents"). The SEC
Documents constitute all the documents that the Company was required to or did
file with the Commission since January 1, 1998. Except as disclosed in Schedule
3.10, each of the SEC Documents has been duly filed, and when filed was in
substantial compliance with the requirements of the applicable form of the
Commission.
(b) Each of the SEC Documents (other than the financial statements or
schedules included therein) was complete and correct in all material respects as
of its date and each of the SEC
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Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances in which
made, not misleading. The audited financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the Commission
with respect thereto and have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as at the date thereof and the
consolidated results of their operations and cash flows for the periods then
ended. The unaudited financial statements included in any SEC Document comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
and such unaudited financial statements fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as at the
date thereof and the consolidated results of their operations and cash flows for
the periods then ended in conformity with GAAP (except as permitted by Form 10-Q
of the Commission) applied on a basis substantially consistent with that of the
audited financial statements included in the SEC Documents, subject to normal
year-end audit adjustments.
SECTION 3.11 Material Agreements. Except as set forth in Schedule 3.11
hereto, neither the Company nor its Subsidiaries are a party to or bound by any
written, oral or implied contact, agreement, license, lease or other commitment
material to the businesses, properties, assets, results of operations or
financial condition of the Company and its Subsidiaries, taken as a whole (each
a "Material Agreement"), including, without limitation: (i) loan agreements,
credit lines, promissory notes, mortgages, pledges, guarantees, security
agreements, factoring agreements and other agreements relating to indebtedness
for borrowed money; (ii) real property leases; (iii) personal property leases
involving annual payments in excess of $25,000; (iv) trademark or other
intellectual property licenses; (v) employment, management, or severance
agreements; (vi) contracts or other agreements to undertake capital expenditures
or to acquire any property (other then in the ordinary course of business) in an
aggregate amount exceeding $250,000; (v) pledges, guarantees, contracts or other
agreements to loan money or to extend credit, other than (a) vendor deposits,
(b) unfactored accounts receivable and (c) any extension of credit in the
ordinary course of business in an amount not greater than $25,000 to any person
or group of related persons; (vi) contracts or other agreements which would
restrict the Company or its Subsidiaries from carrying on any business or which
would restrict the products or services which the Company or its Subsidiaries
may sell or the customers to whom they may sell; (vii) contracts or other
agreements involving any consultant in which the per annum compensation payable
thereunder exceeds $100,000; (viii) contracts or other agreements involving the
sale of any of the assets or properties of the Company or its Subsidiaries,
other than in the ordinary course of business consistent with past practices, or
the grant to any person of any preferential right to purchase any of the assets
or properties of the Company or its Subsidiaries; (ix) contracts or other
agreements pursuant to which the Company or its Subsidiaries agree to share or
otherwise indemnify the tax liability of any party; (x) contracts or other
agreements or arrangements between the Company or its Subsidiaries and any of
their respective officers, directors or affiliates; or (xi) contracts or
agreements (other then purchase orders for inventory and supplies in the
ordinary course of business) pursuant to which there is either a current or
future obligation of the Company or its Subsidiaries to make payments in excess
of $250,000 in the aggregate to any party or related group of parties. Except as
set forth in Schedule 3.11, neither the
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Company nor the Significant Subsidiaries own any real property. Except as set
forth in Schedule 3.11, all of the Company's and its Subsidiaries' Material
Agreements are valid, binding and enforceable by or against the Company and its
Subsidiaries, as applicable, which are parties thereto in accordance with their
respective terms. Except as set forth in Schedule 3.11, to the knowledge of the
Company, there is no breach or violation of, or default under, any such Material
Agreement on the part of the Company or its Subsidiaries, and no event has
occurred which, with notice or lapse of time or both, would constitute a breach,
violation or default on the part of the Company or its Subsidiaries, or give
rise to a right of termination, modification, cancellation, prepayment or
acceleration under any such Material Agreement, other than such breaches,
violations or defaults which would not have a Material Adverse Effect.
SECTION 3.12 Tax Matters. Except as set forth on Schedule 3.12 hereto or in
the SEC Documents, (a) (i) Each of the Company and its Subsidiaries has (x) duly
and timely filed (or there has been filed on its behalf) with the appropriate
governmental authorities all Tax Returns required to be filed by it, and all
such Tax Returns are true, correct and complete and (y) timely paid (or there
has been paid on its behalf) all Taxes due or claimed to be due from it by any
taxing authority;
(ii) The reserves for current Taxes (determined in accordance with GAAP
consistently applied) reflected in the financial statements in the SEC Documents
are adequate for the payment of all Taxes incurred or which may be incurred by
the Company and its Subsidiaries through the date thereof. Since the date of the
balance sheet of the Company including in the Company's Form 10-Q filed for the
quarter ended September 30, 1998 (the "Balance Sheet Date"), neither the Company
nor any of its Subsidiaries has incurred any liability for Taxes other than in
the ordinary course of business;
(iii) Each of the Company and its Subsidiaries has complied in all respects
with all applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign Laws) and has, within the time and
manner prescribed by Law, withheld and paid over to the proper governmental
authorities all amounts required to be withheld and paid over under all
applicable Laws;
(iv) There are no Liens for Taxes upon the assets or properties of any of
the Company or its Subsidiaries except for statutory liens for Taxes not yet
due;
(v) There are no outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns of any of the Company or its Subsidiaries;
(vi) Neither the Company nor any of its Subsidiaries has requested an
extension of time within which to file any Tax Return in respect of any taxable
year, which Tax Return has not since been filed;
(vii) No federal, state, local or foreign audits or other administrative
proceedings have formally commenced or are presently pending with regard to any
Taxes or Tax
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Returns of or including the Company or any Subsidiary thereof, and no
notification has been received by either the Company or any Subsidiaries thereof
that such an audit or other proceeding is pending or threatened with respect to
any Taxes due from or with respect to the Company or any Subsidiary thereof or
any Tax Return filed by or with respect to the Company or any Subsidiary
thereof';
(viii) Neither the Company nor any of its Subsidiaries has changed any
method of accounting, received a ruling from any taxing authority or signed an
agreement with any taxing authority which would have an adverse effect on the
Company or any Subsidiary thereof;
(ix) No deficiency for any Tax has been assessed with respect to the
Company or any Subsidiary thereof which has not been paid in full;
(x) Neither the Company nor any of its Subsidiaries is a party to, has
an obligation under, or is bound by, any Tax sharing or indemnification
agreement or similar contract or arrangement or has a potential liability or
obligation to any Person as a result of, or pursuant to, any such agreement,
contract or arrangement;
(xi) Neither the Company nor any of its Subsidiaries is a party to any
agreement, plan, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code or has made or is obligated to make any payments,
the deductibility of which is limited pursuant to Section 162(m) of the Code;
(xii) No jurisdiction where either the Company or any of its
Subsidiaries does not file a Tax Return has made a claim that the Company or any
of its Subsidiaries is required, to file a Tax Return for such jurisdiction;
(xiii) No power of attorney which is currently in force has been
granted by or with respect to the Company or any Subsidiary thereof with respect
to any matter relating to Taxes; and
(xiv) No closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local or
foreign Law has been entered into by or with respect to the Company or its
Subsidiaries.
(b) (i) All material elections with respect to Taxes of the Company
and its Subsidiaries are set forth on Schedule 3.12(b).
(ii) The Company and its Subsidiaries have previously delivered or
made available to Simon complete and accurate copies of each of: (x) all audit
reports, letter rulings, technical advice memoranda relating to United States
federal, state, local and foreign Taxes due from or with respect to the Company
or its Subsidiaries, (y) United States federal Tax Returns, and those state,
local or foreign Tax Returns, filed by the Company or any of its Subsidiaries
for the Calendar Years ended December 31, 1995, 1996, 1997 and 1998 and (z) any
closing agreements entered into by the Company or any of its Subsidiaries with
any taxing authority in each case existing on the date
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hereof. The Company and its Subsidiaries will deliver or make available to Simon
all materials with respect to the foregoing for all matters arising after the
date hereof.
SECTION 3.13 Compliance. Except as set forth on Schedule 3.13 hereto, the
Company and the Significant Subsidiaries (i) are in material compliance with all
federal, state, local and foreign laws, ordinances, regulations and orders
applicable to them, or their business or the ownership of their assets, and (ii)
have all federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of their business as currently being
conducted.
SECTION 3.14 Offering Exemption. Subject to the accuracy of the
representations and warranties of Simon and AIF set forth under Article IV of
this Agreement, the offering and sale of the Common Stock and Series A Preferred
Stock to be issued to Simon and AIF hereunder is exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
Section 4(2) thereof, and under applicable state securities and "blue sky" laws.
SECTION 3.15 Employee Benefit Plans. Except as set forth in Schedule 3.15
hereto,
(a) Schedule 3.15(a) contains a true and complete list of each deferred
compensation and each bonus or other incentive compensation, stock purchase,
stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of section 3(l) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Company or its Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of section 4001(b) of ERISA, or to
which the Company or an ERISA Affiliate is party, whether written or oral, for
the benefit of any employee or former employee of the Company or any Subsidiary
(the "Plans"). Each of the Plans that is subject to section 302 or Title IV of
ERISA or section 412 of the Code is hereinafter referred to in this Section 3.15
as a "Title IV Plan." Neither the Company, any Subsidiary nor any ERISA
Affiliate has any commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or modify or change any existing
Plan that would affect any employee or former employee of the Company or any
Subsidiary.
(b) With respect to each Plan, the Company has heretofore delivered or made
available to Buyer true and complete copies of each of the following documents:
(i) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a description thereof);
(ii) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA,
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and the most recent report prepared with respect thereto in accordance with
Statement of Financial Accounting Standards No. 87;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the latest
financial statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under section
401 of the Internal Revenue Code of 1986, as amended (the "Code").
(c) No liability under Title IV or section 302 of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring any such liability, other than liability for premiums due
the Pension Benefit Guaranty Corporation ("PBGC") (which premiums have been paid
when due). Insofar as the representation made in this Section 3.15(c) applies to
sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with respect to any
employee benefit plan, program, agreement or arrangement subject to Title IV of
ERISA to which the Company or any ERISA Affiliate made, or was required to make,
contributions during the five (5)-year period ending on the last day of the most
recent plan year ended prior to the Closing Date.
(d) None of the Plans currently maintained by the Company or any ERISA
Affiliate is a Title IV Plan.
(e) All contributions required to be made with respect to any Plan on or
prior to the date of the financial statements included in the SEC Documents have
been timely made or are reflected or reserved for on such financial statements.
There has been no amendment to, written interpretation of or announcement
(whether or not written) by the Company or any Subsidiary relating to, or change
in employee participation or coverage under, any Plan that would increase
materially the expense of maintaining such Plan above the level or expense
incurred in respect thereof for the most recent fiscal year ended prior to the
date hereof.
(f) No Title IV Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any Title IV Plan a plan described in section
4063(a) of ERISA.
(g) Neither the Company or any Subsidiary, any Plan, any trust created
thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which the Company or any Subsidiary, any Plan,
any such trust, or any trustee or administrator
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thereof, or any party dealing with any Plan or any such trust could be subject
to either a civil penalty assessed pursuant to section 409 or 502(i) of ERISA or
a tax imposed pursuant to section 4975 or 4976 of the Code.
(h) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including but not limited to
ERISA and the Code.
(i) Each Plan intended to be "qualified" within the meaning of section
401(a) of the Code is so qualified and the trusts maintained thereunder are
exempt from taxation under section 501(a) of the Code. Each Plan intended to
satisfy the requirements of section 501(c)(9) has satisfied such requirements.
(j) No Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary). No
condition exists that would prevent the Company or any Subsidiary from amending
or terminating any Plan providing health or medical benefits in respect of any
active employee of the Company or any Subsidiary, other than limitations imposed
under the terms of any collective bargaining agreement or multiemployer pension
plan.
(k) No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of section 162(a)(1), 162(m) or 280G of
the Code.
(l) The consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any such employee or
officer.
(m) There has been no material failure of a Plan that is a group health
plan (as defined in section 5000(b)(1) of the Code) to meet the requirements of
section 4980B(f) of the Code with respect to a qualified beneficiary (as defined
in section 4980B(g) of the Code). Neither the Company nor any Subsidiary has
contributed to a nonconforming group health plan (as defined in section 5000(c)
of the Code) and no ERISA Affiliate of the Company or any Significant Subsidiary
has incurred a tax under section 5000(e) of the Code which is or could become a
liability of the Company or a Subsidiary.
(n) There are no pending, threatened or anticipated claims by or on behalf
of any Plan, by any employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for benefits).
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SECTION 3.16 Insurance.
(a) Schedule 3.16 accurately sets forth each insurance policy, including
directors' and officers' liability insurance, maintained by or for the direct or
indirect benefit of the Company. Each of the policies identified on Schedule
3.16 is valid, enforceable and in full force and effect.
(b) Except as set forth on Schedule 3.16, there is no pending claim under
any of the policies identified on Schedule 3.16 and no event has occurred, and
no condition or circumstance exists, that might (with or without notice or lapse
of time) directly or indirectly give rise to or serve as a basis for any such
claim.
(c) Except as set forth on Schedule 3.16, the Company has not received: (i)
any written notice or communication regarding the actual or possible
cancellation or invalidation of any of such policies or regarding any actual or
possible adjustment in the amount of the premiums payable with respect to any of
said policies; (ii) any written notice or communication regarding any actual or
possible refusal of coverage under, or any actual or possible rejection of any
claim under, any of such policies; or (iii) any written indication that the
issuer of any of such policies may be unwilling or unable to perform any of its
obligations thereunder.
SECTION 3.17 Intellectual Property and Related Contracts. Except as set
forth on Schedule 3.17, (a) the Company and each of its Subsidiaries (x) own the
trademarks (including common law names and marks and federally registered names
and marks), trade names, service names, copyrights, patents, technology,
know-how and processes (collectively, "Intellectual Property") set forth on
Schedule 3.17 in the United States and the foreign countries respectively
identified thereon (in each case, free of any Liens), and (y) is licensed to use
all of the Intellectual Property set forth on Schedule 3.17, in the case of
clauses (x) and (y) hereof used in or necessary for the conduct of its business
as currently conducted which are material to the condition (financial and
other), business, or operations of the Company and its Subsidiaries taken as a
whole. Except as set forth on Schedule 3.17, to the knowledge of the Company (i)
the use of such Intellectual Property by the Company, its Subsidiaries and their
respective agents or licensees does not infringe on the rights of any person,
and (ii) no person is infringing on any right of the Company, any of its
Subsidiaries or their respective agents or licensees with respect to any such
Intellectual Property. Except as set forth on Schedule 3.17, to the Company's
knowledge, the Company, its Subsidiaries and their respective agents or
licensees are not in breach or violation in any material respect of any
agreement relating to the use of any of the Intellectual Property, and they have
not received any notification written or oral from any third party that there is
any such violation, breach or inability to perform under any such agreement.
There are no agreements, written or oral, except as set forth in Schedule 3.17,
which in any material respect limit or otherwise relate to any rights by the
Company to use any of its Intellectual Property.
(b) The Company has taken the measures described in the SEC Documents to
attempt to ensure that none of the computer software, computer firmware,
computer hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are used by
the Company or by any of its Subsidiaries in the conduct of its business shall
malfunction, cease to function, generate incorrect data or produce incorrect
results when processing, providing or receiving (i) date-related data from, onto
and between the twentieth
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and twenty-first centuries or (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries, except where any such
malfunction or generation of incorrect data or results (x) would not reasonably
be expected to have a Material Adverse Effect or (y) are due primary to
incorrect data supplied or processed by third parties.
SECTION 3.18 Absence of Undisclosed Liabilities. Neither the Company nor
any of its Subsidiaries has any liabilities (whether absolute, accrued or
contingent) required to be disclosed on a balance sheet prepared in accordance
with GAAP, except: (a) liabilities, obligations or contingencies that are
accrued and reserved against in the consolidated balance sheet of the Company
and its Subsidiaries or reflected in the notes thereto (i) as of December 31,
1997 included in the 1997 Annual Report, (ii) as of September 30, 1998 included
in the Company's Form 10-Q filed for the quarter ended September 30, 1998, (b)
liabilities incurred since September 30, 1998 in the ordinary course of
business, (c) liabilities disclosed in Schedule 3.18, (d) liabilities disclosed
in the SEC Documents, (e) liabilities under executory contracts disclosed (or
contracts in the ordinary course of business not required to be disclosed) in
the Schedules to this Agreement, or (f) liabilities otherwise disclosed on the
Schedules to this Agreement.
SECTION 3.19 Changes. Since September 30, 1998 (and with respect to Section
3.19(f) below, since the date of the 1997 Annual Report), except (i) as set
forth in the SEC Documents, (ii) as otherwise disclosed in Schedule 3.19 or
(iii) as otherwise provided by this Agreement.
(a) there has been no Material Adverse Effect, including with respect to
the Company's relationships with any material suppliers or customers or
licensors;
(b) except as permitted by this Agreement, there has been no direct or
indirect redemption, purchase or other acquisition of any shares of Company
capital stock, or any declaration, setting aside or payment of any dividend or
other distribution by the Company in respect of any Company capital stock, or
any issuance of any shares of capital stock of the Company (other than pursuant
to the exercise of options and warrants pursuant to their terms), or, except in
the ordinary course of business, any grant to any person (other than Ramat) of
any option to purchase or other right to acquire shares of capital stock of the
Company or any stock split or other change in the Company's capitalization;
(c) neither the Company nor any of its Subsidiaries has entered into or
agreed to enter into any new or amended contract with any labor unions
representing employees of the Company or any of its Subsidiaries;
(d) neither the Company nor any of its Subsidiaries has entered into or
agreed to enter into any new or amended contract with any of the officers
thereof or, except in the ordinary course of business, otherwise increased the
compensation payable to the officers or directors of any such entity;
(e) neither the Company nor any of its Subsidiaries has (i) entered into or
amended any bonus, incentive compensation, deferred compensation, profit
sharing, retirement, pension, group insurance or other benefit plan except as
required by law or regulations or (ii) made
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any contribution to any such plan except for contributions specifically required
by law or pursuant to the terms of such plans; and
(f) neither the Company nor any of its Subsidiaries has made any change in
accounting methods, principles or practices materially and adversely affecting
its assets, liabilities or business, except in accordance with generally
accepted accounting principles.
SECTION 3.20 Labor Matters. Except as set forth in Schedule 3.20, (i) none
of the Company and its Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other understanding with a labor union or
labor organization, (ii) as of the date hereof, there are no material
controversies, strikes, slowdowns or work stoppages pending or, to the knowledge
of the Company, threatened between the Company or its Subsidiaries and any of
their respective employees, (iii) to the knowledge of the Company, as of the
date hereof, there are no organizational efforts presently being made involving
any of the employees of the Company or its Subsidiaries, (iv) each of the
Company and its Subsidiaries have complied in all material respects with all
Federal, state, local and foreign laws relating to wages, hours, collective
bargaining, employment and employment practices, and the payment of social
security and similar taxes, and (v) as of the date hereof, no person has
asserted that the Company or its Subsidiaries are liable in any material amount
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing.
SECTION 3.21 Environmental Matters. To the Company's knowledge, except as
described in the SEC Documents or Schedule 3.21 hereto, (i) the Company and each
of the its Subsidiaries are in compliance with all applicable Federal, state,
local and foreign laws and regulations and all judicial and administrative
orders and determinations relating to pollution or protection of the environment
or of human health (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, which
compliance includes, but is not limited to, the possession by the Company and
each of its Subsidiaries of permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof; (ii) none of the Company or its Subsidiaries has received
written notice of, or, to the knowledge of the Company, is the subject of, any
actions, causes of action, claims, investigations, demands or notices by any
person alleging liability under or non-compliance with any Environmental Law
that would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; and (iii) there has not been by the Company or any of
its Subsidiaries any treatment, storage, disposal or release of any hazardous or
toxic material, substance or waste or of petroleum, or any fractions or
by-products thereof, at any of their current properties and facilities used in
the business of the Company or its Subsidiaries in a manner or at levels that
require or is reasonably likely to require investigation, removal or remediation
under Environmental Laws that would reasonably be expected to have a Material
Adverse Effect.
SECTION 3.22 Employment Agreements. Except as disclosed in Schedule 3.22,
there are no employment, consulting, severance or indemnification contracts or
agreements between the Company or any of its Subsidiaries, on the one hand, and
any directors, officers or other employees of the Company or any of its
Subsidiaries, on the other hand.
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SECTION 3.23 Change of Control Provisions. Except as disclosed in Schedule
3.23, none of the contracts or agreements set forth in Schedule 3.22 and none of
the Company's or any of its Subsidiaries' employee benefit plans, programs or
arrangements contains any provision that would become operative as the result of
a change of control of the Company or that would become operative as a result of
the transactions contemplated hereby and by the other Basic Agreements.
SECTION 3.24 State Takeover Statutes. The Board of Directors of the Company
has approved this Agreement and the consummation of the transactions
contemplated hereby and by the other Basic Agreements and such approval
constitutes approval of such transactions by the Board of Directors of the
Company under the provisions of Section 912 of the New York Business Corporation
Law (the "BCL") such that Section 912 of the BCL does not apply to the
transactions contemplated hereby and by the other Basic Agreements.
SECTION 3.25 Brokers. Except as set forth in Schedule 3.25, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based on
arrangements made by or on behalf of the Company.
SECTION 3.26 Accounts Receivable. Schedule 3.26 lists and ages all accounts
receivable of the Company as of December 31, 1998. All such accounts receivable
represent amounts due for bona fide sales generated in the ordinary course of
business of the Company.
SECTION 3.27 Inventory. All inventories of the Company as at December 31,
1998 are set forth on Schedule 3.27 and are valued using lower of average landed
cost or market and are stated in accordance with GAAP. Since December 31, 1998,
the Company has sold such inventory only in the ordinary course of the Company's
business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SIMON AND AIF
Each of Simon and AIF hereby severally represents and warrants to the
Company that, as to itself:
SECTION 4.1 Organization, Existence, Qualification and Authority of Simon
and AIF. Simon is a limited liability company and AIF is a limited partnership,
duly organized, validly existing and, if applicable, in good standing under the
laws of its jurisdiction of organization, and has the power and authority to
enter into each Basic Agreement to which it is a party and perform its
obligations hereunder and thereunder. The execution, delivery and performance of
each Basic Agreement by each of Simon and AIF have been duly and validly
authorized by all requisite company and partnership action and each Basic
Agreement has been duly executed and delivered by each of Simon and AIF. Each
Basic Agreement is legal, valid and binding upon each of Simon and AIF and
enforceable against such party in accordance with its terms.
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SECTION 4.2 No Breach or Default. The execution, delivery and performance
of each Basic Agreement by each of Simon and AIF which is a party thereto and
the consummation of the sale of the Shares to each of Simon and AIF as
contemplated by this Agreement do not and will not: (i) violate each of Simon's
and AIF's constitutive documents; (ii) violate any law or regulation applicable
to each of Simon and AIF; (iii) result in the breach of, or constitute a default
under, any indenture, mortgage, deed of trust, lease or sublease, contract or
other agreement or instrument to which each of Simon and AIF is a party or by
which Simon or AIF or any of their respective properties is bound; (iv) result
in the creation or imposition of any Lien upon any of the property of each of
Simon or AIF; or (v) except as set forth on Schedule 4.2A hereto with respect to
Simon and Schedule 4.2B hereto with respect to AIF, require the consent or
approval of, or any filing with, any governmental body, agency, authority or any
other Person.
SECTION 4.3 Purchase for Own Account.
(a) The Shares to be acquired by each of Simon and AIF pursuant to this
Agreement are being acquired for its own account and with no intention of
distributing or reselling such Shares or any part thereof in any transaction
which would be in violation of the securities laws of the United States, without
prejudice, however, to each of Simon and AIF's rights at all times to sell or
otherwise dispose of all or any part of such Shares under a registration
statement under the Act or under an exemption from such registration available
under the Act, subject to applicable provisions of the New Shareholders
Agreement and the Equity Registration Rights Agreement.
(b) Each of Simon and AIF understands that none of the Shares has been
registered under the Act, and such Shares cannot be sold unless they are
subsequently registered under the Act or unless an exemption from such
registration is available. If either Simon or AIF should in the future decide to
dispose of any Shares being acquired pursuant hereto, such Person understands
and agrees that it may do so only in compliance with the Act, as then in effect,
and that stop-transfer instructions to that effect will be in effect with
respect to such Shares. If either Simon and AIF should decide to dispose of the
Shares being acquired pursuant hereto, other than pursuant to Rule 144 under the
Act or an effective registration statement under the Act, such Person may, in
connection with such disposition and at such Person's expense, appoint counsel
of recognized standing in securities law (including in-house or special counsel)
in connection with such disposition and the Company will accept, and will
recommend that any transfer agent for the Shares accept, the opinion of such
counsel to the effect that the proposed disposition of the Shares would not be
in violation of the Act, assuming such counsel and opinion are reasonably
acceptable to the Company.
SECTION 4.4 Investor Sophistication. Each of Simon and AIF is an
"accredited investor" within the meaning of Rule 501(1) under the Act, and by
reason of its business and financial experience, or the business and financial
experience of those Persons retained by it to advise it with respect to its
investment in the Shares being acquired pursuant to this Agreement, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment,
are able to bear the economic risk of such investment and, at the present time,
are able to afford a complete loss of such investment. Each of Simon and AIF
(together with such Persons retained by it to advise it with respect to its
investment in the Shares being acquired pursuant to this Agreement) has been
afforded the opportunity to ask questions and receive answers concerning the
terms and conditions of the
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purchase of Shares and to obtain any additional information necessary to
evaluate the merits and risks of purchasing the Shares.
SECTION 4.5 Brokers. Except as set forth in Schedule 4.5A with respect to
Simon and Schedule 4.5B with respect to AIF, no broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based on arrangements made by or on
behalf of Simon or AIF.
SECTION 4.6 Ownership of AIF Note. AIF is, and has been since June 30,
1993, the record and beneficial owner of the AIF Note, free and clear of all
Liens, and has never transferred, sold, pledged or hypothecated any interest in
the AIF Note. Neither AIF nor any Affiliate thereof is a party to, or subject
to, any agreement pursuant to which any Person would have the right or option to
acquire any interest in the AIF Note.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APOLLO ARIS PARTNERS, LP
AAP hereby represents and warrants to the Company that as to itself:
SECTION 5.1 Organization, Existence, Qualification and Authority of AAP.
AAP is a limited partnership duly organized, validly existing and, if
applicable, in good standing under the laws of its jurisdiction of organization,
and has the power and authority to enter into each Basic Agreement to which it
is a party and perform its obligations hereunder and thereunder. The execution,
delivery and performance of each Basic Agreement to which AAP is a party by AAP
has been duly and validly authorized by all requisite partnership action and
each Basic Agreement has been duly executed and delivered by AAP. Each Basic
Agreement to which AAP is a party is legal, valid and binding upon AAP and
enforceable against AAP in accordance with its terms.
SECTION 5.2 No Breach or Default. The execution, delivery and performance
of each Basic Agreement by AAP to which it is a party does not and will not: (i)
violate AAP's constitutive documents; (ii) violate any law or regulation
applicable to AAP; (iii) result in the breach of, or constitute a default under,
any indenture, mortgage, deed of trust, lease or sublease, contract or other
agreement or instrument to which AAP is a party or by which AAP or any of its
properties is bound; (iv) result in the creation or imposition of any Lien upon
any of the property of AAP; or (v) except as set forth on Schedule 5.2 hereto,
require the consent or approval of, or any filing with, any governmental body,
agency, authority or any other Person.
SECTION 5.3 Ownership of Shares. AAP is, and has been since June 30, 1993,
the record and beneficial owner of 5,804,820 shares of Common Stock, free and
clear of all Liens, and has never transferred, sold, pledged, or hypothecated
any of such shares. Except for the Existing Shareholders Agreement, neither AAP
nor any Affiliate thereof is a party to, or subject to, any agreement pursuant
to which any Person would have the right or option to acquire any shares of
Common Stock owned by AAP.
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ARTICLE VI
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE SIMON GROUP, L.L.C.
Simon hereby represents and warrants to the Company that as to itself:
SECTION 6.1 Control of Group; Simon Ownership. Arnold Simon, an individual
("AS"), controls the governance and management of Simon, will have the sole
voting and investment power with respect to shares of the Company to be issued
to Simon hereunder, and is and will remain the sole and exclusive Person
authorized to take action on behalf of Simon in connection with all
transactions, including without limitation the execution of all documents and
instruments, between or among Simon, the Company, Apollo and Ramat, pursuant to
and as provided in the constitutive documents of Simon as delivered and
certified to the Company on the date of this Agreement (the "Simon Entity
Agreement"). No consent, approval or signature of any member, partner, investor,
shareholder, officer or manager (other than AS) is required in connection with
the execution, delivery and performance of this Agreement by Simon. AS is the
beneficial owner of not less than twenty-five (25%) percent of the equity
interests in Simon.
SECTION 6.2 Investor Sophistication. Simon has been organized for the
specific purpose of acquiring the Securities being purchased under this
Agreement. Accordingly, each holder of the record and beneficial interests in
Simon is an "accredited investor" within the meaning of Rule 501(1) under the
Act, and by reason of its business and financial experience, or the business and
financial experience of those Persons retained by him or it to advise him or it
with respect to his or its investment in Simon, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment, are
able to bear the economic risk of such investment and, at the present time, are
able to afford a complete loss of such investment. Simon (together with such
Persons retained by it to advise it with respect to its investment in the Shares
being acquired pursuant to this Agreement) has been afforded the opportunity to
ask questions and receive answers concerning the terms and conditions of its
purchase of interests in Simon and Simon's purchase of Shares and to obtain any
additional information necessary to evaluate the merits and risks of purchasing
the Shares.
SECTION 6.3 Funding of Purchase Price. On the date of this Agreement Arnold
Simon has, and at the Closing, Simon will have, immediately available funds in
the aggregate amount not less than the Simon Purchase Price.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1 Conditions Precedent to Obligations of Simon and AIF. The
obligations of each of Simon and AIF to purchase the Shares hereunder are
subject to the satisfaction of the following conditions on or before the Closing
Date:
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(a) With respect to the obligations of Simon, the representations and
warranties made by the Company herein shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except where the specific representation or warranty by its terms applies to an
earlier date).
(b) With respect to the obligations of Simon, the Company shall have
performed and complied in all material respects with all material covenants,
agreements and conditions set forth herein and in each of the Basic Agreements
which are required to be performed or complied with by it on or prior to the
Closing Date.
(c) The purchase of and payment for the Shares to be purchased by Simon or
AIF hereunder shall not (i) be prohibited by any applicable law or governmental
regulation (including without limitation Regulation S, T, U or X of the Board of
Governors of the Federal Reserve System), (ii) subject Simon or AIF to any
penalty or other onerous condition pursuant to any applicable law or
governmental regulation, (iii) be prohibited by the laws or regulations of any
jurisdiction to which it is subject or (iv) be permanently enjoined at the
Closing Date.
(d) All authorizations, consents, approvals, permits and licenses and
filings with, by or in respect of any federal, state, local or foreign
governmental authority, agency, court or other body required to be taken, given
or obtained that are necessary in connection with the transactions contemplated
herein and in the other documents related hereto, shall have been taken, given
or obtained, be in full force and effect and not be subject to any pending
proceedings or appeals, administrative, judicial or otherwise other than those
which would not have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Hart-Scott-Rodino Act
("HSR") pre-merger notification waiting period applicable to the transactions
contemplated hereby shall have expired or have been terminated.
(e) With respect to the obligations of Simon, all consents and approvals to
be obtained by the Company from third parties (including licensors, lessors and
others), including without limitation those set forth on Schedule 3.5 hereto,
that are required in connection with the transactions contemplated herein and in
the other documents related hereto, shall have been given or obtained and be in
full force and effect in form and substance reasonably acceptable to Simon.
(f) The Certificate of Amendment designating the Series A Preferred Stock,
in the form of Exhibit A hereto, shall have been filed with the Department of
State of the State of New York.
(g) The New Shareholders Agreement and the New Equity Registration Rights
Agreement shall have been executed and delivered by all of the parties thereto
(other than AIF, with respect to the obligations of AIF hereunder and Simon and
Arnold Simon, with respect to the obligations of Simon and Arnold Simon
hereunder).
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(h) With respect to the obligations of Simon, AIF shall have exchanged the
AIF Note for cash and shares of Common Stock and Series A Preferred Stock
pursuant to Section 2 and AIF shall have delivered a release to the Company of
all claims arising under the AIF Note.
(i) With respect to the obligations of Simon, there shall not have occurred
any material adverse change in the financial condition or business of the
Company and its Significant Subsidiaries taken as a whole since the date of this
Agreement.
(j) The Closing Date shall not be later than 5:00 p.m., New York time, on
the Outside Date (as defined in Section 10.2 hereof), or such later time as the
Company and the Purchasers may agree to.
(k) The Company shall have executed and delivered in favor of each new
member of the Board of Directors of the Company an indemnification agreement in
the form currently used by the Company.
(l) On or before the Closing Date, Simon and AIF shall have received all of
the following from the Company in form and substance reasonably satisfactory to
Simon and AIF:
(i) Each of the Basic Agreements, duly executed and delivered by each
of the respective parties thereto and in full force and effect;
(ii) Certificates representing the Shares shall be issued in the name
of Simon and AIF and delivered in accordance with Section 2;
(iii) Certificate of Secretary of the Company dated as of the date of
Closing certifying (A) the Restated Certificate of Incorporation and the
Certificate of Amendment relating to the designation of the Series A
Preferred Stock, recently certified by the Secretary of State of New York
as duly filed and currently in full force and effect; (B) Restated By-laws;
(C) absence of amendments to the Restated Certificate of Incorporation and
Restated By-laws since the date of the last amendment shown on the official
evidence as to filed constituent documents furnished pursuant to (vi)
below; (D) resolutions, in form and substance satisfactory to Simon, of the
board of directors of the Company duly authorizing the execution, delivery
and performance of this Agreement and the other documents executed in
connection with this Agreement to which it is a party and absence of other
resolutions relating thereto; (E) the absence of proceedings for the
merger, consolidation, sale of assets, dissolution, liquidation or similar
proceedings with respect to the Company and the Significant Subsidiaries;
and (F) the incumbency and signature of the individuals authorized to
execute and deliver documents on the Company's behalf;
(iv) Certificate of Secretary of the Company dated as of the date of
Closing certifying resolutions, in form and substance satisfactory to
Simon, of the board of directors of the Company duly authorizing the
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following actions, such actions to take effect immediately following the
Closing:
(1) Amendment of the 1993 Stock Incentive Plan to increase the
number of shares covered to 10,000,000, subject to approval and
ratification by the Company's shareholders;
(2) Amendment of the Certificate of Incorporation of the Company
to increase the authorized shares of Common Stock to 100,000,000
shares, subject to approval and ratification by the Company's
shareholders;
(3) Resignation of the current directors of the Company and all
Subsidiaries of the Company, other than Ramat and Robert Katz (as
evidenced by letters of resignation of such directors addressed to and
delivered to the Company at or before the Closing), and election of
the persons set forth on Schedule 7.1 hereto as replacement and
additional members of the Board of Directors of the Company and all
Subsidiaries of the Company; provided however, that the term of office
as directors of the Company of two of the persons set froth on
Schedule 7.1 hereto shall be deferred until ten (10) days have elapsed
from the mailing to the Company's shareholders of the statement
referred to in Section 9.14 hereof.
(v) Certificate of Secretary of each of domestic Significant
Subsidiary dated as of the date of Closing certifying (A) the corporate
charter, by-laws and other constituent document of such person, recently
certified, in the case of any such document filed with the appropriate
governmental authority of the jurisdiction in which such person is
organized (a "filed constituent document") by such governmental authority;
(B) absence of amendment to any filed constituent document since the date
of the last amendment shown on the official evidence as to filed
constituent documents furnished pursuant to (vi) below; (C) resolutions or
other written evidence of corporate action, in form and substance
satisfactory to Purchasers, of the board of directors (or appropriate
committee thereof) and, if applicable, the stockholders of such person duly
authorizing or ratifying the execution, delivery and performance by such
person of each agreement relating to the consummation of the transactions
pursuant to this Agreement to which it is or is to be party, if any, and
absence of other resolutions relating thereto; (D) the absence of
proceedings for the merger, consolidation, sale of assets, dissolution,
liquidation or similar proceedings with respect to such person; and (E) the
incumbency and signature of the individuals authorized to execute and
deliver documents on such person's behalf;
(vi) Recent official evidence from appropriate governmental
authorities of appropriate domestic jurisdictions for each of the Company
and each Significant Subsidiary as to constituent documents on file, good
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standing, payment of franchise taxes and qualification to do business of
such person;
(vii) Certificate executed by the President of the Company dated as of
the Closing Date, certifying on behalf of the Company that the
representations and warranties of the Company contained in this Agreement
are true and correct in all material respects as of the Closing Date;
(viii) A Certificate executed by the President of each of the
Significant Subsidiaries dated as of the Closing Date, certifying on behalf
the Company that the representations and warranties of the Company
contained in this Agreement solely with respect to the Significant
Subsidiary of which such person is President, are true and correct in all
material respects as of the Closing Date; and
(ix) An opinion addressed to Simon and dated the date of Closing of
Herrick, Feinstein LLP, counsel to the Company, with respect to certain
corporate matters and substantially in the form of Exhibit D hereto.
(m) There shall not have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange for a
period in excess of three hours (excluding suspension or limitation resulting
solely from physical damage or interference with such exchanges or related to
market conditions), (2) a declaration of a banking moratorium or any suspension
of payments, lending or the extension of credit generally in respect of banks in
the United States (whether or not mandatory), (3) any decline in either the Dow
Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 25% measured from the close of business on
the date hereof or (4) in the case of any of the foregoing existing at the time
of the execution hereof, a material acceleration or worsening thereof.
(n) With respect to the obligations of Simon hereunder, (i) the Debt
Registration Rights Agreement to which the Company is a party, dated as of June
30, 1993 (the "Debt Registration Rights Agreement"), shall have been terminated
in accordance with its terms, and (ii) Apollo's rights under the Equity
Registration Rights Agreement to which the Company is a party, dated as of June
30, 1993 (the "1993 Equity Registration Rights Agreement"), shall have been
terminated.
SECTION 7.2 Conditions Precedent to Obligations of the Company. The
obligations of the Company to issue and sell the Shares pursuant to this
Agreement are subject, at the Closing Date, to the satisfaction of the following
conditions:
(a) The representations and warranties made by each of Simon, AIF and AAP
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
have been made on and as of the Closing Date (except where the specific
representation or warranty by its terms applies to an earlier date)
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(b) Each of Simon, AIF and AAP shall have performed and complied in all
material respects with all material covenants, agreements and conditions set
forth herein which are required to be performed or complied with by it on or
prior to the Closing Date
(c) The purchase of and payment for the Shares to be purchased by each of
Simon and AIF hereunder shall not (i) be prohibited by any applicable law or
governmental regulation (including without limitation Regulation S, T, U or X of
the Board of Governors of the Federal Reserve System), (ii) be prohibited by the
laws or regulations of any jurisdiction to which the Company is subject or (iii)
be permanently enjoined at the Closing Date.
(d) All authorizations, consents, approvals, permits and licenses and
filings with, by or in respect of any federal, state, local or foreign
governmental authority, agency, court or other body required to be taken, given
or obtained that are necessary in connection with the transactions contemplated
herein and in the other documents related hereto, shall have been taken, given
or obtained, be in full force and effect and not be subject to any pending
proceedings or appeals, administrative, judicial or otherwise, other than those
which would not have a Material Adverse Effect.
Without limiting the generality of the foregoing, the HSR pre-merger
notification waiting period applicable with respect to the transaction
contemplated hereby shall have expired or have been terminated.
(e) All consents and approvals to be obtained by the Company from third
parties (including licensors, lessors and others), including without limitation
those set forth on Schedule 3.5 hereto, that are required in connection with the
transactions contemplated herein and in the other documents related hereto,
shall have been given or obtained and be in full force and effect, and in form
and substance satisfactory to the Company.
(f) All consents and approvals to be obtained by each of Simon, AIF and AAP
from third parties (including licensors and others), including without
limitation those set forth on Schedules 4.2A, 4.2B and 5.2 hereto, that are
required in connection with the transactions contemplated herein and in the
other documents related hereto, shall have been given or obtained and be in full
force and effect, and in form and substance satisfactory to the Company.
(g) The Certificate of Amendment designating the Series A Preferred Stock,
in the form of Exhibit A hereto, shall have been accepted for filing by the
Department of State of the State of New York.
(h) The New Shareholders Agreement and the New Equity Registration Rights
Agreement shall have been executed and delivered by Simon.
(i) The Closing Date shall not be later than 5:00 p.m., New York time, on
the Outside Date, or such later time as the Company and the Purchasers may agree
to.
(j) The Company shall have received the certification by Arnold Simon as to
the representations of Simon set forth in Article VI hereto and the
identification and extent of
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participation of all holders of membership, partnership, shareholder, investor
or other record or beneficial interests in Simon (each a "Simon Participant").
(k) The Company shall have received Investment Representation letters in
form and substance satisfactory to the Company from each Simon Participant
confirming the matters set forth in Article VI as to such Simon Participant.
(l) On or before the Closing Date, the Company shall have received all of
the following from Simon, AIF and/or AAP, as applicable, in form and substance
satisfactory to the Company:
(i) Each of the Basic Agreements, duly executed and delivered by each
of the respective parties thereto and in full force and effect;
(ii) a Certificate of Secretary of Simon, dated as of the date of
Closing certifying (A) the attached operating agreement, article of
association, corporate charter, by-laws and other constituent document of
such person, recently certified, in the case of any such document of such
person filed with the appropriate governmental authority of the
jurisdiction in which such person is organized, by such governmental
authority as being in full force and effect; (B) absence of amendments to
constituent documents of such person(in the case of any such documents of
such person filed with a governmental authority, since the date of the last
amendment shown on the official evidence as to filed constituent documents
finished pursuant to (iii) below; (C) resolutions, in form and substance
satisfactory to the Company, of the manager, board of directors, board of
managers, general partner or other governing authority of such person duly
authorizing the execution, delivery and performance of this Agreement and
the other documents executed in connection with this Agreement to which it
is a party and absence of other resolutions relating thereto; (D) the
absence of proceedings for the merger, consolidation, sale of assets,
dissolution, liquidation or similar proceedings with respect to such
person; and (E) the incumbency and signature of the individuals authorized
to execute and deliver documents on such person's behalf;
(iii) Recent official evidence from appropriate governmental
authorities of appropriate domestic jurisdictions for Simon, as to
constituent documents on file, good standing, payment of franchise taxes
and qualification to do business of such person;
(iv) Certificate executed by the appropriate officer of each of Simon,
AIF and AAP, as applicable, dated as of the Closing Date, certifying that
the representations and warranties of such entity contained in this
Agreement are true and correct in all material respects as of the Closing
Date; and
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(v) An opinion addressed to the Company and dated the date of Closing
of Shapiro, Forman and Allen LLP, counsel to Simon, with respect to certain
corporate matters and substantially in the form of Exhibit E hereto.
(m) On the Closing Date, Simon shall have made the entire payment to the
Company of the Simon Purchase Price against delivery of the Shares to be issued
to Simon, and AIF shall have exchanged the AIF Note for cash and Shares in
accordance with Section 2.1.
ARTICLE VIII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 8.1 Conduct of Businesses Prior to the Effective Time. Except as
set forth in Schedule 8.2 hereto, as expressly contemplated or permitted by this
Agreement, or as required by applicable law, rule or regulation, or with the
consent of Simon, during the period from the date of this Agreement to the
Closing Date, each of the Company and its Significant Subsidiaries shall (i)
conduct its business in the usual, regular and ordinary course consistent with
past practice, and (ii) use reasonable good faith efforts to maintain and
preserve intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees.
SECTION 8.2 Forbearance. Without limiting Section 8.1 hereof, except as set
forth in Schedule 8.2 hereto or as expressly contemplated or permitted by this
Agreement, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Closing Date, neither the Company
nor its Significant Subsidiaries shall, without the prior written consent of
Simon:
(a) adjust, split, combine or reclassify any of its capital stock; make,
declare or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock; issue, deliver or sell any shares of its capital
stock or any securities convertible into or exercisable for, or any rights,
options or warrants to acquire, any such shares or securities (whether for cash
or property) except for (i) the grant of 1,000,000 stock options to Ramat, (ii)
the issuance of shares of Common Stock issuable on the exercise of stock options
granted prior to the date hereof pursuant to the 1993 Stock Incentive Plan,
which options become vested and exercisable on or prior to the Closing Date, and
(iii) shares of Common Stock issuable upon the possible exercise of the Heller
Warrant;
(b) sell, lease, transfer, or otherwise dispose of, or subject to any Lien,
any of its properties or assets, or cancel, release or assign any material
indebtedness owed to it or any material claim held by it, except (i) in the
ordinary course of business consistent with past practice, (ii) as required
under any agreement relating to indebtedness for borrowed money to which the
Company or the Significant Subsidiaries are party or (iii) pursuant to contracts
or agreements in force as of the date of this Agreement and listed in Schedule
8.2 hereto;
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(c) except (i) in the ordinary course consistent with past practice, or
(ii) pursuant to any agreement relating to indebtedness for borrowed money in
effect on the date of this Agreement and disclosed on Schedule 8.2 hereto, incur
or assume any liabilities or incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or entity (other than a
Subsidiary of the Company); provided, however, that the Company and the
Significant Subsidiaries shall be permitted to discuss and negotiate with, and
pay commitment and similar fees to, their lenders and factors so as to provide
working capital credit lines, factoring arrangements and the documentation
relating thereto (A) to extend such facilities so as to cover the period until
the Outside Date and (B) to extend such facilities for periods after the
termination of this Agreement;
(d) make any material acquisition or investment either by purchase of stock
or securities, merger or consolidation, contributions to capital, property
transfers, or purchases of any property or assets of any other individual,
corporation or other entity other than a wholly owned Subsidiary thereof;
(e) except for purchases and sales of inventory and merchandise in the
ordinary course of business, make any material change in any of its licenses,
leases or contracts or enter into, renew or terminate any contract or agreement
that calls for aggregate annual payments of $50,000 or more and which either (i)
is not terminable at will on 60 days or less notice without payment of a penalty
or (ii) has a term of more than one year;
(f) increase in any material respect the compensation or fringe benefits of
any of its employees or pay any bonus, pension or retirement allowance not
required by any existing plan, program or agreement to any such employees or
become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee or accelerate the vesting of any stock
options or other stock-based compensation;
(g) except as provided in the existing budgets and business plans of the
Company dated December 16, 1998 delivered to Simon, make any capital
expenditures in excess of (A) $100,000 individually or (B) $250,000 in the
aggregate, other than expenditures necessary to maintain existing assets in good
repair;
(h) except as otherwise permitted elsewhere in this Section 8.2, engage or
participate in any material transaction or incur or sustain any material
obligation not in the ordinary course of business;
(i) settle any claim, action or proceeding involving money damages which is
material to the financial condition, operations or businesses of the Company and
the Significant Subsidiaries on a consolidated basis, except in the ordinary
course of business consistent with past practice and except for settlements for
monetary damages that are not, individually or in the aggregate with any other
such settlements, in excess of $100,000 in the aggregate;
(j) except for the filing on behalf of the Company of the Certificate of
Amendment relating to the designation of the Series A Preferred Stock in the
form of Exhibit A
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hereto, amend its certificate of incorporation, bylaws or similar governing
documents, as the case may be;
(k) enter into any line of business other than the importation,
manufacturing, distribution, and merchandising of apparel, the licensing of
trademarks relating thereto, and the licensing of the Company's and Significant
Subsidiaries' owned trademarks;
(l) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Closing Date, or in any of the conditions to the transactions contemplated
hereby set forth in Article VII not being satisfied or in a violation of any
provision of this Agreement;
(m) make any changes in its accounting methods, except as may be required
under law, rule, regulation or GAAP, or, upon prior notification to and approval
of Simon, as required pursuant to the Company's or Significant Subsidiaries'
agreements relating to indebtedness for borrowed money;
(n) except as provided in, or otherwise permitted by another section of
this Agreement, enter into any agreement or perform any transaction with any
Affiliate;
(o) enter into any new license agreement as licensor or licensee; or
(p) agree to, or make any commitment to, take any of the actions prohibited
by this Section 8.2.
ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.1 Access to Information.
(a) Upon reasonable notice, the Company shall, and shall cause the
Significant Subsidiaries to, afford to the representatives of Simon and Apollo
during normal business hours during the period prior to the Closing Date, access
to all its properties, books, contracts, commitments and records, and to its
officers, employees, accountants, counsel and other representatives and, during
such period, the Company shall, and shall cause the Significant Subsidiaries to,
make available to the other party all information concerning their business,
properties and personnel as such other party may reasonably request. Neither the
Company nor the Significant Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would, in the opinion
of such counsel, waive the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
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(b) All information furnished by the Company or the Significant
Subsidiaries to Simon and Apollo pursuant to this Agreement (the "Confidential
Information") shall be treated as the sole property of the Company and, if this
Agreement shall be terminated, each party receiving information shall upon
request promptly return to the Company all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. Each party hereto receiving
Confidential Information shall keep confidential all such information, will use
such information solely for the purpose of evaluating the transactions
contemplated by this Agreement and shall not directly or indirectly use such
information for any competitive or other commercial purpose.
(c) The obligation to keep Confidential Information as such shall not apply
to (i) any information which (A) was already in the receiving party's possession
on a non-confidential basis prior to the disclosure thereof by the furnishing
party, (B) was then generally known to the public other than as a result of
disclosure by the receiving party in violation of the provisions hereof, or (C)
was disclosed to the receiving party by a third party not bound by any
obligation of confidentiality or (ii) disclosures made as required by law. If
the receiving party is requested or required (by oral question or request for
information or documents in legal proceedings, interrogatories, subpoena, civil
investigative demand or similar process) to disclose any information concerning
the receiving party, the receiving party will promptly notify the furnishing
party of such request or requirement so that the furnishing party may seek an
appropriate protective order and/or waive the receiving party's compliance with
the provisions of this Agreement. It is further agreed that, if in the absence
of a protective order or the receipt of a waiver hereunder the receiving party
is nonetheless, in the opinion of counsel, compelled to disclose information
concerning the furnishing party to any tribunal or governmental body or agency
or else stand liable for contempt or suffer other censure or penalty, the
receiving party may disclose such information to such tribunal or governmental
body or agency to the extent necessary to comply with such order as advised by
counsel without liability hereunder.
(d) Each receiving party understands and agrees that the furnishing party
will suffer immediate, irreparable harm in the event such receiving party fails
to comply with any of its obligations of confidentiality under this Agreement,
that monetary damages will be inadequate to compensate the furnishing party for
such breach and that such furnishing party shall be entitled to specific
performance as a remedy for any such breach without the necessity of posting a
bond or proving special damages. Such remedy shall not be deemed to be the
exclusive remedy in the event of breach of this Agreement by any receiving
party, but shall be in addition to all other remedies available to the
furnishing party at law or in equity.
(e) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein. No representations or warranties are
made by the Company, the Significant Subsidiaries, Simon, AIF or AAP or any
affiliate thereof except as expressly set forth in this Agreement, the Schedules
hereto and the Basic Agreements.
(f) All discussions by Simon or Apollo with the Company's shareholders,
employees, lenders, licensors, licensees, customers and suppliers will be
coordinated through Ramat.
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SECTION 9.2 Legal Conditions to Transactions. Subject to the terms and
conditions of this Agreement, each of Company, Simon, AIF and AAP shall use
their reasonable good faith efforts (i) to take, or cause to be taken, all
actions necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its Subsidiaries with respect
to the transactions contemplated hereby and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
Agreement and (ii) to obtain (and to cooperate with the other parties to obtain)
any consent, authorization, order or approval of, or any exemption by, any third
party(including any governmental agency) which is required to be obtained by the
Company, Simon, AIF or AAP in connection with the transactions contemplated by
this Agreement.
SECTION 9.3 Further Assurances. In case at any time after the Closing Date
any further action, or the execution and delivery of any additional documents or
instruments, is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall take such actions and execute and deliver
such additional documents and instruments as may be reasonably requested by
Company or the other parties hereto.
SECTION 9.4 Advice of Changes. Each of the parties hereto shall promptly
advise the other parties hereto of any change or event which, individually or in
the aggregate with other such changes or events, would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants contained herein. From time to time prior to the
Closing, each party hereto shall promptly supplement or amend the disclosure
schedules attached hereto relating to such party, to reflect any matter which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such disclosure schedules or which is
necessary to correct any information in such disclosure schedules which has been
rendered inaccurate thereby. No supplement or amendment to such disclosure
schedules shall have any effect for the purpose of determining the accuracy of
any party's representations and warranties contained herein, the satisfaction of
any of the conditions in Article VII hereof, or the compliance by any party with
its covenants or agreements contained herein.
SECTION 9.5 Series A Preferred Stock Designation. The Company shall,
promptly after the execution and delivery of this Agreement, file the
Certificate of Amendment to its Restated Certificate of Incorporation with
respect to the designation of its Series A Preferred Stock, in the form of
Exhibit A hereto, with the New York Secretary of State.
SECTION 9.6 1999 Shareholders Meeting and Related Matters.
(a) The Company shall call and hold a Shareholder's Meeting on a date no
later than ninety (90) days after the Company's 1998 audited financial
statements are available, for the purposes of (i) electing the Directors of the
Company, (ii) appointing the auditors of the Company, (iii) approving an
amendment to the Restated Certificate of Incorporation of the Company increasing
the number of authorized shares of Common Stock of the Company to 100,000,000
shares and (iv) approving an amendment to Aris' 1993 Stock Incentive Plan to
increase the number of shares reserved for issuance under such Plan from
3,500,000 shares to 10,000,000 shares. The Board of Directors of the Company
shall recommend to the shareholders the approval of such appointments and
amendments, and the Company shall use its best efforts to obtain such
shareholder approval. The
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Company shall prepare, file and distribute appropriate proxy statements, annual
reports and other materials necessary for such shareholders meeting. Each of
Apollo and Simon hereby consents to such amendments of the Company's Restated
Certificate of Incorporation and of the Aris' 1993 Stock Incentive Plan, and
agrees that they will, at any annual or special meeting of shareholders of the
Company, vote all shares of the Company owned or controlled by them in favor of
approval of such appointments and amendments and shall otherwise cooperate and
use its best efforts to obtain approval by other shareholders of the Company of
such appointments and amendments.
(b) The Company shall, promptly after the approval by its shareholders,
file a Certificate of Amendment to its Restated Certificate of Incorporation
increasing the number of authorized shares of Common Stock of the Company to
100,000,000 shares with the New York Secretary of State. The Company shall then
take all necessary action to reserve for issuance the number of shares of Common
Stock as may be issuable upon conversion of the Series A Preferred Stock.
Promptly after the filing of such Certificate of Amendment, all issued and
outstanding shares of Series A Preferred Stock, shall, in accordance with their
terms, be automatically converted into the applicable number of shares of Common
Stock.
(c) The Company shall, promptly after the approval by its shareholders of
the foregoing amendment to the 1993 Stock Incentive Plan, prepare, file and
distribute an amended Form S-8 Registration Statement covering the increased
number of 10,000,000 shares reserved for issuance under Aris' 1993 Stock
Incentive Plan.
SECTION 9.7 Transaction Expenses. In the event that (i) the transactions
contemplated by this Agreement (including without limitation, funding of the
Simon Stock Purchase and the redemption of the AIF Note) are consummated on the
Closing Date, or (ii) this Agreement is terminated by Simon as a result of a
material breach of the provisions hereof by either of the Company or Apollo,
then the reasonable fees and disbursements of Simon's legal counsel,
accountants, and other professional advisors relating to the transactions
contemplated by this Agreement and amounts paid to or on behalf of any potential
lenders for the Company, documented to the Company (the "Simon Transaction
Expenses"), shall be paid by the Company. Except as set forth in the preceding
sentence, in the event that, for any reason or circumstance, the closing of the
transactions contemplated by this Agreement does not occur, or this Agreement is
terminated, then the Company shall have no obligation to pay or reimburse any
Simon Transaction Expenses. Except as set forth in this Section 9.7, each party
hereto shall bear its own expenses relating to the transactions contemplated
hereby.
SECTION 9.8 Standstill Provisions. For a period of two (2) years from the
date of this Agreement, neither Simon nor any Affiliate thereof (including
without limitation, Arnold Simon individually, A.S. Enterprises, or any
Affiliate thereof) shall (i) hire or solicit for employment any employee of the
Company or its Subsidiaries, or (ii) except for the transactions contemplated by
this Agreement, purchase any shares or debt of the Company; provided however,
that if the Closing of the transactions contemplated hereby occurs on the
Closing Date, the limitation set forth in clause (ii) above shall terminate on
the Closing Date, and any limitations on purchase of shares or debt of the
Company shall be as set forth in the New Shareholders Agreement; provided,
further, that if this Agreement is terminated by Simon as a result of a material
breach of the
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provisions hereof by either of the Company or Apollo, the limitation set forth
in clause (ii) above shall terminate on the date of termination of this
Agreement.
SECTION 9.9 AIF Note Agreement and Debt Registration Rights Agreement
Termination. The Company and AIF shall on the Closing Date terminate the AIF
Note Agreement and the Debt Registration Rights Agreement.
SECTION 9.10 Public Announcements. None of the parties hereto shall make
any announcement or disclosure of the transactions contemplated hereby without
the prior consent of the other parties hereto, unless and except (i) as required
by applicable law and (ii) to sources of financing who agree to maintain
information regarding such transactions in strict confidence.
SECTION 9.11 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, the Company shall assume and
promptly pay all sales, use, privilege, transfer, documentary, gains, stamp,
duties, recording and similar Taxes and fees (including any penalties, interest
or additions) imposed upon any party incurred in connection with the
transactions contemplated by this Agreement (collectively, the "Transfer
Taxes"), and Company shall, at its own expense, procure any stock transfer
stamps required by, and accurately file all necessary Tax Returns and other
documentation with respect to, any Transfer Tax.
SECTION 9.12 Closing Covenant. The parties hereto agree to act in good
faith in taking any and all commercially reasonable actions necessary to
facilitate the Closing and the other transactions contemplated by this
Agreement, including, without limitation, the satisfaction of the respective
closing conditions of the parties set forth herein. Each party hereto further
agrees not to take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Closing Date, or in any of the conditions to the transactions contemplated
hereby not being satisfied, or in a violation of any provision of this
Agreement.
SECTION 9.13 Obligations of Arnold Simon.
(a) Arnold Simon, personally and individually, shall be jointly and
severally liable for the representations, warranties and covenants of Simon set
forth in Sections 4.1 through 4.5 and Sections 6.1 through 6.3 of this
Agreement.
(b) Arnold Simon shall cause Simon to consummate the transactions
contemplated by this Agreement subject to the terms and conditions hereof.
SECTION 9.14 Rule 14f-1 Compliance. As promptly as practicable following
the date hereof, the Company shall file with the Commission and mail to the
shareholders of the Company a statement complying in all material respects with
the requirements of Rule 14f-1 under the Securities Exchange Act of 1934.
SECTION 9.15 Directors and Officers Liability Insurance. The Company shall
provide, for a period inclusive of the Closing Date and of not less than six
years after the Closing Date, the Company's current directors and officers an
insurance and indemnification policy that
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provides coverage for events occurring or arising at or prior to the Closing
Date ("D&O Insurance") that is no less favorable than the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage. From and after the Closing Date, the Company shall
maintain D&O Insurance that provides coverage for current, past and future
directors and officers with respect to events occurring or arising after the
Closing Date that is no less favorable than the Company's existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage.
SECTION 9.16 Certain Tax Elections. The Company shall consult with its
advisors as to whether it is advisable for the Company to timely file the
"Closing-Of-The-Books" election in accordance with Treasury Regulation
ss.1.382-6(b).
SECTION 9.17 Issuance of Shares to Warnaco. As promptly as practicable
following the closing, the Company shall issue seven hundred thousand (700,000)
shares of Common Stock to the Warnaco Group, Inc. ("Warnaco") pursuant to that
certain letter agreement dated on or about February 24, 1999 between Warnaco and
Arnold Simon.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Indemnification and Related Provisions.
(a) Indemnification. The Company (the "Indemnifying Party") agrees and
covenants to hold harmless and indemnify Simon (including any Affiliate,
director, officer, employee, agent or controlling Person of Simon) (each of the
foregoing Persons being an "Indemnified Person"), from and against any losses,
claims, damages, liabilities and expenses (including reasonable attorneys' fees
and expenses of investigation) incurred by such Indemnified Person after the
Closing Date (collectively, "Indemnifiable Costs and Expenses") arising out of
or based upon any breach by the Indemnifying Party of any of its
representations, warranties (other than Section 3.26 (Accounts Receivable) and
Section 3.27 (Inventory)) or covenants contained herein or in the other Basic
Documents only to the extent required to be performed by the Company prior to
the Closing Date.
In the case of any third party lawsuit, claim or other proceeding which
results in Indemnifiable Costs and Expenses, the Indemnifying Party further
agrees promptly upon demand by each Indemnified Person to reimburse each
Indemnified Person for any Indemnifiable Costs and Expenses as they are incurred
by it; provided that if the Indemnifying Party reimburses an Indemnified Person
hereunder for any expenses incurred in connection with a lawsuit, claim, inquiry
or other proceeding or investigation for which indemnification is sought, such
Indemnified Person agrees to refund such reimbursement of expenses to the extent
it is finally judicially determined that the indemnity provided for in this
Section 10.1 is not applicable to such Indemnified Person in accordance with its
terms or otherwise. In the case of any third party lawsuit, claim or other
proceeding which results in Indemnifiable Costs and Expenses, the Indemnifying
Party further agrees: (i) that the indemnification, contribution and
reimbursement commitments set forth in this Section 10.1 shall apply whether or
not an Indemnified Person is a formal party to any such lawsuits,
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claims or other proceedings; and (ii) promptly upon demand by an Indemnified
Person, at any time or from time to time, to reimburse such Indemnified Person
for, or pay any loss, claim, damage, liability or expense as to which the
Indemnifying Party has indemnification obligations to such Indemnified Person
pursuant to this Agreement.
The obligations of the Indemnifying Party hereunder shall survive any
issuance of the Shares, the transfer of the Shares and the termination of this
Agreement and shall not be extinguished with respect to any Person because any
other Persons are not entitled to indemnity or contribution hereunder.
(b) Procedure. Promptly after receipt by an Indemnified Person under this
Section 10.1 of notice of the commencement of any third party lawsuit, claim,
inquiry or other proceeding or investigation thereof, such Indemnified Person
will, if a claim in respect thereof is to be made against the Indemnifying Party
hereunder, notify in writing the Indemnifying Party of the commencement thereof;
but the omission so to notify the Indemnifying Party will not relieve it from
any liability which it may have to any Indemnified Person hereunder unless the
Indemnifying Party is actually prejudiced thereby. In case any such lawsuit or
other proceeding or investigation shall be brought against any Indemnified
Person, it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it shall wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Person, and after notice from the Indemnifying
Party to such Indemnified Person of its election so to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Person
under these indemnification provisions for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such Indemnified
Person, in connection with the defense thereof other than reasonable costs of
investigation; provided that, if (i) the Indemnifying Party shall have failed to
assume the defense of such action or proceeding or shall have failed to employ
counsel reasonably satisfactory to such Indemnified Person in any action or
proceeding; or (ii) the named parties to any such action or proceeding include
both such Indemnified Person and the Indemnifying Party, and such Indemnified
Person shall have been advised by counsel in writing (with a copy to the
Indemnifying Party) that there may be one or more defenses available to such
Indemnified Person which are different from or additional to those available to
the Indemnifying Party, then, in either case, if the Indemnified Person notifies
the Indemnifying Party in writing that it elects to employ separate counsel,
such separate counsel shall be at the expense of the Indemnifying Party and the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Person. In any event, the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (and local counsel, if necessary) at any time for all
Indemnified Persons. Promptly after the occurrence of any event which may give
rise to a claim for indemnification from the Indemnifying Party not involving a
third party claim, lawsuit or proceeding, the Indemnified Persons shall notify
the Indemnifying Party in writing of such event, and in such writing the
Indemnified Persons shall describe in reasonable detail the facts and
circumstances with respect to the subject matter of such claim and the basis on
which indemnification is sought pursuant to this Agreement. The Indemnified
Persons shall reasonably cooperate with the Indemnifying Party in the defense,
settlement other resolution of any claim for which is indemnification is sought
under this Section 10.1.
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(c) Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity provided for in this Section 10.1 is
for any reason held to be unenforceable by the Indemnified Person though
applicable in accordance with its terms, the Indemnifying Party, in lieu of
indemnifying such Indemnified Person, shall have an obligation to contribute,
and shall contribute to the amount paid or payable by such Indemnified Person as
a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party and the Indemnified Persons, but also to reflect the
relative fault of the Indemnifying Party and the Indemnified Persons in
connection with the statement or omissions which result in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations; provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The relative fault of the Indemnifying Party and the
Indemnified Persons shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact has been made by, or relates to information supplied by, the
Indemnifying Party or Indemnified Persons and the Persons' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a Person as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such Person in connection with investigation or defending any such claim.
The Company and Simon agree that it would not be just and equitable if
contribution pursuant to the immediately preceding paragraph were determined by
any method of allocation which does not take into account the equitable
considerations referred to in such paragraph.
(d) Adjustment of Indemnity. The amount by which a party shall be
indemnified for any Indemnifiable Costs and Expenses shall be reduced by (i) any
insurance proceeds or indemnity, contribution, warranty or other similar
payments recoverable by such party and (ii) any right to income tax or other Tax
savings that reduce or will reduce the impact to such party of such
Indemnifiable Costs and Expenses (provided, however, that in the event that any
party seeking indemnification hereunder is unable to collect a payment with
respect to such right to such insurance proceeds, indemnity, contribution,
warranty or other similar payments (other than as a result of a waiver,
settlement or failure to use commercially reasonable efforts to diligently
prosecute such right by such party), then, at the time such right under clause
(i) or (ii) hereof is uncollectible or it becomes evident that such right is
uncollectible (regardless of when such time occurs), the amount of Indemnifiable
Costs and Expenses will be increased by the amount such Indemnifiable Costs and
Expenses were reduced on account of such right).
(e) Periods of Survival of Representations and Warranties of the Company.
All representations and warranties of the Company (other than Section 3.26
(Accounts Receivable) and Section 3.27 (Inventory) which shall not survive the
Closing) contained in this Agreement shall terminate and expire one (1) year
after the Closing Date.
(f) Limitations. Notwithstanding any provision to the contrary contained in
this Agreement, Simon shall not be entitled to indemnification from the Company
for breaches, inaccuracy or nonfulfillment of representations, warranties,
covenants or agreements under this
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Agreement, until the dollar amount of all such claims shall exceed $1,000,000
(One Million Dollars) (the "Basket Amount"). If such claims exceed the Basket
Amount, the Company shall be liable only for the portion of such claims which
exceed the Basket Amount.
(g) Non-Third Party Claims. To the extent that the Indemnifying Party shall
have any obligation to indemnify, reimburse or compensate the Indemnified
Parties under this Section 10.1 for Indemnifiable Costs and Expenses that are
not the result of a third-party lawsuit, claim or proceeding, the Company agrees
to issue shares of Common Stock, free and clear of any Liens, non-assessable,
fully paid and not subject to any preemptive rights, to the Indemnified Parties
in an amount equal to the product of (i) the quotient of (x) the dollar amount
of the Indemnifiable Costs and Expenses payable hereunder divided by (y) 0.444,
multiplied by (ii) the Ownership Factor. The Ownership Factor shall be defined
as the product of (A) 1.64 (one and sixty-four one hundredths) multiplied by (B)
the quotient of (x) the percentage, expressed as a decimal, of the shares of
Common Stock and Common Stock Equivalents of the Company beneficially owned by
Simon at the time of payment of such indemnification, divided by (y) the
percentage, expressed as a decimal, of the shares of Common Stock and Common
Stock Equivalents of the Company beneficially owned by Simon as of the Closing,
provided, however, the quotient of (x) divided by (y) shall not exceed one (1).
Notwithstanding the foregoing, the Company may elect, and shall elect upon the
written request of Apollo, to pay the Indemnified Party under this Section
10.1(g) in cash (so long as the Company shall have available cash without
violation of bank covenants) in an amount equal to the product of (x) the
Ownership Factor multiplied by (y) the dollar amount of the Indemnifiable Costs
and Expenses, in lieu of the issuance of any shares of Common Stock otherwise
required under this Section 10.1(g).
(h) Third Party Claims. To the extent that the Indemnifying Party shall
have any obligation to indemnify, reimburse or compensate the Indemnified
Parties under this Section 10.1 for Indemnifiable Costs and Expenses that are
the result of a third-party lawsuit, claim or proceeding against the Indemnified
Party, the Company agrees to (i) reimburse in cash the amount of any such
Indemnifiable Costs and Expenses actually paid by the Indemnified Party, and
(ii) issue shares of Common Stock, free and clear of any Liens, non-assessable,
fully paid and not subject to any preemptive rights, to the Indemified Parties
in an amount equal to the product of (A) the quotient of (x) the dollar amount
of the Indemnifiable Costs and Expenses payable hereunder divided by (y) 0.444,
multiplied by (B) the Ownership Amount. The Ownership Amount shall be defined as
the percentage, expressed as a decimal, of the shares of Common Stock and Common
Stock Equivalents of the Company beneficially owned by Simon at the time of
payment of such indemnification. Notwithstanding the foregoing, the Company may
elect and shall elect upon the written request of Apollo, to pay the Indemnified
Party under this Section 10.1(h) in cash (so long as the Company shall have
available cash without violation of bank covenants) in an amount equal to the
product of (x) the Ownership Amount and (y) the dollar amount of the
Indemnifiable Costs and Expenses, in lieu of the issuance of shares of Common
Stock otherwise required under clause (ii) of this Section 10.1(h).
(i) Sole and Exclusive Remedy. Simon hereby acknowledges and agrees that,
other than claims which are the result of fraud which are finally adjudicated by
a court of competent jurisdiction, its sole and exclusive remedy with respect to
any and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions set forth in this Section
- 38 -
<PAGE>
10.1; provided however, that Simon shall be entitled to seek specific
performance of the covenants of the Company set forth in this Agreement. In
furtherance of the foregoing, except for claims for breaches of representations
or warranties that are the result of fraud which is finally adjudicated by a
court of competent jurisdiction, each party hereto hereby waives, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action it may have against any other party hereto arising under or based upon
any Federal, state or local statute, law, ordinance, rule or regulation
(including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or otherwise).
(j) Determination of Indemnification. In the event that any Indemnified
Person seeks indemnification pursuant to this Section 10.1, the determination of
whether the Company is obligated to provide such indemnification will initially
be made on behalf of the Company, by Apollo, in writing delivered to the
Indemnified Person. In the event such Indemnified Person, by written notice
given within five (5) days after Apollo's determination, disputes such
determination by Apollo, in whole or in part, then Apollo, on behalf of the
Company, and the Indemnified Person shall attempt in good faith to mutually
resolve such dispute. In the event that, notwithstanding such good faith
attempts by Apollo, on behalf of the Company, and the Indemnified Person, such
dispute is not resolved within thirty (30) days after Apollo's determination,
the dispute shall be referred to an independent, impartial arbitrator or
arbitrator(s) mutually appointed by Apollo and the Indemnified Person prior to
the end of such thirty (30) day period, and the determination of such
independent arbitrator(s) shall be conclusive and binding on the Company and the
Indemnified Person; provided however, that if Apollo and the Indemnified Person
are unable to agree on the appointment of the independent arbitrator or
arbitrator(s) within such thirty (30) day period, Apollo, on behalf of the
Company, and the Indemnified Person shall be free to pursue available legal
remedies regarding the enforcement or defense against the obligation to provide
such indemnification.
SECTION 10.1 Termination and Amendment.
(a) Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(i) by mutual consent of Simon, Apollo and the Company in a
written instrument, if such termination is approved by the Board of
Directors of the Company;
(ii) by any of Simon, Apollo or the Company (with approval of its
Board of Directors) if the transactions contemplated hereby shall not
have been consummated on or before February 15, 1999 (the "Outside
Date"), unless the failure of the Closing to occur by such date shall
be due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set
forth herein; and
(iii) by any of Simon, Apollo or the Company(with approval of its
Board of Directors), provided that the terminating party is not then
in material breach of any representation, warranty, covenant or other
agreement
- 39 -
<PAGE>
contained herein, if any of the other of such parties shall have
breached in any material respect (i) any of the covenants or
agreements made by such other party herein or (ii) any of the
representations or warranties made by such other party herein;
provided, however, that neither party shall have the right to
terminate this Agreement pursuant to this Section 10.2 unless the
breach of any representation or warranty, together with all other such
breaches, would involve a claim in excess of $100,000 and such breach
is not cured within fifteen (15) days following written notice to the
party committing such breach, or which breach, by its nature, cannot
be cured prior to the Closing.
(b) Effect of Termination. In the event of termination of this Agreement by
any of Simon, Apollo or the Company as provided in this Section 10.2, this
Agreement shall forthwith become void and have no effect, and none of Simon,
AIF, AAP or the Company, shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Sections 9.1(b), (c) and (d) and Sections 9.7, 10.6, 10.7, 10.10 and
10.11 and this Section 10.2(b) shall survive any termination of this Agreement
and (ii) notwithstanding anything to the contrary contained in this Agreement,
none of Simon, AIF, AAP nor the Company shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
(c) Amendment; Extension; Waiver. The parties hereto may (i) amend any
provision of this Agreement, (ii) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (iii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iv) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such amendment, extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party, but any extension
or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure or delay by a party
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
SECTION 10.3 Entire Agreement; Survival of Provisions. This Agreement and
the Basic Agreements constitute the entire agreement of the parties with respect
to the transactions contemplated hereby and supersedes all prior agreements and
understandings with respect thereto. All of the covenants of the parties made
herein shall remain operative and in full force and effect regardless of
acceptance of any of the Shares and payment therefor. No representations or
warranties are made by any party hereto except as expressly set forth in this
Agreement, and no party hereto is entitled to rely on any statement, oral or
written, or document or instrument delivered outside of this Agreement or the
schedules or exhibits hereto.
SECTION 10.4 Communications. All notices, demands and other communications
provided for hereunder shall be in writing, and, if to Simon, AIF or AAP, shall
be given by registered or certified mail, return receipt requested, telecopy,
courier service or personal delivery, addressed to Simon, AIF or AAP as shown on
the execution page hereof, or to such other
- 40 -
<PAGE>
address as any of Simon, AIF or AAP may designate to the Company in writing and,
if to the Company, shall be given by similar means to the Company at 475 Fifth
Avenue, New York, New York 10017, telecopier No. (212) 685-8281, Attention:
Charles S. Ramat or to such other address as the Company may designate in
writing, with a copy to Herrick, Feinstein LLP, 2 Park Avenue, New York, New
York 10016, telecopier No. (212) 889- 7577, Attention: Lawrence M. Levinson,
Esq., and shall be deemed given when received.
SECTION 10.5 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
SECTION 10.6 Binding Effect; Assignment. The rights and obligations of
Simon, AIF and AAP under this Agreement may not be assigned to any other Person
(except that AIF may assign its rights to an Apollo Related Account who agrees
to assume all of its obligations hereunder). The rights and obligations of the
Company under this Agreement may not be assigned to any other Person, except
upon the consent of Simon and AIF. Except as expressly provided in this
Agreement(including without limitation, those provisions of this Agreement as to
which Ramat is a third party beneficiary), this Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and permitted assigns. This
Agreement shall be binding upon the Company, Simon, AIF, AAP and any permitted
assignee.
SECTION 10.7 Governing Law. This Agreement shall be deemed to be a contract
made under the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the federal or state courts located in the City of New York
in any action or proceeding arising out of or relating to this Agreement.
SECTION 10.8 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10.9 Headings. The Article and Section headings used or contained
in this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 10.10 Waiver of Jury Trial. The parties hereto hereby irrevocably
waive all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the Basic Agreements or the
transactions contemplated hereby or thereby.
SECTION 10.11 Absence of Third Party Beneficiary Rights. The provisions of
this Agreement are solely for the benefit of the parties hereto and no provision
of this Agreement is intended, nor will any provision be interpreted, to provide
or create any third party beneficiary rights
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<PAGE>
or any other rights of any kind in any shareholder, creditor, customer, lessor,
lessee, licensor, licensee, employee or any other person or entity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
ARIS INDUSTRIES, INC.
By:
---------------------------------
Name: Charles S. Ramat
Title: President
- 42 -
<PAGE>
APOLLO ARIS PARTNERS, L.P.
By: AIF-II, L.P.,
its General Partner
By: Apollo Advisors, L.P.,
its General Partner
By: Apollo Capital Management, Inc., its General
Partner
By:
--------------------------------------------
Name: Robert A. Katz
Title: Vice President
Address: c/o Apollo Advisors, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attention: Robert A. Katz
Telephone: (914) 694-8000
Telecopy: (914) 694-8032
AIF-II, L.P.
By: Apollo Advisors, L.P.,
its General Partner
By: Apollo Capital Management, Inc.,
its General Partner
By:
--------------------------------------------
Name: Robert A. Katz
Title: Vice President
Address: c/o Apollo Advisors, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attention: Robert A. Katz
Telephone: (914) 694-8000
Telecopy: (914) 694-8032
- 43 -
<PAGE>
THE SIMON GROUP, L.L.C.
By:
--------------------------------------------
Arnold Simon,
its Managing Member
Address: c/o A.S.Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Attention: Arnold Simon
Telephone: (212) 642-4314
Telecopy: (212) 642-4265
with a copy to:
Shapiro, Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Attention: Robert Forman, Esq.
Telephone: (212) 972-4900
Telecopier: (212) 557-1275
and
------------------------------------
Arnold Simon, Individually
Address: 1385 Broadway, Suite 604
New York, New York 10018
Telephone: (212) 642-4314
Telecopier: (212) 642-4265
- 44 -
<PAGE>
SHAREHOLDERS AGREEMENT
dated as of February 26, 1999
among
ARIS INDUSTRIES, INC.
and
THE SUBJECT SHAREHOLDERS REFERRED TO HEREIN
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Usage......................................... 2
1.1 Definitions................................................... 2
1.2 Usage......................................................... 5
Section 2. Corporate Governance.......................................... 6
2.1 Board of Directors; Nomination of Directors................... 6
2.2 Voting for Directors Generally................................ 6
2.3 No Violation of or Conflict with Applicable Law............... 7
Section 3. Restrictive Legends Requirements.............................. 7
3.1 Restrictive Legend on Certificate............................. 7
3.2 Removal of Restrictive Legend from Certificates............... 8
3.3 Non-complying Transfers....................................... 8
Section 4. General Restrictions on Transfer of Common Stock.............. 8
4.1 Restrictions on Transfers..................................... 8
4.2 Permitted Transfers by Non-Simon Subject Shareholders
to Affiliates............................................... 8
4.3 Transfers by Estates.......................................... 9
4.4 Transfer of Employee Benefit Shares........................... 10
4.5 Other Permitted Transfers by Non-Simon Subject Shareholders... 10
4.6 Transfers by Simon-Affiliated Subject Shareholders............ 12
4.7 Sale of Interest in Simon Affiliated Subject Shareholders..... 12
4.8 Registered and Exempt Offerings............................... 15
4.9 Compliance with Securities Laws............................... 15
4.10 Limited Notification on Public Sales.......................... 15
Section 5. Preparation and Contents of Transfer Notice;
Modification of Terms; Confidentiality........................ 15
5.1 Definition of "Transfer Notice"............................... 15
5.2 Notification of Company; Determination of Subject
Shareholders Entitled to Participate in Transfer.............. 16
5.3 Extension of Time Periods to Obtain Regulatory Approvals...... 16
5.4 Confidentiality of Information................................ 17
Section 6. Tag-Along Transfer Rights on Non-public Dispositions
by Simon.................................................... 17
6.1 Delivery of Transfer Notices.................................. 17
6.2 Tag-Along Transfer Rights..................................... 17
6.3 Failure to Complete Tag-Along Transfer........................ 20
6.4 Breach of Tag Along Obligation................................ 20
Section 7. Bring Along Right of Simon.................................... 20
7.1 Qualifying Transaction........................................ 20
<PAGE>
Page
----
7.2 Limitations on the Bring Along Right.......................... 20
7.3 Exercise of the Bring Along Right; Closing Date............... 21
7.4 Closing of Purchase and Sale Pursuant to the Bring
Along Right................................................. 21
7.5 Definition of Marketable Securities........................... 21
7.6 Breach of Bring-Along Right by Non-Simon Subject
Shareholders................................................ 22
Section 8. Amendment..................................................... 22
Section 9. Assignment; No Third Party Beneficiaries...................... 22
Section 10. Governing Law................................................. 22
Section 11. Notices....................................................... 22
Section 12. Entire Agreement.............................................. 23
Section 13. Injunctive Relief............................................. 23
Section 14. Termination of Agreement; Termination with Respect
to Certain Subject Shareholders............................... 23
14.1 Termination of Agreement...................................... 23
14.2 Termination with Respect to Subject Shareholders
with De Minimis Holdings...................................... 23
14.3 Termination with Respect to Transactions by Simon............. 23
Section 15. Section Headings.............................................. 24
Section 16. Counterparts.................................................. 24
Section 17. Consent to Jurisdiction....................................... 24
Section 18. Severability.................................................. 24
SCHEDULES AND EXHIBITS
SCHEDULE 1 Names, Addresses for Notices and Holdings of
Subject Shareholders.........................................S-1
EXHIBIT A Agreement to be Bound by the Shareholders Agreement.......... A-1
<PAGE>
SHAREHOLDERS AGREEMENT
Shareholders Agreement (this "Agreement") dated as of February 26, 1999,
among ARIS INDUSTRIES, INC., a New York corporation (the "Company"), THE SIMON
GROUP, L.L.C., a New York limited liability company ("Simon"), APOLLO ARIS
PARTNERS, L.P., a Delaware limited partnership ("AAP"), AIF-II, L.P., a Delaware
limited partnership ("AIF" and together with AAP, "Apollo") and CHARLES S. RAMAT
("Ramat" and, together with Simon and Apollo, each a "Subject Shareholder" and,
collectively, the "Subject Shareholders").
WHEREAS, AAP beneficially owns 5,804,820 shares of the Common Stock of the
Company, par value $.01 per share (the "Common Stock");
WHEREAS, pursuant to the terms and conditions of that certain Securities
Purchase Agreement dated as of February 26, 1999 (the "Purchase Agreement") by
and among the Company, Simon and Apollo, the Company has, among other things,
(i) issued to Simon 2,093,790 shares of the Series A Preferred Stock of the
Company, par value $.01 per share (the "Series A Preferred Stock"), and
24,107,145 shares of Common Stock and (ii) issued to AIF 512,113 shares of
Series A Preferred Stock and 5,892,856 shares of Common Stock;
WHEREAS, each share of Series A Preferred Stock is mandatorily convertible
into shares of Common Stock immediately upon the filing of a Certificate of
Amendment to the Certificate of Incorporation of the Company with the Secretary
of State of New York (and the acceptance of such certificate by the Secretary
State of New York) which increases the number of authorized shares of Common
Stock to 100,000,000 shares without any cost, fee or expense to the holder
thereof;
WHEREAS, execution and delivery of this Agreement by the parties hereto is
a condition precedent to the closing (the "Closing") under the Purchase
Agreement;
WHEREAS, the Closing, including the purchase and sale of the securities of
the Company pursuant to the Purchase Agreement and the other transactions
specified therein, occurred on the date of this Agreement; and
WHEREAS, as of the closing under the Purchase Agreement, each of the
Subject Shareholders owns shares of Common Stock and/or shares of Series A
Preferred Stock in the respective amounts indicated on Schedule 1 hereto;
NOW THEREFORE, in consideration of the premises, covenants and agreements
contained herein, and for other good and valuable consideration, the sufficiency
and adequacy of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
Section 1. Definitions and Usage.
<PAGE>
As used in this Agreement:
1.1 Definitions.
Additional Sale Number. "Additional Sale Number" shall have the meaning set
forth in Section 7.2(iv).
Affiliate. "Affiliate" (i) shall mean, as to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person, (ii) as to Apollo, shall
also mean Apollo Advisors, L.P. (a limited partnership, the general partner of
which is Apollo Capital Management, Inc.) or any investment fund, investment
account or investment entity whose investing manager, investment advisor or
general partner, or any principal thereof, is Apollo Advisors, L.P. or an
Affiliate of any such Person or Apollo Advisors, L.P. and any Person that owns
any securities of or other equity interest in any of the foregoing; (iii) as to
Simon, shall also mean a Person that (w) is not permitted by its constituent
documents, or, if, and only if, such Person receives shares of Common Stock
and/or Series A Preferred Stock from Simon for consideration of $1,000,000 or
more, is not permitted by such Person's stated investment policies, to directly
or indirectly become a member of Simon, (x) receives shares of Common Stock
and/or Series A Preferred Stock from Simon in a Transfer consummated on or prior
to the six-month anniversary of the date hereof, (y) irrevocably grants to Simon
the exclusive dispositive and voting power with respect to such Person's shares
of Common Stock and/or Series A Preferred Stock, and (z) executes an agreement
to be bound by the terms of this Agreement substantially in the form of Exhibit
A hereto; and (iv) with respect to any such specified Person that is an
individual, shall also mean each Family Group Member of such individual. For the
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 meanings
correlative to the foregoing.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Common Stock. "Common Stock" shall mean (i) the common stock, par value
$.01 per share, of the Company, and (ii) shares of capital stock of the Company
issued by the Company in respect of or in exchange for shares of such common
stock in connection with any stock dividend or distribution, stock splitup,
recapitalization, recombination or exchange by the Company generally of shares
of such common stock. If, as a result of a transaction described in clause (ii)
above, Common Stock of more than one class or series is entitled to vote
generally in the election of directors, a specification of a percentage of
Common Stock herein shall, unless the context otherwise requires, be calculated
by reference to the percentage of aggregate voting power of all Common Stock
represented by such class or series.
Common Stock Equivalents. "Common Stock Equivalents" shall mean the number
of shares of Common Stock which the specified Person would receive upon the
conversion of such Person's shares of Series A Preferred Stock.
-2-
<PAGE>
Employee Benefit Shares. "Employee Benefit Shares" shall mean shares of
Common Stock issued or issuable to a Person upon exercise of such Person's
rights under a stock option or purchase right granted pursuant to a stock
incentive, stock option, stock bonus, stock purchase or other employee benefit
plan of the Company. Such shares of Common Stock acquired by a Subject
Shareholder shall continue to be deemed Employee Benefit Shares following the
Transfer, if any, of such shares by such Subject Shareholder to an Affiliate of
such Person pursuant to Section 4.3.
Excess Estate Shares. "Excess Estate Shares" shall have the meaning set
forth in Section 4.3.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Family Group Member. "Family Group Member" shall mean (i) a relative that
is the spouse, parent, grandparent, brother, sister, or descendant (whether
natural or adopted) of such Person and the respective spouses and descendants of
the foregoing, (ii) any trust for the sole benefit of any Person referred to in
clause (i) above, or (iii) the estate of any Person referred to in clause (i)
above.
Aggregate Tag-Along Number. "Initial Aggregate Tag-Along Number" shall have
the meaning set forth in Section 6.2(ii).
Individual Tag-Along Numbers. "Individual Tag-Along Numbers" shall have the
meaning set forth in Section 6.2(ii).
Marketable Securities. "Marketable Securities" shall have the meaning set
forth in Section 7.5.
Non-Simon Designees. "Non-Simon Designees" shall mean Ramat and a designee
of Apollo reasonably acceptable to Simon.
Non-Simon Subject Shareholder. "Non-Simon Subject Shareholder" shall mean
any Subject Shareholder other than a Simon-Affiliated Subject Shareholder.
Non-public Offering. "Non-public Offering" shall mean the offer for sale or
other proposed Transfer of shares of Common Stock other than in an offering
registered under the Securities Act.
Offered Shares. "Offered Shares" shall have the meaning set forth in
Section 5.1.
Participating Non-Simon Subject Shareholder. "Participating Non-Simon
Subject Shareholder" shall have the meaning set forth in Section 6.2(i).
-3-
<PAGE>
Person. "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended or any successor act or statute regulating the transactions contemplated
hereby that were formerly regulated under the Securities Act that may be enacted
after the date hereof.
Simon-Affiliated Selling Shareholders. "Simon-Affiliated Selling
Shareholders" shall have the meaning set forth in Section 6.1.
Simon-Affiliated Subject Shareholders. "Simon- Affiliated Subject
Shareholders" shall mean Simon and any of its Affiliates, Arnold Simon and any
of his Affiliates or Family Group Members in each case that are required to be
parties to this Agreement.
Simon Designee. "Simon Designee" shall mean Arnold Simon until the death or
disability of Arnold Simon and, after any such event, the successor Simon
Designee shall be the managing member of Simon or such other Person as may be
designated by Simon hereafter until such individual's death or disability and
after any such event, the Simon Designee shall be the Person as Simon shall
designate from time to time in a written notice delivered to the Company and
each of the Subject Shareholders; provided, however, that any such Person shall
have executed and delivered an appropriately completed agreement substantially
in the form of Exhibit A.
Simon Syndicate Representative. "Simon Syndicate Representative" shall mean
the Simon Designee.
Subject Shareholder. "Subject Shareholder" shall mean each of Simon, Apollo
and Ramat and each subsequent holder of shares of Common Stock and/or Series A
Preferred Stock initially owned by any of such parties hereto that executes and
delivers an appropriately completed agreement substantially in the form of
Exhibit A.
Subject Shareholder's Original Holdings. "Subject Shareholder's Original
Holdings" (x) shall mean, with respect to any specified Subject Shareholder, the
aggregate number of shares of Common Stock and Common Stock Equivalents, in all
cases, beneficially owned by such Person on the date as of which such Person
became a party hereto, subject to (i) appropriate adjustment in the event of any
stock dividend or distribution, stock split-up, recapitalization, recombination
or exchange by the Company generally of shares, and (ii) reduction by the
aggregate number of shares of Common Stock and Common Stock Equivalents
Transferred by such Person, and (y) shall not include any Employee Benefit
Shares, regardless of when acquired, or (subject to clauses (i) and (ii) above)
any shares of Common Stock and Common Stock Equivalents acquired by such Subject
Shareholder after the date as of which such Person became a party to this
Agreement.
-4-
<PAGE>
Subsidiary. "Subsidiary" shall mean any corporation or other entity of
which at least a majority of the outstanding capital stock or equity interest
having voting power in ordinary circumstances to elect directors of such
corporation or entity shall at the time be held, directly or indirectly, by the
Company, by the Company and any one or more Subsidiaries thereof or by one or
more Subsidiaries thereof.
Transfer. "Transfer" shall mean the act of issuing, granting, selling,
conveying, giving, transferring, creating a trust (voting or otherwise),
assigning or otherwise disposing of beneficial ownership of (other than
pledging, hypothecating or otherwise transferring as security), and correlative
words shall have correlative meanings; provided, however, that any transfer or
other disposition upon foreclosure or other exercise of remedies of a secured
creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as security shall constitute a "Transfer".
Transfer Notice. "Transfer Notice" shall have the meaning set forth in
Section 5.1.
1.2 Usage.
(i) References to a Person are also references to such Person's assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to shares of Common Stock, Common Stock Equivalents and/or
Series A Preferred Stock "owned" by a Subject Shareholder shall include (A) all
Employee Benefit Shares owned by such person and (B) shares of Common Stock
and/or Series A Preferred Stock beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other agent, but
shall exclude shares held by a Subject Shareholder in a fiduciary capacity for
customers of such Person.
(iii) References to a document are to it as amended, waived and otherwise
modified from time to time and references to a statute or other governmental
rule are to it as amended and otherwise modified from time to time (and
references to any provision thereof shall include references to any successor
provision).
(iv) References to Sections or to Schedules or Exhibits are to sections
hereof or schedules or exhibits hereto, unless the context otherwise requires.
(v) The definitions set forth herein are equally applicable both to the
singular and plural forms and the feminine, masculine and neuter forms of the
terms defined.
(vi) The term "including" and correlative terms shall be deemed to be
followed by "without limitation" whether or not followed by such words or words
of like import.
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(vii) The term "hereof" and similar terms refer to this Agreement as a
whole.
Section 2. Corporate Governance.
2.1 Board of Directors; Nomination of Directors.
(a) During the term of this Agreement, Simon shall nominate the candidates
for the Board of Directors of the Company and shall include among such nominees
the name of: (i) one (1) individual designated in a writing signed by Apollo and
delivered to Simon on or prior to ten (10) business days after the date a notice
requesting such nominee (a "Nominee Request") has been given by Simon to Apollo;
provided, that the individual so designated by Apollo (the "Apollo Designee") is
reasonably acceptable to Simon; and (ii) Charles S. Ramat if at such time Ramat
is entitled pursuant to an employment agreement with the Company (an "Employment
Agreement") to be nominated as a Director of the Company. No party hereto shall
nominate any candidate for the Board of Directors in a manner that is
inconsistent with the foregoing provisions.
(b) Notwithstanding the provisions of Section 2.1(a) to the contrary, Simon
shall not have an obligation to nominate as a Director of the Company (i) the
Apollo Designee on or after the date that the aggregate number of shares of
Common Stock and Common Stock Equivalents owned by Apollo and its Affiliates is
less than 50% of Apollo's Subject Shareholder's Original Holdings or (ii) Ramat
at such time as Ramat may no longer be entitled to be so nominated under an
Employment Agreement. In addition, at such time as Apollo shall beneficially own
less than 50% of Apollo's Subject Shareholder's Original Holdings, Simon may
require the Apollo Designee to resign as a director of the Company. In the event
that Ramat is no longer an executive officer of the Company, Ramat shall resign
as a Director of the Company promptly upon the written request of Simon.
2.2 Voting for Directors Generally. Each Subject Shareholder shall vote for
Directors in accordance with this Agreement as follows. Each Subject Shareholder
shall appear in person, or by proxy, at any annual or special meeting of
shareholders of the Company for the purpose of obtaining a quorum and shall vote
the shares of Common Stock and Common Stock Equivalents (including Employee
Benefit Shares) owned by such Subject Shareholder, either in person or by proxy,
at any such meeting of shareholders called for the purpose of voting on the
election of Directors, in favor of the election of the individuals, if any,
nominated as described in Section 2.1 or, if no candidates are so nominated,
then for the candidates nominated by the Board of Directors in accordance with
the Company's By-Laws. Each Subject Shareholder shall vote in any solicitation
of written consents or proxies consistently with the foregoing. Each Subject
Shareholder shall use its best efforts to cause the Board of Directors to
nominate the individuals designated in accordance with Section 2.1.
2.3 No Violation of or Conflict with Applicable Law. Nothing in this
Agreement shall be construed to require (i) a party hereto to take or fail to
take any action which may be inconsistent with or in violation of such party's
duties or obligations under applicable law as an
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officer or director of the Company or any of its Subsidiaries or (ii) the
Company to take or fail to take any action, including maintaining provisions
referred to in this Section 2 in its Certificate of Incorporation or By-Laws, to
the extent inconsistent with or in violation of the New York Business
Corporation Law or other applicable law.
Section 3. Restrictive Legends Requirements.
3.1 Restrictive Legend on Certificate. Each of the Subject Shareholders
understands and agrees that the Company shall place the applicable portion or
portions of the following legend on the certificates representing the shares of
Common Stock and/or Series A Preferred Stock owned by such Person on the date
hereof or shares of Common Stock (excluding Employee Benefit Shares) and/or
Series A Preferred Stock which may be acquired by such Person during the term of
this Agreement and each Subject Shareholder shall submit to the Company each
certificate representing any shares of Common Stock and/or Series A Preferred
Stock so acquired in order that such legend may be placed on such certificates:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED WITHOUT
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY
STATE BLUE SKY OR SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND BLUE SKY LAWS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR QUALIFICATION, OR AN EXEMPTION FROM THE REGISTRATION OR
QUALIFICATION REQUIREMENTS OF SUCH ACT OR LAWS, OR UNLESS SUCH ACT OR LAWS DO
NOT APPLY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF THE SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 26, 1999, AS
AMENDED, INITIALLY AMONG THE ISSUER, THE ORIGINAL HOLDER OF THIS CERTIFICATE AND
THE OTHER SUBJECT SHAREHOLDERS REFERRED TO THEREIN. THE SHAREHOLDERS AGREEMENT
CONTAINS PROVISIONS RESTRICTING THE TRANSFER OF SECURITIES EVIDENCED BY THIS
CERTIFICATE UNDER CERTAIN CIRCUMSTANCES. SUCH SHAREHOLDERS AGREEMENT ALSO
CONTAINS PROVISIONS REQUIRING THE VOTE OF THE SECURITIES EVIDENCED BY THIS
CERTIFICATE IN FAVOR OF INDIVIDUALS NOMINATED TO THE BOARD OF DIRECTORS OF THE
CORPORATION BY OTHER SUBJECT SHAREHOLDERS REFERRED TO THEREIN UNDER CERTAIN
CIRCUMSTANCES. A COPY OF SUCH SHAREHOLDERS AGREEMENT MAY BE OBTAINED FROM THE
ISSUER WITHOUT CHARGE.
3.2 Removal of Restrictive Legend from Certificates. The Company shall,
upon the request of any holder of a certificate bearing the foregoing legend and
the surrender of such certificate, issue a new certificate (i) without the
foregoing legend if the Common Stock evidenced by such certificate has been
effectively registered under the Securities Act and such Common Stock shall have
been Transferred by the holder thereof in accordance with such registration,
(ii) with only the second, third and fourth sentences of such legend if
circumstances are such as to enable the
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Company reasonably to conclude that the first sentence of such legend is no
longer required or necessary under any applicable federal or state law or
regulation; provided, however, that, as a condition to the removal of such first
sentence the Company shall be entitled to require that such holder shall have
delivered to the Company a written legal opinion, reasonably acceptable to
counsel for the Company, to the foregoing effect if the Company shall reasonably
believe that such an opinion is necessary, or (iii) with only the first sentence
if the restrictive provisions of this Agreement shall have been terminated with
respect to the shares of Common Stock or Series A Preferred Stock represented by
such certificate.
3.3 Non-complying Transfers. Any Transfer by a Subject Shareholder of any
shares of Common Stock, Common Stock Equivalents and/or Series A Preferred Stock
subject to this Agreement that does not comply with the terms of this Agreement
shall be void ab initio and of no effect, and the Company and its transfer agent
and registrar shall have no obligation to give effect to such purported Transfer
or to recognize the purported Transferee as the holder of such shares.
Section 4. General Restrictions on Transfer of Common Stock.
4.1 Restrictions on Transfers. During the term of this Agreement no Subject
Shareholder shall Transfer any shares of Common Stock, Common Stock Equivalents
and/or Series A Preferred Stock, now owned or hereafter acquired by such Person,
except as permitted in this Section 4.
4.2 Permitted Transfers by Non-Simon Subject Shareholders to Affiliates.
Notwithstanding any provision of this Agreement to the contrary, any Non-Simon
Subject Shareholder may Transfer shares of Common Stock, Common Stock
Equivalents and/or Series A Preferred Stock to any Person who is (or immediately
after such proposed Transfer will be) an Affiliate of such Person at any time
provided, that:
(A) no fewer than ten days prior to the Transfer date, such Non-Simon
Subject Shareholder shall have delivered to the Simon Designee and the Secretary
of the Company written notification setting forth the number of shares of Common
Stock and/or Common Stock Equivalents proposed to be Transferred and the
identities of such Non-Simon Subject Shareholder and/or Series A Preferred Stock
proposed transferee (each, a "Transferee") and the nature of their relationship
to one another; and
(B) such Transferee shall have executed and delivered to the Secretary of
the Company an appropriately completed agreement dated as of the date of the
Transfer substantially in the form of Exhibit A.
4.3 Transfers by Estates. Notwithstanding any provision of this Agreement
to the contrary, following the death of a Non-Simon Subject Shareholder which is
a natural person, such Person's estate may Transfer to any Person a number of
shares of Common Stock, Common Stock Equivalents and/or Series A Preferred Stock
necessary to obtain an aggregate net purchase
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price not to exceed the product obtained by multiplying (x) the total estate tax
payable by the estate after giving effect to the benefit of the unified credit
pursuant to Section 2010 or other applicable provision of the Code by (y) a
fraction the numerator of which is the aggregate value of the shares of Common
Stock, Common Stock Equivalents and/or Series A Preferred Stock owned by the
estate (as set forth on the estate's tax return filed or to be filed with the
Internal Revenue Service, copies of which shall be provided to the Company and
the Simon Designee, if requested by them) and the denominator of which is the
aggregate value of all assets of the estate (as set forth on the estate's tax
return filed or to be filed with the Internal Revenue Service, copies of which
shall be provided to the Company and the Simon Designee if requested by them);
provided, however, that:
(1) such Transfer is completed within 12 months of the date of the
decedent's death;
(2) as soon as practicable following the closing of a Transfer pursuant to
this Section 4.2(ii) such estate shall deliver to the Secretary of the Company
and the Simon Designee written notice of such Transfer setting forth the number
of shares of Common Stock and/or Series A Preferred Stock so Transferred and the
number of such shares, if any, that are Employee Benefit Shares, and the
identities of the decedent and the Transferee;
(3) any Transferee that is an Affiliate of the decedent shall have executed
and delivered to the Secretary of the Company an appropriately completed
agreement dated as of the Transfer date substantially in the form of Exhibit A,
and any Transferee that is not an Affiliate of the decedent or an Affiliate of
any other Non-Simon Subject Shareholder or a Simon-Affiliated Subject
Shareholder shall not be required or permitted to become a party to this
Agreement and shall not be entitled to any rights or benefits nor be subject to
any of the obligations or restrictions as a Subject Shareholder hereunder; and
(4) the number of shares of Common Stock, Common Stock Equivalents and/or
Series A Preferred Stock that a distributee of the estate shall be entitled to
Transfer pursuant to Section 4.5 shall be reduced by the distributee's allocable
portion of such estate's "Excess Estate Shares" determined in accordance with
the next sentences. An estate's "Excess Estate Share" shall equal the number of
shares of Common Stock, Common Stock Equivalents and/or Series A Preferred Stock
Transferred by such estate in excess of the number of shares of Common Stock,
Common Stock Equivalents and/or Series A Preferred Stock that the decedent would
have been permitted to Transfer pursuant to Section 4.5 during the 12-month
period in which the estate Transferred shares of Common Stock and/or Series A
Preferred Stock pursuant to this Section 4.3; the Excess Estate Shares shall be
allocated to the distributees of the estate pro rata in accordance with the
number of shares of Common Stock, Common Stock Equivalents and/or Series A
Preferred Stock Transferred to such distributees by the estate.
References to an estate shall, as appropriate, include references to related
Persons such as personal representatives of a decedent and trustees of a trust
established by a decedent.
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4.4 Transfer of Employee Benefit Shares. Notwithstanding any provision of
this Agreement to the contrary, any Subject Shareholder may Transfer Employee
Benefit Shares to any Person at any time without restriction by the terms of
this Agreement, subject to applicable law, provided, however, that any
Transferee of Employee Benefit Shares that is an Affiliate of the Transferor
shall have executed and delivered to the Secretary of the Company an
appropriately completed agreement substantially in the form of Exhibit A, and
any Transferee that is not an Affiliate of the Transferor nor an Affiliate of
any other Non-Simon Subject Shareholder or a Simon-Affiliated Subject
Shareholder shall not be required or permitted to become a party to this
Agreement and shall not be entitled to any rights or benefits nor be subject to
any of the obligations or restrictions as a Subject Shareholder hereunder. As
soon as practicable following closing of a Transfer pursuant to this Section
4.4, the Transferor shall deliver to the Simon Designee and the Secretary of the
Company written notification of the Transfer setting forth the number of
Employee Benefit Shares Transferred.
4.5 Other Permitted Transfers by Non-Simon Subject Shareholders. In
addition to any Transfer of shares of Common Stock, Common Stock Equivalents
and/or Series A Preferred Stock otherwise permitted by this Agreement, any
Non-Simon Subject Shareholder may Transfer any shares of Common Stock, Common
Stock Equivalent and/or Series A Preferred Stock Transferred as permitted by
this Section 4.5.
(i) De Minimis Transfers. During each 12-month period ending on any
anniversary of the date hereof prior to the termination of this Agreement, any
Non-Simon Subject Shareholder may Transfer to any Person that is not an
Affiliate of such Non-Simon Subject Shareholder a number of shares of Common
Stock or Common Stock Equivalents equal to or less than 10% of the sum of (i)
such Subject Shareholder's Original Holdings and (ii) such Subject Shareholder's
Employee Benefit Shares owned on the date hereof; provided, however, that:
(1) the Transferring Non-Simon Subject Shareholder shall certify that, to
such Person's knowledge following due inquiry, the aggregate Transfers of Common
Stock and/or Common Stock Equivalents by such Person (including the Transfer
described in such notification) and its Affiliates pursuant to Section 4.5(i)
during the relevant 12-month period do not exceed the limit described in the
first clause of this Section 4.5 (i); and
(2) any Transferee that is not an Affiliate of the Transferor or any other
Non- Simon Subject Shareholder nor a Simon-Affiliated Subject Shareholder shall
not be required or permitted to become a party to this Agreement and shall not
be entitled to any rights or benefits nor be subject to any of the obligations
or restrictions as a Subject Shareholder hereunder.
(ii) Transfers Subject to Simon's Right of First Offer. Prior to a
Non-Simon Affiliated Shareholder effecting any Transfer of any shares of Common
Stock and/or Series A Preferred Stock (other than any Transfer otherwise
permitted under this Agreement), such Non-Simon Affiliated Shareholder shall
offer such shares of Common Stock and/or Series A Preferred Stock to Simon
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by delivering to the Simon Designee a Transfer Notice to such effect stating the
terms of such offer, and meeting the requirements of a Transfer Notice under
Section 5.1 hereof and including the proposed closing date, which shall be not
earlier than fifteen (15) business days after delivery of such Transfer Notice.
If the Simon Designee does not deliver a written notice irrevocably accepting,
on behalf of Simon, such offer of Common Stock and/or Series A Preferred Stock
on or prior to ten (10) business days after the Transfer Notice is deemed given
pursuant to Section 11 (or if such notice of acceptance is delivered but Simon
shall fail to purchase such shares of Common Stock and/or Series A Preferred
Stock on the closing date specified in the Transfer Notice), then such Non-Simon
Affiliated Shareholder shall have the right to Transfer such shares of Common
Stock and/or Series A Preferred Stock to any Person on terms no less favorable
to such Non-Simon Affiliated Shareholder than the terms described in such
Transfer Notice on or prior to the date that is ninety (90) days after the
expiration of such ten (10) business day period. If the Simon Designee shall
deliver the written notice irrevocably accepting the offer within the required
time period, such Non-Simon Affiliated Shareholder shall sell such offered
shares to Simon at the price per share and in accordance with the other terms as
set forth in the applicable Transfer Notice on the closing date specified
therein. Any Transferee of such shares of Common Stock and/or Series A Preferred
Stock Transferred pursuant to this Section 4.5(ii) that is not an Affiliate of
such Non- Simon Affiliated Shareholder or an Affiliate of any other Non-Simon
Subject Shareholder or a Simon-Affiliated Subject Shareholder shall not be
required or permitted to become a party to this Agreement and shall not be
entitled to any rights or benefits nor be subject to any of the obligations or
restrictions as a Subject Shareholder hereunder.
4.6 Transfers by Simon-Affiliated Subject Shareholders.
(i) Transfers to Affiliates. Subject to Sections 4.7 and 4.9, any
Simon-Affiliated Subject Shareholder may Transfer shares of Common Stock, Common
Stock Equivalents and/or Series A Preferred Stock to any of its Affiliates at
any time without triggering the rights described in Section 6, if (1)
contemporaneously with the closing of a Transfer pursuant to this Section 4.6(i)
the Simon-Affiliated Subject Shareholder shall deliver to the Secretary of the
Company and each other Subject Shareholder written notification of such Transfer
setting forth the number of shares of Common Stock and/or shares of Series A
Preferred Stock so Transferred and the identities of the Simon-Affiliated
Subject Shareholder and the Transferee and the nature of their relationship to
one another, and shall provide any additional information that the Company
and/or each other Subject Shareholder may reasonably request in order to
determine whether the Transferee is an Affiliate of the Transferor, and (2) if
such Transferee is not then a party hereto, such Person shall have executed and
delivered to the Secretary of the Company an appropriately completed agreement
substantially in the form of Exhibit A. For purposes of this Section 4.6(i), a
Person who is an Affiliate of Simon solely by reason of clause (iii) of the
definition of Affiliate set forth in Section 1.1 hereof shall not be deemed to
be an Affiliate of a Simon-Affiliated Subject Shareholder with respect to any
Transfers of Common Stock and/or Series A Preferred Stock to such Person by any
Simon-Affiliated Subject Shareholder after the six month anniversary date of the
date hereof.
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(ii) De Minimis Transfers to Non-Affiliates. In addition to any shares of
Common Stock, Common Stock Equivalents and/or shares of Series A Preferred Stock
Transferred pursuant to Section 4.6(i) or as otherwise permitted by this
Agreement, during each 12-month period ending on any anniversary date hereof
prior to the termination of this Agreement, each Simon-Affiliated Subject
Shareholder may Transfer to any Person that is not an Affiliate of such
Simon-Affiliated Subject Shareholder, without triggering the rights described in
Section 6, a number of shares of Common Stock and Common Stock Equivalents equal
to a maximum of 10% of such Subject Shareholder's Original Holdings; provided,
however, that no such Transferee shall thereby be required or permitted to
become a party to this Agreement and shall not thereby be entitled to any rights
as a Subject Shareholder hereunder. As soon as practicable following the closing
of a Transfer pursuant to this Section 4.6(ii), the Transferor shall deliver to
the Secretary of the Company and each Subject Shareholder written notification
of such Transfer setting forth the number of shares of Common Stock and/or
shares of Series A Preferred Stock so Transferred and the identity of the
Transferor and Transferee.
4.7 Sale of Interest in Simon Affiliated Subject Shareholders.
(i) Restrictions on Sale of Interest in Simon Affiliated Subject
Shareholders. Notwithstanding any provisions of this Agreement to the contrary,
no Simon-Affiliated Subject Shareholder shall be permitted to Transfer, or
permit the Transfer of, any interest in any such Simon-Affiliated Subject
Shareholder, nor shall any Simon-Affiliated Subject Shareholder Transfer, or
permit the Transfer of, any right of beneficial ownership of the Common Stock
and/or Series A Preferred Stock owned by such Simon Affiliated Subject
Shareholder, in all cases, in any transaction or series of related transactions
(each, a "Simon Indirect Transfer") unless each of the following conditions are
satisfied:
(A) the Simon Indirect Transfer (together with all prior Simon Indirect
Transfers and all prior Transfers of Common Stock and/or Series A Preferred
Stock by the Simon-Affiliated Subject Shareholders) results in Arnold Simon
(and/or his estate) retaining the direct or indirect beneficial ownership of not
less than TWENTY-FIVE (25%) of the aggregate shares of Common Stock and Common
Stock Equivalents beneficially owned by all Simon Affiliated Subject
Shareholders;
(B) such Simon-Affiliated Subject Shareholder remains the sole and
exclusive record owner of all of the shares of Common Stock and Series A
Preferred Stock owned by such Simon Affiliated Subject Shareholder immediately
prior to the Simon Indirect Transfer;
(C) such Simon-Affiliated Subject Shareholder and each Transferee with
respect to such Simon Indirect Transfer (each such Person, a "Simon Subscriber")
shall (i) submit to, and remain subject to the jurisdiction of the federal and
state courts in New York; (ii) designate such Simon-Affiliated Subject
Shareholder as agent for service of any complaint, summons, notice or other
process relating to any action or proceeding arising hereunder by delivery
thereof to such party by hand or by certified mail, delivered or addressed as
set
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forth in Section 11 of this Agreement; and (iii) waive any claim or defense in
any such action or proceeding based on any alleged lack of personal
jurisdiction, improper venue or forum non conveniens or any similar basis;
(D) subsequent to such Simon Indirect Transfer, Arnold Simon shall
ultimately control (as such term is used in the definition of the term
"Affiliate") such Simon-Affiliated Subject Shareholder (including all investment
decisions with respect to, and vote of, the shares of Common Stock and Series A
Preferred Stock owned by such Simon Affiliated Subject Shareholder;
(E) Arnold Simon shall remain the sole and exclusive Person authorized to
represent the Simon-Affiliated Subject Shareholder in connection with all
transactions, and the execution of all documents and instruments between or
among the Simon-Affiliated Subject Shareholder, the Company and/or the Subject
Shareholders (or any of the Subject Shareholders);
(F) each direct or indirect Simon Subscriber of any such interest in any
Simon Indirect Transfer shall be an Accredited Investor (as defined by
Regulation D of the Securities Act);
(G) the Simon Indirect Transfer shall be effected without the requirement
to register any interest offered or sold under the Securities Act in reliance of
Section 4(2) thereunder (including the regulations promulgated thereunder) and
shall be effected in compliance with all applicable securities laws, rules and
regulations;
(H) no such transaction shall relieve such Simon-Affiliated Subject
Shareholder from any of its obligations under this Agreement; and
(I) as soon as practicable following the closing of any Simon Indirect
Transfers, Simon or such Simon-Affiliated Subject Shareholder, as the case may
be, shall deliver to the Secretary of the Company and each other Subject
Shareholder written notification of such Simon Indirect Transfer setting forth
the interest in such Simon-Affiliated Subject Shareholder Transferred and the
identities of each such Simon Subscriber and its respective Affiliates.
(ii) Liquidation of Simon. Neither Simon nor any other Simon Affiliated
Subject Shareholder shall dissolve, liquidate, reorganize, merge, consolidate or
otherwise terminate its existence (a "Liquidation") if such liquidation would
result in any one person or group (as defined in Rule 13(d) under the Securities
Act), other than Arnold Simon and/or his Affiliates, owning beneficially or of
record, more than Thirty Five (35%) Percent of the aggregate number of shares of
Common Stock and Common Stock Equivalents then issued and outstanding.
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(iii) Change of Control of Simon. During the term of this Agreement, Arnold
Simon shall be required to retain control (as defined in the definition of
Affiliate) of Simon and all other Simon Affiliated Subject Shareholders, and
neither Arnold Simon, Simon or any other Simon Affiliated Subject Shareholder
shall enter into, or permit, any transaction or agreement(whether or not it
would constitute a Simon Indirect Transfer, and including without limitation, by
means of a Liquidation) which would result in failure to maintain such control.
(iv) Breach of Restrictions. In the event that (1) Simon or any
Simon-Affiliated Subject Shareholder effects any Simon Indirect Transfer which
does not comply with the terms and provisions of Section 4.7(i), or (2) any
Liquidation occurs, or (3) there is any breach or violation of the control
requirements of Section 4.7(iii), then, in addition to all other rights and
remedies of the parties hereto provided at law and in equity, from and after any
such events, neither Simon nor any Simon-Affiliated Subject Shareholder nor any
direct or indirect Simon Subscriber nor any of the respective assignees or
transferees of any such Person shall have the rights and benefits of Simon and
the Simon-Affiliated Subject Shareholders provided under Sections 2 and 7
hereof.
(v) Coordination with the Transfer Provisions. The terms and provisions of
this Section 4.7 set forth the restrictions on Transfers of interests in the
Simon-Affiliated Subject Shareholders, as distinguished from transfer of record
ownership of the shares of Common Stock or Series A Preferred Stock held by the
Simon-Affiliated Subject Shareholders. Notwithstanding any such Transfer of
interests in the Simon-Affiliated Subject Shareholders, record ownership of the
Common Stock and Series A Preferred Stock held by the Simon-Affiliated Subject
Shareholders must remain in the name of the Simon-Affiliated Subject Shareholder
which is a party to this Agreement and shall be governed by the terms and
conditions of this Agreement.
4.8 Registered and Exempt Offerings. Notwithstanding any provisions of this
Agreement to the contrary, any Subject Shareholder may Transfer shares of Common
Stock (including Employee Benefit Shares) and/or Series A Preferred Stock in (i)
an offering of any such securities which is registered under the Securities Act;
or (ii) a sale of any such securities in compliance with Rule 144 of the
Securities Act (or any successor or similar rule or regulation).
4.9 Compliance with Securities Laws. Notwithstanding any provision of this
Agreement to the contrary, no Transfer of Common Stock and/or Series A Preferred
Stock shall be permitted hereunder unless such Transfer: (i) does not (except
for Transfers pursuant to Section 4.8(i) hereof) require the registration of any
shares of such security under the Securities Act of 1933, as amended, or any
state securities or "Blue Sky" laws (other than those filed in connection with a
transaction exempt from the registration requirements of the Securities Act of
1933, as amended); and (ii) is effected in compliance with all applicable
Federal and State Securities and "Blue Sky" Laws.
4.10 Limited Notification on Public Sales. Notwithstanding any provisions
of this Agreement to the contrary, in the event of a Transfer (or proposed
Transfer) of Common Stock, Series A Preferred Stock or Employee Benefit Shares
permitted by this Agreement which is a sale (or proposed) sale to the public
market in general and such sale is effected through a Person who is
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registered as a broker or dealer pursuant to Section 15 of the Exchange Act (a
"Public Sale"), then the only notice required to be delivered to the Company and
the Simon Designee under this Agreement shall be a letter that sets forth the
number of shares to be transferred and that the Transferee is the public market.
Section 5. Preparation and Contents of Transfer Notice; Modification of
Terms; Confidentiality.
5.1 Definition of "Transfer Notice". As used in this Agreement "Transfer
Notice" shall mean a notice that (x) sets forth: (i) the aggregate number of
shares of Common Stock (other than Employee Benefit Shares) and/or Common Stock
Equivalents to be Transferred (the "Offered Shares"), including the number of
Offered Shares proposed to be Transferred by each of the Transferring Subject
Shareholders listed in the Transfer Notice; (ii) the proposed date, time and
place of Transfer; (iii) the amount and form of consideration to be received in
the aggregate and on a per-share basis by the Transferring Subject Shareholder
(before deduction for the expenses of Transfer), or the method of determining
the amount of such consideration; (iv) the identity of the Transferee or
Transferees (provided that in the case of a Public Sale, or a Transfer pursuant
to Rule 144, the requirement to set forth such identity may be satisfied by a
statement that the Transferee or Transferees is the public market); (v) any
other terms and conditions of the Transfer, together with copies of any
then-available Transfer documents (or the current draft thereof) related
thereto; and (vi) a statement that the Transfer Notice is being delivered to the
recipient pursuant to this Section 5.1 and the address at which such recipient
may notify the Transferring Subject Shareholder of the recipient's election to
exercise any rights that such recipient may have pursuant to this Agreement with
respect to the Transfer proposed in the Transfer Notice; and (y) attaches the
report of holdings of Common Stock and/or Series A Preferred Stock delivered by
the Company pursuant to Section 5.2, or if no such report shall have been so
delivered by the Company, then a copy of the report upon which the Transferring
Subject Shareholder shall be entitled to rely pursuant to Section 5.2(ii).
5.2 Notification of Company; Determination of Subject Shareholders Entitled
to Participate in Transfer.
(i) Prior to delivery of any Transfer Notice pursuant to Section 4.5(ii) or
Section 6.1, the Subject Shareholder obligated to deliver such Transfer Notice
shall request in a writing, directed to the attention of the Secretary of the
Company, that the Company advise such Subject Shareholder of (x) the number of
shares of Common Stock and Series A Preferred Stock, if any, owned by each
Subject Shareholder, respectively, (y) the number of shares of Common Stock and
Series A Preferred Stock, if any, subject to this Agreement, and (z) if the
Transfer Notice is to be delivered pursuant to Section 6.1, the number of
Employee Benefit Shares that each Subject Shareholder is entitled to acquire
upon exercise of a stock option or purchase right, in each case as of the date
such information shall be sent by the Company to the requesting Subject
Shareholder.
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(ii) The Company shall, promptly upon receipt of a request pursuant to
Section 5.2(i), prepare, or cause the transfer agent for the Common Stock to
prepare, a report of such holdings of Common Stock referred to in Section 5.2(i)
and cause such written report to be delivered to the requesting Subject
Shareholder no later than ten days following the date on which the request is
deemed given pursuant to Section 11; if such report shall not have been so
delivered within such ten-day period, such requesting Subject Shareholder shall
be entitled to rely upon the information set forth in the report of Common Stock
holdings most recently delivered by the Company to such Subject Shareholder, or,
if no such report shall have been so previously delivered, upon the information
set forth on Schedule 1.
(iii) In addition to any reports requested pursuant to Section 5.2(i), the
Company shall prepare a report of Common Stock holdings and Series A Preferred
Stock holdings, if any, setting forth the information described in clauses (x),
(y) and (z) of Section 5.2(i) as of the end of each fiscal quarter of the
Company and shall deliver such quarterly reports to each Subject Shareholder no
later than 14 days following the last day of such quarter. Any Common Stock
holdings and Series A Preferred Stock holdings reports prepared pursuant to this
Section 5.2 shall be based on information actually known to the Company or the
transfer agent for the Common Stock, only.
5.3 Extension of Time Periods to Obtain Regulatory Approvals.
Notwithstanding the proposed Transfer date set forth in a Transfer Notice
delivered pursuant to Section 5.1 (i) if a longer period is required to comply
with any law, regulation or order of any federal, state or local governmental
entity, the closing of the Transfer described in such Transfer Notice shall
occur on the fifth business day following the date on which such compliance is
achieved or such negotiations are completed, respectively, and (ii) subject to
any extension required by clause (i) above, the closing of any such Transfer may
be accelerated, upon two business days' written notice from the Simon Designee
to the Participating Non-Simon Subject Shareholders, to any earlier business day
that occurs late enough to permit the Transferees and Transferors to perform
their obligations in connection with the Transfer.
5.4 Confidentiality of Information. The Company and each Subject
Shareholder shall keep confidential all information not otherwise available from
public sources which it obtains from any other Subject Shareholder pertaining to
a Transfer described in a Transfer Notice. Each Subject Shareholder shall use
such confidential information solely for purposes of evaluating the transactions
contemplated by such Transfer Notice and exercising and enforcing any rights
that such Subject Shareholder may have with respect to the Transfer described
therein pursuant to this Agreement.
Section 6. Tag-Along Transfer Rights on Non-public Dispositions by Simon.
6.1 Delivery of Transfer Notices. If prior to the termination of this
Agreement (i) one or more Simon-Affiliated Subject Shareholders (the
"Simon-Affiliated Selling Shareholders") propose to Transfer shares of Common
Stock and/or Series A Preferred Stock in a Non-public Offering other than
Transfers (x) pursuant to Rule 144, (y) in compliance with Section 4.6(i), or
(z)
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permitted by Section 4.6(ii); or (ii) on or after the date that is six (6)
months after the date hereof, Arnold Simon, or any of his Affiliates or Family
Group Members, proposes to effect any Simon Indirect Transfer, the Simon
Designee shall deliver to each Non-Simon Subject Shareholder a Transfer Notice
(x) that states that it is being delivered pursuant to this Section 6.1, and (y)
attaching the report or other information described in Section 5.2(ii). Each
Non-Simon Subject Shareholder shall be entitled to offer for Transfer in the
proposed Transfer pursuant to Section 6.1(i) or 6.1(ii) the number of shares of
Common Stock (including Employee Benefit Shares) and/or Series A Preferred Stock
determined pursuant to Section 6.2 on the terms set forth in such Transfer
Notice. For purposes of this Section 6, a Person shall not be an Affiliate of
Arnold Simon solely by reason of such Person's ownership interest in Simon.
6.2 Tag-Along Transfer Rights.
(i) The Non-Simon Subject Shareholders shall have the right, but not the
obligation, to offer for Transfer shares of Common Stock and/or shares of Series
A Preferred Stock as part of a Transfer or a Simon Indirect Transfer referred to
in Section 6.1(i) or 6.1(ii) which is described in a Transfer Notice delivered
pursuant to Section 6.1. Each Non-Simon Subject Shareholder that elects to
exercise its rights (a "Participating Non-Simon Subject Shareholder") pursuant
to this Section 6 shall notify the Simon Designee of such election not more than
ten (10) business days following the date on which the Transfer Notice,
delivered pursuant to Section 6.1, is deemed given pursuant to Section 11. Such
election notification shall specify the maximum number of shares of Common Stock
(including Employee Benefit Shares and Common Stock Equivalents) that such
Participating Non-Simon Subject Shareholder intends to offer for Transfer in the
Transfer or Simon Indirect Transfer and the number of such shares, if any, that
are Employee Benefit Shares that such Person is then entitled to acquire upon
exercise of a stock option or purchase right and which such Person thereby
agrees to acquire and offer for Transfer in the Transfer. For purposes of this
Section 6.2 references to "Common Stock" owned by a Subject Shareholder shall
include, without limitation, all Employee Benefit Shares and all Common Stock
Equivalents owned by such Subject Shareholder.
(ii) Following the earlier of the end of such ten (10) business day period
and the date of receipt of such election notifications from each of the
Non-Simon Subject Shareholders, the Simon-Affiliated Selling Shareholders shall:
(1) determine (x) in the case of a Transfer of shares of Common Stock by a
Simon-Affiliated Selling Shareholder, the maximum number of shares of Common
Stock that the proposed transferee is willing to acquire, or (y) in the case of
a Simon Indirect Transfer, the maximum number of shares of Common Stock that the
proposed transferee is willing to acquire beneficially, whether by direct or
indirect ownership;
(2) calculate the "Aggregate Tag-Along Number", which:
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(A) in the case of a Transfer of Shares of Common Stock by any Simon-
Affiliated Selling Shareholder, shall equal the aggregate number of shares of
Common Stock owned by all Participating Non-Simon Subject Shareholders
multiplied by a fraction, the numerator of which is equal to the aggregate
number of shares of Common Stock which the proposed transferee is willing to
acquire, and the denominator of which is equal to the aggregate number of shares
of Common Stock owned by all Simon-Affiliated Selling Shareholders and all
Participating Non-Simon Subject Shareholders; or
(B) in the case of a Simon Indirect Transfer, shall equal the aggregate
number of shares of Common Stock owned by all Participating Non-Simon Subject
Shareholders multiplied by a fraction, the numerator of which is equal to the
number of shares of Common Stock which will be beneficially Transferred as a
result of the proposed Simon Indirect Transfer, and the denominator of which is
equal to the aggregate number of shares of Common Stock owned by all
Simon-Affiliated Selling Shareholders and all Participating Non-Simon Subject
Shareholders. The number of Shares of Common Stock beneficially transferred
shall be determined by multiplying (x) the number of shares of Common Stock
owned beneficially and of record by the Simon-Affiliated Subject Shareholder
whose interests are being transferred in the Simon Indirect Transfer and (y) the
percentage change in ownership of interests in such Simon-Affiliated Subject
Shareholder; and
(3) calculate the respective "Individual Tag-Along Numbers" for each of the
Non-Simon Subject Shareholders. The Individual Tag-Along Number for a Non-Simon
Subject Shareholder shall equal the aggregate number of shares of Common Stock
owned by such Participating Non-Simon Subject Shareholder multiplied by a
fraction, the numerator of which is equal to the Aggregate Tag-Along Number, and
the denominator of which is equal to the aggregate number of shares of Common
Stock owned by all Participating Non-Simon Subject Shareholders
(iii) Each Non-Simon Subject Shareholder shall be entitled to offer for
Transfer a number of shares of Common Stock equal to its Individual Tag-Along
Number. If the number of shares of Common Stock that a Participating Non-Simon
Subject Shareholder requested to offer for Transfer in the Transfer, as set
forth in its election notice, does not exceed such Person's Individual Tag-Along
Number, such Person shall be entitled to offer for Transfer such number of
shares of Common Stock.
(iv) If the Non-Simon Subject Shareholders offer shares of Common Stock in
an amount that is less than the Aggregate Tag-Along Number, the Simon-Affiliated
Selling Shareholders shall be permitted to Transfer additional shares of Common
Stock in an amount equal to the difference between the Aggregate Tag-Along
Number and the number of shares of Common Stock offered for Transfer by the
Non-Simon Subject Shareholders pursuant to this Section 6.
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(v) The shares of Common Stock to be offered for Transfer pursuant to this
Section 6 by Participating Non-Simon Subject Shareholders shall be Transferred
on the same terms and conditions as those applicable to the Simon-Affiliated
Selling Shareholders as specified in the relevant Transfer Notice, including the
time of Transfer (provided, however, that the Simon Designee shall be entitled
to postpone such Transfer date if reasonably necessary), form of consideration,
and per-share sale price; provided, however, that in the case of a Simon
Indirect Transfer, such terms and conditions shall be appropriately modified so
that the price per share is the price per share of Common Stock beneficially
sold, transferred, conveyed or assigned by the proposed Simon Indirect Transfer
and the securities to be delivered by the Participating Non-Simon Subject
Shareholder; provided, further, that each Participating Non-Simon Subject
Shareholder jointly and severally with a right of contribution among them, shall
bear the same proportion of the expenses of Transfer as the number of shares of
Common Stock equal to the Individual Tag-Along Number Transferred by such
Participating Non-Simon Subject Shareholder bears to the total number of shares
of Common Stock Transferred. No Transfer of shares of Common Stock shall occur
prior to the expiration of the ten (10) business day period referred to in
Section 6.2(i). Any Participating Non-Simon Subject Shareholder shall promptly
take all steps described in the relevant Transfer Notice to effectuate the
Transfer of such Participating Non-Simon Subject Shareholder's shares of Common
Stock to be offered for Transfer in the Transfer, including the furnishing of
information customarily provided in connection with such a Transfer and the
executing of customary Transfer documents with customary representations and
warranties limited to its authority to Transfer and the title to securities and
the absence of any liens or other encumbrances thereon.
6.3 Failure to Complete Tag-Along Transfer. If a Transfer or Simon Indirect
Transfer described in a Transfer Notice delivered pursuant to Section 6.1 shall
not be completed within 90 days following the date on which such Transfer Notice
is deemed given pursuant to Section 11, either due to circumstances beyond the
control of the Simon Designee or because the Simon Designee shall elect, in its
discretion, not to proceed with the proposed Transfer or Simon Indirect
Transfer, neither the Simon Designee nor any Simon-Affiliated Subject
Shareholder shall have any liability therefor to any of the Participating
Non-Simon Subject Shareholders.
6.4 Breach of Tag Along Obligation. In the event that Simon or any Simon-
Affiliated Subject Shareholder shall affect any Transfer or Simon Indirect
Transfer which is subject to the requirements of this Section 6 and which does
not comply with the terms and provisions of this Section 6, then in addition to
all other rights and remedies of the parties hereto provided at law and in
equity, from and after any such event, neither Simon nor any Simon Affiliated
Subject Shareholder nor any direct or indirect Simon Subscriber nor any of the
respective assignees or transferees of any such Person shall have the rights and
benefits of Simon and the Simon Affiliated Subject Shareholders provided under
Sections 2 and 7 hereof.
Section 7. Bring Along Right of Simon.
7.1 Qualifying Transaction. Subject to Section 7.2, if Simon and each
Simon- Affiliated Subject Shareholder proposes to sell all, but not less than
all, of the shares of Common
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Stock and/or Series A Preferred Stock then owned (of record) by Simon and each
Simon-Affiliated Subject Shareholder to a third party purchaser(s) or its
Affiliates (which, in each case, is not an Affiliate of Simon or any of Simon's
Affiliates either before or after such proposed transaction), Simon shall have
the right, but not the obligation (the "Bring-Along Right"), to require all, but
not less than all, of the Non-Simon Subject Shareholders to sell all, but not
less than all, of their shares of Common Stock and/or Series A Preferred Stock
to such third party purchaser(s) in the same manner, at the same purchase price
per share, on the same closing date and on the same other terms and conditions
as Simon and the Simon Affiliated Subject Shareholders.
7.2 Limitations on the Bring Along Right. Notwithstanding the provisions of
Section 7.1, Simon shall not have a Bring Along Right if (i) any part of the
aggregate purchase price in a proposed transaction with the third party
purchaser(s) is payable in the form of any consideration other than cash,
Marketable Securities or a combination thereof, which is payable or deliverable
in full, as the case may be, on the closing date of such proposed transaction;
and/or (ii) Simon or any of its Affiliates receives any other consideration from
the third party purchaser(s) or any of its Affiliates (including any Person that
would become an Affiliate in connection with such proposed transaction) in any
transaction which is connected with or contemplated by the proposed transaction;
provided, that Arnold Simon may enter into a bona fide employment agreement to
provide services to the third party purchaser(s) after the closing of such
proposed transaction and receive compensation, consistent with the then existing
compensation practices of the third party purchaser, for the provision of such
services. It is acknowledged and agreed that the Bring Along Right is not
applicable to any transaction that is a Simon Indirect Transfer.
7.3 Exercise of the Bring Along Right; Closing Date. Simon may exercise the
Bring Along Right by delivering a written notice to each of the Non-Simon
Subject Shareholders to such effect which notice shall also state (i) that the
notice is being delivered pursuant to the provisions of Section 7, (ii) the
purchase price per share of Common Stock and/or Series A Preferred Stock, (iii)
whether the purchase price will be paid in cash, Marketable Securities or a
combination thereof, (iv) the number of shares of Common Stock and/or Series A
Preferred Stock which such Non-Simon Subject Shareholder shall be required to
sell pursuant to the exercise of the Bring Along Right and (v) the date and time
for the closing of the purchase and sale of the securities pursuant to the
exercise of the Bring Along Right.
7.4 Closing of Purchase and Sale Pursuant to the Bring Along Right. On the
closing date specified for the purchase and sale of the shares of Common Stock
and/or Series A Preferred Stock owned by the Non-Simon Subject Shareholders
pursuant to the exercise by Simon of its Bring-Along Right at the offices of the
Company (x) the party purchasing such shares of Common Stock and/or Series A
Preferred Stock shall (i) to the extent the purchase price is to be paid in
cash, pay the aggregate purchase price for such Common Stock and/or Series A
Preferred Stock to each Non-Simon Subject Shareholder on the same terms and
conditions as regards Simon by wire transfer of immediately available funds and
(ii) to the extent the purchase price is to be paid by delivery of Marketable
Securities, deliver such Marketable Securities, and (y) each Non-Simon Subject
Shareholder shall deliver to such purchaser the stock certificate or
certificates representing all such
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<PAGE>
securities free and clear of any liens or other encumbrances thereon (other than
such liens or other encumbrances which will be satisfied on such closing date by
the payment of money) duly endorsed in blank, or accompanied by stock powers
duly executed in blank, which date shall not be earlier than ten (10) days after
the date such notice is deemed given pursuant to Section 11. Any Non-Simon
Subject Shareholder subject to an exercised Bring Along Right shall promptly
take all steps described in the notice delivered to such Non-Simon Subject
Shareholder pursuant to Section 7.3 to effectuate the Transfer the shares of
Common Stock to be Transferred pursuant to the exercise of the Bring Along
Right, including the furnishing of information customarily provided in
connection with such a Transfer and the executing of customary Transfer
documents with customary representations and warranties limited to its authority
to Transfer, title to such securities and the absence of any liens or other
encumbrances thereon.
7.5 Definition of Marketable Securities. For purposes of this Agreement,
Marketable Securities shall mean equity securities that are, at the time of
closing of a purchase and sale pursuant to the exercise of Simon's Bring-Along
Right, (i) freely tradeable without any restriction on transfer, (ii) listed on
either the New York Stock Exchange, the Nasdaq Stock Market National Market or
the American Stock Exchange, and (iii) issued by an issuer that has an average
market capitalization for such equity securities of more than $500,000,000 for
the twenty business days preceding the date such equity securities are to be
delivered.
7.6 Breach of Bring-Along Right by Non-Simon Subject Shareholders. In the
event that any Non-Simon Subject Shareholder does not comply with the terms and
provisions of this Section 7, then in addition to all other rights and remedies
of the parties hereto provided at law or in equity, from and after any such
event, the Non-Simon Subject Shareholders shall not have the rights and benefits
of the Non-Simon Subject Shareholders provided under Sections 2 and 6 hereof.
Section 8. Amendment. This Agreement may not be amended except by a written
instrument signed by the Company, Simon, Apollo and Ramat (provided that the
signature of any such Person shall not be required if at the time of any such
amendment such Person does not own shares of Common Stock and/or Series A
Preferred Stock subject to the terms of this Agreement, and further provided,
Ramat's signature shall not be required unless such amendment adversely affects
the rights and benefits of Ramat under this Agreement ).
Section 9. Assignment; No Third Party Beneficiaries.
(i) This Agreement and all the provisions hereof shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
assigns, executors, administrators or successors; provided, however, that except
as specifically provided herein with respect to certain matters, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned or delegated by the Company without the prior written consent of Simon,
Apollo and Ramat (provided that the consent of any such Person shall not be
required if at the time of any such assignment such Person does not own shares
of Common Stock and/or Series A Preferred Stock subject to the terms of this
Agreement)
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(ii) This Agreement is not intended to confer any rights or remedies upon
any Person other than the parties hereto and their permitted heirs, assigns,
executors, administrators or successors, and no party hereto shall have any
right to enforce the provisions of this Agreement on behalf of any other Person,
including the Company.
Section 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 11. Notices. All notices given pursuant to this Agreement shall be
in writing and shall be made by hand delivery, first-class mail (registered or
certified, return receipt requested), or nationally recognized overnight air
courier guaranteeing next business day delivery to the relevant address
specified on Schedule 1 to this Agreement or the relevant agreement in the form
of Exhibit A whereby such party agreed to be bound by the provisions of this
Agreement. Except as otherwise provided in this Agreement, each such notice
shall be deemed given: at the time delivered, if personally delivered; if
mailed, three days after being mailed by certified or registered mail, postage
prepaid, return receipt requested; and the next business day after timely
delivery to the courier, if sent by nationally recognized overnight air courier
guaranteeing next business day delivery.
Section 12. Entire Agreement. This Agreement supersede all prior agreements
between or among any of the parties hereto with respect to the subject matter
contained herein, and such agreements embody the entire understanding among the
parties relating to such subject matter.
Section 13. Injunctive Relief. Each of the parties hereto hereby
acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party will be irreparably harmed
(which harm is acknowledged to be not readily measurable in damages) and that
there will be no adequate remedy at law. Each of the parties therefore agrees
that in the event of such a breach hereof the aggrieved party shall have the
right to obtain injunctive relief in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach hereof without
the requirement of posting any bond or security or proving any special damages.
By seeking or obtaining any such relief, the aggrieved party will not be
precluded from seeking or obtaining any other relief to which it may be
entitled.
Section 14. Termination of Agreement; Termination with Respect to Certain
Subject Shareholders.
14.1 Termination of Agreement. This Agreement may be terminated at any time
by a written instrument signed by each of the parties hereto.
14.2 Termination with Respect to Subject Shareholders with De Minimis
Holdings. Unless this entire Agreement is sooner terminated in accordance with
Section 14.1, any Subject
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Shareholder shall cease to be a party hereto as of such earlier date, if any, as
the number of shares of Common Stock (including Employee Benefit Shares) and
Common Stock Equivalents owned by such Person equals less than 10% of such
Subject Shareholder's Original Holdings, and thereafter such Person shall have
no rights or obligations as a party hereto and no termination pursuant hereto
shall be deemed to be a breach of any provision hereof.
14.3 Termination with Respect to Transactions by Simon. This Agreement will
terminate without any further actions, costs, expense or payment by any party
hereto immediately at such time as the number of shares of Common Stock and
Common Stock Equivalents owned by Simon and the Simon Affiliated Subject
Shareholders is less than Thirty-Five (35%) percent of the aggregate number of
shares of Common Stock and Common Stock Equivalents then issued and outstanding
and no termination pursuant hereto shall be deemed to be a breach of any
provision hereof.
Section 15. Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
Section 17. Consent to Jurisdiction. All actions and proceedings arising
out of, or relating to, this Agreement shall be heard and determined in any
state or federal court sitting in New York, unless the Company is reincorporated
in the state of Delaware, in which case, all such actions and proceedings shall
be heard and determined in any state or federal court sitting in Delaware. The
undersigned, by execution and delivery of this Agreement, expressly and
irrevocably consent and submit to the personal jurisdiction of any of such
courts in any such action or proceeding; (ii) consent to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party by hand or by certified mail,
delivered or addressed as set forth in Section 11 of this Agreement; and (iii)
waive any claim or defense in any such action or proceeding based on any alleged
lack of personal jurisdiction, improper venue or forum non conveniens or any
similar basis.
Section 18. Severability. If any provision of this Agreement shall be
determined to be invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity and enforceability of the remaining provision of
this Agreement, unless the result thereof would be unreasonable, in which case
the parties hereto shall negotiate in good faith as to appropriate amendments
hereto.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first written above.
ARIS INDUSTRIES, INC.
By:
---------------------------------
Name: Charles S. Ramat
Title: President and Chief Executive Officer
THE SIMON GROUP, L.L.C.
By:
---------------------------------
Name:
Title:
APOLLO ARIS PARTNERS, L.P.,
By: AIF-II, L.P., its general partner
By: Apollo Advisors, L.P.,
its general partner
By: Apollo Capital Management, Inc.,
its general partner
By:
----------------------------------
Name: Robert A. Katz
Title: Vice President
AIF-II, L.P.
By: Apollo Advisors, L.P.,
its general partner
By: Apollo Capital Management, Inc.,
its general partner
By:
----------------------------------
Name: Robert A. Katz
Title: Vice President
--------------------------------
CHARLES S. RAMAT, Individually
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SCHEDULE 1
to the Shareholders Agreement
================================================================================
Names and Addresses for Notices;
Holdings of Subject Shareholders
================================================================================
COMPANY
If to the Company:
Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Attention: Mr. Charles S. Ramat, President
Telecopy number: (212) 685-8281
Confirmation number: (212) 686-5050
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
SIMON DESIGNEE
If to the Simon Designee:
Mr. Arnold Simon
c/o A.S Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Telecopy number: (212) 642-4265
Confirmation number: (212) 642-4314
<PAGE>
with a copy to:
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Telecopy number: (212) 557-1275
Confirmation number: (212) 972-4900
NON-SIMON DESIGNEES
If to the Non-Simon Designees:
Mr. Charles S. Ramat
c/o Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Telecopy number: (212) 685-8281
Confirmation number: (212) 686-5050
and
Robert A. Katz
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Telecopy number: (914) 694-8032
Confirmation number: (914) 694-8000
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
<PAGE>
SUBJECT SHAREHOLDERS
If to The Simon Group, LLC
c/o A.S Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Attention: Mr. Arnold Simon
Telecopy number: (212) 642-4314
Confirmation number: (212) 642-4265
24,107,145 shares of Common Stock
2,093,790 shares of Series A Preferred Stock
with a copy to:
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Telecopy number: (212) 557-1275
Confirmation number: (212) 972-4900
If to Apollo Aris Partners, L.P.:
Apollo Aris Partners, L.P.
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Attention: Mr. Robert A. Katz
Telecopy number: (914) 694-8032
Confirmation number: (914) 694-8000
5,804,820 shares of Common Stock
0 shares of Series A Preferred Stock
<PAGE>
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Howard Sobel, Esq.
Telecopy number: (212) 715-8000
Confirmation number: (212) 715-9191
If to AIF-II, L.P.
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Attention: Mr. Robert A. Katz
5,892,856 shares of Common Stock
512,113 shares of Series A Preferred Stock
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Howard Sobel, Esq.
Telecopy number: (212) 715-8000
Confirmation number: (212) 715-9191
<PAGE>
If to Charles S. Ramat:
c/o Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Telecopy number: (212) 685-8281
Confirmation number: (212) 686-5050
637,465 shares of Common Stock
0 shares of Series A Preferred Stock
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
<PAGE>
EXHIBIT A
to the Shareholders Agreement
AGREEMENT TO BE BOUND
BY SHAREHOLDERS AGREEMENT
The undersigned, being the transferee of __________ shares of the common
stock, par value $.01 per share, [or describe other securities] (the "Shares")
of Aris Industries, Inc, a New York corporation (the "Company"), as a condition
to the receipt of such shares, acknowledges that the transfer of such shares is
restricted by the Shareholders Agreement dated as of February 26, 1999 initially
among the Company and the Subject Shareholders referred to therein (the
"Agreement"), and the undersigned hereby (1) acknowledges receipt of a copy of
the Agreement, (2) agrees to be bound as [the Simon Designee] [a
Simon-Affiliated Subject Shareholder] [a Non-Simon Subject Shareholder] by the
terms of the Agreement, as the same has been or may be amended from time to time
pursuant to the terms hereof, (3) certifies that of such shares are Employee
Benefit Shares (as defined in the Agreement)and (4) acknowledges and agrees that
the undersigned's rights in, to and under the Shares are subject to the terms
and provisions of the Agreement as if the undersigned were the transferor named
in the Agreement.
Agreed to this ____ day of ____________ , ______.
______________________
______________________*
______________________*
* Include address for notices.
EQUITY REGISTRATION RIGHTS AGREEMENT
dated as of February 26, 1999
among
ARIS INDUSTRIES, INC.
and
THE HOLDERS OF REGISTRABLE SHARES REFERRED TO HEREIN
<PAGE>
EQUITY REGISTRATION RIGHTS AGREEMENT
Equity Registration Rights Agreement (this "Agreement") dated as of
February 26, 1999, among ARIS INDUSTRIES, INC., a New York corporation (such
corporation together with its direct or indirect successors, the "Company"), THE
SIMON GROUP, L.L.C., a New York limited liability company ("Simon"), APOLLO ARIS
PARTNERS, L.P., a Delaware limited partnership ("AAP"), AIF-II, L.P., a Delaware
limited partnership ("AIF" and together with AAP, "Apollo") and CHARLES S. RAMAT
("Ramat").
WHEREAS, AAP beneficially owns 5,804,820 shares of the Common Stock of the
Company, par value $.01 per share (the "Common Stock").
WHEREAS, pursuant to the terms and conditions of that certain Securities
Purchase Agreement dated as of February 26, 1999 (the "Purchase Agreement"), by
and among the Company, Simon and Apollo, the Company on the date hereof has,
among other things, (i) issued to Simon 2,093,790 shares of the Series A
Preferred Stock of the Company, par value $.01 per share (the "Series A
Preferred Stock"), and 24,107,145 shares of Common Stock and (ii) issued to AIF
512,113 shares of Series A Preferred Stock and 5,892,856 shares of Common Stock;
WHEREAS, by their terms each share of Series A Preferred Stock is
mandatorily convertible into shares of Common Stock immediately upon the filing
of a Certificate of Amendment to the Certificate of Incorporation of the Company
with the Secretary of State of New York (and the acceptance thereof by the
Secretary of State of New York) which increases the number of authorized shares
of Common Stock to 100,000,000 shares, without any cost, fee or expense by the
holder thereof;
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition precedent to the closing under the Purchase Agreement; and
WHEREAS, as of the closing under the Purchase Agreement each of the Holders
of Registrable Shares owns shares of Common Stock and/or shares of Series A
Preferred Stock in the respective amounts indicated on Schedule 1 hereto.
NOW THEREFORE, in consideration of the premises, covenants and agreements
contained herein, and for other good and valuable consideration, the sufficiency
and adequacy of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
Section 1. Definitions and Usage.
As used in this Agreement:
1.1. Definitions.
<PAGE>
Affiliate. "Affiliate" (i) shall mean, as to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person, (ii) as to Apollo, shall
also mean Apollo Advisors, L.P. (a limited partnership, the general partner of
which is Apollo Capital Management, Inc.) or any investment fund, investment
account or investment entity whose investing manager, investment advisor or
general partner, or any principal thereof is Apollo Advisors, L.P. or an
Affiliate of any such Person or Apollo Advisors, L.P. and any Person that owns
any securities of or other equity interest in any of the foregoing; and (iii)
with respect to any such specified Person that is an individual, shall also mean
each Family Group Member of such individual. For the 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 meanings correlative to the
foregoing.
Code. "Code" shall mean the Internal Revenue Code of 1986.
Commission. "Commission" shall mean the Securities and Exchange Commission.
Common Stock. "Common Stock" shall mean (i) the common stock, par value
$.01 per share, of the Company and (ii) shares of capital stock of the Company
issued by the Company in respect of or in exchange for shares of such common
stock in connection with any stock dividend or distribution, stock splitup,
recapitalization, recombination or exchange by the Company generally of shares
of such common stock.
Continuously Effective. "Continuously Effective", with respect to a
registration statement under the Securities Act, shall mean that it shall not
cease to be effective and available for sales of Registrable Shares thereunder
for longer than either (i) any fifteen consecutive days, or (ii) an aggregate of
30 days during the period specified in the relevant provision of this Agreement.
Demand Registration. "Demand Registration" shall have the meaning set forth
in Section 2.1(i).
Demand Registration Period. "Demand Registration Period" shall have the
meaning set forth in Section 2.2.
Demanding Holders. "Demanding Holders" shall have the meaning set forth in
Section 2.1(i).
Eligible Holders of Registrable Shares. "Eligible Holders of Registrable
Shares" shall have the meaning set forth in Section 2.4(i).
Employee Benefit Shares. "Employee Benefit Shares" shall mean shares of
Common Stock issued or issuable to an individual upon exercise of such Person's
rights under a stock option
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or purchase right granted pursuant to a stock incentive, stock option, stock
bonus, stock purchase or other employee benefit plan of the Company.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor act or statute regulating the transactions
contemplated hereby that were formerly regulated under the Exchange Act that may
be enacted after the date hereof.
Family Group Member. "Family Group Member" shall mean (i) a relative that
is the spouse, parent, grandparent, brother, sister or descendant (whether
natural or adopted) and the respective spouses and descendants of the foregoing,
(ii) any trust for the sole benefit of any Person or Persons referred to in
clause (i) above, or (iii) the estate of any Person referred to in clause (i)
above.
Holder of Registrable Shares. "Holder of Registrable Shares" shall mean
Simon, Apollo, Ramat and Ramat's Family Group Members and the Permitted
Transferees of any such Person's Registrable Shares.
Inspectors. "Inspectors" shall have the meaning set forth in Section 4.8.
Permitted Transferee. "Permitted Transferee" shall mean, as to a Holder of
Registrable Shares (i) an Affiliate of such Person or (ii) any transferee of
such Person if such Affiliate or Transferee shall have executed and delivered a
properly completed agreement substantially in the form of Exhibit A hereto.
Person. "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
Register, Registered and Registration. "Register", "registered" and
"registration" shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering by the Commission of effectiveness of such
registration statement or document.
Registered Shares. "Registered Shares" shall mean, with respect to a
specified Demand Registration statement on a specified determination date, the
Registrable Shares registered for Transfer under such Demand Registration
statement and owned by Holders of Registrable Shares on such date.
Registrable Shares. "Registrable Shares" shall mean, subject to Section 9
and Section 11.3: (i) the shares of Common Stock owned by a Holder of
Registrable Shares on the date hereof, (ii) any shares of Common Stock or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Company generally for, or in
replacement by the Company
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<PAGE>
generally of, such shares of Common Stock, and (iii) shares of Common Stock
acquired during the term of this Agreement by a Holder of Registrable Shares,
including, without limitation, in all cases, any Employee Benefit Shares.
Registrable Shares then outstanding. "Registrable Shares then outstanding"
shall mean, with respect to a specified determination date, Registrable Shares
owned by Holders of Registrable Shares on such date.
Registration Expenses. "Registration Expenses" shall have the meaning set
forth in Section 6.1(i).
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor act or statute regulating the transactions
contemplated hereby that were formerly regulated under the Securities Act that
may be enacted after the date hereof.
Selling Holders of Registrable Shares. "Selling Holders of Registrable
Shares" shall mean Holders of Registrable Shares whose Registrable Shares are
included in a registration statement pursuant to this Agreement.
Shelf Registration. "Shelf Registration" shall have the meaning set forth
in Section 2.1(i).
Simon-Affiliated Holders. "Simon-Affiliated Holders" shall mean Simon and
any Simon Entity that is a party to this Agreement.
Simon Designee. "Simon Designee" shall mean Arnold Simon until the death or
disability of Arnold Simon and, after any such event, the successor Simon
Designee shall be the managing member of Simon, or such other Person as may be
designated by Simon hereafter until such individual's death or disability and
after any such event, the Simon Designee shall be the Person that Simon shall
designate from time to time in a written notice delivered to the Company and
each Holder of Registrable Shares; provided, however, that any such Person shall
have executed and delivered an appropriately completed agreement substantially
in the form of Exhibit A hereto.
Transfer. "Transfer" shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of beneficial ownership of (other than pledging, hypothecating or
otherwise transferring as security) and correlative words shall have correlative
meanings; provided however, that any transfer or other disposition upon
foreclosure or other exercise of remedies of a secured creditor after an event
of default under or with respect to a pledge, hypothecation or other transfer as
security shall constitute a "Transfer".
Violation. "Violation" shall have the meaning set forth in Section 8.1.
1.2. Usage.
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<PAGE>
(i) References to a Person are also references to such Person's assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to Registrable Shares "owned" by a Holder of Registrable
Shares shall include Registrable Shares beneficially owned by such Person but
which are held of record in the name of a nominee, trustee, custodian, or other
agent, but shall exclude shares of Common Stock held by a Holder of Registrable
Shares in a fiduciary capacity for customers of such Person.
(iii) References to a document are to it as amended, waived and otherwise
modified from time to time and references to a statute or other governmental
rule are to it as amended and otherwise modified from time to time (and
references to any provision thereof shall include references to any successor
provision).
(iv) References to Sections or to Schedules or Exhibits are to sections
hereof or schedules or exhibits hereto, unless the context otherwise requires.
(v) The definitions set forth herein are equally applicable both to the
singular and plural forms and the feminine, masculine and neuter forms of the
terms defined.
(vi) The term "including" and correlative terms shall be deemed to be
followed by "without limitation" whether or not followed by such words or words
of like import.
(vii) The term "hereof" and similar terms refer to this Agreement as a
whole.
Section 2. Demand Registration. At any time during the term of this
Agreement:
Section 2.1 Demand Registration Rights.
(i) If any Holder or Holders of Registrable Shares, other than Ramat and
Ramat's Permitted Transferees (a "Non-Ramat Holder"), shall make a written
request to the Company (a "Demand Registration Notice"), such Non-Ramat Holder
or Holders (the "Demanding Holder(s)"), shall be entitled to have all, or any
number in excess of 5,606,268 Registrable Shares, in the case of Apollo and/or
its Permitted Transferees, and 15,015,015 Shares, in the case of Simon and its
Permitted Transferees, (in each case as adjusted for any stock dividend,
distribution, stock-split, recapitalization, recombination or exchange by the
Company generally with respect to such shares) of each such Demanding Holder's
Registrable Shares included (subject to Section 7(i)) in a registration with the
Commission in accordance with the provisions of the Securities Act (a "Demand
Registration"). Any request made pursuant to this Section 2.1(i) shall be
addressed to the attention of the Secretary of the Company, and shall specify
the number of Registrable Shares to be registered, the intended methods of
disposition thereof and whether the registration shall be for an offering on a
delayed or continuous basis (a "Shelf Registration") pursuant to Rule 415 under
the Securities Act.
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<PAGE>
(ii) The Company shall be entitled to postpone for up to six months the
filing of any registration statement otherwise required to be prepared and filed
pursuant to this Section 2, if the Company determines, in its reasonable
judgment (with the concurrence of the managing underwriter, if any), that such
registration and sale would materially interfere with any material financing or
other material transaction involving the Company or any of its subsidiaries and
the Company promptly gives the Demanding Holders notice of such determination;
provided, however, that the Company shall not have postponed pursuant to this
Section 2.1(ii) the filing of any other registration statement otherwise
required to be prepared and filed pursuant to this Section 2 during the 12-month
period ended on the date on which the relevant request pursuant to Section
2.1(i) is deemed given pursuant to Section 15.
(iii) After receiving a request for a Demand Registration pursuant to
Section 2.1(i), the Company shall prepare and file a registration statement with
the Commission as promptly as reasonably practicable; provided, however, the
Company shall not be required to file a registration statement pursuant to a
request for a Demand Registration prior to April 3, 2000. If the Company
receives a request for a Demand Registration thirty or more days prior to April
3, 2000, it shall use its commercially reasonable efforts to file a registration
statement with respect to such Demand Registration on April 3, 2000. Subject to
the proviso to the first sentence of this Section 2.1(iii), the Company shall
use its commercially reasonable efforts to have each Demand Registration
declared effective under the Securities Act as soon as reasonably practicable,
in each instance giving due regard to the need to prepare current financial
statements, conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering.
(iv) For all purposes hereunder, Demand Registration Notices received in
accordance with Section 15 by the Company within 45 days of each other shall be
treated as if such Demand Registration Notices were received simultaneously.
2.2 Demand Registration Period. Upon the request of a Demanding Holder, the
Company shall use its commercially reasonable efforts to keep the relevant
registration statement Continuously Effective (i) if a Shelf Registration, for
up to six months, and (ii) if an underwritten offering, for up to 90 days or
until such earlier date as of which all the Registrable Shares under the Demand
Registration statement shall have been sold (a "Demand Registration Period").
Notwithstanding the foregoing, if for any reason the effectiveness or
availability for sales of Registrable Shares under the Demand Registration is
suspended, or postponed as permitted by Section 2.1(ii), the Demand Registration
Period shall be extended by the aggregate number of days of such suspension or
postponement.
2.3. Limit on Demand Registration Rights.
(i) Apollo and its Permitted Transferees shall be entitled to an aggregate
of three (3) Demand Registrations, one of which may be a Shelf Registration;
provided that (x) Apollo and its Permitted Transferees shall not be entilted to
more than two (2) Demand Registrations prior
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<PAGE>
to the fourth anniversary of the date hereof, and (y) Apollo and its Permitted
Transferees shall not be entitled to more than one (1) Demand Registration in
any twelve month period.
(ii) Simon and its Permitted Transferees shall be entitled to an aggregate
of three (3) Demand Registrations, one of which may be a Shelf Registration.
(iii) A Demand Registration will not be deemed to have been effected unless
and until it is declared effective by the Commission.
2.4 Piggy-Back Rights of Eligible Holders of Registrable Shares.
(i) Subject to Section 7 and Section 2.2, each Holder of Registrable Shares
other than a Demanding Holder (the "Eligible Holders of Registrable Shares")
shall be entitled to have such Registrable Shares owned by it included in a
Demand Registration statement prepared pursuant to Section 2.1.
(ii) Subject to Sections 7 and 2.2, within seven days following the date on
which a Demand Registration Notice request pursuant to Section 2.1 is deemed
given pursuant to Section 15, the Company shall deliver to each Eligible Holder
of Registrable Shares written notice of such Demand Registration. Upon the
written request of any Eligible Holder of Registrable Shares (requesting that
all or a portion of its Registrable Shares be included in such Demand
Registration Statement) given within seven days following the date on which such
notice is deemed given pursuant to Section 15, the Company shall (1) deliver to
the Demanding Holders copies of such written requests from such Eligible Holders
of Registrable Shares, and (2) cause to be included in such Demand Registration
statement and use its commercially reasonable efforts to be registered under the
Securities Act (subject to Section 7(i)) all the Registrable Shares that each
such Eligible Holder of Registrable Shares shall have requested to be
registered.
(iii) Each Eligible Holder of Registrable Shares shall be entitled to have
its Registrable Shares included in an unlimited number of registrations pursuant
to this Section 2.4.
2.5. Selection of Registration Form. A Demand Registration pursuant to this
Section 2 shall be on such appropriate registration form of the Commission as
shall (i) be selected by the Company and be reasonably acceptable to each of the
Demanding Holders and (ii) permit the disposition of the Registrable Shares in
accordance with the intended method or methods of disposition specified in the
request pursuant to Section 2.1(i).
2.6. Selection of Underwriters and Placement Agents. If any Demand
Registration involves an underwritten offering (whether on a "firm", "best
efforts" or "all reasonable efforts" basis or otherwise), or an agented
offering, each of the Demanding Holders shall have the right to select the
investment banker or bankers and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented
offering; provided, however, that each Person so selected shall be reasonably
acceptable to the Company.
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<PAGE>
2.7 Exchange Listing. The Company will use its commercially reasonable
efforts to cause its Common Stock to be listed on a nationally recognized
securities exchange on or prior to the effective date of the first Demand
Registration requested by Apollo and/or its Permitted Transferees.
Section 3. Company Registration. If the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders of the Company other than the Holders of Registrable Shares) any of
its stock or other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration on
Form S-8 or S-4 or equivalent successor form), the Company shall promptly give
each Holder of Registrable Shares written notice of such registration. Upon the
written request of each Holder of Registrable Shares given within seven (7) days
following the date on which such notice is deemed given pursuant to Section 15,
the Company shall cause to be included in such registration statement and use
its commercially reasonable efforts to be registered under the Securities Act
(subject to Section 7(ii)) all of the Registrable Shares that each such Holder
of Registrable Shares shall have requested to be registered. Each Holder of
Registrable Shares shall be entitled to have its Registrable Shares included in
an unlimited number of registrations pursuant to this Section 3.
Section 4. Obligations of the Company. Whenever required under Section 2 or
Section 3 to effect the registration of any Registrable Shares, the Company
shall, as expeditiously as reasonably practicable:
4.1. Preparation of Registration Statement. Prepare and, subject to the
provisions of Section 2.1(iii), file with the Commission a registration
statement with respect to such Registrable Shares and use the Company's
commercially reasonable efforts to cause such registration statement to become
effective as soon as practicable; provided, however, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
including documents incorporated by reference after the initial filing of the
registration statement and prior to effectiveness thereof, the Company shall
furnish to each of the Selling Holders of Registrable Shares copies of all such
documents in the form substantially as proposed to be filed with the Commission
at least four business days prior to filing for review and comment by such
Selling Holders of Registrable Shares and their counsel.
4.2. Amendments to Registration Statement. Prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act and rules
thereunder with respect to the disposition of all securities covered by such
registration statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the prospectus
whenever required by the terms of the underwriting agreement entered into
pursuant to Section 4.5. Subject to Rule 415 under the Securities Act, if the
registration statement is a Shelf Registration, the Company shall amend the
registration statement or supplement the prospectus so that it will remain
current and in compliance with the requirements of the Securities Act for six
months after its effective date, and
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<PAGE>
if during such period any event or development occurs as a result of which the
registration statement or prospectus contains a misstatement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, the Company shall promptly notify
each Selling Holder of Registrable Shares, amend the registration statement or
supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish to each Selling Holder of Registrable Shares such
amended or supplemented prospectus, which each such Holder shall thereafter
exclusively use in the Transfer of Registered Shares. Pending such amendment or
supplement, and after written notice from the Company, each such Holder shall
cease making offers or Transfers of Registered Shares pursuant to the prospectus
as it existed prior to such amendment or supplement.
4.3. Providing Copies of Registration Statement. Furnish to each Selling
Holder of Registrable Shares, without charge, such reasonable numbers of copies
of the registration statement, any pre-effective or post-effective amendment
thereto, the prospectus, including each preliminary prospectus and any
amendments or supplements thereto, in each case in conformity with the
requirements of the Securities Act and the rules thereunder, and such other
related non-confidential documents as any such Selling Holder may reasonably
request in order to facilitate the disposition of Registrable Shares owned by
such Selling Holder.
4.4. Blue Sky Filings. Use the Company's commercially reasonable efforts to
register and qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such states or jurisdictions as shall
be reasonably requested by the Selling Holders of Registrable Shares; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
4.5. Underwriting Agreement. In the event of any underwritten or agented
offering, enter into and perform the Company's obligations under an underwriting
or agency agreement (including customary indemnification and contribution
obligations to the underwriters or agents), in usual and customary form, with
the managing underwriter or underwriters of, or agents for, such offering. In
order to participate in such underwritten or agented offering, each Selling
Holder of Registrable Shares participating in such underwritten or agented
offering shall also enter into and perform its obligations under each such
agreement. The Company shall also cooperate with the Demanding Holders and the
managing underwriter or agent for such offering in the marketing of the
Registered Shares, including making available the Company's officers,
accountants, counsel, premises, books and records (subject to reasonable
confidentiality provisions) for such purpose.
4.6. Stop Order; Change in Material Facts. Promptly notify each Selling
Holder of Registrable Shares included in such registration statement, (i) of any
stop order issued or threatened to be issued by the Commission in connection
therewith (and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered) and (ii) at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, when the
Company becomes aware of the happening of any event as a result of which the
prospectus included in such
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registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, promptly prepare and file with the Commission, and
furnish to the Selling Holders of Registrable Shares, a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.7. Proxy and Similar Statements. Make generally available to the
Company's security holders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days following the end of
the 12-month period beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of each registration statement filed
pursuant to this Agreement.
4.8. Due Diligence Inspection. Make available for inspection by any Selling
Holder of Registrable Shares whose Registrable Shares are included in such
registration statement, any underwriter participating in such offering and their
respective representatives (collectively, the "Inspectors"), all financial and
other information as shall be reasonably necessary to enable them to exercise
their due diligence responsibility under the Securities Act; provided, however,
that information that the Company determines, in good faith, to be confidential
shall not be disclosed to any Inspector unless such Inspector signs a
confidentiality agreement reasonably satisfactory to the Company.
4.9. Comfort Letters. Use the Company's commercially reasonable efforts to
obtain a so-called "cold comfort letter" from its independent public accountants
and legal opinions addressed to the Selling Holders of Registrable Shares, in
customary form and covering such matters of the type customarily covered by such
letters.
4.10. Transfer Agent. Provide and cause to be maintained a transfer agent
for all Registrable Shares covered by such registration statement from and after
a date not later than the effective date of such registration statement.
4.11. Exchange Listing. Use all reasonable efforts to cause the Registrable
Shares covered by such registration statement if the Common Stock is then listed
on a securities exchange or included for quotation in a recognized trading
market, to continue to be so listed or included for a reasonable period of time
after the offering.
Section 5. Information from Selling Holders of Registrable Shares. It shall
be a condition precedent to the obligations of the Company to take any action
pursuant to this Agreement with respect to the Registrable Shares of any Selling
Holder of Registrable Shares that such Selling Holder shall furnish to the
Company such information regarding such Selling Holder, the number of the
Registrable Shares owned by it, the intended method of disposition of such
securities and such other
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information as shall be required under the Securities Act and the rules
promulgated thereunder to effect the registration of such Selling Holder's
Registrable Shares.
Section 6. Expenses of Registration; Marketing.
6.1 Demand Registration. Expenses in connection with registrations pursuant
to this Agreement shall be allocated and paid as follows: the Company shall bear
and pay all expenses incurred in connection with any registration, filing, or
qualification of Registrable Shares with respect to each Demand Registration for
each Selling Holder of Registrable Shares, whether such Selling Holder is a
Demanding Holder or the Registrable Shares of such Selling Holder of Registrable
Shares are included in a Demand Registration pursuant to Section 2.4, (which
right may be assigned to any Permitted Transferee as permitted by Section 9),
including all registration, filing and National Association of Securities
Dealers, Inc. fees, all fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, and the reasonable fees (up to $50,000) and disbursements of one
firm of counsel for the Selling Holders of Registrable Shares (the "Registration
Expenses"), but excluding underwriting discounts and commissions relating to
Registrable Shares (which shall be paid on a pro rata basis by the Selling
Holders of Registrable Shares based upon the numbers of shares sold).
6.2 Company Registration. The Company shall bear and pay all Registration
Expenses incurred in connection with any registrations pursuant to Section 3 for
each Selling Holder of Registrable Shares (which right may be Transferred to any
Permitted Transferee as permitted by Section 9), but excluding underwriting
discounts and commissions relating to Registrable Shares (which shall be paid on
a pro rata basis by the Selling Holders of Registrable Shares based upon the
number of shares sold).
6.3 Failure to Pay Registration Expenses. Any failure of the Company to pay
any Registration Expenses as required by this Section 6 shall not relieve the
Company of its obligations under this Agreement.
6.4 Marketing of the Offering. The Company shall, at its sole expense,
cooperate in a manner from time to time reasonably requested by the lead
underwriter(s) of an underwritten offering to market in a customary manner the
proposed offering of the Registrable Shares, including without limitation,
meeting with potential investors and developing investor presentations, in all
cases, subject to compliance with the Securities Act and the Exchange Act.
Section 7. Underwriting Requirements. If the total amount of securities,
including Registrable Shares, to be included in a registration pursuant to this
Agreement exceeds the amount of securities that the managing underwriter or
underwriters reasonably believe would materially adversely affect the success of
the offering:
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(i) If such registration is pursuant to Section 2, the Company shall be
required to include in the registration only that number of Registrable Shares
which the managing underwriter or underwriters believe will not materially
adversely affect the success of the offering. Each Selling Holder of Registrable
Shares shall be required to reduce by the same percentage the number of shares
of Common Stock to be registered for sale by it to give effect to the foregoing.
(ii) If such registration is pursuant to Section 3, the Company shall be
entitled to register (1) any number of shares of Common Stock for sale by it in
such registration, and (2) only that number of Registrable Shares, if any, that
the managing underwriter reasonably believes would not materially adversely
affect the success of the offering in which such shares would be included. Each
Selling Holder of Registrable Shares shall be required to reduce by the same
percentage the number of Registrable Shares to be registered for sale by it to
give effect to the foregoing.
Section 8. Indemnification; Contribution. If any Registrable Shares are
included in a registration statement under this Agreement:
8.1 Indemnification by the Company. The Company shall indemnify and hold
harmless each Selling Holder of Registrable Shares, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act or the
Exchange Act, and each officer, director, partner, and employee of such Selling
Holder, against all losses, claims, damages, liabilities and expenses, including
attorneys' fees and disbursements and expenses of investigation, incurred by
such party pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become subject under
the Securities Act, the Exchange Act or other federal or state laws, insofar as
such losses, claims, damages, liabilities and expenses arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"):
(i) Any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein, or any amendments or supplements thereto;
(ii) The omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading; or
(iii) Any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any applicable state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any
applicable state securities law;
provided, however, that the indemnification required by this Section 8.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in
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<PAGE>
conformity with written information furnished to the Company by the indemnified
party with respect to itself expressly for inclusion in the registration
statement relating to such registration.
8.2 Indemnification by the Selling Holders of Registrable Shares. To the
extent permitted by applicable law, each Selling Holder of Registrable Shares
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who shall have signed the registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act, any
other Selling Holder of Registrable Shares, any controlling Person of any such
other Selling Holder and each officer, director, partner, and employee of such
other Selling Holder of Registrable Securities, against all losses, claims,
damages, liabilities and expenses, including attorneys' fees and disbursements
and expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by such
Selling Holder of Registrable Shares with respect to itself expressly for
inclusion in the registration statement relating to such registration; provided,
however, that (x) the indemnification required by this Section 8.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or expense if settlement is effected without the consent of the relevant Selling
Holder of Registrable Shares, which consent shall not be unreasonably withheld,
and (y) in no event shall the amount of any indemnity under this Section 8.2
exceed the gross proceeds received by such Selling Holder of Registrable Shares
from the applicable offering covered by such registration statement.
8.3 Notification; Legal Representation. Promptly after receipt by an
indemnified party under this Section 8 of notice of the commencement of any
action, suit, proceeding, investigation or threat thereof made in writing for
which such indemnified party may make a claim under this Section 8, such
indemnified party shall deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and disbursements and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of any
such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 8 to the extent that such failure is
prejudicial to the indemnifying party's ability to defend such action, but shall
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than pursuant to this Section 8.
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<PAGE>
8.4 Contribution in Lieu of Indemnification. If the indemnification
required by this Section 8 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to in this Section 8:
(i) The indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any Violation has been committed by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8.1 and Section 8.2,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in Section 8.4(i). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8.5. Fullest Extent. If indemnification is available under this Section 8,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 8.4.
8.6. Continuing Obligations. The obligations of the Company and the Selling
Holders of Registrable Shares under this Section 8 shall survive the completion
of any offering of Registrable Shares pursuant to a registration statement under
this Agreement, and otherwise.
Section 9. Transfer of Registration Rights. The rights (or any portion
thereof) of a Holder of Registrable Shares with respect to Registrable Shares
pursuant to this Agreement may be Transferred by such Holder of Registrable
Shares to any of its Permitted Transferees in connection with the Transfer of
Registrable Shares to any such Person, if (x) any such Transferee that is not a
party to this Agreement shall have executed and delivered to the Secretary of
the Company a properly completed agreement substantially in the form of Exhibit
A hereto, and (y) the Transferor shall have delivered to the Secretary of the
Company and the Simon Designee, no later than 15 days following the date of the
Transfer, written notification of such Transfer setting forth the name of the
Transferor, the name and address of the Transferee, and the number of
Registrable Shares
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<PAGE>
which shall have been so Transferred. The Transferee of the rights of a Holder
of Registrable Shares shall have no greater demand or piggyback registration
rights than the Holder of Registrable Shares who Transferred such rights has at
the time of such Transfer.
Section 10. Restrictions on Public Sale by Holders of Registrable Shares.
Each Holder of Registrable Shares entitled pursuant to this Agreement to have
Registrable Shares included in a registration statement prepared pursuant to
this Agreement, if so requested by the managing underwriter or underwriters in
an underwritten offering or agent for an agented offering of any Registrable
Shares, shall not effect any public sale or distribution of shares of Common
Stock (including Employee Benefit Shares) or any securities convertible into or
exchangeable or exercisable for shares of Common Stock (including rights,
warrants and options to acquire Employee Benefit Shares) including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten or agented registration), during the ten business day period prior
to, and during the 90-day period beginning on the date such registration
statement is declared effective under the Securities Act by the Commission,
provided that such Selling Holder of Registrable Shares shall be timely notified
of such effective date in writing by the Company or such managing underwriter or
underwriters or agent. In order to enforce the foregoing covenant, the Company
shall be entitled to impose stop-transfer instructions with respect to the
Registrable Shares of each Selling Holder of Registrable Shares until the end of
such period.
Section 11. Covenants of the Company. The Company hereby agrees and
covenants as follows:
11.1 Current Public Information. The Company shall file on a timely basis
all reports required to be filed by it under the Exchange Act. If the Company is
not required to file reports pursuant to the Exchange Act, upon the request of
any Holder of Registrable Shares, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities Act,
and take such further action as may be reasonably required from time to time and
as may be within the reasonable control of the Company, to enable the Holders of
Registrable Shares to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act or any similar rule or regulation hereafter adopted by
the Commission.
11.2. Restrictions on Public Sale by the Company. The Company shall not,
and shall cause its majority owned subsidiaries not to, effect any public sale
or distribution of any shares of Common Stock or any securities convertible into
or exchangeable or exercisable for shares of Common Stock (including rights,
warrants and options to acquire shares of Common Stock, other than options to
acquire Employee Benefit Shares), during the ten business days prior to, and
during the 90-day period beginning on, the commencement of a public distribution
of the Registrable Shares pursuant to any registration statement prepared
pursuant to this Agreement. Any agreement entered into after the date of this
Agreement pursuant to which the Company or any of its majority owned
subsidiaries issues or agrees to issue any privately placed securities similar
to any issue of the Registrable Shares (other than (x) Employee Benefit Shares
and (y) securities issued to Persons in exchange for ownership interests in any
Person in connection with a business
-15-
<PAGE>
combination in which the Company or any of its majority owned Subsidiaries is a
party) shall contain a provision whereby holders of such securities agree not to
effect any public sale or distribution of any such securities during the periods
described in the first sentence of this Section 11.2, in each case including a
sale pursuant to Rule 144 under the Securities Act (unless such Person is
prevented by applicable statute or regulation from entering into such an
agreement).
11.3. Merger, Consolidations, Reorganizations and Transfers of Assets. The
Company shall not, directly or indirectly, (x) enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation or (y) Transfer or agree to Transfer all or substantially all the
Company's assets unless prior to such merger, consolidation, reorganization or
asset Transfer, the surviving corporation or the Transferee, respectively, shall
have agreed in writing to assume the obligations of the Company under this
Agreement, and for that purpose references hereunder to "Registrable Shares"
shall be deemed to include the securities which the Holders of Registrable
Shares would be entitled to receive in exchange for Registrable Shares pursuant
to any such merger, consolidation or reorganization.
11.4. No Additional Registration Rights. Except with the consent of Apollo
and its Permitted Transferees, the Company shall not grant to any other Person
registration rights with respect to securities of the Company (other than
Employee Benefit Shares) that would entitle the holder thereof to cause the
Company to attempt to effect a registration with respect to such securities
during the term of this Agreement unless (i) the agreement governing such
subsequent registration rights entitles the Holders of Registrable Shares to
have their Registrable Shares included in all registrations pursuant to such
agreement, which registrations shall be deemed to be Company registrations
pursuant to Section 3, except that the provisions of Section 7(i) shall be
applied in lieu of the provisions of Section 7(ii), and (ii) if such subsequent
registration rights agreement shall entitle the holders of registration rights
thereunder to have securities subject thereto included in a Demand Registration
pursuant to Section 2.1, such holders shall be deemed Eligible Holders of
Registrable Shares for purposes of such registrations except that the provisions
of Section 7.(ii) shall apply to such Persons in lieu of the provisions of
Section 7(i).
Section 12. Provisions Affecting Certain Existing Holders of Registration
Rights.
(a) Pursuant to Section 12.4 of the Equity Registration Rights Agreement,
dated June 30, 1993, between the Company and the holders of registrable shares
referred to therein (the "1993 Registration Rights Agreement"), the "Holders of
Registrable Shares" as defined in the 1993 Registration Rights Agreement shall
be entitled to have their Registrable Shares (as defined therein) included in
all registrations pursuant to this Agreement in which the Holders of Registrable
Shares under this Agreement are entitled to be included pursuant to Section 2.4
and Section 3 of this Agreement, on a pro-rata basis, with the Holders of
Registrable Shares under this Agreement and the holders of shares having similar
inclusion rights pursuant to Section 12(b), below, and subject to all terms and
conditions of this Agreement, including without limitation, all obligations,
adjustments, allocations and limitations provided for herein.
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<PAGE>
(b) Pursuant to Section 10 of the Shareholders Agreement, dated July 15,
1997, between the Company, Davco Industries, Inc., Steven Arnold and Christopher
Healy (the "Davco Shareholders Agreement"), the holders of "Eligible Shares" as
defined in the Davco Shareholders Agreement shall be entitled to have such
Eligible Shares included in all registrations pursuant to this Agreement in
which the Holders of Registrable Shares under this Agreement are entitled to be
included pursuant to Section 2.4 and Section 3 of this Agreement, on a pro-rata
basis, with the Holders of Registrable Shares under this Agreement and the
holders of shares having similar inclusion rights pursuant to Section 12(a)
above, and subject to all terms and conditions of this Agreement, including
without limitation, all obligations, adjustments, allocations and limitations
provided for herein.
Section 13. Amendment; Waiver; Further Assurances.
(i) This Agreement may not be amended except by a written instrument
signed by the Company and each Holder of Registrable Shares at the time of such
amendment (provided that the signature of any such Holder of Registrable Shares
shall not be required if at the time of any such amendment such Person does not
own shares of Common Stock and/or Series A Preferred Stock subject to the terms
of this Agreement, and further provided, Ramat's signature shall not be
required, unless such amendment adversely affects the rights and benefits of
Ramat under this Agreement).
(ii) No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
Section 14. Assignment; No Third Party Beneficiaries. This Agreement and
all the provisions hereof shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, assigns, executors,
administrators or successors; provided, however, that except as specifically
provided herein with respect to certain matters, neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned or delegated
by the Company without the prior written consent of Simon, Apollo and Ramat
(provided that the consent of any such Person shall not be required if at the
time of any such assignment such Person does not own shares of Common Stock
and/or Series A Preferred Stock subject to the terms of this Agreement).
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<PAGE>
Section 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 16. Notices. All notices given pursuant to this Agreement shall be
in writing and shall be made by hand-delivery, first-class mail (registered or
certified, return receipt requested) or nationally recognized overnight air
courier guaranteeing next business day delivery to the relevant address
specified on Schedule 1 to this Agreement or the relevant agreement in the form
of Exhibit A whereby such party became bound by the provisions of this
Agreement. Except as otherwise provided in this Agreement, each such notice
shall be deemed given: at the time delivered, if personally delivered; or if
mailed, three days after being mailed by certified or registered mail, postage
prepaid, return receipt requested; and the next business day after timely
delivery to the courier, if sent by nationally recognized overnight air courier
guaranteeing next business day delivery.
Section 17. Entire Agreement. This Agreement together with the Securities
Purchase Agreement dated as of the date hereof between the Company and the
parties named therein and the other agreements referred to herein and therein
supersede all prior agreements between or among any of the parties hereto with
respect to the subject matter contained herein and therein, and such agreements
embody the entire understanding among the parties relating to such subject
matter.
Section 18. Injunctive Relief. Each of the parties hereto hereby
acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party will be irreparably harmed
(which harm is acknowledged to be not readily measurable in damages) and that
there will be no adequate remedy at law. Each of the parties therefore agrees
that in the event of such a breach hereof the aggrieved party shall have the
right to obtain injunctive relief in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach hereof without
the requirement of posting any bond or security or proving any special damages.
By seeking or obtaining any such relief, the aggrieved party will not be
precluded from seeking or obtaining any other relief to which it may be
entitled.
Section 19. Term of Agreement. This Agreement may be terminated at any time
by a written instrument signed by Simon, Apollo and Ramat. Unless sooner
terminated in accordance with the preceding sentence, this Agreement shall
terminate in its entirety on (i) the ten-year anniversary of this Agreement, or
(ii) such date as there shall be no Registrable Shares outstanding, provided
that any shares of Common Stock previously subject to this Agreement shall not
be Registrable Shares following the sale of any such shares in an offering
registered pursuant to this Agreement.
Section 20. Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
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<PAGE>
Section 21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
Section 22. Consent to Jurisdiction. All actions and proceedings arising
out of, or relating to, this Agreement shall be heard and determined in any
state or federal court sitting in New York. Each of the undersigned, by
execution and delivery of this Agreement, expressly and irrevocably consents and
submits to the personal jurisdiction of any of such courts in any such action or
proceeding; (ii) consents to the service of any complaint, summons, notice or
other process relating to any such action or proceeding by delivery thereof to
such party by hand or by certified mail, delivered or addressed as set forth in
Section 15 of this Agreement; and (iii) waives any claim or defense in any such
action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis.
Section 23. Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first written above.
ARIS INDUSTRIES, INC.
By: ______________________________
Name: Charles S. Ramat
Title: President and Chief Executive Officer
THE SIMON GROUP, L.L.C.
By: ______________________________
Name: Arnold Simon
Title: Managing Member
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<PAGE>
APOLLO ARIS PARTNERS, L.P.,
By: AIF-II, L.P., its general partner
By: Apollo Advisors, L.P.,
its general partner
By: Apollo Capital Management, Inc., its general
partner
By: _____________________
Name: Robert A. Katz
Title: Vice President
AIF-II, L.P.
By: Apollo Advisors, L.P.,
its general partner
By: Apollo Capital Management, Inc., its general partner
By: _______________________
Name: Robert A. Katz
Title: Vice President
______________________________
CHARLES S. RAMAT, Individually
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<PAGE>
SCHEDULE 1
to the Equity Registration Rights Agreement
================================================================================
Names and Addresses for Notices;
Holdings of Subject Shareholders
================================================================================
COMPANY
If to the Company:
Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Attention: Mr. Charles S. Ramat
Telecopy number: (212) 685-8281
Confirmation number: (212) 686-5050
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
SIMON DESIGNEE
If to the Simon Designee:
Arnold Simon
c/o AS Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Telecopy number: (212) 642-4265
Confirmation number: (212) 642-4314
<PAGE>
with a copy to:
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Telecopy number: (212) 557-1275
Confirmation number: (212) 972-4900
HOLDERS OF REGISTRABLE SHARES
If to The Simon Group, L.L.C.:
Mr. Arnold Simon
c/o AS Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Telecopy number: (212) 642-4265
Confirmation number: (212) 642-4314
24,107,145 shares of Common Stock
2,093,790 shares of Series A Preferred Stock
with a copy to:
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Telecopy number: (212) 557-1275
Confirmation number: (212) 972-4900
<PAGE>
If to Apollo Aris Partners, L.P.
or if to AIF-II, L.P.:
to such Person
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Attention: Mr. Robert A. Katz
Telecopy number: (914) 694-8032
Confirmation number: (914) 694-8000
5,804,820 shares of Common Stock owned by Apollo Aris Partners, L.P.
5,892,856 shares of Common Stock owned by AIF-II, L.P.
512,113 shares of Series A Preferred Stock owned by AIF-II, L.P.
11,013,986 Registrable Shares owned by AIF-II, L.P.
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
If to Charles S. Ramat:
c/o Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Telecopy number: (212) 685-8281
Confirmation number: (212) 686-5050
637,465 shares of Common Stock *
* As of the date hereof, 105,135 additional shares of Common Stock are held by
three trusts for the benefit of three children of Charles S. Ramat. David N.
Schreiber and Ora Ramat are the co-trustees of such trusts.
<PAGE>
with a copy to:
Herrick, Feinstein, LLP
2 Park Avenue
New York, New York 10016
Attention: Lawrence M. Levinson, Esq.
Telecopy number: (212) 889-7577
Confirmation number: (212) 592-1412
<PAGE>
EXHIBIT A
to the Equity Registration Rights Agreement
AGREEMENT TO BE BOUND
BY THE EQUITY REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee of ___ shares of the common stock,
$.01 par value per share [or describe other capital stock received in exchange
for such common stock] (the "Registrable Shares"), of Aris Industries, Inc., a
New York corporation (the "Company"), as a condition to the receipt of such
Registrable Shares, acknowledges that matters pertaining to the registration of
such Registrable Shares is governed by the Equity Registration Rights Agreement
dated as of February 26, 1999 initially among the Company and the Holders of
Registrable Shares referred to therein (the "Agreement"), and the undersigned
hereby (1) acknowledges receipt of a copy of the Agreement, and (2) agrees to be
bound as a Holder of Registrable Shares by the terms of the Agreement, as the
same has been or may be amended from time to time pursuant to the terms thereof.
Agreed to this _____day of _____________, _____________.
___________________________________
___________________________________*
___________________________________*
* Include address for notices.
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Usage............................................1
1.1. Definitions...................................................2
1.2. Usage.........................................................5
Section 2. Demand Registration..............................................5
2.1. Demand Registration Rights....................................5
2.2. Demand Registration Period....................................6
2.3. Limit on Demand Registration Rights...........................7
2.4. Piggy-Back Rights of Eligible Holders of Registrable
Shares......................................................7
2.5. Selection of Registration Form................................8
2.6. Selection of Underwriters and Placement Agents................8
2.7. Exchange Listing..............................................8
Section 3. Company Registration.............................................8
Section 4. Obligations of the Company.......................................8
4.1. Preparation of Registration Statement.........................8
4.2. Amendments to Registration Statement...........................9
4.3. Providing Copies of Registration Statement.................9
4.4. Blue Sky Filings..............................................9
4.5. Underwriting Agreement.......................................10
4.6. Stop Order; Change in Material Facts.........................10
4.7. Proxy and Similar Statements.................................10
4.8. Due Diligence Inspection.....................................10
4.9. Comfort Letters..............................................11
4.10. Transfer Agent..............................................11
4.11. Exchange Listing............................................11
Section 5. Information from Selling Holders of Registrable Shares..........11
Section 6. Expenses of Registration; Marketing.............................11
6.1. Demand Registration..........................................11
6.2. Company Registration.........................................12
6.3. Failure to Pay Registration Expenses.........................12
6.4. Marketing of the Offering....................................12
Section 7. Underwriting Requirements.......................................12
<PAGE>
Section 8. Indemnification; Contribution....................................12
8.1. Indemnification by the Company................................12
8.2. Indemnification by the Selling Holders of Registrable
Shares......................................................13
8.3. Notification; Legal Representation............................14
8.4. Contribution in Lieu of Indemnification.......................14
8.5. Fullest Extent................................................15
8.6. Continuing Obligations........................................15
Section 9. Transfer of Registration Rights..................................15
Section 10. Restrictions on Public Sale by Holders of Registrable
Shares..........................................................15
Section 11. Covenants of the Company........................................16
11.1. Current Public Information...................................16
11.2. Restrictions on Public Sale by the Company...................16
11.3. Merger, Consolidations, Reorganizations and Transfers
of Assets...................................................16
11.4. No Additional Registration Rights............................17
Section 12. Provisions Affecting Certain Existing Holders of
Registration Rights.............................................17
Section 13. Amendment; Waiver; Further Assurances...........................18
Section 14. Assignment; No Third Party Beneficiaries........................18
Section 15. Governing Law...................................................18
Section 16. Notices.........................................................18
Section 17. Entire Agreement................................................19
Section 18. Injunctive Relief...............................................19
Section 19. Term of Agreement...............................................19
Section 20. Section Headings................................................19
Section 21. Counterparts....................................................19
Section 22. Consent to Jurisdiction.........................................19
Section 23. Severability....................................................20
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE 1 Names, Addresses and Holdings of Holders of
Registrable Shares........................................S-1
EXHIBIT A Agreement to be Bound.....................................A-13
RETENTION AGREEMENT
AGREEMENT by and among Charles S. Ramat (the "Executive") and Aris
Industries, Inc., a New York corporation (the "Company"); Europe Craft Imports,
Inc., a New Jersey corporation ("ECI"); ECI Sportswear, Inc., a New York
Corporation ("ECI Sportswear"); Unishops of Clarkins, Inc., an Ohio corporation
("Unishops") (ECI, ECI Sportswear and Unishops, each a wholly owned subsidiary
of the Company, individually are referred to herein as a "Subsidiary" and
collectively are referred to herein as the "Subsidiaries"); and, solely for
purposes of Section 7(b) hereof, The Simon Group, L.L.C., a Delaware limited
liability company (the "Simon Entity") and Arnold Simon ("Simon"), dated as of
February ___, 1999.
W I T N E S S E T H
WHEREAS, the Executive is employed by the Company; and
WHEREAS, Company, has entered into a Securities Purchase Agreement among
the Company, Apollo Aris Partners, L.P., AIF-II, L.P. and the Simon Entity,
pursuant to which the Simon Entity will acquire a controlling interest in the
Company at a cost of $.44 per share of the Company's common stock (the
"Acquisition"); and
WHEREAS, the Company, Apollo Aris Partners, L.P., AIF-II, L.P. and the
Simon Entity have, as a result of arm's length negotiation, determined that $.44
will represent the fair market value per-share of the Company's common stock at
the time of the Acquisition; and
WHEREAS, the Executive has entered into an employment agreement with the
Company dated as of February 1, 1988, as amended through the date hereof (the
"Employment Agreement"); and
WHEREAS, Section 3(f) of the Employment Agreement provides for certain
payments to be made to the Executive in the event he terminates his employment
within twelve months following a "Change in Control" (as such term is defined in
the Employment Agreement); and
WHEREAS, the Acquisition would constitute a Change in Control under the
Employment Agreement; and
WHEREAS, the Simon Entity, the Company and the Subsidiaries have determined
that it is in the best interests of the Company that the Company be able to rely
on the Executive to continue in his position as President of the Company at
least through the end of the one-year period immediately following the
consummation of the Acquisition (the "Closing") in order to assure continuity of
management of the Company, to assure customers and other Company employees of
<PAGE>
stability at the Company and to provide critical assistance in the management
and operation of the Company; and
WHEREAS, the Company and the Subsidiaries have determined to offer the
Executive the benefits described in this Agreement to provide an incentive to
encourage the Executive to remain in the employ of the Company so that the
Company may receive his continued dedication and assure the continued
availability of his advice and counsel notwithstanding the potential personal
uncertainty arising as a result of the Acquisition.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Effective Date.
The "Effective Date" of this Agreement shall be the date immediately prior
to the date on which the Closing occurs (the "Closing Date"). In the event the
Acquisition is not consummated for whatever reason, this Agreement (and any
agreement entered into in connection herewith) shall be null and void and of no
force and effect, and shall have no impact or effect with respect to the
Employment Agreement, the Overhead Assumption Agreement or any other agreement
by and between the Executive and the Company and or any Subsidiary in effect
prior to the date this Agreement was executed.
2. Severance Payment
(a) Amount and Timing of Severance Benefit. Notwithstanding Section 3(f) of
the Employment Agreement, in lieu of the "Severance Amount" (as such term is
defined in the Employment Agreement) to which the Executive may be entitled
pursuant to Section 3(f) of the Employment Agreement (as modified in accordance
with the limitation contained in paragraphs (1) through (4) of Section 3(f) of
the Employment Agreement) or any other rights the Executive may have to receive
compensation under the Employment Agreement upon the termination of the
Executive's employment under the circumstances described herein, subject to
Paragraph (b) of this Section, in the event the Executive's employment with the
Company terminates for any reason whatsoever (whether voluntarily or
involuntarily and whether or not for cause (as defined in or determined by any
plan, program, agreement, statute or common law)) during the period beginning
(i) except if the Executive voluntarily terminates his employment with the
Company without Good Reason, on the date on which this Agreement is executed and
(ii) solely if the Executive voluntarily terminates his employment with the
Company without Good Reason, on the date that is 120 days after the Closing Date
and, in either case, ending on the date 13 months immediately following the
Closing Date, the Company shall pay to the Executive in one lump sum by wire
transfer in accordance with instructions provided by the Executive, an amount
equal to $2,400,716 (the "Severance Payment"). The Severance Payment shall be
paid to the Executive: (A) if the Executive's employment is terminated without
"Cause" (as that term is defined in the Employment Agreement)
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<PAGE>
on or before the Closing Date, on the Closing Date; and (B) if the Executive's
employment terminates after the Closing Date, not later than the date 30 days
after the earlier of (1) the date the Executive provides written notice to the
Company of his intent to terminate his employment and receive the Severance
Payment provided for hereunder, (2) the date the Company notifies the Executive
of its intent to terminate the Executive's employment or (3) in the event the
Executive's employment terminates as a result of death or "total disability" (as
that term is defined in the Employment Agreement), the date the Executive dies
or becomes totally disabled. It is understood that the effective date of the
Executive's resignation or termination, as the case may be, shall not occur
prior to the date the Executive receives the Severance Payment, and during the
period after the Company or the Executive, as the case may be, has given such
notice (the "Notice Date") and through the date the Executive receives the
Severance Payment, the Executive shall continue to receive all of the
compensation, benefits and perquisites he received immediately prior to the
Notice Date. The Executive's receipt of the Severance Payment shall be deemed a
waiver of the Executive's right to receive the unpaid portions of his "Annual
Bonuses" (as such term is defined in the Employment Agreement) under Section
4(b)(ii)(B) and Section 4(b)(ii)(D) of the Employment Agreement and any other
amount that may have been payable to him under the employment agreement to the
same extent as if he received the Severance Amount under the terms of the
Employment Agreement as in effect immediately prior to the Effective Date. The
Company's obligation to pay the Executive the Severance Payment shall be
absolute, and the amount of the Severance Payment shall not be reduced or offset
as a result of any actual or purported obligation of the Executive to the
Company or, any Subsidiary, the Simon Entity, Simon or any other party (or
otherwise) or any claim any such party may have against the Executive, except
that the Company shall be permitted to withhold from the Severance Payment the
minimum amount required in order to meet applicable federal, state and local
income and employment tax withholding requirements (which amount shall be
calculated consistent with Section 7 hereof).
(b) Condition to Receipt of Severance Payment.
(i) Notwithstanding anything herein or in the Employment Agreement to the
contrary, the Executive shall not be entitled to the Severance Payment unless he
makes himself available to perform services to the Company in accordance with
Section 2 of the Employment Agreement during the period beginning on the date he
executes this Agreement and ending on the earliest to occur of (i) the date the
executive terminates his employment with the Company for Good Reason; (ii) the
date of the Executive's death, (iii) the date the Executive becomes unable
substantially to perform such services to the Company as a result of his illness
or disability; (iii) the date the Executive's employment is terminated by the
Company with or without Cause; and (iv) the date that is 120 days after the
Closing Date, subject to the Executive's reasonable time away from work for
reasons such as vacation, sickness and attending to personal matters.
(ii) In the event the Company believes that the Executive at any time has
failed to satisfy the condition described in Section 2(b)(i), the Company shall
provide the Executive with a written notice specifying in reasonable detail the
act or omission constituting such failure. The
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<PAGE>
Executive shall not be deemed to have failed to meet the condition described in
Section 2(b)(i) if he cures such failure within 5 business days after his
receipt of such notice from the Company. The Executive shall be deemed
conclusively to have satisfied the condition of Section 2(b)(i) if the Company
has not provided the Executive with any notice referred to in the first sentence
of this Section 2(b)(ii) within the 120-day period described in Section 2(b)(i).
3. Retention Option.
(a) Grant of Retention Option. In order to provide an incentive for the
Executive to remain in the employ of the Company and as consideration for
services to be rendered to the Company in the future, the Executive shall,
concurrently herewith, receive a non-qualified option (the "Retention Option")
to purchase one million shares of Company common stock pursuant to the Aris
Industries Inc. 1993 Stock Incentive Plan, as amended (the "Option Plan"). The
Retention Option shall be granted pursuant to an Agreement substantially
identical to the form of agreement attached hereto as Exhibit A.
(b) Certain Terms of Retention Option. The Retention Option shall contain
the following significant terms:
(i) Exercise Price. The exercise price-per-share with respect to
the Retention Option shall be $.48 per share.
(ii) Term. The Retention Option shall have a term of 10 years from
the date of grant.
(iii) Vesting. The Retention Option shall vest and become
exercisable in full upon the earliest to occur of: (A) the date the
Executive's employment is terminated by the Company without "Cause" (as
defined in the Employment Agreement); (B) the date the Executive
terminates his employment for Good Reason (as hereinafter defined); and
(C) if neither (A) nor (B) has occurred, the date 12 months following the
Closing Date (provided he is employed by the Company on such date).
(iv) Termination as Result of Expiration of Employment Agreement.
If the Executive's employment terminates as a result of the expiration
and non-renewal of the Employment Agreement, then the Retention Option,
to the extent outstanding at the time of such termination, shall remain
exercisable until the earlier of (A) the expiration of ten years after
the Retention Option was granted or (B) the date three months after the
effective date of the termination of the Executive's employment.
(v) Resignation for Good Reason or Termination Without Cause. If
the Executive's employment terminates (A) as a result of his resignation
for Good Reason or (B) as a result of a termination by the Company
without Cause, then the
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<PAGE>
Retention Option, to the extent outstanding at the time of such
termination, shall remain exercisable until the earlier of (1) the
expiration of ten years after the Retention Option was granted or (2) the
date two years after the effective date of the termination of the
Executive's employment.
(vi) Termination as Result of Resignation Without Good Reason. If
the Executive's employment terminates as a result of his resignation
without Good Reason, the Retention Option, to the extent outstanding and
exercisable at the time of such termination, shall remain exercisable
until the earlier of (1) the expiration of ten years after the Retention
Option was granted or (2) the date one year after the effective date of
the termination of the Executive's employment.
(vii) Termination for Cause. If the Executive's employment
terminates as a result of a termination by the Company for Cause, the
Retention Option, to the extent outstanding and exercisable at the time
of such termination, shall remain exercisable until the earlier of (1)
the expiration of ten years after the Retention Option was granted or (2)
the date three months after the effective date of the termination of the
Executive's employment.
(viii) Death of Executive or Termination for Total Disability. If
the Executive's employment terminates as a result of his death or "total
disability" (as defined in the Employment Agreement) or if the Executive
dies after termination of employment but during the period of time the
Retention Option is exercisable as a result of an event described in
Paragraph (b)(iv), (b)(v) or (b)(vi) of this Section, the Retention
Option, to the extent outstanding and exercisable at the time of the
Executive's death, shall remain exercisable until the earlier of (A) the
expiration of ten years after the Retention Option was granted or (B) the
later of (1) the period described in Paragraph (b)(iv), (b)(v) or (b)(vi)
of this Section, as the case may be, or (2) the date one year after the
Executive's death or the effective date of the termination of his
employment as a result of "total disability," as the case may be.
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<PAGE>
4. Good Reason.
For the purposes of this Agreement, "Good Reason" shall mean the occurrence
(without the Executive's written consent) after the Effective Date, of any one
of the following acts by the Company, or failures by the Company to act, unless,
in the case of any act or failure to act described in paragraph (a), (e), (f) or
(g) below, such act or failure to act is corrected within 5 days after the
Executive gives the Company a written notice of the event constituting Good
Reason:
(a) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position with the Company (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities immediately before the Effective Date, the failure at any time
to elect the Executive, or the removal of the Executive, as a Director of the
Company or any other action by the Company that results in a diminution in such
position, authority, duties or responsibilities; provided, however, Arnold
Simon's becoming Chief Executive Officer of the Company on or after the Closing
Date shall not constitute Good Reason;
(b) the Company requiring the Executive to be based at any office or
location that either is (i) outside of Manhattan or (ii) not a main headquarters
of the Company or one of its significant operating subsidiaries, or requiring
the Executive to travel for business purposes significantly more than the
Executive was required to travel for business purposes immediately prior to the
Effective Date;
(c) any diminution in the Executive's rate of annual base salary;
(d) the failure by the Company, without the Executive's consent, to pay to
the Executive any portion of the Executive's current compensation, or to pay to
the Executive any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within 7 days of the date such
compensation is due;
(e) the failure by the Company to continue in effect any compensation plan
(other than a bonus plan) in which the Executive participates immediately prior
to the Effective Date, which is material to the Executive's total compensation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the failure by the
Company to continue the Executive's participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of the Executive's participation
relative to other participants, as existed at the time of the Effective Date;
(f) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the Executive under any of
the Company's life insurance, accident or disability plans in which the
Executive was participating at the time of the Effective
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<PAGE>
Date, the failure to provide the Executive with medical or health benefits
substantially similar to those provided to the senior executives of ECI
immediately prior to the Effective Date or the taking of any action by the
Company that would directly or indirectly materially reduce any of such benefits
or deprive the Executive of any material fringe benefit including, without
limitation, his ability to take paid vacation substantially in accordance with
past practice, first class air travel when traveling for business purposes,
level of hotel accommodations when traveling for business purposes, Company
provided memberships in professional organizations (and payment for activities
in connection therewith), Company provided use of the same type of automobile
(and payment of related insurance and other expenses) and level of secretarial
assistance and office facilities, in each case as enjoyed by the Executive
immediately prior to the Effective Date; or
(g) the Company's or any Subsidiary's breach of any material term of the
Employment Agreement, the agreement dated as of June 25, 1991, as amended, by
and among the Company and each of the Subsidiaries and Charles S. Ramat and the
other "Beneficiaries" designated therein (the "Overhead Assumption Agreement")
or this Agreement.
5. Continuing Obligations
Nothing herein shall relieve the Company of its obligation to pay to the
Executive upon the termination of his employment any earned but unpaid base
salary, any earned but unpaid bonus payable pursuant to Paragraph 3 of the
Eighth Amendment dated August 28, 1997 to the Employment Agreement (or any other
Company bonus plan, program or arrangement), any portion of any bonus otherwise
payable to the Executive pursuant to Section 3(f) of the Employment Agreement
for the year in which the Executive's employment terminates and any unpaid
portion of the "Perry Success Fee" (as defined in the Employment Agreement)
payable to the Executive (as of January 27, 1999, the unpaid portion of the
Perry Success Fee was $91,016.28). All such amounts shall be paid to the
Executive as and when they would have been payable to him in the absence of this
Agreement.
6. Certain Option Agreements.
Notwithstanding any other provision in the Option Plan, the Employment
Agreement or in any applicable option agreement, the following provisions shall
apply to all options previously granted to the Executive under the Stock Option
Plan, including, without limitation, the option to purchase 400,000 shares of
Company common stock that was granted to the Executive on August 2, 1993, the
option to purchase 750,000 shares of Company common stock that was granted to
the Executive on August 28, 1997 and the option to purchase 152,500 shares of
Company common stock that was granted to the Executive on December 18, 1996
(collectively, the "Prior Options"):
(a) Vesting. The Prior Options shall vest and become exercisable in full
(to the extent then outstanding and not otherwise already vested and
exercisable) on the earliest to occur of:
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<PAGE>
(i) the date the Executive's employment is terminated by the Company without
Cause; (ii) the date the executive terminates his employment for Good Reason;
and (iii) the Closing Date.
(b) Period of Exercise in Certain Circumstances.
(i) Termination as Result of Expiration of Employment Agreement,
Resignation for Good Reason or Termination without Cause. If the
Executive's employment terminates (A) as a result of the expiration and
non-renewal of the Employment Agreement, (B) as a result of his
resignation for Good Reason or if (C) as a result of a termination by the
Company without Cause, then each Prior Option, to the extent outstanding
at the time of such termination, shall remain exercisable until the
earlier of (1) the expiration of the original term of the Prior Option or
(2) the date two years after the effective date of the termination of the
Executive's employment.
(ii) Termination as Result of Resignation Without Good Reason. If
the Executive's employment terminates as a result of his resignation
without Good Reason, each Prior Option, to the extent outstanding and
exercisable at the time of such termination, shall remain exercisable
until the earlier of (1) the expiration of ten years after the Prior
Option was granted or (2) the date one year after the effective date of
the termination of the Executive's employment.
(iii) Termination for Cause. If the Executive's employment
terminates as a result of a termination by the Company for Cause, each
Prior Option, to the extent outstanding and exercisable at the time of
such termination, shall remain exercisable until the earlier of (1) the
expiration of ten years after the Prior Option was granted or (2) the
date three months after the effective date of the termination of the
Executive's employment.
(iv) Death of Executive or Termination for Total Disability. If
the Executive's employment terminates as a result of his death or if the
Executive dies after termination of employment but during the period of
time the Prior Option is exercisable as a result of an event described in
Paragraph (b)(i) or (b)(ii) of this Section, each Prior Option, to the
extent outstanding and exercisable at the time of the Executive's death,
shall remain exercisable until the earlier of (A) the expiration of the
original term of the Prior Option or (B) the later of (1) the period
described in Paragraph (b)(i) or (b)(ii) of this Section, as the case may
be, or (2) the date one year after the Executive's death or the effective
date of the termination of his employment as a result of "total
disability," as the case may be.
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<PAGE>
7. Certain Conclusions.
(a) Conclusions as to Value and Underlying Assumptions. The parties hereto
have concluded that the amounts described in Exhibit B hereto reflect the
maximum amounts that should be considered "parachute payments" for purposes of
Section 280G and Section 4999 of the Internal Revenue Code of 1986 (the "Code")
as a result of the acceleration of the exercisability of certain of the Prior
Options in accordance with Section 6(a) hereof. Similarly, the parties have
concluded that the grant of the Retention Option constitutes reasonable
compensation for services to be rendered to the Company. Nevertheless, in the
event any part or all of the grant of the Retention Option were to be considered
a "parachute payment," for purposes of Section 280G and Section 4999 of the
Code, the parties hereto have concluded that the amount described in Exhibit B
hereto reflects the maximum amount that should be considered a "parachute
payment" for purposes of Section 280G and Section 4999 of the Code as a result
of the grant of the Retention Option. The parties understand the assumptions
used in determining the values in Exhibit B, and agree that they are
appropriate.
(b) Public and Private Positions. Each party hereto agrees that it will
not, without the prior written consent of the other parties, take any public or
private position or make any statement or filing with any governmental or
regulatory authority that is inconsistent in any respect with the conclusions
described in Paragraph (a) of this Section 7, except to the extent such party is
advised in a written opinion of a nationally recognized accounting firm or law
firm that is reasonably acceptable to all of the parties that such inconsistent
position, statement or filing is required by (i) Generally Accepted Accounting
Principles (as such principles relate to recognizing compensation expense) in
connection with the preparation of the Company's financial statements or (ii)
any statute or any regulation or binding interpretive release issued thereunder,
in any case that is promulgated after the date hereof. Each of the parties
hereto agrees that in the event any of the conclusions described in Paragraph
(a) of this Section 7 is challenged by any person, entity or governmental or
regulatory authority, it will take all reasonable steps to defend vigorously the
appropriateness of the challenged conclusion (notwithstanding any inconsistent
position it may take as permitted by Clause (i) of this Paragraph (b)) and it
will not settle any such matter or enter into a consent or similar agreement
with respect to any such matter without the prior written consent of the other
parties (which consent shall not be unreasonably withheld).
8. Obligations in Respect of the Overhead Assumption Agreement.
The Overhead Assumption Agreement, pursuant to which the Subsidiaries
agreed directly to assume the obligations to pay and perform certain obligations
relating to compensation and benefits to the Executive and the other
Beneficiaries (the "Overhead Obligations"), shall be amended hereby as of the
Effective Date to provide as follows:
(a) the Overhead Obligations specifically shall include, without
limitation, all of the Company's obligations under the Employment
Agreement, this Agreement and any agreement entered into in connection
with this Agreement;
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<PAGE>
(b) notwithstanding any change in ownership or control of the
Company as a result of the Acquisition, the obligations of the Company
and the Subsidiaries shall continue in full force and effect, and the
Subsidiaries shall continue to be jointly and severally obligated to pay
and perform all of the obligations under the Overhead Assumption
Agreement;
(c) the Company and each Subsidiary shall cause each of their
respective future direct and indirect subsidiaries to adopt the Overhead
Assumption Agreement and this Agreement and to become obligated in
respect of the obligations hereunder and the Overhead Obligations to the
same extent as are the existing Subsidiaries.
9. Successors and Assigns.
(a) Limited Assignment by Executive. This Agreement is personal to the
Executive and without the prior written consent of the Company, the
Subsidiaries, the Simon Entity and Simon shall not be assignable by him nor may
he delegate his duties hereunder; provided, however, all of the Executive's
rights following his death or disability shall inure to the benefit of his
personal representatives or designees or other legal representatives, as the
case may be.
(b) Successors and Assigns Bound. This Agreement shall inure to the benefit
of and be binding upon the Company, the Subsidiaries and, solely respect to
Section 7(b) hereof, Simon and the Simon Entity and, in each case, their
respective successors and assigns.
(c) Same Manner of Performance; Company Remains Liable. The Company, and
the Subsidiaries each will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
Company's or any Subsidiary's business and/or assets (or its interest therein)
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent as would be required if no such succession had taken place.
Notwithstanding any such assumption or assignment, unless otherwise agreed by
the Executive, the Company, and the Subsidiaries shall remain liable and
responsible for fulfillment of their obligations under this Agreement.
10. Miscellaneous.
(a) Headings and Captions; Amendment. The headings and captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be supplemented, amended or modified otherwise
than by a specific written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) Notices. All notices and other communication hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive:
Charles S. Ramat
1185 Park Avenue
Apartment 16A
New York, New York 10028
If to the Company:
Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Attention: Chief Executive Officer
If to the Subsidiaries:
c/o Aris Industries, Inc.
475 Fifth Avenue
New York, New York 10017
Attention: Aris Chief Executive Officer
If to Simon or the Simon Entity:
c/o A.S. Enterprises
1385 Broadway, Suite 604
New York, New York 10018
Attention: Arnold Simon
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be deemed
effectively given when the same has been hand delivered or five (5) days after
the same has been deposited in a post box under the exclusive control of the
United States Postal Service.
(c) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) No Waiver. A party's failure to insist on strict compliance with any
provision of this Agreement or the failure to assert any right the party may
have hereunder, shall not be deemed to be a waiver of such provision or right.
No waiver by a party of any provision or condition of this Agreement shall be
deemed a waiver of similar or dissimilar provisions and conditions at the same
time or any prior or subsequent time or of that provision or condition at any
prior or subsequent time.
(e) No Third Party Beneficiaries. This Agreement is intended solely for the
benefit of the parties hereto (and their permitted beneficiaries, successors and
assigns) and is not intended to, and shall not, benefit any other person or
entity.
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<PAGE>
11. Legal Expenses.
The Company, the Subsidiaries and Simon, jointly and severally, agree to
pay directly or reimburse the Executive (at the Executive's option) for any and
all reasonable legal fees and expenses incurred by the Executive relating to the
enforcement or attempted enforcement of any of their obligations hereunder,
regardless of outcome, provided, that: (a) the Executive prevails on at least
one substantive issue; and (b) the Executive is not found to have breached his
material obligations hereunder.
12. Governing Law.
This Agreement shall be construed and interpreted according to the laws of
the State of New York without reference to the principles of conflicts of law.
13. Effect on Current Agreements.
Except as specifically provided herein, all of the provisions of any
agreement between the Executive and the Company and/or any Subsidiary
(including, without limitation, the Overhead Assumption Agreement and the
Employment Agreement), shall continue unchanged and shall remain in full force
and effect.
14. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute but one Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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It shall not be necessary that any counterpart be signed by all of the parties
hereto so long as each party shall have executed a counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
ARIS INDUSTRIES, INC.
By:______________________
EUROPE CRAFT IMPORTS, INC.
By:______________________
ECI SPORTSWEAR, INC.
By:______________________
UNISHOPS OF CLARKINS, INC.
By:______________________
THE SIMON GROUP, L.L.C.,
solely for purposes
of Section 7(b) hereof
By:______________________
_________________________
Arnold Simon,
solely for purposes
of Section 7(b) hereof
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_________________________
Charles S. Ramat
EXHIBIT B
ASSUMPTIONS
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ARIS INDUSTRIES, INC.
1385 Broadway
New York, New York 10018
GROUP LED BY ARNOLD SIMON BUYS 63.4% OF ARIS INDUSTRIES
Aris Redeems Approximately $10.7 Million in Long Term Debt
Simon to Become Chairman and CEO
NEW YORK, N.Y., FEBRUARY 26, 1999 - Aris Industries, Inc. (OTC BB: AISI) today
announced that an investment group led by Arnold Simon, former chief executive
officer of Designer Holdings, Ltd., purchased approximately 45 million newly
issued shares of common stock and common stock equivalents for $20 million, or
$0.44 per share. Mr. Simon will become Chairman and Chief Executive Officer of
Aris, effective immediately.
As part of the company's recapitalization, Aris retired approximately $10.7
million of long term debt held by an investment partnership controlled by Apollo
Advisors, L.P. in exchange for approximately 11,000,000 shares of Aris
Industries' common stock and common stock equivalents plus $4 million in cash.
With the transaction now completed, the Simon-led investment group will own
approximately 63% of shares outstanding, and investment partnerships controlled
by Apollo Advisors L.P. will control 23%.
Aris also announced that it has entered into a new, $65 million revolving credit
facility with a bank group led by CIT Group/Commercial Services, Inc.
Commenting on the transaction, Mr. Simon said, "We believe that Aris has a real
platform for growth, both in its existing businesses and with new licensing
opportunities."
CHANGES TO BOARD OF DIRECTORS OUTLINED
Under the agreement, the Simon-led investment group has the right to nominate
and elect a majority of the Company's Directors. In addition to Mr. Simon
becoming Chairman, three new
<PAGE>
directors will be joining the Board: Deborah Simon, David Fidlon and Howard
Schneider. Three current directors - David Schrieber, John Hannan and Ed Yorke -
have resigned from the Board. Charles Ramat, former chairman and CEO of Aris,
will remain President of the Company and a member of the Board.
Aris Industries designs and imports "Members Only" and private label men's
outerwear and sportswear, as well as "FUBU" boy's and men's loungewear and
sportswear, "Perry Ellis" men's and "Perry Ellis America" men's outerwear and
loungewear and boy's outerwear and sportswear. It is also the licensor of other
"Members Only" products domestically and internationally.
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CONTACT: Don Nathan 212-484-7782
