SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
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
-------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
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 _______
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 October 11, 1996
- --------------------------------- -------------------------------
Common Stock
Par Value $1.00 per share 3,684,931
<PAGE>
KLEINERT'S, INC.
INDEX
Part I. Financial information PAGE
Item 1. Financial statements
Consolidated statements of operations 3
for the three months and nine months
ended August 31, 1996 and September 2,
1995
Consolidated balance sheets at 4
August 31, 1996, December 2, 1995 and
September 2, 1995
Consolidated statements of cash flows 6
for the nine months ended August 31, 1996
and September 2, 1995
Notes to consolidated financial statements 8
Item 2. Management's discussion and analysis of 12
the financial condition and results of
operations
Part II. Other information
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted, except per share amounts)
Three Months Ended Nine Months Ended
-------------------- ---------------------
Aug. 31, Sept. 2, Aug. 31, Sept. 2,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $30,877 $26,451 $53,888 $44,296
Cost of goods sold 25,648 22,131 43,454 35,447
------- ------- ------- -------
Gross profit 5,229 4,320 10,434 8,849
------- ------- ------- -------
Selling, general and
administrative expenses 1,739 1,272 4,537 3,668
Interest expense, net 592 569 1,352 1,254
------- ------- ------- -------
2,331 1,841 5,889 4,922
------- ------- ------- -------
Income before income
taxes 2,898 2,479 4,545 3,927
Provision for income taxes 1,049 890 1,647 1,416
------- ------- ------- -------
Net income $ 1,849 $ 1,589 $ 2,898 $ 2,511
======= ======= ======= =======
Earnings per share:
Net income $ .48 $ .42 $ .77 $ .67
======= ======= ======= =======
Weighted average shares
outstanding 3,831 3,745 3,775 3,755
======= ======= ======= =======
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
ASSETS
Aug. 31, Dec. 2, Sept. 2,
1996 1995 1995
------- ------ ------
Current assets:
Cash $ 337 $ 327 $ 84
Accounts receivable (net) 30,092 21,899 21,580
Inventories:
Raw materials 9,109 4,222 5,371
Work-in-process 4,864 4,321 3,694
Finished goods 15,270 5,987 15,249
------- ------- -------
Total inventories 29,243 14,530 24,314
------- ------- -------
Other current assets 1,374 2,380 1,941
------- ------- -------
Total current assets 61,046 39,136 47,919
------- ------- -------
Property, plant & equipment, at cost 14,296 11,544 11,328
Less: accumulated depreciation and
amortization 6,757 6,051 5,879
------- ------- -------
net property, plant and
equipment 7,539 5,493 5,449
------- ------- -------
Other assets 4,983 3,593 3,556
------- ------- -------
$73,568 $48,222 $56,924
======= ======= =======
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
LIABILITIES AND SHAREHOLDERS' EQUITY
Aug. 31, Dec. 2, Sept. 2,
1996 1995 1995
------- ------ ------
Current liabilities
Notes payable and current portion
of long-term debt $30,046 $14,195 $22,835
Accounts payable 5,626 5,024 5,508
Accrued expenses 1,443 1,331 2,324
Income taxes payable 23 29 -
------- ------- -------
Total current liabilities 37,138 20,579 30,667
------- ------- -------
Deferred income taxes 134 134 123
Long-term debt 7,329 3,429 3,874
------- ------- -------
Total liabilities 44,601 24,142 34,664
------- ------- -------
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,
4,198,398, 3,798,398 and 3,798,398
shares issued and outstanding,
respectively 4,198 3,798 3,798
Capital in excess of par value 12,965 10,626 10,626
Retained earnings 15,770 12,872 11,052
------- ------- -------
32,933 27,296 25,476
------- ------- -------
Less:
Treasury stock, at cost, 513,467, $466,967
and 466,967 (3,966) (3,216) (3,216)
------- ------- ------
Total shareholders' equity 28,967 24,080 22,260
------- ------- -------
73,568 $48,222 $56,924
======= ======= =======
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Nine Months Ended
------------------
Aug. 31, Sept. 2,
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 2,898 $ 2,511
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 717 500
Provision for losses on accounts receivable 16 60
Change in assets and liabilities:
(Increase) in accounts receivable (8,180) (3,586)
(Increase) in inventory (12,674) (11,617)
Decrease(increase) in other current assets 2,019 (328)
Increase in accounts payable and
accrued expenses 714 2,559
(Decrease) in income taxes payable (6) -
(Increase) in other assets (1,491) (312)
------- --------
Total adjustments (18,885) (12,724)
------- --------
Net cash used in operating activities (15,987) (10,213)
------- --------
Cash flows from investing activities:
Purchase of assets - Pixie Acquisition (4,650) -
Capital expenditures (1,183) (795)
Note receivable related party (Note 2) - (500)
Proceeds from note receivable 90 70
------- --------
Net cash used in investing activities (5,743) (1,225)
======= ========
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
(CONTINUED)
Nine Months Ended
------------------
Aug. 31, Sept. 2,
1996 1995
-------- --------
Cash flows from financing activities:
Net borrowings under revolving
line-of-credit agreement $15,651 $12,140
Principal payments of debt (550) (750)
Proceeds from long-term debt 4,650
Exercise of stock options 2,739
Acquisition of treasury stock (750)
------- -------
Net cash provided by financing
activities 21,740 11,390
======= =======
Net increase (decrease) in cash 10 (48)
Cash at beginning of period 327 132
------- -------
Cash at end of period $ 337 $ 84
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,154 $ 1,235
Income taxes $ 842 $ 225
See accompanying notes
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended August 31, 1996 and September 2, 1995
(1) Basis of presentation:
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the results for the
interim periods. Operating results for the nine months ended August 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended November 30, 1996. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures presented are adequate
for a fair presentation of the financial statements. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 2, 1995.
(2) Acquisition
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 "Pixie Acquisition") 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., S.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 Pixie Acquisition, the Company
entered into a three year lease agreement with the principal shareholder of
Pixie for the premises in which Pixie was conducting business. To date the
Company has continued manufacturing operations as was conducted by Pixie,
Certified and CASH prior to the Pixie Acquisition.
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. 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 acquisition has been accounted for using the purchase method, and
accordingly, the results of operations are included in the Company's results
from the date of acquisition, December 19, 1995.
<PAGE>
The proforma unaudited results of operations for the nine months ended
August 31, 1996 and September 2, 1995, assuming consummation of the purchase and
amendment of the term debt as of December 4, 1994 are as follows:
Three Months Ended Nine Months Ended
------------------ --------------------
Aug. 31, Sept. 2, Aug. 31, Sept. 2,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $ 30,877 $ 29,283 $ 53,959 $ 52,124
Net income 1,849 1,826 2,898 2,642
Net income per common share: $ .48 $ .49 $ .77 $ .70
(3) Refinancing of Term Loan
On February 28, 1996 the Company refinanced its existing term loan and
provided for an additional term debt facility of $4,650,000 to finance the Pixie
Acquisition. The term loan is in the form of an amended and restated term loan
note with the same bank as the original term loan. Total borrowing at August 31,
1996 was $7,749,000. The interest rate is indexed by LIBOR rates plus a spread
of 1.12%.
Simultaneously, the Company entered into an interest rate swap to
convert its floating-rate to a fixed-rate of 5.88% which effectively fixes the
rate at 7.0%. This reduces the Company's risk of incurring higher interest costs
due to rising interest rates. At August 31, 1996, the interest rate swap
agreement had a notional amount of $7,749,000 which decreases by $300,000
quarterly through the September 2002 termination date. The fair value of this
agreement at August 31, 1996 was $167,780.
(4) Stock Repurchase Program
On June 21, 1996, the Company announced the commencement of a common
stock repurchase program. Purchases under the program will occur in the public
market and in negotiated private transactions. Total purchases under the
repurchase program will not exceed $5,000,000. During the three months ended
August 31, 1996, the Company repurchased 46,500 shares of common stock.
(5) Related Party Transactions
The Chairman has an employment agreement which provides for an
incentive bonus of 5% of pre-tax income if pre-tax income exceeds fiscal year
1989 pre-tax income. The employment agreement extends through the end of fiscal
year 1997.
In addition, the Company is funding life insurance contracts on behalf
of the Chairman, whose beneficiaries are designated by the individual.
The Company has a six month note receivable of $373,920 with the
Chairman due on November 14, 1996 at market rate.
See footnote (6) Subsequent Event regarding the acquisition of Scott
Mill, Inc. ("Scott Mills") by the Company. On December 5, 1994 the Company
loaned Scott Mills $500,000. Scott Mills, formerly an indirect wholly-owned
subsidiary of the Company, is a knitting and textile manufacturer and the
<PAGE>
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. On December 1, 1995 the Company executed a working capital
agreement with Scott Mills that confirms Scott Mills' obligations to the Company
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 of $2,404,000 as of August 31, 1996. Scott Mills,
which has operated independently of the Company since November 27, 1993
continues to be a principal supplier of fabric to the Company.
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 for which Scott Mills reimburses the Company.
As a consequence, the balance due the Company fluctuates based on the timing of
Scott Mills repayments to the Company for disbursements made on behalf of Scott
Mills.
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. The terms of the sublease were reached at an arms length basis.
(6) Subsequent Event
On September 30, 1996, the Company consummated the Merger (the
"Merger") of Scott Mills, Inc. ("Scott Mills"), with and into the Company's
wholly-owned subsidiary, Kleinert's, Inc. of Alabama ("Kleinert's Alabama"),
pursuant to an Agreement and Plan of Merger dated as of June 10, 1996 among the
Company, Scott Mills and Kleinert's Alabama (the "Merger Agreement"). Pursuant
to the Merger Agreement, each share of Scott Mills Common Stock outstanding on
September 30, 1996 was converted into the right to receive $.03 in cash and
1.52% of a share of the Company's Common Stock, determined by the division of
$.27 for each share of Scott Mill's stock by $17.75 which represents the average
price of the Company's stock on the five trading days immediately preceding the
consumation of the Merger(as determined pursuant to the Merger Agreement). Cash
will be paid in lieu of fractional shares. The Company expects to issue
approximately 51,000 shares of its Common Stock and approximately $101,000 in
cash in exchange for all of the outstanding shares of Common Stock of Scott
Mills.
The Merger was consummated upon approval of the Merger Agreement and
the Merger by the Scott Mills shareholders at the Scott Mills Annual Meeting of
Shareholders held on September 27, 1996.
<PAGE>
The Company was the largest customer of Scott Mills. Scott Mills' sales
for the nine months ended August 31, 1996 were $6,678,000 of which $5,737,000
were sales to the Company. The Merger of Scott Mills with Kleinert's Alabama
will permit the Company to maintain its flexibility in servicing its retail
customers in its sleepwear and activewear products.
The proforma unaudited results of operations for the nine months ended
August 31, 1996 and September 2, 1995, assuming consummation of the Merger as of
December 4, 1994 are as follows:
Three Months Ended Nine Months Ended
------------------ -----------------
Aug. 31, Sept. 2, Aug. 31, Sept. 2,
1996 1995 1996 1995
------- ------- ------- -------
Net sales $31,385 $28,444 $54,829 $61,658
Net income/(loss) $ 1,611 $ (451) $ 2,506 $ 76
Net income/(loss) per common share $ .42 $ (.12) $ .66 $ .02
On September 12, 1995, Scott Mills announced, in light of poor
operating results and as part of its ongoing effort to control operating costs,
their decision to concentrate its business solely on its knitting operations and
to subcontract all of its dying and finishing services. In connection with the
closing of its dying and finishing facility, the Company reduced its workforce
and sought buyers for its dying and finishing business and equipment.
Subsequently, Scott Mill's was able to find a buyer for the dying and finishing
equipment. During the third quarter of 1995, Scott Mill's provided a charge of
$1,994,000 to operations for the write down of assets to estimated net
realizable value and for other costs associated with the ceasation of the dying
and finishing operations.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's apparel business is highly seasonal. Consequently, the
sales and operating results for the nine months ended August 31, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending November 30, 1996.
Nine Months Ended
(000's omitted)
------------------ Increase
Aug. 31, 1996 Sept. 2, 1995 (Decrease)
------------- ------------- ----------
Net Sales $53,888 $44,296 $9,592
Gross Profits $10,434 $ 8,849 $1,585
Selling, general and
administrative expenses $ 4,537 $ 3,668 $ 869
Net sales increased by $9,592,000, or 22%, to $53,888,000 from
$44,296,000 for the nine months ended August 31, 1996 compared to the nine
months ended September 2, 1995. Sales of products associated with the business
arising from the Company's acquisition (the Pixie Acquisition) of the assets of
Pixie Playmates, Inc. ("Pixie") and Certified Sewing Services, Inc.
("Certified") and the shares of Certified Apparel Services of Honduras, S.A.
("CASH") on December 16, 1995 accounted for approximately 14% of the increase,
and the remaining 8% increase related to the Company's continuing business. The
increase in the Company's sales from its continuing business related primarily
to knitsets and separates. Test programs and good sales results at very large
retail chains during 1995 were successful and have resulted in growth for the
Company with these customers. Gross profit increased by $1,585,000, or 18%
primarily as a result of increased sales volume.
Selling, general and administrative expenses increased $869,000, or 24%
primarily reflecting expenses associated with the Pixie business.
It is the Company's intention to integrate many systems and functions
that are currently being performed independently at Pixie.
Interest expense in the first nine months of 1996 was $1,352,000
compared to $1,254,000 in the first nine months of 1995, reflecting increased
borrowing levels.
<PAGE>
Impact of Inflation and Changing Prices on Sales and Income from Operations
Although the Company's costs for raw materials, labor and equipment are
influenced by inflation, management believes that inflation did not have a
material impact on the Company's operations prior to fiscal year 1994. In fiscal
year 1994, the Company experienced an increase in raw material prices which
continued into fiscal year 1995. The impact on margins of increased raw material
prices was offset primarily by increased sales volume that permitted the
absorption of relatively stable fixed costs. Consequently, margins remained
stable without a corresponding increase in selling prices. Raw material prices
have not changed significantly in 1996. The Company has not been able to
increase its selling prices to any great extent during fiscal year 1996;
therefore, the Company continues to examine all of its costs in an effort to
maintain its profit margins.
Liquidity and Capital Resources
At August 31, 1996, Kleinert's had working capital of $23,908,000
compared to $17,252,000 at September 2, 1995. Net cash used in operating
activities increased $5,774,000 from ($10,213,000) in the first nine months of
fiscal year 1995 to ($15,987,000) in the first nine months of fiscal year 1996.
This reflected increases in inventory and accounts receivable when comparing the
first nine months of fiscal year 1996 to the comparable 1995 period. The higher
inventory levels and related account receivable balances reflect higher
production levels in anticipation of increased sales expected for the balance of
the fiscal year 1996. In addition, approximately $2,000,000 of inventory was
acquired in the Pixie acquisition.
Cash used in investing activities increased $4,518,000 to ($5,743,000)
in the first nine months of 1996 from ($1,225,000) in the same period of 1995.
The increase was primarily the result of the acquisition of the assets of Pixie
and Certified and of the capital stock of CASH for an aggregate cash purchase
price of $4,650,000.
Net cash provided by financing activities increased by $10,350,000 to
$21,740,000 in the nine months ended August 31, 1996 from $11,390,000 for the
comparable period in 1995. The increase was primarily the result of
approximately $2,739,000 of proceeds from the sale of common stock upon the
exercise of stock options, proceeds from refinancing of existing term debt, and
the addition of a $4,650,000 term debt facility to finance the purchase of the
Pixie and Certified assets and the shares of CASH offset by the repurchase of
treasury stock. The term loan is in the form of an amended and restated term
loan note with the same bank as the original term loan. The total borrowing at
August 31, 1996 was $7,749,000 which is payable in quarterly installments of
$300,000 through September, 2002 with a final installment of $249,000 due
December 2002. The interest rate is based on LIBOR but has been effectively
fixed at 7.00% by an interest rate swap agreement with the same bank.
<PAGE>
It is expected that the Pixie acquisition will enhance Kleinert's
earnings and, ultimately, its cash flows; however, due to the seasonality of the
Company's business, additional working capital requirements are anticipated in
periods when production levels exceed sales.
The Company used its short-term borrowings to build inventory levels
for shipment in the fall season.
The Company believes that cash flow generated by operations, together
with amounts available under its existing credit arrangements, should be
sufficient to fund its working capital needs for the remainder of fiscal year
1996 and for the future.
The Company has unsecured lines of credit aggregating $42,000,000 of
which $28,651,000 was outstanding at August 31, 1996 bearing interest at rates
ranging from 6.3% to 6.9%. The following table sets forth certain information
concerning this indebtedness:
Principal
Name of Lender Amount Outstanding
CoreStates Bank, N.A. $13,151,000
Brown Brothers,
Harriman and Company. $ 500,000
PNC Bank $10,000,000
Republic National Bank
of New York $ 5,000,000
The Company expects to fund its capital needs primarily from cash flow
generated by operations over the next twelve months. Since the Company uses its
short-term lines of credit to fund working capital needs, any additional
financing related to capital needs is generally provided either by lease
financing or other long-term sources. Currently, the Company has no material
capital commitments.
Income Taxes
The provision for income taxes is based upon the effective tax rates
expected to be recognized for the full fiscal year 1996. The rate for the first
nine months of 1996 was 36.2%, which approximates the rate for the first nine
months of fiscal year 1995 of 36.1%.
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued FASB
Statement No. 121 Accounting for the Impairment of Long-Lived 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 that are expected to be disposed. The Company expects the impact of
adoption in 1997 will not be significant.
<PAGE>
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>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
(1) Amended and Restated Employment Agreement dated June 28,
1996 for Jack Brier, CEO.
(2) Lease Agreement for Cadtex workstations dated March, 1996
among Meridian Leasing and Kleinert's, Inc.
(3) Lease Agreement for Cadtex workstations dated July, 1996
among Meridian Leasing and Kleinert's, Inc.
(4) Line of Credit dated June 17, 1996 by and among
Kleinert's, Inc. of Alabama and Brown Brothers, Harriman
and Co.
(b) Reports on Form 8-K
No reports on Form 8K were filed during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: October 15, 1996 By: /s/ Gerald E. Monigle
------------------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: October 15, 1996 By: /s/ Gerald E. Monigle
--------------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 28th day of June, 1996, by and between
KLEINERT'S, INC., a Pennsylvania Corporation (hereinafter called "Kleinert's")
and JACK BRIER, an individual (hereinafter referred to as "Brier").
W I T N E S S E T H:
Brier has been Chairman and Chief Executive Officer of Kleinert's for
many years and is a party to an Employment Agreement dated November 21, 1994.
Kleinert's and Brier each desire to set forth in writing the amended and
restated terms of Brier's continued employment with Kleinert's.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Kleinert's
and Brier agree as follows:
1. Employment. Kleinert's hereby employs Brier and Brier hereby accepts
employment by Kleinert's for the period and upon the terms and conditions
contained in this Agreement.
2. Office and Duties.
(a) Brier shall serve Kleinert's as its Chief Executive Officer and,
if elected to the Board of Directors, as Chairman of the Board of Directors, and
shall have such authority and such responsibilities as generally accorded a
Chief Executive Officer and Chairman of the Board of Directors of a
publicly-held company.
(b) Throughout the term of this Agreement, Brier shall devote such
time, energy, skill and efforts to the performance of his duties hereunder in a
manner which will
<PAGE>
faithfully and diligently further the business and interests of Kleinert's. No
provision of this Agreement shall in any way restrict Brier's right to act in
any capacity for Scott Mills, Inc. or any successor to Scott Mills, Inc.
3. Term. This Agreement shall be for a term of four (4) fiscal years of
Kleinert's, commencing on December 3, 1995 and ending on December 4, 1999,
unless sooner terminated as hereinafter provided. Unless either party elects to
terminate this Agreement at the end of the original or any renewal term by
giving the other party notice of such election at least ninety (90) days before
the expiration of the then current term, this Agreement shall be deemed to have
been renewed for an additional term of one (1) fiscal year commencing on the day
after the expiration of the then current term.
4. Compensation.
(a) For all of the services rendered by Brier to Kleinert's, for the
fiscal year beginning December 3, 1995, Brier shall receive an annual base
salary of Four Hundred Thousand Dollars ($400,000), payable in reasonable
periodic installments, and for the three fiscal years beginning December 1,
1996, Brier shall receive an annual base salary of Four Hundred Fifty Thousand
Dollars ($450,000) payable in reasonable periodic installments.
(b) In addition to Brier's base salary, Kleinert's shall pay Brier,
within forty-five (45) days from the end of each fiscal year during the term of
this Agreement, a bonus with respect to such fiscal year equal to five percent
(5%) of the amount, if
- 2 -
<PAGE>
any, by which income before deduction of state and federal income taxes of
Kleinert's for such fiscal year exceeds income before deduction of state and
federal income taxes of Kleinert's for the fiscal year ended December 2, 1989.
Income before deduction of state and federal income taxes shall be determined on
a consolidated basis in accordance with generally accepted accounting principles
for each fiscal year. Notwithstanding the foregoing, the amount of bonus to be
paid under this subparagraph shall be limited for each fiscal year to an amount
equal to the base compensation provided in subparagraph 4(a) hereof.
(c) Throughout the term of this Agreement and as long as they are
kept in force by Kleinert's, Brier shall be entitled to participate in and
receive the benefits of any profit sharing, pension or retirement plans and any
health, life, accident or disability insurance plans or programs made available
to Brier and/or available to other executive officers of Kleinert's, including
but not limited to, a Deferred Compensation and Salary Continuation Agreement
dated November 30, 1991, certain Split Dollar Insurance Agreements and
Collateral Assignment Agreements dated April 21, 1993 and May 26, 1993;
provided, however, that nothing herein shall preclude the Board of Directors of
Kleinert's, in its discretion, from providing any benefits to Brier in excess of
those presently available to other executive officers of Kleinert's.
5. Reimbursement of Expenses. Kleinert's will reimburse Brier for all
reasonable expenses incurred by Brier in
- 3 -
<PAGE>
connection with the performance of Brier's duties hereunder and, retroactively
to July 1, 1994, will provide Brier with a monthly automobile lease allowance of
at least Eleven Hundred Dollars ($1,100) and will reimburse Brier for all costs
associated with the operation and maintenance of such automobile selected by
Brier. In addition, Kleinert's shall pay for or reimburse Brier for legal and
accounting fees for tax and estate planning not to exceed $20,000 during the
term of this Agreement.
6. Loan. At anytime during the term of this Agreement, Brier shall have
the right to borrow from the Company up to $500,000 to be repaid by the end of
the term of this Agreement. The Company shall charge interest to Brier at the
same rate the Company pays on its line of credit borrowing.
7. Authority to Bind Kleinert's. Brier shall be permitted and
authorized to make any disbursements or purchases, to enter into agreements, to
incur any liabilities on behalf of Kleinert's or to otherwise obligate
Kleinert's in a manner consistent with his duties, subject to further direction
of the Board of Directors.
8. Disability. If Brier becomes unable to perform his duties hereunder
due to partial or total disability or incapacity resulting from a mental or
physical illness, injury or any other cause, Kleinert's nonetheless will
continue the payment of Brier's base salary for the balance of the term of this
Agreement and any bonuses to which Brier shall be entitled hereunder.
Additionally, Brier shall be entitled to such other benefits to which he may be
- 4 -
<PAGE>
entitled hereunder during the continuance of such disability or
incapacity.
9. Death. If Brier dies, Kleinert's shall continue to pay to Brier's
estate all payments of base salary hereunder until the end of the fiscal year
following the fiscal year in which Brier's death shall occur, together with the
bonus to which Brier otherwise would be entitled for such fiscal years.
Thereafter, Kleinert's shall have no further obligations or liabilities
hereunder to Brier's estate or legal representative or otherwise.
10. Discharge for Cause. Kleinert's may discharge Brier at any time for
commission of a felony if related to Brier's employment, willful violation of
any express direction of the Board of Directors, intoxication or drug addiction
directly affecting Brier's performance of his duties hereunder or material
misrepresentation made in this Agreement, in which event Kleinert's shall have
no further obligations or liabilities hereunder after the date of such
discharge.
11. Kleinert's Property. All advertising, sales, manufacturers' and
other materials or articles or information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information, samples, or any other materials or data of any kind furnished to
Brier by Kleinert's or developed by Brier on behalf of Kleinert's or at
Kleinert's direction or for Kleinert's use or otherwise in connection with
Brier's employment hereunder, are and shall remain the sole and confidential
property of Kleinert's; if Kleinert's
- 5 -
<PAGE>
requests the return of such materials at any time during or at or after the
termination of Brier's employment, Brier shall immediately deliver the same to
Kleinert's.
12. Noncompetition. Trade Secrets. Etc.
(a) During the term of this Agreement and for a period of two (2)
years after the termination of his employment with Kleinert's for any reason
whatsoever, Brier shall not engage in (as a principal, partner, director,
officer, agent, employee, consultant or otherwise) or be financially interested
in any business which is engaged in a business which is directly competitive
with the business then engaged in by Kleinert's. However, nothing contained in
this Paragraph 11 shall prevent Brier from owning any number of shares of Scott
Mills, Inc. or from holding for investment no more than five percent (5%) of any
class of equity securities of a company (other than Kleinert's) whose securities
are traded on a national securities exchange and which is engaged in a business
which is directly competitive with the business then engaged in by Kleinert's.
(b) During the term of this Agreement and at all times thereafter,
Brier shall not use for his personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or Kleinert's other than Kleinert's, any material referred to in
Paragraph 10 above or any information regarding the business methods, business
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes of or
- 6 -
<PAGE>
developed by the Kleinert's or any names and addresses of customers or clients
or any data on or relating to past, present or prospective customers or clients
or any other confidential information relating to or dealing with the business
operations or activities of Kleinert's, made known to Brier or learned or
acquired by Brier while in the employ of Kleinert's.
(c) Any and all writings, improvements, processes, procedures
and/or techniques which Brier may make, conceive, discover or develop, either
solely or jointly with any other person or persons, at any time during the term
of this Agreement, whether during working hours or at any other time and whether
at the request or upon the suggestion of Kleinert's or otherwise, which relate
to or are useful in connection with any business now or hereafter carried on or
contemplated by Kleinert's, including developments or expansions of its present
fields of operations, shall be the sole and exclusive property of Kleinert's.
Brier shall make full disclosure to Kleinert's of all such writings,
improvements, processes, procedures and techniques, and shall do everything
necessary or desirable to vest the absolute title thereto in Kleinert's.
(d) Brier acknowledges that the restrictions contained in the
foregoing subparagraphs (a), (b) and (c), in view of the nature of the business
in which Kleinert's is engaged, are reasonable and necessary in order to protect
the legitimate interests of Kleinert's, and that any violation thereof would
result in irreparable injuries to Kleinert's, and Brier therefore
- 7 -
<PAGE>
acknowledges that, in the event of his violation of any of these restrictions,
Kleinert's shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which Kleinert's may be entitled.
(e) If the period of time or the area specified in subparagraph
(a) above should be adjudged unreasonable in any proceeding, then the period of
time shall be reduced by such number of months or the area shall be reduced by
the elimination of such portion thereof or both so that such restrictions may be
enforced in such area and for such time as is adjudged to be reasonable. If
Brier violates any of the restrictions contained in the foregoing subparagraph
(a), the restrictive period shall not run in favor of Brier from the time of the
commencement of any such violation until such time as such violation shall be
cured by Brier to the satisfaction of Kleinert's.
13. Prior Agreements. Brier represents to Kleinert's (a) that there are
no restrictions, agreements or understandings whatsoever to which Brier is a
party which would prevent or make unlawful his execution of this Agreement or
his employment hereunder, (b) that his execution of this Agreement and his
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which he is a party or by which he is bound
and (c) that he is free and able to execute
- 8 -
<PAGE>
this Agreement and to enter into employment by Kleinert's.
14. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under this
Agreement 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
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
(b) 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,
notwithstanding any conflict-of-laws doctrines to the contrary.
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or when deposited in the United States mails, registered or certified
mail, postage prepaid, return receipt requested, addressed as set forth below:
- 9 -
<PAGE>
(i) If to Kleinert's:
Kleinert's Inc.
120 West Germantown Pike
Suite 100
Plymouth Meeting, PA 19462
Attention: Chief Financial Officer
with a copy, given in the manner
prescribed above, to:
E. Gerald Riesenbach, Esquire
Cozen and O'Connor
The Atrium
1900 Market Street
Philadelphia, PA 19103
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(d) Binding Nature of Agreement. This Agreement shall be binding
upon and inure to the benefit of Kleinert's and its successors and assigns and
shall be binding upon Brier, his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement 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 thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
- 10 -
<PAGE>
(f) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(g) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing
(h) Paragraph Headings. The paragraph headings in this Agreement
are for convenience only; they form no part of this Agreement and shall not
affect its interpretation.
(i) Gender, Etc. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(j) Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or
- 11 -
<PAGE>
holiday on which federal banks are or may elect to be closed, then the final day
shall be deemed to be the next day which is not a Saturday, Sunday or such
holiday.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
KLEINERT'S, INC.
By: ______________________________
Executive Vice President
Attest:____________________________
/s/ JACK BRIER
______________________________(SEAL)
Jack Brier
- 12 -
<PAGE>
EXHIBIT 10.2
CORESTATES LEASING, INC. NON-TAX
MASTER LEASE SCHEDULE
CoreStates Leasing, Inc. Schedule Dated _________________ to
One Meridian Blvd. Master Lease Agreement No. 01678
Wyomissing, PA 19610 Master Lease Schedule #002
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: $3,780.25
2. Lessor's Cost: $101,975.87
3. Commencement Date: ___________________ (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 30 months and ending on _____________________
5. First Rent Payment Factor: .03707
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
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. Lease Type
Lessor agrees not to claim the tax benefits of an owner of the Equipment
for federal income tax purposes or for state or local tax purpose, and the
provisions of Section 10 of the Lease shall have no application.
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 30 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 29 additional installments of rent each in the amount
of $3,780.25 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.
CORESTATES LEASING, INC.
KLEINERT'S INC. OF NEW YORK
By:_____________________________________ By:_________________________________
Edward R. Bruner
Title: _________________________________ Title:______________________________
President
Date:___________________________________ Date:_______________________________
9801-004
1/94
<PAGE>
EXHIBIT 10.3
CORESTATES LEASING, INC. NON-TAX
MASTER LEASE SCHEDULE
CoreStates Leasing, Inc. Schedule Dated _________________ to
One Meridian Blvd. Master Lease Agreement No. 01678
Wyomissing, PA 19610 Master Lease Schedule #003
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: $1,303.41
2. Lessor's Cost: $32,105.00
3. Commencement Date: ___________________ (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 27 months and ending on _____________________
5. First Rent Payment Factor: .040598
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. Lease Type
Lessor agrees not to claim the tax benefits of an owner of the Equipment
for federal income tax purposes or for state or local tax purpose, and the
provisions of Section 10 of the Lease shall have no application.
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 27 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 26 additional installments of rent each in the amount
of $1,303.41 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.
CORESTATES LEASING, INC.
KLEINERT'S INC. OF NEW YORK
By:_____________________________________ By:_________________________________
Edward R. Bruner
President
Title:__________________________________ Title:______________________________
Date:___________________________________ Date:_______________________________
9801-004
1/94
<PAGE>
EXHIBIT 10.4
UNSECURED PROMISSORY NOTE (GRID)
$2,500,000.00 Date: 6/17/96
Name of Maker: Kleinert's, Inc. of Alabama
Address of Maker: Suite 100, 120 W. Germantown Pike
Plymouth Meeting, Pa. 19462
State of Incorporation (if applicable): N/A
Partnership Certificate Filed With (if applicable): N/A
Due On: Demand
Interest Payable on: first day of each month
FOR VALUE RECEIVED the Marker and, if more than one, each of them
jointly and severally promises to pay on the due date set forth above, to the
order of BROWN BROTHERS HARRIMAN & CO., ("Payee") at its office at 1531 Walnut
Street, Philadelphia, PA. 19102, the face amount hereof or such lesser amount as
is from time to time outstanding hereunder as indicated on the reverse side
hereof. Interest on the balance from time to time outstanding shall accrue at
the rate of **% per annum, and shall be payable as set forth above. ** specially
quoted rates to be agreed upon from time to time.
All advances pursuant to this Note and all repayments of principal due
hereunder shall be endorsed by the Payee on the schedule on the reverse side
hereof, or any continuation of such schedule attached hereto and denominated a
part hereof. Said endorsement on such schedule by an authorized agent of the
Payee shall be conclusive evidence of the unpaid balance due on this Note.
Post-maturity or post-demand (as the case may be) interest shall accrue
and be payable at 120% of the rate payable on the due date or demand, computed
from said date to the date of actual payment.
In no contingency or event whatsoever shall the interest rate charged
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that the Payee has received interest
hereunder in excess of said highest permissible rate, Payee shall promptly
refund such excess interest to Maker.
Maker affirms and certifies that the obligation evidenced by this Note
was not and will not be incurred for the purpose of purchasing, carrying or
trading in securities as defined in the Federal Reserve Board's Regulation T.
Upon the occurrence of any of the following events of default, to wit:
the non-payment when due of any obligation now or hereafter owing by the Maker
to the Payee, however arising, ("Obligation(s)"); the failure of the Maker
forthwith, upon demand, to furnish satisfactory Collateral, or to make payments
on account as may be agreed in any of the Obligations; the death, failure in
business, dissolution or termination of existence of the Maker or any endorser,
guarantor or surety of any Obligation (the Maker and any such other person(s)
being hereinafter referred to collectively as "Obligor(s)"); any petition for
relief under the Bankruptcy Code being filed by or against any Obligator or any
proceedings in bankruptcy, or under any Acts of Congress relating to the relief
of debtors, being commenced for the relief or readjustment of any indebtedness
of any Obligor either through reorganization, composition, extension or
otherwise; the making by any Obligor of any assignment for the benefit of
creditors or for taking advantage by any of the same of any insolvency law; any
seizure, vesting or intervention by or under authority of a government, by which
the management of any Obligor is displaced or its authority in the conduct of
its business is curtailed; the appointment of any receiver of any property of
any Obligor; the attachment or distraint of any of the property of any Obligor
or of same becoming subject at any time to any mandatory court order or other
legal process; the failure of the undersigned to perform any of its duties as
specified in any agreement(s) with respect to the Obligations; the expulsion or
suspension of any Obligor from membership in any national securities association
or any national securities exchange or
<PAGE>
other organized exchange, or any clearin association; the admission in writing
by any Obligor of inability to pay its debts generally as they become due; the
issuance of an attachment or garnishment or the filing of a lien against
property of any Obligor; the entry of a judgment against any Obligor; a
determination by the Payee that a material adverse change has occurred in the
financial condition of any Obligor from the condition set forth in the most
recent financial statement of such Obligor heretofore furnished to the Payee or
from the condition of such Obligor as heretofore most recently disclosed to the
Payee in any other manner; the merger or consolidation of any Obligor; the
Pension Benefit Guaranty Corporation shall commence proceedings (including
proceedings under Section 4042 of the Employee Retirement Income Security Act of
1974) to terminate any employee pension benefit plan of the Marker; any
misstatement or false statement of any Obligor in connection with any agreement
between any Obligor and the payee has been made; then in such event the Maker
shall immediately be liable without notice and shall pay on demand all
Obligations (whether or not otherwise due), together with all collection costs
and expenses, including reasonable attorney's fees, in connection with the
collection of such indebtedness.
As security for all Obligations, the Payee shall have a continuing
right of set-off against, a security interest in and a lien upon any and all
deposits, funds, securities, instruments and other property of any Obligor at
any time owing by the Payee or in its hands. The Payee shall be deemed to have
exercised such right of set-off immediately upon the occurrence of any event of
default hereunder even though such set-off is entered on the Payee's books
subsequent thereto.
In any litigation hereunder, all Obligors hereby waive trial by jury
and waive the right to interpose any defense based upon any Statute of
Limitations or any claim of latches. Each Obligor hereby consents to the in
personam jurisdiction of the Courts of the Commonwealth of Pennsylvania and the
United States District Court for the Eastern District of Pennsylvania in
connection with any claim arising hereunder. In the event that any action is
commenced hereunder in any such court, service of process may be made on any
Obligor by mail addressed to said party at its address then reflected in Payee's
records.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
All Obligors hereby forever waive presentment, demand, protest, notice
of protest and notice of dishonor of this Note and consent without notice to any
and all extensions of time or terms of payment including any compromise or
settlement thereof.
Kleinert's, Inc. of Alabama
/s/ Denise L. Hale By: /s/ Joseph J. Connors
Denise L. Hale Joseph J. Connors, Executive Vice
Asst. Secretary President/Assistant Secretary
ENDORSEMENT
In addition to liability as endorsers, which the undersigned hereby
assume, and intending to be legally bound, the undersigned (and, if more than
one, each of them jointly and severally) hereby (1) assent to all of the terms
and conditions of the within Note and hereby forever waive presentment, demand,
protest and notice of dishonor of the within Note and trial by jury, (2) become
surety to the Payee, its successors and assigns for the payment of the within
Note and (3) consent to any and all extensions of time or other terms of payment
and the release or substitution of, or the failure to perfect a security
interest in, any collateral as agreed to or granted by the Payee without notice
to any of the undersigned.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 337
<SECURITIES> 0
<RECEIVABLES> 30,092<F1>
<ALLOWANCES> 0
<INVENTORY> 29,243
<CURRENT-ASSETS> 1,374
<PP&E> 14,296
<DEPRECIATION> 6,757
<TOTAL-ASSETS> 73,568
<CURRENT-LIABILITIES> 37,138
<BONDS> 0
0
0
<COMMON> 4,198<F2>
<OTHER-SE> 24,769
<TOTAL-LIABILITY-AND-EQUITY> 73,568
<SALES> 30,877
<TOTAL-REVENUES> 30,877
<CGS> 25,648
<TOTAL-COSTS> 25,648
<OTHER-EXPENSES> 1,739
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> 2,898
<INCOME-TAX> 1,049
<INCOME-CONTINUING> 1,849<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,849
<EPS-PRIMARY> .48
<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 in interim reports
<F4>4. Net income
</FN>
</TABLE>
