<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
(Mark One)
X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 2, 1995
----------------
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 number 1-6454
KLEINERT'S, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 13-0921860
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 West Germantown Pike, Suite 100
Plymouth Meeting, Pennsylvania 19462
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 828-7261
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
----------------
(Title of class)
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 _______
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
Continued
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 value of the voting stock held by the non-affiliates of
the registrant was $27,741,247 at February 2, 1996.
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date:
Class Outstanding at February 2, 1996
- ------------------------------- -------------------------------
Common Stock 3,331,431
Par Value $1.00 per share
DOCUMENTS INCORPORATED BY REFERENCE: Part III-Definitive proxy statement for the
Annual Meeting of Shareholders presently scheduled to be held April 18, 1996
to be filed pursuant to Regulation 14A.
<PAGE>
PART I
Item 1. Business
Kleinert's, Inc. (together with its subsidiaries, "Kleinert's" or the
"Registrant") is engaged in the design, manufacture and sale of infants' and
children's sleepwear and playwear and children's T-shirts. The Registrant also
manufactures, distributes and sells certain items of personal apparel. In
February 1993, the Registrant declared its textile division, Scott Mills, a
discontinued operation, and in July 1993, the Registrant decided to spin-off the
Scott Mills division to its shareholders. In November 1993, the Company
contributed substantially all of its textile division's assets, subject to
substantially all of its liabilities, to Scott Mills, Inc., a newly formed
corporation for all of the outstanding shares of the corporation and the Board
of Directors of the Registrant declared a distribution of one share of Scott
Mills, Inc. common stock for every one share of the Registrant's common stock
payable to the shareholders of record of the Registrant's common stock at the
close of business on the record date, November 27, 1993. This tax free
distribution occurred on March 15, 1994 and resulted in 100% of the outstanding
shares of Scott Mills, Inc. common stock being distributed to the Registrant's
shareholders.
The Registrant was founded in 1869 under the name of I.B. Kleinert
Rubber Company and was reincorporated in Pennsylvania under its current name in
1970. The Registrant's principal executive offices are located at 120 West
Germantown Pike, Suite 100, Plymouth Meeting, Pennsylvania 19462 and its
telephone number is (610) 828-7261.
On December 19, 1995, Kleinert's, Inc., through its newly
formed wholly-owned subsidiary, Kleinert's, Inc. of Florida,("together, the
Company"), consummated a transaction (the "Transaction") pursuant to which the
Company acquired substantially all of the assets of Pixie Playmates, Inc.
("Pixie") and Certified Sewing Services, Inc. ("Certified") two Florida
corporations, and all of the capital stock of Certified Apparel Services of
Honduras, Inc., C.A., a Honduran corporation ("CASH"). Pixie, Certified and
CASH, all of which are affiliated entities, are engaged in the manufacture and
sale of children's apparel.
In consideration for the assets of Pixie and Certified and the shares
of CASH, the Company paid an aggregate purchase price of $4,650,000 in cash, of
which $500,000 has been retained by the Company pending confirmation of
inventory quantities and completion of an audit of CASH. The purchase price was
financed by the Company through an amendment to its existing bank financing
agreement to provide for an additional term debt facility.
To more reasonably reflect the seasonality of operations, the
Registrant's fiscal year ends the Saturday nearest November 30. Fiscal year 1995
was a fifty two week year and fiscal year 1994 was fifty three week year.
As used herein, unless the context otherwise indicates, the term
"Registrant" refers to Kleinert's, Inc. and its subsidiaries, Kleinert's, Inc.
of Alabama, Kleinert's, Inc. of Delaware and Kleinert's, Inc. of New York,
Kleinert's, Inc. of Florida and Certified Apparel Services of Honduras Inc.,
C.A.
<PAGE>
The following table sets forth financial information for each of the
Registrant's last three fiscal years relating to: (1) net sales; (2) operating
profit; and (3) identifiable assets. For comparative purposes, the following
table excludes information relating to the textile division which was declared a
discontinued operation effective February 1993.
Fiscal Year Ended
Dec. 2, Dec. 3, Nov. 27,
------- ------- --------
1995 1994 1993
------- ------- --------
($000's omitted)
Net sales $75,121 $69,262 $61,428
Operating profit $ 8,334 $ 7,326 $ 6,407
Identifiable assets* $48,222 $40,462 $39,206
- -------------
*Includes goodwill of $310, $325 and $340, respectively
1. Apparel
Children's Apparel
The sleepwear manufactured by the Registrant consists of blanket
sleepers made of 100% polyester fleece in sizes ranging from newborn to girls'
and boys' size 14 and knit sets made of interlock, jersey, doubleknit or
terrycloth fabric for infants in sizes ranging from newborn to size 24 months.
All of the Registrant's sleepwear is made of 100% polyester and complies with
the requirements of the Consumer Products Safety Commission relating to
flammability standards (See "Manufacturing"). Sales of sleepwear represented 50%
of children's apparel net sales in fiscal year 1995.
The Registrant's playwear consists primarily of activewear sets and
separates in sizes ranging from newborn through girls' and boys' size 14.
Activewear sets are two-piece jog sets consisting of pants and a top made of
polyester cotton blend, 100% acrylic fleece or interlock fabric. Separates are
the same as the jog sets, except separates consist of either the top or the
pant. The Registrant also manufactures and sells T-shirts, primarily for
children, made of 100% cotton or polyester cotton blend, and polo shirts, made
of cotton blend in sizes ranging from infant through toddler. Sales of playwear
including T-shirts/polo shirts represented 50% of children's apparel net sales
in fiscal year 1995.
The Registrant has screen print and embroidery equipment which is used
in the apparel manufacturing process. The Registrant's in-house staff of artists
creates designs which are meticulously engineered onto cut parts and then sewn
in the manufacturing process. Typically the screen print equipment is used in
the manufacture of jog sets and the embroidery equipment is used in the
manufacture of the Registrant's sleepwear products.
The Registrant's apparel products are sold at retail prices generally
ranging from $7.00 to $18.00 for sleepwear, from $6.00 to $14.00 for playwear
and from $5.00 to $9.00 for T-shirts/polo shirts (See "Marketing").
Personal Apparel
The Registrant manufactures and sells dress and garment shields and
distributes personal apparel and sanitary items. Dress and garment shields
protect clothing from underarm perspiration stains. The retail price of the
personal apparel items sold by the Registrant generally ranges from $4.25 to
$15.90. The Registrant distributes adult incontinence products under the names
"Safe `N Dry" and "Feel and Sure". These products are distributed in conjunction
with Hygienics Industries, Inc., in accordance with an exclusive licensing
arrangement. Sales of personal apparel items represented less than 5% of the
Registrant's consolidated net sales during each of the last three fiscal years.
<PAGE>
2. Manufacturing
Production
The Registrant's infants' and children's playwear and sleepwear is cut,
sewn, inspected, packaged and warehoused at the Registrant's 340,000 square foot
Elba, Alabama facility. The Elba facility performs the same functions with
respect to T-shirts and polo shirts, except for the sewing and inspection of
T-shirts, which are currently performed at the Registrant's 22,000 square foot
Greenville, Alabama facility. The 85,000 square foot facilities of the
Kleinert's, Inc. of Florida facility in the Tampa Bay area of Florida perform
essentially the same functions as the Elba facility with respect to woven
children's wear products and some knit products. The knit products are cut first
at the Elba facility. The Registrants Honduras facility is primarily engaged in
sewing, inspection and packaging of woven and knit products.
The apparel manufacturing process begins with purchased fabric, which
is then cut into specific garment parts such as sleeves, fronts, backs and
collars, and then bundled. The cut parts are sewn in an assembly line format
with various adornments, such as screen printing or embroidery added before the
cut parts are sewn. Fabric is inspected prior to cutting and each garment is
inspected at least twice, once during sewing and once after it is sewn, but
before it is warehoused. Quality control tests are also performed after cut
parts are printed or embroidered. Samples of each lot of sleepwear are tested to
ensure compliance with government flammability standards and samples from all
lots of sleepwear, playwear and T-shirts are wash tested for shrinkage and
colorfastness.
In an effort to control more closely its apparel manufacturing process,
the Registrant during the past five years has installed new equipment and
upgraded existing equipment at a cost of approximately $2,480,000. The
Registrant has installed a completely integrated screen print system, a "real
time" work-in-process system to better monitor and control the manufacturing
process and additional embroidery machines. During fiscal year 1994, the
Registrant installed in its Elba, Alabama facility the initial portion of a
real-time computer based data collection and information warehouse processing
system which has enabled improved monitoring of the movement of finished goods
as they are warehoused and processed for shipment. This system provides
up-to-the minute information both to management and its retail customers and
permits the Registrant to ship more goods in the ever shrinking shipping window
as a result of implementation of "Quick Response" via Electronic Data
Interchange ("E.D.I."). The installation of the system was completed during
fiscal year 1995, enabling the Registrant to fully utilize the system's benefits
during the fiscal year 1995 fall shipping season.
The Registrant's Elba facility currently operates one eight-hour shift
a day for sewing and two shifts a day (when needed) for cutting, screen print
and embroidery, five days a week. The Greenville and Florida facilities
currently operate one eight-hour shift a day, five days a week. The Honduras
facility operates on five and one-half day weeks.
During fiscal years 1995 and 1994, the Registrant spent $5,808,000 and
$4,086,000, respectively, for contract sewing of T-shirts, jog sets, basic
separates, polo shirts and prams. The Registrant will continue to use outside
contractors to manufacture various products in order to meet peak season
deliveries which are in excess of the existing in-house manufacturing capacity
of the Registrant.
<PAGE>
Raw Materials
During fiscal year 1995, approximately 42% of the fabric purchased for
the Registrant's children's apparel division was purchased from two vendors,
including 14% from Scott Mills, Inc. ("Scott Mills") and approximately 28% from
one other vendor. Vendors are selected on the basis of quality, price and
service; however, the Registrant's fabric needs could be met by other vendors at
prices that in most cases are competitive. The remaining materials used in the
manufacture of children's apparel were purchased from a variety of sources.
Scott Mills is a textile company which is the successor to the Registrant's
former textile division. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Discontinued Operations".
Raw materials for the Registrant's personal apparel products are
purchased from a limited number of sources. The Registrant believes that
alternative sources are readily available at competitive prices.
3. Marketing
The Registrant's apparel products are sold primarily by an in-house
sales staff of seven people which are organized on the basis of specific
customers. In addition, there are three independent commissioned sales
representatives. Sales efforts are principally conducted from the Registrant's
New York City showroom.
The Registrant sells most of its apparel to national chain stores, mass
merchandisers, department stores and specialty stores, such as Target Stores,
J.C. Penney, Wal-Mart, K-Mart, Federated, Nordstrom and Mercantile Stores.
During fiscal year 1995 sales of apparel were made to less than 800 customers.
No single customer accounted for more than 10% of the Registrant's consolidated
net sales for fiscal year 1995 other than Target Stores and J.C. Penney, which
accounted for approximately 19% and 14%, respectively, of consolidated net sales
during the period.
In recent years the Registrant has received awards from its customers
in recognition of the Registrant's outstanding quality and service. The awards
are indicative of strategic partnerships which the Registrant has been
successful in developing over many years of providing quality service and
merchandise, particularly as the number of retailers continues to decrease. The
result of the Registrant's emphasis on quality is demonstrated by the
Registrant's returns and allowances being less than 3% of gross sales in each of
the last three fiscal years.
The apparel division has quick response programs in place with major
customers and communicates with many of its vendors and customers via E.D.I.
This E.D.I. system allows customers and vendors to communicate purchase orders,
invoices, advance shipping notices and available inventory lists electronically.
The real-time, work-in-process and warehouse systems aid the Registrant in
servicing the customer by enabling the Registrant to monitor on a "real time"
basis goods on the sewing floor and in the warehouse, thereby permitting the
Registrant to circumvent production bottlenecks that could cause late
deliveries.
The Registrant markets its personal apparel products exclusively under
the Kleinert's label through chain, variety and drug stores, wholesale
distributors, fabric centers and direct mail order.
<PAGE>
Backlog
The backlog of orders for apparel goods was approximately $4,486,000 at
February 2, 1996 compared with $8,270,000 at January 27, 1995. The amount of
unfilled orders at a particular time is affected by a number of factors
including the scheduling of manufacturing and product shipping, which in many
instances is dependent on the desires of the customer. The decrease in open
orders at February 2, 1996 is due in large part to higher shipping production
levels of knitsets and T-shirts when compared to January 27, 1995. The
Registrant anticipates that all orders will be filled during the current fiscal
year.
4. Competition
The infants' and children's apparel markets are highly competitive and
include many manufacturers from around the world in all product lines, including
some which are larger and have substantially greater market share and resources
than the Registrant. The Registrant believes that it competes with other
manufacturers in each of its markets on the basis of price, quality, service and
availability of products.
Foreign competition has been a significant factor in the apparel
industry. The Registrant believes that it can best compete with foreign
competition by providing superior customer service, responding quickly to
changes in customer demand and providing more timely deliveries. The benefits of
manufacturing domestically may permit retailers to reduce their inventory levels
and lower the risk that product availability will not match consumer demand.
The Registrant experiences limited competition in the personal apparel
market.
5. Employees
As of January 1, 1996, the Registrant had 1,454 full time employees
including approximately 1,270 in manufacturing (of which 751 are in Elba, 96 in
Greenville, 193 in the Florida plants and 230 in Honduras, 24 in merchandising,
design and sales, 101 in clerical/administration and 59 in general management.
Historically, the number of employees increases during the summer and fall due
to seasonal factors. None of the Registrant's United States employees are party
to a collective bargaining agreement and the Registrant believes its employee
relations are satisfactory. The employees in Honduras are under a collective
bargaining agreement as required by Honduras laws.
6. Governmental and Environmental Regulation
The Company and its operations are subject to federal, state and local
laws, as well as Honduran law in the case of Certified Apparel Services of
Honduras, Inc., including the Consumer Product Safety Act, the Flammable Fabrics
Act, and the rules and regulations promulgated thereunder. The Company believes
it is in substantial compliance with all applicable governmental requirements
under these laws and regulations.
The Company and its operations are subject to federal, state and local
laws and regulations concerning the protection of the environment. The Company
is not currently the subject of any proceedings under these laws and
regulations, and believes it is in substantial compliance with all applicable
governmental requirements under these laws and regulations.
The Company does not anticipate that environmental or Occupational
Safety Health Act (O.S.H.A.) law and regulations, or compliance with other
federal, state and local laws and regulations, will require substantial
expenditures or materially affect its results of operations or financial
condition during the foreseeable future unless conditions unknown to the Company
are discovered or new or stricter requirements are imposed.
<PAGE>
Item 2. Properties
The Registrant conducts its manufacturing operations from two plants in
Alabama, one in Elba and one in Greenville and two plants in Florida and one
plant in Honduras, C.A. The Registrant's principal executive offices are located
in Plymouth Meeting, Pennsylvania, a suburb of Philadelphia. The Registrant's
sales, marketing, merchandising and design functions are conducted from its
offices located in New York, New York. The Registrant believes that its plants
and equipment are well maintained and are sufficient, when combined with
production from outside contractors, to meet expected output levels in fiscal
year 1996.
In addition, the Registrant leases an office in Wilmington, Delaware
for its subsidiary, Kleinert's, Inc. of Delaware.
The following table sets forth a summary of the principal facilities
owned or leased by the Registrant as of Januray 1, 1996:
Location Primary Use Sq. Ft. Basis of
- -------- ----------- ------- Occupancy
---------
Elba, Manufacture of children's 340,000 Owned
Alabama apparel
Elba, Finished goods warehouse 11,000 Lease expiring
Alabama November 30, 1997
Greenville, Sewing of T-shirts and 22,000 Lease expiring
Alabama polo shirts February 14, 1997
(1)
New York, Marketing, merchandising 12,878 Lease expiring
New York and design of infant's March, 2001
and children's wear
Plymouth Executive offices 3,900 Lease expiring
Meeting, October, 1996
Pennsylvania
Largo, Manufacture of Childrens' 78,000 Lease expiring
Florida apparel December,1998(2)
Safety Harbor Manufacture of Childrens' 7,000 Lease expiring
Florida apparel July, 1996 (2)
San Pedro Manufacture of Childrens' 34,000 Lease expiring
Sula apparel August, 1996 (2)
Cores,
Honduras, CA
San Pedro Office and Manufacturing 14,000 Lease expiring
Sula of childrens' apparel May 1997
Cores,
Honduras, CA
- ---------------
(1) The Registrant has an option to renew the lease for an additional one
year, and has an option to purchase this facility, including
approximately 5.6 acres of land, for for $140,000. Certain portions of
the rental payments may be applied against the purchase price.
(2) The Registrant has options to renew these leases.
Item 3. Legal Proceedings
The Registrant currently is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of fiscal year
1995.
<PAGE>
PART II
Item 5. Market For The Registrant's Common Stock
And Related Stockholder Matters
The Registrant's common stock is traded in the over-the-counter market
on the NASDAQ National Market System under the symbol "KLRT". The following
table sets forth for the periods indicated the high and low closing sale prices
as reported by NASDAQ.
Stock Price Range
-----------------
High Low
------- -------
Fiscal Year 1995
- ----------------
Dec. 4, 1994 - Mar. 4, 1995 $22 1/4 $15 3/4
Mar. 5, 1995 - June 3, 1995 21 1/2 18
June 4, 1995 - Sept. 2, 1995 18 3/4 16
Sept. 3, 1995 - Dec. 2, 1995 18 15 1/4
Fiscal Year 1994
- ----------------
Nov. 28, 1993 - Feb. 26, 1994 $12 1/4 $11
Feb. 27, 1994 - May 28, 1994 12 1/2 11 1/4
May 29, 1994 - Sept. 3, 1994 17 1/2 11 1/2
Sept. 4, 1994 - Dec. 3, 1994 18 3/4 15 1/4
The Registrant's common stock is thinly traded. The average weekly
trading volume in fiscal years 1995 and 1994 was approximately 9,100 and 7,200
shares, respectively.
On February 2, 1996, the closing sale price of the common stock was
$15.75. On that date there were in excess of 250 holders of record of the common
stock of the Registrant.
No cash dividends were paid with respect to the Registrant's common
stock during the past five fiscal years. The Registrant's working capital loan
agreements provide that no cash dividends may be paid on the common stock unless
the Registrant's consolidated net worth exceeds $15,000,000 after the payment of
cash dividends. The Registrant's working capital loan agreements also require
the Registrant to maintain certain financial covenants, including requirements
on pretax income, working capital, tangible net worth, debt and capital
expenditures. The Registrant was in compliance with all such financial covenants
as of December 2, 1995. The Registrant does not expect to pay cash dividends in
the foreseeable future, but rather expects to use its cash to expand its
operations and become less of a seasonal borrower for working capital.
<PAGE>
Item 6. Selected Financial Data
See Management's Discussion and Analysis of Financial
Condition and Results of Operations
--------------Fiscal Year Ended--------------
Dec. 2, Dec. 3, Nov. 27, Nov. 28, Nov. 30,
1995 1994(1) 1993 1992 1991
------ ------- ------- ------- -------
(Dollar amounts in thousands, except per share data)
Operating Results:
Net sales $75,121 $69,262 $61,428 $58,542 $50,391
------- ------- ------- ------- -------
Income from
continuing
operations before
cumulative effect
of change in
accounting for
income taxes $ 4,331 $ 3,872 $ 3,325 $ 3,124 $ 1,992
------- ------- ------- ------- -------
Loss from
discontinued opera-
tions, net of tax
effect $ - $ - $(1,263) $(2,599) $ (456)
------- ------- -------- -------- --------
Cumulative effect
of change in
accounting for
income taxes $ - $ 210 $ - $ - $ -
------- ------- -------- -------- --------
Per Share:
Income from
continuing
operations before
cumulative effect
of change in
accounting for
income taxes $ 1.15 $ 1.04 $ .93 $ .90 $ .61
------- ------- -------- -------- --------
Loss from
discontinued opera-
tions $ - $ - $ (.35) $ (.75) $ (.14)
------- ------- -------- -------- --------
Cumulative effect
of change in
accounting for
income taxes $ - $ .06 $ - $ - $ -
------- ------- -------- -------- --------
Total assets $48,222 $40,462 $41,907 $42,472 $45,753
------- ------- -------- -------- --------
Long-term debt $ 3,429 $ 4,624 $ 5,469 $ 6,643 $ 9,616
------- ------- -------- -------- --------
(1) Includes 53 weeks of operations.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table presents, for the periods indicated, the
Registrant's net sales by product line and segment. Amounts presented below
relate only to continuing operations.
Fiscal Year Ended
. ---------------------------------
Dec. 2, Dec. 3, Nov. 27,
1995 1994 1993
------- -------- --------
($000's omitted)
Sleepwear $37,015 $34,601 $28,610
Playwear 31,432 29,892 29,004
T-shirts 5,640 3,604 2,634
------- ------- -------
Total Children's Apparel 74,087 68,097 60,248
Personal Apparel 1,034 1,165 1,180
------- ------- -------
Total $75,121 $69,262 $61,428
------- ------- ------
Net sales increased $5,859,000 or 8.4% in fiscal year 1995 compared to
fiscal year 1994. This increase was primarily due to a 7% increase ($2,414,000)
in sleepwear, a 5% increase ($1,540,000) in playwear and a 56% increase
($2,036,000) in T-shirt sales. The increases represent an increase market share
since retail selling prices remained relatively constant throughout both years.
Net sales increased $7,834,000 or 13% in fiscal year 1994 compared to
fiscal year 1993. This increase was primarily due to a 21% increase ($5,991,000)
in sleepwear and a 37% increase ($970,000) in T-shirt sales. The increase in net
sales represented an increase in market share since retail selling prices
remained relatively constant throughout both years.
Gross Profit
The following table presents, for the periods indicated, the
Registrant's gross profit dollars and gross profit as a percentage of net sales
(profit margin) for each of its segments. Amounts presented below relate only to
continuing operations:
Fiscal Year Ended
------------------------------------------------
Dec. 2, 1995 Dec. 3, 1994 Nov. 27, 1993
------------ ------------ -------------
% of Net % of Net % of Net
Sales Sales Sales
-------- -------- ---------
($000's omitted))
Children's
Apparel $13,114 17.7% $12,039 17.7% $10,639 17.7%
Personal
Apparel 371 35.9% 437 37.5% 393 33.3%
------- ----- ------- ----- ------- -----
Total $13,485 18.0% $12,476 18.0% $11,032 18.0%
======= ===== ======= ===== ======= =====
Gross profit increased $1,009,000 in fiscal year 1995 compared to
fiscal year 1994 and the profit margin remained stable at 18.0% when compared to
fiscal year 1994.
<PAGE>
Gross profit increased $1,444,000 in fiscal year 1994 compared to
fiscal year 1993 while the profit margin remained stable at 18.0% when compared
to fiscal year 1993 which was reimbursed by Scott Mills at a rate less then the
amount expended during fiscal year 1994.
General corporate expenses which are included in cost of goods sold
increased $743,000 to $1,704,000 in fiscal year 1995 compared to $961,000 in
fiscal year 1994. The increase was primarily the result of increased salaries,
legal expenses and reduced reimbursement from Scott Mills to the Company for
certain corporate support services in fiscal year 1995 when compared to fiscal
year 1994.
General corporate expenses, which are included in cost of goods sold,
decreased $563,000 in fiscal year 1994 compared to fiscal year 1993 principally
due to the reimbursement by Scott Mills, Inc. for management time and other
expenses spent by the Registrant on its behalf.
Depreciation and amortization expense was $676,000, $674,000 and
$695,000 in the three fiscal years ended December 2, 1995, December 3, 1994, and
November 27, 1993, respectively.
Selling, General and Administrative Expenses
The following table presents, for the periods indicated, the
Registrant's selling, general and administrative expenses, including design,
merchandising and related expenses, in dollars and as a percentage of net sales
for each of its segments. Amounts presented below relate only to continuing
operations:
Fiscal Year Ended
---------------------------------------------------
Dec. 2, 1995 Dec. 3, 1994 Nov. 27, 1993
------------ ------------ -------------
% of Net % of Net % of Net
Sales Sales Sales
-------- -------- --------
($000's omitted))
Children's
Apparel $4,971 6.7% $4,967 7.3% $4,322 7.2%
Personal
Apparel 180 17.4% 183 15.7% 303 25.7%
------ ----- ------ ----- ------ -----
Total $5,151 6.9% $5,150 7.4% $4,625 7.5%
====== ===== ====== ===== ====== =====
The percentage of selling, general and administrative expenses to net
sales ("expense ratio") decreased to 6.9% in fiscal year 1995 from 7.4% in
fiscal year 1994. The decrease represents increased sales volume compared to
relatively constant expenses when comparing 1995 to 1994.
The percentage of selling, general and administrative expenses to net
sales ("expense ratio") decreased slightly in fiscal year 1994 when compared to
fiscal year 1993 due principally to increased expenses in the children's apparel
division which were offset by lower expenses in the personal apparel division.
The increased expenses in the children's apparel division were principally due
to more designers and higher marketing salaries. The decrease in expenses in the
personal apparel segment was due to lower product development costs and
administrative expenses.
<PAGE>
Interest Expense
Interest expense in fiscal year 1995 was $1,651,000, a $248,000
increase when compared to fiscal year 1994. The increase was principally due to
higher average short-term borrowing levels and higher short-term interest rates.
Interest expense in fiscal year 1994 was $1,403,000, a $115,000 increase when
compared to fiscal year 1993. The increase was due primarily to higher
short-term interest rates partially offset by lower average short-term borrowing
levels.
Discontinued Operations
In February 1993, the Registrant declared the textile division, Scott Mills,
a discontinued operation. In July 1993, the Registrant decided to spin-off the
Scott Mills division to its shareholders. In November 1993, the Registrant
contributed substantially all of its textile division's assets, subject to
substantially all of its liabilities, to Scott Mills, Inc., a newly formed
corporation, for all of the outstanding shares of the corporation and the Board
of Directors declared a distribution of one share of Scott Mills, Inc. common
stock for every one share of the Registrant's common stock payable to the
shareholders of record of the Registrant's common stock at the close of business
on November 27, 1993. The distribution occurred on March 15, 1994 and resulted
in 100% of the outstanding shares of Scott Mills, Inc. common stock being
distributed to the Registrant's shareholders.
The textile division was classified in the Registrant's consolidated
statement of operations as a discontinued operation for fiscal year 1993.
Textile sales and losses which were excluded from continuing operations during
the period are set forth below:
Fiscal Year
--------------
1993
----
($000's omitted)
Textile net sales $ 9,578
=======
Operating loss before
income tax benefit $ 2,677
Income tax benefit (922)
-------
Net loss 1,755
Less fiscal year 1992 provision
for additional operating losses
through date of disposal,
net of income tax benefit
of $249 (492)
-------
Loss from discontinued
operations $ 1,263
=======
Taxes
The effective tax rates for fiscal years 1995, 1994 and 1993 relating
to continuing operations were 35.2%, 34.6%, and 35.0%, respectively.
Impact of Inflation and Changing Prices
on Sales and Income from Operations
Although the Registrant's costs for raw materials, labor and equipment
are influenced by inflation, management believes that inflation has not had a
material impact on the Registrant's operations prior to fiscal year 1994. In
fiscal year 1994, the Registrant experienced an increase in raw material prices
which continued into fiscal year 1995. Raw material prices are not expected to
change significantly in 1996. The Registrant does not expect to be able to
increase its selling prices to any great extent during fiscal year 1996;
therefore the Registrant continues to examine all of its costs in an effort to
maintain its profit margins.
<PAGE>
Liquidity and Capital Resources
At December 2, 1995, the Registrant had working capital of $18,557,000
compared to $16,511,000 at December 3, 1994. The ratio of current assets to
current liabilities was 1.91 to 1.0 and 2.0 to 1.0 at December 2, 1995 and
December, 3, 1994, respectively. The ratio of liabilities to equity was 1.0 to
1.0 and 1.0 to 1.0 at December 2, 1995 and December 3, 1994, respectively.
During fiscal year 1995, the Registrant had unsecured lines of credit of
$42,000,000 with maximum outstanding borrowings of $23,480,000. At December 2,
1995 $13,000,000 was outstanding under the lines of credit. For fiscal year
1996, the Registrant has unsecured lines of credit aggregating $42,000,000 with
borrowing rates at the respective banks' prevailing prime rates or matched funds
rates which are fixed short-term rates below prime rate.
The Registrant anticipates spending approximately $1,480,000 for
capital expenditures in fiscal year 1996 primarily for building improvements at
the Elba facility, leasehold improvements at the New York office and showrooms
and to replace old equipment which the Registrant believes will improve its
manufacturing operations. Depreciation expense is expected to approximate
$980,000 for fiscal year 1996.
The Registrant sold its non-operating property in June 1994 for
$500,000 which required the Registrant to accept a 3 year $350,000 note
receivable. The sale of the property resulted in a small loss. The balance on
the note receivable at December 2, 1995 was $200,000.
In consideration for the assets of Pixie and Certified and the shares
of CASH, the Company paid an aggregate purchase price of $4,650,000 in cash, of
which $500,000 has been retained by the Company pending confirmation of
inventory quantities and completion of an audit of CASH. The purchase price was
financed by the Company through an amendment to its existing bank financing
agreement to provide for an additional term debt facility.
The Registrant believes that cash flow generated by operations,
together with amounts available under its existing credit arrangements, should
be sufficient to fund the Registrant's working capital needs in fiscal year 1996
and for the future.
It is expected that the acquisition will enhance the company's earnings
and ultimately its cash flows, however, due to the seasonality of the
registrant's business additional working capital requirements are anticipated in
periods when production levels exceed sales.
Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121 Accounting for the
Impairment of Long-Lives Assets to Be disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company expects the impact of adoption in 1997 will be insignificant.
In October 1995, the Financial Accounting Standards Board issued FASB
Statement No. 123, Accounting for Stock-Based Compensation. The new standard
prescribes new accounting and reporting standard which reflect the standards'
"fair value method" to estimate expense associated with stock based
compensations plans. Companies may elect to continue to use existing accounting
rules or adopt the "fair value method" for expense recognition. Companies that
elect to continue to use existing accounting rules will be required to provide
pro-forma disclosures of what net income and earnings per share would have been
had the new "fair value method" been used. The Company will elect to continue to
use existing accounting rules. Both statements are effective for fiscal years
beginning after December 15, 1995 and accordingly will not be required until
fiscal year 1997.
<PAGE>
Item 8. Consolidated Financial Statements
and Supplementary Data
Page
----
Reports of Independent Auditors 29
Consolidated Balance Sheets at
December 2, 1995 and December 3, 1994. 31
Consolidated Statements of Operations
for the Fiscal Years ended December 2,
1995, December 3, 1994 and November 27,
1993. 33
Consolidated Statements of Shareholders'
Equity for the Fiscal Years ended
December 2, 1995, December 3, 1994 and
November 27, 1993. 34
Consolidated Statements of Cash Flows
for the Fiscal Years ended December 2,
1995, December 3, 1994 and November 27,
1993. 35
Notes to Consolidated Financial
Statements 37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Kleinert's, Inc.
We have audited the accompanying consolidated balance sheets of Kleinert's, Inc.
as of December 2, 1995 and December 3, 1994 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period ended December 2, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kleinert's, Inc.
at December 2, 1995 and December 3, 1994, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 2, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1994 the Company changed
its method of accounting for income taxes.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 9, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
of Kleinert's, Inc.
In our opinion, the accompanying consolidated statements of operations,
of shareholders' equity and of cash flows of Kleinert's, Inc. and its
subsidiaries present fairly, in all material respects, the results of their
operations and their cash flows for the year ended November 27, 1993, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
February 14, 1994
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
December 2, 1995 and December 3, 1994
($000's omitted)
ASSETS 1995 1994
------ ---- ----
Current assets:
Cash $ 327 $ 132
Accounts receivable (net of allowances
for doubtful accounts of $259 and
$188, respectively) 21,899 18,036
Inventories:
Raw materials 4,222 4,077
Work-in-process 4,321 2,942
Finished goods 5,987 5,677
------- -------
Total inventories 14,530 12,696
------- -------
Other current assets 2,380 1,613
------- -------
Total current assets 39,136 32,477
------- -------
Property, plant and equipment, at cost
Building and leasehold improvements 5,106 4,622
Machinery and equipment 6,070 5,578
Furniture and fixtures 368 369
------- -------
11,544 10,569
Less accumulated depreciation 6,051 5,427
------- -------
Net property, plant and equipment 5,493 5,142
------- -------
Cash surrender value (net) 2,402 2,087
Other assets 1,191 756
------- -------
$48,222 $40,462
======= =======
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(continued)
December 2, 1995 and December 3, 1994
($000's omitted)
LIABILITIES and SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
Current liabilities:
Notes payable and current portion of
long-term debt $14,195 $10,695
Accounts payable 5,024 3,585
Accrued expenses 1,360 1,686
------- -------
Total current liabilities 20,579 15,966
Deferred income taxes 134 123
Long-term debt 3,429 4,624
------- -------
Total liabilities 24,142 20,713
------- -------
Commitments -- --
Shareholders' equity
Preferred stock - par value $1.00 per
share, 2,000,000 shares authorized,
none issued -- --
Common stock - par value $1.00 per
share, 10,000,000 shares authorized,
3,798,398 shares
issued, 3,798 3,798
Capital in excess of par value 10,626 10,626
Retained earnings 12,872 8,541
------- -------
27,296 22,965
Less:
Treasury stock, at cost, 466,967
common shares (3,216) (3,216)
------- -------
Total shareholders' equity 24,080 19,749
------- -------
$48,222 $40,462
======= =======
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended December 2, 1995
December 3, 1994 and November 27, 1993
($000's omitted, except per share amounts)
1995 1994 1993
---- ---- ----
Net sales $75,121 $69,262 $61,428
Cost of goods sold 61,636 56,786 50,396
------- ------- -------
Gross profit 13,485 12,476 11,032
------- ------- -------
Selling, general and administrative
expenses 5,151 5,150 4,625
Interest expense 1,651 1,403 1,288
------- ------- -------
6,802 6,553 5,913
------- ------- -------
Income from continuing operations
before income taxes and cumulative
effect of change in accounting
for income taxes 6,683 5,923 5,119
Provision for income taxes 2,352 2,051 1,794
------- ------- -------
Income from continuing operations
before cumulative effect of change in
accounting for income taxes 4,331 3,872 3,325
Discontinued operations:
Loss from operations of
discontinued textile business net
of applicable income tax benefit -- -- (1,263)
------- ------- -------
Income before cumulative effect of
change in accounting for income taxes 4,331 3,872 2,062
------- ------- -------
Cumulative effect of change in
accounting for income taxes -- 210 --
------- ------- -------
Net income $ 4,331 $ 4,082 $ 2,062
======= ======= =======
Earnings per share:
Income from continuing operations $ 1.15 $ 1.04 $ .93
before change in accounting for income
taxes
Discontinued operations -- -- (.35)
Cumulative effect of change in
accounting for income taxes -- .06 --
------- ------- -------
Net income $ 1.15 $ 1.10 $ .58
======= ======= =======
Weighted average shares outstanding 3,750 3,702 3,569
======= ======= =======
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
($000's Omitted except share data)
<TABLE>
<CAPTION>
Number of Capital in Total
Shares Common Excess of Retained Treasury Shareholders'
Outstanding Stock Par Value Earnings Stock Equity
----------- ------ ----------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 28, 1992 3,255,098 $ 3,653 $ 9,788 $ 6,398 $(2,383) $17,456
Exercise of non-statutory stock
options 137,500 137 725 862
Repurchase of common stock (25,000) (289) (289)
Dividend payable (4,001) (4,001)
Net income 2,062 2,062
--------- ------- ------- ------- ------- -------
Balance, November 27, 1993 3,367,598 3,790 10,513 4,459 (2,672) 16,090
Exercise of incentive stock
options 8,333 8 61 69
Repurchase of common stock (44,500) (544) (544)
Tax benefit of exercise of stock
options 52 52
Net income -- -- -- 4,082 -- 4,082
--------- ------- ------- ------- ------- -------
Balance, December 3, 1994 3,331,431 3,798 10,626 8,541 (3,216) 19,749
========= ======= ======= ======= ====== =======
Net income 4,331 4,331
------- -------
Balance, December 2, 1995 3,331,431 $ 3,798 $10,626 $12,872 $(3,216) $24,080
========= ======= ======= ======= ====== =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
($000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operations:
Net income $ 4,331 $4,082 $ 2,062
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 676 674 1,361
Cumulative effect of change in
accounting principle -- (210) --
Provision for estimated operating
losses on discontinued operations -- -- (492)
Loss on disposal of fixed assets -- 29 2
Provision for losses on
accounts receivable 71 80 39
Change in assets and liabilities:
Increase in accounts
receivable (3,844) (318) (1,613)
(Increase)decrease in inventory (1,834) (943) 1,736
(Increase)decrease in other
current assets (767) (450) 652
Increase (decrease) in accounts
payable and accrued expenses 1,186 (1,529) 1,998
Increase (decrease) in income
taxes payable (73) -- (20)
Increase in deferred income taxes 11 89 36
------- ------ -------
Total adjustments (4,645) (2,578) 3,699
------- ------ -------
Net cash (used in) provided by
operating activities (317) 1,504 5,761
------- ------ -------
Cash flows from investing activities:
Capital expenditures (1,012) (618) (704)
Note receivable related party (500) -- --
Proceeds from sale of non-operating
property -- 185 --
Decrease in restricted cash -- -- 237
Additions to other assets (384) (457) (570)
Proceeds from note receivable 100 -- --
------- ------ -------
Net cash used in investing
activities (1,796) (890) (1,037)
------- ------ -------
</TABLE>
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
($000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net borrowings and (repayments) under
revolving line-of-credit agreement 3,500 1,389 (3,229)
Proceeds from long-term debt -- 544 289
Dividends paid -- (1,300) --
Principal payments on debt (1,195) (1,389) (1,445)
Principal payments on capital leases -- (18) (604)
Proceeds from exercise of stock options -- 69 862
Payments to acquire treasury stock -- (544) (289)
------ ------ -------
Net cash provided by (used in)
financing activities 2,305 (1,249) (4,416)
------ ------ -------
Net increase (decrease) in cash 195 (635) 308
Cash at beginning of period 132 767 459
------ ------ -------
Cash at end of period $ 327 $ 132 $ 767
====== ====== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $1,730 $ 1,150 $ 1,650
Income taxes $2,046 $ 2,289 $ 1,010
Equipment purchased under capital leases -- -- $ 140
Accrued dividends payable -- -- $ 4,001
Tax benefit of exercise of stock options -- $ 52 --
Note receivable on sale of non-operating
property -- $ 350 --
</TABLE>
The Consolidated Statements of Cash Flows include activity related to the
Discontinued Operations for fiscal year 1993.
See notes to consolidated financial statements
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
1. Business of the Company and
Summary of Significant Accounting Policies
Business of the Company - The Company manufactures and sells infants' and
children's sleepwear and activewear and personal apparel, including such items
as dress and garment shields. The Company's principal customers are national
chain stores, mass merchandisers, department stores and specialty stores. See
Note 10 for information on business segments. The Company treated its textile
division (Scott Mills) as a discontinued operation during fiscal year 1993.
Scott Mills was spun-off in a tax-free distribution on November 27, 1993.
Principles of Consolidation - The consolidated financial statements include
the accounts of Kleinert's, Inc. (Kleinert's) and its wholly-owned subsidiaries,
Kleinert's, Inc. of Alabama, Kleinert's, Inc. of Delaware and Kleinert's, Inc.
of New York. All significant intercompany balances and transactions have been
eliminated in consolidation.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Fiscal Year - The Company utilizes a 52-53 week fiscal year ending on the
Saturday nearest November 30. Fiscal year 1995 and 1993 are fifty two week
years. Fiscal year 1994 was a fifty three week year.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined on a first-in, first-out basis. Aggregate corporate general and
administrative charges were $1,704,000, $961,000 and $1,524,000 for fiscal years
1995, 1994 and 1993, respectively. Such costs remaining in inventory at December
3, 1995 and November 27, 1994 were approximately $390,000 and $211,000,
respectively.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
1. Business of the Company and
Summary of Significant Accounting Policies (continued)
Revenue Recognition - The Company's sale of product is made net of returns,
allowances and discounts.
Property, Plant and Equipment - The Company depreciates property, plant and
equipment over their estimated useful lives, principally on a straight-line
basis.
Useful Lives
------------
Buildings 30 - 40 years
Leasehold improvements Term of lease
Machinery and equipment 3 - 10 years
Furniture and fixtures 3 - 5 years
Earnings Per Share - Earnings per share has been computed based on the
weighted average number of common shares outstanding and common stock equivalent
shares deemed outstanding during each period presented.
Goodwill - Goodwill, included in other assets, represents the excess of the
cost over the fair value of the net assets at the date of acquisition and is
being amortized using the straight-line method over 40 years.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
1. Business of the Company and
Summary of Significant Accounting Policies (continued)
Income Taxes - Effective November 28, 1993, the Company accounts for income
taxes under the provisions of Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" (FAS #109). This statement requires
recognition of deferred tax assets and liabilities for all timing differences
resulting from reporting certain income and expense items differently for income
tax and financial accounting purposes. In prior fiscal years income taxes were
accounted for under APB Opinion No. 11. The impact of the adoption of the change
in accounting for income taxes during fiscal year 1994 was $210,000.
Financial Statement Reclassification - Certain prior years' amounts in the
consolidated financial statements have been reclassified to conform to the
fiscal year 1995 presentation.
Stock Based Compensation - The Company accounts for stock options according
to the provisions of Accounting Principles Board Opinion 25 (APB 25), Accounting
for Stock Issued to Employees. In October 1995, the Financial Accounting
Standards Board issued FASB Statement No. 123, Accounting for Stock-Based
Compensation. The new standard prescribes new accounting and reporting standards
which reflect the standards' "fair value method" to estimate expense associated
with stock based compensations plans. Companies may elect to continue to use
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
1. Business of the Company and
Summary of Significant Accounting Policies (continued)
existing accounting rules or adopt the "fair value method" for expense
recognition. Companies that elect to continue to use existing accounting rules
will be required to provide pro-forma disclosures of what net income and
earnings per share would have been had the new "fair value method" been used.
The Company will elect to continue to use existing accounting rules. The new
statement is effective for fiscal years beginning after December 15, 1995.
Accordingly, the new standards pro-forma disclosure provisions will be required
for the Company for its fiscal year ending November 29, 1997.
In March 1995, the FASB issued Statement No. 121 Accounting for the
Impairment of Long-Lives Assets to Be disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The statement is effective for fiscal years beginning after December 15,
1995 and accordingly will not be required until fiscal year 1997. The Company
expects the impact of adoption in 1997 will be insignificant.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
2. Financing Arrangements
Financing arrangements consist of the following:
1995 1994
---- ----
Current Long-Term Current Long-Term
------ --------- ------- ---------
($000's omitted)
Term loans $ 1,000 $2,649 $ 1,000 $3,649
Short-term borrowings,
reclassified -- -- -- --
Revolving line
of credit 13,000 9,500 --
Revenue bond 195 780 195 975
Capital leases -- -- -- --
------- ------ ------- ------
$14,195 $3,429 $10,695 $4,624
======= ====== ======= ======
The following information relates to the Company's short-term revolving
lines of credit:
Weighted
Weighted Maximum Amount Average Amount
Average Outstanding At Outstanding
Interest Any Fiscal Month-End During The
Rate (1) During the Period Period (2)
-------- -------------------- --------------
($000's omitted)
1995 7.0% $23,480 $13,521
1994 6.3% $20,540 $11,388
1993 5.6% $19,475 $12,866
(1) The weighted average interest rate for each period was
computed by dividing interest expense by the weighted average
amount outstanding.
(2) The weighted average amount outstanding for each period was
computed by averaging the daily balances during the year.
The Company's agreement with its banks provided for a $42,000,000 unsecured
line of credit for use in fiscal year 1995 bearing interest between 6.40% and
the prime rate (8.75% as of December 2, 1995) and required compensating
balances. For fiscal year 1996, the Company has available $42,000,000 in
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
2. Financing Arrangements (continued)
unsecured lines of credit. On December 2, 1995 the unused portion of the lines
of credit was $29,000,000. The Company's unsecured term loan is payable in
quarterly installments of $250,000 through September 1999 and bears interest at
the prime rate plus one-quarter percent. The prime rate was 8.75% at December 2,
1995 and 8.5% at December 3, 1994. On November 10, 1994 the Company amended the
term loan to borrow an additional $544,000.
The banking agreements require the Company to maintain financial statement
covenants, including requirements on pre-tax income, working capital, tangible
net worth, debt and capital expenditures. In addition, no cash dividends may be
paid on the common stock unless the Company's net worth exceeds $15,000,000
after the payment of dividends. With the exception of this net worth covenant,
retained earnings are free of restrictions and the Company had $9,080,000 of
retained earnings available for dividends at December 2, 1995.
The Company holds an industrial revenue bond from the Industrial
Development Board of the City of Elba, Alabama collateralized by a first
mortgage on the Elba, Alabama facility. This loan is payable in annual
installments of $195,000 with the final payment due in October 2000. Interest is
payable quarterly at a variable rate of 85% of the bank's prime rate. Prime rate
was 8.75% at December 2, 1995 and 8.5% at December 3, 1994.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
2. Financing Arrangements (continued)
Aggregate maturities of long-term debt after December 2, 1995, are as
follows: 1996 - $1,195,000; 1997 - $1,195,000; 1998 - $1,195,000; 1999 -
$844,000; 2000 - $195,000; thereafter - 0.
Borrowings against the cash surrender value of officers' life insurance
policies amounted to $3,450,000 and $3,030,000 as of December 2, 1995 and
December 3, 1994, respectively. These borrowings are recorded as a reduction in
the related assets and bear interest ranging from 7.11% to 7.20% in fiscal year
1995.
3. Discontinued Operations
On February 11, 1993, the Board of Directors approved a plan to dispose of
the Company's textile division, known as Scott Mills. In August 1993, the
Company organized Scott Mills, Inc., and its wholly-owned subsidiary, Scott
Mills, Inc. of North Carolina, to operate the Scott Mills Division independently
of the Company effective after November 27, 1993. On November 16, 1993, the
Board of Directors declared a distribution of one share of Scott Mills, Inc.
common stock for every one share of Kleinert's, Inc. common stock payable to the
holders of record of Kleinert's, Inc. common stock, par value $1.00 per share,
at the close of business on the record date, November 27, 1993.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
3. Discontinued Operations (continued)
The distribution, which occurred on March 15, 1994, resulted in the
separation of the Company into two publicly-owned companies with each company
continuing to engage in the business in which it had previously engaged. Certain
directors of Scott Mills, Inc. including its Chief Executive Officer, also serve
as officers, or directors of the Company.
In connection with the transfer of assets to Scott Mills, the Company
contributed $1,300,000 in cash to Scott Mills and retained the accounts
receivable and accounts payable at November 27, 1993. The assets distributed to
Scott Mills included cash, leasehold improvements, machinery and equipment,
furniture and fixtures, deposits on machinery and other assets including prepaid
expenses and cash surrender value of life insurance policy.
In April 1994 the Internal Revenue Service granted the Company's previously
filed Private Letter Ruling request for tax free treatment of the transfer of
Scott Mills ownership to the Company's shareholders.
The accompanying consolidated financial statements reflect the textile
division as a discontinued operation for fiscal year 1993; accordingly, the
operating results of the textile division are excluded from continuing
operations for that year.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
3. Discontinued Operations (continued)
The loss from discontinued operations included in the Consolidated
Statement of Operations is as follows:
1993
($000's omitted)
Operating loss before income
tax benefit $ 2,677
Income tax benefit (922)
-------
Net loss 1,755
Less fiscal year 1993
provision for additional
operating losses through
date of disposal, net of
income tax benefit of $249 (492)
-------
Loss from discontinued
operations $ 1,263
=======
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
4. Income Taxes
Income tax expense (benefit) is included in the financial statements as
follows:
Liability Method Deferred Method
---------------- ---------------
1995 1994 1993
---- ---- ----
Continuing operations $2,352,000 $2,051,000 $1,794,000
Discontinued operations -- -- (673,000)
---------- ---------- ----------
$2,352,000 $2,051,000 $1,121,000
========== ========== ==========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
4. Income Taxes (continued)
The provision for income taxes consists of the following:
Liability Method Deferred Method
---------------- ---------------
1995 1994 1993
---- ---- ----
Current:
Federal $2,245,000 $1,838,000 $1,201,000
State 135,000 43,000 --
---------- ---------- ----------
2,380,000 1,881,000 1,201,000
---------- ---------- ----------
Deferred:
Federal (30,000) 176,000 (80,000)
State 2,000 (6,000) --
---------- ---------- ----------
(28,000) 170,000 (80,000)
---------- ---------- ----------
$2,352,000 $2,051,000 $1,121,000
========== ========== ==========
The components of the deferred tax provision, including the related tax effects
of timing differences, are as follows:
Deferred Method
---------------
1993
----
Depreciation $ 22,000
Inventory reserves (58,000)
Benefit plans (32,000)
Bad debt expense (13,000)
Charitable contributions 21,000
Capital leases (13,000)
Vacation (7,000)
--------
$(80,000)
========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
4. Income Taxes (continued)
Income tax expense differs from the amount computed by applying the federal
tax rate to income before income taxes are as follows:
Liability Method Deferred Method
---------------- ---------------
1995 1994 1993
---- ---- ----
Statutory rate applied to
income from continuing opera-
tions before income taxes $2,272,000 $2,014,000 $1,740,000
State taxes, net of federal
benefit 90,000 28,000 41,000
Other (10,000) 9,000 13,000
---------- ---------- ----------
Income tax benefit of
discontinued operations -- -- (673,000)
---------- ---------- ----------
$2,352,000 $2,051,000 $1,121,000
========== ========== ==========
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. Significant
components of the Company's deferred tax liabilities and assets, as of December
2, 1995 and December 3, 1994 are as follows:
1995 1994
---- ----
Deferred Tax Assets:
Benefit plans $156,000 $121,000
Inventory reserves 75,000 88,000
Bad debt expense 92,000 68,000
Vacation 15,000 27,000
-------- --------
Total deferred tax assets $338,000 $304,000
-------- --------
Deferred Tax Liabilities:
Depreciation $290,000 $244,000
Charitable contributions -- 40,000
-------- --------
Total deferred tax liabilities 290,000 284,000
-------- --------
Net deferred tax asset $ 48,000 $ 20,000
======== ========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
5. Retirement Plans
The Company has a defined benefit pension plan (the Plan) covering
substantially all of its employees subject to certain age and service
requirements. Scott Mills' employee participation in the pension plan terminated
on December 31, 1993, resulting in a $23,000 gain. Normal costs and past service
costs are amortized over thirty years. The Company contributions to the Plan are
made in accordance with applicable E.R.I.S.A. and tax regulations. Assets of the
Plan are invested in equity, corporate and government bonds and short-term
instruments. Pension costs for fiscal years 1995, 1994 and 1993 are as follows:
1995 1994 1993
---- ---- ----
Benefits earned during the period $289,688 $271,405 $ 275,657
Interest cost on benefits earned
in prior years 231,054 209,540 182,751
Net investment(income)loss (475,375) 88,677 (213,693)
Net amortization and deferral 207,339 (317,020) 10,696
--------- -------- ---------
$252,706 $252,602 $ 255,411
======== ======== =========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
5. Retirement Plans (continued)
The projected benefit obligation below is based on the following
assumptions:
1995 1994 1993
---- ---- ----
Discount rate 7.0% 7.75% 7.25%
Weighted average expected
long-term rate of return 8.75% 7.75% 7.25%
Annual rate of increased
compensation 4.0% 5.0% 5.0%
The following is a reconciliation of the Plan's assets and liabilities to
amounts recorded in the Company's financial statements:
1995 1994
---- ----
Present value of future benefit
payments based on service to date
and present pay levels:
Vested.............................. $3,295,523 $2,506,847
Non-vested.......................... 88,664 56,531
---------- ----------
Accumulated benefit obligation 3,384,187 2,563,378
Projected pay increases 472,967 389,001
---------- ----------
Projected benefit obligation (PBO) 3,857,154 2,952,379
Fair value of plan assets
available for benefits................. 3,494,944 2,916,825
---------- ----------
Assets (Liabilities) in excess of PBO... (362,210) (35,554)
Items not yet recognized in the Company's
balance sheet:
Unamortized transition asset........ (130,646) (149,309)
Unamortized prior service cost...... 27,707 38,318
Unrecognized net actuarial and
investment losses................. 560,099 247,952
---------- ----------
Prepaid pension cost $ 94,950 $ 101,407
========== ==========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
5. Retirement Plans (continued)
Participants' benefits are fully vested after five years, and future
benefit accruals are 0.8% of each year's compensation.
The Company has supplemental retirement agreements with certain key
employees. The cost of these benefits, which are funded with life insurance
contracts, are expensed over the employees' service lives and amounted to
$104,000, $58,000, and $94,000 in fiscal years 1995, 1994, and 1993,
respectively.
6. Property, Plant and Equipment and Lease Commitments
Property, plant and equipment at December 2, 1995 and December 3, 1994
includes equipment under capital leases with a cost of $988,000 and a net book
value of $341,000 and $440,000 respectively. There are no future minimum lease
payments remaining to be paid at December 2, 1995.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
6. Property, Plant and Equipment and Lease Commitments
(continued)
Depreciation expense was $661,000, $659,000 and $680,000 for fiscal years
1995, 1994 and 1993 respectively.
Rent expense under operating leases was $1,350,000, $1,094,000 and
$1,207,000 in fiscal years 1995, 1994 and 1993, respectively. Minimum rentals
for operating leases (principally office space, machinery and equipment) that
have initial or remaining noncancelable lease terms in excess of one year as of
December 2, 1995 are as follows:
Fiscal Year Amount
----------- ------
1996 - $ 853,000
1997 - 722,000
1998 - 597,000
1999 - 535,000
2000 - 434,000
----------
Total $3,141,000
==========
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994, and November 27, 1993
6. Property, Plant and Equipment and Lease Commitments
(continued)
The Company sold its non-operating property in June 1994 for $500,000 and
accepted a 3 year, $350,000 note receivable. The sale of the property resulted
in a small loss.
7. Shareholders' Equity
Pursuant to the Company's plan to spin-off its Scott Mills Division, the
Board of Directors unanimously voted on November 16, 1993 to distribute one
share of common stock of Scott Mills, Inc., a Pennsylvania corporation, for each
share of the Company's common stock, held by shareholders of record at November
27, 1993. Accordingly, a dividend payable for the net assets of the discontinued
operation plus $1,300,000 was accrued at November 27, 1993. On March 15, 1994
the Company distributed the Scott Mills, Inc. common stock.
The Company's stock option plan (The Plan) authorizes the issuance of
500,000 shares of common stock to officers, directors and key employees.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
7. Shareholders' Equity (continued)
The information with respect to these incentive stock option plans is
as follows:
Fiscal Year Ended
12/2/95 12/3/94 11/27/93
Options outstanding beginning
of period 190,000 215,000 175,000
Granted under New Plan (1) 10,000 - 40,000
Exercised - (8,333) -
Canceled - (16,667) -
--------- --------- ----------
Options outstanding end
of period 200,000 190,000 215,000
--------- --------- ----------
Exercise price per share $6.90-$18.00 $6.90-$12.50 $6.90-$12.50
Options exercisable end
of period 193,333 185,000 129,997
(1) Options granted during fiscal year 1995 were granted at $18.00.
Options granted during fiscal year 1993 were granted at prices ranging
from $8.25 to $12.50 per share.
On June 23, 1992 the Board of Directors granted three outside directors
non-statutory stock options to purchase 25,000 shares each of common stock at
$8.50 per share. In November 1993, one of the options to purchase 25,000 shares
was exercised. The remaining options expire in June 1997.
In May 1991, the Board of Directors granted the Company's Chairman and
Chief Executive Officer (the Chairman) a non-statutory stock option to purchase
375,000 shares of the Company's common stock at $4.60 per share. This option
expires in May 1996.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
8. Commitments
The Chairman has an employment agreement which provides for an
incentive bonus if pre-tax income exceeds fiscal year 1989 pre-tax income.
Bonuses of $153,000, $124,000 and $110,000 were earned for fiscal years 1995,
1994 and 1993, respectively. The employment agreement with the Chairman extends
through the end of fiscal year 1997 and provides for an annual incentive bonus
of 3.1% of pre-tax income in excess of fiscal year 1989 pre-tax income.
In addition the Company is funding life insurance contracts on behalf
of the Chairman, whose beneficiaries are designated by the individual. The
funded amounts will be repaid to the Company upon receipt of insurance proceeds,
against which the Company holds collateral assignments. The Company has included
at December 2, 1995, as a non-current asset, $1,265,000 which is equal to the
cash surrender value of the policies.
The Company is party to an agreement with Precision Textile, Inc.
(P.T.I.), a related party, whereby P.T.I. provides low cost contract sewing
labor for the Company's children's apparel division. This agreement offers the
Company the exclusive use of P.T.I.'s low cost sewing labor in exchange for a
guarantee by the Company to purchase 100% of P.T.I.'s capital stock (for no more
than $400,000) if certain production levels are not maintained. Purchases from
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
November 3, 1994 and November 27, 1993
8. Commitments (continued)
P.T.I. included in cost of goods sold were approximately $2,525,000, $2,539,000
and $2,377,000 in fiscal years 1995, 1994 and 1993, respectively. Amounts
payable to P.T.I. were $64,000 and $30,000 at December 2, 1995 and December 3,
1994, respectively. The Company is presently renewing the existing agreement
with P.T.I. on a year-to-year basis.
Kleinert's entered into a two year supply agreement with a major vendor
starting in December 1996. This supply agreement requires among other things for
the Company to purchase its requirements for various fabrics from this vendor at
negotiated prices and requires the same vendor to commission dye and finish
fabric formerly finished by Scott Mills. Additionally, the Company and its
vendor have agreed to commission dye and finish a minimum of 2,500,000 pounds
during the term of the two year agreement.
9. Major Customers
In 1995 two apparel customers individually accounted for 19% and 14%
each of the Company's consolidated net sales while the same two apparel
customers individually accounted for 21% and 15% in 1994 and 20% each of the
Company's consolidated net sales in 1993.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993
10. Segment Information
The Company's products are principally grouped into two industry
segments: children's apparel and other. Corporate assets include cash, pension
assets, cash surrender value of life insurance, non-trade receivables, general
corporate assets and goodwill.
Fiscal Year Ended
------------------
12/2/95 12/3/94 11/27/93
------- ------- --------
($000's omitted)
Net sales to unaffiliated customers:
Children's apparel $74,087 $68,097 $60,248
Other 1,034 1,165 1,180
Operating profit:
Children's apparel $ 9,847 $ 8,033 $ 7,841
Other 191 254 90
------- ------- -------
10,038 8,287 7,931
General corporate expenses (1,704) ( 961) ( 1,524)
Interest expense (1,651) (1,403) (1,288)
------- ------- -------
Income from continuing
operations before taxes $ 6,683 $ 5,923 $ 5,119
------- ------- -------
Identifiable assets*:
Children's apparel $43,082 $35,995 $35,360
Other** 5,140 4,467 3,846
Capital expenditures:
Children's apparel $ 989 $ 603 $ 627
Other 23 15 12
Depreciation and amortization:
Children's apparel $ 635 $ 619 $ 652
Other 41 55 43
* Does not include net assets from discontinued operations of $2,701 at
November 27, 1993.
** Includes goodwill of $310, $325, and $340, respectively.
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994, and November 27, 1993
11. Stock Repurchase Program
In June 1993 the Board of Directors unanimously approved a plan to
repurchase up to $3,000,000 of the Company's stock. As of December 2, 1995,
under the stock repurchase program, the Company has repurchased 69,500 shares of
its common stock at prices ranging from $11.25 to $12.38 per share.
12. Related Party Transactions
On December 5, 1994 the Company loaned Scott Mills, Inc. ("Scott
Mills") $500,000. Scott Mills, formerly an indirect wholly-owned subsidiary of
the Company, is the successor in interest to the Company's textile division, the
assets of which were transferred to Scott Mills on November 27, 1993. The loan
bears interest, payable annually, at 8 1/2% per annum and the principal is due
in full on December 4, 1997. Scott Mills, which has operated independently of
the Company since November 27, 1993, continues to be a principal supplier of
fabric to the Company. Total fabric purchases from Scott Mills were $6,840,900
$6,185,000 and $4,720,000 for fiscal years 1995, 1994 and 1993, respectively.
The Company provides certain third party services on behalf of Scott
Mills including data processing and account payable check processing functions
and business management services. As a consequence, the balance due to
Kleinert's, Inc. fluctuates based on the timing of Scott Mills repayments to
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994, and November 27, 1993
12. Related Party Transactions (continued)
Kleinert's for disbursements made on behalf of Scott Mills. The net receivable
due to the Company at December 2, 1995 was $1,561,000 and consisted primarily of
the unreimbursed balance of disbursements made on behalf of Scott Mills.
Kleinert's charged Scott Mills management and service fees of $86,000, $293,000
and $415,000 in the fiscal years ended 1995, 1994 and 1993, respectively. On
December 1, 1995 the Company executed a working capital agreement with Scott
Mills that confirms Scott Mills' obligations and provides to the Company a first
lien and security interest in substantially all of Scott Mills' assets to secure
Scott Mills obligation to repay to the Company the loan balance due.
In March 1995, the Company subleased knitting machines to Scott Mills
for a forty-five month term to be used to produce certain fabrics on behalf of
the Company.
13. Subsequent Event
On December 19, 1995, Kleinert's, Inc., through its newly formed,
wholly-owned subsidiary, Kleinert's, Inc. of Florida,("together, the Company"),
consummated a transaction (the "Transaction") pursuant to which the Company
acquired substantially all of the assets of Pixie Playmates, Inc. ("Pixie") and
Certified Sewing Services, Inc. ("Certified") two Florida corporations, and all
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Fiscal Years Ended December 2, 1995,
December 3, 1994, and November 27, 1993
13. Subsequent Event (continued)
of the capital stock of Certified Apparel Services of Honduras, Inc., C.A., a
Honduran corporation ("CASH"). Pixie, Certified and CASH, all of which were
affiliated entities, are engaged in the manufacture and sale of children's
apparel. Concurrent with the Transaction, the Company entered into a three year
lease agreement with the principal shareholder of Pixie for the premises in
which Pixie was conducting business. The Company intends to continue
manufacturing operations as was conducted by Pixie, Certified and CASH prior to
the Transaction.
In consideration for the assets of Pixie and Certified and the shares
of CASH, the Company paid an aggregate purchase price of $4,650,000 in cash, of
which $500,000 has been retained by the Company pending confirmation of
inventory quantities and completion of an audit of CASH. The purchase price was
financed by the Company through an amendment to its existing bank financing
agreement to provide for an additional term debt facility.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The Company filed a report on Form 8-K dated November 18, 1994
disclosing a change in the Company's independent auditors.
PART III
Item 10. Directors and Executive Officers of the Company
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on April 18, 1996, to be filed pursuant to Regulation 14A.
Item 11. Executive Compensation
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on April 18, 1996, to be filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on April 18, 1996, to be filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on April 18, 1996, to be filed pursuant to Regulation 14A.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
KLEINERT'S, INC. INDEX TO FINANCIAL STATEMENTS
Page
Reports of Independent Auditors 29
Consolidated Balance Sheets at December 2, 1995
and December 3, 1994. 31
Consolidated Statements of Operations
for the Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993 33
Consolidated Statements of Shareholders' Equity
for the Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993 34
Consolidated Statements of Cash Flows
for the Fiscal Years Ended December 2, 1995,
December 3, 1994 and November 27, 1993 35
Notes to Consolidated Financial Statements 37
- -----------
All other financial statements or schedules are omitted since the
required information is not present or is not present in amounts
sufficient to require submission of the financial statement or
schedule, or because the information required is included in the
Consolidated Financial Statements and notes thereto.
<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.
KLEINERT'S, INC.
By: /s/ Joseph J. Connors
---------------------------------
Joseph J. Connors
Executive Vice President
(Principal accounting and
financial officer)
Dated: March 1, 1996
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.
SIGNATURE CAPACITY DATE
/s/ Jay B. Andrews Director 2/26/96
- ------------------------------ --------
Jay B. Andrews
/s/ Jack Brier Director, Chairman 2/26/96
- ------------------------------ (Principal Executive -------
Jack Brier Officer)
/s/ Kenneth L. Brier Director 2/26/96
- ------------------------------ -------
Kenneth L. Brier
/s/ Joseph J. Connors Executive Vice President 2/26/96
- ------------------------------ (Principal Accounting -------
Joseph J. Connors and Financial Officer)
/s/ William Forman Director 2/26/96
- ------------------------------ -------
William Forman
/s/ Bernhardt Denmark Director 2/26/96
- ------------------------------ -------
Bernhardt Denmark
/s/ Nathan Greenberg Director 2/26/96
- ------------------------------ -------
Nathan Greenberg
/s/ Marvin Grossman Director 2/26/96
- ------------------------------ -------
Marvin Grossman
- ------------------------------
E. Gerald Riesenbach Director
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Page
- ---------- ----
(3) (a) By-Laws
(b) Articles of Incorporation Incorporated by reference to the
copy thereof filed as an Exhibit to
Registrant's Quarterly Report on
Form 10-Q for its fiscal quarter
ended February 29, 1992
(10) Material Contracts
(a) Property Lease Agreement Incorporated by reference to the
dated January 24, 1986 copy thereof filed as an Exhibit
between C/N Leedon Limited to Registrant's Annual Report
Partnership II and year on Form 10-K for its fiscal
Kleinert's, Inc., and as ended December 3, 1988
amended
(b) License Agreement dated Incorporated by reference to the
May 12, 1989 between copy thereof filed as an Exhibit
Hygienics, Industries, Inc. to Registrant's Quarterly Report
and Kleinert's, Inc. of on Form 10-Q for its fiscal
Alabama quarter ended June 3, 1989
(c) Agreement dated as of Incorporated by reference to the
September 1, 1990 between copy thereof filed as an Exhibit
the Industrial Development to Registrant's Quarterly Report
Board of the City of Inc. of on Form 10-Q for its fiscal
Alabama Elba, Alabama and quarter ended September 1, 1990
Kleinert's,
(d) Guaranty Agreement dated Incorporated by reference to the
September 26, 1990 between copy thereof filed as an Exhibit
Brown Brothers Harriman and to Registrant's Quarterly Report
Co. and Kleinert's, Inc. on Form 10-Q for its fiscal
quarter ended September 1, 1990
(e) Guaranty Agreement dated Incorporated by reference to the
September 26, 1990 between copy thereof filed as an Exhibit
Brown Brothers Harriman and to Registrant's Quarterly Report
Co. and Kleinert's, Inc. of on Form 10-Q for its fiscal
Alabama quarter ended September 1, 1990
(f) Letter Agreement dated Incorporated by reference to the
September 26, 1990 between copy thereof filed as an Exhibit
Philadelphia National Bank to Registrant's Quarterly Report
and Kleinert's, Inc. of on Form 10-Q for its fiscal
Alabama quarter ended September 1, 1990
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(g) Agreement dated as of Incorporated by reference to the
November 9, 1989 between copy thereof filed as an Exhibit
Precision Textiles, Inc. and to Registrant's Quarterly Report
Kleinert's, Inc. of Alabama on Form 10-Q for its fiscal
quarter ended September 1, 1990
(h) Line of Credit Agreement Incorporated by reference to the
dated October 18, 1990 between copy thereof filed as an Exhibit
Republic National Bank and to Registrant's Annual Report
Kleinert's, Inc. of Alabama on Form 10-K for its fiscal
year ended December 1, 1990
(i) Lease agreement dated Incorporated by reference to the
December 31, 1990 between copy thereof filed as an Exhibit
General Electric Capital to Registrant's Annual Report
Corporation and Kleinert's, on Form 10-K for its fiscal
Inc. of Alabama year ended December 1, 1990
(j) Sublease Agreement between Incorporated by reference to the
Harco Drug, Inc. and copy thereof filed as an Exhibit
Kleinert's, Inc. of Alabama to Registrant's Annual Report
dated February 14, 1991 on Form 10-K for its fiscal
year ended December 1, 1990
(k) Non-Qualified Stock Option Incorporated by reference to the
Agreement dated May 7, 1991 copy thereof filed as an Exhibit
between Jack Brier and to Registrant's Quarterly Report
Kleinert's, Inc. on Form 10-Q for its fiscal
quarter ended August 31, 1991
(l) Addendum's to Lease Agreement Incorporated by reference to the
dated December 31, 1990 Between copy thereof filed as an Exhibit
General Electric Capital to Registrant's Annual Report
Corporation and Kleinert's, on Form 10-K for its fiscal
Inc. of Alabama year ended November 30, 1991
(m) Property Lease Agreement dated Incorporated by reference to the
February 15, 1992 between copy thereof filed as an Exhibit
Fortex and Kleinert's, Inc. of to Registrant's Annual Report
Alabama on Form 10-K for its fiscal
year ended November 30, 1991
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(n) Demand Grid Note dated Incorporated by reference to the
October 22, 1990 between copy thereof filed as an Exhibit
Republic National Bank of New to Registrant's Quarterly Report
York and Kleinert's, Inc. of on Form 10-Q for its fiscal
Alabama and Guaranty of quarter ended February 29, 1992
Kleinert's, Inc. dated October
23, 1990
(o) Consent letter dated October Incorporated by reference to the
30, 1990 between Philadelphia copy thereof filed as an Exhibit
National Bank, incorporated as to Registrant's Quarterly Report
CoreStates Bank, N.A., on Form 10-Q for its fiscal
Kleinert's, Inc. of Alabama and quarter ended February 29, 1992
Kleinert's, Inc.
(p) Kleinert's, Inc. 1991 Stock Incorporated by reference to the
Option Plan copy thereof filed as an Exhibit
to Registrant's Quarterly Report
on Form 10-Q for its fiscal
quarter ended February 29, 1992
(q) Unsecured Promissory Note dated Incorporated by reference to the
February 19, 1992 to Brown copy thereof filed as an Exhibit
Brothers, Harriman & Co. from to Registrant's Quarterly Report
Kleinert's, Inc. of Alabama and on Form 10-Q for its fiscal
Surety Agreement dated quarter ended February 29, 1992
February 19, 1992 between
Brown Brothers, Harriman and
Co. and Kleinert's, Inc.
(r) Non-Qualified Stock Option Incorporated by reference to the
Agreement with Kenneth Brier, copy thereof filed as an Exhibit
a Director for Kleinert's, Inc. to Registrant's Annual Report
dated June 23, 1992 on Form 10-K for its fiscal
year ended November 28, 1992
(s) Non-Qualified Stock Option Incorporated by reference to the
Agreement with Bernard Denmark, copy thereof filed as an Exhibit
a Director for Kleinert's, to Registrant's Annual Report
Inc. dated June 23, 1992 on Form 10-K for its fiscal
year ended November 28, 1992
(t) Line of Credit and Term Loan Incorporated by reference to the
Agreement dated April 8, 1993 copy thereof filed as an Exhibit
between CoreStates Bank, N.A., to Registrant's Quarterly Report
Philadelphia National Bank, and on Form 10-Q for its fiscal
Kleinert's, Inc. of Alabama quarter ended May 29, 1993
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(u) Lease Agreement dated May 27, Incorporated by reference to the
1993 between Deutsche Credit copy thereof filed as an Exhibit
Corporation and Kleinert's, Inc. to Registrant's Quarterly Report
of Alabama-Scott Mills Division on Form 10-Q for its fiscal
quarter ended May 29, 1993
(v) Lease Agreement dated June 6, Incorporated by reference to the
1993 between Meridian Leasing, copy thereof filed as an Exhibit
Inc. and Kleinert's, Inc. of to Registrant's Quarterly Report
Alabama on Form 10-Q for its fiscal
quarter ended May 29, 1993
(w) Amended and Restated Term Loan Incorporated by reference to the
Note dated December 10, 1993 copy thereof filed as an Exhibit
between CoreStates Bank, N.A., to Registrant's Annual Report
Philadelphia National Bank and on Form 10-K for its fiscal
Kleinert's, Inc. of Alabama year ended November 27, 1993
(x) Letter Amendment dated February Incorporated by reference to the
1994 to the Loan Agreement copy thereof filed as an Exhibit
dated April 8, 1993 to Registrant's Annual Report
on Form 10-K for its fiscal
year ended November 27, 1993
(y) Line of credit agreement dated Incorporated by reference to the
May 16, 1994 between PNC Bank copy thereof filed as an Exhibit
and Kleinert's, Inc. of Alabama to Registrant's Quarterly Report
on Form 10-Q for its fiscal
quarter ended May 28, 1994
(z) Note Receivable agreement Incorporated by reference to the
dated May 27, 1994 between copy thereof filed as an Exhibit
Norman Katz and Marcia Katz, as to Registrant's Quarterly Report
trustees of the Katz family on Form 10-Q for its fiscal
trust quarter ended May 28, 1994
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(aa) Operating lease agreement dated Incorporated by reference to the
May 26, 1994 between Meridian copy thereof filed as an Exhibit
Leasing Inc. and Kleinert's, to Registrant's Annual Report
Inc. of Alabama on Form 10-K for its fiscal
year ended December 2, 1995
(ab) Property Lease agreement dated Incorporated by reference to the
November 8, 1994 between Robert copy thereof filed as an Exhibit
Clayton Hickman and Kleinert's, to Registrant's Annual Report
Inc. of Alabama on Form 10-K for its fiscal
year ended December 2, 1995
(ac) Second amended and restated Incorporated by reference to the
term loan note dated November copy thereof filed as an Exhibit
10, 1994 between CoreStates to Registrant's Annual Report
Bank, N.A. and Kleinert's, Inc. on Form 10-K for its fiscal
of Alabama year ended December 2, 1995
(ad) Employment agreement dated Incorporated by reference to the
November 21, 1994 between Jack copy thereof filed as an Exhibit
Brier and Kleinert's, Inc. to Registrant's Annual Report
on Form 10-K for its fiscal
year ended December 2, 1995
(ae) Promissory note agreement dated Incorporated by reference to the
December 5, 1994 between Scott copy thereof filed as an Exhibit
Mills, Inc. and Kleinert's, NC. to Registrant's Annual Report
of Delaware on Form 10-K for its fiscal
year ended December 2, 1995
(af) License agreement extension Incorporated by reference to the
dated December 22, 1994 between copy thereof filed as an Exhibit
Hygienics Industries, Inc. to Registrant's Annual Report
and Kleinert's, Inc. on Form 10-K for its fiscal
year ended December 2, 1995
(ag) Letter amendment dated January Incorporated by reference to the
7, 1995 to property lease copy thereof filed as an Exhibit
agreement dated February 15, to Registrant's Annual Report
1992 between Fortex and on Form 10-K for its fiscal
Kleinert's, Inc. of Alabama year ended December 2, 1995
(ah) Operating lease agreement Incorporated by reference to the
dated December 30, 1994 copy thereof filed as an Exhibit
between Meridian Leasing, Inc. to Registrant's Annual Report
and Kleinert's, Inc. of Alabama on Form 10-K for its fiscal
year ended December 2, 1995
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(ai) Sublease agreement dated Incorporated by reference to the
January 23, 1995 between copy thereof filed as an Exhibit
Scott Mills, Inc. of North to Registrant's Annual Report
Carolina and Kleinert's, on Form 10-K for its fiscal
Inc. of Alabama year ended December 2, 1995
(aj) Lease agreement dated December
5, 1994 between Meridian
Leasing Inc. and Kleinert's
Inc.
(ak) Line of Credit Demand Note
dated March 1, 1995 between
Kleinert's, Inc. of Alabama and
PNC Bank
(al) Demand Grid Note dated April
20, 1995 between Republic
National Bank of New York
and Kleinert's, Inc. of
Alabama and Guaranty of
Kleinert's, Inc. dated April
20, 1995
(am) License agreement dated June
21, 1995 between Cadtex
Corporation and Kleinert's
Inc. of New York.
(an) Deferred compensation
agreement dated August 15,
1995 between Jack Brier
and Kleinert's, Inc.
(ao) Rent agreement dated
August 22, 1995 between 112
West 34th Street Company and
Kleinert's, Inc. of New York
(ap) Guaranty agreement dated
November 29, 1995 between
Meridian Leasing Inc. and
Kleinert's, Inc. of New York
(aq) Lease agreement dated
November 29, 1995 between
Meridian Leasing Inc. and
Kleinert's, Inc. of New York
(ar) Supply agreement dated
December 4, 1995 between
Dyersburg Fabrics Inc. and
Kleinert's, Inc. of Alabama
<PAGE>
INDEX TO EXHIBITS-Continued
Exhibit No. Page
(as) Lease agreement dated December
15, 1995 between Jeffrey A.
Lopatin and Kleinert's, Inc. of
Florida
(at) Purchase agreement dated
December 15, 1996 between Pixie
Playmates, Inc., Certified
Sewing Services, Inc., Certified
Apparel Services of Honduras,
Inc. C.A. and Kleinert's, Inc.
of Florida
(11) Statement regarding Computation
of Per Share Earnings
(21) Subsidiaries of Registrant:
Kleinert's, Inc. of Alabama,
Kleinert's, Inc. of Delaware
Kleinert's, Inc. of New York
Kleinert's, Inc. of Florida
Certified Apparel Services of
Honduras, Inc.
<PAGE>
Meridian Leasing
MASTER LEASE AGREEMENT
FINANCE LEASE, ARTICLE 2A UCC
MERIDIAN LEASING INC.
Master Lease Agreement No. 01678
THIS MASTER LEASE AGREEMENT (the "Lease"), dated as of the 5TH day of
December, 94, is executed by and between MERIDIAN LEASING INC., a Pennsylvania
corporation, with a place of business located at One Meridian Boulevard,
Wyomissing, PA 19610 (together with its successors and assigns, if any, the
"Lessor") and KLEINERT'S INC., a Pennsylvania corporation, with its mailing
address and chief place of business at 120 W. Germantown Pike, Suite 100,
Plymouth Meeting, PA 19462, (the "Lessee").
The Parties hereto, for good and valuable consideration and intending
to be legally bound, hereby agree as follows:
1. MASTER LEASE WITH SCHEDULES:
(a) Subject to the terms and conditions set forth below, Lessor agrees
to lease to Lessee and Lessee agrees to lease from Lessor such unit or units of
equipment (the "Equipment" and individually sometimes "Item" or "Item of
Equipment") described in any Master Lease Schedule (a "Schedule") now or
hereafter from time to time executed by the parties pursuant hereto, and any and
all such Schedules are deemed a part hereof. Each Schedule shall incorporate
this Lease by reference. Capitalized terms not otherwise defined herein will
have the meaning provided for in any Schedules.
(b) Lessor has no obligation to purchase Equipment from the
manufacturer or supplier thereof ("Supplier") or to lease the same to Lessee
under any Schedule unless each of the following is satisfied and delivered to
Lessor prior to the Commencement Date with respect to the Schedule in form and
substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then
being leased hereunder reflecting Lessor's Cost, and a term and rate
satisfactory to Lessor, (ii) unless Lessor has delivered its purchase order for
the purchase of such Equipment, a Purchase Order Assignment and Consent in form
satisfactory to Lessor, (iii) a Closing Certificate in form satisfactory to
Lessor, (iv) a Certificate of Insurance which complies with the requirements of
Section 7 and the Schedule, and (v) a properly executed Certificate of
Acceptance in form satisfactory to Lessor covering each Item of Equipment set
forth in the Schedule and the execution by Lessee of any Certificate of
Acceptance will (i) confirm that each Item of Equipment described thereon has
been delivered to and irrevocably accepted by Lessee for lease hereunder, and
(ii) constitute Lessee's acknowledgment that Lessee has received a copy of and
has approved the contract under which Lessor acquired the Equipment. Lessee
hereby waives as between Lessor and Lessee any right to revoke acceptance of the
Equipment under this Lease once made and evidenced by its Certificate of
Acceptance. Lessee shall also deliver such other documents as Lessor may
reasonably request.
<PAGE>
2. TERM:
The Lease of and rent for Equipment leased under any Schedule will
commence on the day specified in the Schedule as the Commencement Date, and will
continue for the period specified as the "term" in the said Schedule as the same
may be extended pursuant to the terms hereof.
3. RENT:
Payment of rent will be made during the term of the Lease on the due
dates and in the amount set forth in the Schedule and will not be prorated for
any cause or reason except as herein specifically provided. If one or more
advance payments of rent are required, the advance rent will be due and paid in
the amount specified in the Schedule upon acceptance by Lessor of each Schedule
providing for such rent. Lessor will apply said advance rent toward the first
basic rent payment and, provided no default is then existent hereunder, the
balance, if any, of the advance rent will be applied to the final rent payment.
Subsequent rent payments will be due periodically thereafter as specified in the
Schedule. In no event will any advance rent or any other rent payment be
refunded to Lessee, it being the intention of the parties hereto that the rents
and other amounts payable by the Lessee hereunder will continue to be payable in
all events unless the obligation to pay the same will be terminated pursuant to
the terms hereof. All rent will be paid to the Lessor in immediately available
funds without notice or demand on the due dates with respect thereto at Lessor's
address set forth above or as otherwise directed by the Lessor in writing. In
order to secure all obligations of Lessee hereunder, Lessee hereby grants to
Lessor a security interest in the amount of any advance rent not applied to the
first basic rent payment.
4. USE, OPERATION AND INDEMNIFICATION:
(a) Lessee will not assign, sublet, mortgage, hypothecate or alter any
of the Equipment leased hereunder or any interest in the Lease, nor will Lessee
remove any of the Equipment from the location specified in the Schedule without
(except in the ordinary course of its business for use or maintenance) the prior
written consent of Lessor, and any attempt to so assign, sublet, mortgage,
hypothecate, alter or remove will constitute a default hereunder and such
assignment, sublease, mortgage, or hypothecation will be void and without
effect. Lessee will keep all Equipment leased hereunder free and clear from all
claims, liens and encumbrances whatsoever.
(b) Lessee agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses of whatsoever kind and nature, in contract or tort, howsoever arising
from any cause whatsoever including but not limited to Lessor's strict liability
in tort, or otherwise arising out of (i) the selection, manufacture, purchase,
financing, acceptance or rejection of Equipment, the ownership of Equipment
during the term of this Lease, and the delivery, lease, possession, maintenance,
uses, condition, return or operation of Equipment (including, without
limitation, latent and other defects, whether or not discoverable by Lessor or
Lessee and any claim for patent, trademark or copyright infringement) or (ii)
the condition of Equipment sold or disposed of after use by Lessee, any
sublessee or employee of Lessee. Lessee hereby represents and warrants that each
Item of Equipment acquired and leased hereunder is new and not previously used
unless specifically disclosed on the Schedule and Lessee agrees to indemnify,
save and keep harmless Lessor against any loss howsoever arising directly or
indirectly from any subsequent determination that the Supplier has sold Items of
Equipment for lease hereunder which have been previously used. Lessee will, upon
request, at its own expense, defend any and all actions based on, or arising out
of, any of the foregoing and this indemnification will survive termination of
the Lease.
<PAGE>
(c) Lessee will not without the prior written consent of Lessor (i)
make any material alterations of the Equipment or (ii) affix or install any
accessory, equipment or device on any Equipment leased hereunder if such
addition will impair the originally intended function or use of such Equipment.
All additions, repairs, parts, supplies, accessories, equipment and devices
furnished, attached or fixed to any Equipment will thereupon without further act
or instrument become the property of Lessor (except such as may be removed
without in any way affecting or impairing the originally intended function,
condition or use of such Item). Further, Lessee will not, without the prior
written consent of Lessor and subject to such conditions as Lessor may impose
for its protection, affix or install any Equipment leased hereunder to or in any
other personal property or in real property.
5. SERVICE AND MAINTENANCE:
(a) Lessee will, at its sole expense, at all tines maintain all
Equipment consistent with recommendations of the Supplier and as required by the
conditions of any warranty in order to maintain same current and effective and
in good operating order, repair, condition and appearance and keep all Equipment
protected from the elements, except during use in the normally contemplated
manner. Lessee will, at its own expense, provide all maintenance and service and
make all repairs and replacements reasonably necessary for such purposes. If any
parts of the Equipment are worn out, lost or are otherwise rendered unfit for
use, Lessee will, at its own expense, replace such parts promptly by replacement
parts of at least equal value and utility with title thereto vesting in Lessor
free and clear of all liens and encumbrances.
(b) Lessee will, at its sole expense, make all alterations and
modifications with respect to the Equipment that may at any time during the term
of this Lease or any Schedule hereunder be required to comply with any
applicable law or any governmental rule or regulation.
6. RETURN OF EQUIPMENT:
(a) Unless otherwise provided in the Schedule, upon termination of the
Lease or of any Schedule upon default or by expiration of the term hereof or
thereof or upon termination for any other cause, Lessee will, at its sole cost
and expense, promptly return the Equipment to Lessor at any address specified by
Lessor in the same condition as received, reasonable wear and tear and normal
depreciation from proper use and maintenance alone excepted, capable of
performing its originally intended use at its originally rated capacity. Lessee
will be responsible for all costs and expenses for packing, shipping and
insuring the Equipment until delivered to the location designated by Lessor.
Lessee will also provide storage without charge to Lessor, if requested' for
ninety (90) days after the termination of the Lease. At least ninety (90) days
prior to the last day of the term, Lessee shall deliver to Lessor a report of an
independent expert advising Lessor on the condition of the Equipment and its
compliance with the terms hereof.
(b) In addition to Lessor's other rights and remedies hereunder, if the
Equipment is not returned on the last day of the term or repairs are necessary
to place the Equipment in the condition required hereby, Lessee shall continue
to pay for the period of delay and acceptance of such rents by Lessor will not
constitute a renewal of the Lease or a waiver of the Lessor's right to a prompt
return.
<PAGE>
7. INSURANCE:
Lessee hereby assumes all risks of damage, loss, theft, or destruction,
partial or complete, with respect to each Item of Equipment during the term of
the Lease and during any storage period until Lessee has returned or disposed of
the Equipment as provided for herein. Lessee will, at its own expense, keep each
Item of Equipment insured against all risks with extended coverage and insurance
companies satisfactory to Lessor, with Lessor named as loss payee for an amount
at least equal to such amount as designated in writing from time to time by
Lessor and, failing any such designation, to an amount at least equal to the
greater of (i) the fair market value of the Equipment, or (ii) the then current
Stipulated Loss Value of the Equipment determined by reference to the related
Schedule. Lessee agrees to obtain and maintain at its expense with insurance
companies of recognized standing general public liability insurance for the
protection of Lessor and Lessee, as their interests may appear, in an amount at
all times satisfactory to Lessor and otherwise as specified in the related
Schedule against claims for bodily injury, death or property damage arising out
of the use, ownership, possession, operation or condition of the Equipment. Each
insurer will agree, by endorsement upon the policy or policies issued by it, or
by independent instruments furnished to Lessor, that Lessor will have the power
to file claims against the insurer under said policy, that it will give Lessor
thirty (30) days written notice before the policy or policies in question will
be altered, expired or canceled last day and that no act or default of any
person other than Lessor, its agents, or those claiming under Lessor, will
affect Lessor's rights to recover under such policy or policies in case of loss.
Lessee will deliver to Lessor the policies or evidence of insurance and renewal
thereof satisfactory to Lessor prior to the Commencement Date and thirty (30)
days prior to each expiration date thereof for each Item of Equipment. The
failure of Lessee to secure or maintain such insurance will constitute a default
under this Lease. In the event of such breach, Lessor may, but will not be
obligated to, obtain such insurance. In the event that Lessor obtains such
insurance, an amount equal to the cost of such insurance will be deemed
supplemental rent to be paid forthwith by Lessee.
8. LOSS OR DAMAGE:
(a) Lessee hereby assumes and is solely responsible for the entire risk
of use, operation and/or loss of the Equipment and for each and every accident
or hazard resulting therefrom and all losses and damages associated therewith
howsoever arising.
(b) In the event of the total loss, destruction, theft or damage beyond
repair (determined without reference to the remaining term with respect thereto)
of the Equipment or any Item (a "Casualty Occurrence"), Lessee will pay to
Lessor on the next due date for rent following the Casualty Occurrence or on the
last day of the term with respect to such Equipment an amount equal to the rent
then due plus an amount equal to the Stipulated Loss Value of such Equipment as
of such due date. Upon payment of such amounts, and provided no default exists
hereunder, Lessee will be entitled to recover possession of such Item and title
thereto will vest in Lessee free and clear of the right and interest of Lessor.
(c) In the event of damage to any Item of Equipment which does not
amount to a Casualty Occurrence, Lessee will give prompt notice of such damage
to Lessor and, at Lessee's sole cost and expense, Lessee will promptly repair
such Item, restoring it to its previous condition and the condition assuming
Lessee had met all of its obligations required for maintenance hereunder.
Provided Lessee is not in breach or default of this Lease, any proceeds of
insurance received by Lessor with respect to any such loss will be paid over by
Lessor to Lessee to the extent necessary to reimburse Lessee for costs incurred
and paid by Lessee in repairing such damaged Equipment, but only upon evidence
satisfactory to Lessor that such repairs have been accomplished.
<PAGE>
9. TRANSFER OF WARRANTIES:
Notwithstanding anything contained herein to the contrary and to the
extent permitted by law and contract, Lessor will pass through without
representation to Lessee the benefit of all warranties, if any, of the Supplier
of the Equipment and, so long as there exists no default hereunder, Lessee will
have the right to, and will, directly avail itself of all warranties made by the
Supplier with respect to the Equipment. Lessee will give Lessor notice of any
claim made by Lessee against the Supplier of the Equipment and any cash
settlement of any such claim will be payable solely to Lessor.
10. TAX TREATMENT AND INDEMNIFICATIONS:
(a) It is acknowledged and agreed by the parties that they are entering
into this Lease with the assumption that Lessor and the consolidated group of
which Lessor is a member (all references to Lessor in this Section include such
consolidated group) will be treated for federal income tax purposes (and to the
extent allowable, for state and local tax purposes) as the owner of all
Equipment leased hereunder and will have a federal tax rate of at least 34%
during the term of the Lease.
(b) Unless otherwise provided for in a particular Schedule, the Lessee
acknowledges and agrees that each Schedule has been executed by Lessor based
upon the following representations and warranties of Lessee: (i) each Item of
Equipment has been placed in service on the Commencement Date; (ii) Lessor will
not under the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (the "Code"), be required to include in its gross income,
for federal income tax purposes, any amount with respect to any improvement,
modification or addition made by Lessee to any Item of Equipment; (iii) Lessor
shall be entitled to accelerated cost recovery deductions ("Recovery
Deductions") for Lessor's Cost of each Item of Equipment over the number of
years indicated on the related Schedule by using the 200% declining balance
method permitted under Code Section 168 and the half year convention, unless
otherwise required by operation of Code Section 168(d)(3)(A); (iv) no Item of
Equipment is limited use property within the meaning of Rev. Proc. 76-30; and
(v) for federal income tax purposes, all amounts included in the gross income of
the Lessor with respect to each Item of Equipment will be treated as derived
from or allocable to sources within the United States.
(c) If by reason of (1) the inaccuracy in law or in fact of any of the
assumptions or representations or warranties set forth in Subsections (a) or (b)
of this Section, (2) the inaccuracy of any statement or any letter or document
furnished to Lessor by or on behalf of Lessee in connection with the
transactions contemplated under the Lease, or (3) the act, failure to act or
omission of or by Lessee of (4) any change in the Code occurring prior to the
Commencement Date on any Schedule, Lessor will (i) lose, will not have the right
to claim or if there will be disallowed with respect to Lessor all or any
portion of the Recovery Deduction as to any Item of Equipment on such Schedule,
(ii) be required to include in its gross income any alteration, modifications or
addition to, any Item, other than an alteration, modification or addition which
is permitted without adverse tax consequences to Lessor under Rev. Procs. 75-21,
76-30 or 79-48 (an "Improvement Loss"), or (iii) suffer a decrease in Lessor's
net return over the then remaining portion of the term of the Lease (any such
occurrence referred to hereinafter as "Loss") for such Schedule, then at
Lessor's option either (X) the rent on such Schedule will, on and after the next
succeeding date for the payment thereof upon notice to the Lessee by the Lessor
that a Loss has occurred, and describing the amount as to which Lessor intends
to claim indemnification and the reason for such adjustment in reasonable
detail, be increased by such amount, which will cause Lessor's net return over
the then remaining portion of the term of the Lease (taking into account the tax
effect from deferred utilization of tax basis resulting from changes in the
method of calculating Recovery Deductions) to equal the net return that would
have been available if such Loss had not occurred, or (Y) in lieu of a rent
increase, the Lessee shall pay to Lessor on such next succeeding date for the
<PAGE>
payment of rent such sum as will cause Lessor's net return over the term of the
Lease in respect of the Equipment to equal the net return that would have been
available if such Loss had not occurred. If such Loss occurs after the
expiration or termination of the Lease, Lessor will notify Lessee of such Loss
and Lessee will, within sixty (60) days after such notice, pay to Lessor such
sum as required by the preceding clause (Y). Lessee will forthwith pay on demand
to Lessor an amount on an after-tax basis which will be equal to the amount of
any interest and/or penalties which may be assessed by the United States or any
state against Lessor as a result of the Loss.
(d) For purposes of this Section a Loss will occur upon the earliest of
(1) the happening of any event which in Lessor's judgment reasonably may cause
such Lass, (2) the payment by Lessor to the Internal Revenue Service of the tax
increase, if any, resulting from such Loss, or (3) the adjustment of the tax
return of Lessor to reflect such Loss.
Lessor will be responsible for, and will not be entitled to a payment
under this Section on account of, any Loss due solely to one or more of the
following events: (i) the failure of Lessor to have sufficient taxable income to
benefit from the Recovery Deduction; (ii) any disposition of the Equipment by
Lessor prior to any default which has occurred and is continuing under the
Lease; or (iii) the failure of Lessor to properly claim the Recovery Deduction.
(e) The indemnities and assumptions of liability provided for herein
and all Lessor's rights and privileges herein will continue in full force and
effect notwithstanding the expiration or termination of the Lease.
11. DISCLAIMER:
Lessee acknowledges that it alone selects the Equipment and the
Supplier(s) thereof. LESSEE UNDERSTANDS AND AGREES THAT LESSOR MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED, WITH RESPECT TO
THE EQUIPMENT. IT IS UNDERSTOOD AND AGREED THAT NO WARRANTY IS TO BE IMPLIED
WITH RESPECT TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, THE FITNESS
OF THE EQUIPMENT FOR A PARTICULAR PURPOSE, OR WITH RESPECT TO PATENT, TRADEMARK,
COPYRIGHT OR OTHER INFRINGEMENT OR THE LIKE. NOTHING HEREIN CONTAINED WILL BE
CONSTRUED AS DEPRIVING THE LESSEE OF WHATEVER RIGHTS, IF ANY, LESSEE MAY HAVE
AGAINST THE SUPPLIER AND/OR MANUFACTURER OF THE EQUIPMENT AND LESSEE AGREES TO
LOOK SOLELY TO SUCH THIRD PARTIES WITH RESPECT TO ANY AND ALL CLAIMS CONCERNING
THE EQUIPMENT.
12. NO ABATEMENT:
This Lease is a net Lease, intended by the parties to constitute a
"Finance Lease" under Article 2A of the Uniform Commercial Code as in effect in
Pennsylvania (the "UCC") and Lessee waives any right to suspend the performance
of all or any of its obligations hereunder. This is not a consumer lease and the
promises of Lessee hereunder and under each Schedule are irrevocable upon
acceptance of the Equipment under each Schedule. Lessor and Lessee each hereby
waive the provisions of the UCC, Section 2A 401 through 403 inclusive, and it is
the intent of the parties that under no circumstances is the Lease or any
Schedule to be subject to repudiation by either party. Lessee's obligation to
pay rent and all other amounts due hereunder is absolute, unconditional and not
subject to cancellation. Lessee agrees to pay rent and all other amounts due
hereunder when due without abatement or reduction, irrespective of any claims,
demands, set-offs, actions, suits or proceedings that it may have or assert
<PAGE>
against Lessor or any Supplier or manufacturer of Equipment or any part thereof.
Lessor will have no liability to Lessee in the event that any Supplier,
manufacturer or one or more others fails to perform any obligations at any time
due to Lessor, Lessee, persons in privity with Lessor or Lessee and any other
persons, or any one or more of the foregoing.
13. DEFAULT; REMEDIES:
(al Each of the following will constitute a default hereunder: (a)
Lessee fails to pay rent or any other amount when due under any Schedule and
such failure will continue for five (5) days from the due date thereof; (b)
Lessee breaches any of the other terms or covenants hereof (including without
limitation any Schedule) or commits any other act of default specified in this
Lease; (c) any representation or warranty of Lessee contained herein or in any
other document or instrument delivered in connection herewith or made from time
to time hereafter is false or misleading when made; (d) Lessee or any Guarantor
become insolvent or ceases to do business as a going concern; (e) the Equipment
or any Item is abused, illegally used, or misused; (f) Lessee or any Guarantor
makes any assignment for the benefit of creditors, receivership or the like is
filed with respect to Lessee, or any substantial part of Lessee's property is
attached or a receiver, trustee or liquidator is appointed for Lessee or any
substantial part of Lessee's property or whenever Lessor may deem itself
insecure hereunder; (g) Lessee or any Guarantor fails to make any payment on
indebtedness for borrowed money when due, or to make any payment on a lease or
installment sale obligation when due, in each case when any applicable grace
period for such obligation has expired and the lender, lessor or creditor has
commenced to exercise any remedy, but only if the indebtedness or other
obligations for which payment is sought is an amount equal to or in excess of
$100,000; (h) final judgment for the payment of money aggregating in excess of
$100,000 will be outstanding against Lessee for more than sixty (60) days from
the date of entry and will not have been discharged in full or stayed or fully
bonded; or (i) Lessee or any Guarantor shall suffer any material adverse change
in their financial position which may reasonably cause Lessor to feel the
payment of rent hereunder may be impaired. On the occasion of any such default
hereunder, Lessor, at its option, may do any one or more of the following: (1)
declare this Lease and any or all Schedules in default upon notice to Lessee,
whereupon the entire amount of rent and all other amounts remaining to be paid
over the balance of the term of all Equipment then leased hereunder, computed
from the date of Lessee's default, will become immediately due and payable and
be accelerated; (2) proceed by appropriate court action or actions at law or in
equity or in bankruptcy to enforce performance by Lessee of the covenants and
terms of this Lease and/or to recover damages for the breach thereof; (3)
terminate this Lease and any or all Schedules upon notice to Lessee; (4) whether
or not this Lease or any Schedules be so terminated, upon demand by Lessor,
Lessee will return the Equipment consistent with its obligation in Section 6
hereof. Lessor may without notice to Lessee repossess the Equipment wherever
found, with or without legal process, and for this purpose Lessor and/or its
agents may enter upon any premises of or under control or jurisdiction of Lessee
or any agent of Lessee without liability for suit, action or other proceedings
by Lessee (any damages occasioned by such repossession being hereby expressly
waived by Lessee except for the damages occasioned by gross negligence or
willful misconduct, and remove the Equipment therefrom.
(b) With respect to any Equipment returned to Lessor, or repossessed by
Lessor pursuant to provision (4) above, Lessor may hold or use such Equipment
for any purpose whatsoever or either sell same at a private or public sale, cash
or credit, or re-lease same for such term and upon such rental as will be solely
determined by Lessor. In the event of the sale or re-leasing by Lessor of any
such Equipment, Lessee will be liable for, and Lessor may forthwith recover from
Lessee as liquidated damages for breach of this Lease, and not as a penalty, an
amount equal to (X) the entire amount of rent which would have accrued for the
balance of the term for such Equipment computed from the date of Lessee's
default, plus (Y) an amount determined by multiplying Lessor's Cost by the
percentage indicated for the Stipulated Loss Values for the final rent period
during the term hereof, less (Z) the proceeds of any sale or releasing of such
Equipment, after first deducting therefrom all costs and expenses of
<PAGE>
repossession, storage, repairs, reconditioning, sale, re-leasing, attorneys'
fees and collection fees with respect to such Equipment provided, however, in no
event shall the damages calculated hereunder be less than an amount equal to 10%
of Lessor's Cost of the Equipment. If Lessee fails to return any Equipment to
Lessor or Lessor is unable, for any reason, to effect repossession of any
Equipment, then with respect to such Equipment, Lessee will be liable for, and
Lessor may forthwith recover from Lessee as liquidated damages for breach of
this Lease, and not as a penalty, an amount equal to the sum of the amounts
specified in items (X) and (Y) above for such Equipment provided, however, in no
event shall the damages calculated hereunder be less than an amount equal to 10%
of Lessor's Cost of the Equipment. Whether or not any Equipment is returned to,
or repossessed by Lessor, as aforesaid, Lessee will also be liable for, and
Lessor may forthwith recover from Lessee, all unpaid rent and other unpaid sums
that accrued prior to the date of Lessee's default. In addition to the
foregoing, Lessor may also recover from Lessee all costs and expenses, including
without limitation attorneys' fees and fees of collection agencies, incurred by
Lessor in exercising any of its rights or remedies hereunder. Since pursuant to
the foregoing Lessor may receive or recover payment of the amounts specified in
paragraph (1) and items (X) and (Y) above earlier than Lessor would otherwise be
entitled to receive or recover same but for Lessee's default, such amounts will
be discounted to their then present value at the rate of six percent (6%) per
annum, and there will be added to such amounts, after such discount, interest at
the rate specified in Section 18 hereof from the date of Lessee's default up to
the date of the payment of such amounts to Lessor.
(c) Lessee hereby AUTHORIZES THE PROTHONOTARY OR CLERK OR ANY ATTORNEY
OF ANY COURT OF RECORD OF PENNSYLVANIA OR ELSEWHERE, UPON OR AFTER THE
OCCURRENCE OF ANY DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST LESSEE AT
ANY TIME FOR ALL AMOUNTS DUE HEREUNDER INCLUDING ACCELERATED RENTALS AS PROVIDED
FOR HEREIN INCLUDING THE AMOUNT DUE UPON FAILURE TO RETURN THE EQUIPMENT AND ALL
OTHER DAMAGES OR OTHER AMOUNTS TO WHICH LESSOR MAY BE ENTITLED UPON DEFAULT,
WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, RELEASE OF ERRORS, WITHOUT STAY
OF EXECUTION AND WITH 15% ADDED FOR LESSOR'S ATTORNEYS' FEES. Lessee waives and
releases all relief from all appraisement rights on any property levied upon,
voluntarily condemns the same, authorizes the Prothonotary, Clerk or attorney to
enter upon the Writ of Execution such voluntary condemnation and, to the extent
permitted by law, waives all rights or appeal, inquisition, stay of execution
and exemption under any law now or later in force. A copy of this Lease,
verified by Lessor, may be filed in such suit in lieu of the original Lease. The
right to confess judgment will not be exhausted by any single or subsequent
exercise, but Lessor will be entitled to confess judgment successively, by any
exercise thereof, whether or not such exercise will be held by any court to be
invalid, voidable or void, but the power will continue undiminished and may be
exercised from time to time, and contemporaneously in more than one
jurisdiction, as often as Lessor will elect until all obligations of Lessee
hereunder will have been satisfied in full. Lessee consents to the jurisdiction
of the courts of Pennsylvania and the Federal District Court for the Eastern
District of Pennsylvania in any action or proceeding which may be brought under
or in connection with this Lease or any obligation with respect thereto or to
enforce any agreement contained herein or in any such obligation, and in the
event such action or proceeding will be brought against it, Lessee agrees not to
raise any objection to such jurisdiction or the laying of venue in Berks County,
Pennsylvania. Lessee agrees that service of process in any such action or
proceeding may be duly effected upon him or her by service in accordance with
the provisions of the Uniform Interstate and International Procedure Act.
14. CUMULATIVE REMEDIES:
The remedies herein provided in favor of Lessor are not exclusive, but
will be cumulative and will be in addition to all other remedies in Lessor's
favor existing in law, in equity or in bankruptcy. The receipt and acceptance by
Lessor of any rent or other payment after occurrence of a default will not be
deemed to be a waiver of such default on the part of Lessor. In the event that
any court or competent jurisdiction determines that any provision of this Lease
is invalid or unenforceable in whole or in part, such determination will not
prohibit Lessor from establishing its damages sustained as a result of any
<PAGE>
breach of this Lease in any action or proceeding in which Lessor seeks to
recover such damages. Any repossession or resale of any Equipment will not bar
an action for damages for breach of this Lease, as hereinbefore provided, and
the bringing of an action or the entry of judgment against Lessee will not bar
Lessor's right to repossess any or all Equipment.
15. ASSIGNMENTS:
Lessor may without the consent of Lessee sell, assign or otherwise
transfer or grant a security interest in, its right, title and interest in the
Equipment, this Lease or any Schedule and the rent due or to become due
thereunder and when so sold, assigned, transferred or encumbered this Lease will
be free of any counterclaim. set-off, defense or cross-claim by Lessee as
against such assignee whenever arising, before or after such sale, assignment,
transfer or security grant. Upon notice to Lessee of such sale, assignment,
transfer or security interest, Lessee agrees to direct all payments hereunder,
if requested, to Lessor's assignee.
16. PAYMENT OF TAXES:
Lessee agrees to pay promptly when due, and to indemnify and hold
Lessor harmless from, all license, title and registration fees whatsoever, all
levies, imposts, duties, charges or withholdings whatsoever, and all sales, use,
personal property, franchise (howsoever calculated), and other taxes whatsoever
together with any penalties, fines or interest thereon) whether assessed levied
or imposed by any governmental or taxing authority against or upon Lessor or
otherwise, with respect to any Equipment or the purchase, acquisition,
ownership, delivery, leasing, possession, use, operation, control, return, or
other disposition thereof, or the rents, receipts or earnings arising therefrom,
or with respect to this Lease, excluding, however (i) any such taxes or charges
to the extent they are included in Lessor's Cost, (ii) any federal taxes levied
on Lessor's net income, or (iii) state or local taxes levied on Lessor's net
income, as net income determined under, and at rates which do not exceed those
originally imposed by the jurisdiction in which the Equipment is located as
specified in the related Schedule. In the event any such fees, levies, imposts,
duties, charges or taxes are paid by Lessor, or if Lessor be required to collect
or pay any thereof, Lessee will reimburse Lessor therefor (plus any penalties,
fines or interest thereon) promptly upon demand. Until Lessor notifies Lessee to
the contrary, Lessee will promptly before any penalty attaches, prepare and file
in Lessor's name or on Lessor's behalf all personal property tax returns
covering the Equipment and Lessee will pay the personal property taxes levied or
assessed thereon directly to the levying authority. If Lessor timely notifies
Lessee that Lessor will prepare and/or file any such return, Lessee will,
promptly upon being invoiced by Lessor, reimburse Lessor for the full amount of
such personal property taxes so paid by Lessor. All of the obligations of Lessee
under this Section with respect to any fees, levies, imposts, duties, charges,
withholdings and taxes (plus any penalties, fines or interest thereon and, in
the event that any of the foregoing are deemed to be income to Lessor, any
attendant income tax) assessed, levied, imposed or accrued prior to the
expiration or other termination of this Lease will continue in full force and
effect notwithstanding such expiration or other termination. Lessee will either
provide Lessor a copy of all property and other tax returns filed hereunder by
Lessee in Lessor's name or on Lessor's behalf or provide to Lessor an affidavit
or a responsible corporate officer certifying that the property taxes so
identified therein have been reported and are current.
<PAGE>
17. LATE CHARGE:
If any rent or any other amount due hereunder from Lessee other than
the amounts due under this Section 17 is not paid within five (5) days after the
due date, Lessee agrees to pay a late charge equal to five percent (5%) of such
delinquent payment and such late charge shall be due and payable within ten days
after the date of notice of such late charge from Lessor to Lessee. All amounts
past due hereunder including any late charge shall accrue interest at a rate
equal to eighteen percent (18%) on the amount of such delinquent rent or other
payment, but not exceeding the maximum permissible amount under applicable law.
The failure of Lessor to collect any late charge will not constitute a waiver of
Lessor's right with respect thereto.
18. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS:
In case of failure of Lessee to comply with any provision of the Lease
or any Schedule, Lessor will have the right, but will not be obligated, to
effect such compliance in whole or in part, and all money spent and expenses
incurred by Lessor will be paid by Lessee forthwith and will bear interest at
the daily equivalent of eighteen percent (18%) per annum from the date said
obligation was due. Lessor's action in effecting such compliance will not be a
waiver of Lessee's default. All such money spent by and expenses of Lessor and
any other obligation assumed or incurred by Lessor in effecting such compliance
will constitute additional rent payable to Lessor with the next rent payment.
19. SEVERABILITY:
Any provision herein contained which may be invalid under applicable
law or any governmental rule or regulation, will be deemed omitted, modified or
altered to conform thereto.
20. NOTICES:
All notices required or permitted to be given hereunder will be in
writing and will be deemed given if sent by registered or certified mail to the
address of Lessor or Lessee stated herein or in any Schedule or to such other
place as either party may in writing direct pursuant to this Section.
21. LEGAL CONSTRUCTION:
The validity, construction and performance of the Lease and any
Schedule will in all respects be governed by the laws of the Commonwealth of
Pennsylvania.
22. FINANCIAL INFORMATION:
Lessee agrees to provide Lessor with: (i) a balance sheet and statement
of income of Lessee, or any consolidated group of which Lessee is a member,
prepared in accordance with generally accepted accounting principles and
certified by independent certified public accountants or other financial
statements acceptable to Lessor within ninety (90) days after the close of each
fiscal year of Lessee occurring after the date of this Lease, and (ii) from time
to time such information relating to the Equipment or the financial condition of
the Lessee as Lessor may reasonably request.
<PAGE>
23. ADDITIONAL DOCUMENTS:
Lessee agrees to execute or obtain and deliver to Lessor at Lessor's
request such additional documents as Lessor may reasonably deem necessary or
appropriate to protect Lessor's interest in the Equipment and in this Lease
including, without limitation, financing statements. Lessee will pay, or
reimburse Lessor on demand, for any filing fees or expenses incurred by Lessor
in connection with any such additional documents. Lessee hereby designates
Lessor its attorney-in-fact and authorizes and empowers Lessor to execute and
complete in Lessee's name and on Lessee's behalf all financing statements and
other documents necessary to and anticipated by any Schedule to provide to
Lessor the benefits anticipated by such Schedule.
24. MISCELLANEOUS:
The Lease will note be binding on Lessor until executed by an
authorized officer of Lessor. Lessor and Lessee waive all rights to trial by
jury in any litigation arising herefrom or in relation hereto. Lessee will, at
Lessee's sole expense, obtain from each owner, landlord, mortgagee or other
person having an encumbrance, lien or other interest on or in the premises in
which the Equipment is or will be located, all necessary consents to the
installment or use of the Equipment therein and the removal thereof in
accordance with the terms of the Lease, together with waivers of claim with
respect to the Equipment, and record the same when and where necessary. This
Lease shall be executed in two originals, counterpart #2 shall be retained by
Lessee and counterpart #1 shall be retained by Lessor and duly marked as such
and shall be the only original for chattel paper purposes.
25. ENTIRE AGREEMENT:
This Lease and any instrument referred to herein together with any
Schedule(s), Attachment(s), or Rider(s) signed by the parties or delivered in
connection herewith constitute the entire agreement of the parties with respect
to the subject matter hereof and will collectively constitute the Lease with
respect to an Item of Equipment and supersede any prior written or oral
agreement of the parties with respect to such Equipment. No agent or employee of
the Supplier is authorized to bind Lessor to the Lease, to waive or alter any
item or condition herein or ad any provision hereto. No variation or
modification of the Lease and no waiver of any of its provisions or conditions
will be valid unless in writing and signed by Lessor and Lessee.
<PAGE>
MERIDIAN LEASING INC.
KLEINERT'S, INC.
By: By: /s/ Joseph J. Connors
--------------------------- ---------------------------
Title: President Title: Executive Vice President
--------- ------------------------
Date: Date: 12/5/94
--------------------------- -------
Witness: /s/ Denise L. Hale
------------------
Date: 12/5/94
-------
THE UNDERSIGNED LESSEE HEREBY ACKNOWLEDGES AND AGREES THAT ANY
MODIFICATION OR AMENDMENT OF THIS LEASE MUST BE IN WRITING AND THAT NO
MODIFICATION OR AMENDMENT SHALL BE ENFORCEABLE UNLESS SUCH MODIFICATION OR
AMENDMENT IS IN WRITING DULY SIGNED BY LESSEE AND LESSOR.
/S/ Joseph J. Connors
- ---------------------
KLEINERT'S, INC.
<PAGE>
SCHEDULE OF STIPULATED LOSS VALUES
MERIDIAN LEASING INC.
MASTER LEASE AGREEMENT NO. 01511
-----
SCHEDULE NO. 001, DATED_______________
The Stipulated Loss Value for any Item of Equipment of any due date is
equal to Lessor's Cost of such Equipment multiplied by the applicable percentage
shown below as af the applicable rent payment date.
Adjusted
Number Stipulation
of Value
Base as
Rent Percent
Payments of
Made Cost
1 103.911275
2 102.266678
3 100.611046
4 98.944355
5 97.264044
6 95.570059
7 93.863484
8 92.143151
9 90.411465
10 88.666989
11 86.908637
12 85.138771
13 83.355916
14 81.559062
15 79.750533
16 77.930480
17 76.100075
18 74.258922
19 72.407979
20 70.546342
21 68.672757
22 66.789151
23 64.894749
24 62.988260
<PAGE>
25 61.071578
26 59.143995
27 57.204186
28 55.252597
29 53.292588
30 51.323652
31 49.346303
32 47.359973
33 45.361170
34 43.353796
35 41.337347
36 39.308298
37 37.370520
38 35.223569
39 33.163891
40 31.092063
41 29.009060
42. 26.914230
43 24.807814
44 22.689497
45 20.558153
46 18.415031
47 16.259891
48 15.000000
Thereafter
This Attachment is incorporated into the Master Lease Schedule referred to
above.
Meridian Leasing Inc. Kleinert's, Inc.
--------------------- ----------------
(Lessor) (Lessee)
By: By: /s/ Joseph J. Connors
--------------------------- ----------------------
Edward R. Bruner
Title: President Title: Executive Vice President
--------- ------------------------
Date: Date: 12/5/94
------------------------- -------
<PAGE>
If KLEINERT'S, INC. is exempt from state sales/rental tax, please return a copy
of the Tax Exemption Certificate with the document package. If not exempt from
state sales/rental tax, please include the appropriate tax amount with any
advance rentals paid. Regardless, please enter your company's Federal Tax I.D.
Number below and return this form with the signed documents.
Federal Tax I.D. Number: 13-0921860
-----------
<PAGE>
MERIDIAN LEASING INC. TRUE LEASE
MASTER LEASE SCHEDULE
Meridian Leasing Inc. Schedule Dated December 5, 1994
One Meridian Blvd. Master Lease Agreement No. 01511
Wyomissing, PA. 19610 Master Lease Schedule #001
The Master Lease Agreement referred to above is incorporated herein by reference
as if set forth at length and Lessee and Lessor confirm all the terms and
provisions thereof except as specifically set forth herein to the contrary.
A. Equipment
This Schedule covers all Equipment described in Rider #1 attached
hereto and made a part hereof.
B. Definitions and Meanings of Certain Terms
1. Advance Rental: $ 924.55
2. Lessor's Cost: $ 42,515.65
3. Commencement Date: December 5, 1994 (To be the date of execution of
the Certificate of Acceptance)
4. Term of Lease: 27 days (the "interim term") followed by a basic term
of 48 months and ending on______
5. First Rent Payment Factor: 021746
6. Second Rent Payment Factor:
7. All Riders (if any) in addition to Rider #1 are listed hereinafter and
made a part hereof: Rider #5 and #8
C. Stipulated Loss Values
The Stipulated Loss Value of any Item of Equipment may be determined as
of any rent due date by multiplying Lessor's Cost for the Equipment by the
percentage applicable to such date in each case determined by reference to the
Schedule Loss Values attached hereto.
D. Tax Treatment
This is a true lease and not a conditional sale and the provisions of
Section 10 of the Lease shall be fully applicable. Recovery Deductions: 5 year
period using the 200% declining balance method and the half-year convention,
unless otherwise required by operation of Code Section 168(3)(3)(A).
E. Rent Payments
Lessee promises to pay rent for the interim term, if any, on the first
day of the basic term in an amount equal to $924.55 and thereafter Lessee
promises to pay rent for the basic term by making 48 consecutive installments of
rent, with the first such payment due Dec. 5, 1994 and with succeeding payments
due on the 5th day of each month thereafter. Lessee promises to pay 47
additional installments of rent each in the amount of $942.55 on the 5th day of
each succeeding month during the basic term.
<PAGE>
Except as expressly modified hereby, all terms and provisions of the
Lease remain in full force and effect. The parties hereto have caused their duly
authorized officers to execute this Schedule as of the Commencement Date.
MERIDIAN LEASING, INC. KLEINERT'S. INC.
By: By: /s/ Joseph J. Connors
-------------------------------- ---------------------
Edward R. Bruner
Title: Title: Executive Vice President
----------------------------- ------------------------
Date: Date: 12/5/94
------------------------------ -------
<PAGE>
Master Lease Schedule #001
Purchase Option Month-To-Month Renewal
Rider #8
Master Lease Agreement No. 01511
1. Upon the expiration of the original term under the referenced Master Lease
Agreement and Schedule (collectively, the "Lease"), provided that Lessee has
paid all rent and all other sums then due by Lessee to Lessor, or provisions of
this Lease, and provided that no default has occurred and then remains
unremedied, Lessee will have the option, exercisable by written notice to Lessor
given at least ninety (90) days prior to the expiration of the original term, to
purchase all, but not less than all (except for Items for which Lessor has
received payment of the casualty value with respect thereto) of the Equipment
then subject to the referenced Schedule, for an amount (the "Purchase Price"),
payable in full in cash or by certified check on or before such expiration date,
equal to the greater of (I) that amount which would be obtained in an
arms-length transaction between an informed and willing buyer and an informed
and willing seller under no compulsion to sell (said amount herein referred to
as the "Fair Market Value"), or (ii) 15% of the original cost of the Equipment
subject to such Schedule and purchased hereunder.
2. For purposes of Lessee's exercise of the purchase option under this Rider,
Fair Market Value shall be determined by an independent third-party appraiser
selected by Lessee. Lessee will pay the fees and expenses of the appraiser and
shall deliver to Lessor the appraiser's report, in writing, on or before the
expiration date of the original term.
3. (a) If Lessee does not elect to exercise and perform such purchase option,
all in accordance with the terms and conditions of this Rider, then subject to
the rights, remedies and obligations of Lessor under the Lease, and hereunder,
the term of the Lease set forth in the Schedule shall automatically and without
further action on the part of either Lessor or Lessee be extended on a basis
(the "Extended Lease Term") at a monthly rent of $400.00, with the first such
rent payment due and payable by Lessee on December 5, 1998, and with each
succeeding rent payment due and payable on the same day of each succeeding month
thereafter, until the Equipment is either (I) sold or re-leased by Lessor to a
third party or (ii) purchased by Lessee upon ninety (90) days written notice to
Lessor and otherwise in accordance with Paragraphs 1 & 2 hereof.
(b) Lessor undertakes in good faith to attempt to sell or release the
Equipment during any Extended Lease Term at then current market rates, provided
however, that Lessor shall have no obligation to accept the terms of any offer
to purchase or re-lease which in the opinion of Lessor requires any unacceptable
extension of credit or represents a short-term distortion of historic market
values, but the foregoing shall not constitute any guarantee with respect
thereto or otherwise operate to release Lessee from its continuing obligation
for rent during the Extended Lease Term.
4. Lessor shall have full right and authority to sell the Equipment at any time
during such Extended Lease Term. Upon termination of the Extended Lease Term by
Lessor's sale of the Equipment to a third party with ten (10) days prior notice
to Lessee, or upon termination for any other cause, Lessee shall be obligated to
return the Equipment to Lessor (or Lessor's purchaser) in accordance wit h the
terms and provisions of the Lease.
5. If Lessee elects to purchase the Equipment pursuant to this option, and
provided Lessee is not then in default, Lessee will purchase from Lessor and
Lessor will sell to Lessee, without recourse or warranty, the Equipment for the
Purchase Price.
<PAGE>
6. Upon payment of the Purchase Price, Lessor will upon the request of Lessee,
execute and deliver to Lessee or to Lessee's assignee or nominee, a bill of sale
(without representations or warranties except that the Equipment is free and
clear of all claims, liens, security interests or other encumbrances by or in
favor of any person claiming through or under Lessor) releasing the Equipment
from the terms and scope of this Lease and transferring title thereto to Lessee
or such assignee or nominee, in such form as may reasonably be requested by
Lessee, all at Lessee's expense.
Except as expressly modified hereby, all terms and provisions of the Lease
remain in full force and effect.
This Rider #8 is incorporated into the Schedule referred to above.
MERIDIAN LEASING INC. KLEINERT'S, INC.
By: By: /s/ Joseph J. Connors
-------------------------------- ---------------------
Edward R. Bruner
Title: President Title: Executive Vice President
--------- ------------------------
Date: Date: 12/5/94
------------------------------ -------
<PAGE>
SCHEDULE A
All equipment as acquired under lease to KLEINERT'S, INC. Pursuant to
Master Lease #01511 Schedule #001, dated December 5, 1994 between MERIDIAN
LEASING INC. (Lessor) and KLEINERT'S, INC. (Lessee).
QUANTITY DESCRIPTION S/N
- -------- ----------- ---
Four (4) Compaq Prolinea 4/66MT, Mini Tower
486DX2 Processor, 66mhz, 8MB RAM,
525MB HDD, 3 1/2"FDD, 14"Ultra
VGA Monitor
Four (4) Upgrade to Samsung 4 Plus 17"Color
UltraVGA Display Factory Refurbished
Four (4) American Power Conversions Back-UPS 450
One (1) Compaq ProSignia Network Server
Pentium Processor 60mhz, 32MB
One (1) Microsoft Windows NT Advance Server
Version 3.1
One (1) American Power Conversions Smart-UPS
1200 Uninteruptable Power System Battery
Backup with Server Notification System
Software Setup Configuration
One (1) Microsoft SNA Server for mainframe access
One (1) DCA ISCA SNA Communications interface
One (1) Wall Data Rumba for the Mainframe,
Windows version 4.0
One (1) US Robotics 28.6 Kbps V.FC Fax/Modem
with cable, software
One (1) HP Laser Jet 4Si Network Printer w/
2 letter size paper trays
One (1) HP Laser Jet Legal Size Paper Tray
Four (4) Microsoft Office (includes Word, Exel,
PowerPoint and Mail)
One (1) Compaq TurboDAY 4/16GB Tape Backup Drive
One (1) Comm:Motorola/UDS V.3225 sync modem
Seventeen (17) Media: 80m 4mm Data Tape Sony
240 Cable: RG58 Coax Cable for Thin Ethernet
Thirty (30) Cable: BNC end Connector
Ten (10) Cable: BNC interconnect
Six (6) Cable: Wall Plates
Six (6) Cable: Wall Mounts
One (1) Microsoft PC Mail Server Version 3.2 10 user
One (1) Microsoft Remote Client for Windows
One (1) Microsoft MHS Gateway
<PAGE>
The above equipment complete with all related parts, attachments, accessories,
substitutions and proceeds thereof.
MERIDIAN LEASING, INC. KLEINERT'S, INC.
/s/ Joseph J. Connors
- ----------------------------------- ---------------------
Signature Signature
Executive Vice President
- ----------------------------------- ------------------------
Title Title
12/5/94
- ----------------------------------- -------------------------
Date Date
<PAGE>
Master Lease #01511
Schedule #001, dated December 5, 1994
----------------
PAY PROCEEDS LETTER
KLEINERT'S, INC. Hereby irrevocably directs Meridian Leasing Inc. To pay the
proceeds of the above lease as follows:
VENDOR ADDRESS PAYMENT
SBM Computers 2906 William Penn Hwy $23,156.02
Easton, PA 18042
Kleinert's, Inc. 120 W. Germantown Pike $19,359.63
Plymouth Meeting, PA 19462
Meridian Leasing Inc. Reserves the right to withhold any advance rentals and
fees due when payment of proceeds is made directly to Lessee.
KLEINERT'S, INC.
Signed: /s/ Joseph J. Connors
---------------------
Title: Executive Vice President
------------------------
Date: 12/5/94
------------------------
<PAGE>
CERTIFICATE OF ACCEPTANCE
Master Lease Schedule #001
MERIDIAN LEASING INC.
CERTIFICATE OF ACCEPTANCE
Meridian Leasing Inc.
One Meridian Blvd.
Wyomissing, PA 19610
Re: Master Lease Agreement No. 01511 and the
Schedule thereunder dated December 5, 1994
The undersigned duly authorized representative of Lessee under the
referenced Master Lease Agreement and Schedule (the {Lease") does hereby certify
that I have inspected and accepted delivery of the following Items of Equipment
under and pursuant to the Lease:
EQUIPMENT: See Schedule A attached hereto and forming a part hereof.
DATE ACCEPTED (COMMENCEMENT DATE): December 5, 1994
----------------
The undersigned does hereby further certify that the foregoing Items of
Equipment are in good order and condition, and conform to the specifications,
requirements and standards applicable thereto. This certificate does not waive
any right Lessee or Lessor may have against the manufacture or supplier of the
Equipment.
The undersigned does hereby further certify that as of the date hereof
(i) Lessee is not in default under the Lease, and (ii) the representations and
warranties made by Lessee pursuant to or under the Lease are true and correct on
the date hereof.
KLEINERT'S, INC.
By: /s/ Joseph J. Connors
----------------------
Title: Executive Vice President
------------------------
December 5, 1994
------------------------------
(Date - the Commencement Date)
<PAGE>
Description of Equipment
Master Lease Schedule #001
Meridian Leasing Inc.
Rider #1 Description of Equipment
Schedule Dated December 5, 1994
----------------
Master Lease Agreement No. 01511
Number of Model of Serial
Units Equipment Numbers Location Supplier
--------- --------- ------- -------- --------
See Schedule A attached hereto and forming
a part hereof 120 West SBM Computers
Germantown Pike
Plymouth
Meeting, PA
19462
Total Lessor's Cost $42,515.65
----------
MERIDIAN LEASING INC. KLEINERT'S, INC.
By: By: /s/ Joseph J. Connors
------------------------------- ---------------------
Edward R. Bruner
Title: President Title: Executive Vice President
--------------------------- ------------------------
Date: Date: December 5, 1994
----------------------------- ----------------
<PAGE>
RETURN PROVISIONS
RIDER #5
Schedule #001, dated December 5, 1994, to Master Lease Agreement #01511,
between MERIDIAN LEASING, INC., as Lessor, and KLEINERT'S, INC., as Lessee.
This Rider forms a part of the above-referenced Schedule to Master Lease. Terms
defined in the Schedule and Master Lease will have the same meanings when used
in the Rider unless otherwise defined.
1. RETURN
------
Lessee shall, upon the expiration of the Lease Term of each Item of Equipment,
return such Item of Equipment to Lessor at such place within the continental
United States of America as Lessor pursuant to the provisions of this Section,
all of the previsions of this Lease with respect thereto shall continue in full
force and effect. Lessee shall pay all the costs and expenses in connection with
or incidental to the return of the Equipment, including, without limitation, the
cost of removing, dismantling by manufacturer's representative (or anyone else
designated by Lessor), assembling, packing, insuring and transporting the
Equipment. At the time of such return, the Equipment shall be in the condition
and repair required to be maintained by Section 6 of the Lease and Section 2
hereof and free and clear of all Liens. At the expiration of the Lease Term,
Lessee shall provide 120 days of storage for the units of Equipment free of
charge. During this period, each unit of Equipment must remain assembled and
operational:
2. OPERATION, MAINTENANCE, ADDITIONS
---------------------------------
A) Lessee will, at its own expense, keep and maintain the Equipment in good
repair, condition and working order and furnish all parts, replacements,
mechanisms, devices and servicing required therefore so that the value,
condition and operating efficiency thereof will at all times be maintained and
preserved, reasonable wear and tear excepted. All such repairs, parts,
mechanisms, devices and replacements shall immediately, without further act,
become the property of Lessor and part of the Equipment. Without limiting the
generality of the foregoing provisions of this Subsection, Lessee agrees that
upon the required return of the Equipment to Lessor pursuant to the Section 1
hereof, each item of Equipment shall comply with the following criteria at
minimum:
-- At the time of return, the Equipment must be operational and able to
perform its required tasks effectively without repair or overhaul,
complete with no missing components. All components must be attached,
clean and functioning.
-- All manuals and documentation must be present and returned to Lessor.
-- Dismantling and handling is to be done in accordance with the
<PAGE>
Exhibit (ak)
PNC Bank, N.A.
Valley Forge Regional
Banking Center
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312
610 640 4900 Tel
March 1, 1995
Kleinert's, Inc.
Suite 100, 120 W. Germantown Pike
Plymouth Meeting, PA 19462
Attention: Joseph J. Connors
Executive Vice President
Re: $15,000,000 Discretionary Line of Credit
-------------------------------------
Dear Joe:
You have requested that PNC Bank, National Association (the "Bank") provide
financing to Kleinert's, Inc. of Alabama (the "Borrower"). This letter is to
confirm that the Bank has approved a $15,000,000 discretionary line of credit to
the Borrower. Advances made under the line of credit, if any, shall be due and
payable on demand. All advances will bear interest and be subject to the
terms and conditions set forth herein and in the Note enclosed herewith.
This is not a committed line of credit. The Borrower acknowledges and agrees
that advances under this line of credit, if any, shall be made at the sole
discretion of the Bank. The Bank maY decline to make advances under the line,
terminate the line or demand repayment of all outstanding obligations
thereunder, at any time and for any reason without prior notice to the Borrower.
This letter sets forth certain terms and conditions solely to assure that the
parties understand each other's expectations and to assist the Bank in
evaluating the status, on an ongoing basis, of the line of credit.
The Bank's willingness to consider making advances under this facility is
subject to the Borrower's ongoing agreement as follows: (a) Advances, if any,
will be supported by unconditional guarantee and surety of Kleinert's, Inc.
pursuant to a Surety Agreement in the form attached to this letter; (b) Borrower
must furnish the Bank with its audited annual financial statements within 90
days after the end of its fiscal year, its unaudited quarterly financial
statements within 60 days after the end of each fiscal quarter and such other
financial information as the Bank may reasonably request from time to time
promptly after receipt of each request; (c) Borrower must notify the Bank as
soon as practicable following the occurrence of any material default (or event
which, with the passage of time or giving of notice or both, would become a
default) under any direct or contingent obligation of the Borrower, and (d) upon
the Bank's request, Borrower must furnish copies of any covenant compliance
certificates prepared in connection with any such obligations.
<PAGE>
Please indicate the Borrower's agreement to the terms and conditions of this
letter by having the enclosed copy of this letter executed where indicated and
returning it to me. Prior to the making of any advances hereunder, the Borrower
must deliver to the Bank duly executed originals of the Note and the Surety
Agreement from Kleinert's, Inc., each in form and substance satisfactory to
the Bank.
This letter, and the corresponding line of credit, will replace the existing
$10,000,000 discretionary line of credit evidenced by a letter agreement dated
May 10, 1994 and note dated May 16, 1994. Upon your execution of this letter and
the enclosed documents, the existing documents will be cancelled and returned to
you.
I am pleased to offer support for your banking needs and look forward to working
with you.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Mark E. Bevilacqua
--------------------------------
Mark E. Bevilacqua
Vice President
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted this 3rd day of March, 1995:
KLEINERT'S, INC. OF ALABAMA
By: /s/ Joseph J. Connors
------------------------------
Title: Executive Vice President
----------------------------
<PAGE>
DISCRETIONARY LINE OF CREDIT DEMAND NOTE
$15,000,000 March 1, 1995
Philadelphia, PA
FOR VALUE RECEIVED, KLEINERT'S, INC. OF ALABAMA (the "Borrower") , with an
address at Suite 100, 120 W. Germantown Pike, Plymouth Meeting, PA 19462
promises to pay ON DEMAND to the order of PNC BANK, NATIONAL ASSOCIATION (the
"Bank"), in lawful money of the United States of America in immediately
available funds at its offices located at Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19101, or at such other location as the Bank may
designate from time to time, the principal sum of Fifteen Million Dollars
($15,000,000) (the "Facility") or such lesser amount as may be advanced to or
for the benefit of the Borrower hereunder, together with interest accruing on
the outstanding principal balance from the date hereof, as provided below:
1. Rate of Interest. Amounts outstanding under this Note will bear interest
at a rate per annum determined in the Bank's sole discretion, as offered in good
faith by the Bank to the Borrower as the rate at which Bank would advance funds
to Borrower in the principal amount requested for the interest period requested,
not to exceed 180 days (the "Offered Rate").
Interest will be calculated on the basis of a year of 360 days for the
actual number of days in each interest period. In no event will the rate of
interest hereunder exceed the maximum rate allowed by law.
2. Discretionary Advances. THIS IS NOT A COMMITTED LINE OF CREDIT AND
ADVANCES UNDER THIS NOTE, IF ANY, SHALL BE MADE BY THE BANK IN ITS SOLE
DISCRETION. NOTHING CONTAINED IN THIS NOTE OR ANY OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED TO OBLIGATE THE BANK TO MAKE ANY ADVANCES. THE BANK SHALL HAVE THE
RIGHT TO REFUSE TO MAKE ANY ADVANCES AT ANY TIME WITHOUT PRIOR NOTICE TO THE
BORROWER.
The Borrower may request advances, repay and request additional advances
hereunder, subject to the terms and conditions of this Note and the Loan
Documents (as defined herein). In no event shall the aggregate unpaid principal
amount of advances under this Note exceed the face amount of this Note.
3. Payment Terms. The outstanding principal balance and any accrued but
unpaid interest shall be due and payable on demand. THE BORROWER ACKNOWLEDGES
AND AGREES THAT THE BANK MAY AT ANY TIME AND IN ITS SOLE DISCRETION DEMAND
PAYMENT OF ALL AMOUNTS OUTSTANDING UNDER THIS NOTE WITHOUT PRIOR NOTICE TO THE
BORROWER. Accrued interest will be due and payable in the absence of demand on
the last day of the interest period, or, in the case of an interest period which
is longer than 90 days, on the 90th day and at the end of the interest period.
<PAGE>
Any payment of principal or interest under this Note must be received by
the Bank by 2:00 p.m. prevailing Eastern Time on a business day in order to be
credited on such date. If any payment under this Note shall become due on a
Saturday, Sunday or public holiday under the laws of the Commonwealth of
Pennsylvania, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment. The Borrower hereby authorizes the Bank to charge Borrower's
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys'
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
4. Default Rate. Beginning five days following demand, this Note shall bear
interest at a rate per annum (based on a year of 360 days and actual days
elapsed) which shall be equal to two percentage points (2.00%) in excess of the
Prime Rate but not more than the maximum rate allowed by law (the "Default
Rate"). As used herein, "Prime Rate" shall mean the rate publicly announced by
Bank from time to time as its prime rate. The Prime Rate is determined from time
to time by the Bank as a means of pricing some loans to its borrowers. The Prime
Rate is not tied to any external rate of interest or index, and does not
necessarily reflect the lowest rate of interest actually charged by the Bank to
any particular class or category of customers. If and when the Prime rate
changes, the Default Rate on this Note will change automatically without notice
to the Borrower, effective on the date of such change.
The Default Rate shall continue to apply whether or not judgment shall be
entered on this Note.
5. Prepayment. If the Borrower prepays all or any part of any advance which
is accruing interest at an As Offered rate which is a fixed rate on other than
the last day of the applicable interest period, the Borrower shall also pay to
the Bank, on demand therefor, the Cost of Prepayment. "Cost of Prepayment" means
an amount equal to the present value, if positive, of the product of (a) the
difference between (i) the yield on the beginning date of the applicable
interest period, of a U.S. Treasury obligation with a maturity similar to the
applicable interest period minus (ii) the yield, on the prepayment date, of a
U.S. Treasury obligation with a maturity similar to the remaining maturity of
the applicable interest period, and (b) the principal amount to be prepaid, and
(c) the number of years, including fractional years, from the prepayment date to
the end of the applicable interest period. The yield on any U.S. Treasury
obligation shall be determined by reference to Federal Reserve Statistical
Release H.15(519) "Selected Interest Rates". For purposes of making present
value calculations, the yield to maturity of a similar U.S. Treasury obligation
on the prepayment date shall be deemed the discount rate. The Cost of Prepayment
shall also apply to any prepayments made after acceleration of the maturity of
this Note.
2
<PAGE>
6. Other Loan Documents. This Note is issued in connection with the
confirmation letter dated March 1, 1995 and the other agreements referred to
therein, the terms of which are incorporated herein by reference (collectively,
the "Loan Documents").
7. Advance Procedures. A request for advance made by telephone shall be
promptly confirmed in writing. The Borrower authorizes the Bank to accept
telephonic requests for advances, and the Bank shall be entitled to rely upon
the authority of any person providing such instructions. The Borrower hereby
indemnifies and holds the Bank harmless from and against any and all damages,
losses, liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) which may arise or be created by the acceptance of such telephone
requests or making such advances. The Bank will enter on its books and records,
which entry when made will be presumed correct, the date and amount of each
advance, as well as the date and amount of each payment made by the Borrower.
B. Power to Confess Judgment. The Borrower hereby empowers any attorney of
any court of record within the Commonwealth of Pennsylvania, after demand is
made hereunder, to appear for the Borrower and, with or without complaint filed,
confess judgment, or a series of judgments, against the Borrower in favor of the
Bank for the entire principal balance of this Note and all accrued interest,
together with costs of suit and a reasonable attorney's commission, and for
doing so, this Note or a copy verified by affidavit shall be a sufficient
warrant. The Borrower hereby forever waives and releases all errors in said
proceedings and all relief from any and all appraisement, stay or exemption laws
of any state now in force or hereafter enacted.
No single exercise of the foregoing power to confess judgment, or a series
of judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Bank shall elect until such time as the Bank shall have received
payment in full of the debt, interest and costs.
3
<PAGE>
9. Right of Setoff. In addition to all liens upon and rights of setoff
against the money, securities or other property of the Borrower given to the
Bank by law, the Bank shall have, with respect to the Borrower's obligations to
the Bank under this Note and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff against, and the Borrower
hereby assigns, conveys, delivers, pledges and transfers to the Bank all of the
Borrower's right, title and interest in and to, all deposits, moneys, securities
and other property of the Borrower now or hereafter in the possession of or on
deposit with the Bank whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to the Borrower.
10. Miscellaneous. No delay or omission of the Bank to exercise any right
or power arising hereunder shall impair any such right or power or be considered
to be a waiver of any such right or power or any acquiescence therein nor shall
the action or non-action of the Bank impair any right or power resulting
therefrom. The Borrower agrees to pay on demand, to the extent permitted by law,
all costs and expenses incurred by the Bank in the enforcement of its rights in
this Note and any security therefor, including without limitation reasonable
fees and expenses of the Bank's counsel. If any provision of this Note is found
to be invalid by a court, all the other provisions of this Note will remain in
full force and effect.
The Borrower hereby forever waives presentment, demand, protest, notice of
dishonor, non-payment or default and any other notices of any kind.
If this Note is executed by more than one Borrower, the obligations of such
persons or entities hereunder will be joint and several. This Note shall bind
the Borrower and the heirs, executors, administrators, successors and assigns of
the Borrower, and the benefits hereof shall inure to the benefit of Bank and its
successors and assigns. All references herein to the "Borrower" and "Bank" shall
be deemed to apply to the Borrower and Bank and their respective heirs,
executors, administrators, successors and assigns.
4
<PAGE>
This Note has been delivered to and accepted by the Bank and will be deemed
to be made in the Commonwealth of Pennsylvania. This Note will be interpreted
and the rights and liabilities of the parties hereto determined in accordance
with the laws of the Commonwealth of Pennsylvania. The Borrower hereby agrees to
the jurisdiction of any state or federal court located within the county where
the Bank's office identified above is located, or such other venue as the Bank
chooses, and consents that all service of process be made by certified mail
directed to Borrower at the Borrower's address set forth herein, and service so
made will be deemed to be completed five (5) business days after the same has
been deposited in U.S. mails, postage prepaid; provided that nothing contained
herein will prevent the Bank from bringing any action or exercising any rights
against any security or against the Borrower individually, or against any
property of the Borrower within any other state or nation to enforce any award
or judgment obtained in the venue specified above or such other venue as the
Bank chooses. The Borrower waives any objection to venue and any objection based
on a more convenient forum in any action instituted hereunder.
11. Renewal Note. This Note is a renewal of and in substitution for a Note
in the principal amount of $10,000,000 payable to Bank dated May 16, 1994 (the
"Original Note"). However, without duplication, this Renewal Note shall in no
way extinguish Borrower's unconditional obligation to repay all indebtedness
evidenced by the original Note.
12. Waiver of Jury Trial. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL
RIGHTS THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION
WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all the
provisions of this Note, including the confession of judgment and waiver of jury
trial, and has been advised by counsel as necessary or appropriate.
WITNESS the due execution and sealing hereof with the intent to be legally
bound hereby.
[CORPORATE SEAL] KLEINERT'S, INC. OF ALABAMA
Attest: /s/ Gerald E. Monigle By: /s/ Joseph J. Connors
---------------------------- --------------------------------
Title: Asst. Secretary Title: Asst. Secretary
---------------------------- --------------------------------
5
<PAGE>
DEMAND GRID PROMISSORY NOTE
New York, New York
$10,000,000.00 April 20,1995
The undersigned promises to pay to the order of REPUBLIC NATIONAL BANK OF NEW
YORK (the "Bank") in lawful money of the United States in immediately available
funds at the office of the Bank located at 452 Fifth Avenue, New York, New York
10018, the principal sum of TEN MILLION DOLLARS ($10,000,000.00), or so much
thereof as shall be advanced by the Bank to the undersigned, in the Bank's sole
discretion, in one or more loans (each an "Advance" and collectively the
"Advances") under the line of credit referred to below and not repaid, and to
pay interest (computed on the basis of a 360-day year and the actual number of
days elapsed) at such office in such money and funds on the unpaid principal
amount of each Advance from time to time outstanding from the date such Advance
is made until the date on which such Advance is paid in full, payable with
respect to such Advance monthly, commencing one month after such Advance is
made, and on the date of payment in full of such Advance. After demand or if an
Advance is not paid in full on its Due Date, the rate of interest on the entire
unpaid principal amount hereof at all times shall be three percent (3%) above
the highest Agreed Rate than in effect hereunder.
As used herein the "Due Date" of an Advance shall mean the maturity date of
such Advance as agreed upon by the undersigned and the Bank and the "Agreed
Rate" of an Advance shall mean the per annum interest rate charged on such
Advance as agreed upon by the undersigned and the Bank, except for manifest
error such agreed maturity date and such agreed interest rate to be deemed for
all purposes of this Note to be the respective Due Date and Agreed Rate endorsed
by the Bank on the grid attached to and made a part of this Note.
This Note evidences Advances made by the Bank to the undersigned, in the
Bank's sole discretion, under a line of credit which the Bank has offered to the
undersigned. The unpaid principal balance of this Note at any time shall be the
total amount advanced by the Bank to the undersigned, in the Bank's sole
discretion, under said line of credit less the total amount of principal
payments made hereon by the undersigned. The date, amount of each Advance, Due
Date of such Advance, Agreed Rate of such Advance and each payment on account of
principal thereof shall be endorsed by the Bank on the grid attached to and made
a part of this Note, and when so endorsed shall represent evidence thereof
binding upon the undersigned in the absence of manifest error. Any failure by
the bank to so endorse shall in no way mitigate or discharge the obligation of
the undersigned to repay any loans actually made. The undersigned may not prepay
any Advance.
<PAGE>
Requests for Advances under said line of credit and directions as to the
disposition of the proceeds thereof shall be given orally (including by
telephone) or in writing to the Bank by the officers of the undersigned or other
persons authorized to borrow on its behalf by borrowing resolutions of the
undersigned's Board of Directors heretofore delivered to the Bank, as such
resolutions may be amended or superseded from time to time, provided that any
such amending or superseding resolutions shall have been certified by the
Secretary or an Assistant Secretary of the undersigned, and a copy thereof, so
certified, shall have been delivered to an officer of the Bank at its above
office. The Bank may conclusively rely on the authorities contained in said
resolutions. Any such Advance so made shall be conclusively presumed to have
been made to or for the benefit of the undersigned and the undersigned shall be
liable in respect thereof when made in accordance with any such request or
direction, or when deposited to any account of the undersigned with the Bank
even though persons other than those authorized to borrow on behalf of the
undersigned may have authority to draw against such account. The Bank may rely
on any such request or direction, which it believes to be genuine, and the Bank
shall be fully protected in so doing without any duty to make further inquiry as
to such genuineness or in otherwise acting in good faith in the premises.
The Bank shall have a continuing lien and/or right of set-off on deposits
(general and special) and credits with the Bank of the undersigned and the Bank
may at any time or from time to time at its option and without prior notice
appropriate and apply any such amounts toward the payment of any of the
liabilities of the undersigned. The term "liabilities of the undersigned" shall
include all liabilities now or hereafter evidenced by this Note and all other
liabilities, direct or contingent, joint, several or independent, of the
undersigned now or hereafter existing, due or to become due to, or held or to be
held by, the Bank for its own account or as agent for another or others, whether
created directly or indirectly or acquired by assignment or otherwise.
To induce the bank, in its sole discretion, to make loans under said line of
credit the undersigned represents, warrants and covenants to the Bank that (i)
it is duly incorporated and validly existing in good standing under the laws of
the jurisdiction of its incorporation, with full power and authority to make,
deliver and perform this Note; (ii) the execution, delivery and performance by
the undersigned of this Note have been duly authorized by all necessary
corporate action and do not and will not violate or conflict with its charter or
<PAGE>
by-laws or any law, rule, regulation or order binding on the undersigned or any
agreement or instrument to which the undersigned is a party or which may be
binding on the undersigned;(iii) this Note has been duly executed by an
authorized officer of the undersigned and constitutes a legal, valid, binding
and enforceable obligation of the undersigned; (iv) no authorization, consent,
approval, license, exemption of or filing or registration with, any court or
government or governmental agency is or will be necessary to the valid
execution, delivery or performance by the undersigned of this Note; (v) the
loans evidenced by this Note will be used solely for working capital purposes,
(vi) there are no pending or threatened actions, suits or proceedings against or
affecting the undersigned by or before any court, commission, bureau or other
governmental agency or instrumentality, which, individually or in the aggregate,
if determined adversely to the undersigned, would have a material adverse effect
on the business, properties, operations, or condition, financial or otherwise,
of the undersigned; and (vii) the most recent financial statements of the
undersigned heretofore delivered to the Bank are complete and correct and since
the date thereof there has not occurred any material adverse change in the
financial condition or operations of the undersigned from that shown on said
financial statements.
No amendment, modification, or waiver of any provision of this Note nor
consent to any departure by the undersigned therefrom shall be effective,
irrespective of any course of dealing, unless the same shall be in writing and
signed by the Bank and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. The options,
powers and rights of the Bank specified herein are in addition to those
otherwise available to the Bank. Anything herein to the contrary
notwithstanding, no interest payment or interest rate charged hereunder shall
exceed the maximum amount or rate permitted under applicable law. The
undersigned agrees to pay all costs and expenses incurred or payable by the Bank
in connection with the enforcement or collection of this Note, including court
costs and reasonable attorneys' fees. To the extent permitted by applicable law,
the undersigned waives notice of protest, presentment, demand and any other
notice in connection with the collection of this Note. This Note shall be
binding on the undersigned, its successors and assigns and shall inure to the
benefit of the Bank, its successors and assigns. Any payment hereunder which is
required to be made on a day which is not a banking business day in the City of
<PAGE>
New York shall be payable on the next succeeding banking business day and such
additional time shall be included in the computation of interest. This Note
shall be governed by, and construed in accordance with, the laws of the State of
New York. It is understood and agreed that the representations and warranties
and other provisions contained in this Note and in any other agreement between
the undersigned and the Bank are matters of contractual agreement and shall in
no way be deemed to detract from, diminish or amend or modify in any way the
demand nature of this Note or the Bank's, powers and rights with respect hereto,
and the undersigned agrees that the Bank may at any time demand payment in whole
or in part of this Note in its discretion, notwithstanding any compliance or
noncompliance herewith.
KLEINERT'S, INC.
OF ALABAMA
By:/s/ Joseph J. Connors
--------------------------------
Title: Asst. Secretary/Treasurer
<PAGE>
GUARANTY
AND SECURITY AGREEMENT
Date: April 20, 1995
--------------
SECTION 1. Definitions. The following terms have the following meanings
unless otherwise specified herein:
"Bank" means Republic National Bank of New York, a national banking
association, and its successors and assigns, and any Person acting as agent
or nominee for Republic National Bank of New York and any corporation the
stock of which is owned or controlled directly or indirectly by, or is
under common control with, Republic National Bank of New York and/or
Republic New York Corporation.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, and any
amendments thereto (Title 11, United States Code).
"Borrower" shall mean Kleinert's Inc. of Alabama (if more than one,
"Borrower" shall mean each, any or all of them)
"Claims" shall mean each "claim" as that term is defined under Section
101.4) of the Bankruptcy Code.
"Collateral" shall mean all property that secures the payment of the
Obligations, and any Proceeds thereof.
"Guaranty" shall mean this Guaranty and Security Agreement.
"Guarantor" shall mean the undersigned (and if more than one, "Guarantor"
shall mean each, any and all of them, jointly and severally).
"Liabilities" shall mean any and all indebtedness, obligations (whether
monetary or non-monetary) and liabilities of Guarantor to the Bank under
this Guaranty, and all Claims thereon.
"Lien" means any lien, security interest, pledge, hypothecation, or other
claim in or with respect to any Security.
"Obligations" shall mean any and all indebtedness, obligations and
liabilities of the Borrower to the Bank, and all Claims of the Bank against
the Borrower, now existing or hereafter arising, direct or indirect
(including participations or any interest of the Bank in indebtedness of
the Borrower to others), acquired outright, conditionally, or as collateral
security from another, absolute or contingent, joint or several, secured or
unsecured, matured or not matured, monetary or non-monetary, arising out of
contract or tort, liquidated or unliquidated, arising by operation of law
or otherwise and all extensions, renewals, refundings, replacements and
modifications of any of the foregoing.
"Person" shall mean any natural person, corporation, partnership, trust,
government or other association or legal entity.
"Proceeds" shall have the meaning assigned to that term by the New York
Uniform Commercial Code, as amended, and also means all "proceeds,"
"products," "offspring," "rents" or "profits" of any property, as such
quoted terms are used in the Bankruptcy Code.
"Security" shall mean any property which secures payment or performance of
any of the Liabilities, and all Proceeds thereof.
SECTION 2. Scope of Guaranty. In consideration of any extension of credit
or other financial accommodation heretofore, now or hereafter made by the
Bank to or for the account of the Borrower, whether voluntary or
obligatory, Guarantor hereby absolutely and unconditionally guarantees to
the Bank the prompt and complete payment and performance when due (whether
at stated maturity, by required prepayment, acceleration, or otherwise) of
all Obligations and the performance of each of Borrower's covenants and
obligations under all loan agreements, documents and instruments evidencing
or relating to any Obligations or under which any Obligations may have been
issued, created, assumed, suffered involuntarily, or guaranteed, and all
expenses incurred in collecting or enforcing the same, as more fully set
forth below, all of which conclusively shall be deemed to have been
incurred in reliance upon this Guaranty, as if each of the foregoing were
the direct and primary legal responsibility of Guarantor and not the
Borrower.
<PAGE>
To the extent permitted by applicable law, the Bank or its nominee is
hereby given a right of set-off for the amount of the Liabilities upon any
of and all said deposits and any credits of Guarantor with, and any and all
claims of Guarantor against, the Bank at any time existing and the Bank is
hereby authorized to setoff and apply such deposits, credits and claims,
without prior notice or demand, to the Liabilities in such order and
amounts as the Bank may elect, although such Liabilities may be contingent
or unmatured.
SECTION 4. Reinstatement. If after receipt of any payment of, or any part
of the Obligations, the Bank is for any reason compelled to surrender or
voluntarily surrenders, such payment or proceeds to any person, (a) because
such payment or application of proceeds is or may be avoided, invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, fraudulent conveyance, impermissible setoff or a diversion of
trust funds; car (b) for any other reason, including without limitation (i)
any judgment, decree or order of any Court or administrative body having
jurisdiction over the Bank or any of its property, or (ii) any settlement
or compromise of any such claim effected by the Bank with any such claimant
(including the Borrower), then the Obligations or part thereof intended to
be satisfied shall be reinstated and continue and this Guaranty shall
continue in full force as if such payment or proceeds had not been received
by the Bank, notwithstanding any revocation thereof or the cancellation of
any note or other instrument evidencing any Obligation or otherwise; and
Guarantor shall be liable to pay to the Bank, and hereby does indemnify the
Bank and hold the Bank harmless for, the amount of such payment or proceeds
so surrendered and all expenses (including all attorneys' fees, court costs
and expenses attributable thereto) incurred by the Bank in the defense of
any claim made against the Bank that any payment or proceeds received by
the Bank in respect of all or any part of the Obligations must be
surrendered. The provisions of this Section 4 shall survive the termination
of this Guaranty, and any satisfaction and discharge of the Borrower by
virtue of any payment, court order or any federal or state law.
SECTION 5. Waiver. Guarantor hereby waives (a) notice of acceptance of this
Guaranty and all notice of the creation, extension or accrual of any of the
Obligations; (b) presentment, demand for payment, notice of dishonor, and
protest; (c) notice of any other nature whatsoever, except for notices
specifically provided for in this Guaranty or which may not be waived under
applicable law; (d) any requirement that the Bank take any action
whatsoever against the Borrower or any other party or file any claim in the
event of the bankruptcy of the Borrower; or (e) failure to protect,
preserve or resort to any Collateral or to exercise or enforce the Bank's
rights under any other guaranties of or security for the Obligations; and
Guarantor further agrees that this Guaranty will not be discharged (subject
to the provisions contained in Section 11) except by complete performance
of all Obligations of the Borrower and the Liabilities of Guarantor
hereunder.
SECTION 6. Consent. Guarantor hereby consents that from time to time, and
without further notice to or consent of Guarantor, the Bank may take any or
all of the following actions without diminishing, releasing or otherwise
affecting the liability of Guarantor to pay and perform under this
Guaranty: (a) extend, renew, modify, compromise, settle or release the
Obligations (including without limitation any increase or decrease in the
interest rate); (b) release or compromise any liability of any party or
parties with respect to Obligations; (c) release its security interest in
any or all of the Collateral or exchange, surrender, or otherwise deal with
the Collateral as the Bank may determine; or (d) exercise or refrain from
exercising any right or remedy of the Bank against any person or property.
SECTION 7. Guaranty Absolute. The liability of Guarantor under this
Guaranty shall be absolute and unconditional irrespective of any lack of
validity, regularity or enforceability of the Obligations or any note,
instrument or agreement evidencing the same or relating thereto, the
acceptance of additional guarantees or collateral or the termination, by
operation of law or otherwise, of the liability of anyone with respect to
the Obligations, or any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Borrower.
SECTION 8. COMPLETE WAIVER OF SUBROGATION. NOTWITHSTANDING ANY PAYMENT OR
PAYMENTS MADE BY GUARANTOR HEREUNDER, OR ANY SETOFF OR APPLICATION BY THE
BANK OF THE SECURITY OR OF ANY CREDITS OR CLAIMS, GUARANTOR WILL NOT ASSERT
<PAGE>
OR EXERCISE ANY RIGHTS OF THE BANK OR GUARANTOR AGAINST THE BORROWER TO
RECOVER THE AMOUNT OF ANY PAYMENT MADE BY GUARANTOR TO THE BANK HEREUNDER
OR UNDER ANY OTHER GUARANTEE BY WAY OF SUBROGATION, REIMBURSEMENT,
CONTRIBUTION, INDEMNITY, OR OTHERWISE ARISING BY CONTRACT OR OPERATION OF
LAW, AND GUARANTOR SHALL HAVE NO RIGHT OF RECOURSE TO OR ANY CLAIM AGAINST
ANY ASSETS OR PROPERTY OF THE BORROWER, WHETHER OR NOT THE OBLIGATIONS OF
THE BORROWER HAVE BEEN SATISFIED, ALL OF SUCH RIGHTS BEING HEREIN EXPRESSLY
WAIVED BY GUARANTOR. If there is more than one Guarantor, each Guarantor
agrees not to seek contribution from any other Guarantor until all the
Obligations shall have been paid in full. If any amount shall nevertheless
be paid to a Guarantor by Borrower or another Guarantor such amount shall
be held in trust for the benefit of the Bank and shall forthwith be paid to
the Bank to be credited and applied to the Obligations, whether matured or
unmatured. The provisions of this Section 8 shall survive the termination
of this Guaranty, and any satisfaction and discharge of the Borrower by
virtue of any payment, court order or any federal or state law.
SECTION 9. Expenses. Guarantor hereby agrees to pay any and all expenses
incurred by the Bank in enforcing any rights under this Guaranty or in
defending any of its rights or any amounts received hereunder. Without
limiting the foregoing, Guarantor agrees that whenever any attorney is used
by the Bank to obtain payment hereunder, to advise it as to its rights, to
adjudicate the rights of the parties hereunder or for the defense of any of
its rights or amounts received hereunder, the Bank shall be entitled to
recover all attorneys' fees, court costs, and expenses attributable
thereto.
SECTION 10. Binding Effect. Except to the extent it may be terminated in
accordance with Section 11, this Guaranty shall remain in full force and
effect and shall be binding upon Guarantor, its successors and assigns, in
accordance with its terms, notwithstanding any increase, decrease or change
in the partners of Guarantor, if it should be a partnership, or the merger,
consolidation, or reorganization of Guarantor, if it be a corporation, or
any other change concerning the form, structure or substance of any such
entity.
SECTION 11. Continuing Guaranty: Termination. This Guaranty is a continuing
guaranty, which shall remain in effect until notice of termination in
writing from Guarantor is actually received by the Bank at the Bank's
address set forth below. Such termination will be effective only with
respect to all Obligations incurred or contracted by the Borrower or
acquired by the Bank after the date on which such notice is so received,
but this Guaranty shall remain in full force and effect as to all
Obligations existing at the date of receipt of such notice, including all
renewals, compromises, modifications, extensions and other amendments
relating thereto, all interest thereon and collection expenses therefor,
until full payment of such Obligations to the Bank.
SECTION 12. Obligations Deemed to Become Due. If the Borrower or Guarantor
makes an assignment for the benefit of creditors or a trustee or receiver
is appointed for the Borrower or Guarantor or for any of its property; or
any proceeding by or against the Borrower or Guarantor (or any other
guarantor), under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt, receivership, liquidation or dissolution
law or statute is commenced; or Guarantor fails to furnish to the Bank such
financial information concerning Guarantor as the Bank may from time to
time request; or Bank shall in good faith determine that there has been a
material adverse change in Guarantor's or the Borrower's net worth or in
good faith deem itself insecure with respect to Guarantor's or the
Borrower's financial condition or ability to pay the Liabilities or
Obligations, as the case may be, then all Obligations, regardless of their
terms, for the purposes of this Guaranty, together with all Liabilities,
shall be immediately due and payable, notwithstanding the absence of any
default by the Borrower under any of the Obligations.
SECTION 13. Assignment. The Bank may, without notice, assign the
Obligations, in whole or in part, and each successive assignee of the
Obligations so assigned may enforce this Guaranty for its own benefit with
respect to the Obligations so assigned.
<PAGE>
SECTION 14. Notices. Each notice or other communication hereunder shall be
in writing, shall be sent by messenger, by first class mail or by facsimile
transmitter or tested telex, and shall be effective when received, and
shall be sent as follows:
If to the Guarantor, to the address set forth below its signature or such
other address as it may designate, by written notice to the Bank as herein
provided or such other address as may appear in the records of the Bank.
If to the Bank, to the following address:
Republic National Bank of New York
452 Fifth Avenue
New York, New York 1W18
Attention: Loan Department
or such other address as it may designate, by written notice to the
Guarantor as herein provided.
SECTION 15. Other Guarantees: Amendments. The execution and delivery
hereafter to the Bank by Guarantor of a new instrument of guarantee shall
not terminate, supersede or cancel this instrument, unless expressly
provided therein, and this instrument shall not terminate, supersede or
cancel any instrument of guarantee previously delivered to the Bank by
Guarantor, and all rights and remedies of the Bank hereunder or under any
instrument of guarantee hereafter or heretofore executed and delivered to
the Bank by Guarantor shall be cumulative and may be exercised singly or
concurrently. This Guaranty may be amended only by a writing executed by
Guarantor and a duly authorized officer of the Bank.
SECTION 16. No Waiver: Cumulative Remedies. No delay on the part of the
Bank in exercising any of its options, powers or rights, or partial or
single exercise thereof, shall constitute a waiver thereof. NO WAIVER OF
ANY PROVISION OF THIS GUARANTY IS EFFECTIVE UNLESS MADE IN WRITING AND
EXECUTED BY A DULY AUTHORIZED OFFICER OF THE BANK. All rights and remedies
hereunder are cumulative and may be exercised singly or concurrently.
SECTION 17. Statute of Limitations. Any acknowledgment, new promise,
payment of principal or interest or other act by the Borrower or others
with respect to the Obligations shall be deemed to be made as agent of
Guarantor, and shall, if the statute of limitations in favor of Guarantor
against the Bank shall have commenced to run, toll the funning of such
statute of limitations, and if such statute of limitations shall have
expired, prevent the operation of such statute.
SECTION 18. Governing Law: Consent to Jurisdiction: Service of Process.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York made and to be performed wholly within that
State. Guarantor hereby consents to the jurisdiction of the courts of the
State of New York and the courts of the United States of America for the
Southern District of New York and consents that any action or proceeding
hereunder may be brought in such courts, and waives any objection that it
may now or hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; and
authorizes the service of process on Guarantor by registered or certified
mail sent to its address as set forth in Section 14.
SECTION 19. RIGHT OF BANK TO ARBITRATE DISPUTES.
(a) GUARANTOR AGREES THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR
CONTROVERSY BETWEEN OR AMONG GUARANTOR AND THE RANK WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL AT THE BANK'S
ELECTION, WHICH ELECTION MAY BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT
OF A JUDICIAL PROCEEDING BY THE BANK, OR IN THE EVENT OF A JUDICIAL
PROCEEDING INSTITUTED BY GUARANTOR AT ANY TIME PRIOR TO THE LAST DAY TO
ANSWER AND/OR RESPOND TO A SUMMONS AND/OR COMPLAINT MADE BY GUARANTOR, BE
RESOLVED BY ARBITRATION IN NEW YORK, NEWYORK IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION 19 AND SHALL, AT THE ELECTION OF THE BANK,
INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (I) THIS GUARANTY
<PAGE>
OR ANY RELATED AGREEMENTS OR INSTRUMENTS, (II) ALL PAST, PRESENT AND FUTURE
AGREEMENTS INVOLVING GUARANTOR AND THE BANK, (III) ANY TRANSACTION
CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS INVOLVING
GUARANTOR AND THE BANK, AND (IV) ANY ASPECT OF THE PAST, PRESENT OR FUTURE
RELATIONSHIP OF GUARANTOR AND THE BANK. Bank may elect to require
arbitration of any such Dispute with Guarantor without thereby being
required to arbitrate all Disputes between the Bank and Guarantor. Any such
dispute shall be resolved by binding arbitration in accordance with Article
75 of the New York Civil Practice Law and Rules and the commercial
arbitration rules of the American arbitration association ("AAA"). In the
event of any inconsistency between such Rules and these arbitration
provisions, these provisions shall supersede such Rules. All statutes of
limitations which would otherwise be applicable shall apply to any
arbitration proceeding under this subsection 19(a). In any arbitration
proceeding subject to these provisions, the arbitration panel (the
"arbitrator") is specifically empowered to decide (by documents only, or
with a hearing, at the arbitrator's sole discretion) pre-hearing motions
which are substantially similar to pre-hearing motions to dismiss and
motions for summary adjudication. In any such arbitration proceeding, the
arbitrator shall not have the power or authority to award punitive damages
to any party. Judgment upon the award rendered may be entered in any court
having jurisdiction. Whenever an arbitration is required, the parties shall
select an arbitrator in the manner provided in subsection 19(d).
(b) No provision of, nor the exercise of any rights under, subsection
19(a)shall limit the right of any party (i) to foreclose against any real
or personal property collateral through judicial foreclosure, by the
exercise of a power of sale under a deed of trust, mortgage or other
security agreement or instrument, pursuant to applicable provisions of the
Uniform Commercial Code, or otherwise pursuant to applicable law, (ii) to
exercise self help remedies including but not limited to setoff and
repossession, or (iii) to request and obtain from a court having
jurisdiction before, during or after the pendency of any arbitration,
provisional or ancillary remedies and relief including but not limited to
injunctive or mandatory relief or the appointment of a receiver. The
institution and maintenance of an action or judicial proceeding for, or
pursuit of, provisional or ancillary remedies or exercise of self help
remedies shall not constitute a waiver of the right of the Bank, even if
the Bank is the plaintiff, to submit the Dispute to arbitration if the Bank
would otherwise have such right.
(c) The Bank may require arbitration of any Dispute(s) concerning the
lawfulness, unconscionableness, propriety, or reasonableness of any
exercise by the Bank of its right to take or dispose of any Collateral or
its exercise of any other right in connection with Collateral including,
without limitation, judicial foreclosure, exercising a power of sale under
a deed of trust or mortgage, obtaining or executing a writ of attachment,
taking or disposing of property with or without judicial process pursuant
to Article 9 of the Uniform Commercial Code or otherwise as permitted by
applicable law, notwithstanding any such exercise by the Bank.
(d) Whenever an arbitration is required under subsection 19(a), the
arbitrator shall be selected, except as otherwise herein provided, in
accordance with the Commercial Arbitration Rules of the AAA. A single
arbitrator shall decide any claim of $100,000 or less and he or she shall
be an attorney with at least five years' experience. Where the claim of any
party exceeds $100,000, the Dispute shall be decided by a majority vote of
three arbitrators, at least two of whom shall be attorneys (at least one of
whom shall have not less than five years' experience representing
commercial banks).
(e) In the event of any Dispute governed by this Section 19, each of the
parties shall, subject to the award of the arbitrator, pay an equal share
of the arbitrator's fees. The arbitrator shall have the power to award
recovery of all costs and fees (including attorneys' fees, administrative
fees, arbitrator's fees, and court costs) to the prevailing party.
SECTION 20. Severability. If any one or more of the provisions contained in
this Guaranty or any document executed in connection herewith shall be
invalid, illegal or unenforceable in any respect under any applicable law,
the validity, legality and enforceability of the remaining provisions
contained herein shall not (to the full extent permitted by law) in any way
be affected or impaired.
SECTION 21. Headings. The descriptive headings used in this Guaranty are
for convenience only and shall not be deemed to affect the meaning or
construction of any provision hereof.
<PAGE>
SECTION 22. WAIVER OF TRIAL BY JURY. EACH OF THE BANK AND (GUARANTOR HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS GUARANTY OR THE OBLIGATIONS.
SECTION 23. WAIVER OF CERTAIN OTHER RIGHTS. GUARANTOR HEREBY WAIVES THE
RIGHT TO INTERPOSE ANY DEFENSE BASED UPON ANY CLAIMS OF LACHES OR SET-OFF
OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, ANY OBJECTION BASED ON FORUM
NON CONVENIENS OR VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR
SPECIAL DAMAGES.
IN WITNESS WHEREOF, the Guarantor(s) has/have executed this Guaranty and
Security Agreement.
KLEINERT'S INC.
[ SEAL ] /s/ Joseph J. Connors
---------------------
Address
120 West Germantown Pike
------------------------
Plymouth Meeting, Pa. 19462
---------------------------
[Individual Acknowledgment(s)]
STATE OF NEW YORK
COUNTY OF
On this ______ day of_________________, 19 _____, before me personally
appeared_________, and ____________, to me known, and known to me to be the
individuals) described in and who executed the foregoing instrument
and (t)(s)he(y) duly acknowledged to me that (t)(s)he(y)
executed the same.
Notary Public
[Partnership Acknowledgment]
STATE OF NEW YORK
COUNTY OF
On this ______ day of ____________________, 19 ____, before me personally
appeared________ and _________________ to me known and known to me to be
the members of _________________, the partnership mentioned and described
in and which executed the foregoing instrument, and the said members duly
acknowledged to me that they executed said instrument for and on behalf of
and with the authority of the said partnership for the uses and purposes
therein mentioned.
Notary Public
<PAGE>
[Corporate Acknowledgment]
Commonwealth of Pennsylvania
COUNTY OF Montgomery
On this 20th day of April, 1995, before me personally appeared
Joseph J. Connors to me known who, being sworn, deposes and says that he is
the Executive Vice President of Kleinert's, Inc., the corporation described
in and which executed the above instrument; that he know(s) the seal of the
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 he.
<PAGE>
C A D T E X
PRIMAVISION EQUIPMENT SALES AND SOFTWARE LICENSE AGREEMENT
----------------------------------------------------------
Purchaser: Name. Kleinert's
Address: Meeting House Business Center,
120 West Germantown Pike, Suite 100,
Plymouth Meeting, Pa 19462
Telephone: 610-828-7261 Facsimile: 610-828-589
Contact: Joe Conners
Shipping Address: 112 West 34th Street' Room 1711,
New York, NY 10120
Date: 21 June 95
Equipment: PRIMAVISION C.A.D. SYSTEM SOFTWARE consisting of: Four PrimaVision
Functions Card: Four PrimaVision
Digitizing Tablet Interface Modules with cables and Connectors: One PrimaVision
Canon CJ-10 Printer Interface Module with cables: One NPPU Functions Card; One
Local Scanning Option; One PrimaVision CLC-700 Color Libra: One Novell 3.12 Ten
User License Network:
Installation Diskettes. And all necessary Hardware stated in Annex A
Price: $123,102.00 PRICE EXCLUDING SALES TAX. TRAINING AND SERVICE CONTRACT
Payment Terms: 25% Deposit with the balance payable immediately upon delivery.
Delivery Schedule: Four weeks upon receipt of deposit
CADTEX CORPORATION (the "Supplier") agrees to sell and the Purchaser
agrees to purchase the Equipment and a non-exclusive license to use the
software upon the terms and conditions set forth herein
1. Supplier represents and Purchaser agrees that the PRIMAVISION will
operate only in conjunction with CADTEX Corporation approved hardware.
Attempts to operate the PRIMAVISION C.A.D. SYSTEM PROGRAM on any other
hardware or without the Protection devices will void any warranties made
herein and will terminate the software license granted herein.
2. Within 10 days after delivery of the Equipment, provided that either
the hardware listed in Annex A attached is either (i) listed as part of this
sale; or (ii) available in working order at the Purchaser's premises: the
Suppliers still install the PRIMAVISION C.A.D. System.
3. Supplier will provide up to three (3) one-half (l/2) day instruction
sessions and three (3) one-half (1/2) day supervised sessions at the
premises of Supplier for four (4) persons designated by Purchaser at a cost
of $5,000.00.
4. Supplier shall deliver and assign to Purchaser any warranties
provided to the Supplier by the manufacturers or suppliers of any of the
Equipment.
5. Supplier shall provide Purchaser at no additional charge with any
subsequent updates to the original software included with the Equipment for
a period of one (1) year after date of delivery of the Equipment, when and
if they become available. Supplier will from time to time produce new
features that extend the capabilities of the System and in certain cases, at
the sole discretion of the Supplier some of these new features (software and
hardware) will be packaged as "Optional Add-On Products". These Optional
Add-On Products are NOT classified as "Software Updates" and will have their
own price levels. These "Optional Add-On Products" will be offered to the
Purchaser as and if they become available.
<PAGE>
6. Purchaser is heady granted a non-exclusive, non-transferable license
to use the software included with the Equipment only on the hardware on
which the PRIMAVISION C.A.D. system is originally installed and any
replacements to such hardware. This license will terminate if Purchaser
fails to comply with any of the provisions of this agreement. Upon such
termination, Purchaser shall destroy the software program and all
documentation, and any and all copies and modifications thereof, whether
authorized or not.
7. The software program included win the Equipment and its documentation
are copyrighted. The Purchaser may not copy or otherwise reproduce any part
of die software program or its documentation Purchaser may not use. copy,
modify or transfer the software program in whole or in part.
8. Supplier walnuts to Purchaser that the software program or software
diskettes are free from defects in materials and worship under normal use
and service for a period of one (1) year from date of delivery of the
Equipment Supplier does not claim the software parts of the system are free
of bugs never the less Supplier hereby undertakes to fix any such software
bugs reported by Purchaser. in a timely fashion. If during this one year
period a defect in the pans of the software or the software diskettes should
occur the software may be returned to Supplier at the address noted above
and Supplier will replace or repair the diskette or other parts of the
software without charge to Purchaser provided that Purchaser is not in
default under the terms of this agreement. Any attempt by Purchaser to copy
or modify any portion of the software program may result in rendering the
software program inoperable. This warrant does not apply in the event
Purchaser has attempted to modify or copy any portion of the software
program.
9. Supplier warrants that it has the right to grant the Purchaser the
license to use the software upon the terms set forth herein and that it has
the right and power to enter into this agreement.
10. This agreement shall not be binding upon Supplier until a
counterpart of this agreement has been executed on behalf of Supplier and
retuned to Purchaser, and Supplier has received the down payment within the
agreed upon four weeks period. Upon cancellation of order, supplier will
deduct 10% of tota1 purchase price from down payment. and refund the balance
promptly.
11. Purchaser shall be responsible for any sales tax in connection with
its purchase of the Equipment.
12. Supplier retains the right to retrieve all or part of the system if
any payment is not made when due.
13. Supplier retains the right to give Purchaser's name as reference.
This also includes the right to mention Purchaser's name in promotional
material and in interviews.
14. Neither this agreement nor any of the rights of Purchaser, except to
an affiliated company of Purchaser, set forth herein may be assigned by
Purchaser without the prior written consent of Supplier.
15. THIS WRITING CONTAINS THE ENTIRE AGREEMENT BETWEEN PURCHASER AND
SUPPLIER EXCEPT AS OTHERWISE SET FORTH HEREIN, THERE ARE NO WARRANTIES
EXPRESS OR IMPLIED, OF MERCHANTABILITY FITNESS OR OTHERWISE WHICH EXTEND
BEYOND THE; ABOVE DESCRIPTION OF THE EQUIPMENT. SUPPLIER DOES NOT WARRANT
THE RESULTS THAT MAY BE OBTAINED BY USING THE SOFTWARE PROGRAM SUPPLIED WITH
THE EQUIPMENT. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE
EQUIPMENT INCLUDING THE SOFTWARE PROGRAM IS ASSUMED BY PURCHASER. NEITHER
SUPPLIER NOR ANYONE INVOLVED IN THE CREATION, PRODUCTION OR DELIVERY OF THE
EQUIPMENT, INCLUDING THE SOFTWARE PROGRAM, SHALL BE LIABLE FOR ANY DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF
ANTICIPATED PROFITS OR BENEFITS FROM THE USE OF THE EQUIPMENT OR ARISING OUT
OF ANY BREACH OF ANY WARRANTY.
<PAGE>
16. This agreement shall be construed in accordance wide the laws of the
State of New York.
17. THIS AGREEMENT CAN ONLY BE CANCELED 2 WEEKS PRIOR TO DELIVERY AND IN
WRITING.
Rev1/95
ACCEPTED AND AGREED PURCHASER
CADTEX CORPORATION
Signature: By: Kleinert's, Inc. of N.Y.
Name/Title: Michael DeMatteis. Managing Director /s/ Joseph J. Connors
------------------------------------ Executive Vice President
Date: 21 JUNE 95 Date: 7/8/94
---------- ------
C A D T E X C O R P O R A T 10 N
DESIGN COMPUTERS FOR THE TEXTILE/APPAREL INDUSTRY
121 WEST 27TH STREET, SUITE 204,NEW YORK NY 10001 TEL 212/255-4700
FAX 212/463-7983 1 800-CADTEX-CORP
<PAGE>
C A D T E X
ANNEX A
PV HIGH RESOLUTION WORKSTATION 4
Pentium 100 CPU. 256K Cache. 32 MB RAM
Middle tower case with 250 W PS + extra fan
1 GB Hard Drive
High resolution Graphics Card with 6 MB V + D RAM
One 1.44 MB 3.5" floppy drive
Multi I/O Card w/ 1 parallel / 2 serial ports
Network Card and cable
One Keyboard and mouse
WACOM UD 12" x 12" Professional Tablet with cordless four
button cursor and pressure pen
NEC XP 17 17" color monitor
Hayes Optima External Modem 1
4x CD ROM Drive 1
FILE SERVER 1
486DX/66 Mhz CPU. 256 K Cache. 16 MB RAM
9" Monochrome VGA Monitor and card
Middle tower case with 250 w PS + extra fan
2 GB Hard Drive
SCSI Controller
One 1.44 MB 3.5" floppy drive
Multi I/O card w/ 1 parralel / 2 serial ports
Network Card and Cable
9 Port Ethernet HUB
Keyboard and mouse
Digital Data Storage 2 GB Tape Backup Drive
(installed on any workstation)
NETWORK PARALLEL PRINTING UNIT (NPPU) 1
486DX/66 Mhz CPU. 256k CACHE. 16 MB RAM
9" Monochrome VGA Monitor and Card
Middle tower case with 250 W PS + extra fan
340 MB Hard Drive
Adaptec 1542 SCSI Controller with FDD Control
One 1.44 MB 3.5" floppy drive
Multi I/O card w/ 1 parallel / w serial ports
Network card and cable
Keyboard and Mouse
Canon CJ-10 Printer. Scanner and Copier wide 16 MB IPU
computer interface 1
Canon IPU-10 with 24 MB computer interface 1
Epson ES600 Scanner 1
Rev1/95
CADTEX CORPORATION
DESIGN COMPUTERS FOR THE TEXTILE/APPAREL INDUSTRY
121 WEST 27TH STREET, SUITE 204. NEW YORK NY 10001 TEL 212/255-4700
FAX 212/463-7983 1-800-CADTEX-CORP
<PAGE>
Kleinert's, Inc.
DEFERRED COMPENSATION AND SALARY CONTINUATION AGREEMENT
DEFERRED COMPENSATION AND SALARY CONTINUATION AGREEMENT made the 15th day
of August, 1995, between KLEINERT'S, INC., a Pennsylvania corporation
(hereinafter referred to as "Company") and Jack Brier (hereinafter referred to
as "Employee").
BACKGROUND
----------
Employee is a valued employee of the Company. As an additional inducement
to Employee to continue to render services and to refrain from engaging in
conduct harmful to the Company and to reward past services, the Company agrees
to provide deferred compensation benefits to Employee or salary continuation
benefits to Employee's beneficiary under the terms and subject to the conditions
hereinafter set forth. This Agreement replaces and terminates the Kleinert's,
Inc. Deferred Compensation and Salary Continuation Agreement dated November 30,
1991.
AGREEMENT
---------
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Conditions to Deferred Compensation Payments. Employee shall receive
deferred compensation payments in an amount of $11,666.66 per month, commencing
in accordance with paragraph 2 and payable in accordance with paragraph 3.
Employee shall vest ratably in this benefit effective 7/1/94 through 6/30/98. If
employee dies prior to 6/30/98, employee will become 100% vested in this
benefit. Notwithstanding the foregoing, any right of Employee or any beneficiary
of Employee to payment under this Agreement shall terminate immediately upon a
finding by the Company's Board of Directors, after full consideration of the
facts presented on behalf of both the Company and the Employee, that the
Employee has engaged in any sort of disloyalty of the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of employment or has disclosed trade secrets of the
Company.
2. Commencement of Deferred Compensation. Deferred compensation payments
under this Agreement shall commence with the month following the month in which
Employee attains age 73.
3. Payment Amount and Term. Deferred compensation payments shall be due on
the fifteenth day of each month and shall continue through 84 months. If
Employee dies after payments commence, but before 84 monthly payments are made,
the balance of the payments shall be made in accordance with paragraph 5 to
Employee's beneficiary designated on Schedule A hereto if such person is then
living, or, if not, to Employee's estate.
-2-
<PAGE>
4. Salary Continuation Payments. If Employee dies before payment of
benefits commences under paragraph 2, a lump sum $1M survivor benefit will be
made payable in accordance with attached split dollar life insurance agreement,
in lieu of the deferred compensation benefit, and any remaining benefit payment
shall be due on the fifteenth day of each month commencing with the month
following the month in which Employee dies and shall continue for 84 months.
5. Beneficiary. Employee shall have the right to designate in writing on
Schedule A attached hereto a beneficiary or contingent beneficiary to receive
benefits payable after Employee's death under this Agreement. Employee shall
have the right to change his beneficiary designation at any time by amending
Schedule A hereto or by an instrument in writing signed by Employee and
delivered to the Company. If Employee does not designate a beneficiary, or the
beneficiary and all contingent beneficiaries die before payments commence,
Employee's beneficiary shall be Employee's estate. If Employee's beneficiary (or
last contingent beneficiary) dies before all payments are made, the balance of
the payments shall be made to the last beneficiary's estate. The Company, in its
discretion, may accelerate all payments due to an estate using a present value
interest factor equal to the prime rate of interest plus two percent on the date
of acceleration at CoreStates Bank N.A.
6. General Obligation. The rights and benefits of Employee and any
beneficiary hereunder shall be solely those of an unsecured creditor of the
Company. No assets acquired or held by the Company shall be deemed to be held by
the Company in trust for them hereunder or to be security for the performance of
any obligation of the Company hereunder.
7. Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
8. Assignment. Except for the right to designate a beneficiary, Employee
may not assign, transfer, pledge or encumber Employee's rights under this
Agreement. The right of any beneficiary of Employee to the payment of deferred
compensation or salary continuation benefits under this Agreement may not be
assigned, transferred, pledged or encumbered.
-3-
<PAGE>
9. Facility of Payment. If the Company finds that any person to whom any
payment is payable under this Agreement is unable to care for this affairs
because of illness or accident, or is a minor, any payment due (unless a prior
claim therefore shall have been made by a duly appointed guardian, committee or
other legal representative) may be paid to the spouse, a child, or a parent or a
brother or sister, or to any person deemed by the Company to have incurred
expense for such person otherwise entitled to payment, in such manner and
proportions as the Company may determine. Any such payment shall be a complete
discharge of the liabilities of the Company under this Agreement.
10. Employment Agreement. Nothing contained herein shall be construed as
conferring upon Employee the right to continue in Company's employ.
11. Other Benefits. Any amount payable under this Agreement shall not be
deemed salary or other compensation for the purpose of computing benefits to
which Employee may be entitled under any plan, program or arrangement of the
Company for the benefit of its employees.
12. Binding Agreement. This Agreement shall be binding upon the Company and
its successors and assigns and shall be binding upon and insure to the benefit
of Employee and his beneficiary.
13. Amendment of Agreement. This Agreement may be amended in whole or in
part by a written agreement between the Company and Employee.
14. Paragraph Headings. The paragraph headings used in this Agreement are
for convenience of reference only and shall not be construed to be a part of
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed,
sealed and attested on its behalf by its duly authorized officers, and Employee
has hereunto set his hand and seal as of the day and year first above written.
ATTEST: KLEINERT'S, INC.
By:/s/Denise L. Hale By:/s/Joseph J. Connors
------------------- ------------------------
Assistant Secretary Executive Vice President
(Corporate Seal)
WITNESS: EMPLOYEE
By:/s/ Roseann Moore By: /s/ Jack Brier
----------------- --------------
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<PAGE>
August 17,1995
Mr. Joseph J. Connors
Executive Vice President
Kleinert's, Inc.
120 West Germantown Pike
1) Suite 100
Plymouth Meeting, Pa. 19462
Dear Joe:
As a participant in the Kleinert's, Inc. Supplemental Income Plan (S.I.P.)
established pursuant to Agreement entitled "Deferred Compensation and Salary
Continuation Agreement", dated August 15, 1995, I hereby designate the following
as the beneficiary and contingent beneficiary to receive benefits payable
following my death under the Agreement:
A. If my wife, IRENE, survives me (or if we die under such circumstances
that the order of our deaths cannot be established) --
1) The primary beneficiary shall be my wife, IRENE.
2) The contingent beneficiary shall be my wife's
estate.
B. If my wife fails to survive me, the primary and contingent
beneficiary shall be my estate.
This letter shall be deemed to constitute Schedule A to be attached to the
Agreement.
This letter shall hereby revoke my prior Beneficiary Designation dated
April 1, 1992. I reserve the right to alter or amend this Beneficiary
Designation from time to time.
Would you please acknowledge receipt on the enclosed copy of this letter
and return the same to me.
Sincerely,
/s/ Jack Brier
- --------------
Jack Brier
Receipt Acknowledged:
/s/ Joseph J. Connors
- ---------------------
Joseph J. Connors, Executive V.P.
Dated: August 31, 1995
<PAGE>
LANDLORD LEASE dated August 22, 1995, between 112 WEST 34th STREET COMPANY
a New York partnership, having an office at 60 East 42nd Street,
New York, New York, hereinafter referred to as "Landlord" or
"Lessor" and Kleinert's Inc., of New York having its principal
place of business at 112 West 34th Street, New York, New York
10120.
TENANT hereinafter jointly severally and collectively referred to as
"Tenant" or "Lessee".
SPACE WITNESSETH: The Landlord DOES HEREBY LEASE to Tenant, and Tenant
DOES HEREBY TAKE from the Landlord, the space(s) designated Room
1710
TERM substantially as outlined in red on the plan(s) attached hereto,
on the Seventeenth RENT (17th) floor(s) of the building known as
112 WEST 34 STREET (hereinafter referred to as "the Building") in
the Borough of Manhattan, City, County and State of New York,
which space, together with all the fixtures and improvements
which, at the commencement of or during the term, are thereto
attached (except items not deemed to be included therein and
removable by Tenant as provided in Article 6 hereof) is
hereinafter referred to as "the premises" or the "demised
premises", SUBJECT to mortgages, and ground and underlying
leases, as hereinafter provided and UPON and SUBJECT to the
covenants, terms and conditions of this Lease, for a term to
commence on November 1, 1995, and to end on March 31, 2001,
unless terminated prior thereto in the manner hereinafter
provided, at the ANNUAL RENT of THREE HUNDRED AND EIGHTY SIX
THOUSAND, THREE HUNDRED FORTY AND 00/100 ($386,340.00) DOLLARS
FROM 11/1/95 to 9/30/98 and FOUR HUNDRED AND TWELVE THOUSAND, AND
NINETY SIX AND 00/100 ($412,096.00) DOLLARS FROM 10/1/98 TO
3/31/01, which Tenant agrees to pay in United States legal
tender, by cash or by good and sufficient check drawn on a New
York City Clearinghouse Bank, in equal monthly installments in
advance on the first day of each month during said term, at the
office of Landlord.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and
assigns, hereby covenant, as follows:
1. Tenant shall pay the rent and additional rent as above and as
hereinafter provided.
USE 2. Tenant shall use and occupy the premises for Showroom and
office for the sale at wholesale only and display of children's
wearing apparel and Design Room for manufacture of samples and
the premises shall be used for no other purpose by the Tenant or
any other person.
It is the express provision of this lease that the demised
premises are rented for showroom and office use only, and the
Tenant shall not do any manufacturing therein or retail sales
therefrom. The Tenant shall not in connection with its business
ship or receive merchandise at regular intervals in any
substantial quantity. This restriction includes the specific
prohibition against the use of any hand trucks or other wheeled
vehicles in the corridors on the floor adjacent to the demised
premises or in any other part of the building.
<PAGE>
ASSIGNMENT 3. Tenant shall not assign, mortgage or encumber this agreement,
nor underlet, or AND use, suffer or permit the premises or any
part hereof to be used by others, without the prior UNDERLETTING
written consent of Landlord in each instance. The acceptance of
rent from the Tenant after possession is obtained by anyone other
than the Tenant shall not constitute a waiver of the provisions
hereof. The listing of any name other than that of the Tenant
whether on the doors of the premises or on the building
directory, or otherwise, shall not operate to vest any right or
interest in this lease or in the premises or be deemed to be the
written consent of the Landlord mentioned in this Article. It
being expressly understood that any such listing is a privilege
extended by the Landlord revocable at will by written notice to
the Tenant. If this Lease be assigned, or if the premises or any
part thereof by underlet or occupied by anybody other than
Tenant, Landlord 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 collection 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 Landlord to an assignment or
underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any
further assignment or underletting. In no event shall any
permitted sublessee assign or encumber its sublease or further
sublet all or any portion of its sublet space, or otherwise
suffer or permit to sublet space or any part thereof to be used
or occupied by others, without Landlord's prior written consent
in each instance. A modification, amendment or extension of a
sublease shall be deemed a sublease.
OBSTRUCTIONS 4. The Tenant shall not obstruct or permit the obstruction of the
SIGNS light, halls, areas, roof, stairways stairway or entrances to
the building, and will not affix, erect or inscribe any signs,
projections, awnings, signals or advertisements of any kind to
any part of the premises including the inside or outside of the
windows or doors thereof and will not paint the outside of the
doors thereof or the inside or outside of the windows thereof
unless and until the style, size, color, construction and
location thereof have been approved in writing by the Landlord.
The Landlord shall have the right to withdraw such approval at
any time and to require the Tenant to remove any such signs,
projections, awnings, signals or advertisements. The Landlord
also reserves to itself the sole right to designate the person,
firm or corporation which shall do the work of lettering and
erecting of any and all signs to be affixed to the premises or
the building. In the event that said work is done by the Tenant
through any person, firm or corporation, other than that
designated by the Landlord, the Landlord is hereby given the
right to remove said signs without being liable to the Tenant by
reason thereof and to charge the cost of so doing to the Tenant
as additional rent payable on the first day of the next following
month, or at Landlord's option, on the first day of any
subsequent month.
<PAGE>
ALTERATIONS 5. Tenant shall make no alterations, decorations, additions or
LIENS improvements in or to the demised premises without Landlord's
prior written consent, and then only by contractors or mechanics
approved by Landlord. All such work shall be done at such times
and in such manner as Landlord may designate. All work done or
required to be done by Tenant shall be done with union labor
having the proper jurisdictional qualifications and shall comply
in all respects and at all times with all applicable laws and
governmental regulations and the orders of any organizations
having or asserting jurisdiction in the premises.
(a) Any mechanic's lien filed against the demised premises, or
the building of which the same form a part for work claimed to
have been done for, or materials claimed to have been furnished
to, Tenant, shall be discharged by Tenant within ten (10) days
thereafter, by payment in full or, at Tenant's expense, by filing
the bond required by law. If Tenant fails to so pay or file any
bond, Landlord may pay the amount of said lien or discharge the
same by deposit, or otherwise, billing tenant for all expenses in
connection therewith as additional rent.
(b) Nothing in this lease contained shall be deemed or construed
in any way as constituting the consent or request of Landlord,
express or implied by inference or otherwise, to any contractor,
sub-contractor, laborer or materialman and architects, engineers
and designers for the performance of any labor or the furnishing
of any materials for any specific improvement, alteration to, or
repair of the demised premises, or any part thereof, or for the
demolition or replacement of the demised premises or any part
thereof.
(c) Tenant agrees to obtain and deliver to Landlord, written and
unconditional waivers of liens (and agreement that its filed
plans may be replaced), for all plans, specifications and
drawings for work or materials to be furnished to Tenant at the
premises, signed by all architects, engineers and designers to
become involved in such work for Tenant; with respect to
contractors, subcontractors, materialmen and laborers, and all
work or materials to be furnished to Tenant at the premises.
Tenant agrees to obtain and deliver to Landlord written and
unconditional waivers of mechanics liens upon the premises or the
building after payments to the contractors, and subject to any
applicable provisions of the Lien Law.
(d) Prior to commencement of its work in the demised premises,
Tenant shall obtain and deliver to Landlord a written letter of
authorization, in form satisfactory to Landlord's counsel, signed
by architects, engineers and designers to become involved in such
work, which shall confirm that any of their drawings or plans are
to be removed from any filing with governmental authorities, on
request of Landlord(s), in the event that said architect,
engineer, surveyor or designer thereafter no longer is providing
services with respect to the demised premises.
<PAGE>
FIXTURES 6. All fixtures, equipment, improvements and appurtenances
attached to, or built into, the space herein demised at the
commencement of or during the term, whether by the Landlord at
its own expense or at the expense of the Tenant, or by the
Tenant, shall be and remain part of the premises and shall not be
removed by the Tenant at the end of the term, unless Landlord
shall elect otherwise, which election shall be made by giving
notice pursuant to the provisions of Article 35 not less than
thirty (30) days prior to the expiration or other termination of
this lease or any renewal or extension thereof. In the event the
Landlord shall elect otherwise, then such fixtures, equipment and
appurtenances as the Landlord shall select, shall be removed by
the Tenant and Tenant shall restore the demised premises to the
original condition, at its own cost and expense prior to the
expiration of the term of this lease. All electric, plumbing,
heating, sprinkling, telephone, telegraph, communication and
radio systems, fixtures and outlets, venetian blinds, partitions,
railings, gates, doors, vaults, panelling, molding, shelving,
radiator enclosures, corks, rubber, linoleum and composition
floors, ventilating, silencing, air-conditioning and cooling
equipment, shall be deemed to be included in such fixtures,
equipment, improvements and appurtenances. Where not built into
the space and if furnished by or at the expense of the Tenant,
all removable electric fixtures, carpets, wind deflectors,
electric fans, water coolers, furniture, trade fixtures and
business equipment shall not be deemed to be included in such
fixtures, equipment, improvements and appurtenances, and shall be
removed by Tenant and Tenant shall pay the cost of repairing any
damage to the premises or the building arising from such removal.
All the outside walls of the premises, including corridor walls
and the outside entrance doors to the premises, any balconies,
terraces or roofs adjacent to the premises, and any space in the
premises used for shafts, stacks, pipes, conduits, ducts or other
building facilities and the use thereof, as well as access
thereto in and through the premises for the purpose of operation,
maintenance, decoration and repair, are expressly reserved to the
Landlord, and the Landlord has not conveyed any rights to the
Tenant therein.
REPAIRS 7. Tenant shall take good care of the premises and fixtures
therein and, subject to provisions of Article 5 hereof shall
make, as and when needed, as a result of misuse or neglect by
Tenant or Tenant's servants, employees, agents, visitors or
licensees all repairs in and about demised premises necessary to
preserve them in good order and condition, which repairs shall be
in quality and class equal to the original work. However,
Landlord may repair, at the expense of Tenant, all damage or
injury to demised premises, or to the building, or to its
fixtures, appurtenances or equipment, done by Tenant or Tenant's
servants, employees, agents, visitors or licensees, or caused by
moving property of Tenant in or out of the building or by
installation or removal of furniture or other property, or
resulting from fire, air-conditioning unit or system short
circuits, overflow or leakage of water, steam, illuminating gas,
sewer gas, sewage or odors, or by frost or by bursting or leaking
of pipes or plumbing works, or gas, or from any other cause, due
to the carelessness, negligence, or improper conduct of Tenant,
or Tenant's servants, employees, agents, visitors or licensees.
Except as provided in Article 13 hereof, there shall be no
allowance to Tenant for a diminution of rental value, and no
liability on the part of Landlord by reason of inconvenience,
annoyance or injury to person(s), property or business arising
from the making of any repairs, alterations, additions or
improvements in or to any portion of the building or the
premises, or in or to fixtures, appurtenances or equipment, nor
shall there be any liability upon the Landlord for failure to
make any repairs, alterations, additions or improvements in or to
any portion of the building or demised premises, or in or to
fixtures, appurtenances or equipment.
<PAGE>
WINDOW
CLEANING 8. Tenant shall require every person engaged by him to clean any
window in the premises from the outside, to use the equipment and
safety devices required by Section 202 of the Labor Law and the
rules of any governmental authority having or asserting
jurisdiction.
REQUIREMENT OF
LAW FIRE
INSURANCE 9. Tenant at its expense shall comply with all laws, orders and
regulations of any INSURANCE governmental authority having or
asserting jurisdiction over the premises, which shall impose any
violation, order or duty upon Landlord or Tenant with respect to
the premises or the use or occupancy thereof, including, without
limitation, compliance in the premises with New York City Local
Law No. 5 or any similar law. The foregoing shall not require the
Tenant to do structural work. Tenant shall not do or permit to be
done, any act or thing upon said premises, which will invalidate
or be in conflict with fire insurance policies covering the
building, and fixtures and property therein, and shall not do or
permit to be done, any act or thing upon said premises which
shall or might subject the Landlord to any liability or
responsibility for injury to any person or persons or to any
property by reason of any business or operation being carried on
upon said premises; and shall comply with all rules, orders,
regulations or requirements of the New York Board of Fire
Underwriters, or any other similar body, and shall not do, or
permit anything to be done, in or upon said premises, or bring or
keep anything therein, which shall increase the rate of fire
insurance on the building or on property located therein. If by
reason of failure of Tenant to comply with the provisions hereof,
or if by reason of the nature of the Tenant's occupancy, the fire
insurance rate shall at any time be higher than it otherwise
would be, then Tenant shall reimburse Landlord, as additional
rent hereunder, for that part of all fire insurance premiums
thereafter paid by Landlord, which shall have been charged
because of such violation or because of such occupancy by Tenant
and shall make such reimbursement upon the first day of the month
following such outlay by Landlord. That the premises are being
used for the purposes set forth in Article 2 hereof shall not
relieve Tenant from the foregoing duties, obligations and
expenses. In any action or proceeding wherein Landlord and Tenant
are parties, a schedule or "make up" of rate for the building or
the premises issued by the New York Fire Insurance Exchange, or
other body making fire insurance rates for said premises, shall
be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rate then
applicable to said premises.
<PAGE>
SUBORDINATION 10. This lease is and shall remain subject and subordinate to all
ground or underlying leases, and mortgages and building loan
mortgages which may now or hereafter affect the real property of
which the demises premises form a part, or such leases as to
which this lease is subordinate, and including but not limited to
mortgages affecting any of said ground or underlying leases,
whether or not said leases or mortgages also affect other
premises, and each and every of the advances which have
heretofore been made or which may hereafter be made thereunder,
and to all renewals, modifications, consolidations, replacements
and extensions thereof. In confirmation of such subordination,
Tenant shall execute promptly any instruments or certificates
that Landlord may request. Tenant hereby irrevocably constitutes
and appoints Landlord the Tenant's attorney-in-fact to execute
any such instruments or certificates for and on behalf of Tenant.
This clause shall be self-operative.
RULES AND
REGULATIONS 11. Tenant and Tenant's servants, employees, agents, visitors or
licensees shall-faithfully comply with the Rules and Regulations
attached to and made a part of this lease, and with such further
reasonable Rules and Regulations as Landlord at any time may make
and communicate in writing to Tenant, which, in the Landlord's
judgment, shall be necessary for the reputation, safety, care or
appearance of the building, or the preservation of good order
therein, or the operation or maintenance of the building, its
equipment, or the more useful occupance or the comfort of the
Tenants or others in the building. Landlord shall not be liable
to Tenant for the violation of any of said Rules and Regulations,
or the breach of any covenant or condition in any lease by any
other tenant in the building, or for any failure to enforce said
Rules and Regulations.
PROPERTY LOSS,
LIABILITY 12. Landlord or Landlord's agents shall not be liable for any
damage to property entrusted to employees of the building nor for
the loss of any property by theft or otherwise. Landlord or
Landlord's agents shall not be liable for any injury or damage to
persons or property resulting from falling plaster, steam, gas,
electricity, water, rain or snow which may leak from any part of
said building or from the pipes, appliances or plumbing works of
the same or from the street or sub-surface or from any other
place or by dampness or any other cause of whatsoever nature,
unless caused by or due to the negligence of Landlord; nor shall
Landlord be liable for any such damage caused by other tenants or
persons in said building, or for interference with the light or
other incorporeal hereditaments, or caused by operations in
construction of any public or quasi public work; nor shall
Landlord be liable for any latent defect in the building. Tenant
shall reimburse Landlord as additional rent for all expenses,
damages or fines incurred or suffered by Landlord by reason of
any breach, violation or nonperformance by Tenant, or Tenant's
servants, employees, agents, visitors or licensees. Tenant agrees
to look solely to Landlord's estate and interest in the land and
building, or the lease of the building or of the land and
building, and the demised premises, for the satisfaction of any
right or remedy of Tenant for the collection of a judgment (or
other judicial process) requiring the payment of money by
Landlord, in the event of any liability by Landlord, and no other
property or assets of Landlord shall be subject to levy,
execution or other enforcement procedure for the satisfaction of
Tenant's remedies under or with respect to this lease, the
relationship or landlord and tenant hereunder, or Tenant's use
and occupancy of the demises premises or any other liability of
Landlord to Tenant (except for negligence).
<PAGE>
DESTRUCTION
FIRE OR OTHER
CAUSE 13. If the demised premises shall be partially damaged by fire or
other cause without the fault or neglect of Tenant, Tenant's
servants, employees, agents, visitors or licensees, the damages
shall be repaired by and at the expense of Landlord and the rent
until such repairs shall be made shall be apportioned according
to that part of the premises which is usable by Tenant. No
penalty shall accrue for reasonable delay with may arise by
reason of adjustment of fire insurance on the part of Landlord
and/or Tenant, and for reasonable delay on account of "labor
troubles", or any other cause beyond Landlord's control. But if
the demised premises are totally damaged or are rendered wholly
untenantable by fire or other cause, and the Landlord shall
decide not to rebuild the same, or if the building of which the
demised premises are a part shall be so damaged that Landlord
shall decide to demolish it or to rebuild it, then or in any of
such events Landlord may, within ninety (90) days after such fire
or other cause, give Tenant a notice in writing of such decision,
which notice shall be given as in Article 35 hereof provided, and
thereupon the term of this lease shall expire by lapse of time
upon the third day after such notice is given, and Tenant shall
vacate the demised premises and surrender the same to Landlord.
EMINENT DOMAIN 14. If the whole or any part of demised premises shall be taken
or condemned by any competent authority for any public or quasi
public use or purpose, then, and in that event, the term of this
lease shall cease and terminate from the date when the possession
of the part so taken shall be required for such use or purpose,
and without apportionment of the award. The current rental,
however, shall in any such case be apportioned. The Tenant shall
not be entitled to any part of the award as damages or otherwise
for such condemnation and the Landlord is to receive the full
amount of such award, the Tenant hereby expressly waiving any
right or claim to any part thereof.
ELEVATORS,
HEAT, CLEANING 15. As long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall, if and insofar as the
existing facilities provide: (a) at Landlord's expense run
elevators on business days from 8 A.M. to 6 P.M. and in addition
on Saturdays from 8 A.M. to 1 P.M. and also provide one elevator
which will be subject to call during all other hours on business
days, Saturdays, Sundays and holidays; (b) at Landlord's expense
furnish on business days from 8 A.M. to 6 P.M. and on Saturdays
from 8 A.M. to 1 P.M. heat to warm the demised premises when and
as required by law; (c) at Landlord's expense cause to be kept
clean the halls, corridors and public portions of the building,
which are used in common by all tenants. Tenant shall, at
<PAGE>
Tenant's expense, keep the demised premises clean and in order,
to the satisfaction of Landlord, and remove its own rubbish.
Landlord has the sole right to designate and appoint the person
or concern to be employed, at Tenant's expense, for the removal
of Tenant's refuse and rubbish from the building. Landlord
reserves the right to stop service of the heat, elevator, air
conditioning, cooling, plumbing and electric systems, when
necessary, by reason of accident, or of repairs, alterations or
improvements, in the judgment of Landlord desirable or necessary
to be made, until said repairs, alterations or improvements shall
have been completed, and shall further have no responsibility or
liability for failure to supply heat, elevator, plumbing, air
conditioning, cooling and electric service, when prevented from
so doing by strikes or accidents or by any cause beyond
Landlord's reasonable control, or by orders or regulations of any
federal, state, county or municipal authority, or failure of
coal, oil or other suitable fuel. It is expressly understood and
agreed that any covenants on Landlord's part to furnish any
service pursuant to any of the terms or provisions of this lease,
or to perform any act or thing for the benefit of Tenant shall
not be deemed breached if Landlord is unable to perform the same
by virtue of a strike or labor trouble or any other cause
whatsoever beyond Landlord's control, and Tenant agrees that
there shall be no abatement of rent in the event that any of said
systems or service should fail to function for the reasons above
set forth.
WATER 16. The Landlord shall have the right to install a separate water
meter for the demised premises. If a separate water meter be
installed for the demised premises, or any part thereof, the
Tenant shall keep the same in repair, and pay the charges made by
the municipality for or in respect to the consumption of water,
as and when bills therefor are rendered. If the demised premises
or any part thereof, be supplied with water through a meter which
supplies other parts of the building, the Tenant shall pay to the
Landlord, as and when bills are rendered therefor, the Tenant's
proportionate part of all charges which the municipality shall
make for all water consumed through said meter, as indicated by
said meter together with the sewer rental based on said meter
charges. Such proportionate part shall be fixed by apportioning
the respective charge according to floor area against all of the
floor area in the building to which water charges through any
such meter is furnished (exclusive of the basement) which shall
have been occupied during the period of respective charges,
taking into account the period that each part of such area was
occupied. A water bill submitted by any public authority shall be
conclusive evidence of the amount due and the basis of
calculation of the amount to be paid by the Tenant under the
provisions of this paragraph. If any bill for water supply is not
paid by the Tenant when due, the Landlord may discontinue the
water supply upon twelve (12) hours written notice to the Tenant.
All bills for water shall be deemed conclusive as to amount
within ten (10) days after such bills are rendered.
<PAGE>
ELECTRICITY 17. Lessee agrees that Lessor may furnish to Lessee on a
"submetering" basis or on a "rent inclusion" basis.
(a) Submetering: If and so long as Lessor provides electricity to
the demised premises on a submetering basis, Lessee covenants and
agrees to purchase the same from Lessor or Lessor's designated
agent at charges, terms and rates set, from time to time, during
the term of this lease by Lessor but not more than those
specified in the service classification in effect on January 1,
1970 pursuant to which Lessor then purchased electric current
from the public utility corporation serving the part of the city
where the building is located; provided, however, said charges
shall be increased in the same percentage as any percentage
increase in the billing to Lessor for electricity for the entire
building, by reason of increase in Lessor's electric rates or
service classifications, subsequent to January 1, 1970, and so as
to reflect any increase in Lessor's electric charges, fuel
adjustment, or by taxes or charges of any kind imposed on
Lessor's electricity purchases, or for any other such reason,
subsequent to said date. Any such percentage increase in Lessor's
billing for electricity due to changes in rates or service
classifications shall be computed by the application of the
average consumption (energy and demand) of electricity for the
entire building for the twelve (12) full months immediately prior
to the rate and/or service classification change, or any changed
methods of or rules on billing for same, on a consistent basis to
the new rate and/or service classification and to the service
classification in effect on January 1, 1970. If the average
consumption of electricity for the entire building for said prior
twelve (12) months cannot reasonably be applied and used with
respect to changed methods of or rules on billing, then the
percentage increase shall be computed by the use of the average
consumption (energy and demand) for the entire building for the
first three (3) months after such change, projected to a full
twelve (12) months; and that same consumption, so projected,
shall be applied to the service classification in effect on
January 1, 1970. Where more than one meter measures the service
of Lessee in the building, the service rendered through each
meter may be computed and billed separately in accordance with
the rates herein. Bills therefor shall be rendered at such times
as Lessor may elect and the amount, as computed from a meter,
shall be deemed to be, and be paid as, additional rent. In the
event that such bills are not paid within five (5) days after the
same are rendered, Lessor may, without further notice,
discontinue the service of electric current to the demised
premises without releasing Lessee from any liability under this
lease and without Lessor or Lessor's agent incurring any
liability for any damage or loss sustained by Lessee by such
discontinuance of service. If any tax is imposed upon Lessor's
receipt from the sale or resale of electrical energy or gas or
telephone service to Lessee by any Federal, State or Municipal
Authority, Lessee covenants and agrees that where permitted by
law, Lessee's pro-rata share of such taxes shall be passed on to,
and included in the bill of, and paid by, Lessee to Lessor.
<PAGE>
(b) Rent Inclusion: If and so long as Lessor provides electricity
to the demised premises on a rent inclusion basis, Lessee agrees
that the fixed annual rent shall be increased by the amount of
the Electricity Rent Inclusion Factor ("ERIF"), as hereinafter
defined, Lessee acknowledges and agrees (i) that the fixed annual
rent hereinabove set forth in this lease does not yet, but is to
include an ERIF or $2.95 per rentable square foot to compensate
Lessor for electrical wiring and other installations necessary
for, and for its obtaining and making available to Lessee the
redistribution of, electric current as an additional service; and
(ii) that said ERIF, which shall be subject to periodic
adjustments as hereinafter provided, has been partially based
upon an estimate of the Lessee's connected electrical load, which
shall be deemed to be the demand (KW), and hours of use thereof,
which shall be deemed to be the energy (KWH) for ordinary
lighting and light office equipment and the operation of the
usual small business machines, including Xerox or other copying
machines (such lighting and equipment are hereinafter called
"Ordinary Equipment") during ordinary business hours ("ordinary
business hours" shall be deemed to mean 50 hours per week), with
Lessor providing an average connected load of 4-1/2 watts of
electricity for all purposes per rentable square foot. Any
installation and use of equipment other than Ordinary Equipment
and/or any connected load and/or any connected load and/or any
energy usage by Lessee in excess of the foregoing shall result in
adjustment of the ERIF as hereinafter provided. For purposes of
this lease the rentable square foot area of the presently demised
premises shall be deemed to be 12,878 square feet.
If the cost to Lessor of electricity shall have been, or shall
be, increased or decreased subsequent to May 1, 1993 (whether
such change occurs prior to or during the term of this lease), by
change in Lessor's electric rates or service classifications, or
by any increase, subsequent to the last such electric rate or
service classification change, in fuel adjustments or charges of
any kind, or by taxes, imposed on Lessor's electricity purchases,
or for any other such reason, then the ERIF, which is a portion
of the fixed annual rent, shall be changed in the same percentage
as any such changes in cost due to changes in electric rates or
service classifications, and, also, Lessee's payment obligation,
for electricity redistribution, shall change from time to time so
as to reflect any such increase in fuel adjustments or charges,
and taxes. Any such percentage change in Lessor's cost due to
changes in electric rates or service classifications shall be
computed by the application of the average consumption (energy
and demand) of electricity for the entire building for the twelve
(12) full months immediately prior to the rate and/or service
classification change, or any changed methods of or rules on
billing for same, on a consistent basis to the new rate and/or
service classification change, and to the immediately prior
existing rate and/or service classifications. If the average
consumption of electricity for the entire building for said prior
(12) months cannot reasonably be applied and used with respect to
changed methods of or rules on billing, then the percentage
increase shall be computed by the use of the average consumption
(energy and demand) for the entire building for the first three
(3) months after such change, projected to a full twelve (12)
months, so as to reflect the different seasons; and the same
consumption, so projected, shall be applied to the rate and/or
service classification which existed immediately prior to the
change.
<PAGE>
The parties agree that a reputable, independent consultant,
selected by Lessor ("Lessor's electrical consultant"), shall
determine the percentage change for the changes in the ERIF due
to Lessor's changed costs, and that Lessor's electrical
consultant may from time to time make surveys in the demised
premises of the electrical equipment and fixtures and the use of
current, (i) If any such survey shall reflect a connected load in
the demised premises in excess of 4-1/2 watts of electricity for
all purposes per rentable square foot and/or energy usage in
excess of ordinary business hours (each such excess is
hereinafter called "excess electricity") then the connected load
and/or the hours of use portion(s) of the then existing ERIF
shall each be increased by an amount which is equal to a fraction
of the then existing ERIF, the numerator of which is the excess
electricity (i.e. excess connected load and/or excess usage) and
the denominator of which is the connected load and/or the energy
usage which was the basis for the computation of the then
existing ERIF. Such fractions shall be determined by Lessor's
electrical consultant. The fixed annual rent shall then be
appropriately adjusted, effective as of the date of any such
change in connected load and/or usage, as disclosed by said
survey, (ii) If such survey shall disclose installation and use
of other than Ordinary Equipment, then effective as of the date
of said survey, there shall be added to the ERIF portion of the
fixed annual rent (computed and fixed as hereinabove described)
an additional amount equal to what would be paid according to the
rate schedule currently in effect for the building during peak
hours of the business day under the SC-4 Rate I Service
Classification in effect on May 1, 1993 (and not the time-of-day
rate schedule) for such load and usage of electricity, with the
connected load deemed to be the demand (KW) and the hours of use
thereof deemed to be the energy (KWH), as hereinbefore provided,
(which addition to the ERIF shall be increased or decreased by
all electricity cost changes of Lessor, as hereinabove provided,
from May 1, 1993 through the date of billing).
In no event, whether because of surveys or for any other reason,
is the originally specified $2.95 per rentable square foot ERIF
portion of the fixed annual rent (plus any net income thereof,
but not decrease, by virtue of all electric rate or service
classification changes subsequent to May 1, 1993) to be reduced.
(c) General Conditions: The determinations by Lessor's electrical
consultant shall be binding and conclusive on Lessor and on
Lessee from and after the delivery of copies of such
determinations to Lessor and Lessee, unless, within fifteen (15)
days after delivery thereof, Lessee disputes such determination.
If Lessee so disputes the determination, it shall, at its own
expense, obtain from a reputable, independent electrical
consultant its own determinations in accordance with the
provisions of this Article, Lessee's consultant and Lessor's
consultant then shall seek to agree. If they cannot agree within
thirty (30) days they shall choose a third reputable electrical
consultant, whose cost shall be shared equally by the parties, to
make similar determinations which shall be controlling. (If they
cannot agree on such third consultant within (10) days, then
either party may apply to the Supreme Court in the County of New
York for such appointment). However, pending such controlling
determinations, Lessee shall pay to Lessor the amount of
additional rent or ERIF in accordance with the determinations of
Lessor's electrical consultant. If the controlling determinations
differ from Lessor's electrical consultant, then the parties
shall promptly make adjustment for any deficiency owed by Lessor
or overage paid by Lessee.
<PAGE>
Lessor shall not be liable to Lessee for any loss or damage or
expense which Lessee may sustain or incur if either the quantity
or character of electric service is changed or is no longer
available or suitable for Lessee's requirements. Lessee 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 installation Lessor shall assure Lessee that
sufficient quantity exists for Lessee's needs as of this date;
such minimum quantity shall remain available for lease term.
Lessee agrees not to connect any additional electrical equipment
to the building electric distribution system, other than lamps,
typewriters and other small office machines which consume
comparable amounts of electricity, without Lessor's prior written
consent, which consent shall not be unreasonably withheld. Any
riser or risers to supply Lessee's electrical requirements, upon
written request of Lessee, will be installed by Lessor, at the
sole cost and expense of Lessee, if, in Lessor'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, Lessor will also at the
sole cost and expense of Lessee, install all other equipment
proper and necessary in connection therewith subject to the
aforesaid terms and conditions. The parties acknowledge that they
understand that it is anticipated that electric rates, charges,
etc. may be changed by virtue of time-of-day rates or other
methods of billing, and that the references in the foregoing two
paragraphs to changes in methods of or rules on billing are
intended to include any such changes. Supplementing Article 42
hereof, if all or part of the submetering additional rent or the
ERIF payable in accordance with Subdivision (a) or (b) of this
Article becomes uncollectible or reduced or refunded by virtue of
any law, order or regulation, the parties agree that, at Lessor's
option, in lieu of submetering additional rent or ERIF, and in
consideration of Lessee's use of the building's electrical
distribution system and receipt of redistributed electricity and
payment by Lessor of consultants' fees and other redistribution
costs, the fixed annual rental rate(s) to be paid under this
Lease shall be increased by an "alternative charge" which shall
be a sum equal to $2.95 per year per rentalable sq. ft. of the
demised premises, changed in the same percentage as any changes
in the cost of Lessor for electricity for the entire building
subsequent to May 1, 1993, because of electric rate or service
classification changes, as in Subdivision (b) hereof provided,
and such percentage change to be computed as in Subdivision (b)
provided. The Lessor reserves the right, at any time upon thirty
(30) days' written notice to change its furnishing of electricity
to Lessee from a rent inclusion basis to a submetering basis, or
vise versa provided that at the same time the change is made to a
majority of the existing Tenants. The Lessor reserves the right
to terminate the furnishing of electricity on a rent inclusion,
submetering, or any other basis at any time, upon thirty (30)
days' written notice to the Lessee in no event shall service be
terminated prior to provision of similar service by the public
utility, in which event the Lessee may make application directly
to the public utility for the Lessee's entire separate supply of
electric current and Lessor shall permit its wires and conduits,
to the extent available and safely capable, to be used for such
<PAGE>
purpose. Any meters, risers or other equipment or connections
necessary to furnish electricity on a submetering basis or to
enable Lessee to obtain electric current directly from such
utility shall be installed at Lessee's sole cost and expense.
Only rigid conduit or electricity metal tubing (EMT) will be
allowed. The Lessor, upon the expiration of the aforesaid thirty
(30) days' written notice to the Lessee may discontinue
furnishing the electric current but this lease shall otherwise
remain in full force and effect. If Lessee was provided
electricity on a rent inclusion basis when it was so
discontinued, then commencing when Lessee receives such direct
service and as long as Lessee shall continue to receive such
service, the fixed annual rental rate payable under this lease
shall be reduced by the amount of the ERIF which was payable
immediately prior to such discontinuance of electricity on a rent
inclusion basis.
AIR 18. (a) The Landlord has installed within the building of which
CONDITIONING the demised premises are a part, machinery, appliances, equipment
COOLING and appurtenances for the operation and maintenance of a modern
peripheral air-conditioning system which when supplemented with
the ducts and booster units required to be installed by the
tenant for the interior spaces as set forth in paragraph "b"
hereof, will, during the summer time, when the outside
temperatures is 95 degrees, maintain inside the building a
temperature of approximately 10 degrees less and a
proportionately less difference of temperature between the inside
and outside, as the outside temperature falls to 73 degrees
Fahrenheit. It will also maintain an inside temperature of
approximately 70 degrees Fahrenheit in the winter time when the
outside temperature is zero degrees Fahrenheit.
(b) The Landlord has provided main cooling system units at the
windows which service the peripheral area. The Landlord will also
install two main ducts on all floors of the building and the
Tenant agrees at his or its own sole costs and expense to install
and connect his or its own necessary ducts and booster units to
air condition the interior portion of the demised premises
hereunder. The Tenant shall not, however, make such
installation(s) and connection(s) unless it first submits plans
and specifications therefor to the Landlord and the Landlord or
its engineers have approved in advance such plans and
specifications in writing.
It is expressly agreed by the Tenant that in order for the system
to function properly, the Tenant is obliged to, and the Tenant
agrees to, keep all windows in the premises closed.
Subject always to events and causes, physical, mechanical and
otherwise, beyond the reasonable control of the Landlord, for the
failure of which the Landlord shall not be liable in any event
whatever, the Landlord will service and maintain said
air-conditioning system in such manner as to provide
air-conditioning for the premises on business days generally
during the hours of 8 A.M. to 6 P.M. during the summer.
Any damage caused to said appliances, equipment or appurtenances
shall be repaired by the Landlord at the cost and expense of the
Tenant. Any such expense shall constitute additional rent.
<PAGE>
ACCESS TO
PREMISES 19. (a) Tenant shall permit Landlord to erect, use and maintain,
pipes and conduits PREMISES in and through the demised premises
provided that Tenant's space is not materially diminished.
Landlord's agents shall have the right to enter the demised
premises at all times with reasonable notice to Tenant except in
case of emergency to examine the same, to show them to
prospective purchasers or lessees of the building, and to make
such decorations, repairs, alterations, improvements or additions
as Landlord may deem necessary or desirable either to the
building or to the demised premises and Landlord shall be allowed
to take all material into and upon said premises that may be
required therefore without the same constituting an eviction of
Tenant in whole or in part and the rent reserved shall in no wise
abate while said decorations, repairs, alterations, improvements,
or additions are being made, by reason of loss or interruption of
the business of Tenant because of the prosecution of any such
work, or otherwise.
(b) The Tenant shall give prompt notice to the Landlord of any
fire, accident to, or defective condition in any part of the
demised premises, including but not limited to the sanitary,
electrical, heating, air conditioning, cooling and other systems
located in, or passing through the premises, and the damage or
defective condition shall be remedied by the Landlord with due
diligence, but if said damage or defective condition was caused
by the Tenant or by the employees, licensees or invitees of the
Tenant or if the system was installed for the particular use of
the Tenant and the damage or defective condition was not caused
by the negligence of the Landlord, the cost of the remedy thereof
shall be paid by the Tenant.
(c) During the six months prior to the expiration of the term of
this lease, Landlord may exhibit the premises to prospective
tenants at all reasonable hours.
(d) If, during the last month of the Term, Tenant shall have
removed all or substantially all of Tenant's property from the
premises, Landlord may immediately enter and alter, renovate and
decorate the premises, or any part thereof, without affecting
this lease, and without liability to Tenant for an abatement of
rent or other compensation.
(e) Landlord may permit access to the premises, without incurring
liability to the Tenant, and whether or not the Tenant shall be
present, upon demand of any receiver, trustee, assignee for the
benefit of creditors, sheriff, marshal, court officer or
government official entitled to, or reasonably purporting to be
entitled to such access for the purpose of taking possession of
or removing Tenant's property or for any other lawful purpose.
This provision and any action by the Landlord hereunder shall not
be deemed a recognition by Landlord that the person or official
making such demand has any right or interest in or to this lease
or in or to the premises.
<PAGE>
(f) Landlord shall have the right to change the arrangement,
and/or location of entrances or passageways, doors and doorways,
and corridors, elevators, stairs, toilets, or other public parts
of the building, and, after reasonable notice, to change the
name, number or designation by which the building is commonly
known. Nothing herein contained, however, shall be deemed or
construed to impose upon Landlord any obligation, responsibility
or liability whatsoever for the care, supervision or repair of
the building or any part thereof, unless herein otherwise
provided.
(g) In the event of a refusal by the Tenant to permit an entry
upon the premises as in this Article provided, the Landlord and
the Landlord's agents may forcibly enter the same nevertheless
without incurring any liability by reason thereof.
20. The Tenant shall repair, at its own expense, all damage or
destruction of any plate glass in the demised premises, and shall
maintain adequate plate glass insurance at its own expense for
the benefit of the Landlord. If the Tenant fails to repair the
damage of any plate glass on the demised premises, or fails or
refuses to maintain adequate plate glass insurance for the
benefit of the Landlord, then the Landlord may repairs in damage
or destruction or may insure the plate glass and charge the cost
of such repairing or the cost of premium for the plate glass
insurance to the Tenant, and the amount thereof shall be deemed
to be, and be paid, as additional rent.
21. No vaults, vault space or space not within the property line
of the building is leased hereunder, anything contained in or
indicated on any sketch, blueprint or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Landlord
makes no representations as to the location of the property line
of the building. All vaults and vault space and all space not
within 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 be curtailed by any federal, state or
municipal authority, Landlord 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 or
curtainment be deemed a constructive or actual, total or partial
eviction. Tenant shall pay any fees, taxes, or charges of any
governmental authority for such vault space used by tenant.
CERTIFICATE OF
OCCUPANCY 22. Tenant will not at any time use or occupy the premises in
violation of the certificate of occupancy issued for the
building, and in the event that any department of the City or
State of New York shall hereafter at any time contend that the
premises are used for a purpose which is a violation of such
certificate of occupancy, in that event Tenant shall, upon 5
days' written notice from Landlord, immediately discontinue such
use of said premises. Failure by Tenant to discontinue such use
after such notice shall be considered a default in the
fulfillment of a covenant of this lease and Landlord shall have
the right to terminate this lease immediately, and in addition
thereto shall have the right to exercise any and all rights and
privileges and remedies given to Landlord pursuant to the
provisions of Article 25 hereof. The statement in this Lease of
the nature of the business to be conducted by Tenant in demised
premises shall not be deemed or construed to constitute a
representation or guaranty by Landlord that such business is
lawful or permissible under the certificate of occupancy issued
for the building, or otherwise permitted by law.
<PAGE>
SPRINKLERS 23. If there now is or shall be installed in the building a
"sprinkler system", and such system or any of its appliances
shall be damaged or not in proper working order by reason of any
act or omission of Tenant, Tenant's agents, servants, employees,
licensees or visitors. Tenant shall forthwith at Tenant's own
expense restore the same to good working condition. If the New
York Board of Fire Underwriters, the New York Fire Insurance
Exchange or any bureau, department or official of the state or
city government, require, or recommend the installation of a
sprinkler system or equipment, or that any changes,
modifications, alterations or additional sprinkler heads or other
equipment, be made or supplied 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
changes, modifications, alterations, additional sprinkler heads
or other equipment, became necessary to prevent the imposition of
a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate as fixed by said Exchange, or
by any Fire Insurance Company, Tenant shall, at Tenant's expense,
promptly make and supply such installation or changes,
modifications, alterations, additional sprinkler heads or other
equipment.
BANKRUPTCY 24. If, when and to the extent permitted by law, the parties
agree that the following provisions shall apply to this lease and
tenancy (and that the provisions of 11 U.S.C. Section 365(b)
shall be applied): (a) If at any time prior to the date herein
fixed as the commencement of the term of this lease there shall
be filed against Tenant thereof or if such filing is made by
Tenant in any court pursuant to any statute either of the United
States or of any State a petition in bankruptcy or insolvency or
for reorganization or for the appointment of a receiver or
trustee of all or a portion of Tenant's property, and within
thirty (30) days thereof Tenant fails to secure a discharge
thereof, or if Tenant make an assignment for the benefit of
creditors, or petition for or enters into an arrangement, this
lease shall ipso facto be cancelled and terminated, and in which
event, neither Tenant nor any person claiming through or under
Tenant or by virtue of any statute or of an order of any court
shall be entitled hereof and by virtue of any other provision
herein or elsewhere in this lease contained or by virtue of any
statute or rule of law, may retain as liquidated damages any
rent, security, deposit or monies, received by him from Tenant or
others in behalf of Tenant upon the execution hereof.
(b) If at the date fixed as the commencement of the term of this
lease or if at any time during the term hereby demised, there
shall be filed against Tenant thereof or if such filing is made
by Tenant in any court pursuant to any statute of the United
States or any State a petition of bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of
all or a portion of Tenant's property, and within thirty (30)
days thereof Tenant fails to secure a discharge thereof, or if
Tenant makes an assignment for the benefit of creditors or
petition for or enters into an arrangement, this lease, at the
option of Landlord, exercised within a reasonable time after
notice of the happening of any one or more of such events, may be
<PAGE>
cancelled and terminated, and in which event neither Tenant nor
any person claiming through or under Tenant by virtue of any
statute or of an order of any court shall be entitled to
possession or to remain in possession of the premises demised,
but shall forthwith quit and surrender the premises, and
Landlord, in addition to the other rights and remedies Landlord
has by virtue of any other provision herein or elsewhere in this
lease contained or by virtue of any statute or rule of law, may
retain as liquidated damages any rent, security deposit or monies
received by him from Tenant or others in behalf of Tenant.
(c) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) or (b) hereof, Landlord
shall forthwith, notwithstanding 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 rent reserved hereunder for the unexpired portion of the term
demised and the then 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 re-let by Landlord
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
re-letting shall prima facie 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 Landlord 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 25. (1)(a) If Tenant defaults in fulfilling any of the covenants
of this lease other than the covenants for the payment of rent or
additional rent, or of any ancillary agreement, or of the demised
premises become vacant or deserted, then, in any one or more of
such events, upon Landlord 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 such 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 curing
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 Landlord 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 date of 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 hereinafter provided.
<PAGE>
(b) If the notice provided for in (a) hereof shall have been
given, and the term shall expire as aforesaid; or (1) if Tenant
shall make default in the payment of the rent reserved herein or
any item of additional rent herein mentioned or any part of
either or in making any other payment herein provided; or (2) 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 or attempted to be taken or occupied by someone
other than Tenant; or (3) if Tenant shall make default with
respect to any other lease between Landlord and Tenant; or (4) if
Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after commencement of the term of this
lease, of which fact Landlord shall be the sole judge; then and
in any of such events Landlord may without notice, reenter the
demised premises either by force or otherwise, and dispossess
Tenant, the legal representative of Tenant or other occupant of
demised premises, by summary proceedings or otherwise, 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.
Landlord may cancel and terminate such renewal or extension
agreement by written notice.
(c) If Tenant is presently in possession of the demised premises
pursuant to a lease in writing heretofore made and if, before the
commencement of the term herein provided, the aforesaid lease
shall be terminated or Tenant shall be dispossessed or shall
voluntarily or involuntarily vacate, surrender or remove from the
demised premises, then this lease shall, at the option of
Landlord, be terminated, but Tenant shall nevertheless remain
liable as hereinbefore provided.
REMEDIES OF
LANDLORD (2) In case of any such default, entry, expiration and, or
dispossess by summary proceedings or otherwise (a) the rent shall
become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration, together with such expenses as
Landlord may incur for legal expenses, attorneys' fees,
brokerage, and or putting the premises in good order, or for
preparing the same for re-rental; (b) Landlord may re-let the
premises or any part or parts thereof either in the name of the
Landlord or otherwise, for a term or terms which may at
Landlord'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; and (c) Tenant or the
legal representatives of Tenant shall also pay Landlord as
liquidated damages for the failure of Tenant to observe and
perform said Tenant's covenants herein contained, and deficiency
between the rent hereby reserved and, or covenanted to be paid
and the net amount, if any, or the rents collected on account of
<PAGE>
the lease or leases of the premises for each month of the period
which would otherwise have constituted the balance of the term of
this lease. In computing such liquidated damages there shall be
added to the said deficiency such expenses as Landlord may incur
in connection with re-letting, such as legal expenses,
attorneys' fees, brokerage and for keeping the 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 Landlord to collect
the deficiency for any subsequent month by a similar proceeding.
Landlord at Landlord's option may make such alterations and/or
decorations in the premises as Landlord in Landlord's sole
judgment considers advisable and necessary for the purpose of re-
letting the premises; and the making of such alterations and, or
decorations shall not operate or be construed to release Tenant
from liability hereunder as aforesaid. Landlord shall in no event
be liable in any way whatsoever for failure to re-let the
premises, or in the event that the premises are re-let, for
failure to collect the rent thereof under such re-letting. In the
event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or
in equity as if-entry, summary proceedings and other remedies
were not herein provided for. Mention in this lease of any
particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity.
WAIVER OF
REDEMPTION (3) Tenant for the Tenant and on behalf of any and all persons
claiming through or under the Tenant, including creditors of all
kinds, hereby expressly waives any and all rights of redemption
granted by or under any present of future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the
event of Landlord obtaining possession of demised premises, by
reason of the violation by Tenant of any of the covenants and
conditions of this lease, or otherwise.
FEES AND
EXPENSES 26. If Tenant shall default in the performance of any covenant on
Tenant's part to be performed as in this lease contained,
Landlord may immediately, or at any time thereafter, without
notice, perform the same for the account of Tenant. If Landlord
at any time is compelled to pay or elects to pay any sum of
money, or do any act which will require the payment of any sum of
money, by reason of the failure of Tenant to comply with any
provision hereof, or, if Landlord is compelled to or does incur
any expense including reasonable attorneys' fees, instituting,
prosecuting and/or defending any action or proceeding instituted
by reason of any default of Tenant hereunder, the sum or sums so
paid by Landlord with all interest, costs and damages, shall be
deemed to be additional rent hereunder and shall be due from
Tenant to Landlord on the first day of the month following the
incurring of such respective expenses, or at the Landlord's
option on the first day of any subsequent month.
<PAGE>
REPRESENTATIONS
BY LANDLORD 27. Landlord or Landlord's agents have made no representations or
promises the respect to the said building or demised premises
except as herein expressly set forth. The taking possession of
the premises by Tenant shall be conclusive evidence, as against
Tenant, that the demised premises and the building were in good
and satisfactory condition at the time such possession was taken.
END OF TERM 28. Upon the expiration or other termination of the term hereof,
Tenant shall quit and surrender to Landlord the premises, broom
clean, in good order and condition, ordinary wear and tear
excepted, Tenant shall remove all property of Tenant as directed
by Landlord. If the last day of the term of this lease or any
renewal thereof falls on Sunday or a legal holiday, this lease
shall expire at 12 noon on the business day immediately
preceding. Tenant's obligation to observe or perform this
covenant shall survive the expiration of other termination of the
term of this lease. Any personal property of the Tenant or of any
subtenant or occupant which shall remain in the building after
the expiration or termination of the term and the removal of
Tenant from the premises shall be deemed to have been abandoned
by the Tenant and either may be retained by the Landlord as its
property or any part thereof shall be sold, the Landlord any
receive and retain the proceeds of such sale and apply the same,
at its option, against the expenses of the sale, the cost of
moving and storage, any arrears of rent or additional rent
payable hereunder and any damages to which the Landlord may be
entitled under Article 25 hereof or pursuant to law.
QUIET
ENJOYMENT 29. Landlord covenants and agrees with Tenant that upon Tenant
paying said rent, and performing at covenants and conditions
aforesaid, on Tenant's part to be observed and performed. Tenant
shall and may peaceably and quietly have, hold and enjoy the
demised premises, for the term aforesaid, subject, however, to
the terms of the lease, ground and underlying leases, if any, and
mortgage hereinbefore mentioned.
FAILURE TO GIVE
POSSESSION 30. If Landlord shall be unable to give possession of the
premises on the commencement date of the term because of the
retention of possession by any occupant thereof, alteration or
construction work, or for any other reason, Landlord shall not be
subject to any liability for such failure. In such event, this
lease shall stay in full force and effect, without extension of
its term. However, the rent hereunder shall not commence until
the premises are available for occupancy by Tenant. If Landlord
is unable to give possession of the premises on the commencement
date of the term because changes, repairs, or decorations being
made for Tenant's use have not been completed, or because of the
holding over by a prior occupant thereof, there shall be no
abatement of rent and the rent shall commence on the date
specified in this lease. If permission is given to Tenant to
occupy the demised premises or other premises prior to the date
specified as the commencement of the term, such occupancy shall
be deemed to be pursuant to the terms of this lease, except that
the parties shall separately agree as to the obligation of Tenant
to pay rent for such occupancy. The provisions of this article
are intended to constitute an "express provision to the contrary"
within the meaning of Section 223(a), the New York Real Property
Law.
<PAGE>
31. No act or omission of Landlord or its agents shall constitute
an actual or constructive eviction, unless Landlord shall have
first received written notice of Tenant's claim and shall have
had a reasonable opportunity to meet such claim. In the event
that any payment herein provided for by Tenant to Landlord shall
become overdue for a period in excess of ten (10) days, then at
Landlord's option a "late charge" for such period and for each
additional period of twenty (2) days or any part thereof shall
become immediately due and owing to Landlord, as additional rent
by reason of the failure of Tenant to make prompt payment, at the
following rates: for individual and partnership Tenants, said
late charge shall be computed at two percent per month unless
there is an applicable maximum legal rate of interest which then
shall be used. No act or omission of Landlord or its agents shall
constitute an acceptance of a surrender of the premises, except a
writing signed by Landlord. The delivery of keys to Landlord or
its agents shall not constitute a termination of this lease or a
surrender of the premises. Acceptance by Landlord of less than
the rent herein provided shall at Landlord's option be deemed on
account of earliest rent remaining unpaid. No endorsement on any
check, or letter accompanying rent, shall be deemed an accord and
satisfaction, and such check may be cashed without prejudice to
Landlord. This lease contains the entire agreement between the
parties, and no modification thereof shall be binding unless in
writing and signed by the party concerned. Failure of Landlord to
enforce any provision of this lease, or any rule or regulation,
shall not be construed as the waiver of any subsequent violation
of a provision of this lease, or any rule or regulation. This
lease shall not be affected by nor shall Landlord in any way be
liable for the closing, darkening or bricking up of windows in
the premises, as a result of construction on any property of
which the premises are not a part, or by Landlord's own acts.
COST OF LIVING
ADJUSTMENT 32. The fixed annual rent reserved in this lease and payable
hereunder shall be adjusted, as of the times and in the manner
set forth in this Article.
(a) Definitions: For the purposes of this Article, the following
definitions shall apply:
(i) the term "Base Year" shall mean the full calendar year during
which the term of this lease commences.
(ii) The term "Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the U.S.
Department of Labor. All Items, New York, N.Y. - Northeastern,
N.J., all urban consumers (presently denominated "CPI-U"), or a
successor or substitute index appropriately adjusted.
(iii) The term "Price Index for the Base Year" shall mean the
average of the monthly All Items Price Indexes for each of the 12
months of the Base Year.
<PAGE>
(b) Effective as of each January and July subsequent to the Base
Year, there shall be made a cost of living adjustment of the
fixed annual rental rate payable hereunder. The July adjustment
shall be based on the percentage difference between the Price
Index for the preceding month of June and the Price Index for the
Base Year. The January adjustment shall be based on the
percentage difference between the Price Index for the preceding
month of December and the Price Index for the Base Year.
(i) In the event the Price Index for June in any calendar year
during the term of this lease reflects an increase over the Price
Index for the Base Year, then the fixed annual rent herein
provided to be paid as of the July 1st following such month of
June (unchanged by any adjustments under this Article) shall be
multiplied by the percentage difference between the Price Index
for June and the Price Index for the Base Year, and the resulting
sum shall be added to such fixed annual rent, effective as of
such July 1st. Said adjusted fixed annual rent shall thereafter
be payable hereunder, in equal monthly installments, until it is
readjusted pursuant to the terms of this lease.
(ii) In the event the Price Index for December in any calendar
year during the term of this lease reduces an increase over the
Price Index for the Base Year, then the fixed annual recent
herein provided to be paid as of the January 1st following such
month of December (unchanged by any adjustments under this
Article) shall be multiplied by the percentage difference between
the Price Index for December and the Price Index for the Base
Year, and the resulting sum shall be added to such fixed annual
rent, effective as of such January 1st. Said adjusted fixed
annual rent shall thereafter be payable hereunder, in equal
monthly installment, until it is readjusted pursuant to the terms
of this lease.
The following illustrates the intentions of the parties hereto as
to the computation of the aforementioned cost of living
adjustment in the annual rent payable hereunder:
Assuming that said fixed annual rent of $10,000, that the Price
Index for the Base Year was 1020 and that the Price Index for the
month of June in a calendar year following the Base Year was
105.0, then the percentage increase thus reflected, i.e., 2.941%
(3.0/102.0) would be multiplied by $10,000, and said fixed annual
rent would be increase by $294.10 effective as of July 1st of
said calendar year.
In the event that the Price Index ceases to use 1967-100 as the
basis of calculation or if a substantial change is made in the
terms or number of items contained in the Price Index, then the
Price Index shall be adjusted to the figure that would have been
arrived at had the manner of computing the Price Index in effect
at the date of this lease not been altered. In the event such
Price Index (or a successor or substitute index) is not
available, a reliable governmental or other non-partisan
publication evaluating the information theretofore used in
determining the Price Index shall be used.
No adjustments or recommendation, retroactive or otherwise, shall
be made due to any revision which may later be made in the first
published figure of the Price Index for any month.
<PAGE>
(c) Landlord will cause statements of the cost of living
adjustments provided for in subdivision (b) to be prepared in
reasonable detail and delivered to Tenant.
(d) In no event shall the fixed annual rent originally provided
to be paid under this lease (exclusive of the adjustments under
this Article) be reduced by virtue of this Article.
(e) Any delay or failure of Landlord, beyond July or January of
any year, in computing or billing for the rent adjustments
hereinabove provided, shall not constitute a waiver of or in any
way impair the continuing obligation of Tenant to pay such rent
adjustments hereunder.
(f) Notwithstanding any expiration or termination of this lease
prior to the lease expiration date (except in the case of a
cancellation by mutual agreement) Tenant's obligation to pay rent
as adjusted under this Article shall continue and shall cover all
periods up to the lease expiration date, and shall survive any
expiration or termination of this lease.
TAX
ESCALATION 33. Lessee shall pay to Lessor, as additional rent, tax
escalation in accordance with this Article:
(a) Definitions for the purpose of this Article, the following
definitions shall apply:
(i) The term "base tax year" as hereinafter set forth for the
determination of real estate tax escalation, shall mean the New
York City real estate tax year commencing July 1, 1995 and ending
June 30, 1996.
(ii) The term "The Percentage", for purposes of computing tax
escalation, shall mean two percent plus 13/100 of one percent
(2.13%). The Percentage has been computed on the basis of a
fraction, the numerator or which is the rentable square foot area
of the presently demised premises and the denominator of which is
the total rentable square area of the office and commercial space
in the building project. The parties acknowledge and agree that
the rentable square foot area of the demised premises shall be
deemed to be 12,878 sq. ft. and that the total rentable square
foot area of the office and commercial space in the building
project shall be deemed to be 603,473 sq. ft.
(iii) The term "the building project" shall mean the aggregate
combined parcel of land on a portion of which are the improvement
of which the demised premises form a part, with all the
improvements thereon, said improvements being a part of the block
and lot for tax purposes which are applicable to the aforesaid
land.
(iv) The term "comparative year" shall mean the twelve (12)
months following the base tax year, and each subsequent period of
twelve (12) months (or such other period of twelve (12) months
occurring during the term of this lease as hereunder may be duly
adopted as the fiscal year for real estate tax purposes by the
City of New York).
<PAGE>
(v) The term "real estate taxes" shall mean the total of all
taxes and special or other determination of legal proceedings,
settlement or otherwise, Lessor shall within ten (10) days after
receiving the refund pay to Lessee The Percentage of the refund
less The Percentage of expenses (including attorneys' and
appraisers' fees) incurred by Lessor in connection with any such
application or proceeding. If, prior to the payment of taxes for
any comparative year, Lessor shall have obtained a reduction of
that comparative year's assessed valuation of the building
project, and therefore of said taxes, then the term "real estate
taxes" for that comparative year shall be deemed to include the
amount of Lessor's expenses in obtaining such reduction in
assessed valuation, including attorneys' and appraisers' fees.
4. The statements of the real estate taxes to be furnished by
Lessor as provided above shall be certified by Lessor and shall
constitute a final determination as between Lessor and Lessee of
the real estate taxes for the periods represented thereby, unless
Lessee within thirty (30) days after they are furnished shall
give a written notice to Lessor that it disputes their accuracy
or their appropriateness, which notice shall specify the
particular respects in which the statement is inaccurate or
inappropriate. If Lessee shall so dispute said statement then
pending the resolution of such dispute, Lessee shall pay the
additional rent to Lessor in accordance with the statement
furnished by Lessor.
5. In no event shall the fixed annual rent under this Lease
(exclusive of the additional rents under this Article) be reduced
by virtue of this Article.
6. If the commencement date of the term of the Lease is not the
first day of the first comparative year, then the additional rent
due hereunder for such first comparative year shall be a
proportionate share of said additional rent for the entire
comparative year, said proportionate share to be based upon the
length of time that the Lease term will be in existence during
such first comparative year. Upon the date of any expiration or
termination of this Lease (except termination because of Lessee's
default) whether the same be the date hereinabove set forth for
the expiration of the term or any prior or subsequent date, a
proportionate share of said additional rent for the comparative
year during which such expiration or termination occurs shall
immediately become due and payable by Lessee to Lessor, if it was
not theretofore already billed and paid. The said proportionate
share shall be based upon the length of time that this Lease
shall have been in existence during such comparative year. Lessor
shall promptly cause statements of said additional rent for that
comparative year to be prepared and furnished to Lessee. Lessor
and Lessee shall thereupon make appropriate adjustments of
amounts then owing.
7. Lessor's and Lessee's obligations to make the adjustments
referred to in subdivision (6) above shall survive any expiration
or termination of this Lease.
<PAGE>
8. Any delay or failure of Lessor in billing any tax escalation
hereinabove provided shall not constitute a waiver of or in any
way impair the continuing obligation of Lessee to pay such tax
escalation hereunder.
WAIVER OF TRIAL BY
JURY, ETC 34. It is mutually agreed by and between Landlord and Tenant that
the respective parties hereto shall and they hereby do waive
trail by jury in any action, proceeding or counter claim brought
by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way connected with this
lease, of any extension or renewal thereof, or the Tenant's use
or occupancy of said premises. It is further mutually agreed that
in the event Landlord commences any summary proceeding for
possession of the premises. Tenant will not interpose any
counterclaim of whatever nature or description in any such
proceeding.
NOTICES, 35. Except as otherwise in this lease provided, any notice, bill
BILLS, AND or statement by either party to the other may be given or sent
STATEMENTS and shall be deemed to have been duly given or sent if either
delivered personally or mailed, by registered or certified mail,
in a postpaid envelope, addressed to the landlord c/o
Helmsley-Spear, Inc., Agents, 60 East 42nd Street, New York, N.Y.
10017 and to the Tenant at the premises (or at the Tenant's
present address as above set forth, if mailed prior to the
Tenant's occupancy of the Premises), or if any address for
notices shall have been duly changed as hereinafter provided, if
mailed to the party at such changed address. Either party may at
any time change the address for notices, bills or statements by
delivering or mailing, as aforesaid, a notice stating the change
and setting forth the changed address.
Should the term "Tenant", as used in this Lease, refer to more
than one person, any notice, bill or statement given or sent as
aforesaid to any one of such persons shall be deemed to have been
duly given or sent to the Tenant.
SECURITY 36. Tenant has deposited with Landlord the sum of None 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, Landlord 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 Landlord may expend or may be required to
expend by reason of Tenant's default in respect of the terms,
covenants and conditions of this lease, including but not limited
to, any damages or deficiency in the re-letting of the premises,
whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Landlord. Tenant shall,
upon demand, deposit with Landlord the full amount so used, in
order that Landlord shall have the full security deposit on hand
at all times during the term of this lease. In the event that
Tenant shall fully and faithfully comply with all of 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 Landlord. In the event of a conveyance of the land
<PAGE>
and building of which the demised premises form a part or
assignment or leasing of Landlord's interest therein, Landlord
shall have the right to transfer the security to the vendee,
assignee or lessee and Landlord shall thereupon be released by
Tenant from all liability for the return of such security; and
Tenant agrees to look to the new Landlord 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 Landlord. 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 Landlord nor its
successors or assigns shall be bound by any such assignment,
encumbrances, attempted assignment or attempted encumbrance.
MARGINAL NOTES 37. The marginal notes are inserted only as a matter of
convenience and for reference and in no way define, limit or
describe the scope or intent of this lease nor in any way affect
this lease.
DEFINITIONS 38. The term "Landlord" as used in this lease means only the
owner or the mortgagee in possession for the time being of the
land and building (or the owner of a lease or sublease of the
entire building), 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 other disposition of said land and
building or said leasehold, the said Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations
of Landlord 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, that the purchaser
or the lessee of the building has assumed and agreed to carry out
any and all covenants and obligations of Landlord hereunder. The
term "business days" shall be construed to mean Monday to Friday
inclusive, excluding holidays. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their
technical legal meaning The use herein of the neuter pronoun in
reference to Landlord or Tenant shall be deemed to include any
individual landlord or tenant.
Gross footage shall include all the aliquot space taken up for
stairways, stair wells, lobbies, elevator shafts, lavatories,
wash rooms, utilities, etc., and air-conditioning equipment in
the building whether or not located in the demised premises.
RIGHTS OF SUCCESSORS
AND ASSIGNS 39. The covenants, conditions and agreements contained in this
lease shall bind and inure to the benefit of Landlord and Tenant
and their respective heirs, distributees, executors,
administrators, successors, and except as otherwise provided in
this lease, their assigns. If any provision of any Article of
this lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable,
the remainder of that Article, or the application of such
provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
thereby, and each provision of said Article and this lease shall
be valid and be enforced to the fullest extent permitted by law.
<PAGE>
40. Tenant covenants and agrees that, if by reason of a default
upon the part of the Landlord as lessee under any underlying
lease in the performance of any of the terms or provisions of
such underlying lease, such underlying lease and the leasehold
estate of Landlord as lessee thereunder is terminated by summary
proceedings or otherwise in accordance with the terms of such
underlying lease or if such underlying lease and such leasehold
estate is terminated through foreclosure proceedings brought by
the holder of any mortgage to which such underlying lease is
subject or subordinate. Tenant will attorn to the lessor under
such underlying lease or the purchaser in foreclosure
proceedings, as the case may be, and will recognize such lessor
or such purchaser, as the case may be, as Tenant's Landlord under
this lease, unless the lessor under such underlying lease or the
holder of any such mortgage in any such proceedings shall elect
in connection therewith to terminate this lease and the right of
Tenant to the possession of the premises demised hereby. Tenant
agrees to execute and deliver, at any time and from time to time,
upon the request of Landlord or of the lessor under any such
underlying lease, any instrument which may be necessary or
appropriate to evidence such attornement, and Tenant hereby
appoints Landlord the attorney-in-fact, irrevocable, of Tenant to
execute and deliver for and on behalf of Tenant any such
instrument. Tenant further waives the provisions of any statute
or rule of law now or hereafter in effect which may give or
purport to give Tenant any right of election to terminate this
lease or to surrender possession of the premises demised hereby
in the event any such proceedings are brought by the lessor under
any such underlying lease or the holder of such mortgage, and
agrees that unless and until any such lessor or the holder of any
such mortgage, in connection with any such proceedings, shall
elect to terminate this lease, and to extinguish the leasehold
estate of Tenant hereunder, by naming Tenant as a party and by
entering judgment in any such proceedings barring or foreclosing
Tenant from any rights in the demised premises, this lease shall
not be affected in any way whatsoever by any such proceedings.
OCCUPANCY AND
USE BY LESSEE 41. (a) Lessee acknowledges that its continued occupancy of the
demised premises, and the regular conduct of its business
therein, are of utmost importance to the Lessor in the renewal of
other leases in the building, in the renting of vacant space in
the building, in the providing of electricity, air conditioning,
steam and other services to the tenants in the building, and in
the maintenance of the character and quality of the tenants in
the building. Lessee therefore covenants and agrees that it will
occupy the entire demised premises and will conduct its business
therein in the regular and usual manner, throughout the term of
this lease. Lessee acknowledges that Lessor is executing this
lease in reliance upon these covenants, and that these covenants
are a material element of consideration inducing the Lessor to
execute this lease. Lessee further agrees that if it vacates the
demised premises or fails to so conduct its business therein, at
any time during the term of this lease, without the prior written
consent of the Lessor, then all rent and additional rent reserved
in this lease from the date of such breach to the expiration date
of this lease shall become immediately due and payable to Lessor.
<PAGE>
(b) The parties recognize and agree that the damage to Lessor
resulting from any breach of the covenants in subdivision (A)
hereof will be extremely substantial, will be far greater than
the rent payable for the balance of the term of this lease, and
will be impossible of accurate measurement. The parties therefore
agree that in the event of a breach or threatened breach of the
said covenants, in addition to all of Lessor's other rights and
remedies, at law or in equity or otherwise. Lessor shall have the
right of injunction to preserve Lessee's occupancy and use. The
words "become vacant or deserted" as used elsewhere in this lease
shall include Lessee's failure to occupy or use as by this
Article required.
(c) If Lessee breaches either of the covenants in subdivision (A)
above, and this lease be terminated because of such default,
then, in addition to Lessor's rights of re-entry, restoration,
preparation for and rerental, and anything elsewhere in this
lease to the contrary notwithstanding. Lessor shall retain its
right to judgment on and collection of Lessee's aforesaid
obligation to make a single payment to Lessor of a sum equal to
the total of all rent and additional rent reserved for the
remainder of the original term of this lease, subject to future
credit or repayment to Lessee in the event of any rerenting of
the premises by Lessor, after first deducting from rerental
income all expenses incurred by Lessor in reducing to judgment or
otherwise collecting Lessee's aforesaid obligation, and in
obtaining possession of, restoring, preparing for and re-letting
the premises. In no event shall Lessee be entitled to a credit or
repayment for rerental income which exceeds the sums payable by
Lessee hereunder or which covers a period after the original term
of this lease.
RENT CONTROL 42. In the event the rent or any part thereof provided to be paid
by Tenant under the provisions of this lease during the demised
term shall become uncollectable by virtue of any Federal, State,
County, or City law, ordinance or regulation or by any direction
of a public officer or body pursuant to law. Landlord, at its
option, may at any time thereafter terminate this lease, by not
less than thirty (30) days' written notice to Tenant, on a date
set forth in said notice, in which event this lease and the term
hereof shall terminate and come to an end on the date fixed in
said notice as if the said date where the date originally fixed
herein for the termination of the demised term. Landlord shall
not have the right so to terminate this lease if Tenant within
such period of thirty (30) days shall in writing lawfully agree
that the rental herein reserved is a reasonable rental and agreed
to continue to pay such rental, and if such agreement by Tenant
shall be legally enforceable by Landlord.
END OF TERM 43. Tenant shall surrender the demised premises to the Landlord
at the expiration or sooner termination of this lease in good
order and condition, except for reasonably wear and tear and
damage by fire or other casualty, and tenant shall remove all of
its property. Tenant agrees it shall indemnify and save Landlord
harmless against costs, claims, loss or liability resulting from
delay by Tenant in so surrendering the demised premises,
including, without limitation, any claims made by any succeeding
Tenant found on such delay . The parties recognize and agree that
<PAGE>
the damage to Landlord resulting from any failure by Tenant
timely to surrender possession of the demised premises as
aforesaid will be extremely substantial, will exceed the amount
of monthly rent theretofore payable hereunder, and will be
impossible of accurate measurement. Tenant therefore agrees that
if possession of the demised premises is not surrendered to
Landlord within one (1) day after the date of expiration or
sooner termination of the term of this lease, then Tenant agrees
to pay Landlord as liquidated damages for each month and for each
portion of any month during which Tenant holds over the premises
after expiration or termination of the term of this lease, a sum
equal to three times the average rent and additional rent which
was payable per month under this lease during the last six months
of the term thereof. The aforesaid provisions of this article
shall survive the expiration or sooner termination of the term of
this lease or from any breach of this lease.
INDEMNITY 44. Tenant shall, throughout the term and thereafter, indemnify
Landlord and save it harmless and free from damages, liabilities,
losses, expenses, causes of action, claims, suits and judgments,
as well as all expenses and attorneys' fees, arising from injury
during said term to person or property of any nature, and also
for any matter or thing growing out of the occupation of the
demised premises or the streets, sidewalks, or vaults adjacent
thereto occasioned in whole or part by any act or acts, omission
or omissions of Tenant, its employees, guests, agents, assigns or
undertenants, or from any breach of this lease.
ADJACENT EXCAVATION
- -SHORING 45. 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 the 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 Landlord, or diminution or abatement of rent.
46. This lease may not be modified or amended, nor any provision
hereof waived, except by an agreement in writing signed by the
parties hereto.
BROKERS 47. Tenant represents and warrants that it neither consulted nor
negotiated with any broker or finder with regard to the demised
premises or this lease other than . Tenant agrees to indemnify,
defend and save Landlord harmless from and against any claims for
with whom Tenant has dealt in connection with the demised
premises or this lease.
48. The premises are rented "as is."
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed
and sealed this lease as of the day and year first above written.
WITNESS FOR LANDLORD: 112 WEST 34th STREET COMPANY,
Landlord
BY: Helmsley-Spear, Inc., Agents
By:/s/ IRVING SCHNEIDER
-------------------------- ---------------------------------
Executive Vice President
WITNESS FOR TENANT: KLEINERT'S INC., OF NEW YORK
By:/s/ JOSEPH J. CONNORS
-------------------------- ---------------------------------
Additional Clauses attached to and made part of the lease dated
August 22, 1995 between 112 West 34th Street Company and
Kleinert's Inc., of New York.
<PAGE>
GUARANTY
For Value Received, and in consideration for, and as an inducement
to Landlord making the foregoing lease with Tenant, the undersigned
guarantees to Landlord, its successors and assigns, the full performance
and observance of all the covenants, conditions and agreements,
including the "Rules and Regulations", therein provided to be performed
and observed by Tenant, without requiring any notice or proof of
non-payment, non-performance, or non-observance, and without demand, to
charge the undersigned therefor, all of which the undersigned hereby
expressly waives.
The undersigned further covenants and agrees: (a) that the validity
of this agreement and its obligations hereunder shall in no wise be
terminated, affected or impaired by reason of the assertion by Landlord
against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of the within lease; (b) that this guaranty
shall remain and continue in full force and effect as to any renewal,
modification or extension of the within lease.
As a further inducement to Landlord to make the within lease and in
consideration thereof, Landlord and the undersigned covenant and agree
that in any action or proceeding or counterclaim brought by either
against the other on any matters whatsoever arising out of, under, or in
any way connected with said lease or this guaranty, or by virtue of the
terms thereof, Landlord and the undersigned shall and do hereby waive
trial by jury.
Dated, New York City, September 19, 1995
KLEINERT'S INC., OF NEW YORK, INC.
/s/ JACK H. SEGAL By: /s/ JOSEPH J.CONNORS
- ------------------------------- --------------------------
Witness
Joseph J. Connors
--------------------------
Executive Vice President
--------------------------
Address
<PAGE>
State of New York )
) ss.:
County of New York )
On this 19th day of September, 1995, before me personally came
Joseph J. Connors to me known and known to me to be the individual
described in, and who executed the foregoing Guaranty and acknowledged
to me that he executed the same.
/s/ Barbara A. Raskob
-----------------------
Notary Public
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, corridors or halls shall not be obstructed or encumbered by
any Tenant or used for any purpose other than ingress and egress to and
from the demised premises.
2. The freight and note the passenger elevators shall be used by
the working hands of the Tenant and by persons calling for and
delivering goods to and from the demised premises.
3. The Landlord may refuse admission to the building outside of
ordinary business hours to any person not known to the watchman in
charge or not having a pass issued by the Landlord or not property
identified and may require all persons admitted to or leaving the
building outside of ordinary business hours to register. Any person
whose presence in the building at any time shall, in the Landlord's
judgment, be prejudicial to the safety, character, reputation and
interests of the building or of its tenants may be denied access to the
building or may be ejected therefrom. The Landlord may require any
person leaving the building with any package or other object to exhibit
a pass from the tenant from those premises the package or object is
being removed, but the establishment and enforcement of such
requirements shall not impose any responsibility on the Landlord for the
protection of any tenant against the removal of property from the
premises of the tenant. Landlord shall, in no way, be liable to any
tenant for damages or loss arising from the admission, exclusion or
ejection of any person to or from the premises or the building under the
provision of this Rule.
4. No tenants shall obtain or accept for use in the premises ice,
drinking water, towel, barbering, bootblacking, floor polish or other
similar services from any persons not authorized by the Landlord in
writing to furnish such services, provided always, that the charges for
such services by persons authorized by the Landlord are not excessive.
Such services shall be furnished only at hours and under regulations
fixed by the Landlord.
5. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of the Landlord.
No curtains, blinds, shades, or screens shall be attached to or hung in,
or used in connection with, any window or door of the premises, without
the Landlord's prior written consent.
6. The sashes, sash doors, skylights, windows, and doors that
reflect or admit light and air into the halls, passageways or other
public places in the building shall not be covered or obstructed by any
Tenant nor shall any bottles, parcels, or other articles be placed on
the windowsills.
<PAGE>
7. The water and wash closets and other plumbing fixtures shall not
be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or substances shall be
thrown therein. All damages resulting from any misuse of the fixtures
shall be borne by the Tenant who, or whose servants, employees, agents,
visitors or licensees, shall have caused the same.
8. No Tenant shall mark, paint, drill into, or in any way deface
any part of the demised premises or the building of which they from a
part. No boring, cutting or suringing of wires shall be permitted,
except with the prior written consent of the Landlord, and as the
Landlord may direct. No Tenant shall lay linoleum, or other similar
floor coverings, 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.
9. No Tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or
neighboring buildings or premises or those having business with them
whether by the use of any instrument, radio, talking machine, unmusical
noise, whistling, singing, or in any other way.
10. No Tenant, nor any of Tenant's servants, employees, agents,
visitors or licensees, shall at any time bring or keep upon the demised
premises any inflammable, combustible or explosive fluid, chemical or
substance, or cause or permit any unusual or objectionable odors to be
produced upon or permeate from the demised premises.
11. No Tenant shall place a load upon any floor of the building
exceeding the floor load per square foot area which such floor was
designed to carry, and all floor loads shall be evenly distributed. All
removals, or the carrying in and out of any safes, freight, furniture or
bulky matters of any description must take place during such hours and
in a manner approved by the Landlord. The Landlord reserves the right to
prescribe the weight and position of safes as well as the placing of
large quantities of merchandise. The Landlord reserves the right to
inspect all freight to be brought into the building and to exclude from
the building all freight which violates any provision of the lease of
which these Rules and Regulations are a part or any of these Rules and
Regulations.
12. All machinery shall be placed by the Tenant in the demised
premises in approved settings to absorb or prevent any vibration, noise
or annoyance.
13. The Landlord shall have the right to prohibit any advertising
by any Tenant which, in its opinion, tends to impair the reputation of
the building or its desirability as a building for lofts, and upon
written notice from the Landlord, Tenants shall refrain from or
discontinue such advertising.
14. Any person employed by any Tenant to do janitor work, shall,
while in said building and outside of said demised premises, be subject
to, and under the control and direction of the Superintendent of said
building (but not as agent or servant of said Superintendent or of the
Landlord).
<PAGE>
15. Canvassing, soliciting and peddling in the building is
prohibited and each Tenant shall co-operate to prevent the same.
16. No water cooler, air conditioning unit or system or other
apparatus shall be installed or used by any Tenant without the written
consent of Landlord.
17. There shall not be used in any space, or in the public halls of
any 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 side guards.
18. The Landlord reserves the right to rescind, alter or waive any
rule or regulation at any time prescribed for the Building when in its
judgment, it deems it necessary, desirable or proper for its best
interest and for the best interests of the tenants, and no alteration or
waiver of any rule or regulation in favor of one Tenant shall operate as
an alteration or waiver in favor of any other Tenant.
19. The use in the demised premises of auxiliary heating devices,
such as portable electric heaters, heat lamps or other devices whose
principal function at the time of operation is to produce space heating,
is prohibited.
20. Whenever Tenant shall submit to Landlord any plan, agreement or
other document for Landlord's consent or approval, Tenant agrees to pay
Landlord as additional rent, on demand, a sum equal to the reasonable
fees of any architect, engineer or attorney employed by Landlord to
review said plan, agreement or document.
ADDITIONAL PARAGRAPHS attached to and forming a part of lease
dated August 22, 1995 between 112 WEST 34th STREET COMPANY and
Kleinert's, Inc. of New York
Supplementing the provisions of Article 3 and 41 hereof, Landlord,
subject to the provision hereof, will not unreasonably withhold consent
to an assignment of this lease or to subletting of all or part of the
demised premises provided that Tenant will not move the conduct of its
business to another building in New York City.
A. Any such assignment or subletting shall be made solely upon the
following terms and conditions:
1.(a) No assignment and no subletting shall become effective unless
and until Tenant shall have given Landlord at least 30 days' prior
written notice of such proposed assignment or proposed bona fide
subletting and requested Landlord's consent thereto. With the notice
Tenant shall submit in writing to Landlord (i) the name and address of
the proposed assignee or sublessee, (ii) Tenant will present list of all
material terms and conditions of proposed sublease or assignment, (iii)
reasonably satisfactory information as to the nature and character of
the business of the proposed assignee or sublessee, and as to the nature
of its proposed use of the space, and (iv) banking, financial or other
credit information relating to the proposed assignee or sublessee
reasonably sufficient to enable Landlord to determine the financial
responsibility and character of the proposed assignee or sublessee.
<PAGE>
(b) The parties agree that if there is a proposed assignment or a
proposed subletting of all of the demised premises, then Landlord shall
thereupon have the option, exercisable by written notice within 20 days
after receipt of the notice from Tenant, to terminate this lease
effective as of the date of the proposed assignment or the commencement
date of the term of such proposed subletting. If there is a proposed
subletting of part but not all of the demised premises, then Landlord
shall thereupon have the option, exercisable by written notice within 30
days after the receipt of the notice from Tenant, to delete the space
proposed to be subleased from the premises demised hereunder (with a
prorated change in all payments due hereunder for the remainder of the
term of this lease) effective as of the commencement date of the term of
such proposed subletting. If Landlord shall so terminate this lease or
delete portions of space therefrom, then Tenant shall vacate and
surrender the demised premises, or the deleted space portion, to
Landlord, on or before the date fixed in the Landlord's termination or
space deletion notice. Tenant may sublease space to up to 4 separate
entities.
(c) In the event Landlord shall elect not to terminate this lease
or delete portions of space therefrom pursuant to the provisions of
subdivision (a) hereof and Tenant effects such assignment or subletting,
then Tenant thereafter shall pay to Landlord a sum equal to 50% (a) any
rent or other consideration paid to Tenant by any subtenant which (after
deducting the costs of Tenant, if any, in effecting the subletting,
including reasonable alteration costs, commissions and legal fees) is in
excess of the rent allocable to the subleased space which is then being
paid by Tenant to Landlord pursuant to the terms hereof; and (b) any
other profit or gain (after deducting any necessary expenses incurred)
realized by Tenant from any such subletting or assignment. All sums
payable hereunder by Tenant shall be payable to Landlord as additional
rent upon receipt thereof by Tenant.
2. There shall be no monetary default by Tenant under any of the
terms, covenants and conditions of this lease at the time that
Landlord's consent to any such subletting or assignment is requested and
on the date of the commencement of the term of any such proposed
sublease or the effective date of any such proposed assignment.
3. Upon receiving Landlord's written consent, a duly executed copy
of the sublease or assignment shall be delivered to Landlord within ten
(10) days after execution thereof. Any such sublease shall provide that
the subtenant shall comply with all applicable terms and conditions of
this lease to be performed by the Tenant hereunder. Any such assignment
of lease shall contain an assumption by the assignee of all of the terms
and obligations of this lease to be performed by the Tenant.
4. Anything herein contained to the contrary notwithstanding:
(a) Tenant shall not advertise or list its space for assignment or
subletting at a rental rate lower than the rental rate then being paid
by Tenant to Landlord.
(b) The transfer of a majority of the issued and outstanding
capital stock of any corporate Tenant of this lease or a majority of the
total interest in any partnership Tenant, however accomplished, and
whether in a single transaction or in a series of related or unrelated
transactions, shall be deemed an assignment of this lease. The transfer
of outstanding capital stock of any corporate Tenant, for purposes of
this Article, shall not include sale of such stock by persons other than
those deemed "insiders" within the meaning of the Securities Exchange
Act of 1934 as amended, and which sale is effected through the
"over-the-counter market" or through any recognized stock exchange.
<PAGE>
5. No assignment or subletting shall be made:
(a) To any person or entity shall at that time be a tenant,
subtenant or other occupant of any part of the building of which the
demised premises form a part: or which shall within the prior six months
have been negotiating with the Managing Agent to become such a tenant,
subtenant or occupant unless Landlord has the comparable space.
(b) By the legal representatives of the Tenant or by any person to
whom Tenant's interest under this lease passes by operation of law,
except in compliance with the provisions of this Article and Articles 3
and 41 hereof; and
(c) To any person or entity for the conduct of a business which is
not the business as stated in paragraph, or to any person or entity for
the conduct of a business which is not in keeping with the standards for
and general character of the building of which the demised premises form
a part.
6. No other or further assignment or subletting shall be made
except in compliance with the provisions of this Article and Articles 3
and 41 hereof.
ADDITIONAL PARAGRAPHS attached to and forming a part of lease dated
August 22, 1995 between 112 WEST 34TH STREET COMPANY and KLEINERT'S,
INC. OF NEW YORK.
50. It is understood and agreed that this lease is submitted to
Tenant in the understanding that it shall not be considered an offer and
shall not bind Landlord in any way until (i) Tenant has duly executed
and delivered duplicate originals to Landlord and (ii) Landlord has
executed and delivered one of said originals to Tenants.
51. Tenant shall not be required to pay base rent, for the four (4)
months of November, 1995, December, 1995, January, 1996 and February,
1996. It is understood and agreed that in no event shall tenant be
entitled to more than four (4) months free rent.
52. It is understood and agreed that Landlord and tenant will share
equally in the cost of the installation for Room 1710 as per plan
prepared by "The Phillips Janson Group". In no event shall Landlord's
cost exceed One Hundred Seventy Five Thousand Dollars ($175,000.00).
PLEASE NOTE: TENANT IS RESPONSIBLE TO PAY ANY FEES INCURRED IN
DESIGNING THE SPACE. THE SPACE DESIGNER AND/OR ARCHITECT FEES SHALL BE
THE SOLE RESPONSIBILITY OF TENANT.
<PAGE>
GUARANTY
MERIDIAN LEASING INC.
Meridian
GUARANTY
Master Lease Agreement No. 01618
In order to induce MERIDIAN LEASING INC. ("Lessor") at its sole
discretion to enter into one or more Master Lease Agreements, and any
and all Schedules thereto now existing or hereafter executed, with
KLEINERT'S INC. OF NEW YORK, a New York corporation ("Lessee"), each
of the undersigned guarantors (collectively, the "Guarantors"),
intending to be legally bound, hereby warrants and guarantees,
unconditionally and absolutely, the prompt and full payment to Lessor
and performance when due of nil rent obligations, indebtedness and
liabilities of any kind and description, and the timely and faithful
performance of all other duties, obligations and responsibilities, of
Lessee to Lessor, howsoever created or incurred, whether now existing
or hereafter arising, due or to become due, absolute or contingent,
primary or secondary, joint or several or both, direct or indirect,
secured or unsecured, regardless of how long before or after the date
hereof such obligations may have been or will be incurred, and whether
or not Guarantors, or any of them, will not have received actual
notice thereof, together with all expenses of obtaining or endeavoring
to obtain payment or performance thereof or security therefore, or of
enforcing this Guaranty, including attorneys' fees and other legal
expenses (all of the foregoing hereinafter being referred to
collectively as the "Obligations"). This Guaranty is unlimited in
amount and may be relied upon hereafter unless notice of revocation is
provided as required hereunder. This Guaranty is a continuing one and
will be effective and binding upon the Guarantors regardless of how
long before or after the date hereof any of the Obligations are
incurred.
SECTION 1. GUARANTY OF PAYMENT.
This Guaranty is a guaranty of payment and not a guaranty of
collection and may be enforced by Lessor without first making demand
upon or proceeding against Lessee or any other person liable upon any
Obligation and without first resorting to any security or other
property or invoking any other available rights or remedies, and this
Guaranty will continue until it is revoked by written notice given by
the Guarantor and actually received by Lessor. No such notice or
revocation will in any manner affect the operation and effect of this
Guaranty as to any Obligation arising or existing, whether or not
contingently, prior to the receipt of such notice by a responsible
officer of Lessor, or as to any Obligations arising thereafter created
pursuant to a commitment of Lessor made prior to the receipt of such
notice, and as to all such Obligations this Guaranty will remain in
full force and effect.
SECTION 2. UNCONDITIONAL.
Each Guarantor agrees that its or his or her liability hereunder
is absolute, unconditional and continuing, and that, without notice to
such or any other Guarantor and without releasing or affecting the
liability of any Guarantor to any extent, Lessor may extend, renew,
modify, release, surrender, exchange, compromise or settle, or waive
any term of, any Obligation, may elect not to enforce any right or to
forego any remedy of Lessor with respect to any Obligation or any
security held therefore or any other guaranty thereof, and may
exchange, release or surrender any such security or other guaranty.
Notice of the acceptance of this Guaranty and of the creation of the
Obligation or of any default thereon, as well as all demand, protest,
presentment for acceptance or payment, or notice of dishonor or of
protest with respect to the Obligations, are hereby waived. The
liabilities of the Guarantors hereunder will not be affected by (a)
any failure to retain or preserve or any lack of prior enforcement of
any rights against any person or persons (including without limitation
Lessee or any of the Guarantors or any other accommodation party) or
any property, (b) the invalidity of any such rights which may be
attempted to be obtained or enforced, (c) any delay in enforcing or
failure to enforce any such rights, even if such rights are thereby
lost or (d) any delay in making demand on Lessee, any one or more of
the Guarantors or any other accommodation party for performance or
payment of the Obligation.
<PAGE>
SECTION 3. DEFAULT.
If an Obligation is not promptly and fully paid or performed, or
if any Guarantor or Lessee shall die or be dissolved, or if all or
substantially all of the assets of any Guarantor or Lessee are sold or
otherwise transferred, or proceedings in the nature of insolvency,
receivership, bankruptcy or reorganization will be commenced with
respect to Lessee or any Guarantor or if Lessee or any Guarantor will
make an assignment for the benefit of creditors or will be the subject
of a receiver for all or any part of its property, or if any judgment
will be entered against Lessee or any Guarantor and will not have been
paid or bonded within ten (10) days, or any levy, writ of attachment,
execution or other process will issue against any property of Lessee
or any Guarantor, or if Lessee or any Guarantor will become insolvent
or unable to pay its or his or her debts as they mature, or if the
financial condition of Lessee or any Guarantor will change such that,
in the judgment of Lessor, Lessor's risk is materially increased, then
and in any such event all of the Obligations will forthwith become and
be immediately due and payable by the Guarantors and each of them all
without any demand or notice whatsoever.
In the event of any default on the part of any Guarantor in
respect of any of the Obligations, Lessor may, at its option and
without notice to any other Guarantor, exercise as to any security
held for this Guaranty all of the rights and remedies of a secured
creditor under the Uniform Commercial Code as in effect in
Pennsylvania and, without limitation, may apply the proceeds of any
sale or other disposition of any collateral, and any other funds
whatsoever in Lessor's hands, to the payment or other satisfaction of
any one or more of the Obligations (after deducting all costs,
attorneys' fees and other expenses incurred in the realization on or
perfection or protection of such security) in such order as Lessor may
elect, without any duty to marshal any such property in favor of any
Guarantor or other person, all without releasing any Guarantor from
Liability to pay any deficiency remaining unpaid after such
application. So long as any Obligation has not been paid in full, no
payment by any Guarantor pursuant to any provision hereof will entitle
such (guarantor, by subrogation to Lessor's rights or otherwise, to
any payment by or out of the property of Lessee.
SECTION 4. SECURITY.
As security for each of the Obligations and its or his or leer
liability hereunder in respect thereof, each Guarantor hereby assigns
and pledges to Lessor and grants to Lessor a general continuing lien
upon, security interest in and right of offset against all monies,
deposits or other claims and property of such Guarantor, or in which
such Guarantor may have any interest, which may be in the possession
of Lessor in any capacity whatsoever.
SECTION 5. CONFESSION OF JUDGMENT.
Each Guarantor hereby irrevocably authorizes, appoints and
empowers any attorney of any court of record, upon any default
hereunder or by the Lessee with respect to any Obligations to appear
for and confess judgment against such Guarantor or against any one or
more of the Guarantors, jointly or severally, for all or any portion
of the unpaid amount of the Obligations, as evidenced by an affidavit
signed by an officer of Lessor setting forth the amount or amounts
then due, plus attorneys' fees of 15% of the amount due, but not less
than $500, and costs of suit, with release of errors and without right
of appeal. If a copy hereof, verified by Lessor, will have been filed
in any such proceeding, it will not be necessary to file the original
hereof as a warrant of attorney, and the original or any copy hereof
will be a good and sufficient warrant of attorney. Each Guarantor
hereby waives the right to stay any execution and the benefits of all
exemption laws now or hereafter in effect. No single exercise of the
foregoing warrant and power to confess judgment will be deemed to
exhaust the power, whether or not such exercise will be held by any
court to be invalid, voidable or void, but the power will continue
undiminished and may be exercised from time to time, and
contemporaneously in more than one jurisdiction, as often as Lessor
will elect until all the Obligations have been paid in full.
<PAGE>
SECTION 6. LEGAL CONSTRUCTION AND JURISDICTION.
All issues arising hereunder will be governed by the laws of
Pennsylvania. Each Guarantor consents to the Jurisdiction of the
courts of Pennsylvania and the Federal District Court for the Eastern
District of Pennsylvania in any action or proceeding which may be
brought against it or him or her, under or in connection with this
Guaranty or any Obligation or otherwise, or to enforce any agreement
contained herein or in any such Obligation, and in the event any such
action or proceeding will be brought against, it, such Guarantor
agrees not to raise any objection to such jurisdiction or to the
laying of venue in Berks County, Pennsylvania. Each Guarantor agrees
that service of process in any such action or proceeding may be duly
brought upon it or him by her by service in accordance with applicable
court rules or with the provisions of the Uniform Interstate and
International Procedure Act.
<PAGE>
SECTION 7. MISCELLANEOUS.
This Guaranty will be binding upon the Guarantors and each of
them and their respective heirs, executors, administrators, personal
representatives, successors and assigns, and, if executed by more than
one party, will be their joint and several obligation and will not be
revoked or impaired as to any of them by the death or dissolution of
any of them or by any release or revocation as to any of them. This
Guaranty will inure to the benefit of Lessor and its successors and
assigns and will he construed liberally in favor of Lessor for its
benefit and protection, the Guarantors acknowledging that this
Guaranty has been a material inducement to Lessor to extend lease
accommodations to or for the account of Lessee. As used herein, words
of any gender will include those of any other gender, and the singular
will include the plural and vice versa, whenever the same is necessary
to give a fair and meaningful construction to this instrument. A
subsequent guaranty in favor of Lessor by any Guarantor by any other
guarantor of any of the Obligations will not be deemed to be in lieu
of or to supersede or terminate this Guaranty but will be construed as
an additional or supplemental guaranty unless expressly provided to
the contrary therein, and in the event any Guarantor or other
guarantor has given to Lessor a previous guaranty or guaranties, this
Guaranty will be construed to be an additional or supplemental
guaranty, and not to be in lieu of or to terminate such previous
guaranty or guaranties.
SECTION 8. ENTIRE AGREEMENT.
No waiver by Lessor of any of its rights hereunder nor any
modification hereof will be effective unless in writing signed by an
authorized officer of Lessor, and any such waivers will extend only to
the specific instance involved and for the specific purpose stated and
will not impair any other right of Lessor. Although referred to as a
Guaranty, this instrument is intended to be a contract of suretyship,
upon which each Guarantor intends to be legally bound, jointly and
severally with the other Guarantors, if any.
Signed, sealed and delivered by the undersigned Guarantors under
due authorization on the date hereafter Indicated.
Commonwealth of Pennsylvania Name: Kleinert's, Inc.
----------------
(Guarantor)
COUNTY OF Montgomery Signature: /s/ Joseph J. Connors
---------------------
Title: Executive Vice President
------------------------
<PAGE>
On the 29th day of November, 95, before me, the subscriber, a
notary public for the State and County above, personally appeared the
above named Joseph J. Connors and in due form of law acknowledged the
within and foregoing Guaranty and that (he) (she) (they) executed the
same for the purposes contained herein.
(610) 828-7261 Date: November 29, 1995
-------------- -------------------------
Phone Number
/s/ Denise Hale Witness: /s/ Michael Boyle
--------------- --------------------------
Notary Public
Date: November 29, 1995
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<PAGE>
Meridian Leasing
MASTER LEASE AGREEMENT
FINANCE LEASE, ARTICLE 2A UCC
MERIDIAN LEASING INC.
Master Lease Agreement No. 01678
THIS MASTER LEASE AGREEMENT (the "Lease"), dated as of the 29th day of
November, 1995, is executed by and between MERIDIAN LEASING INC., a
Pennsylvania corporation, with a place of business located at One Meridian
Boulevard, Wyomissing, PA 19610 (together with its successors and assigns,
if any, the "Lessor") and KLEINERT'S INC. OF NEW YORK, a New York
corporation, with its mailing address and chief place of business at 112
W. 34th Street Suite 1711 New York, NY 10120, (the "Lessee").
The Parties hereto, for good and valuable consideration and intending to
be legally bound, hereby agree as follows:
1. MASTER LEASE WITH SCHEDULES:
(a) Subject to the terms and conditions set forth below, Lessor
agrees to lease to Lessee and Lessee agrees to lease from Lessor such unit
or units of equipment (the "Equipment" and individually sometimes "Item"
or "Item of Equipment") described in any Master Lease Schedule (a
"Schedule") now or hereafter from time to time executed by the parties
pursuant hereto, and any and all such Schedules are deemed a part hereof.
Each Schedule shall incorporate this Lease by reference. Capitalized terms
not otherwise defined herein will have the meaning provided for in any
Schedules.
(b) Lessor has no obligation to purchase Equipment from the
manufacturer or supplier thereof ("Supplier") or to lease the same to
Lessee under any Schedule unless each of the following is satisfied and
delivered to Lessor prior to the Commencement Date with respect to the
Schedule in form and substance satisfactory to Lessor: (i) a Schedule
relating to the Equipment then being leased hereunder reflecting Lessor's
Cost, and a term and rate satisfactory to Lessor, (ii) unless Lessor has
delivered its purchase order for the purchase of such Equipment, a
Purchase Order Assignment and Consent in form satisfactory to Lessor,
(iii) a Closing Certificate in form satisfactory to Lessor, (iv) a
Certificate of Insurance which complies with the requirements of Section 7
and the Schedule, and (v) a properly executed Certificate of Acceptance in
form satisfactory to Lessor covering each Item of Equipment set forth in
the Schedule and the execution by Lessee of any Certificate of Acceptance
will (i) confirm that each Item of Equipment described thereon has been
delivered to and irrevocably accepted by Lessee for lease hereunder, and
(ii) constitute Lessee's acknowledgment that Lessee has received a copy of
and has approved the contract under which Lessor acquired the Equipment.
Lessee hereby waives as between Lessor and Lessee any right to revoke
acceptance of the Equipment under this Lease once made and evidenced by
its Certificate of Acceptance. Lessee shall also deliver such other
documents as Lessor may reasonably request.
2. TERM:
The Lease of and rent for Equipment leased under any Schedule will
commence on the day specified in the Schedule as the Commencement Date,
and will continue for the period specified as the "term" in the said
Schedule as the same may be extended pursuant to the terms hereof.
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3. RENT:
Payment of rent will be made during the term of the Lease on the due
dates and in the amount set forth in the Schedule and will not be prorated
for any cause or reason except as herein specifically provided. If one or
more advance payments of rent are required, the advance rent will be due
and paid in the amount specified in the Schedule upon acceptance by Lessor
of each Schedule providing for such rent. Lessor will apply said advance
rent toward the first basic rent payment and, provided no default is then
existent hereunder, the balance, if any, of the advance rent will be
applied to the final rent payment. Subsequent rent payments will be due
periodically thereafter as specified in the Schedule. In no event will any
advance rent or any other rent payment be refunded to Lessee, it being the
intention of the parties hereto that the rents and other amounts payable
by the Lessee hereunder will continue to be payable in all events unless
the obligation to pay the same will be terminated pursuant to the terms
hereof. All rent will be paid to the Lessor in immediately available funds
without notice or demand on the due dates with respect thereto at Lessor's
address set forth above or as otherwise directed by the Lessor in writing.
In order to secure all obligations of Lessee hereunder, Lessee hereby
grants to Lessor a security interest in the amount of any advance rent not
applied to the first basic rent payment.
4. USE, OPERATION AND INDEMNIFICATION:
(a) Lessee will not assign, sublet, mortgage, hypothecate or alter
any of the Equipment leased hereunder or any interest in the Lease, nor
will Lessee remove any of the Equipment from the location specified in the
Schedule without (except in the ordinary course of its business for use or
maintenance) the prior written consent of Lessor, and any attempt to so
assign, sublet, mortgage, hypothecate, alter or remove will constitute a
default hereunder and such assignment, sublease, mortgage, or
hypothecation will be void and without effect. Lessee will keep all
Equipment leased hereunder free and clear from all claims, liens and
encumbrances whatsoever.
(b) Lessee agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including
legal expenses of whatsoever kind and nature, in contract or tort,
howsoever arising from any cause whatsoever including but not limited to
Lessor's strict liability in tort, or otherwise arising out of (i) the
selection, manufacture, purchase, financing, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Lease, and
the delivery, lease, possession, maintenance, uses, condition, return or
operation of Equipment (including, without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or
employee of Lessee. Lessee hereby represents and warrants that each Item
of Equipment acquired and leased hereunder is new and not previously used
unless specifically disclosed on the Schedule and Lessee agrees to
indemnify, save and keep harmless Lessor against any loss howsoever
arising directly or indirectly from any subsequent determination that the
Supplier has sold Items of Equipment for lease hereunder which have been
previously used. Lessee will, upon request, at its own expense, defend any
and all actions based on, or arising out of, any of the foregoing and this
indemnification will survive termination of the Lease.
(c) Lessee will not without the prior written consent of Lessor (i)
make any material alterations of the Equipment or (ii) affix or install
any accessory, equipment or device on any Equipment leased hereunder if
such addition will impair the originally intended function or use of such
Equipment. All additions, repairs, parts, supplies, accessories, equipment
and devices furnished, attached or fixed to any Equipment will thereupon
without further act or instrument become the property of Lessor (except
such as may be removed without in any way affecting or impairing the
originally intended function, condition or use of such Item). Further,
Lessee will not, without the prior written consent of Lessor and subject
to such conditions as Lessor may impose for its protection, affix or
install any Equipment leased hereunder to or in any other personal
property or in real property.
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5. SERVICE AND MAINTENANCE:
(a) Lessee will, at its sole expense, at all tines maintain all Equipment
consistent with recommendations of the Supplier and as required by the
conditions of any warranty in order to maintain same current and effective
and in good operating order, repair, condition and appearance and keep all
Equipment protected from the elements, except during use in the normally
contemplated manner. Lessee will, at its own expense, provide all
maintenance and service and make all repairs and replacements reasonably
necessary for such purposes. If any parts of the Equipment are worn out,
lost or are otherwise rendered unfit for use, Lessee will, at its own
expense, replace such parts promptly by replacement parts of at least
equal value and utility with title thereto vesting in Lessor free and
clear of all liens and encumbrances. Lessee will, at its expense, affix in
a prominent position on each Item of Equipment plates, tags or other
identifying labels showing ownership of the Equipment by Lessor. Lessor
will, at all reasonable times, have the right to inspect the Equipment and
Lessee's maintenance records related thereto.
(b) Lessee will, at its sole expense, make all alterations and
modifications with respect to the Equipment that may at any time during
the term of this Lease or any Schedule hereunder by required to comply
with any applicable law or any governmental rule or regulation.
6. RETURN OF EQUIPMENT:
(a) Unless otherwise provided in the Schedule, upon termination of the
Lease or of any Schedule upon default or by expiration of the term hereof
or thereof or upon termination for any other cause, Lessee will, at its
sole cost and expense, promptly return the Equipment to Lessor at any
address specified by Lessor in the same condition as received, reasonable
wear and tear and normal depreciation from proper use and maintenance
alone excepted, capable of performing its originally intended use at its
originally rated capacity. Lessee will be responsible for all costs and
expenses for packing, shipping and insuring the Equipment until delivered
to the location designated by Lessor. Lessee will also provide storage
without charge to Lessor, if requested' for ninety (90) days after the
termination of the Lease. At least ninety (90) days prior to the last day
of the term, Lessee shall deliver to Lessor a report of an independent
expert advising Lessor on the condition of the Equipment and its
compliance with the terms hereof.
(b) In addition to Lessor's other rights and remedies hereunder, if the
Equipment is not returned on the last day of the term or repairs are
necessary to place the Equipment in the condition required hereby, Lessee
shall continue to pay for the period of delay and acceptance of such rents
by Lessor will not constitute a renewal of the Lease or a waiver of the
Lessor's right to a prompt return.
7. INSURANCE:
Lessee hereby assumes all risks of damage, loss, theft, or destruction,
partial or complete, with respect to each Item of Equipment during the
term of the Lease and during any storage period until Lessee has returned
or disposed of the Equipment as provided for herein. Lessee will, at its
own expense, keep each Item of Equipment insured against all risks with
extended coverage and insurance companies satisfactory to Lessor, with
Lessor named as loss payee for an amount at least equal to such amount as
designated in writing from time to time by Lessor and, failing any such
designation, to an amount at least equal to the greater of (1) the fair
market value of the Equipment, or (ii) the then current Stipulated Loss
Value of the Equipment determined by reference to the related Schedule.
Lessee agrees to obtain and maintain at its expense with insurance
companies of recognized standing general public liability insurance for
the protection of Lessor and Lessee, as their interests may appear, in an
amount at all times satisfactory to Lessor and otherwise as specified in
the related Schedule against claims for bodily injury, death or property
damage arising out of the use, ownership, possession, operation or
condition of the Equipment. Each insurer will agree, by endorsement upon
the policy or policies issued by it, or by independent instruments
furnished to Lessor, that Lessor will have the power to file claims
against the insurer under said policy, that it will give Lessor thirty
(30) days written notice before the policy or policies in question will be
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altered, expired or canceled last day and that no act or default of any
person other than Lessor, its agents, or those claiming under Lessor, will
affect Lessor's rights to recover under such policy or policies in case of
loss. Lessee will deliver to Lessor the policies or evidence of insurance
and renewal thereof satisfactory to Lessor prior to the Commencement Date
and thirty (30) days prior to each expiration date thereof for each Item
of Equipment. The failure of Lessee to secure or maintain such insurance
will constitute a default under this Lease. In the event of such breach,
Lessor may, but will not be obligated to, obtain such insurance. In the
event that Lessor obtains such insurance, an amount equal to the cost of
such insurance will be deemed supplemental rent to be paid forthwith by
Lessee.
8. LOSS OR DAMAGE:
(a) Lessee hereby assumes and is solely responsible for the entire risk
of use, operation and/or loss of the Equipment and for each and every
accident or hazard resulting therefrom and all losses and damages
associated therewith howsoever arising.
(b) In the event of the total loss, destruction, theft or damage beyond
repair (determined without reference to the remaining term with respect
thereto) of the Equipment or any Item (a "Casualty Occurrence"), Lessee
will pay to Lessor on the next due date for rent following the Casualty
Occurrence or on the last day of the term with respect to such Equipment
an amount equal to the rent then due plus an amount equal to the
Stipulated Loss Value of such Equipment as of such due date. Upon payment
of such amounts, and provided no default exists hereunder, Lessee will be
entitled to recover possession of such Item and title thereto will vest in
Lessee free and clear of the right and interest of Lessor.
(c) In the event of damage to any Item of Equipment which does not amount
to a Casualty Occurrence, Lessee will give prompt notice of such damage to
Lessor and, at Lessee's sole cost and expense, Lessee will promptly repair
such Item, restoring it to its previous condition and the condition
assuming Lessee had met all of its obligations required for maintenance
hereunder. Provided Lessee is not in breach or default of this Lease, any
proceeds of insurance received by Lessor with respect to any such loss
will be paid over by Lessor to Lessee to the extent necessary to reimburse
Lessee for costs incurred and paid by Lessee in repairing such damaged
Equipment, but only upon evidence satisfactory to Lessor that such repairs
have been accomplished.
9. TRANSFER OF WARRANTIES:
Notwithstanding anything contained herein to the contrary and to the
extent permitted by law and contract, Lessor will pass through without
representation to Lessee the benefit of all warranties, if any, of the
Supplier of the Equipment and, so long as there exists no default
hereunder, Lessee will have the right to, and will, directly avail itself
of all warranties made by the Supplier with respect to the Equipment.
Lessee will give Lessor notice of any claim made by Lessee against the
Supplier of the Equipment and any cash settlement of any such claim will
be payable solely to Lessor.
10. TAX TREATMENT AND INDEMNIFICATIONS:
(a) It is acknowledged and agreed by the parties that they are entering
into this Lease with the assumption that Lessor and the consolidated group
of which Lessor is a member (all references to Lessor in this Section
include such consolidated group) will be treated for federal income tax
purposes (and to the extent allowable, for state and local tax purposes)
as the owner of all Equipment leased hereunder and will have a federal tax
rate of at least 35% during the term of the Lease.
(b) Unless otherwise provided for in a particular Schedule, the Lessee
acknowledges and agrees that each Schedule has been executed by Lessor
based upon the following representations and warranties of Lessee: (i)
each Item of Equipment has been placed in service on the Commencement
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Date; (ii) Lessor will not under the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code"), be
required to include in its gross income, for federal income tax purposes,
any amount with respect to any improvement, modification or addition made
by Lessee to any Item of Equipment; (iii) Lessor shall be entitled to
accelerated cost recovery deductions ("Recovery Deductions") for Lessor's
Cost of each Item of Equipment over the number of years indicated on the
related Schedule by using the 200% declining balance method permitted
under Code Section 168 and the half year convention, unless otherwise
required by operation of Code Section 168(d)(3)(A); (iv) no Item of
Equipment is limited use property within the meaning of Rev. Proc. 76-30;
and (v) for federal income tax purposes, all amounts included in the gross
income of the Lessor with respect to each Item of Equipment will be
treated as derived from or allocable to sources within the United States.
(c) If by reason of (1) the inaccuracy in law or in fact of any of the
assumptions or representations or warranties set forth in Subsections (a)
or (b) of this Section, (2) the inaccuracy of any statement or any letter
or document furnished to Lessor by or on behalf of Lessee in connection
with the transactions contemplated under the Lease, or (3) the act,
failure to act or omission of or by Lessee of (4) any change in the Code
occurring prior to the Commencement Date on any Schedule, Lessor will (i)
lose, will not have the right to claim or if there will be disallowed with
respect to Lessor all or any portion of the Recovery Deduction as to any
Item of Equipment on such Schedule, (ii) be required to include in its
gross income any alteration, modifications or addition to, any Item, other
than an alteration, modification or addition which is permitted without
adverse tax consequences to Lessor under Rev. Procs. 75-21, 76-30 or 79-48
(an "Improvement Loss"), or (iii) suffer a decrease in Lessor's net return
over the then remaining portion of the term of the Lease (any such
occurrence referred to hereinafter as "Loss") for such Schedule, then at
Lessor's option either (X) the rent on such Schedule will, on and after
the next succeeding date for the payment thereof upon notice to the Lessee
by the Lessor that a Loss has occurred, and describing the amount as to
which Lessor intends to claim indemnification and the reason for such
adjustment in reasonable detail, be increased by such amount, which will
cause Lessor's net return over the then remaining portion of the term of
the Lease (taking into account the tax effect from deferred utilization of
tax basis resulting from changes in the method of calculating Recovery
Deductions) to equal the net return that would have been available if such
Loss had not occurred, or (Y) in lieu of a rent increase, the Lessee shall
pay to Lessor on such next succeeding date for the payment of rent such
sum as will cause Lessor's net return over the term of the Lease in
respect of the Equipment to equal the net return that would have been
available if such Loss had not occurred. If such Loss occurs after the
expiration or termination of the Lease, Lessor will notify Lessee of such
Loss and Lessee will, within sixty (60) days after such notice, pay to
Lessor such sum as required by the preceding clause (Y). Lessee will
forthwith pay on demand to Lessor an amount on an after-tax basis which
will be equal to the amount of any interest and/or penalties which may be
assessed by the United States or any state against Lessor as a result of
the Loss.
(d) For purposes of this Section a Loss will occur upon the earliest of
(1) the happening of any event which in Lessor's judgment reasonably may
cause such Lass, (2) the payment by Lessor to the Internal Revenue Service
of the tax increase, if any, resulting from such Loss, or (3) the
adjustment of the tax return of Lessor to reflect such Loss. Lessor will
be responsible for, and will not be entitled to a payment under this
Section on account of, any Loss due solely to one or more of the following
events: (i) the failure of Lessor to have sufficient taxable income to
benefit from the Recovery Deduction; (ii) any disposition of the Equipment
by Lessor prior to any default which has occurred and is continuing under
the Lease; or (iii) the failure of Lessor to properly claim the Recovery
Deduction.
(e) The indemnities and assumptions of liability provided for herein and
all Lessor's rights and privileges herein will continue in full force and
effect notwithstanding the expiration or termination of the Lease.
11. DISCLAIMER:
Lessee acknowledges that it alone selects the Equipment and the
Supplier(s) thereof. LESSEE UNDERSTANDS AND AGREES THAT LESSOR MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED, WITH RESPECT
TO THE EQUIPMENT. IT IS UNDERSTOOD AND AGREED THAT NO WARRANTY IS TO BE
IMPLIED WITH RESPECT TO THE CONDITION OF THE EQUIPMENT, ITS
MERCHANTABILITY, THE FITNESS OF THE EQUIPMENT FOR A PARTICULAR PURPOSE, OR
WITH RESPECT TO PATENT, TRADEMARK, COPYRIGHT OR OTHER INFRINGEMENT OR THE
LIKE. NOTHING HEREIN CONTAINED WILL BE CONSTRUED AS DEPRIVING THE LESSEE
OF WHATEVER RIGHTS, IF ANY, LESSEE MAY HAVE AGAINST THE SUPPLIER AND/OR
MANUFACTURER OF THE EQUIPMENT AND LESSEE AGREES TO LOOK SOLELY TO SUCH
THIRD PARTIES WITH RESPECT TO ANY AND ALL CLAIMS CONCERNING THE EQUIPMENT.
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12. NO ABATEMENT:
This Lease is a net Lease, intended by the parties to constitute a
"Finance Lease" under Article 2A of the Uniform Commercial Code as in
effect in Pennsylvania (the "UCC") and Lessee waives any right to suspend
the performance of all or any of its obligations hereunder. This is not a
consumer lease and the promises of Lessee hereunder and under each
Schedule are irrevocable upon acceptance of the Equipment under each
Schedule. Lessor and Lessee each hereby waive the provisions of the UCC,
Section 2A 401 through 403 inclusive, and it is the intent of the parties
that under no circumstances is the Lease or any Schedule to be subject to
repudiation by either party. Lessee's obligation to pay rent and all other
amounts due hereunder is absolute, unconditional and not subject to
cancellation. Lessee agrees to pay rent and all other amounts due
hereunder when due without abatement or reduction, irrespective of any
claims, demands, set-offs, actions, suits or proceedings that it may have
or assert against Lessor or any Supplier or manufacturer of Equipment or
any part thereof. Lessor will have no liability to Lessee in the event
that any Supplier, manufacturer or one or more others fails to perform any
obligations at any time due to Lessor, Lessee, persons in privity with
Lessor or Lessee and any other persons, or any one or more of the
foregoing.
13. DEFAULT; REMEDIES:
(a) Each of the following will constitute a default hereunder: (a) Lessee
fails to pay rent or any other amount when due under any Schedule and such
failure will continue for five (5) days from the due date thereof; (b)
Lessee breaches any of the other terms or covenants hereof (including
without limitation any Schedule) or commits any other act of default
specified in this Lease; (c) any representation or warranty of Lessee
contained herein or in any other document or instrument delivered in
connection herewith or made from time to time hereafter is false or
misleading when made; (d) Lessee or any Guarantor become insolvent or
ceases to do business as a going concern; (e) the Equipment or any Item is
abused, illegally used, or misused; (f) Lessee or any Guarantor makes any
assignment for the benefit of creditors, receivership or the like is filed
with respect to Lessee, or any substantial part of Lessee's property is
attached or a receiver, trustee or liquidator is appointed for Lessee or
any substantial part of Lessee's property or whenever Lessor may deem
itself insecure hereunder; (g) Lessee or any Guarantor fails to make any
payment on indebtedness for borrowed money when due, or to make any
payment on a lease or installment sale obligation when due, in each case
when any applicable grace period for such obligation has expired and the
lender, lessor or creditor has commenced to exercise any remedy, but only
if the indebtedness or other obligations for which payment is sought is an
amount equal to or in excess of $100,000; (h) final judgment for the
payment of money aggregating in excess of $100,000 will be outstanding
against Lessee for more than sixty (60) days from the date of entry and
will not have been discharged in full or stayed or fully bonded; or (i)
Lessee or any Guarantor shall suffer any material adverse change in their
financial position which may reasonably cause Lessor to feel the payment
of rent hereunder may be impaired. On the occasion of any such default
hereunder, Lessor, at its option, may do any one or more of the following:
(1) declare this Lease and any or all Schedules in default upon notice to
Lessee, whereupon the entire amount of rent and all other amounts
remaining to be paid over the balance of the term of all Equipment then
leased hereunder, computed from the date of Lessee's default, will become
immediately due and payable and be accelerated; (2) proceed by appropriate
court action or actions at law or in equity or in bankruptcy to enforce
performance by Lessee of the covenants and terms of this Lease and/or to
recover damages for the breach thereof; (3) terminate this Lease and any
or all Schedules upon notice to Lessee; (4) whether or not this Lease or
any Schedules be so terminated, upon demand by Lessor, Lessee will return
the Equipment consistent with its obligation in Section 6 hereof. Lessor
may without notice to Lessee repossess the Equipment wherever found, with
or without legal process, and for this purpose Lessor and/or its agents
may enter upon any premises of or under control or jurisdiction of Lessee
or any agent of Lessee without liability for suit, action or other
proceedings by Lessee (any damages occasioned by such repossession being
hereby expressly waived by Lessee except for the damages occasioned by
gross negligence or willful misconduct, and remove the Equipment
therefrom.
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(b) With respect to any Equipment returned to Lessor, or repossessed by
Lessor pursuant to provision (4) above, Lessor may hold or use such
Equipment for any purpose whatsoever or either sell same at a private or
public sale, cash or credit, or re-lease same for such term and upon such
rental as will be solely determined by Lessor. In the event of the sale or
re-leasing by Lessor of any such Equipment, Lessee will be liable for, and
Lessor may forthwith recover from Lessee as liquidated damages for breach
of this Lease, and not as a penalty, an amount equal to (X) the entire
amount of rent which would have accrued for the balance of the term for
such Equipment computed from the date of Lessee's default, plus (Y) an
amount determined by multiplying Lessor's Cost by the percentage indicated
for the Stipulated Loss Values for the final rent period during the term
hereof, less (Z) the proceeds of any sale or re-leasing of such Equipment,
after first deducting therefrom all costs and expenses of repossession,
storage, repairs, reconditioning, sale, re-leasing, attorneys' fees and
collection fees with respect to such Equipment provided, however, in no
event shall the damages calculated hereunder be less than an amount equal
to 10% of Lessor's Cost of the Equipment. If Lessee fails to return any
Equipment to Lessor or Lessor is unable, for any reason, to effect
repossession of any Equipment, then with respect to such Equipment, Lessee
will be liable for, and Lessor may forthwith recover from Lessee as
liquidated damages for breach of this Lease, and not as a penalty, an
amount equal to the sum of the amounts specified in items (X) and (Y)
above for such Equipment provided, however, in no event shall the damages
calculated hereunder be less than an amount equal to 10% of Lessor's Cost
of the Equipment. Whether or not any Equipment is returned to, or
repossessed by Lessor, as aforesaid, Lessee will also be liable for, and
Lessor may forthwith recover from Lessee, all unpaid rent and other unpaid
sums that accrued prior to the date of Lessee's default. In addition to
the foregoing, Lessor may also recover from Lessee all costs and expenses,
including without limitation attorneys' fees and fees of collection
agencies, incurred by Lessor in exercising any of its rights or remedies
hereunder. Since pursuant to the foregoing Lessor may receive or recover
payment of the amounts specified in paragraph (1) and items (X) and (Y)
above earlier than Lessor would otherwise be entitled to receive or
recover same but for Lessee's default, such amounts will be discounted to
their then present value at the rate of six percent (6%) per annum, and
there will be added to such amounts, after such discount, interest at the
rate specified in Section 18 hereof from the date of Lessee's default up
to the date of the payment of such amounts to Lessor.
(c) Lessee hereby AUTHORIZES THE PROTHONOTARY OR CLERK OR ANY ATTORNEY OF
ANY COURT OF RECORD OF PENNSYLVANIA OR ELSEWHERE, UPON OR AFTER THE
OCCURRENCE OF ANY DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST
LESSEE AT ANY TIME FOR ALL AMOUNTS DUE HEREUNDER INCLUDING ACCELERATED
RENTALS AS PROVIDED FOR HEREIN INCLUDING THE AMOUNT DUE UPON FAILURE TO
RETURN THE EQUIPMENT AND ALL OTHER DAMAGES OR OTHER AMOUNTS TO WHICH
LESSOR MAY BE ENTITLED UPON DEFAULT, WITH OR WITHOUT DECLARATION, WITH
COSTS OF SUIT, RELEASE OF ERRORS, WITHOUT STAY OF EXECUTION AND WITH 15%
ADDED FOR LESSOR'S ATTORNEYS' FEES. Lessee waives and releases all relief
from all appraisement rights on any property levied upon, voluntarily
condemns the same, authorizes the Prothonotary, Clerk or attorney to enter
upon the Writ of Execution such voluntary condemnation and, to the extent
permitted by law, waives all rights or appeal, inquisition, stay of
execution and exemption under any law now or later in force. A copy of
this Lease, verified by Lessor, may be filed in such suit in lieu of the
original Lease. The right to confess judgment will not be exhausted by any
single or subsequent exercise, but Lessor will be entitled to confess
judgment successively, by any exercise thereof, whether or not such
exercise will be held by any court to be invalid, voidable or void, but
the power will continue undiminished and may be exercised from time to
time, and contemporaneously in more than one jurisdiction, as often as
Lessor will elect until all obligations of Lessee hereunder will have been
satisfied in full. Lessee consents to the jurisdiction of the courts of
Pennsylvania and the Federal District Court for the Eastern District of
Pennsylvania in any action or proceeding which may be brought under or in
connection with this Lease or any obligation with respect thereto or to
enforce any agreement contained herein or in any such obligation, and in
the event such action or proceeding will be brought against it, Lessee
agrees not to raise any objection to such jurisdiction or the laying of
venue in Berks County, Pennsylvania. Lessee agrees that service of process
in any such action or proceeding may be duly effected upon him or her by
service in accordance with the provisions of the Uniform Interstate and
International Procedure Act.
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14. CUMULATIVE REMEDIES:
The remedies herein provided in favor of Lessor are not exclusive, but
will be cumulative and will be in addition to all other remedies in
Lessor's favor existing in law, in equity or in bankruptcy. The receipt
and acceptance by Lessor of any rent or other payment after occurrence of
a default will not be deemed to be a waiver of such default on the part of
Lessor. In the event that any court or competent jurisdiction determines
that any provision of this Lease is invalid or unenforceable in whole or
in part, such determination will not prohibit Lessor from establishing its
damages sustained as a result of any breach of this Lease in any action or
proceeding in which Lessor seeks to recover such damages. Any repossession
or resale of any Equipment will not bar an action for damages for breach
of this Lease, as hereinbefore provided, and the bringing of an action or
the entry of judgment against Lessee will not bar Lessor's right to
repossess any or all Equipment.
15. ASSIGNMENTS:
Lessor may without the consent of Lessee sell, assign or otherwise
transfer or grant a security interest in, its right, title and interest in
the Equipment, this Lease or any Schedule and the rent due or to become
due thereunder and when so sold, assigned, transferred or encumbered this
Lease will be free of any counterclaim. set-off, defense or cross-claim by
Lessee as against such assignee whenever arising, before or after such
sale, assignment, transfer or security grant. Upon notice to Lessee of
such sale, assignment, transfer or security interest, Lessee agrees to
direct all payments hereunder, if requested, to Lessor's assignee.
16. PAYMENT OF TAXES:
Lessee agrees to pay promptly when due, and to indemnify and hold Lessor
harmless from, all license, title and registration fees whatsoever, all
levies, imposts, duties, charges or withholdings whatsoever, and all
sales, use, personal property, franchise (howsoever calculated), and other
taxes whatsoever together with any penalties, fines or interest thereon)
whether assessed levied or imposed by any governmental or taxing authority
against or upon Lessor or otherwise, with respect to any Equipment or the
purchase, acquisition, ownership, delivery, leasing, possession, use,
operation, control, return, or other disposition thereof, or the rents,
receipts or earnings arising therefrom, or with respect to this Lease,
excluding, however (i) any such taxes or charges to the extent they are
included in Lessor's Cost, (ii) any federal taxes levied on Lessor's net
income, or (iii) state or local taxes levied on Lessor's net income, as
net income . determined under, and at rates which do not exceed those
originally imposed by the jurisdiction in which the Equipment is located
as specified in the related Schedule. In the event any such fees, levies,
imposts, duties, charges or taxes are paid by Lessor, or if Lessor be
required to collect or pay any thereof, Lessee will reimburse Lessor
therefor (plus any penalties, fines or interest thereon) promptly upon
demand. Until Lessor notifies Lessee to the contrary, Lessee will promptly
before any penalty attaches, prepare and file in Lessor's name or on
Lessor's behalf all personal property tax returns covering the Equipment
and Lessee will pay the personal property taxes levied or assessed thereon
directly to the levying authority. If Lessor timely notifies Lessee that
Lessor will prepare and/or file any such return, Lessee will, promptly
upon being invoiced by Lessor, reimburse Lessor for the full amount of
such personal property taxes so paid by Lessor. All of the obligations of
Lessee under this Section with respect to any fees, levies, imposts,
duties, charges, withholdings and taxes (plus any penalties, fines or
interest thereon and, in the event that any of the foregoing are deemed to
be income to Lessor, any attendant income tax) assessed, levied, imposed
or accrued prior to the expiration or other termination of this Lease will
continue in full force and effect notwithstanding such expiration or other
termination. Lessee will either provide Lessor a copy of all property and
other tax returns filed hereunder by Lessee in Lessor's name or on
Lessor's behalf or provide to Lessor an affidavit or a responsible
corporate officer certifying that the property taxes so identified therein
have been reported and are current.
<PAGE>
17. LATE CHARGE:
If any rent or any other amount due hereunder from Lessee other than the
amounts due under this Section 17 is not paid within five (5) days after
the due date, Lessee agrees to pay a late charge equal to five percent
(5%) of such delinquent payment and such late charge shall be due and
payable within ten days after the date of notice of such late charge from
Lessor to Lessee. All amounts past due hereunder including any late charge
shall accrue interest at a rate equal to eighteen percent (18%) on the
amount of such delinquent rent or other payment, but not exceeding the
maximum permissible amount under applicable law. The failure of Lessor to
collect any late charge will not constitute a waiver of Lessor's right
with respect thereto.
18. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS:
In case of failure of Lessee to comply with any provision of the Lease or
any Schedule, Lessor will have the right, but will not be obligated, to
effect such compliance in whole or in part, and all money spent and
expenses incurred by Lessor will be paid by Lessee forthwith and will bear
interest at the daily equivalent of eighteen percent (18%) per annum from
the date said obligation was due. Lessor's action in effecting such
compliance will not be a waiver of Lessee's default. All such money spent
by and expenses of Lessor and any other obligation assumed or incurred by
Lessor in effecting such compliance will constitute additional rent
payable to Lessor with the next rent payment.
19. SEVERABILITY:
Any provision herein contained which may be invalid under applicable law
or any governmental rule or regulation, will be deemed omitted, modified
or altered to conform thereto.
20. NOTICES:
All notices required or permitted to be given hereunder will be in
writing and will be deemed given if sent by registered or certified mail
to the address of Lessor or Lessee stated herein or in any Schedule or to
such other place as either party may in writing direct pursuant to this
Section.
21. LEGAL CONSTRUCTION:
The validity, construction and performance of the Lease and any Schedule
will in all respects be governed by the laws of the Commonwealth of
Pennsylvania.
22. FINANCIAL INFORMATION:
Lessee agrees to provide Lessor with: (i) a balance sheet and statement
of income of Lessee, or any consolidated group of which Lessee is a
member, prepared in accordance with generally accepted accounting
principles and certified by independent certified public accountants or
other financial statements acceptable to Lessor within ninety (90) days
after the close of each fiscal year of Lessee occurring after the date of
this Lease, and (ii) from time to time such information relating to the
Equipment or the financial condition of the Lessee as Lessor may
reasonably request.
<PAGE>
23. ADDITIONAL DOCUMENTS
Lessee agrees to execute or obtain and deliver to Lessor at Lessor's
request such additional documents as Lessor may reasonably deem necessary
or appropriate to protect Lessor's interest in the Equipment and in this
Lease including, without limitation, financing statements. Lessee will
pay, or reimburse Lessor on demand, for any filing fees or expenses
incurred by Lessor in connection with any such additional documents.
Lessee hereby designates Lessor its attorney-in-fact and authorizes and
empowers Lessor to execute and complete in Lessee's name and on Lessee's
behalf all financing statements and other documents necessary to and
anticipated by any Schedule to provide to Lessor the benefits anticipated
by such Schedule.
24. MISCELLANEOUS:
The Lease will not be binding on Lessor until executed by an authorized
officer of Lessor. Lessor and Lessee waive all rights to trial by jury in
any litigation arising herefrom or in relation hereto. Lessee will, at
Lessee's sole expense, obtain from each owner, landlord, mortgagee or
other person having an encumbrance, lien or other interest on or in the
premises in which the Equipment is or will be located, all necessary
consents to the installment and use of the Equipment therein and the
removal thereof in accordance with the terms of the Lease, together with
waivers of claim with respect to the Equipment, and record the same when
and where necessary. This Lease shall be executed in two originals,
counterpart #2 shall be retained by Lessee and counterpart #1 shall be
retained by Lessor and duly marked as such and shall be the only original
for chaste' paper purposes.
25. ENTIRE AGREEMENT:
This Lease and any instrument referred to herein together with any
Schedule(s), Attachment(s), or Rider(s) signed by the parties or delivered
in connection herewith constitute the entire agreement of the parties with
respect to the subject matter hereof and will collectively constitute the
Lease with respect to an Item of Equipment and supersede any prior written
or oral agreement of the parties with respect to such Equipment. No agent
or employee of the Supplier is authorized to bind Lessor to the Lease, to
waive or alter any term or condition herein or add any provision hereto.
No variation or modification of the Lease and no waiver of any of its
provisions or conditions will be valid unless in writing and signed by
Lessor and Lessee.
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
------------------------ -------------------------
Edward R. Bruner Title: Treasurer
Title: President Date: November 29, 1995
Date: Witness: /s/ Denise L. Hale
-------------------------
Date: November 29, 1995
THE UNDERSIGNED LESSEE HEREBY ACKNOWLEDGES AND AGREES THAT ANY
MODIFICATION OR AMENDMENT OF THIS LEASE MUST BE IN WRITING AND THAT NO
MODIFICATION OR AMENDMENT SHALL BE ENFORCEABLE UNLESS SUCH MODIFICATION OR
AMENDMENT IS IN WRITING DULY SIGNED BY LESSEE AND LESSOR.
/s/ Gerald E. Monigle
- ---------------------
KLEINERT'S, INC. OF NEW YORK
<PAGE>
MERIDIAN LEASING INC. TRUE LEASE
MASTER LEASE SCHEDULE
Meridian Leasing Inc. Schedule Dated November 29, 1995 to
One Meridian Blvd. Master Lease Agreement No. 01678
Wyomissing, PA 19610 Master Lease Schedule #001
The Master Lease Agreement referred to above is incorporated herein by reference
as if set forth at length and Lessee and Lessor confirm all the terms and
provisions thereof except as specifically set forth herein to the contrary.
A. Equipment
This Schedule covers all Equipment described in Rider #1 attached hereto
and made a part hereof.
B. Definitions and Meanings of Certain Terms
1. Advance Rental: $4,485.42
2. Lessor's Cost: $144,040.56
3. Commencement Date: November 29, 1995 (To be the date of execution of the
Certificate of Acceptance)
4. Term of Lease:__________ days (the "interim term") followed by a basic
term of 36 months and ending on
5. First Rent Payment Factor: .03114
6. Second Rent Payment Factor: -----
7. Additional Provisions: $100.00 processing fee.
8. All Riders (if any) in addition to Rider #1 are listed hereinafter and
made a part hereof: Rider #2, #5
C. Stipulated Loss Values
The Stipulated Loss Value of any Item of Equipment may be determined as of
any rent due date by multiplying Lessor's Cost for the Equipment by the
percentage applicable to such date in each case determined by reference to the
Schedule of Stipulated Loss Values attached hereto.
D. Tax Treatment
This is a true lease and not a conditional sale and the provisions of
Section 10 of the Lease shall be fully applicable. Recovery Deductions: 5 year
period using the 200% declining balance method and the half-year convention,
unless otherwise required by operation of Code Section 168(d)(3)(A).
E. Rent Payments
Lessee promises to pay rent for the interim term, if any, on the first day
of the basic term in an amount equal to $______________ and thereafter Lessee
promises to pay rent for the basic term by making 36 consecutive installments of
rent, with the first such payment due ______________ and with succeeding
payments due on the _____________ day of each month thereafter. Lessee
thereafter promises to pay 35 additional installments of rent each in the amount
of $4,485.42 on the ________________ day of each succeeding month during the
basic term.
Except as expressly modified hereby, all terms and provisions of the Lease
remain in full force and effect. The parties hereto have caused their duly
authorized officers to execute this Schedule as of the Commencement Date.
MERIDIAN LEASING, INC. KLEINERT'S INC. OF NEW YORK
By By: /s/ Gerald E. Monigle
-------------------------- ---------------------
Edward R. Bruner
Title: President Title: Treasurer
---------
Date:
Date: November 29, 1995
-----------------
<PAGE>
Meridian Leasing
SCHEDULE OF STIPULATED LOSS VALUES
MERIDIAN LEASING INC.
Master Lease Agreement No. 01678
Schedule No. 001, Dated November 29, 1995
The Stipulated Loss Value for any Item of Equipment at any due date is equal
to Lessor's Cost of such Equipment multiplied by the applicable percentage shown
below as of the applicable rent payment date.
Adjusted
Number Stipulation
of Value
Base as
Rent Percent
Payments of
Made Cost
1 105.291310
2 101.040857
3 96.872741
4 92.785600
5 88.786242
6 84.889393
7 81.069030
8 77.348214
9 73.700971
10 70.126084
11 66.646682
12 63.236859
13 59.895464
14 56.645690
15 53.461695
16 50.342391
17 47.291829
18 44.300991
19 41.371647
20 38.500020
21 35.687917
22 32.934350
23 30.235S93
24 27.593497
25 25.007126
26 22.472797
27 19.992410
28 17.565071
29 15.189322
30 12.886060
31 10.6329t6
32 8.450231
33 6.315668
34 4.228432
35 2.208909
36 0.000000
Thereafter
This Attachment is incorporated into the Master Lease Schedule referred to
above.
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
------------------------------- ----------------------------
Edward R. Bruner
Title: Title: Treasurer
----------------------------- -------------
President
Date: Date: November 27, 1995
------------------------------ -------------------
<PAGE>
Meridian Leasing
LEASE END OPINIONS
MASTER LEASE SCHEDULE NO. 001
MERIDIAN LEASING INC.
RIDER #2 LEASE END OPTIONS
Schedule dated November 29, 1995 to Master Lease Agreement No. 01678
1. RENEWAL AT FAIR MARKET RENTAL RATE
Length of Renewal Term: 12 months Number of Renewal Terms: One (1)
Upon the expiration of the original term under the referenced Lease and Schedule
and any renewal term provided for herein, provided that Lessee has paid all rent
and all other sums then due by Lessee to Lessor, or which would become due upon
request of Lessor, as required under the provisions of this Lease, and provided
that no default has occurred and then remains unremedied, Lessee will have the
option, exercisable on written notice to Lessor given at least 180 days prior to
the end of the original term or any renewal term, to renew the Lease with
respect to all, but not less than all (except for items for which Lessor has
received payment of the Casualty Value with respect thereto) of the Equipment
then subject to said Schedule for an additional term as set forth above (herein
called a "Renewal Term") at a rental for such renewal term that would be
obtained in an arms-length transaction between an informed and willing
prospective lessee and an informed and willing lessor under no compulsion to
lease (said rate being herein called the "Fair Market Rental Rate"). Lessee's
option provided for herein may not be exercised for more than the number of
renewal terms set forth above.
2. PURCHASE AT FAIR MARKET SALE VALUE
Upon expiration of the original term or any renewal term with respect to the
Equipment, provided that Lessee has paid all rentals and all other sums then due
by Lessee to Lessor, or which would become due upon request of Lessor as
required under the provisions of this Lease, and provided that no default has
occurred and then remains unremedied to Lessor's satisfaction. Lessee will have
the option, exercisable by written notice to be given to Lessor at least 180
days prior to the expiration of the term, to purchase all, but not less than all
(except for Items that have been destroyed and for which Lessor has received
payment of the Casualty Value with respect thereto) of the Equipment, for an
amount, payable on or before such expiration date, that would be obtained in an
arms-length transaction between an informed and willing buyer and an informed
and willing seller under no compulsion to sell (said amount being herein called
the "Fair Market Sale Value").
3. PROCEDURE
If, on or before a date 135 days prior to the expiration of the original term or
any renewal term with respect to the Schedule, Lessor and Lessee are unable to
agree upon a determination of the Fair Market Rental Rate or the Fair Market
Sale Value of the Equipment, Lessee will have no obligation to renew this Lease
or purchase the Equipment. However, if Lessee wishes to proceed with its option,
such value will be determined in accordance with procedure for appraisal set
forth herein. Lessee may not proceed simultaneously to exercise both options
provided for herein.
Appraisal means a procedure whereby two recognized independent equipment
appraisers, one chose by Lessee and one by Lessor, will mutually agree upon the
amount in question. To commence the procedure Lessee will give Lessor a written
notice appointing its appraiser not later than 125 days prior to the expiration
of the original or renewal term. Lessor will within fifteen (15) days thereafter
give Lessee a written notice appointing its appraiser. If within fifteen (15)
days after appointment of the two appraisers as described above, the two
appraisers are unable to agree upon the amount in question, a third recognized
independent appraiser will be chosen within five (5) days thereafter by the
mutual consent of such first two appraisers or, if such first two appraisers
fail to agree upon the appointment of a third appraiser, such appointment will
be made by an authorized representative of the American Arbitration Association
or any organization successor thereto. The decision of the appraisers so
<PAGE>
appointed and chosen will be given within a period of ten (10; days after the
selection of such third appraiser. The average of the three appraisals arrived
at by said three appraisers will be binding and conclusive on Lessor and Lessee.
Lessor and Lessee will pay the fees and expenses of the respective appraisers
appointed by them and will share equally the fees and expense of the third
appraiser, if any, and those of the American Arbitration Association, if
applicable, PROVIDED, HOWEVER, that if Lessee does not exercise the option to
renew or purchase, then Lessee will pay the fees and expenses of all appraisers
and American Arbitration Association.
If Lessee does not elect to exercise such purchase or renewal option after the
decision of the appraisers, Lessor shall have an additional period of 120 days
storage rights at the risk and expense of Lessee from and after the later of the
end of the Lease term or Lessee's decision not to exercise such option.
After a determination of the Fair Market Rental Rate or the Fair Market Sale
Value of the Equipment has been made in accordance with the procedure described
above, Lessee may exercise its option to renew the Lease for the Fair Market
Rental Rate or to purchase the Equipment for the Fair Market Sale Value by
delivering written notification of such exercise to Lessor not less than ninety
(90) days prior to the expiration of the term.
If Lessee has elected to purchase the Equipment pursuant to this option and
provided Lessee is not then in default hereunder, Lessee will purchase from
Lessor and Lessor will sell to Lessee, without recourse or warranty, the
Equipment for a cash consideration equal to the Fair Market Sale Value thereof
which amount will be paid in full on the last date for the payment of basic rent
as provided for in the Schedule or the last such date provided for in any
renewal term. The Bill of Sale will be dated the date of payment.
If Lessee has elected to renew the Lease pursuant to this option, the renewal
rentals will be payable on the same day of each rental period consistent with
the rental payment dates of the original term of the Lease commencing with the
first rental period after the expiration of the original term and continuing
until the expiration of the renewal terms).
Upon payment of the Fair Market Sale Value, Lessor will upon request of Lessee,
execute and deliver to Lessee or to Lessee's assignee or nominee, a bill of sale
(without representations or warranties except that the Equipment is free and
clear of all claims, liens, security interest and other encumbrances by or in
favor of any person claiming through or under Lessor) releasing the Equipment
from the terms and scope of this Lease and to transferring title thereto to
Lessee or such assignee or nominee, in such form as may reasonably be requested
by Lessee, all at Lessee's expense.
Except as expressly modified hereby, all terms and provisions of the Lease
remain in full force and effect.
This Rider #2 is incorporated into the Schedule referred to above.
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
------------------------ -------------------------
Edward R. Bruner
Title: President Title: Treasurer
----------
Date: Date: November 29, 1995
-----------------
<PAGE>
Master Lease Schedule =C01
RETURN PROVISIONS
RIDER #5
Master Lease Agreement #01678, Dated November 29, 1995
between MERIDIAN LEASING
INC., as Lessor, and
KLEINERT'S INC. OF NEW YORK, as Lessee.
This Rider forms a part of the above-referenced Schedule to Master Lease.
Terms defined in the Schedule and Master Lease will have the same meanings
when used in the Rider unless otherwise defined.
1. RETURN
Lessee shall, upon the expiration of the Lease Term of each Item of
Equipment, return such Item of Equipment to Lessor at such place within the
continental United States of America as Lessor pursuant to the provisions of
this Section, all of the provisions of this Lease with respect thereto shall
continue in full force and effect. Lessee shall pay all the costs and
expenses in connection with or incidental to the return of the Equipment,
including, without limitation, the cost of removing, dismantling by
manufacturer's representative (or anyone else designated by Lessor),
assembling, packing, insuring and transporting the Equipment. At the time of
such return, the Equipment shall be in the condition and repair required to
be maintained by Section 6 of the Lease and Section 2 hereof and free and
clear of all Liens. At the expiration of the Lease Term, Lessee shall
provide 120 days of storage for the units of Equipment free of charge.
During this period, each unit of Equipment must remain assembled and
operational:
2. OPERATION, MAINTENANCE. ADDITIONS
A) Lessee will, at its own expense, keep and maintain the Equipment in
good repair, condition and working order and furnish all parts,
replacements, mechanisms, devices and servicing required therefore so that
the value, condition and operating efficiency thereof will at all times be
maintained and preserved, reasonable wear and tear excepted. All such
repairs, parts, mechanisms, devices and replacements shall immediately,
without further act, become the property of Lessor and part of the
Equipment. Without limiting the generality of the foregoing provisions of
this Subsection, Lessee agrees that upon the required return of the
Equipment to Lessor pursuant to the Section 1 hereof, each item of Equipment
shall comply with the following criteria at minimum:
- At the time of return, the Equipment must be operational and able to perform
its required tasks effectively without repair or overhaul, complete with no
missing components. All components must be attached, clean and functioning.
- All manuals and documentation must be present and returned to Lessor.
- Dismantling and handling is to be done in accordance with the manufacturer's
instructions or normally accepted industry standards and practices.
- All peripheral and additional systems to the Equipment must be intact and
correctly operational.
- Meridian Leasing Inc. and potential purchasers of the Equipment must be
given access to the Equipment upon reasonable demand.
- The Equipment must remain at its current location during the term of the
lease and all auxiliary equipment must remain attached to or within close
proximity.
- All cables, wires, and attachments must be returned with the system.
B) Lessee will not make or authorize any improvement, change, addition or
alteration to the Equipment (i) if such improvement, change, addition or
alteration will impair the originally intended function or use of the Equipment
or impair the value of the Equipment as it existed immediately prior to such
improvement, change, addition or alteration; or (ii) if any parts installed in
or attached to or otherwise becoming a part of the Equipment as a result of any
such improvement, change, addition or alteration shall not be readily removable
without damage to the Equipment. Any part which is added to the Equipment
without violating the provisions of the immediately preceding sentence and which
is not a replacement or substitution for any property which was a part of the
Equipment, shall remain the property of Lessee and may be removed by Lessee at
any time prior to the expiration or earlier termination of the Lease Term. All
such parts shall be and remain free and clear of any Liens. Any such part which
is not so removed without further act, become the property of Lessor.
<PAGE>
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
------------------------ -------------------------
Edward R. Bruner
Title: President Title: Treasurer
----------
Date: Date: November 29, 1995
-----------------
<PAGE>
Meridian Leasing
CERTIFICATE OF ACCEPTANCE
Master Lease Schedule #001
MERIDIAN LEASING INC.
CERTIFICATE OF ACCEPTANCE
Meridian Leasing Inc.
One Meridian Blvd.
Wyomissing, PA 19610
Re: Master Lease Agreement No. 01678 and
the Schedule thereunder dated
November 29, 1995
The undersigned duly authorized representative of Lessee under the
referenced Master Lease Agreement and Schedule (the "Lease") does hereby
certify that I have inspected and accepted delivery of the following
Items of Equipment under and pursuant to the Lease:
EQUIPMENT: See Schedule A attached hereto and forming a part hereof.
DATE ACCEPTED (COMMENCEMENT DATE November 29, 1995
-----------------
The undersigned does hereby further certify that the foregoing Items of
Equipment are in good order and condition, and conform to the
specifications, requirements and standards applicable thereto. This
certificate does not waive any right Lessee or Lessor may have against
the manufacturer or supplier of the Equipment.
The undersigned does hereby further certify that as of the date hereof
(i) Lessee is not in default under the Lease, and (ii) the
representations and warranties made by Lessee pursuant to or under the
Lease are true and correct on the date hereof.
KLEINERT'S INC. OF NEW YORK
By: /s/ Gerald E. Monigle
-------------------------
Title: Treasurer
---------
November 29, 1995
-----------------
(Date - the Commencement Date)
<PAGE>
Meridian Leasing
CLOSING CERTIFICATE
MASTER LEASE SCHEDULE #001
MERIDIAN LEASING INC.
CLOSING CERTIFICATE
Schedule dated November 29, 1995 to Master Lease Agreement No. 01678
Meridian Leasing Inc.
One Meridian Blvd.
Wyomissing, PA 19610
As a condition to your advance of funds for the above referenced Lease and
Schedule, the undersigned as Lessee thereunder hereby represents, warrants and
covenants to you as Lessor each of the following as of the date hereof and as of
the "Commencement Date" under the Schedule.
(a) The Balance Sheet and Statement of Income of Lessee, or of any
consolidated group of which Lessee is a member, heretofore delivered to
Lessor have been prepared in accordance with generally accepted accounting
principles and fairly presents the financial position of Lessee or the
consolidated group of companies of which Lessee is a member on and as of the
date thereof and the results of its or their operations for the period or
periods covered thereby. Since the date of such Balance Sheet and Statement
of Income there has been no material adverse change in the financial or
operating condition of Lessee or of its consolidated group;
(b) Lessee agrees to furnish annually, within 90 days after the close of its
fiscal year, and also at Lessor's request, a certificate of an authorized
officer of Lessee stating that he has reviewed the activities of Lessee and
that, to the best of his knowledge, there exists no default, as such term is
defined in the Lease, and no event which, with the giving of notice or the
lapse of time or both, would become such a default;
(c) Lessee is a (corporation) (general partnership) (limited partnership),
organized and validly existing and in good standing under the laws of the
State of New York, with full power and capacity to enter into the Lease, all
documents relative to the purchase of the Equipment and any other documents
required to be delivered in connection with the Lease (said Lease, purchase
documents and other documents being hereinafter called "Documents") and is
duly qualified to do business wherever necessary to carry on its present
business, but particularly in all states where leased Equipment is to be
located;
(d) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws;
(e) No approval, consent or withholding of objections is required from any
federal, state or local governmental authority or instrumentality with
respect to the entry into or performance by Lessee of the Documents except
such as have already been obtained;
(f) The entry into and performance by Lessee of the Documents will not:
(i)violate any judgment, order, (law or regulation applicable to Lessee or
any provision of Lessee's Certificate of Incorporation of Bylaws (if a
corporation) or partnership agreement (if a partnership) or limited
partnership certificate lit a limited partnership!; or (ii)result in any
breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Item of Equipment
pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement of other Instrument (other than the Lease or any purchase money
security interest retained by a Supplier)to which Lessee is a party;
<PAGE>
(g) There are no suits or proceedings pending or threatened in court or
before any regulatory commission, board or other administrative governmental
agency against or affecting Lessee, which will have a material adverse
effect on the ability of Lessee to fulfill its obligations under the Lease;
(h) The Equipment accepted under the Certificate of Acceptance executed
pursuant to the Lease is tangible personal property and, when subjected to
use by Lessee, will not be or become fixtures under applicable laws; all
landlords and holders of liens with respect to premises where Equipment is
to be located have executed waivers, originals of which have been delivered
to Lessor herewith, and any landlord or mortgagee waiver executed in
connection with the Equipment is valid and enforceable against the person
executing the same and is sufficient to protect Lessor's interest in the
Equipment from any claim against the Equipment by said person. The Equipment
accepted under the Certificate of Acceptance is new and unused on the date
title thereto is acquired by Lessor;
(i) The representations, warranties and covenants of Lessee contained in the
Lease are true and correct on the date hereof and there exists this day no
default or event with which notice or time or both would be a default under
the Lease;
(j) Attached hereto is a full, true and complete copy of resolutions (if a
corporation) or other appropriate action (if a partnership)authorizing
Lessee to enter into the Lease, duly adopted or taken by the Board of
Directors of Lessee (if a corporation)or the general partners of Lessee (if
a partnership) at a meeting called and held on April 20, 1995 at which a
quorum was present and acting throughout, or (if a partnership) pursuant to
the terms of the partnership agreement, and said resolutions or other
actions have not been amended or rescinded and are in full force and effect
on the date hereof.
KLEINERT'S INC. OF NEW YORK
By: /s/ Gerald E. Monigle
---------------------
Title: Treasurer
---------
Date: November 29, 1995
------------------
<PAGE>
Meridian Leasing
If KLEINERT'S INC. OF NEW YORK is exempt from state sales/rental tax, please
return a copy of the Tars Exemption Certificate with the document package.
If not exempt from state sales/rental tax, please include the appropriate
tax amount with any advance rentals paid. Regardless, please enter your
company's Federal Tax I.D. Number below and return this form with the signed
documents.
Federal Tax I.D. Number: 23-2746614
-----------
<PAGE>
Meridian Leasing SALE AND LEASEBACK
MASTER LEASE # 01678
SCHEDULE #001
MERIDIAN LEASING INC.
BILL OF SALE
FOR VALUE RECEIVED, KLEINERT'S INC. OF NEW YORK, a New York corporation
(herein called "Seller") does hereby sell, transfer and convey to Meridian
Leasing Inc. (hereinafter called "Buyer") all of Seller's right, title and
interest in the following Equipment:
See Schedule A attached hereto and forming a part hereof.
Seller hereby represents and warrants to Buyer and Seller hereby conveys to
Buyer good and marketable title to the Equipment free and clear of all liens and
encumbrances whatsoever except such liens and encumbrances as Buyer shall itself
create and the leasehold interest of Seller, Seller shall warrant and defend
good title consistent herewith in Buyer and Seller's obligation shall survive
the delivery of this Bill of Sale.
In witness whereof, Seller has executed this Bill of Sale.
KLEINERT'S INC. OF NEW YORK
By: /s/ Gerald E. Monigle
---------------------
Title: Treasurer
---------
Dated: November 29, 1995
-----------------
<PAGE>
Master Lease #01678
Schedule #001, dated
PAY PROCEEDS LETTER
KLEINERT'S INC. OF NEW YORK hereby irrevocably directs Meridian Leasing Inc.
to pay the proceeds of the above lease as follows:
VENDOR ADDRESS PAYMENT
Kleinert's Inc. 120 W. Germantown Pike $144,040.56
Plymouth Meeting, PA 19462
Meridian Leasing Inc. reserves the right to withhold any advance rentals and
fees due when payment of proceeds is made directly to Lessee.
KLEINERT'S INC. Of NEW YORK
Signed: /s/ Gerald E. Monigle
---------------------
Title: Treasurer
----------------------
Date: November 29, 1995
----------------------
<PAGE>
Meridian Leasing
Description of Equipment
Master Lease Schedule #001
Meridian Leasing Inc.
Rider #1 Description of Equipment
Schedule dated November 29, 1995
-----------------
Master Lease Agreement No. 01678
Number of Model of Serial
Units Equipment Numbers Location Supplier
-----------------------------------------------------------------------
See Schedule A attached hereto and forming a part hereof.
112 W. 34th Street Cadtex
Suite 1711
New York, NY 10120 SBM
Total Lessor's Cost $144,040.56
-----------
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
---------------------
Edward R. Bruner
Title: President Title: Treasurer
---------
Date: Date: November 29, 1995
-------------------
<PAGE>
SCHEDULE A
----------
All equipment as acquired under lease to KLEINERT'S INC. OF NEW YORK pursuant to
Master Lease #01678, Schedule #001, dated ____, between MERIDIAN LEASING INC.
(Lessor) and KLEINERT'S INC. OF NEW YORK (Lessee).
QUANTITY DESCRIPTION S/N
- -------- ----------- ---
Four (4) PV High Resolution Workstations including:
Pentium 100 CPU, 256K Cache, 32MB
RAM, Middle tower case w/250 W PS+
extra fan, 1 GB hard drive, High
resolution Graphics Card w/6 MB
V + D RAM, One 1.44 MB 3.5" floppy
drive, Multi I/O Card w/ 1 parallel/
2 serial ports, Network Card and cable,
One Keyboard and mouse, WACOM UD 12"
x 12" Professional Tablet w/cordless
four button cursor and pressure pen,
NEC XP 17 17" color monitor
One (1) Hayes Optima External Modem
One (1) 4xCD ROM Drive
One (1) File Server including:
486DX/66 Mhz CPU, 256 K Cache, 16MB RAM
9" Monochrome VGA Monitor and card
Middle tower case with 250 w PS +
extra fan, 2 GB hard Drive, SCSI
controller, One 1.44 MB 3.5" floppy
drive, Multi I/O card w/ 1 parallel/
2 serial ports, Network Card and Cable,
9 port Ethernet Hub, keyboard and mouse,
Digital Data Storage 2 GB Tape
Backup Drive
One (1) Network Parallel Printing Unit including:
486DX/66 Mhz CPU, 256k CACHE , 16 MB
RAM, 9" Monochrome VGA Monitor and
Card, Middle tower case with 250 W PS +
extra fan, 340 MB Hard Drive, Adaptec
1542 SCSI Controller with FDD Control,
One 1.44 MB 3. 5 " floppy drive, Multi
I/O card w/ 1 parallel/ 2 serial ports,
Network card and cable, keyboard & mouse
One (1) Canon CJ-10 Printer, Scanner and copier
with 16 MB IPU computer interface
One (1) Canon IPU-10 with 24 MB computer interface
One (1) Epson ES600 Scanner
One (1) SBM Prostation Pentium 100
One (1) SBM Upgrade to 1GB Hard Drive
One (1) Sony 4x Internal w/tray, IDE CD-ROM
One (1) SBM Upgrade to 20" Display
<PAGE>
Schedule A
Page 2
Thirty-six RG58 Cable for Thin EtherNet
One (1) SBM 1 yr Extended
One (1) Adobe Aldus PageMaker 5.0, 3.5"
One (1) Adobe Photoshop v3.0 Single
Documentation, Win
One (1) Adobe Illustrator v4.0 Single
Documentation, Win
One (1) On-site System Setup Workstation
The above equipment complete with all related parts, attachments,
accessories, substitutions and proceeds.
MERIDIAN LEASING INC. KLEINERT'S INC. OF NEW YORK
By: By: /s/ Gerald E. Monigle
-----------------------
Title: Title: Treasurer
---------
Date: Date: November 29, 1995
-----------------
<PAGE>
EXIBIT E
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the "Agreement"), effective as of December 4, 1995,
is made by and between DYERSBURG FABRICS INC., a Tennessee corporation (the
"Seller"), and KLEINERT'S, INC. OF ALABAMA, an Alabama corporation (the
"Buyer").
W I T N E S S E T H
-------------------
WHEREAS, simultaneously with the execution of this Agreement, Buyer has
purchased certain assets of Scott Mills, Inc. of North Carolina, an affiliate of
Seller, used to knit, dye and finish fabric for Seller and other persons; and
WHEREAS, Seller desires to supply Buyer's requirements of the products
listed on Schedule 1 (the "Products"), and Buyer desires to purchase from Seller
all of Buyer's requirements of the Products, subject to the terms and provisions
hereof; and
WHEREAS, Buyer desires for Seller to perform certain commission dyeing and
finishing with respect to fabrics produced by Buyer;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants contained herein, and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. TERM. Unless earlier terminated, this Agreement shall begin as of
December 4, 1995 (the "Effective Date") and extend through and including
November 30, 1997.
2. PRODUCT REQUIREMENTS.
2.1 Basic Requirements. During the term of this Agreement and in
accordance with the terms and conditions hereof, Seller hereby agrees to
sell and deliver, and Buyer agrees to buy, receive, and pay for, all of the
Buyer's requirements for the Products for use in the ordinary course of the
Buyer's business at the prices determined in accordance herewith.
2.2 Minimum Requirements. During the term of this Agreement, Buyer shall
have minimum requirements for the Products as set forth on Schedule 1, and
in no event shall Buyer order less than the minimum amounts of the
Products. Buyer shall be deemed to have purchased its minimum requirements
so long as the aggregate number of yards of all Products purchased by Buyer
equals or exceeds the aggregate number of yards of all Products required to
be purchased pursuant to Schedule I, even though Buyer purchased less than
the minimum number of yards of any particular Product.
2.3 New Products. If, during the term of this Agreement, Buyer requires
any knitted fabric item that is not listed on Schedule 1, but is of a type
that is manufactured by Seller, Buyer shall offer Seller the opportunity to
submit an offer to supply such item, based upon Buyer's specifications for
such item, to Buyer. It is expressly acknowledged and agreed that Buyer has
no obligation to select Seller as the supplier of any such item and that
Buyer's only obligation hereunder with respect to such item is to allow
Seller the opportunity to submit an offer to supply such item.
2.4 Products Purchased From Third Parties. If, notwithstanding Seller's
receipt of Buyer's purchase order for Products as set forth on Schedule I,
Seller is unable or unwilling to perform in accordance with such purchase
order, whether due to failure to deliver within the time specified or
failure to provide Products of kind and/or quality consistent with Products
previously accepted by Buyer, Buyer shall be entitled to purchase such
<PAGE>
Products as provided in the purchase order from any other third party on
such terms as Buyer shall determine in its sole discretion ("Third Party
Purchases"). All Third Party Purchases shall be included in computing the
minimum purchase requirements by Buyer of Products under this Agreement as
if such Third Party Purchases were purchased from Seller.
3. PRODUCT PRICES. The prices for the Products shall be the prices agreed
upon by the Buyer and Seller at the time of delivery; provided, that if the
parties cannot agree upon the price of a Product, the price will be determined
by reference to the market prices for the particular Product of similar quality
and quantity.
4. F.O.B. TERMS. The prices for the products determined in accordance with
Section 3 are F.O.B., 1315 Phillips Street, Dyersburg, Tennessee 38025. The term
F.O.B. as used in this Agreement is a price term only, and Seller shall have the
risk of loss until the Products covered by this Agreement have been delivered to
the facility of Buyer.
5. COMMISSION DYE AND FINISHING. During the term of this Agreement, Buyer
may, from time to time, request that Seller dye and/or finish certain goods to
be sold by Buyer (the "Commission Goods"). For such services, Seller will charge
Buyer, and Buyer will pay, Seller's cost in performing such services as set
forth on Schedule 2 plus a commission of $.10 per pound of Commission Goods dyed
and/or finished by Seller. Buyer guarantees that Seller shall be paid not less
than $250,000 plus its costs for performing such services pursuant to this
Section 5. Buyer shall not be required to pay the $.10 commission once the total
commissions paid equals $250,000.
6. DELIVERY AND INSPECTION. Delivery of the Products and Commission Goods
by Seller shall be made at Buyer's place of business at 2251 Old Curtis Road,
Elba, Alabama 36323, or at such other place of business of Buyer within the
United States as may be designated by Buyer in any purchase order or other
document initiating a purchase or service under this Agreement.
7. PAYMENT OF PURCHASE PRICE. Buyer shall pay the purchase price or
commission, as applicable, for all Products and Commission Goods delivered
hereunder within the time period set forth in the appropriate invoice.
8. TERMINATION.
8.1 Termination By Buyer. Buyer may terminate this Agreement for cause
only upon breach by Seller of any of its obligations under this Agreement
and failure by Seller to cure such breach within thirty days of notice of
breach.
8.2 Termination By Seller. Seller may terminate this Agreement for cause
only upon Buyer's breach of its obligations under this Agreement and
failure by Buyer to cure such breach within thirty days of notice of
breach.
9. REMEDIES.
9.1 The remedies available to the parties to this Agreement, whether by
virtue of the provisions of the Tennessee Uniform Commercial Code, or by
the terms of this Agreement, are in addition to and cumulative with all
remedies arising under any collateral or ancillary agreements between the
parties.
9.2 Buyer shall recover all direct damages resulting from any breach by
Seller, including, but not limited to, all expenses reasonably incurred in
inspection, receipt, transportation, and care and custody of goods
rightfully rejected.
<PAGE>
10. NOTICES, PURCHASE ORDERS.
10.1 Any notice required or desired to be furnished under this Agreement
shall be in writing, postage prepaid, and shall be sent by United States,
certified, registered, or express mail, by an overnight delivery service
(e.g., FedEx), or by facsimile transmission and addressed or delivered to
the party receiving notice at the address designated below. Any notice
shall be deemed to be given (i) when received or when first refused if
mailed or sent by overnight delivery service, and (ii) when received if
transmitted by facsimile transmission. All such notices shall be addressed
as follows:
If to Buyer: Kleinert's, Inc. of Alabama
c/o Kleinert's, Inc.
Suite 100, 120 West Germantown Pike
Plymouth Meeting, PA 19462-1420
Attn: Gerry Monigle
Fax: 610-828-4589
If to Seller: Dyersburg Fabrics Inc.
1315 Phillips Street
Dyersburg, TN 38024
Attn: Jerome M. Wiggins
Fax: 901-286-3411
<PAGE>
In like manner, any party may change the address to which notice to it
is to be sent.
10.2 Any orders by Buyer of any Products to be delivered hereunder may
be on Buyer's standard purchase order and may be sent by regular mail to:
Dyersburg Fabrics Inc.
1460 Broadway
New York, NY 10036
Attn: Steve Dauer
At the request of Seller, upon mailing any such order, Buyer shall also
send to Seller either a telecopy of such purchase order to such location as
may be reasonably designated by Seller. At the request of Buyer, Seller
also shall accept orders from Buyer by telex or electronic data interchange
or transmission.
11. ASSIGNMENT. This Agreement and the covenants, restrictions, and
limitations contained herein shall be binding upon and shall be to the benefit
of each of the parties and their respective successors and assigns; provided,
however, that neither Buyer's nor Seller's obligations under this Agreement may
be assigned or delegated without the prior written consent of the other party.
12. WAIVER. The failure of either Buyer or Seller to seek redress for the
breach of, or to insist upon the strict performance of, any term, clause, or
provision of this Agreement, shall not constitute a waiver of such breach of
non-performance, unless such waiver shall be in writing and signed by the party
executing the waiver. Any waiver so signed shall not constitute a waiver of any
difference or subsequent breach or non-performance.
13. VALIDITY OF PROVISIONS. Whenever possible, each provision and term of
this Agreement shall be interpreted in such a manner as to be valid and
enforceable; provided, however, that in the event any provision or term of this
Agreement should be determined to be invalid or unenforceable, all other
provisions and terms of this Agreement and the application thereof to all
persons and circumstances subject thereto shall remain unaffected to the extent
permitted by law. If any application of any provisions or term to other persons
and circumstances shall remain unaffected to the extent permitted by law.
<PAGE>
14. CONSTRUCTION. This Agreement shall be construed and interpreted in
accordance with the laws of the state of Tennessee including, except when
expressly inconsistent therewith, the provisions of the Tennessee Uniform
Commercial Code, T.C.A. Sections 47-1-101 et. seq., including all definitions
contain therein. Section or paragraph headings are employed herein solely for
convenience of reference, and such headings shall not in any way affect meaning,
validity, or enforceability of any term or provision of this Agreement. All
references herein to "section" or "paragraph" shall mean the appropriate
numbered section or paragraph of this Agreement except where reference is
particularly made to some other instrument or document.
15. FORCE MAJEURE. Either party will be excused from performance of its
duties under this Agreement during any period of time when that party is
prevented from so performing due to act of God, war, riot, acts of governmental
authorities, or other cause beyond its control other than due to labor stoppage,
slowdown or other labor related issues; provided, however, that should such
continue for a period of two consecutive months, the other party may, at its
option, terminate this Agreement.
16. RELATIONSHIP OF THE PARTIES. It is the express intention of the parties
hereto that Seller is and shall be an independent contractor under this
Agreement, and no partnership, joint venture, or fiduciary relationship shall
exist between Buyer and Seller. This Agreement does not constitute either party
as the agent, legal representative or employee of the other for any purpose
whatsoever, and neither party is granted any right or authority to assume or
create any obligation for or on behalf of, or in the name of, the other party or
in any way to bind the other party.
17. COSTS AND EXPENSES. Except as otherwise expressly provided in this
Agreement, each party hereto shall be responsible for the payment of the fees
and expenses (including legal fees and expenses) incurred by that party in
connection with this Agreement and the transactions contemplated herein.
18. ENTIRE AGREEMENT: MODIFICATION. This Agreement, as executed,
constitutes the entire agreement between the parties and no representation,
promise, condition, warranty or understanding, other than herein set forth,
shall be binding upon any of the parties hereto. Non of the provisions of this
Agreement may be waived, altered, or amended except in a writing signed by the
party to be bound thereby.
19. PURCHASE ORDERS. The terms and conditions of Buyer's purchase order
shall control the rights and obligations of the parties unless expressly
inconsistent with the provisions of this Agreement, in which case this Agreement
shall control the rights and obligations of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, each
by its duly authorized officer and representative, as of the date and year first
above written.
DYERSBURG FABRICS INC. KLEINERT'S, INC. OF ALABAMA
By: By: /s/ Joseph J. Connors
------------------------------------ ---------------------
Title: Title: Treasurer
--------------------------------- ---------
<PAGE>
AGREEMENT OF LEASE BY AND BETWEEN
JEFFREY A. LOPATIN, AS LANDLORD, AND
KLEINERT'S, INC. OF FLORIDA, AS TENANT
Table of Contents
Page
1. Reference Data and Definitions..................................... 1
2. Demise, Use, Rent and Term......................................... 2
3. Commencement of Term............................................... 3
4. Holding Over....................................................... 3
5. Improvements....................................................... 4
6. Real Estate Taxes.................................................. 6
7. Lease Tax.......................................................... 7
8. Tenant Utilities................................................... 8
9. Payment of Rent; Interest.......................................... 8
10. Quiet Enjoyment.................................................... 10
11. Signage............................................................ 10
12. Use................................................................ 10
13. Assignment and Subletting.......................................... 10
14. Fire or Other Casualty............................................. 11
15. Landlord's Right to Enter.......................................... 15
16. Insurance.......................................................... 16
17. Representations and Warranties of Landlord......................... 19
18. Representations and Warranties of Tenant........................... 23
19. Repairs and Condition of Premises.................................. 25
20. Compliance with Law................................................ 27
21. Mechanics' Liens................................................... 28
22. Recordation of Memorandum of Lease................................. 28
23. Default/Remedies of Landlord....................................... 29
24. Default/Remedies of Tenant......................................... 32
25. Remedies Cumulative................................................ 33
26. Excepted from Premises............................................. 33
27. Lease Subordinated................................................. 33
28. Paramount Lease.................................................... 35
29. Condemnation....................................................... 36
30. Notices............................................................ 37
31. Definitions........................................................ 38
32. Estoppel Certificate............................................... 40
33. Brokers............................................................ 41
34. Whole Agreement.................................................... 42
35. Security Interest.................................................. 42
36. Extension Option................................................... 43
37. WAIVER OF JURY TRIAL............................................... 43
38. Miscellaneous...................................................... 44
Exhibits
EXHIBIT A - The Leased Premises.............................................
i
<PAGE>
AGREEMENT OF LEASE
AGREEMENT (hereinafter referred to as "the Lease"), made and
effective the 15th day of December, 1995, by and between JEFFREY A. LOPATIN
(hereinafter "Landlord"), and KLEINERT'S, INC. OF FLORIDA, a Florida
corporation, (hereinafter "Tenant").
1. Reference Data and Definitions. Any reference in this
Lease to the following subjects including any reference contained in the
Articles and Exhibits indicated by parentheticals, shall incorporate therein the
data stated for the subject(s) in this Article 1:
LANDLORD'S ADDRESS: 3 North Pine Circle
Belleair, FL 34616
Telephone: (813) 587-6557
Facsimile: None
WITH AN ADDITIONAL COPY TO:
Hamden H. Baskin, III, Esquire
516 N. Ft. Harrison Avenue
Clearwater, FL 34616
Telephone: (813) 447-2994
Facsimile: (813) 446-0049
TENANT'S ADDRESS: 2300 South Belcher Road
Largo, FL 34641
Telephone:
Facsimile:
WITH AN ADDITIONAL COPY TO:
Cozen and O'Connor
The Atrium
1900 Market Street - 3rd Floor
Philadelphia, PA 19103
Attention: Steven N. Haas, Esquire
Telephone: (215) 665-4171
Facsimile: (215) 665-2013
LEASED PREMISES: All of that parcel of real property
and the 78,000 +\- square foot
commercial building constructed on
it located at 2300 South Belcher
Road, Pinellas County, Largo, FL
34641, more particularly described
on Exhibit "A", attached to and
forming a part of this Lease.
(Article 2)
<PAGE>
BUILDING RENTABLE AREA: 78,000 +\- rentable square feet.
COMMENCEMENT DATE: December 15, 1995 (Article 2)
TERM: Three (3) years (Article 2)
EXTENSION OPTIONS: Three (3) consecutive (Article 36)
EXTENSION PERIOD: One (1) year each (Article 36)
TERMINATION DATE: 11:59 p.m. on December 31, 1998,
ANNUAL FIXED RENT: $312,000.00 plus applicable Florida State Sales Tax
(Article 2, Article 36)
MONTHLY FIXED RENT: $26,000.00 plus applicable Florida State Sales Tax
(Article 2, Article 36)
PERMITTED USE: A textile manufacturing plant, related and
affiliated warehouse and office use, and such other and additional
lawful related purposes.
SECURITY DEPOSIT: None
IN CASE OF CONFLICT BETWEEN THE PROVISIONS OF THIS ARTICLE 1 AND
THE PROVISIONS SET FORTH ELSEWHERE IN THIS LEASE, SUCH PROVISIONS
ELSEWHERE SHALL CONTROL.
2
<PAGE>
2. Demise, Use, Rent and Term. In consideration of the mutual
covenants set forth in this Lease, and of the rent provided for herein, Landlord
hereby leases to Tenant and Tenant hereby hires and takes from Landlord, for the
term and subject to the provisions hereof, the Leased Premises in Article 1
above (the parcel of land herein referred to separately as the "Land", the
commercial building herein referred to separately as the "Building" and
collectively herein referred to as the "Premises"); this demise being for a term
(herein referred to as the "Term") beginning on the Commencement Date and
ending, without the necessity of notice from either party to the other, on the
Termination Date, for the Annual Fixed Rent, lawful money of the United States
of America, payable from and after the Commencement Date in equal monthly
installments, each in the amount of 1/12 of the Annual Fixed Rent, in advance on
or before the first day of each calendar month during the Term. Rent Year 1
shall commence on the Commencement Date, and shall terminate on the day before
the first anniversary of the Commencement Date if the Commencement Date is the
first day of a month (or the day before the first day of the first month
occurring after the first anniversary of the Commencement Date if the
Commencement Date is not the first day of a month). The remaining Rent Years
shall be the successive one year periods after Rent Year 1. If the Commencement
Date is other than the first day of a month, rent (including Annual Fixed Rent
and any additional rent) from such date until the first day of the following
month shall be prorated and shall be payable (together with the rent for the
first full calendar month after the Commencement Date) on the Commencement Date.
3. Commencement of Term.
(a) The Term shall commence on December 15, 1995
(herein referred to as the "Commencement Date").
4. Holding Over. If Tenant or any person claiming through
Tenant shall continue to occupy the Premises after the expiration or earlier
termination of the Term or any renewal of the Term with or without Landlord's
prior written consent, such holding over shall not be deemed to extend the Term
or to renew the Lease, but the tenancy thereafter shall be from month-to-month
only, at the rental in effect during the last month of the immediately-
preceding Term, subject to being terminated by either party at the end of any
month, upon thirty (30) days' prior written notice and subject to all of the
other terms and conditions of this Lease.
3
<PAGE>
5. Improvements.
(a) In reliance upon Landlord's representation and
warranty that all mechanical systems and structural components of the Building
are in good condition, working order and fully operative, without the necessity
for any capital improvements or major repairs, Tenant, by entering into
possession of the Premises, accepts the Premises subject to the foregoing
representation and warranty of Landlord, except: (a) as provided elsewhere by
the provisions of this Lease, and (b) for latent defects as to which Tenant
specifically reserves, and does not waive, all claims, rights and remedies it
may have at law, in equity or by contract.
(b) During the initial Term of the Lease, and any
extension or renewal of it, Tenant has the right, at its own expense, and
without the prior written consent and approval of Landlord or any mortgagee of
the Premises, to make alterations and improvements to the Premises which may be
necessary for carrying on Tenant's business. Provided, however, that Tenant
shall not, without the prior written consent of Landlord, make any additions,
alterations or improvements to the Building which would substantially alter or
change the architectural or structural character of the Building. At the
expiration or earlier termination of the Lease all such leasehold improvements
and alterations shall become the property of the Landlord, unless Landlord shall
have given Tenant written notice at least ninety (90) days before the expiration
or earlier termination of the Lease to remove such improvements and alterations.
4
<PAGE>
(c) Tenant shall obtain all permits and
authorizations required for the prosecution of alterations and improvements, and
shall comply with the requirements of all applicable insurance coverage in
prosecuting the work. To the extent that any additional risk is created by
Tenant's performance of alterations and improvements, Tenant will obtain
appropriate insurance coverage to protect Landlord and Tenant, as their
interests may appear, against such additional risk during the construction
period.
(d) Tenant shall hold harmless, indemnify and defend
Landlord against all claims or liability attributable to mechanics' or similar
lien claims, arising out of Tenant's construction of alterations and
improvements to the Building.
(e) Notwithstanding anything in this Article to the
contrary, at the expiration or earlier termination of this Lease all personal
property of Tenant, including, but not limited to, goods, wares, inventory,
furniture, fixtures, equipment and machinery shall be and remain property of
Tenant, and, provided that Tenant is not then in default under the Lease, Tenant
shall have the right and shall be permitted to remove such personal property
from the Premises. Personal property of Tenant specifically excludes any
alteration or improvement that is permanently affixed to the Building,
including, but not limited to, walls, floors, carpeting, ceilings and
partitions. To the extent that the removal of Tenant's personal property may
cause any damage to the Building, Tenant shall repair the damage, restoring the
damaged area to its condition immediately preceding removal of Tenant's personal
property.
5
<PAGE>
(f) The maintenance and/or repair of mechanical
systems in the Building are not to be construed as alterations or improvements
within the scope of this Article.
6. Real Estate Taxes.
(a) All Real Estate Taxes, as hereafter defined,
shall be paid by Landlord, including any increase in real estate taxes
attributable to Tenant's leasehold improvements. Provided, however, that Tenant
shall reimburse Landlord for any increase in real estate taxes attributable
solely to Tenant's leasehold improvements within fifteen (15) business days
after Tenant's receipt from Landlord of an invoice for such increase accompanied
by a copy of Landlord's original Real Estate Tax Bill, evidence of payment of
Real Estate Taxes, and a separate calculation from the applicable taxing
authority stating that portion of any Real Estate Tax increase specifically
attributable to Tenant's leasehold improvements. Notwithstanding the foregoing,
Tenant reserves the right to contest and to protest the validity and/or amount
of any such increase, and any recovery credit, reduction or remittance achieved
by Tenant shall be the exclusive property of and shall be paid directly to
Tenant. The term "Real Estate Taxes" shall mean all real estate taxes and
assessments, general or special, ordinary or extraordinary, foreseen or
unforeseen, and ad valorem taxes (other than "Lease Taxes" as defined in Article
7 below) assessed or imposed upon the Premises. If, due to a future change in
the method of taxation, any franchise, income, profit or other tax, however
designated, shall be levied or imposed in substitution, in whole or in part, for
(or in lieu of) any tax or addition or increase in any tax which would otherwise
be included within the definition of Real Estate Taxes, such other tax shall be
deemed to be included within Real Estate Taxes as defined herein.
6
<PAGE>
7. Lease Tax. If federal, state or local law now or hereafter
imposes any tax, assessment, levy or other charge (other than any income tax)
directly or indirectly upon Landlord with respect to this Lease or the value of
it, or upon the Tenant's use or occupancy of the Premises, or upon the rent
(including, but not limited to applicable state sales tax attributable to the
Lease), additional rent or any other sums payable under this Lease or upon this
transaction (all of which are herein called "Lease Taxes"), Tenant shall pay to
Landlord, as additional rent within ten (10) business days after Tenant's
receipt of a bill from Landlord, the amount of the Lease Taxes, unless Tenant
shall be prohibited by law from paying the same, in which event, Landlord shall
be entitled, at its election, to terminate this Lease by written notice to
Tenant.
7
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8. Tenant Utilities. Tenant shall make application for,
obtain directly, pay for and be solely responsible for all utilities consumed at
the Premises, including, but not limited to, all water, gas, telephone service,
garbage and trash collection, and electricity used or consumed by Tenant, and
hold harmless Landlord against any charge, lien, claim or demand arising out of
Tenant's use or consumption of such utilities.
8
<PAGE>
9. Payment of Rent; Interest. Without any demand therefor and
without setoff or deduction (except as otherwise expressly provided in the
Lease), Tenant shall pay to Landlord the Annual Fixed Rent and all additional
rent and all other sums due hereunder, at the times and in the manner herein
provided, to Landlord at the address set forth in Article 1, above, or to such
other person and at such other place as Landlord may from time to time designate
in writing. If any payment or any part of a payment to be made by Tenant to
Landlord pursuant to the terms of this Lease shall become overdue for a period
in excess of five (5) days after such payment is due (such due date to include
any grace period granted or established by notice from Landlord to Tenant as
provided in this Lease), Tenant shall pay interest on the payment overdue from
the date when such payment or part of a payment was due at the rate of twelve
percent (12%), (the "Lease Interest Rate") or, if there shall be a maximum
amount rate permitted by law, such lesser amount or rate as represents the
maximum amount or rate Landlord lawfully may charge with respect to Tenant in
such circumstances. Nothing herein shall be construed as waiving any rights of
Landlord arising out of any default of Tenant, by reason of Landlord's imposing
or accepting such interest; the right to collect interest is separate and apart
from any rights relating to remedies of Landlord after default by Tenant.
Without limiting the generality of the foregoing, if Tenant shall be in default
in the performance of any of its obligations hereunder, Landlord may (but shall
not be obligated to do so), in addition to any other rights it may have in law
or equity, cure such default on behalf of Tenant, and Tenant shall reimburse
Landlord within ten (10) days after demand for all costs reasonably and
necessarily incurred by Landlord (supported by invoices providing in reasonable
detail and explanation of all services rendered, and costs incurred) in curing
such default, including, without limitation, reasonable attorneys' fees and
other legal expenses, together with interest thereon at the Lease Interest Rate,
which costs and interest thereon shall be deemed to be additional rent
hereunder. If Landlord fails to submit to Tenant the requisite documentary
support, Tenant's obligation to make payment within such time-frame shall be
deferred until the requisite documentary support is delivered to and approved by
Tenant, which approval shall not be unreasonably conditioned, withheld or
delayed, and shall be deemed to have been given within ten (10) business days
after Tenant's receipt of the requisite documentary support if Tenant's
objection or approval is not given sooner. Tenant's covenant to pay the Annual
Fixed Rent and additional rent is independent of any other covenant, agreement,
term or condition of this Lease.
9
<PAGE>
10. Quiet Enjoyment. Upon paying to Landlord Rent and all
other charges provided for under this Lease, and observing and keeping all
covenants, agreements and conditions of this Lease, Tenant shall quietly have
and enjoy the Premises during the Term of this Lease, and any renewal or
extension of it, without hindrance or molestation by Landlord or anyone claiming
by, through or under Landlord.
11. Signage. Tenant shall have the right to install signage
at the Premises and on the Building identifying Tenant, displaying its logo,
identifying the location of the Premises, and otherwise regulating the day to
day operation of Tenant's business at and from the Premises. Such signage shall
be built and installed in accordance with all applicable state, county and local
codes. At the expiration or earlier termination of this Lease, Tenant shall
remove the signage installed and repair any damage caused by such removal.
12. Use. Tenant shall not use or occupy, or permit to be used
or occupied, the Premises or any part thereof, other than for the Permitted Use
specified in Article 1.
10
<PAGE>
13. Assignment and Subletting. Tenant shall not mortgage,
pledge or encumber this Lease. Tenant may assign this Lease, or sublet or
underlet all or any portion of the Premises, provided that in each instance
Tenant (i) first notifies Landlord in writing that it desires to assign the
Lease, sublet or underlet the Premises a portion of it, providing the terms of
the proposed assignment or sublease; and (ii) first obtains the written consent
of Landlord which consent Landlord shall not unreasonably withhold, condition or
delay. The foregoing conditions for assignment or subletting shall not apply to
an assignment or subletting by operation of law. In the event that Landlord
grants its consent to any assignment of the Lease or subletting of the Premises,
no such assignment will be valid unless the assignee shall execute and deliver
to Landlord an assumption of liability agreement in form satisfactory to
Landlord, and no such subletting will be valid unless the subtenant first enters
into a written agreement with Landlord, in such form and with such terms,
covenants and conditions as may be reasonably required by Landlord. No consent
by Landlord to an assignment or subletting shall constitute a consent to any
further assignment of this Lease or subletting of all or any portion of the
Premises. Further, Landlord's consent to an assignment or subletting shall not
release Tenant from its primary obligation to pay the Annual Rent and all rent
and other sums payable by Tenant under the Lease and to perform all other
obligations to be performed by Tenant under the Lease.
11
<PAGE>
14. Fire or Other Casualty.
(a) If the Building and/or other improvements on the
Premises (including mechanical systems and/or equipment used in the operation of
the Building) are damaged or destroyed by fire or other casualty, Landlord
shall, at its sole cost and expense, promptly and diligently commence and
prosecute to completion the repair, rebuilding, restoration or replacement
(hereafter generically "restoration") of the Building and/or other improvements
on the Premises, so as to restore them within sixty (60) days after such
casualty, to their respective conditions immediately before such damage or
destruction. Provided however, that if such fire or other casualty occurs (i)
during the last six (6) months of the then-current Term of this Lease, which
Term Tenant has not extended pursuant to express provision of this Lease, and it
will take more than sixty (60) days to restore the damage or destruction
measured from the date of the fire or other casualty, or (ii) renders all or a
substantial portion of the Building untenantable, Landlord shall have the right
to terminate this Lease (with equitable prorations of Rent for Tenant's
possession of any tenantable portion of the Premises from and after the date of
casualty and before the effective date of termination) by giving Tenant written
notice within thirty (30) days after the date of the fire or other casualty, and
the Lease shall be deemed to be terminated as of the date Tenant receives
Landlord's notice, but affording Tenant sufficient time and opportunity to
remove its property from the Premises; and neither party shall have any further
liability to the other under the Lease except for obligations which were accrued
and unpaid as of the date of the casualty, subject to appropriate set-offs, if
any. For the purposes of this Article, thirty percent (30%) or more of the floor
area of the Building shall be deemed to be a substantial portion of the
Building. Landlord and Tenant agree that any deviation plus or minus two percent
(2%) from the definition of "substantial portion of the Building", shall be
deemed to be a de minimis deviation and the provisions of this subparagraph
shall remain operative. If such notice is given, Landlord shall have no
obligation to restore. If Landlord fails to give written notice of termination
within such thirty (30)-day period, Landlord shall be deemed to have elected to
restore such damage in accordance with this Article. Under all circumstances,
Rent shall equitably abate as to those portions of the Building that are
untenantable, from time to time, as a result of such fire or other casualty.
12
<PAGE>
It shall be Landlord's responsibility to obtain its
mortgagee's release of insurance proceeds for the purpose of making repairs and
Landlord's consent not to apply any portion of insurance proceeds to the
mortgage loan except if the insurance proceeds exceed the cost of repairs and
restoration.
13
<PAGE>
(b) If the Building and/or other improvements on the
Premises (including mechanical systems and/or equipment used in the operation of
the Building) are damaged or destroyed by fire or other casualty, Tenant shall
have the right to terminate this Lease in accordance with the provisions of this
subparagraph. If the damage or destruction (i) occurs within the last six (6)
months of the then-current Term of this Lease, which Term Tenant has not
extended pursuant to express provisions of this Lease, and will take more than
sixty (60) days to restore measured from the date of the fire or other casualty,
or (ii) renders all or a substantial portion of the Building untenantable,
Tenant may terminate this Lease by giving Landlord written notice thirty (30)
days after the date of fire or other casualty, and the Lease shall be deemed to
be terminated as of the date Landlord receives Tenant's notice, but affording
Tenant sufficient time and opportunity to remove its property from the Premises.
If the commencement or substantial completion of the restoration of the Premises
does not occur, or in Landlord's reasonable judgment (of which Tenant shall be
given notice within thirty (30) days after the fire or other casualty) will not
occur, within sixty (60) days after the fire or other casualty, Landlord shall
notify Tenant in writing (which notice shall include Landlord's reasonable
estimate of the date of substantial completion of the restoration), and Tenant
shall have the right to terminate this Lease effective as of the date of
Landlord's notice to Tenant, but affording Tenant sufficient time and
opportunity to remove its property from the Premises, by giving written notice
of termination within fifteen (15) business days after its receipt of Landlord's
notice. In the event of any termination pursuant to this subparagraph; neither
party shall have any further liability to the other under the Lease except for
obligations which were accrued and unpaid as of the date of the casualty,
subject to appropriate set-offs, if any. If Tenant does not terminate this lease
as provided above, and the substantial completion of the restoration does not
occur by the estimated date of substantial completion contained in Landlord's
notice, within ten (10) business days after a determination is made that
substantial completion will not occur by the estimated date, Landlord shall
provide Tenant a second written notice estimating the extended date of
substantial completion and Tenant shall again have the right, exercisable by
written notice given with ten (10) business days after the receipt of Landlord's
notice, to terminate the Lease within the fifteen (15)-day time period set forth
above. In each instance in which Tenant elects not to exercise its right to
terminate as provided in this subparagraph, that right to terminate, following
the same procedure and schedule, shall arise again if substantial completion has
not occurred by the estimated date of substantial completion set forth in the
notice upon which Tenant's previous election not to terminate was based.
14
<PAGE>
15. Landlord's Right to Enter. Tenant will permit Landlord,
its agents, employees and any other persons authorized by Landlord in writing,
to enter the Premises at reasonable times during Tenant's normal operating
hours, which times have been mutually agreed upon by Landlord and Tenant, and
after Landlord's first having given Tenant at least twenty-four (24) hours'
prior written notice (except in the event of an emergency, in which case prior
written notice shall not be required), to inspect and exhibit the Premises and
to make alterations, improvements or repairs to the Building that may reasonably
be necessary to the operation, preservation or maintenance of the Building;
provided, however, that such entry by Landlord shall not deprive Tenant of or
interfere with Tenant's use of the Premises and/or operation of its business in
and from the Premises.
15
<PAGE>
16. Insurance.
(a) Throughout the Term of this Lease and any
renewal or extension of it, Landlord shall carry commercial general liability
insurance endorsed for contractual liability covering Landlord and having limits
of not less than $3,000,000 per occurrence and annual aggregate limit for bodily
injury, and $1,000,000 per occurrence and annual aggregate limit for property
damage. Landlord's liability policy shall name Tenant as an additional insured
and provide that it shall not be cancelled or changed without at least thirty
(30) days' prior written notice to Tenant. Landlord's policy(ies) shall be
issued by insurers of recognized responsibility licensed to do business in
Florida, and certificates of such insurance certified by the insurer shall be
supplied to Tenant. All premiums for Landlord's insurance and any endorsements
to such coverage shall be the responsibility of and shall be paid for by
Landlord.
(b) Tenant will not knowingly do or commit, or
suffer or permit to be done or committed, any act or thing as a result of which
any policy of insurance of any kind on or in connection with the Building or the
Premises, or any part thereof, shall become void or suspended, or the insurance
risk on the Building or the Premises or any part thereof shall (in the opinion
of the insurer or proposed insurer) be rendered materially more hazardous. If it
is determined that (in the opinion of the insurer or proposed insurer) conduct
of the Tenant caused the insured risk on the Building or the Premises, or any
part thereof, to be materially more hazardous with a resulting increase in
premium, Tenant shall pay as additional rent the amount of any increase of
premiums for such insurance within thirty (30) days after receiving a bill for
the increase in premium supported by documentation evidencing the determination
of materially increased hazard and resulting increase in premium.
Notwithstanding anything to the contrary in this subparagraph, Tenant shall have
the right to contest any determination of materially increased hazard and
resulting increase in premium. To the extent that Tenant's contest is
successful, any rebate or refund of premium shall be paid directly to Tenant, or
paid over by Landlord to Tenant within ten (10) days after Landlord's receipt of
the rebate or refund.
16
<PAGE>
(c) Tenant shall obtain and maintain all-risk, fire
and extended coverage upon the Building, and all alterations, additions,
improvements (leasehold or otherwise) and decorations in, or and to the
Building. Such coverage shall include full replacement cost coverage and an
agreed amount endorsement, and shall provide for a deductible of no more than
$5,000. The premium for such coverage shall be paid by Landlord either within
five (5) business days after Landlord's receipt of an invoice from Tenant, or by
Tenant's deduction of the premium from the monthly installment of rent, at
Tenant's option. Payment of the deductible shall be solely the responsibility of
Landlord, and shall be paid by Landlord to Tenant within five (5) business days
after Landlord's receipt of Tenant's written demand for payment.
17
<PAGE>
(d) Throughout the Term of this Lease and any
renewal or extension of it, Tenant shall maintain, at Tenant's expense, (i) all
risk, fire and extended coverage insurance against hazards to Tenant's personal
property located on or in the Premises up to their full replacement cost, and
(ii) a policy or policies of comprehensive general public liability insurance,
endorsed for contractual liability, having such limits of not less than
$3,000,000 per occurrence and annual aggregate limit for bodily injury, and
$1,000,000 per occurrence and annual aggregate limit for property damage. Such
policies shall name Landlord as an additional insured and provide that they
shall not be cancelled or changed without at least thirty (30) days' prior
written notice to Landlord. All of Tenant's policies shall be issued by insurers
of recognized responsibility licensed to do business in Florida, and
certificates of such insurance certified by the insurers shall be supplied to
Landlord. All premiums for Tenant's insurance and any endorsements to such
coverage shall be the responsibility of and shall be paid for by Tenant.
(e) Notwithstanding anything in this Lease to the
contrary, each party hereby releases the other party, its agents and employees,
to the full extent that the releasing party is or is required under this Lease
to be insured, from any and all liability for any loss or damage which may be
inflicted upon the property of such party, notwithstanding that such loss or
damage shall have arisen out of the negligent or other tortious act or omission
of the other party, its agents or employees. Each and every policy of property
insurance of the party so releasing shall contain a clause either (i) that such
release shall not affect the policy or the right of the insured to recover
thereunder, or (ii) an express waiver of the insurer's rights of subrogation.
18
<PAGE>
17. Representations and Warranties of Landlord.
(a) Landlord represents and warrants that:
(1) The mechanical systems serving and/or
delivering services and/or utilities to the Building
(including, but not limited to heating, ventilation, air
conditioning, plumbing, and electrical systems) have been
maintained continuously by Landlord, its agents, employees or
independent contractors, and that those systems are and on
the Commencement Date will be in good condition, working
order and fully operative.
(2) The current zoning classification of the
Premises is "C-2", and the construction of the Building on
the Land, and Tenant's operation of its business from and use
of the Building does not violate any zoning, subdivision,
building or similar laws, codes, ordinances, orders,
regulations or recorded plats, and there are no presently
outstanding and uncured notices of violations;
(3) Landlord has not received notice of any
condemnation proceeding or other proceedings in the nature of
eminent domain ("Taking"), and no Taking has been threatened.
(4) The Building was constructed in
accordance with, and complies with, all applicable federal,
state and local laws, ordinances, codes, rules, orders,
regulations or requirements. Landlord has no knowledge of any
defective condition, structural or otherwise, with respect to
the Building.
19
<PAGE>
(5) The Premises and all activities and
conditions at the Premises have been in compliance with the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.ss.9601 et seq., as amended from
time to time ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. ss.ss.6901 et seq., as amended from
time to time ("RCRA"), and the Clean Water Act, 33 U.S.C.
ss.ss.7401 et seq., as amended from time to time, the Toxic
Substances Control Act, 15 U.S.C. ss.ss.2601 et seq., as
amended from time to time, and with all other federal, state
and local environmental statutes, ordinances, regulations,
orders and requirements of common law, regarding and
including, without limitation: the discharge, emission or
release of any Contaminant (hereinafter defined) to the air,
soil, surface water or ground water; the discharge of any
dredge or fill material to a wetland or other water of the
United States (as hereinafter defined); the storage,
treatment, disposal or handling of any Contaminant; or the
construction, operation, maintenance or repair of aboveground
or underground storage tanks (collectively, "Environmental
Laws").
(6) No Contaminant that may require
remediation under Environmental Laws is present on, over or
under or is migrating from the Premises. The term
"Contaminant" shall mean any "hazardous substance",
"pollutant or contaminant" as defined pursuant to CERCLA or
the Spill Act, "petroleum" as defined pursuant to RCRA or the
Spill Act or any material containing petroleum, any
polychlorinated biphenyls (PCBs) or substances containing
PCBs, any urea formaldehyde foams, or any asbestos or
materials containing asbestos.
20
<PAGE>
(7) Neither radon nor any radon progeny is
present at any area of the Premises in excess of 4
picocuries/liter.
(8) Neither Landlord, nor any prior tenant
of the Premises, has generated, stored, treated, disposed of,
discharged, released, emitted or otherwise handled any
Contaminant on, over, under, from or in any manner affecting
the Premises. For the purposes of this paragraph only,
"Contaminant" shall not include construction materials (other
than asbestos, polychlorinated biphenyls or urea formaldehyde
foam), office equipment, fuel and other similar products
contained in vehicles and cleaning solutions and other
maintenance materials that are customarily used or stored
incidental to and are reasonably necessary for the operation
or maintenance of the Building.
(9) With the exception of a single
underground storage tank identified in the Phase I Report by
Atlanta Testing & Engineering, No. 9042-1 dated June 28,
1991, no underground or above ground storage tanks are
present at the Premises.
21
<PAGE>
(10) No civil, criminal or administrative
proceeding is pending or threatened relating to Environmental
Laws or Contaminants on, over, under, from or affecting the
Premises. Neither Landlord, nor its agents has received any
notice of violation or potential liability regarding the
Premises or activities thereon relating to Environmental Laws
or Contaminants on, over, under, from or affecting the
Premises and Landlord has no reason to believe that any such
notice or notices will be received, nor does Landlord have
reason to know of circumstances that would give rise to such
notice or notices or proceedings in the future. Landlord has
not entered into any consent order, consent decree,
administrative order, judicial order or settlement relating
to Environmental Laws or Contaminants on, over, under,
migrating from or affecting the Premises.
(11) All services necessary for the
operation of Tenants's business at and from the Building
(including, but not limited to, electricity, gas, water,
sanitary sewer and other requisite utilities) are available,
installed and servicing the Building.
(b) The foregoing representations and warranties are
true and correct as of the date of this Lease, shall be true and correct at and
as of the Commencement Date in all respects as though such representations and
warranties were made both at and as of the date of this Lease, and at and as of
the Commencement Date; and shall survive the expiration or earlier termination
of this Lease.
22
<PAGE>
(c) Landlord shall hold harmless, indemnify and
defend Tenant of, from and against any liability, claim, cause of action,
demand, suit, proceeding, judgment, loss, penalty, fine, damages, costs and
expenses (including, without limitation attorneys' fees and court costs) or the
like asserted against or incurred by Tenant, arising out of or relating to the
breach of any representation or warranty of Landlord, and/or arising out of or
relating to the existence or non-existence of any condition as to which Landlord
delivered its representation and warranty to Tenant. Notwithstanding any
provision of this Lease to the contrary, it is understood and agreed that the
remedy of indemnity pursuant to this subparagraph and Tenant's remedies at law
may be inadequate in the case of any breach by Landlord of its representations
and warranties, and Landlord agrees that Tenant shall be entitled to equitable
relief and to the remedy of specific enforcement, to the extent necessary and
appropriate. Landlord's obligations pursuant to this subparagraph shall survive
expiration or earlier termination of this Lease.
18. Representations and Warranties of Tenant.
(a) Tenant represents and warrants that:
(1) Tenant will not engage in activities at
the Premises that violate the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.
ss.ss.9601 et seq., as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss.6901 et seq., as amended from time to time ("RCRA"),
and the Clean Water Act, 33 U.S.C. ss.ss.7401 et seq., as
amended from time to time, the Toxic Substances Control Act,
15 U.S.C. ss.ss.2601 et seq., as amended from time to time,
and with all other federal, state and local environmental
statutes, ordinances, regulations, orders and requirements of
common law, regarding and including, without limitation: the
discharge, emission or release of any Contaminant
(hereinafter defined) to the air, soil, surface water or
ground water; the discharge of any dredge or fill material to
a wetland or other water of the United States (as hereinafter
defined); the storage treatment, disposal or handling of any
Contaminant; or the construction, operation, maintenance or
repair of aboveground or underground storage tanks
(collectively, "Environmental Laws").
23
<PAGE>
(2) Tenant will not discharge any
Contamination that may require remediation under
Environmental Laws. The term "Contaminant" shall mean any
"hazardous substance", "pollutant or contaminant" as defined
pursuant to CERCLA or the Spill Act, "petroleum" as defined
pursuant to RCRA or the Spill Act or any material containing
petroleum, any polychlorinated biphenyls (PCBs) or substances
containing PCBs, any urea formaldehyde foams, or any asbestos
or materials containing asbestos.
(3) Tenant will not generate, store, treat,
dispose of, discharge, release, emit or otherwise handle any
Contaminant on, over, under, from or in any manner affecting
the Premises. For the purposes of this paragraph only,
"Contaminant" shall not include construction materials (other
than asbestos, polychlorinated biphenyls or urea formaldehyde
foam), office equipment, fuel and other similar products
contained in vehicles and cleaning solutions and other
maintenance materials that are customarily used or stored
incidental to and are reasonably necessary for the operation
or maintenance of the Building.
24
<PAGE>
(b) Tenant shall hold harmless, indemnify and defend
Landlord of, from and against any liability, claim, cause of action, demand,
suit, proceeding, judgment, loss, penalty, find, damages, cost and expenses
(including, without limitation attorneys' fees and court costs) or the like
asserted against or incurred by Landlord, arising out of or relating to the
breach of any representation or warranty of Tenant, and/or arising out of or
relating to the existence or non-existence of any condition as to which Tenant
delivered its representation and warranty to Landlord. Notwithstanding any
provision of this Lease to the contrary, it is understood and agreed that the
remedy of indemnity pursuant to this subparagraph and Landlord's remedies at law
may be inadequate in the case of any breach by Tenant of its representations and
warranties, and Tenant Agrees that Landlord shall be entitled to equitable
relief and to the remedy of specific enforcement, to the extent necessary and
appropriate. Tenant's obligations pursuant to this subparagraph shall survive
expiration or earlier termination of this Lease.
19. Repairs and Condition of Premises.
(a) Landlord shall be responsible to maintain,
repair and replace the foundations, roofs, exterior walls, bearing walls, and
structural components (including, but not limited to, beams and columns) of the
Building, and all components specifically excepted from the Premises pursuant to
Article 26 of this Lease. During the Term of this Lease, Tenant shall keep the
Building, and at the expiration or other termination of this Lease, Tenant shall
leave the Building, in good order and condition, ordinary wear and tear, damage
by fire or other casualty and repairs to be performed by Landlord under this
Lease alone excepted; and for that purpose and except as stated, Tenant will
make all necessary repairs and replacements that are not the responsibility of
Landlord under this Lease.
25
<PAGE>
To the extent that the cost of any such repair or replacement
exceeds $10,000, Tenant shall first obtain Landlord's consent, which Landlord
shall not unreasonably withhold, condition or delay.
(b) Notwithstanding anything to the contrary in this
Lease or in this Article specifically, from and after the date on which the
aggregate cost to Tenant to repair or maintain each separate of the electrical,
plumbing and heating systems equals $5,000, and the aggregate cost to Tenant to
repair or maintain the ventilation and air conditioning system equals $15,000,
any repair or maintenance for that particular system shall be deemed to be a
capital repair and the cost of such repair and/or maintenance in excess of that
amount shall be deemed to be a capital expense, to be borne by and paid by
Landlord exclusively.
(c) During the Term of this Lease, and at its
expiration or earlier termination, Tenant shall remove all dirt, rubbish, waste
and refuse from the Premises, and at the termination of the Term will also have
removed or caused to be removed all of its property from the Premises, so that
Landlord may again have and repossess the Premises.
26
<PAGE>
20. Compliance with Law. Tenant agrees to comply with those
laws, ordinances, notices, requirements, orders, regulations and recommendations
of Federal, State, or local authorities or of the Board of Fire Underwriters or
any insurance organizations, associations or companies, relating to Tenant's
particular use of the Premises and any property owned by Tenant and located on
the Premises or within the Building, the violation of which will have a material
adverse impact on the use, condition or value of the Premises; and not to engage
knowingly in activities at the Premises in violation of the Environmental Laws.
Tenant shall use its good faith efforts to give Landlord prompt written notice
of any accident on the Premises or in the Building and of any breakage, defect
or failing in any of the systems or equipment servicing the Premises. Landlord
shall comply with all legal requirements relating to the use, occupancy and
condition of the Building; and covenants that it will cause the Building to
conform to all applicable legal requirements as the same may change from time to
time. Landlord represents and warrants that the Building has been constructed
and maintained in accordance with all applicable laws, ordinances, notices,
requirements, orders, regulations, codes and recommendations of Federal State or
local authorities, such that Tenant shall be able to obtain and maintain all
necessary permits to use and occupy the Building in the operation of Tenant's
business.
27
<PAGE>
21. Mechanics' Liens.
(a) The parties do not intend that the Landlord's
interest in the Premises is to be subject to liens for improvements made by
Tenant to or upon the Premises. Tenant shall promptly pay all contractors and
materialmen for work done or services, material, equipment or supplies furnished
at the request of Tenant, so as to minimize the possibility of a claim being
asserted or a lien attaching to the Premises or any portion of it. If any such
lien or claim shall be filed, Tenant shall promptly after receipt of written
request from Landlord, cause the same to be discharged of record by payment,
deposit, bond or otherwise. If Tenant shall fail to cause such lien or claim to
be discharged promptly after written request from Landlord, then, in addition to
any other right or remedy it may have, Landlord may, but shall not be obligated
to, contest such lien or claim, or to discharge it by payment, deposit, bond or
otherwise. Any cost incurred by Landlord in contesting such lien claim, or
causing it to be discharged shall be recoverable by Landlord from Tenant as
additional rent pursuant to the terms of this Lease.
22. Recordation of Memorandum of Lease. Either party may
record a memorandum or so called "short form" of this Lease. The cost and
expense of preparing and recording any such memorandum or "short form" of Lease
shall be paid by the party desiring that such memorandum or "short form" of
Lease be recorded.
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23. Default/Remedies of Landlord.
(a) If any of the following shall occur, such
occurrence shall constitute a default under this Lease (and the term "default"
whenever used in this Lease shall refer only to the circumstance that exists
after the giving of notice and the expiration of any cure or grace period
provided in this Lease):
(i) Tenant does not pay in full when due any
installment of Rent or any other sum payable by Tenant to
Landlord under this Lease whether or not included as Rent
under this Lease, and the failure continues for ten (10) days
after Tenant receives written notice from Landlord specifying
such failure;
(ii) Tenant fails to perform or comply with
any obligation imposed upon Tenant under this Lease (other
than the payment of money) and such failure continues for
thirty (30) days after Tenant's receipt of written notice
from Landlord specifying such failure, or such longer period
as may be necessary if such failure cannot reasonably be
cured within thirty (30) days even with the exercise of
reasonable and diligent effort, but Tenant has commenced
curative action within ten (10) days after Tenant's receipt
of notice, and diligently and continuously pursues such
curative action to completion.
(iii) Tenant abandons the Premises;
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(iv) Tenant becomes the subject of
commencement of an involuntary case under the Federal
bankruptcy laws as now or hereafter constituted, or there is
filed a petition against Tenant seeking reorganization,
arrangement, adjustment or composition of or in respect of
Tenant under the Federal bankruptcy laws as now or hereafter
constituted, or under any other applicable federal or state
bankruptcy, insolvency, reorganization or other similar law,
and the case is not dismissed within ninety (90) days after
filing;
(v) Tenant commences a voluntary case or
institutes proceedings to be adjudicated a bankrupt or
insolvent, or consents to the institution of bankruptcy or
insolvency proceedings against it, under the Federal
bankruptcy laws as now or hereafter constituted, or any other
applicable Federal or state bankruptcy or insolvency or other
similar law;
(vi) A receiver, conservator or similar
officer is appointed by a court of competent jurisdiction to
take charge of all or a substantial part of Tenant's
property, and that officer is not discharged and possession
of Tenant's property is not restored to Tenant within ninety
(90) days after appointment;
(vii) Tenant makes any assignment for the
benefit of creditors;
(viii) Tenant's interest in the Premises or
under this Lease is the subject of levy under execution,
attachment or other similar process of law and such actin is
not cancelled or discharged within ninety (90) days after its
occurrence.
(b) In any such event, and at the sole option of
Landlord, Landlord may pursue the following remedies:
(i) Re-enter and repossess the Premises,
remove any property located in or on the Premises and store
such property in a public warehouse or other secure place at
the cost and expense of Tenant, giving Tenant twenty-four
(24) hours' prior written notice; or
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(ii) Re-let the Premises or any part of it
for Tenant's account; or
(iii) Bring any action against Tenant to
recover the amount of any payment owing by Tenant to Landlord
as such payment becomes due; or
(iv) Terminate this Lease by giving Tenant
prior written notice of termination without relieving Tenant
of any liability or obligations for payments that became due
before termination; or
(v) only as an alternative remedy to the
foregoing, and not in conjunction with or cumulatively with
the foregoing remedies, Landlord may accelerate the rental
due from Tenant to Landlord for the remainder of the
then-current term, with the commensurate obligation on the
part of Landlord to make all reasonable efforts to obtain and
lease the Premises to a substitute tenant, including
prospective substitute tenants produced by Tenant having
reasonably satisfactory credit, and to give credit to Tenant
against such accelerated obligation for payments received
from such substitute tenant, in mitigation of Tenant's
damages.
(c) No waiver by Landlord of any breach by Tenant of
any of Tenant's obligations, agreements or covenants in this Lease shall be a
waiver of any subsequent breach or of any obligation, agreement or covenant, nor
shall any forbearance by Landlord to seek a remedy for any breach by Tenant be a
waiver by Landlord of any rights and remedies with respect to such or any
subsequent breach.
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As used in this Section, the "Term" shall include the term of
this Lease and any renewals or extensions the Lease to which Tenant shall have
become bound.
24. Default/Remedies of Tenant.
(a) If Landlord shall be in default under this Lease
including, but not limited to its failure to perform any of its duties or
obligations under this Lease, for thirty (30) days after receipt of written
notice from Tenant (unless such default is not capable of cure within thirty
(30) days, in which event Landlord shall have failed to commence curing such
default within such thirty (30)-day period and diligently prosecuted such
curative action to completion), in addition to any other rights Tenant may have
at law or in equity, Tenant may but shall not be obligated to cure such default
on behalf of Landlord. Landlord shall reimburse Tenant upon demand for all
reasonable out-of-pocket costs and expenses incurred by Tenant in curing such
default, including, without limitation, reasonable attorneys' fees and other
legal expenses, together with interest thereon at the Lease Interest Rate
accruing and payable until the date on which such costs and expenses are
indefeasibly paid in full.
(b) If the cure provided for under subparagraph (a)
above involves a payment of Tenant for Landlord's account, then Tenant may
offset the amount of such payment (plus interest at the Lease Interest Rate)
against Rent payable by Tenant under this Lease.
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(c) If Landlord's default is such that Tenant's
occupancy of the Premises and/or its operation of its business from the Premises
is materially adversely affected, Tenant shall have the right to terminate this
Lease by giving Landlord prior written notice of intention to terminate, and the
Lease shall be deemed to be terminated as of the date specified in Tenant's
notice.
25. Remedies Cumulative. Except as expressly provided
elsewhere in this Lease, the remedies of the parties set forth in this Lease are
cumulative and are in addition to and not exclusive of any other remedy given to
them respectively in this Lease or which may be permitted by law.
26. Excepted from Premises. All ducts, pipes, conduits, wires
or other equipment used in the operation of the Building and/or providing
services or utilities to the Building, or any part of it, and any space occupied
by them, whether or not within the Building, are excepted and reserved from the
Premises and any obligation on the part of Tenant to maintain or repair the
Premises, and Tenant shall not remove or tamper with the same and will permit
Landlord to enter the Premises consistent with the provisions elsewhere in this
Lease, to service, replace, remove or repair the same.
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27. Lease Subordinated; Non-Disturbance and Attornment.
(a) Tenant agrees that this Lease shall be subject
and subordinate to the lien of any mortgage, deed of trust and/or other
encumbrance previously or hereafter placed by Landlord upon the Premises or the
Building, and of all renewals, modifications, consolidations, replacements and
extensions thereof (all of which are hereafter referred to collectively as a
"mortgage"), automatically and without the necessity of any further action on
the part of Tenant to effectuate such subordination; provided, that before the
Commencement Date of this Lease and thereafter, within fifteen (15) days after
Landlord's grant or creation of any additional or substitute mortgage, Landlord
shall have obtained and delivered to Tenant in recordable form, an agreement
from the holder of any such mortgage to which this Lease is or may be
subordinate, a non-disturbance agreement containing a covenant binding upon the
mortgagee, its successors and assigns, that so long as Tenant is not in default
under the Lease, or if Tenant is in default under the Lease, so long as Tenant's
time to cure such default has not expired, this Lease shall not be terminated or
modified in any respect whatsoever, nor shall Tenant's right under the Lease or
its occupancy of the Premises be disturbed or affected by reason of such
mortgage or any foreclosure action or other proceeding that may be instituted in
connection with such mortgage, and that Tenant shall not be named as a defendant
in any such foreclosure action or other proceeding. Provided that the foregoing
conditions are met, Tenant shall, within ten (10) days after the receipt of
written request by any person who acquires Landlord's estate by foreclosure or
otherwise, attorn to such person, provided such person assumes in writing
Landlord's obligations under this Lease and agrees in writing not to disturb
Tenant's rights under the Lease or its occupancy of the Premises, and further
shall execute, acknowledge and deliver, within ten (10) days after the receipt
of written request by Landlord or any mortgage holder, such further instruments
evidencing such subordination, and such further instruments evidencing such
attornment obligation, as may be reasonably requested by such holder, subject to
the satisfaction of the foregoing provisions of this Article regarding non
disturbance of Tenant.
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(b) Notwithstanding anything the contrary contained
in the foregoing provisions of this Article, the holder of any mortgage may at
any time subordinate its mortgage to the operation and effect of this Lease,
without the necessity of obtaining Tenant's consent thereto, by giving notice of
the same in writing to Tenant, and thereupon this Lease shall be deemed to be
prior to such mortgage without regard to their respective dates of execution,
delivery and/or recordation, and in that event such holder shall have the same
rights with respect to this Lease as though this Lease shall have been executed,
delivered and recorded prior to the execution and delivery of such mortgage.
35
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28. Paramount Lease. Subject to the provisions of Article 27,
above, requiring that Tenant receive a reciprocal agreement of non-disturbance,
if Landlord is or becomes lessee of the Building or the Land, then Tenant agrees
that Tenant's possession shall be that of a subtenant and subordinate to the
interest of Landlord's lessor, its heirs, personal representatives, successors
and assigns (such lessor and other persons being hereafter collectively referred
to as the "Overlessor"). If Landlord's tenancy shall terminate by expiration,
forfeiture or otherwise, Tenant agrees, subject to the provisions of Article 26,
above, to attorn to Overlessor and to recognize Overlessor as Tenant's landlord
upon the terms and conditions of this Lease for the balance of the Term of this
Lease and any extensions or renewals of this Lease. Provided that Tenant
receives an appropriate and acceptable agreement of non-disturbance, Tenant
agrees within ten (10) days after its receipt of a written request from Landlord
or any Overlessor, to execute, acknowledge and deliver, such further instruments
reasonably requested evidencing such subordination of Tenant's right, title and
interest under this Lease to the interests of Overlessor, and such further
instruments of attornment, reasonably requested by such Overlessor. All such
instruments shall be prepared at the sole cost and expense of Landlord or the
Overlessor, and Tenant shall not be required to incur any cost or expense in
executing or delivering such instruments. Unless and until the provisions of
Article 26, above, are met, requiring that Tenant receive a reciprocal agreement
of non-disturbance, neither this Article nor any of its provisions shall be
effective or enforceable against Tenant.
36
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29. Condemnation. If the whole or a substantial part of the
Premises is taken or condemned for a public or quasi-public use under any
statute or by right of eminent domain by any competent authority or sold in lieu
of such taking or condemnation, such that in the reasonable opinion of Tenant
the continued conduct of Tenant's business (as it existed before the taking) is
not practicable, this Lease shall terminate automatically on the date that the
right to possession shall vest in the condemning authority (the "Taking Date")
with Rent being adjusted to the Taking Date. Tenant, at its own expense, shall
be entitled to claim and to receive a separate award for damages resulting from
such condemnation, taking or sale, including, but not limited to moving and
related expenses, and such other awards and/or entitlements as may otherwise be
provided by law.
30. Notices.
(a) All notices, demands, requests or other
communications from each party to the other required, desired or permitted under
this Lease shall be in writing, given in compliance with this Article and,
unless and until otherwise specified in a written notice by the party to whom
notice is intended to be given, shall be sent to the parties at their respective
addresses set forth in Article 1, above.
Notices may be given on behalf of any party by its legal
counsel.
(b) Each notice, demand, request or other
communication shall be given (i) by hand delivery, against a written receipt of
delivery, or (ii) by registered or certified mail of the United States Postal
Service, return receipt requested, postage prepaid, or (iii) by an overnight
courier service guaranteeing next business-day delivery or (iv) via telecopier
or facsimile transmission to the facsimile number listed in Article 1 above,
provided, however, that if such communication is given via telecopier or
facsimile transmission, an original counterpart of such communication shall
concurrently be sent in either the manner specified in clause (i) or clause
(iii) above.
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(c) Each notice, demand, request or other
communication shall be deemed to have been received (i) upon actual receipt by
the addressee, if given by hand delivery; (ii) within two (2) business days
after the date of deposit at any main or branch United States post office
(evidenced by United States Post Mark) if sent pursuant to subparagraph (b) (ii)
above, (iii) the next business day if sent pursuant to subparagraph (b)(iii)
above, and (iv) upon electronic confirmation of receipt if sent pursuant to
subparagraph (b)(iv) above, provided all conditions for valid transmission
pursuant to subparagraph (b)(iv) above are met.
31. Definitions.
(a) Definition of "Landlord". The word "Landlord" is
used herein to include the Landlord named in Article 1 above and any subsequent
owner of Landlord's interest in the Premises as well as their respective heirs,
personal representatives, successors and assigns, each of whom shall have the
same rights, remedies, powers, authorities and privileges as it would have had
it originally signed this Lease as Landlord, but no such person, whether or not
named herein, shall have any liability hereunder after it ceases to hold such
interest unless otherwise provided in this Lease.
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(b) Definition of "Tenant". As used herein, the term
"Tenant" shall be deemed to refer to each and every person named in Article 1
above, and to such person's heirs, personal representatives, successors and
assigns, each of whom shall have the same obligations, liabilities, rights and
privileges as it would have possessed had it originally executed this Lease as
the Tenant.
(c) Definition of "Fair Market Rent". The term "fair
market rent" shall mean the fair market rental value determined as follows: The
fair market rental value of the Building shall be determined by Landlord and
designated by notice from Landlord to Tenant, taking into consideration the
fixed or base rental rates being quoted by other landlords for other buildings
in comparable areas of Pinellas County of the same quality, condition and level
of amenities, in either case as adjusted on account of pertinent differences
such as the location, rentable square footage, length of term, leasehold
improvements, the date the particular rental rates under consideration became
effective, applicable distinctions between "gross leases" and "net leases",
items payable by tenants, any other adjustments (including by way of indices) to
base rental, and any other term or condition relevant in making such evaluation,
subject to the limitations in Article 36, below. Landlord's determination of
fair market rental value shall be final and binding unless Tenant submits that
determination to the American Arbitration Association located in Tampa, Florida
within thirty (30) days after Tenant's receipt of that determination. In the
event that Tenant does submit that determination for arbitration, the fair
market rental value shall be determined within sixty (60) days after submission
by a panel of three arbitrators under the Commercial Arbitration Rules of the
American Arbitration Association, whose determination shall be based upon the
factors prescribed by this subparagraph; and subject to the limitations in
Article 36, below; and the award rendered by the arbitrators shall be final,
conclusive and binding. Until such an award is rendered, Tenant's rental
payments shall be made based on the Annual Fixed Rent for the immediately
preceding Term subject to later adjustment upon rendering of the award.
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<PAGE>
32. Estoppel Certificate.
(a) The parties agree that from time to time, within
fifteen (15) business days after written request from the other, to execute,
acknowledge and deliver to and in favor of any proposed or existing mortgagee or
purchaser of the premises or any encumbrance holder, or any proposed and
permitted assignee of Tenant's interest in this Lease or sublessee of Tenant, a
written estoppel certificate in recordable form certifying (i) whether the Lease
is in full force and effect; (ii) whether the Lease has been modified,
supplemented or amended and if so, stating such modifications, supplements and
amendments); (iii) the date to which the rent and other charges arising under
the Lease have been paid; (iv) the amount of any prepaid rent or credits due
Tenant, if any; (v) if applicable, that Tenant has accepted possession, and has
entered into occupancy, of the Premises, and the Commencement Date and the
corresponding expiration date; and (vi) whether or not, to the best knowledge of
the signer of such certificate, there has been a default on the part of the
other party in the performance of any covenant, agreement or condition contained
in this Lease and specifying, if any, each such unsatisfied condition and each
such default of which the signer may have knowledge. Any certification delivered
pursuant to the provisions of this Article may recite that it is intended to be
relied upon by the recipient.
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(b) The failure of either party to execute,
acknowledge and deliver the estoppel certificate requested in accordance with
the provisions of this Article within the fifteen (15)business-day period above
shall constitute an acknowledgement by that party, which may be relied upon by
the recipient of the estoppel certificate, of the truth of such facts and
conditions as shall have been requested to be certified.
33. Brokers. Tenant and Landlord, respectively, represent and
warrant to each other that they have dealt with no broker, agent or other
intermediary who might be entitled to receive a commission in connection with
this Lease and that no such broker or other intermediary brought the Building
and/or the Premises to Tenant's attention, or, to the best of their knowledge,
otherwise participated in bringing about this Lease, and they respectively agree
to pay any commission, fee or charge due to any broker or other intermediary
claiming by, through or under them respectively, who introduced Tenant and
Landlord or brought the Building and/or the Premises to Tenant's attention or
otherwise participated in bringing about this Lease. Landlord and Tenant agree
respectively to indemnify each other with respect to any breach of the
representations and warranties contained in this Article.
41
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34. Whole Agreement. This Lease and all riders and exhibits
attached to it and forming part of it set forth all of the promises, agreements,
warranties, representations and understandings between Landlord and Tenant
relative to the Premises and this leasehold. There are no promises, agreements,
conditions, warranties, representations or understandings, either oral or
written, between them other than as set forth in this Lease. Except as herein
otherwise provided, no subsequent alteration, amendment, understanding or
addition to this Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by both them.
35. Security Interest. Notwithstanding that Landlord may have
a statutory lien for Rent against personal property of Tenant located on or in
the Building, Landlord agrees that within five (5) business days after its
receipt of a written request for the execution of a Landlord's Waiver in favor
of any vendor, lessor or party providing financing for any personal property of
Tenant located or to be located on or in the Building, Landlord will execute and
deliver the requested Landlord's Waiver to Tenant or otherwise in accordance
with Tenant's written instructions.
42
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36. Extension Option.
(a) Tenant shall have three (3) options to extend
the Term of this Lease for one (1) additional period of one (1) year each
(individually, an "Extension Period"). The option for each additional one (1)
year term may be exercised by Tenant giving written notice to Landlord not later
than the date one hundred twenty (120) days before the then-current Termination
Date. Except as stated below in this Article, all of the terms and conditions of
this Lease in effect immediately prior to an Extension Period shall pertain
equally in all respects during that Extension Period.
(b) Within thirty (30) days after receipt by
Landlord of the notice from Tenant prescribed in subparagraph (a) above,
Landlord shall determine, in accordance with the provisions of Article 31 of
this Lease, the Fair Market Rent for the subject Extension Period, which in any
event shall not be less than the Annual Fixed Rent for the immediately preceding
Term, and shall not exceed a three percent (3%) increase above the Annual Fixed
Rent for the immediately preceding Term, and shall notify Tenant in writing of
the Fair Market Rent.
37. WAIVER OF JURY TRIAL. LANDLORD AND TENANT HEREBY MUTUALLY
WAIVE ANY RIGHTS WHICH EITHER OF THEM MAY HAVE TO REQUEST A JURY TRIAL IN ANY
PROCEEDING AT LAW OR IN EQUITY IN ANY COURT OF COMPETENT JURISDICTION.
43
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38. Miscellaneous
(a) Governing Law. This Agreement shall be governed
by and construed under the laws of the State of Florida.
(b) Modification. This Lease may not be changed or
modified unless such change or modification is in writing and signed by both
Landlord and Tenant.
(c) Counterparts. This Lease may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears on it, and all of which shall together
constitute one and the same instrument. This Lease shall be binding when one or
more counterparts of it, individually or taken together, shall bear the
signatures of all of the parties reflected on this Lease as the signatories.
(d) No Waiver. Neither the failure nor any delay on
the part of either party to this Lease to exercise any right, remedy, power or
privilege under this Lease shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any one occurrence be construed as a waiver of any right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party granting that
waiver.
(e) Interpretation. No provision of this Lease shall
be interpreted for or against either party because that party or that party's
legal representative or counsel drafted such provision.
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(f) Time. Time is of the essence of this Lease. In
computing the number of days for purposes of this Lease, all days shall be
counted, including Saturdays, Sundays and holidays; provided, however, that if
the final day of any time period provided in this Lease, shall end on a
Saturday, Sunday or legal holiday, then the final day shall extend to 5:00 p.m.
of the next full business day. For the purposes of this provision, the term
"holiday" shall mean a day other than a Saturday or Sunday on which banks in the
state in which the Real Property is located are or may elect to be closed.
(g) Severability. If any provision contained in this
Lease shall, to any extent, be invalid or unenforceable, the remainder of this
Lease (and the application of such provision to persons or circumstances, if
any, other than those in respect of which it is invalid or unenforceable) shall
not be affected by such invalidity or unenforceability, and each and every other
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
(h) Headings. The headings appearing in connection
with various portions of this Lease are for convenience only. They are not
intended to indicate all of the subject matter in the text and they are not to
be used in interpreting this Lease nor for any other purpose in the event of any
controversy. As used herein (a) the term "person" shall be deemed to mean a
natural person, a trustee, a corporation, a partnership and any other form of
legal entity; (b) all references in the singular or plural number shall be
deemed to have been made, respectively, in the plural or singular number as
well; (c) each and every document or other writing which is referred to herein
as being attached hereto or is otherwise designated herein as an exhibit hereto
is hereby made a part hereof.
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(i) Binding Effect. This Lease shall be binding
upon and inure to the benefit of Landlord and Tenant, and their respective,
heirs, permitted successors and assigns, and legal representatives.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed or caused this Agreement of Lease to be
executed the day and year first written above.
Landlord:
WITNESS:
(Seal)
/s/ By: /s/ Jeffrey A. Lopatin
- ------------------------- -----------------------
Jeffrey A. Lopatin
WITNESS:
/s/
- -------------------------
Tenant:
WITNESS: Kleinert's, Inc. of Florida, a
Florida corporation
/s/ By: /s/ Joseph J. Connors
- ------------------------- -----------------------
Vice President
WITNESS:
Attest:
-----------------------
(Ass't Sec'y/Treasurer)
46
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EXHIBIT "A"
47
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- -------------------------------------------------------------------------------
PURCHASE AGREEMENT
BY AND AMONG
PIXIE PLAYMATES, INC.
a Florida corporation
CERTIFIED SEWING SERVICES, INC.
a Florida corporation
CERTIFIED APPAREL SERVICES OF HONDURAS, INC. S.A.
a Honduran corporation
AND
KLEINERT'S, INC. OF FLORIDA
a Florida corporation
December 15, 1995
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS AND SHARES........... 1
Section 1.1 Purchase and Sale of Assets and Shares........... 1
Section 1.2 Purchase Price................................... 3
Section 1.3 Assumption of Certain Liabilities................ 6
Section 1.4 Date, Time and Place of Closing.................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER......... 7
Section 2.1 Corporate Status................................. 7
Section 2.2 Corporate Authority; Effective Agreement......... 7
Section 2.3 Liabilities...................................... 7
Section 2.4 Real Estate...................................... 7
Section 2.5 Personal Property................................ 8
Section 2.6 Trade Names, Trademarks and Service Marks........ 8
Section 2.7 Taxes............................................ 9
Section 2.8 Legal Matters.................................... 9
Section 2.9 Contracts, Leases, Agreements and Other
Commitments.................................. 9
Section 2.10 Employees and Employment Contracts............... 10
Section 2.11 Employee Pensions and ERISA...................... 12
Section 2.12 Consents......................................... 12
Section 2.13 Financial Statements............................. 12
Section 2.14 Suppliers; Conflicts of Interest. .............. 13
Section 2.16 No Material Change............................... 13
Section 2.17 Actions Since Balance Sheet Date................. 14
Section 2.18 Permits and Licenses............................. 14
Section 2.19 Compliance with Laws............................. 14
Section 2.20 Hazard Communications Standard Regulations and
Laws......................................... 15
Section 2.21 Environmental Matters............................ 15
Section 2.22 Statements and Other Documents Not Misleading.... 15
Section 2.23 Survival of Representations and Warranties....... 16
ARTICLE III FURTHER REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDERS................................. 16
Section 3.1 Ownership of Capital Stock of CASH............... 16
Section 3.2 Agreement Not in Breach of Other Instruments
Effecting Shareholders....................... 16
Section 3.3 Valid and Binding Agreement...................... 16
Section 3.4 Capitalization................................... 16
<PAGE>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER...... 17
Section 4.1 Corporate Status................................. 17
Section 4.2 Corporate Authority.............................. 17
Section 4.3 Survival of Representations and Warranties....... 17
ARTICLE V CONDUCT OF BUSINESS PENDING CLOSING.............. 17
Section 5.1 Conduct of Business Pending Closing.............. 17
ARTICLE VI FURTHER COVENANTS AND AGREEMENTS................. 18
Section 6.1 Access to Information............................ 18
Section 6.2 Confidentiality.................................. 19
Section 6.3 Cooperation...................................... 19
Section 6.4 Bulk Sales Laws.................................. 19
Section 6.5 Employment of Employees.......................... 19
Section 6.6 Employee Benefit Plans........................... 20
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASER........... 20
Section 7.1 No Material Adverse Change....................... 20
Section 7.2 Representations and Warranties................... 20
Section 7.3 Performance of Agreements........................ 21
Section 7.4 Opinion of Counsel............................... 21
Section 7.5 No Actions, Etc.................................. 21
Section 7.6 Consents; Lease Estoppels........................ 21
Section 7.7 Executed Lease Agreements........................ 21
Section 7.8 Deliveries....................................... 21
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLERS AND
SHAREHOLDERS................................. 21
Section 8.1 No Material Adverse Change....................... 21
Section 8.2 Representations and Warranties................... 22
Section 8.3 Performance of Agreements........................ 22
Section 8.4 No Actions, Etc.................................. 22
Section 8.5 Deliveries....................................... 22
<PAGE>
ARTICLE IX CLOSING.......................................... 22
Section 9.1 Sellers' Deliveries.............................. 22
Section 9.2 Shareholders' Deliveries......................... 23
Section 9.3 Deliveries by Purchaser.......................... 23
Section 9.4 Prorations....................................... 24
Section 9.5 Parties to Bear Own Expenses..................... 24
ARTICLE X INDEMNIFICATION.................................. 24
Section 10.1 Indemnifications................................. 25
ARTICLE XI GENERAL.......................................... 28
Section 11.1 Notices.......................................... 28
Section 11.2 Broker's Commission.............................. 28
Section 11.3 Headings......................................... 29
Section 11.4 Entire Agreement; Governing Law.................. 29
Section 11.5 Severability..................................... 29
Section 11.6 Counterpart Execution............................ 29
Section 11.7 Assignability; Binding Effect.................... 29
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is entered into as of the 15th day of
December, 1995, by and among PIXIE PLAYMATES, INC., a Florida corporation
("Pixie"), CERTIFIED SEWING SERVICES, INC., a Florida corporation ("Certified,"
and together with Pixie, the "Sellers"), and each of the persons who are
signatories hereto as shareholders of CERTIFIED APPAREL SERVICES OF HONDURAS,
INC. S.A., a Honduran corporation ("CASH") (each, a "Shareholder" and
collectively, the "Shareholders"), and KLEINERT'S, INC. OF FLORIDA, a Florida
corporation (the "Purchaser").
W I T N E S S E T H:
Sellers and CASH are engaged in the manufacture and marketing
of children's apparel. Sellers desire to sell and Purchaser desires to purchase
substantially all of the assets of Sellers used in the operation of their
respective businesses, and Shareholders desire to sell, assign, transfer and
convey to Purchaser, and Purchaser desires to purchase and acquire from
Shareholders all of the shares of capital stock of CASH owned by Shareholders
(the "Shares"), constituting all of the issued and outstanding capital stock of
CASH, all on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and of the mutual agreements and covenants hereinafter set forth, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND SHARES
Section 1.1 Purchase and Sale of Assets and Shares.
(a) Purchased Assets. Subject to the terms of this Agreement, on the
Closing Date (as defined below), each Seller will sell, assign, convey, transfer
and deliver to Purchaser, and Purchaser will purchase and acquire from each
Seller, all of such Seller's right, title and interest in, to and under the
assets, business, rights, claims and contracts of such Seller relating to and
used in the business of such Seller (other than the assets expressly excluded as
set forth in subsection 1.1(b) (the "Excluded Assets")), including, but not
limited to, the following (collectively, the "Assets"):
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(i) all of such Seller's rights to all of the
Corporation Agreements (as defined herein);
(ii) all of such Seller's rights to all equipment,
machinery, equipment, tools, replacement
parts and fixed assets, including, but not
limited to, the fixed assets identified on
Exhibit "A";
(iii) all of such Seller's rights to all service
marks, trade names, trade secrets, processes
and methods, whether or not patentable;
(iv) all books and records maintained by such
Seller through the Closing Date and
pertaining to the business, including,
without limitation, product manuals,
operating manuals, and records relating to
customer and trade accounts and lists and
similar operating data, other than books and
records which such Seller is required by law
to retain;
(v) all furniture, supplies, inventory items and
other personal property, including, but not
limited to, the inventory identified on
Exhibit "A";
(vi) the prepaid expenses identified on Exhibit
"A";
(vii) all Federal, state and local permits,
authorizations, franchises and licenses; and
(viii) all other current assets.
(b) Excluded Assets. Notwithstanding anything contained in
this Agreement to the contrary, Purchaser and Sellers acknowledge and agree that
Purchaser is not buying and Sellers are not selling the assets identified on
Exhibit "B" (collectively, the "Excluded Assets").
(c) Purchased Shares. Subject to the terms of this Agreement,
on the Closing Date, each Shareholder shall sell, assign, transfer and convey to
Purchaser, and Purchaser shall purchase and acquire from each Shareholder, the
number of Shares set forth opposite such Shareholder's name on Exhibit "C"
attached hereto, which shall represent all of the Shares owned by such
Shareholder and in the aggregate shall represent all of the issued and
outstanding capital stock of CASH. The Shares shall be conveyed to Purchaser
free and clear of all liens, pledges, security interests, claims, encumbrances
and rights of others.
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(d) Transfer of Assets Subject to Consent. To the extent that
the sale, assignment, transfer or conveyance of any Corporation Agreement
requires the consent of any party other than Purchaser or Sellers, this
Agreement shall not constitute an agreement to effect such sale, assignment,
transfer or conveyance if such action would constitute a breach of the
Corporation Agreement. Such sale, assignment, transfer or conveyance shall occur
only after all necessary consents have been obtained. Pending receipt of the
required consents, or if such consents cannot be obtained, Sellers agree to
cooperate with Purchaser in any reasonable arrangement designed to provide
Purchaser with the benefits under the Corporation Agreement as if the
Corporation Agreement had been sold, assigned, transferred and conveyed on the
Closing Date.
Section 1.2 Purchase Price.
(a) Purchase Price. The consideration to be paid to Sellers
for the Assets and to the Shareholders for the Shares at the Closing shall be
Four Million Six Hundred Fifty Thousand Dollars ($4,650,000) (the "Purchase
Price"), subject to adjustment in accordance with subparagraphS 1.2(b) and
1.2(c) hereof. The Purchase Price shall be allocated among the Assets and the
Shares in accordance with Exhibit "D" attached hereto. Neither Purchaser nor
either Seller shall take any position with any taxing authority which is
inconsistent with such allocation. The Purchase Price with respect to the Shares
shall be allocated among each Shareholder in the same proportion that the Shares
owned by such Shareholder bear to the total number of Shares.
(b) Adjustment to Purchase Price for Inventory. That portion
of the Purchase Price allocated to the inventory of Sellers (the "Inventory
Purchase Price") as set forth on Exhibit "A" shall be subject to adjustment as
follows:
(i) (A) Within seven (7) business days from the
Closing Date, Purchaser shall complete a
physical inventory, on a test audit basis, of
the inventory comprising a portion of the
Assets, and shall deliver to Sellers a
statement setting forth the results of such
physical inventory, including the value of
the inventory as would be recorded on the
books of Purchaser on the Closing Date in
accordance with generally accepted accounting
principles (the "Adjustment Statement");
provided, however, that for purposes of
determining the value of the inventory on the
Closing Date: (1) the value of raw materials
received by Sellers during the period
December 1, 1995 through and including the
Closing Date shall not be included in the
computation; (2) costs incurred by Sellers
during the period December 1, 1995 through
and including the Closing Date in connection
with converting raw material to work in
process or converting work in process to
finished goods shall not be included in the
computation; and (3) the cost of the
inventory as reflected on the Adjustment
Statement shall be reduced by the cost of
finished goods inventory shipped during the
period December 1, 1995 through and including
the Closing Date. The value of the inventory
as set forth on the Adjustment Statement
shall be conclusive and binding on the
parties unless the Sellers deliver to
Purchaser, within fifteen (15) days from
delivery of the Adjustment Statement, written
notice disputing the Adjustment Statement,
which written notice shall be as detailed as
reasonably necessary to describe such
disputes (the "Dispute Statement").
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(B) In the event Purchaser and Sellers are
unable to resolve the disputes set forth on
the Dispute Statement within thirty (30) days
from delivery of the Dispute Statement, the
parties shall engage a mutually acceptable
"Big Six" accounting firm whose determination
of the value of the inventory shall be
binding and conclusive. The fees and costs of
the accounting firm shall be allocated among
the Sellers and Purchaser ratably. The
Adjustment Statement as finally determined in
accordance with this subparagraph 1.2(b)
shall be called the Final Adjustment
Statement. If the value of the inventory as
set forth on the Final Adjustment Statement
is greater than the value of the inventory at
December 1, 1995 as set forth on Exhibit "A,"
Purchaser shall pay to Sellers the difference
within ten (10) days from the determination
of the Final Adjustment Statement. If the
value of the inventory as set forth on the
Final Adjustment Statement is less than the
value of the inventory at December 1, 1995 as
set forth on Exhibit "A," Sellers shall pay
to Purchaser the difference within ten (10)
days from the determination of the Final
Adjustment Statement.
(ii) Purchaser and Sellers acknowledge and agree
that the Purchase Price set forth in
subsection 1.2(a) hereof has been reduced by
$100,000, which amount has been retained by
Purchaser in connection with inventory of
Sellers' constituting work in process
currently being manufactured by CASH.
Purchaser hereby covenants and agrees that
within ten (10) days of the end of each
calendar month following Closing, commencing
on December 30, 1995, Purchaser shall pay to
Sellers the amount equal to the cost (as
reflected in the Final Adjustment Statement)
of work in process inventory which is
delivered by CASH to Purchaser in Florida as
first quality finished goods inventory during
the immediately preceding calendar month,
until the aggregate amount of $100,000 has
been paid to Sellers hereunder. Upon delivery
of all or any portion of such amounts,
Purchaser shall also deliver to Sellers a
certificate of an officer of Purchaser
certifying as to the amount of finished goods
inventory which has been received by
Purchaser from CASH and the basis for the
calculation of the amount paid pursuant to
this Subsection 1.2(b)(ii).
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(C) Adjustment to Purchase Price for CASH
Equity Capital Obligations. Purchaser, Seller
and Shareholders acknowledge and agree that
from the Purchase Price set forth in
subsection 1.2(a) has been reduced by
$500,000 (the "Holdback Amount"), which
amount has been retained by Purchaser, and
shall be disbursed to Sellers and
Shareholders in accordance with the terms of
this subsection 1.2(c). As soon as
practicable following Closing, Purchaser
shall engage Ernst & Young, LLP to conduct an
audit of CASH at October 31, 1995 and
November 30, 1995 and for the twelve months
and one month ended October 31, 1995 and
November 30, 1994, respectively. A copy of
the audit report shall be delivered to
Purchaser and Sellers. To the extent the
audited balance sheet reflects a negative net
worth of CASH at November 30, 1995, and
Purchase and Sellers are unable to mutually
agree, within ten (10) days from the date of
delivery of the audit report, upon a non-cash
adjustment which will offset the negative net
worth, or to otherwise avoid having to
liquidate CASH in accordance with applicable
law, then the amount of such funds
constituting the capital contribution or
advance Purchaser, any shareholder of CASH or
any affiliate of either from and after the
Closing Date shall be required to make to
offset the negative net worth of CASH at
November 30, 1995 shall be deducted from the
Holdback Amount, and the balance shall be
disbursed to Sellers and Shareholders as they
shall direct, which disbursement shall be
made within thirty-five (35) business days
from the date the audit report is delivered
to Purchaser. The costs and fees associated
with such audit shall be borne by Sellers,
and Purchaser shall have the right to offset
the amount of such costs against the Holdback
Amount. If the parties agree that no
liquidation of CASH is required under
applicable law as a result of the negative
net worth or accumulated deficit of CASH, the
Holdback Amount shall be reduced to $200,000,
and $300,000 shall be disbursed to Sellers
and Shareholders as they shall direct within
five (5) business days of the date of such
determination.
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Section 1.3 Assumption of Certain Liabilities.
(a) Assumed Liabilities. On the Closing Date, Purchaser shall
assume and agree to undertake to pay, perform and discharge as and when due, and
shall indemnify Sellers and CASH for and hold Sellers and CASH harmless from and
against each of the following obligations, responsibilities, liabilities and
debts of Sellers and CASH (collectively, the "Assumed Liabilities"):
(i) all obligations, responsibilities and
liabilities incurred in connection with the
performance by Purchaser of the Corporation
Agreements from and after the Closing Date;
and
(ii) all obligations and liabilities arising from
Purchaser's use, ownership, possession, sale
or operation of the Assets following the
Closing Date.
(b) Purchaser Assumes No Other Debts Or Liabilities of
Sellers or CASH. Except for the Assumed Liabilities assumed by Purchaser under
Section 1.3(a) above, the purchase by Purchaser of the Assets and the Shares
shall be free and clear of all liens, claims and encumbrances of any kind and
nature, and without any assumption by Purchaser of any debts, taxes, obligations
or liabilities whatsoever of Sellers or CASH or any other persons who at any
time may have been in possession of the Assets or Shares, whether such
liabilities are actual or contingent, known or unknown, liquidated or
unliquidated, whether tax liabilities, liabilities to creditors, liabilities
arising under any profit sharing, pension or other similar employee benefit
plans, liabilities to employees arising for severance, vacation and similar
employment policies and practices for the period up to and including the Closing
Date, liabilities to governmental agencies or third parties, liabilities assumed
or incurred by Purchaser by operation of law (including bulk sales laws) or
otherwise (collectively, the "Unassumed Debts and Liabilities"). Sellers and
Shareholders jointly and severally agree promptly to pay and discharge, as and
when due, the Unassumed Debts and Liabilities, and will indemnify Purchaser for
and hold Purchaser harmless from and against any and all Unassumed Debts and
Liabilities, even if Purchaser voluntarily pays the Unassumed Debts and
Liabilities.
Section 1.4 Date, Time and Place of Closing. The transactions
provided for by this Agreement shall be consummated (the "Closing") at _____
a.m., local time, on or before December [15,] 1995, at Cozen and O'Connor, 1900
Market Street, Philadelphia, Pennsylvania, 19103, or at such other place and
time as Sellers, Shareholders and Purchaser shall mutually agree. The date and
time of Closing is hereinafter sometimes called the "Closing Date."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Purchaser, and
Shareholders jointly and severally represent and warrant to Purchaser as to
CASH, as follows:
Section 2.1 Corporate Status. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has full power and authority to own its properties and to carry on
the business as presently conducted by it. Each Seller is duly qualified to do
business and is in good standing as a foreign corporation in all other
jurisdictions where the conduct of its business so requires. CASH is a
corporation duly organized, validly existing and in good standing under the laws
of Honduras and has the power and authority to carry on its business as
presently as conducted by it.
Section 2.2 Corporate Authority; Effective Agreement. The Board of
Directors and stockholders of each Seller have duly authorized and approved the
execution and delivery of this Agreement and the performance of the transactions
provided for herein. No other corporate action is required in connection with
the foregoing. This Agreement is a legal, valid and binding obligation of each
Seller and is enforceable against each Seller in accordance with its terms. The
execution, delivery and performance of this Agreement by each Seller and by the
Shareholders and the consummation of the transactions provided for herein do not
and will not: (a) conflict with, violate or result in the breach of any of the
terms or conditions of, or constitute a default under (i) the constituent
documents of Sellers or CASH, (ii) any contract, agreement, commitment,
indenture, mortgage, pledge, note, bond, license, permit or other instrument or
obligation to which any of Sellers or CASH is a party or by which any of Sellers
or CASH or any of the Assets is bound, or (iii) any law, regulation, ordinance
or decree to which any of Sellers or CASH is subject, or (b) result in the
creation or imposition of any lien, security interest, charge, encumbrance,
restriction or right, including rights of termination or cancellation, in or
with respect to, or otherwise materially adversely effect any of Sellers, CASH,
the Assets or the Shares.
Section 2.3 Liabilities. At October 31, 1995, neither of Sellers nor
CASH had any liabilities (including, but not limited to, accounts payable)
except as and to the extent reflected in: (a) the Sellers Financial Statements
or CASH Financial Statements (as such terms are defined below); (b) the books
and records of Sellers or CASH to the extent incurred or arising after October
31, 1995; or (c) this Agreement or any Exhibit hereto.
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Section 2.4 Real Estate. Neither of Sellers nor CASH has any
interest in any real estate except that Sellers and CASH lease, as tenant, the
premises described on Exhibit "E" attached hereto. True, complete and correct
copies of the lease agreements pertaining to the leased premises are attached to
Exhibit "E" (individually a "Lease" and collectively the "Leases"). Sellers and
Shareholders know of no pending or proposed eminent domain proceeding or
assessment for public improvements with respect to any of Sellers' or CASH's
leased premises which could adversely affect the use, operation or value of the
Assets or the businesses in which Sellers and CASH are engaged. Neither of
Sellers nor any Shareholder has received notice from any insurance carrier or
landlord for any leased premises notifying Sellers or Shareholders of the need
to undertake any repairs, alterations or construction or to take any action with
respect to the leased premises. Except as described on Exhibit "E," all of the
buildings, fixtures and improvements, including structural condition and roof,
leased by either of Sellers or by CASH, and all heating and air conditioning
equipment, plumbing, electrical and other mechanical facilities which are part
of, or located in, such buildings or improvements are in good operating
condition and repair and do not require any repairs other than normal routine
maintenance to maintain them in good operating condition and repair.
Section 2.5 Personal Property; Inventory. Exhibit "F" attached
hereto is a list of all personal property which is being sold, assigned,
conveyed, transferred and delivered to Purchaser pursuant to this Agreement
("Personal Property"). Each Seller has good and marketable title to, and is the
absolute owner of, all of the Personal Property owned by it, free and clear of
all liens and encumbrances, except Sellers lease or license the Personal
Property described as leased or licensed on Exhibit "F." CASH has good and
marketable title to, and is the absolute owner of, all of the personal property
used by CASH in the operation of its business, free and clear of all liens and
encumbrances, except CASH leases or licenses the personal property described as
leased or licensed on Exhibit "F." All of the Personal Property and all of the
personal property of CASH is in good operating condition and repair and does not
require any repairs other than normal routine maintenance to maintain the
Personal Property and personal property of CASH in good operating condition and
repair. All of the inventory comprising a portion of the Assets and all of the
inventory of CASH is saleable in the ordinary course of business and is free
from material defects.
Section 2.6 Trade Names, Trademarks and Service Marks. The corporate
name of Sellers and CASH and the trade names and trademarks listed on Exhibit
"G" are the only names and trademarks which are used by Sellers and CASH in the
operation of their respective businesses. Each of the Sellers and CASH is the
sole and exclusive owner of its trade names and trademarks and has the sole and
exclusive right to use the trade names and trademarks. No claim has been
asserted against either of Sellers or against CASH that its trade names or
trademarks conflict with the trade names, trademarks, corporate names or other
proprietary rights of others, and neither of Sellers nor any Shareholder has any
knowledge of any basis for any such claim or conflict. Neither of Sellers nor
CASH owns any patents or has patent applications pending and, to the Sellers'
and Shareholders' knowledge, neither of Sellers nor CASH is engaged in any
activity which infringes upon any patent, patent application, trademark, trade
name, copyright or proprietary right of any other party.
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Section 2.7 Taxes.
(a) Filing of Returns and Payment of Taxes. Each Seller and
CASH has timely filed or will timely file all federal, foreign, state and local
tax returns required by law to be filed by such Seller or CASH and has timely
paid or will timely pay and make adequate provision for the payment of all taxes
(and related interest and penalties) required to be paid in respect of such
returns for all taxable periods up to and including the Closing Date, including,
but not limited to real estate, sales, use, social security, payroll,
unemployment compensation and personal property taxes. No waivers or extensions
of statutes of limitations relating to filing of tax returns have ever been
granted to either Seller or to CASH, and no consents or elections have been
filed by either Seller with the Internal Revenue Service or with any other
taxing authority. Each Seller will have paid or made adequate provision for the
payment of all federal and state income and any other taxes payable by such
Seller with respect to the transactions covered by this Agreement, including
sales, transfer and similar types of taxes.
(b) Cooperation With Sellers Following Closing. Purchaser
agrees that following Closing it shall provide to Sellers (on a confidential
basis) information relating to the Assets and/or the business of Sellers which
Sellers reasonably require to prepare any tax returns, information returns or
reports required to be filed by Sellers with governmental agencies. Such
information shall be provided in the form in which such information has
customarily been maintained by Sellers.
Section 2.8 Legal Matters. Except as set forth on Exhibit "H", none
of Sellers, CASH or any Shareholder is a party to or threatened with any suit,
action, arbitration or other legal or administrative proceeding or governmental
inquiry or investigation by which any of Sellers, CASH, the Shares, the Assets
or the business of Sellers and CASH would be adversely effected. There are no
judgments, orders, decrees or awards before any court, department, commission,
board, instrumentality or arbitrator which affects the Assets, either Seller,
their respective business, CASH or the Shares.
Section 2.9 Contracts, Leases, Agreements and Other Commitments.
(a) Corporation Agreements. Neither of Sellers nor CASH is a
party to or bound by any written, oral or implied contract, agreement, lease,
power of attorney, guaranty, surety agreement, or other commitment except for
the following (collectively, the "Corporation Agreements"):
(i) the Leases described on Exhibit "E";
(ii) agreements involving a maximum possible
liability or obligation on the part of either
Seller or CASH of less than Five Thousand
Dollars ($5,000) each and less than Fifteen
Thousand Dollars ($15,000) in the aggregate;
and
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(iii) the agreements listed on Exhibit "I."
True, correct and complete copies of all of the Corporation Agreements
on Exhibit "I," including all amendments thereto, have been delivered to
Purchaser. Except as shown on Exhibit "I," all parties to all of the Corporation
Agreements, including Sellers and CASH, as the case may be, have performed all
of the obligations required to be performed under the Corporation Agreements,
and neither of Sellers nor CASH, nor any other party, is in default or in
arrears under the terms thereof, and no condition exists or event has occurred
which, with the giving of notice or lapse of time or both, would constitute a
default under such Corporation Agreements. The consummation of the transactions
provided for in this Agreement will not result in an impairment or termination
of either Sellers' or CASH's rights under any Corporation Agreement. None of the
terms or provisions of any Corporation Agreement materially adversely affects
the Assets or the business of either of Sellers or CASH. Exhibit "I" also
contains a listing of all outstanding written and oral proposals, bids, offers,
guaranties, advances or credit granted which, if accepted, could impose any
debts, obligations or liabilities upon Purchaser after the Closing Date.
(b) Guaranteed Obligations. Each Seller covenants and agrees
with Purchaser that on or prior to the Closing Date, each Seller shall pay and
discharge in full each and every liability of Seller which is guaranteed by
Kleinert's, Inc. of Alabama or any affiliate thereof, all of which are disclosed
on Exhibit G-1 (the "Guaranteed Obligations"), and to the extent not so
discharged, such liability shall constitute a Loss to which Purchaser shall be
entitled to indemnification pursuant to Section 10.1.
Section 2.10 Employees and Employment Contracts.
(a) Set forth on Exhibit "J" is a list of:
(i) all collective bargaining agreements and
other agreements requiring arbitration of
employment disputes, and any written
amendments thereto, as well as all
arbitration awards decided under any such
agreements, and all oral assurances or
modifications, past practices, and/or
arrangements made in relation thereto, to
which either Seller or CASH is a party or by
which any is bound; and
(ii) all employment agreements, and all severance
agreements which have not been fully
performed, to which either Seller or CASH is
a party or by which any may become bound
following the transactions contemplated by
this Agreement.
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(b) Set forth on Exhibit "J" is a list of all employees of
each Seller and of CASH, broken down by location, together with their rate of
compensation, title, union affiliations (if any), original date of hire, length
of service, leave status, if any, vacation benefits and sick leave benefits
accrued to date (if payable in cash upon termination of employment) and a list
of all other individuals who are employed as independent contractors of either
Seller or of CASH.
(c) Attached to Exhibit "J" are true and correct copies of
all documents referred to in Exhibit "J" and all personnel policies, employee
and/or supervisor handbooks, procedures and forms of employment applications
relating to the employees of either Seller or CASH.
(d) Except as set forth on Exhibit "J", there is no union
representing or purporting to represent any of the employees of either Seller or
CASH nor is any of the foregoing subject to or currently negotiating any
collective bargaining agreements with any union representing or purporting to
represent the employees of any of the foregoing.
(e) Except as set forth in Exhibit "J":
(i) there are no strikes, slow-downs or other
work stoppages, grievance proceedings,
arbitrations, labor disputes or
representation questions pending or, to the
knowledge of Sellers or Shareholders after
due inquiry, threatened against or involving
either Seller or CASH.
(ii) Sellers and CASH have complied with all laws
relating to labor, employment and employment
practices, including without limitation, any
provisions thereof relating to wages, hours
and other terms of employment, collective
bargaining, non-discrimination, payment of
social security, unemployment compensation
and similar taxes, and none of either Seller
or CASH is liable for any arrearages of
wages, or for taxes or penalties for failure
to comply with any of the liabilities set
forth in this subparagraph or is delinquent
in the payment of any such severance, salary,
bonus, commission or other direct or indirect
compensation for services performed by any
employee to the date hereof, or any amount
required to be reimbursed.
(iii) there are no charges, suits, actions,
administrative proceedings, investigations
and/or claims pending or threatened against
either Seller or against CASH, whether
domestic or foreign, before any court,
governmental agency, department, board or
instrumentality concerning or in any way
relating to the employees or employment
practices of either Seller or CASH.
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Section 2.11 Employee Pensions and ERISA. Neither of Sellers nor
CASH nor any of their respective affiliates maintains, sponsors, contributes to
or has any liability under any agreement, plan, practice or program, whether
written or oral, providing for bonus payments, child or dependant care benefits,
death benefits, accidental death and dismemberment benefits, deferred
compensation benefits, disability or other wage continuation benefits,
educational assistance or tuition benefits, health benefits, paid holiday
benefits, incentive compensation payments, leave of absence rights, medical
expense payments, reimbursement benefits, profit sharing, pension plan benefits
or other benefits, retiree medical or retiree life insurance benefits, stock
option, stock appreciation rights or stock purchase benefits, severance or
termination pay or benefits or vacation benefits except as set forth in Exhibit
"K". The items set forth in Exhibit "K" are individually referred to as an
"Employee Benefit Plan" and collectively referred to as "Employee Benefit
Plans." Each Employee Benefit Plan is in substantial compliance with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the
Internal Revenue of 1986 as amended ("Code"). With respect to each Employee
Benefit Plan subject to ss.412 of the Code or Title IV of ERISA (collectively
"Pension Plans"), there has been no failure to make any contribution or pay any
amount required to be paid under ERISA or the terms of any such Pension Plan,
and no request or receipt of any funding waiver has been requested or received
from the IRS. There has been no reportable event (as defined in ss.4043 of
ERISA) within the last five years.
Section 2.12 Consents. Each Seller and CASH has obtained or will
obtain, on or before the Closing Date, all consents, approvals, licenses,
permits or waivers which are required to execute and deliver this Agreement and
to consummate the transactions provided for herein, including the transfer of
the Assets to Purchaser hereby and to afford to Purchaser the benefits to be
provided upon purchase of the Assets and the Shares.
Section 2.13 Financial Statements. Exhibit "L" contains balance
sheets of each Seller at August 31, 1995 and October 31, 1995 and statements of
income and loss of such Seller for the ten months ended August 31, 1995 and the
fiscal year ended October 31, 1995. Exhibit "M" contains balance sheets of CASH
at October 31, 1995 and statements of income and loss of CASH for the fiscal
year ended October 31, 1995. The balance sheets of Sellers at October 31, 1995
and the statements of income and loss for the fiscal year ended October 31, 1995
are sometimes herein called the "Sellers Financial Statements." The balance
sheet of CASH at October 31, 1995 and the statement of income and loss for the
fiscal year ended October 31, 1995 are sometimes herein called the "CASH
Financial Statements." All of such statements have been prepared in accordance
with generally accepted accounting principles (other than for presentation of
footnotes) consistently applied throughout the periods reported upon and present
fairly and accurately the financial position of each Seller and CASH, as the
case may be, as of the dates of such balance sheets and the results of
operations of each Seller and CASH, as the case may be, for the periods reported
upon. Attached to Exhibit "L" and Exhibit "M," respectively, are copies of
management representation letters and legal letters delivered to Sellers and
CASH's auditors for the periods reviewed by them. Also attached to Exhibit "L"
is a signed report of Spencer, Marston, Bunch, Morris & Co. as to an agreed upon
procedures review conducted by said firm on behalf of Sellers. The financial
position of CASH at November 30, 1995 is such, and at Closing will be such, that
there shall be no legal or other regulatory obligation to cause a liquidation of
CASH absent remedial measures to be undertaken by the shareholders of CASH which
could either require a reclassification of items on the balance sheet of CASH or
Pixie or require an additional equity contribution.
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Section 2.14 Suppliers; Conflicts of Interest.
(a) Suppliers. Exhibit "N" is a list of suppliers which have
provided materials or services to either of Sellers or CASH as of October 31,
1995. Neither of Sellers nor CASH has been notified of, nor to Sellers' or
Shareholders' knowledge, has there been any circumstance that would result in a
termination or cancellation of any agreement between either of Sellers or CASH
and any of their respective suppliers, distributors or customers. Prior to the
Closing Date, each Seller and CASH shall cooperate with Purchaser in making or
causing to be made such reasonable inquiries of and written introductions to
customers and suppliers of the business of each as Purchaser may reasonably deem
necessary or advisable.
(b) Conflicts of Interest. Except as shown on Exhibit "O," no
stockholder, director, officer or employee of either Seller or of CASH or any
relative or any affiliate of any of the foregoing: (i) has any pecuniary
interest in any supplier or customer of either Seller or of CASH or in any other
business with which any of the foregoing conducts business or with which either
of Sellers or CASH is in competition; or (ii) has any interest in any property
or assets used by either Seller or CASH, including the Assets; or (iii) has any
contractual or other claim, express or implied, of any kind whatsoever against
either of Sellers or CASH in connection with its business or the Assets.
Section 2.15 Subsidiaries; Officers; Directors. Neither of Sellers
nor CASH has any subsidiary or owns any capital stock, security, partnership
interest or other interest of any kind in any corporation, partnership, joint
venture, association or other entity. Schedule "P" sets forth a complete list of
all directors and officers of CASH, all bank accounts, all safe deposit boxes
and all persons authorized to sign checks drawn on such accounts and to have
access to such safe deposit boxes.
Section 2.16 No Material Change. Since October 31, 1995, there has
been no material adverse change in the business, assets (including the Assets)
or financial condition of either Seller or of CASH and their respective
businesses except as the same may be caused by transactions in the ordinary
course of business which are not prohibited by this Agreement and which are
described on Exhibit "Q."
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Section 2.17 Actions Since Balance Sheet Date. Except as set forth
on Exhibit "R," since October 31, 1995, neither of Sellers nor CASH:
(a) has taken any action outside of the ordinary course of
business;
(b) has borrowed any money or become contingently liable for
any obligation or liability of others;
(c) has not paid all of its debts and obligations as they
became due;
(d) has incurred any debt, liability or obligation of any
nature to any party except for obligations arising in the ordinary course of
business; and
(e) has not used its best efforts to preserve its business
organization intact, to keep available the services of its employees, and to
preserve its relationships with its customers, suppliers and others with whom it
deals.
Section 2.18 Permits and Licenses. Each of Sellers and CASH holds
all franchises, licenses, permits, consents, approvals, waivers and other
authorizations (collectively, the "Permits") which are necessary for the
operation of their respective businesses, including, without limitation, all
Permits issued by federal, foreign, state or local governments and governmental
agencies. Neither of Sellers nor CASH is in default, nor has any of the
foregoing or the Shareholders received any notice of any claim of default, with
respect to any of the Permits or of any notice of any other claim or proceeding
or threatened proceeding relating to any of the Permits. All of the Permits are
in full force and effect. The transactions provided for in this Agreement will
not result in the cancellation or termination of any of the Permits.
Section 2.19 Compliance with Laws. Each of Sellers and CASH is in
compliance with all requirements of law, federal, foreign, state and local, and
all requirements of all governmental bodies or agencies having jurisdiction over
it, the operations of their respective business and the use of the Assets, and
all leasehold premises occupied by it. Neither of Sellers nor CASH nor any
Shareholder has received any notice, not previously complied with, from any
federal, foreign, state or municipal authority or any insurance or inspection
body, that any of its properties, facilities, equipment or business procedures
or practices fails to comply with any applicable law, ordinance, regulation,
building or zoning law, or requirement of any public authority or body. There
are no regulations or legislation pending before any federal, foreign, state,
local or foreign or governmental body or legislature which, if adopted, would
have a materially adverse effect on the business of either Seller or CASH or on
the Assets.
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Section 2.20 Hazard Communications Standard Regulations and Laws.
Each Seller is in compliance with all of its obligations pursuant to the
Occupational Safety and Health Administration, Hazard Communications Standard
Regulations, 29 CFR 1910.1200 ("HCS Regulations") to the extent it is obligated
to be in compliance therewith.
Section 2.21 Environmental Matters. Attached hereto as Exhibit "S"
is a complete inventory of all raw materials, chemicals, products and waste
materials, including all "Hazardous Wastes" as defined in 42 U.S.C. ss.6903(5),
processed, generated, produced, stored, or maintained at any of the facilities
owned or used by Sellers, including real estate subject to Leases; all on-site
spills, leaks, releases at such facilities; past and present off-site disposal
practices and activities with to respect Hazardous Wastes and Hazardous
Substance; and notice of waste disposal if any filed pursuant to Section 103(C)
of the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, et seq. ("CERCLA"). Exhibit "S" also describes the location
and contents of all storage and treatment facilities, including ponds, disposal
areas, underground storage tanks and other storage facilities, currently in use
or formerly used by Sellers or any other person at or in connection with the
facilities referenced above. Such facilities are satisfactory for, and in
compliance with, all environmental, health, fire, safety and regulatory
statutes, laws, rules and regulations. Except as set forth on Exhibit "S", all
facilities owned or used by Sellers, including real estate leased by Sellers,
are in compliance in all material respects with all applicable federal, state
and local environmental laws and regulations, including, but not limited to, the
Clean Air Act, 42 U.S.C. Section 7401, et seq.; the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section 1251,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act
("SARA"), 42 U.S.C. Section 9601, et seq.; the Hazard Communication Standard, 29
CFR Section 1910.1200; and the Toxic Substances Control Act, 15 U.S.C. Section
2601, et seq. There has not been a "Release" (as defined by CERCLA and SARA) of
any "Hazardous Substance" from the facilities described in paragraph (a) hereof.
For purposes of this Section 2.21 the representations and warranties of Sellers
as they apply to the premises leased by Certified shall be deemed to be made to
the best knowledge of Sellers after due inquiry. To the best knowledge of
Shareholders after due inquiry, CASH is in compliance with all laws, rules and
regulations applicable to CASH and to the premises in which CASH conducts its
business to the extent such laws, rules and regulations govern the conduct of
CASH as to environmental matters. CASH has complied with all the requirements of
the Ley General del Ambiente (Decree No. 104-93 of May 27, 1993) including, but
not limited to, the EIA mentioned in Article 5 of the aforesaid Law, having
obtained the corresponding license which is still in good force and effect.
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Section 2.22 Statements and Other Documents Not Misleading. Neither
this Agreement, including all Exhibits, nor any other financial statements,
documents or instruments delivered by either of Sellers or Shareholders to
Purchaser in connection with this Agreement and the transactions contemplated by
this Agreement, contains or will contain any untrue statement of any material
fact or omits or will omit to state any material fact required to be stated to
make such statement, document or instrument not misleading.
Section 2.23 Survival of Representations and Warranties. The
representations, warranties and agreements of Sellers and Shareholders set forth
in this Agreement or in any Exhibit attached hereto are made as of the date of
this Agreement and shall be true, correct, complete and accurate on and as of
the Closing Date and at all times between the date of this Agreement and the
Closing Date, and the same shall survive the Closing Date.
ARTICLE III
FURTHER REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder, severally as to such Shareholder, hereby represents
and warrants to Purchaser that:
Section 3.1 Ownership of Capital Stock of CASH. Such Shareholder
owns the number of Shares set forth opposite his name on Exhibit "C". Such
Shareholder has good, marketable and unencumbered title to such Shares, free and
clear of all liens, security interest, pledges, claims options, rights of
others. There are no restrictions on such Shareholder's rights to transfer such
Shares to Purchaser pursuant to this Agreement. No transfer of record, ownership
of, or beneficial interest in, any of such Shares, will be made between the date
hereof and closing.
Section 3.2 Agreement Not in Breach of Other Instruments Effecting
Shareholders. The execution and delivery of this Agreement, the consummation of
the transactions provided for herein, and the fulfillment of the terms hereof by
the Shareholder will not result in a breach of any of the terms and provisions
of, or constitute a default under, or conflict with, any agreement or the
instrument by which the Shareholder is bound, any judgment, decree, order or
award of any court, governmental body arbitrator, or of any applicable law or
regulation.
Section 3.3 Valid and Binding Agreement. This Agreement constitutes the
valid and binding obligation of the Shareholder, and is enforceable against such
Shareholder in accordance with its terms.
Section 3.4 Capitalization. CASH has an authorized capital
consisting of [to be completed]. Except as set forth on Exhibit "C", there are
no options, warrants, rights, stockholder agreements or other instruments or
agreements outstanding giving any person the right to acquire any shares of
capital stock of CASH, nor are there any commitments to issue or execute any
such options, warrants, rights or other instruments or agreements. True, correct
and complete copies of the constituent documents of CASH and all corporate
records of CASH are complete and accurate and all have been delivered to
Purchaser prior to the execution of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers and Shareholders
that:
Section 4.1 Corporate Status. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has full power and authority to own its properties and to carry on
the business presently as conducted by it. On the Closing Date, Purchaser will
be duly qualified to do business and in good standing in all jurisdictions in
which qualification is necessary to own the Assets and the Shares.
Section 4.2 Corporate Authority. The Board of Directors of Purchaser
has duly authorized and approved the execution and delivery of this Agreement
and the performance of the transactions provided for herein. No other corporate
action is required in connection herewith. This Agreement constitutes a legal,
valid and binding obligation of Purchaser and is enforceable against Purchaser
in accordance with its terms.
Section 4.3 Survival of Representations and Warranties. The
representations, warranties and agreements of Purchaser as set forth in this
Agreement or in any Exhibit attached hereto are made as of the date of this
Agreement and shall be true, correct and accurate on and as of the Closing Date
and at all times between the date of this Agreement and the Closing Date, and
the same shall survive the Closing Date.
ARTICLE V
CONDUCT OF BUSINESS PENDING CLOSING
Section 5.1 Conduct of Business Pending Closing. Each Seller jointly
and severally agrees as to the Sellers, and each Shareholder jointly and
severally agrees as to CASH, that between the date hereof and the Closing Date,
each Seller and CASH shall:
(a) not take any action or omit to take any action which
would cause any of the representations and warranties of either Seller or
Shareholders contained in this Agreement or in any Exhibit to become untrue;
(b) conduct its business in a good and diligent manner in the
ordinary and usual course of its business;
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(c) not enter into any contract, agreement, commitment or
other arrangement with any party, other than contracts in the ordinary course of
its business, and not amend, modify or terminate any Corporation Agreement,
without the prior written consent of Purchaser;
(d) use its best efforts to preserve its business
organization intact, to keep available the service of its employees and to
preserve its relationships with customers, suppliers and others with whom it
deals;
(e) not reveal to any party, other than Purchaser or its
authorized representatives ("Agents"), any of the business procedures and
practices followed by it in the conduct of the Business;
(f) maintain in full force and effect all insurance currently
maintained by it;
(g) keep the premises occupied by it and all of its equipment
and tangible personal property in good operating repair and perform all
necessary repairs and maintenance;
(h) comply with all provisions of any Corporation Agreement
applicable to it as well as with all applicable laws, rules and regulations;
(i) not dispose of any Asset except in the ordinary course of
business, or terminate any Lease;
(j) not engage in any transaction which involves the
expenditure or commitment of more than Ten Thousand Dollars ($10,000) without
the prior consent of the Purchaser; and
(k) not issue any securities or other rights to purchase
capital stock of CASH.
ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS
Section 6.1 Access to Information. Each of Sellers and each
Shareholder shall give to Purchaser and its Agents access to all of the
properties and assets (including the Assets) of Sellers and of CASH and to each
of the foregoing's documents, books and records relating to their respective
current and past operations and businesses, and shall permit Purchaser and its
Agents to make copies thereof, and each Seller and each Shareholder shall permit
Purchaser to interview each of Seller's and CASH's employees during reasonable
business hours and upon reasonable prior notice.
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Section 6.2 Confidentiality.
(a) Purchaser and its Agents will exercise due diligence in
maintaining the confidentiality of all reports, data and other business
information relating to either Seller or CASH which Purchaser or its Agents
obtain in connection with this Agreement. If the transactions contemplated by
this Agreement are not consummated, Purchaser and its Agents will keep and
maintain in strict confidence for a period of one (1) year from the date hereof
all information concerning the business, assets, properties and personnel of
Sellers and CASH obtained by Purchaser or such Agents in connection with this
Agreement, and shall return to the Sellers or CASH, as appropriate, all copies
of the documents, data and other business information which Purchaser and its
Agents shall have acquired from such Seller or CASH.
(b) The confidentiality obligations of Purchaser in this
Section 6.2 shall not apply to information which: (i) is in the public domain;
(ii) is published or otherwise becomes part of the public domain through no
fault of Purchaser, its directors, officers and employees; (iii) Purchaser can
demonstrate was in its possession at the time of disclosure and was not acquired
directly or indirectly from either Seller or from CASH on a confidential basis
or from a source other than either Seller or CASH, which, to the best of
Purchaser's knowledge, did not acquire the information on a confidential basis;
or (iv) is required to be disclosed pursuant to any applicable judgment, order,
decree or subpoena of any court or governmental body or agency having
jurisdiction; provided that Purchaser shall give to the Seller or CASH, as
appropriate, reasonable prior notice of the disclosure of any such information
pursuant to the foregoing exception (iv).
Section 6.3 Cooperation. The parties hereto agree to execute and
deliver all other instruments and take all such other actions as any party may
reasonably request from time to time, before or after Closing and without
payment of further consideration, to effectuate the transactions provided herein
and to confer to Purchaser the benefits intended by such transactions. The
parties shall cooperate fully with each other and with their respective counsel
and accountants in connection with any steps required to be taken as part of
their respective obligations under this Agreement.
Section 6.4 Bulk Sales Laws. Each Seller, at its sole cost and
expense, shall fully and completely comply with the applicable provisions of any
bulk sales law pertaining to the transactions contemplated by this Agreement.
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Section 6.5 Employment of Employees. Purchaser currently expects to
employ, at its option, certain of the employees of Sellers and CASH. Sellers and
CASH agree to take no action which would interfere with such employment by
Purchaser, and Sellers shall take all action required by law or otherwise to
cause the valid termination of employment at the Closing Date of such employees
by Sellers who are to be employed by Purchaser following the Closing Date.
Sellers and Shareholders further agree that Purchaser shall not assume any
responsibility for, and Sellers and Shareholders shall jointly and severally
indemnify Purchaser from and against, any liability arising from any termination
of employment of those employees of Sellers whom Purchaser does not employ after
the Closing Date, or as to whom Purchaser gives Sellers notice that Purchaser
will not continue their employment, such notice to be given on or prior to the
Closing Date. Sellers and Shareholders further agree that Purchaser shall not be
liable for, and Sellers and Shareholders shall jointly and severally indemnify
Purchaser from and against, any liability in respect of any employees of Sellers
or CASH for any acts or omissions relating to the employment of such employees
or to the business of Sellers or CASH arising on or prior to the Closing Date,
regardless of whether the employees of Sellers or CASH are subsequently employed
by Purchaser. Nothing in this Agreement is intended to confer upon any employee
of Sellers or CASH any rights or remedies, including, without limitation, any
rights of employment of any nature or kind whatsoever.
Section 6.6 Employee Benefit Plans. Each of Sellers and Jeffrey
Lopatin shall jointly and severally remain responsible for, and shall indemnify
Purchaser from and against any liability in respect of, any Employee Benefit
Plans established by Sellers or CASH for the benefit of their respective
employees. Notwithstanding any provision contained in this Agreement to the
contrary, Purchaser shall not assume or be responsible in any manner for any
liabilities or obligations arising under or as a result of any Employee Benefit
Plan sponsored by Sellers or CASH or in which Sellers or CASH or their
respective employees participate.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any or all of which Purchaser may
waive:
Section 7.1 No Material Adverse Change. During the period from the
date hereof to the Closing Date there shall not have been any material adverse
change in the business, Assets, results of operations, financial condition or
prospects of the business of either of Sellers or of CASH.
Section 7.2 Representations and Warranties. Each of the
representations and warranties of Sellers and Shareholders set forth in this
Agreement and any Exhibit hereto shall be true and correct on and as of the
Closing Date as if made on and as of the Closing Date.
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Section 7.3 Performance of Agreements. Sellers and Shareholders
shall have performed and complied with all of their respective covenants and
agreements contained in this Agreement which are required to be performed or
complied with on or prior to the Closing Date.
Section 7.4 Opinion of Counsel. Purchaser shall have received an
opinion from Sellers' and Shareholders' counsel, dated as of the Closing Date,
in form and content reasonably acceptable to Purchaser.
Section 7.5 No Actions, Etc. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened, the effect of
which would restrain, prohibit or invalidate the transactions contemplated by
this Agreement or affect the right of Purchaser to own or control, after the
Closing, the Assets or the Shares or to operate the business of either of
Sellers or CASH.
Section 7.6 Consents; Lease Estoppels. All consents of all third
parties required to consummate the transactions provided for in this Agreement
shall have been obtained, and Purchaser shall have received estoppel
certificates executed by the landlords of all real property leased by Sellers
and CASH in a form reasonably acceptable to Purchaser.
Section 7.7 Executed Lease Agreements. Purchaser shall have executed
new lease agreements with respect to the premises leased by Sellers and CASH on
such terms as Purchaser shall, in its sole discretion, deem acceptable.
Section 7.8 Deliveries. All documents required to be delivered by
Sellers and Shareholders at or prior to Closing shall have been delivered to
Purchaser at Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS AND SHAREHOLDERS
The obligations of Sellers and Shareholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions, any or all of
which Sellers and Shareholders may waive:
Section 8.1 No Material Adverse Change. During the period from the
date hereof to the Closing Date there shall not have been any material adverse
change in the ability of Purchaser to perform under this Agreement.
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Section 8.2 Representations and Warranties. Each of the
representations and warranties of Purchaser set forth in this Agreement and any
Exhibit hereto shall be true and correct on and as of the Closing Date as if
made on and as of the Closing Date.
Section 8.3 Performance of Agreements. Purchaser shall have
performed and complied with all of its covenants and agreements contained in
this Agreement which are required to be performed or complied with on or prior
to the Closing Date.
Section 8.4 No Actions, Etc. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened, the effect of
which would restrain, prohibit or invalidate the transactions contemplated by
this Agreement or affect the right of Purchaser to own or control, after the
Closing, the Assets or the Shares or operate the business of either of Sellers
or CASH.
Section 8.5 Deliveries. All documents required to be delivered by
Purchaser at or prior to Closing shall have been delivered to Seller at Closing.
ARTICLE IX
CLOSING
Section 9.1 Sellers' Deliveries. At the Closing, Sellers shall
deliver to Purchaser: -------------------
(a) in a form satisfactory to Purchaser's counsel or as set
forth in this Agreement, such bills of sale, checks, endorsements of transfer,
conveyances, assignments and subleases and other agreements as shall vest in
Purchaser title to the Assets in accordance with the terms hereof.
(b) a certificate signed by a duly authorized officer of each
Seller, dated the Closing Date, confirming: (i) the truth and correctness of all
of the representations and warranties of such Seller contained in this Agreement
as of the Closing Date and as of all times between the date hereof and the
Closing Date; (ii) that all agreements and covenants of such Seller required to
have been complied with have been complied with; and (iii) that all necessary
corporate action by the Board of Directors and stockholders of such Seller have
been taken to authorize the consummation of the transactions contemplated by the
Agreement.
(c) the original copy of each written Corporation Agreement.
(d) a "good standing" certificate for each Seller issued by
the Department of State of the State of Florida.
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(e) keys to all premises and to all automobiles and vehicles
included in the Assets.
(f) the legal opinion referred to in subsection 7.4.
(g) the lease agreements referred to in subsection 7.7
countersigned by the Landlord to the extent either Seller or an affiliate of
either Seller is a party thereto.
(h) an Assumption Agreement executed by Sellers, in form and
content acceptable to Sellers and Purchaser.
Section 9.2 Shareholders' Deliveries. At the Closing, Shareholders
shall deliver to Purchaser the following:
(a) Certificates for the Shares, endorsed by the Shareholders
in blank, or with stock transfer powers executed by Stockholders in blank
attached.
(b) a copy of the certificate of incorporation, or equivalent
constituent document, and by-laws of CASH certified as true, correct and
complete by the President and Secretary of CASH;
(c) a certificate signed by each Shareholder, dated the
Closing Date, confirming: (i) the truth and correctness of all of the
representations and warranties of such Shareholder contained in this Agreement
as of the Closing Date and as of all times between the date hereof and the
Closing Date; (ii) that all agreements and covenants of such Seller required to
have been complied with have been complied with; and (iii) that all necessary
corporate action by the Board of Directors and stockholders of each Seller have
been taken to authorize the consummation of the transactions contemplated by the
Agreement.
Purchaser's Deliveries.
(d) written resignations of all directors and officers of
CASH dated and effective as of the Closing Date.
(e) the stock books and records, corporate minute books and
corporate seal of CASH.
(f) general releases in favor of CASH executed by each
Stockholder and by each officer and director of CASH, in form and substance
satisfactory to Purchaser's counsel releasing CASH from all liability to such
persons.
Section 9.3 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver to Sellers and Shareholders the following:
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(a) the Purchase Price in the form and manner provided for in
Section 1.2 hereof and as adjusted by subsections 1.2(b) and 1.2(c) thereof.
(b) A certificate signed by a duly authorized officer of
Purchaser, dated the Closing Date, confirming: (i) the truth and correctness of
all of the representations and warranties of Purchaser contained in this
Agreement as of the Closing Date and as of all times between the date hereof and
the Closing Date; (ii) that all agreements and covenants of Purchaser required
to have been complied with have been complied with; and (iii) that all necessary
corporate action by the Board of Directors of Purchaser has been taken to
authorize the consummation of the transactions contemplated by the Agreement.
(c) an Assumption Agreement executed by Purchaser, in form
and content acceptable to Sellers and Purchaser.
Section 9.4 Prorations. All taxes, assessments, utilities, and other
similar expenses on or relating to the Assets and to CASH shall be prorated
between the parties hereto as of 12:01 a.m. on the date of the Closing;
provided, however, that all labor costs and overhead expenses allocated to labor
and to the cost of inventory shall be pro rated between the parties hereto as of
12:01 a.m. on December 8, 1995. In the event any such taxes or other expenses
are not then ascertainable, such proration shall be made on the basis of the
most recently ascertainable estimates of such taxes or other expenses. All
rentals, deposits, advances, periodic payments and other amounts paid or to be
paid by Sellers and CASH under the Corporation Agreements shall be prorated
between Sellers and CASH, as appropriate, and Purchaser as of 12:01 a.m. on the
Closing Date. Amounts due each party hereto as a result of the application of
this Section 9.4 shall be offset against each other and the resulting balance
shall be promptly paid by one party to the other. If any statement or invoice
necessary to make the foregoing determination has not yet been received and the
amount due thereunder is not otherwise ascertainable, then proration and payment
therefor shall be deferred until such statement or invoice has been received.
Section 9.5 Parties to Bear Own Expenses. Whether or not the
transactions contemplated by this Agreement are consummated and except as
otherwise provided for herein, Purchaser, Sellers and Shareholders shall each
bear their respective expenses relating to or arising out of this Agreement,
including, but not limited to, fees for attorneys, accountants and other
advisors.
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ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnifications.
(a) Indemnification by the Sellers and Shareholders. Each
Seller jointly and severally agrees, and each Shareholder severally agrees as to
such Shareholder's Shares and jointly and severally agrees as to CASH, to
indemnify, defend and hold harmless Purchaser and its directors, officers,
Agents and employees from and against any and all losses, damages, liabilities
and expenses, including, without limitation, legal fees and court costs, to
which any of them may become subject as the result of:
(i) any and all loss or damage resulting from any
misrepresentation, breach of warranty, or any
non-fulfillment of any warranty,
representation, covenant or agreement on the
part of either of Sellers or any Shareholder
contained in this Agreement;
(ii) any and all loss or damage resulting from any
error contained in any statement, report,
certificate or other document or instrument
delivered to Purchaser pursuant to this
Agreement or contained in any Exhibits;
(iii) any and all loss or damage resulting to
Purchaser by reason of any claim, debt,
liability or obligation not expressly assumed
by Purchaser hereunder, including the
Unassumed Debts and Liabilities, or otherwise
arising from the business of either of
Sellers or CASH or the ownership, use or
operation of the Assets on or prior to the
Closing Date; and
(iv) any and all acts, suits, proceedings,
demands, assessments, judgments, reasonably
attorneys' fees, costs and expenses incident
to any of the foregoing.
(b) Indemnification by Purchaser. Purchaser hereby agrees to
indemnify, defend and hold harmless each Shareholder and each Seller and its
directors, officers, Agents and employees, from and against any and all losses,
damages, liabilities and expenses, including, without limitation, legal fees and
court costs, which any of them may become subject to as the result of:
(i) any and all loss or damage resulting from any
misrepresentation, breach of warranty, or any
non-fulfillment of any warranty,
representation, covenant or agreement on the
part of Purchaser contained in this
Agreement;
25
<PAGE>
(ii) any and all loss or damage resulting to
either Seller or any Shareholders by reason
of any claim, debt, liability or obligation
expressly assumed by Purchaser hereunder; and
(iii) any and all acts, suits, proceedings,
demands, assessments, judgments, reasonably
attorneys' fees, costs and expenses incident
to any of the foregoing.
(c) Procedures for Establishment of Indemnification.
(i) In the event that any claim shall be asserted
by any party which, if sustained, would
result in a right of a party to
indemnification hereunder (a "Loss"), the
person entitled to indemnification hereunder
(the "Indemnitee"), within a reasonable time
after learning of such claim, shall notify
the person obligated to provide
indemnification hereunder with respect to
such claim (the "Indemnitor"), and shall
extend to the Indemnitor a reasonable
opportunity to defend against such claim, at
the Indemnitor's sole expense and through
legal counsel reasonably acceptable to the
Indemnitee, provided that the Indemnitor
proceeds in good faith, expeditiously and
diligently. No determination shall be made
pursuant to subparagraph (ii) below while
such defense is still being made until the
earlier of (A) the resolution of said claim
by the Indemnitor with the claimant, or (B)
the termination of the defense by the
Indemnitor against such claim or the failure
of the Indemnitor to prosecute such defense
in good faith in an expeditious and diligent
manner. The Indemnitee shall be entitled to
rely upon the opinion of its counsel as to
the occurrence of either of said events. The
Indemnitee shall, at its option and expense,
have the right to participate in any defense
undertaken by the Indemnitor with legal
counsel of its own selection. No settlement
or compromise of any claim which may result
in a Loss may be made by the Indemnitor
without the prior written consent of the
Indemnitee unless (A) prior to such
settlement or compromise the Indemnitor
acknowledges in writing its obligation to pay
in full the amount of the settlement or
compromise and all associated expenses and
(B) the Indemnitee is furnished with security
reasonably satisfactory to the Indemnitee
that the Indemnitor will in fact pay such
amount and expenses.
26
<PAGE>
(ii) In the event that an Indemnitee asserts the
existence of any Loss, the Indemnitee shall
give written notice to the Indemnitor of the
nature and amount of the Loss asserted. If
the Indemnitor, within a period of fifteen
(15) days after the giving of the
Indemnitee's notice, shall not give written
notice to the Indemnitee announcing its
intention to contest such assertion of the
Indemnitee (such notice by the Indemnitor
being hereinafter called the "contest
notice"), such assertion of the Indemnitee
shall be deemed accepted and the amount of
the Loss shall be deemed established. In the
event, however, that a contest notice is
given to the Indemnitee within said fifteen
(15) day period, then the contested assertion
of a Loss shall be settled by arbitration to
be held in Philadelphia, Pennsylvania in
accordance with the rules of the American
Arbitration Association then obtaining. The
determination of the arbitrator(s) shall be
delivered in writing to the Indemnitor and
the Indemnitee and shall be final, binding
and conclusive upon all of the parties
hereto, and the amount of the Loss, if any,
determined to exist, shall be deemed
established. Notwithstanding anything herein
contained to the contrary, each party shall
pay its own attorney's fees, costs and
expenses incident to any arbitration
proceeding brought under this subparagraph
9(c)(ii).
(iii) The Indemnitee and the Indemnitor may agree
in writing, at any time, as to the existence
and amount of a Loss, and, upon the execution
of such agreement, such Loss shall be deemed
established.
(iv) Payments of any Loss shall be paid to the
person entitled thereto within ten (10)
business days following the establishment of
the Loss. Failure to pay the amount of the
Loss when due shall give rise to interest
thereon calculated at a rate equal to 12% per
annum. Purchaser shall be entitled to offset
any Loss to which it is entitled to
indemnification hereunder, including any
amounts representing interest calculated
thereon, against rent due under the Lease for
the premises located at 2300 Belcher Road,
Largo, Florida.
27
<PAGE>
ARTICLE XI
GENERAL
Section 11.1 Notices. All notices and other communications hereunder
shall be in writing and shall be sent by certified mail, postage prepaid, return
receipt requested; by an overnight express courier service that provides written
confirmation of delivery; or by facsimile with confirmation, addressed as
follows:
If to Sellers: Jeffrey Lopatin
c/o 516 North Fort Harrison Avenue
Clearwater, FL 34615
With a copy to: Hamden H. Baskin, III, Esquire
516 North Fort Harrison Avenue
Clearwater, FL 34615
If to Shareholders: To the address for such Shareholder
standing on the stock books of Pixie
Honduras
If to Purchaser: Kleinert's, Inc. of Florida
120 West Germantown Pike
Suite 100
Plymouth Meeting, PA 19462
With a copy to: Steven N. Haas, Esquire
Cozen and O'Connor
1900 Market Street
Philadelphia, Pennsylvania 19103
Any party may change its address for receiving notice by giving notice
of a new address in the manner provided herein. Any notice so given, shall be
deemed to be delivered on the second (2nd) business day after the same is
deposited in the United States Mail, on the next business day if sent by
overnight courier, or on the same business day if sent by facsimile before the
close of business, or the next day, if sent by facsimile after the close of
business.
28
<PAGE>
Section 11.2 Broker's Commission. Each party agrees to indemnify and
hold harmless the other party from and against any and all liability, loss,
damage, cost or expense (including court costs and attorney fees) arising out of
or relating to any claim that such party entered into any brokerage agreement or
similar arrangement, whether oral or written.
Section 11.3 Headings. The descriptive article, section and
paragraph headings set forth herein are inserted for convenience of reference
only, do not constitute a part of this Agreement and shall not control or affect
the meaning or construction of any provision of the within Agreement.
Section 11.4 Entire Agreement; Governing Law. This Agreement,
together with Exhibits attached hereto, constitutes the entire agreement between
the parties pertaining to this subject matter and supersedes all prior or
contemporaneous agreements and understandings of the parties relating to the
same. This Agreement may be amended only in writing signed by both parties. This
Agreement shall be governed and construed in accordance with the laws of the
State of Florida, notwithstanding conflicts of laws provisions to the contrary.
Section 11.5 Severability. If any term or provision of this
Agreement or any application thereof shall be invalid or unenforceable, the
remainder of this Agreement and any other application of such term or provision
shall not be affected thereby.
Section 11.6 Counterpart Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 11.7 Assignability; Binding Effect. This Agreement may not
be assigned by either party without the prior written consent of the other
party. This Agreement shall be binding upon the parties hereto, and their
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed the within
Agreement on the day and year first above written.
PIXIE PLAYMATES INC.,
a Florida corporation, Seller
By: /s/ Jeffrey A. Lopatin
----------------------------------
Title: President
Attest: /s/ Arthur Lopatin
----------------------------------
(Assistant) Secretary
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
29
<PAGE>
CERTIFIED SEWING SERVICES, INC.
a Florida corporation, Seller
By: /s/ Jeffrey A. Loptain
-------------------------------
Title: Secretary/Treasurer
[Corporate Seal]
KLEINERT'S, INC. OF FLORIDA
a Florida corporation, Purchaser
By: /s/ Joseph J. Connors
-------------------------------
Title (Vice) President
[Corporate Seal]
SHAREHOLDERS: /s/ Jeffrey A. Lopatin
-------------------------------
/s/ J. Harold Lopatin
-------------------------------
/s/ Arthur Lopatin
-------------------------------
/s/ Owen Perry
-------------------------------
/s/ Leslie Wayne Gray
-------------------------------
30
<PAGE>
LIST OF EXHIBITS
Exhibit "A" Fixed Assets, Inventory, Prepaid Expenses
Exhibit "B" Excluded Assets
Exhibit "C" Shareholders of CASH; Shares
Exhibit "D" Allocation of Purchase Price
Exhibit "E" Real Estate
Exhibit "F" Personal Property
Exhibit "G" Trade Names
Exhibit "H" Legal Matters
Exhibit "I" Corporation Agreements
Exhibit "I-1" Guaranteed Obligations
Exhibit "J" Employees
Exhibit "K" Employee Benefit Plans
Exhibit "L" Sellers Financial Statements
Exhibit "M" CASH Financial Statements
Exhibit "N" Suppliers
Exhibit "O" Conflicts of Interest
Exhibit "P" Subsidiaries
Exhibit "Q" No Material Change
Exhibit "R" Action Since Balance Sheet Date
Exhibit "S" Environmental Matters
31
<PAGE>
REPORTS ON FORM 8-K
The Company filed a report on Form 8-K dated December 19, 1995
disclosing the purchase of the assets of Pixie Playmates, Inc. Certified Sewing
Services, Inc. and all of the capital stock of Certified Apparel Services of
Honduras, Inc., CA. No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
EXHIBIT (11)
Statement Regarding Computation of Per Share Earnings
<TABLE>
<CAPTION>
Weighted Average
Weighted Average Weighted Average Common and Common
Number of Common Number of Dilutive Stock Equivalent
Shares Outstanding Common Stock Options Shares
------------------ -------------------- -----------------
<S> <C> <C> <C>
November 27, 1993 3,250,000 319,000 3,472,000
December 3, 1994 3,346,000 356,000 3,569,000
December 2, 1995 3,331,000 419,000 3,750,000
</TABLE>
<PAGE>
EXHIBIT (21)
Subsidiaries of Registrant
Name: Kleinert's, Inc. of Alabama
State of Incorporation: Alabama
Trading as: Kleinert's, Inc. of Alabama
Name: Kleinert's, Inc. of Delaware
State of Incorporation: Delaware
Trading as: Kleinert's, Inc. of Delaware
Name: Kleinert's, Inc. of New York
State of Incorporation: New York
Trading as: Kleinert's, Inc. of New York
Name: Kleinert's, Inc. of Florida
State of Incorporation: Florida
Trading as: Kleinert's, Inc. of Florida
Name: Certified Apparel Services of Honduras, Inc.
State of Incorporation: Honduras, CA.
Trading as: Certified Apparel Services of Honduras, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-02-1995
<PERIOD-END> DEC-02-1995
<CASH> 327
<SECURITIES> 0
<RECEIVABLES> 21,899<F1>
<ALLOWANCES> 0
<INVENTORY> 14,530
<CURRENT-ASSETS> 39,136
<PP&E> 11,544
<DEPRECIATION> 6,051
<TOTAL-ASSETS> 48,222
<CURRENT-LIABILITIES> 20,579
<BONDS> 0
<COMMON> 3,798
0
0
<OTHER-SE> 20,282<F2>
<TOTAL-LIABILITY-AND-EQUITY> 48,222
<SALES> 75,121
<TOTAL-REVENUES> 75,121
<CGS> 61,636
<TOTAL-COSTS> 61,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 1,651
<INCOME-PRETAX> 6,683
<INCOME-TAX> 2,352
<INCOME-CONTINUING> 4,331<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,331
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 0
<FN>
<F1>1. Accounts receivable (net)
<F2>2. Capital in excess of par value
Retained earnings
Treasury stock, at cost
<F3>3. Not disclosed separately
<F4>4. Net income
</FN>
</TABLE>
