<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
--------------- --------------
Commission File No. 1-5863
JACLYN, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-1432053
- ------------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59th Street, West New York, New Jersey 07093
- ------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 868-9400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
-------------- ---------------------
Common Stock, $1 par value American Stock Exchange
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 the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at September 15, 1999 was approximately $ 6,948,000.
There were 2,711,405 shares of Common Stock outstanding at September 15, 1999.
[Cover Page: 1 of 2 Pages]
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
PART III Certain Portions of the Registrant's Proxy Statement for the
Registrant's Annual Meeting of Stockholders scheduled to be held on
November 30, 1999.
[Cover Page: 2 of 2 Pages]
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Item Page
---- ----
<S> <C> <C>
PART I 1. Business.................................................................1
2. Properties...............................................................4
3. Legal Proceedings........................................................5
4. Submission of Matters to a
Vote of Security Holders.................................................5
PART II 5. Market for the Registrant's Common Equity
and Related Stockholder Matters..........................................6
6. Selected Financial Data..................................................7
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations...............................................................8
7A. Quantitative and Qualitative disclosures about
Market & Risk............................................................12
8. Financial Statements and Supplementary
Data.....................................................................12
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure...............................................................12
PART III 10. Directors and Executive Officers
of the Registrant........................................................12
11. Executive Compensation...................................................12
12. Security Ownership of Certain
Beneficial Owners and Management.........................................13
13. Certain Relationships and Related
Transactions.............................................................13
PART IV 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K........................................13
SIGNATURES........................................................................................................17
</TABLE>
<PAGE>
PART I
------
Item 1. Business.
- ------ --------
Jaclyn, Inc. (incorporated in the State of Delaware in 1968)
("Jaclyn") and its subsidiaries (collectively the "Registrant") are primarily
engaged in the design, manufacture, distribution and sale of vinyl, leather and
fabric handbags, sport bags and related products (collectively, "handbag
products"), and apparel items. The Registrant markets its handbag products in a
variety of popularly priced fashions and designs, with an emphasis on casual,
travel and sport styles. The Registrant's apparel lines are wide ranging and
include women's loungewear, sleepwear, dresses, sportswear, vests, as well as
lingerie.
General. Styling is an important factor in the merchandising
of all of the Registrant's products. The Registrant's staff of full-time
designers studies fashion trends in order to anticipate consumer demand. The
design staff works closely with the purchasing department to determine the
styling and material components for its handbag products, and concepts and
fabrics for its apparel products. The design staff also works with the
production and engineering staffs to determine the costs of production and the
technical problems involved in producing a new style. The Registrant changes
most of its designs from season to season.
Finished merchandise, other than merchandise for the
Registrant's newly acquired women's apparel catalogue business (the "Catalogue
Business") discussed below, is received at independently owned outside
warehouses located in New Jersey, Florida, California and Indiana. From these
locations product is shipped under different selling names to customers all over
the country. Product for the Catalogue Business is shipped directly from outside
contractor locations to the customer. The Registrant's handbag products are
intended to retail at between $6 and $275. The Registrant's better price and
designer lines of handbag products, which are sold under the "ANNE KLEIN(TM)",
"A LINE(TM)"and "Susan Gail" names, are marketed through better department
stores and specialty shops. The Registrant's other handbag products are marketed
primarily through general merchandise, chain and department stores. In addition,
the Registrant markets its apparel lines to existing customers of its handbag
products as premium and/or special order items, as well as to major mail order
catalog chains and other retailers.
The Registrant markets its handbag products under trademarks
and trade names which it owns, including "Shane"and "Aetna," "Susan Gail," and
"Robyn Lyn". In addition, the Registrant is licensed to manufacture and market
handbag products under the names "Looney Tunes(TM)" under three agreements which
expire December 31, 1999 and one other expiring March 30, 2003, "South Park(TM)"
under an agreement which expires December 31, 2000,"Crayola(TM)" under an
agreement which expires December 31, 1999, "Dr. Seuss(TM)" under two agreements
which expire December 31, 1999 and June 30, 2000, and "ANNE KLEIN(TM)" and "A
LINE(TM)" under an agreement which expires December 31, 2001. The Registrant's
apparel lines are marketed under the names "Robyn Lyn," "Saddle River," "Susan
Gail," "Emerson Road," Dawson Road," and "Banner New York." The Registrant also
manufactures apparel items for sale as private-label merchandise. The Registrant
considers all of its licensed trademarks, trade names and other intellectual
property rights to be of significant value in the marketing of its products.
<PAGE>
The Registrant sells throughout the United States through its
own salesmen and through independent sales representatives. Sales of
domestically manufactured merchandise, including those assembled in Central
America and in Mexico from domestically produced components, accounted for
approximately 29% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1999. During fiscal 1998, sales of such merchandise, including
those assembled in Central America and in Mexico from domestically manufactured
components, accounted for approximately 33% of consolidated net sales.
In fiscal 1999, the Registrant's imports of merchandise
manufactured in the Far East accounted for approximately 71% of consolidated net
sales, compared to approximately 67% of consolidated net sales in fiscal 1998.
Imports offer the Registrant the benefit of a greater diversification of styling
resulting from volume purchases and the benefit of cost savings related to such
purchases. While the Registrant's operations are subject to the usual risks
associated with purchases from foreign countries, the Registrant's other foreign
and domestic manufacturing sources provide it with alternative sources and
facilities.
Approximately 75% of the Registrant's consolidated net sales
for fiscal 1999 were to general merchandise, chain, department stores and
catalogue retailers, with the balance consisting of sales to smaller specialty
shops, smaller retail stores and cosmetic firms. During the fiscal year ended
June 30, 1999, four customers of the Registrant accounted for 37% of the
Registrant's consolidated net sales, of which the Registrant's two largest
customers ( Estee Lauder and Wal-Mart Stores, Inc.) accounted for 16% and 11% of
such sales, respectively. Four major customers of the Registrant accounted for
approximately 44% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1998, of which the Registrant's three largest customers ( Estee
Lauder, Wal-Mart Stores, Inc.and Target Stores) accounted for 15% , 12% and 10%
of such sales, respectively. Sales of apparel items during each of the fiscal
years ended June 30, 1999, 1998 and 1997 represented 34%, 35% and 32%,
respectively, of consolidated net sales. Sales of handbag products represented
the remainder of the Registrant's consolidated net sales. The Registrant's sales
are customarily offered on credit terms. The Registrant does not have long-term
contracts with any of its customers.
The Registrant purchases its handbag and apparel raw
materials, primarily fabrics, vinyl and urethane plastics, leather, frames,
ornaments, trim and other materials, and certain of its finished products, from
a variety of sources. In most cases, the Registrant assists its suppliers and
contractors in the design and style of the materials it purchases. The
Registrant's largest expenditures for raw materials are for fabrics, leather,
vinyl and urethane plastics, which the Registrant purchases from several
suppliers, one of which provided about 4% of its raw material needs in fiscal
1999. While the Registrant has no long-term supply contracts, the raw materials
it uses are available from various sources and it anticipates no difficulty in
the future in obtaining the necessary raw materials for its operations. With
respect to its domestic manufacturing and imported purchases from the Far East
and Europe of finished handbags and related products, the Registrant deals with
a number of sources, both domestically and in the Far East and Europe, no one of
which accounted for more than 27% of the Registrant's total cost of goods sold.
The Registrant has no long-term supply contracts with its Far East or European
sources of finished handbags and related products or apparel items and is
subject to the usual risks associated therewith.
-2-
<PAGE>
The Registrant generally offers Fall/Winter, Holiday and
Spring/Summer product lines and in most instances manufactures product to meet
the specific requirements of its customers. The Registrant's business has been
somewhat seasonal in nature, with shipments generally being greater in the first
two quarters of its fiscal years and lower in the third and fourth quarters
although due to scheduling and customer requirements and, in part, to the
Catalogue Business, sales in the first and fourth quarters were greater in
fiscal 1999. Reference is made to Note L, "Unaudited Quarterly Financial Data,"
of the Notes to Consolidated Financial Statements on page F-17 of this Form 10-K
for additional information about quarterly results.
At September 15, 1999, the Registrant had unfilled orders of
approximately $24,149,000 compared to approximately $18,834,000 at September 15,
1998. The increase in backlog is primarily attributable to an increases in the
volume of the women's sleepwear business coupled with backlog related to the
acquisition of the Catalogue Business. In the ordinary course of business, the
amount of unfilled orders at a particular point in time is affected by several
factors, including scheduling of the manufacture and shipping of goods (which,
in turn, may be dependent on the requirements of customers). Accordingly, a
comparison of backlog from period to period is not necessarily meaningful and
may not be indicative of future sales patterns or shipments.
The Registrant employed 138 persons as of June 30, 1999, of
whom 85 were on a salaried basis and the balance on an hourly basis. At June 30,
1999, 18 of the Registrant's employees were members of the Four Joint Boards of
New York, New Jersey, Pennsylvania and New England, affiliated with the
International Leather Goods, Plastics and Novelty Workers Union, AFL-CIO. The
Registrant considers its relations with its employees to be satisfactory.
The Registrant competes with hundreds of domestic and foreign
manufacturers of popular priced handbags and apparel, very few of which are
believed to account for as much as 1% of industry sales. In addition, the
Registrant competes with numerous manufacturers of apparel items. The Registrant
believes its sales of apparel items are not significant in light of total
apparel industry sales. The Registrant's business is dependent, among other
things, on its ability to anticipate and respond to changing consumer
preferences, to remain competitive in price, style and quality and to meet its
customers' production and delivery requirements. While some of the Registrant's
competitors may be larger or may have greater resources than the Registrant, the
Registrant believes that its size and financial position will allow it to
continue to respond to changes in consumer demand and meet its competition.
On January 11,1999, the Registrant acquired the business and
certain assets of the catalogue division of Banner Industries of New York, Inc.
("Banner"), a manufacturer and distributor of sportswear and dresses. Assets
acquired included, among other things, work-in-process, piece goods, raw
materials, customer orders, trademarks and trade names, office equipment,
furniture and fixtures. The Registrant also operates a New York City showroom
formerly operated by Banner. The acquired business manufactures and sells
apparel lines to major mail order catalogues. The aggregate purchase price
(after giving effect to certain post-closing adjustments) was approximately
$2,861,000, of which $2,411,671.21 was paid at the closing of the transaction
and the remainder of which, approximately $450,000 (subject to adjustment), is
payable during the one-year period after closing. The Registrant used funds
generated from
-3-
<PAGE>
operations to pay the purchase price, which was determined through arm's length
negotiations with the Seller. One of the principals of Banner was retained by
the Registrant as a consultant, primarily to provide advice and other assistance
in connection with the transfer of the acquired assets and operations to the
Registrant, for a period of one year from closing (ending January 2000) at a
consulting fee of $50,000.
As previously announced, during fiscal 1999 the Registrant
commenced the process of evaluation its operations with a view to eliminating
unprofitable businesses. During the year ended June 30, 1999, the Registrant
closed three unprofitable divisions, including the operations of its
wholly-owned subsidiary, JLN, Inc., located in Ferris Texas. As a result of the
closure of one of its handbag divisions (discussed below in this Item 1), the
Registrant recorded a pre-tax charge for the write-off of goodwill in the amount
of approximately $1,100,000. In connection with the closure of the Texas
operations of JLN, JLN's real property and certain related fixed assets were
sold and a pretax gain of $324,000 from the sale was recorded by the Registrant.
Reference is made to Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations for further information concerning the
closing of such divisions.
In January 1996, the Registrant entered into a sales
agreement to manufacture and distribute an existing line of women's robes and
sleepwear. In addition, in April 1998, the Registrant entered into a sales
agreement to manufacture and distribute an existing line of junior intimates and
daywear. The Registrant did not incur any significant expenditures as a result
of either of these agreements.
On June 18, 1996, the Registrant acquired certain trademarks
and other assets from McCrackin Industries, Inc. ("McCrackin") and its
affiliates for a purchase price of $1,500,000. The trademarks included "Saddle
River," under which the Registrant has been manufacturing and distributing
ladies' handbags for more than 9 years. In March 1999, the Registrant concluded
that this line of moderately priced handbags, which were primarily sold to
department stores, was not profitable and consequently closed operations. This
resulted in a goodwill pretax writeoff of approximately $1.1 million during
fiscal 1999.
Item 2. Properties.
- ------ ----------
The Registrant's executive offices and one of its warehouse
facilities, containing 140,000 square feet, are located in West New York, New
Jersey. The Registrant occupied these facilities under long-term leases from
1968 to 1981, when these facilities were purchased by the Registrant. The
Registrant currently leases to outside parties approximately 59,000 square feet
of the West New York facilities. The Registrant also leases three showroom and
office facilities in New York City totaling approximately 20,000 square feet.
The executive offices, and manufacturing, distribution and warehouse facilities,
of the Registrant's wholly-owned subsidiary, JLN, Inc., containing 93,250 square
feet, located in Ferris, Texas were sold during fiscal 1999. The Registrant
realized a pretax gain of $324,000 on the sale of land, buildings and equipment
at this location.
Reference is made to Note D, "Commitments," of the Notes to
Consolidated Financial Statements on page F-10 of this Form 10-K for additional
information about the Registrant's commitments under the terms of non-cancelable
leases.
-4-
<PAGE>
Item 3. Legal Proceedings.
- ------ -----------------
(a) The Registrant is not a party to, nor is any of its
property the subject of, any material pending legal proceeding.
(b) No material pending legal proceeding was terminated
during the three-months ended June 30, 1999.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
The Registrant did not submit any matters to a vote of its
security holders, through the solicitation of proxies or otherwise, during the
three-months ended June 30, 1999.
-5-
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.
-----------------------------------------
The Registrant's Common Stock, $1.00 par value per share, is
traded on the American Stock Exchange (Symbol: "JLN"). The following table sets
forth the high and low closing sales prices for the Registrant's Common Stock,
as reported by the American Stock Exchange, for each quarterly period during the
Registrant's fiscal years ended June 30, 1999 and June 30, 1998.
Fiscal Year Ended June 30, 1999 High Low
------------------------------- ---- ---
First Quarter 5 1/4 3 5/8
Second Quarter 4 3 1/8
Third Quarter 4 2 3/8
Fourth Quarter 3 3/16 2 3/16
Fiscal Year Ended June 30, 1998 High Low
------------------------------- ---- ---
First Quarter 5 1/8 3 7/8
Second Quarter 4 15/16 4 3/16
Third Quarter 5 5/16 4
Fourth Quarter 5 13/16 4 3/4
The Registrant did not pay cash dividends during fiscal 1999
or 1998 and does not anticipate the payment of cash dividends in the foreseeable
future.
At June 30, 1999, there were approximately 699 holders of
record of the Registrant's Common Stock.
-6-
<PAGE>
Item 6. Selected Financial Data.
- ------ -----------------------
<TABLE>
<CAPTION>
===================================================================================================================================
Years ended June 30, 1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Sales $ 58,766,000 $ 68,263,000 $ 77,156,000 $ 72,312,000 $ 73,577,000
Cost of Goods Sold 44,873,000 51,401,000 56,825,000 53,836,000 58,639,000
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Profit 13,893,000 16,862,000 20,331,000 18,476,000 14,938,000
- -----------------------------------------------------------------------------------------------------------------------------------
Shipping, selling and administrative
expenses 16,073,000 16,870,000 19,206,000 17,553,000 17,834,000
Writeoff of goodwill - See note below 1,124,000 - - - -
Restructuring costs - - - - 995,000
Interest expense 4,000 182,000 181,000 119,000 309,000
Interest income 207,000 294,000 277,000 338,000 313,000
Other income, net 324,000 - 10,000 - 4,000
(Benefit) provision for income taxes (998,000) 37,000 468,000 457,000 (1,563,000)
- -----------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS $ (1,779,000) $ 67,000 $ 763,000 $ 685,000 $ (2,320,000)
===================================================================================================================================
Weighted average shares outstanding 2,711,000 2,707,000 2,705,000 2,692,000 2,691,000
===================================================================================================================================
Net Earnings per common share-
Basic and Diluted $ (.66) $ .02 $ .28 $ .25 $ (.86)
Cash dividends paid $ - $ - $ $ $ .25
===================================================================================================================================
TOTAL ASSETS $ 25,595,000 $ 24,572,000 $ 34,063,000 $ 31,981,000 $ 28,409,000
===================================================================================================================================
Long term debt:
Guaranteed bank loan - ESOP - $ 56,000 $ 509,000 $ 704,000 $ 888,000
Other non-current liabilities - - $ 28,000 $ 32,000 $ 33,000
Stockholders' equity $ 16,659,000 $ 18,394,000 $ 17,785,000 $ 16,838,000 $ 15,942,000
===================================================================================================================================
Stockholders' equity per share $ 6.15 $ 6.80 $ 6.57 $ 6.26 $ 5.92
===================================================================================================================================
</TABLE>
Note: Goodwill writeoff totaling $1,124,000 resulted from closing one of three
- ----
unprofitable divisions during fiscal 1999.
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations.
---------------------------------------------
Liquidity and Capital Resources
The net decrease in cash and cash equivalents in the fiscal year ended
June 30, 1999 was $1,125,000, resulting from an excess of funds used in
operating activities $1,425,000 and an excess of funds used in investing
activities $1,475,000, offset, in part, by cash provided by financing activities
of $1,775,000. Funds used in operating activities in fiscal 1999 principally was
the result of an increase in accounts receivable (attributable to a higher level
of shipping in the fourth quarter of fiscal 1999 compared to the comparable
quarter in fiscal 1998) offset, for the most part, by a decrease in inventory
(attributable to closing three unprofitable businesses and acquiring a new
women's apparel business, which manufactures and distributes women's apparel to
catalogue retailers, with faster inventory turnover). In addition, the increase
in the Company's net loss offset by a write-off of approximately $1.1 million of
goodwill associated with one of the three unprofitable closed operations during
fiscal 1999 and an increase in prepaid and refundable income taxes, were other
factors which contributed to the net cash used in operating activities. Funds
used in investing activities resulted mainly from the acquisition of the women's
apparel business in January 1999 (described above), offset by proceeds from
sales of securities available for sale. Funds provided by financing activities
were the result of bank borrowing of $1,775,000 at June 30, 1999 under Company's
existing credit facility.
During fiscal 1999, the Company completed the renewal of a $23,000,000
bank line of credit which extends through June 30, 2000. Changes from the
previous bank line of credit include, among other things, an increase in loan
availability from $10,000,000 to $13,000,000 with the Company's inventory and
accounts receivable pledged to the bank as collateral, a minimum quick ratio
requirement of 1 to 1, and the maintenance of a minimum tangible net worth of
$14,000,000. The Company believes that funds provided by operations, existing
working capital and the Company's bank line of credit will be sufficient to meet
foreseeable working capital needs. Reference is made to Note E "Credit
Facilities," of the Notes to Consolidated Financial Statements on page F-10 of
this Form 10-K for additional information about the Company's credit lines.
There were no material commitments for capital expenditures at June
30, 1999.
The net increase in cash and cash equivalents in fiscal 1998 of
$596,000 was the result of an excess of funds provided from operating activities
totaling $4,042,000 and investing activities of $633,000, over funds used in
financing activities of $4,079,000. Funds provided by operating activities were
principally from a $1,985,000 decrease in inventory (resulting from lower first
quarter fiscal 1999 shipping) and a $5,648,000 decrease in accounts receivable
(attributable to a lower level of shipping in the fourth quarter of fiscal 1998
compared to the comparable quarter in fiscal 1997). The resulting cash flows
were mostly used to decrease accounts payable and other current liabilities by
$5,056,000. Cash provided by investing activities resulted mainly from an excess
of proceeds from securities available for sale over purchases of such securities
and the purchases of property and equipment. Funds used in financing activities
were mostly to pay down all outstanding notes payable to the Company's bank
under the existing credit facility.
The net increase in cash and cash equivalents in fiscal 1997 totaling
$915,000 was the result of an excess of funds from financing activities (bank
borrowing under the Company's credit line) of $3,063,000 over funds used in
investing activities of $467,000 and funds used in operating activities of
$1,681,000. Funds from operating activities were used mainly to reduce accounts
payable and other
-8-
<PAGE>
current liabilities totaling $1,677,000 and to finance the $1,179,000 increase
in accounts receivable. These funds were principally offset by a decrease in
inventories of $1,010,000 which resulted from higher shipping in June 1997
compared to June 1996 and net earnings from operations of $763,000. Cash used in
investing activities was primarily for property and equipment additions.
As of June 30, 1999, 1998 and 1997, working capital was $15,069,000,
$16,695,000 and $16,697,000, respectively. The ratio of current assets to
current liabilities for those same periods was 2.9 to 1, 4.4 to 1 and 2.2 to 1,
respectively. The decrease in the current ratio in fiscal 1999 is the result of
using a greater portion of the proceeds from the securities available for sale
to fund part of the Company's working capital needs and from using cash to
purchase the women's apparel catalogue business (including approximately $1.3
million of goodwill for this business) and from a higher level of both notes
payable to the Company's bank and accounts payable. The Company's cash, cash
equivalents and marketable securities totaled $2,725,000, $4,911,000 and
$5,187,000, at June 30, 1999, 1998 and 1997, respectively.
Results of Operations
1999 Compared to 1998
Net sales of $58,766,000 were $9,497,000 below fiscal 1998. This was
due primarily to the closing of three unprofitable operations, as well as lower
volume in the Company's medium priced handbag business due, in general, to
reduced retail demand for non-branded handbag and accessories merchandise,
offset partly by improved premium handbag and women's apparel sales and by sales
from the newly acquired women's apparel business selling to catalogue retailers.
The gross profit margin for fiscal 1999 was 23.6 %, or a decline of
1.1% from the prior year, which resulted from a higher level of inventory
markdowns due to closing three unprofitable operations and also from off-price
sales in the children's and medium priced handbag business. Margins improved
somewhat, however, in the premium and the women's apparel business. Shipping,
selling and administrative expenses decreased by $797,000 related to lower
shipping, royalty and administrative expense offset, in part, by higher
product development costs. Also included in fiscal 1999 are business integration
costs of approximately $230,000 associated with the acquisition of the new
women's apparel business. As a percentage of net sales, the current fiscal year
was 27.4% compared to 24.7% in the prior fiscal year, attributable to the
relatively higher level of fixed costs.
Interest expense was much lower in fiscal 1999 compared to the prior
year because the Company utilized its available investment funds in lieu of
borrowing in the current fiscal year compared to the prior year.
Interest income, decreased $87,000 from the prior fiscal year
generally due to a lower level of interest rates on the investment portfolio and
from the greater utilization of investment funds for working capital needs in
fiscal 1999 compared to the prior fiscal year.
Other income (net) is comprised of a pretax gain on the sale of fixed
assets totaling $324,000 from one of the unprofitable businesses closed during
fiscal 1999.
-9-
<PAGE>
The decrease in earnings before income taxes for the fiscal year ended
June 30, 1999 compared to the prior year was primarily due to the decrease in
sales, a 1.1% decrease in the gross profit margin discussed above, the goodwill
write-off of approximately $1.1 million associated with one of three
unprofitable businesses closed during fiscal 1999 and business integration costs
associated with the acquisition of the women's apparel catalogue business. The
foregoing was offset, in part, by lower shipping, selling and administrative
expenses, as well as the pre-tax gain on the sale of fixed assets as discussed
above.
1998 Compared to 1997
Net sales of $68,263,000 were $8,893,000 below fiscal 1997. This
decrease was due primarily to significantly lower sales volume in the Company's
children's division resulting mostly from the non-renewal of the Company's
"Winnie The Pooh(TM)" license and lower volume in the Company's medium priced
handbag business, due to lower retail demand for non-brand handbag and
accessories merchandise, offset partly by improved premium and women's apparel
sales.
The gross profit margin for fiscal 1998 was 24.7%, or a decline of
1.7% from the prior year, which resulted from a higher level of inventory
markdowns and off-price sales in the children's and medium priced handbag
business. Margins improved somewhat, however, in the premium and the women's
apparel business. Shipping, selling and administrative expenses decreased by
$2,336,000. As a percentage of net sales, the current fiscal year was 24.7%
compared to 24.9% in the prior fiscal year, attributable to lower fiscal 1998
shipping, royalty and product development costs.
Other income, comprised almost exclusively from interest income,
declined slightly from the prior fiscal year generally due to a lower level of
interest rates on the investment portfolio.
The decrease in earnings before income taxes for the fiscal year ended
June 30, 1998 compared to the prior year was primarily due to the decrease in
sales and the 1.7% decrease in the gross profit margin discussed above.
1997 Compared to 1996
Net sales were $77,156,000, or $4,844,000 greater than fiscal 1996.
This increase was primarily due to increased apparel sales, an increase in the
premium business and an increase in the children's licensing business offset
somewhat by a decrease in moderately priced handbag line.
Gross profit margins totaling 26.4% improved slightly due to stronger
margins from licensed products and from improved apparel business margins.
Other income, almost exclusively from investments, declined due to a
lower level of investments in fiscal 1997 compared to fiscal 1996.
The earnings increase for the fiscal year ended June 30, 1997 compared
to the prior year was due to slightly higher gross profit margins on increased
sales and a slightly lower effective tax rate compared to the prior fiscal year
offset by higher shipping, selling and administrative expenses.
-10-
<PAGE>
Recently Issued Accounting Standards
In June 1998 the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement, which is effective for the Company for the year ending June 30, 2001,
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.
Year 2000 Compliance
The Company has completed its assessment of the changes that are
needed to make its critical and other data processing systems Year 2000
compliant. The changes, which include a combination of software modifications,
upgrades, hardware changes and significant customer testing have substantially
been completed. The Company's internal target date to be fully compliant is
October 1999 with continued testing to take place during the balance of 1999 in
order to minimize the risks associated with Year 2000 systems changes.
Existing data processing personnel are being utilized to implement
Year 2000 changes. To date, total costs incurred have been approximately
$20,000, with total aggregate costs to become Year 2000 compliant not expected
to exceed $25,000.
Most of the Company's major customers have already indicated that they
are or will be Year 2000 compliant before the end of 1999. The Company is not
computer interdependent with its significant suppliers and, accordingly, does
not believe that the failure of suppliers to be Year 2000 compliant will pose
any significant risk to the Company's business operation. In any event, the
Company presently has and expects it will have alternative sources of supply if
existing vendors are unable to supply the Company in the event they may not be
Year 2000 compliant and is taking measures to have certain raw materials on
hand, in certain instances, to assure continuity in the first month or two of
the year 2000.
The foregoing constitute forward looking statements based upon
management's best estimates concerning future events. Actual results could
differ as a result of a number of factors, including future costs of Year 2000
compliance, success of testing, successful completion by third parties with
their respective Year 2000 compliance programs, and similar uncertainties.
-11-
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- --------- -----------------------------------------------------------
The Registrant, in the normal course of doing business, is
theoretically exposed to interest rate change market risk with respect to its
Securities Available for Sale and its line of credit. As borrowing patterns are
seasonal, the Registrant is not dependent on borrowing throughout the year.
Therefore, a sudden increase in interest rates (which under the line of credit
is at the prime rate or lower) may, during peak borrowing, have a negative
impact on short-term results, but would unlikely impact longer-term results
since a cost pass-through would offset such higher interest expense.
All of the Registrant's Securities Available for Sale are state
government or municipal bonds. As of June 30, 1999, the cost and market value of
such bonds was $1,651,000 and $1,674,000, respectively. A significant increase
in interest rates would result in a decrease in the market value of the bond
prices. However, to minimize risk, the Registrant has a policy of investing only
in high rated instruments (substantially all have Aa or better Moody's bond
ratings) and generally uses short-term maturities (currently the average life is
about three years). In addition, the proceeds from such securities are not
essential to the working capital needs of the business and therefore could be
held to maturity for full face value.
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
(a) Financial Statements
--------------------
The report dated September 22, 1999 of Deloitte & Touche LLP,
independent auditors, the consolidated balance sheets of Jaclyn, Inc. and
subsidiaries as of June 30, 1999 and 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1999 and Notes to Consolidated
Financial Statements appear on pages F-2 through F-17 of this Form 10-K.
(b) Supplementary Data
------------------
Selected unaudited quarterly financial data for the fiscal years ended
June 30, 1999 and June 30, 1998 is set forth at Note L, "Unaudited Quarterly
Financial Data" on page F-17 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants
- ------- on Accounting and Financial Disclosure.
---------------------------------------------
Not Applicable.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1999 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 11. Executive Compensation.
- -------- -----------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1999 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
-12-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1999 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1999 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- -------- ----------------------------------------------------------------
(a) The following financial statements and financial statement schedules are
filed as part of this report:
1. Financial Statements:
--------------------
Independent Auditors' Report
Consolidated Balance Sheets -- June 30, 1999 and 1998
Consolidated Statements of Operations -- years ended June 30,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity -- years ended
June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows -- years ended June 30,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
-----------------------------
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are either inapplicable,
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
3. Exhibits:
--------
Exhibit No. Description
- ----------- -----------
3(a) Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3(a) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1994).
-13-
<PAGE>
3(b) By-Laws of the Registrant (incorporated herein by
reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1991).
10(a) Lease dated as of February 11, 1993 with 33 East 33rd
Street Realty Associates relating to showroom,
warehouse and distribution facilities of the
Registrant located in New York, New York
(incorporated herein by reference to Exhibit 10(d) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1993).
10(b) Lease dated January 27, 1999 with Ruth R. Abrams LLC,
Rosalie Abrams Katz, First Half Realty Co., Inc. and
Second Half Realty Co., Inc. relating to office and
showroom facilities located in New York, New York.
10(c) Lease dated October 14, 1998 with Statecourt
Enterprises, Inc. relating to office and showroom
facilities located in New York, New York.
10(d) Incentive Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(e) 1984 Employee Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File
No. 1-5863, for the fiscal year ended June 30,
1989).*
10(f) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1991).*
10(g) Amended and Restated Stockholders' Agreement dated
July 30, 1996 among the Registrant and the persons
listed on Schedule A thereto (incorporated herein by
reference to Exhibit 10(j) to the Registrant's Annual
Report on Form 10K, file number 1-5863, for the
fiscal year ended June 30, 1996).
10(h) Key Executive Disability Plan of the Registrant
(incorporated herein by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(i) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Martin Brody.
10(j) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Richard Chestnov
-14-
<PAGE>
10(k) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Albert Safer.
10(l) Split-Dollar Insurance Agreement dated August 15,
1987 between the Registrant and Robert Chestnov
(incorporated herein by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(m) Split-Dollar Insurance Agreement dated August 15,
1987 between the Registrant and Howard Ginsburg
(incorporated herein by reference to Exhibit 10(n) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(n) Split-Dollar Insurance Agreement dated August 15,
1987 between the Registrant and Allan Ginsburg
(incorporated herein by reference to Exhibit 10(o) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(o) 1996 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10(o) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).*
10(p) Non-Qualified Stock Option Contract dated December
3,1996 between the Registrant and Martin Brody
(incorporated by reference to Exhibit 10(p) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3,
1996 between the Registrant and Richard Chestnov
(incorporated by reference to Exhibit 10(q) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(r) Non-Qualified Stock Option Contract dated August 19,
1997 between the Registrant and Al Safer
(incorporated by reference to Exhibit 10(r) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(s) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Martin
Brody. (incorporated by reference to Exhibit 10(s) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
-15-
<PAGE>
10(t) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Richard Chestnov.
(incorporated by reference to Exhibit 10(t) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(u) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Albert Safer.
(incorporated by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(v) Letter Agreement dated as of December 29, 1997
between the Registrant and Robert Chestnov
(incorporated herein by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, file No.
1-5863, for the fiscal year ended June 30, 1998).*
10(w) Purchase and Sale Agreement dated January 11, 1999
between Banner Industries of New York, Inc. and
Jaclyn, Inc. (incorporated herein by reference to
Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, file No. 1-5863, dated January 26, 1999).
21 Subsidiaries of the Registrant (incorporated herein
by reference to Exhibit 21 to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1995).
27 Financial Data Schedule.
- --------------------
*Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the
three months ended June 30, 1999.
(c) Exhibits.
Exhibits are listed in response to Item 14(a)3.
(d) Financial Statement Schedules.
Financial Statement Schedules are listed in response to Item
14(a)2.
-16-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
JACLYN, INC.
By: /s/ Allan Ginsburg
----------------------------
September 22, 1999 ALLAN GINSBURG, Chairman
of the Board
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 and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Allan Ginsburg Chairman of the Board September 22, 1999
- ---------------------------------- and Director
ALLAN GINSBURG
/s/ Robert Chestnov President, Principal September 22, 1999
- -------------------------------- Executive Officer and
ROBERT CHESTNOV Director
/s/ Anthony Christon Chief Financial Officer, September 22, 1999
- -------------------------------- Principal Financial and
ANTHONY CHRISTON Accounting Officer
/s/ Abe Ginsburg Director September 22, 1999
- --------------------------------
ABE GINSBURG
/s/ Howard Ginsburg Director September 22, 1999
- --------------------------------
HOWARD GINSBURG
/s/ Martin Brody Director September 22, 1999
- --------------------------------
MARTIN BRODY
/s/ Richard Chestnov Director September 22, 1999
- --------------------------------
RICHARD CHESTNOV
/s/ Al Safer Director September 22, 1999
- --------------------------------
AL SAFER
</TABLE>
-17-
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
Consolidated Financial Statements and
Financial Statement Schedule for the Years Ended
June 30, 1999, 1998 and 1997 and
Independent Auditors' Report
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets - As of June 30, 1999 and 1998 F-2
Consolidated Statements of Operations - For the years ended June 30,
1999, 1998 and 1997 F-3
Consolidated Statements of Cash Flows - For the years ended June 30,
1999, 1998 and 1997 F-4 to 5
Consolidated Statements of Changes in Stockholders' Equity - For the
years ended June 30, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 to 17
FINANCIAL STATEMENT SCHEDULE:
Valuation and Qualifying Accounts F-18
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Jaclyn, Inc.
West New York, New Jersey
We have audited the accompanying consolidated balance sheets of Jaclyn, Inc. and
subsidiaries as of June 30, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1999. Our audits also included the
consolidated financial statement schedule of Jaclyn Inc. and subsidiaries listed
in item 14(a)2. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Jaclyn, Inc. and subsidiaries as of
June 30, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.
Also, in our opinion, such 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.
Deloitte & Touche, LLP
September 22, 1999
New York, New York
F-1
<PAGE>
<TABLE>
<CAPTION>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
==============================================================================================================================
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 1,051,000 $ 2,176,000
SECURITIES AVAILABLE FOR SALE (COST: 1999, $1,651,000,
1998, $2,676,000) 1,674,000 2,735,000
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL
ACCOUNTS: 1999, $415,000, 1998, $483,000 9,675,000 5,979,000
INVENTORIES 6,341,000 8,077,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS 925,000 533,000
DEFERRED INCOME TAXES 3,212,000 2,050,000
PREPAID AND REFUNDABLE INCOME TAXES 4,000 82,000
------------------- -----------------
TOTAL CURRENT ASSETS 22,882,000 21,632,000
PROPERTY, PLANT AND EQUIPMENT - NET 1,193,000 1,516,000
OTHER ASSETS 1,520,000 1,424,000
------------------- -----------------
$ 25,595,000 $ 24,572,000
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK $ 1,775,000 $ -
ACCOUNTS PAYABLE 4,009,000 2,676,000
COMMISSIONS PAYABLE 160,000 144,000
ACCRUED PAYROLL AND RELATED EXPENSES 368,000 829,000
OTHER CURRENT LIABILITIES 1,501,000 1,288,000
------------------- -----------------
TOTAL CURRENT LIABILITIES 7,813,000 4,937,000
------------------- -----------------
GUARANTEED BANK LOAN - ESOP - 56,000
------------------- -----------------
DEFERRED INCOME TAXES 1,123,000 1,185,000
------------------- -----------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $1: AUTHORIZED, 1,000,000
SHARES; ISSUED NONE - -
COMMON STOCK, PAR VALUE $1: AUTHORIZED, 5,000,000
SHARES; ISSUED 3,368,733 SHARES 3,369,000 3,369,000
ADDITIONAL PAID-IN CAPITAL 12,117,000 12,117,000
RETAINED EARNINGS 7,954,000 9,733,000
ACCUMULATED OTHER COMPREHENSIVE INCOME 23,000 35,000
------------------- -----------------
23,463,000 25,254,000
LESS: TREASURY STOCK AT COST (657,328 SHARES) 6,804,000 6,804,000
GUARANTEED BANK LOAN - ESOP - 56,000
------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 16,659,000 18,394,000
------------------- -----------------
$ 25,595,000 $ 24,572,000
=================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
============================================================================================================================
1999 1998 1997
<S> <C> <C> <C>
Net sales $ 58,766,000 $ 68,263,000 $ 77,156,000
Cost of goods sold 44,873,000 51,401,000 56,825,000
------------ ------------ ------------
Gross profit 13,893,000 16,862,000 20,331,000
------------ ------------ ------------
Shipping, selling and administrative
expenses 16,073,000 16,870,000 19,206,000
Write off of goodwill 1,124,000 -- --
Interest expense 4,000 182,000 181,000
Interest income 207,000 294,000 277,000
Other income, net 324,000 -- 10,000
------------ ------------ ------------
(LOSS) EARNINGS BEFORE INCOME
TAXES (2,777,000) 104,000 1,231,000
(BENEFIT) PROVISION FOR INCOME
TAXES (998,000) 37,000 468,000
------------ ------------ ------------
NET (LOSS) EARNINGS $ (1,779,000) $ 67,000 $ 763,000
Other comprehensive income, net of tax:
Unrealized holding gain (loss) on securities
arising during period 12,000 5,000 (11,000)
------------ ------------ ------------
Net comprehensive (loss) earnings $ (1,767,000) $ 72,000 $ 752,000
============ ============ ============
NET (LOSS) EARNINGS PER
COMMON SHARE - BASIC AND
DILUTED $ (0.66) $ .02 $ .28
============ ============ ============
Weighted average number of shares
outstanding - diluted 2,711,000 2,707,000 2,705,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
============================================================================================================================
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $(1,779,000) $ 67,000 $ 763,000
Adjustments to reconcile net earnings to net
cash provided by (used in)
operating activities:
Depreciation and amortization 322,000 362,000 316,000
Deferred income taxes (1,224,000) (141,000) 14,000
Provision for doubtful accounts (78,000) (143,000) (38,000)
Loss (gain) on sale of fixed assets (324,000) 4,000 (10,000)
Writeoff of goodwill 1,124,000 -- --
Amortization of goodwill 118,000 155,000 155,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (3,628,000) 5,648,000 (1,141,000)
Decrease in inventories 3,260,000 1,985,000 1,010,000
(Increase) decrease in prepaid expenses and
other current assets (392,000) 725,000 (837,000)
(Increase) decrease in prepaid and refundable
income taxes 78,000 431,000 (242,000)
(Increase) decrease in security deposits, other assets
and non current liabilities (3,000) 5,000 6,000
Increase (decrease) in accounts payable and
other current liabilities 1,101,000 (5,056,000) (1,677,000)
----------- ----------- -----------
Net cash provided by (used in) operating activities (1,425,000) 4,042,000 (1,681,000)
----------- ----------- -----------
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
===================================================================================================================================
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (196,000) (304,000) (515,000)
Proceeds from sale of property 521,000 60,000 52,000
Purchases of securities available for sale -- (1,103,000) (184,000)
Proceeds from sales of securities available for sale 1,061,000 1,980,000 180,000
Acquisition of certain assets of Banner Industries of
New York, Inc. (2,861,000) -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities (1,475,000) 633,000 (467,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - bank 1,775,000 (4,163,000) 3,063,000
Proceeds from issuance of treasury stock -- 84,000 --
----------- ----------- -----------
Net cash provided by (used in) financing activities 1,775,000 (4,079,000) 3,063,000
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,125,000) 596,000 915,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,176,000 1,580,000 665,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,051,000 $ 2,176,000 $ 1,580,000
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,000 $ 182,000 $ 181,000
----------- ----------- -----------
Income taxes $ 202,000 $ 872,000 $ 863,000
----------- ----------- -----------
NON-CASH ITEMS:
Unrealized gain on securities available for sale $ 23,000 $ 35,000 $ 30,000
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
(Concluded)
F-5
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK Additional Accumulated
------------------------- Paid-in Comprehensive Retained
Shares Amount Capital Income Earnings
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996 3,368,733 $ 3,369,000 $12,117,000 $ 41,000 $ 9,026,000
Unrealized gain on securities available
for sale at July 1, 1996 -- -- -- (11,000) --
Net earnings, year ended June 30, 1997 -- -- -- -- 763,000
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1997 3,368,733 3,369,000 12,117,000 30,000 9,789,000
Unrealized loss on securities available
for sale at July 1, 1997 -- -- -- 5,000 --
Net earnings, year ended June 30, 1998 -- -- -- -- 67,000
Issuance of treasury shares -- -- -- -- (123,000)
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1998 3,368,733 3,369,000 12,117,000 35,000 9,733,000
Unrealized loss on securities available
for sale at July 1, 1998 -- -- -- (12,000) --
Net loss, year ended June 30, 1999 -- -- -- -- (1,779,000)
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1999 3,368,733 $3,369,000 $12,117,000 $ 23,000 $ 7,954,000
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TREASURY STOCK Guaranteed
-------------------------- Bank Loan -
Shares Amount ESOP
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1996 677,328 $ 7,011,000 $ 704,000
Unrealized gain on securities available
for sale at July 1, 1996 -- -- --
Net earnings, year ended June 30, 1997 -- -- --
ESOP loan repayment -- -- (195,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1997 677,328 7,011,000 509,000
Unrealized loss on securities available
for sale at July 1, 1997 -- -- --
Net earnings, year ended June 30,1998 -- -- --
1997 1996
Issuance of treasury shares (20,000 (207,000) --
ESOP loan repayment -- -- (453,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1998 657,328 6,804,000 56,000
Unrealized loss on securities available
for sale at July 1, 1998 -- -- --
Net loss, year ended June 30,1999 -- -- --
ESOP loan repayment -- -- (56,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1999 657,328 $ 6,804,000 $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Jaclyn, Inc. and its subsidiaries (the "Company") are engaged in the design,
manufacture, marketing and sale of handbags, accessories, apparel and related
products. The Company sells its products to retailers, including department and
specialty stores, national chains, major discounters and mass volume retailers,
throughout the United States.
The consolidated financial statements include the accounts of the Company and
all of its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
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 and disclosure of
contingent 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.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The Company provides for
depreciation and amortization on the straight-line method over the following
estimated useful lives:
Buildings 25 to 40 years
Machinery and equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of life of the asset or life of the lease
Automobiles and trucks 3 to 5 years
Intangible Assets
Goodwill and trademarks arising from acquisitions are being amortized on a
straight-line basis over periods not exceeding 20 years. The Company regularly
reviews the individual components of the balances by evaluating the future cash
flows of the businesses to determine the recoverability of the assets and
recognizes, on a current basis, any diminution in value.
F-7
<PAGE>
In January 1999 the Company closed one its unprofitable divisions. An impairment
charge of approximately $1.1 million was recognized when future cash flows of
the goodwill was determined to be insufficient to recover its carrying value.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped. Sales returns,
discounts and allowances are recorded as components of net sales in the period
in which the related revenue is recorded.
Recently Issued Accounting Standards
Segment Reporting - In June 1999, the Company adopted the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 is effective for fiscal years beginning after December 15, 1997, and
establishes standards for reporting information about a company's operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. The Company operates in a
single operating segment -- the manufacture of women's handbag, apparel and
related accessories. Revenues from customers are derived from merchandise sales.
The Company's merchandise sales mix by product category for the last three years
was as follows:
Year ended June 30,
Product Category 1999 1998 1997
- ---------------- ---- ---- ----
Handbags 66% 65% 68%
Women's apparel 34% 35% 32%
--- --- ---
Total 100% 100% 100%
---- ---- ----
During the year ended June 30, 1999, 1998 and 1997, revenues derived from sales
to one customer were 16%, 15% and 13%, respectively. Sales to a second customer
were 11%, 12% and 12%, respectively, and to a third customer were 5%, 10% and 9%
respectively.
The Company relies on suppliers to purchase a variety of raw materials. The
Company had one supplier who in the aggregate constituted 4% of the Company's
purchases for the year ended June 30, 1999.
Comprehensive Income - Effective July 1, 1998, the Company adopted SFAS No. 130
"Reporting Comprehensive Income." This statement established standards for
reporting types of income and its components in financial statements.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement,
which is effective for the Company for the year ending June 30, 2001,
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.
F-8
<PAGE>
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in certificates of deposits and
money market funds with maturities of three months or less. Such investments are
deemed to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts and notes payable and
accrued expenses are assumed to approximate fair value due to their short
maturities. The carrying value of the long-term bank loan, which bears interest
at a variable rate, approximates fair value. Securities are recorded at fair
value, which is based principally on quoted market prices.
Net Earnings per Common Share
The Company records Net Earnings per Common Share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings per Share."
Reclassifications
Certain items in prior years have been reclassified for comparative purposes.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1999 1998
<S> <C> <C>
Raw material $ 3,466,000 $ 2,937,000
Work in process 1,057,000 835,000
Finished goods 1,818,000 4,305,000
------------------- ------------------
$ 6,341,000 $ 8,077,000
=================== ==================
</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
June 30,
1999 1998
<S> <C> <C>
Land $162,000 $182,000
Buildings 1,181,000 1,311,000
Machinery and equipment 1,572,000 1,697,000
Furniture and fixtures 395,000 394,000
Leasehold improvements 784,000 722,000
Automobiles and trucks 95,000 99,000
------------------- ------------------
4,189,000 4,405,000
Less accumulated
depreciation and amortization 2,996,000 2,889,000
------------------- ------------------
$1,193,000 $1,516,000
=================== ==================
</TABLE>
F-9
<PAGE>
F-10
<PAGE>
NOTE D - COMMITMENTS
The Company leases office facilities under non-cancelable leases that expire in
various years through the year 2006.
Future minimum payments under non-cancelable operating leases with initial or
remaining terms of one year or more are as follows:
Year Ended Office and Showroom
June 30, Facilities
2000 $ 373,500
2001 359,500
2002 322,600
2003 214,900
2004 127,200
After 2004 174,400
Rental expense, including real estate taxes, for all operating leases, totaled
$481,000, $634,000, and $683,000 for 1999, 1998 and 1997, respectively.
NOTE E - CREDIT FACILITIES
The Company has a line of credit with a bank for short-term loans, letters of
credit and bankers acceptances amounting to $23,000,000. At June 30, 1999 and
1998, the Company was contingently obligated on open letters of credit for
approximately $ 7,483,000 and $ 3,257,000 respectively. The Company can borrow
up to $13,000,000 with the Company's inventory and accounts receivable pledged
to the bank as collateral, provided it maintains a minimum quick ratio
requirement of 1 to 1, and a minimum tangible net worth of $14,000,000.
Borrowing on the short-term line of credit was $ 1,775,000 and $ -0- as of June
30, 1999 and 1998, respectively. There was no borrowing on the bankers
acceptance line as of June 30, 1999 and 1998. Borrowing during the year were at
the bank's prime rate or below (LIBOR) at the option of the Company. The bank's
prime rate at June 30, 1999 was 7.75%. During fiscal 1999, the average amount
outstanding under the short-term line was $115,000 with a weighted average
interest rate of 8.0%. During 1998, the average amount outstanding under the
short-term line was $2,569,000 with a weighted average interest rate of 7.3%.
The maximum amount outstanding during fiscal 1999 and fiscal 1998 was $2,270,000
and $9,130,000, respectively.
F-11
<PAGE>
NOTE F - STOCK OPTIONS
The Company has an Incentive Stock Option Plan permitting the granting of
options to purchase up to 500,000 shares of common stock. Under the Plan, the
option price cannot be less than the fair market value of the stock as of the
date of the granting of the option and 110% of the fair market value for certain
management employees. Options, which may be granted to December 2000, are
exercisable as determined by the Board of Directors.
Statement of Financial Accounting Standards No. 123, "Accounting Stock-Based
Compensation" (SFAS 123) was effective for the Company for fiscal 1998. SFAS No.
123 encourages (but does not require) compensation expense to be measured based
on the fair value of the equity instrument awarded. In accordance with APB No.
25, no compensation cost has been recognized in the Consolidated Statements of
Operations for the Company's stock option plans. If compensation cost for the
Company's stock option plans had been determined in accordance with the fair
value method prescribed by SFAS No. 123, the Company's net (loss) earnings would
have been ($1,819,000), $43,000 and $739,000 for 1999 and 1998, and 1997, or
($.67) and $.02 and $.26 per share, respectively. This pro forma information may
not be representative of the amounts to be expected in future years as the fair
value method of accounting prescribed by SFAS No. 123 has not been applied to
options granted prior to 1997.
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of year 267,045 $ 9.35 270,817 $ 9.33 133,168 $ 11.85
Granted 150,000 2.35 - - 159,000 4.29
Exercised - - - - (6,739) 9.18
Forfeited (77,384) 10.61 (3,772) 8.58 (14,612) 10.62
-------------- --------------- ------------- --------------- -------------- ---------------
Outstanding - end of
year 339,661 $ 5.86 267,045 $ 9.35 270,817 $ 9.33
============== =============== ============== =============== ============== ===============
Exercisable - end of
year 339,661 $ 5.86 267,045 $ 9.35 117,817 $ 11.96
Weighted-average
fair value of options
granted during the
year $ 1.66 $ - $ 2.41
</TABLE>
F-12
<PAGE>
The following table summarizes information about stock options outstanding at
June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Option Exercisable
- ------------------------------------------------------------------------------ -----------------------------------------
Weighted-
Number Average Number
Range of Outstanding Remaining Weighted Exercisable Weighted
Exercise at June 30, Contractual Average at June 30, Average
Prices 1999 Life (Yrs) Exercise Price 1999 Exercise Price
- ------------------------------------------------------------------------------ -----------------------------------------
<S> <C> <C> <C> <C> <C>
$2 1/4-$5 1/4 339,661 5.60 $4.13 339,661 $4.13
- ------------------------------------------------------------------------------ -----------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of each grant using
the Black-Scholes option-pricing model. The following weighted average
assumptions were used for grants in 1999 and 1997: risk-free interest rate of
5.5% and 6.43%, expected life of 5 to 10 years; expected volatility of 55.10%
and 36.37%; dividend yield of 0%. The fair values generated by the Black-Scholes
model may not be indicative of the future benefit, if any, that may be received
by the option holder.
NOTE G - PREFERRED STOCK
The Board of Directors of the Company has authority (without action by the
stockholders) to issue the authorized and unissued preferred stock in one or
more series and, within certain limitations, to determine the voting rights,
preference as to dividends and in liquidation, conversion and other rights of
each such series. No shares of preferred stock have been issued.
NOTE H - INCOME TAXES
The components of the Company's tax (benefit) provision for each of the three
years ended June 30, follow:
<TABLE>
<CAPTION>
June 30,
1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $ - ($9,000) ($6,000)
State and Local 7,000 17,000 90,000
Foreign 219,000 170,000 370,000
------------------- ----------------- ----------------
226,000 178,000 454,000
Deferred:
Federal and State (1,224,000) (141,000) 14,000
------------------- ----------------- ----------------
Provision (benefit) ($998,000) $37,000 $468,000
=================== ================= ================
</TABLE>
F-13
<PAGE>
A reconciliation between the provision for income taxes computed by applying the
federal statutory rate to income before income taxes and the actual provision
for income taxes is as follows:
<TABLE>
<CAPTION>
================================================================= ================ =============== =================
June 30, 1999 1998 1997
================================================================= ================ =============== =================
<S> <C> <C> <C>
(Benefit) provision for income taxes at statutory rate (34.0)% 34.0% 34.0%
State and local income taxes net of federal tax benefit (5.2) 5.0 7.4
Tax exempt interest 2.2 (2.0) (1.4)
Other 1.0 1.4 (2.0)
--------------- --------------- -----------------
Effective tax rate % (36.0)% 35.6% 38.0%
=============== =============== =================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The income tax effects of
significant items comprising the Company's net deferred tax assets and
liabilities as of June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
============================= ========================================== ==========================================
June 30, 1999 1998
============================= ========================================== ==========================================
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Depreciation
and amortization - $818,000 - $852,000
Leases - 155,000 - 169,000
Foreign taxes 73,000 - - 140,000
Inventory 549,000 - 628,000 -
Bad debt, sales
allowances and
other reserves 407,000 - 566,000 -
NOL and tax credit
carryforwards
1,407,000 - 518,000 -
Other 776,000 150,000 338,000 24,000
------------------ ----------------- ------------------ -----------------
$3,212,000 $1,123,000 $2,050,000 $1,185,000
================== ================= ================== =================
</TABLE>
F-14
<PAGE>
NOTE I - EMPLOYEE'S BENEFIT PLANS
The Company and its subsidiaries have a trusteed defined benefit pension plan
for certain of their salaried and hourly personnel. The plan provides pension
benefits that are based on a fixed amount of compensation per year of service,
career average pay or on the employee's compensation during a specified number
of years before retirement. The Company's funding policy is to make annual
contributions required by the Employee Retirement Security Act of 1974.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1999 1998 1997
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 2,872,000 $ 2,640,000 $ 2,556,000
Service cost 166,000 194,000 214,000
Interest cost 195,000 176,000 164,000
Plan participants' contributions - - -
Actuarial (gain) loss 194,000 65,000 (132,000)
Gross benefits paid (335,000) (203,000) (162,000)
------------------- ------------------ ------------------
Net benefit obligation at end of year $ 3,092,000 $ 2,872,000 $ 2,640,000
=================== ================== ==================
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 2,383,000 $ 2,423,000 $ 2,142,000
Employer contributions 761,000 - 300,000
Plan participants' contributions - - -
Gross benefits paid (335,000) (203,000) (162,000)
Actual return on plan assets 59,000 163,000 143,000
------------------- ------------------ ------------------
Fair value of plan assets at end of year 2,868,000 2,383,000 2,423,000
=================== ================== ==================
Funded status at end of year (224,000) (489,000) (217,000)
Unrecognized net actuarial loss 826,000 555,000 530,000
Unrecognized transition amount (204,000) (243,000) (282,000)
Unrecognized prior service cost 3,000 4,000 5,000
------------------- ------------------ ------------------
Prepaid (accrued) benefit costs $ 401,000 $ (173,000) $ 36,000
=================== ================== ==================
</TABLE>
F-15
<PAGE>
Pension expenses includes the following components:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1999 1998 1997
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 166,000 $ 194,000 $ 214,000
Interest cost 195,000 176,000 164,000
Expected return on assets (169,000) (145,000) (138,000)
Amortization of prior service cost 1,000 1,000 1,000
Amortization of transition (assets) (39,000) (39,000) (39,000)
Amortization of actuarial loss 32,000 23,000 22,000
---------------- --------------- ---------------
Net periodic benefit cost $ 186,000 $ 210,000 $ 224,000
================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Assumptions used in determining the net pension charges were:
June 30, 1999 1998 1997
------------ --------------- ---------------
<S> <C> <C> <C>
Discount rates 6.75% 6.75% 7.00%
Rates of increase in compensation levels 3.00% 3.00% 4.00%
Expected long-term rate of return on assets 6.50% 6.25% 6.25%
</TABLE>
The Company maintains a non-contributory Employee Stock Ownership Plan (the
"ESOP") and Trust, for its employees who are not covered by a collective
bargaining agreement.
On February 15, 1994, the ESOP authorized the Trust to borrow $1,150,000 from a
bank, which loan is guaranteed by the Company. The debt bears interest at the
prime rate and is payable in a minimum of ten annual installments. As of June
30, 1999, the guaranteed ESOP bank loan had been completely paid.
Contributions to the ESOP are at the discretion of the Company's Board of
Directors. ESOP expense was approximately $56,000 and $250,000 for the years
ended June 30,1999 and June 30, 1998, which includes $ 54,000 and $211,000 of
compensation expense and $2,000 and $39,000 of interest expense, respectively.
Compensation expense related to the plan is based upon the number of shares
allocated to participants in the current year.
Vesting occurs after five years of service. However, if the ESOP is deemed
"top-heavy", vesting will occur at the rate of 20% per year after the completion
of the second year of service.
NOTE J - RECENT ACQUISITION
On January 11, 1999, the Company completed the acquisition of certain assets of
Banner Industries of New York, Inc., which manufactures and distributes its
women's apparel to catalog companies. The Company paid approximately $2.9
million for certain inventory, fixed assets and goodwill. The Company recorded
$1,300,000 of goodwill which is being amortized over 15 years.
F-16
<PAGE>
NOTE K - NET EARNINGS PER SHARE
The Company's calculation of Basic and Diluted Net (Loss) Earnings Per Share are
as follows (in thousands, except per share amounts) :
<TABLE>
<CAPTION>
Year Ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Basic Net Earnings Per Share:
- ----------------------------
Net (Loss) Earnings $ (1,779) $ 67 $ 763
----------------- --------------- ------------------
Basic Weighted Average Shares Outstanding 2,711 2,701 2,691
----------------- --------------- ------------------
Basic Net (Loss) Earnings Per Common Share ($.66) $.02 $.28
----------------- --------------- ------------------
Diluted Net Earnings Per Share:
- ------------------------------
Net (Loss) Earnings $ (1,779) $ 67 $ 763
----------------- --------------- -- ------------------
Basic Weighted Average Shares Outstanding 2,711 2,701 2,691
Add: Dilutive Options (a) 6 14
----------------- --------------- ------------------
Diluted Weighted Average Shares Outstanding 2,711 2,707 2,705
----------------- --------------- ------------------
Diluted Net (Loss) Earnings Per Common Share ($.66) $.02 $.28
----------------- --------------- ------------------
</TABLE>
Options to purchase 180, 89, and 92 common shares were outstanding as of June
30, 1999, 1998, and 1997, respectively, but were not included in the computation
of diluted earnings per share because the exercise price of the options exceeds
the average market price and would have been anti-dilutive.
(a) Options are not considered part of the diluted weighted average share
calculation where there is a loss for the period, since they would be
anti-dilutive.
F-17
<PAGE>
NOTE L - UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data, in thousands of dollars except for per
share amounts, for the fiscal years ended June 30, 1999 and 1998, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30,
1999 1999 1998 1998
<S> <C> <C> <C> <C>
Net sales $17,732 $12,255 $13,134 $15,645
Gross profit $4,017 $2,660 $2,944 $4,272
Net earnings (loss) $30 ($1,458) ($434) $83
Net earnings (loss) per
common share - basic
and diluted $.01 ($.54) ($.16) $.03
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30,
1998 1998 1997 1997
<S> <C> <C> <C> <C>
Net sales $13,565 $13,999 $21,369 $19,330
Gross profit $3,474 $3,060 $5,472 $4,856
Net (loss) earnings ($394) $25 $147 $289
Net (loss) earnings per
common share - basic
and diluted ($.15) $.01 $.06 $.10
</TABLE>
F-18
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Column A Column C Column D Column E
Additions
----------------------------------------
(Credited) Charged
Balance at Charged to to Balance at
beginning costs and accounts Deductions end of
Description of period expenses (1) (2) period
<S> <C> <C> <C> <C> <C>
Year ended June
30, 1999 $483,000 ($78,000) $10,000 - 0- $415,000
---------------- -------------------- ---------------- ------------------ ----------------
Year ended June
30, 1998 $724,000 ($143,000) $1,000 $99,000 $483,000
---------------- -------------------- ---------------- ------------------ ----------------
Year ended June $760,000 ($38,000) $8,000 $6,000 $724,000
30, 1997
---------------- -------------------- ---------------- ------------------ ----------------
</TABLE>
(1) Collection of amounts previously written off.
(2) Doubtful accounts written off.
F-19
<PAGE>
====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED JUNE 30, 1999
----------------------------------------
JACLYN, INC.
====================================================================
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
3(a) Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3(a) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1994).
3(b) By-Laws of the Registrant (incorporated herein by
reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1991).
10(a) Lease dated as of February 11, 1993 with 33 East 33rd
Street Realty Associates relating to showroom,
warehouse and distribution facilities of the Registrant
located in New York, New York (incorporated herein by
reference to Exhibit 10(d) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1993).
10(b) Lease dated January 27, 1999 with Ruth R. Abrams LLC,
Rosalie Abrams Katz, First Half Realty Co., Inc. and
Second Half Realty Co., Inc. relating to office and
showroom facilities located in New York, New York.
10(c) Lease dated October 14, 1998 with Statecourt
Enterprises, Inc. relating to office and showroom
facilities located in New York, New York.
10(d) Incentive Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(e) 1984 Employee Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1989).*
10(f) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1991).*
10(g) Amended and Restated Stockholders' Agreement dated
July 30, 1996 among the Registrant and the persons
listed on Schedule A thereto (incorporated herein by
reference to Exhibit 10(j) to the
</TABLE>
<PAGE>
Registrant's Annual Report on Form 10K, file number
1-5863, for the fiscal year ended June 30, 1996).
10(h) Key Executive Disability Plan of the Registrant
(incorporated herein by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(i) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Martin Brody.
10(j) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Richard Chestnov
10(k) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Albert Safer.
10(l) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Robert Chestnov
(incorporated herein by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(m) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Howard Ginsburg
(incorporated herein by reference to Exhibit 10(n) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(n) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Allan Ginsburg (incorporated
herein by reference to Exhibit 10(o) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1990).*
10(o) 1996 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10(o) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).*
10(p) Non-Qualified Stock Option Contract dated December
3,1996 between the Registrant and Martin Brody
(incorporated by reference to Exhibit 10(p) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3,
1996 between the Registrant and Richard Chestnov
(incorporated by reference to Exhibit 10(q) to the
Registrant's Annual Report on
<PAGE>
Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1997).
10(r) Non-Qualified Stock Option Contract dated August 19,
1997 between the Registrant and Al Safer (incorporated
by reference to Exhibit 10(r) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1997).
10(s) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Martin Brody.
(incorporated by reference to Exhibit 10(s) to the
Registrant's Annual Report on Form 10-K, File No. 1-
5863, for the fiscal year ended June 30, 1998).
10(t) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Richard Chestnov.
(incorporated by reference to Exhibit 10(t) to the
Registrant's Annual Report on Form 10-K, File No. 1-
5863, for the fiscal year ended June 30, 1998).
10(u) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Albert Safer.
(incorporated by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(v) Letter Agreement dated as of December 29, 1997 between
the Registrant and Robert Chestnov (incorporated herein
by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K, file No. 1-5863, for the fiscal
year ended June 30, 1998).*
10(w) Purchase and Sale Agreement dated January 11, 1999
between Banner Industries of New York, Inc. and Jaclyn,
Inc. (incorporated herein by reference to Exhibit 2.1
to the Registrant's Current Report on Form 8-K, file
No. 1-5863, dated January 26, 1999).
21 Subsidiaries of the Registrant (incorporated herein by
reference to Exhibit 21 to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1995).
27 Financial Data Schedule.
- --------------------
*Management contract or compensatory plan or arrangement
<PAGE>
LEASE
EXHIBIT NO. 10(b)
THIS AGREEMENT, made this 27 day of January, 1999, between
RUTH R. ABRAMS LLC, ROSALIE ABRAMS KATZ, FIRST HALF REALTY CO., INC. and SECOND
HALF REALTY CO., INC., do Insignia / Edward S. Gordon Co., Inc., 200 Park
Avenue, New York, New York 10166 ("Landlord") and JACLYN, INC., 330 Fifth
Avenue, New York, New York 10001 ("Tenant").
Landlord and Tenant hereby agree that the terms and
provisions of the annexed lease ("Prior Lease") between 330 Realty Company
("Prior Landlord") and Tenant, dated January 31, 1997, in the building known as
330 Fifth Avenue, New York, New York, are hereby incorporated into this new
lease in their entirety to be effective as of the Commencement Date with the
following modifications:
Premises: Suites 1303 & 1305-07
Tenant's Percentage: 2.78%
Commencement Date: February 1, 1999
Term: Three (3) years
Fixed Annual (Monthly) Rent: See Schedule A
Real Estate Tax Base Year: Calendar year 1999 from January 1,
1999 to December 31, 1999
Operating Expenses: Provision deleted
Security Deposit: $6,289.15
The following provisions shall apply as of the Commencement
Date:
1. Notwithstanding that the Prior Lease has or shall have
expired prior to the Commencement Date, the terms and provisions of the Prior
Lease shall be deemed incorporated in their entirety into this Lease to be
effective as of the Commencement Date as a new direct lease between Landlord and
Tenant, except as modified herein.
2. Except as expressly set forth in this Agreement, (i)
Landlord shall perform no work to the Premises or incur any expense to prepare
same for Tenant's initial or continuing occupancy, as the case may be, and
Tenant agrees to accept same in its "as is" condition on the Commencement Date;
(ii) there shall be no "rent free" period, landlord's contribution, rent
concession or work allowance to Tenant; and (iii) there shall be no Tenant's
right of termination or extension, right of first refusal or right to lease
additional space.
3. Tenant hereby agrees that Tenant shall not look to
Landlord for any claims it may have against the Prior Landlord under the Prior
Lease, including, without limitation, any claims arising
<PAGE>
LEASE
due to (i) Prior Landlord's default under the Prior Lease, (ii) any application
by Prior Landlord of any security deposit (or interest thereon), (iii) receipt
of rent by Prior Landlord for any period after the Commencement Date, (iv) any
misapplication by or overpayment to Prior Landlord of rent or (v) any refund of
prior rent previously paid to Prior Landlord.
4. Tenant represents and warrants that Tenant has had no
dealings or communications with any broker or agent other than Insignia/Edward
S. Gordon Co., Inc. in connection with the subject matter or consummation of
this Agreement, and Tenant covenants and agrees to defend, hold harmless and
indemnify Landlord from and against any and all cost, expense (including
reasonable attorneys' fees) or liability for any compensation, commissions or
charges claimed by any other broker or agent with respect to this Agreement.
It is expressly agreed that if, prior to the Commencement
Date, Tenant shall be in default in any of the covenants, terms and conditions
contained in the Prior Lease by virtue of which Tenant is now in possession of
the Premises, this Agreement shall, at the option of Landlord, be void, null and
of no effect, as though the same had never been made.
IN WITNESS WHEREOF, the parties hereto have executed, or
caused to be executed, these presents by the properly authorized parties and the
appropriate seals thereto duly affixed, the day and year first above written.
HENRY I. FEUERSTEIN, as agent for Landord
JACLYN, INC., Tenant
Name: /s/ Anthony Christon
Title: CFO
Employer ID No. 22-1432053
<PAGE>
RENT SCHEDULE
<TABLE>
<CAPTION>
Period Fixed Annual Rental Rate Fixed monthly Rental Rate
------ ------------------------ -------------------------
<S> <C> <C>
February 1, 1999 - January 31, 2000 $75,500.00 $6,291.67
February 1, 2000 - January 31, 2001 $77,765.00 $6,480.42
February 1, 2001 - January 31, 2002 $80,097.95 $6,674.83
</TABLE>
<PAGE>
EXHIBIT 10(c)
================================================================================
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1982 All Rights Reserved
Reproduction in whole or in part prohibited.
================================================================================
Agreement of Lease, made as of this 14th day of October 1998, between STATECOURT
ENTERPRISES, INC. c/o Williams Real Estate co. Inc., 380 Madison Avenue, New
York, New York 10017 party of the first part, hereinafter referred to as OWNER,
and BANNER INDUSTRIES OF NEW YORK, INC., a New York Corporation party of the
second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner a
portion of the fifth (5th) floor known as 5th floor southeast, as now divided
and set forth on the annexed schematic floor plan (the "demised premises") in
the building known as 1375 Broadway (the "building") in the Borough of
Manhattan, City of New York, for the term of approximately seven (7) years (the
"term") (or until such term shall sooner cease and expire as hereinafter
provided) to commence on the Commencement Date, and to end on the Expiration
Date to be determined pursuant to Article 77 hereof both dates inclusive, at an
annual rental rate of
As provided for in Article 77.03 hereof
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Occupancy:
1. Tenant shall pay the rent as above and as hereinafter provided.
2. Tenant shall use and occupy demised premises for showroom, sample
manufacturing area, general and executive offices for an apparel and soft goods
manufacturing and sales company provided such use is in accordance with the
Certificate of Occupancy for the building, if any, and for no other purpose.
Alterations:
3. Other than tenant's initial improvements, Tenant shall make no changes in or
to the demised premises of any nature without Owner's prior written consent.
Subject to the prior written consent of Owner, and to the provisions of this
article, Tenant, at Tenant's expense, may make alterations, installations,
additions or improvements which are nonstructural and which do not affect
utility services or plumbing and electrical lines, in or to the interior of the
demised premises using contractors or mechanics first approved by Owner. Tenant
shall, at its expense, before making any alterations, additions, installations
or improvements obtain all permits, approval and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner. Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by filing the bond required by law or otherwise. All
fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed, by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or removed from the
premises by Owner, at Tenant's expense.
Repairs:
4. Owner shall maintain and repair the exterior of and the public portions of
the building. Tenant shall, throughout the term of this lease, take good care of
the demised premises including the bathrooms and lavatory facilities (if the
demised premises encompass the entire floor of the building) and the windows and
window frames and, the fixtures and appurtenances therein and at Tenant's sole
cost and expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees, invitees, or licensees, and whether or not arising from
such Tenant conduct or omission, when required by other provisions of this
lease, including Article 6. Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails, after ten days notice, to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Owner at the expense of Tenant, and the expenses thereof
incurred by Owner shall be collectible, as additional rent, after rendition of a
bill or statement therefor. If the demised premises be or become infested with
vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant
shall give Owner prompt notice of any defective condition in any plumbing,
heating system or electrical lines located in the demised premises and following
such notice, Owner shall remedy the condition with due diligence, but at the
expense of Tenant, if repairs are necessitated by damage or injury attributable
to Tenant, Tenant's servants, agents, employees, invitees or licensees as
aforesaid. Except as specifically provided in Article 9 or elsewhere in this
lease, there shall be no allowance to the Tenant for a diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner, Tenant or others making or
failing to make any repairs, alterations, additions or improvements in or to any
portion of the building or the demised premises or in and to the fixtures,
appurtenances or equipment thereof. The provisions of this Article 4 with
respect to the making of repairs shall not apply in the case of fire or other
casualty with regard to which Article 9 hereof shall apply.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in the
demised premises to be cleaned from the outside in violation of Section 202 of
the New York State Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in possession,
and at all times thereafter, Tenant shall, at Tenant's sole cost and expense,
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, or the
Insurance Services Office, or any similar body which shall impose any violation,
order or duty upon Owner or Tenant with respect to the demised premises, whether
or not arising out of Tenant's [ILLEGIBLE] use or manner of use thereof, or,
with respect to the building, if arising out of Tenant's use or manner of use of
the demised premises of the building (including the use permitted under the
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violated
any such laws, ordinances, orders, rules, regulations or requirements with
respect thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall not keep anything in
the demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization and
other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. If by reason of failure to comply
with the foregoing the fire insurance rate shall, at the beginning of this lease
or at any time thereafter, be higher than it otherwise would be, then Tenant
shall reimburse Owner, as additional rent hereunder, for that portion of all
fire insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make-up" or rate for the building or demised
premises issued by a body making fire insurance rates applicable to said
premises shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rates then applicable to said
premises. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installation shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient, in Owner's judgement, to absorb and prevent vibration,
noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases and
to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property -- Loss, Damage, Reimbursement, Indemnity:
8. Owner or its agents shall not be liable for any damage to property of Tenant
or of others entrusted to employees of the building, nor for loss of or damage
to any property of Tenant by theft or otherwise, nor for any injury or damage in
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence of Owner, its agents, servants or employees: Owner
or its agents shall not be liable for any damage caused by other tenants or
persons in, upon or about said building or caused by operations in connection of
any private, public or quasi public work. If at any time any windows of the
demised premises are temporarily closed, darkened or bricked up (or permanently
closed, darkened or bricked up, if required by law) for any reason whatsoever
including, but not limited to Owner's own acts, Owner shall not be liable for
any damage. Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction. Tenant
shall indemnify and save harmless Owner against and from all liabilities,
obligations, damages, penalties, claims, costs and expenses for which Owner
shall not be reimbursed by insurance, including reasonable attorney's fees,
paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents,
contractors, employees, invitees, or licensees, of any covenant or condition of
this lease, or the carelessness, negligence or improper conduct of the Tenant,
Tenant's agents, contractors, employees, invitees or licensees. Tenant's
liability under this lease extends to the acts and omissions of any sub-tenant,
and any agent, contractor, employee, invitee or licensee of any sub-tenant. In
case any action or proceeding is brought against Owner by reason of any such
claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing,
such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner or Tenant may elect to
terminate this lease by written notice to tenants, given within 90 days after
such fire or casualty, specifying a date for the expiration of the lease, which
date shall not be more than 60 days after the giving of such notice, and upon
the date specified in such notice the term of this lease shall expire as fully
and completely as if such date were the date set forth above for the termination
of this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Owner's rights and remedies against Tenant under
the lease provisions in effect prior to such termination, and any rent owing
shall be paid up to such date and any payments of rent made by Tenant which were
on account of any period subsequent to such date shall be returned to Tenant.
Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and (c)
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law, Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from date of
title vesting in such proceeding and Tenant shall have no claim for the value of
any unexpired term of said lease, but may make claims for the value of Tenant's
property and improvements and/or installations by Tenant to the extent paid by
Tenant.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it shall
not assign, mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
prior written consent of Owner in each instance. Transfer of the majority of the
stock of a corporate Tenant other than to an affiliate of the shareholder shall
be deemed an assignment. If this lease be assigned, or if the demised premises
or any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collections shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current:
[CLIP ART]
12. Rates and conditions in respect to submetering or rent inclusion, as the
case may be, to be added in RIDER attached hereto. Tenant covenants and agrees
that at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be obligated) to
enter the demised premises in any emergency at any time, and, upon not less than
one (1) days notice to examine the same and to make such repairs, replacements
and improvements as Owner may deem necessary and reasonably desirable to any
portion of the building or which Owner may elect to perform in the premises
after Tenant's failure to make repairs or perform any work which Tenant is
obligated to perform under this lease, or for the purpose of complying with
laws, regulations and other directions of governmental authorities. Tenant shall
permit Owner to use and maintain and replace pipes and conduits in and through
the demised premises and to erect new pipes and conduits therein provided,
wherever possible, they are within walls or otherwise concealed. Owner may,
during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitle to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term place upon the demised premises the usual notices
"To Let" and "For Sale" which notices Tenant shall permit to remain thereon
without molestation. If Tenant is not present to open and permit an entry into
the demised premises, Owner or Owner's agents may enter the same whenever such
entry may be necessary or permissible by master key or forcibly and provided
reasonable care is exercised to safeguard Tenant's property, such entry shall
not render Owner or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom. Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligation hereunder.
[CLIP ART] Rider to be added if necessary.
-2-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
Vault,* Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding, Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in violation
of the certificate of occupancy issued for the building of which the demised
premises are a part. Tenant has inspected the premises and accepts them as is,
subject to the riders annexed hereto with respect to Owner's work, if any. In
any event, Owner makes no representation as to the condition of the premises and
Tenant agrees to accept the same subject to violations, whether or not of
record. If any governmental license or permit shall be required for the proper
and lawful conduct of Tenant's business, Tenant shall be responsible for and
shall procure and maintain such license or permit.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be cancelled by Owner by sending of a written notice to Tenant within
a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) It is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof, Owner shall forthwith, not withstanding
any other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rental reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease
including, but not limited to, the covenants for the payment of rent or
additional rent and such default shall continue for more than ten (10) days
after owner's notice to Tenant thereof, or if the same cannot be completely
cured within said ten (10) day period, if the Tenant shall not have diligently
commenced such cure within said ten (10) day period and shall not diligently
pursue same to completion; or if the demised premises becomes vacant or deserted
or if this lease be rejected under ss.235 of Title 11 of the U.S. Code
(bankruptcy code); or if any execution or attachment shall be issued against
Tenant or any of Tenant's property whereupon the demised premises shall be taken
or occupied by someone other than Tenant; or if Tenant shall make default with
respect to any other lease between Owner and Tenant; or if Tenant shall have
failed, after five (5) days written notice, to redeposit with Owner any portion
of the security deposited hereunder which Owner has applied to the payment of
any rent and additional rent due and payable hereunder or failed to move into or
take possession of the premises within fifteen (15) days after the commencement
of the term of this lease, of which fact Owner shall be the sole judge; then in
any one or more of such events, upon Owner serving a written five (5) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said five (5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced during such default
within such five (5) day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written three (3) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said three (3) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserve herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required
for ten (10) days after written notice thereof by owner; then and in any of such
events Owner may without notice, re-enter the demised premises either by force
or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the
legal representative of Tenant or other occupant of demised premises and remove
their effects and hold the premises as if this lease had not been made, and
Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall make default hereunder
prior to the date fixed as the commencement of any renewal or extension of this
lease, Owner may cancel and terminate such renewal or extension agreement by
written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent, and additional rent, shall
become due thereupon and be paid up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may re-let the premises or any part or parts
thereof, either in the name of Owner or otherwise, for a term or terms, which
may at Owner's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this lease and may grant concessions
or free rent or charge a higher rental than that in this lease, (c) Tenant or
the legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to re-let the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may reasonably incur in connection with re-letting, such as legal
expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the
demised premises in good order or for preparing the same for re-letting. Any
such liquidated damages shall be paid in monthly installments by Tenant on the
rent day specified in this lease and any suit brought to collect the amount of
the deficiency for any month shall not prejudice in any way the rights of Owner
to collect the deficiency for any subsequent month by a similar proceeding.
Owner, in putting the demised premises in good order or preparing the same for
re-rental may, at Owner's option, make such alterations, repairs, replacements,
and/or decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
Fees and Expenses:
19. If Tenant shall default beyond the applicable grace period, if any, in the
observance or performance of any term or covenant on Tenant's part to be
observed or performed under or by virtue of any of the terms or provisions in
any article of this lease, then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice in
case of emergency, and at other times on reasonable notice, perform the
obligations of Tenant thereunder. If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceedings, then Tenant will reimburse
Owner for such sums so paid or obligations incurred with interest and costs. The
foregoing expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within five (5)
days of rendition of any bill or statement to Tenant therefor. If Tenant's lease
term shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenant making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
any controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owners agents have made any representations or promises
with respect to the physical condition of the building, the land upon which it
is erected or the demised premises, the rents, leases, expenses of operation or
any other matter or thing affecting or related to the demised premises or the
building except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this lease. Tenant has inspected the building and
the demised premises and is thoroughly acquainted with their condition and
agrees to take the same "as is" on the date possession is tendered and
acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
-3-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease, Tenant
shall quit and surrender to Owner the demised premises, broom clean, in good
order and condition, ordinary wear and damage by fire or other insurance
casualty and damages which Tenant is not required to repair as provided
elsewhere in this lease excepted, and Tenant shall remove all its personal
property from the demised premises but leasehold improvements may remain in
place. Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of this lease. If the last day of the term of
this Lease or any renewal thereof, falls on Sunday, this lease shall expire at
noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and
additional rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 34
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the date of
the commencement of the term hereof, because of the holding-over or retention of
possession of any Tenant, undertenant or occupants or if the demised premises
are located in a building being constructed, or if Owner has not completed any
work required to be performed by Owner, or for any other reason, Owner shall not
be subject to any liability for failure to give possession on said date and the
the lease may be terminated by under such circumstances but if not terminated
the rent payable hereunder shall be abated (provided Tenant is not responsible
for Owner's inability to obtain possession or complete any work required) until
after Owner shall have given Tenant notice that the premises are substantially
ready for Tenant's occupancy. If permission is given to Tenant to enter into the
possession of the demised premises or to occupy premises other than the demised
premises prior to time date specified as the commencement of the term of this
lease, Tenant covenants and agrees that such possession and/or occupancy shall
be deemed to be under all the terms, covenants, conditions and provisions of
this lease, except as to the covenant to pay rent. The provisions of this
article are intended to constitute "an express provision to the contrary" within
the meaning of Section 223-a of the New York Real Property Law.
No Waiver:
25. The failure of Owner or Tenant to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of the original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant on receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to Owner by the payor of such rent or as a consent by
Owner to any assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties thereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the covenants and agreements hereunder on part of Tenant to be performed
shall in no wise be affected, impaired or excused because Owner is unable to
fulfill any of its obligations under this lease or to supply or is unable to
make, or is delayed in making any repair, additions, alterations or decorations
or is unable to supply or is delayed in supplying any equipment or fixtures if
Owner is prevented or delayed from doing so by reason of strike or labor
troubles or any cause whatsoever beyond Owner's sole control including, but not
limited to, government preemption in connection with a National Emergency or by
reason of any rule, order or regulation of any department or subdivision thereof
of any government agency or by reason of the conditions of supply and demand
which have been or are affected by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Water Charges:
29. If Tenant requires, uses or consumes water for any purpose in addition to
ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the
sole judge) Owner may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Owner for the cost of the meter
and the cost of the installation, thereof and throughout the duration of
Tenant's occupancy Tenant shall keep said meter and installation equipment in
good working order and repair at Tenant's own cost and expense in default of
which Owner may cause such meter and equipment to be replaced or repaired and
collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay
for water consumed, as shown on said meter as and when bills are rendered, and
on default in making such payment Owner may pay such charges and collect the
same from Tenant, as additional rent. Tenant covenants and agrees to pay, as
additional rent, the sewer rent, charge or any other tax, rent, levy or charge
which now or hereafter is assessed, imposed or a lien upon the demised premises
or the realty of which they are part pursuant to law, order or regulation made
or issued in connection with the use, consumption, maintenance or supply of
water, water system or sewage or sewage connection or system. If the building or
the demised premises or any part thereof is supplied with water, Tenant shall
pay to Owner, as additional rent, on the first day of each month, $45.00 for the
use of such water. Independently of and in addition to any of the remedies
reserved to Owner hereinabove or elsewhere in this lease. Owner may sue for and
collect any monies to be paid by Tenant or paid by Owner for any of the reasons
or purposes hereinabove set forth.
Sprinklers:
30. Anything elsewhere in this lease to the contrary notwithstanding, if the New
York Board of Fire Underwriters or the New York Fire Insurance Exchange or any
bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in fire insurance rate
set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expense, promptly make such sprinkler system installations, changes,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of [CLIP ART OMITTED] $45.00 on the first day of each month during the term of
this lease, as Tenant's portion of the contract price for sprinkler supervisory
service.
Elevators, Heat, Cleaning:
31. As long as Tenant is not in default under any of the covenants of this lease
Owner shall: (a) provide necessary passenger elevator facilities seven (7) days
per week, 24 hours per day; (b) if freight elevator service is provided, same
shall be provided only on regular business days Monday through Friday inclusive,
and on those days only between the hours of 9 a.m. and 12 noon and between 1
p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to
the demised premises, when and as required by law, on business days from 8 a.m.
to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and
public portions of the building which are used in common by all tenants. Tenant
shall, at Tenant's expense, keep the demised premises, including the windows,
clean and in order, to the satisfaction of Owner, and for that purpose shall
employ the person or persons, or corporation approved by Owner. Tenant shall pay
to Owner the cost of removal of any of Tenant's refuse and rubbish from the
building. Bills for the same shall be rendered by Owner to Tenant at such time
as Owner may elect and shall be due and payable hereunder, and the amount of
such bills shall be deemed to be, and be paid as, additional rent. Tenant shall,
however, have the option of independently contracting for the removal of such
rubbish and refuse in the event that Tenant does not wish to have same done by
employees of Owner. Under such circumstances, however, the removal of such
refuse and rubbish by others shall he subject to such rules and regulations as,
in the judgment of Owner, are necessary for the proper operation of the
building. Owner reserves the right to stop service of the heating, elevator,
plumbing and electric systems, when necessary, by reason of accident, or
emergency, or for repairs, alterations, replacements or improvements, in the
judgment of Owner desirable or necessary to be made, until said repairs,
alterations, replacements or improvements shall have been completed. If the
building of which the demised premises are a part supplies manually operated
elevator service, Owner may proceed with alterations necessary to substitute
automatic control elevator service upon ten (10) day written notice to Tenant
without in any way affecting the obligations of Tenant hereunder, provided that
the same shall be done with the minimum amount of inconvenience to Tenant, and
Owner pursues with due diligence the completion of the alterations.
[CLIP ART] Space to be filled in or deleted.
-4-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
Security:
[CLIP ART]
32. Tenant has deposited with Owner the sum of $20,321.34 as security for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the reletting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all the
terms, provisions, covenants and conditions of this lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the demised premises to Owner. In the event of
a sale of the land and building or leasing of the building, of which the demised
premises form a part, Owner shall have the obligation to transfer the security
to the vendee or lessee and Owner shall thereupon be released by Tenant from all
liability for the return of such security; and Tenant agrees to look to the new
Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions:
33. The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any provision thereof.
Definitions:
34. The term "Owner" as used in this lease means only the owner of the fee or of
the leasehold of the building, or the mortgagee in possession, for the time
being of the land and building (or the owner of a lease of the building or of
the land and building) of which the demised premises form a part, so that in the
event of any sale or sales of said land and building or of said lease, or in the
event of a lease of said building, or of the land and building, the said Owner
shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to new Owner from Tenant under this lease, in addition to the
annual rental rate. The term "business days" as used in this lease, shall
exclude Saturdays (except such portion thereof as is covered by specific hours
in Article 31 hereof), Sundays and all days observed by the State or Federal
Government as legal holidays and those designated as holidays by the applicable
building service union employees service contract or by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
Adjacent Excavation -- Shoring:
35. If an excavation shall be made upon land adjacent to the demised premises,
or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the demised premises
for the purpose of doing such work as said person shall deem necessary to
preserve the wall or the building of which demised premises form a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Owner, or diminution or abatement of rent.
Rules and Regulations:
36. Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully, and comply strictly with, the Rules and Regulations
annexed hereto and such other and further reasonable Rules and Regulations as
Owner or Owner's agents may from time to time adopt. Notice of any additional
rules or regulations shall be given in such manner as Owner may elect. In case
Tenant disputes the reasonableness of any additional Rule or Regulation
hereafter made or adopted by Owner or Owner's agents, the parties hereto agree
to submit the question of the reasonableness of such Rule or Regulation for
decision to the New York office of the American Arbitration Association, whose
determination shall be final and conclusive upon the parties hereto. The right
to dispute the reasonableness of any additional Rule or Regulation upon Tenant's
part shall be deemed waived unless the same shall be asserted by service of a
notice, in writing upon Owner within ten (10) days after the giving of notice
thereof. Nothing in this lease contained shall be construed to impose upon Owner
any duty or obligation to enforce the Rules and Regulations or terms, covenants
or conditions in any other lease, as against any other tenant and Owner shall
not be liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
Glass:
37. Owner shall replace, at the expense of the Tenant, any and all plate and
other glass damaged or broken from any cause whatsoever in and about the demised
premises. Owner may insure, and keep insured, at Tenant's expense, all plate and
other glass in the demised premises for and in the name of Owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel Certificate:
38. Tenant, at any time, and from time to time, upon at least 10 days' prior
notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any
other person, firm or corporation specified by Owner, a statement certifying
that this Lease is unmodified in full force and effect (or, if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), stating the dates to which the rent and additional rent have
been paid, and stating whether or not there exists any default by Owner under
this Lease, and, if so, specifying each such default.
Directory Board Listing:
39. If, at the request of and as accommodation to Tenant, Owner shall place upon
the directory board in the lobby of the building, one or more names of persons
other than Tenant, such directory board listing shall not be construed as the
consent by Owner to an assignment or subletting by Tenant to such person or
persons.
Successors and Assigns:
40. The covenants, conditions and agreements contained in this lease shall bind
and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
- ----------
[CLIP ART] Space to be filled in or deleted.
ANNEXED ARTICLES THROUGH 82 ARE HEREBY INCORPORATED INTO THIS LEASE.
In Witness Whereof, Owner and Tenant have respectively signed and sealed
this lease as of the day and year first above written.
STATECOURT ENTERPRISES, INC. [CORP. SEAL]
Witness for Owner: -----------------------------------
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE] [L.S]
- ------------------------ -----------------------------------
Witness for Tenant: BANNER INDUSTRIES OF NEW YORK, INC. [CORP. SEAL]
/s/ [ILLEGIBLE] By: /s/ Lawrence C. Kaplan [L.S]
- ------------------------ -----------------------------------
Lawrence C. Kaplan, President
300 East 74th Street
New York, New York 10021
-5-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
[LOGO] WILLIAMS
Exhibit "A" (Workletter) annexed to and forming part of Lease dated 10-14 1998
between
STATECOURT ENTERPRISES, INC. as Landlord and
BANNER INDUSTRIES OF NEW YORK, INC. as Tenant for 5th Floor Southeast in the
building known as
1375 Broadway New York, New York.
Provided the Tenant is not in default hereunder, Landlord agrees, at
his own cost and expense, to do the following work within the demised
premises in building standard manner:
1. Replace any missing or broken window panes.
2. Make all windows of the building operable, where possible. Clean windows
(exterior and interior).
3. Patch, where necessary, and paint the existing painted surfaces of the
entire premises with one finish coat in Tenant's choice of one of
Landlord's building standard latex color paints.
4. Place the existing air conditioning system in working order. Landlord to
maintain 1st year and, Tenant to maintain thereafter in accordance with
Article 68 of this lease. During the term of this lease, provided Tenant
keeps in full force and effect a maintenance/service contract for the air
conditioning system and provides Landlord with satisfactory evidence
thereof, Landlord guarantees performance of the major component parts
(i.e.: compressor, condenser) of the air conditioning system.
5. Paint two (2) public bathrooms located on the fifth (5th) floor with
Landlord's building standard latex color paints.
6. With respect to bathroom indicated on demolition plan annexed hereto:
a) remove existing tile and replace with new tile (floor and wall) in
building standard;
b) install suspended ceiling with requisite lighting; and
c) install new commode and new basin.
7. Carpet and tile (NO CARPETING ON TOP OF TILE) premises as indicated by
Tenant, with Tenant's choice of one of Landlord's building standard carpet
and tile selections. Install base cove moulding.
8. Demolish and remove one portion of an interior partition within the
demised premises in accordance with the plan annexed hereto and made a
part hereof as Exhibit "B".
9. Install drywall partitions, taped and spackled to receive paint in
accordance with the plan annexed hereto and made a part hereof as Exhibit
"B" and approved of by Landlord. (Plan includes furnishing and installing
two new doors with frames and hardware).
10. Deliver premises in a broom clean condition.
Any request by Tenant for Landlord to make any changes in or to the work
set forth above must be made in writing to Landlord who may consent to or
reject such requests. To the extent such changes result in additional
costs or delay the completion of Landlord's work. Tenant shall be
responsible for such additional costs and delay.
In addition, Tenant shall be liable for any delays resulting from Tenant's
requests regarding the scheduling of Landlord's work or from any other
action of Tenant which otherwise impacts Landlord's ability to perform
such work.
Except as provided in this Workletter: Landlord shall be under no
obligation to make any other improvements or alterations in the demised premises
and Tenant agrees to accept the demised premises "as is" in its present
condition. Any work conditioned upon Tenant's request is deemed waived unless
requested in writing more than three (3) months prior to expiration of the
within terms.
Tenant shall, if required hereunder, make elections and deliver any plans
and specifications to Landlord for Landlord's approval on or before ____________
1998. They shall incorporate all information which may be needed by Landlord to
let the contracts for the performance of the work, and shall be fully
dimensioned working drawings. Progress of the work shall not effect the payment
of rent.
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
41. Rent Escalation Tax Increases
The Tenant agrees to pay as additional rent annually during the term of
this lease 1.399 per cent of any increase in the Real Estate Taxes (as such term
is hereinafter defined) above those for the base year which shall be one-half of
each of fiscal years 1998/1999 and 1999/2000 before any reductions thereto by
certiorari proceedings or otherwise. For the calendar year 1999 Tenant shall
only pay fifty (50%) percent of such calculation. Such additional rent shall be
paid when the tax becomes fixed and within ten (10) days after demand therefor
by the Landlord and shall be collectible as additional rent. For the final year
of the lease term the Tenant shall be obligated to pay only a pro rata share of
such percentage of any such increase in taxes. Tax bills (except as hereinafter
provided) shall be conclusive evidence of the amount of such taxes and shall be
used for the calculation of the amounts to be paid by the Tenant.
The term "Real Estate Taxes" shall mean all the real estate taxes and
assessments, special or otherwise, levied, assessed or imposed by Federal,
State, or Local Governments against or upon which it is erected. If due to a
future change in the method of taxation, any franchise, income, profit or other
tax, or other payment, shall be levied against Landlord in whole or in part in
substitution for or in lieu of any tax which would otherwise constitute a Real
Estate Tax, such franchise, income, profit or other tax or payment shall be
deemed to be a Real Estate Tax for the purposes hereof. The obligation to make
any payments of additional rent pursuant to this Article shall survive the
expiration or other termination of this lease, for a period of two (2) years.
Tenant shall be entitled to its proportionate share of recovery, if any, less
fees, expenses and attorneys fees in connection with certiorari proceedings.
42. Exculpatory Clause
In any action brought to enforce the obligations of Landlord under this
lease, any judgment or decree shall be enforceable against Landlord only to the
extent of Landlord's interest in the building of which the demised premises form
a part, and no such judgment shall be the basis of execution on, or be a lien
on, assets of Landlord, or any assets of any party being a partner or
stockholder in Landlord, other than the interest in said building.
43. Assignment & Subletting (Article 11 continued)
Tenant may sublet all or a portion of the demised premises or assign this
lease with Landlord's prior written consent which shall not be unreasonably
withheld, provided that:
I
(a) Tenant shall furnish Landlord with the name and business address of
the proposed subtenant or assignee, a counterpart of the proposed subleasing or
assignment agreement, and satisfactory information with respect to the nature
and character of the business of the proposed subtenant or assignee together
with current financial information and references reasonably satisfactory to
Landlord.
(b) In the reasonable judgment of the Landlord the proposed subtenant or
assignee is financially responsible with respect to its proposed obligations
under the proposed agreement and is of a character and engaged in a business
which is in keeping with the standards of the building and the floor or floors
on which the demised premises are located.
(c) An executed duplicate original in a form satisfactory to Landlord for
review by Landlord's counsel of such subleasing or assignment agreement shall be
delivered to Landlord at least five (5) days prior to the effective date
thereof. In the event of any assignment, Tenant will deliver to Landlord at
least five (5) days prior to the effective date thereof an assumption agreement
wherein the assignee agrees to assume all of the terms, covenants and conditions
of this lease to be performed by Tenant hereunder and which provides that Tenant
named herein and such assignee shall after the effective date of such assignment
be jointly and severally liable for the performance of all of the terms,
covenants and conditions of this lease.
(e) Tenant, at Tenant's expense, shall provide and permit reasonably
appropriate means of ingress to and egress from space sublet by Tenant.
(f) Except for any subletting or assignment by Tenant to Landlord, each
subletting or assignment shall be subject to all the covenants, agreements,
terms, provisions and conditions contained in this lease.
(g) Tenant covenants and agrees that notwithstanding any subletting or
assignment to Landlord or to any other subtenant or assignee and/or acceptance
of rent or additional rent by Landlord from any subtenant or assignee, Tenant
shall and will remain fully liable for the payment of the annual rent and
additional rent due and to become due hereunder and for the performance of all
the covenants, agreements, terms, provisions and conditions contained in this
lease on the part of the Tenant to be performed.
(h) Tenant further agrees that it shall not at any time publicly advertise
at a rental rate less than the fixed annual rental rate plus any additional rent
then payable hereunder, for assignment or sublease for all of the space demised
herein, or for sublease any portion of the space demised herein, but nothing
herein contained shall be deemed to be Landlord's consent to any assignment or
subletting.
(i) Notwithstanding anything contained herein to the contrary, Tenant
shall have no right to assign this lease or to sublet the whole of the demised
premises prior to or during the first six (6) months following the commencement
date hereof, except for bona fide sale of Tenant's business.
(j) Tenant shall have no right to assign this lease or sublet the whole or
any part of the demised premises to any party who is dealing with or has dealt
with Landlord or Landlord's agent with respect to space then still available for
rent in the building within the three (3) months immediately preceding
Landlord's receipt of Tenant's notice pursuant to item II of this Article.
(k) Such subletting or assignment shall not cause Landlord any cost.
(l) Tenant shall have complied and shall comply with each of the
provisions in this Article and Landlord shall not have made any election as
provided in Item II hereof.
II
If Tenant shall desire to sublet all or a portion of the demised premises
or to assign this lease, Tenant shall send to Landlord a written notice by
registered mail at least thirty (30) days prior to the date such assignment or
subletting is to commence stating (w) that the intention is to assign this
lease, (x) the portion of the demised premises that the Tenant desires to
sublet, and if the portion intended to be sublet shall be less than the entire
demised premises and other than an entire floor or multiple thereof, such notice
shall be accompanied by a reasonably accurate floor plan of the premises to be
sublet, (y) the term of such proposed subletting, and (z) the proposed
commencement date of such subletting or assignment.
(a) If Tenant desires to sublet all of the demised premises or to assign
this lease, then within fifteen (15) days after receipt of the aforesaid notice
Landlord may notify Tenant that Landlord elects (1) to cancel this lease, in
which case, such cancellation shall become effective on the date set forth
pursuant to (z) above and this lease shall thereupon terminate on said date with
the same force and effect as if said date were the expiration date of this
lease; or (2) to require Tenant to assign this lease to Landlord effective from
the date set forth pursuant to (z) above. In either event Tenant shall be
obligated to surrender possession of the demised premises in the same condition
as Tenant is obligated to surrender possession at the end of the term as
provided in this lease. Such assignment to Landlord shall provide that the
parties to such assignment expressly negate any intention that any estate
created under this assignment be merged with any other estate held by either of
said parties.
(b) If Tenant desires to sublet less than all of the demised premises then
within fifteen (15) days after receipt of the aforesaid notice Landlord may
notify Tenant that Landlord elects to require Tenant to sublease to Landlord as
subtenant of Tenant, the portion of the demised premises that Tenant had
specified in its notice to Landlord, for the term, and from the commencement
date specified in said notice. Sublet to Landlord releases Tenant as to space
sublet. The annual rent and additional rent which Landlord shall pay to Tenant
shall be a pro rata apportionment of the annual and additional rent payable
hereunder and it is expressly agreed that such sublease to Landlord shall be
upon all the covenants, agreements, terms, provisions and conditions contained
in this lease except for such thereof which are inapplicable and such sublease
shall give Landlord the unqualified and unrestricted right without Tenant's
reasonable permission to assign such sublease or any part or parts of such space
and to make or cause to have made or permit to be made any and all changes,
alterations, decorations, additions, and improvements in the space covered by
such sublease, and that such may be removed, in whole or part, at Landlord's
option, prior to or upon the expiration or other termination of such sublease
provided that any damage or injury caused by such removal shall be repaired.
Such sublease to Landlord shall also provide that the parties to such sublease
expressly negate any intention that any estate created under such sublease be
merged with any other estate held by either of said parties.
(c) Tenant covenants and agrees that any such assignment or subletting to
Landlord or further assignment or subletting by Landlord or Landlord's assignee
or sublessee may be for any purpose or purposes that Landlord, in Landlord's
uncontrolled discretion, shall deem suitable or appropriate providing it does
not interfere with Tenant's business operation.
III
-R1-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
If this lease is assigned and Landlord consents to such assignment, Tenant
covenants and agrees that the terms, covenants and conditions of this lease may
be changed, altered or modified in any manner whatsoever by Landlord and the
assignee without the prior written consent of Tenant and that no such change,
alteration or modification shall release Tenant from the performance by it of
any of the terms, covenants and conditions on its part to be performed under
this lease. Any such change, alteration or modification which would have the
effect of increasing or enlarging Tenant's obligations or liabilities under this
Lease shall not, to the extent only of such increases in enlargement, be binding
upon Tenant.
IV
Tenant acknowledges that Williams from time to time may be obligated to endeavor
to rent competitive space available in the building on behalf of and pursuant to
the instructions of Landlord or another tenant of the building.
44. Tenant's Changes (Provisions of this paragraph do not apply to Tenant's
initial improvements.)
(a) Supplementing Article 3. Landlord's consent shall not be required for
minor changes to the demised premises such as the installation of furniture,
furnishings, cabinets and shelves which are not affixed to the realty. All other
renovations, decorations, additions, installations, improvements and alterations
of any kind or nature in or to the demised premises whether performed by Tenant
or by Landlord ("Tenant Changes") shall require the prior written consent of
Landlord which, in the case of non-structural interior Tenant Changes, Landlord
agrees not to unreasonably withhold, provided Tenant first complies with all
applicable requirements of this lease including any Workletter attached to this
lease and the building Rules and Regulations Governing Tenant Alterations
(herein called the "Alterations Rules"). In granting its consent to any Tenant
Changes, Landlord may impose such conditions (as to guarantee of completion
including, without limitation, requiring Tenant to post a bond to insure the
completion of Tenant Changes, payment for Tenant Changes and other charges
payable under this Article, restoration or otherwise), as Landlord may
reasonably require. In no event shall Landlord be required to consent to any
Tenant Changes which would affect the structure of the building, the exterior
thereof, any part of the building outside of the demised premises or the
mechanical, electrical, heating, ventilation, air conditioning, sanitary,
plumbing or other service systems and facilities (including elevators) of the
building, and such Tenant Changes shall be performed only by contractors
designated or approved by Landlord. In connection with Landlord's Agent's
review, modification, approval, supervision and/or coordination of plans and
specifications for Tenant Changes, agent shall endeavor to advise Tenant whether
the proposed Tenant's Changes are compatible with building systems and
facilities, in compliance with the requirement of this lease, in conformity with
applicable legal requirements or likely to result in excessive cost to Tenant,
but, not withstanding the foregoing, Landlord's agent shall have no liability in
connection with such advice. Tenant shall, promptly upon demand, reimburse
Landlord's agent for any reasonable out-of-pocket fees, expenses and other
charges incurred by Landlord or its agent in connection with the review,
modification and/or approval of such plans and specifications by Landlord's
agent and other professional consultants of Landlord. The hourly rate for such
agent's review is $70/hour for building manager or superintendent, $95/hour for
District Manager, $150.00/hour for Co-director of Operations and Engineering,
and $250/hour for director of Property Management. In addition, Tenant shall pay
to Landlord's agent during the course of work, as a charge of Landlord's agent
for the supervision and coordination by Landlord's agent of any Tenant Changes
for Landlord's benefit and without waiver of any of the requirements of this
lease, the Workletter, if any, or the Alterations Rules, a fee of five percent
(5%) of the cost of such Tenant Changes. Tenant shall promptly provide such
evidence as Landlord or Landlord's agent may request to substantiate any costs
incurred by Tenant. Tenant shall, at its sole cost and expense, in making any
Tenant Changes, comply with all requirements of the Alterations Rules.
(b) Nothing in this lease is intended to constitute a consent by Landlord
to the subjection of Landlord's or Tenant's interest in the building or the land
on which the building is located to any lien or claim by any person which
supplies any work labor, material, service or equipment to Tenant in performing
any Tenant Changes. Landlord hereby notifies all such persons of such intent and
each such person agrees that by performing any Tenant Changes for Tenant it
accepts that Landlord has not granted such consent and that such person shall
not have a right to file any lien or claim against such interest of Landlord or
Tenant in the building or land upon which it is located. Tenant agrees to
provide a copy of this Article to all such persons prior to entering into any
contract for or otherwise having Tenant Changes performed. If Tenant's use of
any contractor, subcontractor, vendor, supplier or other party causes or
threatens to cause disharmony, labor disputes, strikes, or picketing of any kind
whatsoever, such party shall be dismissed, removed from the job site, and
excluded from the building, and the work of such party shall be continued by
Tenant by others satisfactory to Landlord.
(c) In performing any alterations or installations, Tenant shall be
responsible for the cost of compliance with all applicable government rules and
regulations, including, without limitation, The Americans With Disabilities Act
of 1990, Public Law 101-336 42 U.S.C. Secs. 12101 et. seq., together with all
amendments thereto which may be adopted from time to time, and all regulations
and rules promulgated thereunder.
45. Electric Current
If electric current is to be supplied by Landlord in accordance with the
provisions of Article 75 hereof on a submetering basis, Tenant covenants and
agrees to purchase the same from Landlord or Landlord's designated agent at a
rate equal to 110% (the "Rate") of Landlord's Average Cost for obtaining
electric current from the public utility (or an equivalent substitute provider)
providing the same. "Landlord's Average Cost" shall, for the purposes of this
lease, be determined by dividing (y) the total dollar amount billed to the
Landlord for the building by the public utility company providing electric
current to the building for the relevant billing period (including, without
limitation, all charges for demand, fuel, on-peak and off-peak usage, time of
day usage, and any and all other relevant adjustments and charges) by (z) the
total kilowatt hours utilized by the building for such billing period. Where
more than one submeter measures the service of Tenant in the building, the
service rendered through each submeter may be computed and billed separately in
accordance with the Rate. All bills for submetered electric shall be within ten
(10) days after the same are rendered and to the extent are not paid, Landlord
may, without further notice, discontinue the service of electric current to the
demised premises without releasing Tenant from liability under this lease and
without Landlord or Landlord's agent incurring any liability for any damage or
loss sustained by Tenant by such discontinuance of service. At the option of
Landlord, Tenant also agrees to purchase from Landlord or its agents all lamps
or bulbs used in the demised premises and to pay the cost of installation
thereof. Landlord shall not in any other wise be liable or responsible to Tenant
for any loss or damage or expense which Tenant may sustain or incur if either
the quantity or character of electric services is changed or is no longer
available or suitable for Tenant's requirements. Any riser or risers to supply
Tenant's electrical requirements, upon written request of Tenant, will be
installed by Landlord, at the sole cost and expense of Tenant, if in Landlord's
sole judgment, the same are necessary and will not cause permanent damage or
injury to the building or demised premises or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable alterations, repairs or
expense or interfere with or disturb other tenants or occupants. In addition to
the installation of such riser or risers Landlord will at the sole cost and
expense of Tenant, install all other equipment proper and necessary in
connection therewith subject to the aforesaid terms and conditions. Tenant
covenants and agrees that at all times its use of electric current shall never
exceed the capacity of existing feeders to the building or the risers or wiring
installations. It is further covenanted and agreed by Tenant that all aforesaid
costs and expenses shall be paid by Tenant to Landlord within five (5) days
after rendition of any bill or statement to Tenant therefor. Landlord may
discontinue any of the aforesaid services upon thirty (30) days notice to Tenant
without being liable to Tenant therefor or without in any way affecting this
lease or the liability of Tenant hereunder or causing a diminution of rent
except for amount attributable to electric current and the same shall not be
deemed to be a lessening or diminution of services within the meaning of any
law, rule or regulation now or hereafter enacted, promulgated or issued. In the
event Landlord gives such notice of discontinuance, Landlord shall permit Tenant
to receive such service direct from said public utility corporation, in which
event, the Tenant will at its own cost and expense, furnish and install all
risers, service wiring and switches that may be necessary for such installation
and required by the public utility corporation, and will at its own cost and
expense, maintain and keep in good repair all such risers, wiring and switches.
Tenant shall make no alterations or additions to the electric equipment and/or
appliances without the prior written consent of Landlord in each instance. Rigid
conduit will only be allowed. If any tax is imposed upon Landlord's receipts
from the sale or resale of electric energy or gas or telephone service to Tenant
by any Federal, State or Municipal Authority, Tenant covenants and agrees that,
where permitted by law, Tenant's pro rata share of such taxes shall be passed on
to, and included in the bill of and paid by, Tenant to Landlord. Any sums due
and payable to Landlord under this Article shall be collectible as additional
rent.
46. Deposit of Checks.
Landlord's deposit of any checks delivered by Tenant simultaneously with
Tenant's execution of this lease shall not constitute Landlord's execution and
delivery of this lease.
47. Partial Payment
If Landlord receives from Tenant any payment (Partial Payment) less than
the sum of the fixed annual rent, additional rent and other charges then due and
owing pursuant to the terms of this lease, Landlord in its sole discretion may
allocate such Partial Payment in whole or in part to any fixed annual rent, any
additional rent and/or any other charges or to any combination thereof.
48. Whenever Landlord is required or permitted to send any notice or demand to
Tenant under or pursuant to this lease, including, but not limited to any demand
for rent or notice of default it may be given by Landlord's Agent, attorney,
executor, trustee or personal representative, with the same force and effect as
if given by the Landlord with courtesy copies to:
(a) Mr. Lawrence C. Kaplan, 300 East 74th Street, New York, NY;
(b) Gandin, Schotsky, Rappaport, Glass & Greene LLP, Attn: Arnold M.
Schotsky, Esq, 445 Broad Hollow Road, Melville, NY 11747; and
(c) Mr. Robert C. Kaplan, 36 Roundtree Drive, Melville, NY 11746
Landlord hereby advises Tenant that Landlord's current address is Williams Real
Estate Co. Inc., 380 Madison Avenue, New York, New York 10017.
-R2-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
49. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED
It is specifically understood and agreed that this lease is offered to
Tenant by the managing agent of the building, solely in its capacity as such
agent and subject to Landlord's acceptance and approval and that Tenant has
hereunto affixed its signature with the understanding that the said lease shall
not in any way bind Landlord or its agent until such time as the same has been
approved and executed by Landlord and delivered to Tenant. The execution and
delivery of this lease by Tenant shall constitute an irrevocable offer to enter
into this lease on the part of Tenant and its representation that the Other
Broker, if any, shall not seek compensation from Landlord if Landlord and Tenant
do not approve, execute and deliver this lease.
50. CONFLICT BETWEEN RIDER AND PRINTED LEASE
If and to the extent that any of the provisions of any rider to this lease
conflict or are otherwise inconsistent with any of the printed provisions of
this lease, whether or not such inconsistency is expressly noted in the rider,
the provisions of the rider shall prevail. In the event the party of the first
part is referred to in this lease as "Owner". the term "Landlord", as used
herein, shall be deemed synonymous with the term "Owner".
51. SPECIAL SERVICES
Upon Tenant's request Landlord or its managing agent may, but, except as
otherwise expressly provided in this lease, shall not be obligated to, perform
or cause to be performed for Tenant from time to time various construction.
repair and maintenance work, moving services and other types of work or services
in or about the demised premises and the building. If such work or services
shall be performed for Tenant, Tenant agrees to pay therefor either the standard
charges of Landlord or its managing agent in effect from time to time, if any,
or the amount agreed to be paid for such services. Tenant agrees to pay all such
charges within ten (10) days after Landlord or Landlord's managing agent has
submitted a bill therefor and unless otherwise expressly provided in writing
such charges shall be payable as additional rental under this lease and in the
event of a default by Tenant in the payment thereof Landlord shall have all of
the remedies hereunder that Landlord would have in the event of a default in the
payment of annual rental.
52. AS IS
Tenant acknowledges that it has inspected the building and the demised
premises, agrees to accept the demised premises in its "AS IS" physical
condition as of the Lease Commencement date and acknowledges that Landlord shall
not be obligated to make any improvements or alterations to the demised premises
whatsoever, except as may be provided on the Workletter annexed hereto as
Exhibit "A", if any.
53. ADDITIONAL ASSIGNMENT AND SUBLETTING PROVISIONS
The Article to this lease captioned "Assignment & Subletting (Article 11
continued)" is hereby amended by adding to Subdivision I thereof the following
sub-paragraphs;
(m) The consent by Landlord to any assignment, subletting, or occupancy
shall not in any wise be construed to relieve Tenant from obtaining the express
consent, in writing, of Landlord to any further assignment, subletting,
sub-subletting, or occupancy, which consent Landlord shall not unreasonably
withhold nor unduly delay.
(n) Tenant shall have no right to assign this lease or sublet the whole or
any part of the demised premises to any party which is then a tenant, subtenant,
licensee or occupant of any part of the building in which the demised premises
are located, except with Landlord's prior written consent.
(o) If Tenant hereunder shall be a corporation, the transfer of a majority
of the stock of Tenant shall be deemed an assignment of this lease, but the same
shall be permitted as of right if the sale is a bona fide sale to a third party.
(p) Each sublease of the demised premises shall be deemed to contain the
following provisions, whether or not specifically included therein:
(1) "In the event of a default under any underlying lease of all or any
portion of the premises demised hereby which results in the termination of such
lease, or if the lessor under any such underlying lease shall exercise any right
to cancel or terminate such underlying lease, the subtenant hereunder shall, at
the option of the lessor under any such lease, attorn to and recognize such
lessor as Landlord hereunder and shall, promptly upon such lessor's request,
execute and deliver all instrument necessary or appropriate to confirm such
attornment and recognition. The subtenant hereunder hereby waives all rights
under present or future law to
-R3-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
elect, by reason of the termination of such underlying lease, to terminate this
sublease or surrender possession of the premises demised hereby. If the lessor
under such underlying lease does not exercise the aforesaid option, the term of
this sublease shall terminate simultaneously with the term of the underlying
lease and subtenant hereby agrees to vacate the premises subleased on or before
the effective date of termination of the underlying lease."
(2) "This sublease may not be assigned or the sublet premises further
sublet, in whole or in part, without the prior written consent of the lessor
under any underlying lease of all or any portion of the premises demised
hereby."
(q) Notwithstanding the aforesaid or anything to the contrary herein, if
Tenant sells its business in an arms length transaction, Tenant may as of right,
assign this lease to such purchaser or acquiree. This shall also apply to a
merger where Tenant is not the surviving entity.
54. HOLDING OVER
If Tenant holds over in possession after the expiration or sooner
termination of the original term or of any extended term of this lease, such
holding over shall not be deemed to extend the term or renew this lease, but
such holding over thereafter shall continue upon the covenants and conditions
herein set forth except that the charge for use and occupancy of such holding
over for each calendar month or part thereof (even if such part shall be a small
fraction of a calendar month) shall be the sum of:
(a) 1/12 of the highest annual rent rate set forth on page one of this
lease, times 1.75, plus
(b) 1/12 of the net increase, if any, in annual fixed rental due solely to
increases in the cost of the value of electric service furnished to the premises
in effect on the last day of the term of this lease, plus
(c) 1/12 of all other items of annual additional rental, which annual
additional rental would have been payable pursuant to this lease had this lease
not expired, plus
(d) those other items of additional rent (not annual additional rent)
which would have been payable monthly pursuant to this lease, had this lease not
expired,
which total sum Tenant agrees to pay to Landlord promptly upon demand, in full,
without set-off or deduction. Neither the billing nor the collection of use and
occupancy in the above amount shall be deemed a waiver of any right of Landlord
to collect damages for Tenant's failure to vacate the demised premises after the
expiration or sooner termination of this lease. The aforesaid provisions of this
Article shall survive the expiration or sooner termination of this lease.
55. LIMITATION ON RENT
If at the commencement of, or at any time during the term of this lease,
the rent reserved in this lease is not fully collectible by reason of any
Federal, State, County or City law, proclamation, order or regulation, or
direction of a public officer or body pursuant to law, Tenant agrees to take
such steps as Landlord may request to permit Landlord to collect the maximum
rents which may be legally permissible from time to time during the continuance
of such legal rent restriction (but not in excess of the amounts reserved
therefor under this lease). Upon the termination of such legal rent restriction,
Tenant shall pay to Landlord, to the extent permitted by law, an amount equal to
(a) the rents which would have been paid pursuant to this lease but for such
legal rent restriction less (b) the rents paid by Tenant to Landlord during the
period such legal rent restriction was in effect.
56. BROKERAGE
Tenant warrants and represents to Landlord that it has had no dealings
with any broker or agent except Williams Real Estate Co. Inc. and the broker
listed below, if any, in connection with this lease and covenants and agrees to
hold harmless and indemnify Landlord and Williams Real Estate Co. Inc. from and
against any and all costs, expenses or liability for any compensation,
commissions, fees and charges claimed by any other broker or agent with respect
to this lease or the negotiation thereof. The obligation of Tenant contained in
this Article shall survive the expiration or earlier termination of this lease.
Other Broker: Insignia/Edward S. Gordon, Co., Inc.
57. GOVERNMENTAL REGULATIONS
If, at any time during the term of this lease, Landlord expends any sums
for alterations or improvements to the building which are required to be made
pursuant to any law, ordinance or governmental regulation, or any portion of
such law, ordinance or governmental regulation, which becomes effective after
the date hereof, Tenant shall pay to Landlord, as additional rent, the same
percentage of such cost as is set forth in the provision
-R4-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
of this lease which requires Tenant to pay increases in Real Estate Taxes,
within ten (10) days after demand therefor. If however, the cost of such
alteration or improvement is one which is required to be amortized over a period
of time pursuant to applicable governmental regulations, Tenant shall pay to
Landlord, as additional rent. during each year in which occurs any part of this
lease term the above-stated percentage of the reasonable annual amortization of
the cost of the alteration or improvement made. For the purposes of this
Article, the cost of any alteration or improvement made shall be deemed to
include the cost of preparing any necessary plans and the fees for filing such
plans. Anything to the contrary in this paragraph 57 notwithstanding, the cost
to Tenant shall be limited to a maximum of $1,000.00 per item of alteration or
improvement per calendar year.
58. BASEMENT SPACE
If any basement or sub-basement space is included in the premises demised
hereunder, Tenant agrees that, notwithstanding anything to the contrary
contained in this lease, such basement or sub-basement space (i) shall not be
used for any purpose other than storage and (ii) shall not be sublet or used by
anyone other than Tenant without the prior written consent of Landlord, which
consent Landlord shall have the right to withhold for any reason whatsoever.
59. LANDLORD'S MANAGING AGENT
Tenant agrees that all of the representations, warranties, waivers and
indemnities made in this lease by Tenant for the benefit of Landlord shall also
be deemed to inure to and be for the benefit of Williams Real Estate Co. Inc.,
its officers, directors, employees, independent contractors, affiliates and
subsidiaries.
60. BUILDING DIRECTORY
At the written request of Tenant, Landlord shall list up to a total of
eight (8) listings, on the building's directory the name of Tenant, any trade
name under which Tenant has the right to operate, any other entity permitted to
occupy any portion of the demised premises under the terms of this lease, and
the officers and employees of each of the foregoing entities, provided the
number of names so listed does not exceed the same percentage of the capacity of
such directory as is set forth in the provision of this lease which requires
Tenant to pay increases in Real Estate Taxes. If requested by Tenant, Landlord
may (but shall not be required to) list the name of Tenant's subsidiaries and
affiliates; however, the listing of any name other than that of Tenant shall
neither grant such party or entity any right or interest in this lease or in the
demised premises nor constitute Landlord's consent to any assignment or sublease
to, or occupancy of the demised premises by, such party or entity. Except for
the name of Tenant, any such listing may be terminated by Landlord at any time,
without notice.
61. INTEREST ON SECURITY
Landlord agrees to deposit the security referred to in the Article of this
lease captioned "Security" in an interest bearing account in a bank located in
New York State. To the extent not prohibited by law, Landlord shall be entitled
to receive and retain one (1%) per cent as an administrative expense that
portion of the interest received on such account which represents the maximum
fee permitted under applicable law, which fee Landlord shall have the right to
withdraw from time to time, as Landlord may determine. The balance of the
interest shall be distributed to the Tenant annually provided Tenant makes
written request therefor on an annual basis. Landlord shall not be required to
credit Tenant with any interest for any period during which Landlord does not
receive interest on the security deposited.
62. ADDITIONAL RENT
All payments other than the annual rental to be made by Tenant pursuant to
this lease shall be deemed additional rent and, in the event of any nonpayment
thereof, Landlord shall have all rights and remedies provided for herein or by
law for nonpayment of rent. Tenant shall have thirty (30) days from its receipt
of any additional rent statement to notify Landlord, by certified mail, return
receipt requested, that it disputes the correctness of such statement. After the
expiration of such thirty (30) day period, such statement shall be binding and
conclusive upon Tenant. If Tenant disputes the correctness of such statement,
Tenant shall, as a condition precedent to its right to contest such correctness,
make payment of the additional rent billed, without prejudice to its position.
If such dispute is finally determined in Tenant's favor, Landlord shall refund
to Tenant the amount overpaid (without interest).
-R5-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
63. SUBMISSION TO JURISDICTION, ETC.
This lease shall be deemed to have been made in New York County, New York,
and shall be construed in accordance with the laws of this State of New York.
All actions or proceedings relating, directly or indirectly, to this lease shall
be litigated only in courts located within the County of New York. Tenant, any
guarantor of the performance of its obligations hereunder ("Guarantor") and
their successors and assigns hereby subject themselves to the jurisdiction of
any state or federal court located within such county, waive the personal
service of any process upon them in any action or proceeding therein and consent
that such process be served by certified or registered mail, return receipt
request, directed to the Tenant and any successor at Tenant's address
hereinabove set forth, to Guarantor and any successor at the address set forth
in the instrument of guaranty and to any assignee at the address set forth in
the instrument of assignment. Such service shall be deemed made two (2) days
after such process is so mailed.
If (i) Landlord commences any action or proceeding against Tenant, or (ii)
Landlord is required to defend any action or proceeding commenced by Tenant, in
connection with this lease and such action or proceeding is disposed of, by
settlement, judgment or otherwise, favorably to Landlord, Landlord shall be
entitled to recover from Tenant in such action or proceeding, or a subsequently
commenced action or proceeding, Landlord's reasonable attorneys' fees and
disbursements incurred in connection with such action or proceeding and all
prior and subsequent discussions and negotiations and correspondence relating
thereto.
64. CONDITIONAL LIMITATION
If Tenant shall default in the payment of the rent reserved herein, or any
item of additional rent herein mentioned, or any part of either, during any
three (3) months, whether or not consecutive, in any twelve (12) month period,
and (i) such default continued for more than five (5) days after written notice
of such default by Landlord to Tenant, and (ii) Landlord, after the expiration
of such five (5) day grace period, served upon Tenant petitions and notice of
petition to dispossess Tenant by summary proceedings in each such instance,
then, notwithstanding that such defaults may have been cured prior to the entry
of a judgment against Tenant, any further default in the payment of any money
due Landlord hereunder which shall continue for more than five (5) days after
Landlord shall give a written notice of such default shall be deemed to be
deliberate and Landlord may thereafter serve a written three (3) days' notice of
cancellation of this lease and the term hereunder shall end and expire as fully
and completely as if the expiration of such three (3) day period were the day
herein definitely fixed for the end and expiration of this lease and the term
thereof, and Tenant shall then quit and surrender the demised premises to
Landlord, but Tenant shall remain liable as elsewhere provided in this lease.
In addition, if Tenant shall have defaulted in the performance of the same
or a substantially similar covenant hereunder, other than a covenant for the
payment of rent or additional rent, twice during any consecutive twelve (12)
month period and Landlord, in each case, shall have given a default notice in
respect of such default, then, regardless of whether Tenant shall have cured
such defaults within any applicable grace period, if Tenant shall again default
in respect of the same or a substantially similar covenant hereunder within a
twelve (12) month period after Landlord gave the second such default notice,
Landlord, at its option, and without further notice to Tenant or opportunity for
Tenant to cure such default, may elect to cancel this lease by serving a written
three (3) days' notice of cancellation of this lease and the term hereunder
shall end and expire as fully and completely as if the expiration of such three
(3) day period were the day herein definitely fixed for the end and expiration
of this lease and the term hereof, and Tenant shall then quit and surrender the
demised premises to Landlord, but Tenant shall remain liable as elsewhere
provided in this lease.
65. EXCULPATION
If Tenant shall request Landlord's consent or approval and Landlord shall
fail or refuse to give such consent or approval, Tenant shall not be entitled to
any damages for any withholding by Landlord of its consent or approval, it being
agreed that Tenant's sole remedy shall be an action for specific performance or
an injunction, and that such remedy shall be available only in those cases where
Landlord has expressly agreed in writing not to unreasonably withhold its
consent or approval or where as it matter of law, Landlord may not unreasonably
withhold its consent or approval.
Tenant acknowledges and agrees that if Landlord shall be an individual,
joint venture, tenancy-in-common, firm or partnership, general or limited, there
shall be no personal liability on such individual or on the members of such
joint venture, tenancy-in-common, firm or partnership in respect of any of the
covenants or conditions of this lease. In addition, notwithstanding anything to
the contrary contained in this lease, it is
-R6-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
agreed and understood that Tenant shall look solely to the estate and property
of Landlord in the Building for the enforcement of any judgment (or other
judicial decree) requiring the payment of money by Landlord to Tenant by reason
of any default or breach by Landlord in the performance of its obligations under
this lease, it being intended hereby that no other assets of Landlord or its
principals shall be subject to levy, execution, attachment or other such legal
process for the enforcement or satisfaction of the remedies pursued by Tenant in
the event of such default or breach.
66. INSURANCE
Tenant shall obtain and keep in force, at its own expense, with respect to
the leased premises, a policy or policies of bodily injury and property damage
insurance with an insurance company or companies in a form reasonably
satisfactory to Landlord which shall be in the minimum amount of $2 million
combined single limit per occurrence for bodily injury and property damage. Such
policy or policies shall include Landlord's interest which Landlord named as an
additional insured. Tenant shall deliver to Landlord such policy or policies or
certificates evidencing such coverage, together with a receipt thereon
evidencing payment of premium or other satisfactory proof thereof. Landlord
shall have the right to require Tenant to reasonably increase the amount of
coverage under such policy or policies. In the event of the Tenant's failure to
comply in any respect herein, the Landlord may cause same to be done to the
Tenant's account and the cost thereof, shall be deemed to be additional rent.
During the term hereby demised the Landlord shall insure the building of which
the demised premises are a part, and Tenant shall insure the demised premises
and its fixtures and contents for the full replacement value under an "ALL
RISK" type policy which shall include a waiver by the insurer of all right of
subrogation against Landlord or Tenant in connection with any loss or damage
thereby insured against. Neither party, nor its agents, employees or guest shall
be liable to the other for loss or damage caused by any risk covered by such
insurance. Each party shall deliver to the other satisfactory proof evidencing
such coverage. If the release by either Landlord or Tenant as herein set forth
shall contravene any law with respect to exculpatory agreements, the liability
of the party in question shall be deemed not released but secondary to the
other's insurer.
68. AIR CONDITIONING MAINTENANCE
Throughout the term of this lease Tenant shall at its own cost and expense
(i) cause to be performed all maintenance of the air conditioning system,
equipment and facilities (hereinafter called the "A/C System"), if any, located
in or servicing the demised premises, including all repairs and replacements
thereto, and (ii) maintain in force and provide a copy of same to Landlord an
air conditioning service repair and full service maintenance contract in form
satisfactory to Landlord with an air conditioning contractor or servicing
organization approved by Landlord thirty (30) days after Tenant takes possession
of the demised premises for the conduct of Tenant's business. Any such contract
shall expressly state (i) that it shall be an automatically renewing contract
terminable by no less than thirty (30) days prior written notice to the
Landlord, and (ii) that the contractor providing such service shall maintain a
log at the demised premises detailing the service provided during each visit
pursuant to such contract. Tenant shall keep such log at the demised premises
and permit Landlord to review same promptly after Landlord's request. The entire
A/C System is and shall at all times remain the property of Landlord, and at the
expiration or sooner termination of this lease Tenant shall surrender to
Landlord the entire A/C System in good working order and condition. Tenant shall
not make any changes or additions to the A/C System until Tenant shall have
received Landlord's written consent thereto. Should Tenant fail to obtain the
contract required herein, Landlord may do so and charge the Tenant the monthly
cost
-R7-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
of same plus an administrative fee equal to fifteen percent (15%) of such cost,
as additional rent hereunder, and Tenant shall pay the first installment of same
by no later than the sooner to occur of (a) the tenth (10th) day after Landlord
bills Tenant for such charge, or (b) the date Tenant's next installment of fixed
rent is due. Thereafter, Tenant shall pay such monthly charge with its monthly
fixed rental installment. Provided that Tenant has obtained and maintained in
force an air-conditioning service contract in accordance with the provisions of
this Article, Landlord shall be responsible for the repair or replacement, as
necessary, in Landlord's judgment of any major components of the A/C System
which are defective provided further, however, that in the event that the need
for such repair or replacement arises from an act or omission of Tenant or of
the contractor retained by Tenant to perform such service, such repair or
replacement shall be performed by Landlord at the sole cost and expense of
Tenant.
69. ODORS, NOISE AND VIBRATIONS
Tenant shall not permit any odors, noise or vibrations to emanate from the
demised premises. Tenant shall, within five (5) days after written notice from
Landlord, install at its cost and expense, control devices or procedures to
eliminate such odors, noise or vibrations (as the case or cases may be) if any.
In the event such condition is not remedied within said five (5) day period,
Landlord may, at its sole discretion, either (a) cure such condition and
thereafter add the cost and expense incurred by Landlord therefor to the next
monthly rental to become due and Tenant shall pay said amount, as additional
rent; or (b) treat such failure on the part of Tenant to eliminate such odors,
noise or vibrations (as the case or cases may be) as a material default
hereunder entitling Landlord to enforce any or all of the rights and remedies
provided for under the terms of this lease, including but not limited to its
termination. Landlord shall have the right to enter the demised premises at any
time to inspect the same and ascertain whether they are clean and free of odors,
noise and vibration.
In the event Landlord requires Tenant to install such control devices or
procedures to eliminate such odors, noise or vibrations (as the case or cases
may be) the material, size and location of such installations shall be subject
to Landlord's prior written approval. Such work shall not be commenced until
plans and specifications therefor have been submitted to and approved by
Landlord.
70. CERTAIN RENTAL PAYMENT PROVISIONS
Tenant agrees that annual rental shall he payable as provided in this
lease without prior notice or demand. All rental payable under this lease shall
be paid by check, subject to collection, drawn on a New York City branch of a
member of the New York Clearinghouse. If Tenant shall fail to pay any
installment of annual rental or any other additional rent payable under this
lease within fifteen (15) days after the same shall have become due and payable
hereunder, at Landlord's option such unpaid sums shall bear interest from the
due date(s) thereof until paid in full at a monthly rate of interest equal to
the lesser of (i) one-twelfth (1/12th) of the maximum annual rate of interest
permitted by law or (ii) one and one quarter (1-1/4%) percent.
71. DOORS
Tenant agrees to remove, if existing, within thirty days after the
execution of this lease and not to install kalomein, wood, non-fireproof hollow
metal or any other doors and the attendant door frames thereof in front of the
entrance doors to the demised premises. Tenant shall provide and install
entrance doors of Herculite, Kawneer type, fireproof wood or hollow metal, all
of a design and size approved by the Landlord in writing prior to the
installation thereof.
No installation shall be made by Tenant of any security devices, doors or
gates in the public corridor outside Tenant's premises but Tenant may install at
its own cost and expense the same within Tenant's premises in a manner so that
they close inside of the Tenant's entrance doors.
Tenant agrees that all entrance doors shall be kept closed at all times
except when someone is entering or departing.
If Tenant has separate freight or service entrance doors opening on or
adjacent to the passenger elevator corridor, the same shall not be used by
Tenant for the display of advertising or similar messages, except for
appropriate identification of tenant and the words "freight, shipping entrance"
or similar words.
-R8-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
All entrance doors shall be equipped with door closers either of (a) the
in door type (completely concealed except when in use) or (b) the flush mounted
type (Smoothie LCN or equal) located within the Tenant's premises.
Tenant shall not maintain in the public corridor nor shall Tenant place on
its entrance doors any signs, the design, materials, colors and size thereof
which have not been submitted to Landlord in writing and which have not received
Landlord's prior written approval. Such submission shall include a scale drawing
and, in addition, elevation drawings if the latter shall be requested by
Landlord. Under no circumstance shall Tenant use or be permitted to use any
illuminated sign or device which utilizes moving, color changing or flashing
parts.
72. SHOWROOMS
In order to induce Landlord to enter into this lease Tenant acknowledges
that the building in which the demised premises are located is primarily a
showroom type building and that the maintenance of clean, attractive showrooms
is of great importance to Landlord in obtaining new tenants for the building and
in maintaining the character of the building as a showroom building. For the
foregoing reasons, Tenant agrees to maintain at all times during the term of
this lease a fully stocked and ascetically attractive showroom in that part of
the demised premises which is visible to persons from the public corridors of
the building, even if such showroom is only visible when the doors to the
demised premises are open. Tenant further agrees that no stock or merchandise
shall be stored in the showroom portion of the demised premises and no stock
racks shall be permitted to be installed therein except for the exhibition and
showing of samples. Tenant further acknowledges that its failure to comply with
the above provisions will decrease the value of space in the building to the
detriment of Landlord, and Tenant agrees that its failure to so comply shall be
deemed a substantial default under the terms of this lease entitling Landlord to
exercise all of the rights and remedies provided for herein as a result of
Tenant's default.
73. NO JOBBING
As a material inducement to Landlord to enter into this lease, and a
material condition of it, Tenant covenants and agrees that: the demised premises
shall not be used, in whole or in part, for "jobbing or any other kind of retail
and/or wholesale cash and carry business having goods sold in the demised
premises directly to customer's or otherwise. In addition, Tenant must (i) not
use, or permit to be used, any pipe racks and any other rolling racks within a
showroom or in and about any other portion of the demised premises which is
visible from the passenger elevator, the elevator corridor or any other portion
of the building outside the demised premises at any time; (ii) keep all entrance
door's to the demised premises in a closed position and no door stop or other
device whatsoever shall be used to prevent them from closing at any time; (iii)
not permit goods of any kind whatsoever to be displayed, stored or kept in any
portion of the building outside the demised premises at any time and all common
areas of the building shall remain free of signs, racks, goods and all other
obstructions of every nature and description at all times; (iv) not permit
customers, employees or visitors of Tenant to play music and/or conduct any
business in or about any common corridor, passageway or any other portion of the
building outside the demised premises at any time.
74. SEWING MACHINES LIMITATIONS
Tenant agrees that sewing machines shall be: (i) used only for sample
making; (ii) located in a room whose location within the demised premises is
mutually agreeable to Landlord and Tenant; (iii) shall be limited to
conventional single operator separate motor machines, and the maximum number of
machines shall be equal to (A) the quotient found by taking the "Multiplication
Factor" in this lease and dividing it by 333 or (B) a maximum of twenty (20)
operators at a time which ever is less; (iv) shall be equipped with such
vibration control devices as Landlord may reasonably require to prevent noise or
vibration from emanating from the demised premises. Landlord shall not
unreasonably withhold or delay consent to the location of such room and the
location of those machines within it as proposed by Tenant as long as such
locations correspond to the types of locations permitted for other tenants
engaged in similar activities in comparable space in the building; will not
exacerbate efforts to reduce noise, odors and vibration transmitted outside the
demised premises. No switch shall be wired or used to turn on more than one
machine at a time. Switches shall not be wired so as to require that the motor
of a machine not in use run when the motor of a machine in use runs.
-R9-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
75. ELECTRICITY
(A) As an incident to this lease and as part of the annual rental rate
payable hereunder, Landlord shall furnish to Tenant, through transmission
facilities installed by it in the Building, alternating electric current to be
used by the Tenant in, or in connection with the lighting fixtures and
electrical receptacles presently installed in the demised premises (the annual
rental rate payable from time to time during the Term less the applicable amount
pursuant to subdivision (F) of this Article, being sometimes herein referred to
as the "Factor"). Landlord shall not be liable in any way to Tenant for any
failure or defect in supply or character of electric current furnished to the
demised premises. Landlord shall furnish and install all lighting tubes,
ballasts, lamps and bulbs used in the demised premises and Tenant shall pay,
promptly upon demand, Landlord's reasonable charges therefor. Tenant shall use
said electric current for lighting and, insofar as Landlord's facilities are not
burdened thereby and applicable laws and insurance regulations permit, for
operation of such equipment as is normally used in connection with the operation
of a business office.
(B) Tenant's use of electric current in the demised premises shall not at
any time exceed the capacity of any of the electrical conductors and equipment
in or otherwise serving the demised premises. Tenant shall not make or perform,
or permit the making or performing of, any alterations to wiring installations
or other electrical facilities in or serving the demised premises or any
additions to the business machines, office equipment or other appliances in the
demised premises which utilize electrical energy without the prior consent of
Landlord in each instance. Should Landlord grant any such consent, all
additional risers or other equipment required therefor shall be paid by Tenant
promptly upon demand. As a condition to granting any such consent, Landlord may
require that Tenant agree to an increase in the annual rental rate payable
hereunder by an amount which will reflect the value to Tenant of the additional
service to be furnished by Landlord, that is, the potential additional electric
current to be made available to Tenant. If Landlord and Tenant cannot agree
thereon, such amount shall be determined by a reputable independent electrical
engineer or consultant, to be selected by Landlord and paid equally by both
parties. The findings of the consultant or engineer in all such instances shall
be conclusive upon the parties. When the amount of such increase is so
determined, the parties shall execute and exchange an agreement supplementary
hereto to reflect the increase in the amount of the annual rental rate payable
hereunder, effective from the date such additional service is made available to
Tenant, but such increase shall be effective from such date even if such
supplementary agreement is not executed.
(C) Landlord may, at any time, retain a reputable independent electrical
engineer or consultant, selected by Landlord and paid equally by both parties,
to make a survey of the electrical wiring and power load to determine what the
value would be to Tenant if it were purchasing electricity directly from the
utility company at Landlord's rate schedule. The findings of the consultant or
engineer in all such instances shall be conclusive upon the parties. When the
amount of such value is so determined, the parties shall execute and exchange an
agreement supplementary hereto to reflect any appropriate increase in the amount
of the annual rental rate payable hereunder, effective from the date of such
survey, but such increase shall be effective from such date even if such
supplementary agreement is not executed.
(D) If any tax is imposed upon Landlord in connection with the furnishing
of electric current to Tenant by any Federal, State or Local Government
subdivision or authority, Tenant shall pay Landlord an amount equal to such tax,
where permitted by Law.
(E) If, subsequent to sixty (60) days prior to the date hereof, the public
utility rate schedule or any portion of the charge for the supply of electric
current to the Building is increased or decreased or such rate schedule is
superceded by another rate schedule, the Factor shall be increased or decreased
by the percentage of increase or decrease in Landlord's cost for purchasing
electricity for the Building. If Landlord and Tenant cannot agree thereon, the
amount of such adjustment shall be determined by a reputable independent
electrical engineer or consultant, to be selected by Landlord and paid equally
by both parties. The findings of the consultant or engineer in all such instance
shall be conclusive upon the parties. Whenever the amount of such adjustment is
so determined, the parties shall execute and exchange an agreement supplementary
hereto to reflect such adjustment in the amount of the increase or decrease in
such rate schedule or charge, but such adjustment shall be effective from such
date whether or not a supplementary agreement is executed.
(F) Landlord reserves the right to discontinue furnishing electric current
to Tenant in the demised premises at any time upon not less than thirty (30)
days' written notice to Tenant. If Landlord exercises such right of termination,
this lease shall continue in full force and effect and shall not be affected
thereby, except that, from and after the effective date of such termination,
Landlord shall not be obligated to furnish electric current to Tenant and the
annual rental rate payable hereunder shall be reduced by $16,953.00 per year. If
-R10-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
Landlord so discontinues furnishing electric current to Tenant, Tenant shall
arrange to obtain electric current directly from the public utility company
furnishing electric current to the Building. Such electric current may be
furnished to Tenant by means of the then existing Building system feeders,
risers and wiring to the extent that the same are available, suitable and safe
for such purposes. All meters and additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electric current directly from such utility company shall be installed and
maintained by Tenant (or, at Landlord's option, by Landlord) at Tenant's
expense.
(G) Tenant has the right throughout the term of this lease, at it's sole cost
and expense, to install a submeter in the premises upon not less than sixty (60)
days prior written notice to Landlord. If Tenant exercises such right, this
lease shall continue in full force and effect and shall not be affected thereby,
except that, from and after the date that such submeter has been installed and
is properly operating, Landlord shall furnish electric current to Tenant and
Tenant shall purchase electric current from Landlord on the basis of submetering
in accordance with the provisions of Article 45 hereof and the annual rental
rate payable hereunder shall be reduced by $16,953.00 per year, and Tenant shall
receive the return of $2,825.50 from its security deposit which represents
amount allocable to electric. All meters and additional panel boards, feeders,
risers, wiring and other conductors and equipment which may be required for
Landlord to furnish electric current on the basis of submetering shall be
installed and maintained by Tenant (or, at Landlord's option, by Landlord) at
Tenant's expense.
76. RENT ESCALATION UTILITY INCREASES
A. For the purposes of this Article only, the following words and terms
shall have the following meanings:
(i) "Fuel Cost" shall mean Landlord's cost for all Fuel (including, but not
limited to, oil, steam and coal) delivered to the Building.
(ii) "Electric Cost" shall mean Landlord's cost for all electricity used in
lighting all the public and service areas, and in operating all the service
facilities, of the Building. Landlord and Tenant agree that if the public
utility serving the Building submits bills for periods ending on other than the
last day of a calendar month, the twelve (12) month period ending closest to the
last day of either the Base Year or any Comparison Year, as such terms are
hereinafter defined, shall be used for the purposes of computing the Electric
Cost. If electric current is supplied to Tenant by the public utility
corporation serving the Building, Landlord and Tenant agree that the Electric
Cost shall be deemed, for the purposes of this Article, to constitute one
hundred (100%) percent of Landlord's total cost for electricity consumed at the
Building. If electric current is supplied to Tenant by Landlord, Landlord and
Tenant agree that the Electric Cost shall be deemed, for the purposes of this
Article, to constitute fifty (50%) percent of Landlord's total cost for
electricity consumed at the Building.
(iii) "Utility Cost" shall mean the Fuel Cost and the Electric Cost.
(iv) "Base Year" shall mean calendar year 1999.
(v) "Comparison Year" shall mean the twelve (12) month period commencing on the
first (1st) day of the calendar month immediately following the end of the Base
Year and each successive twelve (12) month period in which occurs any part of
the term of this lease.
(vi) "Tenant's Share" shall mean 1.399%.
B. If the Utility Cost for any Comparison Year exceeds the Utility Cost
for the Base Year, Tenant shall pay to Landlord, as additional rent, Tenant's
Share of the excess. Such additional rent shall be due and payable within ten
(10) days after Landlord shall have furnished Tenant with the statement provided
for in Paragraph C of this Article. Tenant's obligation to pay the amount herein
provided for shall survive the expiration or earlier termination of this lease.
The amount due and payable by Tenant for any partial Comparison Year shall be
appropriately prorated.
C. After the Base Year, Landlord shall furnish Tenant with a statement of
the Base Year Utility Cost. Thereafter, Landlord shall furnish to Tenant a
statement of the Utility Cost (the "Utility Statement") for each Comparison Year
and a computation of the amounts payable by Tenant pursuant to Paragraphs B and
D and E of this Article.
-R11-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
D. During the first Comparison Year, Tenant shall pay to Landlord, on
account of the amount due and payable by Tenant pursuant to this Article,
Tenant's Share of the quotient obtained by dividing ten (10%) percent of the
Base Year Utility Cost by twelve (12). Such payments shall be deferred until
Landlord furnishes [ILLEGIBLE] with a statement of the Base Year Utility Cost,
whereupon Tenant shall promptly pay all deferred payments and commence such
payments. During each succeeding Comparison Year, Tenant shall pay to Landlord,
on account of the amount due and payable by Tenant pursuant to Paragraph B of
this Article, one-twelfth (1/12th) of Tenant's Share of the difference between
the Utility Cost for the prior Comparison Year and [ILLEGIBLE] Utility Cost for
the Base Year, plus an additional ten (10%) percent of such one-twelfth
(1/12th). However, until Landlord furnishes Tenant with the applicable Utility
Statement for the preceding Comparison Year, Tenant shall continue to pay to
Landlord the amount of the monthly payment due and payable pursuant to this
Paragraph D during the last calendar month of the preceding Comparison Year plus
an additional ten (10%) percent of such amount.
E. If the payments made by Tenant pursuant to [ILLEGIBLE] Year preceed the
amount payable to Landlord for such Comparison [ILLEGIBLE] such process shall,
at the option of Landlord, either be paid to Tenant [ILLEGIBLE] next [ILLEGIBLE]
payments provided for in said Paragraph D, except [ILLEGIBLE] such excess shall
be paid (without interest) by Landlord [ILLEGIBLE] for such Comparison Year
pursuant to Paragraph B of this article [ILLEGIBLE] pursuant Paragraph D of this
Article, Tenant shall pay the difference [ILLEGIBLE] furnishes with a Utility
Statement for such Comparison Year.
77. COMMENCEMENT/EXPIRATION DATE
77.01 Anything contained herein to the contrary notwithstanding [ILLEGIBLE] on
the date (the "Commencement Date") on which Landlord gives notice to Tenant
that the work required to be performed by Landlord under the Workletter attached
hereto as Exhibit "A" ("Landlord's Work") will be substantially completed
premises to be in broom clean condition, demolition and removal of debris
completed ("Substantial Completion"), but in no event later than six (6) months
from the date of this Lease, or the date on which Tenant (or its agent) enters,
uses or occupies any portion of the demised premises, whichever occurs first.
Tenant's obligations to pay the "Fixed Rent" shall commence as of the date (the
"Rent Date") which is four (4) months after the Commencement Date except that
Tenant shall pay all additional rent otherwise payable hereunder including,
without limitation, charges attributable to electric service as of the
Commencement Date. As soon as the Commencement Date, Rent Date and the
"Expiration Date" (defined below) are known, Landlord and Tenant shall execute a
memorandum confirming the same on demand, but any failure to execute such a
memorandum shall not affect any of those dates.
77.02 The term of this lease (the "Term") shall expire, unless sooner terminated
as provided herein, on the date (the "Expiration Date") which is the last day
of the calendar month in which the seventh (7th) anniversary of the Rent Date
occurs, unless the Rent Date is the first day of the calendar month, in which
event the Term shall expire on the day before such seventh (7th) anniversary. If
the Rent Date is not the first day of a calendar month, the first monthly
installment of the fixed rent paid upon execution of this lease shall be
prorated on the first day of the month which follows the Rent Date with Tenant
to be credited for the portion of the previous month which elapsed prior to the
Rent Date.
77.03 Tenant covenants and agrees to pay "fixed rent" to Landlord in equal
advance monthly installments on the first day of each and every calendar month
which occurs, in whole or in part, during the Term commencing as of the Rent
Date (except for the first such installment due upon execution of this lease
which shall be applied as the installment due on the Rent Date) without any
prior demand, offset or deduction whatsoever at the following annual rental
rates: (which includes $16,953.00 per year for electric)
(a) $113,020.00 per year ($9,418.34 per month) from the Rent Date to the last
day of the first (1st) "Lease Year": (defined below);
(b) $115,902.00 per year ($9,658.50 per month) from the first day of the second
(2nd) Lease Year to and including the last day of the second (2nd) Lease Year;
(c) $118,870.00 per year ($9,905.84 per month) from the first day of the third
(3rd) Lease Year to and including the last day of the third (3rd) Lease Year;
-R12-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
$121,928.00 per year ($10,160.67 per month) from the first day of the
fourth (4th) Lease Year to and including the last day of the fourth (4th) Lease
Year;
$125,077.00 per year ($10,423.09 per month) from the first day of the
fifth (5th) Lease Year to and including the last day of the fifth (5th) Lease
Year;
$128,321.00 per year ($10,693.42 per month) from the first day of the
sixth (6th) Lease Year to and including last day of the sixth (6th) Lease Year;
and
$131,662.00 per year ($10,971.84 per month) from the first day of the
seventh (7th) Lease Year to and including the Expiration Date.
77.05 Lease Year" means successive twelve (12) calendar month periods commencing
on the first day of the calendar month which follows the Rent Date unless the
Rent Date is the first day of the month, in which event the first Lease Year
shall begin on the Rent Date and each Lease Year thereafter shall begin on an
anniversary of the Rent Date.
77.06 As used in this lease, "rent" or "rents" shall mean and include "fixed
rent" and any and all additional rent References to "fixed rent" shall mean and
include the "annual rental" or the "annual rental rate".
78. DELAY IN SUBSTANTIAL COMPLETION
If Substantial Completion of Landlord's Work is delayed by reason of any
Tenant Delay (as hereinafter defined) and/or Tenant's performance of any work
that Tenant performs with Landlord's permission in the demised premises during
the course of Landlord's Work, the date of Substantial Completion shall be
accelerated by one (1) day for each day of delay and in addition Tenant shall
pay to Landlord as additional rent within ten (10) days after demand therefor
all costs and disbursements which Landlord actually sustains by reason of such
delay. In no event shall Landlord be required to commit additional personnel to
the performance of Landlord's Work to negotiate a Tenant Delay. If Tenant pays
any sum due hereunder later than ten (10) days after the date of request
therefor by Landlord, then Tenant shall pay, as additional rent, interest on the
unpaid sum at the maximum legal rate from the date of Landlord's request.
The term "Tenant Delay" shall mean any delay that Landlord may encounter
in the completion of Landlord's Work by reason of any act, neglect, failure or
omission of Tenant, its agents, servants, contractors, architect or employees,
in the performance of Tenant's obligations under this lease, including, but not
limited to:
1. Any delay in submission of or inadequacy of the information which must
be provided by Tenant to Landlord which is necessary for Landlord to complete
Landlord Work.
2. Any delay due to changes made by or on behalf of Tenant, at Tenant's
request, regarding Landlord's Work.
3. Any delay due to Tenant's request for items to be installed within the
demised premises that have a delivery date which does not provide sufficient
time for installation prior to the otherwise anticipated date of Substantial
Completion or that will delay the installation of any other item of Landlord's
Work; and
4. Any delay due to Tenant performing work or otherwise interfering with
Substantial Completion of Landlord's Work.
79. ASBESTOS
Promptly subsequent to the full execution of this lease and delivery of
same to both parties hereto, Landlord agrees to provide Tenant with an ACP-5
certificate, or comparable certificate providing in effect that plans for
alterations to be performed to the demised premises may be filed by the New York
City Department of Buildings as a "no asbestos" project and that no action need
be taken regarding asbestos with respect to the demised premises. In addition,
Landlord will be responsible, at its sole cost and expense, to promptly
encapsulate or remove any friable asbestos in the demised premises, provided
however that any violations of laws relating to asbestos caused by Tenant's
construction shall be remedied by Tenant at its sole cost and expense.
-R13-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
80. COMPLIANCE WITH LAWS
Landlord represents to the best of its knowledge that as of the date of
execution hereof there are no violations of record outstanding with regard to
the building or to the demised premises in any governmental agency having
jurisdiction thereover which will prevent Tenant from conducting its normal
business operation, prevent Tenant from obtaining its building permit or
otherwise performing the Tenant Work.
81. WAIVER OF SUBROGATION
Each of Landlord and Tenant hereby releases the other and all persons
claiming under it, to the extent of its insurance coverage, from any and all
liability for any loss or damage caused by fire or any of the extended coverage
casualties, or any other insured casualty even if such fire or other casualty
shall be brought about by the fault or negligence of the other party, or any
persons claiming under it, provided, however, this release shall be in force and
effect only with respect to loss or damage occurring during such times as
releasor's policies of fire and extended coverage insurance shall contain a
clause to the effect that this release shall not affect said policies or the
right of releasor to recover thereunder. Each of Landlord and Tenant agrees that
its fire and extended coverage and other insurance policies will include such a
clause so long as the same is obtainable and is includable without extra cost,
or if extra cost is chargeable therefor, so as long as the other party pays such
extra cost. Each party will advise the other of such extra cost and the amount
may be paid by the other party, at its election without obligation to do so.
82. CANCELLATION PRIVILEGE
82.01 Tenant may cancel this lease effective as of the last day of the
fourth (4th), fifth (5th), or sixth (6th) Lease Year (the "Effective Date")
subject to the following conditions precedent:
(a) Tenant shall send Landlord written notice (the "Cancellation Notice")
of Tenant's election to cancel which Cancellation Notice shall be sent certified
mail, return receipt requested.
(b) The Cancellation Notice shall be sent not less than two hundred
seventy (270) days prior to the Effective Date.
(c) Within thirty (30) days from the date of the Cancellation Notice,
Landlord shall send Tenant an itemization of Landlord's cost comprising the
Cancellation Fee as such fee is defined in paragraph 82.02 (the "Cancellation
Fee Statement"). Landlord will upon request, furnish Tenant such additional
information as may be necessary to permit Tenant to verify the component parts
of the Cancellation Fee.
(d) Within twenty (20) days after the receipt of the Cancellation Fee
Statement, Tenant shall pay Landlord by good, certified or bank check, the
Cancellation Fee (as hereinafter defined).
(e) The conditions specified in Paragraph 82.03 herein.
82.02 The "Cancellation Fee" shall mean all of the then accrued but unpaid
rent and additional rent (not then in dispute) and, (a) if the Tenant cancels on
the fourth (4th) anniversary 42.86%; (b) if the Tenant cancels on the fifth
(5th) anniversary 28.57%; or (c) if the Tenant cancels on the sixth (6th)
anniversary 14.29%, of the following amounts incurred by Landlord in connection
with the leasing of the demised premises to Tenant:
(i) The free rent period provided in Article 77 ($32,021);
(ii) Brokerage commission paid by Landlord pursuant to Article 56
($38,720)
(iii) The costs incurred by landlord in connection with Landlord's Work as
set forth in Exhibit "A" (Landlord to furnish Tenant with certified
costs and subcontractor's bills after completion of the Work); and
(iv) $2,000.00 for Landlord's legal fees.
82.03 In the event that, on or after the Effective Date, Tenant shall be
in default in the payment of rent or additional rent (not then subject to a good
faith dispute) and such default shall
-R14-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
have continued beyond any applicable grace period, then Tenant's cancellation
privilege, as herein contained, shall terminate with the same effect as if the
Cancellation Notice had never been sent and, Tenant's cancellation privilege
under this Article 82 shall be null and void.
-R15-
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me personally came
to me known, who being by me duly sworn, did
depose and say that he resides in
that he is the of the corporation
described in and which executed the foregoing instrument, as TENANT; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation, and that he signed his name thereto by like order.
------------------------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me personally came
to me known and known to me to be the individual
described in and who, as TENANT, executed the foregoing instrument and
acknowledged to me that he executed the same.
------------------------------------------------
[CLIPART] IMPORTANT - PLEASE READ [CLIPART]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals, fish, or birds be kept in or
about the building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall the inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at
all hours on Sundays and legal holidays all persons who do not present a pass to
the building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons. Notwithstanding the foregoing, Owner shall not be required to
allow Tenant or any person to enter or remain in the building, except on
business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to
1:00 p.m.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a loft building, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive or hazardous fluid,
material, chemical or substance, or cause or permit any odors or cooking or
other processes, or any unusual or other objectionable odors to permeate in or
emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs
or interferes with other Tenants in the beneficial use of their premises.
Address
Premises
================================================================================
TO
================================================================================
STANDARD FORM OF
[SEAL] LOFT [SEAL]
LEASE
The Real Estate Board of New York, Inc.
(c) Copyright 1982. All rights Reserved.
Reproduction in whole or in part prohibited.
================================================================================
Dated 19
Rent Per Year
Rent Per Month
Term
From
To
Drawn by PM; MM Checked by [ILLEGIBLE]
------------------------ -----------------------------
Entered by MP
---------------------- Approved by 6/16/98
----------------------------
REV: VC/KM 9/22/98
================================================================================
#88263N
WILLIAMS REAL ESTATE CO. INC.
380 Madison Avenue, New York, N.Y.
(212) 716-3500
Tenant's Initials [ILLEGIBLE] Landlord's Initials [ILLEGIBLE]
<PAGE>
EXHIBIT "C"
"GOOD GUY" GUARANTEE
The purpose of this limited Guarantee is to assure Landlord that during
any period that Tenant is in possession of the Demised Premises the payment of
all rent and additional rent shall be made.
1. The "Surrender Date" shall be the date which is prior to or subsequent
to the Expiration Date specified in the lease (as defined herein) that Tenant
(as defined herein) shall have performed all of the following: (a) vacated and
surrendered the Demised Premises (as defined herein) to Landlord (as defined
herein) free of all subleases or licensees and in broom-clean condition, (b) so
notified Landlord or such agent in writing, and (c) delivered the keys to the
Demised Premises to Landlord (or its managing agent). Guarantor shall not be
liable under this Guarantee for any rent, additional or other charges or
payments accruing under the Lease after the Surrender Date.
2. As an inducement to STATECOURT ENTERPRISES, INC. ("Landlord") to enter
into a lease dated as of 10-14, 1998 ("Lease") with BANNER INDUSTRIES OF NEW
YORK, INC., a New York corporation ("Tenant"), of premises located on the fifth
(5th) floor of 1375 Broadway, New York, New York (the "Demised Premises") the
undersigned (the "Guarantor") jointly, and severally hereby guarantees to
Landlord all rent and additional rent payable by Tenant under the Lease
("Accrued Rent") up to the Surrender Date, limited to the following percentage
extent of any amount which may become due to Landlord: Robert C. Kaplan - 55%;
Lawrence C. Kaplan - 25%; Stuart Lesser - 10%; and Jeffrey Kaplan - 10%.
3. Any security deposit under the Lease shall not be credited against
amounts payable by Tenant, or by Guarantor under the terms of this Guarantee.
The acceptance by Landlord of payments under this Guarantee or the acceptance of
a surrender of the Demised Premises shall not be deemed a release or waiver by
Landlord of any obligation of the Tenant under the Lease.
4. This Guarantee is absolute and unconditional and is a guarantee of
payment and performance, not of collection and Guarantor's liability hereunder
shall be primary. This Guarantee may be enforced without the necessity of
resorting to or exhausting any other security or remedy, without the necessity
at any time of having recourse to Tenant and without having commenced any action
against or having obtained any judgment against Tenant or Guarantor. The
validity of this Guarantee shall not be affected or impaired by reason of the
assertion by Landlord against Tenant of any of the rights or remedies reserved
to Landlord under the Lease. Guarantor agrees that this Guarantee shall remain
in force and effect as to any assignment, transfer, renewal, modification or
extension of the Lease. No action of Landlord or Tenant shall effect the
obligations of Guarantor hereunder. The Guarantor waives notice of any and all
defaults by Tenant in the payment of annual rent, additional rent, or other
charges, and waives notice of any and all defaults by Tenant in the performance
of any of the terms of the Lease on Tenant's part to be performed.
5. If Tenant becomes insolvent or shall be adjudicated a bankrupt or shall
file for reorganization or similar relief or if such petition is filed by
creditors of Tenant, under any present or future Federal or State law or if the
Lease is terminated or Tenant's obligations otherwise discharged in any
bankruptcy proceeding, Guarantor's obligations hereunder may nevertheless be
enforced against the Guarantor.
6. This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of New York.
7. All terms and provisions herein shall inure to the benefit of the
Landlord only.
IN WITNESS WHEREOF, the Guarantor has signed this Guarantee on the 7th day of
Oct, 1998.
/s/ Stuart Lesser /s/ Lawrence C. Kaplan
- --------------------------- ---------------------------
Stuart Lesser Lawrence C. Kaplan
SS# ###-##-#### SS# ###-##-####
- ---------------------------
/s/ Jeffrey Kaplan /s/ Robert C. Kaplan
- --------------------------- ---------------------------
Jeffrey Kaplan Robert C. Kaplan
SS# ###-##-#### SS# ###-##-####
- --------------------------- ---------------------------
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 7th day of October, 1998 before me personally came Larry Kaplan, to
me known and known to me to be the individual described in, and who executed the
foregoing Guarantee, and he/she duly acknowledged to me that he/she executed the
same.
/s/ Doris Frankel
-------------------------------
Notary Public
[STAMP]
DORIS FRANKEL
NOTARY PUBLIC, State of New York
No. 41-4974811
Qualified in Queens County
Commission Expires Nov. 19, 1998
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 7th day of October, 1998 before me personally came Stuart Lesser,
to me known and known to me to be the individual described in, and who executed
the foregoing Guarantee, and he/she duly acknowledged to me that he/she executed
the same.
/s/ Doris Frankel
-------------------------------
Notary Public
[STAMP]
DORIS FRANKEL
NOTARY PUBLIC, State of New York
No. 41-4974811
Qualified in Queens County
Commission Expires Nov. 19, 1998
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 7th day of October, 1998 before me personally came Robert Kaplan,
to me known and known to me to be the individual described in, and who executed
the foregoing Guarantee, and he/she duly acknowledged to me that he/she executed
the same.
/s/ Doris Frankel
-------------------------------
Notary Public
[STAMP]
DORIS FRANKEL
NOTARY PUBLIC, State of New York
No. 41-4974811
Qualified in Queens County
Commission Expires Nov. 19, 1998
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 7th day of October, 1998 before me personally came Jeffery Kaplan,
to me known and known to me to be the individual described in, and who executed
the foregoing Guarantee, and he/she duly acknowledged to me that he/she executed
the same.
/s/ Doris Frankel
-------------------------------
Notary Public
[STAMP]
DORIS FRANKEL
NOTARY PUBLIC, State of New York
No. 41-4974811
Qualified in Queens County
Commission Expires Nov. 19, 1998
<PAGE>
EXHIBIT NO. 10(i)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the
2nd day of December 1998, between JACLYN, INC., a Delaware corporation (the
"Company") and Martin Brody (the "Optionee").
--------
WITNESSETH:
-----------
1. The Company, in accordance with the terms and conditions of
the 1996 Non-Employee Director Stock Option Plan of the Company (the "Plan"),
grants as of December 2, 1998 to the Optionee an option to purchase an aggregate
of 2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $3.75 per share, being 100% of the fair market value of
---------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to
the Company at its principal office, presently 635 59th Street, West New York,
New Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee
is exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
4. Notwithstanding the foregoing, and without limiting the
provisions of Article I I of the Plan, this option shall not be exercisable by
the Optionee unless (a) a registration statement under the Securities Act of
1933, as amended (the "Securities Act")
--------------
<PAGE>
with respect to the shares of Common Stock issuable upon the exercise of this
option shall be effective and current at the time of exercise or (b) there is an
exemption from registration under the Securities Act for the issuance of such
shares of Common Stock upon exercise. At the request of the Board of Directors,
the Optionee shall execute and deliver to the Company representations and
warranties, in form and substance satisfactory to counsel to the Company, that
the shares of Common Stock to be issued upon the exercise of the option are
being acquired by the Optionee for his own account, for investment only and not
with a view to the resale or distribution thereof within the meaning of the
Securities Act. Nothing herein shall be construed so as to obligate the Company
to register the shares subject to this option under the Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee
any right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates
for shares of Common Stock issued upon exercise of this option and may issue
such "stop transfer" instructions to its transfer agent in respect of such
shares as it determines, in its discretion, to be necessary or appropriate to
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act.
7. The Company and the Optionee agree that they will both be
subject to and bound by all of the terms and conditions of the Plan, a copy of
which is attached hereto and made a part hereof In the event the Optionee is no
longer a director of the Company or in the event of his death or disability (as
defined in the Plan), his rights hereunder shall be governed by and be subject
to the provisions of the Plan. In the event of a conflict between the terms of
this Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with
all applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or
the laws of descent and distribution and may be exercised during the lifetime of
the Optionee only by him.
10. This Contract shall be binding upon and inure to the
benefit of any successor or assign of the Company and to any heir, distributee,
executor, administrator or legal representative entitled under the Plan and by
law to the Optionee's rights hereunder.
11. This Contract shall be governed by and construed in
accordance with the laws of the State of Delaware.
12. The invalidity or illegality of any provision herein shall
not affect the validity of any other provision.
<PAGE>
13. The Optionee agrees that the Company may amend the Plan and
the options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan
IN WITNESS WHEREOF, the parties hereto have executed this
Contract as of the day and year first above written.
JACLYN, INC.
By:/s/ Robert Chestnov
-------------------
Its: President
------------------
Optionee /s/ Martin Brody
--------------------------
c/o HMK Associates
------------------
30 Columbia Tpke.
------------------
Florham Park, NJ 07932
----------------------
Address
###-##-####
----------------------------
Tax Id. or Social Security No.
<PAGE>
EXHIBIT NO. 10 (j)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the
2nd day of December 1998, between JACLYN, INC., a Delaware corporation (the
"Company") and Richard Chestnov (the "Optionee").
----------
WITNESSETH:
-----------
1. The Company, in accordance with the terms and conditions of
the 1996 Non- Employee Director Stock Option Plan of the Company (the "Plan"),
grants as of December 2, 1998 to the Optionee an option to purchase an aggregate
of 2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $3.75 per share, being 100% of the fair market value of
--------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to
the Company at its principal office, presently 635 59th Street, West New York,
New Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee
is exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
4. Notwithstanding the foregoing, and without limiting the
provisions of Article II of the Plan, this option shall not be exercisable by
the Optionee unless (a) a registration statement under the Securities Act of
1933, as amended (the "Securities Act") with respect to the shares of Common
----------------
Stock issuable upon the exercise of this option shall be effective and current
at the time of exercise or (b) there is an exemption from registration under the
Securities Act for the issuance of such shares of Common Stock upon exercise. At
the request of the Board of Directors, the Optionee shall execute and deliver to
the Company representations and warranties, in form and substance
<PAGE>
satisfactory to counsel to the Company, that the shares of Common Stock to be
issued upon the exercise of the option are being acquired by the Optionee for
his own account, for investment only and not with a view to the resale or
distribution thereof within the meaning of the Securities Act. Nothing herein
shall be construed so as to obligate the Company to register the shares subject
to this option under the Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee
any right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates
for shares of Common Stock issued upon exercise of this option and may issue
such "stop transfer" instructions to its transfer agent in respect of such
shares as it determines, in its discretion, to be necessary or appropriate to
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act.
7. The Company and the Optionee agree that they will both be
subject to and bound by all of the terms and conditions of the Plan, a copy of
which is attached hereto and made a part hereof In the event the Optionee is no
longer a director of the Company or in the event of his death or disability (as
defined in the Plan), his rights hereunder shall be governed by and be subject
to the provisions of the Plan. In the event of a conflict between the terms of
this Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with
all applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or
the laws of descent and distribution and may be exercised during the lifetime of
the Optionee only by him.
10. This Contract shall be binding upon and inure to the
benefit of any successor or assign of the Company and to any heir, distributee,
executor, administrator or legal representative entitled under the Plan and by
law to the Optionee's rights hereunder.
11. This Contract shall be governed by and construed in
accordance with the laws of the State of Delaware.
12. The invalidity or illegality of any provision herein shall
not affect the validity of any other provision.
13. The Optionee agrees that the Company may amend the Plan and
the options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Contract as of the day and year first above written.
JACLYN, INC.
By:/s/ Robert Chestnov
-------------------
Its: President
Optionee /s/Richard Chestnov
----------------------
17142 Whitehaven Dr.
---------------------
Boca Raton, Fl 33496
--------------------
Address
###-##-####
----------------------------
Tax Id. or Social Security No.
<PAGE>
EXHIBIT NO. 10(k)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the
2nd day of December 1998, between JACLYN, INC., a Delaware corporation (the
"Company") and Albert Safer (the "Optionee").
----------
WITNESSETH:
-----------
1. The Company, in accordance with the terms and conditions of
the 1996 Non- Employee Director Stock Option Plan of the Company (the "Plan"),
grants as of December 2, 1998 to the Optionee an option to purchase an aggregate
of 2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $3.75 per share, being 100% of the fair market value of
--------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to
the Company at its principal office, presently 635 59th Street, West New York,
New Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee
is exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
4. Notwithstanding the foregoing, and without limiting the
provisions of Article I I of the Plan, this option shall not be exercisable by
the Optionee unless (a) a registration statement under the Securities Act of
1933, as amended (the "Securities Act") with respect to the shares of Common
-----------------
Stock issuable upon the exercise of this option shall be effective and current
at the time of exercise or (b) there is an exemption from registration under the
Securities Act for the issuance of such shares of Common Stock upon exercise. At
the request of the Board of Directors, the Optionee shall execute and deliver to
the Company representations and warranties, in form and substance satisfactory
to counsel to the Company, that the shares of Common Stock to be issued upon the
exercise of
<PAGE>
the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution thereof within
the meaning of the Securities Act. Nothing herein shall be construed so as to
obligate the Company to register the shares subject to this option under the
Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee
any right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates
for shares of Common Stock issued upon exercise of this option and may issue
such "stop transfer" instructions to its transfer agent in respect of such
shares as it determines, in its discretion, to be necessary or appropriate to
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act.
7. The Company and the Optionee agree that they will both be
subject to and bound by all of the terms and conditions of the Plan, a copy of
which is attached hereto and made a part hereof In the event the Optionee is no
longer a director of the Company or in the event of his death or disability (as
defined in the Plan), his rights hereunder shall be governed by and be subject
to the provisions of the Plan. In the event of a conflict between the terms of
this Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with
all applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or
the laws of descent and distribution and may be exercised during the lifetime of
the Optionee only by him.
10. This Contract shall be binding upon and inure to the
benefit of any successor or assign of the Company and to any heir, distributee,
executor, administrator or legal representative entitled under the Plan and by
law to the Optionee's rights hereunder.
11. This Contract shall be governed by and construed in
accordance with the laws of the State of Delaware.
12. The invalidity or illegality of any provision herein shall
not affect the validity of any other provision.
13. The Optionee agrees that the Company may amend the Plan and
the options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan
IN WITNESS WHEREOF, the parties hereto have executed this
Contract as of the day and year first above written.
<PAGE>
JACLYN, INC.
By: /s/ Robert Chestnov
----------------------
Its: President
Optionee /s/Albert Safer
--------------------
876 Aztec Trail
----------------
Franklin Lakes, NJ 07417
------------------------
Address
###-##-####
----------------------------
Tax Id. or Social Security No.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JACLYN,
INC. CONDENSED CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,051
<SECURITIES> 1,674
<RECEIVABLES> 9,575
<ALLOWANCES> 415
<INVENTORY> 6,341
<CURRENT-ASSETS> 22,882
<PP&E> 1,193
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,595
<CURRENT-LIABILITIES> 7,813
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 12,117
<TOTAL-LIABILITY-AND-EQUITY> 25,595
<SALES> 58,766
<TOTAL-REVENUES> 59,297
<CGS> 44,873
<TOTAL-COSTS> 16,073
<OTHER-EXPENSES> 1,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (2,777)
<INCOME-TAX> (998)
<INCOME-CONTINUING> (1,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,779)
<EPS-BASIC> (0.66)
<EPS-DILUTED> (0.66)
</TABLE>
