SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).
For the fiscal year ended February 1, 1997
Commission file number 1-6083
NOODLE KIDOODLE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-1771705
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
105 Price Parkway, Farmingdale, NY 11735
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code (516)-293-5300
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $.001 par value NASDAQ National Market
Securities registered pursuant to Section 12 (g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates
of the registrant as of April 1, 1997 was $23,212,648 based on
the closing of same stock on that date.
The number of shares of common stock outstanding as of April 1,
1997 was 7,579,640.
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Documents Incorporated by reference: Certain portions of
Registrant's definitive proxy statement with respect to its 1997
Annual Meeting of Stockholders to be filed, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, with
the Commission within 120 days of the close of Registrant's
fiscal year ended February 1, 1997 are incorporated by reference
into Part III of this report.
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TABLE OF CONTENTS
Page
PART I
Item 1. Business 4
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 8
Part II
Item 5. Market for Registrant's Common Stock and
Related Stockholders' Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of 11
Operations
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 17
PART III
Item 10. Directors and Executive Officers of
the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial
Owners and Management 17
Item 13. Certain Relationships and Related
Transactions 17
PART IV
Item 14. Exhibits, Financial Statements,
Schedules and Reports on Form 8-K 18
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PART I
ITEM 1. BUSINESS.
(a) General
Noodle Kidoodle, Inc., a Delaware corporation (the "Company" or
"Registrant") is a specialty retailer of a broad assortment of
educationally oriented, creative and non-violent children's
products, including toys, books, games, video and audio tapes,
computer software, crafts and other learning products.
The Company was founded in 1946 and, doing business under its
former name Greenman Bros. Inc., engaged in the retail toy
business as well as the wholesale distribution of general
merchandise, with an emphasis on toys, stationery and housewares.
During the 1980s, the Company operated a number of retail toy
stores, including a chain of 330 stores under the Circus World
name located principally in shopping malls in approximately 30
states. The Company sold the Circus World stores in Fiscal 1991
but continued to operate a number of retail toy stores under the
Playworld name. The Company opened its first Noodle Kidoodle
store in November 1993, and opened three additional Noodle
Kidoodle stores in Fiscal 1995. During Fiscal 1996, management
determined that the Company should focus exclusively on its
retail business by expanding and developing the Noodle Kidoodle
retail concept. Accordingly, in August 1995, the Company adopted
a new business plan and ceased operating its wholesale division.
The Company, in December 1995, changed its name from Greenman
Bros. Inc. to Noodle Kidoodle, Inc. and, in January 1996,
changed its jurisdiction of incorporation to Delaware.
The Company operated 31 Noodle Kidoodle stores at the close of
the fiscal year ended February 1, 1997 ("Fiscal 1997") located in
New York, New Jersey, Connecticut and the Boston, Chicago, and
Detroit metropolitan areas. The Company also operated one other
retail toy store under the Playworld name. The Company plans to
close the one remaining Playworld retail store as soon as certain
lease issues are resolved.
(b) Financial Information About Industry Segments
Registrant currently operates in an industry segment which
involves the retail sales of children's toys and other products.
In prior years it also operated in a second segment which was the
wholesale distribution of general merchandise. This segment was
discontinued in August 1995 and the results are disclosed in
discontinued operations. See Note 2 (Discontinued Operations) of
the Notes to Consolidated Financial Statements.
(c) Narrative Description of Business
Noodle Kidoodle, Inc. is a specialty retailer of a broad
assortment of educationally oriented, creative and non-violent
children's products. The Noodle Kidoodle concept offers
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something new to parents and children by combining the attractive
pricing and larger size of traditional toy stores with the more
creative product selection and superior customer service of small
boutiques, while providing an entertaining shopping environment
through interactive play areas and frequent in-store events.
The Company's stores range from approximately 6,100 to 13,300
square feet and average approximately 10,600 square feet. Each
store offers customers a warm and inviting shopping environment
with brightly lit spaces, colorful walls, ceilings and carpets,
wide aisles for strollers and kid-level seating and product
shelving. Each store typically carries approximately 25,000
stock-keeping units ("SKU's"), conveniently displayed in separate
merchandise departments, such as "Science & Nature" and "Arts &
Crafts", which are identified by eye-catching signs that are
visual as well as verbal so that children can understand them.
All of the products carried in Noodle Kidoodle stores conform to
the Company's creative, non-violent and educational merchandising
strategy. The Company generally does not carry mass market
television advertised toys. However, in certain product
categories, the Company does carry brand name products which fit
the Noodle Kidoodle philosophy, such as Crayola, Lego, Playmobil,
the full line of Walt Disney video titles and the Goosebumps line
of books. The Company purchases merchandise from over 600
suppliers. There is currently one supplier, Star Video
Entertainment LP, who represents slightly more than 5% of total
purchases.
The Company operated 31 Noodle Kidoodle stores at the end of its
1997 fiscal year, located in New York, New Jersey, Connecticut
and the Boston, Chicago and Detroit metropolitan areas. It has
opened one store in fiscal 1998 in the Boston metropolitan area
and expects to open one additional store in the second half of
the year. The Company believes that there are opportunities for
nationwide expansion over the longer term.
The Company believes that the following elements are important to
its retailing concept:
+ Interactive Shopping Environment - Each Noodle Kidoodle store
is designed with children in mind. Each store has designated
play areas where children and their parents are encouraged to
explore toys and games in keeping with the Company's "try
before you buy" philosophy. Among the key interactive
features of each store are the Computer Center, "Kidoodle
Theater" and the Electronic Learning Center.
+ Broad Assortment of Imaginative Products - Noodle Kidoodle
stores offer a broad assortment of products designed to
stimulate a child's imagination and contribute to his or her
growth and development consistent with the Company's slogan
that "Kids learn best when they're having fun." To keep its
merchandise mix fresh and exciting, the Company continually
seeks innovative new products.
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+ In-Store Events - The Company provides without charge
frequent in-store events such as personal appearances by
authors and children's television personalities, arts and
crafts workshops and readings from selected books to provide
entertainment to its customers, increase store traffic and
position Noodle Kidoodle as a destination store.
+ Superior Customer Service - By providing knowledgeable and
friendly customer service and selecting enthusiastic employees
who enjoy working with children, the Company believes that it
has a competitive advantage over lower-service superstores
and mass merchandisers.
+ Targeted Marketing - The Company has created the Noodle
Kidoodle Club in order to establish customer loyalty and track
repeat customers. The club provides its members advance
notice of sales events and special promotions, a bi-monthly
newsletter and events calendar, birthday cards sent to
children and similar special privileges. The Company also
conducts a targeted direct mail marketing program and
continuously updates its customer database for this purpose.
+ Competitive Pricing - Noodle Kidoodle offers everyday
competitive pricing. Many products are regularly discounted
and prices in general are believed to be competitive with
those featured by superstores carrying similar lines of
merchandise.
Backlog is not considered relevant to an understanding of
Registrant's business. Registrant is required to carry
substantial amounts of inventory in the months of September
through November of each year in order to meet holiday delivery
requirements.
Registrant did not have any customers that represented more than
10% of consolidated revenues for the year ended February 1, 1997.
Registrant's business is highly seasonal and approximately 42% of its
revenues occur in the fourth quarter.
The retail toy business is highly competitive. The Company
competes on the basis of its stores' interactive environment,
broad merchandise selection, superior customer service and
competitive pricing. The Company competes with a variety of mass
merchandisers, superstores and other toy retailers, including
Toys R Us and Kay Bee Toy Stores and other store formats selling
children's products, such as discount stores and smaller
specialty toy stores. Retailing of children's educational
products is a relatively new concept. Included among the
Company's direct competitors are Zany Brainy, Learningsmith and
Imaginarium.
Some of the Company's competitors are much larger in terms of
sales volume and have more capital and greater management
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resources than the Company. If any of the Company's larger
competitors were to increase their focus on the educational
market or if any regional competitors were to expand their
activities in the markets primarily served by the Company, it
could be adversely affected. If any of the Company's major
competitors seek to gain or retain market share by reducing
prices, it may be required to reduce its prices on key items in
order to remain competitive, which would have the effect of
reducing its profitability.
As of February 1, 1997, the Company employed approximately 901
people, approximately 377 of whom were employed full-time. The
Company also employs additional part-time personnel during the
pre-Christmas season. The Company believes that its relations
with its employees are generally good.
The Company has registered several service marks and trademarks
with Federal and State authorities, including Noodle Kidoodle
(registered trademark), Oodles & Oodles of Fun Things to Learn
(registered trademark), Kidoodle Animation (registered
trademark), and the Company's slogan "Kids learn best when
they're having fun (registered trademark)." The Company believes
it has all licenses necessary to conduct its business.
ITEM 2. PROPERTIES.
The Company leases all of its Noodle Kidoodle stores. Original
lease terms generally are for ten years, and many leases contain
renewal options. The Company's stores are generally located in
either strip centers or mall locations. The 31 stores operating
at the end of Fiscal 1997 ranged in size from approximately 6,100
to 13,300 square feet.
The Company currently supports its retail operations with an
owned 269,000 square foot distribution center in Phillipsburg,
New Jersey. The Company had previously supported its total
retail and wholesale operations with three other distribution
centers located in Farmingdale, New York, West Haven, Connecticut
and Birmingham, Alabama. In conjunction with discontinuing its
wholesale operations the Company has ceased operating the
Farmingdale and West Haven distribution centers. The Company
discontinued the use of the Birmingham center in 1989 and has
been sub-leasing the space to third parties since such
discontinuance. The Company sold the Farmingdale facility in
July 1996. The lease for the West Haven center expired in March
1996. The Company does not believe that disposing of or
discontinuing operations in any of these facilities will have a
material adverse effect on its operations or financial condition.
At the end of Fiscal 1997, the Company also operated one other
retail toy store under the Playworld name which is located in
Long Island, New York. This store is leased and is 10,000 square
feet. The Company plans to close this store as soon as certain
lease issues are resolved.
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The Company's executive offices are located at Farmingdale, New
York. The Company has signed a two-year lease, which contains
renewal options, and will move its headquarters in June 1997 to
Syosset, New York.
Registrant believes that the foregoing facilities are adequate
for its present operations and such facilities are maintained in
a good state of repair.
See Note 6 (Commitments and Contingencies) of the Notes to
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS.
As disclosed last year, the Company was a defendant in a
purported plaintiffs' class action filed in August 1995, in the
United States District Court for the Eastern District of New York
against Playmobil USA, Inc., a toy manufacturer ("Playmobil"),
and against the Company and another retailer, as defendant class
representatives of a purported class of those toy retailers
nationwide selling products manufactured by Playmobil. The case
was later consolidated with two others pending against Playmobil.
On October 23, 1996, plaintiffs filed an Amended Complaint
dropping the Company as a defendant, but naming it and three
other retailers as "Co-conspirators who were induced to
participate and did participate in an alleged price fixing
scheme organized by Playmobil." No damages or other forms of
relief are requested against the Company. These developments
confirm the Company's earlier view that this litigation was not
material to the Company.
Except as set forth above, the Company is not a party to any
legal proceedings other than claims and lawsuits arising in the
normal course of its business which, in the opinion of the
Company's management, are not individually or in the aggregate
material to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDERS' MATTERS.
The Company's Common Stock is quoted on the NASDAQ National
Market under the symbol "NKID". Until December 13, 1995, the
Common Stock was traded on the American Stock Exchange under the
symbol "GMN". The following table sets forth, for the periods
indicated, the high and low sales prices per share for the Common
Stock for each of the fiscal quarters indicated for Fiscal 1997
and February 3, 1996 ("Fiscal 1996").
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<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal 1997
First Quarter $ 9.50 $ 6.25
Second Quarter 8.63 5.88
Third Quarter 8.00 5.38
Fourth Quarter 7.25 3.00
Fiscal 1996
First Quarter 5.44 4.00
Second Quarter 11.63 5.06
Third Quarter 14.63 9.25
Fourth Quarter 15.00 8.25
</TABLE>
As of February 1, 1997 there were approximately 623 holders of
record of Common Stock.
The Company has not paid cash dividends on its Common Stock since
1969 and currently anticipates that it will retain all available
funds generated by its operations for the development and growth
of its business. Any future determination as to dividend policy
will be made at the discretion of the Board of Directors of the
Company and will depend on a number of factors, including the
future earnings, capital requirements, financial condition and
business prospects of the Company and such other factors as the
Board of Directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below reflects the
consolidated results of operations, financial condition and
operating data of the Company for the periods indicated, after
giving retroactive effect to the Company's discontinued wholesale
business segment. This data should be read in conjunction with
the Consolidated Financial Statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this report. The
consolidated financial data for the fifty-two weeks ended
February 1, 1997, fifty-three weeks ended February 3, 1996, and
the fifty-two weeks ended January 28, 1995, January 29, 1994, and
January 30, 1993 are derived from the consolidated financial
statements of the Company which have been audited by Janover
Rubinroit, LLC, independent certified public accountants.
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<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3, January 28, January 29, January 30,
1997 1996 1995 1994 1993
(52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks)
(In thousands except for per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $59,410 $32,143 $23,308 $20,712 $18,250
Net income (loss) from:
Continuing operations (7,492) (5,272) (4,490) (1,180) (425)
Discontinued operations - (9,059) 1,096 1,889 2,226
Net income (loss) $(7,492) $(14,331) $(3,394) $ 709 $ 1,801
Net income (loss) per share
from:
Continuing operations $ (1.00) $ (.99) $ (.86) $ (.22) $ (.08)
Discontinued operations - (1.70) .21 .35 .40
Net income (loss)
per share $ (1.00) $ (2.69) $ (.65) $ .13 $ .32
Weighted average shares out-
standing 7,488 5,320 5,220 5,338 5,575
BALANCE SHEET DATA:
Working Capital $16,819 $14,031 $35,667 $39,810 $40,212
Total assets 51,036 37,276 48,042 49,629 50,296
Stockholders' equity 35,699 27,080 40,870 44,064 45,212
Long term debt obligations 753 - - - -
Dividends per common share - - - - -
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Fiscal Year Ended February 1, 1997 Compared to
Fiscal Year Ended February 3, 1996
Continuing Operations
Net sales increased a total of 85.0% to $59.4 million in Fiscal
1997 from $32.1 million in Fiscal 1996. Noodle Kidoodle sales
increased $30.0 million or 108.3% to $57.7 million in Fiscal 1997
from $27.7 million in the prior year, primarily due to the
addition of thirteen Noodle Kidoodle stores during Fiscal 1997.
Other retail sales decreased 61.4% to $1.7 million in Fiscal 1997
from $4.4 million in the prior year, primarily as a result of the
closing of one Playworld store and two Toy Park stores in the
first half of Fiscal 1997. Comparable store sales were virtually
flat. The Company operated 31 Noodle Kidoodle stores and one
Playworld store at February 1, 1997 compared to 18 Noodle
Kidoodle stores, two Playworld stores and two Toy Park stores at
February 3, 1996. Fiscal 1997 contained 52 weeks compared to 53
weeks in Fiscal 1996. Sales for the extra week in Fiscal 1996
represented 1.7% of annual sales.
Gross profit (derived from net sales less cost of products sold,
which includes buying and warehousing costs) increased 86.2% to
$22.9 million for Fiscal 1997 from $12.3 million in Fiscal 1996.
Overall gross profit as a percentage of net sales ("gross profit
percentage") increased to 38.5% in Fiscal 1997 from 38.3% in
Fiscal 1996. The increase in gross profit percentage was
primarily attributable to the increased sales volume at Noodle
Kidoodle stores, which generated higher margins, offset by
decreased sales and margins at the other retail stores. Gross
profit percentage at Noodle Kidoodle stores increased to 38.5% in
Fiscal 1997 from 37.9% in the prior year, primarily as a result
of leveraging buying costs (including the salaries and related
expenses of the Company's buyers) partially offset by increases
in the cost of merchandise. Warehousing costs, which contain
some fixed elements remained flat and did not rise commensurately
with the increased sales levels. Gross margin in the other
retail stores decreased to 36.5% in Fiscal 1997 from 40.7% in the
prior year, primarily due to markdowns taken to liquidate
inventories in three stores that were closed in the first half of
Fiscal 1997 offset by lower buying and warehousing costs.
Selling and administrative expenses, excluding the provision for
restructuring in Fiscal 1996, increased 75.7% to $31.1 million in
Fiscal 1997 from $17.7 million in the prior year. These increases
resulted primarily from; higher direct store expenses, which
increased $9.1 million due to changes in the store base; non-
recurring charges of $.6 million for upgrading the stores' point
of sale system and a provision for severance costs related to a
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20% administrative staff reduction; and higher home office
expenses. Selling and administrative expenses as a percentage of
net sales decreased to 52.4% in Fiscal 1997 from 55.0% in the
prior year, primarily as a result of increased sales due to an
increased store base.
Provision for restructured operations was $.5 million in Fiscal
1996 related to the closing of certain other retail stores. This
included losses from store operations from the date of
announcement until closing, employee severance costs, estimated
lease liabilities, loss on liquidation of inventories and
disposition of assets and other related restructuring costs.
Net loss from continuing operations increased 41.5% to $7.5
million ($1.00 per share) in Fiscal 1997 from $5.3 million ($.99
per share) in the prior year. The net loss in both Fiscal 1997
and Fiscal 1996 did not include tax benefits. At February 1,
1997, the Company had approximately $18.0 million of net
operating loss carryforwards.
Discontinued Operations
In Fiscal 1997 the Company's discontinued operations had no
sales. No income or loss was recognized from these operations in
Fiscal 1997.
Net sales were $51.9 million in Fiscal 1996.
Operating loss before provision for discontinued operations was
$1.9 million in Fiscal 1996.
Provision for loss on disposal of discontinued operations was
$7.1 million in Fiscal 1996 related to the disposal of the
wholesale business, including the estimated losses through the
disposal period and the anticipated sale of two of the Company's
distribution centers, net of income tax expense of $1.6 million.
Net loss from discontinued operations was $9.1 million ($1.70 per
share) in Fiscal 1996 including the $7.1 million ($1.34 per
share) provision for loss on disposal of discontinued operations.
Fiscal Year Ended February 3, 1996 Compared to
Fiscal year Ended January 28, 1995
Continuing Operations
Net sales increased a total of 37.8% to $32.1 million in Fiscal
1996 from $23.3 million in the fiscal year ended January 28, 1995
("Fiscal 1995"). Noodle Kidoodle sales increased $21.3 million
or 332.8% to $27.7 million in Fiscal 1996 from $6.4 million in
the prior year, primarily due to the addition of fourteen Noodle
Kidoodle stores during Fiscal 1996. Other retail sales decreased
74.0% to $4.4 million in Fiscal 1996 from $16.9 million in the
prior year, primarily as a result of the closing of six Playworld
stores during January 1995. The Company operated 18 Noodle
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Kidoodle stores, two Playworld stores and two Toy Park stores at
February 3, 1996, compared to four Noodle Kidoodle stores, two
Playworld stores and two Toy Park stores at January 28, 1995.
Fiscal 1996 contained 53 weeks compared to 52 weeks in Fiscal
1995. Sales for the extra week represented 1.7% of annual sales.
Gross profit (derived from net sales less the cost of products
sold, which includes buying and warehousing costs) increased
73.2% to $12.3 million for Fiscal 1996 from $7.1 million in
Fiscal 1995. Overall gross profit percentage increased to 38.3%
in Fiscal 1996 from 30.5% in Fiscal 1995. The increase in gross
profit percentage was primarily attributable to increased sales
volume at Noodle Kidoodle stores, which generated higher margins
than the Playworld stores and an increase in gross profit
percentage in the remaining other retail stores. Gross profit
percentage at Noodle Kidoodle stores increased to 37.9% in Fiscal
1996 from 37.2% in the prior year, primarily as a result of the
fact that buying costs (including the salaries and related
expenses of the Company's buyers) and certain warehousing costs
contain some fixed elements and therefore did not rise
commensurately with increased sales levels. The improvement in
buying and warehousing costs was partially offset by an increase
in the cost of merchandise. Gross profit percentage in the other
retail stores increased to 40.7% in Fiscal 1996 from 28.0% in the
prior year, primarily due to a greater sales contribution by
higher margin Toy Park stores and a higher mix of lower margin
merchandise in Fiscal 1995.
Selling and administrative expenses, excluding the provision for
restructuring, increased 63.9% to $17.7 million in Fiscal 1996
from $10.8 million in the prior year, primarily as a result of
changes in the store base. Selling and administrative expenses
at Noodle Kidoodle stores increased to $13.7 million in Fiscal
1996 from $3.2 million in the prior year, primarily as a result
of higher direct store expenses, which increased by $6.8 million,
higher advertising expenses, which increased by $2.2 million, and
higher home office expenses. This increase was offset by a
decrease in selling and administrative expenses at the other
retail stores to $1.7 million in Fiscal 1996 from $5.3 million in
the prior year, principally attributable to a decrease in direct
store expenses as a result of the closing of six Playworld stores
at the end of Fiscal 1995. Selling and administrative expenses
as a percentage of net sales increased to 55.0% in Fiscal 1996
from 46.3% in the prior year. The primary factors in the
increase were the higher operating costs of the Noodle Kidoodle
stores and increased home office expenses resulting from the
Company's rapid expansion program.
Provision for restructured operations related to the closing of
certain other retail stores was $0.5 million in Fiscal 1996,
compared to $3.9 million in the prior year. This included losses
from store operations from the date of announcement until
closing, employee severance costs, estimated lease liabilities,
losses on liquidation of inventories and disposition of assets
and other related restructuring costs.
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Operating loss decreased 22.4% to $5.9 million in Fiscal 1996
from $7.6 million in the prior year. Excluding restructuring
charges, the loss from operations would have been $5.4 million
for the period ended February 3, 1996 compared to $3.7 million in
the prior year.
Net loss from continuing operations increased 17.8% to $5.3
million ($.99 per share) in Fiscal 1996 from $4.5 million ($.86
per share) in the prior year. Excluding restructuring charges,
the net loss would have been $4.8 million ($.90 per share) in
Fiscal 1996 compared to $2.2 million ($.41 per share) in the
prior year. The net loss in Fiscal 1996 included no tax benefit
while the prior fiscal year included a tax benefit of $2.8
million. At February 3, 1996, the Company had approximately
$15.0 million of net operating loss carryforwards. The
additional week in the Fiscal 1996 year had no material impact on
the net loss from continuing operations.
Discontinued Operations
Net sales decreased 54.2% to $51.9 million in Fiscal 1996 from
$113.2 million in the prior year. This decrease resulted
primarily from discontinuance of the wholesale business,
effective August 30, 1995.
Operating loss before provision for discontinued operations was
$1.9 million in Fiscal 1996 compared to operating income of $1.8
million for the comparable period in the prior year.
Provision for discontinued operations represents a loss of $7.1
million related to the disposal of the wholesale business,
including estimated losses through the disposal period and the
anticipated sale of two of the Company's distribution centers,
net of income tax expense of $1.6 million.
Net loss from discontinued operations was $9.1 million ($1.70 per
share) in Fiscal 1996 including the $7.1 million ($1.34 per
share) provision for discontinued operations, as compared to net
income of $1.1 million ($.21 per share) for the prior year.
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years the Company satisfied the cash
requirements for its continuing retail operations principally
through the sale of securities, cash flows from discontinued
wholesale operations and internal cash balances. These cash
requirements principally include operating losses, working
capital requirements and expenditures for new store openings.
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<TABLE>
<CAPTION>
Fiscal Years Ended
1997 1996 1995
(In thousands)
<S> <C> <C> <C>
Net cash provided by (used in)
Operating activities:
Continuing operations $ (9,438) $(7,281) $(1,466)
Discontinued operations (1,585) 12,128 9,066
Investing activities (1,798) (8,960) (2,472)
Financing activities 16,882 477 16_
Net increase (decrease) in cash
and cash equivalents 4,061 (3,636) 5,144
Cash and cash equivalents -
beginning of year 7,272 10,908 5,764
Cash and cash equivalents -
end of year $ 11,333 $ 7,272 $10,908
</TABLE>
During Fiscal 1997, the Company generated $16.9 million of cash
from financing activities, principally from the sale of new
Common Stock, the net proceeds of which were approximately $16.0
million. Net cash used in investing activities was $1.8 million,
composed of property additions for new stores and for upgrading
the stores' point-of-sale computer system, which together totaled
$9.4 million, offset by $7.6 million of proceeds from the sale of
property from discontinued operations. Cash was also used to
fund $9.4 million of cash requirements for continuing operations,
attributable to a net loss of $7.5 million and increased working
capital needs of $4.2 million due to new store openings and
increased inventory levels, offset by non-cash charges of $2.3
million. Inventory increased from $10.3 million at February 3,
1996 to $17.3 million at February 1, 1997, primarily resulting
from new store openings. As a result of the foregoing, cash and
cash equivalents increased during the year by $4.1 million.
During Fiscal 1996, the Company generated $12.1 million of cash
from discontinued operations, primarily attributable to
reductions in inventory and other working capital of $20.4
million and $.8 million of non-cash charges offset by a net loss
of $9.1 million, which included a $7.1 million provision for the
discontinuance of the wholesale operations. This cash was used
primarily to fund $7.3 million of cash requirements for
continuing retail operations, attributable to increases in
working capital needs of $3.5 million due to new store openings
and increased inventory levels as well as a net loss of $5.3
million. Inventory increased from $4.3 million at January 28,
1995 to $10.3 million at February 3, 1996 primarily as a result
of new store openings. The Company also used cash to fund
investing activities of $9.0 million, primarily for the purchase
of fixed assets for new stores. As a result of the foregoing,
cash and cash equivalents decreased during the year by $3.6
million.
During Fiscal 1995, the Company generated $9.1 million of cash
from discontinued operations, primarily attributable to
reductions in working capital of $7.2 million, net income of
$1.1 million and $.8 million of non-cash charges. This cash was
-15-
<PAGE>
used primarily to fund $1.5 million of cash requirements for
continuing retail operations, attributable to a net loss of $4.5
million offset by decreased working capital needs of $1.7
million. Inventory decreased from $6.3 million at January 29,
1994 to $4.3 million at January 28, 1995 as a result of the
closing of six Playworld stores. The Company also used cash and
$1.0 million of proceeds received from the sale of marketable
securities to fund $4.0 million of property additions, primarily
for the purchase of fixed assets for new stores. As a result of
the foregoing, cash and cash equivalents increased during the
year by $5.1 million.
During the past several fiscal years, the Company did not require
any cash borrowings under its $10.0 million revolving credit
line, which expired in June 1995. In February 1996 the Company
obtained a line of credit from a bank which is unsecured, and
provides for maximum outstandings of $10.0 million in short-term
loans and letters of credit. The expiration of that line of
credit has been extended to May 31, 1997. The Company is
currently evaluating financing proposals from several lenders to
replace this expiring line of credit. While the Company expects
to enter into a new financing agreement prior to the expiration
of the current line of credit, there is no assurance that
financing will be available in amounts or on terms acceptable to
the Company.
The Company expects to fund its near-term cash requirements
principally from its existing cash balances. The Company expects
to finance its long-term expansion plan principally with
externally generated funds, which may include borrowings under
future credit facilities, and through the sale of equity, equity-
related or debt securities. There can be no assurance that
financing will be available in amounts, or at rates or on terms
and conditions acceptable to the Company.
The Company anticipates that capital expenditures in Fiscal 1998
will be approximately $1.6 million, primarily to finance new
stores.
The Company has available net operating loss carryforwards of
approximately $18.0 million for income tax purposes.
Seasonality
The Company's operations are highly seasonal and approximately
42% of its revenues fall within the Company's fourth quarter
which coincides with the Christmas selling season. New stores
are expected to be opened throughout the year, but generally
before the Christmas selling season, which will make the
Company's fourth quarter revenues an even greater percentage of
the total year's revenues. Operations during the first three
quarters are not expected to be profitable for the foreseeable
future.
-16-
<PAGE>
Impact of Inflation
The impact of inflation on the Company's results of operations
has not been significant. The Company attempts to pass on
increased costs by increasing product prices over time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to directors and executive officers of
the Company is incorporated herein by reference to the
information set forth under the captions "Election of Directors",
"Executive Officers", and "Compliance with Section 16(a) of the
Exchange Act" in the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders (the "1997 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is
incorporated herein by reference to the information set forth
under the captions, "Committees, Meetings, and Director
Compensation" and "Executive Compensation", excluding the
information under the captions "Executive Compensation -
Compensation and Stock Option Committee Report on Executive
Compensation" and "Executive Compensation - Performance Graph",
in the Company's 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information with respect to security ownership is incorporated
herein by reference to the information set forth under the
caption "Security Ownership" in the Company's 1997 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related
transactions is incorporated herein by reference to the
information, if any, set forth under the caption "Certain
Relationships and Related Transactions" in the Company's 1997
Proxy Statement.
-17-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements Page
Independent auditor's report F-1
Consolidated balance sheets at February
1, 1997 and February 3, 1996 F-2
Consolidated statements of operations for
the years ended February 1, 1997,
February 3, 1996 and January 28, 1995 F-3
Consolidated statements of stockholders'
equity for the years ended February 1,
1997, February 3, 1996 and January 28, 1995 F-4
Consolidated statements of cash flows for
the years ended February 1, 1997, February
3, 1996 and January 28, 1995 F-5
Notes to consolidated financial statements F-6
2. Schedules
VIII. Valuation and qualifying accounts (available on
request)
All other schedules have been omitted because they are not
applicable or the required information is shown in the financial
statements or the notes thereto.
The individual financial statements and schedules of Registrant
have been omitted since consolidated financial statements have
been filed and Registrant is primarily an operating company and
all subsidiaries included in the consolidated financial
statements filed are wholly-owned subsidiaries.
Shareholders may obtain a copy of any exhibit not contained
herein free of charge by writing to Kenneth S. Betuker, Vice
President, Chief Financial Officer and Secretary, Noodle
Kidoodle, Inc., 105 Price Parkway, Farmingdale, New York 11735.
-18-
<PAGE>
3. Index to Exhibits
(a) The following documents are filed as Exhibits to this
document:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
<S> <C>
3.1 Certificate of Incorporation of the Registrant
currently in effect, with all amendments thereto
(Incorporated by reference to Exhibit 3.1 to
Registrant's Form S-1 Registration Statement
(Commission File No. 33-65029), effective
February 13, 1996)
3.2 (New York) Certificate of Merger of Noodle
Kidoodle, Inc., a New York corporation, into
Noodle Kidoodle, Inc., a Delaware corporation
(Incorporated by reference to Exhibit 3.2 to
Registrant's Form S-1 Registration Statement
(Commission File No. 33-65029), effective
February 13, 1996)
3.3 Agreement and Plan of Merger of Noodle Kidoodle,
Inc., a New York corporation, and Noodle
Kidoodle, Inc., a Delaware corporation
(Incorporated by reference to Exhibit 3.3 to
Registrant's Form S-1 Registration Statement
(Commission File No. 33-65029), effective
February 13, 1996)
3.4 By-laws of Registrant (Incorporated by reference
to Exhibit 3.4 to Registrant's Form S-1
Registration Statement(Commission File No. 33-
65029), effective February 13, 1996)
3.5 (Delaware) Certificate of Merger of Noodle
Kidoodle, Inc., a New York corporation into
Noodle Kidoodle, Inc., a Delaware corporation
(Incorporated by reference to Exhibit 3.5 to
Registrant's Form S-1 Registration Statement
(Commission File No. 33-65029), effective
February 13, 1996)
3.6* Plan of Merger of C.W.P.W., Inc., a Michigan
corporation, into Noodle Kidoodle, Inc., a
Delaware corporation
3.7* Certificate of Ownership and Merger of C.W.P.W.,
Inc., a Michigan corporation, into Noodle
Kidoodle, Inc., a Delaware corporation
-19-
<PAGE>
4.1 Rights Agreement, dated as of May 6, 1988,
between Registrant and Manufacturers Hanover
Trust Company, as Rights Agent (Incorporated by
reference to Registrant's Report on Form 8-K
dated May 6, 1988 and the exhibits filed
therewith)
4.2 First Amendment to Rights Agreement dated as of
November 22, 1991 (Incorporated by reference to
Registrant's Report on Form 8-K, dated November
22, 1991, and the exhibits filed therewith)
10.1 Stock Incentive Plan and Outside Directors Stock
Option Plan, dated April 26, 1994 (Incorporated
by reference to Registrant's Form S-8
Registration Statement (Commission File No. 33-
82104), effective July 26, 1994 and the exhibits
filed therewith)
10.2 Employment Agreement by and between Registrant
and Stanley Greenman dated as of February 1,
1995 (Incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year
ended January 28, 1995)
10.3 Employment Agreement by and between Registrant
and Stewart Katz dated as of February 1, 1995
(Incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year
ended January 28, 1995)
10.4 Non-Contributory Insured Medical Reimbursement
Plan (Incorporated by reference to Exhibit 10.05
to Registrant's Annual Report on Form 10-K for
the fiscal year ended January 30, 1993)
10.5 Agreement and Plan of Merger dated February 1,
1994 by and between Registrant and certain
wholly-owned subsidiaries of the Registrant
(Incorporated by reference to Exhibit 10.08 to
Registrant's Annual Report on Form 10-K for
fiscal year ended January 29, 1994)
10.6 Amendment to Outside Directors Stock Option Plan,
dated December 13, 1995 (Incorporated by
reference to Exhibit 10.6 to Registrant's Form S-
1 Registration Statement (Commission File No. 33-
65029), effective February 13, 1996)
10.7* Purchase and Sale Agreement - Farmingdale Facility
11.1* Computation of Earnings Per Share
-20-
<PAGE>
21.1* Subsidiaries of Registrant
27.0* Financial Data Schedule
</TABLE>
(b) The following documents are filed as Schedules to
this Document:
Schedule
Number Description of Document
VIII Valuation and Qualifying Accounts for the
Fiscal Years Ended February 1, 1997, February
3, 1996 and January 28, 1995
(b) Reports on Form 8-K
None
* Filed herewith
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NOODLE KIDOODLE, INC.
(Registrant)
April 24, 1997 BY: /s/Stanley Greenman
Stanley Greenman
Chairman of the Board,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities and on
the date indicated.
/s/Stanley Greenman /s/Robin Farkas
Stanley Greenman Robin Farkas, Director
Chairman of the Board,
Chief Executive Officer,
and Treasurer /s/Lester Greenman
(Principal Executive Officer) Lester Greenman, Director
/s/Stewart Katz /s/Joseph Madenberg
Stewart Katz, President, Joseph Madenberg, Director
Chief Operating Officer,
Assistant Secretary and Director
/s/Melvin C. Redman
Melvin C. Redman, Director
/s/Kenneth S. Betuker
Kenneth S. Betuker
Vice President, /s/Barry W. Ridings
Chief Financial Officer Barry W. Ridings, Director
and Secretary
(Principal Financial and
Accounting Officer) /s/Robert Stokvis
Robert Stokvis, Director
-22-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Noodle
Kidoodle, Inc.
We have audited the accompanying consolidated balance sheets
of Noodle Kidoodle, Inc. and Subsidiaries as of February 1,
1997 and February 3, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended
February 1, 1997. Our audits also include the financial
statement schedule listed in the index at Item 14(a)2.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Noodle Kidoodle, Inc. and Subsidiaries
as of February 1, 1997 and February 3, 1996 and the results
of their operations and cash flows for each of the years in
the three year period ended February 1, 1997 in conformity
with generally accepted accounting principles. Further, in
our opinion, the above referenced financial statement
schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
Janover Rubinroit, LLC
/s/Janover Rubinroit, LLC
Garden City, New York
March 31, 1997
F-1
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 1, 1997 and February 3, 1996
<CAPTION>
February 1, February 3,
1997 1996
(In thousands except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,333 $ 7,272
Merchandise inventories 17,318 10,328
Prepaid expenses and other current assets 2,752 3,043
Net assets of discontinued operations - 3,584
Total current assets 31,403 24,227
Property, plant and equipment at cost 23,687 16,535
Less accumulated depreciation 4,104 3,541
19,583 12,994
Other assets 50 55
Total Assets $51,036 $37,276
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 18 $ -
Trade accounts payable 5,049 5,283
Accrued expenses and taxes 7,092 4,913
Net liabilities of discontinued operations 2,425 -
Total current liabilities 14,584 10,196
Long-term debt 753 -
Commitments and contingencies - -
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares,
par value $.001 (none issued) - -
Common stock-authorized 15,000,000 shares,
par value $.001; issued 8,503,901 and
6,300,401 shares, respectively 9 6
Capital in excess of par value 43,063 26,955
Retained earnings (deficit) (3,581) 3,911
39,491 30,872
Less treasury stock, at cost, 924,261 shares 3,792 3,792
Total stockholders' equity 35,699 27,080
Total Liabilities and Stockholders' Equity $51,036 $37,276
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Years Ended
February 1, 1997, February 3, 1996 and January 28, 1995
<CAPTION>
February 1, February 3, January 28,
1997 1996 1995
(In thousands except share data)
<S> <C> <C> <C>
Net sales $59,410 $32,143 $23,308
Costs and expenses:
Cost of products sold including
buying and warehousing costs 36,542 19,825 16,192
Selling and administrative expenses 31,124 17,680 10,790
Provision for restructured operations - 500 3,900
67,666 38,005 30,882
Operating loss (8,256) (5,862) (7,574)
Interest income 839 633 372
Interest expense (75) (43) (75)
Loss from continuing operations
before income taxes (7,492) (5,272) (7,277)
Income taxes (benefit) - - (2,787)
Net (loss) from continuing operations (7,492) (5,272) (4,490)
Discontinued operations:
Income (loss) net of income tax
expense of $0, $0 and $685, respectively - (1,914) 1,096
Operating loss of $7,305 including gain
from disposal of assets and income taxes
of $1,602 - (7,145) -
Net income (loss) from discontinued
operations - (9,059) 1,096
Net (loss) $(7,492) $(14,331) $(3,394)
Net income (loss) per share:
Continuing operations $ (1.00) $ (.99) $ (.86)
Discontinued operations - (1.70) .21
Net (loss) per share $ (1.00) $ (2.69) $ (.65)
Weighted average shares outstanding 7,487,803 5,320,137 5,220,222
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Fiscal Years Ended
February 1, 1997, February 3, 1996 and January 28, 1995
(In thousands)
<CAPTION>
Common Stock Capital in Retained Treasury Stock
Excess of Earnings (at Cost)
Shares Amount Par Value (Deficit) Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance - January 29, 1994 6,119 $ 612 $25,608 $21,636 924 $3,792
Exercise of stock options
including related tax benefits 169 17 193 -- -- --
Tender of shares as payment
for options exercised (103) (10) -- -- -- --
Net loss for the year -- -- -- (3,394) -- --
Balance - January 28, 1995 6,185 619 25,801 18,242 924 3,792
Exercise of stock options 115 12 529 -- -- --
Change in par value of
common stock -- (625) 625 -- -- --
Net loss for the year -- -- -- (14,331) -- --
Balance - February 3, 1996 6,300 6 26,955 3,911 924 3,792
Common stock offering, net 2,180 3 16,007 - - -
Exercise of stock options 24 - 101 - - -
Net loss for the year - - - (7,492) - -
Balance - February 1, 1997 8,504 $ 9 $43,063 $(3,581) 924 $3,792
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended
February 1, 1997, February 3, 1996 and January 28, 1995
(In thousands)
<CAPTION>
February 1, February 3, January 28,
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(7,492) $(5,272) $(4,490)
Adjustments to reconcile to net cash
provided (used):
Depreciation 1,926 1,028 499
Restructuring charges - non-cash portion - 500 834
Loss on disposal of fixtures and equipment 327 - -
Decrease (increase) in non-cash - - -
working capital accounts:
Merchandise inventories (6,990) (5,998) 1,989
Prepaid expenses and other current assets 291 (63) (1,905)
Trade accounts payable (234) 3,021 (125)
Accrued expenses and taxes 2,734 (497) 1,732
Net cash used in continuing operations (9,438) (7,281) (1,466)
Net income (loss) from discontinued
operations - (9,059) 1,096
Adjustments to reconcile to net cash
provided (used):
Decrease (increase) in non-cash working
capital accounts and other (1,585) 21,187 7,970
Net cash provided by (used in)
discontinued operations (1,585) 12,128 9,066
Net cash provided by (used in) operating
activities (11,023) 4,847 7,600
Cash flows from investing activities:
Proceeds from sale of securities - - 1,000
Proceeds from sales of property -
discontinued operations 7,594 - -
Property additions:
Continuing operations (9,397) (8,877) (2,751)
Discontinued operations - (86) (1,213)
Other 5 3 492
Net cash used in investing activities (1,798) (8,960) (2,472)
Cash flows from financing activities:
Proceeds from sale of common stock 16,010 - -
Increase in long-term debt 780 - -
Reduction of long-term debt (9) (64) (64)
Exercise of employee options 101 541 80
Net cash provided by financing
activities 16,882 477 16
Net increase (decrease) in cash and cash
equivalents 4,061 (3,636) 5,144
Cash and cash equivalents - beginning of year 7,272 10,908 5,764
Cash and cash equivalents - end of year $11,333 $ 7,272 $10,908
Supplemental cash flow information:
Net cash paid (received) during the year for:
Interest expense $ 75 $ 43 $ 75
Income taxes, net - (1,512) 328
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-5
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
The following summary of the Company's major accounting policies is
presented to assist in the interpretation of the financial statements.
Principles of consolidation
The consolidated financial statements include the accounts of the parent
company and all subsidiary companies. All significant intercompany
balances and transactions are eliminated in consolidation. The Company and
its subsidiaries are on a 52-53 week accounting period ending on the
Saturday closest to January 31. Fiscal 1997 and 1995 each contained 52
weeks and Fiscal 1996 contained 53 weeks.
Description of business
The Company is a specialty retailer of a broad assortment of educationally
oriented, creative and non-violent children's products, including toys,
books, games, video and audio tapes, computer software, crafts, and other
learning products.
Cash equivalents and short-term investments
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. The Company places its
temporary cash investments in high grade instruments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Earnings per share
The computation of earnings per share is based on the weighted average
number of outstanding common shares. The inclusion of common stock
equivalents had no significant dilutive effect or were antidilutive and
therefore, were not utilized in the computations of net income (loss) per
share.
Property, plant and equipment
Plant and equipment is stated at cost and is depreciated on a straight-line
basis over estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend
the useful lives of existing plant and equipment, are capitalized.
Leasehold improvements are amortized over the terms of the respective
leases or over their useful lives, whichever is shorter. Useful lives of
other plant and equipment varie among the classifications, but range for
buildings and improvements from 10-40 years and for fixtures and equipment
from 4-10 years.
F-6
<PAGE>
Pre-opening expenses
Costs incurred in the opening of new stores are amortized over the first
twelve months of operations.
Income taxes
Deferred taxes provided under SFAS No. 109 result principally from
temporary differences in depreciation, capitalized inventory costs,
restructuring charges, and allowance for doubtful accounts.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expense during the reporting period. Actual results could differ from
those estimates.
Fair value disclosures
The carrying amounts of cash and cash equivalents, other current assets,
accounts payable and other current liabilities approximates fair value
because of the short term maturity of these instruments. The stated value
of long-term debt, including current maturities, approximates fair value.
Accounting changes
Effective February 4, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for The Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". This
statement requires companies to write down to estimated fair value long-
lived assets that are impaired. The adoption of SFAS No. 121 resulted in
no impairment loss required to be recognized for applicable assets of
continuing operations.
Effective February 4, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation", which encourages, but does not require,
recognition of compensation expense for all stock-based awards granted to
employees. The Company has adopted the disclosure only provisions, and
accordingly, no compensation cost has been recognized for the stock option
plans. The Company's stock compensation plans are discussed in Note 8.
NOTE 2 - DISCONTINUED OPERATIONS:
On August 30, 1995, the Company adopted a formal plan to discontinue its
wholesale business segment. The plan provided for the sale of two of the
Company's distribution centers and the disposition through sale or
liquidation of substantially all of the operating assets of such segment.
The operations and net assets of the wholesale business segment are being
accounted for as a discontinued operation, and accordingly, its operating
results and net assets are reported in this manner in all periods presented
in the accompanying consolidated financial statements.
In connection with discontinuing its wholesale operations, the Company
recorded a provision of $7.1 million in the fiscal quarter ended July 29,
1995 for (i)estimated gains or losses on the sale or liquidation of
F-7
<PAGE>
wholesale assets and (ii) estimated losses until such disposal or
liquidation is completed.
Summary of operating results from discontinued operations are as follows:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3, January 28,
1997 1996 1995
(In thousands)
<S> <C> <C> <C>
Net sales $ - $51,931 $113,194
Gross profit - 9,726 24,604
Operating income (loss) - (1,914) 1,781
Provision for discontinued
operations - 7,145 -
Net income (loss) - (9,059) 1,096
</TABLE>
Net assets of this segment at February 3, 1996 consisted principally of
accounts receivable and properties of $5,131,000 less accounts payable
accrued expenses and capital lease obligations of $1,547,000. Net
liabilities of this segment at February 1, 1997 consisted principally of
accounts payable, accrued expenses and capitalized lease obligations of
$3,712,000 less accounts receivable and properties of $1,287,000.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
(In thousands)
<S> <C> <C>
Land $ 272 $ 272
Building and improvements 1,665 1,658
Fixtures and equipment 10,735 6,931
Leasehold improvements 11,015 7,674
23,687 16,535
Less accumulated depreciation (4,104) (3,541)
$19,583 $12,994
</TABLE>
F-8
<PAGE>
NOTE 4 - ACCRUED EXPENSES AND TAXES:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
(In thousands)
<S> <C> <C>
Payroll and related benefits $ 752 $ 468
Rent and occupancy 1,532 512
Insurance 312 276
Restructuring charges 1,424 1,929
Fixtures and equipment 602 297
Other 2,470 1,431
$7,092 $4,913
</TABLE>
F-9
<PAGE>
NOTE 5 - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
(In thousands)
<S> <C> <C>
Bank credit line $ - $ -
8% unsecured promissory note,
due in quarterly installments
through 2016 771 -
771 -
Less current maturities 18 -
$753 $ -
</TABLE>
The Company has an unsecured credit line with a bank which provides for
maximum borrowings of $10 million until May 31, 1997, to be used to meet
the Company's normal short term working capital needs. Interest on
borrowings will be at either the bank's prime rate or at a Eurodollar rate.
The Company had no borrowings under this agreement during Fiscal 1997 and
1996. Annual maturities of long-term debt during the next five years are
$18,000, $20,000, $21,000, $23,000, and $25,000.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
Minimum annual commitments under non-cancelable leases in effect at
February 1, 1997 are as follows:
<TABLE>
<CAPTION>
Sublease
Operating Rental
Leases Income
(In thousands)
<S> <C> <C>
1998 $ 8,243 $ 360
1999 8,833 150
2000 8,932 -
2001 8,998 -
2002 9,125 -
Thereafter 42,331 -
Total minimum obligations $86,462 $ 510
</TABLE>
At February 1, 1997, the Company and its subsidiaries were lessees of
stores and transportation equipment under various leases. In addition to
fixed rents and rentals based on sales, certain of the leases require the
payment of taxes and other costs. Some leases include renewal options.
F-10
<PAGE>
Rental expense (income) for operating leases was as follows:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3, January 28,
1997 1996 1995
(In thousands)
<S> <C> <C> <C>
Minimum rentals $ 5,430 $3,089 $1,850
Taxes and other costs 2,115 1,335 1,027
Sublease rentals (642) (916) (953)
$ 6,903 $3,508 $1,924
</TABLE>
Litigation
Several lawsuits are pending against the Company. In the opinion of
management, the Company has meritorious defenses or is covered by
insurance, and the Company's liability, if any, when ultimately determined,
will not be material.
Employment and consulting agreements
The Company has employment and consulting agreements with certain
directors, officers, and employees. Certain agreements provide for minimum
salary levels as well as for incentive bonuses which are payable if
specified performance goals are attained.
NOTE 7 - CAPITAL STOCK:
Common Stock
On February 13, 1996, the Company completed a public offering of 2.18
million shares (including the over allotment option) of common stock at
$8.00 per share. Proceeds from the offering, net of commissions and
expenses, were approximately $16.0 million. The net proceeds from the
offering are being used primarily to finance the Company's store expansion
plans as well as for general corporate purposes, including approximately
$1.0 million to improve its MIS systems capabilities.
Preferred stock
The Company has 1,000,000 authorized (non-issued) shares of preferred
stock, par value $0.001, consisting of 440,000 shares of Series A Junior
Participating Preferred reserved for use under the Stockholders' Rights
Plan and the remainder for other unspecified purposes.
Stockholders' rights plan
Each outstanding share of the Company's common stock carries a stock
purchase right. Under certain circumstances, as defined in a rights
agreement, each right may be exercised to purchase 1/100 of a share of
Series A Junior Participating Preferred Stock for $25.00, subject to
certain anti-dilution adjustments. The rights are redeemable by the
Company or, under certain circumstances, by a third party to whom the
Company assigns its rights at $.01 each until a person or group acquires
fifteen percent of the Company's common stock or until they expire on May
15, 1998.
F-11
<PAGE>
Treasury stock
On February 4, 1993, the Company's Board of Directors authorized the
repurchase from time to time of up to 500,000 shares of its common stock.
The Company purchased 413,600 shares of common stock at an average price of
$4.52 per share under this authorization. In April 1995, the Board
terminated its stock repurchase program.
NOTE 8 - STOCK OPTIONS:
Stock incentive plan
The Company's Stock Incentive Plan (the "Plan") for key employees and
consultants, reserves 500,000 shares of common stock for the issuance of
stock options, stock appreciation rights (SAR's), dividend equivalent
rights, restricted stock, unrestricted stock and performance shares and is
administered by the Compensation and Stock Option Committee (the
"Committee") of the Board of Directors of the Company.
Under the terms of the Plan, options granted may be either non-qualified or
incentive stock options and the exercise price, determined by the
Committee, shall be at least 75% (100% in the case of an incentive stock
option) of the fair market value of a share on the date of grant. SAR's
may be granted (subject to specified restrictions) in connection with all
or any part of, or independently of, any option granted under the Plan. No
SAR's, dividend equivalent rights, restricted stock, unrestricted stock or
performance shares have been granted to date under the Plan. Options
granted under the Plan are exercisable in installments; however, no options
are exercisable within one year or later than ten years from the date of
grant.
Stock option plan for outside directors
The Company's Outside Directors Stock Option Plan reserves 125,000 shares
of common stock for the issuance of stock options related to this plan.
The Stock Option Plan for Outside Directors provides that upon the initial
election to the Board, each eligible director is granted an option to
purchase 5,000 shares of common stock and 4,000 shares each year thereafter
at the fair market value on the date of grant. The options have a term of
five years and become exercisable 50% on the first anniversary of the date
of grant and 50% on the second anniversary of the date of grant.
The following summary sets forth the activity under the Company's stock
incentive plans:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, 1997 February 3, 1996
Shares Price Range Shares Price Range
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 580,359 $3.50-$13.13 501,459 $3.50-$ 6.50
Granted 272,000 $5.63-$ 8.00 213,500 $4.56-$13.13
Exercised (23,500)$3.50-$ 4.81 (115,100) $4.00-$ 6.50
Terminated (198,000)$4.56-$13.13 (19,500) $4.13-$ 6.50
Outstanding at end of
year 630,859 $4.13-$13.13 580,359 $3.50-$13.13
Exercisable at end of
year 312,609 $4.13-$13.13 298,078 $3.50-$ 6.50
Available for grant at
end of year 253,500 279,250
</TABLE>
F-12
<PAGE>
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting For Stock Based Compensation", and, accordingly, no
compensation cost has been recognized for the stock option plans.
The fair value of options at date of grant was estimated using the Black-
Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
<S> <C> <C>
Expected life (years) 5 5
Risk-free interest rate 6.0% 6.5%
Expected volatility 45.3% 35.4%
Dividend yield 0.0% 0.0%
</TABLE>
Had compensation for options granted in Fiscal 1997 and 1996 been
determined consistent with SFAS No. 123, the Company's net loss and net
loss per share would approximate the pro-forma amounts indicated below (in
thousands, except share data).
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
<S> <C> <C>
Net loss $(7,558) $(14,400)
Net loss per share (1.01) (2.71)
</TABLE>
The effects of applying SFAS No. 123 in this proforma disclosure are not
indicative of future effects. SFAS No. 123 does not apply to awards prior
to Fiscal 1996, and additional awards in future years are anticipated.
The weighted average fair value of options granted was $4.09 and $5.17 for
Fiscal 1997 and 1996, respectively.
NOTE 9 - TAXES ON INCOME:
Income taxes (benefit) consist of the following:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3, January 28,
1997 1996 1995
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ - $ - $(1,429)
State and local - - -
- - (1,429)
Deferred - 1,602 (673)
- 1,602 (2,102)
Discontinued operations - 1,602 685
Continuing operations $ - $ - $(2,787)
</TABLE>
F-13
<PAGE>
A reconciliation of the statutory federal income tax rate attributable to
income (loss) from continuing operations to the effective income tax rate
is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal at statutory rates (34)% (34)% (34)%
State and local taxes
net of federal tax benefits (4) (4) (4)
Losses with no current tax
benefit 38 38 -
-% -% (38)%
</TABLE>
The components of deferred tax assets (liabilities) consist of the
following:
<TABLE>
<CAPTION>
Fiscal Years Ended
February 1, February 3,
1997 1996
(In thousands)
<S> <C> <C>
Net operating loss carryforward
(expires 2012) $6,760 $5,742
Capitalizable inventory costs 312 160
Discontinued operations 992 -
Allowance for doubtful accounts 485 485
Restructured operations and other 778 459
Gross deferred tax assets 9,327 6,846
Depreciation (433) (126)
Gross deferred tax liabilities (433) (126)
Net deferred tax assets 8,894 6,720
Valuation allowance 8,894 6,720
Net tax assets $ - $ -
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of revenue and expense for tax and financial statement purposes. Principal
items resulting in deferred income tax liabilities or assets are
differences in depreciation, inventory valuations, restructuring charges
and allowance for doubtful accounts.
As a result of the Company's decision to discontinue the wholesale business
segment, the Company has incurred losses for which no current tax benefits
are available. Management's decision resulted in a reevaluation of its
ability to fully recognize its 1995 deferred tax assets. The provision for
income taxes for the year ended February 3, 1996 results primarily from a
F-14
<PAGE>
reduction in net deferred tax assets. For financial reporting purposes,
the effective tax rate in Fiscal 1996 represents an increase in the
valuation allowance of net deferred tax assets to an amount realizable
based upon taxes paid for prior years without relying on future income.
NOTE 10 - EMPLOYEE RETIREMENT PLANS:
The Company has a 401-k savings plan designed to provide additional
financial security during retirement by providing eligible employees with
an incentive to make regular savings contributions. The Company matches
10% of the first 4% of compensation contributed by the employee.
The Company participates in various multi-employer pension plans.
Contributions and costs are determined in accordance with the provisions of
negotiated labor contracts or terms of the plans. The Company does not
administer or control the plans. One of the plans covering certain former
employees, to which the Company and many other employers made
contributions, has been terminated. The Employee Retirement Income
Security Act ("ERISA") imposes certain liabilities upon employers who are
contributors to a multi-employer pension plan in the event of withdrawal or
termination of such a plan. During the year, the Company agreed to settle
its liability for approximately $780,000, payable in quarterly installments
over 20 years, plus interest at 8% per annum. The liability was provided
for in prior periods and was charged to discontinued operations in those
periods.
NOTE 11 - INDUSTRY SEGMENTS:
The Company operates substantially in one industry segment which includes
the retail sales of children's toys and other products.
NOTE 12 - PROVISION FOR RESTRUCTURED OPERATIONS:
On August 10, 1994, the Company announced the closing of stores operating
under the name Playworld Toy Stores and one leased department operation. A
provision of $3,900,000 was recorded for restructuring costs representing
employee severance costs ($550,000), estimated lease liabilities
($1,050,000), losses on liquidation of inventories ($1,250,000),
disposition of fixed assets ($1,000,000) and other related restructuring
costs ($50,000). This charge increased the net loss for Fiscal 1995 by
$2,340,000, ($.45 per share). The Company provided an additional $500,000
($.09 per share) in Fiscal 1996 primarily to reflect the closing of one
additional store that was not anticipated previously.
F-15
<PAGE>
NOTE 13 - INTERIM FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands except per share data)
<S> <C> <C> <C> <C>
Fiscal Year Ended February 1, 1997:
Sales $ 9,113 $ 9,531 $11,845 $28,921
Gross profit 3,186 3,446 4,604 11,632
Net income (loss) - continuing
operations $(2,693) $(3,075) $(2,468) $ 744
Net income (loss) per share: $ (.37) $ (.41) $ (.33) $ .10
Weighted average shares
outstanding 7,239 7,558 7,574 7,580
Fiscal Year Ended February 3, 1996:
Sales $ 3,281 $ 3,939 $ 6,288 $18,635
Gross profit 1,162 1,396 2,166 7,594
Net income (loss):
Continuing operations (1,226) (1,674) (2,970) 598
Discontinued operations (840) (8,219) -- --
Net income (loss) $(2,066) $(9,893) $(2,970) $ 598
Net income (loss) per share:
Continuing operations $ (.23) $ (.32) $ (.55) $ .11
Discontinued operations (.16) (1.55) -- --
Net income (loss) per share $ (.39) $ (1.87) $ (.55) $ .11
Weighted average shares
outstanding 5,263 5,287 5,356 5,615
</TABLE>
The Company's sales are highly seasonal. Income (loss) per share
calculations for each of the quarters are based on the weighted average
number of shares outstanding for each period and the sum of the quarters
may not necessarily be equal to the full year income (loss) per share
amount.
F-16
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
For the Fiscal Years Ended
February 1, 1997, February 3, 1996 and January 28, 1995
(In thousands)
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged to Deductions Balance at
beginning of costs and other end of
year expenses accounts year
<S> <C> <C> <C> <C> <C>
For estimated losses
in collection:
Year ended February 1,
1997 $ 1,277 $ - $ - $ - $ 1,277
Year ended February 3,
1996 $ 983 $ 581 $ - $ 287 (a) $ 1,277
Year ended January 28,
1995 $ 874 $ 250 $ - $ 141 (a) $ 983
(a) Write-offs net of recoveries
All amounts are included in discontinued operations.
</TABLE>
<PAGE>
EXHIBIT 11.1
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Fiscal Years Ended
February 1, February 3, January 28, January 29, January 30,
1997 1996 1995 1994 1993
(52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C> <C> <C>
(a) Net income (loss) $(7,491,769) $(14,330,657) $(3,394,364) $ 709,487 $1,801,120
(b) Weighted average number
of shares of common
stock outstanding during
year 7,487,803 5,320,137 5.220,222 5,338,012 5,574,547
Income (loss) per share
(a/b) $ (1.00) $ (2.69) $ (.65) $ .13 $ .32
(c) Incremental shares based
on the treasury stock
method for stock options,
using the average market
price 112,631 178,110 141,219 59,673 94,082
(d)Incremental shares based
on the treasury stock
method for stock options,
using the ending market
price 112,625 205,168 153,036 82,310 94,082
Income (loss) per common
and common equivalent
shares (primary)
(a/(b+c)) $ (.99) $ (2.61) $ (.63) $ .13 $ .32
Income (loss) per common
and common equivalent
shares assuming full
dilution (a/(b+d)) $ (.99) $ (2.59) $ (.63) $ .13 $ .32
NOTE: The inclusion of common stock equivalents were antidilutive in Fiscal 1995, 1996,
and 1997 and had no significant dilutive effect on all other years presented, and
therefore, were not utilized in the above computation of income (loss) per share.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Name(s) Under Which
Name of Subsidiary Jurisdiction of Incorporation Subsidiary Does Business
<S> <C> <C>
M.Z. Catalog Services, New Jersey M.Z. Catalog Services, Inc.
Inc.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 11,333
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 17,318
<CURRENT-ASSETS> 31,403
<PP&E> 23,687
<DEPRECIATION> 4,104
<TOTAL-ASSETS> 51,036
<CURRENT-LIABILITIES> 14,584
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 35,690
<TOTAL-LIABILITY-AND-EQUITY> 51,036
<SALES> 59,410
<TOTAL-REVENUES> 59,410
<CGS> 36,542
<TOTAL-COSTS> 36,542
<OTHER-EXPENSES> 31,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> (7,492)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,492)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> (1.00)
</TABLE>
Exhibit 3.6
CERTIFICATE OF OWNERSHIP AND MERGER
OF
C.W.P.W., INC.
(a Michigan corporation)
into
NOODLE KIDOODLE, INC.
(a Delaware corporation)
It is hereby certified that:
1. Noodle Kidoodle, Inc., hereinafter sometimes
referred to as the "Corporation" is a business corporation of the
State of Delaware.
2. The Corporation is the owner of all of the
outstanding shares of stock of C.W.P.W., Inc., which is a
business corporation of the State of Michigan.
3. The laws of the jurisdiction of organization of
C.W.P.W., Inc., permit the merger of a business corporation of
that jurisdiction with a business corporation of another
jurisdiction.
4. The Corporation hereby merges C.W.P.W., Inc., into
the Corporation.
5. The following are resolutions adopted on November
26, 1996, by the Board of Directors of the Corporation to merge
the said C.W.P.W., Inc., into the Corporation:
RESOLVED that C.W.P.W., Inc., be merged into this
Corporation, and that all of the estate, property, rights,
privileges, powers, and franchises of C.W.P.W., Inc., be vested
in and held and enjoyed by this Corporation as fully and entirely
and without change or diminution as the same were before held and
enjoyed by C.W.P.W., Inc., in its name.
RESOLVED that this Corporation assumes all of the
obligations of C.W.P.W., Inc., including without limitation all
obligations arising under leases to which C.W.P.W., Inc., is a
party. Additionally, all obligations of C.W.P.W., Inc., which
had been guarantied by the Corporation shall, on the date of the
merger, become the primary obligations of the Corporation.
RESOLVED upon the effectiveness of the merger, all
property, real, personal and mixed of C.W.P.W., Inc., and all the
debts due on whatever account to C.W.P.W., Inc., as well as all
stock subscriptions and other choses in action belonging to
C.W.P.W., Inc., shall be transferred to and vested in the
surviving corporation; and all claims, demands, property and
other interests shall be the property of the surviving
corporation. The merger shall have all the effects provided by
Section 259 of the Delaware General Corporation Law and Section
450.1724 of the Business Corporation Act of the State of
Michigan.
RESOLVED that this Corporation shall cause to be
executed and filed and/or recorded the documents prescribed by
the laws of the State of Delaware, by the laws of the State of
Michigan, and by the laws of any other appropriate jurisdiction
and will cause to be performed all necessary acts within the
jurisdiction of organization of C.W.P.W., Inc., and of this
Corporation and in any other appropriate jurisdiction to
effectuate this merger.
6. The effective time of the Certificate of Ownership
and Merger shall be January 31, 1997, and that, insofar as the
General Corporation Law of the State of Delaware shall govern the
same, said time shall be the effective merger time.
Executed on January 14, 1997.
NOODLE KIDOODLE, INC.
By:/s/ Stewart Katz
Stewart Katz, President
(..continued)
KL2:167192.2
Exhibit 3.7
PLAN OF MERGER
OF
C.W.P.W., INC.
(a Michigan Corporation)
into
NOODLE KIDOODLE, INC.
(a Delaware Corporation)
PLAN OF MERGER adopted by C.W.P.W., Inc., a business
corporation organized under the laws of the State of Michigan, by
resolution of its Board of Directors on January 9, 1997, and
adopted by Noodle Kidoodle, Inc., a business corporation organized
under the laws of the State of Delaware, by resolution of its Board
of Directors on November 26, 1996. The names of the corporations
planning to merge are C.W.P.W., Inc., a business corporation
organized under the laws of the State of Michigan, and Noodle
Kidoodle, Inc., a business corporation organized under the laws of
the State of Delaware. The name of the surviving corporation into
which C.W.P.W., Inc., plans to merge is Noodle Kidoodle, Inc.
1. C.W.P.W., Inc., is a wholly owned subsidiary of Noodle
Kidoodle, Inc.
2. C.W.P.W., Inc., shall, pursuant to the provisions of
the Business Corporation Act of the State of Michigan and the
provisions of the laws of the State of Delaware, be merged with and
into Noodle Kidoodle, Inc., which shall be the surviving corporation
on the effective date of the merger and which is sometimes
hereinafter referred to as the "surviving corporation", and which
shall continue to exist as said surviving corporation under its
present name pursuant to the provisions of the laws of the State of
Delaware. The separate existence of C.W.P.W., Inc., which is
sometimes hereinafter referred to as the "non-surviving
corporation", shall cease on the effective date of the merger in
accordance with the provisions of the Business Corporation Act of
the State of Michigan.
3. The certificate of incorporation of the surviving
corporation on the effective date of the merger in the State of
Delaware will be the certificate of incorporation of said surviving
corporation and said certificate of incorporation shall continue in
full force and effect until amended and changed in the manner
prescribed by the provisions of the laws of the State of Delaware.
4. The bylaws of the surviving corporation on the
effective date of the merger in the State of Delaware will be the
bylaws of said surviving corporation and will continue in full force
and effect until changed, altered, or amended as therein provided
and in the manner prescribed by the provisions of the laws of the
State of Delaware.
5. The directors and officers in office of the surviving
corporation on the effective date of the merger in the State of
Delaware shall be the directors and officers of the surviving
corporation, all of whom shall hold their directorships and offices
until the election and qualification of their respective successors
or until their tenure is otherwise terminated in accordance with the
bylaws of the surviving corporation.
6. Each issued share of the non-surviving corporation
shall, on the effective date of the merger, be cancelled. The
issued shares of the surviving corporation shall not be converted or
exchanged in any manner, but each said share which is issued at the
effective date of the merger shall continue to represent one issued
share of the surviving corporation.
7. All of the obligations under existing leases of the
non-surviving corporation shall, on the date of the merger, be
assumed by the surviving corporation.
8. All obligations of the non-surviving corporation which
had been guarantied by the surviving corporation shall, on the date
of the merger, become the primary obligations of the surviving
corporation.
9. Upon the effectiveness of the merger, all of the
estate, property, rights, privileges, powers and franchises of
C.W.P.W., Inc., and all of its property, real, personal and mixed,
and all the debts due on whatever account to C.W.P.W., Inc., as well
as all stock subscriptions and other choses in action belonging to
C.W.P.W., Inc., shall be transferred to and vested in the surviving
corporation; and all claims, demands, property and other interests
shall be the property of the surviving corporation. The merger
shall have all the effects provided by Section 259 of the Delaware
General Corporation Law and Section 450.1724 of the Business
Corporation Act of the State of Michigan.
10. The Plan of Merger herein made and approved shall be
submitted to the shareholders of the non-surviving corporation for
their approval or rejection in the manner prescribed by the
provisions of the Business Corporation Act of the State of Michigan,
and the merger of the non-surviving corporation with and into the
surviving corporation shall be authorized in the manner prescribed
by the laws of the State of Delaware.
11. In the event that the Plan of Merger shall have been
approved by the shareholders entitled to vote of the non-surviving
corporation in the manner prescribed by the provisions of the
Business Corporation Act of the State of Michigan, and in the event
that the merger of the non-surviving corporation with and into the
surviving corporation shall have been duly authorized in compliance
with the laws of the State of Delaware, the non-surviving
corporation and the surviving corporation hereby stipulate that they
will cause to be executed and filed and/or recorded any document or
documents prescribed by the laws of the State of Michigan and of the
State of Delaware, and that they will cause to be performed all
necessary acts therein and elsewhere to effectuate the merger.
12. The Board of Directors and the proper officers of the
non-surviving corporation and of the surviving corporation,
respectively, are hereby authorized, empowered, and directed to do
any and all acts and things, and to make, execute, deliver, file,
and/or record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out or
put into effect any of the provisions of this Plan of Merger or of
the merger herein provided for.
13. The effective date of the merger herein provided for
shall be January 31, 1997.
(..continued)
- 3 -
Exhibit 10.7
PURCHASE AND SALE AGREEMENT - Farmingdale Facility
This Purchase and Sale Agreement (this "Agreement") made as
of the 17th day of April, 1996, between Noodle Kidoodle, Inc., a
Delaware corporation, as successor by merger to Noodle Kidoodle,
Inc. f/k/a/ Greenman Bros., Inc., (a New York corporation), having
an office at 105 Price Parkway, Farmingdale, New York 11735
("Seller"), and Reckson Operating Partnership, L.P., a New York
partnership, having an office at 225 Broadhollow Road, Melville,
New York 11747 ("Purchaser").
RECITALS:
1. Sale and Purchase. Seller shall sell and Purchaser shall
purchase, subject to the terms and conditions herein, that
certain parcel of land more particularly described on Schedule A
attached hereto and made a part hereof, located at 105 Price
Parkway, Farmingdale, New York 11735, together with all the
improvements thereon including:
(i) Seller's interest in all buildings, building fixtures
(including all mechanical, electrical, heating and plumbing
systems owned by Seller located on the subject premises and used
in connection with the operation thereof), utilities and other
improvements existing thereon, excluding, however, all personal
property of the Seller including, without limitations, all
equipment, furniture and furnishings.
(ii) Seller's right, title and interest, if any, in and
to: any strips or gores of land adjoining the subject premises;
any land lying in the bed of any street, road or avenue, opened
or proposed, in front of or adjoining the subject premises, to
the center line thereof; any condemnation award made or to be
make in lieu thereof and any unpaid award for damage to the
subject premises by reason of change of grade of any street.
Seller will, upon demand, execute and deliver to Purchaser at the
Closing, all proper instruments for the conveyance of such right,
title and interest and for the assignment and collection of any
such awards, if applicable; and
(iii) Seller's interest, if any, in all easements, rights
of way or uses, privileges, licenses, appurtenances and rights
belonging or appertaining to the subject premises.
The foregoing property to be conveyed to Purchaser is hereinafter
referred to collectively as the "Premises".
2. Purchase Price. The purchase price payable by Purchaser
to Seller for the Premises (the "Purchase Price") shall be Eight
Million Three Hundred Five Thousand Dollars ($8,305,000) payable
as follows:
(a) $700,000 shall be paid contemporaneously with the
execution of this Agreement (the "Deposit"), such Deposit to be
paid to and held in escrow pursuant to Section 3 hereof by First
American Title Insurance Company, the Purchaser's title company,
(hereinafter "First American" or the "Escrowee");
(b) On the date of the closing of this sale (the
"Closing"), the Purchaser shall pay by bank or certified check
drawn on a member bank of the New York Clearing House, or by wire
transfer of Federal Funds, the sum of $7,605,000.00 to Seller or
its designee(s) subject to adjustment as provided herein.
3. Escrow. (a) The Deposit shall be paid by bank or
certified check drawn to the order of and delivered to Escrowee,
to hold in escrow. Escrowee shall deposit the Deposit in an
interest-bearing escrow account separately designated with
reference to Seller and Purchaser. Escrowee shall hold and
distribute the Deposit as provided in this Agreement. The party
receiving any interest earned on the Deposit shall pay any income
taxes thereon. Purchaser represents and warrants that its
federal tax identification number is 11-3233647 and Seller
represents and warrants that its federal tax identification
number is 11-1771705.
(b) Copies of all notices to be sent under Sections 5, 7,
12, 14 and 16 shall be sent to Escrowee as well.
(c) The parties acknowledge that Escrowee is acting solely
as a stakeholder at their request and for their convenience, that
Escrowee shall not be deemed to be the agent of either of the
parties and shall not be liable for any acts or omissions of any
kind, unless they are grossly negligent or taken in willful
disregard of this Agreement or in bad faith. Escrowee shall be
entitled to rely on any instrument or signature believed by it to
be genuine and may assume that any person purporting to give any
written notice or instruction in connection herewith is fully
authorized to do so by the party on whose behalf such written
notice or instruction is given. Escrowee shall not receive any
payment for handling the Deposit. Seller and Purchaser, jointly
and severally, shall indemnify, defend and hold Escrowee harmless
from and against all costs, claims, losses, liabilities and
expenses, including reasonable attorneys' fees, incurred in
connection with or arising from the performance of Escrowee's
duties hereunder, except for acts or omissions which are grossly
negligent or which are taken or suffered by Escrowee in bad
faith, or in willful disregard of this Agreement. However, as
between Seller and Purchaser, the party ultimately determined not
to be entitled to the payment of the Deposit shall bear all such
costs and expenses. Such indemnity shall survive the Closing or
other termination of this Agreement.
(d) Escrowee shall not be responsible in any manner
whatsoever for any failure or inability of Seller or Purchaser to
perform or comply with any of the provisions of this Agreement.
(e) Escrowee shall not be bound or in any way affected by
any notice of any modification or cancellation of this Agreement,
unless notice of the same is delivered to Escrowee in writing,
signed by the Seller and Purchaser and, in the case of a
modification relating to the escrow, unless such modification
shall be reasonably satisfactory to Escrowee solely with respect
to its duties as Escrowee and, in such case, approved by Escrowee
in writing.
4. Section 4 Intentionally Omitted.
5. Seller's Compliance Period
1. Between the date this Agreement is executed and June 8,
1996 ("Seller's Compliance Period"), Seller shall undertake
to do the following:
(A) Asbestos abatement in accordance with all applicable
laws and under the oversight of ATC Environmental, Inc.
("ATC"). Said asbestos abatement shall be carried out
substantially in accordance with the Project Manual for
Asbestos Abatement and Re-Fireproofing dated March, 1996
prepared by ATC and by either of the contractors listed on
Schedule C. At the completion of the abatement project,
Seller shall deliver to Purchaser a written statement from
ATC that the asbestos abatement project has been lawfully
carried out and that all accessible asbestos containing
spray on fire proofing material has been removed and
disposed of in accordance with law and all inaccessible
asbestos was sealed and enclosed. Seller shall also deliver
the so-called "close-out report" which includes air
monitoring data documenting compliance with 12 NYCRR 56-17.8
and a waste disposal manifest and a detailed survey
identifying all locations where friable forms of asbestos
remain in the building.
(B) Take such actions with respect to the underground
petroleum storage tanks located on the Premises so that
Seller shall deliver to Purchaser a statement from the
County of Suffolk in the form attached hereto as Schedule I
(or any similar, substitute form established by the County
of Suffolk) with the first alternative listed checked off.
If the second alternative is checked off, then, to comply
with the requirements of this clause (B), Seller shall
deliver to Purchaser the letter in the form attached hereto
as Schedule I-A from the New York State Department of
Environmental Control (or any similar, substitute form
established by the NYS Department of Environmental Control).
(C) Take such actions with respect to any septic tanks and
systems located on the Premises so that Seller shall deliver
to Purchaser a Certificate of Compliance (form P19) from the
Southwest Sewer District of Suffolk County, and Form S-9
attached hereto as Schedule II (or any similar, substitute
form established by the County of Suffolk).
2. At such time as Seller has complied with clauses (A) (B)
and (C) and copies of the certificates and/or statement have
been delivered to Purchaser, Seller's Compliance Period
shall be deemed to have ended.
3. If at the end of Seller's Compliance Period, Seller
has not completed undertaking (A), (B) and/or (C), Purchaser
shall have the right, to be exercised within 5 days of the
end of Seller's Compliance Period, to either (x) terminate
this Agreement upon written notice or (y) notify Seller that
it is willing to take title to the Premises subject to all
existing conditions including those conditions covered by
this Section 5 and the Purchase Price shall be reduced by
the amount of contract price yet to be performed as
stipulated by Seller's contractor(s). If Purchaser elects
alternative (x), the Deposit shall be returned to Purchaser
together with all accrued interest (as Purchaser's sole and
exclusive remedy) and this Agreement shall terminate and be
of no force and effect. If Purchaser elects alternative
(y), this Agreement shall continue in full force and effect
and Section 6 shall govern with respect to establishing the
Closing Date.
6. Closing
(A) Closing shall be held at the offices of Purchaser or
its counsel. The Closing Date shall be no earlier than 20 days
or later than 30 days after Seller's Compliance Period, (as it
may be extended), or such other date as the parties hereto may
otherwise agree to (provided that this Agreement has not been
previously terminated as provided herein). Purchaser shall
designate the date of Closing within that time frame by notice
given to Seller within five (5) days after the end of Seller's
Compliance Period provided that Purchaser agrees to reasonably
accommodate Seller if Seller requests an alternate date during
that time frame.
B. Deliveries at Closing.
(a) On the Closing Date, Seller shall convey the
Premises to Purchaser by executing, acknowledging (where
appropriate) and delivering to Purchaser the following documents
as may be applicable (and Purchaser shall execute, acknowledge
(where appropriate) and deliver to Seller as indicated, the
following documents):
(i) A bargain and sale deed with covenants against
Grantor's acts (the "Deed") for the Premises in recordable form
conveying fee simple title to the Premises, subject only to the
matters expressed herein and the "Permitted Encumbrances" (as
defined in Paragraph 7 of this Agreement).
(ii) An assignment, duly executed and acknowledged by
Seller, of Seller's interest in all certificates, licenses,
permits, authorizations, consents and approvals relating to the
ownership of the Premises issued by governmental authorities to
the Premises.
(iii) Such resolutions and certificates as First
American shall reasonably require as evidence of the due
authorization of the documents delivered or to be delivered at
Closing; all reasonable and customary affidavits reasonably
required by such title company to permit it to issue to Purchaser
an owner's policy of title insurance, subject to the matters
expressed herein and such other standard title exceptions.
(iv) An affidavit in form and content reasonably
acceptable to Purchaser in accordance with Section 1445 of the
Internal Revenue Code certifying that Seller is not a foreign
entity.
(v) Keys to the buildings and improvements in the
Premises in the possession or control of Seller.
(vi) The Seller's sublease executed as of the date
hereof by New Breed and Seller for a portion of the Premises
consented to by Purchaser.
(b) (i) At Closing, Seller shall deliver a certified check
or official bank check drawn on any banking institution which is
a member of the New York City Clearinghouse Association, payable
to the order of the appropriate State, City or County officer (or
at Seller's option on written notice to Purchaser given not later
than three (3) days prior to Closing, Purchaser shall provide
such check(s) and receive a credit at Closing in the amount
thereof) in the amount of any applicable transfer tax payable by
reason of the delivery or recording of the Deed (other than the
gains tax pursuant to Article 31-B of the Tax Law, which is
covered by section (b) (ii) hereof), together with any required
tax return. Purchaser agrees to duly complete the tax return as
and if required and to cause the check(s) and the tax return to
be delivered to the appropriate officer promptly (but
nevertheless within the time required by applicable law) after
Closing.
(ii) Seller agrees to comply in a timely manner with
the requirements of Article 31-B of the Tax Law of the State of
New York and the regulations applicable thereto, as the same from
time to time may be amended collectively, the "Gains Tax law")
and Seller agrees to make all necessary submissions to the N.Y.S.
Taxing Commission by April 30, 1996. Purchaser agrees to deliver
to Seller a duly executed and acknowledged Transferee
Questionnaire upon the execution of this Agreement. At the
Closing, Seller shall deliver (x) an official Statement of No Tax
Due or (y) an official Tentative Assessment and Return
accompanied by a certified check or official bank check drawn on
any banking institution which is a member of the New York City
Clearinghouse Association, payable to the order of the State Tax
Commission in the amount of the tax shown to be due thereon (it
being understood, however, that if Seller has duly elected to pay
such tax in installments, the amount so required to be paid may
be the minimum installment of such tax then permitted to be
paid). Seller shall pay all Gains Tax due under the Gains Tax Law
as well as New York State real estate transfer tax (deed stamps).
Seller shall have the right after Closing to attempt to reduce
the amount of the Gains Tax; any refund it receives shall belong
exclusively to Seller.
(iii) Seller agrees (A) to pay promptly any
installment(s) or additional tax due under the Gains Tax Law, and
interest and penalties thereon, if any, which may be assessed or
due after the Closing, (B) to indemnify and save Purchaser
harmless from and against any of the foregoing and any damage,
liability, cost or expense (including reasonable attorneys' fees)
which may be suffered or incurred by Purchaser by reason of the
non-payment thereof, and (C) to make any other payments and
execute, acknowledge and deliver such further documents as may be
necessary to comply with the Gains Tax law.
(iv) Purchaser, if request is made not later than three
(3) days prior to Closing, shall provide a separate certified or
official bank check in the amount of the tax shown to be due on
the official Tentative Assessment and Return, which amount shall
be credited against the balance of the Purchase Price payable at
the Closing.
(v) The provisions of this subparagraph (b) shall
survive the delivery of the Deed.
(c) Each party will bear its own attorneys fees.
(d) At Closing, Seller and Purchaser shall deliver or cause
to be delivered such other payments, documents or agreements as
may be required by the terms of this Agreement and to evidence
and effectuate the transaction contemplated herein.
(e) It shall be a condition to Closing that the Deposit and
accrued interest thereon be delivered to Seller by certified or
bank check payable to Seller.
7. Title.
(a) Seller shall convey and Purchaser shall accept
title to the Premises in accordance with the terms of this
Agreement, subject only to the matters expressed herein and the
Permitted Encumbrances. The title that Purchaser is required to
accept as provided herein shall be insured by First American
under an 1992 ALTA Owner's Policy at regular rates. The term
Permitted Encumbrances shall mean (i) all land use, zoning and
similar laws, statutes and regulations now or hereafter
applicable to the Premises ; (ii) the exceptions to title listed
on Schedule B hereto; (iii) the lien of real estate taxes not yet
due and payable ; (iv) any additional exceptions to title arising
as of the Closing, as to which First American agrees to omit
(v) the Seller's sublease and consent agreement; (vi) UCC filings
against Seller's personal property; (vii) the occupancy of a
portion of the Premises pursuant to a Lease between Purchaser and
New Breed Leasing Corporation); (viii) letter agreement dated
October 26, 1992 with Richard and Patricia Miller; and (ix) all
violations of record including without limitation health,
building, street and highway violations.
(b) At or prior to the Closing, Seller shall, at its
option,either (1) take such steps by indemnification or otherwise
satisfactory to First American so as to permit First American to
omit the Payment Encumbrances, defined below, or to insure that
collection of such matters shall not be made from the Premises or
(2) satisfy and discharge any fee mortgages of record and all
other liens and judgments of Seller of record that can be
discharged by payment of a sum certain other than the Permitted
Encumbrances ("Payment Encumbrances"). If Seller fails to take
either of such actions with respect to the Payment Encumbrances
by Closing, Purchaser shall accept the Premises subject to such
Payment Encumbrances and receive a credit, as an adjustment to
the Purchase Price, in the amount reasonably determined by First
American, required to remove or discharge any Payment
Encumbrance of record. If the title update delivered at Closing
discloses any defects in title other than the Permitted
Encumbrances and Payment Encumbrances (the "Unpermitted Non-
Payment Encumbrances"), Purchaser may, at its option, terminate
this Agreement by giving Seller five days prior written notice
at the Closing to Seller in which event this Agreement shall be
of no force and effect and the Deposit and interest thereon shall
be returned to Purchaser as its sole and exclusive remedy unless
within the said five day period, Seller has First American omit
any such Unpermitted Non Payment Encumbrance in which event the
Closing will be rescheduled to the earliest date reasonably
possible. In the alternative, at Closing Purchaser may accept
such title subject to the Unpermitted Non-Payment Encumbrances
without reduction or adjustment of the Purchase Price. Payment
of the Purchase Price shall be conclusive evidence that Purchaser
has so accepted title. Seller shall under no circumstances have
any obligation to cure any such Unpermitted Non Payment
Encumbrances or title defect or have any liability with respect
thereto.
8. Representations and Warranties of Seller.
(a) Seller represents that the following is true and
correct as of the date hereof and the same shall be true as of
the Closing:
(i) Seller has the legal right, power, and authority
to enter into and perform its obligations under this Agreement
and the individual signing on behalf of Seller has authority to
bind Seller; and all action necessary or appropriate for Seller's
execution and performance of this Agreement has been taken; and
upon Seller's execution, this Agreement and the other such
documents will constitute legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their
respective terms except as may be limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditor's rights.
(ii) Seller is not the subject of any insolvency,
bankruptcy or other similar proceeding.
(iii) The Premises will be delivered at Closing free
of any tenancies and occupants other than Seller pursuant to its
sublease and non disturbance agreement(and the New Breed Lease).
(iv) There are no service contracts relating to the
operation, maintenance or repair of the Premises or the personal
property located thereon other than those which will be
terminated on or prior to Closing.
(v) To Seller's knowledge, there are no existing,
pending or, to its knowledge, threatened condemnation, zoning or
other land use proceedings or road widening proceedings affecting
or pertaining to the Premises. Seller has not received any
notice of any violations of or claim under or pursuant to any
Environmental Law except as set forth on Schedule III. Except as
set forth on Schedule III, Seller (without having made any
independent investigation of its own)is not aware of any
Environmental Activity at the Premises or the existence of any
Hazardous Materials at the Premises.
(vi) Seller is not a "foreign person" as defined in the
Internal Revenue Code Section 1445 and the regulations issued
thereunder.
(vii) Seller has fee simple title to the Premises
subject to the Permitted Encumbrances and the other matters
expressed herein.
(viii) As of the date of the signing of this
Agreement, there is no litigation, proceeding or claim pending,
or to Seller's knowledge, threatened in writing, which (A)
materially adversely affects Seller's title to the Premises, or
(B) materially adversely affects Seller's ability to perform its
obligations under this Agreement.
(ix) Seller will maintain the insurance policies
(currently in effect) with respect to the Premises listed on
Schedule IV:
(x) Seller will maintain the Premises and otherwise
operate the Premises in the same manner as before the making of
this Agreement.
(xi) From and after the date hereof Seller shall not
enter into any mortgage or security agreement affecting the
Premises or any portion thereof or enter into any agreement,
undertaking or instrument affecting title to or the use of the
Premises without Purchaser's prior written approval provided that
Seller shall have the right to enter into or grant such easement
or similar rights as would be considered Permitted Encumbrances
under clause (iv) of that definition.
(xii) Seller has delivered to Purchaser the
Certificates of Occupancy for the Premises.
(b) Purchaser's right to make a bona fide claim against
Seller for the untruthfulness of any matter set forth in this
Paragraph 8 shall survive the Closing but not the termination of
this Agreement for a period of three (3) months only provided
that clauses (i), (v), (vii), (viii), (x), (xi) and (xii) shall
not survive Closing or the termination of this Agreement. In the
event that Purchaser had knowledge at the Closing of the
untruthfulness of any matter set forth in this Paragraph 8,
Purchaser shall be deemed to have waived such matter and its
right to make any claim against Seller. Under no circumstance
shall Purchaser be entitled to make any claim for special or
consequential damages or recision.
9. Representations and Warranties of Purchaser.
(a) Purchaser represents and warrants to the Seller as
follows:
(i) Purchaser has full power to execute, deliver and
carry out the terms and provisions of this Agreement and has
taken all necessary action to authorize the execution, delivery
and performance of this Agreement. The individual(s) executing
this Agreement on behalf of Purchaser has the authority to bind
Purchaser to the terms and conditions of this Agreement. This
Agreement and all documents required hereby to be executed by
Purchaser, when so executed, shall be legal, valid and binding
obligations of Purchaser enforceable against Purchaser in
accordance with their respective terms except as may be limited
by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditor's rights.
(ii) Purchaser will be accepting the Premises in an "as
is" condition including, without limitation, all of the matters
disclosed on the Engineers Report attached hereto as Schedule D
as well as the matters set forth on Schedule III subject,
however, to Section 5 and Section 16. Other than its right to
cancel as provided in Sections 5 and 16, Purchaser hereby waives
any and all claims whatsoever it might have with respect to the
nature or condition of the Premises. Purchaser understands that
Seller is under no obligation whatsoever, to make any
alterations, repairs, renovations, improvements of any nature or
kind to the Premises. Seller, however, shall have all of its
personal property removed from that portion of the Premises it is
not occupying under its Sublease by the Closing Date and said
portion shall be delivered in a "broom clean" condition.
(iii) Before entering into this Agreement, Purchaser
has made all examinations, inspections and investigations of the
operation, condition, income and expenses of the Premises and all
other matters affecting or relating to this transaction as
Purchaser deemed necessary or desirable. In entering into this
Agreement, Purchaser has not been induced by and has not relied
upon any representations, warranties or statements, whether
express or implied, made by Seller or any agent, employee or
other representative of Seller or by any broker or any other
person representing or purporting to represent Seller, which are
not expressly set forth in this Agreement, whether or not any
such representations, warranties or statements were made in
writing or orally.
(iv) No Litigation. As of the date of the signing of
this Agreement, there is no litigation, proceeding or claim
pending, or to Purchaser's knowledge, threatened in writing,
which materially adversely affects Purchaser's ability to perform
its obligations under this Agreement.
(b) The provisions set forth in this Section 9 shall
survive the Closing but not the termination of this Agreement.
10. Apportionments. (a) The following shall be
apportioned and adjusted between Seller and Purchaser as of
midnight of the day preceding the Closing Date:
(i) real estate and other taxes, assessments and
charges (provided that same shall not include taxes based on the
income or profits of Purchaser or Seller), and other municipal
and state charges, license and permit fees (provided that same
shall not include fees or charges for operating the business of
either party other than those arising out of the operation or
ownership of the Premises), if any, on the basis of the fiscal
period for which assessed or charged;
(ii) water and sewer rents and charges on the basis of
the fiscal period for which assessed or charged;
(iii) water, electric, gas, steam and other utility
charges for services furnished to the Premises;
(iv) fuel, if any, and all taxes thereon, on the basis
of a reading taken as late as possible prior to the Closing
Date, at the price then charged by Seller's supplier, including
any taxes;
(v) such additional adjustments as are normally made
in connection with the sale of buildings in New York State or as
may be provided herein.
(vi) Intentionally omitted.
(vii) all interest accrued on the Deposit shall be
credited against the Purchase Price.
(b) Aggregate apportionments payable at the Closing by
either party hereto must be paid by certified check, wire
transfer or attorney's check.
(c) The obligation to adjust as provided hereunder, shall
survive Closing (but not the termination of this Agreement) to
the extent any amounts are not known or incorrectly computed.
11. Recording Charges.
(a) Purchaser shall pay the recording fees imposed for
recording of the Deed and for recording of any other incidental
documents related to conveyance of title to Purchaser. It being
expressly understood and agreed that Seller shall not be
responsible for any fees, taxes or other charges relating to the
recording of Purchaser's mortgage or other financing documents,
if any.
12. Intentionally omitted.
13. Tax Reduction Proceedings. There are, as of the date
hereof, no presently pending tax reduction proceedings involving
the Premises. If any such proceeding is commenced by Seller
prior to Closing, Purchaser shall continue prosecution of same,
which Purchaser may settle and resolve in its sole and reasonable
discretion. If Purchaser obtains a refund by commencing its
own proceeding, the refund, less the legal fees incurred in
connection therewith, shall be apportioned between Seller and
Purchaser as provided herein. The provisions of this Section 13
shall survive the Closing but not the termination of this
Agreement. Purchaser shall commence a tax reduction proceeding
involving the Premises no later than May 3, 1996 and if the
transaction contemplated herein does not close as provided
herein, Purchaser shall assign all of its right, title and
interest in such action to Seller in a written instrument
satisfactory to Purchaser's counsel.
14. Liquidated Damages. (a) If Purchaser shall fail to
close title in accordance with all of the terms and provisions of
this Agreement all monies theretofore paid or deposited by
Purchaser under this Agreement (and interest accrued thereon)
shall be retained by Seller as liquidated damages (which the
parties hereby acknowledge are fair and equitable and not a
penalty) as its sole and exclusive remedy and this Agreement
shall terminate and be of no force and effect, and the parties
hereto shall not thenceforth have any claim of any nature against
the other party hereto.
(b) In the event Seller (assuming Purchaser has
unconditionally waived all of its rights hereunder to terminate)
does not convey title at Closing as a result of a wrongful,
willful failure by Seller, Purchaser shall be entitled to
undertake any legal or equitable remedies available to it
including, without limitation, a suit for specific performance.
15. Brokerage. Each party represents to the other that it
has not dealt with any broker, agent, or finder in connection
with the transactions contemplated by this Agreement, other than
Sutton and Edwards Incorporated (the "Broker"). Each party shall
indemnify and defend the other party from any loss incurred by
the other party, including reasonable legal fees and
disbursements, arising out of a breach of the foregoing
representations made by such party under this Section 15. Seller
shall be responsible for any fees due to Broker in connection
with the transaction contemplated by this Agreement provided that
Purchaser shall be responsible to pay Broker or any other entity
or individual claiming any compensation with respect to Seller's
Sublease and/or the New Breed Lease. Notwithstanding anything to
the contrary in this Agreement, the representations and
indemnifications of the parties under this paragraph 15 shall
survive either the Closing or the termination of this Agreement.
16. Risk of Loss; Eminent Domain.
(a) The parties hereby waive the provisions of Section 5-
1311 of the New York General Obligations Law.
(b) If, prior to Closing, any portion of the Premises
shall be damaged or destroyed by fire or other cause, Seller
shall as soon as practicable, but in no event later than 10 days
after the occurrence of such damage or destruction notify
Purchaser of the estimated cost of restoration of the Premises as
determined by written estimate of an independent, duly licensed
construction contracting firm or architect with at least 5 years
experience selected by Seller from the following list which list
is hereby approved by Purchaser:
1) IVI
2) Herzbeg Sanchez
3) Emanuel Neeval
If the cost of repairing the damage or casualty shall be $300,000
or more , then this Agreement shall terminate and be of no force
and effect and Purchaser (as its sole and exclusive remedy) shall
receive the Deposit with all accrued interest unless Purchaser
elects by written notice given to Seller within 5 business days
of receipt of said estimate to purchase the Premises "as is", In
which event the Closing shall take place on the later of the date
established under Section 6 or ten days after Purchaser's written
election to purchase "as is". If the estimated cost of repair is
less than $300,000, then this Agreement shall continue in full
force and effect and Seller shall give Purchaser a credit against
the Purchase Price in an amount (not to exceed $300,000) equal to
the estimated cost of repair (as set forth in the estimate sent
to Purchaser) and Seller shall retain all rights to any insurance
proceeds. In all events Seller shall have no obligation to repair
or restore the Premises. If the cost of repair exceeds $300,000
and Purchaser shall not elect to terminate as set forth above,
then the Purchase Price shall be reduced by $300,000 and Seller
shall retain a priority right to the insurance proceeds up to
$300,000 and , the balance of the proceeds shall be assigned to
Purchaser (if title is transferred to Purchaser).
(c) If, prior to the Closing, any condemnation or eminent
domain proceedings are initiated which could result in the taking
of any part of the Premises, Seller shall promptly notify
Purchaser of such initiation and the following shall apply.
(i) If the taking is or would be material and
permanent as defined below, this Agreement shall automatically
terminate and be of no further force and effect and the Purchaser
shall receive the Deposit (as its sole and exclusive remedy) with
all accrued interest.
(ii) If the taking is either not material or non-
permanent, then this Agreement shall continue in full force and
effect without any adjustment in the Purchase Price because of
such taking or condemnation, in which event Seller shall assign
to Purchaser (without recourse to Seller) all of Seller's rights,
title and interest in and to any award made in connection with
such condemnation or eminent domain proceedings.
(d) If any taking shall be for a period of more than
one year it shall be deemed "permanent". If more than 10% of the
non-improved portion of the Premises is subject to such permanent
taking it shall be deemed to be "material".
(e) Notwithstanding the determination that the
condemnation or taking is material or permanent as defined
herein, Purchaser may, by written notice to Seller given within 5
business days of Seller's notice concerning the condemnation or
taking, agree to purchase the Premises in which event this
Agreement will continue in full force and effect and at the
Closing, Seller shall assign all of its right, title and interest
in any awards to Purchaser and the Purchase Price shall not be
adjusted because of such condemnation or taking.
17. Limitation on Survival of Representations. Except as
specifically provided for in this Agreement, no covenant,
representation or warranty of either Seller or Purchaser shall
survive the Closing or termination of this Agreement and the
delivery of the Deed by Seller; and the acceptance thereof by
Purchaser, shall be deemed the full performance and discharge of
every obligation on the part of Seller except those which are
expressly stated in this Agreement to survive the Closing.
18. Notices, Etc. All notices, consents, approvals and
other communications under this Agreement shall be in writing and
shall be deemed given the third business day after mailing by one
party addressed as follows:
If to Seller:
Noodle Kidoodle, Inc.
105 Price Parkway
Farmingdale, New York 11735
Attn: Stewart Katz, President
with a copy to:
Charles Bartel, Esq.
Ferrara, Turitz, Harraka & Goldberg, P.C.
505 Main Street
Hackensack, New Jersey 07601
If to Purchaser:
At the address set forth above.
with a copy to:
Lazer, Aptheker, Feldman, Rosella & Yedid, L.L.P.
35 Pinelawn Road
Melville, New York 11747
Attention: Lawrence Feldman, Esq.
Any writing which may be mailed pursuant to the foregoing may
also be delivered by hand or transmitted by telegraph, telex or
telecopier or by overnight courier service of recognized national
standing with guaranteed next-day delivery, and shall be
effective when received by the addressee. Any notices which
either party may be required to give or may desire to give; any
consents by either party under this Agreement; and any
adjournments of the Closing Date may be given or consented to by
the attorney for such party with the same force and effect as if
given or consented to by such party. Either party may, from time
to time, specify as its address for purposes of this Agreement
any other address upon the giving of 5 days' notice thereof to
the other party.
19. Integration. All understandings and agreements
between the parties with respect to the subject matter of this
Agreement are merged in this Agreement, which alone fully
expresses their agreement with respect to such subject matter.
20. Consents, Approvals, Etc. Whenever the consent or
approval of a party is required under any provision of this
Agreement or a matter is subject to the satisfaction of a party,
such party shall not unreasonably delay or withhold such consent
or approval and shall not be unreasonable in deciding whether
such matter is satisfactory.
21. No Assignment. Purchaser may assign its rights
hereunder provided such assignment shall in no way act to relieve
Purchaser of any of its obligations hereunder. To be effective
any such assignment (i) must be in writing, (ii) a copy thereof
must be delivered to Seller within three days of its execution or
at Closing whichever occurs first, (iii) the assignee must
unconditionally assume all of Purchaser's obligations hereunder,
and (iv) Purchaser must confirm its continuing liability
hereunder.
22. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York.
23. Amendments and Waivers. Neither this Agreement nor
any of the terms hereof may be terminated, amended or waived
orally, but only by an instrument in writing signed by the party
against which enforcement of the termination, amendment or waiver
is sought, and then only to the extent set forth in such
instrument. No waiver of any breach of this Agreement or of any
provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof or of this Agreement or of
any provision herein contained. No extension of time for
performance of any obligations to be performed hereunder shall be
deemed an extension of the time for performance of any other
obligations hereunder.
24. Interpretation. The headings of the various
subdivisions of this Agreement are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof. All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the
person or persons may require.
25. Recording. Purchaser shall not record, or cause to
be recorded, this Agreement or any memorandum thereof.
26. No Third Party Beneficiaries. Seller and Purchaser do
not intend to confer any benefit by or under this Agreement upon
any person or entity other than Seller and its successors and
assigns and Purchaser and its permitted successors and assigns.
27. Purchaser's Lien. The Deposit and the reasonable
actual costs incurred by Purchaser in connection with this
Agreement for title examination and survey expenses, shall be
liens against the Premises; provided, however, in the event
Purchaser is in default under this Agreement, all such liens
shall be automatically null and void.
28. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart.
29. Certain Definitions. To the extent utilized herein,
"Environmental Activity" means any use, storage, release,
threatened release, emission, disposal, escape, seepage, leakage,
spillage, pumping, pouring, emptying, injection, dumping,
presence, migration, transferring, manufacturing, discharge,
generation, processing, abatement, removal or disposition of any
Hazardous Materials from, under, into or on the Premises or the
groundwater beneath the Premises or any handling, transportation
or treatment of Hazardous Materials arranged by or on behalf of
Seller and relating to the Premises.
To the extent utilized herein, "Environmental Laws" means
any current federal, state or local statute, code, ordinance,
rule, regulation, permit, consent, approval, license, judgment,
order, writ, decree, injunction, guidance or policy statement or
other authorization, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended (42 U.S.C. Section 9601 et seq.), the Resource
Conservation and Recovery Act as amended (42 U.S.C. Section 6901 et
seq.), the Hazardous Materials Transportation Act, as amended,
(49 U.S.C. Section 1801 et seq.), the Clean Air Act, as amended (33
U.S.C. Section 1251 et seq.), the Federal Water Pollution Control Act,
as amended (33 U.S.C.Section 1251, et seq.), the New York State
Environmental Conservation Law, as amended, the Sanitary Code of
Suffolk, and any applicable requirements to register underground
storage tanks, relating to emissions, discharges, releases or
threatened releases of Hazardous Materials into ambient air,
surface water, groundwater, publicly owned treatment works,
septic systems or land, or otherwise relating to the pollution or
protection of health or the environment.
To the extent utilized herein, "Hazardous Materials" means
(a) any substance, material or waste defined, used or listed as a
"hazardous waste", "extremely hazardous waste", "restricted
hazardous waste", "hazardous substance", "hazardous materials",
"toxic substance" or other similar terms as defined or used in
any Environmental Laws, and (b) any petroleum products, asbestos,
polychlorinated biphenyls, flammable explosives or radioactive
materials,
30. Exchange Language. Like-Kind Exchange. Seller
acknowledges that Purchaser has advised Seller that Purchaser may
exchange the Premises for real property of like kind under such
terms and conditions that qualify as an exchange within the
meaning of Section 1031 of the Internal Revenue Code of 1986, as
amended. Notwithstanding any other provisions of this Agreement
to the contrary, the following conditions are agreed and
understood by the parties hereto:
Purchaser shall have the right, to assign this Agreement to
a trustee under an exchange trust agreement to facilitate a like
kind exchange under Internal Revenue Code Section 1031 provided
that the last sentence of paragraph 21 shall be complied with.
Seller shall not be required to incur any cost or liability
or spend or advance any sums of money in excess of that which
Seller otherwise would have been required to incur or expend in
connection with the sale of the Premises; all such excess sums of
money and all such costs and liabilities shall be the
responsibility of an provided by Purchaser, and shall be paid or
undertaken, as the case may require, by Purchaser in accordance
with the provisions of the exchange trust agreement.
WITNESS: SELLER:
/s/Charles Bartel By:/s/Stewart Katz, President
Stewart Katz
WITNESS: PURCHASER:
_________________________ By:/s/Mitchel Reckson
The undersigned hereby agrees to act as Escrowee pursuant to
the terms of the Purchase and Sale Agreement set forth above and
pursuant to the Rider annexed hereto acknowledges receipt of the
Deposit.
FIRST AMERICAN TITLE INSURANCE, INC.
By:/s/Andrew S. Knee, Sr. V.P.
ESCROWEE
G:\MAIN\CORPS\CO-3376\6thPSA.401
RIDER TO CONTRACT OF SALE
ADDITOINAL ESCROW PROVISIONS
1. Escrowee acknowledges its receipt of the Deposit by
check and agrees to hold it pursuant to the provisions of this
Agreement for the benefit of each of Purchaser and Seller in
accordance with the Contract. The Deposit shall be invested in a
money-market account at either Chemical Bank or EAB in a Nassau
County Branch, New York or other interest bearing account with a
federally insured banking or savings institution having offices
in New York City as selected by Escrowee and agreed to by Seller
and Purchaser. It is expressly acknowledged by Seller and
Purchaser that Escrowee shall be permitted and obligated to
deposit the funds with a federally insured institution, but each
recognizes and agrees that the limits of such insurance may be
less than the total funds on deposit and that Escrowee shall not
be required to spread the funds among different institutions in
order to fall within the federal insurance coverage limitations.
Escrowee shall have no liability for the loss of principal or
interest on the deposited funds by any depository or the failure
of a depository to return the principal of, or pay interest on,
the deposited funds when requested, or for any other default,
action or in action on the part of such depository. Seller and
Purchaser understand that it may take some time to deposit the
funds and some time to withdraw the funds and that the funds will
earn no interest during such times. The term "Deposit" as used
herein shall, unless otherwise provided, be deemed to include any
and all interest earned on the Deposit pursuant to this
Agreement.
2. If a dispute shall arise as to the disposition of the
Deposit or if Escrowee shall be uncertain as to its duties or
rights hereunder, Escrowee is authorized to (x) refrain from
taking any action other than to keep safely the Deposit, except
to comply with the judgment of a court of competent jurisdiction
as to the disposition thereof, or (y) deposit or turn over the
Deposit with or to any court of competent jurisdiction and
thereupon be relieved from all responsibilities with respect
thereto.
LIST OF SCHEDULES
Schedule A................................. Legal Description
Schedule B............................ Permitted Encumbrances
Schedule C............................... List of Contractors
Schedule D................................. Engineer's Report
Schedule I................................ County Certificate
Schedule I-A..................................... Dec. Letter
Schedule II......................................... Form S-9
Schedule III........................... Environmental Matters
Schedule IV........................................ Insurance
SCHEDULE "A" - Legal Discription
FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK
Title No. 151-S-1422
ALL that certain plot, piece of parcel of land, situate,
lying and being at Farmingdale, Town of Babylon, County of
Suffolk and State of New York, more particularly bounded and
described as follows:
BEGINNING at a point on the Northerly side of Price Parkway,
which point of beginning is 1547.61 feet, West of the corner
formed by the intersection of the Westerly side of Broad Hollow
Road and the Northerly side of Price Parkway;
RUNNING THENCE along the Northerly side of Price Parkway,
South 72 degrees 58 minutes 48 seconds West, a distance of 736.62
feet;
THENCE North 40 degrees 22 minutes 06 seconds West, 266.91
feet;
THENCE North 23 degrees 09 minutes 16 seconds East, a
distance of 419.99 feet, to a point;
THENCE along the arc of a curve, bearing to the right, the
radius of which is 310 feet and the arc angle of which is 56
degrees 45 minutes 26 seconds for a length of 307.09 feet, to a
point;
THENCE North 21 degrees 44 minutes 52 seconds East a
distance of 43.64 feet;
THENCE North 68 degrees 15 minutes 08 seconds West, a
distance of 320 feet;
THENCE South 21 degrees 44 minutes 12 seconds West, a
distance of 464.44 feet;
THENCE North 68 degrees 15 minutes 48 seconds West, 58 feet;
THENCE North 21 degrees 44 minutes 12 seconds East, 522.44
feet;
THENCE South 68 degrees 15 minutes 08 seconds East, a
distance of 677.55 feet;
THENCE South 17 degrees 01 minutes 12 seconds East, a
distance of 565.39 feet, to the point or place of BEGINNING.
SCHEDULE "B" - Permitted Encumbrances
FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK
Title No. 151-S-1422
Hereinafter set forth are additional matters which will
appear in our policy as exceptions from coverage unless disposed
of to our satisfaction prior to the closing of delivery of the
policy.
DISPOSITION:
1. Any state of facts which an accurate survey of current date
would disclose.
2. The exact location, courses, distances and dimensions of the
premises described in Schedule A are not insured without a
survey thereof acceptable to this Company.
3. Covenants and/or restrictions set forth in a(n) Declaration by
and between East coast Lumber Terminal, Inc., dated October 4,
1954, recorded October 21, 1954, in Liber 3777 page 424. (See
Within).
4. Covenants and/or restrictions set forth in a(n) Declaration by
and between East Coast Lumber Terminal, Inc., dated September
17, 1954, recorded October 21, 1954, in Liber 3777 page 426
(See Within).
5. Easement contained in deed by and between East Cost Lumber
Terminal, Inc., and S.K. Plainview Corp., dated January 26,
1961, in Liber 4944 page 359 (See Within) not located.
6. Rights and Easements contained in instrument dated June 15,
1962, by and between The Long Island Railroad Company and East
Coast Lumber Terminal, Inc., recorded July 23, 1962, in Liber
5201 page 179 (See Within), as amended by Indenture by and
between the Long Island Railroad Company and Virgil M. Price
Industrial Park, Inc., dated December 10, 1965, recorded
January 28, 1966, in Liber 5903 page 83. (See Within).
7. Terms, Covenants, Conditions and Easements in Agreement by and
between East Coast Lumber Terminal, Inc., and Max L. Bliss,
dated June 30, 1962, recorded September 23, 1962, in Liber
5236 page 68 (See Within) Easements not located.
8. Covenants and/or restrictions set forth in a(n) Declaration by
and between Virgil M. Price Industrial Park, Inc., recorded
April 10, 1963, in Liber 5331 page 479. (See Within).
9. Drainage Easement contained in instrument dated February 26,
1976, by and between Greenman Bros., Inc., and town of
Babylon, recorded May 28, 1976, in Liber 8040 page 597 (See
Within) (Affects Easterly 39.5 feet and Northerly portion of
premises (not specifically located).
10. Covenants and/or restrictions set forth in a(n) deed by and
between Marlyn Associates and 85 Willis Avenue Realty Corp.,
dated January 31, 1969, and recorded February 25, 1969 in
Liber 6510 at page 282. (See Within).
SCHEDULE "C" - List of Contractors
SCHEDULE C TO CONTRACT BETWEEN
NOODLE KIDOODLE, INC.
AND
RECKSON OPERATION PARTNERSHIP
EWT Contracting
47-47 58th Street
Woodside, New York 11377
(718) 533-8306
Asbestos Containment Services
1 World Trade Center
New York, New York 10048
(212) 912-1620
<TABLE>
<CAPTION>
SCHEDULE "D" - Engineer's Report
REMEDIAL COST ESTIMATES
DEFERRED MAINTENANCE & EXISTING DEFICIENCIES
COST ESTIMATE
No. DESCRIPTION IMMEDIATE SHORT-TERM
(0-1 Year)
<S> <C> <C> <C>
1.1 Apply Coal Tar Sealant (3-Coats) to Parking Areas &
Drives - Asphalt pavement is severely oxidized and
encumbered by cracks and oil staining in the parking
spaces. $12,200
Clean all surface cracks 1/4" or larger and fill using
a hot rubberized crack filler ASTM 3405. Clean all
surfaces and prime all oil spots. Squeegee apply Poly-
Tar Coal Tar Emulsion or equal sealer. First coat
(primer) to be without sand, and the second and third
coasts are to include 6 lbs. Sand per gallon of emul-
sion. Upon completion, re-stripe parking lot and all
directional stenciling. $ 500
1.2 Replace Deteriorated Sections of Asphalt Pavement -
Paved parking areas are encumbered by cracks, soft
areas having extensive crazing and alligatoring of
the surface, and deteriorated sections. Previous
patch type repairs were noted. $ 1,500
Saw cut and excavate to a depth of 6" asphalt paving
from deteriorated sections. Install 6" of suitable
base material, either Item IV or crushed limerock, and
compact. Apply liquid tack coat for bonding. Install
1 1/2" of Type III asphalt, and machine roll for com-
paction and smooth finish. Cost will vary depending
upon the area replaced.
1.3 Replace Concrete Walkway Sections - Significant
sections of walkways are severely cracked, settled and
heaved. Such condition is noted at the main entrance
on the south side of the building. Remove deteriorated
sections, prepare bed, and install new 4" thick side-
walks complete with W.W.F. and expansion joints.
Sections that exhibit cracks but that do not warrant
replacement should have all cracks pointed with a non-
shrinking grout. $500
1.4 Repair Cracked and Spalled Steps, and Replace Hand-
rails - The concrete steps located at service areas
are cracked, deteriorated, and spalled. Complete
replacement does not appear to be necessary at this
time. However, patching of cracked and deteriorated
surfaces is recommended. Replace damaged steel pipe
railings with new painted units. $ 3,500
2.0 Substructure & Superstructure
2.1 Superstructure: Replace Missing & Damaged Fire-
proofing Applied to Structural Steel - Fireproof
covering to the steel beams located at the mezza-
nine level area is missing or damaged. Similarly,
column fireproofing is also lacking at some areas.
All beam and girder fireproofing should be repaired,
damaged column fireproofing removed, the column
examined for soundness, and its fireproofing restored. $ 1,000
3.0 Exterior - Stone, Concrete & Masonry Systems
3.1 Repair Brick & CMU Walls - Masonry facade walls are
cracked, have open mortar joints, are displaced,
spalled, and damaged by service vehicles. Seal and
grout all open joints, cracks and wall penetrations,
and replace damaged masonry walls. $15,000
3.2 Fenestration & Doors: Paint Service Doors and
Miscellaneous Metals - Paint on hollow metal doors,
railings and miscellaneous metals is faded and
weathered. Wire brush and prepare surfaces,
prime and apply two (2) coats of Glidden Industrial
Enamel #4550, or equal. $ 2,000
4.0 Roof
4.1 Apply aluminum Reflective Coating to Smooth-Surface
Built-up Roof - Existing reflective coating is
beginning to fade. A re-application of an aluminum
coating is recommended to reflect the sun's heat to
prevent further drying-up of the remaining flood
coat, to reduce the building's cooling load, and to
extend the expected useful life of the BUR system. $75,200
Make necessary remedial flashing repairs and broom
sweep roof of all debris. Further clean roof surface
with Castrol Super Clean, or equal, diluted with 10 parts
water. Then apply Karnak Aluminum Coating or equal
in full conformance with manufacturer's instructions.
Budget cost over three (3) years with 1/3 of the roof
to be coated each year.
5.0 Interior
5.1 Repair CMU Warehouse Wall - Loose and displaced CMU at
an interior warehouse wall at the northwest corner appear
to be in eminent danger of falling. Remove loose
masonry and repair the hazardous condition. $500
5.2 Replace Stained and Damaged Ceiling Tiles - Numerous
acoustic ceiling tiles are damaged, missing or stained
from roof leaks. Budget replace with new ceiling tiles. $ 500
7.0 Heating, Ventilation & Air Conditioning
7.1 Repair Leaks at Boilers - There are indications of water
circulator pump leaks and oil leaks. Replace or repair
pumps as necessary. $ 500
7.2 Refurbish Space Heaters - Hydronic space heaters in the
require refurbishing with new fans, motors, pumps, etc. $12,000
7.3 Replace HVAC System - Five (5) original equipment air
handling units have realized its EUL. Numerous repairs
have not rectified the problems. Replace with package
RTU's to be phased-in over three (3) years. $ 7,700
8.0 Electric
8.1 Relamp and Provide new Ballasts - The 400 watts HPS lights
require relamping and new ballasts. The original units
have realized their EUL. $ 5,000
8.1 Perform Electrical Repairs and Maintenance - Rusted EMT
at the roof area, loose wiring, missing cover plates,
etc. were noted throughout the building. Perform
replacement and repairs to comply with code requirements. $ 5,000
Total: $ 1,000 $141,600
Rounded Total: $ 1,000 $142,000
</TABLE>
SCHEDULE "I" - County Certificate
COUNTY OF SUFFOLK
ROBERT J. GAFFNEY
SUFFOLK COUNTY EXECUTVE
DEPARTMENT OF HEALTH SERVICES MARY E. HIROCAD,
M.D., M.P.H.
COMMISSIONER
Date: October 5, 1996
To: G & M Dege From: Suffolk County Department
250 Orchard Road of Health Services
E. Patchogue, NY 11772 Bureau of Hazardous
Materials
15 Horseblock Place
Farmingville, NY 11730
Re: Decommissioning of Underground Storage Tanks
SCDHG ID # 2-1672
Facility Name:
Facility Address:
Gentlemen/Madem:
This is to confirm that on a representative of this
department witnessed the proper [ ] removal / [ ] abandonment in
place of the following above/underground tank(s):
___________________________ _______________________________
___________________________ _______________________________
___________________________ _______________________________
___________________________ _______________________________
___________________________ _______________________________
[X] This required inspection of the tank removal(s) reveals no
visible ground contamination within the excavation.
[ ] This required inspection of the tank removal(s) revealed
ground contamination.
[ ] This required inspection of the tank abandonment(s) con-
firmed that this tank was properly cleaned and filled with
sand/concrete. Samples taken from the required groundwater
monitoring wells will be analyzed by the NYSDEO and they
will notify you of any necessary remedial action.
Very truly yours,
/s/John A. Gladyez
Bureau of Hazardous Materials
JOHN A. GLADYEZ
SR. PUBLIC HEALTH SANITARIAN
SCHEDULE "I-A" - Dec. Letter
(516) 444-0320
__________________________
__________________________
__________________________
RE: Spill # ____________________________________
Dear _________:
This Department has reviewed the referenced spill file.
Based upon this review, we have no further requirements for this
spill at this time.
Should additional environmental problems be discovered at
this referenced site, this office will require further action at
that time. This spill file has been removed from our active
spill list.
Sincerely,
______________________
______________________
SCHEDULE "II" - Form S-9
FORM S-9
S.C. DEPT. OF PUBLIC WORKS, DIV. OF SANITATION
S.C. DEPT. OF HEALTH
Purported owner Building Permit No. _____________
Name _________________________ Map Name ________________________
Address ______________________ Map No. ________________________
______________________ Hamlet of _______________________
Telephone No. ________________ Township of _____________________
Lot No. _________________________
TO WHOM IT MAY CONCERN:;
The sanitary sewers and appurtenances, sewage disposal facilities
and water supply for the above mentioned structure have been
inspected by these departments and found to be satisfactory.
Construction ____________________
Administration __________________
Sanitary Sewers and Appurtenances
Date ____________________________________________________________
Dept. of Public Works, Div. Of Sanitation
Sewage Disposal Facilities
Date ____________________________________________________________
Department of Health
Water Supply
Date ____________________________________________________________
Department of Health
PLEASE NOTE -Where required by contract, escrow deposits must be
made to the Department of Public Works, Division of
Sanitation, before Certificate of Occupancy can be
issued.
IMPORTANT - Please be advised that a minimum of three (3)
business days are required to process this form.
THIS FORM MUST BE SUBMITTED IN TRIPLICATE.
SCHEDULE "III" - Environmental Matters
Schedule III to Contract between Noodle Kidoodle, Inc.
and Reckson Operating Partnership L.P.
1. Letter from U.S. Department of Labor dated 1/18/96 copy
attached.
2. Response to U.S. Department of Labor dated 1/25/96, copy
attached.
3. Letter from A.N.S. Insulation Corp.
4. Existing unregistered underground oil tank.
5. Possible asbestos in a portion of the warehouse.
U.S. DEPARTMENT OF LABOR Occupational Safety and Health
Administration
990 Westbury Road
Westbury, NY 11590
516-334-3344 Fax: 516-334-3326
1/18/96
Noodle Kidoodle
105 Price Parkway
Farmingdale, NY 11735
RE: Noodle Kidoodle
Complaint No. 76949817
Dear Leslie Fischbein:
On 1/17/96, the Occupational Safety and Health Administration
(OSHA) received a notice of (safety and/or health) hazards at
your worksite at:
105 Price Parkway
Farmingdale, NY 11735
We appreciate the opportunity we had to discuss the alleged
hazards with you over the telephone on 1/18/96. A review of the
specific nature of the alleged hazards is as follow:
Office in the rear, employees (approximately 30 - 50) potentially
exposed to asbestos.
We have not determined whether the hazards, as alleged, exist at
your workplace; and we do not intent to conduct an inspection at
this time. However, since allegations of violations and/or
hazards have been made, we request that you immediately
investigate the alleged conditions and make any necessary
corrections or modifications. Please advise me in writing, no
later than 1/25/96 of the results of your investigation. You
must provide supporting documentation of your findings, including
any applicable measurements or monitoring results, and
photographs/video which you believe would be helpful, as well as
a description of any corrective action you have taken or are in
the process of taking, including of the corrected condition.
This letter is not a citation of proposed penalty which,
according to the OSHA Act, may be issued only after an inspection
or investigation of the workplace. It is our goal to assure that
hazards are promptly identified and eliminated. Please take
immediate corrective action where needed. We encourage employee
participation in investigating and responding to any alleged
hazard. If we do not receive a response from you by 1/25/96
indicating that appropriate action has been taken or that no
hazard exists and why, and OSHA inspection will be conducted. An
inspection may include a review of the following: injury and
illness records, hazard communication, personal protective
equipment, emergency action or response, bloodborne pathogens,
confined space entry, lockout and related safety and health
issues.
Please note, however, that OSHA selects for inspection some cases
where we have received letters in which employees have indicated
satisfactory corrective action. This is to ensure that employers
have actually taken the action stated in their letters.
The State of New York offers OSHA consultation services, without
charge, to assist in resolving all occupational safety and health
issues. The variety of services available or the scheduling of
those services may be limited by the consultation project's
requirement to give priority to small businesses in high hazard
industries and by its backlog. However, you may be able to
obtain similar services from your insurance carrier or private
consultant in a more timely fashion. To discuss or request the
services, call or write your New York consultation project at the
following address:
New York State Department of Labor
Division of Occupational Safety and Health
175 Fulton Avenue
Hempstead, NY 11550
516-485-4408
You are requested to post a copy of this letter where it will be
readily accessible for review by all of your employees and return
a copy of the signed Certificate of Posting (Attachment A) to
this office. Also, you are requested to provide a copy of this
letter and your response to it to a representative of any
recognized employee union of safety committee if these are at
your facility. Failure to do this may result in an on-site
inspection. The complainant has been furnished a copy of this
letter and will be advised of your response. Section 11(c) of
the OSHA Act provides projection for employees against
discrimination because of their involvement in protected safety
and health related activity.
If you have any questions concerning this matter, please contact
the Area Office at the address in the letterhead. Your personal
support and interest in the safety and health of your employees
is appreciated.
Sincerely,
/s/Anthony J. DeSiervi
Anthony J. DeSiervi
Area Director
Enclosure
AJD:
Noodle Kidoodle, Inc.
105 Price Parkway
Farmingdale, NY 11735
January 25, 1996
U.S. Department of Labor
Occupational Safety and Health
Administration
990 Westbury Road
Westbury, NY 11950
Attn: Lucy Zurek
RE: Noodle Kidoodle
Complaint No. 76949817
Dear Ms. Zurek:
As I advised you during our telephone conversation today, Noodle
Kidoodle is in the process of contracting to sell the building at
105 Price Parkway, Farmingdale. The potential buyer hired an
environmental company to inspect the building. Since I have not
been able to get a commitment as to when the report will be
available, I have contacted A.N.S. Environmental to do an
inspection for Noodle Kidoodle.
It is my understanding that they will finish their inspection by
January 29, 1996 and provide us with a written report shortly
thereafter. I will furnish you with the findings and any
necessary action plan by February 2, 1996.
Thank you.
Very truly yours,
/s/Charles A. Rollins, Jr.
Charles A. Rollins, Jr.
Vice President
CAR:ak
A.N.S.
INSULATION CORP.
Asbestos Abatement Specialist
Commercial . Industrial . Residential
(516) 249-5565 . Fax (516) 249-3798
January 29, 1996
Greenman Bros, Inc.
105 Price Parkway
Farmingdale, NY 11735
Attn: Mr. Charles A. Rollins, Jr.
Re: 105 Price Parkway
We have visually inspected the upper office area at 105 Price
Parkway and to the best of our ability and knowledge, we cannot
see any sign of asbestos present. There does not seem to be any
potential exposure.
If you have any further questions, please feel free to call.
Sincerely,
/s/Paula Collins
Paula Collins
ll/PC
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SCHEDULE "IV" - Insurance
111 Dale Street, West Babylon, New York 11704
GREENMAN BROS., INC.
SCHEDULE OF INSURANCE FOR
105 PRICE PARKWAY, FARMINGDALE, NY
Policy Carrier Coverages Policy Period
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Property Arkwright Building - $8,051,000 7/1/95-7/1/96
Machinery & Equipment - $3,810,000
Special Form Includes Flood and
Earthquake
Boiler Coverage Included
Deductible $50,000
Comm'l
Gen. Liab. Fireman's Limit - $1,000,000 Occurrence 7/1/95-7/1/96
Fund $2,000,000 Aggregate
$2,000,000 Prod./Compl. Ops.
Umbrella Fidelity & Limit $10,000,000 7/1/95-7/1/96
Casualty of
NY
Excess U.S. Fire Ins. Limit $10,000,000 x/s $10,000,000 7/1/95-7/1/96
Liab. Co.
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