<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
FEBRUARY 1, 1997
COMMISSION FILE NUMBER
015230
MICHAEL ANTHONY JEWELERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 132910285
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
115 SOUTH MACQUESTEN PARKWAY 10550
MOUNT VERNON, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 6990000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of April 18, 1997.
COMMON STOCK, PAR VALUE $.001 7,771,115
(TITLE OF EACH CLASS) (NUMBER OF SHARES)
Aggregate market value of common stock held by nonaffiliates at April 18, 1997:
$15,929,268*
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE:
Part III Portions of registrant's Definitive Proxy Statement for Annual Meeting
of Stockholders for Fiscal 1997 (to be filed within 120 days of end of Fiscal
Year).
Part IV Certain exhibits to (i) registrant's Registration Statement on Form S-1
(File No. 338289), (ii) registrant's Current Report on Form 8-K filed on June
24, 1992, (iii) registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1993, (iv) registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, (v) registrant's Registration Statement on Form S-3 (File
No. 3371308), (vi) registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1994, (vii) registrant's Transition Report on Form 10-K for the
transition period from July 1, 1994 to January 28, 1995, (viii) registrant's
Annual Report on Form 10-K for the fiscal year ended January 27, 1996, (ix)
registrant's Quarterly Report on Form 10-Q for the quarter ended July 27, 1996,
and (x) registrant's Quarterly Report on Form 10-Q for the quarter ended October
26, 1996.
* Excludes holdings, among others, of Allan Corn, Frances Durden, David Harris,
Donald R. Miller, Michael Anthony Paolercio, Greg Torski, Michael Wager and
Fredric R. Wasserspring who should not be deemed affiliates for any other
purpose.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Michael Anthony Jewelers, Inc. (the "Company") is a leading designer,
marketer and manufacturer of affordable fine jewelry in the United States. The
Company sells its jewelry directly to jewelry chain stores, discount stores,
department stores, television home shopping networks, catalogue retailers, and
wholesalers. The Company manufactures jewelry targeted towards the middle
market, which generally retail between $20 and $200. The Company's products
include rope chain, bracelets, charms, pendants, earrings, rings and watches,
which jewelry is sold in over 20,000 retail locations nationwide.
Most of the Company's products are manufactured at its Mount Vernon,
New York facility. The Company utilizes manufacturing processes that combine
modern technology and mechanization with handcraftsmanship. In order to better
meet its customers' needs, the Company has developed a wide range of customer
service programs, such as inventory management assistance through electronic
data interchange, customized packaging, barcoding and computerized analysis of
sales and marketing trends. As a result of its vertical integration and customer
service programs, the Company is able to be responsive to its customers' needs
and manufacture and deliver most orders on a timely and more cost-effective
basis than many of its competitors.
The Company was organized as a Delaware corporation in 1986 and is the
successor to Michael Anthony Jewelers, Inc., a New York corporation, organized
in 1977.
CHANGES IN FISCAL YEAR
On November 3, 1994, the Company's Board of Directors approved a change
in the fiscal year end of the Company from June 30th to a fiscal year ending on
the last Saturday in January, effective for the seven month period ended January
28, 1995. During fiscal 1997, the Company changed its fiscal year end from the
last Saturday in January to the Saturday closest to the end of January,
effective with the fiscal year ended February 1, 1997. Fiscal years ended
February 1, 1997 and January 27, 1996 were comprised of 53 and 52 weeks,
respectively.
As used below, (a) fiscal 1997 refers to the fiscal year ended February
1, 1997, (b) fiscal 1996 refers to the fiscal year ended January 27, 1996, (c)
"Transition Period" refers to the seven months ended January 28, 1995 and (d)
"fiscal 1994" refers to the fiscal year ended June 30, 1994.
PRODUCT LINES
The Company offers a broad selection of handcrafted gold and silver
jewelry. Many of the Company's products carry the "Ma" trademark, which has
become widely recognized in the jewelry industry and with certain consumers. One
of the Company's largest product lines is an extensive selection of casted gold
charms and pendants. The charms and pendants manufactured by the Company include
religious symbols; popular sayings ("talking charms"); sport themes and team
logos; animal motifs; nautical, seashore, western, musical, zodiac and other
thematic figures; initials; and abstract artistic creations.
The M.A.J. manufacturing division manufactures gold rope chain, gold
locks used in the production of rope chain, and designs gold tubing and bangle
blanks used
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in the production of bangle bracelets. The M.A.E. manufacturing division
manufactures gold earrings and certain findings used to assemble jewelry.
The Company also manufactures a line of men's and ladies' 14 karat gold
watches under the "Michael Anthony" brand name.
The tables below set forth the approximate percentage of (i) sales and
(ii) kilos shipped in fiscal years 1997, 1996, the Transition Period and in
fiscal year 1994, respectively, attributable to each of the Company's product
categories.
<TABLE>
<CAPTION>
APPROXIMATE
FISCAL 1997 APPROXIMATE % OF KILOS
PRODUCT CATEGORY % OF SALES SHIPPED
- ---------------- ---------- -------
<S> <C> <C>
Casted 44 37
Chains 43 50
Earrings 5 4
Other items 8 9
--- ---
Total 100% 100%
=== ===
<CAPTION>
APPROXIMATE
FISCAL 1996 APPROXIMATE % OF KILOS
PRODUCT CATEGORY % OF SALES SHIPPED
- ---------------- ---------- -------
<S> <C> <C>
Casted 45 34
Chains 42 51
Earrings 6 4
Other items 7 11
--- ---
Total 100% 100%
=== ===
<CAPTION>
APPROXIMATE
1995 TRANSITION PERIOD APPROXIMATE % OF KILOS
PRODUCT CATEGORY % OF SALES SHIPPED
- ---------------- ---------- -------
<S> <C> <C>
Casted 43 34
Chains 42 52
Earrings 5 4
Other items 10 10
--- ---
Total 100% 100%
=== ===
<CAPTION>
APPROXIMATE
FISCAL 1994 APPROXIMATE % OF KILOS
PRODUCT CATEGORY % OF SALES SHIPPED
- ---------------- ---------- -------
<S> <C> <C>
Casted 45 35
Chains 40 49
Earrings 7 6
Other items 8 10
--- ---
Total 100% 100%
=== ===
</TABLE>
The Company's jewelry line includes licensed products manufactured
pursuant to arrangements with such licensors as Warner Bros., Inc. (licensors of
Looney Tunes(R)) characters), National Football League Properties, Inc., Major
League Baseball Properties, Inc., NBA Properties, Inc., NHL Enterprises, Inc.,
United Features Syndicate (Peanuts(R)), Playboy Enterprises, Inc., Cathy(R) and
many nationally recognized colleges, including Notre Dame and the University of
Florida. The Company manufactures jewelry products, particularly charms,
pendants and pins, depicting the popular logos and symbols associated with these
licensors. The Company pays each of these licensors a royalty ranging from 6% to
12% on sales of the licensed products. During the fiscal year ended February 1,
1997, the Company's licensed products represented approximately 11% of the
Company's net sales.
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The Company maintains an inhouse design staff which utilizes CAD/CAM
(computer aided design/computer aided manufacturing) technology to enhance its
design, modeling and production capabilities. The equipment is utilized for the
design of the Company's new products and for modifying the scale of existing
Company designs. The Company's policy is to obtain proprietary protection for
its products and designs whenever possible.
The Company updates its product catalogue each year by adding new
designs and eliminating less popular styles. Items removed from the Company's
current catalogue generally remain available on a special order basis.
MANUFACTURING PROCESS
At the Company's manufacturing facility in Mount Vernon, New York,
manufacturing processes combine modern technology and mechanization with
handcraftsmanship to produce fashionable and affordable gold jewelry. The
manufacturing processes utilized by the Company include the casting (or lost
wax) method, a photoetching process which has allowed the Company to enter the
lower priced segment of the market through production of ultralight products and
the diamond cut process, a technique which produces a sparkling effect on a
finished piece of gold jewelry.
The Company's rope chain product is manufactured by machinery designed
in accordance with a patented process. The equipment is capable of operating 24
hours a day and requires minimal direct labor costs, which has enabled the
Company to become one of the lowest cost producers of rope chain in the United
States.
During fiscal 1997, the Company manufactured approximately 95% of its
products from gold bullion and other raw materials and purchased approximately
5% of its product as semi-finished or finished goods. The Company does not
believe the loss of any supplier would have a material adverse effect on its
business. Alternative sources of supply for the goods purchased by the Company
are readily available.
BACKLOG
Orders from the Company's retail customers typically have shipment
dates that range from 24 hours to 60 days. Substantially all of the Company's
wholesale customers' orders are for immediate shipment and generally are shipped
within 7 days of receipt. As of April 18, 1997, the aggregate dollar value of
the Company's backorders was approximately $6,800,000. The Company expects that
substantially all of the current backlog will be shipped in the next 45 days.
Management of the Company does not believe that backlog is indicative of the
Company's future results of operations, as backlog as of any given date is not
necessarily indicative of sales trends.
MARKETING AND SALES
The Company markets and sells its jewelry primarily through its inhouse
sales force. Sales are made by the Company's sales personnel primarily at the
Company's showroom in Mount Vernon, New York and direct presentations at
customers' locations. Products are promoted through the use of catalogues,
advertisements in trade publications, trade show exhibitions and cooperative
advertising allowances with certain customers.
The Company's marketing strategy includes a campaign to increase brand
recognition for the "Michael Anthony" name. This campaign includes advertising
in consumer magazines and a specially selected and packaged line of karat gold
jewelry, including watches, sold by the Company to certain retailers under the
"Michael Anthony" name. The Company believes that there is growing brand
recognition of the "Michael Anthony" name and the "Ma" trademark with consumers
and that this recognition has enhanced sales of its products.
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The Company's jewelry is sold primarily to jewelry chain stores,
discount stores, department stores, television home shopping networks, catalogue
retailers and wholesalers. The Company assists its customers in allocating their
purchasing budget among the items in the various product lines by advising them
of items having higher consumer demand as determined by the Company's
computerized market analysis. Prices vary on the basis of service required by
customers. The Company ships its products in bulk to wholesale distributors and
for certain retail chains, such as Sterling Jewelers, Inc. (a division of Signet
Group PLC and the owner of Kay Jewelers and J.B. Robinson Jewelers), Wal*Mart,
J.C. Penney, Zales, Service Merchandise and Kmart, the Company prepackages and
price tags most items, and then ships an order of many different items to
distribution centers and stores in the chain. The Company provides additional
services to certain of its customers to meet their specific marketing needs,
such as tagging, boxing and point-of-sale displays.
The Company also ships its jewelry to a limited number of customers on
a consignment basis. Under these arrangements, the Company delivers its products
under consignment, and upon sale, the customer pays the Company for the
consigned merchandise. Consigned merchandise is subject to the Company's own
consignment arrangements with its gold lenders (the "Gold Lenders"). See ITEM 1.
"BUSINESS - SUPPLY; RELATED FINANCING ARRANGEMENTS" AND ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
LIQUIDITY AND CAPITAL RESOURCES."
During the fiscal year ended February 1, 1997, sales to the five
largest of the Company's customers aggregated approximately 51% of total net
sales. The Company's two largest customers were Sterling Jewelers, Inc. and
Wal*Mart Stores, Inc., accounting for approximately 13% and 12% of net sales,
respectively. The Company has no long-term contractual commitments with any of
its customers, nor are any of the Company's customers subject to any contractual
provisions or other restrictions which preclude them from purchasing products
from the Company's competitors.
The Company reduces gross sales by the amount of returns and discounts
to determine net sales each month. The Company establishes each month a reserve
for returns based on its historical experience, the amount of gross sales and
the customer base. The total of actual returns and the provision for the returns
reserve amounted to approximately 13% of gross sales in fiscal 1997, 14% of
gross sales in fiscal 1996, 16% of gross sales for the Transition Period and 10%
of gross sales for fiscal 1994. For further information regarding the reserve
for returns, see Note 1 - Notes to Consolidated Financial Statements.
PATENTS AND TRADEMARKS
The Company manufactures its rope chain using machinery that is
designed in accordance with patented processes. The Company also maintains
certain trademarks and generally applies for copyrights covering the design of
its charms and other selected products. The level of copyright protection
available under the law for the Company's proprietary designs and products
varies depending upon a number of factors, including the distinctiveness of the
product and originality of design. There can be no assurance that the Company's
patents, trademarks and copyrights will prevent competitors from producing
products that are substantially similar to those of the Company. See ITEM 1.
"BUSINESS - PRODUCT LINES."
COMPETITION
The jewelry industry is highly competitive, both in the United States
and on a global basis. The Company encounters competition primarily from
manufacturers with national and international distribution capabilities and, to
a lesser extent, from small regional suppliers of jewelry. Management believes
that the Company is well
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positioned in the industry and has a reputation for responsive customer service,
high quality and well designed jewelry with broad consumer appeal.
The principal competitive factors in the industry are price, quality,
design and customer service. The Company's specialized customer service programs
are important competitive factors in sales to nontraditional jewelry retailers,
including television shopping networks and discount merchandisers. The Company
believes that its infrastructure which enables it to offer these programs,
combined with low cost manufacturing capabilities, provide the Company with
competitive strengths that distinguish it from most of its current competitors.
The recent trend towards consolidation at the retail level in the jewelry
industry may increase the level of competition facing the Company.
SEASONAL NATURE OF BUSINESS
The Company's business is seasonal in nature. Presented below are the
Company's net sales for each quarter of fiscal 1997, fiscal 1996, for the first
quarter of the Transition Period and the four month period ended January 28,
1995 and for each quarter of fiscal 1994:
<TABLE>
<CAPTION>
NET % OF
($ IN THOUSANDS) SALES NET SALES
---------------- ----- ---------
<S> <C> <C>
Fiscal 1997 Ended February 1, 1997
First Quarter $29,203 19%
Second Quarter $27,706 18%
Third Quarter $48,772 33%
Fourth Quarter $44,948 30%
Fiscal 1996 Ended January 27, 1996
First Quarter $27,260 19%
Second Quarter $24,902 17%
Third Quarter $47,037 32%
Fourth Quarter $46,058 32%
Transition Period Ended January 28, 1995
First Quarter $34,101 37%
Four Months $59,220 63%
Fiscal 1994 Ended June 30, 1994
First Quarter $27,779 19%
Second Quarter $55,102 39%
Third Quarter $28,492 20%
Fourth Quarter $31,414 22%
</TABLE>
While the Company's net sales are subject to seasonal fluctuation, this
fluctuation is mitigated to a degree by the early placement of orders by many of
the Company's customers, particularly for the Christmas holiday season. In
addition, the Company markets holiday and seasonal products year round for such
occasions as Mother's Day, Valentine's Day, Father's Day, religious holidays and
school graduations.
SUPPLY; RELATED FINANCING ARRANGEMENTS
Gold acquired for manufacture is at least .995 fine and is then
combined with other metals to produce 14 karat and 10 karat gold. The term
"karat" refers to the gold content of alloyed gold, measured from a maximum of
24 karats (100% fine gold). Varying quantities of metals such as silver, copper,
nickel and zinc are combined with fine gold to produce 14 karat gold of
different colors. These alloys are in abundant supply and are readily available
to the Company.
The Company utilizes gold consignment arrangements with the Gold
Lenders to supply substantially all of its gold needs. Under the terms of those
arrangements, the Company is entitled to lease the lesser of (i) an aggregate of
250,000 ounces of
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fine gold or (ii) consigned gold with an aggregate value equal to $106,695,000.
The consigned gold is secured by certain property of the Company including
inventory and machinery and equipment. The Company pays the Gold Lenders a
consignment fee based on the dollar value of ounces of gold outstanding under
their respective agreements, which value is based on the daily Second London
Gold Fix. The Company believes that its financing rate under the consignment
arrangements is substantially similar to the financing rates charged to gold
consignees similarly situated to the Company. At February 1, 1997, the Company
held 116,590 ounces of gold on consignment with a market value of $40,282,000.
The consignment agreements contain certain restrictive covenants
relating to maximum usage, net worth, working capital and other financial ratios
and each of the agreements requires the Company to own a specific amount of gold
at all times. At February 1, 1997, the Company was in compliance with the
covenants in its consignment agreements and the Company's owned gold inventory
was valued at approximately $6,727,000. Management believes that the supply of
gold available through the Company's gold consignment arrangements, in
conjunction with the Company's owned gold, is sufficient to meet the Company's
requirements.
The consignment arrangements are terminable by the Company or the
respective Gold Lenders upon 30 days notice. If any Gold Lender were to
terminate its existing gold consignment arrangement, the Company does not
believe it would experience an interruption of its gold supply that would
materially adversely affect its business. The Company believes that other
consignors would be willing to enter into similar arrangements if any Gold
Lender terminates its relationship with the Company. See ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS AND FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Consigned gold is not included in the Company's inventory, and there is
no related liability recorded. As a result of these consignment arrangements the
Company is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the Gold Lenders, since the Company does
not purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to, its customers. The Company then either locks in the
selling price of the jewelry to its customers concurrently with the required
purchase of gold from the Gold Lenders or hedges against changes in the price of
gold by entering into forward contracts or purchasing futures or options on
futures that are listed on the Commodity Exchange, Inc. ("COMEX").
While the Company believes its supply of gold is relatively secure,
significant increases or rapid fluctuations in the cost of gold may result in
reduced demand for the Company's products. From July 1, 1994 until February 1,
1997, the closing price of gold according to the Second London Gold Fix ranged
from a low of $346 per ounce to a high of $415 per ounce. There can be no
assurance that fluctuations in the credit and precious metals markets would not
result in an interruption of the Company's gold supply or the credit
arrangements necessary to allow the Company to support its accounts receivable
and continue the use of consigned gold.
INSURANCE
The Company maintains primary all-risk insurance, with limits in excess
of the Company's current inventory levels (including consigned gold), to cover
thefts and damage to inventory located on the Company's premises and insurance
on its goods in transit. The Company also maintains insurance covering thefts
and damage to inventory located at the premises of its suppliers. The amount of
coverage available under such policies is limited and may vary by location, but
generally is in excess of the value of the gold held by a particular supplier.
Additional insurance coverage is provided by some of the Company's suppliers.
The Company also maintains fidelity insurance (insurance providing coverage
against theft or embezzlement by employees of the Company).
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EMPLOYEES
As of February 1, 1997, the Company employed 519 persons, 407 of which
were directly engaged in manufacturing and distribution operations, with the
remaining 112 employees who were engaged in administration and sales. The
Company considers relations with its employees to be good.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations routinely involve the use of
certain materials that are classified as hazardous. The Company's use of such
materials is in compliance in all material respects with applicable federal,
state and local laws and regulations concerning the environment, health and
safety. The costs incurred by the Company in complying with such laws and
regulations have not been material to the Company's results of operations.
ACQUISITIONS
While the Company intends to continue to aggressively market its gold
jewelry product lines to its existing customer base, management of the Company
believes opportunities exist to increase sales by expanding its customer base
and exploring product lines that may utilize diamonds or colored stones
(precious, semiprecious or synthetic). As part of the Company's strategy to
increase sales to new and existing customers, in 1994 and 1995 the Company
acquired two small jewelry manufacturers. As a result of these transactions, the
Company increased its market share with an existing customer and added certain
new customers.
During fiscal 1997, the Company was engaged in merger discussions with
one of its major competitors; however, on November 18, 1996, both companies
jointly announced that negotiations were terminated due to an inability to agree
on the value of the stock portion of the purchase price. The Company plans to
continue pursuing the acquisition of one or more additional companies that
manufacture and distribute jewelry products.
ITEM 2. PROPERTIES.
The manufacturing and distribution facilities of the Company are
located in three adjacent buildings in Mount Vernon, New York having a total of
approximately 74,000 square feet. Pursuant to lease agreements entered into in
May 1991 and May 1995, respectively, with Michael Anthony Company, now known as
MacQuesten Realty Company ("MRC"), a New York general partnership, the general
partners of which are Michael Paolercio ("MP") and Anthony Paolercio ("AP"),
during fiscal 1997 the Company paid rent of approximately $624,000, for the
adjacent buildings housing its manufacturing facilities located at 50, 60 and 70
South MacQuesten Parkway in Mount Vernon, plus real estate taxes and other
occupancy costs. The Company believes that the terms of these lease arrangements
with MRC are no less favorable than those that could have been obtained from an
unaffiliated party. Subject to the Company's option to acquire the properties
located at 60 and 70 South MacQuesten Parkway, Mt. Vernon, discussed in more
detail below, the Company will pay an average annual rent of approximately
$478,000 over the term of the leases, plus real estate taxes and other occupancy
costs.
As part of its long-term strategic plan, the Company plans to acquire
during fiscal 1998, one of the buildings housing its manufacturing facilities
(the "50 Building") from MRC for a purchase price of $1,150,000. The 50 Building
has approximately 22,000 square feet.
The Special Real Estate Committee of the Board of Directors, comprised
of the Company's independent, outside directors, obtained an appraisal of the 50
Building, and after reviewing the appraisal and negotiation with MRC as to the
terms of
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purchase, recommended the acquisition to the Company's Board of Directors. On
April 4, 1997, the Board of Directors voted unanimously, with Michael and
Anthony Paolercio abstaining, to authorize the acquisition of the 50 Building,
subject to (1) receipt of an updated, satisfactory appraisal and (2) the Company
obtaining an exclusive, two-year option to acquire from MRC the remaining
manufacturing facilities housed in the buildings located at 60 and 70 South
MacQuesten Parkway, Mt. Vernon at an aggregate purchase price of $2,350,000 and
on terms and conditions substantially the same as those agreed to for the
purchase of the 50 Building.
The general terms of a Contract of Sale for the acquisition of the 50
Building have been agreed to, subject to the Company reviewing its financing
alternatives.
In the event the Company acquires the 50 Building and subsequently
exercises its option to acquire the properties located at 60 and 70 South
MacQuesten, the Company would incur additional long-term indebtedness in order
to finance the purchase.
On December 1, 1994, the Company acquired its corporate headquarters
premises in Mount Vernon, New York (the "Headquarters Property") from MRC. The
Headquarters Property has approximately 71,000 square feet.
The Special Real Estate Committee of the Board of Directors obtained an
appraisal of the Headquarters Property, and after review of the appraisal and
negotiation with MRC as to the terms of purchase of the Headquarters Property,
recommended the acquisition to the Company's Board of Directors. On November 28,
1994, the Board of Directors voted unanimously, with MP abstaining and AP
absent, to authorize the acquisition of the Headquarters Property. Under the
terms of a Contract of Sale, dated November 28, 1994, the Company acquired the
Headquarters Property from MRC for the sum of $2,490,000. The Company funded the
acquisition of the Headquarters Property with cash from its operations and
subsequently financed the purchase with a mortgage loan from a bank.
See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and ITEM 13. "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
The offices and facilities of the Company are protected by
state-of-the-art security systems, procedures and a security staff.
ITEM 3. LEGAL PROCEEDINGS.
Legal proceedings to which the Company is a party are either routine
litigation incidental to Michael Anthony's business or other litigation not
material to the Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol MAJ. The Company's Common Stock began its listing on
AMEX on October 25, 1991. Prior to its listing on AMEX, the Company's Common
Stock was traded in NASDAQ National Market System. The following table sets
forth the high and low sale prices per share on AMEX for the fiscal years 1997,
1996 and the Transition Period.
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<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 1, 1997 HIGH LOW
- ---------------------------------- ---- ---
<S> <C> <C>
First Quarter 3 7/16 2 3/4
Second Quarter 3 5/8 2 3/4
Third Quarter 3 5/8 2 3/4
Fourth Quarter 3 7/16 2 15/16
FISCAL YEAR ENDED JANUARY 27, 1996 HIGH LOW
- ---------------------------------- ---- ---
First Quarter 3 7/8 3 1/8
Second Quarter 3 1/2 2 5/8
Third Quarter 3 2 3/8
Fourth Quarter 3 1/8 2 1/2
TRANSITION PERIOD ENDED JANUARY 28, 1995 HIGH LOW
- ---------------------------------------- ---- ---
First Quarter 6 3/8 5
Four Months ended January 28, 1995 7 3 1/2
</TABLE>
As of April 18, 1997, there were 234 holders of record of the Company's
Common Stock (including brokers holding in street name).
The Company has never paid a cash dividend. The Company anticipates
that all of its earnings will be retained for use in its business and does not
intend to pay cash dividends in the foreseeable future. In addition, the
Company's senior secured note agreements contain covenants which limit the
payment of dividends. Future dividend policy will depend upon, among other
factors, the Company's earnings and its financial condition. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
On November 5, 1993, the Company filed a registration statement with
the Securities and Exchange Commission for an offering of 2,000,000 shares of
Common Stock of the Company and certain stockholders. On December 20, 1993, the
Company sold 1,600,000 shares pursuant to the offering. On January 14, 1994, the
underwriters partially exercised an over-allotment option whereby the Company
sold an additional 7,600 shares. The net proceeds to the Company from the sale
of the Common Stock were approximately $11,679,000 after deducting underwriting
discounts, commissions, and expenses of the offering payable by the Company. The
proceeds to the Company from this offering were used for working capital and
general corporate purposes, including strategic acquisitions of other companies
engaged in the manufacture and distribution of jewelry. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
In connection with the Common Stock repurchase program that the Company
announced in 1994 (the "1994 Stock Repurchase Program"), the Company repurchased
a total of 441,600 shares of Common Stock for an aggregate price of
approximately $1,439,000. The Company will not reissue these shares to the
public. In November 1995, the Company discontinued its 1994 Stock Repurchase
Program.
In December 1995, the Company announced a new Common Stock Repurchase
Program (the "Stock Repurchase Program") pursuant to which the Company may
repurchase up to 750,000 shares of Common Stock. On April 4, 1997, the Board of
Directors authorized an increase of an additional 500,000 shares of Common Stock
that the Company may repurchase under the Stock Repurchase Plan. As of April 18,
1997, the Company had repurchased a total of 567,400 shares of Common Stock
under the Stock Repurchase Program for a total of approximately $1,751,390.
-11-
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data of the Company should be read in
conjunction with the consolidated financial statements and related notes
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
------------------ ENDED YEAR ENDED JUNE 30,
FEB. 1, JAN. 27, JAN. 28, -------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 150,629 $ 145,257 $ 93,321 $ 142,787 $ 119,615 $ 112,748
Cost of goods sold 124,041 121,195 76,782 114,151 97,509 92,028
--------- --------- --------- --------- --------- ---------
Gross profit 26,588 24,062 16,539 28,636 22,106 20,720
Selling, general
and administrative
expenses 21,372 19,455 12,628 17,887 17,148 19,030
--------- --------- --------- --------- --------- ---------
Operating income 5,216 4,607 3,911 10,749 4,958 1,690
Other (expense)/
income:
Interest expense/
gold consignment
fee (3,155) (3,835) (2,030) (3,157) (3,066) (2,629)
Other income/
(expense) net 507 442 117 564 643 458
--------- --------- --------- --------- --------- ---------
Income/(loss)
before income
taxes 2,568 1,214 1,998 8,156 2,535 (481)
Income tax
provision/
(benefit) 778 486 774 3,176 964 (112)
--------- --------- --------- --------- --------- ---------
Net income/(loss) $ 1,790 $ 728 $ 1,224 $ 4,980 $ 1,571 $ (369)
========= ========= ========= ========= ========= =========
Earnings/(loss)
per share $ .22 $ 0.09 $ 0.14 $ 0.63 $ 0.23 $ (0.06)
========= ========= ========= ========= ========= =========
Weighted average
number of shares 8,241 8,475 8,749 7,945 6,916 6,450
========= ========= ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital $ 42,042 $ 46,136 $ 42,778 $ 46,250 $ 31,311 $ 31,954
Total assets(1) 72,749 78,646 72,039 69,962 53,707 52,733
Long-term debt and
capital lease
liability 14,294 19,192 13,282 13,210 15,824 18,009
Stockholders'
equity 47,042 46,048 46,445 45,608 28,402 26,137
<FN>
(1) The year ended February 1, 1997, January 27, 1996, the seven months
ended January 28, 1995 and the years ending June 30, 1994, 1993 and
1992 do not include consigned inventory, which had approximate value of
$40,282,000, $60,700,000, $72,936,000, $70,818,000, $61,796,000 and
$39,345,000, respectively.
</TABLE>
-12-
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Introduction
On November 3, 1994, the Company's Board of Directors approved a change
in the fiscal year end of the Company from June 30th to a fiscal year ending on
the last Saturday in January, effective for the seven month period ended January
28, 1995. During fiscal 1997, the Company changed its fiscal year end from the
last Saturday in January to the Saturday closest to the end of January,
effective with the fiscal year ended February 1, 1997. Fiscal years ended
February 1, 1997 and January 26, 1996 were comprised of 53 and 52 weeks,
respectively.
As used below, (a) "fiscal 1997" refers to the fiscal year ended
February 1, 1997, (b) "fiscal 1996" refers to the fiscal year ended January 27,
1996, (c) "Transition Period" refers to the seven months ended January 28, 1995
and (d) "fiscal 1994" refers to the fiscal year ended June 30, 1994.
Results of Operations
The following table sets forth, as a percentage of net sales, certain
items appearing in the Company's Statements of Operations for the indicated
fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
----------------------------- ENDED YEAR ENDED
FEBRUARY 1, JANUARY 27, JANUARY 28, JUNE 30,
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 82.3 83.4 82.3 80.0
Selling, general and
administrative expenses 14.2 13.4 13.5 12.5
Interest and gold consignment
fee expense 2.1 2.6 2.2 2.2
Other income (.3) (.2) (.1) (.4)
Income tax provision .5 .3 .8 2.2
Net income 1.2 .5% 1.3% 3.5%
</TABLE>
1997 VS. TWELVE MONTHS ENDED JANUARY 27, 1996
Net sales for fiscal 1997 were approximately $150,629,000, an increase of 4%
from net sales of approximately $145,257,000 for the comparable period in fiscal
1996. The increase in net sales resulted primarily from the 53rd week, which
amounted to approximately $3,200,000 and increased shipments to the retail
segment of the Company's customer base, which increase was offset in part by
decreased shipments to the wholesale segment of the Company's customer base.
Gross profit margin increased to approximately 17.7% of net sales for fiscal
1997 compared to approximately 16.6% for the comparable period in fiscal 1996.
The increase in gross margin was attributable to a change in the Company's
product mix and increased sales of the Company's licensed products, which have
higher gross margins.
Selling, general and administrative expenses for fiscal 1997 were approximately
$21,372,000, compared to $19,455,000 for the comparable period in fiscal 1996.
As a percentage of net sales, these expenses increased to 14.2% in fiscal 1997
from 13.4% in fiscal 1996. The increased percentage is primarily attributed to
(i) increased product and packaging supplies, (ii) increased royalty and
licensing expenses, (iii) increased payroll and payroll related expenses and
(iv) the terminated acquisition negotiations with a company. These increases
were offset in part by a decrease in advertising related expenses.
-13-
<PAGE> 14
Other expenses-net for fiscal 1997 were approximately $2,648,000, a decrease of
$745,000 or 22% compared to approximately $3,393,000 for the comparable period
in fiscal 1996. Interest expense (including gold consignment fees) was
approximately $3,155,000 a decrease of $680,000, or 18%, from $3,835,000 for the
comparable period in fiscal 1996. This decrease was primarily due to (i) a lower
average level of consignment inventory, (ii) lower consignment rates and (iii)
lower debt levels.
The effective tax rates for fiscal 1997 and fiscal 1996 were 30% and 40%,
respectively. The decrease in the effective tax rate is due to the reversal of
prior year accruals.
As a result of the above factors, the Company's net income for fiscal 1997 was
approximately $1,790,000 compared to $728,000 for the comparable period in
fiscal 1996.
1996 VS. TWELVE MONTHS ENDED JANUARY 28, 1995 (UNAUDITED)
Net sales for fiscal 1996 were approximately $145,257,000, a decrease of 3% from
net sales of approximately $149,583,000 for the comparable period in the prior
year. The decrease in sales was primarily related to a significant reduction in
volume of sales to the wholesale segment of the Company's customer base. This
decrease was partly offset by an increase in volume of sales to the retail
segment of the Company's customer base.
Gross profit margin decreased to 16.6% of net sales in fiscal 1996 compared to
18.0% for the comparable period in the prior year. The decrease in the gross
margin was due to the sale of discontinued and excess inventory, which
represented approximately 5% of net sales, at margins substantially below the
Company's normal gross margin and an increased percentage of sales of the
Company's rope chain which carries a lower gross margin than the Company's other
products.
Selling, general and administrative expenses for fiscal 1996 were approximately
$19,455,000, compared to $19,454,000 for the comparable period in the prior
year. As a percentage of net sales, these expenses increased to 13.4% in fiscal
1996 from 13.0% in the prior year. The increased percentage of selling expenses
is primarily attributed to advertising expenses that came from additional
support required by the Company's retail customers and the Company's effort to
increase its brand name recognition through advertising placed directly in a
consumer magazine.
Other income and expenses for fiscal 1996 were approximately $3,393,000, an
increase of $604,000 or 22% from $2,789,000 for the comparable period in the
prior year. Interest expense (including gold consignment fees) was approximately
$3,835,000, an increase of $579,000, or 18%, from $3,256,000 for the comparable
period in the prior year. This increase was primarily due to (i) higher
consignment rates, (ii) a higher average level of consigned inventory, and (iii)
loans placed in February and October 1995. The higher consignment rates had a
negative impact later in the fiscal year. The higher average level of consigned
inventory had a more significant impact in the beginning of the fiscal year. The
increase in gold consignment fees was partially offset by lower interest expense
due to principal payments in February and May 1995 on the Company's other
long-term debt and lower interest expense on the Company's short-term
borrowings.
The effective tax rates for fiscal 1996 and the comparable period in fiscal 1995
were 40% and 36.6%, respectively.
As a result of the above factors, the Company's net income for fiscal 1996 was
approximately $728,000 compared to $2,978,000 for the comparable period in the
prior year.
-14-
<PAGE> 15
TRANSITION PERIOD VS. SEVEN MONTHS ENDED JANUARY 29, 1994 (UNAUDITED)
Net sales for the Transition Period were approximately $93,321,000, an
increase of 8% from net sales of approximately $86,524,000 for the comparable
period in the prior year. The increase in net sales was primarily related to
increased shipments to the retail segment of the Company's customer base and
also to increased sales of the Company's rope chain product line.
Gross profit margin decreased to 17.7% of net sales for the Transition
Period, as compared to 21.1% for the comparable period in the prior year. The
decrease in gross margin was attributable to a change in the Company's product
mix and an average increase in the price of gold of approximately 2%.
Selling, general and administrative expenses for the Transition Period
were approximately $12,628,000, an increase of 13.9% from $11,086,000 for the
comparable period in the prior year. The increase is primarily attributed to
increased salaries, advertising, and retail displays and packaging supplies to
which the Company committed in anticipation of higher sales.
Interest expense (including gold consignment fees) for the Transition
Period was $2,030,000, an increase of $99,000, or 5%, from the prior comparable
period. The increase was attributable to the costs to finance the Company's
increased inventory position. Interest income decreased by $44,000 for the
Transition Period compared to the comparable period of the prior year. This was
due to lower amounts of funds available for short-term investments, which was a
result of higher accounts receivable levels and capital expenditures.
As a result of the above factors, the Company's net income for the
Transition Period was $1,224,000, as compared to $3,227,000 for the comparable
period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on a gold consignment program, short-term and
long-term borrowings and internally generated funds to finance its inventories
and accounts receivable. The Company fills most of its gold supply needs through
gold consignment arrangements with the Gold Lenders. Under the terms of those
arrangements, the Company is entitled to lease the lesser of (i) an aggregate of
250,000 ounces of fine gold or (ii) consigned gold with an aggregate value equal
to $105,164,000. The consigned gold is secured by certain property of the
Company including inventory and machinery and equipment. The Company pays the
Gold Lenders a consignment fee based on the dollar value of ounces of gold
outstanding under their respective agreements, which value is based on the daily
Second London Gold Fix. The Company believes that its financing rate under the
consignment arrangements is substantially similar to the financing rates charged
to gold consignees similarly situated to the Company. As of February 1, 1997,
the Company held 116,590 ounces of gold on consignment with a market value of
$40,282,000.
The consignment agreements contain certain restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and each of
the agreements requires the Company to own a specific amount of gold at all
times. At February 1, 1997, the Company was in compliance with the covenants in
its consignment agreements and the Company's owned gold inventory was valued at
approximately $6,727,000. Management believes that the supply of gold available
through the Company's gold consignment arrangements, in conjunction with the
Company's owned gold, is sufficient to meet the Company's requirements.
The consignment agreements are terminable by the Company or the
respective Gold Lenders upon 30 days notice. If any Gold Lender were to
terminate its existing
-15-
<PAGE> 16
gold consignment arrangement, the Company does not believe it would experience
an interruption of its gold supply that would materially adversely affect its
business. The Company believes that other consignors would be willing to enter
into similar arrangements if any Gold Lender terminates its relationship with
the Company.
As of February 1, 1997, two of the Company's Gold Lenders terminated
their respective gold consignment arrangements with the Company as a result of
their decisions to discontinue their involvement in the jewelry industry. The
Company also amended an existing agreement with a Gold Lender whereby the Gold
Lender increased its commitment to the Company. Based on the Company's
anticipated needs, these changes did not have any impact on the Company.
Consigned gold is not included in the Company's inventory, and there is
no related liability recorded. As a result of these consignment arrangements,
the Company is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the Gold Lenders, since the Company does
not purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to its customers. The Company then either locks in the
selling price of the jewelry to its customers concurrently with the required
purchase of gold from the Gold Lenders or hedges against changes in the price of
gold by entering into forward contracts or purchasing futures or options on
futures that are listed on the COMEX.
While the Company believes its supply of gold is relatively secure,
significant increases or rapid fluctuations in the cost of gold may result in
reduced demand for the Company's products. From July 1, 1994 until February 1,
1997, the closing price of gold according to the Second London Gold Fix ranged
from a low of $346 per ounce to a high of nearly $415 per ounce. There can be no
assurances that fluctuations in the precious metals markets and credit would not
result in an interruption of the Company's gold supply or the credit
arrangements necessary to allow the Company to support its accounts receivable
and continue the use of consigned gold.
In each of 1987 and 1992, the Company issued $10,000,000 principal
amount of senior secured notes with various insurance companies, which accrue
interest at 10.5% and 8.61% per annum, respectively. In February 1995, the
Company issued an additional $6,000,000 principal amount of senior secured notes
with various insurance companies, with interest as of February 1, 1997 at 7.00%
per annum. These notes are secured by the Company's accounts receivable,
machinery and equipment, inventory (secondary lien to the Gold Lenders) and
proceeds. In addition, the note purchase agreements contain certain restrictive
financial covenants and restrict the payment of dividends. At February 1, 1997,
the Company was in compliance with the covenants and $14,416,666 of principal
remained outstanding under the notes issued in 1987, 1992 and 1995.
On October 6, 1995, the Company obtained a loan from a bank in the
amount of $2,500,000. As collateral for the loan, the Company granted the bank a
first mortgage on the Company's corporate headquarters. The mortgage has a
ten-year term and interest on the mortgage will accrue at 8% per annum. In
addition, the mortgage contains certain restrictive financial covenants. At
February 1, 1997, the Company was in compliance with the covenants. As of
February 1, 1997, $2,384,000 of principal remained outstanding under the
mortgage.
The Company has a line of credit arrangement with a commercial bank
(the "Line of Credit"), under which the Company may borrow up to $15,000,000.
The Line of Credit is secured by certain assets of the Company, including
accounts receivable and inventory. As of February 1, 1997, there was no amount
outstanding under the Line of Credit. The Line of Credit has been renewed and
currently expires on July 31, 1997, subject to annual renewal. Management
believes that the Line of Credit will be renewed; however, if the current lender
decides not to renew the Line of Credit, the Company believes that other lenders
would be willing to enter into a similar arrangement.
-16-
<PAGE> 17
On November 5, 1993, the Company filed a registration statement with
the Securities and Exchange Commission for an offering of 2,000,000 shares of
Common Stock of the Company and certain stockholders. On December 20, 1993, the
Company sold 1,600,000 shares pursuant to the offering. On January 14, 1994, the
underwriters partially exercised an over-allotment option whereby the Company
sold an additional 7,600 shares. The net proceeds to the Company from the sale
of the Common Stock were approximately $11,679,000 after deducting underwriting
discounts, commissions, and expenses of the offering payable by the Company. The
proceeds to the Company from this offering were used for working capital and
general corporate purposes, including strategic acquisitions of other companies
engaged in the manufacture and distribution of jewelry.
During fiscal 1997, cash provided from operating activities was
$13,160,000. This was primarily attributable to a decrease in accounts
receivable of $8,763,000 and net income of $1,790,000 which included
depreciation and amortization of $3,749,000. The decrease in accounts receivable
is attributed to the Company's implementation of a more aggressive collection
policy.
Cash of $3,816,000 was utilized for investing purposes during fiscal
1997, primarily to purchase machinery and equipment of approximately $2,835,000
and for building and leasehold improvements of $981,000.
During fiscal 1997, cash utilized in financing activities totaled
$5,587,000. This was primarily attributed to payments of long term debt of
$4,776,000 and purchase of treasury stock of $811,000.
As part of its long-term strategic planning, the Company has decided to
pursue a plan to expand its manufacturing and distribution facilities and to
acquire certain properties it is currently leasing from MRC (the "Leased
Properties"). When the Company acquires such properties, the Company may incur
or assume additional long-term indebtedness in order to finance their purchase.
For fiscal 1998, the Company projects capital expenditures of
approximately $3,200,000, which includes certain improvements on its leased and
owned properties and the expenses related to the possible acquisition of the
Leased Properties. See ITEM 2. PROPERTIES" and ITEM 13. "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS".
Except with respect to financing for the possible acquisition of its
Leased Properties as discussed above, the Company believes that its long-term
debt and existing lines of credit provide sufficient funding for the Company's
operations. In the event that the Company requires additional financing during
fiscal 1998, it will be necessary to fund this requirement through expanded
credit facilities with its existing or other lenders. The Company believes that
such additional financing can be arranged.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share",
("SFAS 128"), which requires presentation of basic earnings per share which
includes no dilution. This statement shall be effective for both interim and
annual periods after December 15, 1997. The Company does not expect any
significant impact upon adoption of SFAS 128.
-17-
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 and pages F1 through F26 and S1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Election of Directors" of
the Company's Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation" of
the Company's Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Beneficial Ownership of
Common Stock" of the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Certain Transactions" of
the Company's Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference. See also ITEM 2. "PROPERTIES".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8K.
(a) The following documents are filed as a part of this Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(1) Financial Statements:
Independent Auditors' Report F1
Consolidated Balance Sheets F2
Consolidated Statements of Operations F3
Consolidated Statements of Changes in Stockholders'
Equity F4
Consolidated Statements of Cash Flows F5
Notes to Consolidated Financial Statements F7
(2) Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts S1
</TABLE>
All other schedules are omitted as the required information is
inapplicable or is presented in the consolidated financial statements or related
notes.
The financial statement schedule should be read in conjunction with the
financial statements in the 1997 Annual Report to Stockholders.
-18-
<PAGE> 19
(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of Incorporated by reference
Registrant, as amended to Exhibit 3.1 to
Amendment No. 2 to the
Company's Registration
Statement on Form S3 (File
No. 3371308)(the 1993
Registration Statement")
3.1.1 Certificate of Merger of Michael Incorporated by reference
Anthony Jewelers, Inc. (New York) and to Exhibit 3.1.1 of the
Michael Anthony Jewelers, Inc. Company's Annual Report on
(Delaware) Form 10K for the fiscal year
ended June 30, 1993 (the "1993
Form 10K")
3.2 Amended and Restated ByLaws of Registrant Incorporated by reference
to Exhibit 3.2 to the Company's
Quarterly Report on Form 10Q
for the quarter ended July 29,
1995
4.1 Form of Common Stock Certificate Incorporated by reference
to Exhibit 3.3 to the
Company's Registration
Statement on Form S1 (File
No. 338289) (the "1986
Registration Statement")
4.2 Form of Common Stock Purchase Warrant Certificate Incorporated by reference
to Exhibit 3.4 to the 1986
Registration Statement
10.1 1986 Incentive Stock Option Plan of Registrant Incorporated by reference
to Exhibit 10.14 to the
1986 Registration Statement
10.2 Note Purchase Agreement, dated as of December 15, Incorporated by reference
1987, between and among Registrant and to Exhibit 10.3 of the
Northwestern National Life Insurance Company, 1993 Form 10K
Northern Life Insurance Company and The North
Atlantic Life Insurance Company of America
10.3 Security Agreement, dated as of December 30,1987, Incorporated by reference
between and among Registrant and Northwestern to Exhibit 10.4 of the
National Life Insurance Company, Northern Life 1993 Form 10K
Insurance Company and The North Atlantic Life
Insurance Company of America
10.4 $5,000,000 Senior Note due 1998 of Registrant in Incorporated by reference
favor of Northwestern National Life Insurance to Exhibit 10.5 of the
Company 1993 Form 10K
</TABLE>
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
10.5 $4,000,000 Senior Note due 1998 of Registrant in Incorporated by reference
favor of Northern Life Insurance Company to Exhibit 10.6 of the
1993 Form 10K
10.6 $1,000,000 Senior Note due 1998 of Registrant in Incorporated by reference
favor of The North Atlantic Life Insurance Company to Exhibit 10.7 of the
1993 Form 10K
10.7 Note Purchase Agreement, dated as of June 5, Incorporated by reference
1992,among the Registrant and the holders of the to Exhibit 8 to the Company's
Registrant's Senior Notes due 2002(the "2002 Current Report on Form 8K
Notes") dated June 24, 1992 (the
"1992 Form 8K")
10.8 Security Agreement, dated as of June 5, 1992, among Incorporated by reference
the Registrant and the holders of the 2002 Notes to Exhibit 9 to the 1992
Form 8K
10.9 $3,500,000 Senior Note due 2002 of the Registrant Incorporated by reference
in favor of Northern Life Insurance Company to Exhibit 10 to the 1992
Form 8 K
10.10 $3,000,000 Senior Note due 2002 of the Registrant Incorporated by reference
in favor of Royal Maccabees Life Insurance Company to Exhibit 11 to the 1992
Form 8K
10.11 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference
in favor of The North Atlantic Life Insurance to Exhibit 12 to the 1992
Company of America Form 8K
10.12 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference
in favor of Farm Bureau Life Insurance Company of to Exhibit 13 to the 1992
Michigan Form 8K
10.13 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference
in favor of FB Annuity Company to Exhibit 14 to the 1992
Form 8K
10.14 $500,000 Senior Note due 2002 of the Registrant in Incorporated by reference
favor of FB Annuity Company to Exhibit 15 to the 1992
Form 8K
10.15 1993 Long-term Incentive Plan of the Registrant Incorporated by reference
to Exhibit 19.01 to the
Company's Quarterly Report
on Form 10Q for the
Quarter ended March 31,
1993
10.16 1993 NonEmployee Directors' Stock Option Plan of Incorporated by reference
the Registrant to Exhibit 19.02 to the
Company's Quarterly Report
on Form 10Q for the
Quarter ended March 31,
1993
10.17 Consignment Agreement dated as of August 20, 1993 Incorporated by reference
between the Registrant and Fleet Precious Metals to Exhibit 10.40 of the
Inc. 1993 Form 10K
</TABLE>
-20-
<PAGE> 21
<TABLE>
<S> <C> <C>
10.18 Security Agreement dated as of August 20, 1993 Incorporated by reference
among the Registrant and Fleet Precious Metals Inc. to Exhibit 10.39 of the
1993 Form 10K
10.19 Amended and Restated Consignment Agreement dated as Incorporated by reference
of August 20, 1993 between the Registrant and Rhode to Exhibit 10.41 of the
Island Hospital Trust National Bank 1993 Form 10K
10.20 Amended and Restated Consignment Agreement dated as Incorporated by reference
of August 20, 1993 between the Registrant and ABN to Exhibit 10.44 to the
AMRO Bank N.V., New York Branch 1993 Form 10-K
10.21 Amended and Restated Security Agreement dated as of Incorporated by reference
August 20, 1993 between the Registrant and Rhode to Exhibit 10.46 to the
Island Hospital Trust National Bank ("RIHT") 1993 Form 10K
10.22 Amended and Restated Intercreditor Agreement dated Incorporated by reference
as of August 20, 1993, among the Registrant, its to Exhibit 10.47 to the
gold lenders, the holders of the Registrant's 1993 Form 10K
Senior Notes due 1998 and the holders of the
Registrant's 2002 Notes
10.23 First Amendment to 1993 Long-term Incentive Plan of Incorporated by reference
the Registrant dated as of September 21, 1993 to Exhibit 10.48 to the
1993 Form 10K
10.24 Second Amendment to Assignment of Trademarks and Incorporated by reference
Service Marks as Collateral dated as of July to Exhibit 10.49 to the
12,1990 between the Registrant and RIHT, 1993 Form 10K
individually and as agent
10.25 Consignment Agreement dated as of January 31, 1994 Incorporated by reference
(effective as of May 16, 1994 between the to Exhibit 10.46 to the
Registrant and Credit Suisse, New York Branch Company's Annual report on
Form 10K for the fiscal
year ended June 30, 1994
(the "1994 Form 10K")
10.26 First Amendment to Amended and Restated Security Incorporated by reference
Agreement dated as of May 16, 1994 among the to Exhibit 10.47 to the
Registrant, RIHT, individually and as agent 1994 Form 10K
10.27 Second Amendment to Amended and Restated Incorporated by reference
Intercreditor Agreement dated as of May 16, 1994 to Exhibit 10.48 to the
among the Registrant, its gold lenders, the holders 1994 Form 10K
of the Registrant's Senior Notes due 1998 and the
holders of the Registrant's 2002 Notes
</TABLE>
-21-
<PAGE> 22
<TABLE>
<S> <C> <C>
10.28 Third Amendment to Assignment of Trademarks and Incorporated by reference
Service Marks as Collateral dated as of May 16, to Exhibit 10.49 to the
1994 between the Registrant and RIHT individually 1994 Form 10K
and as agent
10.29 Second Amendment to Amended and Restated Security Incorporated by reference
Agreement dated as of September 1, 1994 among the to Exhibit 10.53 to the
Registrant, RIHT, individually and as agent 1994 Form 10K
10.30 Third Amendment to Amended and Restated Incorporated by reference
Intercreditor Agreement dated as of September 1, to Exhibit 10.54 to the
1994 among the Registrant, its gold lenders, the 1994 Form 10K
holders of the Registrant's Senior Notes due 1998,
the holders of the Registrant's 2002 Notes and
Chemical Bank
10.31 Fourth Amendment to Assignment of Trademarks and Incorporated by reference
Service Marks as collateral dated as of September to Exhibit 10.55 to the
1,1994 between the Registrant and RIHT, 1994 Form 10K
individually and as agent
10.32 Third Amendment to Amended and Restated Consignment Incorporated by reference
Agreement dated as of September 1, 1994 between the to Exhibit 10.56 to the
Registrant and RIHT 1994 Form 10K
10.33 Fourth Amendment to Amended and Restated Incorporated by reference
Consignment Agreement dated as of November 22, 1994 to Exhibit 10.51 to the
between the Registrant and RIHT Company's Transition
Report on Form 10K for
the transition period
ended January 28, 1995
(the "1995 Form 10K")
10.34 Contract of Sale dated as of November 28, 1994 Incorporated by reference
between Michael Anthony Company and the Registrant to Exhibit 10.52 to the
1995 Form 10K
10.35 Note Purchase Agreement dated as of February Incorporated by reference
15,1995, among the Registrant and the holders of to Exhibit 10.53 to the
the Registrant's Senior Notes due 2004 (the "2004 1995 Form 10K
Notes")
10.36 Security Agreement, dated as of February 15, 1995, Incorporated by reference
among the Registrant and the holders of the 2004 to Exhibit 10.54 to the
Notes 1995 Form 10K
10.37 $5,000,000 Senior Note due 2004 of the Registrant Incorporated by reference
in favor of Northern Life Insurance Company to Exhibit 10.55 to the
1995 Form 10
</TABLE>
-22-
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C> <C>
10.38 $1,000,000 Senior Note due 2004 of the Registrant Incorporated by reference
in favor of Northwestern National Life Insurance to Exhibit 10.56 to the
Company 1995 Form 10K
10.39 Third Amendment to Amended and Restated Security Incorporated by reference
Agreement dated as of February 15, 1995 among the to Exhibit 10.57 to the
Registrant and its gold lenders 1995 Form 10K
10.40 Fourth Amendment to Amended and Restated Incorporated by reference
Intercreditor Agreement dated as of February to Exhibit 10.58 to the
15,1995 among the Registrant, its gold lenders, the 1995 Form 10K
holders of the Registrant's Senior Notes due 1998,
the holders of the Registrant's 2002 Notes, the
holders of the Registrant's 2004 Notes and Chemical
Bank
10.41 Fifth Amendment to Amended and Restated Consignment Incorporated by reference
Agreement dated as of February 15, 1995 between the to Exhibit 10.59 to the
Registrant and RIHT 1995 Form 10K
10.42 Amended Security Agreement dated as of March Incorporated by reference
29,1995 between the Registrant and Chemical Bank to Exhibit 10.61 to the
1995 Form 10K
10.43 Lease dated as of May 1, 1995 between the Incorporated by reference
Registrant and Michael Anthony Company to Exhibit 10 to the
Company's Quarterly Report
on Form 10Q for the
quarter ended April 29,
1995
10.44 Loan Agreement dated October 6, 1995 between First Incorporated by reference
Fidelity Bank, National Association ("First to Exhibit 10.1 to the
Fidelity") and Registrant Company's Quarterly Report
on Form 10Q for the
quarter ended October
28,1995 (the "October 1995
Form 10Q")
10.45 Mortgage Note in principal amount of $2,500,000 Incorporated by reference
dated October 6, 1995 issued by Registrant in favor to Exhibit 10.2 to the
of First Fidelity October 1995 Form 10Q
10.46 Mortgage and Security Agreement dated October Incorporated by reference
6,1995 by Registrant for the benefit of First to Exhibit 10.3 to the
Fidelity October 1995 Form 10Q
10.47 Fourth Amendment to Amended and Restated Security Incorporated by reference
Agreement dated October 20, 1995 among Registrant to Exhibit 10.5 to the
and Registrant's gold lenders. October 1995 Form 10Q
10.48 Fifth Amendment to Amended and Restated Security Incorporated by reference
Agreement dated October 20, 1995 among Registrant to Exhibit 10.6 to the
and Registrant's gold lenders. October 1995 Form 10Q
</TABLE>
-23-
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C>
10.49 Fifth Amendment to Assignment of Trademarks and Incorporated by reference
Service Marks dated October 20, 1995 among to Exhibit 10.7 to the
Registrant and Registrant's gold lenders October 1995 Form 10Q
10.50 Seventh Amendment to Amended and Restated Incorporated by reference
Consignment Agreement dated October 20, 1995 to Exhibit 10.8 to the
between Registrant and Rhode Island Hospital Trust October 1995 Form 10Q
National Bank
10.51 Assignment of Trademarks and Service Marks as Incorporated by reference
Collateral, dated July 12, 1990, between Registrant to Exhibit 10.56 to the
and Rhode Island Hospital Trust National Bank, Company's Annual Report on
individually and as agent Form 10-K for the fiscal
year ended January 27,
1996 (the "1996 Form 10-K")
10.52 First Amendment to Assignment of Trademarks and Incorporated by reference
Service Marks as Collateral dated as of June to Exhibit 10.57 to the
5,1992, between Registrant and Rhode Island 1996 Form 10-K
Hospital Trust National Bank, individually and as
agent
10.53 Promissory Note of the Registrant dated February Incorporated by reference
1,1996 in favor of Chemical Bank to Exhibit 10.58 to the
1996 Form 10-K
10.54 Deferred Compensation Plan dated as of March 4, 1996 Incorporated by reference
to Exhibit 10.59 to the
1996 Form 10-K
10.55 Letter Agreement dated July 23, 1996 among the Incorporated by reference
Company and certain of the Senior Note Holders to Exhibit 10.2 to the
Company's Quarterly Report
on Form 10-Q for the quarter
ended July 27, 1996 (the
"July 1996 Form 10-Q")
10.56 Letter Agreement dated July 23, 1996 among the Incorporated by reference
Company and certain of the Senior Note Holders to Exhibit 10.3 to the
July 1996 Form 10-Q
10.57 Letter Agreement dated July 23, 1996 among the Incorporated by reference
Company and certain of the Senior Note Holders to Exhibit 10.4 to the
July 1996 Form 10-Q
10.58 Promissory Note dated July 31, 1996 issued by the Incorporated by reference
Company to The Chase Manhattan Bank to Exhibit 10.5 to the
July 1996 Form 10-Q
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C>
10.59 Amendment to the 1993 Long Term Incentive Plan Incorporated by reference
to Exhibit 10.1 to the
Company's Quarterly Report
on Form 10-Q for the
quarter ended October 26,
1996 (the "October 1996
Form 10-Q")
10.60 Amendment to the NonEmployees Directors' Plan Incorporated by reference
to Exhibit 10.2 to the
Company's October 1996
Form 10-Q
10.61 Lease dated as of May 1, 1991 between Michael Filed as an Exhibit to
Anthony Company d/b/a MacQuesten Realty Form 10-K on page 55
Company and Registrant
10.62 Lease dated as of May 1, 1991 between Michael Filed as an Exhibit to
Anthony Company d/b/a MacQuesten Realty Form 10-K on page 78
Company and Registrant
21 Subsidiaries of the Registrant Filed as an Exhibit to
this Form 10K on page 101
27 Financial Data Schedule Filed as an Exhibit to
this Form 10K on page 102
</TABLE>
REPORT ON FORM 8K
(b) Not applicable
-25-
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
We have audited the accompanying consolidated balance sheets of Michael Anthony
Jewelers, Inc. and subsidiaries as of February 1, 1997 and January 27, 1996 and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years ended February 1, 1997 and January 27, 1996,
the seven-month period ended January 28, 1995, and the year ended June 30, 1994.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Michael Anthony Jewelers, Inc. and
subsidiaries as of February 1, 1997 and January 27, 1996, and the results of
their operations and their cash flows for the years ended February 1, 1997 and
January 27, 1996, the seven-month period ended January 28, 1995 and the year
ended June 30, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 11, 1997
F-1
<PAGE> 27
MICHAEL ANTHONY JEWELERS, INC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS February 1, January 27,
------ 1997 1996
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 10,430 $ 6,673
Accounts receivable:
Trade (less allowances of $1,404 and $1,575, respectively) 21,500 30,062
Other 91 47
Inventories 18,903 19,698
Prepaid expenses and other current assets 885 1,169
Deferred taxes 578 855
-------- --------
Total current assets 52,387 58,504
PROPERTY, PLANT AND EQUIPMENT - net 18,621 18,441
INTANGIBLES - net 916 998
OTHER ASSETS 825 703
-------- --------
$ 72,749 $ 78,646
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 3,141 $ 4,575
Current portion of long-term debt
and lease liability 3,402 3,272
Accrued expenses 3,217 3,980
Taxes payable 585 541
-------- --------
Total current liabilities 10,345 12,368
-------- --------
LONG-TERM DEBT 13,946 18,401
-------- --------
CAPITAL LEASE LIABILITY 348 791
-------- --------
DEFERRED TAXES 1,068 1,038
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - par value $1.00 per share;
1,000,000 shares authorized; none issued -- --
Common stock - par value $.001 per share;
20,000,000 shares authorized; 8,279,000 and
9,239,000 shares issued and outstanding as of
February 1, 1997, and January 27, 1996, respectively 8 9
Additional paid-in capital 31,732 35,170
Retained earnings 16,096 14,306
Treasury stock, 250,000 and 965,200 shares as of
February 1, 1997 and January 27, 1996,
respectively (794) (3,437)
-------- --------
Total stockholders' equity 47,042 46,048
-------- --------
$ 72,749 $ 78,646
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 28
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended Seven Months
------------------------ Ended Year Ended
February 1, January 27, January 28, June 30,
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 150,629 $ 145,257 $ 93,321 $ 142,787
COST OF GOODS SOLD 124,041 121,195 76,782 114,151
--------- --------- --------- ---------
GROSS PROFIT ON SALES 26,588 24,062 16,539 28,636
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 21,372 19,455 12,628 17,887
--------- --------- --------- ---------
OPERATING INCOME 5,216 4,607 3,911 10,749
--------- --------- --------- ---------
OTHER INCOME (EXPENSES):
Gold consignment fee (1,457) (2,006) (1,031) (1,487)
Interest expense (1,698) (1,829) (999) (1,670)
Interest income 433 359 100 426
Other income 74 83 17 138
--------- --------- --------- ---------
Total other income (expenses) (2,648) (3,393) (1,913) (2,593)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 2,568 1,214 1,998 8,156
INCOME TAX PROVISION 778 486 774 3,176
--------- --------- --------- ---------
NET INCOME $ 1,790 $ 728 $ 1,224 $ 4,980
========= ========= ========= =========
EARNINGS PER SHARE $ .22 $ .09 $ .14 $ .63
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES 8,241 8,475 8,749 7,945
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 29
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
-------------------- Paid-In Retained -------------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1993 7,500 8 22,859 7,374 (464) (1,839) 28,402
Exercise of stock
options (including
related income tax
benefit) 113 - 547 - - - 547
Public stock offering (net
of underwriters'
discounts and offering
costs of $1,182) 1,608 1 11,678 - - - 11,679
Net income - - - 4,980 - - 4,980
-------- -------- -------- -------- -------- -------- --------
Balance - June 30, 1994 9,221 9 35,084 12,354 (464) (1,839) 45,608
Exercise of stock
options (including
related income tax
benefit) 18 - 86 - - - 86
Purchase of treasury
stock - - - - (114) (473) (473)
Net income - - - 1,224 - - 1,224
-------- -------- -------- -------- -------- -------- --------
Balance - January 28,
1995 9,239 9 35,170 13,578 (578) (2,312) 46,445
Purchase of treasury stock - - - - (387) (1,125) (1,125)
Net income - - - 728 - - 728
-------- -------- -------- -------- -------- -------- --------
Balance - January 27, 1996 9,239 9 35,170 14,306 (965) (3,437) 46,048
Purchase of treasury stock - - - - (250) (811) (811)
Retirement of treasury
stock (965) (1) (3,453) - 965 3,454 -
Issuance of stock 5 - 15 - - - 15
Net income - - - 1,790 - - 1,790
-------- -------- -------- -------- -------- -------- --------
Balance - February 1, 1997 8,279 $ 8 $ 31,732 $ 16,096 (250) $ (794) $ 47,042
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 30
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Seven Months Year
---------------------- Ended Ended
February 1, January 27, January 28, June 30,
1997 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,790 $ 728 $ 1,224 $ 4,980
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 3,749 4,009 1,948 2,802
Provision for accounts receivable 170 247 211 (70)
Provision for sales returns 261 200 369 (1,098)
Deferred tax benefit 307 (160) (70) (41)
Loss on disposal of property, plant
and equipment 19 48 - -
Provision for stock compensation 15 - - -
(Increase)/decrease in operating assets:
Accounts receivable 8,087 (3,735) (1,606) (11,480)
Inventories 795 452 (159) (3,576)
Prepaid expenses and other current assets 284 (593) 422 (164)
Other assets (164) (833) (451) (74)
Increase/(decrease) in operating liabilities:
Accounts payable (1,434) (414) (48) 696
Accrued expenses (763) 725 656 219
Taxes payable 44 147 42 311
-------- -------- -------- --------
Net cash used in operating activities 13,160 821 2,538 (7,495)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,816) (4,616) (5,675) (3,046)
Purchase of marketable securities - - - (3,870)
Sale of marketable securities - - 1,869 5,124
-------- -------- -------- --------
Net cash (used in)/provided by
investing activities (3,816) (4,616) (3,806) (1,792)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (4,776) (2,722) (171) (2,613)
Proceeds from line of credit 6,600 9,400 14,500 4,000
Payments to line of credit (6,600) (9,400) (14,500) (4,000)
Purchase of treasury stock (811) (1,125) (125) -
Proceeds from mortgage - 2,500 - -
Borrowings of long-term debt - 6,000 - -
Proceeds from stock issuance
including related income tax benefit - - 86 547
Proceeds from public offering - - - 11,679
-------- -------- -------- --------
Net cash provided by/(used in)
financing activities (5,587) 4,653 (210) 9,613
-------- -------- -------- --------
NET INCREASE/(DECREASE) IN CASH 3,757 858 (1,478) 326
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 6,673 5,815 7,293 6,967
-------- -------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 10,430 $ 6,673 $ 5,815 $ 7,293
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 31
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Seven Months Year
-------------------- Ended Ended
February 1, January 27, January 28, June 30,
1997 1996 1995 1994
-------- -------- -------- ------
<S> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Liability incurred for acquisition of
equipment $ - $ 200 $ 307 $ -
Capital lease obligations $ 8 $ 524 $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Purchase of treasury stock $ 250 $ 387 $ 114 $ -
Deferred compensation forfeited $ - $ - $ - $ -
Cancellation of common stock $ - $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest and gold consignment fees $3,451 $3,701 $1,929 $3,101
Income taxes $ 425 $ 475 $ 789 $2,790
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 32
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
Nature of Operations
--------------------
Michael Anthony Jewelers, Inc. ("the Company"), is a leading designer,
marketer and manufacturer of affordable fine jewelry whose customers include
jewelry chain stores, discount stores, department stores, television home
shopping networks, catalogue retailers, and wholesalers.
Basis of Consolidation
----------------------
The accompanying consolidated financial statements include the accounts of
Michael Anthony Jewelers, Inc. and its subsidiaries, all of which are
wholly-owned. All intercompany balances and transactions have been
eliminated.
The Company changed its fiscal year end from June to January, effective for
the seven months ended January 28, 1995 (the "Transition Period").
Selected Financial Data for the Twelve Months Ended January 28, 1995:
---------------------------------------------------------------------
The following sets forth unaudited financial data for the twelve months
ended January 28, 1995, the comparable prior year to the year ended January
27, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net sales $149,583
Operating income 7,484
Income before income taxes 4,695
Provision for income taxes 1,717
Net income 2,978
</TABLE>
Inventories and Cost of Goods Sold
----------------------------------
Inventories are valued at lower of cost (first-in first-out method) or
market.
The Company satisfies a majority of its gold supply needs through gold
consignment agreements with financial institutions that lease gold to the
Company ("gold lenders"), whereby the gold lenders have agreed to consign
fine gold to the Company (see Note 4). In accordance with the terms of the
agreements, the Company has the option of repaying the gold lenders in an
equivalent number of ounces of fine gold or cash based upon the then quoted
market price of gold.
The principal component of cost of goods sold is the cost of the gold
bullion and other raw materials used in the production of the Company's
jewelry. Other components of cost of goods sold include direct costs
incurred by the Company in its manufacturing operations, depreciation,
freight and insurance.
F-7
<PAGE> 33
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, five to fifteen years for machinery and equipment and thirty years
for its building. Leasehold improvements are amortized over the lesser of
the estimated life of the asset or the lease.
Intangibles
-----------
Intangible assets (net of accumulated amortization of $1,209,000 and
$1,002,000 as of February 1, 1997 and January 27, 1996, respectively)
consist of patents which are amortized on a straight-line basis over the
lives of the patents, approximately 14 years, a covenant-not-to-compete
which is amortized on a straight-line basis over the life of the covenant of
five years, and a trademark which will be amortized on a straight-line basis
of approximately 17 years.
Revenue Recognition
-------------------
Revenue from sales to customers (other than consignment) is recognized at
the time the merchandise is shipped. Merchandise sold under consignment
arrangements between the Company and certain customers is not recognized as
revenue by the Company until the products are sold by the consignee. In
certain cases, the Company accepts payment for merchandise in either cash or
gold. Additionally, the Company enters into arrangements for certain
customers of its rope chain and tubing products whereby the gold value of
the finished product is transferred in the form of fine gold ounces from the
customer to the Company. The value of the finished product that exceeds the
gold content value is recovered as revenue and the related cost to
manufacture is recorded as an expense ("tolling arrangements").
Allowance for Sales Returns
---------------------------
The Company reduces gross sales by the amount of discounts and returns to
determine net sales. Each month, the Company estimates a reserve for returns
based on historical experience and the amount of gross sales. The reserve is
adjusted periodically to reflect the Company's actual return experience.
Catalog Costs
-------------
Catalog costs are charged to expense as incurred, the only exception being
major catalog revisions. Costs capitalized are amortized over the units
shipped, up to a maximum of two years. At February 1, 1997 and January 27,
1996, in connection with two significant catalog revisions, approximately
$124,000 and $250,000, respectively, had been capitalized. Included in the
statements of operations for the years ended February 1, 1997 and January
27, 1996 is amortization expense of $230,000 and $82,000, respectively,
F-8
<PAGE> 34
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Catalog Costs (continued)
-------------
related to a 1996 catalog revision. Additionally, included in the statements
of operations for the transition period and the year ended June 30, 1994 is
amortization expense of $90,000 and $257,000, respectively, related to a
1993 catalog revision.
Cash Equivalents
----------------
Highly liquid investments with maturities of three months or less at the
date of acquisition are classified as cash equivalents.
Financial Instruments
---------------------
The Company utilizes derivative financial instruments, including commodity
futures, forwards and options on futures, to limit its exposure to
fluctuations in the price of gold. The Company does not hold or issue such
instruments for trading purposes. Gains and losses on all instruments are
included in the determination of income currently as a component of cost of
goods sold. There were no significant derivative financial instruments
outstanding at February 1, 1997 or January 27, 1996. The company's exposure
to market risk related to the derivative financial instruments is limited to
fluctuations in the price of gold. The Company is also exposed to credit
loss in the event of nonperformance by the counterparties to the
instruments; however, the risk of credit loss is not significant.
Earnings Per Share
------------------
Earnings per share for all periods presented were computed on a primary
basis using the weighted average number of common shares outstanding.
Options and warrants outstanding were not materially dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share", ("SFAS
128"), which requires presentation of basic earnings per share which
includes no dilution. This statement shall be effective for both interim and
annual periods after December 15, 1997. The Company does not expect any
significant impact upon adoption of SFAS 128.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-9
<PAGE> 35
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Use of Estimates (Continued)
----------------
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fiscal Year End
---------------
The Company's fiscal year end is the Saturday closest to the end of January,
effective with the fiscal year ended February 1, 1997. The financial
statements for the fiscal years ended February 1, 1997, and January 27, 1996
were comprised of 53 and 52 weeks, respectively.
Long-Lived Assets
-----------------
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of." This standard requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The adoption of
SFAS 121 did not have a material impact on the Company's financial position
of operations.
Reclassifications
-----------------
Certain reclassifications were made to the prior year's financial statements
to conform to the current year's presentation.
2. INVENTORIES
-----------
Inventories consist of:
<TABLE>
<CAPTION>
February 1, January 27,
1997 1996
------- -------
(In thousands)
<S> <C> <C>
Finished goods $37,020 $56,621
Work in process 14,597 15,240
Raw materials 7,568 8,537
------- -------
59,185 80,398
Less:
Consigned gold 40,282 60,700
------- -------
$18,903 $19,698
======= =======
</TABLE>
At February 1, 1997 and January 27, 1996 inventories excluded approximately
116,590 and 149,300 ounces of gold on consignment, respectively.
F-10
<PAGE> 36
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
February 1, January 27,
1997 1996
----------- ----------
(In thousands)
<S> <C> <C>
Machinery and equipment $30,257 $27,434
Leasehold improvements 2,318 3,781
Building 5,156 2,711
Land 1,070 1,070
------- -------
38,801 34,996
Less: Accumulated depreciation
and amortization 20,180 16,555
------- -------
$18,621 $18,441
======= =======
</TABLE>
4. GOLD CONSIGNMENT AGREEMENTS
---------------------------
The Company has gold consignment agreements with gold lenders. During the
year ended February 1, 1997, the Company received notice from two existing
Gold Lenders that they both plan to discontinue their involvement in the
jewelry lending business and will be terminating their respective
consignment agreements with the Company in February 1997. The Company also
amended an existing agreement with a Gold Lender whereby the Gold Lender
increased its commitment to the Company. Under the terms of the agreements,
the Company is entitled to lease the lesser of an aggregate amount of
250,000 ounces, or an aggregate consigned gold value not to exceed
$106,695,000. The consigned gold is secured by certain property of the
Company including its inventory and equipment. Title to such consigned gold
remains with the gold lenders until the Company purchases the gold. However,
during the period of consignment, the entire risk of physical loss, damage
or destruction of the gold is borne by the Company. The purchase price per
ounce is based on the daily Second London Gold Fix. The Company pays the
gold consignors a consignment fee based on the dollar value of gold ounces
outstanding, as defined in the agreements.
The consignment agreements are terminable by the Company or the respective
gold lenders upon 30 days notice. If any gold lender were to terminate its
existing gold consignment agreement, the Company does not believe it would
experience an interruption of its gold supply that would materially
adversely affect its business. The Company believes that other consignors
would be willing to enter into similar arrangements if any gold lender
terminates its relationship with the Company.
F-11
<PAGE> 37
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. GOLD CONSIGNMENT AGREEMENTS (Continued)
---------------------------
The consignment agreements contain certain restrictive covenants relating to
maximum usage, net worth, working capital, and other financial ratios and each
of the agreements require the Company to own a specific amount of gold at all
times. As of February 1, 1997, the Company was in compliance with these
covenants and the Company's owned gold inventory was valued at approximately
$6,727,000.
5. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
February 1, January 27,
1997 1996
-------- -------
(In thousands)
<S> <C> <C>
Accrued advertising $1,493 $2,321
Accrued payroll expenses 515 654
Accrued interest 347 643
Customer deposits payable 130 86
Other accrued expenses 732 276
------ ------
$3,217 $3,980
====== ======
</TABLE>
F-12
<PAGE> 38
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
February 1, January 27,
1997 1996
-------- -------
(In thousands)
<S> <C> <C>
Notes payable - insurance companies, interest at 10.5% payable quarterly,
principal of $1,750,000 payable on
January 31, 1998 $ 1,750 $ 4,750
Notes payable - insurance companies, interest at 8.61% payable
semi-annually, principal payable in annual
installments of $1,111,000 through May 15, 2002 6,667 7,778
Notes payable - insurance companies, interest at 1.5% above the London
Interbank Offered Rate, adjusted and payable quarterly (7.00% as of February
1, 1997), principal payable in annual installments of $1,000,000
commencing May 1999 through May 15, 2004 6,000 6,000
Mortgage payable - interest at 8%, interest and principal of $24,000 payable
monthly over a ten-year term through
October 2005 2,384 2,478
Promissory notes - interest at 6% payable annually,
principal of $100,000 payable in February 1998 100 200
------- -------
16,901 21,206
Less: current portion 2,955 2,805
------- -------
$13,946 $18,401
======= =======
</TABLE>
The notes payable are secured by the Company's accounts receivable,
machinery and equipment, inventory (secondary lien to the gold lenders) and
proceeds. The mortgage payable is secured by the Company's corporate
headquarters building and land, having a net book value of approximately
$5,041,000 at February 1, 1997, and certain equipment therein.
The note purchase agreements contain certain restrictive financial covenants
and limit the payment of dividends. Although the Company does not expect to
pay dividends in the near future, approximately $4,323,000 would have been
available for payment at February 1, 1997. Additionally, the mortgage
agreement contains certain restrictive financial covenants. At February 1,
1997 the Company was in compliance with the covenants under the note
agreements and mortgage agreement.
F-13
<PAGE> 39
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT (Continued)
--------------
Maturities of long-term debt as of February 1, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending February
--------------------
<S> <C>
1998 $ 2,955
1999 1,315
2000 2,230
2001 2,240
2002 2,251
Thereafter 5,910
-------
$16,901
=======
</TABLE>
7. LINE OF CREDIT
--------------
At February 1, 1997, the Company had a $15,000,000 line of credit agreement
with no borrowings outstanding. The line of credit is secured by certain
assets of the Company, including accounts receivable and inventory. At the
Company's option, the interest rate on borrowings under the facility is
based on prime, LIBOR or Money Market rates. The line of credit expires on
July 31, 1997, subject to annual renewal. Management believes that the line
of credit will be renewed; however, if the current lender decides not to
renew the line, the Company believes that other lenders would be willing to
enter into a similar arrangement.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
February 1, 1997 January 27, 1996
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
(In thousands)
<S> <C> <C> <C> <C>
Notes with insurance companies:
10.5% notes payable $1,750 $1,760 $4,750 $4,887
8.61% notes payable 6,667 6,185 7,778 7,909
1995 notes payable 6,000 6,000 6,000 6,000
Mortgage payable $2,384 $2,384 $2,478 $2,478
Promissory notes $100 $100 $200 $200
</TABLE>
The fair values of the 10.5% and 8.61% notes payable were based on current
rates available to the Company for debt with similar remaining maturities.
The fair values of the 1995 notes payable, the
F-14
<PAGE> 40
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
-----------------------------------
mortgage payable and the promissory notes were assumed to reasonably
approximate their carrying amounts since they contain variable interest
rates or have short maturities.
The Company believes the carrying amount of the following financial
instruments is equal to their fair value, due to their short period of
maturity: accounts receivable, accounts payable and accrued expenses. The
Second London Gold Fix is used daily to value the ounces of gold and as such
the carrying value of inventory approximates fair value.
9. INCOME TAXES
------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
purposes and for income tax purposes.
Income tax provision consists of the following:
<TABLE>
<CAPTION>
Year Ended, Transition Period
------------------------- Ended Year Ended
February 1, January 27, January 28, June 30,
1997 1996 1995 1994
------- ------- ------- --------
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal $398 $565 $676 $2,532
State and local 73 81 168 685
---- ------ ----- ------
471 646 844 3,217
Deferred income tax 307 (160) (70) (41)
---- ------ ----- ------
Total $778 $ 486 $ 774 $3,176
==== ====== ===== ======
</TABLE>
F-15
<PAGE> 41
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (Continued)
------------
The following is a reconciliation of the federal statutory rate to the
effective tax rate:
<TABLE>
<CAPTION>
Transition Period
Year Ended Ended Year Ended
February 1, January 27, January 28, June 30,
1997 1996 1995 1994
-------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State and local taxes,
net of federal benefit 3.0 5.0 5.5 5.5
Reversal of prior year accruals (7.3) - - -
Other .6 1.0 (0.8) (0.6)
---- ---- ---- ----
30.3% 40.0% 38.7% 38.9%
==== ==== ==== ====
</TABLE>
The tax effects of significant items comprising the Company's deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
February 1, January 27,
1997 1996
------ ------
<S> <C> <C>
Non-current deferred tax liability:
Difference between book and tax
depreciation methods $1,068 $1,038
------ ------
Current deferred tax assets:
Reserves for sales returns and
doubtful accounts 520 608
Inventory reserve 50 181
Other 8 66
------ ----
578 855
---- -----
Net deferred tax liabilities $490 $183
==== ====
</TABLE>
F-16
<PAGE> 42
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. RELATED PARTY TRANSACTIONS
--------------------------
In May 1991, the Company entered into two lease agreements with MacQuesten
Realty Company ("MRC"), a partnership consisting of certain stockholders of
the Company. Pursuant to the agreements, the Company agreed to rent the
manufacturing and distributing facilities from MRC for a period of ten
years, at an average annual rental of $478,000, plus real estate taxes and
other occupancy costs.
On December 1, 1994, under the terms of a Contract of Sale dated November
28, 1994, the Company acquired its corporate headquarters premises from MRC
for $2,490,000. The Company funded the acquisition with cash from its
operations and subsequently financed the purchase with a mortgage loan from
a bank.
In May 1995, the Company entered into another lease agreement with MRC.
Pursuant to the agreement, the Company agreed to rent a manufacturing
facility from MRC for a period of six years, at an average annual rental of
$128,000, plus real estate taxes and other occupancy costs.
11. LEASES AND COMMITMENTS
----------------------
(a) Leases
The Company conducts its operations from leased manufacturing and
distribution facilities. In addition to rent, the Company pays property
taxes, insurance and certain other expenses relating to leased facilities
and equipment. The Company also leases machinery and equipment.
The following is a schedule of net minimum lease payments owed under capital
and operating leases as of February 1, 1997:
<TABLE>
<CAPTION>
Year Ending Capital Operating
February Leases Leases
-------- ------ ------
(In thousands)
<S> <C> <C> <C>
1998 $493 $632
1999 240 642
2000 111 673
2001 9 505
------- ------
Minimum lease payments: 853 $2,452
======
Less: Interest 58
------
Present value of net
minimum lease payments 795
Less: current portion 447
------
$348
====
</TABLE>
F-17
<PAGE> 43
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LEASES AND COMMITMENTS (Continued)
----------------------
The majority of the payments set forth above for operating leases are to
MacQuesten Realty Company.
The interest rates applicable to the capital leases range from 4.84% -
8.18%. Included in property, plant and equipment as of February 1, 1997, are
capitalized assets with a carrying value of $581,000. Total capitalized
lease depreciation expense was $261,000, $246,000, $126,000 and $263,000 for
the years ended February 1, 1997, January 27, 1996, the Transition Period
and for the year ended June 30, 1994, respectively.
Rent expense for the years ended February 1, 1997, January 27, 1996, the
Transition Period and for the year ended June 30, 1994, respectively,
amounted to $624,000, $563,000, $420,000 and $876,000, respectively,
principally for manufacturing and distribution facilities.
(b) The Company's product line includes licensed goods manufactured pursuant
to two or three year agreements with licensors. Royalty fees range from 6%
to 12% of net sales of these products, or a minimum guarantee, whichever is
greater. The Company records the related expense over the units sold.
As of February 1, 1997, the future guaranteed royalty commitments are as
follows:
<TABLE>
<CAPTION>
Guaranteed
Year Ending Royalty
January Commitments
------- -----------
(In thousands)
<S> <C> <C>
1998 $545
1999 140
2000 35
----
$720
====
</TABLE>
12. STOCK PLANS
-----------
The Company has elected to continue to account for employees stock-based
transactions under Accounting Principles Board No. 25, "Accounting for Stock
Issued to Employees". Since the exercise price of all stock options granted
under the stock plans were equal to the price of the stock at the date of
grant, no compensation has been recognized by the Company.
Under the Company's stock option agreements, had the compensation expense
been determined based upon the fair value at the grant date consistent with
the methodology prescribed under SFAS No. 123, "Accounting for Stock Based
Compensation," the Company's pro forma, net income and earnings per share
would have been net income of $1,712,000 and $.21 earnings per share for the
year ended
F-18
<PAGE> 44
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
February 1, 1997 and net income of $692,000 and $.08 earnings per share for
the year ended January 27, 1996. The weighted average per share fair value
of the option granted during the years ended February 1, 1997 and 1997 and
January 27, 1996 was estimated as $.89 and $.84, respectively, on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
February 1, January 27
1997 1996
----------- ----------
<S> <C> <C>
Expected life (years) 2 2
Risk-free interest rates 6.2% 5.9%
Expected volatility 66.0% 75.0%
Expected dividend yield - -
</TABLE>
The pro forma effect on net income and earnings per share for the years
ended February 1, 1997 and January 27, 1996 may not be representative of the
pro forma effect in future years because it includes compensation cost on a
straight-line basis over the vesting periods of the grants and does not take
into consideration the pro forma compensation costs for grants made prior to
1996.
INCENTIVE STOCK OPTION PLANS
(1) During July 1986, the Company adopted the 1986 Incentive Stock Option
Plan. The Plan, as amended, permits the granting of incentive stock options
and non-qualified stock options to employees for the purchase of up to an
aggregate of 500,000 shares of common stock. The option term is for a period
not to exceed ten years from the date of grant. At February 1, 1997, all
shares reserved under the plan had been granted.
F-19
<PAGE> 45
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
The changes in the number of shares under option and the weighted average
option price per share are as follows:
<TABLE>
<CAPTION>
1986 Incentive Stock Option Plan
--------------------------------
<S> <C> <C>
Outstanding and exercisable, June 30, 1993 200,433 $ 3.65
Lapsed (2,800) $3.50
Exercised (103,133) $3.58
--------
Outstanding and exercisable, June 30, 1994 94,500 $3.73
Exercised (3,000) $3.63
--------
Outstanding and exercisable, January 28, 1995 91,500 $3.74
Lapsed (37,000) $3.91
--------
Outstanding and exercisable, January 27, 1996 54,500 $3.63
Lapsed (1,000) $3.63
--------
Outstanding and exercisable, at a range of
$3.50 - $4.00, at February 1, 1997 53,500 $3.63
========
</TABLE>
(2) During the year ended June 30, 1994, the Company adopted the 1993
Long-Term Incentive Plan and the 1993 Non-Employee Directors' Stock Option
Plan. The Plans permit the granting of incentive stock options and
non-qualified stock options to employees and non-employee directors for 0the
purchase of up to an aggregate of 1,000,000 and 250,000 shares of common
stock, respectively. The option term is for a period not to exceed five
years from the date of grant.
F-20
<PAGE> 46
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
<TABLE>
<CAPTION>
Long-Term Incentive Plan
------------------------
<S> <C> <C>
Outstanding at June 30, 1993 - $ -
Granted 242,500 $4.76
-------
Outstanding at June 30, 1994 242,500 $4.76
Granted 93,000 $5.88
Exercised (15,000) $4.13
-------
Outstanding at January 28, 1995 320,500 $5.12
Lapsed (27,000) $5.52
Granted 371,400 $3.00
-------
Outstanding at January 27, 1996 664,900 $3.92
Lapsed (11,400) $3.88
Granted 15,000 $3.31
-------
Outstanding at February 1, 1997 668,500 $3.91
=======
</TABLE>
Options exercisable at February 1, 1997 were for 380,161 shares of common
stock at a price between $4.125 - $7.75 a share. At February 1, 1997, shares
for future option grants totalling 316,500 were available under the plan.
F-21
<PAGE> 47
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
<TABLE>
<CAPTION>
Non-Employee Directors' Stock Option Plan
-----------------------------------------
<S> <C> <C>
Outstanding at June 30, 1993 - $ -
Granted 30,000 $5.59
------
Outstanding at June 30, 1994 30,000 $5.59
Granted 10,000 $6.63
------
Outstanding at January 28, 1995 40,000 $5.85
Lapsed (10,000) $7.31
Granted 15,000 $3.02
------
Outstanding at January 27, 1996 45,000 $4.58
Lapsed (10,000) $7.31
Granted 10,000 $3.03
------
Outstanding at February 1, 1997 45,000 $3.63
======
</TABLE>
Options exercisable at February 1, 1997 were for 23,331 shares of common
stock at a price between $2.625 - $5.00 a share. At February 1, 1997, shares
for future option grants totalling 205,000 were available under this plan.
F-22
<PAGE> 48
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
WARRANTS
(3) The Company has granted common stock purchase warrants.
The changes in the number of shares under the stock purchase warrants
and the weighted average option price are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Outstanding and exercisable, June 30, 1993 98,500 $4.16
Granted 19,000 $6.08
Exercised (10,000) $4.75
------
Outstanding and exercisable, June 30, 1994 107,500 $4.54
Granted 15,000 $6.25
------
Outstanding and exercisable, January 28, 1995 122,500 $4.75
Lapsed (52,500) $4.21
------
Outstanding and exercisable, January 27, 1996 70,000 $5.15
Lapsed (45,000) $4.75
------
Outstanding and exercisable, at a range
of $3.25 - $7.50, at February 1, 1997 25,000 $5.82
======
</TABLE>
13. RETIREMENT PLAN
---------------
Effective January 1, 1992, the Company established a 401(k) Profit
Sharing Plan and Trust for all eligible employees. Under the terms of
the plan the employee may contribute 1% to 20% of compensation. There
is a partial employer matching contribution. Included in the statement
of operations for the fiscal year ended February 1, 1997 is $34,000 of
expense for the employer portion of the contribution. There was no
employer contributions for the year ended January 27, 1996, the
transition period and the year ended June 30, 1994.
F-23
<PAGE> 49
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SIGNIFICANT CUSTOMERS
---------------------
Sales to the Company's two largest customers aggregated approximately
25%, 29%, 24% and 25% of net sales for the years ended February 1, 1997,
January 27, 1996, the Transition Period and for the year ended June 30,
1994, respectively.
15. PUBLIC STOCK OFFERING
---------------------
On December 20, 1993, the Company sold 1.6 million shares pursuant to an
offering. On January 14, 1994, the underwriters partially exercised the
over-allotment option, whereby the Company sold 7,600 shares. The
remaining over-allotment option lapsed on January 20, 1994. The net
proceeds from the offering of approximately $11,679,000 (net of
underwriters' discounts and commission and expenses of approximately
$1,182,000) were used for working capital and for general corporate
purposes which included strategic acquisitions of other companies
engaged in the manufacture and distribution of jewelry.
16. STOCK REPURCHASE PROGRAM
------------------------
In May 1994, the Company announced a Common Stock repurchase program
(the "1994 Stock Repurchase Program"), pursuant to which the Company
could repurchase up to 500,000 shares of Common Stock. During the
Transition Period ended January 28, 1995 and the year ended January 27,
1996, the Company had repurchased 114,100 and 327,500 shares,
respectively, on the open market under the 1994 Stock Repurchase Program
for approximately $473,000 and $966,000, respectively. The Company will
not reissue these shares to the public. In November 1995, the Company
discontinued its 1994 Stock Repurchase Program.
In December 1995, the Company announced a Common Stock Repurchase
Program, (the "1995 Stock Repurchase Program"), pursuant to which the
Company may repurchase up to 750,000 shares of Common Stock. During the
years ended February 1, 1997 and January 27, 1996, the Company had
repurchased a total of 250,000 and 60,000 shares, respectively, on the
open market under the 1995 Stock Repurchase Program for an aggregate
price of approximately $811,000 and $159,000, respectively. Effective
May 24, 1996, the Board of Directors authorized the Company to retire
965,200 shares of Common Stock, previously held as Treasury Stock. As of
April 9, 1997, the Company had repurchased an additional 257,400 shares
on the open market for an aggregate price of approximately $812,000.
17. LEGAL PROCEEDINGS
-----------------
The Company is involved in various legal claims and disputes, none of
which is considered material and all of which, for the most part, are
normal to the Company's business. In the opinion of management, the
amount of losses that might be sustained, if any, from such claims and
disputes would not have a material effect on the Company's financial
statements.
F-24
<PAGE> 50
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. EQUITY
------
On June 28, 1996, the Company issued 4,614 shares of Common Stock to the
Company's three outside directors. Included in the statement of
operations is approximately $15,000 of expense related to Common Stock
which was priced at the fair market value on the date of issuance.
F-25
<PAGE> 51
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Summary of Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 1, 1997 YEAR ENDED JANUARY 27, 1996
-------------------------------------------- --------------------------------------------
QUARTER ENDED QUARTER ENDED
-------------------------------------------- --------------------------------------------
(In thousands, except
per share amounts)
Apr. 27, Jul. 27, Oct. 26, Feb. 1, April 29, July 29, Oct. 28, Jan. 27,
1996 1996 1996 1997 1995 1995 1995 1996
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (A) 29,203 27,706 48,772 44,948 27,260 24,902 47,037 46,058
Cost of goods sold 24,250 23,641 39,800 36,350 22,048 21,628 38,789 38,730
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 4,953 4,065 8,972 8,598 5,212 3,274 8,248 7,328
Selling, general
& administrative
expenses 4,335 4,482 6,019 6,536 4,493 4,137 5,431 5,394
-------- -------- -------- -------- -------- -------- -------- --------
Operating income /(loss) 618 (417) 2,953 2,062 719 (863) 2,817 1,934
Other income
(expense):
Gold consignment fees (351) (312) (349) (445) (414) (448) (485) (659)
Interest expense (429) (410) (426) (433) (456) (451) (428) (494)
Interest income 160 125 94 54 124 135 55 45
Other - net 14 6 34 20 5 75 8 (5)
-------- -------- -------- -------- -------- -------- -------- --------
Total other (606) (591) (647) (804) (741) (689) (850) (1,113)
income (expense)
Income (loss) from
operations before
income taxes 12 (1,008) 2,306 1,258 (22) (1,552) 1,967 821
Income taxes/(benefit) (4) (383) 878 279 (9) (621) 776 340
-------- -------- -------- -------- -------- -------- -------- --------
Net income/(loss) $ 8 $ (625) $ 1,428 $ 979 $ (13) $ (931) $ 1,191 $ 481
======== ======== ======== ======== ======== ======== ======== ========
Earnings/(loss)
per share(B) $ 0.00 $ (0.08) $ 0.17 $ 0.12 $ 0.00 $ (0.11) $ 0.14 $ 0.06
======== ======== ======== ======== ======== ======== ======== ========
<FN>
(A) The Company's net sales for the third and fourth quarters are subject to
seasonal fluctuation. This fluctuation is mitigated to a degree by the
early placement of orders for the holiday season.
(B) Per share amounts do not always add because the figures are required to
be independently calculated.
</TABLE>
F-26
<PAGE> 52
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF ADDITIONS CHARGED TO OTHER END OF
DESCRIPTION PERIOD COSTS AND EXPENSES ACCOUNTS DEDUCTIONS(A) PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts:
<S> <C> <C> <C> <C> <C>
Year ended February 1, 1997 $901 $170 $ - $(415) $656
Year ended January 27, 1996 646 247 - (8) 901
Seven month period ended 496 211 - 61 646
January 28, 1995
Year ended June 30, 1994 443 (70) 49 74 496
Allowance for sales returns:
Year ended February 1, 1997 $674 $261 $ - $187 $748
Year ended January 27, 1996 754 200 - 280 674
Seven month period ended 385 369 - - 754
January 28, 1995
Year ended June 30, 1994 525 1,098 - 1,238 385
<FN>
(A) Allowances, returns and uncollectible accounts charged against the
reserve, (net of collections on previously written-off accounts).
</TABLE>
S-1
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Michael Paolercio
Michael W. Paolercio, Co-Chairman of the
Board and Chief Executive Officer
Date: April 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael Paolercio CoChairman of the Board April 28, 1997
(Michael W. Paolercio) and Chief Executive Officer
(Principal Executive Officer)
/s/ Anthony Paolercio Co-Chairman of the Board April 28, 1997
(Anthony Paolercio, Jr.) and Executive Vice President
/s/ Fredric R. Wasserspring President, Chief Operating April 28, 1997
(Fredric R. Wasserspring) Officer and Director
/s/ Allan Corn Chief Financial Officer, April 28, 1997
(Allan Corn) Senior Vice President
and Director (Principal
Accounting Officer)
/s/ Michael A. Paolercio Senior Vice President, April 28, 1997
(Michael Anthony Paolercio) Treasurer and Director
/s/ Michael Wager Director April 28, 1997
(Michael Wager)
/s/ David Harris Director April 28, 1997
(David Harris)
/s/ Donald Miller Director April 28, 1997
(Donald Miller)
</TABLE>
<PAGE> 54
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Filed as an Exhibit
to this Form 10-K on
Exhibit No. Description Page No.
----------- ----------- --------------------
<S> <C> <C>
10.61 Lease dated as of May 1, 1991 between Michael Anthony
Company d/b/a MacQuesten Realty Company and Registrant
Page 55
10.62 Lease dated as of May 1, 1991 between Michael Anthony
Company d/b/a MacQuesten Realty Company and Registrant
Page 78
21 Subsidiaries of the Registrant Page 101
27 Financial Data Schedule Page 102
</TABLE>
<PAGE> 1
EXHIBIT 10.61
THIS LEASE made the 1st day of May, 1991 between MICHAEL ANTHONY
COMPANY, having an address at 115 South MacQuesten Parkway, Mt. Vernon, New York
hereinafter referred to as LANDLORD, and MICHAEL ANTHONY JEWELERS, INC., located
at 115 South MacQuesten Parkway, Mount Vernon, New York hereinafter jointly,
severally and collectively referred to as TENANT.
WITNESSETH, that the Landlord hereby leases to the Tenant, and the
Tenant hereby hires and takes from the Landlord the entire building in the
building known as 60 South MacQuesten Parkway, Mount Vernon, New York to be used
and occupied by the Tenant
and for no other purpose, for a term to commence on May 1, 1991, and to end on
April 30th, 2001, unless sooner terminated as hereinafter provided, at the
ANNUAL RENT of
See paragraph 62 herein
all payable in equal monthly installments in advance on the first day of each
and every calendar month during said term, except the first installment, which
shall be paid upon the execution hereof.
THE TENANT JOINTLY AND SEVERALLY COVENANTS:
FlRST.--That the Tenant will pay the rent as above provided.
SECOND.-- REPAIRS
ORDINANCES AND VIOLATIONS
ENTRY
INDEMNIFY LANDLORD
That, throughout said term, the Tenant will take good care of the
demised premises, fixtures and appurtenances, and all alterations,
additions and improvements to either; make all repairs in and about the
same necessary to preserve them in good order and condition, which
repairs shall be, in quality and class, equal to the original work;
promptly pay the expense of such repairs; suffer no waste or injury;
give prompt notice to the Landlord of any fire that may occur; execute
and comply with all laws, rules, orders, ordinances and regulations at
any time issued or in force, applicable to the demised premises or to
the Tenant's occupation thereof, of the Federal, State and Local
Governments, and of each and every department, bureau and official
thereof, and of the New York Board of Fire Underwriters; permit
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<PAGE> 2
at all times during usual business hours, the Landlord and
representatives of the Landlord to enter the demised premises for the
purpose of inspection, and to exhibit them for purposes of sale or
rental; suffer the Landlord to make repairs and improvements to all
parts of the building, and to comply with all orders and requirements
of governmental authority applicable to said building or to any
occupation thereof; suffer the Landlord to erect, use, maintain, repair
and replace pipes and conduits in the demised premises and to the
floors above and below; forever indemnify and save harmless the
Landlord for and against any and all liability, penalties, damages,
expenses and judgments arising from injury during said term to person
or property of any nature, occasioned wholly or in part by any act or
acts, omission or omissions of the Tenant, or of the employees, guests,
agents, assigns or undertenants of the Tenant and also for any matter
or thing growing out of the occupation of the demised premises or of
the streets, sidewalks or vaults adjacent thereto; permit during the
six months next prior to the expiration of the term the usual notice
"To Let" to be placed and to remain unmolested in a conspicuous place
upon the exterior of the demised premises; repair, at or before the end
of the term, all injury done by the installation or removal of
furniture and property; and at the end of the term, to quit and
surrender the demised premises with all alterations, additions and
improvements in good order and condition.
THIRD.-- MOVING INJURY SURRENDER
NEGATIVE COVENANTS
OBSTRUCTION SIGNS
AIR CONDITIONING
That the Tenant will not disfigure or deface any part of the building,
or suffer the same to be done, except so far as may be necessary to
affix such trade fixtures as are herein consented to by the Landlord;
the Tenant will not obstruct, or permit the obstruction of the street
or the sidewalk adjacent thereto; will not do anything or suffer
anything to be done upon the demised premises which will increase the
rate of fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building; will not permit the
accumulation of waste or refuse matter, and will not, withhold the
written consent of the Landlord first obtained in each case, either
sell, assign, mortgage or transfer this lease, underlet the demised
premises or any part thereof, permit the same or any part thereof to be
occupied by anybody other than Tenant and the Tenant's employees, make
any alterations in the demised premises, use the demised premises or
any part thereof for any purpose other than the one first above
stipulated, or for any purpose deemed extra hazardous on account of
fire risk, nor in violation of any law or ordinance. That the Tenant
will not obstruct or permit
2
<PAGE> 3
the obstruction of the light, halls, stairway or entrances to the
building, and will not erect or inscribe any sign, signals or
advertisements unless and until the style and location thereof have
been approved by the Landlord; and if any be erected or inscribed
without such approval, the Landlord may remove the same. No water
cooler, air conditioning unit or system or other apparatus shall be
installed or used without the prior written consent of Landlord.
IT IS MUTUALLY COVENANTED AND AGREED, THAT
FOURTH.-- FIRE CLAUSE.
If the demised premises shall be partially damaged by fire or other
cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired
by and at the expense of Landlord and that rent until such repairs
shall be made shall be apportioned according to the part of the demised
premises which is usable by Tenant. But if such partial damage is due
to the fault or neglect of Tenant, Tenant's servants, employees,
agents, visitors or licensees, without prejudice to any other rights
and remedies of Landlord and without prejudice to the rights of
subrogation of Landlord's insurer, the damages shall be repaired by
Landlord but there shall be no apportionment or abatement of rent. No
penalty shall accrue for reasonable delay which may arise by reason of
adjustment of insurance on the part of Landlord and/or Tenant, and for
reasonable delay on account of "labor troubles", or any other cause
beyond Landlord's control. If the demised premises are totally damaged
or are rendered wholly untenantable by fire or other cause, and if
Landlord shall decide not to restore or not to rebuild the same, or if
the building shall be so damaged that Landlord shall decide to demolish
it or to rebuild it, then or in any of such events Landlord may, within
ninety (90) days after such fire or other cause, give Tenant a notice
in writing of such decision, which notice shall be given as in
Paragraph Twelve hereof provided, and thereupon the term of this lease
shall expire by lapse of time upon the third day after such notice is
given, and Tenant shall vacate the demised premises and surrender the
same to Landlord. If Tenant shall not be in default under this lease
then, upon the termination of this lease under the conditions provided
for in the sentence immediately preceding. Tenant's liability for rent
shall cease as of the day following the casualty. Tenant hereby
expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this Article shall govern
and control in lieu thereof. If the damage or destruction be due to the
fault or neglect of Tenant the debris shall be removed by, and at the
expense of, Tenant.
3
<PAGE> 4
FIFTH.-- EMINENT DOMAIN.
If the whole or any part of the premises hereby demised shall be taken
or condemned by any competent authority for any public use or purpose
then the term hereby granted shall cease from the time when possession
of the part so taken shall be required for such public purpose and
without apportionment of award, the Tenant hereby assigning to the
Landlord all right and claim to any such award, the current rent,
however, in such case to be apportioned.
SIXTH.-- LEASE NOT IN EFFECT
DEFAULTS
TEN DAY NOTICE
RE-POSSESSION OF LANDLORD
RE-LETTING
WAIVER BY TENANT
If, before the commencement of the term, the Tenant be adjudicated a
bankrupt, or make a "general assignment", or take the benefit of any
insolvent act, or if a Receiver or Trustee be appointed for the
Tenant's property, or if this lease or the estate of the Tenant
hereunder be transferred or pass to or devolve upon any other person or
corporation, or if the Tenant shall default in the performance of any
agreement by the Tenant contained in any other lease to the Tenant by
the Landlord or by any corporation of which an officer of the Landlord
is a Director, this lease shall thereby, at the option of the Landlord,
be terminated and in that case, neither the Tenant nor anybody claiming
under the Tenant shall be entitled to go into possession of the demised
premises. If after the commencement of the term, any of the events
mentioned above in this subdivision shall occur, or if Tenant shall
make default in fulfilling any of the covenants of this lease other
than the covenants for the payment of rent or "additional rent" or if
the demised premises become vacant or deserted, the Landlord may give
to the Tenant ten days' notice of intention to end the term of this
lease, and thereupon at the expiration of said ten days' (if said
condition which was the basis of said notice shall continue to exist)
the term under this lease shall expire as fully and completely as if
that day were the date herein definitely fixed for the expiration of
the term and the Tenant will then quit and surrender the demised
premises to the Landlord, but the Tenant shall remain liable as
hereinafter provided.
If the Tenant shall make default in the payment of the rent reserved
hereunder, or any item of "additional rent" herein mentioned, or any
part of either or in making any other payment herein provided for, or
if the notice last above provided for shall have been given and if the
condition which
4
<PAGE> 5
was the basis of said notice shall exist at the expiration of said ten
days' period, the Landlord may immediately, or at any time thereafter,
re-enter the demised premises and remove all persons and all or any
property therefrom, either by summary dispossess proceedings, or by any
suitable action or proceeding at law, or by force or otherwise, without
being liable to indictment, prosecution or damages therefor, and
re-possess and enjoy said premises together with all additions,
alterations and improvements. In any such case or in the event that
this lease be "terminated" before the commencement of the term, as
above provided, the Landlord may either re-let the demised premises or
any part or parts thereof for the Landlord's own account, or may, at
the Landlord's option, re-let the demised premises or any part or parts
thereof as the agent of the Tenant, and receive the rents therefor,
applying the same first to the payment of such expenses as the Landlord
may have incurred, and then to the fulfillment of the covenants of the
Tenant herein, and the balance, if any, at the expiration of the term
first above provided for, shall be paid to the Tenant. Landlord may
rent the premises for a term extending beyond the term hereby granted
without releasing Tenant from any liability. In the event that the term
of this lease shall expire as above in this subdivision "Sixth"
provided, or terminate by summary proceedings or otherwise, and if the
Landlord shall not re-let the demised premises for the Landlord's own
account, then, whether or not the premises be re-let, the Tenant shall
remain liable for, and the Tenant hereby agrees to pay to the Landlord,
until the time when this lease would have expired but for such
termination or expiration, the equivalent of the amount of any of the
rent and "additional rent" reserved herein less the avails of
re-letting, if any, and the same shall be due and payable by the Tenant
to the Landlord on the several rent days above specified, that is, upon
each of such rent days the Tenant shall pay to the Landlord the amount
of deficiency then existing. The Tenant hereby expressly waives any and
all right of redemption in case the Tenant shall be dispossessed by
judgment or warrant of any court or judge, and the Tenant waives and
will waive all right to trial by jury in any summary proceedings
hereafter instituted by the Landlord against the Tenant in respect to
the demised premises. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning.
In the event of a breach or threatened breach by the Tenant of any of
the covenants or provisions hereof, the Landlord shall have the right
of injunction and the right to invoke any remedy allowed at law or in
equity, as if re-entry, summary proceedings and other remedies were not
herein provided for.
5
<PAGE> 6
SEVENTH.-- LANDLORD MAY PERFORM
ADDITIONAL RENT
If the Tenant shall make default in the performance of any covenant
herein contained, the Landlord may immediately, or at any time
thereafter, without notice, perform the same for the account of the
Tenant. If a notice of mechanic's lien be filed against the demised
premises or against premises of which the demised premises are part,
for, or purporting to be for, labor or material alleged to have been
furnished, or to be furnished to or for the Tenant at the demised
premises, and if the Tenant shall fail to take such action as shall
cause such lien to be discharged within fifteen days after the filing
of such notice, the Landlord may pay the amount of such lien or
discharge the same by deposit or by bonding proceedings, and in the
event of such deposit or bonding proceedings, the Landlord may require
the lienor to prosecute an appropriate action to enforce the lienor's
claim. In such case, the Landlord may pay any judgment recovered on
such claim. Any amount paid or expense incurred by the Landlord as in
this subdivision of this lease provided, and any amount as to which the
Tenant shall at any time be in default for or in respect to the use of
water, electric current or sprinkler supervisory service, and any
expense incurred or sum of money paid by the Landlord by reason of the
failure of the Tenant to comply with any provision hereof, or in
defending any such action, shall be deemed to be "additional rent" for
the demised premises, and shall be due and payable by the Tenant to the
Landlord on the first day of the next following month, or, at the
option of the Landlord, on the first day of any succeeding month. The
receipt by the landlord of any installment of the regular stipulated
rent hereunder or any of said "additional rent" shall not be a waiver
of any other "additional rent" then due.
EIGHTH.-- AS TO WAIVERS.
The failure of the Landlord to insist, in any one or more instances
upon a strict performance of any of the covenants of this lease or to
exercise any option herein contained, shall not be construed as a
waiver or a relinquishment for the future of such covenant or option,
but the same shall continue and remain in full force and effect. The
receipt by the Landlord of rent, with knowledge of the breach of any
covenant hereof, shall, not be deemed a waiver of such breach and no
waiver by the Landlord of any provision hereof shall be deemed to have
been made unless expressed in writing and signed by the Landlord. Even
though the landlord shall consent to an assignment hereof no further
assignment shall be made without express consent in writing by the
Landlord.
6
<PAGE> 7
NINTH.-- COLLECTION OF RENT FROM OTHERS.
If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than the Tenant, the
Landlord may collect rent from the assignee, undertenant or occupant,
and apply the net amount collected to the rent herein reserved, and no
such collection shall be deemed a waiver of the covenant herein against
assignment and underletting, or the acceptance of the assignee,
undertenant or occupant as tenant or a release of the Tenant from the
further performance by the Tenant of the covenants herein contained on
the part of the Tenant.
TENTH.-- MORTGAGES.
This lease shall be subject and subordinate at all times, to the lien
of the mortgages now on the demised premises, and to all advances made
or hereafter to be made upon the security thereof, and subject and
subordinate to the lien of any mortgage or mortgages which at any time
may be made a lien upon the premises. The Tenant will execute and
deliver such further instrument or instruments subordinating this lease
to the lien of any such mortgage or mortgages as shall be desired by
any mortgagee or proposed mortgagee. The Tenant hereby appoints the
Landlord the attorney-in-fact of the Tenant, irrevocable, to execute
and deliver any such instrument or instruments for the Tenant.
ELEVENTH.-- IMPROVEMENTS.
All improvements made by the Tenant to or upon the demised premises,
except said trade fixtures, shall when made, at once be deemed to be
attached to the freehold and become the property of the Landlord, and
at the end or other expiration of the term, shall be surrendered to the
Landlord in as good order and condition as they were when installed,
reasonable wear and damages by the elements excepted.
TWELFTH.-- NOTICES.
Any notice or demand which under the terms of this lease or under any
statute must or may be given or made by the parties hereto shall be in
writing and shall be given or made by mailing the same by certified or
registered mail addressed to the respective parties at the addresses
set forth in this lease.
7
<PAGE> 8
THIRTEENTH.-- NO LIABILITY.
The Landlord shall not be liable for any failure of water supply or
electrical current, sprinkler damage, or failure of sprinkler service,
nor for injury or damage to person or property caused by the elements
or by other tenants or persons in said building, or resulting from
steam, gas, electricity, water, rain or snow, which may leak or flow
from any part of said buildings, or from the pipes, appliances or
plumbing works of the same, or from the street or sub-surface, or from
any other place, nor for interference with light or other incorporeal
hereditaments by anybody other than the Landlord, or caused by
operations by or for a governmental authority in construction of any
public of quasi-public work, neither shall the Landlord be liable for
any latent defect in the building.
FOURTEENTH.-- NO ABATEMENT.
No diminution or abatement of rent, or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the building or to its appliances,
nor, for any space taken to comply with any law, ordinance or order of
a governmental authority. ln respect to the various "services" if any,
herein expressly or impliedly agreed to be furnished by the Landlord to
the Tenant, it is agreed that there shall be no diminution or abatement
of the rent, or any other compensation for interruption or curtailment
of such "service" when such interruption or curtailment shall be due to
accident, alterations or repairs desirable or necessary to be made or
to inability or difficulty in securing supplies or labor for the
maintenance of such "service" to some other cause, not gross negligence
on the part of the Landlord. No such interruption or curtailment of any
such "service" shall be deemed a constructive eviction. The Landlord
shall not be required to furnish, and the Tenant shall not be entitled
to receive, any of such "services" during any period wherein the Tenant
shall be in default in respect to the payment of rent. Neither shall
there be any abatement or diminution of rent because of making of
repairs, improvements or decorations to the demised premises after the
date above fixed for the commencement of the term, it being understood
that rent shall, in any event, commence to run at such date so above
fixed.
8
<PAGE> 9
FIFTEENTH.-- RULES, ETC.
The Landlord may prescribe and regulate the placing of safes,
machinery, quantities of merchandise and other things. The Landlord may
also prescribe and regulate which elevator and entrances shall be used
by the Tenant's employees, and for the Tenant's shipping. The Landlord
may make such other and further rules and regulations as, in the
Landlord's judgment, may from time to time be needful for the safety,
care or cleanliness of the building, and for the preservation of good
order therein. The Tenant and the employees and agents of the Tenant
will observe and conform to all such rules and regulations.
SIXTEENTH.-- SHORING OF WALLS.
In the event that an excavation shall be made for building or other
purposes upon land adjacent to the demised premises or shall be
contemplated to be made, the Tenant shall afford to the person or
persons causing or to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person or
persons shall deem to be necessary to preserve the wall or walls,
structure or structures upon the demised premises from injury and to
support the same by proper foundations.
SEVENTEENTH--VAULT SPACE.
No vaults or space not within the property line of the building are
leased hereunder. Landlord makes no representation as to the location
of the property line of the building. Such vaults or space as Tenant
may be permitted to use or occupy are to be used or occupied under a
revocable license and if such license to revoked by the Landlord as to
the use of part or all of the vaults or space Landlord shall not be
subject to any liability; Tenant shall not be entitled to any
compensation of reduction in rent nor shall this be deemed constructive
or actual eviction. Any tax, fee or charge of municipal or other
authorities for such vaults or space shall be paid by the Tenant for
the period of the Tenant's use or occupancy thereof.
EiGHTEENTH.-- ENTRY.
That during seven months prior to the expiration of the term hereby
granted, applicants shall be admitted at all reasonable hours of the
day to view the premises until rented; and the Landlord and the
Landlord's agents shall be permitted at any time during the term to
visit and examine them at any reasonable hour of the day, and workmen
may enter at any time when
9
<PAGE> 10
authorized by the Landlord or the Landlord's agents, to make or
facilitate repairs in any part of the building; and if the said Tenant
shall not be personally present to open and permit an entry into said
premises, at any time, when for any reason an entry therein shall be
necessary or permissible hereunder, the Landlord or the Landlord's
agents may forcibly enter the same without rendering the Landlord or
such agents liable to any claim or cause of action for damages by
reason thereof (if during such entry the Landlord shall accord
reasonable care to the Tenant's property) and without in any manner
affecting the obligations and covenants of this lease; it is, however,
expressly understood that the right and authority hereby reserved, does
not impose, nor does the Landlord assume, by reason thereof, any
responsibility or liability whatsoever for the care or supervision of
said premises, or any of the pipes, fixtures, appliances or
appurtenances therein contained or therewith in any manner connected.
NINETEENTH.-- NO REPRESENTATIONS.
The Landlord has made no representations or promise in respect to said
building or to the demised premises except those contained herein, and
those, if any, contained in some written communication to the Tenant,
signed by the Landlord. This instrument may not be changed, modified,
discharged or terminated orally.
TWENTIETH.-- ATTORNEY'S FEES.
If the Tenant shall at any time be in default hereunder, and if the
Landlord shall institute an action or summary proceeding against the
Tenant based upon such default, then the Tenant will reimburse the
Landlord for the expense of attorneys' fees and disbursements thereby
incurred by the Landlord, so far as the same are reasonable in amount.
Also so long as the Tenant shall be a tenant hereunder the amount of
such expenses shall be deemed to be "additional rent"' hereunder and
shall be due from the Tenant to the Landlord on the first day of the
month following the incurring of such respective expenses.
TWENTY-FIRST.-- POSSESSION.
Landlord shall not be liable for failure to give possession of the
premises upon commencement date by reason of the fact that premises are
not ready for occupancy, or due to a prior Tenant wrongfully holding
over or any other person wrongfully in possession or for any other
reason: in such event the rent shall not commence until possession is
given or is available but the term herein shall not be extended.
10
<PAGE> 11
THE TENANT FURTHER COVENANTS:
TWENTY-SECOND.-- IF A FIRST FLOOR
If the demised premises or any part thereof consist of a store, or of a
first floor, or of any part thereof, the Tenant will keep the sidewalk
and curb in front hereof clean at all times and free from snow and ice,
and will keep insured in favor of the Landlord, all plate glass therein
and furnish the landlord with policies of insurance covering the same.
TWENTY-THIRD.-- INCREASED FIRE INSURANCE RATE.
If by reason of the conduct upon the demised premises of a business not
herein permitted, or if by reason of the improper or careless conduct
of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the
Tenant will reimburse the Landlord, as additional rent hereunder, for
that part of all fire insurance premiums hereafter paid out by the
Landlord which shall have been charged because of the conduct of such
business not so permitted, or because of the improper or careless
conduct of any business upon or use of the demised premises, and will
make such reimbursement upon the first day of the month following such
outlay by the Landlord; but this covenant shall not apply to a premium
for any period beyond the expiration date of this lease first above
specified.In any action or proceeding wherein the Landlord and Tenant
are parties, a schedule or "make up" of rate for the building on the
demised premises, purporting to have been issued by New York Fire
Insurance Exchange, or other body making fire insurance rates for the
demised premises, shall be prima facie evidence of the fact therein
stated and of the several items and charges included in the fire
insurance rate then applicable to the demised premises.
TWENTY-FOURTH.-- WATER RENT
SEWER
If a separate water meter be installed for the demised premises, or any
part thereof, the Tenant will keep the same in repair and pay the
charges made by the municipality of water supply company for or in
respect to the consumption of water, as and when bills therefor are
rendered. If the demised premises, or any part thereof, be supplied
with water through a meter which supplies other premises, the Tenant
will pay to the Landlord, as and when bills are rendered therefore, the
Tenant's proportionate part of all charges which the municipality or
water supply
11
<PAGE> 12
company shall make for all water consumed through said meter, as
indicated by said meter. Such proportionate part shall be fixed by
apportioning the respective charge according to floor area against all
of the rentable floor area in the building (exclusive of the basement)
which shall have been occupied during the period of the respective
charges, taking into account the period that each part of such area was
occupied. Tenant agrees to pay as additional rent the Tenant's
proportionate part determined as aforesaid, of the sewer rent or charge
imposed or assessed upon the building of which the premises are a part.
TWENTY-FIFTH.-- ELECTRIC CURRENT.
That the Tenant will purchase from the Landlord, if the Landlord shall
so desire, all electric current that the Tenant requires at the demised
premises, and will pay the Landlord for the same, as the amount of
consumption shall be indicated by the meter furnished therefor. The
price for said current shall be the same as that charged for
consumption similar to that of the Tenant by the company supplying
electricity in the same community. Payment shall be due as and when
bills shall be rendered. The Tenant shall comply with like rules,
regulations and contract provisions as those prescribed by said company
for a consumption similar to that of the Tenant.
TWENTY-SIXTH.-- SPRINKLER SYSTEM.
If there now is or shall be installed in said building a "sprinkler
system" the Tenant agrees to keep the appliances thereto in the demised
premises in repair and good working condition, and if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or
any bureau, department or official of the State or local government
requires or recommends that any changes, modifications, alterations or
additional sprinkler heads or other equipment be made or supplied by
reason of the Tenant's business, or the location of partitions, trade
fixtures, or other contents of the demised premises, or if such
changes, modifications, alterations, additional sprinkler heads or
other equipment in the demised premises are necessary to prevent the
imposition of a penalty or charge against the full allowance for a
sprinkler system in the fire insurance rate as fixed by said Exchange
or by any fire insurance company, the Tenant will at the Tenant's own
expense, promptly make and supply such changes, modifications,
alterations, additional sprinkler head or other equipment. As
additional rent hereunder the Tenant will pay to the Landlord, annually
in advance, throughout the term 100%, toward the contract price for
sprinkler supervisory service.
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<PAGE> 13
TWENTY-SEVENTH.-- SECURITY.
The sum of -0- Dollars is deposited by the Tenant herein with the
Landlord herein as security for the faithful performance of all the
covenants and conditions of the lease by the said Tenant. If the Tenant
faithfully performs all the covenants and conditions on his part to be
performed, then the sum deposited shall be returned to said Tenant.
TWENTY-EIGHTH.-- INSURANCE.
This lease is granted and accepted on the especially understood and
agreed condition that the Tenant will conduct his business in such a
manner, both as regards noise and kindred nuisances, as will in nowise
interfere with, annoy, or disturb any other tenants, in the conduct of
their several businesses, or the landlord in the management of the
building; under penalty of forfeiture of this lease and consequential
damages.
TWENTY-NINTH.-- BROKERS COMMISSIONS.
The Landlord hereby recognizes MA as the broker who negotiated and
consummated this lease with the Tenant herein, and agrees that if, as,
and when the Tenant exercises the option, if any, contained herein to
renew this lease, or fails to exercise the option, if any, contained
therein to cancel this lease, the Landlord will pay to said broker a
further commission in accordance with the rules and commission rates of
the Real Estate Board in the community. A sale, transfer, or other
disposition of the Landlord's interest in said lease shall not operate
to defeat the Landlord's obligation to pay the said commission to the
said broker. The Tenant herein hereby represents to the Landlord that
the said broker is the sole and only broker who negotiated and
consummated this lease with the Tenant.
THIRTIETH.-- WINDOW CLEANING.
The Tenant agrees that it will not require, permit, suffer, nor allow
the cleaning of any window, or windows, in the demised premises from
the outside (within the meaning of Section 202 of the Labor Law) unless
the equipment and safety devices required by law, ordinance, regulation
or rule, including, without limitation, Section 202 of the New York
Labor Law, are provided and used, and unless the rules or any
supplemental rules of the Industrial Board of the State of New York are
fully complied with; and the Tenant hereby agrees to indemnify the
Landlord, Owner, Agent, Manager
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<PAGE> 14
and/or Superintendent as a result of the Tenant's requiring,
permitting, suffering, or allowing any window, or windows in the
demised premises to be cleaned from the outside in violation of the
requirements of the aforesaid laws, ordinances, regulations and/or
rules.
THIRTY-FIRST.-- VALIDITY.
The invalidity or unenforceability of any provision of this lease shall
in no way affect the validity or enforceability of any other provision
hereof.
THIRTY-SECOND. EXECUTION AND DELIVERY OF LEASE.
In order to avoid delay, this lease has been prepared and submitted to
the Tenant for signature with the understanding that it shall not bind
the Landlord unless and until it is executed and delivered by the
Landlord.
THIRTY-THIRD.-- EXTERIOR OF PREMISES.
The Tenant will keep clean and polished all metal, trim, marble and
stonework which are a part of the exterior of the premises, using such
materials and methods as the Landlord may direct and if the Tenant
shall fail to comply with the provisions of this paragraph, the
Landlord may cause such work to be done at the expense of the Tenant.
THIRTY-FOURTH.-- PLATE GLASS.
The Landlord shall replace at the expense of the Tenant any and all
broken glass in the skylights, doors, and walls in and about the
demised premises. The Landlord may insure and keep insured all plate
glass in the skylights, doors and walls in the demised premises, for
and in the name of the Landlord and bills for the premiums thereof
shall be rendered by the Landlord to the Tenant at such times as the
Landlord may elect and shall be due from and payable by the Tenant when
rendered, and the amount thereof shall be deemed to be, and shall be
paid as, additional rent.
THIRTY-FIFTH.-- WAR EMERGENCY
This lease and the obligations of the Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of
Tenant to be performed shall in nowise be affected, impaired or
executed because Landlord is unable to supply or is delayed in
supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repairs, additions,
alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is
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<PAGE> 15
prevented or delayed from so doing by reason of governmental preemption
in connection with a National Emergency declared by the President of
the United States or in connection with any rule, order or regulation
of any department or subdivision thereof of any government agency or by
reason of the conditions of supply and demand which have been or are
affected by war or other emergency.
THE LANDLORD COVENANTS
FIRST.-- QUIET POSSESSION.
That if and so long as the Tenant pays the rent and "additional rent"
reserved hereby, and performs and observes the covenants and provisions
hereof, the Tenant shall quietly enjoy the demised premises, subject,
however, to the terms of this lease, and to the mortgages above
mentioned, provided however, that this covenant shall be conditioned
upon the retention of title to the premises by Landlord.
And it is mutually understood and agreed that the covenants and
agreements contained in the within lease shall be binding upon the
parties hereto and upon their respective successors, heirs, executors
and administrators.
IN WITNESS WHEREOF, the Landlord and Tenant have respectively signed
and sealed these presents the day and year first above written.
/s/ Anthony Paolercio
---------------------
MICHAEL ANTHONY COMPANY Landlord
IN PRESENCE OF:
MICHAEL ANTHONY JEWELERS, INC.
------------------------------
Tenant
BY: /s/Allan Corn
----------
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<PAGE> 16
State of New York, County of Westchester ss:
On the 1st day of May, 1991, before me personally came Anthony
Paolercio, to me known, who, being by me duly sworn, did depose and say that he
resides at ; that he is General Partner of Michael Anthony
Company , the partnership described in and which executed the
within instrument; and that he signed his name thereto by like order.
/s/RoseAnn Bosco
----------------
Notary Public
State of New York, County of Westchester ss:
On the Ist day of May, 1991, before me personally came Allan Corn, to
me known, who, being by me duly sworn, did depose and say that he resides at
; that he is Chief Financial Officer of Michael Anthony Jewelers,
Inc., the corporation described in and which executed the within instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
/s/RoseAnn Bosco
----------------
Notary Public
BUILDING
-----------------------------
Premises 60 South MacQuesten Parkwav
---------------------------
Mount Vernon, New York
----------------------
MICHAEL ANTHONY COMPANY Landlord
to
MICHAEL ANTHONY JEWELERS, INC. Tenant
-------------------------------------------
LEASE
--------------------------------------------
16
<PAGE> 17
RIDER TO LEASE DATED:
May 1, 1991
by and between: MICHAEL ANTHONY COMPANY
of: 115 South MacQuesten Parkway, Mount Vernon, NY and: MICHAEL ANTHONY
JEWELERS, INC.
of: 115 South MacQuesten Parkway, Mount Vernon, NY respecting premises:
The entire building known as 60 South MacQuesten Parkway, Mount Vernon,
NY
36. If this rider conflicts in any way with the printed form Lease, this
rider shall control.
37. Tenant shall provide and keep in force during the term of this lease,
for the benefit of Landlord and Tenant, general liability insurance in
good and solvent insurance companies selected by Tenant but licensed in
the State of New York, with limits of $2,000,000 in respect to any one
accident and $300,000 in respect to property damages. Landlord may at
any time and from time to time require that the limits for the said
liability insurance to be maintained by Tenant be increased to such
limits as new tenants in the building wherein the demised premises are
located are required by landlord to maintain. Such general liability
insurance shall be in standard form and shall name the Landlord and
his, her or its agents, servants, employees, contractors, licensees and
invitees as insured parties. Tenant agrees to furnish certificates of
such insurance to Landlord at the commencement of this lease and
thereafter to deliver renewal certificates or replacement policies at
least 15 days prior to the expiration of any such policy. In the event
that the Tenant shall fail to provide any coverage required in this
lease, Landlord may place the same and may pay the premium therefor for
a period not exceeding one year and the amount so paid by Landlord
shall be payable by Tenant to Landlord as additional rent on the next
rent day after presentation of a bill therefor. Notwithstanding the
terms of any such policy, Tenant agrees that occupation of the demised
premises is at Tenant's own risks and Tenant hereby agrees to indemnify
and hold Landlord harmless for any and all liability for injury to
persons and/or property resulting from Tenant's operation of the
demised premises and from any and all claims resulting from accident,
damage, injury or death occurring at the demised premises.
38. Tenant acknowledges that Tenant has made a careful inspection of the
entire premises hereunder and is thoroughly familiar with the condition
thereof, and agrees to accept same in "as is" condition.
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<PAGE> 18
39. Landlord reserves and Tenant shall have no right to use:
(a) The exterior faces of all perimeter walls
(b) The roof and
(c) The land, improvements and space below the lower surface of the
lowest floor of the demised premises and above the interior
surface of the ceiling of the highest floor of the demised
premises.
40. Landlord in no way warrants the fitness of the demised premises for any
particular purpose and makes no representation that the premises are in
good repair or otherwise fit for use and occupancy.
41. Tenant expressly acknowledges and agrees that Landlord has not made and
is not making, and tenant, in executing and delivering this lease, is
not relying upon, any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth
in this lease or in any other written agreement(s) which may be made
between the parties concurrently with the execution and delivery of
this lease. All understandings and agreements heretofore made between
the parties are merged in this lease and any other written agreement(s)
made concurrently herewith, which alone fully and completely express
the agreement of the parties and which are entered into after full
investigation. Neither party has relied upon any statements or
representations not embodied in this lease or in any other written
agreement(s) made concurrently herewith. No agreement shall be
effective to change, modify, waive, release, discharge, terminate or
effect abandonment of this lease, in whole or in part unless such
agreements are in writing, refers expressly to this lease and is signed
by the party against whom enforcement of effectuation of abandonment is
sought.
42. Tenant may not assign this lease without Landlord's prior written
consent in each instance, which consent Landlord agrees not to withhold
or delay unreasonably. Any such assignment, sublease or other transfer,
however, must be in writing. The Tenant's obligations hereunder must be
assumed in writing by the transferee and a fully executed copy of the
instrument of transfer with assumption thereof must be furnished to
Landlord within ten (10) days after full execution thereof. No such
transfer, however, shall be construed so as to release the transferor
from responsibility for performance of Tenant's obligations
hereunder. In determining whether to grant consent to the Tenant's
sublet or assignment request, the Landlord may consider any reasonable
factor. Landlord and Tenant agree that any one of the following
factors, or any other reasonable factor, will be reasonable grounds for
deciding the Tenant's request:
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<PAGE> 19
(a) Financial strength of the proposed subtenant/assignee must be at
least equal to that of the existing tenant, as of the date of signing of this
Lease Agreement;
(b) Business reputation of the proposed subtenant/assignee must be in
accordance with generally acceptable commercial standards ;
(c) Use of the premises by the proposed subtenant/assignee must be
identical to the use permitted by this Lease Agreement;
(d) Managerial and operational skills of the proposed
subtenant/assignee must be of a quality equal or superior to that of the
existing Tenant;
(e) Use of the premises by the proposed subtenant/assignee must not
violate or create any potential violation of any laws;
(f) Use of the premises by the proposed subtenant/assignee must not
violate any other agreements affecting the premises, the Landlord or other
Tenants.
43. If Tenant shall at any time request Landlord to sublet or let the
demised premises for Tenant's account, Landlord or its agent is
authorized to receive keys for such purposes without releasing Tenant
from any of its obligations under this lease, and Tenant hereby
releases Landlord from any liability for loss or damage to any of the
Tenant's property in connection with such subletting or letting.
44. The liability of the original named Tenant and any other person(s) who
at any time was or were liable to perform Tenant's obligations under
this lease shall not be discharged, released or impaired by an
agreement or stipulation made by Landlord modifying any of the
obligations of this lease, except to the extent of any increase in the
rent then called for by extension of the original duration of this
lease beyond the original term, or by any waiver or failure of Landlord
to enforce any of the obligations of this lease.If this lease is:
(a) Assigned, or otherwise transferred, or
(b) Through a sublease the demised premises or any part thereof is
sublet, then any rent paid by such assignee, transferee, or
sub lessee, all rent in excess of the rent provided by this
lease, shall be for the benefit of and shall be immediately
paid to the Landlord.
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<PAGE> 20
45. If Tenant shall request Landlord's consent and Landlord shall fail and
refuse to give such consent, Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent; Tenant's sole
remedy shall be an action for specific performance or injunction, and
such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not to unreasonably withhold its consent or
where as a matter of law Landlord may not unreasonably withhold its
consent.
46. Tenant shall reimburse Landlord for the full cost incurred by landlord
in maintaining fire, liability and other hazard insurance on the
premises during the entire term of this lease and Tenant shall pay same
as additional rent payable on the next day ensuing thereafter.
47. Tenant may not effect any alterations at the demised premises without
Landlord's prior written consent in each instance, which consent will
not be withheld unreasonably; however in connection with any such
alteration, Tenant must comply with the rules and regulations of any
and all governmental authorities having jurisdiction and, at the
termination of Tenant's occupancy, Tenant must restore the premises to
its former condition at Landlord's option.
48. INTENTIONALLY OMITTED.
49. Anything herein contained to the contrary not notwithstanding, Tenant
shall have the right to install and maintain a sign or signs at the
demised premises providing that same comply in all respects with such
governmental or other regulations as may apply thereto, and further
providing that Landlord's prior written consent is obtained in each
instance which consent shall not be unreasonably withheld.
50. Anything herein contained to the contrary notwithstanding:
(a) Landlord shall not be responsible for the furnishing of any heat or
hot water to the demised premises.
(b) Tenant agrees to procure and maintain plate glass insurance in
standard form naming both Tenant and Landlord as insured parties and covering
all exterior plate glass at the demised premises. Upon Tenant's failure so to
do, Landlord may replace, at the Tenant's expense, any and all broken exterior
plate glass at the demised premises, and may insure and keep insured all such
plate glass for and in the name of the Landlord, whereupon bills for the
premiums therefor, when rendered by Landlord to Tenant, shall be due and payable
when rendered and the amount thereof shall be deemed to be and shall be payable
as additional rent.
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<PAGE> 21
51. Tenant agrees to collect, properly contain and dispose of any and all
garbage, trash, rubbish and refuse generated at the demised premises or
by reason of the Tenant's business and to dispose of same promptly at
Tenant's sole cost and expense in full compliance with any and all
applicable municipal regulations and without undue interference with
the Landlord and/or other Tenants in the building in which the demised
premises are located. Tenant further agrees to store any garbage
dumpster inside the building at all times the Tenant's business is
closed.
52. Tenant shall not do any act, whether in connection with maintenance or
use of the equipment or otherwise, which will or may disturb any other
occupant of the building where the demised premises are located,
including but not limited to the generation of noise to excess, the
emission of unpleasant or disturbing odors/or permitting of the
congregation of teenagers and the like.
53. As a further consideration for the granting of this lease, Tenant
agrees that it will maintain any and all plumbing waste lines serving
the demised premises or the demises premises and other and keep said
lines clear of blockages from the building in which the demised
premises are located up to the connection with the public sewer main.
54. Tenant shall be solely responsible for and maintaining all electricity
and air-conditioning used by it at the time demised premises. Tenant
covenants and agrees that at all times its uses of electric current
shall not exceed the capacity of existing feeders to the building or
the risers or wiring installations and Tenant may not use any
electrical equipment which, in Landlord's opinion, reasonably exercised
will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character
of electric service shall in no way make Landlord liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.
Tenant shall make all repairs to and/or replace if necessary, the gas
heater.
55. The rent shall be paid on the first of the month in lawful money of the
United States at its office, or such other place, or the Landlord's
agent at such other place, as Landlord shall designate by notice to
Tenant. Tenant shall pay the rent promptly when due without notice or
demand therefore and without any abatement, deduction or setoff for any
reason whatsoever, except as may expressly be provided for in this
lease.If Tenant makes any payment to Landlord by check, same shall be
Tenant's check and Landlord shall not be required to accept the check
of any other person, and any check received by Landlord shall be deemed
received subject to collection. If any check is mailed by Tenant,
Tenant shall post such check and will be received by Landlord on or
before date
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<PAGE> 22
when payment is due. Tenant shall assume the risk of lateness or
failure of delivery of the mail, and no lateness or failure of the mail
will excuse Tenant from its obligations to have made payment in
question when required under this lease. Landlord shall have the right
at all times to require payment of rent by means of cash, money order,
certified or bank check. In the event that rent due on the first of the
month is not paid by the fifth of the month, Tenant acknowledges that
it shall pay Landlord a late charge of two cents for each dollar paid
late to cover additional administration and bookkeeping costs.
56. No payment by Tenant or receipt or acceptance by Landlord of a lesser
amount than the correct rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's rights to recover the balance or pursue any
other remedy in this lease to recover the balance or pursue any other
remedy in this lease or at law provided. Whether or not Tenant is in
arrears in payment of rent Tenant waives Tenant's right if any, to
designate the times to which any payments made by Tenants are to be
credited and Landlord may apply any payments made of and
notwithstanding any designation or request by Tenant as to the items to
which any such payments shall be credited. If any of Tenant's check
shall be dishonored by Tenant's bank, for whatever reason, Landlord
shall be entitled to a dishonored check fee of fifty ($50.00) dollars,
payable immediately, for each such occurrence, and Tenant shall replace
such dishonored check with a certified check immediately.
57. Tenant shall be responsible for all janitorial or cleaning expenses
relating to the demised premises.
58. Tenant agrees to pay, as additional rent, all real estate taxes,
assessments, water and sewer charges and any other taxes which may
hereafter be assessed or attributable to the land and building of which
the demised premises form a part for the entire term of the lease and
any extensions thereto. Where any lease year does not coincide with the
fiscal year, an appropriate adjustment shall be made. The land and
buildings are known as tax block _________and Lots______________.
59. lrrespective of the place of execution or performance, this lease shall
be governed by and construed in accordance with the Laws of the State
of New York.
60. Tenant shall pay for its own utility charges.
61. Tenant agrees not to record this lease.
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<PAGE> 23
62. (a) Tenant agrees to pay a base annual rental in equal monthly
installments in advance on the first day of each and every
month during said term, except the first installment which
shall be paid upon execution hereof, as follows:
(1) Eighteen Thousand and 00/100 (18,000.00) dollars each
month for period commencing May 1, 1991, and ending
April 30, 1993;
(2) Nineteen Thousand Five Hundred and 00/100 (19,500.00)
dollars each month for period commencing May 1, 1993,
and ending April 30, 1995;
(3) Twenty-One Thousand and 00/100 (21,000.00) dollars
each month for period commencing May 1, 1995, and
ending April 30, 1997;
(4) Twenty-Four Thousand and 00/100 ($24,000.00) dollars
each month for period commencing May 1, 1997, and
ending April 30, 1999;
(5) Twenty-Seven Thousand and 00/100 ($27,000.00) dollars
each month for period commencing May 1, 1999, and
ending April 30, 2001, at which time the tenancy
shall terminate.
63. Landlord reserves the right to require Tenant to deposit two months
security at any time during the pendency of the lease term.
64. This lease is intended to be a net/net/net Lease and any maintenance or
operating costs, taxes or insurance not mentioned herein, which costs
are incurred by virtue of the existence of the premises leased
hereunder, are to be borne by the Tenant as additional rental and are
due on the next rent day ensuing thereafter.
65. Tenant agrees to clean the sidewalk in front of the premises and keep
same free of snow, ice and rubbish. Tenant further agrees to keep
premises free of vermin, rodents, and other such pest and to use the
services of any exterminator if necessary.
66. Tenant agrees that tenant will keep tenant's business at the demised
premises open for business during normal business hours during the
period of this lease with the exception of not more than two (2) weeks
during the calendar year for vacation or other purposes.
Landlord Michael Anthonv Cornpany
By: /s/Anthony Paolercio
--------------------
Anthony Paolercio, General Partner
Tenant Michael Anthony Jewelers, Inc.
-----------------------------
By: /s/ Allan Corn
--------------
Allan Corn, Chief Financial Officer
23
<PAGE> 1
EXHIBIT 10.62
THIS LEASE made the 1st day of May, 1991 between MICHAEL ANTHONY
COMPANY, having an address at 115 South MacQuesten Parkway, Mt. Vernon, New York
hereinafter referred to as LANDLORD, and MICHAEL ANTHONY JEWELERS, INC., located
at 115 South MacQuesten Parkway, Mount Vernon, New York hereinafter jointly,
severally and collectively referred to as TENANT.
WITNESSETH, that the Landlord hereby leases to the Tenant, and the
Tenant hereby hires and takes from the Landlord the entire building in the
building known as 70 South MacQuesten Parkway, Mount Vernon, New York to be used
and occupied by the Tenant
and for no other purpose, for a term to commence on May 1, 1991, and to end on
April 30th, 2001, unless sooner terminated as hereinafter provided, at the
ANNUAL RENT of
See paragraph 62 herein
all payable in equal monthly installments in advance on the first day of each
and every calendar month during said term, except the first installment, which
shall be paid upon the execution hereof.
THE TENANT JOINTLY AND SEVERALLY COVENANTS:
FIRST.--That the Tenant will pay the rent as above provided.
SECOND.-- REPAIRS
ORDINANCES AND VIOLATIONS
ENTRY
INDEMNIFY LANDLORD
That, throughout said term, the Tenant will take good care of the
demised premises, fixtures and appurtenances, and all alterations,
additions and improvements to either; make all repairs in and about the
same necessary to preserve them in good order and condition, which
repairs shall be, in quality and class, equal to the original work;
promptly pay the expense of such repairs; suffer no waste or injury;
give prompt notice to the Landlord of any fire that may occur; execute
and comply with all laws, rules, orders, ordinances and regulations at
any time issued or in force, applicable to the demised premises or to
the Tenant's occupation thereof, of the Federal, State and Local
Governments, and of each and every department, bureau and official
thereof, and of the New York Board of Fire Underwriters; permit
1
<PAGE> 2
at all times during usual business hours, the Landlord and
representatives of the Landlord to enter the demised premises for the
purpose of inspection, and to exhibit them for purposes of sale or
rental; suffer the Landlord to make repairs and improvements to all
parts of the building, and to comply with all orders and requirements
of governmental authority applicable to said building or to any
occupation thereof; suffer the Landlord to erect, use, maintain, repair
and replace pipes and conduits in the demised premises and to the
floors above and below; forever indemnify and save harmless the
Landlord for and against any and all liability, penalties, damages,
expenses and judgments arising from injury during said term to person
or property of any nature, occasioned wholly or in part by any act or
acts, omission or omissions of the Tenant, or of the employees, guests,
agents, assigns or undertenants of the Tenant and also for any matter
or thing growing out of the occupation of the demised premises or of
the streets, sidewalks or vaults adjacent thereto; permit during the
six months next prior to the expiration of the term the usual notice
"To Let" to be placed and to remain unmolested in a conspicuous place
upon the exterior of the demised premises; repair, at or before the end
of the term, all injury done by the installation or removal of
furniture and property; and at the end of the term, to quit and
surrender the demised premises with all alterations, additions and
improvements in good order and condition.
THIRD.-- MOVING INJURY SURRENDER
NEGATIVE COVENANTS
OBSTRUCTION SIGNS
AIR CONDITIONING
That the Tenant will not disfigure or deface any part of the building,
or suffer the same to be done, except so far as may be necessary to
affix such trade fixtures as are herein consented to by the Landlord;
the Tenant will not obstruct, or permit the obstruction of the street
or the sidewalk adjacent thereto; will not do anything or suffer
anything to be done upon the demised premises which will increase the
rate of fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building; will not permit the
accumulation of waste or refuse matter, and will not, withhold the
written consent of the Landlord first obtained in each case, either
sell, assign, mortgage or transfer this lease, underlet the demised
premises or any part thereof, permit the same or any part thereof to be
occupied by anybody other than Tenant and the Tenant's employees, make
any alterations in the demised premises, use the demised premises or
any part thereof for any purpose other than the one first above
stipulated, or for any purpose deemed extra hazardous on account of
fire risk, nor in violation of any law or ordinance. That the Tenant
will not obstruct or permit
2
<PAGE> 3
the obstruction of the light, halls, stairway or entrances to the
building, and will not erect or inscribe any sign, signals or
advertisements unless and until the style and location thereof have
been approved by the Landlord; and if any be erected or inscribed
without such approval, the Landlord may remove the same. No water
cooler, air conditioning unit or system or other apparatus shall be
installed or used without the prior written consent of Landlord.
IT IS MUTUALLY COVENANTED AND AGREED, THAT
FOURTH.-- FIRE CLAUSE.
If the demised premises shall be partially damaged by fire or other
cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired
by and at the expense of Landlord and that rent until such repairs
shall be made shall be apportioned according to the part of the demised
premises which is usable by Tenant. But if such partial damage is due
to the fault or neglect of Tenant, Tenant's servants, employees,
agents, visitors or licensees, without prejudice to any other rights
and remedies of Landlord and without prejudice to the rights of
subrogation of Landlord's insurer, the damages shall be repaired by
Landlord but there shall be no apportionment or abatement of rent. No
penalty shall accrue for reasonable delay which may arise by reason of
adjustment of insurance on the part of Landlord and/or Tenant, and for
reasonable delay on account of "labor troubles", or any other cause
beyond Landlord's control. If the demised premises are totally damaged
or are rendered wholly untenantable by fire or other cause, and if
Landlord shall decide not to restore or not to rebuild the same, or if
the building shall be so damaged that Landlord shall decide to demolish
it or to rebuild it, then or in any of such events Landlord may, within
ninety (90) days after such fire or other cause, give Tenant a notice
in writing of such decision, which notice shall be given as in
Paragraph Twelve hereof provided, and thereupon the term of this lease
shall expire by lapse of time upon the third day after such notice is
given, and Tenant shall vacate the demised premises and surrender the
same to Landlord. If Tenant shall not be in default under this lease
then, upon the termination of this lease under the conditions provided
for in the sentence immediately preceding. Tenant's liability for rent
shall cease as of the day following the casualty. Tenant hereby
expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this Article shall govern
and control in lieu thereof. If the damage or destruction be due to the
fault or neglect of Tenant the debris shall be removed by, and at the
expense of, Tenant.
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<PAGE> 4
FIFTH.-- EMINENT DOMAIN.
If the whole or any part of the premises hereby demised shall be taken
or condemned by any competent authority for any public use or purpose
then the term hereby granted shall cease from the time when possession
of the part so taken shall be required for such public purpose and
without apportionment of award, the Tenant hereby assigning to the
Landlord all right and claim to any such award, the current rent,
however, in such case to be apportioned.
SIXTH.-- LEASE NOT IN EFFECT
DEFAULTS
TEN DAY NOTICE
RE-POSSESSION OF LANDLORD
RE-LETTING
WAIVER BY TENANT
If, before the commencement of the term, the Tenant be adjudicated a
bankrupt, or make a "general assignment", or take the benefit of any
insolvent act, or if a Receiver or Trustee be appointed for the
Tenant's property, or if this lease or the estate of the Tenant
hereunder be transferred or pass to or devolve upon any other person or
corporation, or if the Tenant shall default in the performance of any
agreement by the Tenant contained in any other lease to the Tenant by
the Landlord or by any corporation of which an officer of the Landlord
is a Director, this lease shall thereby, at the option of the Landlord,
be terminated and in that case, neither the Tenant nor anybody claiming
under the Tenant shall be entitled to go into possession of the demised
premises. If after the commencement of the term, any of the events
mentioned above in this subdivision shall occur, or if Tenant shall
make default in fulfilling any of the covenants of this lease other
than the covenants for the payment of rent or "additional rent" or if
the demised premises become vacant or deserted, the Landlord may give
to the Tenant ten days' notice of intention to end the term of this
lease, and thereupon at the expiration of said ten days' (if said
condition which was the basis of said notice shall continue to exist)
the term under this lease shall expire as fully and completely as if
that day were the date herein definitely fixed for the expiration of
the term and the Tenant will then quit and surrender the demised
premises to the Landlord, but the Tenant shall remain liable as
hereinafter provided.
If the Tenant shall make default in the payment of the rent reserved
hereunder, or any item of "additional rent" herein mentioned, or any
part of either or in making any other payment herein provided for, or
if the notice last above provided for shall have been given and if the
condition which
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was the basis of said notice shall exist at the expiration of said ten
days' period, the Landlord may immediately, or at any time thereafter,
re-enter the demised premises and remove all persons and all or any
property therefrom, either by summary dispossess proceedings, or by any
suitable action or proceeding at law, or by force or otherwise, without
being liable to indictment, prosecution or damages therefor, and
re-possess and enjoy said premises together with all additions,
alterations and improvements. In any such case or in the event that
this lease be "terminated" before the commencement of the term, as
above provided, the Landlord may either re-let the demised premises or
any part or parts thereof for the Landlord's own account, or may, at
the Landlord's option, re-let the demised premises or any part or parts
thereof as the agent of the Tenant, and receive the rents therefor,
applying the same first to the payment of such expenses as the Landlord
may have incurred, and then to the fulfillment of the covenants of the
Tenant herein, and the balance, if any, at the expiration of the term
first above provided for, shall be paid to the Tenant. Landlord may
rent the premises for a term extending beyond the term hereby granted
without releasing Tenant from any liability. In the event that the term
of this lease shall expire as above in this subdivision "Sixth"
provided, or terminate by summary proceedings or otherwise, and if the
Landlord shall not re-let the demised premises for the Landlord's own
account, then, whether or not the premises be re-let, the Tenant shall
remain liable for, and the Tenant hereby agrees to pay to the Landlord,
until the time when this lease would have expired but for such
termination or expiration, the equivalent of the amount of any of the
rent and "additional rent" reserved herein less the avails of
re-letting, if any, and the same shall be due and payable by the Tenant
to the Landlord on the several rent days above specified, that is, upon
each of such rent days the Tenant shall pay to the Landlord the amount
of deficiency then existing. The Tenant hereby expressly waives any and
all right of redemption in case the Tenant shall be dispossessed by
judgment or warrant of any court or judge, and the Tenant waives and
will waive all right to trial by jury in any summary proceedings
hereafter instituted by the Landlord against the Tenant in respect to
the demised premises. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning.
In the event of a breach or threatened breach by the Tenant of any of
the covenants or provisions hereof, the Landlord shall have the right
of injunction and the right to invoke any remedy allowed at law or in
equity, as if re-entry, summary proceedings and other remedies were not
herein provided for.
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SEVENTH.-- LANDLORD MAY PERFORM
ADDITIONAL RENT
If the Tenant shall make default in the performance of any covenant
herein contained, the Landlord may immediately, or at any time
thereafter, without notice, perform the same for the account of the
Tenant.If a notice of mechanic's lien be filed against the demised
premises or against premises of which the demised premises are part,
for, or purporting to be for, labor or material alleged to have been
furnished, or to be furnished to or for the Tenant at the demised
premises, and if the Tenant shall fail to take such action as shall
cause such lien to be discharged within fifteen days after the filing
of such notice, the Landlord may pay the amount of such lien or
discharge the same by deposit or by bonding proceedings, and in the
event of such deposit or bonding proceedings, the Landlord may require
the lienor to prosecute an appropriate action to enforce the lienor's
claim. In such case, the Landlord may pay any judgment recovered on
such claim. Any amount paid or expense incurred by the Landlord as in
this subdivision of this lease provided, and any amount as to which the
Tenant shall at any time be in default for or in respect to the use of
water, electric current or sprinkler supervisory service, and any
expense incurred or sum of money paid by the Landlord by reason of the
failure of the Tenant to comply with any provision hereof, or in
defending any such action, shall be deemed to be "additional rent" for
the demised premises, and shall be due and payable by the Tenant to the
Landlord on the first day of the next following month, or, at the
option of the Landlord, on the first day of any succeeding month. The
receipt by the landlord of any installment of the regular stipulated
rent hereunder or any of said "additional rent" shall not be a waiver
of any other "additional rent" then due.
EIGHTH.-- AS TO WAIVERS.
The failure of the Landlord to insist, in any one or more instances
upon a strict performance of any of the covenants of this lease or to
exercise any option herein contained, shall not be construed as a
waiver or a relinquishment for the future of such covenant or option,
but the same shall continue and remain in full force and effect. The
receipt by the Landlord of rent, with knowledge of the breach of any
covenant hereof, shall, not be deemed a waiver of such breach and no
waiver by the Landlord of any provision hereof shall be deemed to have
been made unless expressed in writing and signed by the Landlord. Even
though the landlord shall consent to an assignment hereof no further
assignment shall be made without express consent in writing by the
Landlord.
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NINTH.-- COLLECTION OF RENT FROM OTHERS.
If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than the Tenant, the
Landlord may collect rent from the assignee, undertenant or occupant,
and apply the net amount collected to the rent herein reserved, and no
such collection shall be deemed a waiver of the covenant herein against
assignment and underletting, or the acceptance of the assignee,
undertenant or occupant as tenant or a release of the Tenant from the
further performance by the Tenant of the covenants herein contained on
the part of the Tenant.
TENTH.-- MORTGAGES.
This lease shall be subject and subordinate at all times, to the lien
of the mortgages now on the demised premises, and to all advances made
or hereafter to be made upon the security thereof, and subject and
subordinate to the lien of any mortgage or mortgages which at any time
may be made a lien upon the premises. The Tenant will execute and
deliver such further instrument or instruments subordinating this lease
to the lien of any such mortgage or mortgages as shall be desired by
any mortgagee or proposed mortgagee. The Tenant hereby appoints the
Landlord the attorney-in-fact of the Tenant, irrevocable, to execute
and deliver any such instrument or instruments for the Tenant.
ELEVENTH.-- IMPROVEMENTS.
All improvements made by the Tenant to or upon the demised premises,
except said trade fixtures, shall when made, at once be deemed to be
attached to the freehold and become the property of the Landlord, and
at the end or other expiration of the term, shall be surrendered to the
Landlord in as good order and condition as they were when installed,
reasonable wear and damages by the elements excepted.
TWELFTH.-- NOTICES.
Any notice or demand which under the terms of this lease or under any
statute must or may be given or made by the parties hereto shall be in
writing and shall be given or made by mailing the same by certified or
registered mail addressed to the respective parties at the addresses
set forth in this lease.
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THIRTEENTH.-- NO LIABILITY.
The Landlord shall not be liable for any failure of water supply or
electrical current, sprinkler damage, or failure of sprinkler service,
nor for injury or damage to person or property caused by the elements
or by other tenants or persons in said building, or resulting from
steam, gas, electricity, water, rain or snow, which may leak or flow
from any part of said buildings, or from the pipes, appliances or
plumbing works of the same, or from the street or sub-surface, or from
any other place, nor for interference with light or other incorporeal
hereditaments by anybody other than the Landlord, or caused by
operations by or for a governmental authority in construction of any
public of quasi-public work, neither shall the Landlord be liable for
any latent defect in the building.
FOURTEENTH.-- NO ABATEMENT.
No diminution or abatement of rent, or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the building or to its appliances,
nor, for any space taken to comply with any law, ordinance or order of
a governmental authority. In respect to the various "services" if any,
herein expressly or impliedly agreed to be furnished by the Landlord to
the Tenant, it is agreed that there shall be no diminution or abatement
of the rent, or any other compensation for interruption or curtailment
of such "service" when such interruption or curtailment shall be due to
accident, alterations or repairs desirable or necessary to be made or
to inability or difficulty in securing supplies or labor for the
maintenance of such "service" to some other cause, not gross negligence
on the part of the Landlord. No such interruption or curtailment of any
such "service" shall be deemed a constructive eviction. The Landlord
shall not be required to furnish, and the Tenant shall not be entitled
to receive, any of such "services" during any period wherein the Tenant
shall be in default in respect to the payment of rent. Neither shall
there be any abatement or diminution of rent because of making of
repairs, improvements or decorations to the demised premises after the
date above fixed for the commencement of the term, it being understood
that rent shall, in any event, commence to run at such date so above
fixed.
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FIFTEENTH.-- RULES, ETC.
The Landlord may prescribe and regulate the placing of safes,
machinery, quantities of merchandise and other things. The Landlord may
also prescribe and regulate which elevator and entrances shall be used
by the Tenant's employees, and for the Tenant's shipping. The Landlord
may make such other and further rules and regulations as, in the
Landlord's judgment, may from time to time be needful for the safety,
care or cleanliness of the building, and for the preservation of good
order therein. The Tenant and the employees and agents of the Tenant
will observe and conform to all such rules and regulations.
SIXTEENTH.-- SHORING OF WALLS.
In the event that an excavation shall be made for building or other
purposes upon land adjacent to the demised premises or shall be
contemplated to be made, the Tenant shall afford to the person or
persons causing or to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person or
persons shall deem to be necessary to preserve the wall or walls,
structure or structures upon the demised premises from injury and to
support the same by proper foundations.
SEVENTEENTH--VAULT SPACE.
No vaults or space not within the property line of the building are
leased hereunder. Landlord makes no representation as to the location
of the property line of the building. Such vaults or space as Tenant
may be permitted to use or occupy are to be used or occupied under a
revocable license and if such license to revoked by the Landlord as to
the use of part or all of the vaults or space Landlord shall not be
subject to any liability; Tenant shall not be entitled to any
compensation of reduction in rent nor shall this be deemed constructive
or actual eviction. Any tax, fee or charge of municipal or other
authorities for such vaults or space shall be paid by the Tenant for
the period of the Tenant's use or occupancy thereof.
EIGHTEENTH.-- ENTRY.
That during seven months prior to the expiration of the term hereby
granted, applicants shall be admitted at all reasonable hours of the
day to view the premises until rented; and the Landlord and the
Landlord's agents shall be permitted at any time during the term to
visit and examine them at any reasonable hour of the day, and workmen
may enter at any time when
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authorized by the Landlord or the Landlord's agents, to make or
facilitate repairs in any part of the building; and if the said Tenant
shall not be personally present to open and permit an entry into said
premises, at any time, when for any reason an entry therein shall be
necessary or permissible hereunder, the Landlord or the Landlord's
agents may forcibly enter the same without rendering the Landlord or
such agents liable to any claim or cause of action for damages by
reason thereof (if during such entry the Landlord shall accord
reasonable care to the Tenant's property) and without in any manner
affecting the obligations and covenants of this lease; it is, however,
expressly understood that the right and authority hereby reserved, does
not impose, nor does the Landlord assume, by reason thereof, any
responsibility or liability whatsoever for the care or supervision of
said premises, or any of the pipes, fixtures, appliances or
appurtenances therein contained or therewith in any manner connected.
NINETEENTH.-- NO REPRESENTATIONS.
The Landlord has made no representations or promise in respect to said
building or to the demised premises except those contained herein, and
those, if any, contained in some written communication to the Tenant,
signed by the Landlord. This instrument may not be changed, modified,
discharged or terminated orally.
TWENTIETH.-- ATTORNEY'S FEES.
If the Tenant shall at any time be in default hereunder, and if the
Landlord shall institute an action or summary proceeding against the
Tenant based upon such default, then the Tenant will reimburse the
Landlord for the expense of attorneys' fees and disbursements thereby
incurred by the Landlord, so far as the same are reasonable in amount.
Also so long as the Tenant shall be a tenant hereunder the amount of
such expenses shall be deemed to be "additional rent"' hereunder and
shall be due from the Tenant to the Landlord on the first day of the
month following the incurring of such respective expenses.
TWENTY-FIRST.-- POSSESSION.
Landlord shall not be liable for failure to give possession of the
premises upon commencement date by reason of the fact that premises are
not ready for occupancy, or due to a prior Tenant wrongfully holding
over or any other person wrongfully in possession or for any other
reason: in such event the rent shall not commence until possession is
given or is available but the term herein shall not be extended.
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THE TENANT FURTHER COVENANTS:
TWENTY-SECOND.-- IF A FIRST FLOOR
If the demised premises or any part thereof consist of a store, or of a
first floor, or of any part thereof, the Tenant will keep the sidewalk
and curb in front hereof clean at all times and free from snow and ice,
and will keep insured in favor of the Landlord, all plate glass therein
and furnish the landlord with policies of insurance covering the same.
TWENTY-THIRD.-- INCREASED FIRE INSURANCE RATE.
If by reason of the conduct upon the demised premises of a business not
herein permitted, or if by reason of the improper or careless conduct
of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the
Tenant will reimburse the Landlord, as additional rent hereunder, for
that part of all fire insurance premiums hereafter paid out by the
Landlord which shall have been charged because of the conduct of such
business not so permitted, or because of the improper or careless
conduct of any business upon or use of the demised premises, and will
make such reimbursement upon the first day of the month following such
outlay by the Landlord; but this covenant shall not apply to a premium
for any period beyond the expiration date of this lease first above
specified. In any action or proceeding wherein the Landlord and Tenant
are parties, a schedule or "make up" of rate for the building on the
demised premises, purporting to have been issued by New York Fire
Insurance Exchange, or other body making fire insurance rates for the
demised premises, shall be prima facie evidence of the fact therein
stated and of the several items and charges included in the fire
insurance rate then applicable to the demised premises.
TWENTY-FOURTH.-- WATER RENT
SEWER
If a separate water meter be installed for the demised premises, or any
part thereof, the Tenant will keep the same in repair and pay the
charges made by the municipality of water supply company for or in
respect to the consumption of water, as and when bills therefor are
rendered. If the demised premises, or any part thereof, be supplied
with water through a meter which supplies other premises, the Tenant
will pay to the Landlord, as and when bills are rendered therefore, the
Tenant's proportionate part of all charges which the municipality or
water supply
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company shall make for all water consumed through said meter, as
indicated by said meter. Such proportionate part shall be fixed by
apportioning the respective charge according to floor area against all
of the rentable floor area in the building (exclusive of the basement)
which shall have been occupied during the period of the respective
charges, taking into account the period that each part of such area was
occupied. Tenant agrees to pay as additional rent the Tenant's
proportionate part determined as aforesaid, of the sewer rent or charge
imposed or assessed upon the building of which the premises are a part.
TWENTY-FIFTH.-- ELECTRIC CURRENT.
That the Tenant will purchase from the Landlord, if the Landlord shall
so desire, all electric current that theTenant requires at the demised
premises, and will pay the Landlord for the same, as the amount of
consumption shall be indicated by the meter furnished therefor. The
price for said current shall be the same as that charged for
consumption similar to that of the Tenant by the company supplying
electricity in the same community. Payment shall be due as and when
bills shall be rendered. The Tenant shall comply with like rules,
regulations and contract provisions as those prescribed by said company
for a consumption similar to that of the Tenant.
TWENTY-SIXTH.-- SPRINKLER SYSTEM.
If there now is or shall be installed in said building a "sprinkler
system" the Tenant agrees to keep the appliances thereto in the demised
premises in repair and good working condition, and if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or
any bureau, department or official of the State or local government
requires or recommends that any changes, modifications, alterations or
additional sprinkler heads or other equipment be made or supplied by
reason of the Tenant's business, or the location of partitions, trade
fixtures, or other contents of the demised premises, or if such
changes, modifications, alterations, additional sprinkler heads or
other equipment in the demised premises are necessary to prevent the
imposition of a penalty or charge against the full allowance for a
sprinkler system in the fire insurance rate as fixed by said Exchange
or by any fire insurance company, the Tenant will at the Tenant's own
expense, promptly make and supply such changes, modifications,
alterations, additional sprinkler head or other equipment. As
additional rent hereunder the Tenant will pay to the Landlord, annually
in advance, throughout the term 100%, toward the contract price for
sprinkler supervisory service.
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TWENTY-SEVENTH.-- SECURITY.
The sum of -0- Dollars is deposited by the Tenant herein with the
Landlord herein as security for the faithful performance of all the
covenants and conditions of the lease by the said Tenant. If the Tenant
faithfully performs all the covenants and conditions on his part to be
performed, then the sum deposited shall be returned to said Tenant.
TWENTY-EIGHTH.-- INSURANCE.
This lease is granted and accepted on the especially understood and
agreed condition that the Tenant will conduct his business in such a
manner, both as regards noise and kindred nuisances, as will in nowise
interfere with, annoy, or disturb any other tenants, in the conduct of
their several businesses, or the landlord in the management of the
building; under penalty of forfeiture of this lease and consequential
damages.
TWENTY-NINTH.-- BROKERS COMMISSIONS.
The Landlord hereby recognizes MA as the broker who negotiated and
consummated this lease with the Tenant herein, and agrees that if, as,
and when the Tenant exercises the option, if any, contained herein to
renew this lease, or fails to exercise the option, if any, contained
therein to cancel this lease, the Landlord will pay to said broker a
further commission in accordance with the rules and commission rates of
the Real Estate Board in the community. A sale, transfer, or other
disposition of the Landlord's interest in said lease shall not operate
to defeat the Landlord's obligation to pay the said commission to the
said broker. The Tenant herein hereby represents to the Landlord that
the said broker is the sole and only broker who negotiated and
consummated this lease with the Tenant.
THIRTIETH.-- WINDOW CLEANING.
The Tenant agrees that it will not require, permit, suffer, nor allow
the cleaning of any window, or windows, in the demised premises from
the outside (within the meaning of Section 202 of the Labor Law) unless
the equipment and safety devices required by law, ordinance, regulation
or rule, including, without limitation, Section 202 of the New York
Labor Law, are provided and used, and unless the rules or any
supplemental rules of the Industrial Board of the State of New York are
fully complied with; and the Tenant hereby agrees to indemnify the
Landlord, Owner, Agent, Manager
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and/or Superintendent as a result of the Tenant's requiring,
permitting, suffering, or allowing any window, or windows in the
demised premises to be cleaned from the outside in violation of the
requirements of the aforesaid laws, ordinances, regulations and/or
rules.
THIRTY-FIRST.-- VALIDITY.
The invalidity or unenforceability of any provision of this lease shall
in no way affect the validity or enforceability of any other provision
hereof.
THIRTY-SECOND. EXECUTION AND DELIVERY OF LEASE.
In order to avoid delay, this lease has been prepared and submitted to
the Tenant for signature with the understanding that it shall not bind
the Landlord unless and until it is executed and delivered by the
Landlord.
THIRTY-THIRD.-- EXTERIOR OF PREMISES.
The Tenant will keep clean and polished all metal, trim, marble and
stonework which are a part of the exterior of the premises, using such
materials and methods as the Landlord may direct and if the Tenant
shall fail to comply with the provisions of this paragraph, the
Landlord may cause such work to be done at the expense of the Tenant.
THIRTY-FOURTH.-- PLATE GLASS.
The Landlord shall replace at the expense of the Tenant any and all
broken glass in the skylights, doors, and walls in and about the
demised premises. The Landlord may insure and keep insured all plate
glass in the skylights, doors and walls in the demised premises, for
and in the name of the Landlord and bills for the premiums therefor
shall be rendered by the Landlord to the Tenant at such times as the
Landlord may elect and shall be due from and payable by the Tenant when
rendered, and the amount thereof shall be deemed to be, and shall be
paid as, additional rent.
THIRTY-FIFTH.-- WAR EMERGENCY.
This lease and the obligations of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of
Tenant to be performed shall in nowise be affected, impaired or
executed because Landlord is unable to supply or is delayed in
supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repairs, additions,
alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is
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prevented or delayed from so doing by reason of governmental preemption
in connection with a National Emergency declared by the President of
the United States or in connection with any rule, order or regulation
of any department or subdivision thereof of any government agency or by
reason of the conditions of supply and demand which have been or are
affected by war or other emergency.
THE LANDLORD COVENANTS
FIRST.-- QUIET POSSESSION.
That if and so long as the Tenant pays the rent and "additional rent"
reserved hereby, and performs and observes the covenants and provisions
hereof, the Tenant shall quietly enjoy the demised premises, subject,
however, to the terms of this lease, and to the mortgages above
mentioned, provided however, that this covenant shall be conditioned
upon the retention of title to the premises by Landlord.
And it is mutually understood and agreed that the covenants and
agreements contained in the within lease shall be binding upon the
parties hereto and upon their respective successors, heirs, executors
and administrators.
IN WITNESS WHEREOF, the Landlord and Tenant have respectively signed
and sealed these presents the day and year first above written.
/s/ Anthony Paolercio
---------------------
MICHAEL ANTHONY COMPANY Landlord
IN PRESENCE OF:
MICHAEL ANTHONY JEWELERS, INC.
------------------------------
Tenant
BY: /s/Allan Corn
----------
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State of New York, County of Westchester ss:
On the 1st day of May, 1991, before me personally came Anthony
Paolercio, to me known, who, being by me duly sworn, did depose and say that he
resides at ; that he is General Partner of Michael Anthony
Company , the partnership described in and which executed the
within instrument; and that he signed his name thereto by like order.
/s/RoseAnn Bosco
----------------
Notary Public
State of New York, County of Westchester ss:
On the Ist day of May, 1991, before me personally came Allan Corn, to
me known, who, being by me duly sworn, did depose and say that he resides at
; that he is Chief Financial Officer of Michael Anthony
Jewelers,Inc., the corporation described in and which executed the within
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
/s/RoseAnn Bosco
----------------
Notary Public
BUILDING
-----------------------------
Premises 70 South MacQuesten Parkwav
---------------------------
Mount Vernon, New York
----------------------
MICHAEL ANTHONY COMPANY Landlord
to
MICHAEL ANTHONY JEWELERS, INC. Tenant
-------------------------------------------
LEASE
--------------------------------------------
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RIDER TO LEASE DATED:
May 1, 1991
by and between: MICHAEL ANTHONY COMPANY
of: 115 South MacQuesten Parkway, Mount Vernon, NY and: MICHAEL ANTHONY
JEWELERS, INC.
of: 115 South MacQuesten Parkway, Mount Vernon, NY respecting premises:
The entire building known as 70 South MacQuesten Parkway, Mount Vernon,
NY
36. If this rider conflicts in any way with the printed form Lease, this
rider shall control.
37. Tenant shall provide and keep in force during the term of this lease,
for the benefit of Landlord and Tenant, general liability insurance in
good and solvent insurance companies selected by Tenant but licensed in
the State of New York, with limits of $2,000,000 in respect to any one
accident and $300,000 in respect to property damages. Landlord may at
any time and from time to time require that the limits for the said
liability insurance to be maintained by Tenant be increased to such
limits as new tenants in the building wherein the demised premises are
located are required by landlord to maintain. Such general liability
insurance shall be in standard form and shall name the Landlord and
his, her or its agents, servants, employees, contractors, licensees and
invitees as insured parties. Tenant agrees to furnish certificates of
such insurance to Landlord at the commencement of this lease and
thereafter to deliver renewal certificates or replacement policies at
least 15 days prior to the expiration of any such policy. In the event
that the Tenant shall fail to provide any coverage required in this
lease, Landlord may place the same and may pay the premium therefor for
a period not exceeding one year and the amount so paid by Landlord
shall be payable by Tenant to Landlord as additional rent on the next
rent day after presentation of a bill therefor. Notwithstanding the
terms of any such policy, Tenant agrees that occupation of the demised
premises is at Tenant's own risks and Tenant hereby agrees to indemnify
and hold Landlord harmless for any and all liability for injury to
persons and/or property resulting from Tenant's operation of the
demised premises and from any and all claims resulting from accident,
damage, injury or death occurring at the demised premises.
38. Tenant acknowledges that Tenant has made a careful inspection of the
entire premises hereunder and is thoroughly familiar with the condition
thereof, and agrees to accept same in "as is" condition.
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39. Landlord reserves and Tenant shall have no right to use:
(a) The exterior faces of all perimeter walls
(b) The roof and
(c) The land, improvements and space below the lower surface of the
lowest floor of the demised premises and above the interior surface
of the ceiling of the highest floor of the demised premises.
40. Landlord in no way warrants the fitness of the demised premises for any
particular purpose and makes no representation that the premises are in
good repair or otherwise fit for use and occupancy.
41. Tenant expressly acknowledges and agrees that Landlord has not made and
is not making, and tenant, in executing and delivering this lease, is
not relying upon, any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth
in this lease or in any other written agreement(s) which may be made
between the parties concurrently with the execution and delivery of
this lease. All understandings and agreements heretofore made between
the parties are merged in this lease and any other written agreement(s)
made concurrently herewith, which alone fully and completely express
the agreement of the parties and which are entered into after full
investigation. Neither party has relied upon any statements or
representations not embodied in this lease or in any other written
agreement(s) made concurrently herewith. No agreement shall be
effective to change, modify, waive, release, discharge, terminate or
effect abandonment of this lease, in whole or in part unless such
agreements are in writing, refers expressly to this lease and is signed
by the party against whom enforcement of effectuation of abandonment is
sought.
42. Tenant may not assign this lease without Landlord's prior written
consent in each instance, which consent Landlord agrees not to withhold
or delay unreasonably. Any such assignment, sublease or other transfer,
however, must be in writing. The Tenant's obligations hereunder must be
assumed in writing by the transferee and a fully executed copy of the
instrument of transfer with assumption thereof must be furnished to
Landlord within ten (10) days after full execution thereof. No such
transfer, however, shall be construed so as to release the transferor
from responsibility for performance of Tenant's obligations
hereunder. In determining whether to grant consent to the Tenant's
sublet or assignment request, the Landlord may consider any reasonable
factor. Landlord and Tenant agree that any one of the following
factors, or any other reasonable factor, will be reasonable grounds for
deciding the Tenant's request:
18
<PAGE> 19
(a) Financial strength of the proposed subtenant/assignee must be at
least equal to that of the existing tenant, as of the date of signing of this
Lease Agreement;
(b) Business reputation of the proposed subtenant/assignee must be in
accordance with generally acceptable commercial standards ;
(c) Use of the premises by the proposed subtenant/assignee must be
identical to the use permitted by this Lease Agreement;
(d) Managerial and operational skills of the proposed
subtenant/assignee must be of a quality equal or superior to that of the
existing Tenant;
(e) Use of the premises by the proposed subtenant/assignee must not
violate or create any potential violation of any laws;
(f) Use of the premises by the proposed subtenant/assignee must not
violate any other agreements affecting the premises, the Landlord or other
Tenants.
43. If Tenant shall at any time request Landlord to sublet or let the
demised premises for Tenant's account, Landlord or its agent is
authorized to receive keys for such purposes without releasing Tenant
from any of its obligations under this lease, and Tenant hereby
releases Landlord from any liability for loss or damage to any of the
Tenant's property in connection with such subletting or letting.
44. The liability of the original named Tenant and any other person(s) who
at any time was or were liable to perform Tenant's obligations under
this lease shall not be discharged, released or impaired by an
agreement or stipulation made by Landlord modifying any of the
obligations of this lease, except to the extent of any increase in the
rent then called for by extension of the original duration of this
lease beyond the original term, or by any waiver or failure of Landlord
to enforce any of the obligations of this lease.If this lease is:
(a) Assigned, or otherwise transferred, or
(b) Through a sublease the demised premises or any part thereof is
sublet, then any rent paid by such assignee, transferee, or
sub lessee, all rent in excess of the rent provided by this
lease, shall be for the benefit of and shall be immediately
paid to the Landlord.
19
<PAGE> 20
45. If Tenant shall request Landlord's consent and Landlord shall fail and
refuse to give such consent, Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent; Tenant's sole
remedy shall be an action for specific performance or injunction, and
such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not to unreasonably withhold its consent or
where as a matter of law Landlord may not unreasonably withhold its
consent.
46. Tenant shall reimburse Landlord for the full cost incurred by landlord
in maintaining fire, liability and other hazard insurance on the
premises during the entire term of this lease and Tenant shall pay same
as additional rent payable on the next day ensuing thereafter.
47. Tenant may not effect any alterations at the demised premises without
Landlord's prior written consent in each instance, which consent will
not be withheld unreasonably; however in connection with any such
alteration, Tenant must comply with the rules and regulations of any
and all governmental authorities having jurisdiction and, at the
termination of Tenant's occupancy, Tenant must restore the premises to
its former condition at Landlord's option.
48. INTENTIONALLY OMITTED.
49. Anything herein contained to the contrary not notwithstanding, Tenant
shall have the right to install and maintain a sign or signs at the
demised premises providing that same comply in all respects with such
governmental or other regulations as may apply thereto, and further
providing that Landlord's prior written consent is obtained in each
instance which consent shall not be unreasonably withheld.
50. Anything herein contained to the contrary notwithstanding:
(a) Landlord shall not be responsible for the furnishing of any heat or
hot water to the demised premises.
(b) Tenant agrees to procure and maintain plate glass insurance in
standard form naming both Tenant and Landlord as insured parties and covering
all exterior plate glass at the demised premises. Upon Tenant's failure so to
do, Landlord may replace, at the Tenant's expense, any and all broken exterior
plate glass at the demised premises, and may insure and keep insured all such
plate glass for and in the name of the Landlord, whereupon bills for the
premiums therefor, when rendered by Landlord to Tenant, shall be due and payable
when rendered and the amount thereof shall be deemed to be and shall be payable
as additional rent.
20
<PAGE> 21
51. Tenant agrees to collect, properly contain and dispose of any and all
garbage, trash, rubbish and refuse generated at the demised premises or
by reason of the Tenant's business and to dispose of same promptly at
Tenant's sole cost and expense in full compliance with any and all
applicable municipal regulations and without undue interference with
the Landlord and/or other Tenants in the building in which the demised
premises are located. Tenant further agrees to store any garbage
dumpster inside the building at all times the Tenant's business is
closed.
52. Tenant shall not do any act, whether in connection with maintenance or
use of the equipment or otherwise, which will or may disturb any other
occupant of the building where the demised premises are located,
including but not limited to the generation of noise to excess, the
emission of unpleasant or disturbing odors/or permitting of the
congregation of teenagers and the like.
53. As a further consideration for the granting of this lease, Tenant
agrees that it will maintain any and all plumbing waste lines serving
the demised premises or the demises premises and other and keep said
lines clear of blockages from the building in which the demised
premises are located up to the connection with the public sewer main.
54. Tenant shall be solely responsible for and maintaining all electricity
and air-conditioning used by it at the time demised premises. Tenant
covenants and agrees that at all times its uses of electric current
shall not exceed the capacity of existing feeders to the building or
the risers or wiring installations and Tenant may not use any
electrical equipment which, in Landlord's opinion, reasonably exercised
will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character
of electric service shall in no way make Landlord liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.
Tenant shall make all repairs to and/or replace if necessary, the gas
heater.
55. The rent shall be paid on the first of the month in lawful money of the
United States at its office, or such other place, or the Landlord's
agent at such other place, as Landlord shall designate by notice to
Tenant. Tenant shall pay the rent promptly when due without notice or
demand therefore and without any abatement, deduction or setoff for any
reason whatsoever, except as may expressly be provided for in this
lease. If Tenant makes any payment to Landlord by check, same shall be
Tenant's check and Landlord shall not be required to accept the check
of any other person, and any check received by Landlord shall be deemed
received subject to collection. If any check is mailed by Tenant,
Tenant shall post such check and will be received by Landlord on or
before date
21
<PAGE> 22
when payment is due. Tenant shall assume the risk of lateness or
failure of delivery of the mail, and no lateness or failure of the mail
will excuse Tenant from its obligations to have made payment in
question when required under this lease. Landlord shall have the right
at all times to require payment of rent by means of cash, money order,
certified or bank check. In the event that rent due on the first of the
month is not paid by the fifth of the month, Tenant acknowledges that
it shall pay Landlord a late charge of two cents for each dollar paid
late to cover additional administration and bookkeeping costs.
56. No payment by Tenant or receipt or acceptance by Landlord of a lesser
amount than the correct rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's rights to recover the balance or pursue any
other remedy in this lease to recover the balance or pursue any other
remedy in this lease or at law provided. Whether or not Tenant is in
arrears in payment of rent Tenant waives Tenant's right if any, to
designate the times to which any payments made by Tenants are to be
credited and Landlord may apply any payments made of and
notwithstanding any designation or request by Tenant as to the items to
which any such payments shall be credited. If any of Tenant's check
shall be dishonored by Tenant's bank, for whatever reason, Landlord
shall be entitled to a dishonored check fee of fifty ($50.00) dollars,
payable immediately, for each such occurrence, and Tenant shall replace
such dishonored check with a certified check immediately.
57. Tenant shall be responsible for all janitorial or cleaning expenses
relating to the demised premises.
58. Tenant agrees to pay, as additional rent, all real estate taxes,
assessments, water and sewer charges and any other taxes which may
hereafter be assessed or attributable to the land and building of which
the demised premises form a part for the entire term of the lease and
any extensions thereto. Where any lease year does not coincide with the
fiscal year, an appropriate adjustment shall be made. The land and
buildings are known as tax block _________and Lots______________.
59. Irrespective of the place of execution or performance, this lease shall
be governed by and construed in accordance with the Laws of the State
of New York.
60. Tenant shall pay for its own utility charges.
61. Tenant agrees not to record this lease.
22
<PAGE> 23
62. (a) Tenant agrees to pay a base annual rental in equal monthly
installments in advance on the first day of each and every
month during said term, except the first installment which
shall be paid upon execution hereof, as follows:
(1) Eighteen Thousand and 00/100 ($18,000.00) dollars
each month for period commencing May 1, 1991, and
ending April 30, 1993;
(2) Eighteen Thousand Seven Hundred Fifty and 00/100
($18,750.00) dollars each month for period commencing
May 1, 1993, and ending April 30, 1995;
(3) Nineteen Thousand Five Hundred and 00/100
($19,500.00) dollars each month for period commencing
May 1, 1995, and ending April 30, 1997;
(4) Twenty-One Thousand and 00/100 ($21,000.00) dollars
each month for period commencing May 1, 1997, and
ending April 30, 1999;
(5) Twenty-Two Thousand Five Hundred and 00/100
($22,500.00) dollars each month for period commencing
May 1, 1999, and ending April 30, 2001, at which time
the tenancy shall terminate.
63. Landlord reserves the right to require Tenant to deposit two months
security at any time during the pendency of the lease term.
64. This lease is intended to be a net/net/net Lease and any maintenance or
operating costs, taxes or insurance not mentioned herein, which costs
are incurred by virtue of the existence of the premises leased
hereunder, are to be borne by the Tenant as additional rental and are
due on the next rent day ensuing thereafter.
65. Tenant agrees to clean the sidewalk in front of the premises and keep
same free of snow, ice and rubbish. Tenant further agrees to keep
premises free of vermin, rodents, and other such pest and to use the
services of any exterminator if necessary.
66. Tenant agrees that tenant will keep tenant's business at the demised
premises open for business during normal business hours during the
period of this lease with the exception of not more than two (2) weeks
during the calendar year for vacation or other purposes.
Landlord Michael Anthonv Cornpany
------------------------
By: /s/Anthony Paolercio
--------------------
Anthony Paolercio, General Partner
Tenant Michael Anthony Jewelers,Inc.
-----------------------------
By: /s/ Allan Corn
--------------
Allan Corn, Chief Financial Officer
23
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following are the Company's subsidiaries as of April 18, 1997. All
beneficial interests are wholly-owned by the Company and are included in the
Company's consolidated financial statements.
<TABLE>
<CAPTION>
Name of Subsidiary State of Organization Date of Incorporation
------------------ --------------------- ---------------------
<S> <C> <C>
F & F Acquisition Corp New York 9-12-94
Mount Vernon Distributors, Inc. New York 10-15-93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR MICHAEL ANTHONY JEWELERS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> FEB-01-1997
<CASH> 10,430
<SECURITIES> 0
<RECEIVABLES> 22,904
<ALLOWANCES> 1,404
<INVENTORY> 18,903
<CURRENT-ASSETS> 52,387
<PP&E> 38,801
<DEPRECIATION> 20,180
<TOTAL-ASSETS> 72,749
<CURRENT-LIABILITIES> 10,345
<BONDS> 0
<COMMON> 8
0
0
<OTHER-SE> 47,034
<TOTAL-LIABILITY-AND-EQUITY> 72,749
<SALES> 150,629
<TOTAL-REVENUES> 150,629
<CGS> 124,041
<TOTAL-COSTS> 124,041
<OTHER-EXPENSES> 20,695
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 3,155
<INCOME-PRETAX> 2,568
<INCOME-TAX> 778
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,790
<EPS-PRIMARY> .22
<EPS-DILUTED> 0
</TABLE>
