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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number: 2-98277C
THE COLONEL'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-3262264
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
620 SOUTH PLATT ROAD, MILAN, MICHIGAN 48160
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 439-4200
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Number of shares outstanding of the registrant's Common Stock, $0.01 par
value as of November 13, 1996: 24,177,830
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements required under Item 1 are set forth in
Appendix A to this Report on Form 10-Q and are herein incorporated by
reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
BACKGROUND
Effective December 31, 1995, Brainerd International, Inc. ("Brainerd")
merged (the "Merger") with and into The Colonel's International, Inc. (the
"Company"). The Company was the surviving corporation in the Merger.
Prior to the Merger, Brainerd had 677,830 shares of its common stock
outstanding and traded on the Nasdaq SmallCap Market (symbol BIRI).
Pursuant to the Merger, these shares were converted into the same number of
shares of common stock in the Company.
Also effective December 31, 1995, Brainerd Merger Corporation, a
Michigan corporation and a wholly owned subsidiary of Brainerd, merged with
and into The Colonel's, Inc. ("The Colonel's"). The Colonel's was the
surviving corporation in this merger. In consideration of this merger, the
Company issued 23,500,000 shares of its common stock to Donald J.
Williamson and Patsy L. Williamson, who were the sole shareholders in The
Colonel's. In addition, Brainerd transferred all of its operating assets
to its newly formed subsidiary, Brainerd International Raceway, Inc.
("Brainerd International Raceway, Inc.").
As a result of these transactions, the Company now has two wholly
owned subsidiaries: The Colonel's and Brainerd International Raceway.
For accounting purposes, the transaction was treated as a
recapitalization of the Company with the Company as the acquiror (a reverse
acquisition). The effective date of the Merger was December 31, 1995.
Therefore, the assets acquired and liabilities assumed are included in the
Company's balance sheet at December 31, 1995. The historical financial
statements prior to December 31, 1995 are those of The Colonel's only and
do not include any operating results of Brainerd. Beginning January 1,
1996, the incomes of both The Colonel's and Brainerd International Raceway
are reflected and reported as combined income in the consolidated income
statement.
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THE COLONEL'S, INC.
The Colonel's was organized in 1982 and began producing and selling
plastic bumpers and facias in 1983. By the start of 1996, The Colonel's
had grown through acquisitions, joint ventures, and normal expansion to two
manufacturing plants, four distribution warehouses and a network of
independent distributors that sell The Colonel's products throughout the
United States, Canada, Mexico, Puerto Rico, Bahamas, and the District of
Columbia. The recent start up of a new truck accessory division that
manufactures and sells pickup truck bedliners and tail gate covers (the
"Bedliner Division"), and the formation of Brainerd International Raceway
as a subsidiary of the Company, represent efforts by the Company to begin
to diversify into other areas outside the automotive collision parts
industry.
BRAINERD INTERNATIONAL RACEWAY, INC.
From the time of its formation in 1982, Brainerd has operated a motor
sports facility located approximately six miles northwest of Brainerd,
Minnesota. As of 1996, this facility is now operated by Brainerd
International Raceway, a subsidiary of the Company. Substantially all of
Brainerd International Raceway's revenues are obtained from motor sports
racing events at the raceway. Historically, Brainerd International Raceway
has scheduled racing and other events to be held at the racetrack during
weekends in the months of May through September each year.
COMBINED OPERATIONS
The Colonel's Milan manufacturing plant is a 350,000 square foot
facility (plus a 45,000 square foot covered crane bay) situated on a 62
acre site on the outskirts of Milan, Michigan. Milan is located
approximately 10 miles south of Ann Arbor, Michigan, 60 miles west of
Detroit, and 25 miles northwest of Toledo, Ohio. There is sufficient room
to expand the physical plant. The Milan plant manufactures the aftermarket
bumper facias. This facility is leased from a company owned by Donald and
Patsy Williamson.
The Colonel's new Owosso manufacturing facility occupies a 210,000
square foot building located on 27 acres on the outskirts of Owosso,
Michigan. Owosso is located about 100 miles northwest of Milan, Michigan
and about 30 miles northeast of Lansing, Michigan. The building has power
capacities exceeding current use and would permit expansion if necessary.
This plant manufactures truck accessories. It is also leased from a
company owned by Donald and Patsy Williamson.
Brainerd International Raceway owns and operates a three-mile race
track including a one-quarter mile drag strip located approximately six
miles northwest of Brainerd, Minnesota. The terrain of the 600 acre site
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is slightly rolling hills and is partially wooded. The track and various
roads are composed of blacktop. The Brainerd International Raceway
contains several buildings, including a four-story tower containing twelve
executive viewing suites, a control tower, various single story buildings
containing concession stands, rest rooms, and storage and service
facilities located throughout the property. The buildings are concrete or
wood frame and are suitable for warm weather use only. Grandstand
bleachers for approximately 18,000 spectators are primarily located along
the drag strip.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated current assets slightly decreased from
$11,483,000 at December 31, 1995 to $11,271,000 at September 30, 1996.
Current liabilities decreased from $15,026,000 at December 31, 1995 to
$13,966,000 at September 30, 1996. The change in current liabilities
resulted primarily from a $1,400,000 decrease in accounts payable. The
decrease was offset by additional financing of equipment/lease
obligations at the Bedliner Division. The Company's subsidiaries made
all of their scheduled principal and interest payments on their
outstanding debt and leases during the third quarter of 1996.
Inventories increased by $800,000 at September 30, 1996 compared to
December 31, 1995 due to increased production to build initial warehouse
stock needed in anticipation of fall sales. The Colonel's routinely
attempts to maintain a 60-day supply of each product available for
immediate shipment. Inventory levels traditionally decline during the
first quarter of the year and are replenished by late summer. During the
nine months ending September 30, 1996 the Company wrote down inventory
$600,000 with a corresponding charge to Cost of Sales for manufacturing
cost variations.
Deposits on tools and machinery decreased at September 30, 1996
compared to December 31, 1995, due to a reclassification to property, plant
and equipment. When equipment is delivered and accepted by the Company,
the recorded deposits are reclassified to property, plant and equipment.
Prepaid expenses decreased from December 31, 1995 to September 30,
1996 due to normal amortization for the 9 month period.
The Colonel's signed permanent capital leases to replace interim
leases for the additional Bedliner Division equipment during the second
quarter of 1996. Approximately $960,000 remains in deposits on machinery
financed by interim leases.
Notes receivable that were outstanding at December 31, 1995 have all
been repaid at September 30, 1996.
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As a result of the Merger, the acquisition value of Brainerd
International Raceway exceeded the value of the assets by $425,000. The
associated amortization expense for the twelve-month period ending December
31, 1996 will be $52,000. The Company has chosen to expense this at one
time instead of amortizing throughout the year.
OUTSTANDING DEBT
The Colonel's has a $4,500,000 line of credit secured by accounts
receivable and inventory with a term that expires in May 1997. The
Colonel's expects to negotiate renewals as necessary with its current
lending institution. Interest is paid at prime on a monthly basis. The
outstanding balance on the line of credit was $4,500,000 at September 30,
1996. Brainerd International Raceway has a $300,000 line of credit which
is secured by all of its assets, of which $272,000 was outstanding at
September 30, 1996.
The Colonel's received new financing of $6,000,000 in April 1995,
under a facility which calls for payments of $200,000 in principal plus
interest on a monthly basis calculated at 0.5 percent over prime on the
outstanding balance. The loan is secured by machinery and equipment and
had a balance of $3,000,000 at September 30, 1996. If the need arose, the
Company believes it could obtain additional financing using its machinery
and equipment as collateral.
Brainerd International Raceway has a mortgage in the amount of
$468,000, which is secured by property. This loan requires quarterly
interest payments at 2 percent above prime and a single principal payment
made in the third quarter of $50,000 per year through 2004.
The balance on The Colonel's mortgage of its former Owosso facility
was $979,000 at the end of the third quarter of 1996.
The Colonel's entered into a capital lease to finance equipment for
the new Owosso location. The Colonel's leased $5,095,000 worth of that
equipment under a six-year agreement with monthly payments of $79,000 which
includes an option for the Company to purchase the equipment for $1.00 upon
expiration of the lease term. The leases are collateralized by the
machinery. The Colonel's has also financed interim leases in the amount of
$960,000 which are deposits paid to the machinery manufacturers. As the
machinery is delivered and accepted by The Colonel's, final payments will
be made by the leasing company by signing a permanent lease. The remaining
balance is $650,000.
RESULTS OF OPERATIONS
Revenues for The Colonel's were $11,200,000 for the quarter ending
September 30, 1996, compared to $7,062,000 for the same period in 1995.
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The growth in 1996 was primarily due to direct sales efforts, the addition
of the Bedliner Division, the addition of revenues from Brainerd
International Raceway which were not reflected in last year's pre-merger
revenues, and the addition of a new warehouse in Totowa, New Jersey.
Revenues for the nine-month period ended September 30, 1996 increased
approximately $8,000,000 over the same period in 1995. The Bumper Division
(which includes all direct warehouses) led this growth with an increase in
sales over last year by $3,500,000. Brainerd International Raceway
contributed $2,500,000, and the Bedliner Division contributed $2,000,000.
Cost of sales have increased from 70 percent of sales for the nine
months ending September 30, 1995 to 73 percent for the same nine months in
1996, in part because of the start-up costs of the Bedliner Division.
Gross profits for the three-month period ended September 30, 1996
increased from 22 percent in 1995 to 26 percent in 1996. The gross profit
for the nine-month period ended September 30, 1996, is 27 percent, compared
to 30 percent in the same period in 1995.
Selling, general and administrative expenses as a percentage of sales
were consistent with the percent of sales for the third quarter 1995 of 14
percent. The nine-month comparison continues to decrease from 15 percent
in 1995 to 14 percent of sales in 1996. Although more sales staff were
added in the third quarter, the increase in sales associated with the costs
of the additional staff continues to be favorable.
Interest expense increased by $250,000 for the nine months ending
September 30, 1996 over the same period last year, due to the addition of
the new equipment leases that the Company has at the Bedliner Division.
To date, the Company has accrued $1,189,000 for income taxes, which
reflects the Company's expected effective tax rate of 37 percent.
SUBSEQUENT EVENTS
Director Richard L. Roe resigned effective October 11, 1996.
The Company borrowed an additional $1,000,000 from their primary
lending bank to purchase prime property in Florida.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As described in the Company's Report on Form 10-K for the year ended
December 31, 1995, The Colonel's was a defendant and counterplaintiff in a
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suit filed December 5, 1991, in the United States District Court for the
Eastern District of Michigan, in a private action seeking damages under the
Federal Antitrust statutes. The Colonel's settled this lawsuit on
September 30, 1996. The terms of the settlement are restricted from
disclosure but call for The Colonel's to pay out certain amounts in cash
and merchandise. The Company has accrued for the settlement.
During the third quarter of 1996, there were no other material
developments in legal proceedings involving the Company or its
subsidiaries. These proceedings were described in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-K.
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit A to
the Proxy Statement of Brainerd International, Inc. for the
Annual Meeting of Shareholders of Brainerd International, Inc.
held on November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd
International, Inc. and The Colonel's Holdings, Inc. Incorporated
by reference from Exhibit D to the Proxy Statement of Brainerd
International, Inc. for the Annual Meeting of Shareholders of
Brainerd International, Inc. held on November 21, 1995.
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference from Exhibit E to the Proxy Statement
of Brainerd International, Inc. for the Annual Meeting of
Shareholders of Brainerd International, Inc. held on November 21,
1995.
3.2 Certificate of Amendment to the Articles of Incorporation
changing name from "The Colonel's Holdings, Inc." to "The
Colonel's International, Inc." Incorporated by reference from
Exhibit 3.2 to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995.
3.3 Bylaws of the Company. Incorporated by reference from Exhibit F
to the Proxy Statement of Brainerd International, Inc. for the
Annual Meeting of Shareholders of Brainerd International, Inc.
held on November 21, 1995.
4.1 Articles of Incorporation. See Exhibit 3.1 above.
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10.1 The Company's 1995 Long-Term Incentive Plan. Incorporated by
reference from Exhibit G to the Proxy Statement of Brainerd
International, Inc. for the Annual Meeting of Shareholders of
Brainerd International, Inc. held on November 21, 1995.
10.2 Incentive Stock Option Plan. Incorporated by reference from the
Annual Report on Form 10-K of Brainerd International Inc. for the
fiscal year ended December 31, 1987.
10.3 Form of Non-Statutory Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from the
Annual Report on Form 10-K of Brainerd International Inc. for the
fiscal year ended December 31, 1987.
10.4 Form of Incentive Stock Option Agreement used under the Incentive
Stock Option Plan. Incorporated by reference from the Annual
Report on Form 10-K of Brainerd International Inc. for the fiscal
year ended December 31, 1987.
10.5 Office Lease Agreement dated January 23, 1991 between Brainerd
International, Inc. and Woodland Office Partnership.
Incorporated by reference from the Annual Report on Form 10-K of
Brainerd International Inc. for the fiscal year ended December
31, 1990.
10.6 Amendment dated December 11-12, 1991 to Office Lease Agreement
(see Exhibit 10(e) above) between Brainerd International, Inc.
and Woodland Office Partnership. Incorporated by reference from
Brainerd International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.7 $404,700 Promissory Note dated January 1, 1992, from Brainerd
International, Inc. payable to Gene Snow and James W. Littlejohn.
Incorporated by reference from Brainerd International, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1991.
10.8 Lease Agreement between Issuer and National Hot Rod Association,
Inc. consisting of March 17, 1984 Lease Agreement; April 28, 1986
letter extending term to 1991; March 12, 1987 Letter of
Amendment; and April 7, 1992 letter extending term to 1996 and
amending agreement. Incorporated by reference from Brainerd
International, Inc.'s Registration Statement on Form S-1
(Registration No. 33-055876).
10.9 November 8, 1988 Sponsorship Agreement between Champion Auto
Stores, Inc. and National Hot Rod Association, Inc. Incorporated
by reference from Brainerd International, Inc.'s Registration
Statement on Form S-1 (Registration No. 33-055876).
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10.10 June 22, 1992 Title Rights Sponsorship Agreement between Champion
Auto Stores, Inc. and National Hot Rod Association, Inc.
Incorporated by reference from Brainerd International, Inc.'s
Registration Statement on Form S-1 (Registration No. 33-055876).
10.11 February 16, 1994 Loan Agreement with American National Bank of
Brainerd; $550,000 Promissory Note; and $300,000 Line of Credit
Note. Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1993.
10.12 December 21, 1993 Agreement among Issuer, Motor Stadium, Inc. and
Gene M. Snow providing for termination of March 23, 1993
Financing Agreement, dissolution of Motor Sports Stadium, Inc.
and grant of interest by Mr. Snow in potential future project.
Incorporated by reference from Brainerd International, Inc.'s
Annual Report on Form 10-KSB for the fiscal year ended December
31, 1993.
10.13 Amendment dated February 1, 1994 to Office Lease Agreement (See
Exhibits 10(e) and 10(f)). Incorporated by reference from
Brainerd International, Inc.'s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1993.
10.14 September 1994 Stock Purchase Agreement among Gene M. Snow, James
W. Littlejohn and Donald J. Williamson. Incorporated by
reference from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1993.
10.15 December 1994 Letter of Intent between Issuer and The Colonel's,
Inc. Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1993.
10.16 Addendum to Lease dated December 16, 1994 (See Exhibits 10(e),
10(f) and 10(m)). Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1993.
10.17 Variable Rate-Installment Note ($6,000,000) between The Colonel's
and Comerica Bank dated April 14, 1995. Incorporated by reference
from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.18 Master Revolving Note ($4,500,000) between The Colonel's and
Comerica Bank dated May 1, 1995. Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
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10.19 Security Agreement between The Colonel's and Comerica Bank (f/k/a
Manufacturers National Bank of Detroit) dated December 4, 1991.
Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.20 Amended and Restated Security Agreement between The Colonel's and
Comerica Bank (f/k/a Manufacturers National Bank of Detroit)
dated December 4, 1991. Incorporated by reference from Amendment
No. 1 to Brainerd International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
10.21 Amended and Restated Guaranty between Donald and Patsy Williamson
and Comerica Bank dated October 8, 1992. Incorporated by
reference from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.22 Lease Agreement between 620 Platt Road, Inc. and The Colonel's
dated June 18, 1993 (for Milan, Michigan manufacturing facility).
Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.23 First Amendment to Lease Agreement between 620 Platt Road, L.L.C.
(f/k/a 620 Platt Road, Inc.) and The Colonel's dated June 16,
1995. Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.24 Industrial/Warehouse Lease between JMB/Warehouse Associates
Limited Partnership and The Colonel's dated August 1, 1993 (for
Houston, Texas warehouse distribution facility). Incorporated by
reference from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.25 Lease Agreement between Industrial Properties Corporation and The
Colonel's dated September 15, 1992 (for Dallas, Texas warehouse
distribution facility). Incorporated by reference from Amendment
No. 1 to Brainerd International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
10.26 Standard Industrial Lease between Revco D.S., Inc. and The
Colonel's dated February 5, 1993 (for Phoenix (Glendale), Arizona
warehouse distribution facility). Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
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10.27 Interim Equipment Lease Schedule ($2,729,370) between The
Colonel's and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.28 Interim Equipment Lease Schedule ($2,044,000) between The
Colonel's and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.29 Interim Equipment Lease Schedule ($383,468) between The Colonel's
and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.30 Lease Schedule ($3,464,557) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.30 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.31 Interim Lease Schedule ($960,000) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.31 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.32 Interim Lease Schedule ($542,811) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.32 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.33 Interim Lease Schedule ($85,800) between The Colonel's, Inc. and
Comerica Leasing Corporation dated January 26, 1996.
Incorporated by reference from Exhibit 10.33 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.34 Interim Lease Schedule ($52,556) between The Colonel's, Inc. and
Comerica Leasing Corporation dated February 16, 1996.
Incorporated by reference from Exhibit 10.34 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.35 Interim Lease Schedule ($584,250) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.35 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
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10.36 Interim Lease Schedule ($364,650) between The Colonel's, Inc. and
Comerica Leasing Corporation dated January 26, 1996.
Incorporated by reference from Exhibit 10.36 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.37 Interim Lease Schedule ($178,200) between The Colonel's, Inc. and
Comerica Leasing Corporation dated February 16, 1996.
Incorporated by reference from Exhibit 10.37 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.38 Lease Schedule between The Colonel's, Inc. and Comerica Leasing
Corporation dated May 31, 1996.
10.39 Lease Agreement between The Colonel's, Inc. and Gamma Realty Co.
for lease of premises in Totowa, New Jersey.
10.40 Interim Lease Schedule between The Colonel's, Inc. and Comerica
Leasing Corporation dated June 17, 1996.
10.41 Interim Lease Schedule between The Colonel's, Inc. and Comerica
Leasing Corporation dated August 30, 1996.
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K have been filed
during the quarter for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE COLONEL'S INTERNATIONAL, INC.
Date: November 13, 1996 /S/ RICHARD S. SCHOENFELDT
Vice President-Finance and Chief
Financial Officer (Principal Financial
Officer and Duly Authorized Signatory
for Registrant)
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APPENDIX A
<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
SEPT 30 DEC 31
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 285,099 $ 634,290
Accounts receivable--trade (net of allowance 2,282,398 2,292,112
for doubtful accounts of $401,200 and
$521,800 at December 31, 1995 and
September 30, 1996, respectively)
Inventories (Note 2) 7,601,557 6,805,906
Prepaid expenses 44,504 164,692
Notes receivable:
Related party 0 240,000
Other 0 302,401
Deferred taxes - current 931,000 917,000
Current portion of deferred compensation 52,000 52,000
Assets held for sale 75,000 75,000
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Total current assets 11,271,558 11,483,401
PROPERTY, PLANT, AND EQUIPMENT - Net (Note 3) 24,358,186 20,876,669
OTHER ASSETS:
Notes receivable--related party 0 250,000
Long-term portion of deferred compensation 235,300 266,163
Deposits 1,814,193 4,757,342
Goodwill 366,497 425,609
Other 9,802 184,802
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Total other assets 2,425,792 5,883,916
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TOTAL ASSETS $38,055,536 $38,243,986
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
SEPT 30 DEC 31
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 4,500,000 $ 4,180,000
Current portion of long-term obligations 5,785,598 5,424,455
Accounts payable-trade 1,534,339 2,938,494
Accrued expenses (Note 4) 2,094,994 2,431,074
Current portion of deferred compensation 52,000 52,000
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Total current liabilities 13,966,931 15,026,023
LONG-TERM OBLIGATIONS, NET OF CURRENT 4,814,382 6,064,705
PORTION (Note 5)
LONG-TERM PORTION OF DEFERRED COMPENSATION 235,300 266,163
DEFERRED TAXES - LONG-TERM 4,226,000 4,014,000
SHAREHOLDERS' EQUITY:
Common stock: 35,000,000 shares authorized
at $0.01 par value, 24,177,830 shares issued
and outstanding 241,778 241,778
Additional paid-in capital 5,557,832 5,557,833
Retained earnings 9,013,313 7,073,484
----------- -----------
Total shareholders' equity 14,812,923 12,873,095
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $38,055,536 $38,243,986
=========== ===========
</TABLE>
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<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
NINE MONTHS ENDING THREE MONTHS ENDING
SEPT 30 SEPT 30
------------------------------ ------------------------------
1996 1995 1996 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
SALES $29,654,986 $21,713,181 $11,210,682 $7,062,030
COST OF SALES 21,719,135 15,283,285 8,326,616 5,475,917
----------- ----------- ----------- ----------
GROSS PROFIT 7,935,851 6,429,896 2,884,066 1,586,113
SELLING, GENERAL AND
ADMINISTRATIVE 4,207,152 3,302,302 1,670,519 964,237
----------- ----------- ----------- ----------
INCOME FROM OPERATIONS 3,728,699 3,127,594 1,213,547 621,876
OTHER INCOME (EXPENSE):
Interest expense (775,532) (513,402) (246,643) (262,277)
Interest income 54,615 137,452 10,985 30,237
Rental income 45,000 54,000 20,000 18,000
Other 76,047 4,458 18,061 1,229
----------- ----------- ----------- ----------
Other income (expense), net (598,277) (317,492) (197,597) (212,811)
----------- ----------- ----------- ----------
INCOME BEFORE TAXES $ 3,130,422 $ 2,810,102 $ 1,015,950 $ 409,065
PROVISION FOR INCOME
TAXES (Note 5) 1,189,000 708,000
----------- ----------- ----------- ----------
NET INCOME $ 1,941,422 $ 2,810,102 $ 307,950 $ 409,065
=========== =========== =========== ==========
EARNINGS PER SHARE
(Note 6) $ 0.08 $ 0.01
=========== ===========
PRO FORMA EARNINGS
PER SHARE (Note 6) $ 0.10 $ 0.05
=========== ==========
</TABLE>
-16-
<PAGE> 17
<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDING
SEPT 30
------------------------------
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,939,829 $ 1,345,324
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and Amortization 2,985,534 661,499
Deferred Tax Provision 198,000
Gain on sale of assets 5,255
Changes in assets and liabilities that provided (used) cash:
Accounts receivable:
Trade 9,714 (90,526)
Related Parties (272,418)
Insurance 4,352,239
Inventories (795,651) 230,350
Prepaid expenses 120,188 20,997
Accounts payable (1,404,154) 169,002
Accrued expenses (336,080) (81,974)
----------- -----------
Net cash provided by operating activities 2,722,635 6,334,493
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (6,257,695) (1,296,559)
Proceeds from sale of property, plant and equipment 19,500
Net change in deposits (principally for tooling and equipment) 2,943,149 (123,200)
Additions to notes receivable-related party 0 (427,944)
Payments received on notes receivable - related party 490,000 8,795
Additions to notes receivable - other (770)
Payments received on notes receivable - other 303,170 57,971
----------- -----------
Net cash used in investing activities (2,502,646) (1,780,937)
-17-
<PAGE> 18
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under notes payable 320,000 (1,050,000)
Proceeds from long-term obligations 75,000
Principal payments on long-term debt (916,585) (1,127,453)
Principal payment on obligations under capital leases (47,595)
Distributions paid to shareholders 0 (2,449,631)
Net cash used in financing activities (569,180) (4,627,084)
----------- -----------
NET DECREASE IN CASH $ (349,191) $ (73,528)
=========== ===========
CASH BEGINNING OF YEAR 634,290 164,286
=========== ===========
CASH END OF PERIOD $ 285,099 $ 90,758
=========== ===========
</TABLE>
-18-
<PAGE> 19
THE COLONEL'S INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ---------------------------------------------------------------------------
Note 1 BASIS OF PRESENTATION
The financial information included herein is unaudited; however
such information reflects all adjustments (consisting solely of
normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods
presented.
The results of operations for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the
results expected for the full year.
Note 2 INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
SEPT 30 DEC 31
1996 1995
---------- ----------
<S> <C> <C> <C>
Finished products $7,225,390 $6,168,440
Raw materials 376,167 637,466
---------- ----------
Total inventories $7,601,557 $6,805,906
========== ==========
</TABLE>
Note 3 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized by major
classification as follows:
-19-
<PAGE> 20
<TABLE>
<CAPTION>
SEPT 30 DEC 31
1996 1995
------------ ------------
<S> <C> <C> <C>
Land and improvements $ 3,214,815 $ 2,269,400
Track 1,406,634 1,537,800
Buildings 1,172,860 622,000
Leasehold improvements 157,681 707,076
Bleachers & fencing 432,200 432,200
Equipment (including equipment under capital lease) 15,004,870 10,460,954
Transportation equipment (including equipment 831,369 609,097
under capital lease)
Furniture & fixtures 541,632 537,230
Tooling 20,480,083 19,658,447
------------ ------------
Total 43,242,144 38,834,204
Less accumulated depreciation and amortization (18,883,958) (15,957,535)
------------ ------------
Net property, plant and equipment $ 24,358,186 $ 20,876,669
============ ============
</TABLE>
Note 4 ACCRUED EXPENSES
<TABLE>
<CAPTION>
SEPT 30 DEC 31
1996 1995
---------- ----------
<S> <C> <C> <C>
Accrued expenses consist of the following:
Accrued legal $ 531,176 $ 349,331
Accrued compensation for NuPar (Note 7) 200,000 900,000
Accrued environmental costs 598,717 598,717
Accrued taxes 759,951 276,619
Other 5,150 240,407
---------- ----------
Total $2,094,994 $2,431,074
========== ==========
</TABLE>
-20-
<PAGE> 21
Note 5 INCOME TAXES
Effective December 31, 1995 The Colonel's, Inc. changed its tax
status from an "S" corporation to a "C" corporation. The
provision for income taxes reflects the Company's expected
estimated effective tax rate of approximately 37 percent.
Note 6 EARNINGS PER SHARE
The computation of earnings per share is based on the weighted
average number of shares of common stock outstanding during the
three-month and nine-month periods ended September 30, 1996. The
pro forma earnings per share for the three-month and nine-month
periods has been calculated as if the Merger and the Company's
change in tax status had occurred on January 1, 1995.
Note 7 LITIGATION
In connection with the acquisition of a facility in Florida (known
as "NuPar") The Colonel's signed employment agreements with the
former NuPar shareholders for the three-year period beginning
December 1991. In 1994, the former NuPar shareholders filed a
lawsuit against The Colonel's for $1,800,000, claiming they had
met the conditions of the agreement and were therefore entitled to
the payments thereunder. In July, 1995, the Company settled these
actions for $1.4 million, payable in installments through January
1997, and has accrued remaining compensation of $200,000 at
September 30, 1996.
A suit was filed against The Colonel's in 1992 claiming The
Colonel's violated antitrust laws and alleging that The Colonel's
has engaged in predatory pricing, monopolization and anti-
competitive acquisitions. Discovery has narrowed the plaintiffs'
theories of recoveries and the allegedly offending predatory
prices. The Colonel's has settled the dispute. The Settlement
restricts disclosure of the terms. The Colonel's has accrued for
the settlement and costs.
The Company is involved in various other legal proceedings which
have arisen in the normal course of the operations. The Company
has accrued its best estimate of the cost of litigation based on
known facts. It is possible that this estimate may change in the
near term as these lawsuits progress. Although the final
resolution of any such matters could have a material effect on the
Company's operating results for the particular reporting period in
which an adjustment of the estimated liability is recorded, the
Company believes that any resulting liability should not
materially affect its financial position.
-21-
<PAGE> 22
Note 8 ENVIRONMENTAL REMEDIATION
The Company is responsible for the remediation of hazardous
materials and ground contamination located at its former
manufacturing facility in Owosso, Michigan, which was destroyed by
fire in June of 1993. In August 1993, the Michigan Department of
Natural Resources required that the Company perform a complete
hydrogeological study of the site to determine the extent of the
contamination. The Company has engaged environmental consultants
to determine the extent of the hazardous materials located at this
site, if any, and the cost of any remediation. The Company has
accrued its best estimate of the cost of remediation based on
known facts. It is possible that this estimate may change in the
near term as the project progresses. Although the final
resolution of any such matters could have a material effect on the
Company's operating results for the particular reporting period in
which an adjustment of the estimated liability is recorded, the
Company believes that any resulting liability should not
materially affect its financial position.
As part of the lease agreement with a related party for the Milan,
Michigan facility, the Company is also responsible for the
remediation of hazardous material, if any, up to an amount of
$2,000,000, which existed at this site prior to The Colonel's
entering into the lease in June 1993. The Company has accrued for
estimated remediation costs based on an environmental study of the
site. The Company has accrued its best estimate of the cost of
remediation based on known facts. It is possible that this
estimate may change in the near term as the project progresses.
Although the final resolution of any such matters could have a
material effect on the Company's operating results for the
particular reporting period in which an adjustment of the
estimated liability is recorded, the Company believes that any
resulting liability should not materially affect its financial
position.
-22-
<PAGE> 23
EXHIBIT INDEX
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit A to
the Proxy Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held on
November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd International,
Inc. and The Colonel's Holdings, Inc. Incorporated by reference
from Exhibit D to the Proxy Statement of Brainerd International,
Inc. for the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference from Exhibit E to the Proxy Statement of
Brainerd International, Inc. for the Annual Meeting of
Shareholders of Brainerd International, Inc. held on November 21,
1995.
3.2 Certificate of Amendment to the Articles of Incorporation changing
name from "The Colonel's Holdings, Inc." to "The Colonel's
International, Inc." Incorporated by reference from Exhibit 3.2
to the Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1995.
3.3 Bylaws of the Company. Incorporated by reference from Exhibit F
to the Proxy Statement of Brainerd International, Inc. for the
Annual Meeting of Shareholders of Brainerd International, Inc.
held on November 21, 1995.
4.1 Articles of Incorporation. See Exhibit 3.1 above.
10.1 The Company's 1995 Long-Term Incentive Plan. Incorporated by
reference from Exhibit G to the Proxy Statement of Brainerd
International, Inc. for the Annual Meeting of Shareholders of
Brainerd International, Inc. held on November 21, 1995.
10.2 Incentive Stock Option Plan. Incorporated by reference from the
Annual Report on Form 10-K of Brainerd International Inc. for the
fiscal year ended December 31, 1987.
10.3 Form of Non-Statutory Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from the
Annual Report on Form 10-K of Brainerd International Inc. for the
fiscal year ended December 31, 1987.
-23-
<PAGE> 24
10.4 Form of Incentive Stock Option Agreement used under the Incentive
Stock Option Plan. Incorporated by reference from the Annual
Report on Form 10-K of Brainerd International Inc. for the fiscal
year ended December 31, 1987.
10.5 Office Lease Agreement dated January 23, 1991 between Brainerd
International, Inc. and Woodland Office Partnership. Incorporated
by reference from the Annual Report on Form 10-K of Brainerd
International Inc. for the fiscal year ended December 31, 1990.
10.6 Amendment dated December 11-12, 1991 to Office Lease Agreement
(see Exhibit 10(e) above) between Brainerd International, Inc. and
Woodland Office Partnership. Incorporated by reference from
Brainerd International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.7 $404,700 Promissory Note dated January 1, 1992, from Brainerd
International, Inc. payable to Gene Snow and James W. Littlejohn.
Incorporated by reference from Brainerd International, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31,
1991.
10.8 Lease Agreement between Issuer and National Hot Rod Association,
Inc. consisting of March 17, 1984 Lease Agreement; April 28, 1986
letter extending term to 1991; March 12, 1987 Letter of Amendment;
and April 7, 1992 letter extending term to 1996 and amending
agreement. Incorporated by reference from Brainerd International,
Inc.'s Registration Statement on Form S-1 (Registration No. 33-055876).
10.9 November 8, 1988 Sponsorship Agreement between Champion Auto
Stores, Inc. and National Hot Rod Association, Inc. Incorporated
by reference from Brainerd International, Inc.'s Registration
Statement on Form S-1 (Registration No. 33-055876).
10.10 June 22, 1992 Title Rights Sponsorship Agreement between Champion
Auto Stores, Inc. and National Hot Rod Association, Inc.
Incorporated by reference from Brainerd International, Inc.'s
Registration Statement on Form S-1 (Registration No. 33-055876).
10.11 February 16, 1994 Loan Agreement with American National Bank of
Brainerd; $550,000 Promissory Note; and $300,000 Line of Credit
Note. Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1993.
10.12 December 21, 1993 Agreement among Issuer, Motor Stadium, Inc. and
Gene M. Snow providing for termination of March 23, 1993 Financing
Agreement, dissolution of Motor Sports Stadium, Inc. and grant of
-24-
<PAGE> 25
interest by Mr. Snow in potential future project. Incorporated by
reference from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1993.
10.13 Amendment dated February 1, 1994 to Office Lease Agreement (See
Exhibits 10(e) and 10(f)). Incorporated by reference from
Brainerd International, Inc.'s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1993.
10.14 September 1994 Stock Purchase Agreement among Gene M. Snow, James
W. Littlejohn and Donald J. Williamson. Incorporated by reference
from Brainerd International, Inc.'s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1993.
10.15 December 1994 Letter of Intent between Issuer and The Colonel's,
Inc. Incorporated by reference from Brainerd International, Inc.'s
Annual Report on Form 10-KSB for the fiscal year ended December
31, 1993.
10.16 Addendum to Lease dated December 16, 1994 (See Exhibits 10(e),
10(f) and 10(m)). Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1993.
10.17 Variable Rate-Installment Note ($6,000,000) between The Colonel's
and Comerica Bank dated April 14, 1995. Incorporated by reference
from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.18 Master Revolving Note ($4,500,000) between The Colonel's and
Comerica Bank dated May 1, 1995. Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
10.19 Security Agreement between The Colonel's and Comerica Bank (f/k/a
Manufacturers National Bank of Detroit) dated December 4, 1991.
Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.20 Amended and Restated Security Agreement between The Colonel's and
Comerica Bank (f/k/a Manufacturers National Bank of Detroit) dated
December 4, 1991. Incorporated by reference from Amendment No. 1
to Brainerd International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
-25-
<PAGE> 26
10.21 Amended and Restated Guaranty between Donald and Patsy Williamson
and Comerica Bank dated October 8, 1992. Incorporated by
reference from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.22 Lease Agreement between 620 Platt Road, Inc. and The Colonel's
dated June 18, 1993 (for Milan, Michigan manufacturing facility).
Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.23 First Amendment to Lease Agreement between 620 Platt Road, L.L.C.
(f/k/a 620 Platt Road, Inc.) and The Colonel's dated June 16,
1995. Incorporated by reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.24 Industrial/Warehouse Lease between JMB/Warehouse Associates
Limited Partnership and The Colonel's dated August 1, 1993 (for
Houston, Texas warehouse distribution facility). Incorporated by
reference from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No. 33-91374).
10.25 Lease Agreement between Industrial Properties Corporation and The
Colonel's dated September 15, 1992 (for Dallas, Texas warehouse
distribution facility). Incorporated by reference from Amendment
No. 1 to Brainerd International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
10.26 Standard Industrial Lease between Revco D.S., Inc. and The
Colonel's dated February 5, 1993 (for Phoenix (Glendale), Arizona
warehouse distribution facility). Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
10.27 Interim Equipment Lease Schedule ($2,729,370) between The
Colonel's and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.28 Interim Equipment Lease Schedule ($2,044,000) between The
Colonel's and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
-26-
<PAGE> 27
10.29 Interim Equipment Lease Schedule ($383,468) between The Colonel's
and Comerica Leasing Corporation dated July 27, 1995.
Incorporated by reference from Amendment No. 2 to Brainerd
International, Inc.'s Registration Statement on Form S-4
(Registration No. 33-91374).
10.30 Lease Schedule ($3,464,557) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.30 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.31 Interim Lease Schedule ($960,000) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.31 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.32 Interim Lease Schedule ($542,811) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.32 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.33 Interim Lease Schedule ($85,800) between The Colonel's, Inc. and
Comerica Leasing Corporation dated January 26, 1996. Incorporated
by reference from Exhibit 10.33 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.34 Interim Lease Schedule ($52,556) between The Colonel's, Inc. and
Comerica Leasing Corporation dated February 16, 1996.
Incorporated by reference from Exhibit 10.34 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.35 Interim Lease Schedule ($584,250) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
Incorporated by reference from Exhibit 10.35 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.36 Interim Lease Schedule ($364,650) between The Colonel's, Inc. and
Comerica Leasing Corporation dated January 26, 1996. Incorporated
by reference from Exhibit 10.36 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.37 Interim Lease Schedule ($178,200) between The Colonel's, Inc. and
Comerica Leasing Corporation dated February 16, 1996.
Incorporated by reference from Exhibit 10.37 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.38 Lease Schedule between The Colonel's, Inc. and Comerica Leasing
Corporation dated May 31, 1996.
-27-
<PAGE> 28
10.39 Lease Agreement between The Colonel's, Inc. and Gamma Realty Co.
for lease of premises in Totowa, New Jersey.
10.40 Interim Lease Schedule between The Colonel's, Inc. and Comerica
Leasing Corporation dated June 17, 1996.
10.41 Interim Lease Schedule between The Colonel's, Inc. and Comerica
Leasing Corporation dated August 30, 1996.
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
-28-
<PAGE> 1
EXHIBIT 10.38
Lease Agreement No. 2885
Dated: May 31, 1996
Schedule No. 014
COMERICA LEASING CORPORATION
LEASE SCHEDULE
1. DESCRIPTION OF LEASE: Lease Agreement dated DECEMBER 21, 1993, by and
between COMERICA LEASING CORPORATION (herein "CLC") as Lessor, and THE
COLONEL'S, INC. as Lessee (herein called "Lease Agreement").
2. DESCRIPTION OF EQUIPMENT: (Describe equipment fully, including make,
kind of unit, serial numbers, and other pertinent information which is
herein called "Equipment"):
Equipment as further described on attached Exhibit "A"
3. LOCATION: The equipment described above shall be located at 951 AIKEN
ROAD, OWOSSO, MICHIGAN 49224.
4. TERM; RENTAL: The Term of the Lease Agreement for the Equipment
described in this Schedule shall be in accordance with the provisions of
the Lease Agreement and shall continue until all rental payments are fully
paid. Lessee agrees to pay CLC as rental payments aggregating
$3,198,432.72 plus any applicable sales and/or use taxes thereon payment in
84 MONTHLY payments of $38,076.58 each, plus any applicable sales and/or
use taxes commencing JUNE 30, 1996, and on the same calendar day of each
succeeding like period until fully paid. THE RENTAL PAYMENTS SHALL BE
REMITTED TO CLC AT P.O. DRAWER 67-042, DETROIT, MICHIGAN 48267, unless CLC
specifies otherwise in writing.
5. INSURANCE: Lessee agrees to maintain adequate property damage
insurance in accordance with the terms of the Lease Agreement, but in any
event not less than the sum of the payments due, protecting CLC as a loss
payee. The minimum amount indicated above shall not be construed to imply
such amount will be or is adequate, but rather as a minimum amount.
6. UCC 2A: In accordance with Section 2A of the Michigan Uniform
Commercial Code (MCLA Section 440.3101 et seq.) ("UCC") Lessee acknowledges
either (a) that Lessee has reviewed and approved any written Supply
Contract (as defined by UCC Section 2A-103(i)(y)) covering the Equipment
purchased from the "Supplier" (as defined by UCC Section 2A-103(i)(x))
thereof for lease to Lessee or (b) that Lessor has informed or advised
Lessee, in writing, either previously or by this Lease Schedule of the
following: (i) the identity of the supplier; (ii) that the Lessee may have
rights under the Supply Contract; and (iii) that the Lessee may contact the
Supplier for a description of any such rights lessee may have under the
Supply Contract.
<PAGE> 2
Lessee acknowledges that Lessee has reviewed and approved the Purchase
Order, Supply Contract or Purchase Agreement covering the Equipment
purchased from the seller or supplier thereof for lease to Lessee.
Lessee's Initials: RLS
7. ADDITIONAL CONDITIONS: At the end of the Lease term, Lessee may
purchase the equipment for $1.00 provided no event of default shall have
occurred and been left unremedied.
The foregoing is hereby approved and agreed to by the undersigned as a
Schedule to and a part of the Lease Agreement, the provisions of which are
hereby incorporated herein by reference and which shall govern,
notwithstanding anything contrary or inconsistent herein.
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
Address: 620 South Platt Road,
Milan, Michigan 48160
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
<PAGE> 3
Dated: May 31, 1996
COMERICA LEASING CORPORATION
"EXHIBIT A"
LEASE AGREEMENT NO. 2885
SCHEDULE NO. 14
Equipment as fully described below:
Four (4) Brown R-224-E Rotary Thermoformers, Serial Nos. 13054, 13055,
13056, and 13057, including: training, setup, freight, rigging, and
installation, all electrical, air, and water hookups, and all
accessories and attachments thereto.
One (1) Busch Quadruplex Central Vacuum System and all accessories and
attachments including;
Four (4) Busch 25 HP Vacuum Pumps, Model #RC0630
One (1) 400 Gallon Electrical Control Panel
One (1) 8" Vacuum Header with Multiple Lines
One (1) Gardner Denver Refrigerated Air Dryer
One (1) 5 Micron Prefilter
One (1) Automatic Drain
One (1) Conair 10HP Vacuum Pump System and
One (1) Conair Dust Collector System and all accessories and attachments
including attachments for six (6) Thermoformers
One (1) AEC, Inc. Flexible Hose and Tube Conveyor System, including;
One (1) 20 HP TEFC, 6PSI Capacity Motor
One (1) 4" Flexible Hose and Tube
One (1) NEMA-12 Control Enclosure System
One (1) Rotary Valve, Drop-Thru
Two (2) 30 cubic foot full capacity 16" flanged cones
Thirty (30) tubes of various size
One (1) 1/2 HP TEFC Gear Motor; and all accessories and attachments
One (1) Square-D Central Switch Gear & Electrical Circuit Panels and
Breakers, Model #599880C
Cabinet #1-1 Serial #D226966
Cabinet #1-2 Serial #D226965
Cabinet #1-3 Serial #D226963
Cabinet #1-4 Serial #D71350
Cabinet #2-1 Serial #D226960
Cabinet #2-2 Serial #D226961
Cabinet #2-3 Serial #D226962
Cabinet #2-4 Serial #D71351
Cabinet #3-1 Serial #D226968
Cabinet #3-2 Serial #D226964
<PAGE> 4
Cabinet #3-3 Serial #D226825
Cabinet #3-4 Serial #D226826
Cabinet #3-5 Serial #D226870
Cabinet #4-1 Serial #D226827
Cabinet #4-2 Serial #D226868
Cabinet #4-3 Serial #D71103
Cabinet #4-4 Serial #D226869
Cabinet #4-5 Serial #D226824
One (1) Load Center - Main Cut Off, Switch #17-05999880A
Two (2) Transformers, Serial Nos. 17-05998811A, and 44036-325-50; and
all accessories and attachments
Agreed and Accepted:
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
<PAGE> 5
COMERICA LEASING CORPORATION
DELIVERY AND ACCEPTANCE CERTIFICATE
TO: COMERICA LEASING CORPORATION
RE: LEASE AGREEMENT NUMBER 2885 DATED AS OF DECEMBER 21, 1993
BETWEEN COMERICA LEASING CORPORATION, LESSOR, AND THE
UNDERSIGNED LESSEE
The undersigned hereby certifies that all of the goods, chattels and
equipment ("Equipment") described in the Schedule Number 014 to that
certain lease referenced above have been furnished to the undersigned at
the location designated in said Schedule, that delivery and installation of
the Equipment have been inspected and accepted by the undersigned as
satisfactory as of the date set forth below.
The undersigned understands that Lessor is relying on this certificate in
its purchase of the Equipment and, to induce Lessor to purchase the
Equipment, the undersigned agrees to settle all claims, set-offs and
counterclaims it may have with the vendor or vendors of the Equipment
directly with such vendor or vendors and will not set-off any thereof
against Lessor; and the undersigned further understands and agrees that the
undersigned's obligations to Lessor under the Lease are absolute, that
Lessor is neither the manufacturer, distributor nor seller of the Equipment
and LESSOR HAS NOT MADE, NOR DOES IT MAKE, ANY REPRESENTATION OR WARRANTY
OR AGREEMENT WITH RESPECT TO THE FITNESS, MERCHANTABILITY, CONDITION,
QUALITY, DURABILITY OR SUITABILITY OF THE EQUIPMENT IN ANY RESPECT
INCLUDING ITS FITNESS FOR THE PURPOSE AND USES OF LESSEE. The undersigned
hereby acknowledges that it has reviewed and approved the Purchase Order,
Supply Contract or Purchase Agreement covering the Equipment purchased from
the vendor(s) or supplier(s) thereof for lease to the undersigned.
Dated: May 31, 1996
THE COLONEL'S, INC.
(Lessee)
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt
Its: Controller
<PAGE> 1
EXHIBIT 10.39
THIS LEASE AGREEMENT, MADE THE 15 DAY OF MARCH 1996,
BETWEEN
GAMMA REALTY CO
LANDLORD
RESIDING OR LOCATED AT P.O. BOX 808
IN THE TOWN OF LYNDHURST IN THE COUNTY OF
BERGEN AND STATE OF NEW JERSEY 07071, HEREIN DESIGNATED AS THE
LANDLORD,
AND
THE COLONEL'S INC,
TENANT
RESIDING OR LOCATED AT 620 SOUTH PLATT ROAD
IN THE TOWN OF MILAN IN THE COUNTY OF
________________ AND STATE OF MICHIGAN 48160, HEREIN DESIGNATED AS
THE TENANT;
WITNESSETH THAT, THE LANDLORD DOES HEREBY LEASE TO THE TENANT
AND THE TENANT DOES HEREBY RENT FROM THE LANDLORD, THE FOLLOWING
DESCRIBED PREMISES:
40 VREELAND AVE., TOTOWA, NJ
PREMISES 23,000 SQ. FT. AT $6.25/SQ. FT. PER YEAR GROSS WITH AN
ADDITIONAL 3 YEAR OPTION AT $7.00/SQ. FT. PER YEAR GROSS
SEE RIDER
FOR A TERM OF THIRTY-SIX (36) MONTHS, THREE YEARS
TERM COMMENCING ON APRIL 1 1996, AND ENDING ON MARCH 31 1999,
TO BE USED AND OCCUPIED ONLY AND FOR NO OTHER PURPOSE THAN
WAREHOUSE AND DISTRIBUTION OF AUTOMOBILE AND TRUNK
USE BUMPERS, RELATED PARTS AND TRUCK BEDLINERS.
SEE RIDER
UPON THE FOLLOWING CONDITIONS AND COVENANTS:
1ST: THE TENANT COVENANTS AND AGREES TO PAY TO THE LANDLORD,
AS RENT FOR AND DURING THE TERM HEREOF, THE SUM OF $431,250 FOUR
HUNDRED THOUSAND THIRTY ONE TWO HUNDRED FIFTY DOLLARS IN THE
FOLLOWING MANNER:
PAYMENT YEAR TOTAL MONTHLY TOTAL ANNUAL
OF RENT 1 $ 11,979.17 $143,750.00
2 $ 11,979.17 $143,750.00
3 $ 11,979.17 $143,750.00
2ND: THE TENANT HAS EXAMINED THE PREMISES AND HAS ENTERED
REPAIRS INTO THIS LEASE WITHOUT ANY REPRESENTATION ON THE PART OF THE
AND CARE LANDLORD AS TO THE CONDITION THEREOF. THE TENANT SHALL TAKE GOOD
CARE OF THE PREMISES AND SHALL AT THE TENANT'S OWN COST AND EXPENSE,
<PAGE> 2
MAKE ALL REPAIRS, INCLUDING PAINTING AND DECORATING, AND SHALL
MAINTAIN THE PREMISES IN GOOD CONDITION AND STATE OF REPAIR, AND AT
THE END OR OTHER EXPIRATION OF THE TERM HEREOF, SHALL DELIVER UP THE
RENTED PREMISES IN GOOD ORDER AND CONDITION, WEAR AND TEAR FROM A
REASONABLE USE THEREOF, AND DAMAGE BY THE ELEMENTS NOT RESULTING
FROM THE NEGLECT OR FAULT OF THE TENANT, EXCEPTED. THE TENANT SHALL
NEITHER ENCUMBER NOR OBSTRUCT THE SIDEWALKS, DRIVEWAYS, YARDS,
ENTRANCES, HALLWAYS AND STAIRS, BUT SHALL KEEP AND MAINTAIN THE SAME
IN A CLEAN CONDITION, FREE FROM DEBRIS, TRASH, REFUSE, SNOW AND ICE.
3RD: IN CASE OF THE DESTRUCTION OF OR ANY DAMAGE TO THE GLASS
GLASS, IN THE LEASED PREMISES, OR THE DESTRUCTION OF OR DAMAGE OF ANY KIND
ETC. WHATSOEVER TO THE SAID PREMISES, CAUSED BY THE CARELESSNESS,
DAMAGE NEGLIGENCE OR IMPROPER CONDUCT ON THE PART OF THE TENANT OR THE
REPAIRS TENANT'S AGENTS, EMPLOYEES, GUESTS, LICENSEES, INVITEES, SUBTENANTS,
ASSIGNEES OR SUCCESSORS, THE TENANT SHALL REPAIR THE SAID DAMAGE OR
REPLACE OR RESTORE ANY DESTROYED PARTS OF THE PREMISES, AS SPEEDILY
AS POSSIBLE, AT THE TENANT'S OWN COST AND EXPENSE.
4TH: NO ALTERATIONS, ADDITIONS OR IMPROVEMENTS SHALL BE MADE,
ALTERA- AND NO CLIMATE REGULATING, AIR CONDITIONING, COOLING, HEATING OR
TIONS SPRINKLER SYSTEMS, TELEVISION OR RADIO ANTENNAS, HEAVY EQUIPMENT,
IMPROVE- APPARATUS AND FIXTURES, SHALL BE INSTALLED IN OR ATTACHED TO THE
MENTS LEASED PREMISES, WITHOUT THE WRITTEN CONSENT OF THE LANDLORD. UNLESS
OTHERWISE PROVIDED HEREIN, ALL SUCH ALTERATIONS, ADDITIONS OR
IMPROVEMENTS AND SYSTEMS, WHEN MADE, INSTALLED IN OR ATTACHED TO THE
SAID PREMISES, SHALL BELONG TO AND BECOME THE PROPERTY OF THE
LANDLORD AND SHALL BE SURRENDERED WITH THE PREMISES AND AS PART
THEREOF UPON THE EXPIRATION OR SOONER TERMINATION OF THIS LEASE,
WITHOUT HINDRANCE, MOLESTATION OR INJURY. SEE RIDER
5TH: THE TENANT SHALL NOT PLACE NOR ALLOW TO BE PLACED ANY
SIGNS OF ANY KIND WHATSOEVER, UPON, IN OR ABOUT THE SAID PREMISES OR
SIGNS ANY PART THEREOF, EXCEPT OF A DESIGN AND STRUCTURE AND IN OR AT SUCH
PLACES AS MAY BE INDICATED AND CONSENTED TO BY THE LANDLORD IN
WRITING. IN CASE THE LANDLORD OR THE LANDLORD'S AGENTS, EMPLOYEES OR
REPRESENTATIVES SHALL DEEM IT NECESSARY TO REMOVE ANY SUCH SIGNS IN
ORDER TO PAINT OR MAKE ANY REPAIRS, ALTERATIONS OR IMPROVEMENTS IN
OR UPON SAID PREMISES OR ANY PART THEREOF, THEY MAY BE SO REMOVED,
BUT SHALL BE REPLACED AT THE LANDLORD'S EXPENSE WHEN THE SAID
REPAIRS, ALTERATIONS OR IMPROVEMENTS SHALL HAVE BEEN COMPLETED. ANY
SIGNS PERMITTED BY THE LANDLORD SHALL AT ALL TIMES CONFORM WITH ALL
MUNICIPAL ORDINANCES OR OTHER LAWS AND REGULATIONS APPLICABLE
THERETO. SEE RIDER
6TH: THE TENANT SHALL PAY WHEN DUE ALL THE RENTS OR CHARGES
FOR WATER OR OTHER UTILITIES USED BY THE TENANT, WHICH ARE OR MAY BE
UTILITIES ASSESSED OR IMPOSED UPON THE LEASED PREMISES OR WHICH ARE OR MAY BE
CHARGED TO THE LANDLORD BY THE SUPPLIERS THEREOF DURING THE TERM
HEREOF, AND IF NOT PAID, SUCH RENTS OR CHARGES SHALL BE ADDED TO AND
<PAGE> 3
BECOME PAYABLE AS ADDITIONAL RENT WITH THE INSTALLMENT OF RENT NEXT
DUE OR WITHIN 30 DAYS OF DEMAND THEREFOR, WHICHEVER OCCURS SOONER.
7TH: THE TENANT SHALL PROMPTLY COMPLY WITH ALL LAWS,
ORDINANCES, RULES, REGULATIONS, REQUIREMENTS AND DIRECTIVES OF THE
FEDERAL, STATE AND MUNICIPAL GOVERNMENTS OR PUBLIC AUTHORITIES AND
COMPLIANCE OF ALL THEIR DEPARTMENTS, BUREAUS AND SUBDIVISIONS, APPLICABLE TO
WITH LAWS AND AFFECTING THE SAID PREMISES, THEIR USE AND OCCUPANCY, FOR THE
ETC. CORRECTION, PREVENTION AND ABATEMENT OF NUISANCES, VIOLATIONS OR
OTHER GRIEVANCES IN, UPON OR CONNECTED WITH THE SAID PREMISES,
DURING THE TERM HEREOF; AND SHALL PROMPTLY COMPLY WITH ALL ORDERS,
REGULATIONS, REQUIREMENTS AND DIRECTIVES OF THE BOARD OF FIRE
UNDERWRITERS OR SIMILAR AUTHORITY AND OF ANY INSURANCE COMPANIES
WHICH HAVE ISSUED OR ARE ABOUT TO ISSUE POLICIES OF INSURANCE
COVERING THE SAID PREMISES AND ITS CONTENTS, FOR THE PREVENTION OF
FIRE OR OTHER CASUALTY, DAMAGE OR INJURY, AT THE TENANT'S OWN COST
AND EXPENSE.
8TH: THE TENANT, AT TENANT'S OWN COST AND EXPENSE, SHALL
OBTAIN OR PROVIDE AND KEEP IN FULL FORCE FOR THE BENEFIT OF THE
LIABILITY LANDLORD, DURING THE TERM HEREOF, GENERAL PUBLIC LIABILITY
INSURANCE INSURANCE, INSURING THE LANDLORD AGAINST ANY AND ALL LIABILITY OR
CLAIMS OF LIABILITY ARISING OUT OF, OCCASIONED BY OR RESULTING FROM
ANY ACCIDENT OR OTHERWISE IN OR ABOUT THE LEASED PREMISES, FOR
INJURIES TO ANY PERSON OR PERSONS, FOR LIMITS OF NOT LESS THAN
$500,000.00 FOR INJURIES TO ONE PERSON AND $1,000,000.00 FOR
INJURIES TO MORE THAN ONE PERSON, IN ANY ONE ACCIDENT OR OCCURRENCE,
AND FOR LOSS OR DAMAGE TO THE PROPERTY OF ANY PERSON OR PERSONS, FOR
INDEMNI- NOT LESS THAN $250,000.00. THE POLICY OR POLICIES OF INSURANCE SHALL
FICATION BE OF A COMPANY OR COMPANIES AUTHORIZED TO DO BUSINESS IN THIS STATE
AND SHALL BE DELIVERED TO THE LANDLORD, TOGETHER WITH EVIDENCE OF
THE PAYMENT OF THE PREMIUMS THEREFOR, NOT LESS THAN FIFTEEN DAYS
PRIOR TO THE COMMENCEMENT OF THE TERM HEREOF OR OF THE DATE WHEN THE
TENANT SHALL ENTER INTO POSSESSION, WHICHEVER OCCURS SOONER. AT
LEAST FIFTEEN DAYS PRIOR TO THE EXPIRATION OR TERMINATION DATE OF
ANY POLICY, THE TENANT SHALL DELIVER A RENEWAL OR REPLACEMENT POLICY
WITH PROOF OF THE PAYMENT OF THE PREMIUM THEREFOR. THE TENANT ALSO
AGREES TO AND SHALL SAVE, HOLD AND KEEP HARMLESS AND INDEMNIFY THE
LANDLORD FROM AND FOR ANY AND ALL PAYMENTS, EXPENSES, COSTS,
ATTORNEY FEES AND FROM AND FOR ANY AND ALL CLAIMS AND LIABILITY FOR
LOSSES OR DAMAGE TO PROPERTY OR INJURIES TO PERSONS OCCASIONED
WHOLLY OR IN PART BY OR RESULTING FROM ANY ACTS OR OMISSIONS BY THE
TENANT OR THE TENANT'S AGENTS, EMPLOYEES, GUESTS, LICENSEES,
INVITEES, SUBTENANTS, ASSIGNEES OR SUCCESSORS, OR FOR ANY CAUSE OR
REASON WHATSOEVER ARISING OUT OF OR BY REASON OF THE OCCUPANCY BY
THE TENANT AND THE CONDUCT OF THE TENANT'S BUSINESS.
9TH: THE TENANT SHALL NOT, WITHOUT THE WRITTEN CONSENT OF THE
ASSIGNMENT LANDLORD, ASSIGN, MORTGAGE OR HYPOTHECATE THIS LEASE, NOR SUBLET OR
SUBLEASE THE PREMISES OR ANY PART THEREOF.
<PAGE> 4
RESTRIC- 10TH: THE TENANT SHALL NOT OCCUPY OR USE THE LEASED PREMISES
TION OF OR ANY PART THEREOF, NOR PERMIT OR SUFFER THE SAME TO BE OCCUPIED OR
USE USED FOR ANY PURPOSES OTHER THAN AS HEREIN LIMITED, NOR FOR ANY
PURPOSE DEEMED UNLAWFUL, DISREPUTABLE, OR EXTRA HAZARDOUS, ON
ACCOUNT OF FIRE OR OTHER CASUALTY.
11TH: THIS LEASE SHALL NOT BE A LIEN AGAINST THE SAID
PREMISES IN RESPECT TO ANY MORTGAGES THAT MAY HEREAFTER BE PLACED
MORTGAGE UPON SAID PREMISES. THE RECORDING OF SUCH MORTGAGE OR MORTGAGES
PRIORITY SHALL HAVE PREFERENCE AND PRECEDENCE AND BE SUPERIOR AND PRIOR IN
LIEN TO THIS LEASE, IRRESPECTIVE OF THE DATE OF RECORDING AND THE
TENANT AGREES TO EXECUTE ANY INSTRUMENTS, WITHOUT COST, WHICH MAY BE
DEEMED NECESSARY OR DESIRABLE, TO FURTHER EFFECT THE SUBORDINATION
OF THIS LEASE TO ANY SUCH MORTGAGE OR MORTGAGES. A REFUSAL BY THE
TENANT TO EXECUTE SUCH INSTRUMENTS SHALL ENTITLE THE LANDLORD TO THE
OPTION OF CANCELLING THIS LEASE, AND THE TERM HEREOF IS HEREBY
EXPRESSLY LIMITED ACCORDINGLY.
12TH: IF THE LAND AND PREMISES LEASED HEREIN, OR OF WHICH THE
LEASED PREMISES ARE A PART, OR ANY PORTION THEREOF, SHALL BE TAKEN
UNDER EMINENT DOMAIN OR CONDEMNATION PROCEEDINGS, OR IF SUIT OR
OTHER ACTION SHALL BE INSTITUTED FOR THE TAKING OR CONDEMNATION
CONDEMNA- THEREOF, OR IF IN LIEU OF ANY FORMAL CONDEMNATION PROCEEDINGS OR
TION ACTIONS, THE LANDLORD SHALL GRANT AN OPTION TO PURCHASE AND OR SHALL
SELL AND CONVEY THE SAID PREMISES OR ANY PORTION THEREOF, TO THE
EMINENT GOVERNMENT OR OTHER PUBLIC AUTHORITY, AGENCY, BODY OR PUBLIC
DOMAIN UTILITY, SEEKING TO TAKE SAID LAND AND PREMISES OR ANY PORTION
THEREOF, THEN THIS LEASE, AT THE OPTION OF THE LANDLORD, SHALL
TERMINATE, AND THE TERM HEREOF SHALL END AS OF SUCH DATE AS THE
LANDLORD SHALL FIX BY NOTICE IN WRITING; AND THE TENANT SHALL HAVE
NO CLAIM OR RIGHT TO CLAIM OR BE ENTITLED TO ANY PORTION OF ANY
AMOUNT WHICH MAY BE AWARDED AS DAMAGES OR PAID AS THE RESULT OF SUCH
CONDEMNATION PROCEEDINGS OR PAID AS THE PURCHASE PRICE FOR SUCH
OPTION, SALE OR CONVEYANCE IN LIEU OF FORMAL CONDEMNATION
PROCEEDINGS; AND ALL RIGHTS OF THE TENANT TO DAMAGES, IF ANY, ARE
HEREBY ASSIGNED TO THE LANDLORD. THE TENANT AGREES TO EXECUTE AND
DELIVER ANY INSTRUMENTS, AT THE EXPENSE OF THE LANDLORD, AS MAY BE
DEEMED NECESSARY OR REQUIRED TO EXPEDITE ANY CONDEMNATION
PROCEEDINGS OR TO EFFECTUATE A PROPER TRANSFER OF TITLE TO SUCH
GOVERNMENTAL OR OTHER PUBLIC AUTHORITY, AGENCY, BODY OR PUBLIC
UTILITY SEEKING TO TAKE OR ACQUIRE THE SAID LANDS AND PREMISES OR
ANY PORTION THEREOF. THE TENANT COVENANTS AND AGREES TO VACATE THE
SAID PREMISES, REMOVE ALL THE TENANT'S PERSONAL PROPERTY THEREFROM
AND DELIVER UP PEACEABLE POSSESSION THEREOF TO THE LANDLORD OR TO
SUCH OTHER PARTY DESIGNATED BY THE LANDLORD IN THE AFOREMENTIONED
NOTICE. FAILURE BY THE TENANT TO COMPLY WITH ANY PROVISIONS IN THIS
CLAUSE SHALL SUBJECT THE TENANT TO SUCH COSTS, EXPENSES, DAMAGES AND
LOSSES AS THE LANDLORD MAY INCUR BY REASON OF THE TENANT'S BREACH
HEREOF.
<PAGE> 5
13TH: IN CASE OF FIRE OR OTHER CASUALTY, THE TENANT SHALL
GIVE IMMEDIATE NOTICE TO THE LANDLORD. IF THE PREMISES SHALL BE
PARTIALLY DAMAGED BY FIRE, THE ELEMENTS OR OTHER CASUALTY, THE
LANDLORD SHALL REPAIR THE SAME AS SPEEDILY AS PRACTICABLE, BUT THE
TENANT'S OBLIGATION TO PAY THE RENT HEREUNDER SHALL NOT CEASE. IF,
FIRE AND IN THE OPINION OF THE LANDLORD, THE PREMISES BE SO EXTENSIVELY AND
OTHER SUBSTANTIALLY DAMAGED AS TO RENDER THEM UNTENANTABLE, THEN THE RENT
CASUALTY SHALL CEASE UNTIL SUCH TIME AS THE PREMISES SHALL BE MADE TENANTABLE
BY THE LANDLORD. HOWEVER, IF, IN THE OPINION OF THE LANDLORD, THE
PREMISES BE TOTALLY DESTROYED OR SO EXTENSIVELY AND SUBSTANTIALLY
DAMAGED AS TO REQUIRE PRACTICALLY A REBUILDING THEREOF, THEN THE
RENT SHALL BE PAID UP TO THE TIME OF SUCH DESTRUCTION AND THEN AND
FROM THENCEFORTH THIS LEASE SHALL COME TO AN END. IN NO EVENT
HOWEVER, SHALL THE PROVISIONS OF THIS CLAUSE BECOME EFFECTIVE OR BE
APPLICABLE, IF THE FIRE OR OTHER CASUALTY AND DAMAGE SHALL BE THE
RESULT OF THE CARELESSNESS, NEGLIGENCE OR IMPROPER CONDUCT OF THE
TENANT OR THE TENANT'S AGENTS, EMPLOYEES, GUESTS, LICENSEES,
INVITEES, SUBTENANTS, ASSIGNEES OR SUCCESSORS. IN SUCH CASE, THE
TENANT'S LIABILITY FOR THE PAYMENT OF THE RENT AND THE PERFORMANCE
OF ALL THE COVENANTS, CONDITIONS AND TERMS HEREOF ON THE TENANT'S
PART TO BE PERFORMED SHALL CONTINUE AND THE TENANT SHALL BE LIABLE
TO THE LANDLORD FOR THE DAMAGE AND LOSS SUFFERED BY THE LANDLORD. IF
THE TENANT SHALL HAVE BEEN INSURED AGAINST ANY OF THE RISKS HEREIN
COVERED, THEN THE PROCEEDS OF SUCH INSURANCE SHALL BE PAID OVER TO
THE LANDLORD TO THE EXTENT OF THE LANDLORD'S COSTS AND EXPENSES TO
MAKE THE REPAIRS HEREUNDER, AND SUCH INSURANCE CARRIERS SHALL HAVE
NO RECOURSE AGAINST THE LANDLORD FOR REIMBURSEMENT.
14TH: IF THE TENANT SHALL FAIL OR REFUSE TO COMPLY WITH AND
PERFORM ANY CONDITIONS AND COVENANTS OF THE WITHIN LEASE, THE
REIMBURSE- LANDLORD MAY, IF THE LANDLORD SO ELECTS, CARRY OUT AND PERFORM SUCH
MENT OF CONDITIONS AND COVENANTS, AT THE COST AND EXPENSE OF THE TENANT, AND
LANDLORD THE SAID COST AND EXPENSE SHALL BE PAYABLE ON DEMAND, OR AT THE
OPTION OF THE LANDLORD SHALL BE ADDED TO THE INSTALLMENT OF RENT DUE
IMMEDIATELY THEREAFTER BUT IN NO CASE LATER THAN ONE MONTH AFTER
SUCH DEMAND, WHICHEVER OCCURS SOONER, AND SHALL BE DUE AND PAYABLE
AS SUCH. THIS REMEDY SHALL BE IN ADDITION TO SUCH OTHER REMEDIES AS
THE LANDLORD MAY HAVE HEREUNDER BY REASON OF THE BREACH BY THE
TENANT OF ANY OF THE COVENANTS AND CONDITIONS IN THIS LEASE
CONTAINED.
15TH: THE TENANT AGREES THAT THE LANDLORD AND THE LANDLORD'S
AGENTS, EMPLOYEES OR OTHER REPRESENTATIVES, SHALL HAVE THE RIGHT TO
INSPECTION ENTER INTO AND UPON THE SAID PREMISES OR ANY PART THEREOF, AT ALL
AND REPAIR REASONABLE HOURS, FOR THE PURPOSE OF EXAMINING THE SAME OR MAKING
SUCH REPAIRS OR ALTERATIONS THEREIN AS MAY BE NECESSARY FOR THE
SAFETY AND PRESERVATION THEREOF. THIS CLAUSE SHALL NOT BE DEEMED TO
BE A COVENANT BY THE LANDLORD NOR BE CONSTRUED TO CREATE AN
OBLIGATION ON THE PART OF THE LANDLORD TO MAKE SUCH INSPECTION OR
REPAIRS.
<PAGE> 6
16TH: THE TENANT AGREES TO PERMIT THE LANDLORD AND THE
LANDLORD'S AGENTS, EMPLOYEES OR OTHER REPRESENTATIVES TO SHOW THE
RIGHT TO PREMISES TO PERSONS WISHING TO RENT OR PURCHASE THE SAME, AND TENANT
EXHIBIT AGREES THAT ON AND AFTER NOVEMBER 1, 1998 NEXT PRECEDING THE EXPIRA-
TION OF THE TERM HEREOF, THE LANDLORD OR THE LANDLORD'S AGENTS,
EMPLOYEES OR OTHER REPRESENTATIVES SHALL HAVE THE RIGHT TO PLACE
NOTICES ON THE FRONT OF SAID PREMISES OR ANY PART THEREOF, OFFERING
THE PREMISES FOR RENT OR FOR SALE; AND THE TENANT HEREBY AGREES TO
PERMIT THE SAME TO REMAIN THEREON WITHOUT HINDRANCE OR MOLESTATION.
INCREASE OF SEE RIDER
INSURANCE
RATES
18TH: ANY EQUIPMENT, FIXTURES, GOOD OR OTHER PROPERTY OF THE
REMOVAL OF TENANT, NOT REMOVED BY THE TENANT UPON THE TERMINATION OF THIS
TENANT'S LEASE, OR UPON ANY QUITTING, VACATING OR ABANDONMENT OF THE PREMISES
PROPERTY BY THE TENANT, OR UPON THE TENANT'S EVICTION, SHALL BE CONSIDERED AS
ABANDONED AND THE LANDLORD SHALL HAVE THE RIGHT, WITHOUT ANY NOTICE
TO THE TENANT, TO SELL OR OTHERWISE DISPOSE OF THE SAME, AT THE
EXPENSE OF THE TENANT, AND SHALL NOT BE ACCOUNTABLE TO THE TENANT
FOR ANY PART OF THE PROCEEDS OF SUCH SALE, IF ANY.
19TH: IF THERE SHOULD OCCUR ANY DEFAULT ON THE PART OF THE
TENANT IN THE PERFORMANCE OF ANY CONDITIONS AND COVENANTS HEREIN
REMEDIES CONTAINED, OR IF DURING THE TERM HEREOF THE PREMISES OR ANY PART
UPON THEREOF SHALL BE OR BECOME ABANDONED OR DESERTED, VACATED OR VACANT,
TENANT'S OR SHOULD THE TENANT BE EVICTED BY SUMMARY PROCEEDINGS OR OTHERWISE,
DEFAULT THE LANDLORD, IN ADDITION TO ANY OTHER REMEDIES HEREIN CONTAINED OR
AS MAYBE PERMITTED BY LAW, MAY EITHER BY FORCE OR OTHERWISE, WITHOUT
BEING LIABLE FOR PROSECUTION THEREFOR, OR FOR DAMAGES, RE-ENTER THE
SAID PREMISES AND THE SAME HAVE AND AGAIN POSSESS AND ENJOY; AND AS
AGENT FOR THE TENANT OR OTHERWISE, RE-LET THE PREMISES AND RECEIVE
THE RENTS THEREFOR AND APPLY THE SAME, FIRST TO THE PAYMENT OF SUCH
EXPENSES, REASONABLE ATTORNEY FEES AND COSTS, AS THE LANDLORD MAY
HAVE BEEN PUT TO IN RE-ENTERING AND REPOSSESSING THE SAME AND IN
MAKING SUCH REPAIRS AND ALTERATIONS AS MAY BE NECESSARY; AND SECOND
TO THE PAYMENT OF RENTS DUE HEREUNDER. THE TENANT SHALL REMAIN
LIABLE FOR SUCH RENTS AS MAY BE IN ARREARS AND ALSO THE RENTS AS MAY
ACCRUE SUBSEQUENT TO THE RE-ENTRY BY THE LANDLORD, TO THE EXTENT OF
THE DIFFERENCE BETWEEN THE RENTS RESERVED HEREUNDER AND THE RENTS,
IF ANY, RECEIVED BY THE LANDLORD DURING THE REMAINDER OF THE
UNEXPIRED TERM HEREOF, AFTER DEDUCTING THE AFOREMENTIONED EXPENSES,
FEES AND COSTS; THE SAME TO BE PAID AS SUCH DEFICIENCIES ARISE AND
ARE ASCERTAINED EACH MONTH.
<PAGE> 7
20TH: UPON THE OCCURRENCE OF ANY OF THE CONTINGENCIES SET
FORTH IN THE PRECEDING CLAUSE, OR SHOULD THE TENANT BE ADJUDICATED A
BANKRUPT, INSOLVENT OR PLACED IN RECEIVERSHIP, OR SHOULD PROCEEDINGS
TERMINA- BE INSTITUTED BY OR AGAINST THE TENANT FOR BANKRUPTCY, INSOLVENCY,
TION ON RECEIVERSHIP, AGREEMENT OF COMPOSITION OR ASSIGNMENT FOR THE BENEFIT
DEFAULT OF CREDITORS, OR IF THIS LEASE OR THE ESTATE OF THE TENANT HEREUNDER
SHALL PASS TO ANOTHER BY VIRTUE OF ANY COURT PROCEEDINGS, WRIT OF
EXECUTION, LEVY, SALE, OR BY OPERATION OF LAW, THE LANDLORD MAY, IF
THE LANDLORD SO ELECTS, AT ANY TIME THEREAFTER, TERMINATE THIS LEASE
AND THE TERM HEREOF, UPON GIVING TO THE TENANT OR TO ANY TRUSTEE,
RECEIVER, ASSIGNEE OR OTHER PERSON IN CHARGE OF OR ACTING AS
CUSTODIAN OF THE ASSETS OR PROPERTY OF THE TENANT, FIVE DAYS NOTICE
IN WRITING, OF THE LANDLORD'S INTENTION SO TO DO. UPON THE GIVING OF
SUCH NOTICE, THIS LEASE AND THE TERM HEREOF SHALL END ON THE DATE
FIXED IN SUCH NOTICE AS IF THE SAID DATE WAS THE DATE ORIGINALLY
FIXED IN THIS LEASE FOR THE EXPIRATION HEREOF; AND THE LANDLORD
SHALL HAVE THE RIGHT TO REMOVE ALL PERSONS, GOODS, FIXTURES AND
CHATTELS THEREFROM, BY FORCE OR OTHERWISE, WITHOUT LIABILITY FOR
DAMAGES.
21ST: THE LANDLORD SHALL NOT BE LIABLE FOR ANY DAMAGE OR
INJURY WHICH MAY BE SUSTAINED BY THE TENANT OR ANY OTHER PERSON, AS
A CONSEQUENCE OF THE FAILURE, BREAKAGE, LEAKAGE OR OBSTRUCTION OF
NON-LIA- THE WATER, PLUMBING, STEAM, SEWER, WASTE OR SOIL PIPES, ROOF,
BILITY OF DRAINS, LEADERS, GUTTERS, VALLEYS, DOWNSPOUTS OR THE LIKE OR OF THE
LANDLORD ELECTRICAL, GAS, POWER, CONVEYOR, REFRIGERATION, SPRINKLER,
AIRCONDITIONING OR HEATING SYSTEMS, ELEVATORS OR HOISTING EQUIPMENT;
OR BY REASON OF THE ELEMENTS; OR RESULTING FROM THE CARELESSNESS,
NEGLIGENCE OR IMPROPER CONDUCT ON THE PART OF ANY OTHER TENANT OR OF
THE LANDLORD OR THE LANDLORD'S OR THIS OR ANY OTHER TENANT'S AGENTS,
EMPLOYEES, GUESTS, LICENSEES, INVITEES, SUBTENANTS, ASSIGNEES OR
SUCCESSORS; OR ATTRIBUTABLE TO ANY INTERFERENCE WITH, INTERRUPTION
OF OR FAILURE, BEYOND THE CONTROL OF THE LANDLORD, OF ANY SERVICES
TO BE FURNISHED OR SUPPLIED BY THE LANDLORD.
22ND: THE VARIOUS RIGHTS, REMEDIES, OPTIONS AND ELECTIONS OF
THE LANDLORD, EXPRESSED HEREIN, ARE CUMULATIVE, AND THE FAILURE OF
THE LANDLORD TO ENFORCE STRICT PERFORMANCE BY THE TENANT OF THE
NON-WAIVER CONDITIONS AND COVENANTS OF THIS LEASE OR TO EXERCISE ANY ELECTION
BY LAND- OR OPTION OR TO RESORT OR HAVE RECOURSE TO ANY REMEDY HEREIN
LORD CONFERRED OR THE ACCEPTANCE BY THE LANDLORD OF ANY INSTALLMENT OF
RENT AFTER ANY BREACH BY THE TENANT, IN ANY ONE OR MORE INSTANCES,
SHALL NOT BE CONSTRUED OR DEEMED TO BE A WAIVER OR A RELINQUISHMENT
FOR THE FUTURE BY THE LANDLORD OF ANY SUCH CONDITIONS AND COVENANTS,
OPTIONS, ELECTIONS OR REMEDIES, BUT THE SAME SHALL CONTINUE IN FULL
FORCE AND EFFECT.
<PAGE> 8
23RD: THIS LEASE AND THE OBLIGATION OF THE TENANT TO PAY THE
RENT HEREUNDER AND TO COMPLY WITH THE COVENANTS AND CONDITIONS
NON-PER- HEREOF, SHALL NOT BE AFFECTED, CURTAILED, IMPAIRED OR EXCUSED
FORMANCE BECAUSE OF THE LANDLORD'S INABILITY TO SUPPLY ANY SERVICE OR
BY LAND- MATERIAL CALLED FOR HEREIN, BY REASON OF ANY RULE, ORDER, REGULATION
LORD OR PREEMPTION BY ANY GOVERNMENTAL ENTITY, AUTHORITY, DEPARTMENT,
AGENCY OR SUBDIVISION OR FOR ANY DELAY WHICH MAY ARISE BY REASON OF
NEGOTIATIONS FOR THE ADJUSTMENT OF ANY FIRE OR OTHER CASUALTY LOSS
OR BECAUSE OF STRIKES OR OTHER LABOR TROUBLE OR FOR ANY CAUSE BEYOND
THE CONTROL OF THE LANDLORD.
24TH: THE TERMS, CONDITIONS, COVENANTS AND PROVISIONS OF THIS
LEASE SHALL BE DEEMED TO BE SEVERABLE. IF ANY CLAUSE OR PROVISION
VALIDITY HEREIN CONTAINED SHALL BE ADJUDGED TO BE INVALID OR UNENFORCEABLE BY
OF LEASE A COURT OF COMPETENT JURISDICTION OR BY OPERATION OF ANY APPLICABLE
LAW, IT SHALL NOT AFFECT THE VALIDITY OF ANY OTHER CLAUSE OR
PROVISION HEREIN, BUT SUCH OTHER CLAUSES OR PROVISIONS SHALL REMAIN
IN FULL FORCE AND EFFECT.
25TH: ALL NOTICES REQUIRED UNDER THE TERMS OF THIS LEASE
SHALL BE GIVEN AND SHALL BE COMPLETE BY MAILING SUCH NOTICES BY
NOTICES CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, TO THE
ADDRESS OF THE PARTIES AS SHOWN AT THE HEAD OF THIS LEASE, OR TO
SUCH OTHER ADDRESS AS MAY BE DESIGNATED IN WRITING, WHICH NOTICE OF
CHANGE OF ADDRESS SHALL BE GIVEN IN THE SAME MANNER.
26TH: THE LANDLORD COVENANTS AND REPRESENTS THAT THE LANDLORD
TITLE AND IS THE OWNER OF THE PREMISES HEREIN LEASED AND HAS THE RIGHT AND
QUIET AUTHORITY TO ENTER INTO, EXECUTE AND DELIVER THIS LEASE; AND DOES
ENJOYMENT FURTHER COVENANT THAT THE TENANT ON PAYING THE RENT AND PERFORMING
THE CONDITIONS AND COVENANTS HEREIN CONTAINED, SHALL AND MAY
PEACEABLY AND QUIETLY HAVE, HOLD AND ENJOY THE LEASED PREMISES FOR
THE TERM AFOREMENTIONED.
27TH: THIS LEASE CONTAINS THE ENTIRE CONTRACT BETWEEN THE
ENTIRE PARTIES. NO REPRESENTATIVE, AGENT OR EMPLOYEE OF THE LANDLORD HAS
CONTRACT BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS OR PROMISES WITH
REFERENCE TO THE WITHIN LETTING OR TO VARY, ALTER OR MODIFY THE
TERMS HEREOF. NO ADDITIONS, CHANGES OR MODIFICATIONS, RENEWALS OR
EXTENSIONS HEREOF, SHALL BE BINDING UNLESS REDUCED TO WRITING AND
SIGNED BY THE LANDLORD AND THE TENANT.
28TH: IF IN ANY CALENDAR YEAR DURING THE TERM AND OF ANY
RENEWAL OR EXTENSION OF THE TERM HEREOF, THE ANNUAL MUNICIPAL TAXES
ASSESSED AGAINST THE LAND AND IMPROVEMENTS LEASED HEREUNDER OR OF
TAX WHICH THE PREMISES HEREIN LEASED ARE A PART, SHALL BE GREATER THAN
INCREASE THE MUNICIPAL TAXES ASSESSED AGAINST THE SAID LANDS AND IMPROVEMENTS
FOR THE CALENDAR YEAR 19_____, WHICH IS HEREBY DESIGNATED AS THE
BASE YEAR, THEN, IN ADDITION TO THE RENT HEREIN FIXED, THE TENANT
AGREES TO PAY A SUM EQUAL TO ______________________________________
______________________________ OF THE AMOUNT BY WHICH SAID TAX
<PAGE> 9
EXCEEDS THE ANNUAL TAX FOR THE BASE YEAR, INCLUSIVE OF ANY INCREASE
DURING ANY SUCH CALENDAR YEAR. THE SAID SUM SHALL BE CONSIDERED AS
ADDITIONAL RENT AND SHALL BE PAID IN AS MANY EQUAL INSTALLMENTS AS
THERE ARE MONTHS REMAINING IN THE CALENDAR YEAR IN WHICH SAID TAXES
EXCEED THE TAXES FOR THE BASE YEAR, ON THE FIRST DAY OF EACH MONTH
IN ADVANCE, DURING THE REMAINING MONTHS OF THAT YEAR. IF THE TERM
HEREOF SHALL COMMENCE AFTER THE FIRST DAY OF JANUARY OR SHALL
TERMINATE PRIOR TO THE LAST DAY OF DECEMBER IN ANY YEAR, THEN SUCH
ADDITIONAL RENT RESULTING FROM A TAX INCREASE SHALL BE
PROPORTIONATELY ADJUSTED FOR THE FRACTION OF THE CALENDAR YEAR
INVOLVED. N.A.
29TH: IF ANY MECHANICS' OR OTHER LIENS SHALL BE CREATED OR
FILED AGAINST THE LEASED PREMISES BY REASON OF LABOR PERFORMED OR
MATERIALS FURNISHED FOR THE TENANT IN THE ERECTION, CONSTRUCTION,
MECHANICS' COMPLETION, ALTERATION, REPAIR OR ADDITION TO ANY BUILDING OR
LIENS IMPROVEMENT, THE TENANT SHALL UPON DEMAND, AT THE TENANT'S OWN COST
AND EXPENSE, CAUSE SUCH LIEN OR LIENS TO BE SATISFIED AND DISCHARGED
OF RECORD TOGETHER WITH ANY NOTICES OF INTENTION THAT MAY HAVE BEEN
FILED. FAILURE SO TO DO, SHALL ENTITLE THE LANDLORD TO RESORT TO
SUCH REMEDIES AS ARE PROVIDED HEREIN IN THE CASE OF ANY DEFAULT OF
THIS LEASE, IN ADDITION TO SUCH AS ARE PERMITTED BY LAW.
30TH: THE TENANT WAIVES ALL RIGHTS OF RECOVERY AGAINST THE
WAIVER OF LANDLORD OR LANDLORD'S AGENTS, EMPLOYEES OR OTHER REPRESENTATIVES,
SUBROGA- FOR ANY LOSS, DAMAGES OR INJURY OF ANY NATURE WHATSOEVER TO PROPERTY
TION OR PERSONS FOR WHICH THE TENANT IS INSURED. THE TENANT SHALL OBTAIN
RIGHTS FROM TENANT'S INSURANCE CARRIERS AND WILL DELIVER TO THE LANDLORD,
WAIVERS OF THE SUBROGATION RIGHTS UNDER THE RESPECTIVE POLICIES.
31ST: THE TENANT HAS THIS DAY DEPOSITED WITH THE LANDLORD THE
SUM OF $23,958.34 AS SECURITY FOR THE PAYMENT OF THE RENT HEREUNDER
AND THE FULL AND FAITHFUL PERFORMANCE BY THE TENANT OF THE COVENANTS
AND CONDITIONS ON THE PART OF THE TENANT TO BE PERFORMED. SAID SUM
SHALL BE RETURNED TO THE TENANT, WITHOUT INTEREST, AFTER THE
SECURITY EXPIRATION OF THE TERM HEREOF, PROVIDED THAT THE TENANT HAS FULLY
AND FAITHFULLY PERFORMED ALL SUCH COVENANTS AND CONDITIONS AND IS
NOT IN ARREARS IN RENT. DURING THE TERM HEREOF, THE LANDLORD MAY, IF
THE LANDLORD SO ELECTS, HAVE RECOURSE TO SUCH SECURITY, TO MAKE GOOD
ANY DEFAULT BY THE TENANT, IN WHICH EVENT THE TENANT SHALL, ON
DEMAND, PROMPTLY RESTORE SAID SECURITY TO ITS ORIGINAL AMOUNT.
LIABILITY TO REPAY SAID SECURITY TO THE TENANT SHALL RUN WITH THE
REVERSION AND TITLE TO SAID PREMISES, WHETHER ANY CHANGE IN
OWNERSHIP THEREOF BE BY VOLUNTARY ALIENATION OR AS THE RESULT OF
JUDICIAL SALE, FORECLOSURE OR OTHER PROCEEDINGS, OR THE EXERCISE OF
A RIGHT OF TAKING OR ENTRY BY ANY MORTGAGEE. THE LANDLORD SHALL
ASSIGN OR TRANSFER SAID SECURITY, FOR THE BENEFIT OF THE TENANT, TO
ANY SUBSEQUENT OWNER OR HOLDER OF THE REVERSION OR TITLE TO SAID
PREMISES, IN WHICH CASE THE ASSIGNEE SHALL BECOME LIABLE FOR THE
REPAYMENT THEREOF AS HEREIN PROVIDED, AND THE ASSIGNOR SHALL BE
DEEMED TO BE RELEASED BY THE TENANT FROM ALL LIABILITY TO RETURN
<PAGE> 10
SUCH SECURITY. THIS PROVISION SHALL BE APPLICABLE TO EVERY
ALIENATION OR CHANGE IN TITLE AND SHALL IN NO WISE BE DEEMED TO
PERMIT THE LANDLORD TO RETAIN THE SECURITY AFTER TERMINATION OF THE
LANDLORD'S OWNERSHIP OF THE REVERSION OR TITLE. THE TENANT SHALL NOT
MORTGAGE, ENCUMBER OR ASSIGN SAID SECURITY WITHOUT THE WRITTEN
CONSENT OF THE LANDLORD.
** TWO MONTHS SECURITY IN THE SUM OF $23,958.34 AND FIRST
MONTH RENT DUE AT THE TIME OF SIGNING THIS LEASE.
CONFORMA- THE LANDLORD MAY PURSUE THE RELIEF OR REMEDY SOUGHT IN ANY
TION WITH INVALID CLAUSE, BY CONFORMING THE SAID CLAUSE WITH THE PROVISIONS OF
LAWS AND THE STATUTES OR THE REGULATIONS OF ANY GOVERNMENTAL AGENCY IN SUCH
REGULA- CASE MADE AND PROVIDED AS IF THE PARTICULAR PROVISIONS OF THE
TIONS APPLICABLE STATUTES OR REGULATIONS WERE SET FORTH HEREIN AT LENGTH.
IN ALL REFERENCES HEREIN TO ANY PARTIES, PERSONS, ENTITIES OR
CORPORATIONS THE USE OF ANY PARTICULAR GENDER OR THE PLURAL OR
SINGULAR NUMBER IS INTENDED TO INCLUDE THE APPROPRIATE GENDER OR
NUMBER AS THE TEXT OF THE WITHIN INSTRUMENT MAY REQUIRE. ALL THE
TERMS, COVENANTS AND CONDITIONS HEREIN CONTAINED SHALL BE FOR AND
SHALL INURE TO THE BENEFIT OF AND SHALL BIND THE RESPECTIVE PARTIES
HERETO, AND THEIR HEIRS, EXECUTORS, ADMINISTRATORS, PERSONAL OR
LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE HEREUNTO SET THEIR
HANDS AND SEALS, OR CAUSED THESE PRESENTS TO BE SIGNED BY THEIR
PROPER CORPORATE OFFICERS AND THEIR PROPER CORPORATE SEAL TO BE
HERETO AFFIXED, THE DAY AND YEAR FIRST ABOVE WRITTEN.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF /S/ ALFRED TEO
OR ATTESTED BY ALFRED TEO, GAMMA REALTY LANDLORD
/S/ MARK TEO /S/ JEFFREY A. CHIMOVITZ 3/10/96
Mark Teo JEFFREY A. CHIMOVITZ TENANT
VICE PRESIDENT & SECRETARY, THE
COLONEL'S INC.
___________________________________
<PAGE> 11
RIDER TO LEASE DATED MARCH 15, 1996 BETWEEN GAMMA REALTY, AS
LANDLORD, AND THE COLONEL'S, INC., AS TENANT.
PROPERTY ADDRESS
40 VREELAND AVENUE
TOTOWA, NJ 07512
ADDED PROVISIONS AS PER JEFFREY A. CHIMOVITZ
32ND THE LEASED SPACE WILL BE APPROXIMATELY 23,000 SQUARE
FEET.
33RD OCCUPANCY WILL COMMENCE ON APRIL 1, 1996 OR WHEN TOWNSHIP
ISSUES USE AND OTHER PERMITS, WHICHEVER OCCURS LATER.
34TH THE LEASE'S INITIAL TERM WILL BE 3 YEARS, AT $6.25/SQ.
FT. PER YEAR GROSS.
35TH THE LEASE WILL GRANT THE TENANT AN OPTION TO RENEW FOR AN
ADDITIONAL 3 YEAR TERM AT $7.00/SQ. FT. PER YEAR GROSS.
36TH THE TENANT WILL BE REQUIRED TO DEPOSIT TWO MONTH'S RENT
($23,958.34) AS SECURITY FOR ITS PERFORMANCE UNDER THE
LEASE.
37TH THE TENANT MAY TERMINATE THE LEASE, IF ITS RENT IS PAID
TO DATE AT THE TIME OF TERMINATION, BY TENDERING A LEASE
TERMINATION FEE, EQUAL TO FOUR MONTH'S RENT.
38TH LANDLORD SHALL BE RESPONSIBLE FOR MAINTAINING THE
BUILDING AND PAYING REAL ESTATE TAXES, BUILDING
INSURANCE, LANDSCAPING, SNOW REMOVAL AND OTHER COMMON
AREA COSTS.
39TH TENANT SHALL BE RESPONSIBLE FOR PAYING ITS OWN UTILITIES
AND THE COST OF OBTAINING NECESSARY APPROVALS, INCLUDING
AN OCCUPANCY PERMIT, FROM THE TOWNSHIP.
40TH TENANT WILL ACCEPT THE PREMISES IN ITS "AS IS" CONDITION,
EXCEPT THAT LANDLORD SHALL DELIVER POSSESSION OF IT BROOM
CLEAN AND WITH ALL ELECTRICAL, PLUMBING, MECHANICAL AND
HEATING UNITS IN GOOD WORKING ORDER AT THE TIME THE LEASE
TERM BEGINS.
41ST PRIOR TO THE LEASE TERM BEGINNING, LANDLORD SHALL
COMPLETE THE ENCLOSURE OF THE LEASED AREA BY REPAIRING
THE SHEET ROCK WALL WHERE AN ENTRANCE HAD BEEN CUT.
LANDLORD WILL FURTHER PROVIDE A BATHROOM CONSTRUCTED IN
SUCH A WAY AND LOCATED SO THAT IT COMPILES WITH ALL STATE
AND TOWNSHIP REQUIREMENTS INCLUDING HANDICAP
ACCESSIBILITY IF NECESSARY.
<PAGE> 12
42ND TENANT SHALL HAVE THE RIGHT TO INSTALL THREE SIGNS ON THE
SITE WITH THE LANDLORD'S PERMISSION, WHICH SHALL NOT BE
UNREASONABLY WITHHELD. THOSE SIGNS WILL BE LOCATED ABOVE
THE LOADING DOCK ON THE BUILDING, AT THE TOP LEFT OF THE
BUILDING, AND ON THE GRASS AT THE DRIVEWAY.
43RD TENANT SHALL HAVE THE RIGHT, AT ITS OWN EXPENSE AND
SUBJECT TO OBTAINING TOWNSHIP APPROVAL, TO INSTALL A
PORTABLE DRIVE IN RAMP AT THE BUILDING.
44TH TENANT'S USE OF THE LEASED PREMISES SHALL BE FOR
WAREHOUSE AND DISTRIBUTION OF AUTOMOBILE AND TRUCK
BUMPERS, RELATED PARTS AND TRUCK BED LINERS.
45TH IF ALPHA INDUSTRIES IS UNABLE TO COMPLETE ITS VACATION OF
THE PREMISES BEFORE APRIL 1, 1996, TENANT AGREES TO SHARE
THE PREMISES WITH ALPHA DURING APRIL IN RETURN FOR A 1/2
REDUCTION OF ITS RENT FOR THAT MONTH ($5,989.58)
ADDITIONAL PROVISIONS
46TH LANDLORD AGREES THAT IT IS RESPONSIBLE FOR ANY BROKERS
FEE ARISING OUT OF THE EXECUTION OF THIS LEASE.
47TH UPON THE EXPIRATION OF THIS LEASE AND PROVIDING TENANT IS
NOT IN DEFAULT OF ANY TERM OF THIS LEASE, TENANT AT ITS
OPTION MAY RENEW THIS LEASE. IF TENANT ELECTS TO EXERCISE
THE THREE YEAR OPTION, SIX (6) MONTHS WRITTEN NOTICE
SHALL BE SUBMITTED TO THE LANDLORD VIA CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
GAMMA REALTY CO. THE COLONEL'S, INC.
BY: BY:
/S/ ALFRED TEO /S/ JEFFREY A. CHIMOVITZ 3/21/96
LANDLORD DATE TENANT DATE
ALFRED TEO JEFFREY A. CHIMOVITZ
___________________________ ___________________________________
WITNESS DATE WITNESS DATE
<PAGE> 1
EXHIBIT 10.40
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 00002H THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated DECEMBER 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
One (1) HPM 6.0" Model TM111 Extruder, Serial No. 95212,
including: extrusion lines, dies, forming lines, screen changers,
tooling, sheet line system, omart sheet thickness gauge,
supplemental dip tank, process control HPM EPM-11 Allen Bradley,
training, setup, freight, rigging, and installation, all
electrical, air, and water hookups, and all accessories and
attachments thereto.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 AIKEN ROAD, OWOSSO, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
A, B, & C, to acquire security interest in the equipment. Upon the
<PAGE> 2
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments
for the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount
paid to the Lessee by CLC hereunder shall be the "Funded Amount"
as hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered
the Equipment and simultaneously with the execution of this
Schedule, Lessee shall execute to CLC, security interest in the
equipment. CLC will pay the amounts required for the purchase of
the equipment as provided in the purchase order. Such payments
shall be the "Funded Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this
Schedule shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent lease
schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
AUGUST 30, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of NINE HUNDRED SIXTY THOUSAND AND 00/100
Dollars ($960,000.00) (herein called "Funded Amount"), at the per annum
rate of the prime rate (currently 8.25%) of Comerica Bank, as determined
from time to time, commencing on JUNE 27, 1996, until the expiration or
termination of this Schedule. Interest shall be computed on a daily basis
using a year of 360 days, and in such computation, effect shall be given to
any change in the interest rate resulting from a change in said prime rate
on the date of such change in said prime rate. The first rental shall be
due July 30, 1996, with subsequent rental payments due on the 30th of each
succeeding month until the termination of this INTERIM LEASE SCHEDULE. If
any part of the above described rental payments shall not be paid when due,
Lessee shall pay to CLC, in addition to the rental payments due, a sum
<PAGE> 3
equal to five percent (5%) of the said delinquent rental amounts for each
month or portion thereof for which said rental amounts are delinquent.
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and in witness thereof hereby executes this Interim Lease Schedule,
this 27TH day of JUNE, 1996.
ACCEPTED:
Date: June 27, 1996 Date: June 27, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road,
Southfield, MI 48034 Milan, MI 48160
<PAGE> 1
EXHIBIT 10.41
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 00003H THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated DECEMBER 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
One (1) HPM 6.0" Model TM111 Extruder, Serial No. 95212,
including; extrusion lines, dies, forming lines, screen changers,
tooling, sheet line system, omart sheet thickness gauge,
supplemental dip tank, process control HPM EPM-11 Allen Bradley,
training, setup, freight, rigging, and installation, all
electrical, air, and water hookups, and all accessories and
attachments thereto.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 AIKEN ROAD, OWOSSO, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
A, B, & C, to acquire security interest in the equipment. Upon the
<PAGE> 2
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments
for the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount
paid to the Lessee by CLC hereunder shall be the "Funded Amount"
as hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered
the Equipment and simultaneously with the execution of this
Schedule, Lessee shall execute to CLC, security interest in the
equipment. CLC will pay the amounts required for the purchase of
the equipment as provided in the purchase order. Such payments
shall be the "Funded Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this
Schedule shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent lease
schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
OCTOBER 30, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of NINE HUNDRED SIXTY THOUSAND AND 00/100
Dollars ($960,000.00) (herein called "Funded Amount"), at the per annum
rate of the prime rate (currently 8.25%) of Comerica Bank, as determined
from time to time, commencing on AUGUST 30, 1996, until the expiration or
termination of this Schedule. Interest shall be computed on a daily basis
using a year of 360 days, and in such computation, effect shall be given to
any change in the interest rate resulting from a change in said prime rate
on the date of such change in said prime rate. The first rental shall be
due September 30, 1996, with subsequent rental payments due on the 30th of
each succeeding month until the termination of this INTERIM LEASE SCHEDULE.
If any part of the above described rental payments shall not be paid when
due, Lessee shall pay to CLC, in addition to the rental payments due, a sum
<PAGE> 3
equal to five percent (5%) of the said delinquent rental amounts for each
month or portion thereof for which said rental amounts are delinquent.
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and in witness thereof hereby executes this Interim Lease Schedule,
this 30TH day of AUGUST, 1996.
ACCEPTED:
Date: August 30, 1996 Date: August 30, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road,
Southfield, MI 48034 Milan, MI 48160
<PAGE> 1
EXHIBIT 11.1
A statement of computation of per share earnings can be found in
Note 6 to the financial statements contained in Appendix A to this Report
on Form 10-Q.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF INCOME, BALANCE SHEETS, AND
STATEMENT OF CASH FLOWS OF THE COLONEL'S INTERNATIONAL, INC. AND
ITS SUBSIDIARIES AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 285,099
<SECURITIES> 0
<RECEIVABLES> 2,282,398
<ALLOWANCES> (521,800)
<INVENTORY> 7,601,557
<CURRENT-ASSETS> 11,271,558
<PP&E> 24,358,186
<DEPRECIATION> 18,883,958
<TOTAL-ASSETS> 38,055,536
<CURRENT-LIABILITIES> 13,966,931
<BONDS> 0
<COMMON> 241,778
0
0
<OTHER-SE> 14,571,145
<TOTAL-LIABILITY-AND-EQUITY> 38,055,536
<SALES> 11,210,682
<TOTAL-REVENUES> 11,210,682
<CGS> 8,326,616
<TOTAL-COSTS> 8,326,616
<OTHER-EXPENSES> 1,670,519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (246,643)
<INCOME-PRETAX> 1,015,950
<INCOME-TAX> 307,950
<INCOME-CONTINUING> 307,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,950
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
