UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED OCTOBER 31, 1998 COMMISSION FILE NO. 0-8512
------------------ --------
MONARCH SERVICES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 52-1073628
- ---------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
4517 Harford Road, Baltimore, Maryland 21214
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 410-254-9200
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Monarch Avalon, Inc.
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Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [ X ] NO [ ]
As of October 31, 1998, the number of shares outstanding of the issuer's common
stock was 1,619,820 shares.
Transitional Small Business Issue Format (check one): YES [ ] NO [ X ]
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
MONARCH SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
<CAPTION>
October 31, April 30,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $8,008 $1,738
Accounts receivable, net 863 973
Inventories, net 318 1,968
Other current assets 100 47
------ ------
TOTAL CURRENT ASSETS 9,289 4,726
PROPERTY AND EQUIPMENT 4,634 4,634
Less allowance for depreciation (4,152) (4,076)
------ ------
482 558
OTHER ASSETS AND DEFERRED CHARGES 15 45
------ ------
TOTAL ASSETS $9,786 $5,329
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 309 $ 352
Accrued expenses 316 723
Income taxes payable 720 0
Deferred subscription revenues 1,501 1,024
------ ------
TOTAL CURRENT LIABILITIES 2,846 2,099
STOCKHOLDERS' EQUITY
Preferred Stock - par value $.01 per share:
Authorized 100,000 shares; no shares
issued
Common Stock - par value $.25 per share:
Authorized 3,000,000 shares; shares
issued - 2,109,985; shares outstanding
1,619,820 on October 31, 1998 and
April 30, 1998 527 527
Capital surplus 3,378 3,378
Retained earnings 3,157 (553)
------ ------
7,062 3,352
Treasury stock at par - shares
outstanding 490,165 on October
31, 1998 and April 30, 1998 (122) (122)
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6,940 3,230
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,786 $5,329
------ ------
<FN>
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
MONARCH SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
---------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 2,038 $ 1,490 $ 3,105 $ 2,377
Cost of goods sold 1,319 1,167 2,348 1,963
------- ------- ------- -------
Gross profit 719 323 757 414
Selling, general and
administrative expenses 364 524 539 702
------- ------- ------- -------
Income (loss from continuing
operations before other
income 355 (201) 218 (288)
Other income, net 18 12 28 35
------- ------- ------- -------
Income (loss) from continuing
operations 373 (189) 246 (253)
Discontinued Operations:
Operating income (loss) from games
division 170 195 (279) 3
Gain on disposal of games business
(less income taxes of $720 for the
three months and the six months
ended October 31, 1998) 3,743 0 3,743 0
------- ------- ------- -------
Net income (loss) 4,286 6 3,710 (250)
------- ------- ------- -------
Income (loss) per share $ 2.65 $ 0.00 $ 2.29 $ (0.15)
------- ------- ------- -------
Weighted average shares
outstanding 1,619,820 1,619,820 1,619,820 1,619,820
--------- --------- --------- ---------
<FN>
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
MONARCH SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months Ended
October 31,
----------------
1998 1997
---- ----
(000's omitted)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,710 $ (250)
------- -------
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Gain on disposal of games business (3,743) 0
Depreciation and amortization 76 43
Changes in accounts receivable,
inventories, other assets, accounts
payable, accrued expenses and
deferred subscription revenue 227 (103)
------ ------
Net cash provided by (used in)
operating activities 270 (310)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment 0 (106)
Cash proceeds from sale of substantially
all the assets of the games division 6,000 0
----- ------
Total cash provided by (used in)
investing activities 6,000 (106)
------ ------
Net increase (decrease) in cash
and cash equivalents 6,270 (416)
Cash and cash equivalents at beginning of
period 1,738 2,131
------ ------
Cash and cash equivalents at end of period $8,008 $1,715
------ ------
<FN>
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
MONARCH SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include Monarch
Services, Inc. ("Monarch"), formerly Monarch Avalon, Inc., and its wholly-owned
subsidiary, Girls' Life, Inc. (Monarch and Girls' Life, Inc. collectively
referred to herein as ("the Company") have been prepared in accordance with the
instructions to Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals and charges) considered necessary for a fair
presentation have been included. All material intercompany balances between
Monarch and its subsidiary have been eliminated in consolidation. Operating
results for the three months ended October 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending April 30,
1999. For further information, reference should be made to the financial
statements and notes included in the Company's annual report on Form 10-KSB for
the fiscal year ended April 30, 1998.
NOTE B - SALE OF GAMES DIVISION
On October 27, 1998, the Company sold substantially all the assets of the games
division to a subsidiary of Hasbro, Inc. for $6,000,000 in cash. The assets
sold included trademarks, copyrights and other intellectual property rights,
inventory and tooling. The operating results of the games division have been
classified as discontinued operations for all periods presented in the
consolidated statements of operations.
NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable are net of the following allowances:
October 31, 1998 April 30, 1998
---------------- --------------
(000's omitted)
Doubtful accounts $142 $142
Customer returns 0 45
---- ----
$142 $187
NOTE D - INVENTORIES
For quarterly reporting purposes, Monarch values inventory using both
perpetual records and physical counts, while at year-end values are
determined solely on the basis of physical counts.
The major components of inventories consist of the following:
October 31, 1998 April 30, 1998
---------------- --------------
(000's omitted)
Raw materials $ 215 $ 694
Work in progress 62 174
Finished goods 41 1,100
------- ------
$ 318 $1,968
The above components are shown net of lower of cost or market reserves of
$65,000 at October 31, 1998 and $350,000 at April 30, 1998. On October 27,
1998, the Company sold substantially all the assets of the Games division.
All games inventories were transferred to Hasbro, Inc. as part of the sales
agreement. The remaining inventories at October 31, 1998 relate entirely to
the printing segment of Monarch Services, Inc. The Company values its
inventories at the lower of cost (first-in, first-out) or market.
<PAGE>
ITEM II MONARCH SERVICES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of this discussion references to "fiscal 1999" are to the fiscal
year ending April 30, 1999, and references to "fiscal 1998" are to the fiscal
year ended April 30, 1998.
CERTAIN CAUTIONARY INFORMATION
In connection with the Private Securities Litigation Reform Act of 1995 (the
"Litigation Reform Act"), the Company is hereby disclosing certain cautionary
information to be used in connection with written materials (including this
Report on Form 10-QSB) and oral statements made by or on behalf of its employees
and representatives that may contain "forward-looking statements" within the
meaning of the Litigation Reform Act. Such statements consist of any statement
other than a recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. The listener or reader is cautioned that all forward-looking
statements are necessarily speculative and there are numerous risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements. The discussion
contained in the Company's Annual Report on Form 10-KSB for the year ended April
30, 1998 and incorporated herein by reference highlights some of the more
important risks identified by management, but should not be assumed to be the
only factors that could affect future performance. Included in these risks is
the Company's history of losses, its fluctuations in operating results,
competition and other risks set forth herein and in the Company's annual report
on Form 10KSB for the year ended April 30, 1998. The reader or listener is
cautioned that the Company does not have a policy of updating or revising
forward-looking statements and thus he or she should not assume that silence by
management over time means that actual events are bearing out as estimated in
such forward-looking statements.
RESULTS OF OPERATIONS
Monarch Services, Inc. consists of one division, printing and one subsidiary,
Girls' Life, Inc. that publishes a magazine.
On August 4, 1998, the Company announced that it had entered into a definitive
agreement to sell substantially all the assets of the games division of the
Company to a newly formed subsidiary of Hasbro, Inc. for $6,000,000 in cash.
The assets sold include trademarks, copyrights and other intellectual property
rights, inventory and tooling. In light of the Company's sale of the assets of
the games division, the Company has taken steps to cut costs related to the
games division. Such steps have included curtailment of the research and
developement and sales and marketing activities of the games division and
layoffs of games division employees. The sale of substantially all of the assets
of the games division was completed on October 27, 1998. Accordingly management
expects that the operations of the games division, consisting primarily of
liquidation of the remaining games division assets and winding up its affairs,
will not have a significant impact on the Company's results of operation for the
remainder of fiscal year 1999 and thereafter.
RESULTS FOR THE SECOND QUARTER OF FISCAL YEAR 1999 AND 1998
Net sales increased by $548,000 or 37% in the second quarter of fiscal 1999 as
compared to the second quarter of fiscal 1998.
Sales in the printing division decreased by $58,000 in the second quarter of
fiscal 1999 or 9% from the second quarter of fiscal 1998. Sales of Girls' Life
magazine in the second quarter of fiscal 1999 increased by $606,000 or 73% from
the second quarter of fiscal 1998. The increase in sales of Girls' Life
magazine relates primarily to the increase in promotions and direct mailing
advertising of the magazine and increased revenue from newsstand sales and
advertising.
Gross profit increased by $396,000 or 123% during the second quarter of fiscal
1999 compared to the second quarter of fiscal 1998. Gross margin was 35% during
the second quarter of fiscal 1999 as compared to 22% during the second quarter
of fiscal 1998. The increase in gross margin primarily relates to the increase
in the Girls' Life magazine sales.
Operating expenses were 18% of net sales in the second quarter of fiscal 1999 as
compared to 35% in the second quarter of fiscal 1998. Operating expenses for
the second quarter of fiscal 1999 decreased by $160,000 or 31% from the same
period in fiscal 1998, primarily because of lower promotional and advertising
expenses for publishing.
<PAGE>
RESULTS FOR THE FIRST SIX MONTHS OF FISCAL YEAR 1999 AND 1998
Net sales increased by $728,000 or 31% in the first six months of fiscal 1999 as
compared to the same period in fiscal 1998. Sales in the printing division for
the first six months of fiscal 1999 decreased by $62,000 or 5% from the same
period in fiscal 1998. Sales of Girls' Life magazine for the first six months
of fiscal 1999 increased by $790,000 or 69% compared to the same period in
fiscal 1998 as a result of promotions and direct mail advertising of the
magazine and increased revenue from newsstand sales and advertising.
Gross profit increased by $343,000 or 83% during the first six months of fiscal
1999 compared to the same period in fiscal 1998. Gross margin was 24% during
the first six months of fiscal 1999 as compared to 17% for the same period
during fiscal 1998. The increase in gross margin primarily relates to the
increase in Girls' Life magazine sales.
Operating expenses decreased $163,000 or 23% for the first six months of fiscal
1999 as compared to the same period in fiscal 1998. Operating expenses
represented 17% and 30% of net sales for the first six months of fiscal 1999 and
1998, respectively. The decrease in operating expenses primarily relates to
lower promotional and advertising expenses for publishing.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1998, the Company has cash and cash equivalents of approximately
$8,008,000, an increase of $6,270,000 from the amount at April 30, 1998. The
increase resulted from the sale of substantially all the assets of the games
division for $6,000,000 cash. The Company's cash and cash equivalents are
subject to variation based upon the timing of receipts and the payment of
payables.
At October 31, 1998, the Company has no debt with third party lenders.
YEAR 2000 DISCLOSURE
The Company has reviewed existing computer programs, including software and
hardware, and plans to replace the existing software and hardware by the end of
1998 at an estimated cost of under $40,000. The sale of substantially all the
assets of the Games division reduced the requirements of software and hardware
costs from the previous estimate of $100,000 from the quarter ended July 31,
1998. Company management does not believe the change over to new software and
hardware will have a material effect on the Company's business, operations or
financial condition.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1998 Annual Meeting of Stockholders was held at 11:00 A.M. on October 23,
1998, at the Center Club, Legg Mason Building, 100 Light Street, Baltimore,
Maryland.
Results of the proposal to approve the "Asset Purchase Agreement" dated as of
August 3, 1998 between the Company and HIAC XII Corp., an indirect subsidiary of
Hasbro, Inc. for $6,000,000 in cash plus the assumption of certain liabilities:
FOR WITHHELD ABSTAIN
----- ---------- ---------
1,009,911 77,588 1,576
Results of the proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to Monarch Services, Inc. effective upon
consummation of the "Asset Purchase Agreement" above:
FOR WITHHELD ABSTAIN
----- ---------- ---------
1,011,036 78,756 2,458
Results of the voting on the election of directors:
Directors FOR WITHHOLD
--------- ----- ----------
A. Eric Dott 1,234,312 71,700
David F. Gonano 1,234,312 71,700
Jackson Y. Dott 1,234,312 71,700
Helen Delich Bentley 1,233,295 72,717
Results of the voting on the ratification of the appointment of Deloitte &
Touche LLP as the independent accountants for the fiscal year ending April 30,
1998:
FOR AGAINST ABSTAIN
----- ---------- ---------
1,243,215 62,421 1,376
There were no broker non-votes on these matters.
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
------ -----------
3.a The Company's Restated Certificate of Incorporation
dated October 27, 1998.
3.b The Company's Restated Bylaws dated August 2, 1996.
10.a Lease Agreement dated July 2, 1973 between the
Company as lessee and A. Eric Dott and Esther J.
Dott as lessors.
10.b Lease renewal and Amendment of Lease Agreement
dated July 1, 1997 between the Company and A. Eric
Dott and Esther J. Dott, renewing and amending
terms of the Lease Agreement in Exhibit 10.a.
10.c Option to Purchase Common Stock dated June 19,
1991 issued to A. Eric Dott, Chairman of the
Company.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated August
3, 1998 to report under Item Five of Form 8-K, that
the Company had entered into a definitive agreement
to sell its games division to a newly formed subsidiary
of Hasbro, Inc. for $6,000,000 in cash. The Company also
submitted under Item Seven of Form 8-K, unaudited Pro
Forma Consolidated Financial Information to present the
effect of the August 3, 1998 agreement as if the transaction
had occurred on April 30, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MONARCH SERVICES, INC.
Date 12/15/98 By /s/ A. Eric Dott
-----------------------------
A. Eric Dott
Chariman of the Board
Date 12/15/98 /s/ A. Eric Dott
-----------------------------
A. Eric Dott
Chairman of the Board
(Principal Executive Officer)
Date 12/15/98 /s/ Marshall Chadwell
-----------------------------
Marshall Chadwell
Chief Financial Officer
(Principal Accounting and
Financial Officer)
<PAGE>
EXHIBIT INDEX
3.a The Company's Restated Certificate of Incorporation
dated October 27, 1998.
3.b The Company's Restated Bylaws dated August 2, 1996.
10.a Lease Agreement dated July 2, 1973 between the
Company as lessee and A. Eric Dott and Esther J.
Dott as lessors.
10.b Lease renewal and Amendment of Lease Agreement
dated July 1, 1997 between the Company and A. Eric
Dott and Esther J. Dott, renewing and amending
terms of the Lease Agreement in Exhibit 10.a.
10.c Option to Purchase Common Stock date June 19,
1991 issued to A. Eric Dott, Chairman of the
Company.
27 Financial Data Schedule
<PAGE>
MONARCH SERVICES, INC.
--------------------
RESTATED CERTIFICATE OF INCORPORATION
Monarch Services, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
The name of the Corporation is Monarch Services, Inc., and the name under which
the Corporation was organized is Nation-Wide Diversified Corporation.
The date of filing the original Certificate of Incorporation of the Corporation
with the Secretary of State of Delaware was August 26, 1976.
At a Special Meeting of the Board of Directors of the Corporation, a resolution
was adopted declaring that a restatement of the Cerificate of Incorporation of
the Corporation was advisable and directing that the proposed restatement be
submitted for consideration by the Stockholders of the Corporation in accordance
with the provisions of Sections 242 and 245 of the Delaware General Corporation
Law.
Notice stating that a purpose of the Annual Meeting of Stockholders would be to
take action upon the proposed restatement of the Certificate of Incorporation
was given, as required by law, to all Stockholders of the Corporation entitled
to vote thereon.
At the Annual Meeting of Stockholders of the Corporation next following the
Special Meeting of Directors referred to above, the Stockholders of the
Corporation duly adopted the proposed restatement in accordance with the
provisions of Section 242 and 245 of the Delaware General Corporation Law.
The restatement of the Certificate of Incorporation of the Corporation has been
duly advised by the Board of Directors and approved by the Stockholders of the
Corporation as required by law and is set forth in full as follows:
First: The name of the Corporation shall be MONARCH SERVICES, INC.
Second: The location of the registered office of the Corporation in the
State of Delaware is 100 West Tenth Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
Fourth: The total number of shares of all classes of capital sstock
which the Corporation shall have authority to issue is Three million one hundred
thousand (3,100,000) shares which are divided into the following classes:
(a) Three Million (3,000,000)
shares of Common Stock with a par
value of $0.25 per share; and
(b) One Hundred Thousand (100,000)
shares of Preferred Stock with a par value
of $.01 per share.
The designations, voting rights, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the above classes of stock are as follows:
1. Issuance of Preferred Stock in Series.
-------------------------------------
Shares of Preferred Stock may be issued in one or more
series at such time or times, and for such consideration or considerations as
the Board of Directors of the Corporation may determine. All shares of any one
series of preferred stock will be identical with each other in all respects,
except that shares of any one series issued at different times may differ as to
dates from which dividends thereon may be cumulative. All series will rank
equally and be identical in all respects, except as permitted by the following
provisions of Section 2.
2. Authority of the Board with Respect to Preferred Series.
-------------------------------------------------------
The Board of Directors is authorized, at any time and
from time to time, to provide for the issuance of shares of Preferred Stock in
one or more series with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, as are stated and expressed in the resolution or resolutions providing
for the issue thereof adopted by the Board of Directors, and as are not stated
and expressed in this certificate of Incorporation or any amendment hereto
including, but not limited to, determination of any of the following:
(a) the distinctive serial designations and the number
of shares constituting a series;
(b) the dividend rate or rates, whether dividends are
cumulative and, if so, from which date, the payment
date or dates for dividends, and the participating
or other special rights, if any, with respect to
dividends;
(c) the voting powers, full or limited, if any, of the
shares of the series;
(d) whether the shares are redeemable and, if so, the
price or prices at which, and the terms and
conditions on which, the shares may be redeemed;
(e) the amount or amounts payable upon the shares in the
event of voluntary or involuntary liquidation, dis-
solution or winding up of the Corporation prior to
any payment or distribution of the assets of the
Corporation to any class or classes of stock of the
Corporation ranking junior to the Preferred Stock;
(f) whether the shares are entitled to the benefit of a
sinking or retirement fund to be applied to the
purchase or redemption of shares of a series and,
if so entitled, the amount of the fund and the
manner of its application, including the price or
prices at which the shares may be redeemed or
purchased through the application of the fund;
(g) whether the shares are convertible into, or exchange-
able for, shares of any other class or classes or of
any other series of the same or any other class or
classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price
or prices, or the rates of exchange, and the adjust-
ments thereof, if any, at which the conversion or
exchange may be made, and any other terms and
conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers, and
relative participating, optional or other special
rights, and qualifications, limitations or restric-
tions of a series, as the Board of Directors my
deem advisable and as are not inconsistent with
the provisions of these Articles of Amendment and
Restatement.
3. Dividends
---------
Before any dividends or any class or classes of stock of
the Corporation ranking junior to the Preferred Stock (other than dividends
payable in shares of any class or classes of stock of the Corporation ranking
junior to the Preferred Stock) may be declared or paid or set apart for payment,
the holders of shares of Preferred Stock of each series are entitled to such
dividends, but only when and as declared by the Board of Directors out of funds
legally available therefor, as they may be entitled to in accordance with the
resolution or resolutions adopted by the Board of Directors providing for the
issue of the series, payable on such dates in each year as may be fixed in the
resolution or resolutions. The term "class or classes of stock of the
Corporation ranking junior to the Preferred Stock" means the Common Stock and
any other class or classes of stock of the Corporation hereafter authorized
which rank junior to the Preferred Stock as to dividends.
Fifth: The Board of Directors of the Corporation shall have the power
to alter, amend or repeal the By-Laws of the Corporation.
SIXTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, other than (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of the State of
Delaware or (d) for any transaction from which the director derived an improper
personal benefit. Nothing in this Article shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date this
provision becomes effective.
MONARCH SERVICES, INC.
BYLAWS
ARTICLE 1.
---------
OFFICES AND REGISTERED AGENT
----------------------------
1.1 Registered Offices and Registered Agent. The initial registered
office of the corporation and the initial registered agent of the Corporation at
said office shall be as set forth in the Certificate of Incorporation of the
corporation. The registered office of the corporation and the registered agent
of the corporation at such office may be changed from time to time by the Board
of Directors of the corporation.
1.2 Additional Offices. The corporation may establish offices at such
other place or places both within and without the State of Delaware as the Board
of Directors may from time to time determine.
ARTICLE 2.
---------
MEETINGS OF SHAREHOLDERS
------------------------
2.1 Place and Time of Meetings. Meetings of the Shareholders shall be
held at the regtistered office of the corporation, or at such other place either
within or without the State of Delaware as the Board of Directors or the
Shareholders may from time to time select, at such time as may be fixed by the
Board of Directors or the Shareholders.
2.2 Annual Meeting. An annual meeting of the Shareholders shall be
held on the last Thursday of the fourth month following the end of the fiscal
year of the corporation, if not a legal holiday, and if a legal holiday, then on
the next regular business day following the legal holiday, at 10:oo a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting.
2.3 Special Meetings. Special meetings of the Shareholders may be
called at any time by the President, by a majority of the Board of Directors, or
by the holder or holders of not less than twenty-five (25%) of the capital stock
of the corporation issued and outstanding and entitled to vote in an election of
directors.
2.4 Notice of Meeting. Written notice stating the place, day, and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than ten (10) nor more
than fifty (5) days before the date of the meeting, either by hand or by first-
class mail, by or at the direction of the President, the Secretary or the other
person or persons calling the meeting, to each Shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail with first-class postage thereon
prepaid, addressed to the Shareholder at his address as it appears on the stock
transfer books of the corporation.
2.5 Waiver of Notice. Notice of a meeting need not be given to any
Shareholder who signs a waiver of notice, in person or by proxy, either before
or after the meeting; and a Shareholder's waiver shall be deemed the equivalent
of giving notice. Attendance of a Shareholder at a meeting either in person or
by proxy, shall of itself constitute waiver of notice and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a Shareholder attends a
meeting solely for the purpose of stating, at the beginning of the meeting, any
such objection or objections to the transaction of business. Unless otherwise
specified herein, neither the business transacted nor the purpose of the meeting
need be specified in the waiver.
2.6 Quorum. A majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum at any meeting of Shareholders.
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the Shareholders, unless the vote of a greater number or voting by
classes or series is required by the Delaware General Corporation Law. When a
quorum is once present to organize a meeting, the Shareholders present may
continue to do business at the meeting or any adjournment thereof
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum.
2.7 Adjournment. Any meeting of the Shareholders may be adjourned by
the holders of a majority of the voting shares represented at a meeting,
whether or not a quorum is present. Notice of the adjourned meeting or of the
business to be transacted at such meeting shall not be necessary, provided the
time and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken. At an adjourned meeting at which a quorum is
present or represented, any business may be transacted which could have been
transacted at the meeting originally called.
2.8 Voting Rights. Each Shareholder shall be entitled at each
Shareholders' meeting to one vote for each share of the capital stock having
voting power held by such Shareholder.
2.9 Proxies. A Shareholder entitled to vote may vote in person or
by proxy executed in writing by the Shareholder or by his attorney-in-fact. A
proxy shall not be valid after eleven months from the date of its execution
unless a longer period is expressly stated in such proxy.
2.10.Director Nominations. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Section shall be eligible for election as
directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
secretary of the Corporation as set forth in this Section. To be timely, a
stockholder's notice shall be delivered to, or mailed to and received at, the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the date of the annual meeting, as established pursuant to
Section 2.2 hereof, regardless of postponements, deferrals, or adjournments of
that meeting to a later date; provided, however, that if less than 70 days'
notice or prior public disclosure of the date of the scheduled annual meeting is
given or made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the 10th day following the
earlier of the day on which such notice of the date of the scheduled annual
meeting was mailed or the day on which such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director and as to the
stockholder giving the notice (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of Corporation stock which are
beneficially owned by such person on the date of such stockholder notice and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for election as
directors, pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including, but not limited to, information required to be disclosed
by Item 4(b) and Item 6 of Schedule 14A of Regulation 14A and information which
would be required to be filed on Schedule 14B of Regulation 14A with the
Securities and Exchange Commission; and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and any other stockholders known by such stockholder to be
supporting such nominees and (ii) the class and number of shares of Corporation
stock which are beneficially owned by such stockholder on the date of such
stockholder notice and by any other stockholders known by such stockholder to be
supporting such nominees on the date of such stockholder notice. At the request
of the Board of Directors, any person nominated by, or at the direction of, the
Board for election as a director at an annual meeting shall furnish to the
secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
No person shall be elected as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section. Ballots
bearing the names of all the persons who have been nominated for election as
directors at an annual meeting in accordance with the procedures set forth in
this Section shall be provided for use at the annual meeting.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Section. If the Board
of Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Section in any material respect, the secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board
of Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Section in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The secretary of the Corporation shall notify a stockholder in writing whether
his nomination has been made in accordance with the time and informational
requirements of this Section. Notwithstanding the procedure set forth in this
paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a stockholder, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether a nomination was made in accordance with the terms of
this Section. If the presiding officer determines that a nomination was made in
accordance with the terms of this Section, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to
such nominee. If the presiding officer determines that a nomination was not
made in accordance with the terms of this Section, he shall so declare at the
annual meeting and the defective nomination shall be disregarded.
ARTICLE 3.
---------
DIRECTORS
---------
3.1 Number, Qualification and Term of Office. The business and affairs
of the corporation shall be managed by a Board of Directors. The number of
Directors of the corporation shall be not less than the minimum number required
by the applicable provisions of the General Corporation Law of the State of
Delaware and shall not be more than 15. At any regular meeting or at any
special meeting called for that purpose, a majority of the entire Board of
Directors may increase or decrease the number of Directors, provided that the
number thereof shall never be less than the minimum number required by the
General Corporation Law of the State of Delaware, nor more than 15, and further
provided that the tenure of office of a Director shall not be affected by any
decrease in the number of Directors. At each annual meeting of the
Shareholders, the Shareholders shall elect Directors to hold office until the
next succeeding annual meeting. Each Director shall hold office for the term
for which he is elected and until his successor shall have been elected and
qualified, or until his earlier resignation, removal from office, death, or
incapacity to serve.
3.2 Vacancies and Newly Created Directorships. Vacancies and newly
created directorships resulting from any increase in the authorized number of
Directors may be filled by a majority of the Directors then in office, although
less than a quorum, or by a sole remaining Director. A Director elected by the
Board of Directors to fill a vacancy or a newly created directorship shall serve
until the next annual meeting of Shareholders and until his successor is elected
and qualifies.
3.3 Compensation. Directors shall receive such compensation for their
services as Directors and expenses of attendance at Directors meetings as
determined from time to time by the Board of Directors. A Director may serve
the corporation in a capacity other than that of Director and receive
compensation for the services rendered in that other capacity.
ARTICLE 4.
---------
MEETINGS OF THE BOARD
---------------------
4.1 Place and Time of Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place within or without
the State of Delaware that the Board of Directors may from time to time
designate.
4.2 Annual Meeting. The Board of Directors shall meet each year
immediately following the annual meeting of the Shareholders at the place that
meeting has been held for the purpose of electing officers and for the
consideration of other business.
4.3 Special Meetings. Special meetings of the Board of Directors
may be called at any time by the President or by any two Directors.
4.4 Notice of Meeting. Notice of the annual meeting of the Board of
Directors need not be given. Written notice of each special meeting setting
forth the time and place of the meeting shall be given to each Director at least
two days before the meeting. This notice may be given either by hand or by
sending a copy of the notice through the United States mail or by telegram,
charges prepaid, to the address of each Director appearing on the books of the
corporation. No notice of any meeting of the Board of Directors need state the
business to be transacted, nor the purpose of, any regular or special meeting of
the Board of Directors.
4.5 Waiver of Notice. A Director may waive in writing notice of a
special meeting of the Board either before or after the meeting; and his waiver
shall be deemed the equivalent of giving notice. Attendance of a Director at a
meeting shall constitute a waiver of notice of that meeting unless he attends
for the express purpose of objecting to the transaction of business because that
meeting has not been lawfully called or convened.
4.6 Quorum. At meetings of the Board of Directors, a majority of
the Directors in office shall be necessary to constitute a quorum for the
transaction of business. If a quorum is present, the acts of a majority of the
Directors in attendance shall be the acts of the Board.
4.7 Adjournment. A meeting of the Board of Directors may be
adjourned by a majority of the Directors present, whether or not a quorum
exists. Notice of the time and the place of the adjourned meeting and of the
business to be transacted thereat, other than by announcement at the meeting at
which the adjournment is taken, shall not be necessary. At an adjourned meeting
at which a quorum is present, any business may be transacted which could have
been transacted at the meeting originally called.
4.8 Action by Consent. Any action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if written
consent, setting forth the action so taken, shall be signed by all the
Directors, and be filed with the minutes of the proceedings of the Board of
Directors. Such consent shall have the same force and effect as a unanimous
vote.
ARTICLE 5.
---------
OFFICERS
--------
5.1 Officers. The officers of the corporation shall consist of a
Chairman of the Board, President, Secretary and Treasurer, and, if deemed by the
Board of Directors to be necessary or appropriate to conduct the business of the
corporation, one or more Vice Presidents. Two or more offices may be held by
the same person except that one person shall not at the same time hold the
offices of President and Secretary. The officers shall be elected by the
Directors and shall serve at the pleasure of the Board of Directors.
5.1A Chairman of the Board. The Chairman of the Board shall
preside at all meetings of Shareholders and Directors and discharge the duties
of a presiding officer and shall, in general, perform all duties incident to the
office of Chairman of the Board and such other duties as, from time to time, may
be assigned to him by the Board of the Board of Directors.
5.2 President. The President shall have general supervision and
direction over the business affairs of the corporation subject, however, to the
control of the Board of Directors. He shall present at each annual meeting of
the Shareholders a report of the business of the corporation for the preceding
fiscal year, and shall, in general, perform all duties incident to the office of
President and such other duties as, from time to time, may be assigned to him by
the Board of Directors.
5.3 Secretary. The Secretary shall keep minutes of all meetings
of the Shareholders and Directors and have charge of the minute books, stock
books and seal of the corporation and shall perform such other duties and have
such other powers as may from time to time be delegated to him by the President
or the Board of Directors.
5.4 Treasurer. The Treasurer shall be charged with the management
of the financial affairs of the corporation and shall have the power to
recommend action concerning the corporation's affairs to the President.
5.5 Vice President. The Board of Directors may designate one or
more Vice Presidents or may otherwise specify the order of seniority of the Vice
Presidents. The duties and powers of the President shall disburse to the Vice
Presidents in such specified order of seniority.
5.6 Assistant Secretary and Assistant Treasurer. Assistants to
the Secretary and Treasurer may be appointed and shall have such duties as shall
be delegated to them by the President or the Board of Directors.
5.7 Vacancies. When a vacancy occurs in one of the executive
offices by death, resignation, or otherwise, it shall be filled by the Board of
Directors. The officer so selected shall hold office until his successor is
chosen and qualified.
5.8 Salaries. The Board of Directors shall fix the salaries of
the Officers of the Corporation. The salaries of other agents and employees of
the corporation may be fixed by the Board of Directors or by an officer to whom
that function has been delegated by the Board.
5.9 Delegation of Duties. Whenever an officer is absent or
whenever for any reason the Board of Directors may deem it desirable, the Board
may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
5.10 Removal of Officers and Agents. An officer or agent of the
corporation may be removed by a majority vote of the Board of Directors whenever
in their judgment the best interests of the corporation will be served by the
removal. The removal shall be without prejudice to the contract rights, if any,
of the person so removed.
ARTICLE 6.
---------
CAPITAL STOCK
-------------
6.1 Certificates. The interest of each Shareholder shall be evidenced
by a certificate or certificates representing shares of stock of the corporation
which shall be in such form as the Board of Directors may from time to time
adopt and shall be numbered and shall be entered in the books of the corporation
as they are issued. Each certificate shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and shall be sealed with
the seal of the corporation or a faxsimile thereof; provided, however, that when
such certificate is countersigned by a transfer agent, or registered by a
registrar, the signatures of such officers may be facsimiles.
6.2 Transfers. Transfers of stock shall be made on the books of the
corporation only by the person named in the certificate, or by attorney lawfully
constituted in writing, and upon surrender of the certificate therefor, or in
the case of a certificate alleged to have been lost, stelen or destroyed, upon
compliance with the provisions of Section 6.4 of these bylaws.
6.3 Record Date. In lieu of closing the stock transfer books, the
Board of Directors may fix in advance a date as the record date for a
determination of Shareholders entitled to notice of and to vote at any meeting
of Shareholders of any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of Shareholders for any other
proper purpose, such date to be not more than fifty (50) days and, in case of a
meeting of Shareholders, not less than ten (10) days, prior to the date on which
the particular action, requiring such determination of Shareholders, is to be
taken.
6.4 Lost Certificates. Any person claiming a certificate of stock to
be lost, stolen or destroyed shall make an affidavit or affirmation of the fact
in such manner as the Board of Directors may require and shall, if the Directors
so require, give the corporation a bond of indemnity in form and amount and with
one or more sureties satisfactory to the Board of Directors, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE 7.
---------
MISCELLANEOUS
-------------
7.1 Inspection of Books. The Board of Directors shall have power to
determine which accounts and books of the corporation, if any, shall be open to
the inspection of Shareholders, except such as may by law be specifically open
to inspection, and shall have power to fix reasonable rules and regulations not
in conflict with the applicable law for the inspection thereof.
7.2 Seal. The corporate seal shall be in such form as the Board of
Directors may from time to time determine. In the event that it is inconvenient
at any time to use the corporate seal of the corporation, the words "Seal" or
"Corporate Seal" enclosed in parenthesis or scroll shall be deemed the corporate
seal of the corporation.
ARTICLE 8.
---------
The Bylaws of the corporation may be altered, amended, or repealed and new
Bylaws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors.
ARTICLE 9.
---------
INDEMNIFICATION OF OFFICERS AND DIRECTORS: INSURANCE
-----------------------------------------------------
(a) This corporation shall indemnify any person who was or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a Director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a pleas of nolo contendere or its equivalent, shall not, of
itself, create a presumption that a person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact he is or was a Director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonaly believed to be in or not opposed to the best interest of the
corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court of
Chancery or such other court shall deem proper.
(c) To the extent that a Director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonable
incurred by him in connection therewith.
(d) The indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be effective upon the corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or (iii) by the affirmative vote
of a majority of the shares entitled to vote thereon.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this section.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other rights, to which those seeking indemnification may be
entitled under any Agreement, vote of stockholders, or disinterested Directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(g) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this section.
ARTICLE 10.
----------
COMMITTEES
----------
(10.1) Executive Committee. (a) The Board of Directors may by
resolution adopted by a majority of the entire Board, designate an Executive
Committee of three or more Directors. Each member of the Executive Committee
shall hold office until the first meeting of the Board of Directors after the
annual meeting of Shareholders next following his election and until his
successor member of the Executive Committee is elected, or until his death,
resignation or removal, or until he shall cease to be a Director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all of the powers of the Board
of Directors in the management of the business affairs of the corporation;
provided, however, that the Executive Committee shall not have the power to
amend or repeal any resolution of the Board of Directors that by its terms shall
not be subject to amendment or repeal by the Executive Committee, and the
Executive Committee shall not have the authority of the Board of Directors in
reference to (i) amending the Articles of Incorporation or Bylaws of the
corporation; (ii) adopting a plan of merger or consolidation; (iii) the sale,
lease, exchange or other disposition of all or substantially all of the property
and assets of the corporation; or (iv) a voluntary dissolution of the
corporation or a revocation of any such voluntary dissolution.
(c) The Executive Committee shall meet from time to time on call of
the President or of a majority of the members of the Executive Committee.
Meetings of the Executive Committee may be held at such place or places, within
or without the State of Delaware as the Executive Committee shall determine or
as may be specified or fixed in the respective notices or waivers of such
meetings. The Executive Committee may fix its own rules of procedure, including
provision for notice of its meetings. It shall keep a record of its proceedings
and shall report these proceedings to the Board of Directors at the meeting
thereof held next after they have been taken, and all such proceedings shall be
subject to revision or alteration by the Board of Directors except to the extent
that action shall have been taken pursuant to or in reliance upon such
proceedings prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its members.
(e) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more Directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee.
10.2 Other Committees. The Board of Directors, by resolution adopted
by a majority of the entire Board, may designate one or more additional
committees, each committee to consist of three or more of the Directors of the
corporation, which shall have such name or names and shall have and may exercise
such powers of the Board of Directors in the management of the business and
affairs of the corporation, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors.
10.3 Removal. The Board of Directors shall have power at any time to
remove any member of any committee, with or without cause, and to fill vacancies
in and to dissolve any such committee.
Restatement and Amendment
as of October 27, 1998
/s/ Steven M. Szekely
- --------------------------------
Steven M. Szekely, Secretary
THIS LEASE, made as of this 2nd day of July, 1973, by and between A. ERIC
DOTT and ESTHER J. DOTT, his wife, both of Baltimore County, State of Maryland,
hereinafter called "Landlord", and MONARCH OFFICE SERVICE, INC., a body
corporate of the State of Delaware, hereinafter called "Tenant".
W I T N E S S E T H:
That the Landlord does hereby demise, let nd lease unto said Tenant, its
successors and assigns, and Tenant hereby takes and hires as Tenant of the
Landlord the premises improved by the following buildings: (1) approximately
32,000 square feet known as 4517 Harford Road, Rear; (2) approximately 2,795
square feet addition to 4517 Harford Road and (3) the premises known as 4529
Harford Road, located in Baltimore, Maryland, hereinafter called "demised
premises".
TO HAVE AND TO HOLD the same for an intitial term of ten (10) years
commencing on the 1st day of July, 1973, and ending on the 30th day of June,
1983, with right of Tenant to renew this lease for an additional term of ten
(10) years at the end of the initial term.
The Tenant covenants and agrees to pay to the Landlord at 7925 York Road,
Towson, Maryland 21204, as a basic rental, the annual sum of Fifty Three
Thousand Eight Hundred ($53,800) Dollars, payable in equal monthly installments
of Four Thousand Four Hundred Eighty-Three and 33/100 ($4,483.33) Dollars on the
first day of each month, in advance, during the initial term hereof.
In addition thereto, on a month to month basis the Tenant shall lease from
the Landlord for use as a parking lot the premises know as 4611 Harford Road in
Baltimore, Maryland for a rental of One Hundred ($100.00) Dollars per month.
TENANT COVENANTS AND AGREES:
1. To pay the aforesaid rent at the time and times and in the manner
hereinabove provided, without demand therefor, at such places as Landlord shall
from time to time designate.
2. To use and occupy the demised premises as a printing plant,
affiliated operations and for general office space.
3. Not to assign this lease, or sublet the demised premises or any
part thereof, without the consent in writing of the Landlord, such consent not
to be unreasonably withheld.
4. To pay at its own expense all charges for gas, electric current and
water used in the demised premises during the continuance of this lease.
5. To provide heat for the demised premises at its own expense.
6. To maintain the demised premises, both interior and exterior,
including roof, electrical, plumbing, heating, air conditioning, and other
mechanical installations therein and thereon, in good order and repair, at
Tenant's own expense, and to surrender the demised premises at the expiration of
the term or terms, or at such time as Tenant may vacate the demised premises, in
good condition as when received, excepting depreciation caused by ordinary wear
and tear and damage by fire, unavoidable accident or Act of God.
7. To pay as additional rent any fire insurance and liability insurance
premiums on the premises to protect the interest of the Landlord, fire insurance
being based upon market value of the premises.
8. The Tenant shall at its own expense replace all broken glass, no
matter what the cause of such breakage, so long as without fault on the part of
the Landlord.
9. To pay at its own expense all tangible personal property taxes
levied on its equipment, inventory and supplies and all minor privilege taxes
levied on the premises.
10. That Tenant shall pay as additional rent all real property taxes
assessed against the demised premises and shall submit to Landlord a receipted
tax bill for such payments. The taxes shall be paid during the period permitted
by law for payment without penalty or interst and receipted tax bill shall be
submitted to Landlord within thirty days of such payment.
11. The intention is that the rent paid to the Landlord is net of all
expenses with the exception of any debt service which the Landlord may incur.
12. To observe and comply with, at its expense, any laws, rules and
regulations of the United States or any political sub-division thereof, and any
and all governmental agencies and authorities and Board of Fire Underwriters
respecting the manner in which the premises are or should be used by the Tenant
and not to use or permit said premises to be used for any disorderly or unlawful
purpose.
13. The Tenant covenants and agrees that the Landlord shall not be held
responsible for, and the Landlord is hereby released, and relieved from, any
liability by reason of or resulting from damage or injury to person or property
of the Tenant or anyone else, directly or indirectly, caused by (a) dampness or
water in any part of said premises, and (b) from any and all liability in any
action for damages which may arise from any kind of injury to person, property,
in or upon or adjacent to the premises or that may arise from any other cause.
Said Tenant is to carry a public liability policy with a responsible insurance
company with limits of not less than $100,000/$300,000 for the term of this
lease, protecting the Landlord and the Tenant against injury to persons or
property, and to deliver said policy or a certificate thereof to the Landlord.
14. To permit the Landlord or its duly authorized agents and employees
to enter the said premises at all reasonable times to examine the condition of
the same and to make any necessary repair to said premises and within six (6)
months from the end of the term to exhibit the demised premises for rent or sale
including exhibiting a "for rent" or "for sale" sign.
LANDLORD COVENANTS AND AGREES:
1. That the Tenant, upon paying of rents and performing the covenants of
this lease, on its part to be performed, without any hinderance or molestation,
by or on the part of said Landlord, or anyone claiming by, from, through, under
or with the Landlord.
2. That the premises may be legally used for the purposes set forth
under subparagraph 2 on Page 2.
3. That the premises are currently free of violations.
4. That the premises comply with requirements of governmental agencies
and Board of Fire Underwriters.
THE PARTIES HERETO DO FURTHER MUTUALLY COVENANT AND AGREE:
1. That if said rent or any charges herein included as rent shall at any
time be in arrears and unpaid and shall remain unpaid for five (5) days after
the giving of notice in writing thereof by the Landlord, by addressing same to
the Tenant at its offices at the demised premises, or if Tenant shall fail to
comply with the conditions of this lease, or notice given under the terms
hereof, or shall not well and truly perform and fulfill each and every covenant
and agreement herein contained on the part of the Tenant to be performed and
kept, and said default shll contine for five (5) days after the giving of notice
in writing specifying such default of which complaint is made, which notice will
be addressed to the Tenant at its offices at the demised premises, or if the
Tenant shall amek an assignment for the benefit of creditors, be declared
bankrupt, voluntarily or involuntarily, and said assignment shall not be revoked
or said bankruptcy set aside within ten (10) days thereafter, or said Tenant
shall abandon or vacate said premises during the terms hereof, or if the
interest of the Tenant in said premises shall be sold undeer execution or other
legal process, the Landlor may, at Landlord's option, enter in and upon said
premises and again have, repossess and enjoy the same as if this lease had not
been made, and thereupon this lease and everything herein contained on the part
of the Landlord to be kept and performed, shall cease, determine, and be utterly
void, without prejudice, however, to the right of the Landlord to recover from
the said Tenant or assigns all rent due up to the time of such entry. In cases
of said default and entry by said Landlord, said Landlord, may at the Landlord's
option, re-rent said premises for the remainder of said term for the best rent
obtainable under the surrounding dircumstances and conditions then present, and
may recover from said Tenant any rent hereinbefore reserved.
2. That the words "enter" and "re-enter" as used in this lease are not
restricted to their technical leagal meaning.
3. That in the event of a breach, or threatened breach by the Tenant,
of any of the covenants or provisions hereof, the Landlord shall have the right
of injunction and the right to invoke any remedy allowed, at law or in equity,
as if re-entry, summary proceedings and other remedies were not herein provided
for.
4. That any failure of Landlord or Tenant to enforce rights or seek
remedies upon any default of the other party, with respect to the obligations of
each or either hereunder, or any of them, shall not prejudice or affect the
rights or remedies of each or either of them in the event of any subsequent
default.
5. And, provided further, that if during the term of this lease the
demised premises, or any portion thereof, is damaged by fire, windstorm, Act of
God, or other casualty causing such damage that the demised premises are
rendered wholly untenantable, this lease shall terminate from such date, unless
within thirty (30) days thereafter the Landlord shall elect to repair and so
notify the Tenant in writing, in which event the Landlord shall re-enter and
repair with reasonable promptness, and this lease shall not be affected except
that the rent shall be abated from the date of the happening of such damage
until the repairs have been sufficiently completed to render the premises
tenantable. If the damage is such that the leased premises are rendered
partially untenantable, the Landlord shall enter and repair with reasonable
promptness, and this lease shall not be affected except that the rent shall be
abated in proportion to the Tenant's loss of use as
regards time and space until such time as the repairs are completed. If the
damage shall not render the leased premises wholly or partially untenantable,
this lease shall not be affected, but the Landlord shall enter and repair with
reasonable promptness.
6. In the event the building shall be appropriated or taken under the
power of eminent domain by any public or quasi public authority, this Lease
shall terminate and expire as of the date of such taking, and the Tenant shall
thereupon be released from any further liability hereunder.
7. That the Tenant will not make any alterations to said premises
without the written consent of the Landlord.
8. The Tenant has previously been occupying the premises and agrees to
accept said pemises in the existing condition.
9. The covenants and agreements herein contained are binding upon and
shall inure to the benefit of the successors, heirs, assigns, executors,
administrators and/or personal representatives of the Landlord and Tenant.
RENEWAL OPTION:
---------------
1. Tenant shall, provided it is not in default in any of the terms and
conditions of this lease, have the option to renew this lease for an additional
period of ten (10) years, such extended term to begin upon the expiration of the
initial term of this lease, upon the same terms and conditions contained in this
Lease, except that the annual rental for the demised premises shall be adjusted
as set forth in Section 2 below, and provided that Tenant shall give Landlord
notice in writing by registered or certified mail of its intention to exercise
such option, no later that one (1) year prior to the expiration of the initial
term of this Lease.
2. The annual rental for each year of the additional term of this Lease
shall be adjusted, upward but not downward, as of the date of the exercise of
the renewal option by Tenant, but in no event more than eighteen (18) months
prior to the expiration of the initial term of this Lease, so that the base
annual rental shall be a sum in dollars equivalent to the purchasing power of
Fifty-Three Thousand Eight Hundred ($53,800.00) Dollars. Such base rental shall
be determined by dividing the said base rental by the index number for the first
month of the initial term of this Lease as the same shall appear in the column
"All Items" in the Consumer Price Index and then multiplying that amount by the
corresponding index number for the month that precedes the month in which the
Tenant shall have exercised the option to renew this Lease. The Consumer Price
Index referred to is the Consumer Price Index - U.S (1967 equal 100) -
(reflecting the change of prices in goods and services purchased by city wage-
earner and clerical-worker families to maintain their level of living) purlished
by the Bureau of Labor Statistics, United States Department of Labor. If the
Bureau of Labor Statistics changes the form or basis of calculating the Consumer
Price Index, the parties agree to request the Bureau to make available, for the
life of this lease, a monthly Consumer Price Index in its present form and
calculated on the same basis as the index for the first month of the initial
term of this Lease.
WITNESS the signatures and seals of the Landlord and the corporate seal
of the Tenant and the signature of the President thereof.
WITNESS: LANDLORD:
/s/ Joseph Jackson /s/ A. Eric Dott (SEAL)
- ----------------------------- -------------------------
Joseph Jackson A. Eric Dott
/s/ Joseph Jackson /s/ Esther J. Dott (SEAL)
- ----------------------------- -------------------------
Joseph Jackson Esther J. Dott
ATTEST: TENANT:
Monarch Office Service, Inc.
/s/ Steven M. Szekely By /s/ A. Eric Dott
- ---------------------------- ---------------------------
Secretary President
HARFORD ROAD
------------
LEASE RENEWAL AND AMENDMENT
---------------------------
This agreement of Lease Renewal, effective July 1, 1997 by and between A. Eric
Dott and Esther J. Dott, his wife, both of Baltimore County, State of Maryland,
(hereinafter referred to as "Landlord") and Monarch Avalon, Inc. (formerly
Monarch Office Service, Inc.), a body corporate of the State of Delaware,
(hereinafter referred to as "Tenant"), withnesseth that the parties hereby agree
as follows:
1. Premises
--------
That the parties do hereby agree to extend the lease period pursuant to the
terms of the original lease agreement daated July 2, 1973 by and between the
parties as amended below for the premises improved by the following buildings:
(a) approximately 32,000 square feet known as 4517 Harford Road, Rear; (b)
approximately 2,795 square feet addition to 4517 Harford Road and (c) the
premises known as 4529 Harford Road, located in Baltimore, Maryland.
2. Term
----
The lease term shall be extended for a term of ten (10) years commencing on the
1st day of July 1997, and ending on the 30th day of June 2007.
3. Rent
----
The Tenant covenants and agrees to pay to the landlord at 2514 Stone Mill Road,
Baltimore, Maryland 21208, as basic annual rent for the premises, during the
first year of the term of this lease renewal, the sum of One Hundred Twenty-
Seven Thousand Twenty Dollars ($127,020.00), payable in equal monthly
installments of Ten Thousand Five Hundred Eighty-Five Dollars ($10,585.00).
4. During the second and each following year of this lease renewal term, the
base annual rent shall be adjusted annually (upwards only) as of the first day
of each lease year in the same as the increase in the Consumer Price Index (the
"Index") as hereinafter provided.
Such increase in the Index shall be calculated by comparing the Index in
effect as of the first full calendar month of the preceding lease year (the
"Base Index Number") with the Index in effect as of the last full calendar month
of the preceding lease year (the "Current Index Number") - i.e., the Base Annual
Rent shall be multiplied by a fraction, the numerator of which is the Current
Index Number and the denominator of which is the base index number. As used
herein, the "Index" means the U.S. Bureau of Labor Statistics, Consumer Price
Index for Urban Wage Earners (CPI-w), U.S. City Average.
5. Other Terms and Considtions
All other terms and conditions of the Lease shall remain the same.
In Witness Whereof; Landlord and Tenant have respectively signed and sealed this
Lease Renewal and Amendment as of the day and year first above written.
WITNESS: LANDLORD:
/s/ A. Eric Dott
- --------------------------------- --------------------------------
A. Eric Dott
/s/ Esther J. Dott
- --------------------------------- --------------------------------
Esther J. Dott
TENANT:
MONARCH AVALON, INC.
ATTEST:
/s/ Steven M. Szekely by /s/ Jackson Y. Dott
- -------------------------------- ------------------------------
Secretary President
EXHIBIT 10(f) - RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
OF MONARCH AVALON, INC. ON JUNE 19, 1991 AS AMENDED ON MARCH
11, 1992
RESOLVED: That A. Eric Dott be, and he hereby is, granted an option (the "AED
Option") to purchase an aggregate of 300,000 shares of the Company's Common
Stock at a purchase price equal to the higher of (i) the closing price reported
by NASDAQ for the Company's Common Stock on the trading day immediately
preceding any exercise of the AED Option, or if no closing price was reported by
NASDAQ on such trading day, then at a price equal to the mean between the bid
and asked prices of the Common Stock reported by NASDAQ on such trading day, and
(ii) the book value per share of the Common Stock on the date of the exercise
thereof. The AED Option may only be exercised for a period of sixty (60) days
(the "AED Option Period:) after an Acquisition Date, Tender Offer Date, or Proxy
Contest Date. For the purposes of the AED Option:
(i) The Acquistion Date shall mean the date on which it is publicly
announced that a person or an entity, which prior to the Acquisition
Date held less than twenty percent (20%) of the total number of the
issued and outstanding shares of the Company's Common Stock, acquires
shares of the Company's Common Stock, and such acquisition increases
that person's or entity's shareholdings to an amount which is greater
than twenty (20%) of the total number of the issued and outstanding
shares of the Company's Common Stock;
(ii) The Tender Offer Date shall mean the date of the commencement
of a tender or exchange offer (as determined by reference to Rule
14 d-2(a) or any successor rule under the Securities Exchange Act of
1934, as amended) by any person or entity for thirty percent (30%)
or more of the issued and outstanding shares of the Company's Common
Stock; and
(iii) The Proxy Contest Date shall mean the date of the public
announcement through a solicitation of proxies, that a person or
entity is proposing the election of a director or slate of
directors opposed to any director or slate of directors proposed
by management of the Company.
The AED Option is exercisable in whole or in part by written notice to the
Company and shall expire, to the extent unexercised, on June 19, 2001.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
EXHIBIT 27
Article 5
The schedule contains summary financial information extracted from Monarch
Avalon, Inc.'s unaudited financial statements for the six months ended October
31, 1997, and is qualified in its entirety by reference to such financial
statements and the notes thereto.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Apr-30-1999
<PERIOD-START> May-01-1998
<PERIOD-END> Oct-31-1998
<CASH> 8,008
<SECURITIES> 0
<RECEIVABLES> 863
<ALLOWANCES> 142
<INVENTORY> 318
<CURRENT-ASSETS> 9,289
<PP&E> 4,634
<DEPRECIATION> 4,152
<TOTAL-ASSETS> 9,786
<CURRENT-LIABILITIES> 2,846
<BONDS> 0
0
0
<COMMON> 527
<OTHER-SE> 6,940
<TOTAL-LIABILITY-AND-EQUITY> 9,786
<SALES> 3,105
<TOTAL-REVENUES> 6,848
<CGS> 2,348
<TOTAL-COSTS> 2,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 246
<INCOME-CONTINUING> 246
<DISCONTINUED> 3,464
<INCOME-TAX> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,710
<EPS-PRIMARY> 2.29
<EPS-DILUTED> 2.29
</TABLE>
