<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------
F O R M 1 0 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 1-8176
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____.
---------------------------
LITTLEFIELD, ADAMS & COMPANY
(Exact name of Registrant as specified in its charter)
NEW JERSEY 22-1469846
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
6262 EXECUTIVE BLVD., HUBER HEIGHTS, OHIO 45424
(Address or principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (937) 236-0660
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------------------ ------------------------------------
COMMON STOCK, $1.00 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
__________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YesX No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant at March 26, 1997, was approximately $5,601,000. On such date, the
last sale price of registrant's common stock was $2.6250 per share. Solely for
the purposes of this calculation, shares beneficially owned by directors and
officers of registrant have been excluded, except shares with respect to which
such directors and officers disclaim beneficial ownership. Such exclusion
should not be deemed a determination or admission by registrant that such
individuals are, in fact, affiliates of registrant.
<TABLE>
<S> <C>
Indicate number of shares outstanding of each of the registrant's classes of common stock, as of
March 26, 1997.
CLASS OUTSTANDING ON MARCH 26, 1997
- - ------------------------------------------------ ------------------------------------------------
Common Stock, par value $1.00 per share 2,277,981
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF THE FORM 10-K INTO WHICH
<S> <C>
DOCUMENT THE DOCUMENT IS INCORPORATED
------------------------------------------ ----------------------------------
Definitive Proxy Statement to Shareholders Part III, Items 10, 11, 12, and 13
</TABLE>
<PAGE> 2
LITTLEFIELD, ADAMS & COMPANY
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters 4
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 8. Financial Statements 10
Item 9. Change in Registrant's Certifying Accountant 10
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners & Management 11
Item 13. Certain Relationships and Related Party Transactions 11
PART IV
Item 14. Financial Statements, Exhibits and Reports on Form 8-K 11
ADDITIONAL INFORMATION 14
EXHIBITS
Item 601. Exhibit Index Required by Item 601 of Regulation S-K
</TABLE>
This document incorporates into a single document the requirements of the
Securities and Exchange Commission for the Annual Report to Shareholders and
the Form 10-K.
<PAGE> 3
PART I
ITEM 1: BUSINESS
GENERAL INFORMATION
Littlefield, Adams & Company (the "Registrant", the "Company" and "LFA")
is a New Jersey corporation which was organized in 1949. The Registrant,
through its operating division, Sports Imprints/Fun Wear, is principally
engaged in the design, imprinting and distribution of young men's and boys'
active wear products under various license agreements. The accompanying
consolidated financial statements include the accounts of Littlefield, Adams &
Company and its now dissolved subsidiaries, Medical Sales Associates, Inc.,
Cornerstone Laboratories, Inc., and NUTECH, Inc. The former wholly owned
subsidiaries, Collegiate Pacific Company and Sports Imprints, Inc., were merged
into the Company effective June 30, 1995. In January 1996, the former wholly
owned subsidiaries, Medical Sales Associates, Inc., Cornerstone Laboratories,
Inc., and NUTECH, Inc., were dissolved. Neither Medical Sales Associates,
Inc., Cornerstone Laboratories, Inc. nor NUTECH, Inc., conducted any business
during 1996. The Company closed its Collegiate Pacific division on August 31,
1995.
The Registrant's principal executive offices are located at 6262 Executive
Boulevard, Huber Heights, Ohio 45424. The Company's telephone number is (937)
236-0660. Its operating division, Sports Imprints, also known as "Fun Wear,"
maintains its principal operating headquarters at the same location.
Effective August 19, 1996, the Company changed its principal executive
offices from 253 North First Avenue, Sturgeon Bay, Wisconsin 54235, to the
present location stated above.
The Company also maintains an administrative office and sales showroom in
the Empire State Building, New York, New York.
PRODUCTS
The products of Sports Imprints/Fun Wear include imprinted and embroidered
T-shirts, sweatshirts, boxer shorts and related sportswear. Prior to its
closure on August 31, 1995, Collegiate Pacific, in addition to the above
products, also produced jackets, hats, banners and pennants. Sports
Imprints/Fun Wear produces its own art designs which are transferred to apparel
by the direct textile printing method (application of ink directly to garments
using silk screens).
Sports Imprints/Fun Wear is continuously developing new graphics, designs,
logos and other art using modern computer equipment and technology; seeking new
licenses; researching different methods of applying artwork to garments and
seeking newer and faster methods for production of the artwork. Presently,
Sports Imprints/Fun Wear is also engaging the services of an outside
contractor. In addition, the Company is currently buying the products for its
new boxer short line from outside resources.
The following table discloses the percentage of total revenue contributed
by any class of products which accounted for the consolidated revenue during
each of the past three fiscal years:
<TABLE>
<CAPTION>
PERCENTAGE OF CONSOLIDATED REVENUE
PRODUCT CLASS 1996 1995 1994
-------------------- ------------ ------------ ------------
<S> <C> <C> <C>
T-shirt 88% 82% 80%
Pennants and Banners -- 4% 4%
Fleece Wear 12% 13% 15%
</TABLE>
Littlefield, Adams & Company 1996 Form 10-K, Page 1
<PAGE> 4
TRADEMARKS
The Company is the owner of the trademark "Fun Wear", which is registered
with the U.S. Patent and Trademark Office, registration number 1,952,545. This
registration is due for renewal in 2006. The Company is also in the process of
registering its "TacoBat" character trademark.
LICENSES
Refer to Note 3 (section "Significant Licensors") of the Notes to the
Consolidated Financial Statements.
MARKETS AND CUSTOMERS
The markets for the Sports Imprints/Fun Wear products are principally
retail chain stores, specialty stores and department stores. Prior to its
closure, Collegiate Pacific sold its products primarily to college bookstores,
resort areas, theme parks, and industrial and commercial customers.
The Company sells its products through Company employed sales personnel,
and, to a lesser degree, through a sales force of independent representatives.
An important part of the Company's ability to compete in the imprinting
industry is its ability to create marketable art designs. The Company has its
own art staff for that purpose, uses modern computer equipment and technology.
As needed, the Company utilizes free-lance artists in various capacities to
assist in that effort.
Sales to Wal-Mart and K-Mart during 1996 amounted to 56% and 16%,
respectively, of consolidated revenue. Refer to Note 3 of the Notes to the
Consolidated Financial Statements.
Other major customers include J.C. Penney, Meijer, Shopko, Ames, Sears,
Hills, Duckwall and Army-Air Force Exchange.
INVENTORY, BACKLOG AND PRODUCTION
As of December 31, 1996, 1995 and 1994, the Company had a backlog of
orders of approximately $26 thousand, $3.5 million and $5.8 million,
respectively. From January 1, 1997 through March 20, 1997, the Company
received orders for approximately $709,000 of goods. The decrease in backlog
as of December 31, 1996 is due to the transition from sales of Harley-Davidson
licensed products to sales of the Company's new licensed product lines.
The Company maintained an inventory adequate to meet anticipated demands
during a 69 day period in 1996, compared to a 119 day period in 1995 and an 80
day period in 1994. The total value of such inventory as of
December 31, 1996, was $1,579,000. During calendar years 1996, 1995 and 1994,
$56,000, $160,000 and $228,000, respectively, in merchandise, was returned to
the Company by customers.
Generally, the Company requires payment for goods within 30 days after
delivery; however, exceptions are made on a case by case basis depending on
circumstances such as sizes of orders, anticipated future business and past
credit experience. As of December 31, 1996, the Company had net receivables of
$2,894,000, with an average aging period, from delivery, of 29 days.
SUPPLIERS
The Company currently purchases T-shirts, sweatshirts, sweatpants and
boxer shorts from various mills. Availability is plentiful, and good
relationships with suppliers are very important. The Company believes that it
has such relationships.
Littlefield, Adams & Company 1996 Form 10-K, Page 2
<PAGE> 5
EMPLOYEES
As of December 31, 1996, the Company had approximately 74 full time
employees, and the Company believes that employee relations are good.
COMPETITION
The Company competes against a large number of national and regional
manufacturers of similar products and does not have a dominant market share in
the imprinted young men's and boys' active wear industry. The Company believes
that competition is based on popularity of a particular licensed brand, price,
quality of merchandise, artistic creativity and service, including timeliness
of delivery.
There are a significant number of major participants in the imprinted
young men's and boys' active wear industry. Starter, Champion, Changes, Sun
Sportswear, Freeze, Signal Knitting Mills, Wilson and Salem Knitting Mills are
among the Company's most significant competitors.
COST & EFFECT OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
<TABLE>
<S> <C>
1. Federal: To the best of management's knowledge, the Company will not be required to directly incur material expenses in
conjunction with environmental regulations; however, like all other companies, there are many incalculable
indirect expenses associated with compliance by other entities that affect the prices paid by the Company for
goods and services.
2. State: To the best of management's knowledge, the Company will not be required to directly incur material expenses in
conjunction with environmental regulations at the state level.
3. Local: To the best of management's knowledge, the Company will not be required to directly incur material expenses in
conjunction with environmental regulations at the local level.
</TABLE>
THE MEDICAL GROUP
The former Medical Group was comprised of Medical Sales Associates, Inc.,
Cornerstone Laboratories, Inc. and NUTECH, Inc. In January 1996, Medical Sales
Associates, Inc., Cornerstone Laboratories, Inc. and NUTECH, Inc. were
dissolved. As a result, the Medical Group, which never produced revenue for
the Company, will not be of any further cost or expense to the Company.
ITEM 2: PROPERTIES
The following tables set forth information with respect to the material
real property owned or leased by the Registrant as of December 31, 1996. Refer
to Note 13 of the Notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
OWNERSHIP
GENERAL CHARACTER OR EXPIRATION
LOCATION AND USE OF PROPERTY DATE OF LEASE
- - -------------- ------------------------------------------------ -------------
<S> <C> <C>
Huber Heights, 64,000 square feet, used for administration and 1999
Ohio graphics design, imprinting and shipping.
New York, 2,000 square feet in the Empire State Building, 2004
New York used as a sales showroom and for administration.
</TABLE>
As of December 31, 1996, the Registrant's facilities and the equipment
located therein were in good working condition and adequate for its needs and
future expansion.
Littlefield, Adams & Company 1996 Form 10-K, Page 3
<PAGE> 6
ITEM 3: LEGAL PROCEEDINGS
Refer to Note 18 of the Notes to the Consolidated Financial Statements.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1996 to a vote of
security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's Common Stock is traded on the American Stock Exchange
(the "Exchange") under the symbol "LFA". However, the Registrant does not
satisfy all the financial guidelines for continued listing on the Exchange and
accordingly there can be no assurance that such listing will be continued.
The Exchange, as a matter of policy, will consider the suspension of
trading in or delisting of a security when, in the opinion of the Exchange, the
financial condition and/or operating results of the issuer appear to be
unsatisfactory. To assist in the application of this and other listing
policies, the Exchange has adopted certain guidelines under which it will
normally give consideration to suspending dealings in or delisting a security.
The Exchange's financial guidelines include as criteria for the Exchange to
consider suspending dealings in or delisting securities that the issuer (i) has
shareholders' equity of less than $2 million if such issuer had losses in two
of its three most recent fiscal years, or (ii) has shareholders' equity of less
than $4 million if such issuer had losses in three of its four most recent
fiscal years, or (iii) has sustained losses which are so substantial in
relation to its overall operations or its existing financial resources, or its
financial condition has become so impaired that it appears questionable, in the
opinion of the Exchange, as to whether such issuer will be able to continue
operations and/or meet its obligations as they mature.
The Company, which at December 31, 1995, had losses in three of its four
most recent fiscal years, and shareholders' equity at that date of
approximately $24,000, had at December 31, 1996, income in two of its three
most recent fiscal years. The Company therefore met the American Stock
Exchange financial guidelines summarized in clauses (i) and (ii) above.
However, the Exchange may also suspend trading in or delist the Company's
securities under the guideline summarized in clause (iii) above if, in the
opinion of the Exchange, the financial condition of the Company has become so
impaired that it appears questionable as to whether the Company will be able to
continue operations and/or meet its obligations as they mature. In addition,
the Exchange is not limited or restricted by these guidelines, and the Exchange
may at any time, in view of the circumstances in each case (and regardless of
whether the issuer meets or fails to meet any or all of such guidelines),
suspend dealings in or delist any security when, in the opinion of the
Exchange, such security is unsuitable for continued trading on the Exchange.
For these reasons, no assurance can be given that the Exchange, which continues
to monitor the Company's progress, will not suspend trading in or delist the
Company's stock.
The high and low closing prices of the Registrant's common stock, as
reported on the Exchange for each quarter of the last two fiscal years, were as
follows:
<TABLE>
<CAPTION>
1996 1995
High Low High Low
------ ------ ----- ------
<S> <C> <C> <C> <C>
First Quarter 2 1/4 1 1/2 7 4 5/8
Second Quarter 2 1/8 1 1/16 7 3/8 4 3/8
Third Quarter 5 9/16 15/16 5 5/8 3 3/16
Fourth Quarter 4 1/2 2 9/16 3 3/4 1 1/8
</TABLE>
Littlefield, Adams & Company 1996 Form 10-K, Page 4
<PAGE> 7
The Registrant has not paid any dividends on its common stock during the
last two fiscal years. There were approximately 180 holders of record of the
Registrant's common stock as of December 31, 1996, including several holders
who are nominees for an undetermined number of beneficial owners. The
Registrant believes there are approximately 1,028 beneficial owners of the
Registrant's common stock. These numbers may increase with the issuance of
stock in 1997 in settlement of the Class Action Litigation. The estimated
dilution caused by issuing this additional stock will be an increase in the
shares currently outstanding of approximately 22% (Note 18 of the Notes to the
Consolidated Financial Statements).
ITEM 6: SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the audited
consolidated financial statements of the Company. The data presented below for
the fiscal years ended December 31, 1996, 1995 and 1994, should be read in
conjunction with the consolidated financial statements, the notes thereto, and
the other financial information included in this report.
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
OPERATING RESULTS (1) 1996 1995 1994 1993 (2) 1992 (2)
- - --------------------- --------- --------- ---- ---- ----
CONTINUING OPERATIONS (Unaudited) (Unaudited)
- - ---------------------
<S> <C> <C> <C> <C> <C>
Total revenues $12,036 $14,735 $24,557 $16,722 $4,653
Income (loss) before income taxes 769 (1,006) 951 (4,041) (707)
Income tax benefit (provision) 30 14 (294) (129) --
Net income (loss) before extraordinary gain 799 (992) 657 (4,170) (707)
Extraordinary gain, net 94 -- -- -- --
Net income (loss) 893 (992) 657 (4,170) (707)
Net income (loss) per common share:
Before extraordinary gain 0.27 (0.44) 0.29 (2.03) (0.41)
Extraordinary gain 0.03 -- -- -- --
Net income (loss) per common share 0.30 (0.44) 0.29 (2.03) (0.41)
Weighted average common shares and
common share equivalents outstanding 2,967,812 2,275,701 2,230,391 2,058,731 1,711,927
FINANCIAL POSITION (1)
- - -------------------------------------------
Working capital 1,336 (295) 605 838 (347)
Working capital ratio 1.36/1 .94/1 1.09/1 1.12/1 .81/1
Property, plant and equipment, net 558 1,109 1,254 1,194 826
Total assets 6,120 6,676 9,232 10,464 2,396
Long term debt, less current portion 1 119 219 768 344
Shareholders' investment 2,321 24 1,172 205 140
</TABLE>
(1) Dollars in thousand except for per share amounts.
(2) See Note 4 of the Notes to Consolidated Financial Statements in both
the 1995 and 1994 Form 10-K concerning the restatement of prior years'
financial statements audited by the Company's former independent public
accountants. The opinion of such auditors does not cover the restatement.
Littlefield, Adams & Company 1996 Form 10-K, Page 5
<PAGE> 8
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion provides information which management believes is
relevant to assessing and understanding the Registrant's operations and
financial condition. This discussion should be read in conjunction with the
financial statements included in this report on Form 10-K and their
accompanying notes.
RESULTS OF OPERATIONS
Revenues
Net product sales decreased from $14,478,000 in 1995 to $11,884,000 in
1996, a decrease of 18%. This decrease was attributable to a downturn in the
imprinted sportswear business, a decline in customer interest in the Company's
Harley-Davidson licensed products and the closing of Collegiate Pacific in
Roanoke, Virginia. Collegiate Pacific's revenues for 1995 were $1,527,000,
compared to $25,000 in 1996. Since the Company closed its Collegiate Pacific
operations in August 1995, the Company does not expect to derive any future
revenue from that division
(Note 5 of the Notes of the Consolidated Financial Statements).
Other revenues declined from $257,000 in 1995 to $152,000 in 1996 due to
the termination of a sub-lease agreement from which the Company had received
monthly revenues. The Company does not expect to receive any material amounts
of other revenues in 1997.
For the period from 1994 to 1995, net product sales decreased 40% on a
year-to-year basis. The decrease was due to a lessening of customer interest
in the Company's licensed products (primarily Harley-Davidson), the downturn of
retail apparel sales in general and the closing of Collegiate Pacific. In
1995, revenues from Collegiate Pacific decreased to $1,527,000 from $3,756,000
in 1994 (Note 5 of the Notes of the Consolidated Financial Statements).
The gross profit margin, as a percentage of net sales, was 29% for 1996,
compared to 30% for 1995. The gross profit margin decreased from 33% in 1994
to 30% in 1995. The decreases were due primarily to the decreased sales volume
and lower average selling prices for these periods.
In 1996, Harley-Davidson Motor Co. (Harley-Davidson) advised the Company
that it desired to upgrade the quality of apparel associated with its
trademarks, trade dress and designs and to sell those licensed products through
second-tier department stores rather than mass merchandisers. Harley-Davidson
offered to enter into a new license agreement which would have allowed the
Company to move from the mass merchandising market into the second-tier
department store market. The Company declined that offer based on its
evaluation of Harley-Davidson as a second-tier department store license.
Accordingly, the Company's Harley-Davidson license agreement expired on
December 31, 1996. Sales of Harley-Davidson licensed products accounted for
90%, 89% and 80% of total consolidated product sales for 1996, 1995 and 1994,
respectively. The expiration of the Harley-Davidson license is expected to
have, at a minimum, a short-term material adverse effect on future revenue and
results of operations (Note 2 of the Notes of the Consolidated Financial
Statements).
The Company is continuing its efforts to enhance and stabilize its
business through the acquisition of significant new licenses and the
development of new product lines, and the reduction of overhead. During 1996,
the Company entered into a two-year license agreement with PepsiCo, Inc., for
its soft drink brands, and a two-year license agreement with Miller Brewing
Company. In 1997, the Company entered into a three-year license agreement with
Kawasaki Motors Corp., U.S.A. The Company also expanded its business by
entering the boxer shorts segment of the apparel market under each of these
license agreements. Management considers the potential of each of these new
license agreements to be significant. There can be no assurance, however, that
the Company will be successful in its efforts to maintain or increase sales
levels through any or all of these new licenses, or that, if it is able to do
so, the revenue from such sales will be sufficient to sustain the Company for
any particular period (Note 3 of the Notes to the Consolidated Financial
Statements).
Littlefield, Adams & Company 1996 Form 10-K, Page 6
<PAGE> 9
The Company also closed its Collegiate Pacific division in Roanoke,
Virginia, on August 31, 1995. Collegiate Pacific had not shown a profit in
several years and was requiring on-going substantial infusions of cash in order
to remain in business. By closing Collegiate Pacific, the Company was able to
eliminate the continuing drain on its resources (Note 5 of the Notes of
Consolidated Financial Statements). The Company also closed its Sturgeon Bay,
Wisconsin, office in August 1996, and consolidated its operations in Huber
Heights, Ohio. The consolidation of operations in Ohio has resulted in
significant cost savings, and the Company believes these cost savings will
continue.
The Company records estimated local, state and federal income taxes,
including federal alternative minimum taxes. For year ended December 31, 1996,
the Company reported a net income tax benefit of $30,000 before the
extraordinary gain. The extraordinary gain of $94,000 reported for the same
period is net of $9,000 of estimated income tax expense. The net tax benefit
was due to the reversal of excess prior period accruals of $61,000 based on the
refunds and credits requested on the Company's 1995 income tax returns. A
summary of income taxes reported for 1996 is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1996
------------------
<S> <C>
Estimated combined current year income tax
expense before extraordinary gain $ 31,000
Refunds and credits reversed (61,000)
---------
Net income tax benefit before extraordinary gain (30,000)
Estimated income tax on extraordinary gain 9,000
---------
Total 1996 estimated income tax effect $(21,000)
=========
</TABLE>
Expenses
Selling and administrative expenses, as a percentage of net sales,
decreased from 40% in 1995 to 27% in 1996 due to cost cutting efforts. Total
professional fees amounted to approximately $475,000 and $806,000 in 1996 and
1995, respectively, a reduction of 41%. Professional fees in 1995 were
particularly high due to the Company's involvement in numerous lawsuits.
Management believes that the decreased level of professional fees (compared
with 1995 professional fees) will continue through 1997, since the majority of
the Company's litigation has been resolved.
Included in selling and administrative expenses are royalty expenses
related to the sales of licensed products amounting to $671,000, $1,611,000 and
$2,312,000 in 1996, 1995 and 1994, respectively. Due to decreased average
borrowings because of lower inventory levels, interest expense for the year
1996 was $235,000, compared to $327,000 in 1995, a decrease of 28% .
From December 31, 1995 to December 31, 1996, management's efforts to
reduce inventory by controlling purchases resulted in a decrease in net
inventories of $1,753,000, a 53% reduction for the year. The annualized
inventory turnover rate for 1996 increased to 5.3 turns per year compared to
3.0 turns per year for 1995, primarily due to management control of inventory
levels (Note 4 of the Notes to the Consolidated Financial Statements).
Included in other income from litigation settlements in 1996 is a net gain
of $395,000, of which $325,000 relates to the Company's settlement with
Midlantic National Bank, N.A. and $70,000 relates to the derivative action
settlement (Note 18 of the Notes to the Consolidated Financial Statements).
Littlefield, Adams & Company 1996 Form 10-K, Page 7
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had an accounts receivable financing
agreement with Merchant Factors Corp., which expired on January 31, 1996, and
which allowed the Company to borrow up to 75% of net qualified accounts
receivable. The balance as of December 31, 1995, was approximately $1,269,000,
and was repaid as the receivables were collected. The agreement bore interest
at prime plus 3.5%; however, the Company did not pay any additional financing
fees. The Company's accounts receivable were the collateral for this loan
(Note 8 of the Notes to the Consolidated Financial Statements).
Effective February 1, 1996, the Company entered into a new discount
factoring agreement with Merchant Factors Corp., which expires in August 1997.
All of the Company's accounts receivable which Merchant Factors Corp. approves
for credit, excluding Wal-Mart, are being factored at the rate of 1 1/8%.
Accounts that are credit approved by Merchant Factors are at its risk, which
minimizes the Company's credit risk. The Company, at its option, can factor at
a rate of 1 1/8%, with recourse, accounts that Merchant Factors Corp. does not
approve for credit. The servicing of all factored accounts is done by Merchant
Factors. Under the factoring agreement, the Company may borrow up to 75% of
the net accounts receivable at an annual interest rate of prime plus 2.5%. At
December 31, 1996, the Company had factored receivables amounting to $858,000,
most of which had been approved for credit by Merchant Factors (Note 8 of the
Notes to the Consolidated Financial Statements). At December 31, 1996, the
amount borrowed was $396,000.
In addition, the Company has an accounts receivable financing arrangement
with Merchant Factors Corp. covering only its accounts receivable from
Wal-Mart. This agreement allows the Company to borrow up to 75% of its net
receivables from Wal-Mart at an annual interest rate of prime plus 5%. The
Company does not pay any factoring fees for the financing of the Wal-Mart
accounts receivable (Note 8 of the Notes to the Consolidated Financial
Statements). At December 31, 1996, the amount borrowed was $40,000.
In addition, Merchant Factors Corp. has periodically issued purchase order
guarantees and/or letters of credit against this line of credit. At December
31, 1996, outstanding purchase order guarantees issued by Merchant Factors
Corp. amounted to approximately $48,000 (Note 8 of the Notes to the
Consolidated Financial Statements).
At December 31, 1996, the remaining borrowing availability from both
agreements with Merchant Factors Corp. was approximately $1,705,000 (Note 8 of
the Notes to the Consolidated Financial Statements).
In March 1997, the Company signed two new promissory notes, effective as
of January 31, 1997 and February 1, 1997 in the amounts of $468,000 and
$143,000, respectively, evidencing its outstanding obligations to The Bank of
Floyd. The notes, bearing an annual interest rate of prime plus 1%, provide
for monthly payments on terms substantially similar to the note payable and
line of credit in place at December 31, 1996. The new promissory notes are
payable on demand and are collateralized by the Company's fixed assets. The
Company is currently in discussions with The Bank of Floyd to convert these new
promissory notes to a term loan to be collateralized by the Company's fixed
assets. There can be no assurances, however, that such discussions will be
successful (Note 8 of the Notes to the Consolidated Financial Statements).
For the year ended December 31, 1996, operating activities provided cash
of $225,000, while $797,000 was provided from investing activities. The
Company borrowed a total of $9,473,000 during 1996, and repaid $10,646,000.
Additionally, the Company utilized $36,000 to purchase rights to stock. This
resulted in net cash used in financing activities of $1,209,000. During 1996,
there was a net decrease in cash of $187,000.
At December 31, 1995, the Company had a working capital deficit of
$295,000 and a working capital ratio of .94/1. However, at December 31, 1996,
the Company had net working capital of $1,336,000 and a working capital ratio
of 1.36/1.
Littlefield, Adams & Company 1996 Form 10-K, Page 8
<PAGE> 11
The Company expects to renew its agreement with Merchant Factors Corp.
when the current agreement expires in August 1997, although there can be no
assurance that the Company will, or will be able to, do so. The availability
of cash flow from operations subsequent to December 31, 1996, is dependent on
the ability of the Company to acquire and sell licensed products other than
Harley-Davidson throughout 1997. The success of the Company's new licensed
product sales with Pepsi and Mountain Dew, Miller Brewing Company and Kawasaki
Motors Corp., U.S.A. is an integral part of that effort. There can be no
assurance, however, that sales of these new licensed products will be
sufficient to sustain the Company's operations (Notes 2 and 3 of the Notes to
the Consolidated Financial Statements).
In spite of lower sales levels in 1996 compared to 1995, income from
operations increased from a loss of $1,090,000 in 1995 to income of $391,000 in
1996. The Company believes that this increase in operating results, the
collection of current accounts receivable, increased control of inventory
purchasing and the anticipated 1997 sales of newly acquired licensed products
will help the Company's cash flow during 1997, and support the Company's effort
to achieve sufficient sales revenue from new licenses to offset the reduction
in revenue resulting from the expiration of the Harley-Davidson license. There
can be no assurance, however, that the anticipated level of 1997 sales will be
achieved, or that, even if it is, the revenue from such sales will be
sufficient to sustain the Company for any particular period.
The Company manufactures and sells imprinted apparel primarily to national
retail discount chains. The license agreement with Harley-Davidson, which
terminated on December 31, 1996, had limited the number of customers to which
the Company could sell Harley-Davidson products. Because Harley-Davidson
accounted for such a large portion of the Company's revenues and sales efforts,
the Company did not pursue customers who were not approved by Harley-Davidson.
The Company's new licenses, including Pepsi and Mountain Dew, Miller Brewing
Company and Kawasaki Motors Corp., U.S.A., do not limit the customers to which
the products can be sold. Additionally, the Company has recently entered into
the boxer short segment of the apparel industry. Accordingly, the Company is
expanding its sales force and aggressively seeking new customer accounts (Notes
2 and 3 of the Notes to the Consolidated Financial Statements).
Sale of Assets
During 1996, the Company sold fixed assets, with a net book value of
$445,000, for $663,000; resulting in a reported net gain of $218,000. Included
in the sale was real property utilized by Collegiate Pacific in Roanoke,
Virginia. The proceeds were used to pay down debt (Note 5 of the Notes to the
Consolidated Financial Statements).
Purchase of Property, Plant and Equipment
During 1996, the Company acquired $95,000 of additional property, plant
and equipment. Of the total $95,000, approximately 40% was for office
furniture, fixtures and data processing equipment; 22% was for production
equipment; and 38% was for leasehold improvements.
The Company does not plan any major capital expenditures during 1997 and
has a 1997 capital expenditures budget of $100,000.
Settlement of Securities Class Action Litigation and Derivative Action
The Company reached an agreement with the plaintiffs to settle the class
action litigation, as described in Note 18 of the Notes to the Consolidated
Financial Statements, on February 21, 1995. Under the agreement approved by
the Court, the Company will issue $1,400,000 of its common stock and pay
$210,000 in cash to the members of the class. The Company estimates that the
number of shares to be issued is approximately 478,000, an increase of
approximately 21% of the shares currently outstanding, based on the average
closing price of the Company's stock for the 20 trading days immediately
preceding the end of the appeal period following entry of the final order of
dismissal. The final order of dismissal was entered by the Court on January
27, 1997, and no appeal was filed within the 30 day appeal period. The
$210,000 cash portion of the Company's settlement obligation was received by
the Company from a third party in connection with the settlement of a related
matter, and was paid into the settlement fund escrow account. Upon the final
conclusion of the litigation, the Company received an additional $150,000 from
the same third party. The
Littlefield, Adams & Company 1996 Form 10-K, Page 9
<PAGE> 12
derivative action, described in Note 18 of the Notes to the Consolidated
Financial Statements, was also settled on February 21, 1995. As part of the
settlement of the derivative action, the Company will receive 1,000 shares of
its stock from a former president of the Company. A former president and
director of the Company will relinquish to the Company rights to 5,000 shares
of stock, and rights that he had as of February 21, 1995 under options to
acquire 50,000 shares of LFA stock (the options expired unexercised on July 12,
1996). A current officer and director will relinquish to the Company rights to
5,000 shares of stock. The Company will also issue and provide $50,000
(approximately 17,000 shares) of the Company's common stock to its former
auditor, which when combined with the shares to go to the class members
described above, represents a total increase in the shares currently
outstanding of approximately 22%. The total of $1,450,000 payable in the
Company's stock has been classified as capital in excess of par value as of
December 31, 1996. At December 31, 1995, these amounts were classified as
liabilities rather than shareholders' investment due to the uncertainty of the
final resolution. Based on the recommendation of the magistrate judge in the
derivative action, the Company expects to receive approximately $70,000 cash,
net of attorneys' fees and expenses, from a $130,000 payment made by the
Company's former auditor as part of the derivative action settlement.
Management does not expect these settlements to have a material adverse effect
on the condition of the Company. The settlement costs, together with related
professional fees, were recorded in 1993 as part of the restatement of that
year (Note 18 of the Notes to the Consolidated Financial Statements).
Legal Matters
See Note 18 of the Notes to the Consolidated Financial Statements for a
review of the other outstanding legal matters.
ITEM 8: FINANCIAL STATEMENTS
The consolidated financial statements of the Company and the related
report of the Company's independent public accountants thereon are included in
this report at the page indicated.
PAGE
<TABLE>
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Shareholders' Investment for the
Years Ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-7
</TABLE>
ITEM 9: CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
------- ---------------------------------------------
None
Littlefield, Adams & Company 1996 Form 10-K, Page 10
<PAGE> 13
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required is set forth under the captions "Management -
Directors and Executive Officers" in the Company's Definitive Proxy Statement
to be filed pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
The information required is set forth under the captions "Management
Compensation" and "Certain Transactions" in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A and is incorporated herein by
reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is set forth under the caption "Security
Ownership of Certain Beneficial Owners" in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A and is incorporated herein by
reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The information required is set forth under the caption "Certain
Transactions" in the Company's definitive Proxy Statement to be filed pursuant
to Regulation 14A and is incorporated herein by reference.
PART IV
ITEM 14: FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets At December 31, 1996 and 1995
Consolidated Statements of Operations For Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Shareholders' Investment For Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows For Years Ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
(2) Exhibits
NUMBER DESCRIPTION OF EXHIBIT
3.1 Certificate of Incorporation of the Registrant and all
amendments thereto. Incorporated by reference to exhibit 1 to the
Registrant's Form 8-K filed November 1991.
3.2 Certificate of Amendment to the Certificate of
Incorporation of Littlefield, Adams & Company amending Article IV
to increase the number of shares of Common Stock authorized for
issuance from 3,000,000 shares, $1.00 par value, to 25,000,000
shares, $1.00 par value. Incorporated by reference to exhibit 3.2
to the Registrant's 1994 Form 10-K, filed March 1995.
Littlefield, Adams & Company 1996 Form 10-K, Page 11
<PAGE> 14
3.3 Certificate of Amendment to the Certificate of
Incorporation of Littlefield, Adams & Company amending Article VI
to provide for classification of the Board of Directors into three
classes. Incorporated by reference to exhibit 3.3 to the
Registrant's 1994 Form 10-K, filed March 1995.
3.4 Composite copy of the Certificate of Incorporation of the
Registrant. Incorporated by reference to exhibit 3.4 to the
Registrant's 1994 Form 10-K, filed March 1995.
3.5 By-laws of the Registrant, as amended. Incorporated by
reference to exhibit 3.5 to the Registrants 1995 Form 10-K, filed
April 1996.
10.1 A. Promissory Note for $250,000, dated August 29, 1994,
between Collegiate Pacific Company and The Bank of Floyd.
Incorporated by reference to exhibit 10.2A to the Registrant's
1994 Form 10-K, filed March 1995.
B. Line of Credit of $500,000, dated August 29,
1994, between Collegiate Pacific Company and The Bank of
Floyd. Incorporated by reference to exhibit 10.2B to the
Registrant's 1994 Form 10-K, filed March 1995.
10.2 Financing Agreement with Merchant Factors Corp., dated
October 16, 1993. Incorporated by reference to exhibit 10.27.2 to
the Registrant's 1994 Form 10-K, filed March 1995.
10.3 Financing Agreement with Merchant Factors Corp., dated
January 25, 1996. Incorporated by reference to exhibit 10.9 to the
Registrant's 1994 Form 10-K, filed March 1995.
10.4 Settlement Agreement in the Registrant's Securities Class
Action litigation. Incorporated by reference to exhibit 2.5 to the
Registrant's 1994 Form 10-K, filed March 1995.
10.5 Full and Final Release and Settlement Agreement by and
among Littlefield, Adams & Company, Jeffers, Brook, Kreager and
Gragg, Inc., David Ylitalo, and Michael Kreager. Incorporated by
reference to exhibit 10.8 to the Registrants 1995 Form 10-K, filed
April 1996. *
10.6 Littlefield, Adams & Company Incentive Plan. Incorporated
by reference to exhibit 2.1 to the Registrant's 1994 Form 10-K,
filed March 1995.
10.7 Settlement Agreement between Harley-Davidson Motor Co. and
Sports Imprints division of Littlefield, Adams & Company, dated
March 1, 1996, relating to License Agreement with Harley-Davidson
Motor Co., dated January 12, 1995. Incorporated by reference to
exhibit 10.7 to the Registrants 1995 Form 10-K, filed April 1996. *
10.8 License Agreement with PepsiCo, Inc., dated as of February
1, 1996. Incorporated by reference to exhibit 10.9 to the
Registrants 1995 Form 10-K, filed April 1996.
10.9 Amendment of License Agreement with PepsiCo, Inc., dated
October 1, 1996.
10.10 Collateral Product License Agreement with Miller Brewing
Company, dated October 31, 1996.
10.11 License Agreement with Kawasaki Motors Corp., U.S.A.,
dated January 1, 1997.
10.12 Purchase Agreement with 5W Partnership for sale of real
estate and all improvements located at 1302 Rockland Avenue, N.W.,
Roanoke, Virginia, dated March 5, 1996.
10.13 Amendment to Purchase Agreement with 5W Partnership by
letter dated May 14, 1996.
Littlefield, Adams & Company 1996 Form 10-K, Page 12
<PAGE> 15
10.14 Employment Agreement with Stanley I. Halbreich, dated
November 16, 1992.
10.15 Amendment to Employment Agreement with Stanley I.
Halbreich, dated January 4, 1993.
10.16 Employment Agreement with Warren L. Rawls, dated June 21,
1996.
10.17 Promissory Note for $142,634.32, dated February 1, 1997,
loan number 0105592300, payable to The Bank of Floyd, Floyd,
Virginia.
10.18 Business Loan Agreement, effective as of February 1, 1997,
relating to loan number 0105592300, with The Bank of Floyd, Floyd,
Virginia.
10.19 Promissory Note for $468,483.83, dated January 31, 1997,
loan number 5312501, payable to The Bank of Floyd, Floyd, Virginia.
10.20 Business Loan Agreement, effective as of January 31, 1997,
relating to loan number 5312501, with The Bank of Floyd, Floyd,
Virginia.
10.21 Commercial Security Agreement, dated January 31, 1997,
relating to loan numbers 0105592300 and 5312501, with The Bank of
Floyd, Floyd, Virginia.
11 Computation of Earnings Per Share
27 Financial Data Schedule.
* The Company has requested confidential treatment for portions of this
Exhibit, and such portions are omitted from the Exhibit filed herewith. A
complete copy of such Exhibit has been filed separately with the
Securities and Exchange Commission.
(b) REPORTS ON FORM 8-K:
None
Littlefield, Adams & Company 1996 Form 10-K, Page 13
<PAGE> 16
ADDITIONAL INFORMATION
CORPORATE HEADQUARTERS
6262 Executive Boulevard, Huber Heights, OH 45424
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN, LLP
901 Main Street, Suite 5600, Dallas, TX 75202
GENERAL COUNSEL
DAVID M. SIMMONDS, ESQ.*
P.O. Box 70091, Bellevue, WA 98007
TRANSFER AGENT
FIRST CITY TRANSFER COMPANY
Suite 206
111 Wood Avenue South, Iselin, New Jersey 08830
Exhibits to the Form 10-K will be provided to shareholders of the Company
upon written request addressed to Stanley I. Halbreich, Investor Relations,
Littlefield, Adams & Company, 6262 Executive Boulevard, Huber Heights, OH
45424. Any exhibits furnished are subject to a reasonable photocopying charge.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THIS FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS, NOR HAS IT PASSED UPON ITS
ACCURACY OR ADEQUACY.
* Mr. Simmonds also serves as the Company's Chairman, Chief Executive
Officer and President.
Littlefield, Adams & Company 1996 Form 10-K, Page 14
<PAGE> 17
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.
LITTLEFIELD, ADAMS & COMPANY
By: /S/ DAVID M. SIMMONDS
David M. Simmonds
Chairman, CEO, President and General Counsel
March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Chairman, CEO, President and General Counsel
(principal executive officer)
/S/ DAVID M. SIMMONDS Director March 28, 1997
- - -------------------------
David M. Simmonds
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
/S/ STANLEY I. HALBREICH Director March 28, 1997
- - -------------------------
Stanley I. Halbreich
/S/ WILLIAM E. GOETTELMAN Director March 28, 1997
- - -------------------------
William E. Goettelman
/S/ MARTIN B. SHIFRIN Director March 28, 1997
- - -------------------------
Martin B. Shifrin
</TABLE>
Littlefield, Adams & Company 1996 Form 10-K, Page 15
<PAGE> 18
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Littlefield, Adams & Company:
We have audited the accompanying consolidated balance sheets of Littlefield,
Adams & Company (a New Jersey corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations,
shareholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Littlefield, Adams & Company
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has been
largely dependent on the sales of specific licensed products during the past
three years. The Company's license agreement relating to the right to sell
such licensed products expired on December 31, 1996, and was not renewed.
Sales of such products represented 90 percent, 89 percent and 80 percent of
total consolidated net product sales in 1996, 1995 and 1994, respectively. In
addition, the Company has limited financial resources available to support its
ongoing operations subsequent to termination of this license agreement. These
matters, as further discussed in Notes 2 and 3, raise substantial doubt
concerning the ability of the Company to continue as a going concern.
Management's plans regarding these matters are also described in Notes 2 and 3.
The consolidated financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the Company
be unable to continue as a going concern.
Dallas, Texas /S/ ARTHUR ANDERSEN LLP
March 7, 1997
F-1
<PAGE> 19
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash $54 $241
Accounts receivable:
Trade, net of allowances of $86 and $288
for 1996 and 1995, respectively 2,036 1,010
Due from factor 858 --
Note and other 419 43
Inventories 1,579 3,332
Prepaid expenses and other 142 163
------ ------
Total current assets 5,088 4,789
Property, plant and equipment, net 558 1,109
Goodwill, net 449 524
Note receivable and other assets, net of allowance of
$0 and $75 for 1996 and 1995, respectively 25 254
------ ------
TOTAL ASSETS $6,120 $6,676
====== ======
</TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<S> <C> <C>
Current liabilities:
Notes payable $22 $28
Factor borrowing 396 --
Revolving lines of credit 509 1,754
Current portion of long-term debt 150 456
Accounts payable 974 1,041
Accrued expenses 1,701 1,805
------ ------
Total current liabilities 3,752 5,084
Creditors' debt settlement -- 109
Long-term debt, less current portion 1 10
Deferred compensation 46 49
Class action settlement payable -- 1,400
Commitments and contingencies (Notes 13 and 18)
Shareholders' investment:
Common stock, $1.00 par; authorized 25,000,000;
issued 2,296,145 for 1996 and 1995; outstanding
2,277,981 and 2,279,647 for 1996 and 1995, respectively 2,296 2,296
Capital in excess of par value 6,820 5,406
Accumulated deficit (6,682) (7,575)
------ ------
2,434 127
Treasury stock, at cost - shares of 18,164 and
16,498 for 1996 and 1995, respectively (113) (103)
------ ------
2,321 24
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $6,120 $6,676
</TABLE> ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 20
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Net product sales $11,884 $14,478 $24,329
Other revenues 152 257 228
--------- --------- ---------
Total revenues 12,036 14,735 24,557
Costs and expenses:
Cost of products sold 8,403 10,073 16,214
Selling and administrative 3,242 5,752 7,081
--------- --------- ---------
Total costs and expenses 11,645 15,825 23,295
--------- --------- ---------
Income (loss) from operations 391 (1,090) 1,262
Other income (expense):
Gain on sale of property and equipment 218 49 68
Litigation settlements, net 395 362 --
Interest (235) (327) (379)
--------- --------- ---------
Total other income (expense) 378 84 (311)
--------- --------- ---------
Income (loss) before income taxes 769 (1,006) 951
Income tax benefit (provision) 30 14 (294)
--------- --------- ---------
Net income (loss) before extraordinary gain 799 (992) 657
Extraordinary gain, net of
income tax provision 94 -- --
--------- --------- ---------
Net income (loss) $893 $(992) $657
========= ========= =========
Weighted average common shares and common
share equivalents outstanding (Note 1) 2,967,812 2,275,701 2,230,391
Net income (loss) per share:
Before extraordinary gain $0.27 $(0.44) $0.29
Extraordinary gain 0.03 -- --
Net income (loss) per share $0.30 $(0.44) $0.29
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-3
<PAGE> 21
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1994 , 1995 AND 1996
<TABLE>
<CAPTION>
Common Stock
Capital in
Excess of Accumulated Treasury
Shares Amount Par Value Deficit Stock
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993
(unaudited - Note 1) 2,371,145 $2,371 $5,501 $(7,240) $(427)
Reissuance of 20,396 shares of treasury stock as
contingent acquisition consideration -- -- (98) -- 98
Reissuance of 35,000 shares of treasury stock as
officers' bonuses -- -- 47 -- 167
Reissuance of 15,000 shares of treasury stock as
directors' awards -- -- 24 -- 72
Net income -- -- -- 657 --
--------- ----- ----- ------- ---
Balance at December 31, 1994 2,371,145 2,371 5,474 (6,583) (90)
Retirement of 75,000 shares previously held in
escrow as contingent acquisition consideration (75,000) (75) 75 -- --
Acquisition of 7,974 shares of treasury stock -- -- -- -- (88)
Acquisition of 12,690 shares of treasury stock -- -- -- -- (68)
Reissuance of 23,044 shares of treasury stock as
contingent acquisition consideration -- -- (143) -- 143
Net loss -- -- -- (992) --
--------- ------ ------ ------- -----
Balance at December 31, 1995 2,296,145 2,296 5,406 (7,575) (103)
Acquisition of 1,666 unvested, forfeited shares
originally granted to a former outside
director -- -- -- -- (10)
Purchase of rights to shares due a former
officer and director as a contingent
acquisition consideration -- -- (36) -- --
Accrual of approximately 495,000 shares
to be issued in settlement of litigation 1,450
Net income -- -- -- 893 --
--------- ------ ------ ------- -----
Balance at December 31, 1996 2,296,145 $2,296 $6,820 $(6,682) $(113)
========= ====== ====== ======= =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 22
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $893 $(992) $657
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 266 545 330
Gain on sale of property and equipment (218) (49) (69)
Expenses paid with treasury stock -- -- 251
Extraordinary gain on debt extinguishment (109) -- --
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net (2,260) 1,739 1,698
(Increase) decrease in inventories, net 1,753 292 (149)
(Increase) decrease in prepaid expenses and other 21 3 (105)
Decrease in accounts payable (67) (1,106) (478)
Increase (decrease) in accrued expenses and other (54) (771) 523
------ ------ ------
Net cash provided by (used in) operating activities 225 (339) 2,658
Cash flows from investing activities:
Proceeds from sale of property and equipment 663 127 150
Purchase of property, plant and equipment (95) (239) (351)
Decrease in notes receivable and other assets 229 70 34
------ ----- ------
Net cash provided by (used in) investing activities 797 (42) (167)
Cash flows from financing activities:
Decrease in bank overdraft -- -- (24)
Proceeds from (payments of) line of credit and
factor borrowings (849) 618 (2,047)
Payment on creditors' debt settlement -- (96) (269)
Proceeds from bank and other notes payable 80 93 250
Payments of bank and other notes payable (404) (146) (180)
Purchase of rights to stock (36) -- --
Purchases of treasury stock -- (68) --
------ ----- ------
Net cash provided by (used in) financing activities (1,209) 401 (2,270)
------ ----- ------
Net increase (decrease) in cash (187) 20 221
Cash at beginning of year 241 221 --
------ ----- ------
Cash at end of year $54 $241 $221
====== ===== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 23
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Supplemental disclosures of cash flows information:
Cash paid during the year for interest $243 $333 $376
Cash paid during the year for income taxes $31 $322 $144
</TABLE>
Supplemental schedule of noncash investing and financing activities:
In 1996, the Company accrued 495,000 shares of common stock to be issued
in the settlement of litigation which represented $1,450 of capital in
excess of par value (Note 18).
In 1995, the Company received 7,974 shares of its own stock which
satisfied a receivable of $88.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 24
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation -
The accompanying consolidated financial statements include the accounts of
Littlefield, Adams & Company and its now dissolved subsidiaries, Medical Sales
Associates, Inc., Cornerstone Laboratories, Inc. and NUTECH, Inc. ("the
Company" and "LFA"). Former wholly owned subsidiaries, Collegiate Pacific
Company and Sports Imprints, Inc., were merged into Littlefield, Adams &
Company effective June 30, 1995. Medical Sales Associates, Inc., Cornerstone
Laboratories, Inc., and NUTECH, Inc., were dissolved in January 1996, and had
no significant operations in each of the years ended December 31, 1996, 1995
and 1994, and had no consolidated assets or liabilities as of December 31, 1996
and 1995. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Restatement of Prior Period Results -
As a result of investigations by the Company and the Securities and
Exchange Commission and inquiries by its current independent public
accountants, the Company reviewed its accounting treatment for certain prior
year transactions and concluded that restatements were required to be made to
the previously issued financial statements for the year ended December 31,
1993. The company has been unable to obtain a report of independent public
accountants related to the restated consolidated financial statements for 1993
due to the class action litigation as described in Note 18 and disputes between
the Company and its former auditor concerning performance of the auditor for
such years and related unpaid professional fees.
Reclassifications -
Certain reclassifications have been made to prior year amounts to conform
to current year presentations.
Nature of Business -
The Company is principally engaged in the imprinting and distribution of
young men's and boys' active wear products under various license agreements.
Prior to August 31, 1995, the Company sold its products to customers in various
markets, such as major nationwide retailers, college bookstores, resort areas
and theme parks across the United States. On August 31, 1995, the Collegiate
Pacific division was closed. Subsequent thereto, the Company's distribution
has been primarily to nationwide retailers.
Inventories -
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market (net realizable value). Costs include direct
materials, direct labor and certain indirect manufacturing overhead expenses.
Property, Plant and Equipment -
Property, plant and equipment are carried at historical cost less
accumulated depreciation and amortization. Depreciation is generally recorded
on the straight-line basis over the estimated useful lives of the related
assets. These are as follows:
<TABLE>
<S> <C>
Buildings and improvements 10-30 years
Machinery and equipment 3-10 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the terms of the respective leases or their estimated useful lives.
Major renewals and betterments are capitalized. Maintenance and repairs which
do not extend the useful lives of property, plant and
(Continued)
F-7
<PAGE> 25
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
equipment are expensed as incurred. When property, plant and equipment are
retired or otherwise disposed of, related cost and accumulated depreciation and
amortization are removed from the accounts, and any gain or loss is reflected in
the determination of income.
Goodwill -
The Company has classified as goodwill the cost in excess of the fair
value of the net assets of Sports Imprints, Inc., acquired in a purchase
transaction in early 1993. Goodwill is being amortized on a straight-line
basis over 10 years. Accumulated amortization was approximately $300 and $225
in 1996 and 1995, respectively.
Income Taxes -
The Company files a consolidated federal income tax return which includes
all of its former subsidiaries. The provision for income taxes includes
federal, state and local income taxes currently payable and those deferred
because of temporary differences between the financial statement and tax bases
of assets and liabilities.
Deferred tax liabilities and assets are recorded based on the enacted
income tax rates which are expected to be in effect in the periods in which the
deferred tax liability or asset is expected to be settled or realized. A
change in the tax laws or rates results in adjustments to the deferred tax
liabilities and assets. The effect of such adjustments shall be included in
income in the period in which the laws or rates are changed.
Treasury Stock -
The purchase of the Company's treasury stock is recorded using the cost
method. Issuances of treasury stock are recorded at average cost.
Revenue Recognition -
Revenues are generally recognized when products are shipped or legal
ownership of the products otherwise passes to the customer, and are presented
net of sales returns and allowances.
Net Income (Loss) Per Share -
Net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares and common share equivalents
outstanding during each year. Any options outstanding are considered common
stock equivalents provided they have a dilutive effect on income (loss) per
share. For 1995 such items were antidilutive and have not been included in the
per share calculation. Net income per share for 1996 reflects the approximate
495,000 shares of the Company's stock to be issued in the securities class
action and derivative action settlements (Note 18).
Estimates in the Financial Statements -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
New Accounting Standards -
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which provides accounting and reporting standards for, among
other things, the transfer and servicing of financial assets, such as factoring
receivables with recourse. SFAS No. 125 is effective for transfers and
servicing of financial assets occurring after December 31, 1996, and is to be
applied prospectively. In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of SFAS No. 125". SFAS
No. 127 amends
(Continued)
F-8
<PAGE> 26
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the effective date for certain provisions of SFAS No. 125 to December 31,
1997. Management of the Company does not anticipate the adoption of SFAS No.'s
125 and 127 will have a material impact on the Company's financial position or
results of operations.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share (EPS) for
entities with publicly held common stock or potential common stock. SFAS No.
128 simplifies the standards for computing EPS previously found in APB Opinion
No. 15, "Earnings per Share," and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS, which excludes dilution. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures. Management of the Company does not anticipate the
adoption of SFAS No. 128 will have a material impact on the Company's financial
position or results of operations.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure," which establishes standards for the disclosing
information about an entity's capital structure. SFAS No. 129 is effective for
fiscal years ending after December 15, 1997. Management of the Company does
not anticipate the adoption of SFAS No. 129 will have a material impact on the
Company's financial position or results of operations.
Note 2: Future Operations
The Company has been largely dependent on sales of Harley-Davidson Motor
Co. (Harley-Davidson) licensed products to generate cash flow from operations
and provide funds to meet the Company's obligations as they become due. In
1996, Harley-Davidson advised the Company that it desired to upgrade the
quality of apparel associated with its trademarks, trade dress and designs and
to sell these licensed products through second-tier department stores rather
than mass merchandisers. Harley-Davidson offered to enter into a new license
agreement which would have allowed the Company to move from the mass
merchandising market into the second-tier department store market. The Company
declined this offer based on its evaluation of Harley-Davidson as a second-tier
department store license. Accordingly, the Company's Harley-Davidson license
agreement expired on December 31, 1996. Sales of Harley-Davidson licensed
products accounted for 90%, 89%, and 80% of total consolidated net product
sales for the years ended December 31, 1996, 1995 and 1994, respectively. The
expiration of the Harley-Davidson license will have, at a minimum, a short-term
material adverse effect on future results of operations, and in the event that
the Company cannot generate sufficient sales of other licensed products, it is
probable that the Company will not be able to continue as a going concern. The
Company also has limited financial resources available to support existing
operations until such time sales of other licensed products are sufficient to
generate positive cash flow from operations at levels necessary to meet the
Company's obligations as they become due. These factors raise substantial
doubt concerning the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon the
ongoing support of its stockholders, customers and creditors and its ability to
generate sufficient sales of other licensed products subsequent to the
termination of the Harley-Davidson license agreement, effective December 31,
1996. The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business.
In response to the matters discussed above, the Company has obtained new
licenses as described in Note 3, and continues to pursue other new license
opportunities to replace the sales volume which was attributable to the
Company's Harley-Davidson licensed products. The Company had net income before
extraordinary gain of $799 for the year ended December 31, 1996, and had
working capital of $1,336 at December 31, 1996. Furthermore, in 1995, the
Company closed its Collegiate Pacific Division, which incurred an operating
loss of $495 for the year ended
(Continued)
F-9
<PAGE> 27
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31, 1995. Closure of that division has eliminated the negative
operating cash flow associated with those operations. The sale of various fixed
assets primarily related to Collegiate Pacific in Roanoke, Virginia, generated
$663 of cash flow during 1996, and was used primarily to reduce debt. The
Company closed its Sturgeon Bay, Wisconsin, office in August 1996, and
consolidated its operations in Huber Heights, Ohio. The consolidation of
operations in Ohio has resulted in significant cost savings, and the Company
believes these cost savings will continue.
As part of its effort to enhance and stabilize its business through the
acquisition of significant new licenses and the development of new product
lines, during 1996, the Company entered into a two-year license agreement with
PepsiCo, Inc., for its soft drink brands and a two-year license agreement with
Miller Brewing Company. In 1997, the Company entered into a three-year license
agreement with Kawasaki Motors Corp., U.S.A. The Company also expanded its
business by entering the boxer shorts segment of the apparel market under each
of these licenses. The Company continues to pursue other new license
opportunities (Note 3).
In spite of lower sales levels in 1996 compared to 1995, income from
operations increased from a loss of $1,090 in 1995 to income of $391 in 1996.
The Company believes that this increase in operating results, collection of
current accounts receivable, increased control of inventory purchasing and the
anticipated 1997 sales of newly acquired licensed products will help the
Company's cash flow during 1997 and support the Company's effort to achieve
sufficient sales revenue from new licenses to offset the reduction in revenue
resulting from the expiration of the Harley-Davidson license. There can be no
assurance, however, that the anticipated level of 1997 sales will be achieved,
or that, even if it is, the revenue from such sales will be sufficient to
sustain the Company for any particular period.
The Company expects to renew its agreement with Merchant Factors Corp.
when the current agreement expires in August 1997, although there can be no
assurance that the Company will, or will be able to, do so. The availability
of cash flow from operations subsequent to December 31, 1996, is dependent on
the ability of the Company to acquire and sell licensed products other than
Harley-Davidson throughout 1997. The success of the Company's new licensed
product sales with Pepsi and Mountain Dew, Miller Brewing Company and Kawasaki
Motors Corp., U.S.A. is an integral part of that effort. There can be no
assurance, however, that sales of these new licensed products will be
sufficient to sustain the Company's operations (Note 3).
Note 3: Concentration of Sales and Credit Risk
Significant Customers-
The Company's customers are reputable national retail discount chains.
Effective February 1, 1996, the Company entered into a factoring arrangement
for all accounts, except the Company's largest retail customer. The Company,
at its option and its credit risk, can factor accounts receivable that the
factor does not approve for credit (Note 8). Historically, bad debt expense
has been minimal.
Sales to customers which individually exceeded 10% of consolidated net
product sales were as follows:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Customer 1 56% 66% 40%
Customer 2 16% 4% 10%
---- ---- ----
Total 72% 70% 50%
==== ==== ====
</TABLE>
(Continued)
F-10
<PAGE> 28
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Trade receivable balances relating to these two customers were
approximately $2,117 and $439 at December 31, 1996. The trade receivable
balances relating to the two customers were $731 and $197 at December 31, 1995.
Significant Licensors-
The Company had one significant license, Harley-Davidson, which expired on
December 31, 1996. Harley-Davidson licensed sales accounted for 90%, 89% and
80% of total consolidated net product sales in 1996, 1995 and 1994.
Current licenses and their respective expiration dates are as follows:
<TABLE>
<CAPTION>
LICENSE EXPIRATION
----------------------------- -------------
<S> <C>
PepsiCo, Inc. January 1998
Miller Brewing Company December 1998
Kawasaki Motors Corp., U.S.A. February 2000
Hershey Foods Corporation November 1998
Heinz U. S. A. December 1998
</TABLE>
Refer to Note 2 for discussion of the Harley-Davidson license expiration
and its impact on the Company. In light of the expiration of the
Harley-Davidson license as discussed above, the Company has developed, and will
continue to pursue, new license opportunities in order to replace sales of
Harley-Davidson licensed products. However, there can be no assurance that
revenues from other such licenses will be sufficient to replace the revenues
that were attributable to Harley-Davidson licensed products (Note 2).
As of December 31, 1996, the minimum royalties to be paid in future years
are:
<TABLE>
<S> <C>
1997 $45
1998 5
---
$50
===
</TABLE>
Note 4: Inventories
- - --------------------
Inventories at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials $1,192 $1,838
Finished goods 537 1,895
Allowance for inventory obsolescence (150) (401)
------ ------
$1,579 $3,332
====== ======
</TABLE>
(Continued)
F-11
<PAGE> 29
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 5: Property, Plant and Equipment
- - --------------------------------------
Property, plant and equipment at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ---
<S> <C> <C>
Land $ -- $95
Building and improvements 266 906
Machinery and equipment 843 1,609
------ ------
1,109 2,610
Less: Accumulated depreciation and amortization (551) (1,501)
----- ------
$ 558 $1,109
===== ======
</TABLE>
As a result of the Company closing its Collegiate Pacific division, the
Company has included in the balance of property, plant and equipment at
December 31, 1996 and 1995, respectively, assets to be disposed of with net
book values of approximately $52 and $206 of machinery and equipment and $0 and
$382 related to the land and building of the Collegiate Pacific division.
Management believes the fair value of the above assets exceeds the above stated
net book values at December 31, 1996 and anticipates disposition of these
assets within the next two years.
Selected results of operations of the Collegiate Pacific division for the
years ended December 31, 1996, 1995 and 1994, and which will be non-recurring
in the future, are summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
----- ------- -------
<S> <C> <C> <C>
Revenues $25 $1,527 $3,756
Expenses -- (2,022) (3,817)
Income (loss) from operations 25 (495) (61)
Depreciation -- 103 93
Gain on sales of assets 216 34 68
</TABLE>
Note 6: Recoverability of Long-Lived Assets
During the fourth quarter of 1995, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". SFAS No. 121 requires an assessment of the recoverability
of the Company's investment in long-lived assets to be held and used in
operations whenever events or circumstances indicate that their carrying
amounts may not be recoverable. Such assessment requires that the future cash
flows associated with the long-lived assets be estimated over their remaining
useful lives and an impairment loss recognized when the future cash flows are
less than the carrying value of such assets.
The Company has assessed the recoverability of its investment in
long-lived assets to be held and used in operations under the guidelines set
forth in SFAS No. 121 and determined that no impairment loss was required as of
December 31, 1996 or 1995. Such assessment required the Company to make
certain estimates of future sales volumes and prices which are expected to
occur over the remaining useful lives of its long-lived assets. Such
long-lived assets
(Continued)
F-12
<PAGE> 30
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
primarily consist of the Company's investment in property, plant and
equipment, and goodwill. The Company's estimates of these factors are based
upon management's belief that the Company will be successful in developing new
licensed products which generate sales subsequent to 1996, which are sufficient
to offset the loss of revenues from the expiration of the Harley-Davidson
license (Notes 2 and 3).
Although the Company believes it has a reasonable basis for its estimates
of future sales volumes and prices, it is reasonably possible that the
Company's actual performance could materially differ from such estimates.
Management expects that the Company's performance during 1997 will provide
additional evidence to confirm or disprove such future estimates. Management
also believes that if such estimates are not confirmed, revisions to such
estimates could result in a material impairment loss on its long-lived assets
constituting all or a material portion of the carrying value of the Company's
property, plant and equipment, and goodwill which were $558 and $449,
respectively, at December 31, 1996.
Note 7: Accrued Expenses
Included in accrued expenses at December 31, 1996, are $1,052 of accrued
royalties, $214 of professional fees, and $57 of accrued income taxes.
The December 31, 1995, balance of accrued expenses consists primarily of
$976 of accrued royalties, $229 of professional fees and $76 of accrued income
taxes.
Note 8: Revolving Lines of Credit
In January 1992, Collegiate Pacific Company entered into a line of credit
agreement with The Bank of Floyd, Virginia for a maximum principal amount of
$750 payable on demand, but not less than monthly payments of 0.25% of the
outstanding principal balance and accrued interest. Effective August 1994, the
Bank of Floyd reduced the maximum principal amount available to $500 payable on
demand. In addition, the Bank of Floyd set the interest rate on the line of
credit at prime plus 1%. The Company is required to make monthly payments of
0.25% of the outstanding principal balance and accrued interest until the line
is paid in full. Collateral consists of all of the plant and equipment of
Collegiate Pacific Company and was guaranteed by Littlefield, Adams & Company.
At December 31, 1996, there was no remaining availability under this line of
credit. In March 1997, the Company signed two new promissory notes, effective
as of January 31, 1997 and February 1, 1997 in the amounts of $468 and $143,
respectively, evidencing its outstanding obligations to The Bank of Floyd. The
notes, bearing an annual interest rate of prime plus 1%, provide for monthly
payments on terms substantially similar to the note payable and the line of
credit in place at December 31, 1996. The new promissory notes are payable on
demand and are collateralized by the Company's fixed assets. The Company is
currently in discussions with The Bank of Floyd to convert these new promissory
notes to a term loan to be collateralized by the Company's fixed assets. There
can be no assurances, however, that such discussions will be successful.
The Company had an accounts receivable financing agreement with Merchant
Factors Corp., which expired January 31, 1996, and which allowed the Company to
borrow up to 75% of net qualified accounts receivable. The balance as of
December 31, 1995, was approximately $1,269 and was repaid as the receivables
were collected. The agreement bore annual interest at prime plus 3.5%. This
loan was secured by the Company's accounts receivable. Additionally, Merchant
Factors Corp., when needed, issued purchase order guarantees and/or letters of
credit against this line of credit which are collateralized by the related
inventory purchases.
(Continued)
F-13
<PAGE> 31
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the year ended December 31, 1995, Merchant Factors Corp., under a
special loan arrangement, lent the Company additional amounts not exceeding
$600 at any one time, secured by the Company's inventory. This arrangement was
repaid in full in January 1996.
Effective February 1996, the Company entered into a new discount factoring
agreement with Merchant Factors Corp., which expires in August 1997. All of
the Company's accounts receivable which Merchant Factors Corp. approves for
credit, excluding Wal-Mart, are being factored at the rate of 1 1/8%. Accounts
that are credit approved by Merchant Factors Corp. are at its risk, which
minimizes the Company's credit risk. The Company, at its option, can factor at
a rate of 1 1/8%, with recourse, accounts that Merchant Factors Corp. does not
approve for credit. The servicing of all factored accounts is done by Merchant
Factors Corp. Under the factoring agreement, the Company may borrow up to 75%
of the net accounts receivable at an annual interest rate of prime plus 2.5%.
Borrowings are secured by the Company's accounts receivable and inventories.
At December 31, 1996, the Company had factored receivables amounting to $858,
most of which had been approved for credit by Merchant Factors Corp.
In addition, the Company has an accounts receivable financing arrangement
with Merchant Factors Corp. covering only its accounts receivable from
Wal-Mart, which amounted to $2,117 at December 31, 1996. This agreement allows
the Company to borrow up to 75% of its net receivables from Wal-Mart at an
annual interest rate of prime plus 5%. Borrowings are secured by the Company's
accounts receivable and inventories. The Company does not pay any factoring
fees for the financing of the Wal-Mart accounts receivable. At December 31,
1996, outstanding purchase order guarantees issued by Merchant Factors Corp.
amounted to approximately $48.
At December 31, 1996, the combined remaining borrowing availability from
Merchant Factors Corp. was approximately $1,705.
The weighted average interest rates on short-term borrowings were 11.0%,
12.3% and 11.0% as of December 31, 1996, 1995 and 1994, respectively.
Outstanding balances are as follows:
<TABLE>
<CAPTION>
December 31,
--------------
1996 1995
------ ------
<S> <C> <C>
The Bank of Floyd $469 $485
Merchant Factors Corp. - Line of Credit 40 1,269
------ ------
Subtotal Revolving Lines of Credit 509 1,754
Merchant Factors Corp. - Factor Borrowing 396 --
------ ------
Total $905 $1,754
====== ======
</TABLE>
(Continued)
F-14
<PAGE> 32
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 9: Long-Term Debt
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
---- ----
Long-term debt balances are as follows:
<S> <C> <C>
Mortgage payable, principal callable after
January 1995, interest at 9.38%, due July 1, 2003,
payable monthly, collateralized by real property $-- $253
Note payable to a bank, principal callable on demand,
due September 1, 1999, interest at 8.75%, payable
monthly, collateralized by machinery and equipment 147 192
Other 4 21
--- ---
Total debt 151 466
Less - current portion 150 456
--- ---
$1 $10
=== ===
</TABLE>
Following are the maturities of long-term debt outstanding at December
31, 1996:
1998 $ 1
Note 10: Creditor's Debt Settlement
In December 1991, Sports Imprints, Inc., (the Company's former wholly
owned subsidiary acquired in 1993) entered into a plan of reorganization with
its creditors and a bank pursuant to Chapter 11 of the U.S. Bankruptcy Code.
As a result, Sports Imprints, Inc., negotiated a payment plan with its
creditors that included extending payments through 1996. Of the total of $204
to be repaid as of December 31, 1995, $95 is included in accrued expenses in
the accompanying financial statements and the remaining $109 is shown as
creditors' debt settlement.
In July 1996, an order was entered by a court relieving the Company of
$109 of liability for the settlement of the creditors' debt. As a result, an
extraordinary gain from the extinguishment of debt was recognized in 1996 as
follows:
<TABLE>
<S> <C>
Extinguishment of debt $109
Legal costs (6)
----
103
----
Income taxes (9)
Extraordinary gain, net $ 94
====
</TABLE>
(Continued)
F-15
<PAGE> 33
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 11: Common Stock
The Registrant's Common Stock is traded on the American Stock Exchange
(the "Exchange") under the symbol "LFA". However, the Registrant does not
satisfy all the financial guidelines for continued listing on the Exchange and
accordingly there can be no assurance that such listing will be continued.
The Exchange, as a matter of policy, will consider the suspension of
trading in or delisting of a security when, in the opinion of the Exchange, the
financial condition and/or operating results of the issuer appear to be
unsatisfactory. To assist in the application of this and other listing
policies, the Exchange has adopted certain guidelines under which it will
normally give consideration to suspending dealings in or delisting a security.
The Exchange's financial guidelines include as criteria for the Exchange to
consider suspending dealings in or delisting securities that the issuer (i) has
shareholders' equity of less than $2 million if such issuer had losses in two
of its three most recent fiscal years, or (ii) has shareholders' equity of less
than $4 million if such issuer had losses in three of its four most recent
fiscal years, or (iii) has sustained losses which are so substantial in
relation to its overall operations or its existing financial resources, or its
financial condition has become so impaired that it appears questionable, in the
opinion of the Exchange, as to whether such issuer will be able to continue
operations and/or meet its obligations as they mature.
The Company, which at December 31, 1995, had losses in three of its four
most recent fiscal years, and shareholders' equity at that date of
approximately $24, had at December 31, 1996, income in two of its three most
recent fiscal years. The Company therefore met the American Stock Exchange
financial guidelines summarized in clauses (i) and (ii) above. However, the
Exchange may also suspend trading in or delist the Company's securities under
the guideline summarized in clause (iii) above if, in the opinion of the
Exchange, the financial condition of the Company has become so impaired that it
appears questionable as to whether the Company will be able to continue
operations and/or meet its obligations as they mature. In addition, the
Exchange is not limited or restricted by these guidelines, and the Exchange may
at any time, in view of the circumstances in each case (and regardless of
whether the issuer meets or fails to meet any or all of such guidelines),
suspend dealings in or delist any security when, in the opinion of the
Exchange, such security is unsuitable for continued trading on the Exchange.
For these reasons, no assurance can be given that the Exchange, which continues
to monitor the Company's progress, will not suspend trading in or delist the
Company's stock.
Note 12: Sales and Repurchases of Treasury Stock
During 1996, the Company reacquired 1,666 unvested, forfeited shares which
were originally granted to an outside director.
During 1995, the Company reissued 23,044 shares as contingent
consideration for the Sports Imprints, Inc., acquisition in connection with the
earn-out agreement for 1994. Additionally, 75,000 shares previously held in
escrow as contingent acquisition consideration were retired and an additional
20,664 shares were reacquired.
In 1994, the Company reissued 20,396 shares as contingent consideration
for the Sports Imprints, Inc., acquisition in connection with the earn-out
agreement for 1993. Additionally, 35,000 shares were reissued to officers as
bonuses and 15,000 shares were reissued to directors as awards.
(Continued)
F-16
<PAGE> 34
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 13: Leases
In March 1987, the Company shut down its Gardena, California, facility
and, in conjunction therewith, sold the machinery and equipment at that
location to an unrelated third party through a "sales type" lease agreement.
Under this agreement, the Company would receive payments of approximately $2
per month for 10 years. The net present value of these payments was $20 and
$32 as of December 31, 1995 and 1994, respectively, of which $0 and $12,
respectively, was included in other assets. The Company also renegotiated its
lease of the California facility. The agreement provided for annual rentals of
$72 over a ten-year period beginning July 1, 1987. The Company also entered
into another agreement to sublease the facility at $188 annually over the same
period of the principal lease. Rental income under these agreements (before
payments to the lessor) was $111, $179 and $195 in 1996, 1995 and 1994,
respectively.
In June 1996, the Company and the sub-lessee agreed to a settlement of the
remaining payments owed under the sub-lease agreement. The settlement required
the sub-lessee to deliver $100 of blank T-shirts to the Company, which were
delivered to the Company in 1996.
In August 1996, the Company and the lessor agreed to a settlement of the
lease agreement for $36, payable in twelve equal monthly payments, without
interest.
The Company leases production, office and warehouse space in Huber
Heights, Ohio. Lease payments are $189, $196 and $202 for years 1997, 1998 and
1999, respectively.
The Company leases showroom and office space in the Empire State Building,
New York, New York, with payments of $59 per year through 2003 and $54 in 2004.
Total rent expense was $313, $330 and $342 for 1996, 1995 and 1994,
respectively.
Following are the future minimum lease payments under non-cancelable
operating leases as of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997 $248
1998 255
1999 261
2000 59
2001 59
Thereafter 172
-------
Total $ 1,054
</TABLE>
(Continued)
F-17
<PAGE> 35
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 14: Deferred Compensation
The Company has deferred compensation agreements with certain retired
employees under which the Company agreed to pay certain amounts annually over a
ten-year period subsequent to retirement. The present value of such payments
was charged ratably to expense over the years of active employment. In
addition, the Company has incentive plans for which charges to operations have
been made generally based upon certain defined levels of income before taxes.
The plan has been frozen and no additional benefits are accruing. The accrued
but unfunded liability at December 31, 1996 and 1995, amounted to $78 and $80,
respectively. The amount currently due of $32 is included in accrued expenses
at December 31, 1996.
Note 15: Income Taxes
Composition of the income tax benefit (provision) consisted of the
following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Federal -
Current $3 $-- $--
Deferred -- -- --
----- ---- -----
$3 $-- $--
Local and State -
Current $(33) $14 $(294)
Deferred -- -- --
----- ---- -----
$(33) $14 $(294)
Total -
Current $(30) $14 $(294)
Deferred -- -- --
----- ---- -----
$(30) $14 $(294)
===== ==== =====
</TABLE>
The following summarizes the estimated tax effect of significant
cumulative temporary differences which comprise the deferred tax assets:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Differences in depreciation and amortization $87 $75
Accruals and reserves not deducted for tax purposes until paid 558 845
Net operating loss carryforwards 2,427 2,596
Deferred tax assets $3,072 $3,516
Valuation allowance (3,072) (3,516)
------ ------
$-- $--
====== ======
</TABLE>
(Continued)
F-18
<PAGE> 36
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company has recorded valuation allowances for the entire amount of
deferred income tax assets and net operating loss carryforwards at December 31,
1996 and 1995. As of December 31, 1996, the Company had net operating loss
(NOL) carryforwards of approximately $7,137 for federal income tax purposes
available to reduce future taxable income. The carryforwards expire in 1999
through 2010 if not utilized.
The Company's ability to use its NOL carryforwards to offset future
taxable income is subject to restrictions enacted in the Internal Revenue Code
of 1986 as amended (the "Code"). These restrictions provide for limitations on
the Company's utilization of its NOL carryforwards following certain ownership
changes described in the Code. As a result of ownership changes in 1993, $673
of the Company's existing NOL carryforwards are subject to the limitation of
which the maximum amount which can be utilized is $315 in 1997 and $61
thereafter.
The reconciliation of the U.S. statutory tax rate to the effective income
tax rate is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
United States statutory rate 34.0% (34.0)% 34.0%
Amortization of goodwill 4.7 3.4 0.8
State income taxes (4.3) (1.4) 30.9
NOL benefit (recognized) unrecognized (38.3) 30.6 (34.8)
----- ----- -----
(3.9)% (1.4)% 30.9%
===== ===== ====
</TABLE>
Note 16: Related-Party Transactions
During 1995 and 1994, the Company paid approximately $33 and $55,
respectively, in sales commissions to John Stuth Associates, Inc. (JSA, Inc.),
a sales and marketing company founded by John K. Stuth, former Chairman of the
Board of Directors, Chief Executive Officer and President of Littlefield, Adams
& Company. The relationship between the Company and JSA, Inc., has been
terminated. Thus, no such payments were made in 1996.
The Company incurred approximately $92 and $81 in legal fees and
reimbursed expenses for the years of 1995 and 1994, respectively, to David M.
Simmonds, Esquire. Mr. Simmonds, who is a member of the Board of Directors,
also serves as General Counsel for the Company. Mr. Simmonds was elected
President of the Company by the Board of Directors on May 30, 1995, and Chief
Executive Officer of the Company and interim Chairman of the Board on July 12,
1995. On March 5, 1996, Mr. Simmonds was elected Chairman of the Board. As a
result, Mr. Simmonds is now compensated as an employee.
During May 1995, John K. Stuth, former Chairman of the Board of Directors,
Chief Executive Officer and President, and Warren L. Rawls, Secretary and
former Chief Financial Officer, sold back to the Company 9,482 and 3,208
shares, respectively, of the Company's common stock, for approximately $51 and
$17, respectively. The shares had been received by Mr. Stuth and Mr. Rawls as
stock grants under the Company's Stock Incentive Plan and were returned to the
Company's treasury.
(Continued)
F-19
<PAGE> 37
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 17: Incentive Plan (the "Plan")
During 1994, the Company adopted the Littlefield, Adams & Company
Incentive Plan (the "Plan"). All options referred to herein were granted, and
are governed, under the Plan. There are a maximum of 1,000,000 shares of the
Company's common stock available for issuance under the Plan. Under the Plan,
incentive stock options, nonstatutory stock options, performance units,
restricted stock awards, stock appreciation rights, and cash and stock bonus
awards may be granted to key employees, directors, and certain consultants and
advisors of the Company. Awards granted are approved by a committee of the
Company's board of directors. Each award will vest pursuant to individual
award agreements. Through December 31, 1996, stock options granted pursuant to
the Plan have been one hundred percent vested on the date of grant.
Unexercised stock options will expire at the end of the term set forth pursuant
to the individual option agreements, or ten years from the date of grant,
whichever is sooner. The exercise price allowable for stock options granted
under the Plan depends on the type of option but, in any case, may not be less
than the greater of either (a) the par value per share of the stock, or (b)
fifty percent of the fair market value (as defined in the Plan) per share of
the stock on the date of grant. Through December 31, 1996, stock options
granted pursuant to the Plan have had an exercise price equal to one hundred
percent of the fair market value (as defined in the Plan) per share of the
stock on the date of grant.
A summary of the status of options granted pursuant to the Plan at
December 31, 1996, 1995 and 1994, and changes during the years then ended, is
presented below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 352,500 $6.02 325,000 $6.13 -- $ --
Granted 645,000 1.22 27,500 4.74 325,000 6.13
Exercised -- -- -- -- -- --
Forfeited (313,500) 6.01 -- -- -- --
Expired -- -- -- -- -- --
Outstanding at end of year 684,000 1.50 352,500 6.02 325,000 6.13
------- ------- -------
Exercisable at end of year 684,000 $1.50 352,500 $6.02 325,000 $6.13
Weighted average fair
value of options granted $0.68 $3.14
</TABLE>
(Continued)
F-20
<PAGE> 38
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------
Options Exercisable
Weighted --------------------------
Average Weighted Number Weighted
Remaining Average Exercisable at Average
Grant Exercise Number Contractual Exercise December 31, Exercise
Date Price Outstanding Life Price 1996 Price
- - ---------------- -------- ----------- ----------- -------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
October 21, 1994 $6.13 25,000 7.8 years $6.13 25,000 $6.13
May 9, 1995 6.88 10,000 8.3 years 6.88 10,000 6.88
December 2, 1995 2.19 10,000 8.9 years 2.19 10,000 2.19
May 28, 1996 1.25 309,000 9.4 years 1.25 309,000 1.25
June 4, 1996 2.00 5,000 9.4 years 2.00 5,000 2.00
August 5, 1996 1.00 300,000 9.6 years 1.00 300,000 1.00
December 4, 1996 3.38 25,000 9.9 years 3.38 25,000 3.38
----------- --------------
684,000 9.4 years $1.50 684,000 $1.50
=========== ==============
</TABLE>
The Company accounts for the Plan under APB Opinion No. 25, under which no
compensation cost has been recognized for stock options granted under the Plan.
Had compensation cost for stock options granted under the Plan been determined
consistent with SFAS Statement No. 123, the Company's net income (loss) and net
income (loss) per share would have been the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
----- --------
<S> <C> <C> <C>
Net income (loss) As reported $893 $(992)
Pro forma $511 $(1,078)
Net income (loss) per share As reported $0.30 $(0.44)
Pro forma $0.17 $(0.47)
</TABLE>
The fair value of each grant is estimated on the date of the grant using
the Modified Black-Scholes American option pricing model with the following
weighted average assumptions used:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Risk free interest rate 6.1% 5.9%
Estimated dividend yield 0.0% 0.0%
Estimated expected lives 3.2 years 5.1 years
Estimated expected volatility 77% 72%
</TABLE>
During 1996, 1995 and 1994 no compensation expense was recorded for
options granted because the exercise price was equal to fair market value on
such measurement date.
(Continued)
F-21
<PAGE> 39
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 18: Litigation
Securities Class Action
The Company and certain of its current and past officers and directors,
and others, were named as defendants in three actions brought by individual
plaintiffs, purportedly representing persons who purchased securities of the
Company during a total period running from July 1, 1991 through May 17, 1994.
These actions were filed by the plaintiffs on July 22, 1993, August 13, 1993
and March 16, 1994. These actions were consolidated for discovery and pretrial
purposes in the United States District Court of the Western District of Texas
and are captioned In re Littlefield, Adams & Co. Securities Litigation, Civil
Action No. SA 93 CA 0561 ("Consolidated Action"). The plaintiffs alleged that
the Company and certain of its current and past officers and directors, and
others violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10(b)-5 promulgated thereunder, and other law, as a result of alleged
misrepresentations and omissions in connection with the annual report for 1992,
the 1993 quarterly reports, and certain press releases. The complaint also
alleged a claim for treble-damages under the Racketeer Influenced and Corrupt
Organization Act, 18 U.S.C. Sec. 1964. On February 21, 1995, the Company
reached an agreement with the plaintiffs to settle these claims, as well as
certain related claims involving other parties. The settlement has been
approved by the Court and a final order of dismissal was entered on January
27, 1997. As no appeal was filed within 30 days following the entry of the
dismissal order, that order is now final and non-appealable. Under the terms
of the settlement, the Company will issue $1,400 (approximately 478,000 shares)
of the Company's stock and pay $210 in cash to the members of the class to
settle the claims brought by the securities litigation plaintiffs. A total of
$1,450 payable in the Company's stock, which consists of the $1,400 referred to
above and $50 as part of the derivative action settlement discussed below, has
been classified as capital in excess of par value as of December 31, 1996. At
December 31, 1995, these amounts were classified as liabilities rather than
shareholders' investment due to the uncertainty of the final resolution. In
return for the cash paid and the stock to be issued, the Company received
releases from the class plaintiffs and the other defendants. The number of
shares to be issued is to be based on the average closing price of the
Company's stock for the 20 trading days immediately preceding the end of the
appeal period following entry by the Court of the final order of dismissal.
The issuance of these shares will result in an increase of approximately 22% in
the number of the Company's shares outstanding. Based on the recommendation of
the magistrate judge in the derivative action, the Company expects to receive
approximately $70 cash, net of attorneys' fees and expenses, from a $130
payment made by the Company's former auditor as part of the derivative action
settlement. The $210 cash portion of the Company's settlement obligation was
received by the Company from a third party in connection with the settlement of
a related matter, and was paid into a court monitored escrow account
established for the benefit of the securities litigation plaintiffs. Upon the
final conclusion of the litigation, the Company received an additional $150
from the same third party.
Charlotte E. Picard, Derivatively on Behalf of Littlefield, Adams &
Company, v. Curtis A. Younts, Jr., et al.-
This action was filed in the United States District Court, Western
District of Texas on June 29, 1994, under Cause No. SA 94 CA 0544. The Company
was named as a nominal defendant. The complaint alleged that certain current
and former officers and directors of the Company, certain of the Company's
former lawyers, and the Company's former auditors "damaged LFA by causing or
permitting LFA to commit securities fraud and by damaging or destroying the
Company's reputation," and otherwise. The parties to this action, with the
exception of certain of the Company's former lawyers, have settled this action.
The settlement agreement has been approved by the Court and a final order of
dismissal was entered on January 27, 1997. As no appeal was filed within 30
days following the entry of the dismissal order, that order is now final and
non-appealable. Under the terms of the settlement, the Company's former
auditors will pay $130 to the Company (of which the Company expects to receive
$70, net of attorneys' fees
(Continued)
F-22
<PAGE> 40
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
and expenses) and the Company will issue $50 (approximately 17,000 shares) of
the Company's stock to those former auditors in settlement of claims for fees.
The $130 has been placed into a Court monitored escrow account for the
benefit of the Company. In addition, (1) John K. Stuth, the Company's former
Chairman of the Board and CEO, will relinquish to the Company rights to 5,000
shares of LFA stock, and rights that he had as of February 21, 1995 under
options to acquire 50,000 shares of LFA stock (the options expired unexercised
on July 12, 1996); (2) Director Stanley Halbreich, currently the Company's
Treasurer and Chief Financial Officer, will relinquish to the Company rights to
5,000 shares of LFA stock; and (3) former President Wade Hudman will return
1,000 shares of LFA stock to the Company.
Littlefield, Adams & Company v. Younts, et al.-
This action was filed on June 15, 1994, in the Texas District Court in the
57th Judicial District, Bexar County, Texas, by the Company against its former
Chairman, Curtis A. Younts, Jr., his wife and various of their affiliated
entities seeking the immediate repayment of $912 and other amounts alleged to
have been misappropriated by the defendants. Younts filed a counterclaim
against the Company seeking compensation for an unstated amount for services
and expense funds he claims to have provided the Company. The Company denies
that it owes any amount to Younts. As a result of Younts agreeing to
contribute $330 to settle the class action litigation described above, all of
the parties have agreed to dismiss their claims and provide mutual releases of
liability.
Curtis A. Younts, Jr. v. Littlefield, Adams & Company, et al.-
This action was filed on June 16, 1994, in the Texas District Court in the
169th Judicial District, Bell County, Texas, against the Company and one of its
officers by its former Chairman, Curtis A. Younts, Jr. Mr. Younts sought an
unspecified amount for the reasonable value of his services, allegedly rendered
on behalf of the Company since 1991. The Company denied that it owed any
amount to Younts. As a result of Younts agreeing to contribute $330 to settle
the class action litigation described above, all of the parties had agreed to
dismiss their claims and provide mutual releases of liability. Notwithstanding
the foregoing, this case was dismissed by the Court, on its own initiative, in
August 1996, for want of prosecution.
Atkisson v. Littlefield, Adams & Company and Curtis A. Younts, Jr.
The Company and a former chief executive officer have been named as
defendants in an action filed on October 15, 1995, by A. Carroll Atkisson in
the United States District Court for the Western District of Virginia, Cause
No. 95-1107-R. Atkisson was the owner of a company known as Personal
Screening, Inc. In approximately 1991, Atkisson transferred all of his stock
in Personal Screening, Inc., to LFA, in exchange for shares of LFA.
Subsequently, Personal Screening, Inc. was merged into Collegiate Pacific.
Thereafter, Atkisson served, for a period of time, as a director of LFA and an
officer of Collegiate Pacific.
Atkisson alleges that LFA has wrongly deprived him of a total of 52,500
(post-split) shares of LFA stock, to which he claims he is entitled in
compensation for services rendered as a director, pursuant to an alleged stock
option agreement, and otherwise. He alleges that he is entitled to damages, in
lieu of the referenced stock, of approximately $370. He also alleges that he
is entitled to damages of $16, which he claims to be owed by virtue of LFA's
breach of an employment agreement under which LFA allegedly promised to pay him
$4 per month salary for four months in
(Continued)
F-23
<PAGE> 41
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1993, but failed to do so. In an apparently separate claim, he alleges what
appears to be a claim for compensatory damages of not less than $600.
Atkisson's complaint seeks judgment of $1,000.
The Company answered and filed a counterclaim on December 22, 1995. The
Company denies Atkisson's allegations against it, denies that it is indebted to
Atkisson in any amount and contends that it is entitled to recovery against
Atkisson on its counterclaims. In its counterclaim, the Company asserts causes
of action for breach of fiduciary duty, negligence, fraud, conspiracy and
violation of the Texas Deceptive Trade Practices Act.
Based on the opinion of the Company's General Counsel that the Company has
factual and legal defenses to the plaintiff's claims against it, the Company
does not expect the outcome of this litigation will have a material adverse
effect on the Company's financial position or results of operations.
Littlefield, Adams & Co. v. Midlantic Bank, N.A.
On October 17, 1995, the Company commenced an action against Midlantic
National Bank, N.A., in the District Court, 131st Judicial District, Bexar
County, Texas. The Company alleged that Midlantic, acting as transfer agent
for LFA, breached its contract and common law duties by facilitating the
wrongful transfer of shares of common stock, and in connection with a scheme
concocted by LFA's former chief executive officer, Curtis Younts, Jr., to steal
and convert shares of LFA's common stock which were legally and/or beneficially
owned by LFA.
On December 15, 1995, Midlantic Bank counterclaimed on grounds that LFA's
action was brought in bad faith and for purposes of harassment. Midlantic
sought unspecified damages, including attorneys fees and costs incurred in
defending the action, and damages under the Texas Deceptive Trade Practices
Act. The Company denied Midlantic's allegations.
The Company and Midlantic Bank reached an agreement to settle their
claims, pursuant to which the action was dismissed in August 1996. In
connection with the settlement, the Company recorded other income of $325, net
of associated legal fees, in 1996.
(Continued)
F-24
<PAGE> 42
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Jerrold Luloff v. Littlefield, Adams & Company, et al.-
On May 9, 1996, the Company's former President, Co-CEO and director filed
a lawsuit against the Company and certain of its current officers and directors
in The Court of Common Pleas of Franklin County, Ohio. The plaintiff sought
combined damages of $284, plus punitive damages and attorney's fees, based on
an alleged breach by the Company of a purported severance agreement related to
the plaintiff's termination/resignation as an officer, employee and director
of the Company.
The Company answered and filed a counterclaim on June 28, 1996. In its
counterclaim, the Company asserted causes of action for breach of fiduciary
duty, mismanagement and waste, conversion and defalcation, and for judgment
declaring that an alleged agreement under which Luloff claimed rights and
benefits created no such rights and entitled him to no such benefits. The
Company denied the plaintiff's allegations against it and contended that it was
entitled to recover against Luloff on its counterclaim.
In September 1996, a settlement was reached, whereunder the Company agreed
to pay Luloff a total of $36 over two years, without interest, and Luloff
released his rights to 23,044 shares of stock which he had earned under the
agreement pursuant to which the Company acquired Sports Imprints, Inc., in
1993.
F-25
<PAGE> 43
EXHIBIT INDEX REQUIRED BY ITEM 601 OF REGULATION S-K
Number Description of Exhibit
------ ----------------------
3.1 Certificate of Incorporation of the Registrant and all
amendments thereto. Incorporated by reference to exhibit 1 to the
Registrant's Form 8-K filed November 1991.
3.2 Certificate of Amendment to the Certificate of
Incorporation of Littlefield, Adams & Company amending Article IV
to increase the number of shares of common stock authorized for
issuance from 3,000,000 shares, $1.00 par value, to 25,000,000
shares, $1.00 par value. Incorporated by reference to exhibit 3.2
to the Registrant's 1994 Form 10-K, filed March 1995.
3.3 Certificate of Amendment to the Certificate of
Incorporation of Littlefield, Adams & Company amending Article VI
to provide for classification of the Board of Directors into three
classes. Incorporated by reference to exhibit 3.3 to the
Registrant's 1994 Form 10-K, filed March 1995.
3.4 Composite copy of the Certificate of Incorporation of the
Registrant. Incorporated by reference to exhibit 3.4 to the
Registrant's 1994 Form 10-K, filed March 1995.
3.5 By laws of the Registrant, as amended. Incorporated by
reference to exhibit 3.5 to the Registrants 1995 Form 10-K, filed
April 1996.
10.1 A. Promissory Note for $250,000, dated August 29, 1994,
between Collegiate Pacific Company and The Bank of Floyd.
Incorporated by reference to exhibit 10.2A to the Registrant's
1994 Form 10-K, filed March 1995.
B. Line of Credit of $500,000, dated August 29,
1994, between Collegiate Pacific Company and The Bank of
Floyd. Incorporated by reference to exhibit 10.2B to the
Registrant's 1994 Form 10-K, filed March 1995.
10.2 Financing Agreement with Merchant Factors Corp., dated
October 16, 1993. Incorporated by reference to exhibit 10.27.2 to
the Registrant's 1994 Form 10-K, filed March 1995.
10.3 Financing Agreement with Merchant Factors Corp., dated
January 25, 1996. Incorporated by reference to exhibit 10.9 to the
Registrant's 1994 Form 10-K, filed March 1995.
10.4 Settlement Agreement in the Registrant's Securities Class
Action litigation. Incorporated by reference to exhibit 2.5 to the
Registrant's 1994 Form 10-K, filed March 1995.
10.5 Full and Final Release and Settlement Agreement by and
among Littlefield, Adams & Company, Jeffers, Brook, Kreager and
Gragg, Inc., David Ylitalo, and Michael Kreager. Incorporated by
reference to exhibit 10.8 to the Registrants 1995 Form 10-K, filed
April 1996. *
10.6 Littlefield, Adams & Company Incentive Plan. Incorporated
by reference to exhibit 2.1 to the Registrant's 1994 Form 10-K,
filed March 1995.
10.7 Settlement Agreement between Harley-Davidson Motor Co. and
Sports Imprints division of Littlefield, Adams & Company, dated
March 1, 1996, relating to License Agreement with Harley-Davidson
Motor Co., dated January 12, 1995. Incorporated by reference to
exhibit 10.7 to the Registrants 1995 Form 10-K, filed April 1996. *
Littlefield, Adams & Company 1996 Form 10-K
<PAGE> 44
EXHIBIT INDEX REQUIRED BY ITEM 601 OF REGULATION S-K
(Continued)
Number Description of Exhibit
------ ----------------------
10.8 License Agreement with PepsiCo, Inc., dated as of February
1, 1996. Incorporated by reference to exhibit 10.9 to the
Registrants 1995 Form 10-K, filed April 1996.
10.9 Amendment of License Agreement with PepsiCo, Inc., dated
October 1, 1996.
10.10 Collateral Product License Agreement with Miller Brewing
Company, dated October 31, 1996.
10.11 License Agreement with Kawasaki Motors Corp., U.S.A.,
dated January 1, 1997.
10.12 Purchase Agreement with 5W Partnership for sale of real
estate and all improvements located at 1302 Rockland Avenue, N.W.,
Roanoke, Virginia, dated March 5, 1996.
10.13 Amendment to Purchase Agreement with 5W Partnership by
letter dated May 14, 1996.
10.14 Employment Agreement with Stanley I. Halbreich, dated
November 16, 1992.
10.15 Amendment to Employment Agreement with Stanley I.
Halbreich, dated January 4, 1993.
10.16 Employment Agreement with Warren L. Rawls, dated June 21,
1996.
10.17 Promissory Note for $142,634.32, dated February 1, 1997,
loan number 0105592300, payable to The Bank of Floyd, Floyd,
Virginia.
10.18 Business Loan Agreement, effective as of February 1, 1997,
relating to loan number 0105592300, with The Bank of Floyd, Floyd,
Virginia.
10.19 Promissory Note for $468,483.83, dated January 31, 1997,
loan number 5312501, payable to The Bank of Floyd, Floyd, Virginia.
10.20 Business Loan Agreement, effective as of January 31, 1997,
relating to loan number 5312501, with The Bank of Floyd, Floyd,
Virginia.
10.21 Commercial Security Agreement, dated January 31, 1997,
relating to loan numbers 0105592300 and 5312501, with The Bank of
Floyd, Floyd, Virginia.
11 Computation of Earnings Per Share
27 Financial Data Schedule.
* The Company has requested confidential treatment for portions of this
Exhibit, and such portions are omitted from the Exhibit filed herewith. A
complete copy of such Exhibit has been filed separately with the
Securities and Exchange Commission.
Littlefield, Adams & Company 1996 Form 10-K
<PAGE> 1
EXHIBIT 10.9
U.S.A.
AMENDMENT OF
LICENSE AGREEMENT
-----------------------
THIS AMENDMENT AGREEMENT effective as of the 1st day of October,
1996 by and between PepsiCo, Inc., a corporation of the State of North
Carolina, with its principal place of business at 700 Anderson Hill Road,
Purchase, New York 10577, U.S.A. (hereinafter referred to as "Licensor") and
Littlefield Adams & Co., a corporation of the State of New Jersey, with its
principal place of business at 6245 Executive Blvd., Huber Heights, Ohio 45424
(hereinafter referred to as "Licensee")
WHEREAS, Licensor and Licensee are parties to a certain License Agreement
dated February 1, 1996 and wish to amend said Agreement in certain respects
without modifying, changing or otherwise amending any other provisions of said
agreement, and therefore the parties agree as follows:
Schedule B is hereby amended to add the following Licensed Products:
Boxer Shorts
Headwear
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement effective as of the date and year first set forth hereinabove.
PepsiCo, Inc.(LICENSOR)
By: /S/ William A. Finkelstein
--------------------------
Name: William A. Finkelstein
Title: Vice President
Littlefield Adams & Co.(LICENSEE)
By: /S/ Michael Balber
-------------------
Name: Michael Balber
Title: President
littamen
<PAGE> 1
EXHIBIT 10.10
REF. #113089
COLLATERAL PRODUCT LICENSE
THIS AGREEMENT is made effective October 30, l996, between MILLER BREWING
COMPANY, a Wisconsin corporation with offices at 3939 West Highland Boulevard,
Milwaukee, Wisconsin, 53208 ("Miller"), and LITTLEFIELD ADAMS & COMPANY, a New
Jersey corporation with offices at 6262 Executive Boulevard, Huber Heights, OH
45424 ("Licensee").
WITNESSETH
WHEREAS, Miller has the exclusive right to license for commercial purposes
the Licensed Trademarks depicted on Schedule A hereto (the "Licensed
Trademarks:);
AND WHEREAS, the parties desire that Licensee be granted the right to use
the Licensed Trademarks in the Territory in connection with those products
identified on Schedule B hereto (the "Licensed Products");
NOW THEREFORE, in consideration of the premises and mutual covenants
herein, the parties agree as follows:
1. During the Agreement term, Miller hereby grants to Licensee the
non-exclusive right (only for retail sales within the Territory market and only
with respect to products having all the characteristics of the Licensed
Products identified on Schedule B), to use the Licensed Trademarks in
connection with the manufacture and marketing of the Licensed Products. No
activity outside of the Territory is authorized hereunder except that Licensee
may produce the Licensed Products outside the U.S. (or have others do so for
it) but only if no sales (except to Licensee) take place outside the Territory
as a result of this activity. "Retail sales" means sales of Licensed Product
directly to the ultimate consumer; provided that such sales are through the
distribution channels set forth in Paragraph 6 herein. Miller retains the
right to use the Licensed Trademarks as it sees fit outside the Territory, to
use the Licensed Trademarks on other products besides Licensed Products
anywhere, and to use the Licensed Trademarks on the Licensed Products for
activity in the Territory other than for the retail sales market. No License
is granted hereunder for the manufacture, sale or distribution of Licensed
Products as premiums, in combination sales, as giveaways, or to be disposed of
under similar methods of merchandising. "Premium" means any article used for
the purpose of increasing the sale of any other product or any service,
including but not limited to incentives for sales
<PAGE> 2
forces, and trade and consumer incentives for fundraising. "Territory" shall
be limited to the United States, its territories and possessions, and United
States Military PX's.
2. The use of Licensed Trademarks shall only be in accordance with
quality and other standards specified and approved by Miller. To this end:
(a) Licensee shall submit four (4) preproduction samples of all
Licensed Products and related containers, packaging and advertising, and all
usage of Licensed Trademarks, for written approval by Miller (or Miller's
designee, Hamilton Projects, Inc.) before the first use or distribution thereof
(of each format). Such submission shall be approved or disapproved within
fifteen (15) business days of receipt by Miller (or Miller's designee, Hamilton
Projects, Inc.). Licensee will not depart from the quality and design of
approved formats and samples without Miller's prior written permission. Upon
distribution of the Licensed Products, Licensee shall also furnish Miller's
designee, Hamilton Projects, Inc. with six (6) samples of each type of Licensed
Product and ten (10) samples of all collateral materials (i.e., hangtags,
packaging, advertising).
(b) The manufacture of Licensed Products may not be sublicensed.
(c) Miller or its designated representatives shall have the right to
inspect all manufacturing facilities for Licensed Products at any time, during
reasonable business hours.
(d) All Licensed Products and all usage of Licensed Trademarks will
comply with all applicable alcoholic beverage advertising restrictions and
safety standards, and all other applicable laws and regulations, and will be
accompanied by such notices and markings as Miller shall specify (e.g.
"Manufactured Under License," "TM," etc.).
(e) Licensee's advertising and promotional material relating to
Licensed Products will be truthful and in good taste, and will not be such as
would be likely to damage or diminish the reputation of Miller, its
identifications, or its products.
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<PAGE> 3
3. In consideration of the rights granted hereunder, Licensee agrees to
pay Miller's designee, Hamilton Projects, Inc.:
(a) a non-refundable advance against royalties of Ten Thousand Dollars
$10,000.00, made payable to Miller's designee, Hamilton Projects, Inc. This
Paragraph 3(a) advance will not be refunded even if not earned by actual
royalties prior to termination; and
(b) a royalty of ten percent (10%) of "Billings" for all sales or
other commercialization of Licensed Products.
(c) Licensee agrees to pay Miller's designee, Hamilton Projects, Inc.,
the minimum guaranteed royalty payments set forth on Schedule C according to
the payment schedule set forth therein regardless of whether actual royalties
reach that amount. Minimum guaranteed royalty payments shall be applied only
against the period they relate to and excess royalties in any period may not be
credited against periods having deficiencies. Upon termination of the
Agreement under Paragraph 8 herein, all minimum guaranteed royalty payments
shall be immediately due and owing to the extent not paid. All royalty
payments shall be sent to, and payable to, Miller's designee, Hamilton
Projects, Inc.
(d) Payment shall be made on a calendar quarter basis, with payment
for each quarter to be made by the fifteenth day of the month following the end
of the calendar quarter.
(e) "Billings" means the total of the gross prices charged to
customers for all sales or other commercialization of Licensed Products after
deducting any credits for returns actually made or allowed. In computing
Billings no costs incurred in manufacturing, selling, advertising or
distributing the Licensed Products covered by this Agreement or any indirect
expenses shall be deducted, nor shall any deduction be made for uncollectible
accounts, cash discounts or similar allowances. Sales (or commercialization)
shall be deemed to have been made on the day of shipment or the date of
invoice, whichever is first, regardless of when or whether payment is received
by Licensee. Royalties relating to Licensed Products that are returned may be
offset against previous credits for the returned item, but only where the
return can be documented (no return reserve or estimates), and only when the
return occurs within three months of the shipment.
3
<PAGE> 4
(f) Payment for each calendar quarter shall be accompanied by a
detailed statement showing, by product and customer, the charges, returns,
sales and other commercialization of Licensed Products during such quarter.
Such statement and payment shall be sent to, and payable to, Miller's
designee, Hamilton Projects, Inc.
(g) To the extent there are any below cost sales, or transfers to
related or affiliated entities, these shall be reported and shall be treated
as the greater of sales made at Licensee's then current prices for arm's length
transactions or actual charges.
4. Licensee will obtain no ownership rights in the Licensed Trademarks by
virtue of any of its activities hereunder, and all uses of the same shall inure
only to Miller's benefit. Licensee shall have no right to take or require any
action with regard to obtaining, maintaining, or enforcing registrations or
rights in the Licensed Trademarks, but will report promptly to Miller any
suspected infringements of the Licensed Trademarks.
5. Licensee agrees to keep at a single U.S. Location accurate books of
account and records covering all transactions relating to the subject matter
herein. Miller and its duly authorized representative shall have the right at
all reasonable hours of the day to examine such books of account and records in
Licensee's possession or under its control with respect to the subject matter
and terms of this Agreement, and shall have free and full access thereto for
such purposes and for the purpose of making extracts therefrom. All such books
of account and records shall be kept available for at least two years after the
termination of this Agreement. Licensee further agrees that it will designate
a record identification symbol or number which will be used exclusively in
connection with all documents relating to the Licensed Products (and with no
other articles which Licensee may manufacture, sell or distribute). In the
event that Miller's duly authorized representatives shall discover that
Licensee has underpaid Miller by more than 3% in any such examination, Licensee
shall reimburse Miller for its costs of such examination plus the deficiency.
Moreover, in the event Licensee has underpaid Miller by ten percent (10%) or
more, Miller shall have the right to terminate the agreement in addition to
receiving such sums.
4
<PAGE> 5
6. Licensee agrees to use its best efforts during the Agreement term to
sell, distribute and supply the Licensed Products throughout the U.S. on or
before December 01, 1996. Licensee's right are hereby limited to the following
distribution channels only: Mass Mkt. Discount Chains and Department Store
Chains.
7. Miller does not warrant or guarantee any Licensed Products, and
Licensee will not expressly or impliedly indicate otherwise. Licensee shall be
solely responsible for all claims resulting from its failure to comply with any
provision hereof or otherwise resulting from its activities hereunder, and
shall indemnify and defend Miller (and Hamilton Projects, Inc.) with respect to
any claims, damages, attorney fees and other loses and expenses incurred by
either (or their agents or employees) as a result of such claims or
activities. In addition, Licensee shall, throughout the useful life of all
Licensed Products it sells (and throughout this Agreement), obtain and maintain
product liability insurance having combined single limits in the amount of not
less than One Million Dollars ($1,000,000), by a policy naming Miller and
Hamilton Projects, Inc. as co-insureds and providing that the same may not be
canceled without at least thirty days prior notice to Miller and Hamilton
Projects, Inc. Copies of certificates evidencing such insurance must be
provided by Licensee to Miller (attention Corporate Banking And Insurance) and
Hamilton Projects, Inc. prior to Licensee's exercise of its rights hereunder.
8. This Agreement shall be effective as of the date first written above,
and unless otherwise terminated earlier as provided below it shall run for a
term of two (2) years and three (3) months (October 01, 1996 - December 31,
1998). This Agreement shall terminate automatically if Licensee is or becomes
bankrupt or insolvent or makes any arrangement for the benefit of creditors.
Also, if Licensee is in default hereunder, and if such default is not
completely cured within thirty days of written notice thereof by Miller, Miller
may terminate this Agreement by written notice. Failure to give notice of or
terminate for any default shall not operate as a waiver with respect to
continued or subsequent defaults.
9. After termination of this Agreement, Licensee shall have no further
right to manufacture, advertise, distribute, sell, or otherwise deal in (or
use) any Licensed Trademarks
5
<PAGE> 6
(or any confusingly similar marks), except as hereinafter provided. Upon a
termination:
(a) Licensee shall prepare a detailed inventory list of Licensed
Products then in its possession or control, and submit the same to Miller
within ten (10) business days of the termination.
(b) Miller shall then have twenty (20) business days thereafter to
decide whether to purchase any or all inventory with the exception of inventory
necessary to fill existing orders, at the lower of Licensee's cost or fair
market value. If Miller exercises such right of purchase, Licensee shall
deliver the inventory referred to in Miller's notice to Miller within ten (10)
business days after Miller's notice. Miller shall then pay Licensee (but only
for such delivered inventory as is in marketable condition) within thirty (30)
days after Miller's receipt.
(c) If Miller does not elect to purchase the inventory, for Licensed
Products fully meeting the quality control standards of this Agreement which
were produced prior to termination, Licensee, on an non-exclusive basis, may
dispose of the articles, but only for a period of ninety (90) days after
termination provided all payments with respect to Paragraph 3 hereof.
(d) Except as otherwise specifically provided in this paragraph, all
of the rights of Licensee under this Agreement shall terminate as of the date
of termination, and shall revert immediately to Miller. All royalties on sales
theretofore made shall become immediately due and payable, and Licensee shall
discontinue forthwith all use of the Licensed Trademarks.
10. This Agreement sets forth the final and complete understanding of the
parties with respect to this subject matter. It is understood and agreed that
there are no other representations with respect to this Agreement, and this
Agreement supersedes all prior discussions, agreements and undertakings
relating to the subject matter hereof. It is further agreed that the rights,
interests, understandings, agreements and obligations of the respective parties
pertaining to the subject matter of this Agreement may not be amended, waived,
modified or supplemented in any respect except by a subsequent written
instrument evidencing the express written consent of each of the parties duly
executed
6
<PAGE> 7
by the parties. Any terms inconsistent with or additional to the terms set
forth in this Agreement which may be included with a purchase order,
acknowledgment, invoice, etc., of either party shall not be binding on the
other party hereto.
11. This Agreement shall be interpreted and construed in accordance with
the internal laws of the State of Wisconsin.
12. Notices required or permitted hereunder shall be given by first class
mail, postage prepaid, to the parties at the addresses set forth at the
beginning of the Agreement, with copies to Hamilton Projects, Inc., 1700
Broadway, New York, New York 10019, or such other addresses as may be specified
by written notice; provided that Licensee must send an additional copy of any
legal notice to Miller to the attention of Miller's "Legal Department" in order
for the notice to be binding on Miller.
13. Nothing herein contained shall be construed to place the parties in
the relationship of partners, joint venturers or agents, and Licensee shall
have no power to obligate or bind Miller in any manner whatsoever with respect
to third parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first set forth above.
MILLER BREWING COMPANY
By /s/Dennis Madigan
----------------------
TITLE Director Marketing Materials
Corporate Purchasing
LITTLEFIELD ADAMS & COMPANY
By /s/ David M. Simmonds
----------------------
TITLE President & CEO
Ref. #113089
7
<PAGE> 8
Ref. #113089
Schedule A - Licensed Trademarks
Licensed Trademarks means and shall be deemed to mean the MILLER GENUINE
DRAFT Beer, MILLER Beer, MILLER LITE Beer identifications, including their
logos, symbols, trademarks, copyrights, likenesses, depictions, sobriquets and
photographs to the fullest extent that Miller has, or may hereafter obtain
title or right thereto. Specifically excluded from the Licensed Trademarks
granted hereunder is the RED DOG logo and graphics developed by Plank Road
Brewery.
<PAGE> 9
Ref. #110389
Schedule B - Licensed Products
Property-identified 100% cotton T-shirts and cotton/poly sweatshirts in adult
sizes M, L, XL, XXL, and boxer shorts.
Licensee agrees to achieve Minimum Net Sales for the Licensed Product(s) herein
during the Term of this Agreement as follows:
$100,00 (US Dollars)
Detailed as follows:
$100,000.00 October 01, 1996 - December 31, 1998
<PAGE> 10
Ref. #113089
Schedule C - Minimum Guarantee
TOTAL GUARANTEE: Ten Thousand Dollars $10,000.00
The guarantee is due and payable as follows:
Upon Signing $10,000.00 Adv. & Guarantee
<PAGE> 1
EXHIBIT 10.11
LICENSE AGREEMENT
This LICENSE AGREEMENT (this "Agreement") is made and entered into as of
January 1, 1997, by and between KAWASAKI MOTORS CORP., U.S.A., a Delaware
corporation ("Licensor"), and LITTLEFIELD, ADAMS & CO. a New Jersey corporation
("Licensee").
RECITALS:
A. Licensee acknowledges that Licensor, either directly or by and through
related companies, is the sole and exclusive owner in the United States and
Canada of the entire right, title and interest, together with all goodwill
connected therewith, in and to the Subject Matter (as the term "Subject Matter"
is defined and described in Schedule "A" attached hereto and made a part
hereof), which by reason of wide-spread advertising and publicity has become
well-known and identified in the minds of the general public.
B. Licensee desires to obtain the right to use the Subject Matter in
connection with the manufacture, sale and distribution of certain articles of
merchandise.
C. Licensor is willing to permit the use of the Subject Matter in
connection with the manufacture, sale and distribution of certain articles of
merchandise by Licensee upon the terms, conditions and covenants set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
l. Grant of License
(a) Upon the terms and conditions hereinafter set forth, Licensor hereby
grants to Licensee and Licensee hereby accepts the non-exclusive,
non-transferable right, license and privilege of using the Subject Matter in
connection with the manufacture, sale and distribution of certain articles of
merchandise consisting of those articles described in Schedule "B" attached
hereto and made part of this Agreement ("Licensed Goods").
(b) The license hereby granted extends only to the territory (the
"Territory") specified in Schedule "C" attached hereto and made a part hereof.
(c) The term of this Agreement and the license hereby granted shall
commence on the date specified in Schedule "D" attached hereto and made a part
hereof, and shall continue until the date specified in Schedule "D", unless
sooner terminated in accordance with the provisions of this Agreement.
<PAGE> 2
2. Terms of Payment
(a) Licensee agrees to pay to Licensor as fees for the use of the Subject
Matter the sum of money specified in Schedule "E" attached hereto and made a
part hereof.
(b) Within thirty (30) days after the end of each calendar quarter during
the term of this Agreement, Licensee shall furnish to Licensor complete and
accurate statements certified to be accurate by an officer of Licensee showing
the number, description, gross sales price, itemized deductions from gross
sales price, and net sales price of Licensed Goods manufactured, distributed
and/or sold by Licensee and all subsidiaries, parents and affiliates of
Licensee during the preceding calendar quarter, together with any returns made
during such quarter.
(c) Fees for the preceding calendar quarter shall be due within thirty
(30) days from the end of said quarter, and payment therefor shall accompany
the statement furnished as required above. The receipt or acceptance by
Licensor of any of the statements furnished pursuant to this Agreement or of
any fees paid hereunder shall not preclude Licensor from questing the
correctness thereof at any time, and in the event that any inconsistencies or
mistakes are discovered in such statement or payments, they shall be
immediately rectified and the appropriate payment made by Licensee.
3. Goodwill
Licensee recognizes the great value of the goodwill associated with the
Subject Matter and acknowledges that the Subject Matter and goodwill pertaining
thereto belong exclusively to Licensor and have a secondary meaning in the mind
of the public.
4. Licensor's Title and Protection of Licensor's Rights
Licensee agrees that it will not during the term of this Agreement or
thereafter attack the title or any rights of Licensor, or any related company
of Licensor, in and to the Subject Matter or attack the validity of this
Agreement. Licensee agrees to assist Licensor and to cooperate fully with
Licensor to procure any protection or to protect any of the right of Licensor
or any related company of Licensor to the Subject Matter or any trademark,
service mark, trade name or copyright or any other protection or right
pertaining thereto. Licensee shall promptly notify Licensor in writing of any
infringement or imitations by others of Licensor's rights in the Subject Matter
which may come to Licensee's attention, and Licensor shall have the sole right,
in its discretion, to determine whether or not any action shall be taken on
account of any such
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<PAGE> 3
infringement or imitations. Licensor may prosecute an action for infringement
at its sole expense and join Licensee in such action. Licensee does hereby
acknowledge and agree that ownership of any and all copyrights, trademarks,
trade names, services marks, logotypes, commercial symbols and all other rights
of any nature whatsoever, including without limitations, goodwill pertaining to
the Subject Matter, shall be and remain in the name of Licensor or related
companies of Licensor. Reference in the paragraph 4 to "Licensee" shall be
deemed to include subsidiaries, parents and affiliates of Licensee.
5. Indemnification and Insurance
Licensee agrees to assume full responsibility for compliance with all laws
in connection with the manufacture and/or sale of the Licensed Goods. Licensor
assumes no liability to Licensee or any third party with respect to the
Licensed Goods. Licensee hereby agrees to indemnify, defend and hold harmless
Licensor, Licensor's suppliers and related companies, including without
limitation, Kawasaki Heavy Industries, Ltd. and each of its direct and indirect
subsidiaries and affiliates, and their respective shareholders, directors,
officers, agents, employees and representatives, during the term and after
termination or expiration of this Agreement, from and against any and all
claims suits, loss and damage, including reasonable attorneys' fees, arising
out of, based upon, or in connection with the Licensed Goods including, without
limitation, those arising out of alleged defect thereon or infringement thereby
of any alleged patent, trademark, copyright, trade secret, contractual
statutory or judicially created right of others. Licensee agrees that it will
obtain and maintain in full force and effect during the entire term of this
Agreement, and continuing for a reasonable period of not less than two (2)
years immediately following the termination or expiration of this Agreement, at
Licensee's own expense, comprehensive general liability, property damage and
products liability insurance, acceptable to Licensor in its sole discretion,
from an insurance company approved in writing by Licensor, providing adequate
protection in amounts equal to or greater than the minimum amounts specified in
Schedule "F" attached hereto and made a part hereof, for the protection of
Licensor, Licensor's affiliates, and Licensee against any claims, suits, loss
and damage as aforesaid. One or more fully paid certificates of insurance
reflecting the minimum coverage specified in Schedule "F" and naming Licensor,
Kawasaki Motors Manufacturing Corp., U.S.A., Kawasaki Heavy Industries, Ltd.,
and their subsidiaries and affiliates and Licensee as insured parties shall be
submitted to Licensor by Licensee for Licensor's prior
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<PAGE> 4
written approval before any Licensed Goods are manufactured, distributed or
sold hereunder, and any proposed change in such certificates of insurance shall
be submitted to Licensor for its prior written approval. Licensor shall be
entitled to a copy of the then prevailing certificates of insurance, which
shall be furnished to Licensor by Licensee within five (5) business days after
the purchase of each insurance policy. No insurance shall be cancelable or
terminable without at least thirty (30) days' prior written notice to be given
to Licensor. However, no such cancellation or termination shall result in
interruption of the coverage as specified above and in Schedule "F".
6. Quality of Merchandise
Licensee agrees that the Licensed Goods shall be of high standard and of
such style, appearance and quality as to be adequate and suited to their
exploitation to the best advantage and to the protection and enhancement of the
Subject Matter and the goodwill pertaining thereto. The Licensed Goods will be
manufactured, sold and distributed in accordance with all applicable federal,
state and local laws, regulations, rules and orders. Neither the Licensed
Goods nor Licensee's policy of sale, distribution and/or exploitation thereof
shall in any manner reflect adversely upon the good name of Licensor or the
Subject Matter. To this end and to the end that the nature and quality of the
Licensed Goods shall be satisfactory, Licensee shall, before selling or
distributing any of the Licensed goods, furnished to Licensor, free of cost,
for Licensor's written approval, a reasonable number of samples of each
Licensed Good, together with their cartons and containers, including packaging
and wrapping materials and catalogs or brochures. The quality and style of all
such Licensed Goods, as well as any carton, container, packaging and/or
wrapping materials, shall be subject to Licensor's prior written approval.
After samples of the Licensed Goods, catalogs, cartons, containers or packaging
or wrapping material have been approved pursuant to this paragraph, Licensee
shall not depart therefrom in any material respect without Licensor's prior
written approval. After Licensee has commenced selling the Licensed Goods, and
at least once each year during the term of this Agreement, upon Licensor's
written request, Licensee shall furnish without cost to Licensor not more than
ten (10) additional random samples of each Licensed Good being manufactured and
sold by Licensee hereunder, together with any cartons, containers and packaging
or wrapping material used in connection therewith.
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<PAGE> 5
7. Labeling: Promotional Material
(a) Licensee agrees that it will cause to appear on or within each
Licensed Good sold by it under this Agreement, and on or within all
advertising, promotional or display material pertaining to the Subject Matter,
and on any and all cartons, containers, packaging and/or wrapping material
pertaining to the Subject Matter, the following copyright and trademark
notices:
Copyright 1997 Littlefield, Adams & Company.
"Kawasaki", "Ninja", and "Jet Ski" are registered trademarks licensed
by Kawasaki Motors Corp., U.S.A. This product is manufactured and
distributed by Littlefield, Adams, & Company, 6254 Executive
Boulevard, Huber Heights, OH 45424.
(b) Licensee will submit all advertising and promotional materials related
to the Subject Matter or the Licensed Goods, including without limitation
warranty information, for Licensor's review at least two (2) weeks before the
first time such materials are to be broadcast or published. Licensee agrees
not to use any such advertising or promotional materials without Licensor's
prior written consent. If Licensor has not disapproved any such proposed
materials within ten (10) days after receipt of same from Licensee, such
materials shall be deemed approved.
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<PAGE> 6
8. Distribution
(a) Licensee agrees that during the term of this Agreement, at no expense
to Licensor, it will diligently and continuously, and to the greatest extent
possible, manufacture, promote, distribute and sell the Licensed Goods.
(b) Licensee shall exercise due care to avoid selling or distributing the
Licensed Goods to jobbers, wholesalers, distributors, retail stores or
merchants whose sale or distribution of the Licensed Goods is or will be made
for publicity purposes, combination sales, premiums, giveaways, or similar
methods of merchandising, or whose business methods are questionable. Licensee
shall not sell or distribute to any person, firm or corporation, except
Licensor, its subsidiaries, affiliates and authorized dealers, any of the
Licensed Goods for premium, giveaway, or promotional tie-in purposes without
the prior written consent of Licensor.
(c) In no event shall any sale be made at a special price to any of
Licensee's subsidiaries or to any other person, firm or corporation related in
any manner to Licensee or its officers, directors or stockholders. In the
event any sale is made in violation of this paragraph 8(c), Licensor, in
addition to any of its other rights, shall be paid the fee payable under
paragraph 2 hereof, with the net sales price equal to the price generally and
customarily charged by Licensee to non-affiliated parties.
9. Records
Licensee agrees to keep accurate books of account and records covering all
transactions relating to the license hereby granted. Licensor and its duly
authorized representatives shall have the right at reasonable times to examine
said books of account and records, including without limitation, any available
computer printouts, summaries and/or reports with respect to the Subject Matter
of this Agreement, and the right at any reasonable time upon five (5) days'
prior notice to cause a complete audit to be made of Licensee's entire business
with respect to the Subject Matter. Licensee shall promptly remit any
deficiency in fees established by such audit. If the audit discloses that the
actual net sales or quantities of Licensed Goods sold or distributed by
Licensee exceed those reported by Licensee by two percent(2%) or more, Licensee
shall pay the cost of the audit together with the deficiency in fees, if any.
If such audit discloses that Licensee has overpaid the fees, Licensee shall
receive a credit equal to the amount of such overpayment.
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<PAGE> 7
10. Termination
Licensor shall have the right to terminate this Agreement immediately in
any of the following events:
(a) If Licensee shall not have commenced the manufacture, marketing and
sale of the Licensed Goods in a substantial manner by June 1, 1997;
(b) If Licensee shall substantially suspend the manufacture, marketing,
sale or distribution of any of the Licensed Goods for a period of ninety (90)
days;
(c) If Licensee shall fail to perform any condition or covenant provided
for in the Agreement, other than the payment of money, but including without
limitation the rendering of accountings, within thirty (30) days after written
notice of such failure;
(d) If Licensee shall fail to make any payment due Licensor under
paragraph 2 hereof within five (5) days after written demand for such payment
by Licensor;
(e) If Licensee during the term of this Agreement becomes insolvent by
reason of inability to pay its debts as they mature, or makes any assignment
for the benefit of creditors, or files any petition under any bankruptcy or
insolvency act, whether state or federal, or is adjudicated a bankrupt, or an
insolvency proceeding is instituted against Licensee, or any receiver is
appointed for Licensee's business or property, or any trustee in bankruptcy is
appointed for Licensee;
(f) If any attachment, execution or other form of sequestration of a
substantial asset or assets of Licensee is levied and is not bonded or
discharged within ten (10) days after such levy becomes effective.
11. Procedure on Termination or Expiration
Upon the termination or expiration of this Agreement, Licensee may dispose
of any Licensed Goods then on hand, but only in conformity with the following
express conditions:
(a) Licensee shall deliver to Licensor a complete inventory of Licensed
Goods on hand not later than thirty (30) days following the effective date of
expiration or service of the notice of termination, whichever occurs first.
(b) Licensee shall not cause any further Licensed Goods to be manufactured
after termination or service of a notice of termination, whichever occurs first.
(c) The Licensed Goods specified in the inventory furnished to Licensor
pursuant to the provisions of paragraph 11(a) hereof may be sold only during a
period of ninety (90) days
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<PAGE> 8
after the effective date of expiration or termination, and upon expiration of
such 90-day period, at the option of Licensor, either all remaining Licensed
Goods shall be promptly delivered to Licensor at Licensee's expense or the
Subject Matter shall be completely removed and obliterated from such remaining
Licensed Goods.
(d) License fees will be paid pursuant to paragraph 2 hereof, for each
Licensed Good manufactured, sold or distributed by Licensee.
12. Effect of Termination or Expiration
(a) Upon and after the expiration or termination of this Agreement, (i)all
rights granted to Licensee hereunder shall forthwith revert to Licensor, and
(ii) Licensee shall refrain from further use of the Subject Matter or any
further reference to the Subject Matter, direct or indirect, in connection with
the manufacture, sale or distribution of Licensee's products, except as provided
in paragraph 11 hereof.
(b) In the event that Licensor shall be required by reason of any breach
hereof by Licensee to resort to litigation to enforce any of its rights
hereunder, the prevailing party shall be entitled to recover all of its costs
and expenses, including reasonable attorneys' fees, incurred in connection with
such litigation.
(c) Notwithstanding the expiration or termination of this Agreement,
Licensee hereby agrees to continue to pay fees and all other amounts owing to
Licensor, and to deliver statements and reports to Licensor, as specified in
paragraph 2 and Schedule "E" hereof, in respect of all Licensed Goods sold or
distributed during the term of this Agreement and all Licensed Goods sold or
distributed after the termination of this Agreement pursuant to paragraph 11
hereof, including without limitation continuing submission of royalty reports to
Licensor substantially in the form of Schedule "H" attached hereto and made a
part hereof.
13. Renewal
Licensee shall have no right of renewal other than as provided in
Schedule"G" attached hereto and made a part hereof.
14. Force Majeure
In the event that either party hereto is delayed or hindered from the
performance of any act required hereunder by reason of strike, lockouts,
prohibitive governmental laws or regulation, riots, insurrections, war or other
reasons of a like nature beyond the control of such party, then performance of
such acts shall be excused the period of the delay and the period
-8-
<PAGE> 9
of the performance of any such acts shall be extended for a period equivalent
to the period of such delay but in no event shall said performance period be
extended more than one hundred twenty (120) days. The provisions of this
section shall not, however, operate to excuse Licensee from payment of any fees
which are owing under this Agreement.
15. Notices
All notices and statements to be given, and all payments to be made
hereunder, shall be given or made to the parties hereto at the addresses set
forth below the signatures of the parties, or at any other address designated by
either party in writing to the other, and shall be delivered by hand, telegram,
facsimile transmission, or registered or certified mail, postage prepaid, return
receipt requested. Unless otherwise specified in this Agreement, the date of
mailing to said addresses shall be deemed the date any notice or statement is
given.
16. No Joint Venture
Nothing herein shall be construed to place the parties in the relationship
of partners or joint venturers, and Licensee shall have no power to obligate or
bind Licensor in any manner whatsoever.
17. No Assignment or Sublicense
This Agreement is personal to Licensee and neither this Agreement nor any
of the rights or duties hereunder may be assigned, mortgaged, sublicensed or
otherwise encumbered by Licensee or by operation of law.
18. Construction
This Agreement constitutes the entire Agreement between the parties and all
prior negotiations, understandings and commitments are superseded hereby. This
Agreement may be amended or modified only by an instrument in writing executed
by both of the parties. This Agreement shall be construed in accordance with
the laws of the State of California.
19. Disputes: Arbitration
Except as provided in paragraph 19(e) hereof, all controversies, claims
and disputes arising in connection with this Agreement shall be settled by
mutual consultation between the parties in good faith as promptly as possible,
but failing an amicable settlement shall be settled finally by binding
arbitration in accordance with the provisions of this paragraph 19. Such
arbitration shall be conducted in Irvine, California, in accordance with the
commercial arbitration
-9-
<PAGE> 10
rules of the American Arbitration Association; provided document requests and
depositions shall be permitted.
(a) Exclusivity. The parties hereby agree that the arbitration procedure
provided for herein shall be the sole and exclusive method of resolving any and
all controversies, claims or disputes arising hereunder.
(b) Decision by Arbitrators. Licensor and Licensee shall each select an
arbitrator to resolve any dispute hereunder, and the two arbitrators shall
select a third arbitrator. The three arbitrators shall make a final decision
and award according to the terms and provision of this Agreement and applicable
law. The decision shall set forth findings of fact and conclusions of law upon
which the award is based. The arbitrators may select counsel to provide advice
in the preparation of such findings and conclusions, and on any point of law
arising in the course of arbitration. The decision of any two (2) arbitrators
shall constitute a final decision and award hereunder. Judgment upon the award
may be entered in any court which has jurisdiction over such matter accordance
with the provisions of paragraph 19(d) hereof.
(c) Costs and Expenses. The costs and expenses of the arbitration,
including without limitation attorney's fees, shall be borne by the parties in
the manner determined by the arbitrators; provided, however, the prevailing
party shall be entitled to reimbursement of its costs and expenses, including
without limitation attorneys' fees.
(d) Judicial Action. Legal action for entry of judgment upon any
arbitration award, or adjudication of any controversy, claim or dispute arising
from an alleged breach of paragraphs 19(a) through 19(c) hereof, or any action
for injunctive relief pursuant to paragraph 19(e) hereof, may be heard or tried
only in the courts of Orange County, California. Each party hereby waives any
defense of lack of in personam jurisdiction of said courts and agrees that
service of process in such action may be made upon each of them by mailing it
certified or registered mail, return receipt requested, to the other party at
the address provided for in paragraph 19 hereof. Each party hereby submits to
the jurisdiction of the courts so designated, to the exclusion of any other
courts which might have had jurisdiction apart from this paragraph 19(d) and
agrees that the prevailing party shall be entitled to recover from the
non-prevailing party reasonable expenses, including without limitation
attorneys' fees.
(e) Injunctive Relief. Notwithstanding anything herein to the contrary,
the parties hereby agree that any infringement or improper use of the Subject
Matter by Licensee, or any breach
-10-
<PAGE> 11
of the Agreement by Licensee with regard to the Subject Matter, including
without limitation a breach under paragraph 4 hereof, will result in immediate
irreparable harm to Licensor. Therefore, in the event of any such
infringement, improper use or breach, Licensor shall be entitled to immediately
apply for injunctive relief in the courts of Orange County, California, as
provided in paragraph 19(d) hereof.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first set forth above.
LICENSOR:
KAWASAKI MOTORS CORP., U.S.A.,
a Delaware corporation
By: /s/ Barry Beehler Date: 1/27/97
------------------------------ -------
Barry Beehler, Vice President
9950 Jeronimo Road
Irvine, California 92618-2084
Tel: 714-770-0400
Fax: 714-460-5628
LICENSEE:
LITTLEFIELD, ADAMS & CO.
a New Jersey corporation
By: /s/ Michael Balber Date: 1/20/97
------------------------ --------
Michael Balber, President
Sports Imprints/Fun Wear
a division of Littlefield, Adams & Co.
By: /s/ Warren L. Rawls Date: 1/20/97
------------------------- -------
Warren L. Rawls, Corp. Secretary
Littlefield, Adams & Company
6254 Executive Blvd.
Huber Height, OH 45424
Tel: 513-236-0660
Fax: 513-236-1681
-12-
<PAGE> 13
SCHEDULE "A"
The Subject Matter: Licensor's trademark KAWASAKI, JET SKI, NINJA and any
additional or modified trademarks and logotypes pertaining thereto, and
registrations thereon.
SCHEDULE "B"
The Licensed Goods: T-shirts, sweatshirts, tank tops, boxer shorts and hats,
bearing the Subject Matter (as defined and described in Schedule "A").
SCHEDULE "C"
The Territory: United States of America and its Possessions.
SCHEDULE "D"
The term of this Agreement and the license hereby granted shall commence as of
January 1, 1997 and shall continue through and including February 29, 2000.
SCHEDULE "E"
The fees for the use of the Subject Matter shall be eight percent (8%) of the
net sales price of each of the Licensed Goods sold by Licensee and, in the case
of Licensed Goods distributed by Licensee free of charge in connection with the
promotion of the Licensed Goods, eight percent (8%) of the product of (a) the
number of Licensed Goods of each type so distributed and (b) the unit price for
each such Licensed Goods usually charged to Licensee's customers. The term
"net sales price" shall mean Licensee's gross receipts from sales, less only
credits actually granted to customers and excluding any consideration received
in connection with the delivery for purposes of resale of any the Licensed
Goods to any subsidiary, parent or affiliate of Licensee. Reference in this
schedule to "Licensee" shall be deemed to include subsidiaries, parents and
affiliates of Licensee.
Licensee shall pay a guaranteed minimum fee of $30,000.00 during the term of
this Agreement, no part of which shall be refundable. The minimum fee shall be
payable as follows: $7,500.00 upon execution of this agreement. The remaining
$22,500.00 will be payable in two installments of $12,500.00 on December 13,
1998 and $10,000.00 on December 31, 1999.
-13-
<PAGE> 14
SCHEDULE "F"
The amount of coverage of insurance to be obtained and maintained by Licensee
shall be (i) bodily injury liability insurance with coverage limits of not less
than $1,000,000 per person and $1,000,000 per occurrence and (ii) property
damage liability insurance with a coverage limit of not less than $1,000,000
per accident or occurrence.
SCHEDULE "G"
Licensee shall have the option to renew this Agreement for a period of one (1)
years (hereinafter "Renewal Term") said option being exercisable only upon six
(6) months prior written notice to Licensor; however, Licensor shall have the
right to terminate this Agreement, notwithstanding the timely exercise of said
option by Licensee, by giving notice in writing to Licensee prior to the
beginning of any renewal period, if Licensee has not fulfilled all the terms
and conditions of the License Agreement.
SCHEDULE "H"
Sample royalty report: See attached exemplar.
-14-
<PAGE> 15
SCHEDULE "H"
KAWASAKI MOTORS CORP., U.S.A.
ROYALTY STATEMENT
DATE:
LICENSEE NAME:
ADDRESS:
PHONE NUMBER:
FAX NUMBER:
CONTACT PERSON:
FOR THE CALENDAR QUARTER ENDING:
LIST ALL PRODUCTS:
NET SHIPMENTS BY UNIT (ITEMIZE BY PRODUCT):
NET $ SALES (ITEMIZE BY PRODUCT):
TOTAL (ALL PRODUCTS) NET $ SALES:
ROYALTY RATE %:
ROYALTIES EARNED:
MINIMUM ROYALTIES DUE:
MINIMUM ROYALTIES ALREADY PAID:
TOTAL PAYMENT DUE:
STATE ADVERTISING EXPENDITURES (BY PRODUCT):
REPORT DISTRIBUTION:
Mail original report plus check to: Mail copy to:
KAWASAKI MOTORS CORP., U.S.A. BRADFORD LICENSING ASSOC.
9950 Jeronimo Road 209 Cooper Avenue
Irvine, California 92718 Upper Montclair, NJ 07043
Attn: Tracy Thomton Attn: Len Reiter
IMPORTANT NOTICE:
A separate report must be completed for territory granted by License Agreement
<PAGE> 1
EXHIBIT 10.12
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, made this 5th day of March, 1996, by and between
5 W Partnership, a Virginia General Partnership, hereinafter known as "5 W" or
"Purchaser"; Littlefield Adams Inc., hereinafter known as "Littlefield" or
"Seller"; Sawyer Properties, Inc.; Waldvogle Poe & Cronk Real Estate Group,
Inc., hereinafter collectively known as "Agent".
W I T N E S S E T H
That for and in consideration of the mutual entry into this Agreement by
the Parties hereto and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged by each party hereto, Owner
agrees to sell and Purchase agrees to buy the following described real estate
and all improvements thereon located in the jurisdiction of the City of
Roanoke, Virginia, herein called "the property":
That Office and Warehouse located at 1302 Rockland Avenue, N.W., Roanoke,
Virginia containing approximately 32,000 sf and approximately 8 acres and
further identified by Roanoke City Tax Map #213-1301.
1. The purchase price of the property is Seven Hundred Thousand and NO/100
Dollars ($700,000.00) and such price shall be paid by cash or certified funds
at final closing.
2. 5 W has made a deposit of Five Thousand and NO/100 Dollars
1
<PAGE> 2
($5,000.00) with Sawyer Properties, receipt of which is hereby acknowledged,
and such deposit shall be held in escrow until the date of final settlement and
then applied to the purchase price, or returned to the 5 W if the title to the
property is not clear as described in Paragraph #3 of this Agreement or if the
transaction does not close because of conditions of sale contained herein are
not able to be met through no fault of 5 W.
3. Seller agrees to convey the property to 5 W by General Warranty Deed with
the usual covenants of title and free and clear from all encumbrances,
tenancies, liens (for taxes or otherwise), except as may be other wise provided
above, but subject to applicable restrictive covenants of record. Seller
further agrees to deliver possession of the property to 5 W on the date of
final settlement and to pay the expense of Preparation Deed of Conveyance,
Seller's Tax and Seller's legal fees.
4. Final settlement shall be made at the offices of such closing attorney as
designated by 5 W on or about July 1, 1996, or as soon thereafter as title can
be examined and necessary documents prepared, with allowance of a reasonable
time for Seller to correct any defects identified by such title examination.
5. All taxes, interest or similar escrow deposits, if any, shall be pro rated
as of the date of final settlement.
6. All risk of loss or damage to the property by fire, windstorm, casualty,
environmental contamination, or other cause is assumed by Seller until date of
final settlement. In the event of substantial loss or damage to the property
before final settlement, 5 W shall have the option of (a) terminating the
Purchase Agreement and recovering the deposit held in escrow, or (b) affirming
the Purchase Agreement, in which event Seller shall assign to 5 W all of
Seller's rights under any policy or policies
2
<PAGE> 3
if insurance applicable to the property.
7. Littlefield agrees that they shall continue to manage and maintain and
operate the property in a manner consistent with good management practices
until final settlement, making all repairs to the property when required to
maintain the property in good condition.
8. AGENT DISCLOSURE: In accordance with the regulations of the State of
Virginia Real Estate Board, REALTORS hereby discloses to Owner and Buyer that
REALTOR and REALTOR'S salespeople are the Agent of the Owner in connection with
marketing the Property under this agreement. As such, REALTOR and its
salespeople owe Owner their duties of loyalty and faithfulness. At the same
time, brokers and their salespeople are required to treat all parties to a
transaction fairly. Without breaching their duties to Owner, REALTOR and its
salespeople may provide Purchasers with information about the property and may
assist a prospective 5 W in preparing an offer to purchase the Property.
REALTOR and its salespeople have a duty to respond accurately to a Purchasers
questions, to disclose to a prospective Purchaser material information known to
him about the property, and to submit to Owner all offers to purchase the
property.
The parties agree that the Agent was the sole procuring cause of this
transaction. Littlefield agrees to pay Agent a fee for services equal to six
percent (6%) of the purchase price and hereby authorizes and directs the
settlement agent to disburse this fee from Seller's proceeds at final
settlement. This fee will be divided equally between Sawyer Properties, Inc.
as Selling Agent and Waldvogle Poe & Cronk Real Estate Group as Listing Agent.
Except for the Agent herein, the parties hereto agree to indemnify and hold
each harmless in all respects as to
3
<PAGE> 4
any claim made by any other agent, real estate or otherwise, for a commission
with respect to this agreement. The parties further agree, that in the event
that either should default under the terms of this agreement the defaulting
party shall be liable to the Agent for the above mentioned Agent commission.
9. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable as follows:
(A) FIVE THOUSAND DOLLARS ($5,000.00) paid to Sawyer Properties as Escrow
Agent, the receipt of which is hereby acknowledged;
(B) SIX HUNDRED NINETY FIVE THOUSAND ($695,000.00) in cash or certified
funds at final settlement.
10. 5 W CONDITIONS OF SALE. The sale and conveyance of the property under
this Agreement and 5 W's performance hereof is in addition to other
considerations of this Purchase Agreement, are conditioned upon the following:
(A) 5 W at its sole cost and expense have an inspection made of the
property by licensed firms holding out to possess expertise in such matters as
to render an opinion on the basic structure of the building, plumbing,
heating/air conditioning and electrical systems. If such inspections reveal a
defect or defects that would negatively impact the intended use by 5 W, and the
repair and/or replacement of such defect or defects and intended renovations by
5 W exceed $100,000.00, then in that event 5 W shall have the option to declare
this agreement null and void;
(B) 5 W being able to obtain financing at current market rates in the
amount of $650,000.00 with 5 W providing a maximum cash investment or
$150,000.00. 5 W hereby agrees they shall make such loan application within
then (10) working days from the date of acceptance of this agreement and in the
event approval of said loan is not received in ninety (90) days from the date
of this agreement, Littlefield, at it's option, may declare this Purchase
Agreement null and void;
4
<PAGE> 5
(C) Further, 5 W at its expenses shall have the right to have made an
environmental inspection of the property. In the event such inspection
disclose any present contamination and/or violations of environmental law,
remediation of any such contamination and/or violation shall be to the expense
of Littlefield, but subject to the prior written approval of Littlefield. In
the event Littlefield shall fail to give their prior written approval, then,
and in that event, 5 W shall have the option to declare this Purchase Agreement
Null and Void.
5 W at its sole discretion may waive all or any part of the above
"conditions of sale". At such time as all contingencies have been satisfied,
cleared or waived, Seller shall have the right to give the current
month-to-month tenant 60 days notice to vacate the premises.
11. RIGHT TO SURVEY. 5 W may, at any time prior to the Closing, enter upon
the property for the purpose of surveying the property.
12. ASSIGNMENT BY BUYER. The deed shall be made to Buyer or any party,
parties, firm, or corporation the Buyer may designate.
13. BENEFIT. This Agreement shall inure to the benefit of, and shall bind the
heirs, successors and assigns of the respective parties.
14. NOTICES. Any notice or demand under this Agreement shall be by registered
mail and sent to 5 W Partnership, 3215 Brandon Avenue S.W., Roanoke, Virginia
24018 and Littlefield Adams, Inc. C/O Waldvogle Poe & Cronk Real Estate Group,
800 Professional Arts Building, 30 W. Franklin Road, S.W., Roanoke, Virginia
24011 and Sawyer Properties, Inc., 3807 Brandon Avenue, S.W., Suite 2490,
Roanoke, Virginia 24018 and Waldvogle Poe & Cronk Real Estate Group, 800
Professional Arts Building, 30 W. Franklin Road, S.W., Roanoke, Virginia 24011.
17. CONSTRUCTION. The interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia. The
captions and margin notes, if any, are used only as a matter of convenience and
are not to be
5
<PAGE> 6
considered a part of this Agreement as such.
18. SURVIVAL OF ALL REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties contained in this Agreement
shall survive the Closing hereunder and the delivery and recordation of the
deed pursuant to this Agreement.
19. MECHANIC'S LIEN DISCLOSURE. Virginia law (43-1 et seq.) permits persons
who have performed labor or furnished materials for the consideration for the
construction, removal, repair or improvement of any building or structure to
file a lien against the property. This lien may be filed at any time after the
work is commenced or the material is furnished, but not later that the earlier
of (i) 90 days from the last day of the month in which the lien or last
performed work or furnished materials or (ii) 90 days from the time the
construction, removal, repair or improvement is terminated. AN EFFECTIVE LIEN
FOR WORK PERFORMED PRIOR TO THE DATE OF SETTLEMENT MAY BE FILED AFTER
SETTLEMENT. LEGAL COUNSEL SHOULD BE CONSULTED.
20. ENTIRE AGREEMENT. This Purchase Agreement constitutes the entire
agreement between the parties. No representation, warranties, or promises
pertaining to this Agreement or any property affected by this agreement have
been made by, or shall be binding on, any of the parties, except as expressly
stated in this Agreement. This Agreement may not be changed orally, but only
by agreement in writing signed by the party against whom enforcement of any
such change is sought.
6
<PAGE> 7
Witness the following signatures and seal:
5 W Partnership
/s/Anna Thompson , Dated 3-04-96
- - -------------------------------------------------- -------
/s/Michael Turner , Dated 3-04-96
- - -------------------------------------------------- -------
Littlefield Adams, Inc.
/s/David M. Simmonds , Dated 3-12-96
- - -------------------------------------------------- -------
/s/Stanley Halbreich , Dated 3-12-96
- - -------------------------------------------------- -------
Sawyer Properties, Inc.
/s/Jack Carter , Dated 3-04-96
- - -------------------------------------------------- -------
Waldvogle Poe & Cronk Real Estate Group, Inc.
/s/William D. Poe , Dated 3-12-96
- - -------------------------------------------------- -------
<PAGE> 1
EXHIBIT 10.13
5W PARTNERSHIP
P.O. Box 2129
Roanoke, Virginia 24009
May 14, 1996
Littlefield Adams, Inc.
c/o Jack Carter
Sawyer Properties, Inc.
3807 Brandon Avenue, Suite 2490
Roanoke, VA 24018
Reference: 1302 Rockland Avenue Property
Dear Jack:
Effective May 14, 1996 5W Partnership will release all contingencies on the
property located at 1302 Rockland Avenue with the exception of the three items
listed below. If an agreement can be reached on these three items we can close
as soon as the tenants vacate the premises.
(1.) Item #7 - our Purchase Agreement stipulates that the property is to be
"managed and maintained and operate the property in a manner consistent with
good management practices until final settlement, making all repairs to the
property when required to maintain the property in good condition.". In
performing our due diligence, we found that the HVAC system, with the exception
of one over the main office area, have not been serviced or used in quite some
time. Our inspector for the HVAC system informed us that the heater coil
needed to be replaced before testing the compressors in the five older units.
We paid $1,285.00 just to have the system tested. After testing the system, we
found, as noted in the report, that the equipment has not been properly
maintained for quite some time. It will cost $5,575.00 in labor to ensure that
the equipment runs properly. We feel this is the responsibility of the owner
under Item #7.
The inspection of the roof indicated that there are several leaks. It appears
that attempts were made to repair the roof but the repairs were not done
properly. This estimate is $60,010.00.
<PAGE> 2
Littlefield Adams, Inc.
c/o Jack Carter
Page 2
(2) As per our purchase agreement, we are to keep renovations cost to about
$100,000.00. You can see from the enclosed quote, renovations far exceed the
$100,000.00. But, if you agree to a credit of $35,575.00 on the purchase price
that will cover renovations and construction cost overruns we can proceed with
our closing as soon as the tenant vacates the building.
(3) Upon acceptance of the above, please furnish a copy of your notice to the
present tenant to vacate not later than sixty (60) days from the date of our
signed agreement of this contingency release.
Enclosures (6)
IN WITNESS WHEREOF the parties hereto have executed this agreement as of the
day and year first above written.
5W PARTNERSHIP
Date 5/14/96 By /s/Michael Turner
------- ----------------------
Its General Partner
----------------------
LITTLEFIELD ADAMS, INC.
Date 5/16/96 By /s/David M.Simmonds
------- ----------------------
Its Chairman & CEO
----------------------
WALDVOGEL POE & CRONK
Date 5/17/96 By /s/William D. Poe
------- ----------------------
Its Vice President
----------------------
SAWYER PROPERTIES, INC.
Date 5/14/96 By /s/ Jack Carter
------- ----------------------
Its Agent
----------------------
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
among STANLEY HALBREICH, an individual residing in the State of New York (the
"Employee"), and, SPORTS IMPRINTS, INC., an Ohio corporation (the "Corporation";
the Employee and the Corporation being collectively referred to as the "Parties"
and generically as a "Party").
PREAMBLE:
WHEREAS, the Corporation is engaged in the design, manufacture and
sale of sports apparel; and
WHEREAS, the Employee has been involved with the Corporation as an
employee thereof for a significant time; and
WHEREAS, the Parties desire to memorialize all of the provisions
pursuant to which the Employee is employed by the Corporation in order to more
clearly define their respective rights and obligations:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby
acknowledge that the following terms govern their current and anticipated legal
relationships:
WITNESSETH:
ARTICLE ONE
TERM, RENEWALS, TERMINATION
1.1 Term.
This Agreement shall be in effect for a term of three years following
the date hereof or until December 31, 1995, whichever shall be later.
1.2 Renewals.
This Agreement shall, notwithstanding the provisions of Section 1.1,
be renewed automatically, after expiration of the original term, on a year to
year basis, unless the Party wishing not to renew this Agreement provides the
other Party with written notice of its election not to renew ("Termination
Election
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 1
<PAGE> 2
Notice") on or before the 90th day prior to termination of the then current
term.
1.3 Earlier Termination.
The Corporation shall have the right to terminate this Agreement prior
to the expiration of its Term, or of any renewals thereof:
(a) For Cause: The Corporation may terminate the Employee's
employment under this Agreement at any time for cause. Such termination shall
be evidenced by written notice thereof to the Employee, which notice shall
specify the cause for termination. For purposes hereof, the term "cause" shall
mean the inability of the Employee, through sickness or other incapacity, to
perform his duties under this Agreement for a period in excess of six months;
dishonestly; theft; conviction of a crime; and, a material breach of this
Agreement. The term "cause" shall also include the failure of the Employee, for
any reason, within ten days after receipt of a written notice thereof from the
Corporation, to correct, cease or otherwise alter any insubordination, failure
to comply with reasonable instructions or other intentional action or omission
to act which the Corporation reasonably believes does or may materially or
adversely affect its business or operations.
(b) Termination Due to Discontinuance of Business: In the event that
the Corporation discontinues operating its business without continuation through
a successor entity, this Agreement shall terminate as of the last day of the
month on which the Corporation ceases operation with the same force and effect
as if such last day of the month were originally set as the termination date
hereof.
(c) Termination Due to Death: This Agreement shall terminate
immediately on the death of the Employee.
(d) Termination Due to Disability: This Agreement shall terminate
immediately on the medical determination of permanent disability of the Employee
to perform under this Agreement.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Employee of all
amounts due him hereunder, the Employee or his representative shall execute and
deliver to the Corporation on a form prepared by the Corporation a receipt for
such sums, and, shall forthwith tender to the Corporation all records, recipes,
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 2
<PAGE> 3
manuals, procedures, lists of providers, etc., as may be desired by the
Corporation for the continued conduct of its restaurant business.
ARTICLE TWO
SCOPE OF EMPLOYMENT
2.1 Retention.
The Corporation has hired the Employee and the Employee has accepted
such employment, in accordance with the terms, provisions and conditions of this
Agreement.
2.2 General Description of Duties.
The Employee shall perform all duties requested by the Corporation
consistent with the position of an executive officer of the Corporation.
2.3 Status.
The Employee shall during his entire tenure as a full time employee of
the Corporation serve as one of its executive officers. The employee currently
serves as the Corporation's chief executive officer.
2.4 Exclusivity.
The Employee shall be required to devote full business time to the
business of the Company and its affiliates, and, may engage in any other
business activities only long as such activities are not directly, indirectly or
incidentally competitive with the business of the Corporation or its affiliates
and in no manner interfere or curtail his ability to perform the duties required
hereby.
ARTICLE THREE
COMPENSATION
3.1 Compensation.
In consideration for the Employee's services to the Corporation, the
Employee shall be entitled to:
(a) An annual base salary of $100,000; and
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 3
<PAGE> 4
(b) An annual bonus equal to 9% of the Corporation's calendar year
pre-tax earnings (the "Basic Bonus"), subject to non-refundable, monthly draws
in anticipation thereof in a sum equal to $4,100.
3.2 Entire Compensation.
The compensation herein provided shall constitute full payment for the
services of the employee rendered to the Corporation and the Employee shall not
receive any additional compensation for extraordinary services, unless, prior to
their rendition, the Corporation agrees to additional compensation in writing.
The Employee expressly waives, discharges and releases the Corporation from any
claims for additional compensation for extraordinary services unless such
compensation is specifically provided for, in writing, prior to their rendition.
3.3 Termination of Compensation.
Except as provided in this Agreement to the contrary, compensation
provided to the Employee pursuant to this Article Three shall cease immediately
after the death or permanent disability of the Employee, provided that any
payment accrued before the employee's death or permanent disability shall be
made to the Employee, or, if the Employee is deceased, to the Employee's
Personal Representative for distribution in accordance with the directions,
testamentary or otherwise, of the Employee.
ARTICLE FOUR
SPECIAL COVENANTS OF THE EMPLOYEE
4.1 Confidentiality.
The Employee acknowledges that, in and as a result of his employment
hereunder, he will be developing for the Corporation, making use of, acquiring
and/or adding to, confidential information of special and unique nature and
value relating to such matters as the Corporation's trade secrets, systems,
procedures, manuals, confidential reports, and lists of clients, financial
sources, advertisers and suppliers; consequently, as material inducement to the
entry into this Agreement by the Corporation, the Employee hereby covenants and
agrees that all confidential information so developed shall be the property of
the Corporation, and he shall assure that legible written copies of all such
information are provided to the Corporation prior to his disassociation
therefrom. In the event of a breach or threatened breach by the Employee of any
of the
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 4
<PAGE> 5
provisions of this Section 4.1, the Corporation, in addition to and not in
limitation of any other rights, remedies or damages available to the
Corporation, whether at law or in equity, shall be entitled to a permanent
injunction in order to prevent or to restrain any such breach by the Employee,
or by the Employee's partners, agents, representatives, servants, employers,
employees, affiliates and/or any and all persons directly or indirectly acting
for or with him.
4.2 Competition.
The Employee acknowledges that the services to be rendered hereunder
are of a special and unusual character which have a unique value to the
Corporation, and that the loss thereof cannot adequately be compensated by
damages in an action at law; consequently, in view of the unique value to the
Corporation of the services of the Employee for which the Corporation has
contracted hereunder, and because of the confidential information to be obtained
by or disclosed to the Employee, as hereinabove set forth, and as a material
inducement to the Corporation's entry into this Agreement, the Employee
covenants and agrees that, provided that the Corporation has not theretofore
breached its obligations under this Agreement:
(a) During the term of the Employee's employment and for a period of
two years after its termination, the Employee shall not, directly or indirectly,
solicit business from, divert business from, or attempt to convert to other
methods of using the same or similar services as provided by the Corporation,
any client, account or business contact of the Corporation with which the
Employee has had any contact as a result of his employment by the Corporation
hereunder or otherwise;
(b) During the Employee's employment hereunder and for a period of
two years after he ceases to be employed by the Corporation, the Employee shall
not, directly or indirectly, solicit for employment or employ any employee of
the Corporation or its affiliates.
4.3 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly
occur to the Corporation as a result of a breach by the Employee of the
covenants or agreements contained in this Article Four, and in view of the lack
of an adequate remedy at law to protect the Corporation's interests, the
Employee hereby consents to the issuance of a permanent injunction enjoining him
from any violations of the covenants set forth in Section 4.1 hereof.
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 5
<PAGE> 6
4.4 Cumulative Remedies.
The Employee hereby irrevocably agrees that the remedies described in
Section 4.3 hereof shall be in addition to, and not in limitation of, any of the
rights or remedies to which the Corporation is or may be entitled to, whether at
law or in equity, under or pursuant to this Agreement.
4.5 Acknowledgment of Reasonableness.
The Employee hereby represents, warrants and acknowledges that he has
carefully read and considered the provisions of this Article Four and, having
done so, agrees that the restrictions set forth herein are fair and reasonable
and are reasonably required for the protection of the interests of the
Corporation, its officers, directors and other employees; consequently, in the
event that any of the above-described restrictions shall be held unenforceable
by any court of competent jurisdiction, the Employee hereby covenants, agrees
and directs such court to substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and, the Employee
hereby covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth herein
directly by the Parties. In determining the nature of this limitation, the
Employee hereby acknowledges, covenants and agrees that it is the intent of the
Parties that a court adjudicating a dispute arising hereunder recognize that the
Parties desire that this covenant not to compete be imposed and maintained to
the greatest extent possible.
ARTICLE FIVE
MISCELLANEOUS
5.1 Notices.
All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been duly given
on the first business day after mailing by the United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
To the Employee:
Stanley Halbreich
---------------------
---------------------
---------------------
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 6
<PAGE> 7
To the Corporation:
SPORTS IMPRINTS, INC.
350 Fifth Avenue, Suite 1134
New York, New York 10118
Attention: Stanley Halbreich
or to such other address or to such other person as any party shall designate
to the other for such purpose in the manner hereinafter set forth.
5.2 Amendment.
No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by the Party
against which the enforcement of said modification, waiver, amendment, discharge
or change is sought.
5.3 Merger.
This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein. All prior
agreements whether written or oral, are merged herein and shall be of no force
or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or
the application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the
State of New York and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in the City and State of New York.
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 7
<PAGE> 8
5.7 Litigation.
In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including reasonable
attorneys' fees up to and including all negotiations, trials and appeals,
whether or not litigation is initiated.
5.8 Benefit of Agreement.
This Agreement may be assigned only by the Corporation, the Employee's
duties being of a personal nature, however, the Employee may assign his rights
to compensation under this Agreement provided that any such assignment is
subject to defenses available against the Employee for non-performance or
improper performance under this Agreement. Subject to the restrictions on
transferability and assignment contained herein, the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the Parties,
their successors, assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identity of the
Party or Parties, or their personal representatives, successors and assigns may
require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or
cause to be done, executed or acknowledged or delivered and to perform all such
acts and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but rather,
the relationship established hereby is that of employer-employee.
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 8
<PAGE> 9
5.13 Counterparts.
This Agreement may be executed in any number of counterparts. All
executed counterparts shall constitute one Agreement notwithstanding that all
signatories are not signatories to the original or the same counterpart.
9.15 Copyright.
This Agreement is the property of Houston, Calvo & Houston, P.A., a
Florida professional corporation. The use hereof by the Parties is authorized
hereby solely for purposes of this transaction and, the use of this form of
agreement or of any derivation thereof without Houston, Calvo & Houston, P.A.'s
prior written permission is prohibited.
IN WITNESS WHEREOF, the Parties have executed this Agreement,
effective as of the 16 day of November, 1992.
Signed, Sealed & Delivered
In Our Presence
Sports Imprints, Inc.
/s/ Carole Gershowitz
- - -------------------------------
By: /s/ Jerrold Luloff
- - ---------------------------- -------------------------
President
(CORPORATE SEAL) Attest: /s/ Jerrold Luloff
-------------------------
Secretary
EMPLOYEE
/s/ Carole Gershowitz
- - ----------------------------
/s/ Stanley Halbreich
- - ---------------------------- -------------------------
Stanley Halbreich
Please Initial: Corporation: /s/ JL Employee: /s/ SH
------ ------
Employment Agreement, Page 9
<PAGE> 1
EXHIBIT 10.15
AMENDMENT TO EMPLOYMENT AGREEMENT
Agreement made and entered into as of the 4th day of January, 1993 by
and between Stanley Halbreich (the "Employee") and Sports Imprints, Inc. (the
"Corporation").
WHEREAS, the Corporation and the Employee are parties to a certain
employment agreement effective as of November 16, 1992 (the "Employment
Agreement"); and
WHEREAS the parties wish to amend the Employment Agreement in
accordance with the terms of Paragraph 5.2 of the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions herein contained the parties hereto agree as follows:
1. Paragraph 3.1(b) of the Employment Agreement is hereby amended to
read as follows:
"3.1(b) an annual bonus equal to nine (9%) percent of the first Five
Hundred Thousand ($500,000) Dollars of the Corporation's calandar year
pre-tax earnings (the "Basic Bonus") subject to non-refundable monthly
draws in anticipation thereof in the sum of Four Thousand One Hundred
($4,100) Dollars."
<PAGE> 2
IN WITNESS WHEREOF, the Parties have executed this Agreement,
effective as of the 16 day of November, 1992.
Signed, Sealed & Delivered
In Our Presence
SPORTS IMPRINTS, INC.
- - ---------------------------
/s/ Sarah Colasurdo By: /s/ Jerrold Luloff
- - --------------------------- ------------------------
President
(CORPORATE SEAL) Attest: /s/ Jerrold Luloff
------------------------
Secretary
EMPLOYEE
- - ---------------------------
/s/ Sarah Colasurdo /s/ Stanley Halbreich
- - --------------------------- ------------------------
Stanley Halbreich
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of June 21, 1996, by and between
LITTLEFIELD, ADAMS & COMPANY (the "Company" or "LFA") and Warren L. Rawls
("Rawls").
W I T N E S S E T H:
WHEREAS, Rawls desires to be employed by LFA, and LFA desires to employ
Rawls, on the terms and conditions contained herein; and
WHEREAS, the parties desire to enter into this Agreement for the purpose
of setting forth the terms of Rawls' employment by LFA;
NOW, THEREFORE, in consideration of the above premises and mutual promises
and covenants herein, the parties agree as follows:
1. Term.
The term of this Agreement shall be for a period of two (2) years,
commencing on July 1, 1996 and expiring on June 30, 1998.
2. Time and Efforts/Duties of Employee.
Rawls covenants and agrees that he shall, throughout the Term of this
Agreement, diligently and conscientiously devote all of his working time and
attention and best efforts to discharging the duties described herein, and
to promote and uphold the best interests of LFA.
Rawls shall be employed as an Officer of the Company, with such title,
duties, and responsibilities as assigned to Rawls by LFA's Board of
Directors, subject to limitations set forth in paragraph #5 below.
3. Compensation.
A. In consideration for the performance of services by Rawls, LFA shall
pay Rawls an annual gross salary, less usual and ordinary deductions, of
not less than One Hundred Thousand Dollars ($100,000) per year. The
payments will be made on a minimum of a semi-monthly basis.
B. LFA shall provide Rawls medical insurance, as well as other fringe
benefits, comparable to those provided other top management personnel
employed by LFA.
C. Rawls will retain any and all stock options granted previous to this
Agreement, pursuant to the terms and conditions of the Littlefield, Adams
& Company Stock Incentive Plan in effect at the time the options were
granted. Rawls will be eligible to participate in additional grants of
stock options which may, at the sole discretion of LFA, be granted in the
future.
D. Rawls will be eligible to participate in any cash or stock bonus
program which may, at the sole discretion of LFA, be instituted in the
future.
E. LFA will reimburse Rawls for his reasonable and ordinary business
expenses such as travel, food, entertainment and lodging. LFA will also
reimburse Rawls for expenses necessary to maintain his CPA license and
memberships in national and state CPA associations.
<PAGE> 2
4. Termination.
Notwithstanding the "Term" of employment described in paragraph 1
above, LFA may terminate this Agreement "for cause" at any time without
notice if Rawls commits any dishonest, fraudulent or criminal act,
discloses confidential information, is guilty of gross carelessness or
misconduct, or intentionally and materially breaches any term of this
Agreement. In the event this Agreement is terminated "for cause"
pursuant to this paragraph, all salary and benefits of whatever kind,
including vested stock options, shall be forfeited, except for accrued
wages and bonuses, if applicable.
During the "Term" of employment described in paragraph 1 above, LFA, at
its sole discretion, may elect to terminate this agreement "without cause"
by so notifying Rawls in writing and paying Rawls severance in accordance
with the following:
Termination "without cause"
occurs during this period Amount of severance
-------------------------- -------------------
July 1, 1996 to June 30, 1997 $100,000
July 1, 1997 to June 30, 1998 $ 50,000
In the event this Agreement is terminated "without cause" pursuant to
this paragraph, payment of appropriate severance plus any applicable
accrued wages and bonuses will be made within fifteen (15) days of the
written notification. Said payment shall constitute the complete remedy
of Rawls for any and all claims alleged to arise under this Agreement.
5. Encumbrances.
Rawls hereby acknowledges that he is not in any way restricted from
being employed by LFA and fulfilling the duties and responsibilities
contemplated by this agreement, except as follows:
Rawls is subject to an Agreed Consent Order, dated June 27, 1995,
with the SEC which suspends Rawls from practicing as a professional
accountant before the SEC. Rawls may apply for reinstatement with the
SEC on June 27, 1997. Rawls and LFA acknowledge that until the SEC
grants such reinstatement, Rawls' duties and responsibilities must be
compatible with the Agreed Consent Order.
6. Severability and Reformation.
In the event any provision of this Agreement shall be judged
unenforceable to the full extent as written, the parties hereby consent and
agree that the scope of such clause or provision may be modified in any
enforcement permitted in equity or law as most nearly effectuates the
understanding of the parties set forth in the language herein agreed upon.
If any provision is adjudged void or unenforceable, or is modified as
provided herein, all other clauses and provisions shall, in any case, be
deemed severable and shall remain in full force and effect.
Page 2 of 3
<PAGE> 3
7. Entire Agreement.
This agreement, constitutes the entire agreement between the parties
hereto. Any oral representation, prior agreements, writings of whatever
kind, or contracts are hereby canceled without further liability whatsoever
upon either party, except for benefits or rights generally available to
employees or officers of the Company and the following agreements which are
not canceled and remain in full force and effect (copies of which are
attached):
A. Letter dated March 7, 1996 from David Simmonds concerning
reimbursement of moving expenses.
B. Letter dated April 22, 1996 from Stanley Halbreich concerning
relocation to the Dayton, OH area.
IN WITNESS WHEREOF, Littlefield, Adams & Company has caused this
instrument to be executed on LFA's behalf by a duly authorized officer and
Rawls has set his hand hereunto both this 21st day of June, 1996.
Littlefield, Adams & Company
By: /S/ DAVID M. SIMMONDS /S/ WARREN L. RAWLS
---------------------------- -----------------------
Warren L. Rawls
Name: David M. Simmonds
----------------------------
Title: Chairman, President & CEO
----------------------------
Date: June 21, 1996 June 21, 1996
---------------------------- -----------------------
Date
Page 3 of 3
<PAGE> 1
EXHIBIT 10.17
PROMISSORY NOTE
<TABLE>
<S><C>
Borrower: Littlefield, Adams & Company, A New Jersey Lender: THE BANK OF FLOYD
Corporation (TIN: 22-1469846) P.O. BOX 215
6262 Executive Boulevard 101 JACKSONVILLE CIRCLE
Huber Heights, OH 45424 FLOYD, VA 24091
Principal Amount: $142,634.32 Initial Rate: 9.250% Date of Note: February 1, 1997
</TABLE>
PROMISE TO PAY. Littlefield, Adams & Company, A New Jersey Corporation
("Borrower") promises to pay to THE BANK OF FLOYD ("Lender"), or order, in
lawful money of the United States of America, the principal amount of One
Hundred Forty Two Thousand Six Hundred Thirty Four & 32/l00 Dollars
($142,634.32), together with interest on the unpaid principal balance from
February 1, 1997, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan on demand, or if no demand is made, in 30 payments
of $5,188.41 each payment and an irregular last payment estimated at $5,188.44.
Borrower's first payment is due March 1, 1997, and all subsequent payments are
due on the same day of each month after that. Borrower's final payment will be
due on September 1, 1999, and will be for all principal, accrued interest, and
all other applicable fees, costs and charges, if any, not yet paid. Payments
include principal and interest. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual interest
rate over the number of days in a year, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the WALL
STREET JOURNAL PRIME RATE (the "Index"). The Index is not necessarily the
lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each year beginning August 29, 1997, and every year thereafter. The Index
currently is 8.250% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.000 percentage point over
the Index, resulting in an initial rate of 9.250% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law. Whenever increases occur in the interest rate,
Lender, at its option, may do one or more of the following: (a) increase
Borrower's payments to ensure Borrower's loan will pay off by its original
final maturity date, (b) increase Borrower's payments to cover accruing
interest, (c) increase the number of Borrower's payments, and (d) continue
Borrower's payments at the same amount and increase Borrower's final payment.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note, Borrower understands that Lender is entitled to a minimum
interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in Borrower making fewer payments.
<PAGE> 2
02-01-1997 PROMISSORY NOTE Page 2
Loan No 0105592300 (Continued)
LATE CHARGE. If a payment is 7 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (f) Any
guarantor dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A material adverse
change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (h) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest, together with all other
applicable fees, costs and charges, if any, immediately due and payable,
without notice, and then Borrower will pay that amount. Furthermore, subject
to any limits under applicable law, upon default, Borrower also agrees to pay
Lender's attorneys' fees, and all of Lender's other collection expenses,
whether or not there is a lawsuit and including without limitation legal
expenses for bankruptcy proceedings. This Note shall be governed by, construed
and enforced in accordance with the laws of the Commonwealth of Virginia.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by a Security Agreement from Collegiate
Pacific Company, an Iowa Corporation to The Bank of Floyd dated January 17,
1992 a Financing Statement from Collegiate Pacific Company, an Iowa Corporation
filed January 27, 1992 at the State Corporation Commission as File Number
920131569 and also filed at the office of the Secretary of State of Iowa on
January 30, 1992 as File Number K329339; a Security Agreement and Amendment of
Financing Statement from Collegiate Pacific Company, an Iowa Corporation to The
Bank of Floyd dated August 29, 1994; Security Agreement and Financing
Statements from Littlefield, Adams & Company, A New Jersey Corporation to The
Bank of Floyd dated February 1, 1997.
ASSUMPTION. THIS NOTE MAY NOT BE ASSUMED.
<PAGE> 3
02-01-1997 PROMISSORY NOTE Page 3
Loan No 0105592300 (Continued)
SIGNATURES AND SEALS. In witness whereof, I have signed my name and affixed my
seal.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Littlefield, Adams & Company, A New Jersey Corporation
<TABLE>
<S> <C>
By: /s/ David M. Simmonds (SEAL) By: /s/ Stanley I. Halbreich (SEAL)
---------------------------------------------- ---------------------------------------
David M. Simmonds, Chairman, President and CEO Stanley I. Halbreich, Treasurer and CEO
</TABLE>
By: /s/ Warren L. Rawls (SEAL)
-----------------------------------------
Warren L. Rawls, Secretary and Controllor
State of Ohio
County of Montgomery
On this 10th day of March, 1997, before me appeared
David M. Simmonds, Stanley I. Halbreich, and Warren L. Rawls
and executed the foregoing document.
/s/ Mary C. Burns
------------------
Mary C. Burns
Notary Public
Mary C. Burns, Notary Public
In and for the State of Ohio
My Commission Expires Jan. 26,
1998
<PAGE> 1
EXHIBIT 10.18
BUSINESS LOAN AGREEMENT
<TABLE>
<S> <C>
Borrower: Littlefield, Adams & Company, A New Jersey Lender: THE BANK OF FLOYD
Corporation (TIN: 22-1469846) P.O. BOX 215
6262 Executive Boulevard 101 JACKSONVILLE CIRCLE
Huber Heights OH 45424 FLOYD, VA 24091
</TABLE>
THIS BUSINESS LOAN AGREEMENT between Littlefield, Adams & Company, A New Jersey
Corporation ("Borrower) and THE BANK OF FLOYD ("Lender") is made on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of February 1,1997, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement,
as this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Business
Loan Agreement from time to time.
Borrower. The word "Borrower" means Littlefield, Adams & Company, A New
Jersey Corporation and its successors and assigns. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
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02-01-1997 BUSINESS LOAN AGREEMENT Page 2
Loan No 0105592300 (Continued)
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security Interest in
any Collateral for the Indebtedness, and their personal representatives,
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness and their personal representatives,
successors and assigns.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, including all principal, interest and other fees,
costs and charges, if any, together with all other present and future
liabilities and obligations of Borrower, or any one or more of them, to
Lender, whether direct or indirect, matured or unmatured, and whether
absolute or contingent, joint, several, or joint and several, and
no matter how the same may be evidenced or shall arise.
Lender. The word "Lender" means THE BANK OF FLOYD, its successors and
assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or
refinancing note or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender; (b)
liens for taxes, assessments or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics
warehousemen, or carriers, or, other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(d) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this
Agreement or permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens"; (e) liens and security
interests which, as of the date of this Agreement, have been disclosed to
and approved by the Lender in writing; and (f) those liens and security
interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether
<PAGE> 3
02-01-1997 BUSINESS LOAN AGREEMENT Page 3
Loan No 0105592300 (Continued)
created by law, contract, or otherwise, evidencing, governing,
representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any and all types of liens and encumbrances, whether
created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d)
evidence of insurance as required below; and (e) any other documents
required under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties
set forth in this Agreement, in the Related Documents, and in any
document or certificate delivered to Lender under this Agreement are
true and correct.
No Event of Default. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in which
it is presently engaged or presently proposes to engage. Borrower also
is duly qualified as a foreign corporation and is in good standing in
all states in which the failure to so qualify would have a material
adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower to the extent to be
executed delivered or performed by Borrower, have
<PAGE> 4
02-01-1997 BUSINESS LOAN AGREEMENT page 4
Loan No 0105592300 (Continued)
been duly authorized by all necessary action by Borrower; do not require
the consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of,
or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will
constitute, legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
Hazardous Substances The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the "CERCLA,"
"SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower represents
and warrants that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the
properties. (b) Borrower has no knowledge of, or reason to believe that
there has been (i) any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or
substance on, under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters.
(c) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the properties shall use, generate,
manufacture, store, treat dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any
<PAGE> 5
02-01-1997 BUSINESS LOAN AGREEMENT Page 5
Loan No 0105592300 (Continued)
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws,
and (b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to Borrower. The
provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other events,
if any, that have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid
in full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and rights
in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note and
all of the Related Documents are binding upon Borrower as well as upon
Borrower's successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
Commercial Purposes Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more than
one place of business, is located at 6262 Executive Boulevard,
Huber Heights, OH 45424. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower keeps
its records concerning the Collateral.
<PAGE> 6
02-01-1997 BUSINESS LOAN AGREEMENT Page 6
Loan No 0105592300 (Continued)
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in making the above referenced
Loan to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and
shall remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to
occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which
could materially affect the financial condition of Borrower or the
financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at
all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in
no event later than thirty (30) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended,
compiled by a certified public accountant satisfactory to Lender. All
financial reports required to be provided under this Agreement shall
be prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true
and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may from time to time
reasonably require with respect to Borrower's properties and operations,
in form, amounts, coverages and with insurance companies acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Borrower or any
other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower
will provide Lender with such loss payable or other endorsements
as Lender may require.
<PAGE> 7
02-01-1997 BUSINESS LOAN AGREEMENT Page 7
Loan No 0105592300 (Continued)
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of
determining those values; and (f) the expiration date of the policy. In
addition, upon request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to Lender
determine, as applicable, the actual cash value or replacement cost of
any Collateral. The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default
in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any of
Borrower's properties, income, or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same
shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of the
assessments, taxes, charges, levies, liens and claims and will authorize
the appropriate governmental official to deliver to Lender at any time a
written statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in a
timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under this
Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel, conduct its
business affairs in a reasonable and prudent manner and in compliance
with all applicable federal, state and municipal laws, ordinances, rules
and regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans
With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books,
<PAGE> 8
2-01-1997 BUSINESS LOAN AGREEMENT Page 8
Loan No 0105592300 (Continued)
accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any
records it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement are
true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part
or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is
damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness. Except for trade debt incurred in the normal course of
business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including
capital leases.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that notwithstanding
the foregoing, but only so long as no Event of Default has occurred and
is continuing or would result from the payment of dividends, if Borrower
is a "Subchapter S Corporation" (as defined in the Internal Revenue Code
of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state
<PAGE> 9
02-01-1997 BUSINESS LOAN AGREEMENT Page 9
Loan No 0105592300 (Continued)
law which arise solely from their status as Shareholders of a Subchapter
S Corporation because of their ownership of shares of stock of Borrower,
or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
SIGNATURES AND SEALS. In witness whereof, I have signed my name and affixed my
seal.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security interest) at
any time and for any reason.
<PAGE> 10
02-01-1997 BUSINESS LOAN AGREEMENT Page 10
Loan No 0105592300 (Continued)
Insolvency. The dissolution or termination of Borrower's existence as
a going business, or a trustee or receiver is appointed for Borrower or
for all or a substantial portion of the assets of Borrower, or Borrower
makes a general assignment for the benefit of Borrower's creditors, or
Borrower files for bankruptcy, or an involuntary bankruptcy petition is
filed against Borrower and such involuntary petition remains undismissed
for sixty (60) days.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the Indebtedness,
or by any governmental agency. This includes a garnishment, attachment,
or levy on or of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate and, at Lender's
option, all sums owing in connection with the Loans, including all principal,
interest, and all other fees, costs and charges, if any, will become
immediately due and payable, all without notice of any kind to Borrower, except
that in the case of an Event of Default of the type described in the
"Insolvency" subsection above, such acceleration shall be automatic and not
optional. In addition, Lender shall have all the rights and remedies provided
in the Related Documents or available at law, in equity, or otherwise. Except
as may be prohibited by applicable law, all of Lender's rights and remedies
shall be cumulative and may be exercised singularly or concurrently. Election
by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation
of Borrower or of any Grantor shall not affect lender's right to declare a
default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Virginia.
<PAGE> 11
02-01-1997 BUSINESS LOAN AGREEMENT Page 11
Loan No 0105592300 (Continued)
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the
Borrowers signing below is responsible for all obligations in this
Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of
such interests in the Loans and will have all the rights granted under
the participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of any holder
of any interest in the Loans. Borrower further agrees that the purchaser
of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's out-of-pocket expenses incurred in connection with this
Agreement or in connection with the Loans made pursuant to this
Agreement. Subject to any limits under applicable law, if Lender hires
an attorney to help enforce this Agreement or to collect any
Indebtedness, Borrower agrees to pay Lender's attorneys' fees, and all
of Lender's other collection expenses, whether or not there is a lawsuit
and including legal expenses for bankruptcy proceedings.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as certified or
registered mail in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower will keep Lender informed at
all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid and
enforceable.
<PAGE> 12
02-01-1997 BUSINESS LOAN AGREEMENT Page 12
Loan No 0105592300 (Continued)
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or ovenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assign. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
Survival. All warranties, representations, and agreements of Borrower
in this Agreement shall survive the making of the Loan or Loans
contemplated hereby, and shall be deemed made and redated by Borrower at
the time of the making of each disbursement of Loan proceeds.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Indulgence by Lender with respect to any of the terms and
conditions of this Agreement or the failure of Lender to exercise any of
its rights under this Agreement shall not constitute a waiver thereof,
and Borrower shall remain liable for the strict performance of such terms
and conditions until this Agreement shall be terminated. No provision of
this Agreement may be waived or modified orally, but all such waivers or
modifciations shall be in writing. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in
one instance shall not constitute Lender's continuing consent in
subsequent instances, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE> 13
02-01-1997 BUSINESS LOAN AGREEMENT Page 13
Loan No 0105592300 (Continued)
THIS BUSINESS LOAN AGREEMENT IS SIGNED, SEALED AND DELIVERED EFFECTIVE IN ALL
RESPECTS AS OF FEBRUARY 1,1997.
BORROWER:
Littlefield, Adams & Company, A New Jersey Corporation
<TABLE>
<S> <C>
By: /s/ David M. Simmonds (SEAL) By: /s/ Stanley I. Halbreich (SEAL)
---------------------------------------------- ---------------------------------------
David M. Simmonds, Chairman, President and CEO Stanley I. Halbreich, Treasurer and CEO
</TABLE>
By: /s/ Warren L. Rawls (SEAL)
-------------------------------------------
Warren L. Rawls, Secretary and Controllor
LENDER:
THE BANK OF FLOYD
By : /s/ Lawrence M. Renfroe
-------------------------------------
Authorized Officer
State of Ohio
County of Montgomery
On this 10th day of March, 1997, before me appeared
David M. Simmonds, Stanley I. Halbreich, and Warren L. Rawls
and executed the foregoing document.
/s/Mary Burns
--------------------
Mary C. Burns
Notary Public MARY C. BURNS, Notary Public
In and for the State of Ohio
My Commission Expires
Jan 26,1998
<PAGE> 1
EXHIBIT 10.19
PROMISSORY NOTE
<TABLE>
<S><C>
Borrower: Littlefield, Adams & Company, A New Jersey Lender: THE BANK OF FLOYD
Corporation (TIN: 22-1469846) P.O. BOX 215
6262 Executive Boulevard 101 JACKSONVILLE CIRCLE
Huber Heights, OH 45424 FLOYD, VA 24091
Principal Amount: $468,483.83 Initial Rate: 9.250% Date of Note: January 31, 1997
</TABLE>
PROMISE TO PAY. Littlefield, Adams & Company, A New Jersey Corporation
("Borrower") promises to pay to THE BANK OF FLOYD ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Four
Hundred Sixty Eight Thousand Four Hundred Eighty Three & 83/100 Dollars
($468,483.83), together with interest on the unpaid principal balance from
January 31, 1997, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in accordance with the following payment schedule:
Borrower will pay this loan on demand, or if no demand is made, beginning
February 28, 1997, and each month thereafter, payments will consist
of accrued interest and One Quarter of One Percent (0.25%) of the
outstanding principal balance.
Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the WALL
STREET JOURNAL PRIME RATE (the "Index"). The Index is not necessarily the
lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each DAY. The Index currently is 8.250% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting in a current rate of 9.250% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. Whenever increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (a) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (b) increase Borrower's payments to
cover accruing interest, (c) increase the number of Borrower's payments, and
(d) continue Borrower's payments at the same amount and increase Borrower's
final payment.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note, Borrower understands that Lender is entitled to a minimum
interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in Borrower making fewer payments.
<PAGE> 2
01-31-1997 PROMISSORY NOTE Page 2
Loan No 5312501 (Continued)
LATE CHARGE. If a regularly scheduled interest payment is 7 days or more late,
Borrower will be charged 5.000% of the regularly scheduled payment. If Lender
demands payment of this loan, and Borrower does not pay the loan within 7 days
after Lender's demand, Borrower also will be charged 5.000% of the sum of the
unpaid principal plus accrued unpaid interest.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (f) Any
guarantor dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A material adverse
change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (h) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest, together with all other
applicable fees, costs and charges, if any, immediately due and payable,
without notice, and then Borrower will pay that amount. Furthermore, subject
to any limits under applicable law, upon default, Borrower also agrees to pay
Lender's attorneys' fees, and all of Lender's other collection expenses,
whether or not there is a lawsuit and including without limitation legal
expenses for bankruptcy proceedings. This Note shall be governed by, construed
and enforced in accordance with the laws of the Commonwealth of Virginia.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by a Security Agreement from Collegiate
Pacific Company, an Iowa Corporation to The Bank of Floyd dated January 17,
1992; a Financing Statement from Collegiate Pacific Company, an Iowa
Corporation filed January 27 1992 at the State Corporation Commission as File
Number 920131569 and also filed at the office of the Secretary of State of Iowa
on January 30, 1992 as File Number K329339; a Security Agreement and Amendment
of Financing Statement from Collegiate Pacific Company, an Iowa Corporation to
The Bank of Floyd dated August 29, 1994; a Security Agreement and Financing
Statements from Littlefield, Adams & Company, a New Jersey Corporation to the
Bank of Floyd dated January 31, 1997.
ASSUMPTION. THIS NOTE MAY NOT BE ASSUMED.
<PAGE> 3
01-31-1997 PRIMISSORY NOTE Page 3
Loan No 5312501 (Continued)
SIGNATURES AND SEALS. In witness whereof, I have signed my name and affixed my
seal.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE
BORROWER:
Littlefield, Adams & Company, A New Jersey Corporation
<TABLE>
<S> <C>
By: /s/David M. Simmonds (SEAL) By: /s/Stanley I. Halbreich (SEAL)
------------------------------------------------ -----------------------------------------
David M. Simmonds, Chairman, President and CEO Stanley I. Halbreich, Treasurer and CEO
</TABLE>
By: /s/Warren L. Rawls (SEAL)
-------------------------------------------
Warren L. Rawls, Secretary and Controllor
State of Ohio
County of Montgomery
On this 10th day of March, 1997, before me appeared
David M. Simmonds, Stanley I. Halbreich, and Warren L. Rawls
and executed the foregoing document.
/s/Mary C. Burns
--------------------
Mary C. Burns
Notary Public
Mary C. Burns, Notary Public
In and for the State of Ohio
My Commission Expires Jan. 26,1998
<PAGE> 1
EXHIBIT 10.20
BUSINESS LOAN AGREEMENT
<TABLE>
<S><C>
Borrower: Littlefield, Adams & Company, A New Jersey Lender: THE BANK OF FLOYD
Corporation (TIN: 22-1469846) P.O. BOX 215
6262 Executive Boulevard 101 JACKSONVILLE CIRCLE
Huber Heights, OH 45424 FLOYD, VA 24091
</TABLE>
THIS BUSINESS LOAN AGREEMENT between Littlefield, Adams & Company, A New Jersey
Corporation ("Borrower") and THE BANK OF FLOYD ("Lender") is made on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole Judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of January 31,1997, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Business
Loan Agreement from time to time.
Borrower. The word "Borrower" means Littlefield, Adams & Company, A New
Jersey Corporation and its successors and assigns. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of Borrower
as provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
<PAGE> 2
01-31-1997 BUSINESS LOAN AGREEMENT Page 2
Loan No 5312501 (Continued)
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, and their personal representatives,
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness and their personal representatives,
successors and assigns.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, including all principal, interest and other fees,
costs and charges, if any, together with all other present and future
liabilities and obligations of Borrower, or any one or more of them, to
Lender, whether direct or indirect, matured or unmatured, and whether
absolute or contingent, joint, several, or joint and several, and no
matter how the same may be evidenced or shall arise.
Lender. The word "Lender" means THE BANK OF FLOYD, its successors and
assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or
refinancing note or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender; (b)
liens for taxes, assessments, or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money security interests
upon or in any property acquired or held by Borrower in the ordinary
course of business to secure indebtedness outstanding on the date of this
Agreement or permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens; (e) liens and security
interests which, as of the date of this Agreement, have been disclosed to
and approved by the Lender in writing; and (f) those liens and security
interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties,
<PAGE> 3
01-31-1997 BUSINESS LOAN AGREEMENT Page 3
Loan No 5312501 (Continued)
security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any and all types of liens and encumbrances, whether
created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required
under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other documents
and instruments as Lender or its counsel, in their sole discretion, may
require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties
set forth in this Agreement, in the Related Documents, and in any
document or certificate delivered to Lender under this Agreement are true
and correct.
No Event of Default. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender,
as of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of New Jersey
and is validly existing and in good standing in all states in which
Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower also is duly
qualified as a foreign corporation and is in good standing in all
<PAGE> 4
01-31-1997 BUSINESS LOAN AGREEMENT Page 4
Loan No 5312501 (Continued)
states in which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered will
constitute, legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to
all of Borrower's properties free and clear of all Security Interests,
and has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. Except
as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release
of any hazardous waste or substance by any person on, under, about or
from any of the properties. (b) Borrower has no knowledge of, or reason
to believe that there has been (i) any use, generation, manufacture,
storage, treatment, disposal, release, or threatened release of any
hazardous waste or substance on, under, about or from the properties by
any prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or release
any hazardous waste or substance on, under, about or from any of the
properties, and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and its agents to
enter upon the properties to make such inspections
<PAGE> 5
01-31-1997 BUSINESS LOAN AGREEMENT Page 5
Loan No 5312501 (Continued)
and tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or liability
on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's
due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases and waives any
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws,
and (b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the
properties, whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness
and the termination or expiration of this Agreement and shall not be
affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other events,
if any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and rights
in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note and
all of the Related Documents are binding upon Borrower as well as upon
Borrower's successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
<PAGE> 6
01-31-1997 BUSINESS LOAN AGREEMENT Page 6
Loan No 5312501 (Continued)
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more than
one place of business, is located at 6262 Executive Boulevard,
Huber Heights, OH 45424. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower keeps
its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in making the above referenced
Loan to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall
remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or the
financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at
all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in
no event later than thirty (30) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended,
compiled by a certified public accountant satisfactory to Lender.
All financial reports required to be provided under this Agreement shall
be prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true
and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may from time to time
reasonably require with respect to Borrower's properties and operations,
in form, amounts, coverages and with insurance companies acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written
notice to
<PAGE> 7
01-31-1997 BUSINESS LOAN AGREEMENT Page 7
Loan No 5312501 (Continued)
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person.
In connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of
determining those values; and (f) the expiration date of the policy. In
addition, upon request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to Lender
determine, as applicable, the actual cash value or replacement cost of
any Collateral. The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default
in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower will not be
required to pay and discharge any such assessment, tax, charge, levy,
lien or claim so long as (a) the legality of the same shall be contested
in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with
generally accepted accounting practices. Borrower, upon demand of
Lender, will furnish to Lender evidence of payment of the assessments,
taxes, charges, levies, liens and claims and will authorize the
appropriate governmental official to deliver to Lender at any time a
written statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in a
timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under this
Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans
With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
<PAGE> 8
01-31-1997 BUSINESS LOAN AGREEMENT Page 8
Loan No 5312501 (Continued)
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts, and
records and to make copies and memoranda of Borrower's books, accounts,
and records. If Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a third party Borrower, upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying that
the representations and warranties set forth in this Agreement are true
and correct as of the date of the certificate and further certifying
that, as of the date of the certificate, no Event of Default exists under
this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part
or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof
a copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is
damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness. Except for trade debt incurred in the normal course of
business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including
capital leases.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than dividends
payable in its stock), provided, however that notwithstanding the
foregoing, but only so long as no Event of Default has occurred and is
continuing or would result from the payment of dividends, if Borrower is
a "Subchapter S Corporation" (as defined in the Internal Revenue Code of
1986, as amended), Borrower may pay cash dividends on its stock to its
<PAGE> 9
01-31-1997 BUSINESS LOAN AGREEMENT Page 9
Loan No 5312501 (Continued)
shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d)
purchase or retire any of Borrower's outstanding shares or alter or
amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
SIGNATURES AND SEALS. In witness whereof, I have signed my name and affixed my
seal.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
<PAGE> 10
01-31-1997 BUSINESS LOAN AGREEMENT Page 10
Loan No 5312501 (Continued)
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, or a trustee or receiver is appointed for Borrower or for
all or a substantial portion of the assets of Borrower, or Borrower makes
a general assignment for the benefit of Borrower's creditors, or Borrower
files for bankruptcy, or an involuntary bankruptcy petition is filed
against Borrower and such involuntary petition remains undismissed for
sixty (60) days.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate and, at Lender's
option, all sums owing in connection with the Loans, including all principal,
interest, and all other fees, costs and charges, if any, will become
immediately due and payable, all without notice of any kind to Borrower, except
that in the case of an Event of Default of the type described in the
"Insolvency" subsection above, such acceleration shall be automatic and not
optional. In addition, Lender shall have all the rights and remedies provided
in the Related Documents or available at law, in equity, or otherwise. Except
as may be prohibited by applicable law, all of Lender's rights and remedies
shall be cumulative and may be exercised singularly or concurrently. Election
by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation
of Borrower or of any Grantor shall not affect Lender's right to declare a
default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by the
alteration or amendment.
<PAGE> 11
01-31-1997 BUSINESS LOAN AGREEMENT Page 11
Loan No 5312501 (Continued)
Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Virginia.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the
Borrowers signing below is responsible for all obligations in this
Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of
such interests in the Loans and will have all the rights granted under
the participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of any holder
of any interest in the Loans. Borrower further agrees that the purchaser
of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses incurred in connection with this Agreement or
in connection with the Loans made pursuant to this Agreement. Subject to
any limits under applicable law, if Lender hires an attorney to help
enforce this Agreement or to collect any Indebtedness, Borrower agrees to
pay Lender's attorneys' fees, and all of Lender's other collection
expenses, whether or not there is a lawsuit and including legal expenses
for bankruptcy proceedings.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as certified
or registered mail in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower will keep Lender informed
at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or
<PAGE> 12
01-31-1997 BUSINESS LOAN AGREEMENT Page 12
Loan No 5312501 (Continued)
validity; however, if the offending provision cannot be so modified, it
shall be stricken and all other provisions of this Agreement in all other
respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign its rights under this Agreement
or any interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and agreements of Borrower in
this Agreement shall survive the making of the Loan or Loans contemplated
hereby, and shall be deemed made and redated by Borrower at the time of
the making of each disbursement of Loan proceeds.
Time Is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Indulgence by Lender with respect to any of the terms and
conditions of this Agreement or the failure of Lender to exercise any of
its rights under this Agreement shall not constitute a waiver thereof,
and Borrower shall remain liable for the strict performance of such terms
and conditions until this Agreement shall be terminated. No provision of
this Agreement may be waived or modified orally, but all such waivers or
modifications shall be in writing. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in
one instance shall not constitute Lender's continuing consent in
subsequent instances, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE> 13
01-31-1997 BUSINESS LOAN AGREEMENT Page 13
Loan No 5312501 (Continued)
THIS BUSINESS LOAN AGREEMENT IS SIGNED, SEALED AND DELIVERED EFFECTIVE IN ALL
RESPECTS AS OF JANUARY 31, 1997.
BORROWER:
Littlefield, Adams & Company, A New Jersey Corporation
<TABLE>
<S> <C>
By: /s/ David M. Simmonds (SEAL) By: /s/ Stanley I Halbreich (SEAL)
---------------------------------------------- -------------------------------------------
David M. Simmonds, Chairman, President and CEO Stanley I Halreich, Treasurer and CEO
</TABLE>
By: /s/ Warren L Rawls (SEAL)
------------------------------------------
Warren L. Rawls, Secretary and Controllor
LENDER:
THE BANK OF FLOYD
By: /s/ Lawrance M. Renfroe
----------------------------
Authorized Officer
State of Ohio
County of Montgomery
On this 10th day of March, 1997, before me appeared
David M. Simmonds, Stanley I. Halbreich, and Warren L. Rawls
and executed the foregoing document.
/s/ Mary C. Burns
---------------------
Mary C. Burns
Notary Public
Mary C. Burns, Notary Public
In and for the State of Ohio
My Commission Expires Jan. 26, 1998
<PAGE> 1
EXHIBIT 10.21
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<S> <C>
Borrower: Littlefield, Adams & Company, A New Jersey Lender: THE BANK OF FLOYD
Corporation (TIN: 22-1469846) P.O. BOX 215
6262 Executive Boulevard 101 JACKSONVILLE CIRCLE
Huber Heights, OH 45424 FLOYD, VA 24091
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT is entered into between Littlefield, Adams &
Company, A New Jersey Corporation (referred to below as "Grantor"); and THE
BANK OF FLOYD (referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired, whether now
existing or hereafter arising, and wherever located:
All Equipment; together with the following specifically described
property: See Attached List, but not limited to this list;
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of and
substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in
this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in
and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic
media.
Event of Default. The words "Event of Default." mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
<PAGE> 2
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No 5312501 (Continued)
Grantor. The word "Grantor" means Littlefield, Adams & Company, A New
Jersey Corporation, its successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness and their personal representatives,
successors and assigns.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note, including all principal, interest, and fees, costs, and
expenses, if any, together with all modifications of and renewals,
replacements and substitutions for any of the foregoing.
Lender. The word "Lender" means THE BANK OF FLOYD, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated January
17, 1992, in the principal amount of $750,000.00 from Collegiate Pacific
Company, an Iowa Corporation to Lender and guaranteed by Littlefield,
Adams & Company, A New Jersey Corporation, together with all
modifications of and renewals, replacements, and substitutions for the
note or credit agreement and the note or credit agreement dated August
29, 1994, in the principal amount of $250,000.00 from Collegiate Pacific
Company, an Iowa Corporation to Lender and guaranteed by Littlefield,
Adams & Company, A New Jersey Corporation, together with all
modifications of and renewals, replacements, and substitutions for the
note or credit agreement and the note or credit agreement dated January
31, 1997 in the principal amount of $468,483.83 from Littlefield, Adams &
Company, A New Jersey Corporation which represents a refinance of the
original Collegiate Pacific note dated January 17, 1992 in the amount of
$750,000.00, together with all modifications of and renewals,
replacements, and substitutions for the note or credit agreement and the
note or credit agreement dated February 1, 1997 in the principal amount
of $142,634.32 from Littlefield, Adams and Company, A New Jersey
Corporation, which represents a refinance of the original Collegiate
Pacific note dated August 29, 1994 in the amount of $250,000.00, together
with all modifications of and renewals, replacements, and substitutions
for the note or credit agreement.
Related Documents. The words "Related Documents." mean and include
without limitation all promissory notes, credit agreements loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in
connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding, however, all IRA and Keogh accounts, and all
trust accounts for which the grant of a security interest would be prohibited
by law. Grantor authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are requested by
Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Grantor will note Lender's interest upon
<PAGE> 3
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 3
Loan No 5312501 (Continued)
any and all chattel paper if not delivered to Lender for possession by
Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from
Grantor, file a carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing
statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security
interest in the Collateral. Grantor promptly will notify lender before
any change in Grantor's name including any change to the assumed business
names of Grantor.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral.
Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property owned
or being purchased by Grantor; (b) all real property being rented or
leased by Grantor; (c) all storage facilities owned, rented, leased, or
being used by Grantor; and (d) all other properties where Collateral is
or may be located. Except in the ordinary course of its business,
Grantor shall not remove the Collateral from its existing locations
without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as accounts,
the records concerning the Collateral) at Grantor's address shown above,
or at such other locations as are acceptable to Lender. Except in the
ordinary course of its business, including the sales of inventory,
Grantor shall not remove the Collateral from its existing locations
without the prior written consent of Lender. To the extent that the
Collateral consists of vehicles, or other titled property, Grantor shall
not take or permit any action which would require application for
certificates of title for the vehicles outside the Commonwealth of
Virginia, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale
in the ordinary course of Grantor's business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral
to be subject to any lien, security interest, encumbrance, or charge,
other than the security interest provided for in this Agreement, without
the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of
the Collateral (for whatever reason) shall be held in trust for Lender
and shall not be commingled with any other funds; provided however, this
requirement shall not constitute consent
<PAGE> 4
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 5312501 (Continued)
by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public office
other than those which reflect the security interest created by this
Agreement or to which Lender has specifically consented. Grantor shall
defend Lender's rights in the Collateral against the claims and demands
of all other persons.
Collateral Schedules and Locations. Insofar as the Collateral consists
of inventory, Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such Collateral as
Lender may require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and each of
its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not
commit or permit damage to or destruction of the Collateral or any part
of the Collateral. Lender and its designated representatives and agents
shall have the right at all reasonable times to examine, inspect, and
audit the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor is
in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized in Lender's sole opinion. If the Collateral is subjected
to a lien which is not discharged within fifteen (15) days, Grantor shall
deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender and
shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral. Grantor
may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate appeals,
so long as Lender's interest in the Collateral, in Lender's opinion, is
not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation, manufacture,
storage, transportation, treatment, disposal, release or threatened
release of any hazardous waste or substance, as those terms are defined
in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA".), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
<PAGE> 5
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 5
Loan No 5312501 (Continued)
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any fraction
thereof and asbestos. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this
Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis acceptable to Lender and issued by a company or companies
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in
form satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender and not including any disclaimer of the
insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements as
Lender may require. If Grantor at any time fails to obtain or maintain
any insurance as required under this Agreement, Lender may (but shall not
be obligated to) obtain such insurance as Lender deems appropriate,
including if it so chooses "single interest insurance," which will cover
only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss
if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds,
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to
pay all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value on the
basis of which insurance has been obtained and the manner of determining
that value; and (f) the expiration date of the policy. In addition,
Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine,
as applicable, the cash value or replacement cost of the Collateral.
<PAGE> 6
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 6
Loan No 5312501 (Continued)
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of
the tangible personal property and beneficial use of all the Collateral and may
use it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole
discretion, shall deem appropriate under the circumstances, but failure to
honor any request by Grantor shall not of itself be deemed to be a failure to
exercise reasonable care. Lender shall not be required to take any steps
necessary to preserve any rights in the Collateral against prior parties, nor
to protect, preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of the Indebtedness and, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to become
due during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will
be due and payable at the Note's maturity. This Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement
or in any of the Related Documents or in any other agreement between
Lender and Grantor.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit
of creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
<PAGE> 7
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 7
Loan No 5312501 (Continued)
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by
any governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the Virginia Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title
and other documents relating to the Collateral. Lender may require
Grantor to assemble the Collateral and make it available to Lender
at a place to be designated by Lender. Lender also shall have full power
to enter upon the property of Grantor to take possession of and remove
the Collateral. If the Collateral contains other goods not covered by
this Agreement at the time of repossession, Grantor agrees Lender may
take such other goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
its own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the time
after which any private sale or any other intended disposition of the
Collateral is to be made. The requirements of reasonable notice shall be
met if such notice is given at least ten (10) days before the time of the
sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking,
holding, insuring, preparing for sale and selling the Collateral, shall
become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment of
a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the Indebtedness secured by this Agreement and shall
be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
<PAGE> 8
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 8
Loan No 5312501 (Continued)
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive
the payments rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether
or not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and
payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment,
shipment, or storage of any Collateral. To facilitate collection, Lender
may notify account debtors and obligors on any Collateral to make
payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after application
of all amounts received from the exercise of the rights provided in
this Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsection is a sale of accounts or chattel
paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial
Code, as may be amended from time to time. In addition, Lender shall
have and may exercise any or all other rights and remedies it may have
available at law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures
or to take action to perform an obligation of Grantor under this
Agreement, after Grantor's failure to perform, shall not affect Lender's
right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Virginia.
Attorneys' Fees; Expenses. Grantor agrees that if Lender hires an
attorney to help enforce this Agreement or to collect any sums owing
under this Agreement, Grantor will pay, subject to any limits under
applicable law, Lender's attorneys' fees, and all of Lender's other
collection expenses, whether or not there is a lawsuit and including
without limitation additional legal expenses for bankruptcy proceedings.
<PAGE> 9
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 9
Loan No 5312501 (Continued)
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered if hand delivered or when deposited with a
nationally recognized overnight courier or deposited as certified or
registered mail in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Grantor, notice to any Grantor will constitute notice to all
Grantors. For notice purposes, Grantor will keep Lender informed at all
times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become
due, owing or payable from the Collateral; (b) to execute, sign and
endorse any and all claims, instruments, receipts, checks, drafts
or warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and, in the
place and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or to take
any action or institute or take part in any proceedings, either in its
own name or in the name of Grantor, or otherwise, which in the discretion
of Lender may seem to be necessary or advisable. This power is given as
security for the Indebtedness, and the authority hereby conferred is and
shall be irrevocable and shall remain in full force and effect until
renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid and
enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the
<PAGE> 10
01-31-1997 COMMERCIAL SECURITY AGREEMENT Page 10
Loan No 5312501 (Continued)
granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
SIGNATURES AND SEALS. In witness whereof, I have signed my name and affixed my
seal.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JANUARY
31,1997.
GRANTOR:
Littlefield, Adams & Company, A New Jersey Corporation
<TABLE>
<S> <C>
By: /s/David M. Simmonds (SEAL) By: /s/Stanley I. Halbreich (SEAL)
------------------------------------------------ ---------------------------------------
David M. Simmonds, Chairman, President and CEO Stanley I. Halbreich, Treasurer and CEO
</TABLE>
By: /s/Warren L. Rawls (SEAL)
------------------------------------------
Warren L. Rawls, Secretary and Controllor
State of Ohio
County of Montgomery
On this 10th day of March, 1997, before me appeared
David M. Simmonds, Stanley I. Halbreich, and Warren L. Rawls
and executed the foregoing document.
/s/ Mary C. Burns
------------------
Mary C. Burns
Notary Public MARY C. BURNS, Notary Public
In and for the State of Ohio
My Commission Expires
Jan. 26, 1998
<PAGE> 1
EXHIBIT 11
LITTLEFIELD, ADAMS & COMPANY
COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1996 1995 (b) 1994
----- ---- -----
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION:
- - ---------------------------------------
Earnings:
Net income (loss) applicable to common stock:
Before extraordinary gain $ 799 $ (992) $ 657
Extraordinary gain 94 -- --
------ ------- ------
Net income (loss) applicable to common stock $ 893 $ (992) $ 657
====== ======= ======
Shares:
Weighted average number of shares
of common stock outstanding 2,279 2,276 2,229
Weighted average common stock
equivalents applicable to stock options 194 -- 1
Weighted average common stock equivalents
applicable to shares to be issued
in settlement of litigation 495 -- --
------ ------- ------
Weighted average shares used for computation 2,968 2,276 2,230
====== ======= ======
Primary earnings per common share:
Net income (loss) applicable to common stock -
Before extraordinary gain $ 0.27 $ (0.44) $ 0.29
Extraordinary gain 0.03 -- --
------ ------- ------
Net income (loss) applicable to common stock $ 0.30 $ (0.44) $ 0.29
====== ======= ======
FULLY DILUTED EARNINGS PER SHARE CALCULATION: (a)
- - ---------------------------------------------------
Earnings:
Net income (loss) applicable to common stock:
Before extraordinary gain $ 799 $ (992) $ 657
Extraordinary gain 94 -- --
------ ------- ------
Net income (loss) applicable to common stock $ 893 $ (992) $ 657
====== ======= ======
Shares:
Weighted average number of shares
of common stock outstanding 2,279 2,276 2,229
Weighted average common stock
equivalents applicable to stock options 203 -- 1
Weighted average common stock equivalents
applicable to shares to be issued
in settlement of litigation 495 -- --
------ ------- ------
Weighted average shares used for computation 2,977 2,276 2,230
====== ======= ======
Fully diluted earnings per common share:
Net income (loss) applicable to common stock -
Before extraordinary gain $ 0.27 $ (0.44) $ 0.29
Extraordinary gain 0.03 -- --
------ ------- ------
Net income (loss) applicable to common stock $ 0.30 $ (0.44) $ 0.29
====== ======= ======
</TABLE>
(a) This calculation is submitted in accordance with Item 601(b)(ii) of
Regulation S-K, although it is not required by APB Opinion No. 15 because
it results in dilution of less than three percent.
(b) The stock options have an antidilutive effect on net loss per share in
1995 and are, therefore, excluded from the computation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 54
<SECURITIES> 0
<RECEIVABLES> 2,980
<ALLOWANCES> 86
<INVENTORY> 1,579
<CURRENT-ASSETS> 5,088
<PP&E> 1,109
<DEPRECIATION> 551
<TOTAL-ASSETS> 6,120
<CURRENT-LIABILITIES> 3,752
<BONDS> 1
0
0
<COMMON> 2,296
<OTHER-SE> 25
<TOTAL-LIABILITY-AND-EQUITY> 6,120
<SALES> 11,884
<TOTAL-REVENUES> 12,036
<CGS> 8,403
<TOTAL-COSTS> 8,403
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 235
<INCOME-PRETAX> 769
<INCOME-TAX> (30)
<INCOME-CONTINUING> 799
<DISCONTINUED> 0
<EXTRAORDINARY> 94
<CHANGES> 0
<NET-INCOME> 893
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
<FN>
<F1>Bad debt expense of (149) is included in the 3,242 reported as Selling and
Administrative expenses.
</FN>
</TABLE>
