Exhibit 10.1
The Xxxxxxx, Xxxxx Company
00 Xxxxx Xxxxxx
Xxx Xxxxx, XX 00000
September 17, 1997
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxx, XX 00000
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
Sandside
Port Xxxxx, Jamaica
Ladies and Gentlemen:
Reference is hereby made to the agreements (collectively, the "Agreements")
described on Exhibit A attached hereto each dated as of December 22, 1994 by,
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between and among The Xxxxxxx, Xxxxx Company ("Xxxxxxx, Xxxxx"), PBS Enterprises
Ltd. ("PBS"), Xxxxx Xxxxx Shalleck ("Xxxxx"), Xxxxx Xxxxxxxx ("Xxxxx"), Davedan
Properties Ltd. ("Davedan") and Xxxxxx Manufacturing Company Ltd. ("Xxxxxx I"),
pursuant to which PBS has agreed, among other things, to provide certain
manufacturing services to Strouse, Adler, and Xxxxxxx, Xxxxx has acquired an
option to purchase certain assets owned by PBS and Xxxxxx I and real property
owned by Davedan. Capitalized terms which are used but not otherwise defined
herein and which are defined in the Agreements shall have the respective
meanings herein as are given to such terms in the Agreements.
This letter agreement ("Letter Agreement") will confirm the following:
X. Xxxxxxx, Xxxxx understands that Xxxxx and Xxxxx are in the process of
forming a Jamaican limited liability company named Xxxxxx Manufacturing Co. 1997
Ltd. ("Xxxxxx XX") with the intent that Xxxxxx XX will take over the operations
of Xxxxxx X. Xxxxxxx, Xxxxx further understands that Xxxxx, Xxxxx and Xxxxxxx
Xxxxxxxxx will be the sole shareholders of Xxxxxx XX and that Xxxxx and Xxxxx
will be the sole directors of Xxxxxx XX. Xxxxxxx, Xxxxx also understands that
upon the formation of Xxxxxx XX, Xxxxxx I will assign and transfer to Xxxxxx XX
all of Xxxxxx I's rights under each of the Agreements to which Xxxxxx I is a
party and that Xxxxxx XX will assume and agree to pay, perform or discharge all
liabilities and obligations of Xxxxxx I under each of the Agreements to which
Xxxxxx I is a party (the "Assignment and Assumption"). Xxxxxxx, Xxxxx hereby
consents to such Assignment and Assumption.
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 2
B. Xxxxx and Xxxxx hereby covenant and agree that immediately upon the
formation of Xxxxxx XX, they shall cause Xxxxxx XX to execute this Letter
Agreement and shall undertake diligently to consummate the Assignment and
Assumption. The parties hereto acknowledge and agree that if, for whatever
reason, Xxxxxx XX does not execute this Letter Agreement, then (i) Xxxxxx I
shall remain solely liable for all existing and future liabilities and
obligations under the Agreements to which Xxxxxx I is a party and (ii) the
provisions of this Letter Agreement shall nonetheless be effective against
Peter, Sandy, Strouse, Adler, PBS, Davedan and Xxxxxx X. The parties further
agree that upon the execution of this Letter Agreement by Xxxxxx XX and the
consummation of the Assignment and Assumption, Xxxxxx I and Xxxxxx XX shall be
jointly and severally liable for all existing or future liabilities and
obligations under each of the Agreements to which Xxxxxx I is a party and that
Xxxxxx I shall not be released from any existing or future obligations or
liabilities under any of the Agreements to which Xxxxxx I is a party. Xxxxx and
Xxxxx specifically acknowledge and confirm that upon the execution of this
Letter Agreement by Xxxxxx XX, the provisions of the Specific Performance
Agreement shall be enforceable against each of them in their respective
capacities as shareholders and directors of both Xxxxxx I and Xxxxxx XX. The
parties also specifically acknowledge and confirm that upon the execution of
this Letter Agreement by Xxxxxx XX, the Restrictive Covenant shall be
enforceable against both Xxxxxx I and Xxxxxx XX. The parties further agree that
any usage of the capitalized term "Xxxxxx" made in any of the Agreements and
this Letter Agreement shall for all purposes of the Agreements and this Letter
Agreement be deemed to refer collectively to Xxxxxx I and Xxxxxx XX.
C. The parties hereto acknowledge that, in connection with the Assignment
and Assumption and as a result of the termination of the employees of Xxxxxx I
(the "Employees") by Xxxxxx I and the re-hiring thereof by Xxxxxx XX, severance,
redundancy and other payment obligations may be triggered respecting the
Employees (the "Severance Obligations"). Xxxxxx hereby agrees to take any and
all actions reasonably necessary to avoid the triggering of the Severance
Obligations, including, without limitation, the giving of appropriate "notice in
lieu of severance" to each of the Employees. The parties agree that,
notwithstanding the foregoing or anything to the contrary contained in the
Agreements, Xxxxxx shall be solely responsible for the payment of any Severance
Obligations and Xxxxxxx, Xxxxx shall in no event be liable for payment to the
Employees or reimbursement to Xxxxxx of the Severance Obligations.
D. The parties acknowledge that Xxxxxx I has been receiving a monthly
subsidy from the Jamaican government in the amount of approximately $2700 U.S.
per month since January, 1997 and may in the future receive such monthly subsidy
payments and other payments, subsidies, allowances or credits from the Jamaican
government or any subdivision or agency
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 3
thereof (collectively, the "Subsidy Payments"). The parties further acknowledge
that the Subsidy Payments have reduced and may in the future reduce Maggie's
Actual Operating Costs funded by Xxxxxxx, Xxxxx under the Exclusive
Subcontracting Agreement. The parties hereto hereby agree that Xxxxxx shall use
all previously received or future Subsidy Payments to reduce Actual Operating
Costs funded by Xxxxxxx, Xxxxx under the Exclusive Subcontracting Agreement. The
parties further agree that Xxxxxxx, Xxxxx may offset against any future
quarterly payments of the Annual Amount for 1997 or 1998 the amount of any such
Subsidy Payments which are not so used by Xxxxxx to reduce Actual Operating
Costs.
E. The parties hereto have agreed to amend the Agreements effective as of
the date hereof as follows:
1. The term of the ESA Agreement shall be extended for a period of
twelve (12) months. Accordingly, Article VI, Paragraph A of the ESA
Agreement shall be amended and restated as follows: "Term. The term of this
----
Agreement shall commence on January 2, 1995 (the "Effective Date") and
shall continue until January 1, 1999 or such earlier date upon which it is
terminated pursuant to this Article VI or pursuant to the Option
Agreement."
2. The Annual Amount for purposes of the ESA Agreement and the
Option Agreement for the calendar year 1998 shall be designated as
$265,000. Accordingly, the definition of "Annual Amount" contained in
Article I of the ESA Agreement shall be amended and restated as
follows:```Annual Amount' means (i) for 1995, $325,000, less any sums paid
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to PBS upon the execution hereof; (ii) for 1996, $350,000, (iii) for 1997,
$375,000; and (iv) for 1998, $265,000."
3. The cross reference to Section IV.B contained in Article III (e)
of the ESA Agreement shall be substituted with the proper reference to
Section IV.C. Accordingly, the second sentence of Article III (e) of the
ESA Agreement shall be amended and restated as follows: "The attendance by
Xx. Xxxxxxxx at periodic meetings pursuant to Section IV.C shall be
excluded for purposes of the foregoing sentence and PBS shall not be
entitled to reimbursement of Xx. Xxxxxxxx'x travel and telephone expenses
in respect of his attendance at such periodic meetings."
4. The parties agree that the concept of Projected Operating Costs
shall not apply to reduce the Annual Amount otherwise due and payable under
the ESA Agreement for the calendar year 1998. Accordingly, the second
sentence of Article III (d) of the ESA
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 4
Agreement shall be amended and restated as follows: "The Annual Amount due
and payable hereunder for any year through the period ending December 31,
1997, but not including the year commencing on January 1, 1998, shall be
reduced by the amount, if any, by which the Actual Operating Costs,
calculated as of December 31, for such year exceed Projected Operating
Costs for such year." In addition, the parties agree that solely for
purposes of the calendar year 1998, the definition of Actual Operating
Costs under the ESA Agreement shall be as defined on a new Schedule B to be
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attached to the ESA Agreement. Accordingly, Article III (c) of the ESA
Agreement shall be amended and restated to read: "(c) fund all Actual
Operating Costs incurred during 1995, 1996 or 1997 in accordance with
Schedule A, and fund all Actual Operating Costs incurred during 1998 in
----------
accordance with Schedule B." In addition, a new Schedule B shall be
---------- ----------
attached to the ESA Agreement, which Schedule B shall read as follows:
----------
"SCHEDULE B
----------
A. Actual Operating Costs. For purposes of this Agreement, "Actual
----------------------
Operating Costs" means all costs or expenses reasonably and actually
incurred by Xxxxxx in the conduct of the Business during 1998 or by
Xxxxxxx, Xxxxx in connection with Maggie's operations during 1998,
including, without limitation, costs or expenses related to the
day-to-day upkeep, normal maintenance, insurance and taxes for the
Site, but excluding extraordinary repairs or replacement to the walls
or structural components of the improvements on the Site, plus any and
all costs and expenses, including any employment bonuses, paid by
Xxxxxxx, Xxxxx to or on behalf of the Operations Manager in connection
with his employment.
B. Exclusions from Actual Operating Costs. Actual Operating Costs
--------------------------------------
shall not include any of the following:
(a) any Business Expansion Costs (such costs being the direct
responsibility of Xxxxxxx, Xxxxx pursuant to Section IV.E.); or
(b) any non-cash expenses such as depreciation or amortization; or
(c) any prior period costs or expenses or other charges between PBS,
Xxxxxx and Davedan not related to the current operation of the
Business during 1998; or
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 5
(d) any management charges or other intercompany charges, including,
without limitation, amounts due to PBS in respect of any equipment
leases or due to Davedan respecting the Lease; or
(e) any costs or expenses which are or would be subject to
indemnification by PBS pursuant to the Option Agreement; or
(f) any cost or expense related to any services provided to Xxxxxx by
Xx. Xxxxxxxx or Xxxxx Xxxxxxxx (but such services may be reimbursable
under Section III(e)); or
(g) any income or similar taxes of Xxxxxx, Davedan or PBS; or
(h) an amount equal to 50% of any payments made to Maggie's employees
in respect of severance, redundancy or other obligations upon
termination of such employees (the other 50% being paid by Xxxxxx or
PBS but not being subject to reimbursement as an Actual Operating
Expense); or
(i) any amounts paid to repair, rebuild or restore the Assets or the
Property in the event of any Business Interruption, including the
deductible under any policy of insurance (but the proceeds of such
policy of insurance to be made available to PBS under Section 9.5 of
the Option Agreement); or
(j) any cost or expense related to the negotiation or preparation of
the Option Agreement or the Related Agreements or any amendments
thereto, or the consummation of any of the transactions contemplated
thereby; or
(k) any import duties of Xxxxxx, Davedan or PBS on raw materials,
supplies or machinery.
C. Funding Procedure. Xxxxxxx, Xxxxx and Xxxxxx shall work together
-----------------
to establish and implement mutually acceptable mechanisms and
procedures for the funding of Actual Operating Costs and Business
Expansion Costs (if any)."
5. In lieu of applying the Projected Operating Costs concept in 1998,
the parties agree to apply a "Cost Savings" concept for such year.
Accordingly, a new bonus
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 6
provision shall be added to the end of Article III of the ESA Agreement to
read as follows:
"PBS shall be entitled to receive a bonus ("Bonus") for the calendar
year 1998 if Maggie's actual cost per minute of production for such
calendar year is less than $0.12. The Bonus shall be based on a
calculation of Cost Savings, determined in accordance with the
following formula:
Cost Savings = 1998 Minutes of Production x $0.12 - 1998 Production
Costs
PBS shall be entitled to receive as the Bonus the first $35,000 of any
Cost Savings and fifty percent (50%) of any amount of the Cost Savings
in excess of $35,000. If Xxxxxxx, Xxxxx closes on the purchase of the
Assets and the Property following its exercise of the Option pursuant
to the Option Agreement prior to December 31, 1998, then the initial
$35,000 available to PBS shall be prorated based on the actual number
of weeks of production completed by Xxxxxx in 1998. The Costs Savings
shall be calculated and the Bonus, if any, shall be paid, no later
than April 1, 1999. For purposes hereof,
`1998 Minutes of Production' shall mean the sum of the products
obtained by multiplying the dozens of each style of product
shipped from Xxxxxx to Xxxxxxx, Xxxxx during the calendar year
1998 times the corresponding minutes per dozen for each style of
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product indicated on the attached Exhibit B; provided, however,
---------
that the minutes per dozen for any style of product not indicated
on Exhibit B shall be determined by using the "General Sewing
---------
Data" methodology (GSD). Prior to production, Xxxxxxx, Xxxxx will
notify PBS of the minutes per dozen computed using the GSD
methodology for any style of product not indicated on Exhibit B.
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`1998 Production Costs' shall mean all costs or expenses
reasonably and actually incurred or accrued by Xxxxxx in the
conduct of the business or by Xxxxxxx, Xxxxx in connection with
Maggie's operations during 1998, including without limitation or
duplication, Actual Operating Costs for 1998 (as such term has
been amended for purposes of 1998), the Annual Amount, and
amounts paid by Xxxxxxx, Xxxxx for insurance, supplies, machine
parts and other goods and services related to the continuing
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 7
operations of Xxxxxx less the Adjustment Amount (as such term is
----
defined below).
`Adjustment Amount' shall mean the product of (x) the Minutes
Shortfall and (y) $.069 but in no event shall the Adjustment
---
Amount exceed $48,870. For purposes of the Adjustment Amount, the
`Minutes Shortfall' shall mean the number of minutes of Maggie's
production down time during regular business hours during 1998
resulting solely from Xxxxxxx, Adler's failure (other than due to
any event beyond Xxxxxxx, Adler's reasonable control, including,
without limitation, any act of God or action of government,
strike or employee insurrection, force of nature, accident, fire,
flood or other natural disaster) to ship products to Xxxxxx on a
timely basis, but in no event to exceed the positive remainder of
7,082,900 less the 1998 Minutes of Production."
6. The Purchase Price for the Assets and the Property upon exercise
of the Option under the Option Agreement shall be increased from $700,000
to $784,000. Accordingly, Section 3.1 of the Option Agreement shall be
amended and restated as follows: "3.1 Purchase Price. The purchase price
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for the Assets and the Property upon exercise of the Option (the `Purchase
Price') shall be $784,000 plus the amount of the Remaining Subcontracting
----
Payment, if any, calculated as of the Closing Date."
7. The Expiration Date for purposes of the Option Agreement shall be
extended to May 1, 1998 or shall be the date four (4) months after receipt
of notice by Xxxxxxx, Xxxxx from PBS of PBS' termination of the ESA
Agreement or Option Agreement, if such notice is received in 1997, or four
(4) months after receipt of notice by Xxxxxxx, Xxxxx from PBS of PBS'
termination of the ESA Agreement or Option Agreement, if such notice is
received in 1998. Accordingly, the definition of "Expiration Date"
contained in Article I of the Option Agreement shall be amended and
restated as follows:```Expiration Date' means May 1, 1998, except that, in
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the event that PBS notifies Xxxxxxx, Xxxxx of its termination of the
Exclusive Subcontracting Agreement pursuant to Article VI.D thereof or of
this Agreement, the Expiration Date means (a) if such notice is received in
1995, the date six (6) months after receipt of such notice; and (b) if such
notice is received in 1996, 1997 or 1998, the date four (4) months after
receipt of such notice; provided, however, that, in any and all events, the
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Expiration Date shall not be later than May 1, 1998."
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 8
8. The latest Closing Date for purposes of consummating the purchase
and sale of the Assets and Property upon exercise of the Option under the
Option Agreement shall be extended twelve (12) months. Accordingly, Section
4.1 of the Option Agreement shall be amended and restated as follows:
"Closing. The closing of the sale and purchase of the Assets and the
Property (the `Closing') shall take place at the offices of Xxxxxxx,
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Xxxxxxxx & Xxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxxx 00000, or
such other place as the parties may agree, on the closing date set forth in
the notice of exercise of the Option given by Xxxxxxx, Xxxxx pursuant to
Section 2.3 (the `Closing Date'); provided, however, that such Closing Date
-------- -------
shall not be later than January 15, 1999."
9. The date prior to which PBS shall have a right to terminate the
Option Agreement upon twelve (12) months written notice shall be extended
twelve (12) months to January 16, 1998. Accordingly, Section 12.4 of the
Option Agreement shall be amended and restated as follows: "At any time
after July 1, 1995 and prior to January 16, 1998, and provided that
Xxxxxxx, Xxxxx has not previously exercised the Option and further provided
that no loss or taking has occurred under Section 9.5, PBS may terminate
this Agreement at its option upon not less than twelve (12) months written
notice to Xxxxxxx, Xxxxx. In the event of any termination of this Agreement
by PBS, subject to Xxxxxxx, Adler's right to exercise the Option until the
Expiration Date, all of the obligations of Xxxxxxx, Xxxxx and the PBS
Parties hereunder and under any Related Agreement shall terminate."
F. All other terms and provisions of the ESA Agreement and the Option
Agreement shall remain in full force and effect.
G. Xxxxxx and Davedan each hereby represent and warrant that the term of
the Lease expires no sooner than January 1, 1999. Xxxxxx and Davedan further
covenant and agree to execute a termination of said Lease in recordable form in
accordance with the provisions of Section 4.2(b) of the Option Agreement
following exercise of the Option by Xxxxxxx, Xxxxx.
H. The parties hereto hereby confirm that the Restrictive Covenant, the
Escrow Agreement and the Specific Performance Agreement shall remain in full
force and effect in accordance with their respective terms. The parties hereto
hereby further acknowledge and agree that the amendments to the ESA Agreement
and the Option Agreement effected hereby shall apply for all contextual purposes
to all of the other Agreements. Without limiting the generality of the
foregoing, the parties confirm that the Restricted Period for purposes of the
Restrictive Covenant shall end upon the termination of both the ESA Agreement
and the Option Agreement,
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 9
as such Agreements have been extended and otherwise amended hereby.
I. The terms and provisions of Article VII of the ESA Agreement are
herein incorporated by reference.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
PBS Enterprises Ltd.
Xxxxx Xxxxx Shalleck
Xxxxx Xxxxxxxx
Davedan Properties Ltd.
Xxxxxx Manufacturing Co. 1997 Ltd.
Xxxxxx Manufacturing Company Ltd.
September 17, 1997
Page 10
Please indicate your agreement with and acceptance of the foregoing by
signing in the space indicated below.
Very truly yours,
THE XXXXXXX, XXXXX COMPANY
Xxxx XxXxxxxx
Chief Financial Officer
Agreed and accepted:
PBS ENTERPRISES LTD.
_______________________
By:
Its:
DAVEDAN PROPERTIES LTD.
_______________________
By:
Its:
XXXXXX MANUFACTURING COMPANY LTD.
_______________________
By:
Its:
XXXXXX MANUFACTURING CO. 1997 LTD.
_______________________
By:
Its:
_______________________ _______________________
Xxxxx Xxxxx Shalleck Xxxxx Xxxxxxxx
Exhibit A
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Option Agreement by and among Strouse, Adler, PBS, Davedan and Xxxxxx I ("Option
Agreement").
Exclusive Subcontracting Agreement by and among Strouse, Adler, PBS, Davedan and
Xxxxxx I ("ESA Agreement").
Restrictive Covenant Agreement by and among Strouse, Adler, PBS, Xxxxxx I,
Davedan, Xxxxx and Xxxxx ("Restrictive Covenant").
Letter agreement by and among Strouse, Adler, Xxxxx and Xxxxx ("Specific
Performance Agreement").
Escrow Agreement by and among Strouse, Adler, PBS and Gartner & Bloom, P.C. as
Escrow Agent ("Escrow Agreement").
Lease dated March 1, 1988 by and between Xxxxxx I and Davedan ("Lease").
Exhibit B
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145 BLK 125.75
145 WHT 125.75
145 BSH 125.75
162 BLK 146.30
162 WHT 146.30
164 BLK 120.25
000 XXX 120.25
173 BLK 111.50
173 WHT 111.50
173 BSH 111.50
175 BLK 146.60
183 BLK 132.50
183 WHT 132.50
192 BLK 127.00
192 WHT 122.50
000 XXX 122.50
192D BLK 140.00
192D WHT 135.50
192D CHP 135.50
193 BLK 137.25
193 WHT 137.25
000 XXX 137.25
194 BLK 137.25
195 WHT 137.25
345 BLK 125.75
345 BSH 125.75
400 BLK 138.50
400 BRZ 138.50
410 BLK 166.00
410 WHT 166.00
462 BLK 153.00
462 WHT 153.00
490 BLK 152.70
492 BLK 154.75
492 WHT 154.75
000 XXX 154.75
495 BLK 167.25
545 BLK 156.25
545 WHT 156.25
575 BLK 156.75
575 WHT 156.75
