<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 22, 1999
I.C. ISAACS & COMPANY, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-23379 52-1377061
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
3840 BANK STREET, BALTIMORE, MARYLAND 21224-2522
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code (410) 342-8200
(Former Name or Former Address, if Changed Since Last Report)
1
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 22, 1999, I.C. Isaacs & Company, Inc. (the "Company"), its
wholly-owned subsidiary I.C. Isaacs & Company L.P. ("Isaacs"), Ambra Inc.
("Ambra") and Hugo Boss AG ("Hugo Boss") entered into an agreement (the
"Agreement") pursuant to which, among other things, (i) Isaacs transferred to
Ambra substantially all of Isaacs' rights in and to the marks containing the
term "BOSS" throughout the world; (ii) the $11.25 million secured limited
recourse promissory note made by Isaacs to Ambra in 1997 was cancelled,
resulting in a decrease in interest expense of $1.1 million per full calendar
year; (iii) Isaacs and Ambra agreed to enter into a restated and amended
license agreement (the "License Agreement"), pursuant to which Isaacs
obtained rights to manufacture and sell apparel using the BOSS brand name and
image substantially similar to Isaacs' rights under its previously-existing
agreements with Ambra and Hugo Boss but at reduced minimum annual royalty
payments through 2001; (iv) certain agreements entered into by and among
Isaacs, Hugo Boss and Ambra in 1997 were terminated; and (v) the Company
agreed to issue to Ambra on November 6, 1999 2.0 million shares of a
newly-designated Series A Convertible Preferred Stock, par value $.0001 per
share, of the Company (the "Preferred Stock") and on April 30, 2000 an
additional 1.3 million shares of Preferred Stock and 666,667 shares of common
stock, par value $.0001 per share, of the Company (the "Common Stock").
Item 5. Other Events.
In 1997, Isaacs acquired certain BOSS trademark rights and related
assets from Brookhurst, Inc. ("Brookhurst"). Also in 1997, Isaacs sold its
foreign BOSS trademark rights and its rights under related agreements
acquired from Brookhurst to Ambra and entered into a foreign manufacturing
rights agreement with Ambra (the "Foreign Rights Agreement"), pursuant to
which Isaacs obtained a license to manufacture apparel in certain foreign
countries for sale in the United States using the BOSS brand name and image.
Isaacs retained its ownership of domestic BOSS trademark rights (the
"Domestic BOSS Trademark Rights") subject to a concurrent use agreement with
Hugo Boss (the "Concurrent Use Agreement"). The Foreign Rights Agreement, the
Concurrent Use Agreement and an option on the part of Ambra to purchase the
Domestic BOSS Trademark Rights between November 5, 2006 and December 31, 2007
or earlier upon the occurrence of certain events were all terminated on
October 22, 1999.
Also on October 22, 1999, Isaacs and Ambra entered into the License
Agreement, pursuant to which Isaacs obtained rights to use various trademarks
including the word "Boss" in the manufacture and domestic sale of specified
types of apparel. Except with respect to the initial term and the minimum
annual royalties due Ambra by Isaacs, Isaacs' rights under the License
Agreement are substantially similar to those it previously had. The License
Agreement extends through December 31, 2003 with renewal periods, at the
option of Isaacs, through December 31, 2007, whereas the Foreign Rights
Agreement extended through December 31, 2001 with renewal periods through
December 31, 2007. The minimum annual royalties payable by Isaacs under the
License Agreement are approximately $2.3 million in 1999 (in addition to $1.0
million in royalties already paid in respect of the first
-2-
<PAGE>
quarter of 1999 under the Foreign Rights Agreement), approximately $3.2
million in each of 2000 and 2001, approximately $2.6 million in 2002 and
approximately $2.1 million in 2003. The minimum annual royalties under the
Foreign Rights Agreement were 12.5% on the first $32.0 million in sales
attributable to apparel manufactured in certain foreign countries ("Territory
Net Sales") for a minimum of $4.0 million in each of 1999, 2000 and 2001,
and, if renewed, 12.5% on the first $20 million in Territory Net Sales in
2002 for a minimum in that year of $2.5 million, and 12.5% on the first $16.0
million of Territory Net Sales in 2003 for a minimum in that year of $2.0
million.
Under the terms of the Agreement, the Company will issue to Ambra on
November 6, 1999 2.0 million shares of Preferred Stock and on April 30, 2000
an additional 1.3 million shares of Preferred Stock and 666,667 shares of
Common Stock (which represents $1.0 million dollars of Common Stock at an
agreed-upon value of $1.50 per share). Except as set forth below, the
Preferred Stock will have all of the same preferences, rights and voting
powers as the Common Stock. The Preferred Stock shall not be entitled to vote
on any matters to be voted upon by the stockholders of the Company except
that the holders of the Preferred Stock will be entitled to vote as a
separate class, and the affirmative vote of stockholders holding, in the
aggregate, a majority of the outstanding shares of Preferred Stock shall be
required, for the creation of an equity security senior to the Preferred
Stock or the amendment of the Certificate of Incorporation or By-laws of the
Company to the detriment of the holders of the Preferred Stock. The Preferred
Stock shall have a liquidation preference of $1.00 per share plus the amount
of any declared but unpaid dividends on the Preferred Stock. The Preferred
Stock and Common Stock issued to Ambra pursuant to the Agreement will not be
registered under the Securities Act of 1933, as amended (the "Securities
Act"). The Company may from time to time and at any time redeem any or all of
the Preferred Stock at a redemption price of $1.00 per share. Upon the
occurrence of certain acceleration events under the License Agreement, Ambra
may demand a redemption of the Preferred Stock at a redemption price equal to
$1 per share. Any or all of the unredeemed shares of Preferred Stock will be
convertible, at the option of the holder, for a 60 day period beginning
October 1, 2003 into a promissory note of the Company in a principal amount
equal to $1.00 multiplied by the total number of shares of Preferred Stock
being converted, with interest thereafter at an annual interest rate of 12%,
payable in four quarterly installments beginning January 1, 2004. For
financial reporting purposes, the Preferred Stock will be considered
redeemable preferred stock and, therefore, classified outside of
stockholders' equity. The Common Stock and Preferred Stock to be issued in
April 2000 will be accounted for as deferred royalty expense and amortized to
expense ratably over the period beginning October 1, 1999 and ending December
31, 2003.
Prior to issuance by the Company of any Preferred Stock or Common Stock
to Ambra, the Company and Ambra will enter into a Shareholders' Agreement,
pursuant to which the Company will have a right of first refusal with respect
to all transfers of any Preferred Stock or Common Stock by Ambra and any of
its transferees (the "Shareholders" and each a "Shareholder") except
transfers (i) to an affiliate of a Shareholder, (ii) to the Company, (iii) to
any third party in a broker's transaction pursuant to Rule 144(b) promulgated
under the Securities Act, or (iv) pursuant to a registration statement filed
by the Company. At any time on or after December 15, 2000, a Shareholder may
offer any shares of Common Stock not yet eligible for resale pursuant to Rule
144(k) promulgated under the Securities Act ("Registrable Shares") to the
Company at the then-prevailing market price and, if the Company does not
purchase such shares, the Shareholder will have certain demand registration
rights with respect to such shares.
-3-
<PAGE>
The Shareholders will also have certain piggyback registration rights with
respect to their Registrable Shares.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Not Applicable
(c) EXHIBITS. The following exhibits are filed with this report:
___. Agreement dated October 22, 1999 by and between I.C. Isaacs
& Company, Inc., I.C. Isaacs & Company L.P., Ambra Inc. and
Hugo Boss AG.
[Signature on following page.]
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
I.C. ISAACS & COMPANY, INC.
/s/ Robert J. Arnot
--------------------------------------
Robert J. Arnot
President and CEO
Date: November ___, 1999
-5-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
(c)(1) Agreement dated October 22, 1999 by and between I.C. Isaacs & Company, ______
Inc., I.C. Isaacs & Company L.P., Ambra Inc. and Hugo Boss AG
</TABLE>
-6-
<PAGE>
EXHIBIT (c)(1)
-7-
<PAGE>
Exhibit 99.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT
BETWEEN
I.C. ISAACS & COMPANY, INC.
(THE "CORPORATION")
AND
I.C. ISAACS & COMPANY L.P.
(ISAACS)
AND
AMBRA INC.
(AMBRA)
AND
HUGO BOSS AG
(HUGO BOSS)
DATED AS OF OCTOBER 22, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT
This Agreement made as of the 22nd day of October, 1999, (the "FIRST
SETTLEMENT DATE") between I.C. ISAACS & COMPANY, INC., a Delaware corporation
(the "CORPORATION"), I.C. ISAACS & COMPANY L.P., a Delaware limited partnership
("ISAACS"), AMBRA INC., a Delaware corporation ("AMBRA"), and HUGO BOSS AG, a
German corporation ("HUGO BOSS").
In consideration of the premises and the mutual promises herein
contained, the sufficiency and adequacy of which are acknowledged and agreed to
be fair and adequate, the parties intending to be legally bound agree as
follows:
ARTICLE I
CONSTRUCTION AND DEFINED TERMS
Unless otherwise expressly stated in this Agreement, capitalized terms used in
this Agreement shall have the following meanings:
"1997 DOCUMENTS" The Option Agreement, the Concurrent Use Agreement,
the Foreign Manufacturing Rights Agreement, the Boss Golf License Agreement.
"BOSS BUSINESS" The assets, properties and rights set forth in
Subsections (a), (b) and (c) of Section 2.01.
"BOSS GOLF LICENSE AGREEMENT" The Trademark License Agreement Relating
to Boss Golf and Other Marks dated as of November 5, l997 by and between
Isaacs and Ambra.
"BROOKHURST TRADEMARK ASSETS" All rights and related assets referred to
as "Trademark Assets" in the Worldwide Rights Acquisition Agreement and
acquired by Isaacs under the Worldwide Rights Acquisition Agreement, excepting
and excluding therefrom the "Trademark Assets" referred to in the Foreign Boss
Rights Acquisition Agreement and acquired by Ambra under the Foreign Boss
Rights Acquisition Agreement.
"COMMON STOCK" The common stock, par value $.0001, of the Corporation.
-1-
<PAGE>
"CONCURRENT USE AGREEMENT" The Concurrent Use Agreement dated November
5, 1997 between Hugo Boss and Isaacs.
"CORPORATE 10-K" The Corporation's annual report on Form 10-K for the
fiscal year ended December 31, 1998.
"CORPORATE 10-Q" The Corporation's quarterly report on Form 10-Q for
the fiscal quarter ended June 30, 1999.
"DOLLARS" The lawful currency of the United States of America.
"FIRST SETTLEMENT DATE" The date as set forth on the first page of this
Agreement.
"FOREIGN BOSS RIGHTS ACQUISITION AGREEMENT" The Foreign Boss Rights
Acquisition Agreement dated September 30, 1997 between Ambra and Isaacs.
"FOREIGN MANUFACTURING RIGHTS AGREEMENT" The Foreign Manufacturing
Rights Agreement dated November 5, 1997 between Ambra and Isaacs.
"INITIAL STOCK" The Preferred Stock issued to Ambra pursuant to Section
2.06 hereof.
"OPTION AGREEMENT" The Option Agreement dated November 5, 1997 between
Ambra and Isaacs.
"PREFERRED STOCK" The Series A Convertible Preferred Stock, par value
$.0001, of the Corporation, which shall have the rights and preferences set
forth in EXHIBIT A hereto.
"REGISTRATION STATEMENT" The Corporation's Registration Statement on
Form S-1, as declared effective by the SEC on December 17, 1997.
"SEC" The Securities and Exchange Commission.
"SECOND SETTLEMENT DATE" November 6, 1999.
"SECURED LIMITED RECOURSE PROMISSORY NOTE" The Secured Limited Recourse
Promissory Note in the original principal sum of Eleven Million Two Hundred
Fifty Thousand Dollars ($11,250,000) dated November 5, 1997 made by Isaacs and
payable to Ambra.
"SETTLEMENT DATES" The First Settlement Date, the Second Settlement
Date and the Third Settlement Date.
-2-
<PAGE>
"SUBSEQUENTLY ISSUED STOCK" The Common Stock and Preferred Stock issued
to Ambra pursuant to Section 2.08 hereof.
"STOCK" The Initial Stock and the Subsequently Issued Stock.
"THIRD SETTLEMENT DATE" April 30, 2000.
"TRADEMARKS" The meaning set forth in Section 2.01(a) hereof.
"TRADEMARK ASSETS" The meaning set forth in Section 2.01 hereof.
"WORLDWIDE RIGHTS ACQUISITION AGREEMENT" The Worldwide Rights
Acquisition Agreement dated as of September 30, l997 by and among Isaacs,
Brookhurst, Inc. and William Ott.
ARTICLE II
DESCRIPTION OF THE TRANSACTION
SECTION 2.01 TRANSFER OF THE TRADEMARK ASSETS TO AMBRA. Concurrently
with the execution of this Agreement, Isaacs shall convey, transfer, assign and
deliver to Ambra, and Ambra shall acquire from Isaacs, the following assets,
properties and rights of Isaacs throughout the world (the "Trademark Assets"),
including, without limitation, the Brookhurst Trademark Assets, representing the
BOSS Business of Isaacs operating under the BOSS marks:
(a) Any and all right, title and interest of Isaacs in and to
the trademarks, service marks, trade names, logos, insignias, designs,
copyrights (if any), and other proprietary interests therein, containing the
term "BOSS" or constituting a stylized B, throughout the world, including,
without limitation, all registrations and applications for registration
(including, to the fullest extent permitted by law, all "intent to use"
applications) therefor throughout the world, including those trademark
registrations and applications listed on SCHEDULE 2.01(a) (the "Trademarks"),
and the goodwill symbolized by the Trademarks, together with all causes of
action and the proceeds thereof in favor of Isaacs heretofore accrued or
hereafter accruing with respect to the Trademarks; provided however, that Isaacs
shall retain all causes of action and proceeds thereof, and bear all costs and
expenses, including attorneys fees, with respect to the pending litigation
involving Oh Trading in the Southern District of New York and the parties agree
to cooperate in good faith and to make reasonable efforts to achieve an
expeditious resolution of that matter to the benefit of all parties hereto;
-3-
<PAGE>
(b) All rights of Isaacs under the Worldwide Rights Acquisition
Agreement, the Uniform License Agreement between Isaacs and Brookhurst, Inc.
dated November 5, 1997 and all license agreements, concurrent use agreements and
other agreements listed on SCHEDULE 2.01(b) (the "Assumed Agreements") and all
files relating thereto which were acquired by Isaacs pursuant to the Worldwide
Rights Acquisition Agreement, including, without limitation, an assignment of
all copyrights, if any, that Isaacs may own as a result of use of Property, as
such term is defined in the Foreign Rights Manufacturing Agreement; and
(c) All right, title and interest in and to all files that
Isaacs has within its possession or control relating to the Trademarks provided,
however, that Isaacs shall not be responsible for (i) destruction of records
caused by an Act of God or other "Force Majeure" event, or (ii) any immaterial
non-intentional destruction of records.
Simultaneously herewith Isaacs is executing and delivering to Ambra a
Bill of Sale and Assignment of Trademark Assets in the form attached hereto as
EXHIBIT B and any and all of the items described in Section 2.01(c) above in its
possession and control. To the extent any pending application for the Trademarks
is not assignable under applicable law, the parties agree that, such pending
application shall either be abandoned by Isaacs or Isaacs shall continue to
pursue such pending application, at the sole cost, expense and direction of
Ambra, until it becomes assignable or otherwise is abandoned.
Simultaneously herewith Ambra is also executing and delivering to
Isaacs an Assumption of Assumed Agreements in the form attached hereto as
EXHIBIT C.
SECTION 2.02. CANCELLATION OF NOTE. Concurrently with the execution of
this Agreement, the Secured Limited Recourse Promissory Note shall be marked
"paid and cancelled" and delivered to Isaacs and Isaacs shall have no further
obligation with respect thereto.
SECTION 2.03. LICENSING OF TRADEMARKS TO ISAACS. Concurrently with the
execution of this Agreement, Ambra and Isaacs shall enter into a License
Agreement in the form attached hereto as EXHIBIT D (the "License Agreement"),
which License Agreement shall not be deemed to be part of this Agreement,
granting to Isaacs certain rights to use the Trademarks.
SECTION 2.04. DISMISSAL OF ARBITRATION DISPUTE. The parties agree to
withdraw any and all claims submitted to Jonathan Marks as arbitrator formerly
with J.A.M.S./Endispute now with Marks ADR Inc. and further agree not to
resubmit any such claims or other claims relating to the 1997-1998 royalty
payments under the Foreign Rights Manufacturing Agreement in any forum.
-4-
<PAGE>
SECTION 2.05. TERMINATION OF 1997 DOCUMENTS. Immediately upon execution
and delivery of this Agreement and the License Agreement, and without further
action on the part of the parties hereto, each of the 1997 Documents shall be
terminated in its entirety.
SECTION 2.06. INITIAL STOCK ISSUANCE. Subject to the conditions set
forth in Section 2.07 below, on the Second Settlement Date the Corporation will
issue to Ambra 2,000,000 shares of Preferred Stock (the "Initial Stock").
SECTION 2.07. CONDITIONS TO ISSUANCE OF INITIAL STOCK. The obligation
of the Corporation to issue the Initial Stock shall be subject to the
satisfaction by Ambra of the following conditions:
(a) Prior to the issuance of the Initial Stock, Ambra and the
Corporation shall enter into a Shareholders' Agreement in the form attached
hereto as EXHIBIT E (the "Shareholders' Agreement").
(b) Issuance of the Initial Stock to Ambra in the manner
contemplated herein shall not violate any state or federal securities laws.
(c) Each of the investor representations of Ambra set forth in
Sections 6.01 hereof shall be true and correct as of the Second Settlement Date.
SECTION 2.08. SECOND STOCK ISSUANCE. Subject to the conditions set
forth in Section 2.09 below, on the Third Settlement Date the Corporation will
issue to Ambra (a) One Million Three Hundred Thousand (1,300,000) shares of
Preferred Stock and (b) a number of shares of Common Stock equal to the quotient
of One Million Dollars ($1,000,000) divided by One Dollar and Fifty Cents
($1.50) (collectively, the "Subsequently Issued Stock"), provided that the
number of shares of Common Stock issued pursuant to Subsection (b) above shall
be adjusted proportionately with the other outstanding Common Stock for any
stock splits or stock dividends that occur after the Second Settlement Date.
SECTION 2.09. CONDITIONS TO ISSUANCE OF SUBSEQUENTLY ISSUED STOCK. The
obligation of the Corporation to issue the Subsequently Issued Stock shall be
subject to the satisfaction by Ambra of the following conditions:
(a) Issuance of the Subsequently Issued Stock to Ambra in the
manner contemplated herein shall not violate any state or federal securities
laws.
(b) Each of the representations of Ambra set forth in Section
6.01 hereof shall be true and correct as of the Third Settlement Date.
-5-
<PAGE>
ARTICLE III
NO WARRANTIES WITH RESPECT TO TRADEMARK ASSETS
THE TRADEMARK ASSETS ARE TRANSFERRED ON AN AS IS BASIS, AND ISAACS MAKES NO
WARRANTY, AND HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT
THERETO INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT EXCEPT THAT THE TRADEMARK
ASSETS SHALL BE TRANSFERRED FREE AND CLEAR OF ALL PLEDGES, SECURITY INTERESTS,
MORTGAGES AND LIENS CREATED BY ISAACS OR THE CORPORATION EXCEPT FOR ANY LIENS OF
AMBRA.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The representations and warranties of the Corporation as set out in
Sections 4.01 through 4.04 below shall be true, complete and correct as of the
date hereof and as of each of the Settlement Dates and the representations and
warranties of the Corporation as set forth in Sections 4.05 and 4.06 below shall
be true, complete and accurate as of the date hereof. The Corporation
acknowledges that each of the representations and warranties contained in this
Article IV are material to Ambra and Hugo Boss and Ambra and Hugo Boss are
entering into this Agreement in reliance on such representations and warranties.
SECTION 4.01 ORGANIZATION AND STANDING. The Corporation is duly
organized and validly existing under the laws of the State of Delaware.
SECTION 4.02. REQUISITE POWER; NO CONFLICTS. The Corporation has all
requisite power and authority to enter into this Agreement and to carry out and
perform its obligations hereunder and the performance by it of its obligations
under this Agreement does not, and at each of the Settlement Dates will not,
violate any applicable law or breach the provisions of any contract by which it
is bound. This Agreement is a valid and binding obligation of the Corporation,
enforceable in accordance with its terms.
SECTION 4.03 AUTHORIZATION. All action on the part of the Corporation
necessary for the performance of each of its obligations hereunder has been
taken or will be taken prior to the First Settlement Date, the Second Settlement
Date and the Third Settlement Date, as appropriate.
-6-
<PAGE>
SECTION 4.04 OFFERING. Subject to the accuracy of Ambra's
representations set forth in Section 6.01 hereof, the offer, sale and issuance
of the Initial Stock and the Subsequently Issued Stock in conformity with the
terms of this Agreement will not result in a violation of the requirements of
Section 5 of the Securities Act.
SECTION 4.05 FINANCIAL CONDITION. The Corporation is not insolvent and
will not be rendered insolvent by the transactions contemplated herein, it will
not be left with insufficient working capital to meet its capital requirements
as a result of the transactions contemplated herein, and the transactions
contemplated herein are not, and will not, hinder, delay or defraud any
creditors of the Corporation. For purposes of this Section 4.05, insolvency
shall be determined on a balance sheet and cash flow basis as of the First
Settlement Date.
SECTION 4.06. FINANCIAL STATEMENTS AND OTHER INFORMATION. None of the
Registration Statement, as of the date it became effective, nor the Corporation
10-K as of its filing date, nor the Corporation 10-Q as of its filing date,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Except as
disclosed in the Registration Statement, the Corporation 10-K and the
Corporation 10-Q, there are no material liabilities of the Corporation or any of
its subsidiaries, including Isaacs, of any kind whatsoever, whether or not
accrued and whether or not contingent or absolute, except current liabilities
incurred in the ordinary course of business since June 30, 1999. Except as
disclosed in the Corporation 10-Q, since June 30, 1999:
(i) there has been no material adverse change in the assets or
liabilities or in the business or condition, financial or
otherwise, or in the operations of the Corporation;
(ii) to the knowledge of the Corporation, no event has
occurred which would entitle any third party (with or without
notice) to accelerate any material indebtedness of the
Corporation or Isaacs prior to its maturity date;
(iii) the business of the Corporation and Isaacs has been
carried on in the ordinary and usual course;
(iv) the Corporation has not issued any stock, bond or other
corporate security, including without limitation securities
convertible into or rights to acquire capital stock of the
Corporation;
-7-
<PAGE>
(v) neither the Corporation nor Isaacs has discharged or
satisfied any lien or encumbrance or incurred or paid any
obligation or liability other than current liabilities in the
ordinary course of business;
(vi) neither the Corporation nor Isaacs has declared or made
any payment or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other securities.
If any representation or warranty stated in Sections 4.01 through 4.04
above is not true and accurate at any time prior to or on the Third Settlement
Date, the Corporation will give written notice of such fact to the Ambra and
Hugo Boss promptly.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ISAACS
The representations and warranties of Isaacs as set out below shall be
true, complete and correct as of the date hereof. Isaacs acknowledges that each
of the representations and warranties contained in this Article V are material
to Ambra and Hugo Boss and Ambra and Hugo Boss are entering into this Agreement
in reliance on such representations and warranties.
SECTION 5.01 ORGANIZATION AND STANDING. Isaacs is duly organized and
validly existing under the laws of the State of Delaware.
SECTION 5.02. REQUISITE POWER; NO CONFLICTS. Isaacs has all requisite
power and authority to enter into this Agreement and to carry out and perform
its obligations hereunder and the performance by it of its obligations under
this Agreement does not violate any applicable law or breach the provisions of
any contract by which it is bound. This Agreement is a valid and binding
obligation of Isaacs, enforceable in accordance with its terms.
SECTION 5.03 AUTHORIZATION. All action on the part of Isaacs necessary
for the performance of its obligations hereunder has been taken or will be taken
prior to the First Settlement Date.
SECTION 5.04. FINANCIAL CONDITION. Isaacs is not insolvent and will not
be rendered insolvent by the transactions contemplated herein, it will not be
left with insufficient working capital to meet its capital requirements as a
result of the transactions contemplated herein, and the transactions
contemplated herein are not, and will not, hinder, delay or defraud any
creditors of Isaacs. For purposes of this Section 5.04, insolvency shall be
determined on a balance sheet and cash flow basis as of the First Settlement
Date.
-8-
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF AMBRA
The representations and warranties of Ambra as set out in Section 6.01
below shall be true, complete and accurate as of the date hereof and as of each
of the Settlement Dates and the representations and warranties of Ambra as set
out in Sections 6.02 through Section 6.05 below shall be true, complete and
correct as of the date hereof. Ambra acknowledges that each of the
representations and warranties contained in this Article VI are material to the
Corporation and Isaacs and the Corporation and Isaacs are entering into this
Agreement in reliance on such representations and warranties.
SECTION 6.01. INVESTOR REPRESENTATIONS.
(a) Ambra is a Delaware corporation not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of Five Million Dollars ($5,000,000).
(b) Ambra is acquiring the Stock for its own account for
investment and not with any view to resale or distribution thereof.
(c) Ambra is an "accredited investor" as such term is defined
in Rule 501 of Regulation D under the Securities Act.
(d) The taxpayer identification number of Ambra is 13-397-4089
Ambra is not subject to backup withholding either because it has not been
notified by the Internal Revenue Service that it is subject to backup
withholding as a result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified Ambra that it is no longer subject to
backup withholding. Ambra certifies that Ambra is not a "foreign person" within
the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986 and
agrees to so notify the Corporation prior to becoming a foreign person as so
defined.
(e) If any representation or warranty stated above is not true
and accurate at any time prior to the Third Settlement Date, Ambra will give
written notice of such fact to the Corporation promptly.
SECTION 6.02. NO DEFAULT. Ambra hereby agrees that all royalties due
under the Foreign Manufacturing Rights Agreement and all interest payments due
under the Secured Limited Recourse Note on or before the First Settlement Date
have been fully satisfied and that Isaacs is not in default under the royalty or
interest provisions of any of its agreements with
-9-
<PAGE>
Ambra. To Ambra's knowledge, Isaacs is not in default under any of its
agreements with Ambra. Notwithstanding the foregoing, nothing in this Section
6.02 shall relieve Isaacs of its obligations under the License Agreement.
SECTION 6.03. ORGANIZATION AND STANDING. Ambra is duly organized and
validly existing under the laws of the State of Delaware.
SECTION 6.04. REQUISITE POWER; NO CONFLICTS. Ambra has all requisite
power and authority to enter into this Agreement and to carry out and perform
its obligations hereunder and the performance by it of its obligations under
this Agreement do not, and at each of the Settlement Dates will not, violate any
applicable law or breach the provisions of any contract by which it is bound.
This Agreement is a valid and binding obligation of Ambra, enforceable in
accordance with its terms.
SECTION 6.05. AUTHORIZATION. All action on the part of Ambra necessary
for the performance of Ambra's obligations hereunder has been taken or will be
taken prior to the First Settlement Date.
ARTICLE VII
ACKNOWLEDGEMENTS OF AMBRA
Ambra acknowledges each of the following:
(a) The Stock has not been registered under the Securities Act
of 1933, as amended (the "Securities Act") and except as specifically provided
in Section 3 of the Shareholders' Agreement, Ambra will not have any
registration rights with respect to the Stock;
(b) No federal or state agency has made any finding or
determination as to the fairness of the offering for investment, or made any
recommendation or endorsement of the Stock. The Stock has not been registered
under the securities laws of any state and the offering of the Stock has not
been reviewed for accuracy or completeness by any state securities commissioner
or agency;
(c) Ambra has read the information set forth below regarding
its state of residence:
THE STOCK HAS NOT BEEN REGISTERED UNDER THE DELAWARE SECURITIES ACT, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR SOLD
-10-
<PAGE>
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT, OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH IS
OTHERWISE IN COMPLIANCE WITH SUCH ACT.
(d) Any subsequent assignment, sale, transfer, exchange or
other disposition of the Stock may be made only in compliance with applicable
federal and state securities laws;
(e) Ambra is acquiring the Stock without being furnished any
offering literature or prospectus. The Corporation has made available to Ambra
all material that has been requested relating to an investment in the
Corporation and has provided answers to all questions concerning the offering
addressed by the undersigned. In evaluating the suitability of an investment in
the Corporation, Ambra has not relied upon any representations or other
information (oral or written) other than as contained in any documents or
answers to questions furnished by the Corporation;
(f) Ambra has discussed with its professional legal, tax and
financial advisors the suitability of any investment in the Corporation for its
particular tax and financial situation; and
(g) Ambra has not been offered the Stock by any form of
general solicitation or general advertising, including but not limited to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF HUGO BOSS
The representations and warranties of Hugo Boss as set out below shall
be true, complete and correct as of the date hereof. Hugo Boss acknowledges that
each of the representations and warranties contained in this Article VIII are
material to the Corporation and Isaacs and the Corporation and Isaacs are
entering into this Agreement in reliance on such representations and warranties.
SECTION 8.01. To Hugo Boss's knowledge, Isaacs is not in default under
any of its agreements with Hugo Boss.
-11-
<PAGE>
SECTION 8.02. ORGANIZATION AND STANDING. Hugo Boss is duly organized
and validly existing under the laws of the place of its organization.
SECTION 8.03. REQUISITE POWER; NO CONFLICTS. Hugo Boss has all
requisite power and authority to enter into this Agreement and to carry out and
perform its obligations hereunder and the performance by it of its obligations
under this Agreement does not violate any applicable law or breach the
provisions of any contract by which it is bound. This Agreement is a valid and
binding obligation of Hugo Boss, enforceable in accordance with its terms.
SECTION 8.04. AUTHORIZATION. All action on the part of Hugo Boss
necessary for the performance of Hugo Boss's obligations hereunder has been
taken or will be taken prior to the First Settlement Date.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
assigns.
SECTION 9.02. SEVERABILITY. Any provision of this Agreement prohibited
by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, or modified to conform with such laws,
without invalidating the remaining provisions of this Agreement, and any such
prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.
SECTION 9.03. ALLOCATION OF PROCEEDS. Each party may allocate the
consideration described in Article II of this Agreement as it deems appropriate
to its business, provided that any such allocation is not inconsistent with the
provisions of this Agreement. Any allocation by one party shall not affect the
other party or parties or be indicative of the parties' intent.
SECTION 9.04. FURTHER ACTIONS. Isaacs will execute any documents
reasonably requested by Ambra or Hugo Boss to effect and confirm the assignment
to Ambra of, and to reduce to Ambra's possession, ownership and use, the
Trademark Assets, and Ambra and Hugo Boss will execute any documents and take
any further actions reasonably requested by Isaacs to effect the withdrawal of
any and all claims submitted to Jonathan Marks as arbitrator
-12-
<PAGE>
formerly with J.A.M.S./Endispute now with Marks ADR Inc. Isaacs will deliver to
Ambra such other records, documentation and information in Isaacs' possession or
control as may be reasonably requested by Ambra to assist Ambra in the use and
protection of the Trademark Assets. From and after the date hereof Isaacs shall
promptly remit or refer to Ambra any mail or other communications including,
without limitation, any written inquiries, relating to the Trademark Assets
which are clearly identified as such and received by Isaacs during the period
beginning the date hereof and ending November 5, 2003.
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
SECTION 9.06. NOTICES. Any notice required or permitted by or in
connection with this Agreement shall be in writing and shall be made by
telecopy, or by hand delivery, or by overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to the parties at the
appropriate address set forth below or to such other address as may be hereafter
specified by written notice by the parties to each other. Notice shall be
considered given as of the earlier of the date of actual receipt, or the date of
the telecopy or hand delivery, one (1) calendar day after delivery to an
overnight delivery service, or three (3) calendar days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish
that notice was given as provided herein. Notwithstanding the aforesaid
procedures, any notice or demand upon any party, in fact received by such party,
shall be sufficient notice or demand.
If to Corporation/Isaacs: I.C. Isaacs & Company, Inc.
350 Fifth Avenue, Suite 1029
New York, New York 10118
Attn: Mr. Robert J. Arnot, Chairman and CEO
Telecopy No.: 212-695-7579
With copy to: I.C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attn: Mr. Eugene C. Wielepski
Telecopy No.: 410-563-1512
-13-
<PAGE>
And copy to: Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attn: Robert J. Mathias, Esquire
Telecopy No.: 410-576-1604
If to Hugo Boss/Ambra: Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attn: General Counsel
Telecopy No.: 49-7123-942018
With copy to: Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attn: Chief Financial Officer
Telecopy No.: 212-940-0619
And copy to: Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attn: Pamela T. Church, Esq.
Telecopy No.: (212) 626-4120
SECTION 9.07. AMENDMENTS, WAIVERS AND CONSENTS. This Agreement shall
not be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by all parties
hereto.
SECTION 9.08. NO THIRD PARTY BENEFICIARIES. There shall be no
third-party beneficiaries of this Agreement.
-14-
<PAGE>
SECTION 9.09. ARTICLES AND SECTIONS. The Article and Section headings
and captions in this Agreement are for convenience only and shall not affect the
construction or interpretation of this Agreement. The references in this
Agreement to Articles and Sections shall be read as Articles or Sections of this
Agreement unless otherwise specifically provided.
SECTION 9.10. EXHIBITS AND SCHEDULES. The references in this Agreement
to specific Exhibits shall be read as references to such specific Exhibits
attached, or intended to be attached, to this Agreement and any counterpart of
this Agreement and regardless of whether they are in fact attached to this
Agreement, and including any amendments, supplements, and replacements thereto
from time to time.
SECTION 9.11. ENTIRE AGREEMENT. The parties hereto agree that this
Agreement is a complete and exclusive expression of all the terms hereof.
SECTION 9.12. GOVERNING LAW. The validity, construction, operation and
effect of any and all of the terms and provisions of this Agreement shall be
determined and enforced in accordance with the laws of the State of New York
without giving effect to principles of conflicts of law thereunder. All disputes
arising out of or in connection with this Agreement or the interpretation
thereof shall be submitted to the United States District Court for the Southern
District of New York and the parties hereby submit to the jurisdiction of such
court.
-15-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties, intending to be legally
bound hereby, have caused this Agreement to be duly executed and delivered under
seal as of the date first above written.
WITNESS: I.C. ISAACS & COMPANY, INC.
By: /s/ Robert J. Arnot
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc.
By: /s/ Robert J. Arnot
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: HUGO BOSS AG
By:
- -------------------------- ----------------------------
Name:
Title:
WITNESS: AMBRA INC.
By:
- -------------------------- ----------------------------
Name:
Title:
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties, intending to be legally
bound hereby, have caused this Agreement to be duly executed and delivered under
seal as of the date first above written.
WITNESS: I.C. ISAACS & COMPANY, INC.
By:
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc.
By:
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: HUGO BOSS AG
/s/ Geof F. Keisch By: /s/ W. Baldessarini
- -------------------------- ----------------------------
Name: W. Baldessarini
Title: Chairman a. CEO
By: /s/ Jorg-V. Muller
----------------------------
Name: Jorg-V. Muller
Title: CFO
WITNESS: AMBRA INC.
By: /s/ Vincent Ottomaselli
- -------------------------- ----------------------------
Name: Vincent Ottomaselli
Title: CFO/VP of Finance
-16-
<PAGE>
SCHEDULE 2.01(a) TO AGREEMENT
TRADEMARKS, REGISTRATIONS AND APPLICATIONS
<PAGE>
SCHEDULE OF TRADEMARKS
I.C. Isaacs & Company L.P.'s BOSS
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
B (Stylized) 1,756,992 clothing (25) USA registered 3/9/93
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 1,023,305 work clothes (25) USA registered/renewed
10/21/95
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 1,933,326 golf clubs (28) USA registered 11/7/95
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
LADY BOSS 1,214,960 work clothes for women (25) USA registered 11/2/92
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 101509 clothing (25) California registered
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BABY BOSS 74/346,231 children's flatware (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BABY BOSS 74/801,565 linens (24); USA applied/NOA issued
lace and embroidery (26) 9/7/99
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 75/013,293 machines and tools (7); USA applied/suspended
hand tools and instruments (8);
appliances (11);
vehicle parts (12);
clocks (14);
household utensils (21)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
BOSS 74/323,654 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/074,962 mugs (21); USA applied/NOA issued
towels (24); 6/15/99
socks and sweatbands (25);
golf bags (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/801,552 linens (24); USA applied/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/075,953 clothing (25) USA applied/suspended
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/326,997 clothing (25) USA applied/suspended
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/263,623 skis and roller skates (28) USA applied/suspended
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/269,769 toys/sporting goods (28) USA applied/suspended
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS AMERICA 74/346,232 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS AMERICA 74/801,551 linens (24); USA applied/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
BOSS BUSINESS 74/355,226 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS BUSINESS 74/801,657 linens (24); USA applied/opposition
hair ornaments (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS GOLF 74/346,233 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS GOLF 74/801,554 linens (24); USA applied/suspended
lace and embroidery (26)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
LADY BOSS 74/346,230 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
LADY BOSS 74/801,550 linens (24); USA applied/NOA issued
lace and embroidery (26) 9/7/99
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
LITTLE BOSS 74/346,234 children's flatware (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
LITTLE BOSS 74/801,545 linens (24); USA applied/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
SCHEDULE 2.01(b) TO AGREEMENT
ASSUMED AGREEMENTS.
1. Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
2. Settlement Agreement by and between Brookhurst, Inc. and Bravo Corporation
dated January 21, 1997.
3. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated July
20, 1994.
4. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
6. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc. dated
July 19, 1993.
7. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
8. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
9. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
10. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
11. Agreement by and between Brookhurst, Inc., Yogi Enterprises, Inc. and New
York Wholesale dated February 21, 1994.
12. Worldwide Rights Acquisition Agreement by and between Brookhurst, Inc. and
I.C. Isaacs & Company L.P. dated September 30, 1997; provided that Ambra's
assumption of the obligations under the Worldwide Rights Acquisition
Agreement relates solely to those obligations arising thereunder from and
after the date hereof insofar as they relate to the use of the Trademark
Assets from and after the date hereof.
13. Escrow Agreement by and among Brookhurst, Inc., I.C. Isaacs & Company L.P.
and Paine Webber, Inc., dated November 5, 1997.
<PAGE>
EXHIBIT A TO AGREEMENT
DESCRIPTION OF SERIES A CONVERTIBLE PREFERRED STOCK
Except as expressly set forth herein, shares of Preferred Stock and
shares of Common Stock shall have all of the same preferences, rights (including
rights to dividends) and voting powers, shall be identical in all respects and
will entitle the holders thereof to the same rights and privileges. The
following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Preferred Stock:
(1) The shares of Preferred Stock shall not be entitled to vote on any
matters to be voted upon by the stockholders of the Corporation except as
specifically set forth in this paragraph (1). The holders of the Preferred Stock
shall be entitled to vote as a separate class, and the affirmative vote of
stockholders holding, in the aggregate, a majority of the outstanding shares of
Preferred Stock shall be required, for (i) the creation of an equity security
senior to the Preferred Stock or (ii) the amendment of the Certificate of
Incorporation or Bylaws of the Corporation to the material detriment of the
holders of the Preferred Stock.
(2) The Corporation may redeem at any time and from time to time any or
all of the Preferred Stock at a redemption price of One Dollar ($1) per share.
(3) Unredeemed Shares of Preferred Stock will be convertible, at the
option of the holder, for a sixty (60) day period beginning on October 1, 2003,
into a promissory note of the Corporation substantially in the form attached as
EXHIBIT F to the Agreement in a principal amount equal to One Dollar ($1)
multiplied by the total number of shares of Preferred Stock converted by such
holder, with interest thereafter at an annual interest rate of 12%, payable in
four (4) equal quarterly installments of principal and interest beginning
January 1, 2004.
(4) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, distribution of the net assets of
the Corporation remaining after payment or provision for payment of the debts
and other liabilities of the Corporation (the "Remaining Net Assets") shall be
made as follows: (i) first pro rata to each holder of Preferred Stock an amount
up to One Dollar ($1) per share of Preferred Stock held by such holder plus any
declared but unpaid dividends with respect of shares of Preferred Stock held by
such holder and (ii) then pro rata to the holders of the Common Stock.
A-1
<PAGE>
EXHIBIT B TO AGREEMENT
BILL OF SALE AND ASSIGNMENT OF TRADEMARK ASSETS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, I.C. ISAACS &
COMPANY L.P., a Delaware limited partnership ("Isaacs"), for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
received from AMBRA INC., a Delaware corporation ("Ambra"), pursuant to that
certain Agreement dated October 22, 1999 by and between Isaacs, I.C. Isaacs &
Company, Inc., Ambra and Hugo Boss AG (the "Agreement"), does hereby assign,
transfer, deliver and set over to Ambra and Ambra's successors and assigns
forever, and Ambra hereby acquires from Isaacs, all of Isaacs' right, title and
interest in and to all of the following assets, properties and rights of Isaacs
throughout the world (the "Trademark Assets"), including, without limitation,
the Brookhurst Trademark Assets, representing the BOSS Business of Isaacs
operating under the BOSS marks, as set forth below, the same to be held and
enjoyed by Ambra for its own use and enjoyment, and for the use and enjoyment of
its successors, assigns or other legal representatives forever, as fully and
entirely as the same would have been held and enjoyed by Assignor had the
assignment and sale set forth herein not been made:
(a) Any and all right, title and interest of Isaacs in and to the
trademarks, service marks, trade names, logos, insignias, designs, copyrights
(if any), and other proprietary interests therein, containing the term "BOSS"
or constituting a stylized B, throughout the world, including, without
limitation, all registrations and applications for registration therefor
throughout the world, including those trademark registrations and
applications listed on EXHIBIT A hereto together with the good will
associated therewith, (the "Trademarks") and including all causes of action
and the proceeds thereof in favor of Isaacs heretofore accrued or hereafter
accruing with respect to the Trademarks; provided, however, that Isaacs shall
retain all causes of action and proceeds thereof, and bear all costs and
expenses, including attorneys fees, with respect to the pending litigation
involving Oh Trading in the Southern District of New York;
(b) All rights of Isaacs under the Worldwide Rights Acquisition
Agreement, as that term is defined in the Agreement, the Uniform License
Agreement between Isaacs and Brookhurst, Inc. dated November 5, 1997 and all
license agreements, concurrent use agreements and other agreements listed on
SCHEDULE 2.01(B) to the Agreement and all files relating thereto which were
acquired by Isaacs pursuant to the Worldwide Rights Acquisition Agreement,
including, without limitation, an assignment of all copyrights, if any, that
Isaacs may own as a result of the use of Property, as such term is defined in
the Foreign Rights Manufacturing Agreement; and
(c) All right, title, interest in and to all files that Isaacs has
within its possession or control relating to the Trademarks provided,
however, that Isaacs shall not be responsible for (i) destruction of records
caused by an Act of God or other "Force Majeure" event, or (ii) any
immaterial non-intentional destruction of records.
From and after the date hereof, Isaacs shall, upon request and at the
expense of Ambra but without further consideration, do, execute, acknowledge,
deliver and file, or shall cause to be
B-1
<PAGE>
done, executed, acknowledged, delivered and filed, all such further acts, deeds,
transfers, conveyances, assignments or assurances as may be reasonably requested
by Ambra to transfer, convey and assign to Ambra possession and use of the
Trademark Assets and to comply with all applicable legal requirements to effect
such transfers, conveyances and assignments.
Anything contained in this Bill of Sale and Assignment of Trademark
Assets to the contrary notwithstanding, this Bill of Sale and Assignment of
Trademark Assets shall not constitute an agreement to assign any contract, or
any claim or right or any benefit arising thereunder or resulting therefrom, if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach of or be in violation of any such contract, claim,
right or benefit.
Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
In the event of any conflict or inconsistency between this Bill of Sale
and Assignment of Trademark Assets and the Agreement, the terms of the Agreement
shall prevail.
IN TESTIMONY WHEREOF, Isaacs has caused these presents to be executed.
I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc., its
General Partner
By:
---------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
B-2
<PAGE>
EXHIBIT A TO BILL OF SALE AND
ASSIGNMENT OF TRADEMARK ASSETS
<PAGE>
EXHIBIT C TO AGREEMENT
ASSUMPTION OF ASSUMED AGREEMENTS
This ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this
22nd day of October, 1999, by and between I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership ("Isaacs"), and AMBRA INC., a Delaware corporation
("Ambra").
W I T N E S S E T H:
WHEREAS, Isaacs has agreed to assign, transfer and deliver to Ambra,
and Ambra has agreed to acquire and accept from Isaacs certain assets of Isaacs
pursuant to an Agreement entered into on October 22, 1999, between Isaacs, I.C.
Isaacs & Company, Inc., Ambra and Hugo Boss AG (the "Agreement");
WHEREAS, Ambra has agreed to assume certain obligations related to said
acquired assets;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, it is agreed as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings given such terms in the Agreement.
2. Isaacs hereby assigns to Ambra all its rights under the agreements
identified on SCHEDULE 2.01(b) to the Agreement, constituting the Assumed
Agreements as defined in the Agreement.
3. Ambra hereby assumes all obligations of Isaacs arising from and
after the date hereof under the Assumed Agreements solely insofar as they arise
after the date hereof.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day, month and year first above written.
I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc., its
General Partner
By:
------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
C-1
<PAGE>
AMBRA INC.
By:
-------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT D TO AGREEMENT
LICENSE AGREEMENT
<PAGE>
RESTATED AND AMENDED
LICENSE RIGHTS AGREEMENT
This Agreement (the "License Agreement"), effective as of this 22nd day of
October, 1999 (the "Effective Date") restates, amends and renames the FOREIGN
MANUFACTURING RIGHTS AGREEMENT (the "FMRA") entered into as of the 5th day of
November, 1997 by and between Ambra Inc. a Delaware corporation ("Licensor") and
I. C. Isaacs & Company L.P. ("Licensee"), a Delaware limited partnership.
R E C I T A L S
A. Licensor, directly or through its related entity Hugo Boss AG ("Hugo
Boss"), is the owner of or has rights to license various trademarks including
the word "BOSS" throughout the world and in the United States (collectively,
"Hugo Boss Marks"). Licensor and/or its related companies have used for many
years the mark BOSS and Hugo Boss Marks and have developed certain intellectual
property rights in connection therewith.
B. Licensee, as the successor in interest of Brookhurst, Inc., was the
owner of certain United States trademark rights in and registrations of the word
BOSS. Licensee and its predecessors in interest used the mark BOSS on certain
products in the United States and developed certain intellectual property rights
in connection therewith. Licensee has, simultaneously with the execution of this
Agreement, sold and assigned those trademark and related proprietary rights in
the United States to Licensor without reservation of rights.
C. Licensee is a party to the FMRA pursuant to which Licensee has certain
rights to use certain Hugo Boss Marks for manufacturing and marking of apparel
outside the United States as set forth therein, and desires to obtain a license
to be able to continue to distribute, promote and sell products in the United
States under certain of the Hugo Boss Marks, and Licensor is willing to license
such trademarks to Licensee for such purpose in accordance with the terms
hereof.
D. In countries where necessary and appropriate, Licensor desires that
Licensee be recorded as a registered user of the Licensed Marks (as hereinafter
defined) in relation to the manufacture of the Licensed Products.
<PAGE>
E. In connection with the transactions described above, the parties hereby
wish to restate and amend, and do restate and amend, the FMRA which, as of the
Effective Date of this Agreement, shall cease to be in effect.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Agreement and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
a. "Licensed Mark" or "Licensed Marks" shall mean the trademarks BOSS in
the Microgramma Typestyle and the stylized B (as set forth on Exhibit A attached
hereto) whether used alone or in combination with other words or symbols, with
the appearance and/or style of the said trademark in compliance with the
provisions of Exhibit A.
b. "Property" shall mean the intellectual property rights which Licensor
deems, in its sole reasonable discretion, to be desirable or necessary for
Licensee to enjoy the fruits of the license granted herein and which are or
become primarily associated with the Licensed Marks. Such Property shall
include, but not be limited to, certain titles, trademarks and names, as well as
any of the following used in connection with or as identifiers of the Licensed
Marks: fabrics, styles, designs, and colors other than those which are standard
or traditional in the industry; logos, symbols, copyrights, art work, inventions
(patentable or unpatentable), confidential information, trade secrets, patents
and pending patent applications.
c. "Licensed Product" or "Licensed Products" shall mean solely the products
specified in Exhibit B attached hereto bearing Licensed Marks in compliance with
Exhibit A.
d. "Manufacturing Territory" shall mean any and all countries listed on
Exhibit C.
e. "Sales Territory" means the United States and certain military locations
as set forth in this Agreement.
2
<PAGE>
f. "United States" shall mean the United States of America, its
territories, possessions and commonwealths, except Saipan and American Samoa.
"United States" includes, without limitation, Puerto Rico.
g. "Total Net Sales" shall mean the amount invoiced to third parties by or
on behalf of Licensee with respect to all products bearing a BOSS mark minus
BONA FIDE trade, quantity and early payment discounts actually taken, actual
returns, shipping costs specifically itemized as such, uncollectible amounts
actually written off as bad debt by Licensee and sales or excise taxes (if any)
payable by Licensee in respect of and attributable directly and solely to sales
of Licensed Products, provided that each such item is indicated separately and
appears clearly separate from product price; provided further that for purposes
of Total Net Sales calculations uncollectible amounts shall not exceed one half
of one percent (0.5%) of Total Net Sales (including uncollectible amounts) of
all products bearing a BOSS mark. No costs incurred in the manufacture, sale,
distribution, advertisement or promotion of such products shall be deducted from
the gross sales amounts or from any royalty payable to Licensor by Licensee. Any
sales or transfers of such products made by Licensee to any person or entity
that does not deal at arm's length with Licensee shall be computed, for the
purpose of determining Total Net Sales, at an amount equal to the price at which
Licensee would have invoiced or charged purchasers which deal at arm's length
with Licensee, unless otherwise agreed to by Licensor in writing.
2. RIGHTS GRANTED
(I) LICENSE FOR THE SALES TERRITORY.
a. Licensor hereby grants to Licensee, and Licensee accepts, upon the terms
and conditions set forth herein, the right and license, under the Hugo Boss
Marks, to use the Licensed Marks in connection with, and for the purpose of, the
design, advertising, marketing, sale and other distribution of Licensed Products
in the Sales Territory. Subject to the restrictions and limitations, and
modifications thereto, contained in subsections 2(I)(d), 2(I)(e), 2(I)(f),
2(I)(g), 2(II)(f), 3(b), and 3(c) below, the license granted to Licensee is
non-exclusive. Unless otherwise agreed to by the parties in writing, Licensee
agrees to sell the Licensed Products solely in accordance with Exhibits A, A1
and B. Nothing in this paragraph is intended to prohibit Licensee from using
third party suppliers, service providers and agents in connection with the
designing, advertising, marketing, sale and other distribution of the Licensed
Products in compliance with the terms of this Agreement.
b. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it shall not use the Licensed Marks in connection with the design,
advertisement, marketing,
3
<PAGE>
promotion, distribution or sale of any products other
than Licensed Products.
c. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it will not distribute or sell any Licensed Products bearing the Licensed
Marks to athletic stores whose primary product line is composed of products
intended to be used in connection with golf, tennis, skiing, sailing,
windsurfing, motor sports or any combination thereof or at golf, tennis, skiing,
sailing, windsurfing, or motor sports athletic events, without the prior written
consent of Licensor. The foregoing shall not prevent Licensee from selling
Licensed Products to general sporting goods stores selling multiple lines of
products for a variety of sports (E.G., Modell's and Sports Authority).
d. On those products listed on Exhibit A1, Licensor, for itself and for its
affiliates (including Hugo Boss) agrees to use the word BOSS alone or the words
BOSS HUGO BOSS, whether used only as those words or in combination with any
symbols, on such products in the Sales Territory solely in accordance with the
price points contained in Exhibit A1; provided, however, that such Exhibit A1
shall not apply to such products used or distributed by Licensor, its affiliates
or their licensees for promotional purposes.
e. Licensor, for itself and for its affiliates (including Hugo Boss) agrees
that without Licensee's prior written consent, which consent may be withheld in
Licensee's sole discretion, Licensor and its affiliates shall not license any
nonaffiliated third party to use the word BOSS alone or the words BOSS HUGO
BOSS, whether used only as those words or in combination with any symbols, in
connection with the sale in the Sales Territory of the sportswear products
listed in Exhibit A1 at or below Licensee's maximum wholesale prices listed
therein.
f. Nothing herein is intended to or shall prevent or otherwise restrict
Licensor or its affiliates (including Hugo Boss) from designing, manufacturing,
advertising, promoting, distributing or selling or licensing others to design,
manufacture, distribute, advertise, promote or sell in the Sales Territory any
product, whether or not bearing a mark with the word BOSS alone or the words
BOSS HUGO BOSS, listed in and consistent with Exhibit A1, or any other product
not listed in Exhibit A1, provided that such products do not use the Microgramma
typestyle shown in Exhibit A.
g. Neither Licensor or its affiliates (including Hugo Boss) nor Licensee
shall use on or in connection with apparel bearing the word "BOSS" sold in the
Sales Territory, any apparel style, design, pattern, art work or color which are
or have been primarily associated with products distributed by the other (or any
licensee of the other) except those which are traditional or standard in the
industry.
4
<PAGE>
h. Notwithstanding any other provision of this Agreement, Licensee may,
during 1999 and 2000, use the Licensed Marks on a non-exclusive basis on the
following goods so long as such goods are not intended to be sold to the public
and are intended to be used solely in connection with and for the promotion of
Licensed Products in the Sales Territory: compact discs, videos, stickers,
stick-on-tattoos, photographs and posters, whistles, notebooks, lanyards,
non-leather I.D. tags, basketballs, cassette tapes, sweatbands and visors,
banners and key chains; provided further that Licensee shall not contest, and
agrees that such non-exclusive right to use shall not restrict or limit, in any
way the manufacturing, distributing or selling by Licensor or its affiliates, or
any of their licensees, of any of the above items with the Hugo Boss Marks. For
each year of this Agreement after 2000, Licensee shall submit for approval a
list of goods it intends to use (subject to the terms and conditions of this
Section 2(I)(h), for promotional purposes. Licensor shall consider the request
in good faith and advise Licensee within ten (10) business days of receipt of
such list which of the goods Licensor, in the exercise of its sole discretion,
approves; provided however, that notwithstanding the provision of Section 26(c),
Licensee may seek arbitration solely as to whether Licensor has acted in good
faith in considering Licensee's request. Absent such approval, Licensee shall
not use Licensed Marks on such goods.
i. Licensee acknowledges the legal and beneficial ownership interests of
Licensor and its affiliates in and to the Licensed Marks and the Hugo Boss Marks
and undertakes that it will not take any action which may in any way impair
their rights in the marks, including, without limitation, by challenging or
opposing, or raising or allowing to be raised, on any grounds whatsoever, any
questions concerning or obligations to the validity of the Licensed Marks or the
Hugo Boss Marks. Licensee further acknowledges that Licensor and its affiliates
own extensive trademark rights relating to the word BOSS both within and outside
of the United States. Licensee does not and shall not own, or purport to own,
any trademark rights relating to the word BOSS within or outside of the United
States.
j. Licensee agrees that it will not sell or offer for sale or resale
Licensed Products anywhere in the world other than in the United States.
Licensee shall not sell or cause to be sold, directly or indirectly, any
Licensed Products to any party which Licensee knows, or has reason to know, has
resold or distributed, is reselling or distributing, or is likely to resell or
distribute such Licensed Products (i) outside of the United States; or (ii) as
duty free merchandise. After the execution of this Agreement as is reasonable,
Licensee shall advise each of its customers (other than consumers or other end
users) in writing of the restrictions on such sales.
k. The parties agree that Licensee may sell Licensed Products to the United
States military solely for resale on United States military installations in the
United States. In making such sales, Licensee shall seek to obtain agreement
from its United States military customers
5
<PAGE>
that Licensed Products will not be sold in United States military installations
outside the United States ("Military Agreement").
(i) If Licensee is unable to obtain a Military Agreement with any
military customer, or if the obtaining of any such Military Agreement
substantially adversely affects Licensee's ability to make military sales
in the United States, then Licensee shall promptly notify Licensor. Any
such notice by Licensee shall include a written explanation and
documentation of all efforts by Licensee to obtain such agreement and shall
include (1) data disclosing Licensee's sales of Licensed Products to the
military customer(s) at issue during the immediate prior 12-month period,
(2) projected sales of Licensed Products over the next 12-month period, (3)
the basis for Licensee's belief that obtaining such an agreement will
substantially adversely affect Licensee's military sales, and (4) all
information known or reasonably available to Licensee about sales of
Licensed Products by the military customer(s) at U.S. military
installations outside the United States.
(ii) Upon receipt of such notice and at Licensor's request, the
parties shall meet and confer within five (5) business days, to agree upon
any further steps to be taken by Licensee to obtain the Military Agreement.
Thereafter, absent an agreement between the parties on this issue, or in
the event such steps as may be agreed upon do not result in a Military
Agreement and Licensee does not agree to discontinue sales of Licensed
Products to any such military customer, Licensor may initiate arbitration
under the principles set forth in Exhibit H. In any such proceeding, the
arbiter shall decide whether Licensee shall be permitted to continue
selling Licensed Products to the military customer(s), absent a Military
Agreement, and if so under what circumstances, conditions or limitations,
if any. In considering these issues, the arbiter shall consider, INTER
ALIA, the extent of Licensee's efforts to obtain a Military Agreement, the
extent to which Licensee's military sales are affected), the extent to
which the absence of a Military Agreement has, is or will contribute to the
sale of Licensed Products outside the United States, and the actual or
threatened harm to Licensor from such sales. Pending the resolution of such
arbitration, Licensee may continue to make sales of Licensed Products to
any such military customer(s) absent a Military Agreement; provided,
however, that the continuation of such sales does not constitute (1) a
waiver by Licensor of any rights it may have under this Agreement, or (2)
Licensor's consent to such sales.
Notwithstanding the foregoing or the decision of any arbitration, nothing
in this agreement shall prevent Licensor from fully enforcing all of its
rights to prevent the
6
<PAGE>
unauthorized sale of products bearing Hugo Boss Marks at any U.S. military
installation outside the United States or elsewhere outside the United
States.
(II) LICENSE FOR THE MANUFACTURING TERRITORY.
a. In addition to the rights granted to Licensee above, Licensor hereby
grants to Licensee, and Licensee accepts, upon the terms and conditions set
forth herein, a limited, nonexclusive right and license to itself use, and to
cause and permit third-party foreign manufacturers ("Foreign Manufacturers") and
third-party manufacturers in the United States ("US Manufacturers")
(collectively, "Designated Manufacturer(s)") to use, the Licensed Marks solely
in connection with the manufacture of Licensed Products, labels, displays,
promotional items permitted by this Agreement and other materials used in
connection with the Licensed Products within the Manufacturing Territory for
sale or distribution solely to Licensee.
b. Licensee shall require that the Designated Manufacturer(s) perform all
obligations ascribed to such Designated Manufacturer(s) under this Agreement,
including but not limited to those obligations listed in Section
2(II)(b)(i-xxii), and shall, within sixty (60) days of the effective date of
this Agreement and if not already in place, require each Designated
Manufacturer(s) to enter into a binding written agreement (whether by purchase
order or otherwise) with Licensee, under which each such Designated
Manufacturer(s) agrees to undertake the following obligations provided, however,
that, notwithstanding any other provision of this Agreement, with respect to the
US Manufacturers Licensee, in its sole discretion, may determine the means by
which any of its US Manufacturers is advised of the following obligations
(including without limitation by way of letter or terms and conditions included
in any invoice or purchase order):
(i) The Designated Manufacturer(s) shall manufacture Licensed Products
only for and sell Licensed Products only to Licensee.
(ii) The Designated Manufacturer(s) shall not manufacture any product
bearing the Licensed Marks or any trademarks confusingly similar to the
Licensed Marks, other than Licensed Products.
(iii) The Designated Manufacturer(s) shall not use the name BOSS on
any corporate, partnership or other trade name or as a form of entity
identification.
(iv) The Designated Manufacturer(s) shall modify or terminate use of
the Licensed Marks if requested to do so by Licensee pursuant to Section
2(II)(f) herein.
7
<PAGE>
(v) The Designated Manufacturer(s) shall not use the Licensed Marks in
the Manufacturing Territory in any manner other than as expressly set forth
in this Agreement.
(vi) The Designated Manufacturer(s) shall, following termination of
its agreement with Licensee, terminate any and all uses of the Licensed
Marks in the Manufacturing Territory.
(vii) The Designated Manufacturer(s) shall (A) provide Licensee with a
list of all locations in which the Designated Manufacturer manufactures,
processes or stores Licensed Products, which list from time to time shall
be updated promptly with additional such locations as they are utilized,
and (B) provide reasonable access at each and every such location to
Licensee and Licensor; provided, however, that this provision does not
apply to the initial order placed with any Designated Manufacturer where
the order does not exceed 24,000 units. Licensor shall provide Licensee
with notice and opportunity to participate in any inspection under this
provision provided Licensor decides, in its sole discretion, that to do so
would not impair or hinder the purpose or effectiveness of any such
inspection. With respect to US Manufacturers, Licensee shall always have
the right to participate in any inspection by Licensor and Licensor agrees
to coordinate the inspection through Licensee.
(viii) The Designated Manufacturer(s) shall comply with all applicable
labeling and other laws to the extent affecting the manufacture, storage,
shipment, labeling and sale of Licensed Products pursuant to the terms of
this Agreement, and at all times otherwise conduct its activities under its
agreement with Licensee in a lawful manner.
(ix) The Designated Manufacturer(s) shall permit Licensor, Licensee
and their respective agents and representatives to conduct audits with
respect to the books, records and all other documents and materials in the
possession or under the control of the Designated Manufacturer(s) relating
to the Licensed Products and any agreement in place with Licensee with
respect thereto. With respect to US Manufacturers, Licensee shall always
have the right to participate in any audit by Licensor and Licensor agrees
to coordinate the audit through Licensee.
(x) The Designated Manufacturer(s) shall use the trademark and
copyright notices required by Licensee in connection with the Licensed
Marks.
(xi) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that the Licensed Marks are owned solely
and exclusively by Licensor and Hugo Boss and will not at any time
represent that it has any title or right of ownership in the Licensed
Marks.
8
<PAGE>
(xii) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that materials related to its agreement
with Licensee and uniquely and specifically associated with the Licensed
Marks and/or the Licensed Products (collectively "Works"), whether
developed solely by such Designated Manufacturer(s) or jointly with others,
may qualify for copyright protection under applicable local laws. The
Designated Manufacturer(s) shall agree (or in the case of US Manufacturers,
be advised) that such Works are to be deemed works "made for hire" for the
benefit of Licensor and that if such Works, by operation of law or
otherwise, are not works "made for hire", such Designated Manufacturer(s)
shall agree (A) to assign to Licensor any or all of such Designated
Manufacturer(s)' right, title and interest in the copyright in such Works
throughout the world, and (B) not to seek or obtain registration of such
copyright in its own name.
(xiii) The Designated Manufacturer(s) shall not seek or obtain any
registration of the Licensed Marks or any trademark confusingly similar
thereto in any name or participate directly or indirectly in such
registration without prior written permission of Licensor and Licensee.
(xiv) In the event the Designated Manufacturer(s) has obtained or
obtains in the future in the Manufacturing Territory, any right, title or
interest in the Licensed Marks, or in any other trademark or service mark
owned by Licensor, the Designated Manufacturer(s) shall execute any and all
instruments deemed by Licensor and/or its attorneys or representatives to
be necessary to transfer such right, title or interest to Licensor.
(xv) The Designated Manufacturer(s) shall not take any action which
may in any way impair the rights of Licensor in the Licensed Marks,
including, without limitation, challenging or opposing, or raising or
allowing to be raised, either during the term of its agreement with
Licensee or after its termination, on any grounds whatsoever, any questions
concerning, or objections to, the validity of the Licensed Marks or
Licensor's rights therein, or any other trademarks or service marks owned
by Licensor containing the word BOSS in any manner.
(xvi) The Designated Manufacturer(s) shall reasonably assist Licensor
in obtaining and/or maintaining registration for the Licensed Marks
including, without limitation, by providing information regarding the
Licensed Marks and samples of the Licensed Products.
(xvii) The Foreign Manufacturer(s) shall appoint Licensor as its
respective attorney-in-fact for the limited purpose of executing any and
all documents and performing any and all other acts necessary to give
effect and legality to the provisions of this Section 2 of this
9
<PAGE>
Agreement.
(xviii) The Designated Manufacturer(s) shall not grant, assign,
sublicense or otherwise convey or transfer any rights inuring to such
Designated Manufacturer or any obligations or duties owed by such party to
Licensee or Licensor under this Agreement without the prior written consent
of Licensee, and any attempted transfer or assignment shall be null and
void.
(xix) The Designated Manufacturer(s) shall cooperate with and assist
Licensor in protecting and defending the Licensed Marks, and shall promptly
notify Licensee in writing of any infringements, claims or actions by
others in derogation of the Licensed Marks in the applicable country within
the Manufacturing Territory of which it becomes aware; provided, however,
that Licensor shall have the sole right to determine whether any action
shall be taken on account of such infringements, claims or actions. The
Designated Manufacturer(s) shall not take any action on account of any such
infringement, claim or action without the prior written consent of
Licensor.
(xx) In the event Licensor initiates or defends any legal proceedings
on account of any infringements, claims or actions by others in derogation
of the Licensed Marks, the Designated Manufacturer(s) shall cooperate with
and assist Licensor to the extent reasonably necessary to protect the
Licensed Marks including, but not limited to, being joined as a necessary
party to such proceedings. Any such legal proceedings which do not result
from Licensee's breach of this Agreement or the Designated Manufacturer's
breach of its agreement with Licensee shall be initiated or defended by
Licensor; provided, however, that under no circumstances shall Licensor be
responsible for the costs or expenses incurred by the Designated
Manufacturer(s) in any such legal proceeding in which it elects to be
represented by its own counsel.
(xxi) The Designated Manufacturer(s) shall obtain all government
approvals and registrations which are required under the laws of the
applicable country in the Manufacturing Territory as a result of the
Designated Manufacturer(s) activities in connection with the Licensed
Products and to pay any taxes or fees required by any such foreign
government as a result of its activities under its contract with Licensee.
(xxii) In the manufacture of Licensed Products, the Designated
Manufacturer(s) shall not employ children under fourteen (14) years of age.
c. Licensee shall not authorize any third party to manufacture Licensed
Products in the Manufacturing Territory outside the United States unless and
until such third party executes a binding written agreement (by purchase order
or otherwise) with Licensee containing all of the
10
<PAGE>
obligations listed above in Section 2(II)(b)(i-xxii). Licensee shall take
reasonable steps to monitor
11
<PAGE>
each Designated Manufacturer's compliance with its obligations under its
agreement with Licensee or otherwise. If any such Designated Manufacturer(s)
fails to comply with any of the foregoing obligations listed above in Section
2(II)(b)(i-xxii), Licensee, upon having acquired knowledge thereof, shall
immediately notify Licensor thereof and of the steps being taken to obtain
compliance by such Designated Manufacturer(s) with such obligations. If any such
failure to comply constitutes a material breach of the Designated Manufacturer's
obligations to Licensee as listed above in Section 2(II)(b)(i-xxii), Licensee
shall, at the request of Licensor, also terminate its business dealings with
such Designated Manufacturer as soon as commercially feasible; provided,
however, that as of the date Licensee acquires knowledge of any such breach,
Licensee shall not enter into any new manufacturing agreements or place any
additional orders with such noncomplying Designated Manufacturer without the
written consent of Licensor; provided further that such termination shall not
relieve Licensee of its obligations to continue to enforce its rights against
such Designated Manufacturer for breach of its obligations or Licensee's
indemnity obligations to Licensor under this Agreement.
d. Licensee shall bear all costs and expenses associated with or incurred
by it in carrying out its obligations under Sections 2(II)(b) and 2(II)(c)
above.
e. Notwithstanding Section 2(II)(a) above, Licensee may manufacture or
cause others to manufacture the Licensed Products within the Manufacturing
Territory subject to the terms and restrictions contained in this Section. The
parties agree that they will amend Exhibit C to include countries listed in
Exhibit C1 upon (or as soon thereafter as is practicable) the issuance to Hugo
Boss, or its designee, in each such country, of trademark registration(s) for
the word BOSS for use on products listed in Exhibit B, Section I, as modified by
Section II; provided, however, that any such amendment shall conform to and be
limited by the scope of any such trademark registration obtained. In those
countries listed in Exhibit C1 where Hugo Boss presently has no trademark
application(s) pending, Licensor agrees, upon the written request of Licensee,
to cause Hugo Boss to make such application, and to take appropriate steps to
prosecute such application and Licensee agrees to reimburse Hugo Boss for fifty
percent (50%) of the costs, including attorney's fees and filing fees, of
obtaining such registration. The parties agree that they will amend Exhibit C to
include each country listed on Exhibit C2 when the later of the following two
events occurs (or as soon thereafter as is practicable): (1) the issuance to
Hugo Boss or its designee, of trademark registrations for the word BOSS for use
on products listed in Exhibit B, Section I, as modified by Section II, or (2)
the resolution to the satisfaction of Hugo Boss of pending disputes among third
parties. At any time after the execution of this Agreement, Licensee may notify
Licensor of countries other than those referenced in Exhibits C, C1 and C2 in
which Licensee desires to manufacture Licensed Products. Licensor shall consider
such a request in good faith, and consistent with the principles incorporated
above relating to the
12
<PAGE>
countries listed in Exhibit C. If Licensor agrees to any such request, Licensor
and Licensee will amend this Agreement. The parties agree to execute individual
agreements with respect to manufacturing rights for any country on Exhibit C
outside the United States, if required by the laws or regulations of that
country or to protect the Licensed Marks. Licensee shall only manufacture or
cause others to manufacture Licensed Products in those countries identified in
Exhibit C or any other country as may be later agreed upon pursuant to this
section.
f. Notwithstanding Section 2(II)(a) hereof, neither Licensee nor the
Designated Manufacturer(s) shall have the right to use the Licensed Marks in the
Manufacturing Territory in any manner that conflicts with the rights of any
third party. For purposes of this Section 2(II)(f), the term "third party" shall
not include any natural person under control of Licensor, any entity owned by,
controlled by, or affiliated with Licensor, any natural person or entity that
owns or controls Licensor, or any entity with whom Licensor enters into an
agreement relating to, or creating, the rights that conflict with Licensee's
rights hereunder. If the use of the Licensed Marks on any or all of the Licensed
Products conflicts with the rights of any third party, or if a third party makes
a BONA FIDE claim alleging such a conflict, Licensee agrees to immediately
terminate or modify such use in accordance with Licensor's reasonable
instructions, and Licensee shall have no right of damage or offset in connection
with this Agreement. In the event Licensee fails to terminate or modify such
use, as reasonably directed by Licensor, Licensor may terminate this Agreement
under the provisions of Section 15 below as to such country in which the rights
of the third party exists or with respect to which a BONA FIDE claim has been
made without limiting Licensor's other rights and remedies hereunder or at law
or in equity. Licensee shall indemnify and hold harmless Licensor for all
damages, including attorney's fees and costs incurred in any action or claim
brought against Licensor by such third party arising out of Licensee's actions
under this Agreement. Licensor agrees that neither it nor Hugo Boss shall grant
to any third party an exclusive license for the manufacture of products listed
on Exhibit B, Section I, as modified by Section II, bearing the Licensed Marks.
g. Whenever Licensee itself manufactures Licensed Products anywhere in the
Manufacturing Territory, Licensee agrees to and undertakes the same obligations
set forth in Section 2(II)(b)(i-xxii) for the Designated Manufacturers including
without limitation the following.
(i) To manufacture Licensed Products only for Licensee;
(ii) Not to manufacture any product bearing the Licensed Marks or any
trademarks confusingly similar to the Licensed Marks, other that Licensed
Products and promotional items permitted by this Agreement;
13
<PAGE>
(iii) Not to use the name BOSS on any corporate, partnership or other
trade name or as a form of entity identification;
(iv) Not to seek or obtain any registration of the Licensed Marks or
any trademark confusingly similar thereto in any name or participate
directly or indirectly in such registration without prior written
permission of Licensor; and
(v) Not to employ children under fourteen (14) years of age.
(III) OTHER PROVISIONS REGARDING THE LICENSE FOR THE SALES AND
MANUFACTURING TERRITORY.
a. Licensee acknowledges that Licensor owns, pursuant to that certain
Foreign Boss Rights Acquisition Agreement between Licensor and Licensee dated
September 30, 1997 and that certain Agreement between Licensor, Hugo Boss AG,
I.C. Isaacs & Company, Inc. and I.C. Isaacs & Company L.P. dated October __,
1999 (the "Agreement"), any and all trademark rights relating to the word BOSS
within the Sales and Manufacturing Territories that Brookhurst transferred to
Licensee pursuant to that certain Worldwide Rights Acquisition Agreement between
Licensee, Brookhurst and William Ott dated September 30, 1997. Licensee
acknowledges that it does not own, or purport to own, any trademark rights
relating to the word BOSS in the Sales Territory or the Manufacturing Territory.
b. Licensee acknowledges that it is often difficult to obtain clear,
registered title to trademarks and other intellectual property rights.
Accordingly, Licensor makes no representation whatsoever concerning any rights,
interest, information, agreements, restrictions or other matters relating to the
BOSS marks acquired by Licensor from Licensee under the Foreign Rights Agreement
or the Agreement, and Licensee agrees that the rights granted herein exist only
to the extent that Licensor owns such rights and no warranty, express or
implied, is made with respect thereto or with respect to the rights of any third
parties that may conflict with the rights granted herein. Licensor warrants that
the agreements listed on Exhibit D hereto are the only agreements known to
Licensor or Hugo Boss which impose or may impose restrictions on Licensee's
ability to manufacture Licensed Products in the Manufacturing Territory.
c. Licensor shall obtain from Hugo Boss throughout the term of this
Agreement a license of such of its rights (if any) relating to the exercise by
Licensee of its rights under this Agreement such that Licensor may sublicense
said rights to Licensee to the extent described in the grant of rights set forth
in Sections 2(I) and 2(II), as modified by Section 2(III) hereof, and Licensor
hereby acknowledges that it is sublicensing said rights to Licensee under said
Sections 2(I) and 2(II), as modified by Section 2(III).
14
<PAGE>
d. Licensee makes no representations and warranties to Licensor hereunder
with respect to the Licensed Marks, including, without limitation, any matter
relating to the existence, validity or enforceability of the marks acquired by
Licensee from Brookhurst Inc.
e. Except as expressly stated in this Agreement, Licensor makes no
representations and warranties to Licensee hereunder with respect to the
Licensed Marks, whether such marks were derived from the purchase by Licensor
from Licensee (and ultimately from Brookhurst) or derived by license from Hugo
Boss.
3. ADVERTISING AND PROMOTION; TRANSFER AND OWNERSHIP OF PROPERTY
a. Licensee agrees that any and all of its advertising and sales promotion
activities regarding Licensed Products (including cooperative advertising) shall
be subject to the provisions established by Exhibit A2. Licensee shall not
create, or cause to be created, any advertising or promotional materials that do
not comply with Exhibit A2 and shall use reasonable efforts, including
termination of relationships, to cause third parties who advertise or otherwise
promote Licensed Products to comply with the standards of Exhibit A2. Licensee
shall use reasonable efforts to cause its retail customers to use signage
materials conforming to the requirements of this Section 3(a), but Licensee
shall not be required to terminate its relationship with any retailer solely on
the basis that the retailer continues to use existing non-conforming signage
which has been in use since 1998 or before.
b. Licensor, for itself and its affiliated entities (including Hugo Boss)
agrees that any and all of their advertising activities (including cooperative
advertising) for products listed in Exhibit B, Section I, as modified by Section
II, shall be subject to the provisions established in Exhibit A3.
c. Licensee shall have exclusive rights as between the parties to use the
Licensed Marks with respect to boxing sports sponsorship in the United States,
except Licensor retains the right to use the Hugo Boss Marks in connection with
the sponsoring of boxers in the United States who are neither U.S. citizens, nor
residents of the United States. Unless otherwise agreed to in writing by the
parties, Licensor shall have exclusive rights as between the parties to use BOSS
with respect to golf, tennis, motor sports, skiing, sailing, and windsurfing
sports sponsorship in the United States. With regard to all other sports,
Licensor and Licensee agree to cooperate with each other to avoid interference
with the other party's sports sponsorships in the United States. If either
Licensor or Licensee notifies the other party of the existence of sports
sponsorship relationships in other sports, the party receiving such notice will
then avoid
15
<PAGE>
interfering with the sponsorship relationship established by the other party.
For example, the party receiving such notice will not establish, or attempt to
establish, any sponsorship relationship with the same athlete or the same team
while the sponsorship relationship of the other party to this Agreement remains
in effect, although the party receiving the notice would not be prevented from
establishing other sponsorship relationships in the same sports. After
notification, and upon request by the notified party, the notifying party shall
provide evidence of any such sponsorships to the notified party. The parties
agree that Licensee may use the Licensed Marks in the United States in
connection with the sponsorship of United States Olympic Athletes and United
States Olympic Teams; provided, however, that the Licensed Marks are not used in
advertisements intended to be seen in countries outside the United States and
provided, further, that such Olympic athletes and teams agree not to display the
Licensed Marks outside the United States. Nothing in this Agreement entitles
either Licensor or Licensee to exclusive rights as between the parties with
regard to any Olympic events occurring within the United States, except with
regard to the sports expressly identified above.
d. Licensee may submit to Licensor for prior approval samples of tags,
labels, packaging (including cartons, containers and wrapping or packing
materials) stationery, sales documents, advertising, promotional and display
materials, and other items bearing or using the Licensed Marks, so that Licensor
can ensure that such items comply with the terms of this Agreement. If Licensee
does not submit such items to Licensor for approval, and items are determined to
materially breach the terms of this Agreement on two occasions within a twelve
(12) month period, Licensee must thereafter submit all such items for approval
by Licensor. Under these circumstances, Licensee shall not use any item in that
category until corresponding samples have been approved by Licensor in writing,
and Licensee shall not depart therefrom in any respect without again obtaining
Licensor's prior written approval. If there have been no further material
violations for a twelve (12) month period, approval for such category shall
return to permissive instead of mandatory. When its samples are submitted for
approval (whether mandatory or permissive), Licensor shall either approve or set
forth in writing its reasons for withholding approval within twenty (20) days of
receipt of such samples. Failure by Licensor to so respond within twenty (20)
days shall be deemed as approval.
e. Licensee agrees that all goodwill derived by it or its licensees from
the use of the Licensed Marks after the Effective Date shall inure to the
benefit of Licensor.
f. The parties agree that nothing in this Agreement shall require either
party to do business with any third party wholesaler or retailer. The parties
further agree that each party shall have the right at its sole discretion to
take all steps necessary to prevent its products from being offered for sale to
the public in proximity to the products of the other party or one of its
licensees.
16
<PAGE>
g. Except as otherwise provided herein, the parties agree that each shall
have no right to require the other to make any change in the rights or
obligations set forth in this Agreement. The parties further agree that they
will institute no legal action against each other based solely upon conduct
which is expressly permitted by and in accordance with this Agreement.
h. Licensee agrees that, during the term of this Agreement, it shall not
use the Licensed Marks in any manner other than as expressly set forth in this
Agreement.
i. Licensee agrees that Licensor is and shall be the sole owner of all
items of Property. Subject to the express requirements of Exhibit A, Exhibit A1,
and Exhibit B of this Agreement, the parties agree that Licensor shall have no
right to prevent Licensee from using, during or after the term of this
Agreement, any fabrics, styles, designs and colors that are standard or
traditional in the industry or not primarily associated with the rights licensed
to Licensee hereunder and previously under the FRMA.
j. Following termination of this Agreement, Licensee agrees that it will
terminate any and all use of the Licensed Marks in the Manufacturing Territory
and in the United States, except as otherwise expressly provided in this
Agreement.
4. QUALITY STANDARDS AND INSPECTION
a. The parties acknowledge and agree that great value is placed on the
Licensed Marks and the goodwill associated therewith, that the consuming public
and the industry now associate the Licensed Marks with products of consistently
high quality, and that the terms and conditions of this Agreement are necessary
and reasonable to assure the consuming public and the industry that all Licensed
Products sold hereunder are of the same consistently high quality as Licensed
Products previously sold by Licensee. Accordingly, Licensee agrees that all
Licensed Products shall be substantially equivalent, in terms of quality, to the
products manufactured by Licensee for sale during the Spring and Fall 1996
seasons. Licensor acknowledges that the products bearing the word BOSS
manufactured by Licensee for sale during the 1996 Spring and Fall seasons were
of sufficiently high quality standards as required by this paragraph. If any
Licensed Products fail to conform to the aforementioned quality standards, upon
notification from Licensor, Licensee shall discontinue any and all manufacture,
shipments and distribution of such non-conforming Licensed Products. For
purposes of this Agreement, the parties acknowledge that the quality standards
apply only to the sewing, construction and fabric of the Licensed Products.
17
<PAGE>
b. Licensee agrees to use, in connection with the Licensed Products only,
labels, tags, signs, banners, stationery, order forms, business cards and other
forms of identification for such products which are consistent with the terms of
Exhibit A and Exhibit A2. Licensee agrees that it shall not use the name BOSS in
any corporate, partnership or other trade name or as a form of entity
identification. Licensee shall not use the word BOSS or authorize any third
party to use the word BOSS in connection with the name of any store or retail
establishment; provided that nothing in this Section shall be construed as
prohibiting use of the Licensed Marks in shop-within-a-shop situations. Licensee
may continue its factory outlet operations in proximity to its distribution
facilities which are currently located in Milford, Delaware; provided, however,
that the word BOSS shall not be used in or as part of the name of the store.
Licensee agrees to provide Licensor with written notice of any change in the
location of such factory outlet. To the extent Licensee uses and/or provides
design layouts and/or fixtures for use in stores or retail establishments, it
shall not use design layouts and/or fixtures which are or have been primarily
associated with products distributed by Hugo Boss or its other licensees, except
those which are traditional or standard in the industry.
c. For each Designated Manufacturer not previously disclosed to Licensor
under the FMRA, Licensee shall notify Licensor, in writing, of the identities of
each Designated Manufacturer(s) (including full business name and address), and
the locations of all manufacturing, processing and storage facilities in the
Manufacturing Territory in which the Licensee or the Designated Manufacturer(s)
is manufacturing, processing or storing or intends to manufacture, process or
store Licensed Products which is currently manufacturing Licensed Products for
Licensee in the Manufacturing Territory. Within thirty (30) days of placing any
order for the manufacture of any Licensed Products with a Designated
Manufacturer not previously identified to Licensor, Licensee shall notify
Licensor, in writing, of the identity of such new Designated Manufacturer,
(including full business name and address) and within thirty (30) days after
placing any order (other than an initial order for 24,000 units or less) with
any such Designated Manufacturer, the locations of all manufacturing, processing
and storage facilities in the Manufacturing Territory in which the Licensee or
the Designated Manufacturer is manufacturing, processing or storing or intends
to manufacture, process or store Licensed Products. Licensee shall, from time to
time, provide Licensor promptly with additional such locations as they are
utilized. Licensor and its representatives may from time to time, during all
reasonable business hours and with prior reasonable notice to Licensee, inspect
the operations and facilities of Licensee, the Designated Manufacturer(s) and
their agents with respect to performance under this Agreement.
d. Licensee agrees that it shall comply with all applicable labeling and
other laws affecting the manufacture, storage, shipment, labeling and sale of
the Licensed Products pursuant to the terms of this Agreement, and at all times
otherwise conduct its activities under this Agreement in a lawful manner.
18
<PAGE>
e. The parties agree that they will not, without the written consent of the
other, knowingly seek to obtain products from each other's manufacturers in the
Manufacturing Territory or otherwise interfere in each other's lawful
relationships with any manufacturers in the Manufacturing Territory.
f. In order to ensure that Licensor is fully aware of all products Licensee
may manufacture in the Manufacturing Territory, Licensee shall not sell or
distribute any Licensed Product manufactured, sold or distributed anywhere in
the world, unless and until a prototype or a Computer Assisted Design ("CAD")
which displays clearly and fully each and every use of the Licensed Marks on
such product has been offered to Licensor for inspection. Licensee shall notify
Licensor when such prototypes or CADs are available for inspection at Licensee's
offices in New York ("Notification of Prototype Availability") and Licensor
shall, within ten (10) business days complete its inspection. At the inspection,
or at an inspection to be held within fifteen (15) business days after receipt
by Licensor of CADs as provided for below, Licensee shall make available
representative samples of tags, labels, packaging (including cartons,
containers, and wrapping or packing material) and other advertising, promotional
or display materials or stationery, sale, documents and other items bearing or
using the Mark. Licensor shall, within five (5) business days of implementing
its inspection, notify Licensee in writing of any product that Licensor believes
fails to meet the terms and conditions of this Agreement including the standards
set forth in Exhibit A ("Disputed Garments"). To the extent Licensee intends to
rely upon CADs, Licensee may, at its option, ship such CADs to Licensor for its
review. Under these circumstances, Licensor shall, within ten (10) business days
of receipt of such materials, notify Licensee in writing of any Disputed
Garments. In the event there are Disputed Garments, Licensor and Licensee shall
then meet to resolve any differences concerning such Disputed Garment and if,
after five (5) business days, no resolution has been reached, the matter may be
submitted to arbitration according to the procedures set forth in Exhibit H1.
Pending resolution of any such arbitration, Licensee shall not manufacture,
distribute or sell any such Disputed Garments. Licensor's failure to approve or
disapprove any such prototype or CAD, within thirteen (13) business days of
notification shall be deemed approval of such prototype or CAD. Licensee shall
provide Licensor with a set of prototype garments, CADs or salesperson's samples
of each such garment, each in typical or representative color, and each
accompanied by a list of colors (by references to Pantone or other technical
specification) expected to be used in production, within ten (10) business days
of Notification of Prototype Availability. Subject to the express requirements
of Exhibit A and Exhibit B, nothing in this Agreement is intended to give
Licensor any rights to approve or specify the apparel styling, design, patterns,
art work or colors of Licensed Products.
19
<PAGE>
g. Licensee shall adhere to all prototypes, or CADs reviewed by Licensor.
Any minor departure or variance from such prototypes or CADs as to any of the
requirements or limitations in Exhibit A and Exhibit B, including but not
limited to any change of logo design, must receive the prior written approval of
Licensor, which shall not be unreasonably withheld. Prior to receipt of
Licensor's approval, Licensee may, solely at its own risk and without prejudice
to Licensor, take orders for and/or manufacture such Licensed Products. Should a
dispute arise between the parties over such products requiring arbitration, the
parties agree that the arbitrator shall not be advised that such garments have
been manufactured or that orders have been placed or taken therefor.
h. Licensee shall notify Licensor in writing regarding any change to
Licensee's business that would materially affect the rights, obligations and
benefits of Licensor under this Agreement. Licensor shall notify Licensee in
writing regarding any change to Licensor's or Hugo Boss' business that would
materially affect the rights, obligations and/or benefits of Licensee under this
Agreement. The parties acknowledge and agree that any and all information made
available in any form to the other party under this Section 4(h) shall be
subject in all respects to Section 24(a) hereof concerning confidentiality and
that neither party will trade in violation of applicable U.S. securities laws on
any such information which has not been publicly disclosed.
i. Licensee agrees not to manufacture, export, import, ship or distribute
from or to any country in the Manufacturing Territory, nor give its permission
to any third party to manufacture, export, import, ship or distribute from or to
any country in the Manufacturing Territory, Substandard Licensed Products
without the prior written approval of Licensor. Substandard Licensed Products
shall be defined as damaged or defective merchandise, irregulars, raw material
seconds, made-up merchandise, and any products not meeting the quality standards
set forth in Section 4(a) above or the logo standards set forth in Exhibit A.
Nothing in this Agreement is intended to prevent Licensee from manufacturing or
selling seconds and irregulars in the normal and ordinary course of business,
consistent with the past practices of Licensee in this regard.
j. Upon Licensor's written request, Licensee shall furnish without cost to
Licensor a reasonable number of random production samples per year of each
Licensed Product being manufactured by or on behalf of Licensee hereunder,
together with samples of each tag, label, carton, container and packing or
wrapping material used in connection therewith.
k. Licensee shall submit to Licensor any trademark, service mark, logo or
name which is to be used in connection with the Licensed Products other than
those referenced in Exhibit A. Licensor shall have the right, in its sole
reasonable discretion, to refuse to permit the use of any such trademarks,
service marks, logos or names.
20
<PAGE>
l. Licensee shall not use the stitching designs for clothing pockets as
depicted in Exhibit E on jeans, trousers, shirts, skirts, dresses, shorts,
overalls, jackets, hats or vests or manufacture or distribute any Licensed
Products using any pocket stitching design which infringes the designs set forth
in Exhibit E. Prior to use, Licensee may submit to Licensor for approval other
stitching designs for use on clothing pockets on such garments. In the event
Licensee elects not to submit stitching to Licensor for approval Licensee shall
indemnify, defend and hold harmless Licensor from and against any and all
claims, liabilities and expenses, including reasonable attorney's fees,
disbursements and other charges relating to Licensee's use of such unapproved
stitching designs.
m. Licensor and its representatives may, from time to time during all
reasonable business hours and with prior reasonable notice to Licensee, inspect
the operations and facilities of Licensee with respect to this Agreement.
5. TERM
a. This Agreement shall continue in full force and effect until December
31, 2003, when it shall terminate, unless renewed in accordance with the terms
below, or unless terminated sooner in accordance with the terms and conditions
set forth in this Agreement.
b. Licensee may, at its sole option, renew this Agreement for a period of
two (2) additional years commencing on January 1, 2004, and ending December 31,
2005, if Licensee provides written notice of its intention to extend by no later
than June 30, 2003. Licensee may, at its sole option, extend the term of this
Agreement for an additional two (2) year period commencing on January 1, 2006,
and ending on December 31, 2007, if Licensee provides written notice of its
intention to extend by no later than June 30, 2005.
6. LICENSE FEE AND ROYALTIES
a. Licensee agrees to pay to Licensor a royalty on Licensed Products as
follows:
(i) For the calendar quarter ending June 30, 1999, Licensee will pay
to Licensor on the date hereof Four Hundred Eighty Thousand Dollars
($480,000) as a Minimum Quarterly Royalty Payment and Two Hundred
Eighty-One Thousand Dollars ($281,000) in interest in respect of amounts
due on the Secured Limited Recourse Promissory Note dated November 5, 1997
issued by Licensee to Licensor and which will be cancelled (the "1997
Note").
21
<PAGE>
(ii) For the calendar quarter ending September 30, 1999, Licensee will
pay to Licensor on or before October 31, 1999 Five Hundred Twenty-Four
Thousand Dollars ($524,000) as a Minimum Quarterly Royalty Payment and Two
Hundred Eighty-One Thousand Dollars ($281,000) in interest in respect of
amounts due on the 1997 Note.
(iii) For the calendar quarter ending December 31, 1999, Licensee will
pay to Licensor within thirty (30) days after December 31, 1999 Seven
Hundred Sixty-One Thousand Dollars ($761,000) as a Minimum Quarterly
Royalty Payment.
(iv) Commencing with calendar year 1999, and for each calendar year of
the initial term and either extension term of this Agreement thereafter
(year 1999 and each calendar year of the initial term and each extension
term of the Agreement thereafter being referred to as "Applicable Years"),
Licensee will pay to Licensor an annual royalty equal to the "Annual
Royalty Amount" (herein defined) for the Applicable Year. "Annual Royalty
Amount" means the amount equal to the greater of (A) for Applicable Year
1999, the total of the Minimum Quarterly Royalty Payments required during
the Applicable Year in accordance with clauses (i), (ii) and (iii) above
and the amount paid for the first calendar quarter in 1999 in the amount of
One Million Dollars ($ 1,000,000.00), and for Applicable Years 2000 through
2003, the total of the Minimum Royalty Payments set forth for such
Applicable Year on the Minimum Royalty Table (2000-2003) attached hereto as
Exhibit F-1 (the "Minimum Annual Royalty" ), or (B) an amount equal to six
percent (6%) of Total Net Sales during the Applicable Year (the "Percentage
Annual Royalty"). The Annual Royalty Amount for any Applicable Year will be
paid quarterly (in arrears) within thirty (30) days after each Quarterly
Payment Date in installments equal to the Minimum Quarterly Royalty
Payments for such Quarterly Payment Dates as set forth in clauses (i), (ii)
and (iii) above and on the Minimum Royalty Table (2000-2003). "Quarterly
Payment Dates" means March 31, June 30, September 30 and December 31. For
any Applicable Year in which the Percentage Annual Royalty is greater than
the Minimum Annual Royalty, Licensee will pay to Licensor the Royalty
Adjustment Amount (herein defined) within thirty (30) days after the end of
the Applicable Year. "Royalty Adjustment Amount" means, for any Applicable
Year in which the Percentage Annual Royalty exceeds the Minimum Annual
Royalty, the amount by which the Percentage Annual Royalty exceeds the
Minimum Annual Royalty for such Applicable Year.
(v) The Minimum Annual Royalty during each year of either extension
term will be the same amount as, and will be paid in the same manner as,
the Minimum Annual Royalty for the year 2002 ($2,580,000) on the Minimum
Royalty Table (2000-2003).
b. At the time of each Annual Royalty Payment, Licensee shall provide to
Licensor a written statement illustrating the calculation of the payment due and
the volume of all sales for each product covered by Exhibit B, Section I, as
modified by Section II. The statement should be certified by an officer of
Licensee to be complete and accurate and shall set forth a detailed
22
<PAGE>
accounting of the aggregate amount of Licensed Products shipped during the
contract year. Licensor may provide, in its sole and reasonable discretion, a
statement form, and Licensee agrees to supply the information requested on such
form. The parties agree that the form attached hereto as Exhibit F2 is
acceptable.
7. PAYMENT TERMS
a. Without limiting Licensor's right to terminate this Agreement under
Section 15, below, in the event that Licensee fails to make timely payments to
Licensor under this Agreement, Licensee shall pay to Licensor on demand the
amounts due with interest at the rate of one and one-half percent (1.5%) per
month from the due date until paid. If this rate exceeds the maximum interest
rate allowable by law, then interest shall accrue at the maximum rate allowable
by law.
b. All payments required under this Agreement shall be in U.S. Dollars and
made payable to the order of "Ambra, Inc."
c. Acceptance by Licensor of any payments under this Agreement shall not
prevent Licensor at any later date within thirty-six (36) months from the date
of any payment from disputing the amount owed or from demanding more information
from Licensee regarding payments finally due, and such acceptance of any payment
by Licensor shall not constitute a waiver of any breach of any term or provision
of this Agreement by Licensee if any such breach shall have occurred. Payment by
Licensee of any payments under this Agreement shall not prevent Licensee within
twelve (12) months from the date of such payment from disputing the amount owed
or from demanding from Licensor the repayment of any amounts overpaid by
Licensee; provided, however, that Licensee shall be entitled to reimbursement
for any overpayment made by Licensee discovered by an audit conducted by
Licensor of Licensee's books and records under Section 8(c) herein,
notwithstanding the date of any such audit.
d. Licensee acknowledges and agrees that any manner of payment other than
that stated herein, or as required by law, including, without limitation,
offsets, payment into an escrow account or to any other third party, shall
constitute a material breach of this Agreement.
8. BOOKS AND RECORDS
a. Licensee shall keep complete and accurate records of all Licensed
Products manufactured, shipped, distributed and sold and of Licensee's
activities under this Agreement, and shall make the same readily available to
Licensor and its agents and representatives at such
23
<PAGE>
reasonable times as Licensor may from time to time request for inspection,
copying and extracting.
b. Such books and records shall be kept in accordance with generally
accepted accounting principles, consistently applied, and shall be retained by
Licensee and kept available for at least three (3) years after termination of
this Agreement for possible inspection, copying, extracting and/or audit by
Licensor.
c. Licensor and its agents and representatives shall have the right to
conduct audits with respect to the books, records and all other documents and
materials in the possession or under the control of Licensee relating to this
Agreement, the cost of which shall be borne by Licensor. Any such audit shall be
done during normal business hours and upon reasonable notice to Licensee. If any
such audit, however, discloses that royalty payments due to Licensor under this
Agreement exceed the amount of payments actually made to Licensor during the
audited period, Licensee shall immediately pay all unpaid royalties plus
interest calculated from the date such payment(s) were actually due until the
date when such payment is, in fact, actually made, plus, if payments due to
Licensor under this Agreement exceed the amounts of payments actually paid by an
amount greater than three percent (3%) of the payments made, Licensee shall
immediately pay the cost of the audit, as well. In addition to the foregoing, if
any such audit discloses that payments due to Licensor under this Agreement
exceed the amount of payments actually made to Licensor by an amount greater
than ten percent (10%) of the payments made during the audited period ("Major
Error Audit"), Licensor shall be entitled, in addition to all other remedies
available to it and at its sole option, to an additional payment equal to ten
percent (10%) of the full amount of the unpaid royalties. If during an audit of
a subsequent period conducted within twelve (12) months of the completion of a
Major Error Audit, the payments due to Licensor under this Agreement exceed the
amount of payments actually made to Licensor by an amount greater than ten
percent (10%) of the payments made during the audited period, Licensor shall be
entitled, in addition to an additional payment equal to twenty-five percent
(25%) of the full amount of the unpaid royalties and all other remedies
available to it and at its sole option, to immediately terminate the Agreement.
d. No later than one hundred twenty (120) days after the close of
Licensee's fiscal year, Licensee shall provide Licensor with its annual
financial statements, audited or unaudited, prepared by an independent certified
accountant. If unaudited, an officer of Licensee shall certify under penalty of
perjury that the financial statements are true and correct, and have been
prepared in accordance with generally accepted accounting principles,
consistently applied.
e. Licensor agrees that it will maintain in confidence those records of
Licensee disclosed to Licensor pursuant to paragraphs 8(a), 8(c), and 8(d) above
and any other oral or written confidential information about Licensee's business
and product line disclosed to Licensor.
24
<PAGE>
9. LABELING
Licensee agrees to use the proper trademark and copyright notices in
connection with the Licensed Marks. Upon the execution of this Agreement,
Licensee shall no longer place orders for Licensed Products bearing any
trademark and copyright notices used prior to execution of the FMRA and will
take reasonable steps to ensure that such goods are no longer manufactured in
the Manufacturing Territory; provided, however, that Licensee shall not be
required to remove prior trademark and copyright notices already affixed to such
garments or to unreasonably disrupt work in progress. Where appropriate, such
notices shall appear in the screen for any screen-printed design, in the salvage
of any fabric, in the neck label or waist label of any Licensed Products, and on
any label or tag affixed to the Licensed Products or otherwise attached to the
Licensed Products.
10. OWNERSHIP OF THE MARKS
a. Licensee agrees that it has no right to ownership in the Licensed Marks
and, in furtherance thereof, hereby transfers and conveys all rights, title and
interest, if any, in the Licensed Marks to Licensor, and will not at any time
represent or authorize a Designated Manufacturer(s) to represent that such
manufacturer has any title or right of ownership in the Marks.
b. Licensee agrees that nothing contained in this Agreement shall give to
Licensee or the Designated Manufacturer(s) any right, title or interest in the
Licensed Marks except the limited license granted to Licensee herein, that such
Licensed Marks are the sole and exclusive property of Licensor and that all such
uses by Licensee or the Designated Manufacturer(s) of the Licensed Marks shall
inure only to the benefit of Licensor.
c. Licensee agrees that it will not seek or obtain any registration of the
Licensed Marks in any name or participate directly or indirectly in such
registration without Licensor's prior written permission. Subject solely to the
rights and interest granted herein, Licensee further agrees and acknowledges
that if it has obtained or obtains in the future any right, title or interest in
the Licensed Marks, or in any marks which contain the word BOSS whether used
alone or in combination with other words or symbols or which are confusingly
similar to the Licensed Marks, or in any other trademark or service mark owned
by Licensor, that Licensee has acted or will act as an agent and for the benefit
of Licensor for the limited purpose of obtaining such registrations in the name
and on behalf of Licensor. Licensee further agrees to execute any and all
instruments deemed by Licensor and/or its attorneys or representatives to be
necessary to transfer such right, title or interest to Licensor.
25
<PAGE>
d. Licensee agrees not to take any action which may in any way impair
Licensor's rights in and to the Licensed Marks, including, without limitation,
challenging or opposing, or raising or allowing to be raised, either during the
term of this Agreement or after its termination, on any grounds whatsoever, any
questions concerning, or objections to, the validity of the Licensed Marks or
Licensor's rights therein, or any other trademarks or service marks owned by
Licensor containing the word BOSS in any manner.
e. Licensee agrees to reasonably assist Licensor in obtaining and/or
maintaining registration for the Licensed Marks including, without limitation,
by providing information regarding the Licensed Marks and samples of the
Licensed Products.
f. Licensee acknowledges that materials related to this Agreement and
uniquely and specifically associated with the Licensed Marks and/or the Licensed
Products (collectively "Works"), whether developed solely by Licensee or jointly
with others may qualify for copyright protection under applicable local laws.
Licensee agrees that such Works are to be deemed as Works "made for hire" for
the benefit of Licensor and that if such Works, by operation of law or
otherwise, are not Works "made for Hire," Licensee agrees (i) to assign, and
does hereby assign, to Licensor or its designee any and all of Licensee's right,
title and interest in the copyright in such Works throughout the world, and (ii)
not to seek or obtain registration of such copyright in its own name.
g. Licensee will and does hereby irrevocably appoint Licensor as its
respective attorney-in-fact for the limited purpose of executing any and all
documents and performing any and all other acts necessary to give effect and
legality to the provisions of this Section 10 of this Agreement. Licensor agrees
to provide Licensee with copies of all such documents it executes under this
Section 10(g).
11. INSURANCE
a. Licensee agrees to obtain and keep in full force and effect, during the
term of this Agreement, at its sole cost and expense, a policy of insurance
insuring against those risks customarily insured under comprehensive general
liability policies including, but not limited to, "product liability" and
"completed operations." Such policies of insurance shall have endorsements or
coverage with combined single limits of not less than One Million Dollars
($1,000,000) and shall name Licensor as an additional insured thereunder.
Licensee shall use reasonable efforts to obtain at a reasonable cost an
"advertising" rider and, if such rider is purchased, shall provide that it
cannot be canceled without thirty (30) days prior written notice to Licensor. It
is also agreed that the "other insurance" clause, if any, will be deleted from
such policy, that the insurance under such policy shall be primary, and that
other insurance in
26
<PAGE>
force is neither primary nor contributing.
b. Licensee shall provide to Licensor, within thirty (30) days of the
Effective Date of this Agreement, a certificate showing proof that such policy
of insurance is in effect. In no event shall Licensee manufacture, offer for
sale, sell, advertise, promote, ship and/or distribute the Licensed Products
prior to the receipt by Licensor of such certificate of insurance.
c. Licensee agrees to give Licensor, or cause the insurer to give Licensor,
as the case may be, thirty (30) days prior written notice of any reduction in
limits or termination of such policy of insurance, or of any intention on the
part of Licensee not to pay the premium thereof.
12. NON-TRANSFERABILITY OF RIGHTS
a. Licensee shall not grant, assign, sublicense or otherwise convey or
transfer any rights inuring to Licensee or any obligations or duties owed by
Licensee to Licensor under this Agreement, without the prior written consent of
Licensor, and any attempted transfer or assignment shall be null and void.
Licensor shall consider in good faith any request for such consent and promptly
notify Licensee of Licensor's decision, said decision to be in Licensor's sole
discretion. Licensee shall have the right to transfer or assign its rights under
this Agreement to an affiliate of Licensee (i.e., an entity in control of,
controlled by or under common control with Licensee), provided that any such
transfer or assignment does not in any way diminish, extinguish, or adversely
affect Licensee's obligations to Licensor under this Agreement. Nothing in this
Section 12 is intended to prevent Licensee, its partners or affiliates from
offering and selling stock to the public.
b. Notwithstanding anything to the contrary set forth in this Agreement,
Licensee shall be permitted to assign and transfer Licensee's rights under this
Agreement to any parent, subsidiary or other affiliate of Licensee if Licensee
or its successor in interest remains fully liable for the performance of this
Agreement by such assignee or transferee and indemnifies Licensor with respect
to any costs and damages Licensor may incur because of such assignment or
transfer.
c. Licensor shall provide Licensee with written notice if Licensor intends
to assign or transfer to any third party any of its rights or obligations under
this Agreement.
27
<PAGE>
13. INDEPENDENT CONTRACTOR
The parties hereby agree that Licensee is and shall be an independent
contractor and that no agency (except as specified in Section 10(g)), joint
venture or partnership is created by this Agreement. The legal relationship of
any person or entity performing services for Licensee shall be one solely
between such parties. Neither party shall incur any obligation in the name of
the other party without the prior written consent of that party.
14. INDEMNIFICATION
a. Licensee agrees to indemnify, defend and hold harmless Licensor and Hugo
Boss from and against any and all claims paid, liabilities incurred and all
other out-of-pocket expenses and costs (including reasonable attorney's fees,
disbursement and other charges but excluding lost profits) (collectively
referred to as "Expenses") actually incurred by Licensor or Hugo Boss arising
out of any breach by Licensee of its obligations under this Agreement or any
breach by any Designated Manufacturer of its obligations under its agreement
with Licensee, including, without limitation, Expenses incurred by Licensor or
Hugo Boss in efforts to stop the manufacture, distribution or sale of
unauthorized product bearing the Licensed Marks, or out of any defect whether
obvious or hidden and whether or not present in any sample approved by Licensor,
in any product bearing a BOSS mark manufactured, distributed or sold by or on
behalf of Licensee (regardless of whether such product was manufactured in the
Manufacturing Territory or the Sales Territory) under or arising from personal
injury or property damage or out of any infringement of any rights of any other
person by reason of the design, manufacture, distribution, advertisement,
promotion, sale, possession or use of the Licensed Marks or any Licensed
Products or Licensee's and Designated Manufacturer(s)' failure to comply with
applicable law, regulations and standards.
b. Licensor agrees to indemnify, defend and hold harmless Licensee from and
against any and all claims paid, liabilities incurred and all other Expenses (as
defined above) actually incurred by Licensee arising out of any breach by
Licensor of its obligations, if any, under this Agreement or Licensor's or Hugo
Boss' failure to comply with applicable law, solely attributable to Licensor's
or Hugo Boss' direct conduct (and not the conduct of Licensee).
15. TERMINATION
a. In the event Licensee commits any of the accelerating acts (defined at
Section 15(f)) or fails to make payments required under Section 15(f), Licensor
may terminate this Agreement in its entirety.
28
<PAGE>
b. Licensor may terminate this Agreement as it pertains to any country
included in the Manufacturing Territory only upon any of the following events in
that country:
(i) A material breach by Licensee of any of the material terms and
conditions of this Agreement as it relates to a particular country, which
after due written notice of same from Licensor, remains uncured for a
period of thirty (30) days.
(ii) Licensee's failure to obtain compliance by any Designated
Manufacturer(s) with the list of locations required in Section
2(II)(b)(vii)(A) or Section 4(c) It shall not be a breach of this
Agreement, if, notwithstanding the reasonable efforts of Licensee, a
Designated Manufacturer provides only a partial list of all manufacturing,
processing and storage facilities in the territory as required by Sections
2(II)(b)(vii)(A) and 4(c) herein, provided, however, that any such list as
is provided includes all significant locations. For purposes of a breach of
Licensee's obligation to obtain lists of locations under Section
2(II)(b)(vii)(A) or Section 4(c), a cure may be accomplished by, within
thirty (30) days of receipt of a written demand from Licensor, (A)
delivering the required lists or (B) termination of all business dealings
with the Designated Manufacturer(s) at issue, as soon as commercially
feasible; provided however that as of the date of the written demand from
Licensor (and until a cure occurs), Licensee shall not enter into any new
manufacturing agreements or place any additional orders with such
noncomplying Designated Manufacturer(s) without the written consent of
Licensor; provided further that such termination shall not relieve Licensee
of its obligations to continue to enforce its rights against such
Designated Manufacturer(s) for breach of its obligations or Licensee's
indemnity obligations to Licensor under this Agreement.
(iii) Licensee's failure to obtain substantially full compliance by
any Designated Manufacturer(s) with the child labor restrictions in Section
2(II)(b)(xxii). For purposes of a breach of Licensee's obligations under
Section 2(II)(b)(xxii), a cure may be accomplished by, within thirty (30)
days of receipt of a written demand, termination of all business dealings
with the Designated Manufacturer(s) at issue.
(iv) Licensee's failure to obtain compliance by any Designated
Manufacturer(s) with any of the other material terms and conditions listed
in Section 2(II)(b)(i-xxii) which, after due written notice of same from
Licensor, remains uncured for a period of thirty (30) days.
c. Termination shall be effective upon expiration of the applicable cure
period, if any, and receipt of written notice from Licensor of such expiration.
Upon any such termination, all of the rights and licenses granted hereunder
shall terminate. Any such termination by Licensor shall be without prejudice to
Licensor's other rights and remedies for breach, including damages.
29
<PAGE>
d. If permitted under any applicable laws, including U.S. Bankruptcy laws,
Licensor may terminate this Agreement immediately upon: (i) the insolvency of
Licensee; (ii) the filing of a voluntary petition in bankruptcy for liquidation
by Licensee; (iii) the filing of an involuntary petition in bankruptcy for
liquidation against Licensee that is not vacated within one hundred twenty (120)
days from the date of filing; (iv) the appointment of a receiver or trustee for
Licensee, provided that such appointment is not vacated within one hundred
twenty (120) days from the date of such appointment; or (v) the execution by
Licensee of an assignment for the benefit of all creditors generally.
e. Licensee shall notify Licensor of any change in ownership of more than
fifteen percent (15%) of Licensee's total outstanding equity (on a fully diluted
basis) in any transaction or series of related transactions. Licensor may
terminate this Agreement upon a Change of Control. For purposes of this
Agreement, "Change of Control" shall mean:
(i) (A) the sale of all or substantially all of the assets of
Licensee; (B) the sale of fifteen percent (15%) or more of the equity
of Licensee on a nonpublic sale; (C) any merger or consolidation of
the Licensee; or (D) the transfer of control (as that term is defined
in Rule 405 under Regulation C of the Securities Act of 1933, as
Amended), of Licensee in a public offering, in each of the foregoing
circumstances (i.e., (i) (A), (B), (C) or (D)) to, or with any one or
more of the following entities or persons, or persons or entities
under common control or ownership with them: Brookhurst, Inc., Boss
Golf Co., William Ott, Nicholas Yacobucci, James Ward, Boss Sportswear
(USA), Inc., Peter Chan, Paul Lee, Boss Manufacturing Co., American
Home Products, Inc., Vista 2000, Inc., G. H. Bass Co., and/or Hugo
Bosca; or
(ii) (A) the sale of all or substantially all of the assets of
Licensee; (B) the sale of fifty percent (50%) or more of the equity of
Licensee in a nonpublic sale; (C) any merger or consolidation of the
Licensee; or (D) the transfer of control (as defined in Section
15(e)(i)) of Licensee in a public offering, in each of the foregoing
circumstances (i.e., (ii) (A), (B), (C) or (D)) to, or with any entity
engaged in the manufacturing, distribution or sale (other than retail)
of clothing in direct competition with Licensor or Hugo Boss, (e.g.,
Zegna Corp., Donna Karan Corp., Hart, Shaffner & Marx; Calvin Klein
Corp., Designer Holdings, Liz Claiborne, or Salant Corp.) Licensor
agrees that Licensee, its partners and affiliates, may offer and sell
stock to the public and, subject to the provisions of this
30
<PAGE>
Section 15(e), nothing in this Agreement shall prevent or interfere
with Licensee, or its partners or affiliates offering and selling
stock to the public.
f. In addition to the right of termination and all other available
remedies, any of the following acts by Licensee during the initial term shall at
Licensor's option accelerate all payments that would have been payable pursuant
to Section 6 above during the initial term and require the immediate payment by
Licensee to Licensor of the sum due and payable throughout the initial term
pursuant to Section 6 above, less the cumulative payments made by Licensee to
Licensor during this same period under Section 6 above, but in no event shall
the payment due be more than $13,423,000: (i) a breach by Licensee of its
obligations to make the payments required by Sections 6 and 7 of this Agreement
for any year in accordance with the terms of such Sections, which breach, after
due written notice of same from Licensor, remains uncured for a period of five
(5) days; (ii) Licensee's failure to manufacture any Licensed Products; (iii)
any attempted termination of this Agreement by Licensee, except as expressly
permitted by this Agreement or as agreed to by the parties in writing during the
initial term of this Agreement; (iv) the manufacture, distribution or sale by
Licensee of any product bearing the marks BOSS/HUGO BOSS; HUGO/HUGO BOSS;
BALDESSARINI/HUGO BOSS; HUGO BOSS or any other trademarks owned by Licensor or
Hugo Boss except those which constitute Licensed Marks for the products listed
in Exhibit B, Section I as modified by Section II; (v) the sale by Licensee of
any product bearing a BOSS mark outside the United States; (vi) any willful
material breach of any term of this Agreement; (vii) any attempt by Licensee
other than as requested by Licensor or Hugo Boss to register or otherwise create
or establish trademark rights in the word BOSS in its own name after the
Effective Date of this Agreement (but excluding any activities undertaken by
Licensee in connection with claims against third-parties for past
infringements); or (viii) any act described in Section 15(d) of this Agreement
(collectively referred to as "Accelerating Acts"). Any Accelerating Act(s) by
Licensee during the first option term of this Agreement shall at Licensor's
option accelerate payment of all payments payable during the first option term
and require the immediate payment by Licensee to Licensor of the sum of the
payments due and payable throughout the first option term pursuant to Section 6,
less the cumulative payments made by Licensee to Licensor during this period
under Section 6 above, but in no event shall the payment due be more than
$5,160,000. Any Accelerating Act(s) by Licensee during the second option term of
this Agreement shall at Licensor's option accelerate payment of all payments
payable during the second option term and require the immediate payment by
Licensee to Licensor of the sum of the annual payments due and payable
throughout the second option term pursuant to Section 6, in each of the years of
the final option term of this Agreement less the cumulative royalty payments
made by Licensee to Licensor during this same period under Section 6 above but
in no event shall the payment due be more than $5,160,000. The parties agree
that this provision is not a liquidated damages provision, but a quantification
of the benefit of the bargain to Licensor. In the event Licensee fails to make
immediate payment as required by
31
<PAGE>
this Section, any award, in arbitration or otherwise, to Licensor for an
Accelerating Act(s) of this Agreement by Licensee shall include, but not be
limited to, the payment required by this Section, and such other relief as may
be appropriate. In the event Licensor exercises its option to demand accelerated
payment as set forth above, Licensor shall so notify Licensee in writing.
g. In addition to all other available remedies, Licensor may, solely at its
option and upon written notice to Licensee, terminate this Agreement as it
pertains to a particular country in the Manufacturing Territory (other than the
United States) if substantial, unauthorized sale or distribution of Licensed
Products occurs (i) within any such country and/or (ii) outside any such country
(except for the United States) where the unauthorized goods were manufactured,
distributed or sold by a Designated Manufacturer(s) in such country and is
documented during (i) each of three (3) consecutive quarters (a quarter being
defined as any three-month period beginning on January 1, April 1, July 1 or
October 1) or (ii) each of three (3) consecutive years.
h. Licensee shall have the option to terminate this Agreement at any time,
upon providing Licensor with ninety (90) days written notice, if all of the
following occur: (i) Licensee has used the BOSS mark as required by this
Agreement; (ii) Licensee is prohibited: either (a) by a binding order of a court
of competent jurisdiction (which order has not been vacated within ninety (90)
days of issuance) from using the word BOSS in the Microgramma typestyle and
every variation thereof on a substantial portion (by sales volume) of the
Licensed Products, or (b) by direction of Licensor from using the word BOSS in
the Microgramma typestyle and every variation thereof on a substantial portion
(by sales volume) of the Licensed Products with respect to sales in the United
States pursuant to Section 2(II)(f); and (iii) there is no reasonable
alternative available; provided, however, that if such court order is based upon
Licensee's use of the Licensed Marks in a manner that is inconsistent with the
requirements of this Agreement, then Licensor, but not Licensee, shall have the
option to terminate this Agreement upon ninety (90) days written notice. In the
event this Agreement is terminated by Licensee under this Section 15(h),
royalties due shall be based on amounts due to the date of termination as
provided for in Section 6 above, which shall be calculated on a pro rata basis
for any applicable portion of a calendar quarter.
i. Notwithstanding any other provision of this Agreement, upon termination
of this Agreement, Licensee (and its secured inventory lender), shall be
entitled, subject to the terms and conditions of this Agreement, on a
non-exclusive basis, for a period of nine (9) months from the date of
termination, to complete manufacture of Licensed Products in progress on the
date of termination, and to export to, and distribute and sell in, the Sales
Territory, such completed Licensed Products and any Licensed Products in
Licensee's inventory on the date of termination; provided, however, that such
rights as are granted herein apply only to orders placed and goods manufactured
in the ordinary course of Licensee's business. After the expiration of such nine
(9) month period, Licensee shall completely remove the Licensed
32
<PAGE>
Marks and any and all marks including the word BOSS from any and all products
not manufactured before the expiration of such nine (9) month period.
16. RESULTS OF TERMINATION
a. Upon termination of this Agreement, subject to the terms of Section
15(i) above, all rights relating to the Licensed Products shall immediately
cease and Licensee shall:
(i) cease the manufacture of the Licensed Products except in
accordance with this Section 16;
(ii) cease all use of the rights licensed under this Agreement;
(iii) within thirty (30) days of termination, delete and henceforth
cease from making any reference to the Licensed Marks in, on or in
connection with any advertising, promotional or directory materials,
including any reference to having been previously a licensee of Licensor;
(iv) within ten (10) days of termination, deliver all packaging,
labels, tags and other materials and property (other than actual Licensed
Products) relating to this Agreement to Licensor; and
(v) within ten (10) days of termination, furnish Licensor with a full
and complete statement setting forth (A) the inventory of Licensed Products
manufactured or in the process of manufacture, including the wholesale
price thereof, and (B) production and distribution schedules for the
Licensed Products.
b. The termination of this Agreement shall not relieve Licensee of any
duties or obligations contained herein including, without limitation, the
obligation to pay royalties and interest and furnish required statements; nor
shall termination extinguish any rights of Licensor necessary to ensure an
expeditious conclusion of this Agreement, including, without limitation, the
right to inspect the books, records and facilities of Licensee and the right to
obtain prior written consents.
c. Upon any termination of this Agreement, Licensee shall be liable to
Licensor for actual royalties accrued prior to termination and royalties on any
goods manufactured after termination under Section 15(i), which royalties shall
be calculated on a pro rata basis for any applicable portion of a calendar year.
Upon any termination other than termination resulting from a breach by Licensee
of this Agreement, Licensee shall be liable to Licensor only for such
33
<PAGE>
royalties; provided, however, that nothing in this Section shall affect
Licensor's rights or remedies for any post-termination breach by Licensee.
17. EQUITABLE RELIEF
The parties acknowledge that it will be impossible to measure in money the
damages that would be suffered by one if the other breaches or otherwise fails
to comply with the obligations imposed on it pursuant to this Agreement and
that, in the event of any such failure, the non-breaching party will be
irreparably damaged and will not have an adequate remedy at law. Therefore,
notwithstanding any other provision of this Agreement, the non-breaching party
shall be entitled to equitable relief, including, without limitation, injunctive
relief and/or specific performance to enforce such obligations and, if any
action should be brought in equity to enforce any provisions of this Agreement,
the breaching party shall not raise the defense that there is an adequate remedy
at law. Except as expressly provided in this Agreement, all specific remedies
provided for in this Agreement are cumulative and are not exclusive of one
another or of any other remedies available at law or in equity.
18. LEGAL ACTION
a. Licensee agrees to reasonably cooperate with and assist (and to take
reasonable steps to require the Designated Manufacturer(s) to cooperate with and
assist) Licensor in protecting and defending the Licensed Marks with Licensor
bearing all reasonable out of pocket expenses of Licensee and the Designated
Manufacturers thereof (other than as stated below) and shall promptly notify
Licensor in writing of any infringements, counterfeiting, claims or actions by
others in derogation of the Licensed Marks in the Manufacturing Territory of
which Licensee becomes aware; provided, however, that Licensor shall have the
sole right to determine whether any action shall be taken on account of such
infringements, counterfeiting, claims or actions. Licensee shall not take any
action on account of any such infringement, counterfeiting, claim or action
without the prior written consent of Licensor, which consent shall not be
unreasonably withheld. In the event Licensor grants written permission to
Licensee to take action on account of any such infringement, counterfeiting,
claim or action, Licensee shall bear all costs and expenses related thereto and
shall not settle or otherwise compromise any claim without Licensor's prior
written approval, which shall not be unreasonably withheld.
b. In the event Licensor initiates or defends any legal proceedings on
account of any infringements, counterfeiting, claims or actions by others in
derogation of the licensed rights, Licensee agrees to cooperate with and assist
Licensor to the extent reasonably necessary to protect
34
<PAGE>
the licensed rights hereunder including, but not limited to, being joined as a
necessary party to such proceedings. Any such legal proceedings which do not
result from Licensee's breach of this Agreement shall be initiated or defended
by Licensor; provided, however, that each party shall bear its own costs and
expenses in any such legal proceedings.
c. In the event Licensor determines, in its sole discretion, that it is not
in the best interest of Licensor to initiate any legal proceedings on account of
any such infringements, counterfeiting, claims or action, or in the event
Licensor settles or resolves any such proceedings which may be initiated,
Licensee shall have no claim against Licensor for damages or otherwise, nor
shall the same affect the validity or enforceability of this Agreement.
d. Licensor shall have the right to record, or continue the recordation of,
the Hugo Boss Marks and the Licensed Marks with the Customs Service of the
United States. Upon written request from Licensee for Licensor's reasonable
cooperation, Licensor shall promptly cooperate with Licensee in its efforts to
gain entry into the United States of Licensed Products or components thereof
which are manufactured under authority of and in compliance with this Agreement
(or previously under the FMRA) in the event the Customs Service detains any such
products or components, or raises any question.
19. NOTICES
All notices, requests or other communications required or permitted
hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by registered or certified
airmail, return receipt requested, postage prepaid or (iii) sent by telecopier,
addressed to the party to whom they are directed at the following addresses, or
at such other address as may from time to time be designated by such party to
the others in accordance with this Section 19:
If to Licensor, to:
Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attention: Chief Financial Officer
Telecopier: 212/940-0619
35
<PAGE>
Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942018
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
If to Licensee, to:
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1064
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other parties.
21. FOREIGN AND DOMESTIC TAXES AND GOVERNMENT APPROVALS
a. Licensee agrees to obtain all government approvals and registrations
which are
36
<PAGE>
required under the laws of the Manufacturing Territory as a result of Licensee's
activities in connection with this Agreement and to pay any taxes or fees
required by any such foreign or domestic government as a result of Licensee's
activities under this Agreement other than any taxes payable by Licensor or its
affiliates as a result of its receipt of any payments hereunder.
b. Licensee agrees to pay one-half (1/2) of the reasonable legal fees
necessary to have this Agreement reviewed by an attorney skilled in the laws of
any foreign country to which this Agreement relates and modified to conform with
local laws, if necessary. Wherever required, Licensee agrees to pay one-half
(1/2) of the reasonable legal fees necessary to have Licensee registered as
Registered User or a Permitted User of the Licensed Rights. Prior to executing
this Agreement, Licensor has given Licensee an estimate of all such anticipated
legal fees, and Licensee has had at least ten (10) business days following
receipt of such estimate to determine whether it wishes to forego entering into
this Agreement as to any country or countries.
c. Notwithstanding any other provision of this Agreement, Licensee shall
not be required to pay fees or expenses which arise out of Licensor's efforts to
protect and defend Licensor's intellectual property rights which were not
otherwise caused by activities of Licensee in connection with this Agreement.
22. GOVERNING LAW AND RESOLUTION OF DISPUTES
a. The validity, construction, operation and effect of any and all of the
terms and provisions of this Agreement shall be determined and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law thereunder except as to matters involving issues
of foreign trademark law, in which case the applicable foreign trademark laws
shall be applied. Subject to the provisions of Section 26 below, in the event
any legal action becomes necessary to enforce or interpret the terms of this
Agreement, the parties agree that such action will be brought in the U.S.
District Court for the Southern District of New York, and the parties hereby
submit to the jurisdiction of such court; provided, however, that any party may
enforce an arbitration award in any court of competent jurisdiction located in
New York City and the parties hereby submit to the jurisdiction of any such
court.
b. Nothing in this Agreement is intended to or shall prevent Licensor
and/or Hugo Boss from enforcing any of its rights in any jurisdiction anywhere
in the world to prevent the unauthorized manufacture, sale or distribution of
Licensed Products or of products bearing Hugo Boss Marks.
37
<PAGE>
23. BINDING EFFECT
This Agreement shall be binding on the parties, their parents,
subsidiaries, successors and assigns (if any), and they each warrant that the
undersigned are authorized to execute this Agreement on behalf of the respective
parties.
24. CONFIDENTIALITY
a. This Agreement, its terms, conditions and provisions, and the trade
secrets, confidential information and property of the parties are strictly
confidential and except as provided herein, shall not be disclosed by either
party to any other person or entity without the prior written consent of the
other party, or as required by law, (i) except financial institutions,
(including, but not limited to, investment bankers and underwriters), Designated
Manufacturer(s), government officials, attorneys and accountants with which the
parties transact business; provided, however, that such third parties agree in
writing to abide by the terms of this provision, or (ii) except as appropriate
for Licensor to protect and/or enforce the Licensed Marks and Property. Licensor
and Licensee further agree that disclosure of this Agreement within their
organizations shall be limited to their respective directors, officers and
employees with a "need to know" and that except as provided herein third parties
will not be advised of the relationship between the parties except as is
necessary by law; to carry out the purposes of this Agreement; or to protect the
rights of either party. Nothing in this provision is intended to prevent or
substantially interfere with Licensee's, its partners, affiliates or its
stockholders' ability to make all disclosures required by law pursuant to
offering and selling stock to the public. Notwithstanding the provision of this
Section 24(a), in the event of published reports regarding the Agreement or
Licensee's relationship with Licensor or Hugo Boss, Licensor, Hugo Boss and
Licensee agree to cooperate in good faith to provide appropriate public
responses and comments and the parties shall be free to trade accurate public
statements which are appropriate to correct or clarify the public record.
b. Notwithstanding the provisions of Section 24(a) of this Agreement,
Licensee may supply to its agents, Designated Manufacturers or appropriate
government officials a copy of Exhibit G or convey the information in Exhibit G
to such individuals orally. To the extent Licensee is unable to import or export
Licensed Products by the actions of any government and Licensee cannot through
due diligence and the use of Exhibit G overcome such actions because of the
requirements of Section 24(a), Licensor will cooperate with Licensee, including
submitting written materials from Licensor or its parent or affiliates as
necessary to appropriate government officials, so as to enable Licensee to
obtain all necessary clearances; provided, however, that the failure of Licensee
to obtain any such clearance shall not give rise to any claim whatsoever against
Licensor.
38
<PAGE>
25. GENERAL PROVISIONS
a. No waiver or modification of any of the terms or provisions of this
Agreement shall be valid unless contained in a written document signed by both
parties. No course of conduct of dealing between the parties shall act as a
waiver of any provision of this Agreement.
b. This Agreement, including the entirety of Exhibits A through H1 attached
hereto, contains the entire understanding of the parties as to the subject
matter herein, and there are no representations, warranties, promises or
undertakings other than those contained herein. This Agreement supersedes and
cancels all previous agreements between the parties hereto with respect to the
subject matter herein. This Agreement shall be construed against both parties
equally, regardless of the party that drafted it. Notwithstanding the foregoing,
nothing herein shall affect the validity or enforceability of the Settlement
Agreement and related documents between the parties which terminated the
litigation captioned HUGO BOSS FASHIONS, INC. ET AL. V. BROOKHURST, INC., ET
AL., Civil Action No. 93 Civ 0875 (LMM).
c. If any provision of this Agreement shall be held to be void or
unenforceable, such provision will be treated as severable, leaving valid the
remainder of this Agreement.
d. Wherever necessary to carry out the intent of the parties, certain
provisions of this Agreement including, without limitation, Sections 3(e)
through (j), 8, 10, 14, 15(i) and 16, shall survive the expiration or
termination of this Agreement and shall continue in full force and effect.
e. The parties agree to execute promptly any documents necessary to
effectuate the purpose and intent of this Agreement.
f. Captions and paragraph headings used in this Agreement are for
convenience only and are not a part of this Agreement and shall not be used in
interpreting or construing it.
g. This Agreement may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
26. ARBITRATION
a. In order to expedite the resolution of legal disputes, the parties agree
to have disputes arising in connection with this Agreement finally settled in
accordance with the rules established in Exhibit H, which decision shall be
binding on the parties. The parties further agree that the first such
arbitration proceeding initiated by either party shall be conducted at a
location
39
<PAGE>
and under the auspices and arbitration rules (either the American Arbitration
Association Rules or the Rules of Conciliation and Arbitration of the
International Chamber of Commerce) selected by the non-complaining party;
provided that English shall be the official language of all arbitration
proceedings. For all subsequent arbitrations, the selection of location and
choice of rules shall alternate between the parties, I.E., if the Licensor is
the complaining party in the first arbitration under this Section, Licensee
shall select the location and choice of rules for that arbitration and for the
third, fifth, seventh, ET SEQ. arbitrations, and Licensor shall select the
location and choice of rules for the second, fourth, sixth, ET SEQ.
arbitrations. The parties further agree that notwithstanding this provision,
either party may, consistent with the provisions of Section 17 herein, seek
immediate injunctive relief in court prior to the initiation or pending
resolution, of any dispute in arbitration. If the non-prevailing party does not
comply with an arbitration decision, the prevailing party therein may
immediately enforce the arbitration decision in an equitable proceeding in court
with both parties' court costs and related attorney's fees paid by the
non-prevailing party in the arbitration, unless the arbitration decision is
modified, or not upheld or enforced, in which case each side shall bear its own
costs and attorney's fees. Notwithstanding anything in this Section 26(a),
Licensor or Hugo Boss may seek to enforce any of its rights to prevent the
unauthorized manufacture, sale or distribution of Licensed Products against any
entity in any tribunal anywhere in the world.
b. Notwithstanding anything in this Agreement, the parties agree that
disputes arising under Sections 4(a), 4(f), 4(g), and 4(j) herein, and under
Sections 2(I)(a) and 4(b) solely with respect to Licensee's compliance vel non
with the terms of Exhibit A as referenced in said Sections, may, at the option
of either party, be finally settled in accordance with the expedited arbitration
procedures set forth in Exhibit H1, which decision shall be binding on the
parties.
c. The parties agree that any decision required by this Agreement that is
committed to a party's "sole discretion" shall not be the subject of
arbitration; any decision required by this Agreement that is committed to a
party's "sole reasonable discretion" or "reasonable discretion" may be the
subject of arbitration.
d. The parties agree that in any arbitration proceeding brought under this
Section 26 where the interests of justice so require the arbitrator(s) shall
have the discretion to require one party to pay some or all of the costs and
expenses, including legal fees, incurred by the other party.
27. HUGO BOSS AG GUARANTY
Hugo Boss hereby irrevocably and unconditionally guaranties to Licensee the
full and timely performance of Licensor's obligations to Licensee under this
Agreement.
40
<PAGE>
IN WITNESS WHEREOF, the parties agree that this Agreement shall take effect
as of the date first written above.
AMBRA INC., a Delaware corporation
By:
Name: Vincent Ottomanelli
Title: CFO / VP
By:
Name: Jorg-Viggo Muller
Title: Chairman
HUGO BOSS AG, a corporation of the Federal
Republic of Germany
By:
Name: Werner Beldessarini
Title: Chairman and CEO
By:
Name: Jorg-Viggo Muller
Title: CFO
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.C. ISAACS & COMPANY, INC., a Delaware
corporation, its general partner
By:
Name: Robert J. Arnot
Title: Chairman and Chief
Executive Officer
41
<PAGE>
EXHIBIT F1
MINIMUM ROYALTY TABLE (2000-2003)
MINIMUM ROYALTY PAYMENTS FOR
APPLICABLE YEARS 2000-2003
<TABLE>
<CAPTION>
QUARTERLY MINIMUM TOTAL
PAYMENT QUARTERLY MINIMUM
DATE ROYALTY ANNUAL
PAYMENT ROYALTY
(U.S. $) (U.S. $)
- -----------------------------------------------------------------------------
<S> <C> <C>
March 31, 2000 $810,000
- -----------------------------------------------------------------------------
June 30, 2000 $810,000
- -----------------------------------------------------------------------------
September 30, 2000 $810,000
- -----------------------------------------------------------------------------
December 31, 2000 $810,000 $3,240,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2001 $810,000
- -----------------------------------------------------------------------------
June 30, 2001 $810,000
- -----------------------------------------------------------------------------
September 30, 2001 $810,000
- -----------------------------------------------------------------------------
December 31, 2001 $810,000 $3,240,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2002 $645,000
- -----------------------------------------------------------------------------
June 30, 2002 $645,000
- -----------------------------------------------------------------------------
September 30, 2002 $645,000
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
<S> <C> <C>
December 31, 2002 $645,000 $2,580,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2003 $520,000
- -----------------------------------------------------------------------------
June 30, 2003 $520,000
- -----------------------------------------------------------------------------
September 30, 2003 $520,000
- -----------------------------------------------------------------------------
December 31, 2003 $520,000 $2,080,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E TO AGREEMENT
I.C. ISAACS & COMPANY, INC.
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (the "Agreement") dated November [ ], 1999
is by and among I.C. Isaacs & Company, Inc., a Delaware corporation having its
principal office and place of business at 3840 Bank Street, Baltimore, Maryland
21224-2522 (the "Corporation"), and the shareholders whose names are set forth
in SCHEDULE A hereto (the "Shareholders" and each a "Shareholder").
WHEREAS, Ambra Inc. (the "Initial Shareholder") is the beneficial owner
of 2,000,000 shares of the Preferred Stock of the Corporation (collectively, the
"Initial Shares");
WHEREAS, the Initial Shareholder, the Corporation, Hugo Boss AG and
I.C. Isaacs & Company L.P. ("Isaacs") are parties to an Agreement dated October
[ ], 1999 (the "Agreement"), pursuant to which the Initial Shareholder shall
acquire (i) an additional 1,300,000 shares of Preferred Stock and (ii) a number
of shares of Common Stock of the Corporation equal to the quotient of $1,000,000
divided by One Dollar and Fifty Cents ($1.50) ((i) and (ii) referred to
collectively herein as the "Subsequently Issued Shares"); and
WHEREAS, the Initial Shareholder and the Corporation wish to provide
for the disposition of the capital stock of the Corporation upon the occurrence
of certain events, and to that end, have agreed to execute this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the sufficiency and
adequacy of which is acknowledged, and of the mutual covenants and agreements
hereinafter provided, the parties to this Agreement, on behalf of themselves and
their successors and assigns, agree as follows:
1. DEFINITIONS
The following terms shall have the meanings set forth in this Section
1:
AFFILIATE. Affiliate of a person or entity shall mean any person or
entity, whether now or hereafter existing, which controls, is controlled by, or
is under common control with, such person (including, but not limited to, joint
ventures, limited liability companies, and partnerships). For this purpose,
"control" shall mean ownership of 50% or more of the total combined voting power
of all classes of stock or interests of the entity.
BOARD. Board means the Board of Directors of the Corporation.
COMMON STOCK. Common Stock shall mean the issued and outstanding common
stock, par value $.0001, of the Corporation.
<PAGE>
INVOLUNTARY TRANSFER. Involuntary Transfer shall mean any transfer,
proceeding or action by or in which a Shareholder shall be deprived or divested
of any right, title or interest in or to any of the Stock, including, without
limitation, any seizure under levy of attachment or execution, any transfer in
connection with bankruptcy (whether pursuant to the filing of a voluntary or an
involuntary petition under the United States Bankruptcy Code, as amended, or any
modifications or revisions thereto) or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or agency or any
transfer to a state or to a public officer or agency pursuant to any statute
pertaining to escheat or abandoned property.
MARKET VALUE. Market Value shall have the following meaning:
(i) In the event that, as of the date of the Transfer Notice
or the Corporation Purchase Notice, as the case may be, the Corporation is a
Reporting Company, the Market Value of the Common Stock for any purpose shall
mean the last reported sale price per share of Common Stock, on the date of the
Transfer Notice or the Corporation Purchase Notice, as the case may be, or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on a national securities exchange or included for quotation on the
Nasdaq-National Market, or if the Common Stock is not so listed or admitted to
trading or included for quotation, the last quoted price, or if the Common Stock
is not so quoted, the average of the high bid and low asked prices, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, as furnished by a professional market maker making
a market in the Common Stock as selected in good faith by the Board and the
Initial Shareholder by mutual agreement or by such other source or sources as
shall be selected in good faith by the Board and the Initial Shareholder by
mutual agreement. If, as the case may be, the relevant date is not a trading
day, the determination shall be made as of the next preceding trading day. As
used herein, the term "trading day" shall mean a day on which public trading of
securities occurs and is reported in the principal consolidated reporting system
referred to above, or if the Common Stock is not listed or admitted to trading
on a national securities exchange or included for quotation on the
Nasdaq-National Market, any business day.
(ii) If, as of the date of the Transfer Notice or the
Corporation Purchase Notice, as the case may be, the Corporation is not a
Reporting Company, the Market Value shall be the appraised fair market value as
of the date of the Transfer Notice or the Corporation Purchase Notice, as the
case may be, as determined by an independent appraiser of recognized standing
and appraisal method selected by mutual agreement of the Corporation and the
Initial Shareholder.
PREFERRED STOCK. Preferred Stock shall mean the issued and outstanding
Series A Convertible Preferred Stock, par value $.0001, of the Corporation.
-2-
<PAGE>
REGISTRABLE SHARES. Registrable Shares means Common Stock, except
that Common Stock shall cease to be Registrable Shares when such Common Stock
shall have become eligible for resale pursuant to Rule 144(k) of the
Securities Act.
REGISTRATION STATEMENT. Registration Statement shall mean a
registration statement filed by the Corporation with the SEC under which
Registrable Shares are registered pursuant to Section 3 hereof.
REPORTING COMPANY. Reporting Company shall mean a company the common
stock of which is registered under Section 12 of the Securities Exchange Act.
SEC. SEC means the Securities and Exchange Commission.
SECURITIES ACT. Securities Act means the Securities Act of 1933, as
amended.
SECURITIES EXCHANGE ACT. Securities Exchange Act means the Securities
Exchange Act of 1934, as amended.
STOCK. Stock shall mean (a) the Initial Shares and the Subsequently
Issued Shares; and (b) any capital stock of the Corporation or any of its
successors or assigns issued in respect of or pursuant to a stock split, stock
dividend or reclassification.
2. RESTRICTIONS ON DISPOSITION
A. LIMITATIONS ON TRANSFERS. No Shareholder shall, whether voluntarily
or pursuant to an Involuntary Transfer, transfer, sell, assign, pledge,
encumber, grant any option with respect to, or otherwise create any legal or
equitable interest in any Stock held by such Shareholder except in accordance
with this Section 2.
B. RIGHTS OF FIRST REFUSAL OF COMMON STOCK. (i) Except as otherwise
provided in Subsections C. and F. below, before any Stock may be voluntarily
sold or transferred by a Shareholder (a "Transferring Shareholder"), such
Transferring Shareholder shall first provide written notice of the proposed sale
or transfer to the Corporation, which notice shall include the number of shares
of Stock proposed for transfer (the "Offered Shares"), the price per share of
Stock to be transferred (the "Offer Price"), the name of the proposed transferee
(the "Proposed Transferee"), a representation that the agreement to sell or
transfer constitutes a bona-fide offer to purchase and all other material terms
and conditions of the transfer (the "Transfer Notice");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the Offered Shares at the Offer Price of the Stock
proposed to be transferred. Such right of first refusal shall be exercisable
upon written notice to the Transferring Shareholder within fifteen (15) days
following the date of the Transfer Notice (the "First Refusal Period");
(iii) If, upon termination of the First Refusal Period, the
Corporation has not exercised its right of first refusal with respect to all of
the Offered Shares, the Transferring Shareholder may sell such Offered Shares to
the Proposed Transferee at any
-3-
<PAGE>
time within six months after termination of the Right of First Refusal Period
without again complying with this Section 2.
C. TRANSFERS PURSUANT TO RULE 144(k). A Shareholder holding Stock
eligible to be transferred pursuant to Rule 144(k) promulgated under the
Securities Act ("Rule 144(k)") may transfer such Stock in a Rule 144(k)
transaction in accordance with the procedures set forth in this Section 2.C.:
(i) Such Shareholder (the "Qualifying Shareholder") shall
first provide written notice of its intention to transfer stock in a Rule 144(k)
transaction (the "144(k) Transfer Notice"), which notice shall include the
number of shares eligible for transfer pursuant to Rule 144(k) and proposed for
transfer (the "144(k) Shares") and the name of the proposed broker, if any, in
the 144(k) transaction (the "Proposed Broker");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the 144(k) Shares at the Market Value of the 144(k)
Shares proposed to be transferred (the "144(k) Purchase Rights"). The
Corporation may exercise its 144(k) Purchase Rights by providing written notice
(the "Corporation Purchase Notice") to the Qualifying Shareholder within five
(5) days following the date of the 144(k) Transfer Notice (the "144(k) Notice
Period");
(iii) If, upon termination of the 144(k) Notice Period, the
Corporation has not notified the Qualifying Shareholder of its desire to
exercise its 144(k) Purchase Rights, the Qualifying Shareholder may sell the
144(k) Shares at any time within six months after termination of the 144(k)
Notice Period without again complying with this Section 2.
D. INVOLUNTARY TRANSFERS. Any Involuntary Transfer of Common Stock by a
Shareholder (an "Involuntary Transferor") shall be subject to the rights of
first refusal set forth in Section 2.B. as if the Involuntary Transfer had been
a proposed voluntary transfer of Common Stock except that:
(i) The provisions of Subsection 2.B.(i) shall not apply, but
the Involuntary Transferor shall notify the Shareholders and the Corporation as
soon as practicable upon obtaining knowledge of the Involuntary Transfer (such
notification to be deemed a "Transfer Notice");
(ii) The First Refusal Period shall run from the date of
receipt by the Corporation of the notice of Involuntary Transfer;
(iii) Such right of first refusal shall be exercised by notice
to the Involuntary Transferee rather than to the Shareholders who suffered or
will suffer the Involuntary Transfer; and
(iv) The purchase price per Offered Share shall be Market
Value.
E. SETTLEMENT. If the Corporation elects to exercise its right of first
refusal pursuant to Section 2.B. or 2.D. hereof or its 144(k) Purchase Rights
pursuant to Section
-4-
<PAGE>
2.C. hereof, settlement shall be made within twenty (20) days of the Transfer
Notice or the 144(k) Transfer Notice, whichever is applicable.
F. PERMITTED TRANSFERS. Nothing in this Section 2 shall impede or
prohibit the transfer by a Shareholder of Stock (a) to an Affiliate of the
Shareholder, (b) to the Corporation, (c) to any third party in a broker's
transaction pursuant to Rule 144(b) promulgated under the Securities Act or (d)
pursuant to a Registration Statement. Any successor or transferee who receives
Stock pursuant to an event described in clause (a) above shall, as a condition
of such transfer, enter into an agreement to be bound by the provisions of this
Agreement in its entirety and shall be deemed to be a "Shareholder" hereunder
and SCHEDULE A hereto shall be amended to include the name of such successor or
transferee.
3. REGISTRATION RIGHTS
A. DEMAND REGISTRATION.
(i) At any time on or after December 15, 2000, a Shareholder
may offer Registrable Shares held by such Shareholder to the Corporation at the
then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
Subsections (ii) and (iii) below, use its best efforts to promptly register the
Registrable Shares held by such Shareholder under the Securities Act and shall
maintain the effectiveness of such Registration Statement for a period of 90
days.
(ii) The Corporation shall not be required to effect more than
one registration pursuant to Section 3.A(i) above.
(iii) If (a) at the time of any request to register
Registrable Shares pursuant to this Section 3.A or during the registration
process there is a material development with respect to the Corporation and (b)
the Board concludes in good faith that the registration would have a material
adverse effect on the Corporation or the price of the Common Stock, the Board
may at its option direct that such registration be delayed for a period not in
excess of 90 days from the effective date of the offering by Shareholder to the
Corporation.
B. PIGGYBACK REGISTRATION RIGHTS.
(i) Whenever the Corporation proposes to register any Common
Stock of the Corporation for its own account or the account of others under the
Securities Act for an underwritten public offering (other than registrations for
acquisitions or benefit plans on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), the Corporation shall give the
Shareholders prior written notice of its intent to do so and the Shareholders
may offer any Registrable Shares held by such Shareholders to the Corporation at
the then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
subsection (ii) below, use its reasonable efforts to effect the registration
under the Securities Act of the Registrable Shares that the Corporation has been
so
-5-
<PAGE>
requested to register by the requesting Shareholders, such registration to be
effected on the same terms and conditions as the Corporation Common Stock
otherwise being sold in such registration.
(ii) If the managing underwriter in an underwritten public
offering by the Corporation of Common Stock of the Corporation advises the
Corporation that the inclusion of all or some of the Common Stock (including
Registrable Shares) proposed to be included in such Registration Statement would
interfere with the successful marketing (including pricing) of such Common
Stock, then the Common Stock to be issued by the Corporation in such offering
(the "Corporation Shares"), the Registrable Shares of Shareholders proposed by
the Shareholders to be included in such offering (the "Shareholder Shares") and
the Common Stock of other shareholders proposed to be offered in such offering
("Other Shares") shall be included in the following order of priority until the
total number of shares recommended by the managing underwriters has been
reached:
(A) FIRST, the Corporation Shares;
(B) SECOND, the Shareholder Shares and the Other
Shares of the Corporation, pro rata based upon the number of shares of Common
Stock held by the Shareholders and the holders of the Other Shares;
C. REGISTRATION PROCEDURES. If and whenever the Corporation
is required to use its reasonable efforts to effect the registration of any
Registrable Shares as provided pursuant to Sections 3.A or 3.B, the Corporation
will, as expeditiously as practicable:
(i) After a Registration Statement is filed with the SEC,
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period not in excess of ninety (90) days (or such
earlier date by which all securities that have been requested to be registered
are sold) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period;
(ii) Furnish to the Shareholders and to each underwriter, if
any, of such Registrable Shares, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such person may reasonably request,
in order to facilitate the public sale or other disposition of the Common Stock;
(iii) Use its reasonable efforts to cause such Registrable
Shares covered by such Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be reasonably
necessary to enable the Shareholders to consummate the disposition of such
Registrable Shares in accordance with any plan of distribution described in such
Registration Statement;
-6-
<PAGE>
(iv) Promptly notify the Shareholders, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 3.C(i), if the Corporation
becomes aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and at the request of the Shareholders, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(v) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC; and
(vi) Execute and deliver all instruments and documents
(including in an underwritten offering an underwriting agreement in customary
form) and take such other actions and obtain such certificates and opinions as
are customary in underwritten public offerings.
Any Shareholder will, upon the receipt of any notice from the Corporation of the
occurrence of an event of the kind described in Section 3.C(iv), immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such Registrable Shares until the Shareholders receive copies
of a supplemental or amended prospectus from the Corporation.
D. UNDERWRITING AGREEMENT. In connection with any registration pursuant
to Section 3.A or Section 3.B covering an underwritten public offering, the
Corporation and each Shareholder agree to enter into a written agreement with
the managing underwriters to be negotiated by the Corporation and the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of the Corporation's size and investment stature, including
indemnification. To the extent that the Corporation and the Shareholders shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in Subsections C, E or F of
this Section 3, the provisions contained in such subsections addressing such
issue or issues shall be of no force or effect with respect to such
registration.
E. HOLDBACK AGREEMENT. If the Corporation at any time shall register
any shares of Corporation Common Stock under the Securities Act (including any
registration of the Common Stock pursuant to Section 3.A or Section 3.B above)
for sale to the public, the Shareholders shall not sell publicly (including any
sale pursuant to Rule 144), make any short sale of, grant any options for the
purchase of, or otherwise dispose publicly of any shares of Common Stock, or of
any security convertible into or exchangeable or exercisable for any Common
Stock (other than those Common Stock included in the registration being effected
pursuant to Section 3.B above) without the prior written consent of the
Corporation and the managing underwriter during a period
-7-
<PAGE>
commencing on the effective date of such registration and ending a number of
calendar days thereafter not exceeding one hundred eighty (180) as the
Corporation and the managing underwriter shall reasonably determine is required
to effect a successful offering.
F. EXPENSES. All expenses incurred by the Corporation in connection
with any registration effected under Section 3.A or Section 3.B above (including
all registration, filing qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts on the sale of the Common
Stock) shall be borne by the Corporation.
G. INDEMNIFICATION: (a) The Corporation hereby agrees to indemnify and
hold each Shareholder, each person who controls such Shareholder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act) and their respective agents and representatives (each, a "Holder
Indemnitee") harmless from, and to reimburse any Holder Indemnitee for, on an
after-tax basis and to the extent permitted by applicable law, any loss, damage,
deficiency, claim, liability, obligation, suit, proceeding, action, demand, fee,
penalty, fine, interest, surcharge, cost or expense of any nature whatsoever,
including, without limitation, out-of-pocket expenses, investigation costs and
fees and disbursements of counsel (collectively, "Damages"), caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus relating to the
Registrable Shares or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Corporation by such
Shareholder expressly for use therein; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any Damages arise out of or
are based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said Registration Statement or document incident to
registration or qualification of any Registrable Shares in reliance upon and in
conformity with written information furnished to the Corporation through an
instrument duly executed by such Shareholder or underwriter, or a person duly
acting on their behalf, specifically for use in preparation thereof;
(b) In connection with any Registration Statement, each such
Shareholder will furnish to the Corporation in writing such information as the
Corporation reasonably requests for use in connection with any such Registration
Statement and, to the extent permitted by law, will severally and not jointly
indemnify and hold the Corporation, each person who controls the Corporation
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act) and their respective shareholders, officers, directors,
affiliates, employees, agents and representatives (collectively, for purposes of
this Section 3.G, the "Corporation Indemnitees") harmless from, and reimburse
such Corporation Indemnitees for, on after-tax basis and to the extent permitted
by applicable law, any Damages arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement or prospectus or form of prospectus relating to the Registrable
Shares, or arising out of or based upon any omission or alleged omission of a
material
-8-
<PAGE>
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by such Shareholder to the
Corporation expressly for use in such Registration Statement or prospectus and
that such statement or omission was relied upon by the Corporation in
preparation of such Registration Statement, prospectus or form of prospectus;
provided, however, that such Shareholder shall not be liable in any such case to
the extent that the Shareholder has furnished in writing to the Corporation
prior to the filing of any such Registration Statement or prospectus or
amendment or supplement thereto information expressly for use in such
Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to the
Corporation, and the Corporation failed to include such information therein. In
no event shall the liability of any Shareholder hereunder be greater in amount
than the dollar amount of the proceeds (net of payment of all expenses borne by
such Shareholder) received by such Shareholder upon the sale of the Common Stock
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such indemnified party;
(c) If any person shall be entitled to indemnity hereunder
such indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding, investigation or written threat thereof (a "Proceeding") with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure to so notify the
indemnifying parties shall not relieve the indemnifying parties from any
obligation or liability except to the extent that the indemnifying parties have
been prejudiced by such failure. The indemnifying parties shall have the right,
exercisable by giving written notice to an indemnified party promptly after the
receipt of written notice from such indemnified party of such Proceeding, to
assume, at the indemnifying parties' expense, the defense of any such
Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the parties to such Proceeding include
both the indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between one or
more indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such Proceeding, or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such Proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld);
(d) If a party shall be entitled to indemnification hereunder
but such indemnification is insufficient to hold such indemnified party harmless
for Damages, then
-9-
<PAGE>
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall have an obligation to contribute to the amount paid or payable by
such indemnified party as a result of such Damages, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Damages as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Damages shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.G(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable consideration referred to in the immediately preceding paragraph.
4. MANDATORY REDEMPTION OF PREFERRED STOCK
Upon the occurrence of any Accelerating Acts (as such term is
defined in the Restated and Amended License Agreement dated October 22, 1999 by
and between the Initial Shareholder and Isaacs, the Initial Shareholder may
demand a redemption of any Preferred Stock then held by the Initial Shareholder
at a redemption price equal to One Dollar ($1) per share. Any demand by the
Initial Shareholder for redemption of Preferred Stock pursuant to this Section 4
shall be submitted in writing to the Corporation and effective immediately upon
receipt of such demand the Corporation shall have an obligation to redeem the
Preferred Stock elected to be redeemed by the Initial Shareholder.
5. LEGENDS ON CERTIFICATES
The certificates evidencing the Stock held by the Shareholders shall
bear any legends required by federal or state securities law and the following
legend required by Section 202 (a) of the Delaware General Corporation Law:
"The shares represented by this Certificate are subject to a
Shareholders' Agreement dated as of November ___, 1999, a copy
of which is on file at the office of the Corporation and will
be furnished to any prospective purchaser on request. Such
Shareholders' Agreement provides, among other things, for
certain restrictions on the sale, transfer, pledge,
hypothecation or disposition of the Shares represented by this
Certificate."
-10-
<PAGE>
6. BENEFIT
Except upon the occurrence of a termination event as provided in
Section 14, this Agreement shall be binding upon and shall operate for the
benefit of the parties hereto, their respective successors and assigns.
7. INVALIDITY OF ANY PROVISION
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted, provided that the parties shall negotiate in good faith to replace the
invalid provision with a valid provision reflecting the same balance of economic
interests.
8. MODIFICATION OF AGREEMENT
No modification, amendment or waiver of any of the provisions of this
Agreement shall be valid unless made in writing and signed by the Corporation
and Shareholders owning, in the aggregate, a majority of the Stock subject to
this Agreement.
9. FURTHER ACTION
The Corporation shall not register, and shall instruct any transfer
agent for the Common Stock not to register, on the books of the Corporation any
transfer, pledge or encumbrance of any Stock subject to this Agreement, unless
such transfer, pledge or encumbrance complies with terms of this Agreement and
the Shareholders agree to provide the Corporation (or any such transfer agent)
with such documents, including an opinion of counsel as to compliance with the
applicable securities laws, as the Corporation (or any such transfer agent) may
reasonably request. A copy of this Agreement shall be made a part of the minutes
of the Corporation.
10. ATTORNEY'S FEES AND COSTS
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements, in addition to
any other relief to which he may be entitled.
11. APPLICABLE LAW
The validity, construction, operation and effect of any and all of the
terms and provisions of this Agreement shall be determined and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law thereunder. All disputes arising out of or in
connection with this Agreement or the interpretation thereof shall be submitted
to the United States District Court for the Southern District of New York and
the parties hereby submit to the jurisdiction of such court.
-11-
<PAGE>
12. ENTIRE AGREEMENT
This Agreement supersedes all agreements as to the subject matter
hereof among the Shareholders and the Corporation including in each case
amendments thereto, previously executed by the Shareholders and the Corporation.
This Agreement sets forth all of the provisions, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and superseded all prior and contemporaneous agreements
and understandings express or implied, oral or written as to the subject matter
hereof.
13. NOTICES
Unless otherwise specified herein, all notices, requests, demands and
other communications to be given under this Agreement shall be in writing and
shall be deemed given if (i) delivered in person, or by United States mail,
certified or registered, with return receipt requested, (ii) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (i) above, when transmitted and receipt is confirmed by telephone,
or (iii) if otherwise actually delivered:
TO THE CORPORATION: 3840 Bank Street, Baltimore, MD 21224-2522;
TO ANY SHAREHOLDER: As the name and address of such Shareholder
appears on the records of the Corporation;
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
mailed, as the case may be.
14. TERM OF AGREEMENT
This Agreement shall be effective for a period of ten years from the
date hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and sealed this
Agreement as of the day and year first above written.
I.C. ISAACS & COMPANY, INC.
By:
---------------------------
Robert J. Arnot, Chief Executive Officer
AMBRA INC.
By:
--------------------------
Name:
Title:
-13-
<PAGE>
SCHEDULE A
Ambra Inc.
-14-
<PAGE>
EXHIBIT F TO AGREEMENT
SUBORDINATED PROMISSORY NOTE
$____________ [October _, 2003]
FOR VALUE RECEIVED, the sufficiency and adequacy of which is
hereby acknowledged, I.C. ISAACS & COMPANY, Inc. a Delaware corporation
("MAKER"), promises to pay to the order of AMBRA INC., a Delaware corporation
("PAYEE"), the principal sum of [__________________ Dollars ($____________)],
together with interest until paid, as set forth in this Note.
1. INTEREST RATE. Interest shall accrue and be payable on the
outstanding unpaid principal balance of this Note at the fixed interest rate of
twelve percent (12.0%) per annum computed on the basis of the actual number of
days elapsed over a year of 360 days.
2. PRINCIPAL AND INTEREST PAYMENTS. Maker shall make four equal
quarterly installment payments of principal and interest in the amount of
[_________ Dollars ($_________)] each to Payee on January 1, 2004, April 1,
2004, July 1, 2004 and October 1, 2004. Unless sooner paid in full, the entire
unpaid principal balance of this Note, together with all outstanding and unpaid
accrued interest, shall be due and payable on October 1, 2004. All payments
shall be made in U.S. dollars by wire transfer of immediately available funds to
Payee at Acct. No. 150/1014471/00 USD, Commerzbank AG, New York branch,
Corporate Banking-European Desk, 2 World Financial Center, New York, New York
10281-1050, SWIFT-Code: COBAUS3XXXX, Contact: ________________ [Ambra to confirm
and complete], or to such other account as Payee shall have previously
designated to Maker in writing not later than 14 days prior to the date on which
such payment becomes due. All payments (including any prepayments) shall be
applied first to accrued and unpaid interest, and then to the unpaid principal
balance of this Note.
3. PREPAYMENT. Maker shall be privileged to prepay this Note in
whole or in part, together with all interest accrued through the date of
payment, at any time without premium or penalty. All partial prepayments shall
be applied in inverse order of maturity.
4. DEFAULT; ACCELERATION; COSTS OF COLLECTION. The occurrence of
any of the following events shall be an "EVENT OF DEFAULT": (a) failure of Maker
to make any payment of principal or interest under this Note within ten (10)
days after the due date thereof; or (b) the occurrence of an Insolvency Event
(as defined in Section 10 below). Upon the occurrence of an Event of Default,
the unpaid principal with interest and all other sums evidenced by this Note
shall, at the option of Payee and in Payee's discretion, become immediately due
and payable. Upon and during the continuance of an Event of Default, Maker shall
pay Payee's reasonable costs and expenses (including reasonable attorneys fees
and expenses) incurred in collecting the principal and interest due under this
Note, including, but not limited to, any reasonable attorneys fees and expenses
incurred by Payee in connection with asserting, enforcing or pursuing its claim
-1-
<PAGE>
in any bankruptcy proceeding.
5. CERTAIN WAIVERS. As to this Note, Maker waives all applicable
exemption rights, whether under any state constitution or otherwise, and also
waives valuation and appraisement, diligence, presentment, protest, demand for
payment, notice of default, dishonor or nonpayment of this Note, and notice of
acceleration and expressly agrees that the maturity of this Note, or any payment
under this Note, may be extended from time to time without in any way affecting
the liability of Maker.
6. PRESERVATION OF PAYEE RIGHTS. No failure on the part of Payee
to exercise any right or remedy hereunder, whether before or after the happening
of an Event of Default shall constitute a waiver thereof, and no waiver of any
past Event of Default shall constitute waiver of any future default or of any
other Event of Default. No failure to accelerate the indebtedness evidenced
hereby by reason of any Event of Default hereunder, or acceptance of a past due
installment, or indulgence granted from time to time, shall be construed to be a
waiver of the right to insist upon prompt payment thereafter, or shall be deemed
to be a novation of this Note or as a waiver of such right or acceleration or
any other right, or be construed so as to preclude the exercise of any right
that Payee may have, whether by the laws of the State of New York, by agreement,
or otherwise. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such agreement is sought to be
enforced.
7. NOTICES. Any notice required or permitted by or in connection
with this Note shall be in writing and shall be made by telecopy, or by hand
delivery, or by overnight delivery service, or by certified mail, return receipt
requested, postage prepaid, addressed to the parties at the appropriate address
set forth below or to such other address as may be hereafter specified by
written notice by the parties to each other. Notice shall be considered given as
of the earlier of the date of actual receipt, or the date of the telecopy or
hand delivery, or one (1) business day after delivery to an overnight delivery
service (marked for next business day delivery), or three (3) calendar days
after the date of mailing, independent of the date of actual delivery or whether
delivery is ever in fact made, as the case may be, provided the giver of notice
can establish that notice was given as provided herein. Notwithstanding the
aforesaid procedures, any notice or demand upon any party, in fact received by
such party, shall be sufficient notice or demand.
<TABLE>
<S> <C>
If to Maker: I.C. Isaacs & Company, Inc.
350 Fifth Avenue, Suite 1029
New York, New York 10118
Attn: Mr. Robert J. Arnot, President and CEO
Telecopy No.: 212-695-7579
With copy to: I.C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attn: Mr. Eugene C. Wielepski
Telecopy No.: 410-563-1512
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
And copy to: Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attn: Robert J. Mathias, Esquire
Telecopy No.: 410-576-1604
If to Payee: Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attn: Chief Financial Officer
Telecopy No.: 212-940-0619
With copy to: Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attn: General Counsel
Telecopy No.: 49-7123-942018
And copy to: Coudert Brothers
1114 Avenue of the Americas
New York, N.Y. 10036-7703
Attn: Pamela T. Church, Esquire
Telecopy No.: 212-626-4120
</TABLE>
8. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed entirely in the State of New York without regard to such
state's choice of law rules. In the event any legal action becomes necessary to
enforce or interpret the terms of this Note, the parties agree that such action
may be brought in the Supreme Court of the State of New York, County of New
York, or in the U.S. District Court for the Southern District of New York, and
the parties hereby submit to the jurisdiction of such courts.
9. SEVERABILITY. In case any provision or any part of any
provision contained in this Note shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision or remaining part of the
affected provision of this Note, but this Note shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein but only to the extent such provision or part thereof is
invalid, illegal, or unenforceable.
10. NOTE ISSUED IN EXCHANGE FOR CONVERTED SHARES; SUBORDINATION.
This Note has
-3-
<PAGE>
been issued in exchange for shares of Maker's Series A Convertible Preferred
Stock ("CONVERTED SHARES"), which shares were convertible into this Note in a
principal amount equal to One Dollar ($1) multiplied by the total number of
shares converted, in accordance with the terms of that certain Agreement dated
as of October 22, 1999 between Maker, Payee, I.C. Isaacs & CompanyL.P,, and Hugo
Boss AG. Payee, by accepting delivery of this Note in exchange for the Converted
Shares, covenants and agrees, for itself and each and every subsequent holder of
this Note, that upon and during the continuance of any Insolvency Event, the
indebtedness evidenced by this Note shall be subordinate and junior in right of
payment to Maker's indebtedness to Congress Financial Corporation, its
successors and assigns (and to Maker's indebtedness to any lender, and its
successors and assigns, that may provide financing to Maker in replacement of
Maker's credit facility from Congress Financial Corporation) (Congress Financial
Corporation and any other lender that may provide such replacement financing,
and their respective successors and assigns, are referred to herein as
"LENDER"), such that upon and during the continuance of any Insolvency Event,
(i) no part of the indebtedness evidenced by this Note shall have any claim to
the assets of Maker on parity with or prior to any claims of Lender to such
assets; and (ii) unless and until Maker's indebtedness to Lender shall have been
indefeasibly paid in full, Payee shall not without the express prior written
consent of Lender, take or receive from Maker, and Maker shall not make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any other
manner, any payment of any nature or type for the whole or any part of the
indebtedness evidenced by this Note, provided that no such subordination shall
be effective if all indebtedness owed by Maker to Lender has been equitably
subordinated to the claims of all other general unsecured creditors of Maker by
virtue of Lender's acts or conduct by a court of competent jurisdiction under a
final and non-appealable order, judgment or decree (a "SUBORDINATION EVENT").
Payee, by accepting delivery of this Note in exchange for the Converted Shares,
further covenants and agrees, for itself and each and every subsequent holder of
this Note, that if any payment or distribution, whether consisting of money,
property or securities, be collected or received by Payee, or any such
subsequent holder of this Note, in respect of the indebtedness evidenced by this
Note, upon or during the continuance of an Insolvency Event, provided a
Subordination Event has not occurred, then Payee or such subsequent holder of
this Note immediately shall deliver the same to Lender, in the form received,
duly endorsed to Lender, if required, to be applied to the payment of Maker's
indebtedness to Lender until Maker's indebtedness to Lender is paid in full.
Until so delivered, such payment or distribution shall be held in trust by
Payee, or such subsequent holder of this Note, as property of Lender, segregated
from other funds and property held by Payee, or such other holder of this Note.
The provisions of this Section 10 are, and are intended solely, for the purpose
of defining the relative rights of Payee (and any subsequent holder of this
Note), on the one hand, and Lender, on the other, upon and during the
continuance of an Insolvency Event. Lender is an intended beneficiary of the
subordination provided by the terms of this Section 10. Notwithstanding anything
to the contrary in this paragraph, such subordination of the indebtedness
evidenced by this Note shall not prevent or limit Payee's right or ability to
assert, enforce or otherwise pursue its claim during any Insolvency Event
provided any payments to Payee are treated in accordance with this Section.
As used in this Note, "INSOLVENCY EVENT" means any of the
following: (i)
-4-
<PAGE>
Maker commencing any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, administration, reorganization, conservatorship, or relief from
debtors, seeking to have any order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, administration, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of an administrator or receiver for it or for all or any substantial
part of its assets, or Maker making a general assignment for the benefit of its
creditors, or (ii) there being commenced against Maker any case, proceeding or
other action of a nature referred to in clause (A) hereof, or (iii) there being
commenced against Maker any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief that is not satisfied within 90 days, or (iv) Maker taking any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above,
or (v) Maker admitting in writing its inability to pay its debts as they become
due.
11. MUTUAL WAIVER OF JURY TRIAL. MAKER AND PAYEE WAIVE ALL RIGHTS
TO TRIAL BY JURY OF ANY CLAIMS OF ANY KIND ARISING UNDER OR RELATING IN ANY WAY
TO THIS NOTE. MAKER AND PAYEE ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT
AND REPRESENT TO EACH OTHER THAT THESE WAIVERS ARE MADE KNOWINGLY AND
VOLUNTARILY AFTER CONSULTATION WITH COUNSEL OF THEIR CHOICE. MAKER AND PAYEE
AGREE THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING
JURISDICTION WITHOUT A JURY.
IN WITNESS WHEREOF, and intending to be legally bound hereby Maker
executes this Note under seal as of the date first written above.
WITNESS: I.C. ISAACS & COMPANY, INC.
By: (SEAL)
- ----------------------------- --------------------------------
Name:
Title:
-5-
<PAGE>
