SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended (Commission File Number): 1-4814
March 31, 2000
ARIS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New York 22-1715274
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1411 BROADWAY, NEW YORK, NEW YORK 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 642-4300
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Number of shares of Common Stock outstanding 79,538,401
As of May 11, 2000
<PAGE>
ARIS INDUSTRIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(Unaudited)
<S> <C>
a. Consolidated Condensed Balance Sheets as of March 31, 2000
and December 31, 1999 3
b. Consolidated Condensed Statements of Operations for the
Three-Months Ended March 31, 2000 and March 31, 1999 4
c. Consolidated Condensed Statements of Cash Flows for the
Three-Months Ended March 31, 2000 and March 31, 1999 5
d. Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,445 $ 1,109
Receivables, net 35,765 34,004
Inventories 20,345 18,233
Prepaid expenses and other current assets 1,833 2,509
--------- ---------
Total current assets 61,388 55,855
Property and equipment, net 12,320 10,752
Goodwill, net 37,394 37,894
Other assets 1,793 1,616
--------- ---------
Total Assets $ 112,895 $ 106,117
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving credit facility $ 38,268 $ 25,485
Current portion of long-term debt 2,600 2,600
Current portion of capitalized lease obligations 712 1,755
Accounts payable 14,973 14,591
Accrued expenses and other current liabilities 5,555 4,005
--------- ---------
Total current liabilities 62,108 48,436
Long-term debt 13,842 14,342
Capitalized lease obligations 2,487 1,818
Other liabilities 2,204 2,270
--------- ---------
Total liabilities 80,641 66,866
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value: 10,000,000 shares authorized; none
issued and outstanding -- --
Common stock, $.01 par value: 100,000,000 shares authorized
79,538,000 issued and outstanding at March 31, 2000
and 79,434,000 issued and outstanding at December 31, 1999 795 794
Additional paid-in capital 80,359 80,324
Accumulated deficit (48,493) (41,399)
Unearned compensation (407) (468)
--------- ---------
Total stockholders' equity 32,254 39,251
--------- ---------
Total liabilities and stockholders' equity $ 112,895 $ 106,117
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-3-
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three- Three-
(in thousands, except per share data Months Ended Months Ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Net Sales $ 42,886 $ 28,133
Cost of Sales (27,734) (21,473)
-------- --------
Gross Profit 15,152 6,660
Commission and Licensing Income 565 242
-------- --------
Income before operating expenses, interest expense and income
tax (provision) benefit 15,717 6,902
Operating expenses:
Selling and administrative expenses (19,323) (7,413)
Start-up costs (1,030) --
Restructuring and other costs (1,124) (6,151)
-------- --------
Loss income before interest expense and income tax
(provision) benefit (5,760) (6,662)
Interest expense, net (1,273) (988)
-------- --------
Loss before income tax (provision) benefit (7,033) (7,650)
Income tax (provision) benefit (61) 326
-------- --------
Net Loss $ (7,094) $ (7,324)
======== ========
Basic net loss per share: $ (0.09) $ (0.28)
======== ========
Diluted net loss per share: $ (0.09) $ (0.28)
======== ========
Per share data:
Weighted average shares outstanding - Basic 79,466 26,265
Weighted average shares outstanding - Diluted 79,466 26,265
</TABLE>
See accompanying notes to consolidated condensed financial statements
-4-
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three- Three-
(In thousands, except per share data) Months Ended Months Ended
March 31, March 31,
2000 1999
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,094) $ (7,324)
-------- --------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,313 266
Issuance of notes in lieu of interest -- 108
Non-cash stock based compensation 41 --
Impairment of goodwill and other intangibles -- 3,750
Change in assets and liabilities:
Increase in receivables (1,761) (2,320)
(Increase) / decrease in inventories (2,112) 4,936
Decrease / (increase) in prepaid expenses and other current assets 676 (729)
Increase in other assets (213) (150)
Decrease in accounts payable (2,569) (4,464)
Increase / (decrease) in accrued expenses and other current liabilities 1,550 (4,714)
Decrease in other liabilities (66) (96)
-------- --------
Total Adjustments (3,141) (3,413)
-------- --------
Net cash used in operating activities (10,235) (10,737)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,345) (13)
-------- --------
Net cash used in investing activities (2,345) (13)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt and capital leases (874) (4,583)
Book overdraft 2,951 1,500
Stock options exercised 56 10
Proceeds - 20,000 from the issuance of common -- 20,000
Common stock issuance costs paid -- (1,236)
Increase (decrease) in borrowings under revolving credit facility 12,783 (5,529)
-------- --------
Net cash provided by financing activities 14,916 10,162
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,336 (588)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,109 1,112
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,445 $ 524
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-5-
<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements for the three-month periods
ended March 31, 2000 and March 31, 1999 are unaudited and reflect all
adjustments consisting of normal recurring adjustments except for restructuring
and other costs (See Note 6) which are, in the opinion of management, necessary
for a fair presentation of financial position, operating results and cash flows
for the periods.
The consolidated condensed balance sheet as of December 31, 1999 was derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The accompanying consolidated
condensed financial statements have been prepared in accordance with accounting
standards appropriate for interim financial statements and should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. The
operating results for the three months ended March 31, 2000 are not necessarily
indicative of the operating results for the year ending December 31, 2000.
2. THE SIMON TRANSACTION
On February 26, 1999, the Company issued: (i) 24,107,145 shares of Common Stock
of the Company and 2,093,790 shares of Series A Preferred Stock of the Company
(which shares were converted into 20,937,900 shares of Common Stock on July 29,
1999), for $20,000,000 and (ii) redeemed the Series B Junior Secured Note (which
represented a total indebtedness of $10,658,000) in exchange for $4,000,000 in
cash and an aggregate of 5,892,856 shares of Common Stock and 512,113 shares of
Series A Preferred Stock (which shares were converted into 5,121,130 shares of
Common Stock on July 29, 1999), (the "Simon Purchase Transaction").
3. ACQUISITIONS
On August 10, 1999, the Company consummated the merger of Lola, Inc. ("Lola"), a
California corporation, with and into Europe Craft Imports, Inc. ("ECI"), a New
Jersey corporation (the "Merger"), that is wholly owned by the Company.
Concurrent with the closing, ECI contributed all of the assets formerly owned by
Lola to XOXO
6
<PAGE>
Clothing Company, Incorporated, a Delaware corporation ("XOXO") that is wholly
owned by ECI. Lola's business consisted principally of the manufacture and sale
of women's apparel and accessories principally under the "XOXO" name.
In connection with the acquisition, Lola's shareholders received $10,000,000 in
cash, 6,500,000 shares of the Company's common stock, valued at $1.50 per share
at the time of the acquisition, and options to purchase 1,150,000 shares of the
Company's common stock (valued at $805,000). In addition, the Company incurred
acquisition expenses which approximated $473,000. The acquisition was accounted
for under the purchase method of accounting, and accordingly, the operating
results have been included in the Company's consolidated results of operations
from the date of acquisition. The excess of the purchase price over the fair
values of assets acquired and liabilities assumed amounted to $22,649,000 and
has been recorded as goodwill. The goodwill is being amortized over a twenty
year useful life using the straight line method. In conjunction with the merger,
the Company obtained a $10,000,000 term loan and increased its line of credit
from $65,000,000 to $80,000,000 with a financial institution.
4. DEBT
The Company's long-term indebtedness consists of its obligations to BNY
Financial Corporation ("BNY") under the Series A Junior Secured Note Agreement
dated June 30, 1993,as amended, pursuant to which BNY is currently owed
$6,942,000 plus interest at the rate of 7% per annum, with a final maturity date
of November 3, 2002. The principal of BNY's Note is payable on November 3 of
each year as follows:
YEAR AMOUNT
2000 $ 600,000
2001 $1,100,000
2002 $5,242,000
BNY is also entitled to receive mandatory prepayments based upon 50% of certain
"excess cash flows" of the Company as defined in the Company's note agreements
with BNY.
The Company entered into a Financing Agreement facility with The CIT Commercial
Services Group, Inc. and certain other financial institutions, whereby such
lenders agreed to provide a revolving credit facility of up to $65,000,000, for
working capital, loans and letters of credit financing, which expires on
February 26, 2002. The obligations under the Financing Agreement are
collateralized by liens on substantially all of the assets of the Company's
subsidiaries. For revolving credit loans, interest will accrue at the bank's
prime rate. For Eurodollar loans, interest will accrue at a rate per annum equal
to the Eurodollar rate (as defined) plus 2.5%. The Agreement contains various
financial and other covenants and conditions, including, but not limited to,
limitations on paying dividends, making acquisitions and incurring additional
indebtedness. As of March 31, 2000 the Company had
7
<PAGE>
availability under the facility of approximately $1,645,000 and was incurring
interest at prime rate (9%).
In connection with the XOXO transaction (See Note 3), the Company's loan
agreement was amended in August 1999 to increase the revolving credit line to
$80,000,000, and to provide for a term loan of $10,000,000. The term loan bears
interest at prime plus one-half percent and is payable in quarterly installments
of $500,000, plus interest, commencing January 1, 2000, with a balloon payment
of $5,500,000 on February 26, 2002, the maturity date. The Company is required
to make certain mandatory prepayments based upon "excess cash flows" as defined
in the amendment to the loan agreement.
During April 2000, the Company entered into an amendment of its Financing
Agreement with CIT Commercial Services Group, Inc. and certain other financial
institutions, under which the lenders waived compliance with certain covenant
requirements for 1999 which the Company was not in compliance with and amended
the covenants for the year ended December 31, 2000. In addition, the amendment
provides an overdraft facility based on seasonal needs. In connection with the
waiver and amendment, the Company's Chief Executive Officer agreed to provide a
personal guarantee on $3 million of indebtedness outstanding under the Financing
Agreement through October 31, 2000.
5. START-UP COSTS OF NEW LICENSING OPERATIONS
During the three-months ended March 31, 2000, the Company incurred $1,030,000 of
start-up costs relating to various license agreements for which product launches
are scheduled for years 2000 and 2001. These start-up costs consist of salaries,
samples and related supplies directly attributable to newly licensed operations.
The Company expects to continue to incur such costs during fiscal 2000 and 2001
in connection with several of its new license arrangements.
6. RESTRUCTURING AND OTHER COSTS
During the quarter ended March 31, 2000 the Company recorded charges of
$1,124,000 associated with the continuing restructuring of its corporate office
and distribution facilities. These charges before taxes relate primarily to
employee severance costs.
During the first quarter ended ended March 31, 1999 in connection with the Simon
Purchase Transaction, the Company was required to obtain consents from the
licensor of its Perry Ellis licenses. As a condition to granting its consent,
such licensor required that the term of its licenses be shortened. Based on the
negative undiscounted net cash flows expected to be derived from these licenses
over their revised terms, intangible assets associated with the acquisition of
these licenses of $3,750,000 (included in goodwill) was deemed impaired and
written-off. In addition, the Company made a severance payment of approximately
$2,401,000 pursuant to the Retention Agreement between the Company
8
<PAGE>
and its former President.
7. INVENTORIES
March 31, 2000 December 31, 1999
-------------- -----------------
(In Thousands) (In Thousands)
Finished Goods $ 15,156 $ 14,040
Work-in process 2,322 1,196
Raw materials 2,867 2,997
-------- --------
$ 20,345 $ 18,233
========= ========
8. INCOME TAXES
At December 31, 1999 the Company had available net operating loss carryforwards
for federal income tax purposes of approximately $80,000,000 which expire from
fiscal 2000 through 2018. As a result of the change of control of the Company
caused by the Simon Purchase Transaction, the utilization of these net operating
loss carryforwards are limited by Section 382 of the Internal Revenue Code to
approximately $1,500,000 annually. Accordingly, the Company expects that a
significant portion of these net operating loss carryforwards will expire unused
and has recorded a full valuation allowance against the Company's deferred tax
asset. In addition, the Company's alternative minimum tax credit carryovers are
subject to similar restrictions but do not expire.
9. PER SHARE DATA
Basic (loss) income per common share is computed by dividing net (loss) income
available for common shareholders, by the weighted average number of shares of
common stock outstanding during each period. Diluted (loss) income per share is
computed assuming the conversion of stock options and warrants with a market
value greater than the exercise price.
9
<PAGE>
March 31,2000 March 31, 1999
(In thousands (In thousands
except per except per
share data) share data)
------------- --------------
NUMERATOR:
Net loss ........................... $ (7,094) $ (7,324)
DENOMINATOR:
Basic weighted average shares
outstanding ....................... 79,466 26,265
EFFECT OF DILUTED
SECURITIES:
Stock Options ..................... -- --
-------- -------
Diluted weighted average
shares outstanding .............. 79,466 26,265
======== ========
Basic (loss) per share ............... $ (0.09) $ (0.28)
======== ========
Diluted (loss) per share ............. $ (0.09) $ (0.28)
======== ========
Options and warrants to purchase 3,543,511 and 2,336,510 shares of Common Stock
were outstanding as of March 31, 2000 and March 31, 1999, respectively, but were
not included in the computation of diluted earnings per share because the effect
would be anti-dilutive.
10. COMMITMENTS AND CONTINGENCIES
Licensing Agreements
The Company has been granted several license agreements to manufacture and
distribute men's, women's and boys' outerwear, sportswear and activewear
products bearing the licensors' labels. The agreements expire at various dates
through 2011. The Company is required to make royalty and advertising payments
based on a percentage of sales, as defined in the respective agreements, subject
to minimum payment thresholds. Future minimum royalty and advertising payments
required under the license agreements are as follows (in thousands):
2000 .................................. $ 3,064
2001 .................................. 4,434
2002 .................................. 5,394
2003 .................................. 6,245
2004 .................................. 5,380
Thereafter ............................ 9,939
-------
Total minimum royalty and advertising
payments ............................ $34,456
=======
In April 2000 Perry Ellis International and the Company mutually agreed not to
continue the "Perry Ellis America" Jeanswear license after the Year 2000.
Simultaneous with this agreement the Company and Perry Ellis International
agreed to renew the Company's Loungewear License Agreement through December 31,
2003.
10
<PAGE>
Contingencies
The Company, in the ordinary course of its business, is the subject of, or a
party to, various pending or threatened legal actions. While it is not possible
at this time to predict the outcome of any litigation, in the opinion of
management any ultimate liability arising from these actions will not have a
material effect on the financial position, results of operations or cash flows.
11
<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The following analysis of the financial condition and results of operations of
Aris Industries, Inc. (the "Company") for the three-month periods ended March
31, 2000 and March 31, 1999 should be read in conjunction with the consolidated
condensed financial statements, including the notes thereto, included on pages 3
through 11 of this report.
FORWARD LOOKING STATEMENTS
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended by Public Law 104-67. The Company cautions readers that
forward looking statements, including without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income, are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward looking statements, due to several important factors
herein identified, among others, and other risks and factors identified from
time to time in the Company's reports filed with the Securities and Exchange
Commission.
YEAR 2000 COMPLIANCE
The Company successfully completed its Year 2000 compatibility and compliance
testing during December 1999. The Company did not incur any significant problems
or unanticipated expenses related to Year 2000 compliance issues.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had a working capital deficit of approximately
$720,000 as compared to a working capital surplus of approximately $7,419,000 at
December 31, 1999. The decrease in working capital was due to the Company's net
loss incurred in the three months ended March 31, 2000. During this period, the
Company financed its working capital requirements and capital expenditures
principally through its credit facilities.
On February 26, 1999, simultaneous, with the closing of the Simon Purchase
Transaction, the Company and its subsidiaries entered into a Financing Agreement
with CIT Commercial Services Group, Inc. ("CIT") and certain other financial
institutions, whereby such lenders agreed to provide a revolving credit facility
of up to
12
<PAGE>
$65,000,000 for working capital, loans and letters of credit financing, which
expires on February 26, 2002. The obligations under the Financing Agreement are
collateralized by liens on substantially all of the assets of the Company and
its subsidiaries. For revolving credit loans, interest will accrue at the bank's
prime rate. For Eurodollar loans, interest will accrue at a rate per annum equal
to the Eurodollar rate plus 2.5%. The agreement evidencing the new line of
credit contains various financial and other covenants and conditions, including,
but not limited to, limitations on paying dividends, making acquisitions and
incurring additional indebtedness. As of March 31, 2000 the Company had
availability under the facility of approximately $1,645,000 and was incurring
interest at prime rate (9%).
In connection with the XOXO transaction, the Company's Financing Agreement was
amended to increase the revolving credit line to $80,000,000, and to provide for
a term loan of $10,000,000. The term loan bears interest at prime plus one-half
percent and is payable in quarterly installments of $500,000, plus interest,
commencing January 1, 2000, with a balloon payment of $5,500,000 on February 26,
2002, the maturity date. The Company is required to make certain mandatory
prepayments based upon "excess cash flows" as defined in the amendment to the
loan agreement.
During April 2000, the Company entered into an amendment of its Financing
Agreement with CIT Commercial Services Group, Inc. and certain other financial
institutions, under which the lenders waived compliance with certain covenant
requirements for 1999 which the Company was not in compliance with and amended
the covenants for the year ended December 31, 2000 to provide for the Company to
operate within its fiscal 2000 business plan. In addition, the amendment
provided an overdraft facility based on seasonal needs. In connection with the
waiver and amendment, the Company's Chief Executive Officer agreed to provide a
personal guarantee on $3 million of indebtedness outstanding under the credit
agreement through October 31, 2000.
The Company's long-term indebtedness consists of its obligations to BNY
Financial Corporation ("BNY") under the Series A Junior Secured Note Agreement
dated June 30, 1993, pursuant to which BNY is owed $6,942,000, including
$1,042,000, representing the quarterly interest payments that were deferred for
the period February 1, 1996 through January 31, 1998 by agreement with BNY in
September 1997, plus interest at the rate of 7% per annum, with a final maturity
date of November 3, 2002. The principal of BNY's Note is payable on November 3
of each year as follows:
YEAR AMOUNT
2000 $ 600,000
2001 $1,100,000
2002 $5,242,000
BNY is also entitled to receive mandatory prepayments based upon 50% of certain
"excess cash flows" of the Company as defined in the Company's note agreements
with BNY.
13
<PAGE>
As a result of the CIT Financing Agreement, the Company believes it has adequate
liquidity and capital resources to meet its requirements for the current fiscal
year.
RESULTS OF OPERATIONS
The Company reported a net loss of $7,094,000 for the three-month period ended
March 31, 2000 compared to a net loss of $7,324,000 for the three-month period
ended March 31, 1999.
During the three-months ended March 31, 2000, the Company incurred restructuring
and other costs in the amount of $1,124,000 relating to the continuing
restructuring of its corporate offices and distribution facilities. In addition,
the Company incurred $1,030,000 in start-up costs associated with new licensing
arrangement for which product launches are scheduled for fiscal 2000 and 2001.
For the three-months ended March 31, 1999 the net loss was primarily
attributable to non-recurring charges which consisted of a severance charge of
approximately $2,401,000 made pursuant to the Retention Agreement between the
Company and its former President and the write off of the remaining value of the
Goodwill and certain licenses of $3,750,000.
NET SALES
The Company's net sales increased from $28,133,000 during the three-months ended
March 31, 1999 to $42,886,000 during the three-months ended March 31, 2000. This
increase of $14,753,000 was primarily due to the inclusion of XOXO's sales of
$23,851,000. In addition, there were sales increases of $1,315,000 in the
Company's "Perry Ellis" product lines. These increases in sales were offset by a
decrease in the "Members Only" product line of $2,484,000, $5,443,000 in the
"FUBU" product lines and $2,486,000 for private label sales.
GROSS PROFIT
Gross Profit for the three-months ended March 31, 2000 was $15,152,000 or 35.3%
of net sales compared to $6,660,000 or 23.7% of net sales for the three-months
ended March 31, 1999. Gross profit was positively impacted by sales of higher
margin XOXO products. In addition, margins on "Perry Ellis" branded products
improved compared to last year when the Company liquidated prior season
inventory at reduced prices. Last years gross profit was also negatively
impacted due to the liquidation of inventories on discontinued divisions.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and Administrative expenses were $19,323,000 or 45.1% of net sales for
the three-months ended March 31, 2000 as compared to $7,413,000 or 26.3% of net
sales for the three-months ended March 31, 1999. The increase in Selling and
Administrative expenses is
14
<PAGE>
attributable to the inclusion of XOXO's Selling and Administrative expenses,
from the date of the acquisition. In addition, Selling and Administrative
expenses have increased due to opening of twelve XOXO Retail and Outlet Stores
since the XOXO acquisition on August 10, 1999.
START-UP COSTS OF NEW LICENSING OPERATIONS
During the three-months ended March 31, 2000, the Company incurred $1,030,000 of
start-up costs relating to various license agreements for which product launches
are scheduled for years 2000 and 2001. These start-up costs consist of salaries,
samples and related supplies directly attributable to newly licensed operations.
The Company expects to continue to incur such cost during fiscal 2000 and 2001
in connection with several of its new license arrangements.
RESTRUCTURING AND OTHER COSTS
During the quarter ended March 31, 2000 the Company recorded charges of
$1,124,000 associated with the continuing restructuring of its corporate office
and distribution facilities. These charges before taxes relate primarily to
employee severance costs.
During the first quarter ended March 31, 1999 in connection with the Simon
Purchase Transaction, the Company was required to obtain consents from the
licensor of its Perry Ellis licenses. As a condition to granting its consent,
such licensor required that the term of its licenses be shortened. Based on the
negative undiscounted net cash flows expected to be derived from these licenses
over their revised terms, intangible assets associated with the acquisition of
these licenses of $3,750,000 (included in goodwill) were deemed impaired and
written-off. In addition, the Company made a severance payment of approximately
$2,401,000 pursuant to the Retention Agreement between the Company and its
former President.
INTEREST EXPENSE
Interest expense for the three-months ended March 31, 2000 increased by $285,000
or 28.8% compared to the three-month period ended March 31, 1999. This increase
was due to interest on the Company's $10,000,000 Term Loan dated August 10,
1999, the date of the XOXO acquisition. In addition, the increase in interest
expense is also due to additional borrowings on the Company's working capital
facility, as well as increases in the prime lending rate from 8.25% as of the
period ended March 31, 1999 to 9.00% as of March 31, 2000. This was partially
offset by reduction of interest expense due to the conversion of Apollo debt to
equity due to the Simon Purchase Transaction.
15
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports were filed under Form 8-K
16
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARIS INDUSTRIES, INC.
(Registrant)
Date: May 12, 2000 By /s/
-------------------------------
Paul Spector
Chief Financial Officer / Treasurer
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
- ----------- ----------- --------------------------
<S> <C>
2. Second Amended Joint Plan of Reorganization dated March (3)
26, 1993, as amended May 11 and June 9, 1993
(Note: Annexes omitted)
3.3 Restated Certificate of Incorporation filed on June 30, 1993 (3)
3.4 Amended and Restated By-Laws effective June 30, 1993 (3)
3.5 Amended and Restated Certificate of Incorporation filed on (22)
July 29, 1999 increasing the authorized shares
4.1 Specimen Certificate Evidencing Common Stock. (1)
10.67 Series A Junior Secured Note Agreement dated as of June (3)
30, 1993 between Registrant and BNY Financial Corporation.
10.68 Series A Junior Secured Note dated as of June 30, 1993 (3)
issued by Registrant to BNY Financial Corporation.
10.72 Secondary Pledge Agreement dated as of June 30, 1993 (3)
between Registrant, BNY Financial Corporation and AIF II,
L.P.
10.76 Equity Registration Rights Agreement dated as of June 30, (3)
1993 among Registrant and the Holders of Registered Shares
Referred to Therein.
10.79 Severance Agreement dated April 3, 1991 between (3)
Registrant and Paul Spector.
10.80 1993 Stock Incentive Plan of Registrant, as amended by (3)
Amendment No. 1 thereto dated June 24, 1993.
10.99 Warrant dated September 30, 1996 issued by Aris Industries, (10)
Inc. to Heller Financial, Inc.
10.101 Amendment dated May 5, 1997 to Series A Junior Secured (11)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.103 Amendment dated June 18, 1997 to Series A Junior Secured (13)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.105 Asset Purchase Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., as Seller, Steven Arnold and
Christopher Healy as Shareholders of Seller, and Aris
Management Corp. (n/k/a ECI Sportswear, Inc.), as
Purchaser.
10.106 Shareholders Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., Steven Arnold, Christopher Healy,
Aris Management Corp. (n/k/a ECI Sportswear, Inc.), the
Registrant, Apollo Aris Partners, L.P. and Charles S. Ramat.
10.107 Amendment dated July 18, 1997 to Series A Junior Secured (14)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
- ----------- ----------- --------------------------
<S> <C>
10.109 Amendment executed September 12, 1997 to Series A and (15)
Series B Junior Secured Note Agreements dated as of June
30, 1993 between Registrant, BNY Financial Corporation
and AIF, L.P.
10.111 Securities Purchase Agreement, dated as of February 26, (17)
1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF, L.P., The Simon Group, L.L.C. and Arnold
Simon.
10.112 Shareholders Agreement, dated as of February 26, 1999, (17)
between Aris Industries, Inc., Apollo Aris Partners, L.P.,
AIF, L.P., The Simon Group, L.L.C. and Charles S. Ramat.
10.113 Equity Registration Rights Agreement, dated as of February (17)
26, 1999, between Aris Industries, Inc., Apollo Aris
Partners, L.P., AIF, L.P., The Simon Group, L.L.C. and
Charles S. Ramat.
10.114 Retention Agreement dated as of February 18, 1999 by and (17)
between Aris Industries, Inc. and Charles S. Ramat.
10.115 Financing Agreement dated February 26, 1999 by and (18)
among the Company and its Subsidiaries and CIT
Commercial Group, Inc. and the other Financial Industries
named therein.
10.116 Employment Agreement effective as of March 1, 1999 with (19)
Arnold Simon
10.117 Employment Agreement effective as of March 1, 1999 with (19)
David Fidlon
10.118 Agreement of Lease made as of April 22, 1999 by and (19)
between Erika Realty Trust, as Landlord, and Registrant, as
Tenant, for premises located at 89 West Rodney French
Blvd., New Bedford, Ma.
10.119 First Amendment to CIT Financing Agreement dated as of (20)
March 25, 1999.
10.120 Employment Agreement effective as of June 7, 1999 with (20)
Joseph Purritano
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
- ----------- ----------- --------------------------
<S> <C>
10.121 Agreement and Plan of Merger dated July 19, 1999 by and (21)
among Aris Industries, Inc., XOXO Acquisition Corp. and
Lola, Inc. and its shareholders ("Agreement and Plan of
Merger"). The exhibits and schedules to the Agreement and
Plan of Merger are listed on the last page of such Agreement.
Such exhibits and schedules have not been filed by the
Registrant, who hereby undertakes to file such exhibits and
schedules upon request of the Commission.
10.122 Amendment No. 1 to Agreement and Plan of Merger (21)
10.123 Employment Agreement by and among the Registrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Gregg Fiene, dated
August 10, 1999
10.124 Employment Agreement by and among the Registrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Hollis Fiene, dated
August 10, 1999
10.125 Shareholders' Agreement by and among the Registrant, The (21)
Simon Group, LLC, Gregg Fiene, Michele Bohbot and Lynn
Hanson, dated August 10, 1999
10.126 Amendment No. 2 to Financing Agreement by and among (21)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated August 10,
1999
10.127 Amended and Restated 1993 Stock Option Plan (16)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
- ----------- ----------- --------------------------
<S> <C>
10.128 Amendment No. 3 to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated February
15, 2000
10.129 Waiver and Consent to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated April 1,
2000.
10.130 Amendment No. 4 to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated April 30,
2000.
(1) Filed as the indicated Exhibit to the Annual Report of the Company on Form 10-K for the fiscal year
ended February 2, 1991 and incorporated herein by reference.
(2) Omitted.
(3) Filed as the indicated Exhibit to the Report on Form 8-K dated June 30, 1993 and incorporated
herein by reference.
(4) - (9) Omitted.
(10) Filed as the indicated Exhibit to the Report on Form 8-K dated September 30, 1996 and incorporated
herein by reference.
(11) Filed as the indicated Exhibit to the Annual Report of the Company on Form 10-K for the fiscal year
ended December 31, 1996 and incorporated herein by reference.
(12) Omitted.
(13) Filed as the indicated Exhibit to the Report on Form 8-K dated June 18, 1997 and incorporated
herein by reference.
(14) Filed as the indicated Exhibit to the Report on Form 8-K dated July 15, 1997 and incorporated herein
by reference.
(15) Filed as the indicated Exhibit to the Report on Form 8-K dated September 12, 1997 and incorporated
herein by reference.
(16) Files as Annex A to the Company's Proxy Statement filed with the Commission on May 27, 1999,
and incorporated herein by reference.
(17) Filed as the indicated Exhibit to the Report on Form 8-K dated February 26, 1999 and incorporated
herein by reference.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(18) Filed as the indicated Exhibit to the Annual Report of the Company on Form 10-K for the year
ended December 31, 1998 and incorporated herein by reference.
(19) Filed as the indicated Exhibit to the Report on Form 10-Q dated March 31, 1999 and incorporated
herein by reference.
(20) Filed as the indicated Exhibit to the Report on Form 10Q dated June 30, 1999 and incorporated
herein by reference.
(21) Filed as the indicated Exhibit to the Report on Form 8-K dated August 10, 1999 and incorporated
herein by reference
(22) Filed as the indicated Exhibit to the Report on Form 10Q dated September 30, 1999 and
incorporated herein by reference.
(23) Filed herewith
</TABLE>
22
Exhibit 10.128
THIRD AMENDMENT
TO
FINANCING AGREEMENT
Third Amendment, dated as of February 15, 2000, to the Financing
Agreement, dated as of February 26, 1999, as amended by the First Amendment,
dated as of March 25, 1999 and by the Second Amendment, dated as of August 10,
1999 (as so amended, the "Financing Agreement"), by and among 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
("Sportswear"), Stetson Clothing Company, Inc., a Delaware corporation
("Stetson"), XOXO Clothing Company, Incorporated, a Delaware corporation
("XOXO"), B P Clothing Company, Inc., a New York corporation ("B P" and together
with ECI, Sportswear, Stetson and XOXO, each a "Borrower" and collectively the
"Borrowers"), the financial institutions from time to time party thereto (each a
"Lender" and collectively, the "Lenders"), The Chase Manhattan Bank, as
administrative agent, book manager and arranger for the Lenders (in such
capacity, the "Administrative Agent") and The CIT Group/Commercial Services,
Inc., as collateral agent for the Lenders (in such capacity, the "Collateral
Agent" or "Agent").
WHEREAS, the Company, the Borrowers, the Lenders, the Administrative
Agent and the Agent wish to amend the Financing Agreement to continue to provide
for overadvances.
Accordingly, the Company, the Borrowers, the Additional Borrowers,
the Administrative Agent, the Agent and the Lenders hereby agree as follows:
1. Definitions. All capitalized terms used herein and not otherwise
defined herein are used herein as defined in the Financing Agreement.
2. Existing Definitions. The definition of the term "Overadvance
Amount" in Section 1.01 of the Financing Agreement is hereby amended in its
entirety to read as follows:
"Overadvance Amount" means (A) $5,000,000, from February 1, 2000
through and including March 31, 2000, and (B) such amounts thereafter as the
Agent shall approve in its sole discretion."
3. Conditions to Effectiveness. This Amendment shall become
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions have been satisfied being herein
called the "Third Amendment Effective Date"):
(a) The representations and warranties contained herein, in
Section 6.01 of the Financing Agreement and in each other Loan Document and
certificate or other writing delivered to the Agent and the Lenders pursuant
hereto on or prior to the Third Amendment Effective Date shall be correct on and
as of the Third Amendment Effective Date as though made on and as of such date
(except to the extent that such representations and warranties expressly relate
<PAGE>
solely to an earlier date in which case such representations and warranties
shall be true and correct on and as of such date); and no Default or Event of
Default shall have occurred and be continuing on the Third Amendment Effective
Date or would result from this Amendment becoming effective in accordance with
its terms.
(b) The Agent shall have received on or before the Third
Amendment Effective Date counterparts of this Amendment which bear the
signatures of the Company, the Borrowers and each of the Lenders.
(c) All legal matters incident to this Amendment shall be
satisfaction to the Agent and its special counsel.
4. Representations and Warranties. Each of the Company and the
Borrowers represents and warrants to the Lenders as follows:
(a) The Company and each Borrower (i) is duly organized,
validly existing and in good standing under the laws of the state of its
organization and (ii) has all requisite power, authority and legal right to
execute, deliver and perform this Amendment and all other documents executed by
it in connection with this Amendment, and to perform the Financing Agreement, as
amended hereby.
(b) The execution, delivery and performance by the Company and
the Borrowers of this Amendment and all other documents executed by it in
connection with this Amendment and the performance by the Company and the
Borrowers of the Financing Agreement as amended hereby (i) have been duly
authorized by all necessary action, (ii) do not and will not violate or create a
default under the Company's or any Borrowers organizational documents, any
applicable law or any contractual restriction binding on or otherwise affecting
the Company or any Borrower or any of the Company's or such Borrower's
properties, and (iii) except as provided in the Loan Documents, do not and will
not result in or require the creation of any Lien, upon or with respect to the
Company's or any Borrower's property.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by the
Company or any of the Borrowers of this Amendment and all other documents
executed by it in connection with this Amendment, and the performance by the
Company and the Borrowers of the Financing Agreement as amended hereby.
(d) This Amendment and the Financing Agreement, as amended
hereby and all other documents executed in connection with this Amendment
constitute the legal, valid and binding obligations of the Company and the
Borrowers party thereto, enforceable against such Persons in accordance with
their terms except to the extent the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies and by general principles of equity.
-2-
<PAGE>
(e) The representations and warranties contained in Article VI
of the Financing Agreement are correct on and as of the Third Amendment
Effective Date as though made on and as of the Third Amendment Effective Date
(except to the extent such representations and warranties expressly relate to an
earlier date), and no Event of Default or Default, has occurred and is
continuing on and as of the Third Amendment Effective Date.
5. Continued Effectiveness of Financing Agreement. Each of the
Company and the Borrowers hereby (i) confirms and agrees that each Loan Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Third Amendment Effective Date of this Amendment all references in any such
Loan Document to "the Financing Agreement", "thereto", "thereof, "thereunder" or
words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment, and (ii) confirms and agrees
that to the extent that any such Loan Document purports to assign or pledge to
the Agent, or to grant to the Agent a Lien on any collateral as security for the
Obligations of the Company and the Borrowers from time to time existing in
respect of the Financing Agreement and the Loan Documents, such pledge,
assignment and/or grant of a Lien is hereby ratified and confirmed in all
respects.
6. Miscellaneous.
(a) This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a pan of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(d) The Borrowers will pay on demand all out-of-pocket costs
and expenses of the Agent in connection with the preparation, execution and
delivery of this Amendment, including, without limitation, the reasonable fees,
disbursements and other charges of Schulte Roth & Zabel LLP, counsel to the
Agent.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ARIS INDUSTRIES, INC.
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
EUROPE CRAFT IMPORTS, INC.
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
ECI SPORTSWEAR, INC.
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
STETSON CLOTHING COMPANY, INC.
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
B P CLOTHING COMPANY, INC.
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
XOXO CLOTHING COMPANY,
INCORPORATED
By: /s/ PAUL SPECTOR
------------------------------------
Name: Paul Spector
----------------------------------
Title: Treasurer/VP
---------------------------------
<PAGE>
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent
By: /s/ KATHY LIPTEK
------------------------------------
Name: Kathy Liptek
----------------------------------
Title: VP
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ DAVID MICHAELS
------------------------------------
Name: David Michaels
----------------------------------
Title: Vice President
---------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ ANDREW FINKLE
------------------------------------
Name: Andrew Finkle
----------------------------------
Title: Assistant Manager
---------------------------------
By: /s/ [ILLEGIBLE]
------------------------------------
Name: [ILLEGIBLE]
----------------------------------
Title: Vice President
---------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
------------------------------------
Name: [ILLEGIBLE]
----------------------------------
Title: Assistant Vice President
---------------------------------
WAIVER AND CONSENT
WAIVER AND CONSENT, dated as of April 1, 2000, to the Financing Agreement,
dated as of February 26, 1999, as amended by the First Amendment, dated as of
March 25, 1999, by the Second Amendment, dated as of August 10, 1999 and by the
Third Amendment dated as of February 15, 2000 (as so amended, the "Financing
Agreement"), by and among 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 ("Sportswear"), Stetson Clothing
Company, Inc., a Delaware corporation ("Stetson"), XOXO Clothing Company,
Incorporated, a Delaware corporation ("XOXO"), B P Clothing Company, Inc., a New
York corporation ("B P" and together with ECI, Sportswear, Stetson and XOXO,
each a "Borrower" and collectively the "Borrowers"), the financial institutions
from time to time party thereto (each a "Lender" and collectively, the
"Lenders"), The Chase Manhattan Bank, as administrative agent, book manager and
arranger for the Lenders (in such capacity, the "Administrative Agent") and The
CIT Group/Commercial Services, Inc., as collateral agent for the Lenders (in
such capacity, the "Collateral Agent" or "Agent").
1. All capitalized terms used herein and not otherwise defined herein are
used herein as defined in the Financing Agreement.
2. Pursuant to the request of the Company and the Borrowers and in
accordance with Section 12.03 of the Financing Agreement, the Lenders and the
Agent hereby consent to, and waive any Event of Default that would otherwise
arise under the Financing Agreement by reason of an Overadvance Amount existing
from April 1, 2000 through and including April 30, 2000, provided that the
Overadvance Amount does not exceed (i) $7,000,000, from April 1, 2000 through
and including April 29, 2000 and (ii) $6,000,000 on April 30, 2000.
3. This Waiver and Consent shall become effective when the Agent shall have
received counterparts of this Waiver and Consent which bear the signatures of
the Lenders (such date, the "Effective Date").
4. This Waiver and Consent shall be governed by the laws of the State of
New York.
5. This Waiver and Consent (i) may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument, (ii) shall become effective as of the
Effective Date, (iii) shall be effective only in this specific instance for the
specific purpose set forth herein, and (iv) does not allow any other or further
departure from the terms of the Financing Agreement or the other Loan Documents,
which terms shall continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Consent
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL
SERVICES, INC., as Collateral Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
ISRAEL DISCOUNT BANK OF NEW YORK
By:_____________________________________
Name:___________________________________
Title:__________________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
-2-
Exhibit 10.130
FOURTH AMENDMENT
TO
FINANCING AGREEMENT
Fourth Amendment, dated as of April 30, 2000, to the Financing Agreement,
dated as of February 26, 1999, as amended by the First Amendment, dated as of
March 25, 1999, by the Second Amendment, dated as of August 10, 1999 and by the
Third Amendment dated as of February 15, 2000 (as so amended, the "Financing
Agreement"), by and among 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 ("Sportswear"), Stetson Clothing
Company, Inc., a Delaware corporation ("Stetson"), XOXO Clothing Company,
Incorporated, a Delaware corporation ("XOXO"), B P Clothing Company, Inc., a New
York corporation ("B P" and together with ECI, Sportswear, Stetson and XOXO,
each a "Borrower" and collectively the "Borrowers"), the financial institutions
from time to time party thereto (each a "Lender" and collectively, the
"Lenders"), The Chase Manhattan Bank, as administrative agent, book manager and
arranger for the Lenders (in such capacity, the "Administrative Agent") and The
CIT Group/Commercial Services, Inc., as collateral agent for the Lenders (in
such capacity, the "Collateral Agent" or "Agent").
WHEREAS, the Company, the Borrowers, the Lenders, the Administrative Agent
and the Agent wish to amend certain provisions of the Financing Agreement.
Accordingly, the Company, the Borrowers, the Lenders, the Administrative
Agent and the Agent hereby agree as follows:
1. Definitions. All capitalized terms used herein and not otherwise defined
herein are used herein as defined in the Financing Agreement.
2. Existing Definitions.
(a) The definition of the term "Consolidated Net Income (Loss)" in Section
1.01 of the Financing Agreement is hereby amended to add the following at the
end thereof: "For purposes of the financial covenants set forth in Section
7.02(p) of this Agreement, Consolidated Net Income (Loss) shall be increased by
the sum of (i) $400,000, representing the amendment fee paid to the Lenders in
connection with the Fourth Amendment, and (ii) an amount equal to the value of
the non-cash compensation granted to Arnold Simon in connection with the Simon
Limited Guaranty."
(b) The definition of the term "Consolidated Net Worth" in Section 1.01 of
the Financing Agreement is hereby amended to add the following at the end
thereof: "For purposes of the financial covenants set forth in Section 7.02(p)
of this Agreement, Consolidated Net Worth shall be increased by the sum of (i)
$400,000, representing the amendment fee paid to the Lenders in connection with
the Fourth Amendment, and (ii) an amount equal to the value of non-cash
compensation granted to Arnold Simon in connection with the Simon Limited
Guaranty."
<PAGE>
(c) The definition of the term "Guaranties" in Section 1.01 of the
Financing Agreement is hereby amended by (i) deleting the word "and" after
clause (i) thereof, and (ii) adding a new clause (iii) to read as follows:
"(iii) the Simon Limited Guaranty."
(d) The definition of the term "Overadvance Amount" in Section 1.01 of the
Financing Agreement is hereby amended in its entirety to read as follows:
"'Overadvance Amount' means (i) $7,000,000 from April 1, 2000 through
and including April 29, 2000, (ii) $6,000,000 on April 30, 2000, (iii)
$9,000,000 from May 1, 2000 through and including May 30, 2000, (iv)
$8,000,000 on May 31, 2000, (v) $7,500,000 from June 1, 2000 through and
including June 29, 2000, (vi) $6,500,000 on June 30, 2000, (vii) $4,500,000
from July 1, 2000 through and including July 30, 2000, (viii) $3,500,000 on
July 31, 2000, (ix) $2,000,000 from August 1, 2000 through and including
August 30, 2000, (x) $1,000,000 on August 31, 2000, and (xi) zero
thereafter."
3. New Definitions: The following new definitions are added to Section 1.01
of the Financing Agreement in the appropriate alphabetical order to read as
follows:
"'Fourth Amendment' means the Fourth Amendment, dated as of April 30,
2000, to this Agreement."
"'Guaranty Payment' has the meaning specified therefor in Section
7.02(r)."
"'Reimbursement Payment' has the meaning specified therefor in Section
7.02(r)."
"'Simon Limited Guaranty' means the Limited Guaranty dated as of April
30, 2000 made by Arnold Simon in favor of the Lenders and the Agent in
connection with the Fourth Amendment."
4. Settlement Period. The first sentence of Section 2.05(b)(i) of the
Financing Agreement is hereby amended in its entirety to read as follows:
"With respect to each Eurodollar Loan, on the first and the last day
of each Interest Period and, with respect to all periods for which the
Agent, on behalf of the Lenders, has funded Base Rate Loans pursuant to
subsection 2.05(a), on the first Business Day after the last day of each
week, or such shorter period as the Agent may from time to time select (any
such period being herein called a "Settlement Period"), the Agent shall
notify each Lender of the unpaid principal amount of the Revolving Credit
Loans outstanding as of the last of the Settlement Period."
-2-
<PAGE>
5. Interest. Section 2.06(a) of the Financing Agreement is hereby amended
in its entirety to read as follows:
"(a) Loans. (i) Each Revolving Credit Loan which is a Eurodollar Loan
shall bear interest on the principal amount thereof from time to time
outstanding from the date of such Loan until such principal amount becomes
due, at a rate per annum equal to the Eurodollar Rate for the Interest
Period in effect for such Loan plus 2.75%. Each Revolving Credit Loan which
is a Base Rate Loan shall bear interest on the principal amount thereof
from time to time outstanding from the date of such Loan, until such
principal amount becomes due, at a rate per annum equal to the Base Rate
plus 0.25%.
(ii) Each Term Loan which is a Eurodollar Loan shall bear interest on
the principal amount thereof from time to time outstanding from the date of
such Loan until such principal amount becomes due, at a rate per annum
equal to the Eurodollar Rate for the Interest Period in effect for such
Loan plus 3.25%. Each Term Loan which is a Base Rate Loan shall bear
interest on the principal amount thereof from time to time outstanding from
the date of such Loan, until such principal amount becomes due, at a rate
per annum equal to the Base Rate, plus 0.75%."
6. Prepayment of Loans. The first sentence of Section 2.07(c) of the
Financing Agreement is hereby amended in its entirety to read as follows:
"If at any time the Borrowing Base is less than the sum of the
outstanding principal on all Revolving Credit Loans outstanding plus the
outstanding amount of all Letter of Credit Obligations, the Borrowers will
(i) immediately give notice of such occurrence to the Agent and (ii) prepay
the Revolving Credit Loans in an amount which will reduce the sum of the
outstanding principal on all Revolving Credit Loans, to an amount less than
or equal to the then current Borrowing Base, less the outstanding amount of
all Letter of Credit Obligations."
7. Availability. (a) Section 2.07(h) of the Financing Agreement is hereby
amended in its entirety to read as follows:
"Notwithstanding anything to the contrary contained in this Agreement,
the Borrowers shall repay the Revolving Credit Loans in an amount
sufficient to cause the Availability of the Borrowers, after giving effect
to all Revolving Credit Loans and Letter of Credit Obligations, to be not
less than $3,000,000 on the last day of October and November of each year."
-3-
<PAGE>
8. Amendment Fee. The following Section 2.08(d) is hereby added to Section
2.08 of the Financing Agreement:
"(d) Fourth Amendment Fee. Upon the effective date of the Fourth
Amendment, the Borrowers shall be jointly and severally obligated to pay to
the Agent, for the ratable benefit of the Lenders in accordance with their
Pro Rata Shares, an amendment Fee of $400,000, which amendment fee shall be
fully earned on the effective date of the Fourth Amendment and shall be
payable $200,000 on May 31, 2000 and $200,000 on June 30, 2000."
9. Monthly Financial Statements. Section 7.01(a)(iii) of the Financing
Agreement is hereby amended by deleting the month "January 2000" in the second
line thereof and substituting in lieu thereof "July 2000."
10. Indebtedness. Section 7.02(b) of the Financing Agreement is hereby
amended by (i) deleting the word "and" after clause (viii) thereof, (ii)
redesignating clause (ix) thereof as new clause (x) thereof, and (iii) adding a
new clause (ix) to read as follows:
"(ix) to the extent it constitutes Indebtedness, obligations with
respect to any Reimbursement Payment; and"
11. Investments. Section 7.02(f) of the Financing Agreement is hereby
amended by (i) deleting the word "and" after clause (vi) thereof, (ii)
redesignating clause (vii) thereof as new clause (viii) thereof, and (iii)
adding a new clause (vii) to read as follows:
"(vii) loans and advances by any Borrower to the Company, the proceeds
of which are used to make a Reimbursement Payment permitted by Section
7.02(r), provided that such loans and advances are without duplication of
any dividends made pursuant to Section 7.02(i)(v); and"
12. Dividends. Section 7.02(i) of the Financing Agreement is hereby amended
by (i) deleting the word "and" after clause (iii) thereof and (ii) adding a new
clause (v) to read as follows:
"(v) the Borrowers may pay dividends to the Company, the proceeds of
which are used to make a Reimbursement Payment permitted by Section
7.02(r), provided that such dividends are without duplication of any loans
and advances made pursuant to Section 7.02(f)(vii)."
13. Transactions with Affiliates. Section 7.02(m) of the Financing
Agreement is hereby amended by deleting the words "Except as set forth in
Schedule 7.02(m)," and substituting in lieu thereof "Except as set in Schedule
7.02(m) and except for any Reimbursement Payment permitted by Section 7.02(r),"
-4-
<PAGE>
14. Financial Covenants. Section 7.02(p) of the Financing Agreement is
hereby amended in its entirety to read as follows:
"(i) Net Worth. Permit Consolidated Net Worth of the Company and its
Consolidated Subsidiaries at the end of each of the following Fiscal
Quarters to be less than: (A) for the Fiscal Quarter ending as of March 31,
2000, $30,750,000, (B) for the Fiscal Quarter ending as of June 30, 2000,
$25,000,000, (C) for the Fiscal Quarter ending as of September 30, 2000,
$32,500,000, and (D) for the Fiscal Quarter ending December 31, 2000,
$37,650,000;
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agent shall negotiate in good faith to
determine the Consolidated Net Worth for the Company and its Consolidated
Subsidiaries as of the end of each Fiscal Quarter covered by such financial
projections and, in the event that the Company and the Required Lenders are
unable to agree upon the amounts of such Consolidated Net Worth on or
before the date that is 30 days after the date that the Lenders have
received such financial projections, the Consolidated Net Worth at the end
of each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be less than the amount set forth for the last Fiscal
Quarter end set forth above (December 31, 2000).
(ii) Debt Service Coverage Ratio. For each period of four (4)
consecutive Fiscal Quarters for which the last Fiscal Quarter ends on a
date set forth below, permit the ratio of (A) Consolidated EBITDA of the
Company and its Consolidated Subsidiaries for such period to (B) the sum of
(x) gross interest expense of the Company and its Consolidated Subsidiaries
for such period plus (y) all principal of Indebtedness for borrowed money
of the Company and its Consolidated Subsidiaries having a scheduled payment
or due date in such period plus (z) all amounts payable by the Company and
its Consolidated Subsidiaries on Capitalized Lease Obligations having a
scheduled due date in such period (the "Debt Service Coverage Ratio") to be
less than the amount set forth below opposite such date:
Debt Service
Fiscal Quarter Coverage Ratio
-------------- --------------
March 31, 2000 0.75:1.0
June 30, 2000 0.30:1.0
September 30, 2000 0.75:1.0
December 31, 2000 1.25:1.0
-5-
<PAGE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agent shall negotiate in good faith to
determine the Debt Service Coverage Ratio as of the end of each Fiscal
Quarter covered by such financial projections and, in the event that the
Company and the Required Lenders are unable to agree upon such ratio on or
before the date that is 30 days after the date that the Lenders have
received such financial projections, the Debt Service Coverage Ratio at the
end of each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be less than the ratio set forth for the last Fiscal
Quarter end set forth above (December 31, 2000).
(iii) Net Loss. Incur an Adjusted Consolidated Net Loss (A) for the
Fiscal Quarter ending March 31, 2000 of more than ($6,400,000), (B) for the
Fiscal Quarter ending June 30, 2000 of more than ($4,800,000), and (C) for
any Fiscal Quarter commencing on or after the Fiscal Quarter ending
September 30, 2000;
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agent shall negotiate in good faith to
determine the Adjusted Consolidated Net Loss as of the end of each Fiscal
Quarter covered by such financial projections and, in the event that the
Company and the Required Lenders are unable to agree upon the amounts of
such Adjusted Consolidated Net Loss on or before the date that is 30 days
after the date that the Lenders have received such financial projections,
there shall be no Adjusted Consolidated Net Loss at the end of any Fiscal
Quarter of the Fiscal Year covered by such financial projections.
(iv) Fixed Charge Coverage Ratio. Permit the ratio of Consolidated
EBITDA of the Company and its Consolidated Subsidiaries to Consolidated
Fixed Charges of the Company and its Consolidated Subsidiaries for each
period of four (4) consecutive quarters for which the last quarter ends on
a date set forth below to be less than the amount set forth opposite such
date:
Minimum Fixed
Fiscal Quarter Charge Coverage Ratio
-------------- ---------------------
June 30, 2000 0.20:1.0
September 30, 2000 0.40:1.0
December 31, 2000 0.80:1.0
-6-
<PAGE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agent shall negotiate in good faith to
determine the ratio of Consolidated EBITDA of the Company and its
Consolidated Subsidiaries to Consolidated Fixed Charges of the Company and
its Consolidated Subsidiaries as of the end of each Fiscal Quarter covered
by such financial projections and, in the event that the Company and the
Required Lenders are unable to agree upon such ratio on or before the date
that is 30 days after the date that the Lenders have received such
projections, such ratio for each Fiscal Quarter of the Fiscal Year covered
by such financial projections shall not be less than the ratio set forth
for the last Fiscal Quarter end set forth above (December 31, 2000)."
15. Reimbursement Payments. The following Section 7.02(r) is hereby added
to Section 7.02 of the Financing Agreement to read as follows:
"(r) Reimbursement Payments. After any payment is made by or on behalf
of Arnold Simon under the Simon Limited Guaranty (a "Guaranty Payment"),
directly or indirectly, make or permit any of their Subsidiaries to make,
any payment in the nature of a subrogation, reimbursement, exoneration,
contribution or indemnity payment or any other similar payment, whether
arising by operation of law or by contract, to or for the benefit of Arnold
Simon in connection with such Guaranty Payment, provided that, at any time
on or after December 10, 2000, the Company or any Borrower may make a
Reimbursement Payment in an amount not exceeding the amount of the
corresponding Guaranty Payment if (i) no Event of Default exists
immediately after giving effect to such Reimbursement Payment and no Event
of Default has existed at any time during the period of thirty (30)
consecutive days prior to such Reimbursement Payment and (ii) Availability
is not less than $1,000,000 immediately after giving effect to such
Reimbursement Payment."
16. Availability. Section 7.02(s) of the Financing Agreement is hereby
amended in its entirety to read as follows:
"(s) Availability. Permit Availability, after giving effect to all
Revolving Credit Loans and Letter of Credit Obligations outstanding, to be
less than $3,000,000 on the last day of October and November of each year."
17. Waivers and Consents. (a) Pursuant to the request of the Company and
the Borrowers and in accordance with Section 12.03 of the Financing Agreement,
the Lenders hereby consent to, and waive any Event of Default that would
otherwise arise under Sections 10.01(a) and (c) of the Financing Agreement from
any non-compliance by the Company and the Borrowers with the provisions of (i)
Section 7.01(k) of the Financing Agreement by
-7-
<PAGE>
reason of the failure of the Company and the Borrowers to furnish to the Agent
for the benefit of the Lenders a collateral assignment of the key man life
insurance policy described in such Section, provided that such collateral
assignment is delivered to the Agent on or before May 31, 2000, (ii) Section
7.01(o) of the Financing Agreement by reason of the failure of the Company and
the Borrowers to furnish to the Lenders (A) appraisals of all trademarks of the
Borrowers on or before October 15, 1999, and (B) appraisals of all Inventory of
the Borrowers, (iii) Section 7.01(p) of the Financing Agreement by reason of the
failure of the Borrowers to furnish the waivers and access agreements described
in such Section prior to October 15, 1999, provided that the Borrowers use best
efforts to furnish such waivers and access agreements to the Agent prior to June
30, 2000; (iv) Section 7.02(p)(iii) of the Financing Agreement by reason of the
Adjusted Consolidated Net Loss being greater than ($1,500,000) for the Fiscal
Quarter ending December 31, 1999, provided that the Adjusted Consolidated Net
Loss for such Fiscal Quarter was not greater than ($2,900,000), and (v) Sections
2.07(b) and 7.02(s) of the Financing Agreement by reason of Availability being
less than $7,500,000 on December 31, 1999, provided that Availability was not
less than $5,000,000 on such date.
(b) The waivers and consents contained in this Section 17 (i) shall become
effective as of the Fourth Amendment Effective Date (as hereinafter defined),
(ii) shall be effective only in this specific instance and for the specific
purposes set forth herein, and (iii) do not allow for any other or further
departure from the terms and conditions of the Financing Agreement or any other
Loan Document, which terms and conditions shall continue in full force and
effect.
18. Conditions to Effectiveness. This Amendment shall become effective only
upon satisfaction in full of the following conditions precedent (the first date
upon which all such conditions have been satisfied being herein called the
"Fourth Amendment Effective Date"):
(a) The representations and warranties contained herein, in Article VI
of the Financing Agreement and in each other Loan Document and certificate
or other writing delivered to the Agent and the Lenders pursuant hereto on
or prior to the Fourth Amendment Effective Date shall be correct on and as
of the Fourth Amendment Effective Date as though made on and as of such
date (except to the extent that such representations and warranties
expressly relate solely to an earlier date in which case such
representations and warranties shall be true and correct on and as of such
date); and no Default or Event of Default shall have occurred and be
continuing on the Fourth Amendment Effective Date or would result from this
Amendment becoming effective in accordance with its terms.
(b) The Agent shall have received on or before the Fourth Amendment
Effective Date counterparts of this Amendment which bear the signatures of
the Company, the Borrowers and each of the Lenders.
(c) The Agent shall have received on or before the Fourth Amendment
Effective Date a Limited Guaranty made by Arnold Simon in favor of the
Lenders and the Agent in the form of Annex I hereto.
(d) All legal matters incident to this Amendment shall be satisfactory
to the Agent and its special counsel.
-8-
<PAGE>
19. Representations and Warranties. Each of the Company and the Borrowers
represents and warrants to the Lenders as follows:
(a) The Company and each Borrower (i) is duly organized, validly
existing and in good standing under the laws of the state of its
organization and (ii) has all requisite power, authority and legal right to
execute, deliver and perform this Amendment and all other documents
executed by it in connection with this Amendment, and to perform the
Financing Agreement, as amended hereby.
(b) The execution, delivery and performance by the Company and the
Borrowers of this Amendment and all other documents executed by it in
connection with this Amendment and the performance by the Company and the
Borrowers of the Financing Agreement as amended hereby (i) have been duly
authorized by all necessary action, (ii) do not and will not violate or
create a default under the Company's or any Borrower's organizational
documents, any applicable law or any contractual restriction binding on or
otherwise affecting the Company or any Borrower or any of the Company's or
such Borrower's properties, and (iii) except as provided in the Loan
Documents, do not and will not result in or require the creation of any
Lien, upon or with respect to the Company's or any Borrower's property.
(c) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by
the Company or any of the Borrowers of this Amendment and all other
documents executed by it in connection with this Amendment, and the
performance by the Company and the Borrowers of the Financing Agreement as
amended hereby.
(d) This Amendment and the Financing Agreement, as amended hereby and
all other documents executed in connection with this Amendment constitute
the legal, valid and binding obligations of the Company and the Borrowers
party thereto, enforceable against such Persons in accordance with their
terms except to the extent the enforceability thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies and by general principles of equity.
(e) The representations and warranties contained in Article VI of the
Financing Agreement are correct on and as of the Fourth Amendment Effective
Date as though made on and as of the Fourth Amendment Effective Date
(except to the extent such representations and warranties expressly relate
to an earlier date), and no Event of Default or Default, has occurred and
is continuing on and as of the Fourth Amendment Effective Date.
20. Continued Effectiveness of Financing Agreement. Each of the Company and
the Borrowers hereby (i) confirms and agrees that each Loan Document to which it
is a party is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects except that on and after the Fourth
Amendment Effective Date of this Amendment all references in any such Loan
Document to "the Financing Agreement", "thereto", "thereof", "thereunder" or
words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment, and (ii) confirms and agrees
that to the
-9-
<PAGE>
extent that any such Loan Document purports to assign or pledge to the Agent, or
to grant to the Agent a Lien on any collateral as security for the Obligations
of the Company and the Borrowers from time to time existing in respect of the
Financing Agreement and the Loan Documents, such pledge, assignment and/or grant
of a Lien is hereby ratified and confirmed in all respects.
21. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and the
same agreement.
(b) Section and paragraph headings herein are included for convenience of
reference only and shall not constitute a part of this Amendment for any other
purpose.
(c) This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York.
(d) The Borrowers will pay on demand all out-of-pocket costs and expenses
of the Agent in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees, disbursements and
other charges of Schulte Roth & Zabel LLP, counsel to the Agent.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ARIS INDUSTRIES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
EUROPE CRAFT IMPORTS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
ECI SPORTSWEAR, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
STETSON CLOTHING COMPANY, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
B P CLOTHING COMPANY, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
XOXO CLOTHING COMPANY, INCORPORATED
By:_____________________________________
Name:___________________________________
Title:__________________________________
-11-
<PAGE>
AGENTS AND LENDERS
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
ISRAEL DISCOUNT BANK OF NEW YORK
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,445,000
<SECURITIES> 0
<RECEIVABLES> 35,765,000
<ALLOWANCES> 0
<INVENTORY> 20,345,000
<CURRENT-ASSETS> 61,388,000
<PP&E> 18,351,000
<DEPRECIATION> (6,031,000)
<TOTAL-ASSETS> 112,895,000
<CURRENT-LIABILITIES> 62,108,000
<BONDS> 0
<COMMON> 795,000
0
0
<OTHER-SE> 31,459,000
<TOTAL-LIABILITY-AND-EQUITY> 112,895,000
<SALES> 42,886,000
<TOTAL-REVENUES> 43,451,000
<CGS> 27,734,000
<TOTAL-COSTS> 21,477,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,273,000
<INCOME-PRETAX> (7,033,000)
<INCOME-TAX> 61,000
<INCOME-CONTINUING> (7,094,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,094,000)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
