<PAGE> 1
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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
January 30, 1999
Commission File Number:
015230
MICHAEL ANTHONY JEWELERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
DELAWARE 132910285
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 SOUTH MACQUESTEN PARKWAY
MOUNT VERNON, NEW YORK 10550
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (914) 699-0000
---------------------------------------------
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. [X]
As of April 9, 1999, there were 6,831,223 shares outstanding of Michael
Anthony's common stock.
The aggregate market value of common stock held by nonaffiliates at April
9, 1999 was $14,318,884. For purposes of this calculation, affiliates includes
Michael Anthony's executive officers and directors.
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
Michael Anthony Jewelers, Inc. ("Michael Anthony") is a leading
designer, marketer and manufacturer of affordable fine jewelry in the United
States. We sell our jewelry directly to jewelry chain stores, discount stores,
department stores, television home shopping networks, catalogue retailers, and
wholesalers. Our jewelry is targeted towards the middle market, which generally
retails between $20 and $200 and between $300 and $1,200 for watches. Our
products include rope chain, bracelets, charms, pendants, earrings, rings and
watches. Our products are sold in over 20,000 retail locations nationwide.
Michael Anthony was organized as a Delaware corporation in 1986 and is
the successor to Michael Anthony Jewelers, Inc., a New York corporation,
organized in 1977.
CHANGE IN FISCAL YEAR
On November 3, 1994, Michael Anthony's Board of Directors approved a
change in the fiscal year end 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, Michael Anthony 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
January 30, 1999, January 31, 1998 and February 1, 1997 were comprised of 52, 52
and 53 weeks, respectively.
As used throughout this document, (a) fiscal 1999 refers to the fiscal
year ended January 30, 1999, (b) fiscal 1998 refers to the fiscal year ended
January 31, 1998 and (c) fiscal 1997 refers to the fiscal year ended February 1,
1997.
PRODUCT LINES
Michael Anthony offers a broad selection of handcrafted gold and silver
jewelry. Many of our products carry the "Ma" trademark, which has become widely
recognized in the jewelry industry and with certain consumers. Michael Anthony
manufactures an extensive selection of casted gold charms and pendants including
religious symbols; popular sayings; sport themes and team logos; animal motifs;
nautical, seashore, western, musical, zodiac and other thematic figures;
initials; and abstract artistic creations. We also manufacture a line of men's
and ladies' 14 karat gold watches under the "Michael Anthony" brand name.
Through our M.A.J. manufacturing division, we manufacture gold rope
chain and gold locks, and design gold tubing and bangle blanks used in the
production of bangle bracelets. Through our M.A.E. manufacturing division, we
manufacture gold earrings and certain jewelry components.
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The table below sets forth the approximate percentage of (a) sales and
(b) kilograms shipped in fiscal years 1999, 1998 and 1997, respectively,
attributable to each of Michael Anthony's product categories.
<TABLE>
<CAPTION>
------------------------- --------------------------- -------------------------
Fiscal Fiscal Fiscal
1999 1998 1997
------------------------- --------------------------- -------------------------
% of % of % of % of % of % of
Sales Kilograms Sales Kilograms Sales Kilograms
Shipped Shipped Shipped
- ------------------------- ---------- -------------- ------------ -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charms/Pendants 39 36 42 34 44 37
- ------------------------- ---------- -------------- ------------ -------------- ---------- --------------
Chains 37 44 42 51 43 50
- ------------------------- ---------- -------------- ------------ -------------- ---------- --------------
Earrings 8 7 6 5 5 4
- ------------------------- ---------- -------------- ------------ -------------- ---------- --------------
Other items 16 13 10 10 8 9
- ------------------------- ---------- -------------- ------------ -------------- ---------- --------------
</TABLE>
Michael Anthony's jewelry line includes licensed products that we
manufacture through licensing arrangements with, for example, 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 the University
of Notre Dame and the University of Florida. Michael Anthony manufactures
jewelry products, particularly charms, pendants and pins, depicting the popular
logos and symbols associated with these licensors. Michael Anthony pays each of
these licensors a royalty ranging from 6% to 12% on sales of the licensed
products. During the fiscal year ended January 30, 1999, Michael Anthony's
licensed products represented approximately 7% of our net sales.
Michael Anthony maintains an in-house design staff which utilizes
CAD/CAM (computer aided design/computer aided manufacturing) technology to
enhance our design, modeling and production capabilities. The equipment is
utilized for the design of Michael Anthony's new products and for modifying the
scale of existing designs whenever possible. Michael Anthony obtains proprietary
protection for its products and designs. Michael Anthony updates its product
catalogue periodically by adding new designs and eliminating less popular
styles. Items removed from the current catalogue generally remain available on a
special order basis.
We believe that our future success will depend, in part, on our ability
to enhance existing product lines and develop new styles and products to meet an
expanding range of customer requirements. As of April 9, 1999, our product
development staff consisted of 17 full time employees. Product development
expenses for fiscal 1999 were approximately $874,000. We anticipate that we will
continue to commit substantial resources to product development. We capitalize
50% of all product development costs and amortize the costs over two years.
3
<PAGE> 4
MANUFACTURING PROCESS
Our manufacturing facility is located in Mount Vernon, New
York. We utilize manufacturing processes that combine modern technology and
mechanization with hand craftsmanship to produce fashionable and affordable gold
jewelry. Our manufacturing processes include:
(a) the casting (or lost wax) method, which is a long-standing
jewelry manufacturing process;
(b) a photo etching process, which has allowed Michael Anthony to
enter the lower priced segment of the market through
production of ultra light weight products; and
(c) the diamond cut process, which produces a sparkling effect on
a finished piece of gold jewelry.
The machinery on which we manufacture our rope chain products
can operate up to 24 hours a day and requires minimal direct labor. This has
enabled us to become one of the lowest cost producers of rope chain in the
World.
During fiscal 1999, Michael Anthony manufactured approximately
93.5% of its products from gold bullion and other raw materials and purchased
approximately 6.5% of its product as semi-finished or finished goods. Michael
Anthony 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
Michael Anthony are readily available.
OPEN ORDERS
Orders from our retail customers typically have shipment dates
that range from 24 hours to 60 days. Substantially all of our wholesale
customers' orders are for immediate shipment and generally are shipped within 7
days of receipt. As of April 9, 1999, the aggregate dollar value of orders was
approximately $5,800,000. We expect that substantially all of the current orders
will be shipped in the next 45 days. We do not believe that open orders are
indicative of our future results of operations, as open orders as of any given
date are not necessarily indicative of sales trends.
MARKETING AND SALES
We market and sell our jewelry primarily through our in-house
sales force. Sales are made by our sales personnel primarily at our 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.
Our marketing strategy includes a campaign to increase brand
recognition of 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 Michael Anthony to certain retailers under
the "Michael Anthony" name. We believe that there is growing brand
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<PAGE> 5
recognition of the "Michael Anthony" name and the "Ma" trademark with consumers
and that this recognition has enhanced sales of our products.
To better meet our customers' needs, we have a wide range of customer service
programs:
- inventory management assistance through electronic data
interchange;
- customized packaging and bar coding;
- computerized analysis of sales and marketing trends.
Our vertical integration and customer service programs enable
us to be responsive to our customers' needs. We manufacture and deliver most
orders on a timely and more cost-effective basis than many of our competitors.
Our jewelry is sold primarily to jewelry chain stores,
discount stores, department stores, television home shopping networks, catalogue
retailers and wholesalers. We assist our customers in allocating their
purchasing budget among the items in the various product lines. We advise them
of items having higher consumer demand as determined by Michael Anthony's
computerized market analysis. Prices vary on the basis of service required by
customers. We ship our products in bulk to wholesale distributors. For certain
retail chains, such as Sterling, Inc. (a division of Signet Group PLC and the
owner of Kay Jewelers and J.B. Robinson Jewelers), Wal*Mart, J.C. Penney, Zales
and Kmart, we prepackage and price tag most items. We then ship an order of many
different items to distribution centers and stores in the chain. We provide
additional services to certain customers to meet their specific marketing needs,
such as tagging, boxing and point-of-sale displays.
We also ship our jewelry to a limited number of customers on a
consignment basis. Through these arrangements, we deliver our products on
consignment, and upon sale, the customer pays Michael Anthony for the consigned
merchandise. Consigned merchandise is subject to the Company's own consignment
arrangements with its 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 January 30, 1999, sales to the
five largest of Michael Anthony's customers totaled approximately 51% of total
net sales. Our two largest customers were J.C. Penney and Sterling, Inc.,
accounting for approximately 13% and 11%, respectively, of net sales. Except for
certain retail customers, Michael Anthony generally has no long-term contractual
commitments with any of our customers. None of Michael Anthony's customers are
prohibited from purchasing products from our competitors.
We reduce gross sales by the amount of returns and discounts
to determine net sales each month. Each month we establish a reserve for returns
based on our 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 1999, 12% of gross sales
in fiscal 1998 and 13% of gross sales in fiscal 1997. For further information
regarding the reserve for returns, see Note 1 - Notes to Consolidated Financial
Statements.
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If we lose one or more of our top customers or if any of them
reduce, delay or cancel orders, return significant amounts of product or
experience financial difficulties that result in their inability to pay, it
could have a material adverse effect on our business, operating results and
financial condition.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We use Italian-made machinery, together with acquired
proprietary knowledge, to manufacture our rope chain products. Michael Anthony
maintains certain trademarks and generally applies for copyrights covering the
design of certain of our products. The level of protection available for our
proprietary designs and products varies depending on a number of factors,
including the distinctiveness of the product and originality of design. Our
patents, trademarks and copyrights may not prevent competitors from producing
products that are substantially similar to those of Michael Anthony. See Item 1.
"Business - Product Lines."
Michael Anthony seeks to avoid disclosure of its trade
secrets, and requires those people with access to our proprietary information to
sign confidentiality agreements. Access to our systems is also restricted.
Despite Michael Anthony's efforts to protect our trademarks,
copyrights and other proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that Michael
Anthony considers confidential. Policing unauthorized use of Michael Anthony's
intellectual property rights is difficult. We take appropriate action whenever
we discover unauthorized use of our trademarks or if any of our copyrighted
designs have been copied. Knockoffs and counterfeit products are a persistent
problem in the jewelry industry. The laws of many countries do not protect our
intellectual property rights to the same extent as the laws of the United
States. There can be no assurance, that even if Michael Anthony's means of
protecting our intellectual property and other proprietary rights were
successful, our competitors may not independently develop similar products.
We do not believe that our products or processes infringe the
proprietary rights of any third parties. There can be no assurance that third
parties will not claim infringement with respect to existing or future products
or processes. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require Michael
Anthony to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to Michael
Anthony or at all, which could have a material adverse effect on Michael
Anthony's business, operating results and financial condition.
COMPETITION
The jewelry industry is highly competitive, both in the United
States and on a global basis. Michael Anthony encounters competition primarily
from manufacturers with national and international distribution capabilities
and, to a lesser extent, from small regional suppliers of jewelry. We believe we
are well positioned in the industry. Our reputation is for responsive customer
service, high quality and well designed jewelry with broad consumer appeal.
6
<PAGE> 7
The principal competitive factors in the industry are price,
quality, design and customer service. Our specialized customer service programs
are important competitive factors in sales to nontraditional jewelry retailers,
including television shopping networks and discount merchandisers. The recent
trend towards consolidation at the retail level in the jewelry industry and low
labor costs outside of the United States may increase the level of competition
facing Michael Anthony. There can be no assurance that Michael Anthony will be
able to compete successfully against current and future competitors or that
competitive pressures faced by us will not have a material adverse effect on our
business, operating results and financial condition.
SEASONAL NATURE OF BUSINESS
Our business is seasonal in nature. Presented below are our
net sales for each quarter of fiscal 1999, fiscal 1998 and fiscal 1997:
<TABLE>
<CAPTION>
NET
SALES
---------------- % OF
($ IN THOUSANDS) NET SALES
---------------- -----------
<S> <C> <C>
Fiscal 1999 Ended January 30, 1999
First Quarter $30,432 22%
Second Quarter $26,912 20%
Third Quarter $43,758 32%
Fourth Quarter $35,907 26%
Fiscal 1998 Ended January 31, 1998
First Quarter $27,606 21%
Second Quarter $22,618 17%
Third Quarter $41,753 32%
Fourth Quarter $37,972 30%
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%
</TABLE>
Michael Anthony has experienced a seasonal pattern in its
operating results with the third and fourth quarters typically having the
highest sales. This fluctuation is mitigated to a degree by the early placement
of orders by many of our customers, particularly for the Christmas holiday
season. In addition, we market 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 used in the manufacturing process 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 Michael Anthony.
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<PAGE> 8
Michael Anthony uses gold consignment arrangements with the
gold lenders to supply substantially all of its gold needs. See Item 7.
"Management's Discussion And Analysis And Financial Condition And Results Of
Operations-Liquidity and Capital Resources".
INSURANCE
We maintain primary all-risk insurance, with limits in excess
of our current inventory levels (including consigned gold), to cover thefts and
damage to inventory located on our premises and insurance on Michael Anthony
goods in transit. We also maintain insurance covering theft and damage to
inventory at our suppliers' locations. 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 Michael Anthony's suppliers. We also maintain
fidelity insurance, which is insurance providing coverage against theft or
embezzlement by our employees.
EMPLOYEES
As of January 30, 1999, we employed 683 persons, 560 of which
were directly engaged in manufacturing and distribution operations, with the
remaining 123 employees engaged in administration and sales. None of our
employees are represented by a union and we have not experienced any
labor-related work stoppage. We place a heavy emphasis on employee relations
through educational and training programs and employee teams. We consider our
relations with our employees to be good. We believe there is an adequate pool of
labor available to satisfy our foreseeable hiring needs for our sales,
manufacturing and distribution operations.
ENVIRONMENTAL MATTERS
Extensive environmental laws and regulations and various other
federal, state and local laws and regulations regarding health and safety
matters affect our operations. Since our manufacturing operations routinely use
materials regulated by the environmental laws we may incur material liabilities
if any claims are brought against us in connection with these operations. We
have taken steps to reduce the environmental risks associated with our
operations and believe that we are currently in substantial compliance with all
environmental laws.
ACQUISITIONS
Although we intend to continue to aggressively market our gold
jewelry product lines to our existing customer base, we believe there are
opportunities to increase sales by expanding our customer base and exploring
product lines that may utilize diamonds or colored stones, which are precious,
semiprecious or synthetic. As part of our strategy to increase sales to new and
existing customers, in 1994 and 1995 we acquired two small jewelry
manufacturers. As a result of these acquisitions, we increased our market share
with an existing customer and added new customers. We plan to pursue our long
term growth strategy, that may include the acquisition of one or more additional
companies that manufacture and distribute jewelry products.
8
<PAGE> 9
ITEM 2. PROPERTIES.
Our manufacturing and distribution facilities are located in
three adjacent buildings in Mount Vernon, New York having a total of
approximately 74,000 square feet. We lease the buildings housing our
manufacturing facilities located at 60 and 70 South MacQuesten Parkway in Mount
Vernon from Michael Anthony Company, now known as MacQuesten Realty Company
("MacQuesten Realty"), a New York general partnership, whose general partners
are Michael Paolercio, Co-Chairman and Chief Executive Officer of Michael
Anthony, and Anthony Paolercio, Co-Chairman and President of Michael Anthony.
These leases were entered into in May, 1991 and May, 1995. During fiscal 1999,
we paid rent of approximately $504,000 for these facilities, plus real estate
taxes and other occupancy costs. We believe that the terms of these lease
arrangements are no less favorable than those that could have been obtained from
an unaffiliated party. If we did not exercise our option to acquire the
properties located at 60 and 70 South MacQuesten Parkway, Mt. Vernon, discussed
in more detail below, we would have paid an average annual rent of approximately
$536,000 over the remaining term of the leases, plus real estate taxes and other
occupancy costs.
As part of our long-term strategic plan, on May 16, 1997, we
acquired the other building housing our manufacturing facilities, located at 50
South MacQuesten Parkway, Mount Vernon, (the "50 Building") from MacQuesten
Realty for a purchase price of $1,150,000. This facility has approximately
22,000 square feet.
The special real estate committee of the board of directors,
comprised of our independent, outside directors, obtained an appraisal of the 50
Building, and after reviewing the appraisal and negotiation with MacQuesten
Realty as to the terms of purchase, recommended the acquisition to our 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)
Michael Anthony obtaining an exclusive, two-year option to acquire from
MacQuesten Realty the remaining manufacturing facilities housed in the buildings
located at 60 and 70 South MacQuesten Parkway, Mt. Vernon.
On April 9, 1999, Michael Anthony exercised its option to
purchase the remaining manufacturing and distribution facilities housed in the
buildings located at 60 and 70 South MacQuesten Parkway, Mt. Vernon at an
aggregate purchase price of $2,450,000 and on terms and conditions substantially
the same as those agreed to for the purchase of the 50 Building. Michael Anthony
will incur or assume additional long-term indebtedness in order to finance this
purchase.
We also own the building housing our sales and administrative
offices located at 115 South MacQuesten Parkway, in Mount Vernon, New York, and
an adjacent parking area. The headquarters building has approximately 71,000
square feet.
See Item 7. "Management's Discussion And Analysis Of Financial
Condition And Results Of Operations" and Item 13. "Certain Relationships And
Related Transactions."
Our offices and facilities are protected by state-of-the-art
security systems, procedures and a security staff.
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ITEM 3. LEGAL PROCEEDINGS.
Legal proceedings to which Michael Anthony is a party are
routine litigation incidental to our business which are not material to Michael
Anthony's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is traded on the American Stock Exchange under the
symbol MAJ. Our common stock began its listing on AMEX on October 25, 1991.
Prior to its listing on AMEX, our 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 1999 and 1998.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 30, 1999 HIGH LOW
- ---------------------------------- ---- ---
<S> <C> <C>
First Quarter 2 7/8 2
Second Quarter 3 3/8 2 1/8
Third Quarter 3 3/16 2 1/8
Fourth Quarter 3 5/8 2 3/4
FISCAL YEAR ENDED JANUARY 31, 1998 HIGH LOW
- ---------------------------------- ---- ---
<S> <C> <C>
First Quarter 3 3/8 2 3/4
Second Quarter 4 1/4 3 1/16
Third Quarter 3 5/8 2 13/16
Fourth Quarter 2 15/16 2
</TABLE>
As of April 9, 1999, there were 191 holders of record of Michael
Anthony's common stock (including brokers holding in street name).
We have never paid a cash dividend. We anticipate that all of our
earnings will be retained for use in our business and we do not intend to pay
cash dividends in the foreseeable future. Future dividend policy will depend
upon, among other factors, our earnings and financial condition. See Item 7.
"Management's Discussion And Analysis Of Financial Condition And Results Of
Operations," and Note 6 "Long Term Debt" - Notes to the Consolidated Financial
Statement.
In December 1995, we announced a common stock repurchase program under
which Michael Anthony 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 we may repurchase under the stock repurchase
plan. On May 26, 1998, the board authorized a further increase of up to an
additional 1,000,000 shares of common stock that we may repurchase under the
stock repurchase plan.
As of April 9, 1999, Michael Anthony had purchased a total of 1,517,000
shares on the open market for an aggregate of approximately $4,270,000.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data of Michael Anthony should be read
in conjunction with the consolidated financial statements and related notes
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
Seven Months
Ended Year Ended
Jan. 30, Jan. 31, Feb. 1, Jan. 27, Jan. 28, June 30,
1999 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
(In thousands, except per share amounts)
Statement of Operations
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 137,009 $ 129,949 $ 150,629 $ 145,257 $ 93,321 $ 142,787
Cost of goods sold 105,870 107,182 124,041 121,195 76,782 114,151
--------- --------- --------- --------- --------- ---------
Gross profit 31,139 22,767 26,588 24,062 16,539 28,636
Selling, general and
administrative expenses 25,384 25,155 21,372 19,455 12,628 17,887
--------- --------- --------- --------- --------- ---------
Operating income/(loss) 5,755 (2,388) 5,216 4,607 3,911 10,749
Other(expense)/income:
Interest expense/
gold consignment fee (2,290) (2,827) (3,155) (3,835) (2,030) (3,157)
Other income/(expense), net 326 1,002 507 442 117 564
--------- --------- --------- --------- --------- ---------
Income/(loss) before
extraordinary item and
income taxes 3,791 (4,213) 2,568 1,214 1,998 8,156
Income tax provision/(benefit) 1,441 (1,601) 778 486 774 3,176
--------- --------- --------- --------- --------- ---------
Income/(loss) before
extraordinary item 2,350 (2,612) 1,790 728 1,224 4,980
--------- --------- --------- --------- --------- ---------
Extraordinary item (net of
income taxes of $ 130,000) 212 - - - - -
--------- --------- --------- --------- --------- ---------
Net income/(loss) $ 2,138 $ (2,612) $ 1,790 $ 728 $ 1,224 $ 4,980
========= ========= ========= ========= ========= =========
Earnings/(loss) per share
before extraordinary item - basic $ 0.30 $ (0.34) $ 0.22 $ 0.09 $ 0.14 $ 0.63
========= ========= ========= ========= ========= =========
Earnings/(loss) per share before
extraordinary item - diluted $ 0.30 $ (0.34) $ 0.22 $ 0.09 $ 0.14 $ 0.62
========= ========= ========= ========= ========= =========
Extraordinary item $ (.03) $ - $ - $ - $ - $ -
========= ========= ========= ========= ========= =========
Weighted average number
of shares - basic 7,111 7,746 8,241 8,475 8,749 7,945
Weighted average number
of shares - diluted 7,111 7,746 8,263 8,479 8,862 8,083
Balance Sheet Data:
Working capital $ 39,171 $ 37,260 $ 42,042 $ 46,136 $ 42,778 $ 46,250
Total assets(1) 65,037 65,644 72,749 78,646 72,039 69,962
Long-term debt and capital
lease liability 12,509 12,736 14,294 19,192 13,282 13,210
Stockholders' equity 43,298 43,389 47,042 46,048 46,445 45,608
<FN>
(1) The fiscal year ended January 30, 1999, January 31, 1998, February 1,
1997, January 27, 1996, the seven months ended January 28, 1995 and the
year ending June 30, 1994 do not include consigned inventory, which had
approximate value of $35,096,000, $33,208,000, $40,282,000, $60,700,000,
$72,936,000 and $70,818,000, respectively.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
The following table sets forth, as a percentage of net sales, certain
items appearing in our Statements of Operations for the indicated fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 1, JANUARY 27,
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 77.3 82.5 82.3 83.4
Selling, general and
administrative expenses 18.5 19.3 14.2 13.4
Interest and gold consignment
fee expense 1.7 2.2 2.1 2.6
Other income (.2) (.8) (.3) (.2)
Income tax provision/(benefit) 1.0 (1.2) .5 .3
Extraordinary item .1 - - -
Net income/(loss) 1.6 (2.0) 1.2 .5
</TABLE>
FISCAL 1999 VS. FISCAL 1998
Net sales for fiscal 1999 were approximately $137,009,000, an
increase of 5% from net sales of approximately $129,949,000 for the comparable
period in fiscal 1998. The increase in sales was primarily due to increased
shipments to the retail segment of our customer base. If it were not for the
lower average gold price in fiscal 1999, $300 an ounce versus last year's
average of $335 an ounce, sales would have increased to $146,308,000 or 13% as
compared to the prior fiscal period.
Gross profit for fiscal 1999 increased by approximately $8,372,000
from fiscal 1998. As a percentage of net sales, gross profit increased to 22.7%
in fiscal 1999 compared to 17.5% in fiscal 1998. The increase in gross margin
was attributable to a lower average gold price and in the fourth quarter of
fiscal 1998, we reassessed our marketing and production strategy and decided to
implement a significantly different strategy. This is a direct result of the
changing order patterns of some of our major customers. We made the decision to
write down certain inventory, by approximately $3,309,000, that was related to
the implementation of a SKU reduction program and the markdown of discontinued
styles. If it were not for this unusual charge, our gross profit margin would
have been 20.1% for fiscal 1998.
Selling, general and administrative expenses for fiscal 1999 were
approximately $25,384,000 an increase of $229,000 or 1% from approximately
$25,155,000 for the comparable period in fiscal 1998. The increase is primarily
attributable to increases in advertising expenses and product and packaging
supplies which were offset in part by decreases in software implementation
13
<PAGE> 14
costs and legal costs associated with a litigation settlement in fiscal 1998. As
a percentage of the net sales, as adjusted for the gold price difference
discussed above of $146,308,000, selling, general and administrative expenses
decreased to 17.4% in fiscal 1999, from 19.3% in fiscal 1998. Included in
selling, general and administrative expenses for fiscal 1998 was a charge of
approximately $1,191,000 that was due to a write down of certain assets
and other expenses. If it were not for this unusual charge, selling, general and
administrative expenses would have been 18.4% in fiscal 1998.
Other income and interest income for fiscal 1999, was approximately
$326,000, a decrease of $676,000 from approximately $1,002,000 for the
comparable period in fiscal 1998. The decrease was primarily due a gain of
$625,000 from our sale of an asset in fiscal 1998.
Interest expense and gold consignment fees for fiscal 1999, were
approximately $2,290,000, a decrease of $537,000 or 19% compared to
approximately $2,827,000, for the comparable period in fiscal 1998. The decrease
was primarily due to (a) Michael Anthony's lower average level of our consigned
inventory, (b) lower average gold prices and (c) lower interest expense due to
principal payments in January 1998 and May 1998 on Michael Anthony's long term
debt.
For the year ended January 30, 1999, an income tax provision of
$1,441,000, before an extraordinary item, was recorded compared to an income tax
benefit of $1,601,000 for the prior year. The effective tax rates for fiscal
1999 and fiscal 1998 were 38%.
As a result of the above factors our net income, before an
extraordinary item, for fiscal 1999 was approximately $2,350,000 compared to a
net loss of $(2,612,000) for the comparable period in fiscal 1998.
Michael Anthony incurred a charge of $212,000, net of income taxes
of $130,000, for an extraordinary item during fiscal 1999 related to the
refinancing of its long term debt.
Net income for fiscal 1999 was approximately $2,138,000 compared to
a net loss of $(2,612,000) for the comparable period in fiscal 1998.
FISCAL 1998 VS. FISCAL 1997
Net sales for fiscal 1998 were approximately $129,949,000, a decrease
of 14% from net sales of approximately $150,629,000 for the comparable period in
fiscal 1997. The decrease in sales was primarily due to the lower average gold
price in fiscal 1998, $335 an ounce versus last year's average of $391 an ounce.
Of the $20,680,000 decrease in sales, $12,827,000 was due to lower gold prices,
$4,653,000 was due to fewer units sold and $3,200,000 due to one less week
compared to the 53 weeks in fiscal 1997.
Gross profit for fiscal 1998 decreased by approximately $3,821,000 from
fiscal 1997. As a percentage of net sales, gross profit remained approximately
the same at 17.5% in fiscal 1998 compared to 17.7% in fiscal 1997. In the fourth
quarter of fiscal 1998, we reassessed our marketing and production strategy and
decided to implement a significantly different strategy. This was done because
of the changing order patterns of some of our major customers. We made the
decision to write down certain inventory that was related to the implementation
of a SKU reduction program and the markdown of discontinued styles. The total
write down was approximately $3,309,000. If
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<PAGE> 15
this unusual charge was not made our gross profit margin would have been 20.1%
for fiscal 1998, primarily due to the lower average gold price as well as
changes in product mix.
Selling, general and administrative expenses for fiscal 1998 were
approximately $25,155,000, an increase of $3,783,000 or 17.7% from approximately
$21,372,000 for the same period in fiscal 1997. Included in selling, general and
administrative expenses for fiscal 1998 was a charge of approximately $1,191,000
that was due to a write down of certain company assets and other expenses. As a
percentage of net sales, adjusted for the gold price difference of $12,827,000
discussed above and excluding the $1,191,000 charge, selling, general and
administrative expenses increased to 16.8% in fiscal 1998, from 14.2% in fiscal
1997. The increase is primarily attributable to increases in (a) software
implementation costs, (b) payroll and payroll related expenses, (c) advertising
expenses, and (d) legal costs associated with a litigation settlement. See Item
3. "Legal Proceedings."
Other income for fiscal 1998 was approximately $705,000, an increase of
$631,000 from approximately $74,000 for the same period in fiscal 1997. The
increase was primarily due to a gain of $625,000 from Michael Anthony's sale of
an asset.
Interest expense and gold consignment fees for fiscal 1998 were
approximately $2,827,000, a decrease of $328,000 or 10%, compared to
approximately $3,155,000 for the comparable period in fiscal 1997. The decrease
was primarily due to (a) lower average level of consigned inventory, (b) lower
average gold prices and (c) lower interest expense due to principal payments in
February and May 1997, and January 1998 on our long term debt.
For the year ended January 31, 1998, an income tax benefit of
$1,601,000 was recorded compared to a provision of $778,000 for the prior year.
The effective tax rate for fiscal 1998 was 38% and for fiscal 1997 was 30%. The
lower effective tax rate in fiscal 1997 was due to a reversal in fiscal 1997 of
prior year accruals for taxes.
As a result of the above factors, our net loss for fiscal 1998 was
approximately $(2,612,000) compared to net income of $1,790,000 for the
comparable period in fiscal 1997.
FISCAL 1997 VS. FISCAL 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 our customer base, which increase was offset in part by decreased
shipments to the wholesale segment of our 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 our product
mix and increased sales of our 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
15
<PAGE> 16
percentage is primarily attributed to (a) increased product and packaging
supplies, (b) increased royalty and licensing expenses, (c) increased payroll
and payroll related expenses and (d) the terminated acquisition negotiations
with a company. These increases were offset in part by a decrease in advertising
related expenses.
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 (a) a lower average level of consignment inventory, (b) lower consignment
rates and (c) lower debt levels.
The effective tax rate for fiscal 1997 was 30% and for fiscal 1996 was
40%. The decrease in the effective tax rate is due to the reversal of prior year
accruals.
As a result of the above factors, our net income for fiscal 1997 was
approximately $1,790,000 compared to $728,000 for the comparable period in
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
We rely on a gold consignment program, short-term and long-term
borrowings and internally generated funds to finance our inventories and
accounts receivable. We fill most of our gold supply needs through gold
consignment arrangements with gold lenders. Under the terms of those
arrangements, we are entitled to lease the lesser of (a) an aggregate of 191,000
ounces of fine gold or (b) consigned gold with an aggregate value equal to
$73,500,000. The consigned gold is secured by certain property of Michael
Anthony, including inventory and machinery and equipment. Michael Anthony 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. We believe that our financing rate under the consignment
arrangements is substantially similar to the financing rates charged to gold
consignees similarly situated to Michael Anthony. As of January 30, 1999,
Michael Anthony held 122,900 ounces of gold on consignment with a market value
of $35,096,000.
The consignment agreements contain restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and each of
the agreements requires Michael Anthony to own a specific amount of gold at all
times. At January 30, 1999, Michael Anthony was in compliance with the covenants
in its consignment agreements and our owned gold inventory was valued at
approximately $4,560,000. We believe that the supply of gold available through
our gold consignment arrangements, together with the gold we own, is sufficient
to meet our requirements.
The consignment agreements are terminable by Michael Anthony or the
respective gold lenders upon 30 days notice. If any gold lender were to
terminate its existing gold consignment arrangement, we do not believe we would
experience an interruption of our gold supply that would materially adversely
affect the business. Michael Anthony believes that other consignors would be
willing to enter into similar arrangements if any gold lender terminates its
relationship with Michael Anthony.
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<PAGE> 17
Consigned gold is not included in our inventory, and there is no
related liability recorded. As a result of these consignment arrangements,
Michael Anthony is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the gold lenders, since Michael Anthony
does not purchase gold from the gold lenders until receipt of a purchase order
from, or shipment of jewelry to, our customers. Michael Anthony then either
locks in the selling price of the jewelry to our customers at the same time as
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 we believe our supply of gold is relatively secure, significant
increases or rapid fluctuations in the cost of gold may impact the demand for
our products. From January 27, 1996 until January 30, 1999, the closing price of
gold according to the Second London Gold Fix ranged from a low of $273.40 per
ounce to a high of nearly $414.80 per ounce. Fluctuations in the precious metals
markets and credit may result in an interruption of our gold supply or the
credit arrangements necessary to allow us to support our accounts receivable and
continue the use of consigned gold.
In January 1999, Michael Anthony entered into a Loan and Security
Agreement with General Electric Capital Business Asset Funding Corporation in
the principal amount of $10,444,444. This loan is secured by our machinery and
equipment. The loan agreement contains a cross collateral/cross default clause
in connection with Michael Anthony's line of credit agreement. The loan
agreement does not contain any restrictive financial covenants. The loan bears
interest at 6.85% per annum and payments of interest only are due for the first
year of the loan. The loan matures in January 2007. The proceeds from this loan
were used to repay two series of senior secured notes with various insurance
companies which had an aggregate principal amount of $10,444,444 outstanding.
Those senior secured notes accrued interest at 8.61% per annum and 7.38% per
annum, respectively. Costs of $342,000 associated with the old debt were written
off as an extraordinary charge.
In the fourth quarter of fiscal 1998, we reassessed our marketing and
production strategy and decided to implement a significantly different strategy.
This was done because of the changing order patterns of some of our major
customers. We made the decision to write down some of our inventory that was
related to the implementation of a SKU reduction program and the markdown of
discontinued styles. The total inventory write down was approximately
$3,309,000. Included in selling, general and administrative expenses for the
year ended January 31, 1998, was a charge of approximately $1,191,000 that was
due to the write down of certain assets. Due to these unusual charges in fiscal
1998 totaling $4,500,000, we were in default of a financial covenant under
agreements governing the senior secured notes and an outstanding mortgage. We
obtained waivers of this covenant noncompliance from both the insurance
companies and mortgage lender. In addition, the insurance companies reset the
financial covenant for fiscal 1999 and such covenants were met. However, as
described above, these senior secured notes were repaid in January 1999. We
expect to be in compliance with the amended covenant for the mortgage in fiscal
2000.
On October 6, 1995, Michael Anthony obtained a loan from a bank in the
amount of $2,500,000. As collateral for the loan, we granted the bank a first
mortgage on our 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 restrictive financial covenants. At January 30, 1999, we were in
compliance with the covenants. As of January 30, 1999, $2,173,000 of principal
remained outstanding under the mortgage.
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<PAGE> 18
Michael Anthony has a line of credit arrangement with a commercial
bank, under which Michael Anthony may borrow up to $15,000,000. The line of
credit is secured by certain of our assets, including accounts receivable and
inventory. As of January 30, 1999, there was no amount outstanding under the
line of credit. The line of credit has been renewed and currently expires on
July 31, 1999, subject to annual renewal. We believe that the line of credit
will be renewed; however, if the current lender decides not to renew the line of
credit, we believe that other lenders would be willing to enter into a similar
arrangement.
In April, 1998, Michael Anthony paid $600,000 to M.L. Logo, Inc. in
settlement of the civil lawsuit that M.L. Logo, Inc. commenced against Michael
Anthony in June, 1991. The lawsuit was in connection with an agreement between
Michael Anthony and M.L. Logo regarding a license with Major League Baseball.
The matter was tried without a jury in March, 1997 and a Decision and Order
against Michael Anthony was entered on October 30, 1997. Michael Anthony entered
into a Settlement Agreement in exchange for the vacation of the Decision and
Order, the complete settlement of the matter and the waiver of the right to any
further payment from Michael Anthony. The Settlement Agreement also contained a
covenant not to compete, where M.L. Logo and certain shareholders of M.L. Logo
agreed not to engage in any business involving jewelry with logos from Major
League Baseball. The settlement cost of $600,000 was included in selling,
general and administrative expenses for fiscal 1998.
During fiscal 1999, cash provided from operating activities was
$110,000. This was primarily the result of $2,138,000 in net income, $3,783,000
of non-cash items, mainly depreciation, and a $2,390,000 decrease in other
assets, offset by increases of $8,740,000 in accounts receivable and inventory.
Cash of $2,206,000 was utilized for investing purposes during fiscal
1999, primarily for leasehold improvements of $217,000, and purchases of
machinery and equipment of approximately $2,004,000.
During fiscal 1999, cash utilized in financing activities totaled
$3,690,000. This was primarily attributed to payments of long term debt of
$1,446,000 and the purchase of treasury stock of $2,244,000.
On April 9, 1999 we exercised our option to purchase the remaining
manufacturing and distribution facilities housed in the buildings located at 60
and 70 South MacQuesten Parkway, Mt. Vernon at an aggregate purchase price of
$2,450,000 and on terms and conditions substantially the same as those agreed to
for the purchase of the 50 Building. Michael Anthony will incur or assume
additional long-term indebtedness in order to finance this purchase.
For fiscal 2000, Michael Anthony projects capital expenditures of
approximately $1,939,000, which includes machinery and equipment expenses and
certain improvements on its leased and owned properties. See Item 2.
"Properties" and Item 13. "Certain Relationships And Related Transactions".
Except with respect to financing for the acquisition of the buildings
leased at 60 and 70 South MacQuesten Parkway as discussed above, we believe
that our long-term debt and existing lines of credit provide
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<PAGE> 19
sufficient funding for our operations. In the event that we require additional
financing during fiscal 2000, it will be necessary to fund this requirement
through expanded credit facilities with existing or other lenders. We believe
that additional financing can be arranged.
SUBSEQUENT EVENTS
On February 10, 1999, Michael Anthony obtained a loan from a bank in
the amount of $937,500. As collateral for the loan, we granted the bank a first
mortgage on the 50 Building. The mortgage has a fifteen-year term and accrues
interest at an annual rate of 7.05%.
In March, 1999, Michael Anthony acquired certain assets, primarily
molds, machinery and equipment, and inventory, of Town & Country Fine Jewelry
Group, Inc. Michael Anthony paid an aggregate purchase price of $4,500,000 for
these assets. In a separate transaction, Michael Anthony sold a portion of these
purchased assets for $2,200,000 to Stuller Settings, Inc. of Lafayette,
Louisiana. The assets sold include those associated with the Feature Ring and
Bridal Divisions.
On April 15, 1999, Michael Anthony entered into an Asset Purchase
Agreement with Eurospark Industries, Inc. to purchase machinery and equipment of
Eurospark Industries, Inc. for $500,000. The sale of these assets must be
approved by the United States Bankruptcy Court for the Eastern District of New
York before completion of the transaction.
In early 1999, the compensation committee determined that Michael
Anthony should adopt a Change of Control Plan. The Plan will provide for
severance payments to executive officers and other key employees. The
severance payments to the executives will be an amount equal to three times
the individual's most recent salary and bonus plus a tax "gross up" payment.
Other employees are entitled to one to three times their base salary and bonus
plus a tax "gross up" payment. The Plan also provides for continuation of
medical and dental benefits for a period of one year and automatic vesting of
stock options, if permissible under the applicable stock option plan. These
severance benefits are triggered upon a change of control, as defined in the
Plan. Individual agreements under the plan will be entered into by each of the
executive officers and other key employees.
YEAR 2000 COMPLIANCE
In 1997, Michael Anthony developed, as a strategic corporate goal, a
project plan to address the Year 2000 issue. Monthly progress reports on the
Year 2000 issue were given to our Executive Management Committee. Members of the
Information Systems (IS) Department primarily staffed the project, with outside
consultants being used on an as-needed basis. Most Year 2000 efforts were made
through the use of internal resources or routine software upgrades provided by
our software vendors.
We maintained our business application system hardware platform
(primarily IBM AS/400's) but replaced or upgraded all affected software. We
completed our internal Year 2000 project in March 1999. Total expenditures
related to remediation, testing, conversion and updating system applications
were approximately $308,000. The cost of the Year 2000 project was expensed
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as incurred and did not have a material adverse affect on Michael Anthony's
results of operations, liquidity or capital resources.
Although Michael Anthony does not expect any significant software
failures internally, there could be computer related failures in a number of
areas including the failure of our telecommunications, financial, manufacturing
or distribution systems which are integrated with the systems of suppliers,
customers or other third parties. We do not expect any material impact to
operations or financial result from any minor delay.
Michael Anthony is examining its relationship with certain key
customers and suppliers to determine whether they are Year 2000 compliant, and
if not, ascertain their plans to attain Year 2000 readiness. To the extent our
key customers are not Year 2000 compliant before the end of 1999, those
customers may lose electronic data interchange capabilities in January 2000. If
electronic data interchange communications are no longer possible, we expect to
use voice, facsimile, e-mail, or traditional mail communications in order to
receive customer orders and process customer invoices. In addition, Michael
Anthony has implemented a program to determine the Year 2000 compliance status
of our material vendors, suppliers, service providers and customers. Based on
currently available information, we do not anticipate suffering any material
impact from the failure of these third parties to be Year 2000 compliant.
However, the process of evaluating the Year 2000 compliance status of material
third parties is continually ongoing and, therefore, no guaranty or warranty can
be made as to those third parties' future compliance status and its potential
effect on Michael Anthony. The systems of other companies on which our systems
rely may not be converted in a timely fashion and any failure by those systems
may have an adverse effect on our operations.
The predictions are based on our reasonable expectations but these
estimates may not be achieved. External Year 2000 readiness estimates are
subject to more uncertainty, since this is outside the direct control of
management.
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K contains certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. These forward-looking statements include the words "believe," "expect,"
"plans" or similar words and are based in part on Michael Anthony's reasonable
expectations and are subject to a number of factors and risks, many of which are
beyond Michael Anthony's control. Actual results could differ materially from
those discussed under "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," as a result of any of these
factors:
(a) general economic conditions and their impact on the retail
sales environment;
(b) fluctuations in the price of gold and other metals used to
manufacture our jewelry;
(c) risks related to the concentration of our customers,
particularly the operations of any of our top customers;
(d) increased competition from outside the United States where
labor costs are substantially lower;
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(e) variability of customer requirements and the nature of
customers' commitments on projections and orders; and
(f) the extent to which we are able to retain and attract key
personnel.
In light of these uncertainties and risks, there can be no assurance
that the forward-looking statements in this annual report on Form 10-K will
occur or continue in the future. Except for as required in periodic filings
under the Securities Exchange Act of 1934, Michael Anthony undertakes no
obligations to release publicly any revisions to these forward-looking
statements that may reflect events or circumstances after the date of this
annual report on Form 10-K or to reflect the occurrence of unanticipated events.
NEW ACCOUNTING STANDARDS
During fiscal 1998, Michael Anthony adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), which requires
presentation of basic earnings per share which includes no dilution. Earnings
per share for all periods presented were computed on a basic basis using the
weighted average number of common shares outstanding. Options and warrants
outstanding were not materially dilutive.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131), which is effective for financial
statements beginning after December 15, 1997. SFAS No. 131 redefines how
operating segments are determined and requires expanded quantitative and
qualitative disclosures relating to a company's operating statements. The
adoption of SFAS No. 131 did not have a material impact on current disclosures.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued and is effective for fiscal years beginning
after June 15, 1999. SFAS No. 133 requires that all derivative instruments be
measured at fair value and recognized in the balance sheet as either assets or
liabilities. The Company is currently evaluating the impact of adopting SFAS No.
133.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 and pages F1 through F25 and S1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Election of Directors" of
Michael Anthony's Proxy Statement for the 1999 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation" of
Michael Anthony's Proxy Statement for the 1999 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 Michael Anthony's Proxy Statement for the 1999 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
Michael Anthony's Proxy Statement for the 1999 Annual Meeting of Stockholders is
incorporated herein by reference. See also Item 2. "Properties".
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
PAGE
----
(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
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 1999 Annual Report to Stockholders.
(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of Registrant, as Incorporated by reference to Exhibit 3.1 to
amended 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 Anthony Incorporated by reference to Exhibit 3.1.1 of
Jewelers, Inc. (New York) and Michael Anthony the Company's Annual Report on Form 10K for
Jewelers, Inc. (Delaware) the fiscal year ended June 30, 1993 (the "1993
Form 10-K")
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
</TABLE>
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<PAGE> 24
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
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 Consignment Agreement dated as of August 20, 1993 Incorporated by reference to Exhibit 10.40 of
between the Registrant and Fleet Precious Metals the 1993 Form 10-K
Inc.
10.2 Security Agreement dated as of August 20, 1993 Incorporated by reference to Exhibit 10.39 of
among the Registrant and Fleet Precious Metals the 1993 Form 10-K
Inc.
10.3 Amended and Restated Consignment Agreement dated Incorporated by reference to Exhibit 10.44 to
as of August 20, 1993 between the Registrant and the 1993 Form 10-K
ABN AMRO Bank N.V., New York Branch
10.4 Amended and Restated Intercreditor Agreement Incorporated by reference to Exhibit 10.47 to
dated as of August 20, 1993, among the the 1993 Form 10-K
Registrant, its gold lenders, the holders of the
Registrant's Senior Notes due 1998 and the
holders of the Registrant's 2002 Notes
10.5 First Amendment to 1993 Long-term Incentive Plan Incorporated by reference to Exhibit 10.48 to
of the Registrant dated as of September 21, 1993 the 1993 Form 10-K
10.6 Second Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.49 to
Service Marks as Collateral dated as of July the 1993 Form 10-K
12,1990 between the Registrant and RIHT,
individually and as agent
10.7 Consignment Agreement dated as of January 31, Incorporated by reference to Exhibit 10.46 to
1994 (effective as of May 16, 1994 between the the Company's Annual report on Form 10K for
Registrant and Credit Suisse, New York Branch the fiscal year ended June 30, 1994 (the "1994
Form 10-K")
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
10.8 First Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.47 to
Agreement dated as of May 16, 1994 among the the 1994 Form 10-K
Registrant, RIHT, individually and as agent
10.9 Third Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.49 to
Service Marks as Collateral dated as of May 16, the 1994 Form 10-K
1994 between the Registrant and RIHT individually
and as agent
10.10 Second Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.53 to
Agreement dated as of September 1, 1994 among the the 1994 Form 10-K
Registrant, RIHT, individually and as agent
10.11 Fourth Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.55 to
Service Marks as collateral dated as of September the 1994 Form 10-K
1,1994 between the Registrant and RIHT,
individually and as agent
10.12 Contract of Sale dated as of November 28, 1994 Incorporated by reference to Exhibit 10.52 to
between Michael Anthony Company and the Registrant the 1995 Form 10-K
10.13 Third Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.57 to
Agreement dated as of February 15, 1995 among the the 1995 Form 10-K
Registrant and its gold lenders
10.14 Amended Security Agreement dated as of March Incorporated by reference to Exhibit 10.61 to
29,1995 between the Registrant and Chemical Bank the 1995 Form 10-K
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
10.15 Loan Agreement dated October 6, 1995 between Incorporated by reference to Exhibit 10.1 to
First Fidelity Bank, National Association ("First the Company's Quarterly Report on Form 10Q for
Fidelity") and Registrant the quarter ended October 28,1995 (the
"October 1995 Form 10-Q")
10.16 Mortgage Note in principal amount of $2,500,000 Incorporated by reference to Exhibit 10.2 to
dated October 6, 1995 issued by Registrant in the October 1995 Form 10-Q
favor of First Fidelity
10.17 Mortgage and Security Agreement dated October Incorporated by reference to Exhibit 10.3 to
6,1995 by Registrant for the benefit of First the October 1995 Form 10-Q
Fidelity
10.18 Fourth Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.5 to
Agreement dated October 20, 1995 among Registrant the October 1995 Form 10-Q
and Registrant's gold lenders.
10.19 Fifth Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.6 to
Agreement dated October 20, 1995 among Registrant the October 1995 Form 10-Q
and Registrant's gold lenders.
10.20 Fifth Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.7 to
Service Marks dated October 20, 1995 among the October 1995 Form 10-Q
Registrant and Registrant's gold lenders
10.21 Assignment of Trademarks and Service Marks as Incorporated by reference to Exhibit 10.56 to
Collateral, dated July 12, 1990, between the Company's Annual Report on Form 10-K for
Registrant and Rhode Island Hospital Trust the fiscal year ended January 27, 1996 (the
National Bank, individually and as agent "1996 Form 10-K")
10.22 First Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.57 to
Service Marks as Collateral dated as of June the 1996 Form 10-K
5,1992, between Registrant and Rhode Island
Hospital Trust National Bank, individually and as
agent
10.23 Deferred Compensation Plan dated as of March 4, Incorporated by reference to Exhibit 10.59 to
1996 the 1996 Form 10-K
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
10.24 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")
10.25 Amendment to the NonEmployees Directors' Plan Incorporated by reference to Exhibit 10.2 to
the Company's October 1996 Form 10-Q
10.26 Lease dated as of May 1, 1991 between Michael Incorporated by reference to Exhibit 10.60 to
Anthony Company d/b/a MacQuesten Realty Company the Company's Annual Report on Form 10-K for
and Registrant the year ended February 1, 1997 (the "1997
Form 10-K")
10.27 Lease dated as of May 1, 1991 between Michael Incorporated by reference to Exhibit 10.61 to
Anthony Company d/b/a MacQuesten Realty Company the 1997 Form-10-K
and Registrant
10.28 Contract of Sale dated May 16, 1997 between Incorporated by reference to Exhibit 10 to the
Registrant and MacQuesten Realty Company Company's Quarterly Report on Form 10-Q for
the quarter ended May 3, 1997
10.29 Promissory Note dated August 22, 1997 issued by Incorporated by reference to Exhibit 10 to the
Registrant to the Chase Manhattan Bank Company's Quarterly Report on Form 10-Q for
the quarter ended August 2, 1997
10.30 Severance and Termination Agreement dated October Incorporated by reference to Exhibit 10 to the
22, 1997 between Registrant and Mark Hanna Company's Quarterly Report on Form 10-Q for
the quarter ended November 1, 1997
10.31 1993 Long-term Incentive Plan of the Registrant Filed as Exhibit 10.54 to the 1998 Form 10-K
10.32 1993 NonEmployee Directors' Stock Option Plan of Filed as Exhibit 10.55 to the 1998 Form 10-K
the Registrant
10.33 Loan and Security Agreement, dated January 29, Filed as an Exhibit to this Form 10-K
1999, by and between the Registrant and General
Electric Capital Business Asset Funding
Corporation
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
--- ----------- --------
<S> <C> <C>
10.34 Amendment No. One to Loan and Security Agreement, Filed as an Exhibit to this Form 10-K
dated January 29, 1999, by and between the
Registrant and General Electric Capital Business
Asset Funding Corporation
10.35 Term Promissory Note, dated January 29, 1999, of Filed as an Exhibit to this Form 10-K
the Registrant in favor of General Electric
Capital Business Asset Funding Corporation
10.36 Asset Purchase Agreement, dated March 3, 1999, by Filed as an Exhibit to this Form 10-K
and between the Registrant and Town & Country
Fine Jewelry Group, Inc.
10.37 Mortgage, Security Agreement and Assignment of Filed as an Exhibit to this Form 10-K
Leases and Rents dated February 10, 1999, by and
between Registrant and General Electric Capital
Business Asset Funding Corporation
10.38 Promissory Note dated February 10, 1999 by and Filed as an Exhibit to this Form 10-K
between the Registrant and General Electric
Capital Business Asset Funding Corporation
10.39 Asset Purchase Agreement, dated April 15, 1999, Filed as an Exhibit to this Form 10-K
by and between the Registrant and Eurospark
Industries, Inc.
21 Subsidiaries of the Registrant Filed as an Exhibit to this Form 10-K
27 Financial Data Schedule Filed as an Exhibit to this Form 10-K
</TABLE>
REPORT ON FORM 8-K
(b) Not applicable
28
<PAGE> 29
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.
Date: April 28, 1999 MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Michael Paolerico
----------------------------------------
Michael W. Paolercio, Co-Chairman of the
Board and Chief Executive Officer
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 Co-Chairman of the Board April 28, 1999
- --------------------------- and Chief Executive Officer
(Michael W. Paolercio) (Principal Executive Officer)
/s/ Anthony Paolercio Co-Chairman of the Board April 28, 1999
- --------------------------- and President
(Anthony Paolercio, Jr.)
/s/ Allan Corn Chief Financial Officer, April 28, 1999
- --------------------------- Senior Vice President
(Allan Corn) and Director (Principal
Accounting Officer)
/s/ Michael A. Paolercio Senior Vice President, April 28, 1999
- --------------------------- Treasurer and Director
(Michael Anthony Paolercio)
/s/ Michael Wager Director April 28, 1999
- ---------------------------
(Michael Wager)
/s/ David Harris Director April 28, 1999
- ---------------------------
(David Harris)
/s/ Donald Miller Director April 28, 1999
- ---------------------------
(Donald Miller)
/s/ Nathan Light Director April 28, 1999
- ---------------------------
(Nathan Light)
</TABLE>
29
<PAGE> 30
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 January 30, 1999 and January 31, 1998 and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended January
30, 1999. 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 January 30, 1999 and January 31, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended January 30, 1999, 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
April 9, 1999 (April 14, 1999 as to Note 18)
Parsippany, New Jersey
F-1
<PAGE> 31
<TABLE>
<CAPTION>
MICHAEL ANTHONY JEWELERS, INC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS January 30, January 31,
------ 1999 1998
----------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 961 $ 6,747
Accounts receivable:
Trade (less allowances of $1,124 and $1,196, respectively) 29,194 22,234
Other 203 40
Inventories 14,212 12,913
Income tax refundable - 1,667
Prepaid expenses and other current assets 1,397 1,640
Deferred taxes 1,203 720
-------- --------
Total current assets 47,170 45,961
PROPERTY, PLANT AND EQUIPMENT - net 16,916 18,045
INTANGIBLES - net 377 584
OTHER ASSETS 574 1,054
-------- --------
$ 65,037 $ 65,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 2,808 $ 2,870
Current portion of long-term debt
and lease liability 227 1,446
Accrued expenses 4,964 4,385
-------- --------
Total current liabilities 7,999 8,701
-------- --------
LONG-TERM DEBT 12,498 12,617
-------- --------
CAPITAL LEASE LIABILITY 11 119
-------- --------
DEFERRED TAXES 1,231 818
-------- --------
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; 8,288,000 and
8,282,000 shares issued and outstanding as of
January 30, 1999, and January 31, 1998, respectively 8 8
Additional paid-in capital 31,762 31,747
Retained earnings 15,622 13,484
Treasury stock, 1,457,000 and 578,000 shares as of
January 30, 1999 and January 31, 1998, respectively (4,094) (1,850)
-------- --------
Total stockholders' equity 43,298 43,389
-------- --------
$ 65,037 $ 65,644
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 32
<TABLE>
<CAPTION>
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended
---------------------------------------------------
January 30, January 31, February 1,
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
NET SALES $ 137,009 $ 129,949 $ 150,629
COST OF GOODS SOLD 105,870 107,182 124,041
--------- --------- ---------
GROSS PROFIT ON SALES 31,139 22,767 26,588
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 25,384 25,155 21,372
--------- --------- ---------
OPERATING INCOME/(LOSS) 5,755 (2,388) 5,216
--------- --------- ---------
OTHER INCOME (EXPENSES):
Gold consignment fee (1,106) (1,305) (1,457)
Interest expense (1,184) (1,522) (1,698)
Interest income 245 297 433
Other income 81 705 74
--------- --------- ---------
TOTAL OTHER INCOME/(EXPENSES) (1,964) (1,825) (2,648)
--------- --------- ---------
INCOME/(LOSS) BEFORE EXTRAORDINARY
ITEM AND INCOME TAXES 3,791 (4,213) 2,568
INCOME TAX PROVISION/(BENEFIT) 1,441 (1,601) 778
--------- --------- ---------
NET INCOME/(LOSS) BEFORE
EXTRAORDINARY ITEM 2,350 (2,612) 1,790
--------- --------- ---------
EXTRAORDINARY ITEM - REFINANCING OF
DEBT (net of income taxes of $130,000) 212 - -
--------- --------- ---------
NET INCOME/(LOSS) $ 2,138 $ (2,612) $ 1,790
========= ========= =========
EARNINGS/(LOSS) PER SHARE - BASIC
AND DILUTED
Income/(loss) before extraordinary item $ .33 $ (.34) $ .22
Extraordinary item (.03) - -
--------- --------- ---------
NET EARNINGS/(LOSS) PER SHARE $ .30 $ (.34) $ .22
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES 7,111 7,746 8,241
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 33
<TABLE>
<CAPTION>
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Common Stock Additional Treasury Stock
-------------------- Paid-In Retained ------------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
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
Purchase of treasury stock - - - - (328) (1,056) (1,056)
Issuance of stock 3 - 15 - - - 15
Net loss - - - (2,612) - - (2,612)
-------- -------- -------- -------- -------- -------- --------
Balance - January 31, 1998 8,282 $ 8 $ 31,747 $ 13,484 (578) $ (1,850) $ 43,389
Purchase of treasury stock - - - - (879) (2,244) (2,244)
Issuance of stock 6 - 15 - - - 15
Net income - - - 2,138 - - 2,138
-------- -------- -------- -------- -------- -------- --------
Balance - January 30, 1999 8,288 $ 8 $ 31,762 $ 15,622 (1,457) $ (4,094) $ 43,298
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 34
<TABLE>
<CAPTION>
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended
-----------------------------------------------
January 30, January 31, February 1,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 2,138 $ (2,612) $ 1,790
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 3,535 4,761 3,749
Provision for doubtful accounts 212 284 170
Provision for sales returns 106 - 261
Deferred tax (benefit)/provision (70) (392) 307
Loss/(gain) on disposal of property, plant
and equipment 7 (2) 19
Provision for stock compensation 15 15 15
(Increase)/decrease in operating assets:
Accounts receivable (7,441) (761) 8,087
Inventories (1,299) 5,990 795
Prepaid expenses and other current assets 1,910 (2,422) 284
Other assets 480 (310) (164)
Increase/(decrease) in operating liabilities:
Accounts payable (62) (271) (1,434)
Accrued expenses 579 583 (719)
-------- -------- --------
Net cash provided by operating activities 110 4,863 13,160
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,221) (4,010) (3,816)
Proceeds from sale of equipment 15 34 -
-------- -------- --------
Net cash used in investing activities (2,206) (3,976) (3,816)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (1,446) (3,514) (4,776)
Proceeds from line of credit 10,500 15,700 6,600
Payments to line of credit (10,500) (15,700) (6,600)
Purchase of treasury stock (2,244) (1,056) (811)
-------- -------- --------
Net cash used in financing activities (3,690) (4,570) (5,587)
-------- -------- --------
NET (DECREASE)/INCREASE IN CASH (5,786) (3,683) 3,757
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 6,747 10,430 6,673
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR $ 961 $ 6,747 $ 10,430
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 35
<TABLE>
<CAPTION>
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended
----------------------------------------------------
January 30, January 31, February 1,
1999 1998 1997
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
<S> <C> <C> <C>
Capital lease obligations $ - $ - $ 8
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest and gold consignment fees $2,592 $2,858 $3,451
Income taxes $ 835 $ 95 $ 425
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 36
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
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 and Presentation
---------------------------------------
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.
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.
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 buildings. Leasehold improvements are amortized over
the lesser of the estimated life of the asset or the lease.
Research and Development
------------------------
Fifty percent of product development costs are capitalized and amortized
over three years and the remaining portion is expensed in the year
incurred. In fiscal 1999 and 1998 the Company capitalized approximately
$446,000 and $483,000, respectively.
F-7
<PAGE> 37
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Intangibles
-----------
Intangible assets (net of accumulated amortization of $1,623,000 and
$1,416,000 as of January 30, 1999 and January 31, 1998, respectively),
consist of patents which are amortized on a straight-line basis over the
lives of the patents, approximately 14 years and a
covenant-not-to-compete which is amortized on a straight-line basis over
the life of the covenant of five years.
Long-lived Assets
-----------------
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of", long-lived assets and certain
identifiable intangibles (excluding financial instruments and deferred
tax assets) to be held and used are reviewed by the Company for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
If a review for recoverability is necessary, the Company estimates the
future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss is recognized. Otherwise, an
impairment loss is not recognized. Any impairment loss recognized is
measured as excess of carrying amount of the asset over the fair value
of the asset.
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 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.
F-8
<PAGE> 38
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Catalog Costs
-------------
Catalog costs are charged to expense as incurred, the only exception
being major catalog revisions. Costs capitalized are amortized over the
units of catalogs shipped, up to a maximum of two years. At January 30,
1999, January 31, 1998 and February 1, 1997, in connection with three
significant catalog revisions, approximately $52,000, $210,000 and
$124,000 respectively, had been capitalized. Included in the statement
of operations for the years ended January 30, 1999, January 31, 1998 and
February 1, 1997, is amortization expense of $158,000, $229,000 and
$230,000, respectively.
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 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. The Company hedges its future
contracts for gold against anticipated sales commitments with its
customers. Gains or losses on the future contracts are deferred until
settlement of the related anticipated sales to a customer. At January
30, 1999, there were no forward contracts outstanding. 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 considered to be significant.
Earnings Per Share
------------------
During the year ended January 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share", ("SFAS
128"), which requires presentation of basic and diluted earnings per
share ("EPS") on the face of the consolidated statements of operations
and requires a reconciliation of the numerators and denominators of the
basic and diluted EPS calculations. Basic EPS is computed by dividing
net income by the weighted average shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if options
to issue common stock were exercised and converted to common stock.
Options and warrants outstanding were not materially dilutive for each
of the three years in the period ended January 30, 1999. Earnings per
share for prior periods have been computed in accordance with SFAS 128.
F-9
<PAGE> 39
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
New Accounting Standard
-----------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information", which is effective for the year ended January 30, 1999.
SFAS No. 131 redefines how operating segments are determined and
requires expanded quantitative and qualitative disclosures relating to a
company's operating segments. The adoption of SFAS No. 131 did not have
a material impact on current disclosures.
New Accounting Pronouncements Not Yet Adopted
---------------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued and is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires that all derivative
instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. The Company is currently
evaluating the impact of adopting SFAS No. 133.
Internal-Use Software
---------------------
In March 1998, the American Institute of Certified Public Accountants
issued its Statement of Position ("SOP") 98-1, which provides guidance
on accounting for costs of computer software developed or obtained for
internal use. It defines the various stages of computer software
development as 1) the preliminary project stage, 2) the applications
development stage, and 3) the post-implementation/operations stage.
Internal and external costs incurred during the preliminary project
stage and the post-implementation/operations stage should not be
capitalized. However, internal and external costs during the
applications development stage, generally would be required to be
capitalized.
The Company currently capitalizes externally incurred software costs
relating to internal use software while internally incurred costs are
currently expensed in the year incurred. This statement requires the
capitalization and amortization of such internal costs.
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 reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-10
<PAGE> 40
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
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 January 30, 1999,
January 31, 1998 and February 1, 1997 were comprised of 52, 52 and 53
weeks, respectively.
2. INVENTORIES
-----------
<TABLE>
<CAPTION>
Inventories consist of: January 30, January 31,
1999 1998
----------- ----------
(In thousands)
<S> <C> <C>
Finished goods $31,349 $27,691
Work in process 14,324 13,335
Raw materials 3,635 5,095
------- -------
49,308 46,121
Less:
Consigned gold 35,096 33,208
------- -------
$14,212 $12,913
======= =======
</TABLE>
At January 30, 1999 and January 31, 1998, inventories excluded
approximately 123,000 and 108,900 ounces of gold on consignment,
respectively.
In the fourth quarter of the year ended January 31, 1998, management of
the Company reassessed its marketing and production strategy and
determined to implement a significantly different strategy. This was a
direct result of the changing order patterns of some of the Company's
major customers. As such, management made the determination to write
down certain inventory, by approximately $3,309,000, as part of the
implementation of a SKU reduction program and the markdown of
discontinued styles.
F-11
<PAGE> 41
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
3. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Machinery and equipment $34,441 $32,437
Leasehold improvements 2,573 2,492
Building and building improvements 6,337 6,331
Land 1,638 1,508
------- -------
44,989 42,768
Less: Accumulated depreciation
and amortization 28,073 24,723
------- -------
$16,916 $18,045
======= =======
</TABLE>
Included in selling, general and administrative expenses for the year
ended January 31, 1998 was a charge of approximately $441,000 that was
due to the write down of certain long-lived assets.
4. GOLD CONSIGNMENT AGREEMENTS
---------------------------
The Company has gold consignment agreements with gold lenders. Under the
terms of the agreements, the Company is entitled to lease the lesser of
an aggregate amount of 191,000 ounces, or an aggregate consigned gold
value not to exceed $73,500,000. 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.
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 January 30, 1999, the
Company was in compliance with these covenants, and the Company's owned
gold inventory was valued at approximately $4,560,000.
F-12
<PAGE> 42
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
5. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Accrued advertising $2,119 $1,177
Accrued payroll expenses 1,228 497
Customer deposits payable 261 154
Accrued interest 15 317
Accrued legal expense -- 600
Other accrued expenses 1,341 1,640
------ ------
$4,964 $4,385
====== ======
</TABLE>
6. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
----------- ----------
(In thousands)
<S> <C> <C>
Note payable - interest at 6.85%, interest only of $60,000 payable
monthly for first year, interest and principal of $157,000 payable
monthly over a seven-year term through January 2007.
$10,444 $ -
Mortgage payable - interest at 8%, interest and principal of $24,000
payable monthly over a ten-year term through October 2005
2,173 2,283
Notes payable - insurance companies, interest at 8.61% paid in full at
January 27, 1999 - 5,555
Notes payable - insurance companies, interest at 1.5% above the London
Interbank Offered Rate ("LIBOR"), paid in full at January 27, 1999
- 6,000
------- --------
12,617 13,838
Less: current portion 119 1,221
------- --------
$12,498 $ 12,617
======= ========
</TABLE>
F-13
<PAGE> 43
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
Refinancing
-----------
On January 27, 1999, the Company repaid its existing long-term debt with
the insurance companies. The Company obtained a loan from a new lender
in the amount of $10,444,444. As collateral for the loan, the Company
granted the lender a lien on the Company's machinery and equipment. The
loan has an eight-year term and will accrue interest at 6.85%. The loan
does not contain any restrictive financial covenants. The loan agreement
contains a cross collateral/cross default clause in connection with the
Company's Line of Credit Agreement (see Note. 7).
The proceeds from the new loan were used to repay the notes with the
insurance companies. The Company incurred $10,000 of costs which are
being amortized over the term of the new loan. Costs of $342,000
associated with the old debt were written off as an extraordinary
charge.
The mortgage payable is secured by the Company's corporate headquarters
building and land, having a net book value of approximately $4,555,000
at January 30, 1999. Additionally, the mortgage agreement contains
certain restrictive financial covenants.
Maturities of long-term debt as of January 30, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending January
-------------------
<S> <C>
2000 $ 119
2001 1,333
2002 1,429
2003 1,532
2004 1,642
Thereafter 6,562
-------
$12,617
=======
</TABLE>
7. LINE OF CREDIT
--------------
At January 30, 1999, the Company had an unused $15,000,000 line of
credit agreement. The line of credit is secured by certain assets of the
Company, including accounts receivable and inventory. Borrowings under
the facility bear interest at the Company's option of the bank's prime
rate, the fixed rate loan (as defined in the agreement) or the adjusted
Eurodollar rate plus 2.5%. The line of credit expires on July 31, 1999
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.
F-14
<PAGE> 44
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts and fair values of the Company's financial
instruments are as follow:
<TABLE>
<CAPTION>
January 30, 1999 January 31, 1998
-------------------- ------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
Notes with lenders:
<S> <C> <C> <C> <C>
6.85% note payable $10,444 $10,444 $ - $ -
8.61% notes payable $ - $ - $ 5,556 $ 5,725
1995 notes payable $ - $ - $ 6,000 $ 6,000
Mortgage payable $ 2,173 $ 2,291 $ 2,383 $ 2,383
</TABLE>
The fair value of the 6.85% note payable was assumed to reasonably
approximate the carrying amount since the debt was recently issued. The
fair value of the mortgage payable was based on current rates available
to the Company for debt with similar remaining 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: cash, 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 gold inventory approximates
fair value.
9. INCOME TAXES
------------
Deferred income taxes reflect the net tax effects of temporary
differences between the carry amounts of assets and liabilities for
financial purposes and for income tax purposes.
Income tax provision/(benefit) consists of the following:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
January 30, January 31, February 1,
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 1,406 $(1,080) $ 398
State and local 105 (129) 73
------- ------- -------
1,511 (1,209) 471
Deferred income tax (70) (392) 307
------- ------- -------
Total $ 1,441 $(1,601) $ 778
======= ======= =======
</TABLE>
F-15
<PAGE> 45
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
9. INCOME TAXES (Continued)
-----------
The following is a reconciliation of the federal statutory rate to the
effective tax rate:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
January 30, January 31, February 1,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory tax (benefit) rate 34.0% (34.0)% 34.0%
State and local taxes (benefit),
net of federal benefit 3.0 (4.0) 3.0
Reversal of prior year accruals - - (7.3)
Other 1.0 - .6
---- ----- ----
Statutory tax (benefit) rate 38.0% (38.0)% 30.3%
==== ===== ====
</TABLE>
The tax effects of significant items comprising the Company's deferred
tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---- ----
<S> <C> <C>
Non-current deferred tax liabilities:
Difference between book and tax
depreciation methods $1,231 $ 818
------ ------
Current deferred tax assets:
Reserves for sales returns and
doubtful accounts 427 454
Inventory reserve 424 150
Other 352 116
------ ------
1,203 720
------ ------
Net deferred tax liabilities $ 28 $ 98
====== ======
</TABLE>
10. OTHER INCOME/(EXPENSE)
----------------------
Other income for the year ended January 31, 1998 includes a gain of
approximately $625,000 on the sale of an asset.
F-16
<PAGE> 46
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
11. 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 distribution facilities from MRC
for a period of ten years, at an average annual rental of $536,000, plus
real estate taxes and other occupancy costs.
The Company had another lease agreement with MRC to rent a manufacturing
facility from MRC. On May 16, 1997, the Company acquired the facility
for a purchase price of $1,150,000. As part of the transaction, the
Company obtained an exclusive, two-year option to acquire from MRC the
two remaining manufacturing and distribution facilities for $2,450,000
that are currently being leased from MRC (the "Leased Properties"). (See
Note 18).
12. LEASES AND COMMITMENTS
----------------------
(a) Leases
The Company conducts certain operations from leased manufacturing and
distribution facilities. In addition to rent, the Company pays property
taxes, insurance and certain 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 January 30, 1999:
<TABLE>
<CAPTION>
Year Ending Capital Operating
January Leases Leases
------- ------ ------
(in thousands)
<S> <C> <C> <C>
2000 $ 111 $ 531
2001 11 540
2002 - 135
------ ------
Minimum lease payments: 122 $1,206
======
Less: Interest 3
------
Present value of net
minimum lease payments 119
Less: current portion 108
------
$ 11
======
</TABLE>
The majority of the payments set forth above for operating leases are to
MacQuesten Realty Company.
F-17
<PAGE> 47
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
12. LEASES AND COMMITMENTS (Continued)
----------------------------------
The interest rates applicable to the capital leases range from 5.0% -
8.18%. Included in property plant and equipment as of January 30, 1999
are capitalized assets with a carrying value of $481,000. Total
capitalized lease amortization expense was $215,000, $242,000 and
$353,000 for the years ended January 30, 1999, January 31, 1998 and
February 1, 1997.
Rent expense related to the MRC leases for the years ended January 30,
1999, January 31, 1998 and February 1, 1997 amounted to $504,000,
$498,000 and $624,000, 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 January 30, 1999, the future guaranteed royalty commitments are as
follows:
<TABLE>
<CAPTION>
Year Ending Guaranteed
January Royalty
Commitments
-----------
(in thousands)
<S> <C>
2000 $430
2001 200
Thereafter 4
----
$634
====
</TABLE>
13. 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.
F-18
<PAGE> 48
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
13. STOCK PLANS (Continued)
-----------------------
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 (loss) and earnings (loss) per share would have been net income
(loss) of $2,074,000, $(2,674,000) and $1,731,000, and $.29, $(.35) and
$.21, earnings (loss) per share for the years ended January 30, 1999,
January 31, 1998 and February 1, 1997, respectively. The weighted
average per share fair value of the option granted during the year ended
January 30, 1999 was estimated at $.84 on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
January 30,
1999
----
<S> <C>
Expected life (years) 2
Risk-free interest rates 5.5%
Expected volatility 44.4%
Expected dividend yield -
</TABLE>
The pro forma effect on net income and earnings per share for the year
ended January 30, 1999 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 January 30, 1999, all shares reserved under the plan had been
granted.
F-19
<PAGE> 49
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------------------
The changes in the number of shares under option, the weighted average
option price per share and the exercisable price per share are as
follows:
<TABLE>
<CAPTION>
1986 Incentive Stock Option Plan
--------------------------------
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C>
Outstanding and exercisable, January 27, 1996 54,500 $3.63 $3.63
Lapsed (1,000) $3.63 $3.63
---------
Outstanding and exercisable, February 1, 1997 53,500 $3.63 $3.63
Lapsed (53,500) $3.63 $3.63
-------
Outstanding and exercisable, January 31, 1998
and January 30, 1999 - $ - $ -
=======
</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 the purchase of up to an aggregate of 2,000,000 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.
<TABLE>
<CAPTION>
Long-term Incentive Plan
------------------------
Weighted
Average Exercise
Shares Option Price Prices
------ ------------ ------
<S> <C> <C> <C> <C>
Outstanding at January 27, 1996 664,900 $3.92 $2.63 - $7.75
Lapsed (11,400) $3.88 $2.94 - $4.13
Granted 15,000 $3.31 $3.31
--------
Outstanding at February 1, 1997 668,500 $3.91 $2.63 - $7.75
Lapsed (114,000) $2.63-$6.13 $2.63 - $6.13
Granted 134,400 $3.00 $2.13 - $3.00
-------
</TABLE>
F-20
<PAGE> 50
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------
Long-term Incentive Plan (Continued)
------------------------------------
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
Outstanding at January 31, 1998 688,500 $3.60 $2.13 - $7.75
Lapsed (190,000) $4.14 $2.94 - $7.75
Granted 150,000 $3.125 $3.125
--------
Outstanding at January 30, 1999 648,500 $3.33 $2.13 - $6.13
=========
</TABLE>
Options were exercisable at January 30, 1999 were for 410,060 shares of
common stock at prices between $2.13- $6.13 a share. At January 30,
1999, shares for future option grants totaling 1,336,500 were available
under the plan.
Non-Employee Directors' Stock Option Plan
-----------------------------------------
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
Outstanding at January 27, 1996 45,000 $4.58 $2.63 - $8.00
Lapsed (10,000) $7.31 $6.63 - $8.00
Granted 15,000 $3.03 $3.00 - $3.06
--------
Outstanding at February 1, 1997 50,000 $3.63 $2.63 - $5.00
Lapsed (5,000) $4.18 $4.18
Granted 15,000 $3.00 $2.69 - $3.00
--------
Outstanding at January 31, 1998 60,000 $2.69 $2.63 - $5.00
Lapsed (10,000) $4.19 $4.19
Granted 15,000 $2.75 $2.56 - $3.00
-------
Outstanding at January 30, 1999 65,000 $3.08 $2.39 - $5.00
=======
</TABLE>
Options were exercisable at January 30, 1999 for 33,633 shares of common
stock at prices between $2.93 - $5.00 a share. At January 30, 1999,
shares for future option grants totaling 185,000 were available under
this plan.
F-21
<PAGE> 51
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------------------
WARRANTS AND NON-QUALIFIED OPTIONS
The Company has granted common stock purchase warrants and non-qualified
options.
The changes in the number of shares under the stock purchase warrants
and non-qualified options and the weighted average option price per
share are as follows:
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
Outstanding at January 27, 1996 70,000 $5.15 $3.25 - $7.50
Lapsed (45,000) $4.75 $4.00 - $6.25
--------
Outstanding at February 1, 1997 25,000 $5.82 $3.25 - $7.50
Granted 96,000 $3.00 $3.00
--------
Outstanding at January 31, 1998 121,000 $3.58 $3.00 - $7.50
Lapsed (25,000) $5.82 $3.25 - $7.50
--------
Outstanding and exercisable at
January 30, 1999 96,000 $3.00 $3.00
========
</TABLE>
14. RETIREMENT PLAN
---------------
The Company established a 401(k) Retirement 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
years ended January 30, 1999, January 31, 1998 and February 1, 1997 is
$69,000, $96,000 and $34,000 of expense for the employer portion of the
contribution.
15. SIGNIFICANT CUSTOMERS
---------------------
Sales to the Company's two largest customers were approximately 13% and
11%, 13% and 13%, and 13% and 12%, respectively, of net sales for the
years ended January 30, 1999, January 31, 1998, and February 1, 1997.
F-22
<PAGE> 52
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
16. 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 share 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. On May 26, 1998, the Board of Directors
authorized an increase of up to an additional 1,000,000 shares of common
stock that the Company may repurchase under the Stock Repurchase Plan.
During the years ended January 30, 1999, January 31, 1998, and February
1, 1997, the Company repurchased a total of 879,000, 328,000 and 250,000
shares, respectively, on the open market under the 1995 Stock Repurchase
Program for an aggregate price of approximately $2,244,000, $1,056,000
and $811,000, 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.
17. LEGAL PROCEEDINGS
-----------------
In October 1997, a decision was entered in a case whereby the Company
was ordered to pay the plaintiff according to the terms of an agreement
entered into on May 16, 1986. On April 20, 1998, the Company settled the
case and any future payments that would have been payable under the
agreement for a one-time payment of $600,000. The settlement expense is
included in selling, general and administrative expenses for the year
ended January 31, 1998.
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.
18. SUBSEQUENT EVENTS
-----------------
On February 10, 1999, the Company obtained a loan in the amount of
$937,500. As collateral for the loan, the Company granted the lender a
first mortgage on the manufacturing facility. The mortgage has a
fifteen-year term and interest will accrue at 7.05% per annum. The
mortgage does not contain any restrictive financial covenants.
On March 17, 1999, the Company completed a $4.5 million acquisition of
certain assets, primarily molds, machinery and equipment, and inventory,
of Town and Country Fine Jewelry Group. In a separate transaction, the
Company sold $2.2 million of these purchased assets.
F-23
<PAGE> 53
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 30, 1999
- --------------------------------------------------------------------------------
18. SUBSEQUENT EVENTS (Continued)
-----------------
On April 9, 1999 the Company exercised its option to purchase the
remaining manufacturing and distribution facilities housed in the
buildings located at 60 and 70 South MacQuesten Parkway, Mt. Vernon at
an aggregate purchase price of $2,450,000 and on terms and conditions
substantially the same as those agreed to for the purchase of the 50
building.
In April 1999, the Company entered into an Asset Purchase Agreement with
Eurospark Industries, Inc. to purchase machinery and equipment of
Eurospark Industries, Inc. for $500,000. The sale of these assets must
be approved by the United States Bankruptcy Court for the Eastern
District of New York before completion of the transaction.
In early 1999, the compensation committee determined that Michael
Anthony should adopt a Change of Control Plan. The Plan will provide for
severance payments to executive officers and other key employees. The
severance payments to the executives will be an amount equal to three
times the individual's most recent salary and bonus plus a tax "gross
up" payment. Other employees are entitled to one to three times their
base salary and bonus plus a tax "gross up" payment. The Plan also
provides for continuation of medical and dental benefits for a period of
one year and automatic vesting of stock options, if permissable under
the applicable stock option plan. These severance benefits are triggered
upon a change of control, as defined in the Plan. Individual agreements
under the Plan will be entered into by each of the executive officers
and other key employees.
F-24
<PAGE> 54
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Summary of Quarterly Results (Unaudited) (in thousands)
<TABLE>
<CAPTION>
Year Ended January 30, 1999 Year Ended January 31, 1998
--------------------------------------------- ------------------------------------------
Quarter Ended Quarter Ended
--------------------------------------------- ------------------------------------------
May 2, Aug. 1, Oct. 31, Jan. 30, May 3, Aug. 2, Nov. 1, Jan.31,
1998 1998 1998 1999 1997 1997 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (A) $ 30,432 $ 26,912 $ 43,758 $ 35,907 $ 27,606 $ 22,618 $ 41,753 $ 37,972
Cost of goods sold 23,925 21,163 34,373 26,409 22,544 18,967 33,193 32,478
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 6,507 5,749 9,385 9,498 5,062 3,651 8,560 5,494
Selling, general &
administrative
expenses 5,688 5,686 6,949 7,061 5,252 5,845 6,233 7,825
-------- -------- -------- -------- -------- -------- -------- --------
Operating income/(loss) 819 63 2,436 2,437 (190) (2,194) 2,327 (2,331)
Other income (expense):
Gold consignment fees (260) (242) (344) (260) (260) (347) (378) (320)
Interest expense (277) (266) (283) (358) (381) (304) (363) (474)
Interest income 81 78 52 34 125 113 31 28
Other - net 15 18 31 17 24 643 19 19
-------- -------- -------- -------- -------- -------- -------- --------
Total other income (441) (412) (544) (567) (492) 105 (691) (747)
(expense)
Income/(loss) from operations
before extraordinary item
and income taxes 378 (349) 1,892 1,870 (682) (2,089) 1,636 (3,078)
Income tax
provision/(benefit) 144 (133) 719 711 (259) (822) 650 (1,170)
-------- -------- -------- -------- -------- -------- -------- --------
Net income/(loss)
before extraordinary
item 234 (216) 1,173 1,159 (423) (1,267) 986 (1,908)
Extraordinary item -
net of income taxes of
$130,000 - - - 212 - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Net income/(loss) $ 234 $ (216) $ 1,173 $ 947 $ (423) $ (1,267) $ 986 $ (1,908)
======== ======== ======== ======== ======== ======== ======== ========
Earnings/(loss) per share(B):
Income/(loss) before
extraordinary item $ 0.03 $ (0.03) $ 0.17 $ 0.17 $ (0.05) $ (0.15) $ 0.13 $ (0.25)
Extraordinary item - - - (0.03) - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings/(loss)
per share $ 0.03 $ (0.03) $ 0.17 $ 0.14 $ (0.05) $ (0.15) $ 0.13 $ (0.25)
====== ======= ======== ======== ======== ========= ======= ========
</TABLE>
(A) The Company's net sales for the second quarter 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 to the annual per share amount because
the figures are required to be independently calculated.
F-25
<PAGE> 55
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 January 30, 1999 $716 $212 $ - $(390) $538
Year ended January 31, 1998 656 284 - (224) 716
Year ended February 1, 1997 901 170 - (415) 656
Allowance for sales returns:
Year ended January 30, 1999 $480 $506 $ - $(400) $586
Year ended January 31, 1998 748 - - (268) 480
Year ended February 1, 1997 674 261 - (187) 748
</TABLE>
(A) Allowances, returns and uncollectible accounts charged against the
reserve, (net of collections on previously written-off accounts).
S-1
<PAGE> 1
Exhibit 10.33
LOAN & SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT entered into as of the 29th day of January,
1999, by and between General Electric Capital Business Asset Funding
Corporation, a Delaware corporation, whose address is 10900 NE 4th St.,
Suite 500, Bellevue, WA 98004 ("Lender") and MICHAEL ANTHONY JEWELERS, INC., a
DELAWARE CORPORATION, whose address is 115 SOUTH MACQUESTEN PARKWAY, MT. VERNON,
NY 10550 ("Borrower").
WHEREAS, Lender has agreed to make a commercial loan or loans to
Borrower; and
WHEREAS, as a condition to making the loans, and in order to secure the
repayment thereof, Lender has required Borrower to execute and deliver to Lender
this Loan and Security Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Borrower and Lender agree as follows:
1. CREATION OF SECURITY INTEREST. As security for the due and punctual payment
of any and all of the present and future obligations of the borrower to Lender,
whether direct or contingent or joint or several, Borrower hereby conveys,
assigns and grants to Lender a continuing security interest in all of Borrower's
rights, title and interests in and to the equipment described in the
Supplemental Security Agreement(s) entered into pursuant to this Loan and
Security Agreement from time to time ("Equipment") including all present and
future additions, attachments and accessories thereto, all substitutions
therefor and replacements thereof and all proceeds thereof, including all
proceeds of insurance (such Equipment and property hereinafter called
"Collateral").
2. THE LOANS.
(a) Subject to the terms and conditions of this Loan and Security Agreement,
lender agrees to make a loan or loans to Borrower. The maximum principal amount
of any loan or loans to be made by Lender to Borrower shall be within Lender's
discretion, subject to the exercise of Lender's reasonable business judgment,
and shall be as stated in the loan commitment letter issued by lender to
Borrower, or in the event a commitment letter is not issued by Lender, in
Lender's internal credit approval (each such loan or loans shall be referred to
as "the Loan Amount").
(b) The Loan Amounts shall be repaid by Borrower as a term loan or term loans
("Term Loan"). The Term Loan shall be evidenced by a promissory note or notes in
the form attached hereto as Exhibit "A" ("Term Note"). The payment provisions of
each Term Note shall be stated therein.
(c) If requested by Borrower, and in accordance with the terms and conditions of
Section 3 hereof, Lender shall make interim fundings to Borrower of a Term Loan
as partial advances of the Loan Amount ("Interim Loans"). The Interim Loans
shall either be for the payment of the acquisition cost of any items of
Equipment delivered and accepted by Borrower prior to the expiration date of
Lender's loan commitment to Borrower ("Commitment Expiration date") or to fund
progress payments to the vendor or manufacturer of the Equipment, if the making
of progress payments was agreed to by Lender in its commitment or approval to
make the loan or loans to Borrower. The Interim Loans shall be evidenced by
promissory notes in the form attached hereto as Exhibit "B" ("Interim Note").
Interest on all Interim Loans shall be payable as provided therein. The
principal amount due under the Interim Loans shall be due as provided in the
Interim Notes, at which time, provided no Event of Default hereunder has
occurred and is continuing or event which with the passing of time or giving of
notice or both would become an Event of Default hereunder has occurred and is
continuing. Lender shall consolidate all Interim Loans and convert them to a
Term Loan evidenced by a Term Note or Notes. Whether or not a Term Loan is
evidenced by one or more Term Notes shall be agreed between Lender and Borrower,
or in the absence of such an agreement, as decided by Lender, in the exercise of
its reasonable business judgment.
(d) In the event that the amount loan pursuant to the Interim Loans is less than
the Loan Amount, subject to Borrower's compliance with the terms and conditions
of this Loan and Security Agreement (including the satisfaction of the
conditions of borrowing set forth in Section 7 of this Loan and Security
Agreement including but not limited to providing Lender with a description of
the items of Equipment), Lender shall disburse to Borrower the balance of the
Loan Amount on the same date that the Interim Loans are converted into a term
loan.
3. METHOD FOR BORROWING ON INTERIM LOAN. Borrower shall give Lender at least
five (5) business days written notice of a request for the disbursement of an
Interim Loan ("Request"), specifying the date on which the Interim Loan is to be
disbursed. Such Request shall be in the form attached hereto as Exhibit "C".
Such Request shall be accompanied by an original copy of the invoice or invoices
to be paid from the Interim Loan. Such Request shall constitute a representation
and warranty by the Borrower that (i) as of the date of the Request no Event of
Default or event which with the passing of time or the giving of notice or both
would constitute an Event of Default hereunder has occurred and is continuing
and (ii) in the event items of Equipment have been delivered to Borrower,
Borrower has unconditionally accepted the Equipment from the vendor thereof.
Subject to the conditions of this Loan and Security Agreement, Lender shall
disburse the Interim Loan to the invoicing party, or if Borrower shall have paid
the amount of such invoice, Lender shall reimburse Borrower, upon receipt of
proof of payment from Borrower.
4. CROSS COLLATERAL/CROSS DEFAULT. All Collateral shall secure the payment and
performance of all of Borrower's liabilities and obligations to Lender hereunder
and under any of the loan documents relating hereto including, but not limited
to all Interim Notes and all Term Notes (the Loan and Security Agreement, the
Interim Notes, the Term Notes, the Supplemental Security Agreement(s) and all
other loan documents may be referred to herein collectively as the "Loan
Documents"). Lender's security interest in the Collateral shall not be
terminated until and unless all of Borrower's obligations to Lender under any of
the Loan Documents are fully paid and performed. The occurrence of an event of
default under any other of the Loan Documents shall be deemed to be an Event of
Default hereunder and an Event of Default hereunder shall be deemed to be an
event of default under any other of the Loan Documents.
Page 1 of 6
<PAGE> 2
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants as
follows:
(a) Power and Authorization. Borrower has the full power and (corporate)
authority to execute deliver and perform Borrower's obligations under the Loan
Documents. The execution and delivery of the Loan Documents have been authorized
by all requisite corporate (or partnership) action on the part of Borrower. The
execution, delivery and performance of the Loan Documents have not constituted
and will not constitute a breach, default or violation of or under Borrower's
articles of incorporation, by-laws (partnership agreement), or any other
agreement, indenture, contract, lease, law, order, decree, judgment, or
injunction to which Borrower is a party or may be bound and have not resulted
and will not result in the creation of any lien upon the Equipment pursuant to
any agreement, indenture, lease, contact or other instrument to which Borrower
is a party, except the lien created by this Loan and Security Agreement.
(b) Existence. If Borrower is a corporation, Borrower (i) is duly incorporated,
validly existing and in good standing under the laws of its state of
incorporation, (ii) has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry out its business as now
conducted, and (iii) is duly qualified to transact business as now conducted,
and (iii) is duly qualified to transact business as a foreign corporation in
each jurisdiction where the Equipment will be located and in the jurisdiction
where its principal place of business is located. If Borrower is a partnership,
Borrower (i) has been duly formed as a (limited or general) partnership under
the laws of the state of its organization, (ii) is comprised of the general
partner(s) listed on the Schedule of Partners attached to this Loan and Security
Agreement, and (iii) is in good standing under the laws of the state of its
formation.
(c) Binding Effect. This Loan and Security Agreement constitutes the valid and
binding agreement of the Borrower; the Interim Notes and the Term Note, when
executed and delivered, will constitute the valid and binding obligations of the
Borrower; and the Loan Documents are enforceable in accordance with their terms
except as (i) the enforceability thereof may be limited by the bankruptcy laws,
and (ii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(d) Litigation. There is no action, suit or proceeding pending against, or to
the knowledge of the Borrower, threatened against or affecting the Borrower,
before any court or arbitrator or any governmental body, agency or official
which has not been previously disclosed to the Lender in writing and in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, financial condition or results of operations of
the Borrower or which would in any manner draw into question the validity of any
of the Loan Documents.
(e) Filing of Tax Returns. The Borrower has filed all tax returns required to
have been filed and has paid all taxes shown to be due and payable on such
returns, including interest and penalties, and all other taxes which are payable
by it, to the extent the same have become due and payable. The Borrower knows of
no proposed tax assessment against it and all tax liabilities of the Borrower
are adequately provided for.
(f) Title. The Borrower has or shall have at the time it executes the Term Note
good and indefeasible title to the Collateral free and clear of all liens other
than the Lender's lien.
(g) Compliance with Law. The business and operations of the Borrower have been
and are being conducted in accordance with all applicable laws, rules and
regulations, other than violations which could not (either individually or
collectively) have a material adverse effect on the financial condition or
operations of the Borrower.
(h) Full Disclosure. All documents, records, instruments, certificates,
statements (including, but not by way of limitation, financial statements of
Borrower) and information provided to Lender by Borrower in connection with this
Loan and Security Agreement are true and accurate in all material respects and
do not contain any untrue statement, or fail to contain any statement of a
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact known to the Borrower that Borrower has not
disclosed in writing which could materially and adversely affect the financial
condition or operations of Borrower.
(i) Security Interest. The security interest granted to Lender hereunder is a
valid, first priority security interest in the Collateral and has been, or
promptly after the execution of the Supplemental Security Agreement describing
the Collateral will be, perfected in accordance with the requirements of all
states in which any item of the Collateral is located.
(j) Personal Property. Under the laws of the state(s) in which the Collateral is
to be located, the Collateral is deemed to consist solely of personal property.
(k) Pollution and Environmental Control. Borrower has obtained all permits,
licenses and other authorizations which are required under, and is in material
compliance with, all federal, state, and local laws and regulations relating to
pollution, reclamation, or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into air,
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes. Borrower
shall maintain all such permits, licenses, and authorizations current.
6. COVENANTS. Borrower hereby agrees and covenants as follows:
(a) Payment. Borrower shall pay the indebtedness secured hereby as provided
herein and in the Interim Notes and Term Notes.
(b) Location of Collateral. Borrower will keep the Collateral located at the
location or locations stated on the Supplemental Security Agreements, provided,
however, that Borrower may change the location of the Collateral with Lender's
prior written consent.
(c) No Liens. Except for the security interest granted hereby or under any other
agreement under which Lender is the secured party, whether as mortgagee.
beneficiary or otherwise. Borrower shall keep the Collateral free and clear of
any security interest, lien or encumbrance of any kind and Borrower shall not
sell, assign (by operation of law or otherwise) exchange or otherwise dispose of
any of the Collateral.
Page 2 of 6
<PAGE> 3
(d) Insurance. Borrower shall procure and continuously maintain and pay for
(a) all risk physical damage and property insurance to the equipment for not
less than the full replacement value thereof naming Lender as loss payee and
(b) bodily injury and property damage combined single limit liability insurance,
all in such amounts and against such risks and hazards as are reasonably
required by Lender, with insurance companies and pursuant to contracts or
policies and with deductibles satisfactory to Lender. All contacts and policies
shall include provisions for the protection of Lender notwithstanding any act or
neglect of or breach or default by Borrower, shall provide for payment of
insurance proceeds to Lender, shall provide that they may not be modified,
terminated or canceled unless Lender is given at least thirty (30) days' advance
written notice thereof, and shall provide that the coverage is "primary
coverage" for the protection of Borrower or Lender notwithstanding any other
coverage carried by Lender protecting against similar risks. Borrower shall
promptly notify any appropriate insurer and Lender of each and every occurrence,
which may become the basis of a claim or cause of action against the insured and
provide Lender with all data pertinent to such occurrence. Borrower shall
furnish Lender with certificates of such insurance or copies of policies upon
request and shall furnish Lender with renewal certificates not less than thirty
(30) days prior to the renewal date. Proceeds of all insurance are payable first
to Lender to the extent of its interest.
(e) Financing Statements. At the request of Lender, Borrower will join Lender in
executing one or more financing statements pursuant to the Uniform Commercial
Code and other documents deemed necessary by Lender under applicable law to
record or perfect its security interest in the Collateral, including
continuation statements, in form satisfactory to Lender and will pay the cost of
filing the same in all public offices wherever filing is deemed by Lender to be
necessary or desirable. Borrower hereby authorizes Lender, in such jurisdictions
where such action is authorized by law, to effect any such recordation or filing
of financing statements or other documents without Borrower's signature thereto.
(f) Change of Name or Address. Borrower will immediately notify Lender in
writing of any change in its place of business or the adoption or change of any
tradename or fictitious business name, and will upon request of Lender, execute
any additional financing statements or other similar documents necessary to
perfect or maintain its security interest.
(g) Use of Equipment, Maintenance. Borrower will cause the Equipment to be used
in a careful and proper manner, will comply with and conform to all governmental
laws, rules and regulations relating thereto, and will cause the Equipment to be
operated in accordance with the manufacturer's or supplier's instructions or
manuals and only by competent and duly qualified personnel. Borrower will cause
the Equipment to be kept and maintained in good repair, condition and working
order and will furnish all parts, replacements, mechanisms, devices and
servicing required therefor so that the value, condition and operating
efficiency thereof will at all times be maintained and preserved, normal wear
and tear excepted. All such repairs, parts, mechanisms, devices and replacements
shall immediately, without further act, become part of the Equipment and subject
to the security interest created by this Loan and Security Agreement. Borrower
will not make any improvement, change, addition or alteration to the Equipment
if such improvement, change, addition or alteration will impair the originally
intended function or use of the Equipment or impair the value of the Equipment
as it existed immediately prior to such improvement, change, addition or
alteration. Any part added to the Equipment in connection with any improvement,
change, addition or alteration shall immediately, without further act, become
part of the Equipment and subject to the security interest created by this Loan
and Security Agreement.
(h) Inspection. Lender may at any reasonable time or times inspect the Equipment
and may at any reasonable time or times inspect the books and records of
Borrower.
(i) Taxes. Borrower shall promptly pay, when due, all charges, fees, assessments
and taxes (excluding all taxes measured by Lender's income) which may now or
hereafter be imposed upon the ownership, leasing, possession, sale or use of the
Collateral.
(j) Performance by Lender. If Borrower fails to perform any agreement or
obligation contained herein, Lender may itself perform, or cause the performance
of such agreement or obligation. Borrower will pay, or reimburse Lender, on
demand, for any and all fees, including attorneys' fees, costs and expenses of
whatever kind or nature incurred by Lender in connection with (i) the creation,
preservation and protection of Lender's security interest in the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, (ii)
payments or discharge of any taxes or liens upon or in respect of the
Collateral, (iii) premiums for insurance with respect to the Equipment and
(iv) this Loan and Security Agreement and with protecting, maintaining or
preserving the Collateral and Lender's interests therein, whether through
judicial proceedings or otherwise, or in connection with defending or
prosecuting any actions, suits or proceedings arising out of or related to the
Loan and Security Agreement and the Loan Documents or in connection with any
debt restructuring, loan workout negotiations or bankruptcy or insolvency case
or proceedings. All such amounts shall constitute obligations of Borrower
secured by the Collateral. In the event that Borrower fails to perform any of
its agreements contained herein, Borrower will, on demand, reimburse Lender for
all such expenditures, together with interest thereon from the date of such
expenditure until fully reimbursed at the rate of two percent (2%) per month on
the outstanding balance of such expenditures or the highest rate permitted by
law, whichever is less.
(k) Power of Attorney. Borrower hereby irrevocably appoints Lender Borrower's
attorney-in-fact, with full authority in the place and stead of Borrower and in
the name of Borrower or otherwise, from time to time in the Lender's discretion,
to take any action and to execute any instrument which Lender may deem necessary
or advisable to accomplish the purposes of this Loan and Security Agreement,
including, without limitation; (i) to obtain, compromise and adjust insurance
required to be paid to Lender; (ii) to ask, demand, collect, sue for, recover,
receive, and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; (iii) to receive, endorse, and
collect any drafts or other instruments, documents, and chattel paper in
connection with clause (i) or (ii) above; and (iv) to file any claims or take
any action or institute any proceedings which Lender may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Lender with respect to any of the Collateral.
(l) No Duties. The powers conferred on Lender hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Lender shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
Page 3 of 6
<PAGE> 4
(m) Financial Data. Borrower will furnish to Lender and will cause any guarantor
of Borrower's obligations to furnish to Lender on request (i) annual balance
sheet and profit and loss statements prepared in accordance with generally
accepted accounting principles and practices consistently applied and, if Lender
so requires, accompanied by the annual audit report of an independent certified
public accountant reasonably acceptable to Lender, and (ii) all other financial
information and reports that Lender may from time to time reasonably request,
including, if Lender so requires, income tax returns of Borrower and any
guarantor of Borrower's obligations hereunder.
7. CONDITIONS OF BORROWING. Lender shall not be obligated to make any loan
hereunder unless:
(a) The Interim Notes or Term Notes evidencing such loan shall have been duly
executed and delivered to Lender;
(b) Borrower shall have executed and delivered to Lender the Supplemental
Security Agreement describing the Collateral and stating, except with respect to
progress payment fundings, the location thereof;
(c) Except with respect to progress payment fundings, Lender shall have received
evidence (as described in Section 6d hereof) that insurance has been obtained in
accordance with the provisions of this Loan and Security Agreement;
(d) Lender shall have received any and all third party consents, waivers or
releases deemed necessary or desirable by it in connection with the loan and the
Collateral being financed, including, without limitation, Uniform Commercial
Code lien releases and the consent and waiver, in form and substance
satisfactory to Lender, of each and every realty owner, landlord and mortgagee
holding an interest in or encumbrance on the real property where any of the
Collateral is to be located;
(e) All filings, recordings and other actions deemed necessary or desirable by
Lender in order to establish, protect, preserve and perfect its security
interest in the Collateral being financed by such loan as a valid perfected
first priority security interest shall have been duly effected, including,
without limitation, the filing of financing statements and the recordation of
landlord (owners) and/or mortgagee waivers or disclaimers, all in form and
substance satisfactory to Lender, and all fees, taxes and other charges relating
to such filings and recordings shall have been paid by Borrower;
(f) The representations and warranties contained in this Loan and Security
Agreement shall be true and correct in all respects on and as of the date of the
making of any loan hereunder with the same effect as if made on and as of such
date;
(g) In the sole judgment of Lender, there shall have been no material adverse
change in the financial condition, business or operations of Borrower from the
earliest date of any financial statement, credit report, business report or
similar document submitted to Lender for its review;
(h) All Loan Documents shall be satisfactory to Lender's attorneys; and
(i) Lender shall have received, in form and substance satisfactory to Lender,
such other documents as Lender shall require including, but not limited to, a
Request, proof of payment, vendor invoices and certificates of authority and
incumbency.
8. DEFAULT. The occurrence of any of the following events, following the giving
of any required notice and/or the expiration of any applicable period of grace,
shall constitute an event of default ("Event of Default") hereunder:
(a) Borrower's default in payment of any installment of the principal of or
interest on any Interim Note or Term Note when and after the same shall become
due and payable, whether at the due date thereof or by acceleration or
otherwise, which default shall continue unremedied for ten (10) days; or
(b) The failure by Borrower to make payment of any other amount payable
hereunder or under any Interim Note or Term Note, and the continuance of such
failure for more than ten (10) days after written notice thereof by Lender to
Borrower; or
(c) The failure by Borrower to perform or observe any covenant, condition,
obligation or agreement to be performed or observed by it hereunder, which
failure shall continue unremedied for thirty (30) days after written notice
thereof by Lender to Borrower; or
(d) The occurrence of a default described in Section 4 hereof; or
(e) Any warranty, representation or statement made or furnished with respect to
the Borrower or the Collateral to Lender by or on behalf of Borrower, in
connection with this Loan and Security Agreement, or the indebtedness secured
hereby, shall prove to have been false in any adverse, material respect when
made or furnished; or
(f) Borrower shall become insolvent or bankrupt or make an assignment for the
benefit of creditors or consent to the appointment of a trustee or receiver; or
a trustee or a receiver shall be appointed for Borrower or for a substantial
part of its property without its consent and shall not be dismissed for a period
of sixty (60) days; or bankruptcy, reorganization, liquidation, insolvency or
dissolution proceedings shall be instituted by or against Borrower and, if
instituted against Borrower, shall be consented to or be pending and not
dismissed for a period of sixty (60) days; or any execution or writ of process
shall be issued under any action or proceeding against Borrower in such capacity
whereby any of the Collateral may be taken or restrained; Borrower shall cease
doing business as a going concern; or, without the prior written consent of
Lender, Borrower shall sell, transfer or dispose of all or substantially all of
its assets or property; or
(g) The liquidation, merger, consolidation, reorganization, conversion to an "S"
status or dissolution, if Borrower is a corporation or partnership, of Borrower,
if in Lender's reasonable opinion, such act shall materially and adversely
affect Borrower's ability to perform under any of the Loan Documents. Not
withstanding the forgoing, lender acknowledges that borrower may acquire other
jewelry concerns and the same shall not be deemed a merger or consolidation
herein, provided borrower survives the acquisition; or
Page 4 of 6
<PAGE> 5
(h) Any item of Collateral is seized or levied on under legal or governmental
process or for any reason Lender deems itself insecure. Lender shall be entitled
to deem itself insecure when some event occurs, fails to occur or is threatened
or some objective condition exists or is threatened which significantly impairs
the prospects that any of Borrower's obligations to Lender will be paid when
due, which significantly impairs the value of the Collateral to Lender or which
significantly affects the financial or business condition of Borrower.
The occurrence of an Event of Default shall terminate any commitment or
obligation by Lender to make any of the loans contemplated by this Loan and
Security Agreement.
9. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default hereunder,
Lender may, at its option, do any one or more of the following:
(a) Declare all obligations of Borrower to Lender to be immediately due and
payable, whereupon all unpaid principal of and interest on said indebtedness and
other amounts declared due and payable shall be and become immediately due and
payable;
(b) Take possession of all or any of the Collateral and exclude therefrom
Borrower and all others claiming under Borrower, and thereafter hold, store,
use, operate, manage, maintain and control, make repairs, replacements,
alterations, additions and improvements to and exercise all rights and powers of
Borrower in respect to the Collateral or any part thereof. In the event Lender
demands, or attempts to take possession of the Collateral in the exercise of any
rights under this Loan and Security Agreement, Borrower promises and agrees to
promptly turn over and deliver complete possession thereof to Lender;
(c) Require Borrower to assemble the Collateral, or any portion thereof, at a
place designated by Lender and reasonably convenient to both parties, and
promptly to deliver such Collateral to Lender, or an agent or representative
designated by it;
(d) Sell, lease or otherwise dispose of the Collateral at public or private
sale, without having the Collateral at the place of sale, and upon terms and in
such manner as Lender may determine (and Lender may be a purchaser at any sale);
and
(e) Exercise any remedies of a secured party under the Uniform Commercial Code
as adopted in the state where the Collateral is located or any other applicable
law.
Except as to portions of the Collateral which are perishable or
threaten to decline speedily in value or are of a type customarily sold on a
recognized market, Lender shall give Borrower at least ten (10) days' prior
written notice of the time and place of any public or private sale of the
Collateral or other intended disposition thereof to be made. Such notice may be
mailed to Borrower at the address set forth in the first paragraph of this Loan
and Security Agreement. Borrower hereby specifically agrees (to the extent that
applicable law and public policy allows it to effectively do so) that any public
or private sale held in accordance with the terms of this Loan and Security
Agreement shall, for the purpose of the Uniform Commercial Code as adopted in
the state where the Collateral is located and for all other purposes, be deemed
to have been conducted in a commercially reasonable manner and in good faith.
The proceeds of any sale under Section 9(d) shall be applied as
follows:
(i) To the repayment of the costs and expenses of retaking, holding and
preparing for the sale and the selling of the Collateral (including legal
expenses and attorneys' fees) and the discharge of all assessments,
encumbrances, charges or liens, if any, on the Collateral prior to the lien
hereof (except any taxes, assessments, encumbrances, charges or liens subject to
which such sale shall have been made);
(ii) To the payment of the whole amount then due and unpaid of the
indebtedness of Borrower to Lender;
(iii) To the payment of other amounts then secured hereunder; and
(iv) The surplus, if any, shall be paid to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
Lender shall have the right to enforce one or more remedies hereunder,
successively or concurrently, and such action shall not operate to stop or
prevent Lender from pursuing any further remedy which it may have, and any
repossession or retaking or sale of the Collateral pursuant to the terms hereof
shall not operate to release Borrower until full payment of any deficiency has
been made in cash.
10. LIMITATION ON INTEREST. It is the intent of the parties to this Loan and
Security Agreement to contract in strict compliance with applicable usury laws
from time to time in effect. In furtherance thereof, the parties stipulate and
agree that none of the terms and provisions contained in the Loan Documents
shall ever be construed to create a contract to pay for the use, forbearance or
detention of money at a rate in excess of the maximum interest rate permitted to
be charged by applicable law from time to time in effect.
11. PERSONAL PROPERTY/TAGS. No item of Equipment will be attached or affixed to
realty or any building without Lender's prior knowledge and written consent and
waiver of the landlord and the mortgagee, if any, of the real property. If so
requested by Lender, Borrower will affix tags supplied by Lender, reflecting
Lender's security interest in the Equipment.
12. LOSS AND DAMAGE. Borrower shall bear the risk of damage, loss, theft, or
destruction, partial or complete of the Equipment, whether or not such loss or
damage is covered by insurance, except that while Borrower is not in default,
Lender agrees to apply toward payment of obligations of Borrower insurance
proceeds payable to Lender by reason of such damage, loss, theft, or
destruction. In the event of any damage, loss, theft, or destruction, partial or
complete, of any item of Equipment, Borrower shall promptly notify Lender in
writing and at the option of Lender (a) repair or restore the Equipment to good
condition and working order, or (b) replace the Equipment with similar equipment
in good repair, condition and working order, or (c) pay Lender, in cash, an
amount equal to the unamortized equipment cost for the item or if the Equipment
was not purchased with the loan proceeds, the pro rata portion of the
outstanding principal balance due under the Interim Note or Term Note, as the
case may be, and all other amounts relating to that item of Equipment then due
and owing hereunder, and upon payment of
Page 5 of 6
<PAGE> 6
that amount, Lender's lien shall be terminated with respect to that item of
Equipment only, and Lender will release its interest in that item Equipment.
13. ASSIGNMENT. Borrower may not assign or transfer any rights under this Loan
and Security Agreement or to the Collateral without Lender's prior written
consent.
14. INDEMNIFICATION. Borrower shall indemnify and hold harmless Lender from and
against any and all claims, losses, liabilities. causes of action, costs and
expenses (including the fees of Lender's attorneys) ("Claims") in any way
relating to or arising out of this Loan and Security Agreement, the other Loan
Documents or the Collateral, except for any Claims resulting solely and directly
from Lender's gross negligence or willful misconduct.
15. NOTICES. Whenever Borrower or Lender shall desire to give or serve any
notice, demand, request or other communication with respect to this Loan and
Security Agreement, each such notice, demand, request or communication shall be
in writing and shall be effective only if the same is physically delivered or is
by certified mail, postage prepaid, return receipt requested, or by overnight
courier, postage prepaid, mailed to the parties at the addresses set forth in
the first paragraph of this Loan and Security Agreement, with a copy to Lender's
Vice President of Credit. Any party hereto may change its address for such
notices by delivering or mailing to the other parties hereto, as aforesaid, a
notice of such change.
16. NO WAIVER BY LENDER. By exercising or failing to exercise any of its rights,
options or elections hereunder, Lender shall not be deemed to have waived any
breach or default on the part of Borrower or to have released Borrower from any
of the obligations secured hereby, unless such waiver or release is in writing
and is signed by Lender. In addition, the waiver by Lender of any breach hereof
for default in payment of an indebtedness secured hereby shall not be deemed to
constitute a waiver of any succeeding breach or default.
17. FURTHER AGREEMENTS. From time to time, Borrower will execute such further
instruments as Lender may reasonably require, in order to protect, preserve, and
maintain the security interest granted hereby.
18. BINDING UPON SUCCESSORS. All agreements, covenants, conditions and
provisions of this Loan and Security Agreement shall apply to and bind the
successors and assigns of all parties hereto.
19. GOVERNING LAWS. This Loan and Security Agreement shall be governed by the
laws of the State of Washington.
20. AMENDMENT. This Loan and Security Agreement can be modified or rescinded
only by a writing expressly referring to this Loan and Security Agreement,
signed by both of the parties hereto.
21. INVALIDITY OF PROVISIONS. Every provision of this Loan and Security
Agreement is intended to be severable. In the event that any term or provision
hereof is declared by a court to be illegal or invalid for any reason whatsoever
such illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable, then to the extent possible all of the other provisions shall
nonetheless remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Lender have duly executed this Loan and
Security Agreement the day and year first above written.
Lender: General Electric Borrower: Michael Anthony Jewelers, Inc.
Capital Business Asset
Funding Corporation
------------------------ -------------------------
By: /s/ By: /s/ Michael A. Paolercio
------------------------ -------------------------
(Print Name): (Print Name): Michael A. Paolercio
------------------------ -------------------------
Title: Title: Treasurer
------------------------ -------------------------
Social Security
Number:
-------------------------
(if Borrower is
an individual)
FEIN: 13-2910285
-------------------------
Page 6 of 6
<PAGE> 1
Exhibit 10.34
AMENDMENT NO. ONE
TO
LOAN AND SECURITY AGREEMENT
This Amendment No. One to the Loan and Security Agreement dated JANUARY 29,
1999 (this "Amendment") is made as of the 29TH day of JANUARY, 1999, by and
between General Electric Capital Business Asset Funding Corporation ("Lender")
and Michael Anthony Jewelers, Inc. ("Borrower") with respect to the following
facts:
a. Lender and Borrower are parties to that certain Loan and Security
Agreement of even date herewith (the "Agreement").
b. Lender and Borrower wish to amend the Agreement as provided in this
Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by Lender and Borrower, Lender and Borrower
hereby agree as follows:
1. Section 5(e) is hereby amended by adding the following sentence
after the first sentence of such section:
The foregoing sentence shall not be construed to prohibit Borrower
from seeking and, if granted, complying with extensions of tax
filing or payment deadlines, provided the same is permitted under
applicable law and does not result in any lien on any Equipment.
2. Section 5(f) of the Agreement is hereby amended by adding the
following language at the end of such section:
except for any lender's lien on any Equipment if (but only if) such
lien is (i) disclosed to Lender in writing by Borrower prior to the
closing of the Loan for such Equipment and (ii) released
simultaneously with such closing (any such lien, if so disclosed and
released, being referred to herein as a "Temporary Lien").
3. Section 6(c) of the Agreement is hereby amended by adding the
following language before the word "Borrower" where such word first appears in
such section:
and except for any Temporary Liens,
4. Section 6(c) of the Agreement is hereby further amended by adding
the following language at the end of such section:
; provided, that Borrower may sell or otherwise dispose of any of
the Equipment if, but only if, Borrower is not then in default and,
prior to such sale or other disposition, Borrower either (i) repays
to Lender the portion of the remaining balance of the Loan
attributable to such Equipment (such amount to be approved by
Lender), plus the prepayment premium thereon (calculated in
accordance with the formula set forth in the Term Note for such
Loan) or (ii) grants to Lender a security interest in other
equipment of similar type and value that is (A) owned by Borrower
free and clear of all liens or other claims or interests (other
than the subordinate liens, other claims or interests (if any) that
were permitted on the disposed Equipment) and (B) otherwise in
compliance with and fully subject to the requirements of the
applicable Loan Documents, and Borrower executes and delivers to
Lender such financing statements and other documents as Lender
shall request to perfect and protect its first priority security
interest in such replacement equipment; further provided, that,
within any one-year period, (x) Borrower may only so dispose of
Equipment a maximum of two times and (y) the total remaining
balance of the Loan attributable to the Equipment disposed in such
year shall not exceed $200,000.
5. Section 7(d) of the Agreement is hereby amended by adding the
following language at the end of such section:
provided, that the releases for any Temporary Liens may be delivered
simultaneously with the closing of the Loan for the Equipment that
is the subject of such Temporary Liens.
<PAGE> 2
6. Section 7(e) of the Agreement is hereby amended by adding the
following language at the end of such section:
; provided that, in the case of any Equipment subject to any
Temporary Lien, the financing statement(s) to be filed thereon by or
for Lender shall have been duly executed and delivered by Borrower to
Lender but shall not be filed prior to closing the Loan related to such
Equipment.
7. Section 9(d) of the Agreement is hereby amended in its entirety to
read as follows:
Sell, lease or otherwise dispose of the Collateral at public or private
sale, with or without having the Collateral at the place of sale, and
upon terms and in such manner as Lender may determine (and Lender may
be a purchaser at any sale), Borrower hereby agreeing that, for a
period not to exceed 120 days, and without any charge to Lender, (i)
Lender may store the Collateral at any premises at which the same is
located and attempt to sell the Collateral therefrom and (ii) Borrower
shall ensure that electricity (including back-up electricity for
security purposes) and access to any safes are provided; and
IN WITNESS WHEREOF, Lender and Borrower have caused their respective duly
authorized representatives to execute and deliver this Amendment as of the day
and year first above written.
GENERAL ELECTRIC CAPITAL BUSINESS MICHAEL ANTHONY JEWELERS, INC.
ASSET FUNDING CORPORATION
By By /s/ MICHAEL A. PAOLERCIO
------------------------------ -----------------------------
Its Its TREASURER
------------------------------ -----------------------------
2
<PAGE> 3
SUPPLEMENTAL SECURITY AGREEMENT NO. ONE
LOAN #001-0003281-001
This Supplemental Security Agreement is executed by Michael Anthony Jewelers,
Inc. ("Borrower") pursuant to the terms of a Loan and Security Agreement dated
January 29, 1999 between Borrower and General Electric Capital Business Asset
Funding Corporation ("Lender"). All capitalized terms used herein that are not
otherwise defined herein shall have the respective meanings given to such terms
in the Loan and Security Agreement.
In order to provide security for the payment and performance of Borrower's
obligations under the Loan Documents, Borrower has granted to Lender a first
priority security interest in the Collateral. In addition to said grant,
Borrower intends by this Supplemental Security Agreement to grant to Lender a
first priority security interest in the items of Equipment identified herein.
1. To further secure the payment and performance of all of Borrower's
obligations to Lender under the Loan Documents, Borrower hereby grants to Lender
a first priority security interest in the items of Collateral described below,
including all present and future additions, attachments and accessories thereto,
all substitutions therefor and replacements thereof and all proceeds thereof,
including all proceeds of insurance:
<TABLE>
<CAPTION>
Qty. Model/Mfr. Description Serial No. Cost or Appraised Value
- ---- ---------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C>
Jewelery molds, casts, dyes, tools, machinery $10,444,444.46
and equipment.
</TABLE>
2. Borrower hereby (a) affirms that the representations and warranties set forth
in Section 5 of the Loan and Security Agreement are true and correct as of the
date hereof; (b) represents and warrants that Lender has a first priority
security interest in the Collateral; and (c) represents and warrants that the
above described equipment will be maintained at the following locations:
<TABLE>
<S> <C> <C> <C>
115 SOUTH MACQUESTEN PARKWAY, 50 S. MACQUESTEN PARKWAY, 60S. MACQUESTEN PARKWAY, 70 S. MACQUESTEN PARKWAY
MT. VERNON NY 10550 MT. VERNON, NY 10550 MT. VERNON, NY 10550 MT. VERNON, NY 10550
</TABLE>
3. The Loan Amount for loans to be made pursuant to this Supplemental Security
Agreement is $10,444,444.46
4. The Commitment Expiration Date for loans to be made pursuant to this
Supplemental Security Agreement is JANUARY 30,1999.
5. The amount of liability insurance required to be maintained by Borrower
pursuant to Section 6(d) of the Loan and Security Agreement is
$_______________________________.
6. All of the terms and provisions of the Loan and Security Agreement are hereby
incorporated in and made a part of this Supplemental Security Agreement to the
same extent as if fully set forth herein.
In witness whereof, Borrower has executed and delivered this Supplemental
Security Agreement this 29 day of January 1999.
-- ------------
Borrower: Michael Anthony Jewelers, Inc.
------------------------------
By: /s/ Michael A. Paolercio
------------------------------
(Print Name): Michael A. Paolercio
------------------------------
Title: Treasurer
------------------------------
<PAGE> 1
Exhibit 10.35
No. 001-0003281-001 TERM PROMISSORY NOTE NO. ONE
- --------------------
$ 10,444,444.46 January 29, 1999
------------ --
FOR VALUED RECEIVED, the undersigned, MICHAEL ANTHONY JEWELERS, INC.
("Maker"), promises to pay to the order of General Electric Capital Business
Asset Funding Corporation ("Payee"), at its office at 10900 N.E. 4th St., Suite
500, Box C-97550, Bellevue, Washington 98009, the principal sum of TEN MILLION
FOUR HUNDRED FORTY-FOUR THOUSAND FOUR HUNDRED FORTY-FOUR AND 46/100s
($10,444,444.46) Dollars together with interest on unpaid principal from the
date of disbursement of such principal amount until payment in full at a rate of
6.85% (percent) per annum ("Rate") computed on the basis of a 360 day year of
twelve consecutive thirty day months. Commencing on
______________________________, 1999 and monthly thereafter until _______, 2000,
interest hereunder shall be paid on the unpaid principal in 12 installments of
FIFTY-NINE THOUSAND SIX HUNDRED TWENTY AND 37/100s ($59,620.37) Dollars each.
Commencing on ___________________________, 2000 and monthly thereafter until
____________________________________, 2007, on which date the entire balance of
principal and interest unpaid shall be due and payable. Interest hereunder shall
be paid on the unpaid principal, together with principal, in 84 installments of
ONE HUNDRED FIFTY-SIX THOUSAND EIGHT HUNDRED SIXTY-NINE AND 91/100s
($156,869.91) Dollars each. It is agreed that each installment, when paid, shall
be applied by the holder hereof, first so much as shall be required to the
payment of interest accrued as specified hereto, and the balance thereof to the
repayment of the principal sum.
Except as may be otherwise expressly provided herein, this Note may not
be prepaid in whole or in part, except with the prior written consent of Payee.
Maker shall have the privilege of prepaying all (but not part) of the then
outstanding balance under this Note on _______________________________________
or on any installment due date thereafter, subject to giving thirty (30) days
prior written notice to Payee specifying the date of prepayment and further
subject to payment of a prepayment premium equal to the amount, if any, required
to offset the adverse impact to Payee of any decline in interest rates. The
prepayment premium is determined by (i) calculating the decrease, expressed in
basis points (but not less than zero) in the current weekly average yield for
FIVE (5) year U.S. Treasury Constant Maturities as published in FEDERAL RESERVE
STATISTICAL RELEASE H.15(519) (the "Index") from the weekly average yield of
4.39% as of DECEMBER 11, 1998 to the Friday (or, if Friday is not a business
day, the last business day) of the week immediately preceding the prepayment
date (ii) dividing the difference by 100, (iii) multiplying the result by the
applicable "Premium Factor" set forth below, and (iv) multiplying the product by
the principal to be prepaid. Any prepayment shall be applied first to the
prepayment premium, if any, next to accrued interest and late charges (if any),
and thereafter to the principal then outstanding. The Premium Factor shall be
the amount shown on the following chart for the month in which prepayment
occurs.
<TABLE>
<CAPTION>
NUMBER OF MONTHS REMAINING (YEARS) PREMIUM FACTOR
- -------------------------- ------- --------------
<S> <C> <C>
60-49 (5) 0.024
46-37 (4) 0.019
36-25 (3) 0.014
24-13 (2) 0.010
12-1 (1) 0.005
</TABLE>
In the event the Federal Reserve Board ceases to publish Statistical Release
H.15(519), then the decrease in FIVE (5) - Year U.S. Treasury Constant
Maturities will be determined from another source designated by Payee.
If Maker shall have given to Payee notice of Maker's intention to so
prepay, Maker shall not then be entitled to withdraw such notice, and the
indebtedness proposed to be prepaid in such notice together with the aforesaid
prepayment fee, if applicable, shall be due and payable upon the date specified
for such prepayment in such notice. Upon the occurrence of an Event of Default
and acceleration of payment of indebtedness evidenced hereby during a period
open to prepayment, Maker shall pay to Payee, in addition to any and all other
sums due and payable hereunder, as liquidated damages for the loss of Payee's
investment and not as a penalty, an amount equal to the prepayment fee which
would have been payable hereunder on such date of acceleration in the event of a
voluntary prepayment. Maker and Payee agree that the foregoing amounts do not
constitute penalties but rather constitute reasonable calculations of the
investment loss that would be sustained by Payee in the event of such
prepayment.
It is specifically understood and agreed by Maker that, in the event of
a default under this Note or under any instrument securing the Note, a tender of
payment of the unpaid principal and accrued interest then outstanding shall be
deemed a prepayment, and, accordingly, said tender must include the premium
herein above required, or if said tender is made prior to the time this
privilege is operative, then said tender must include a premium equal to six (6)
months' interest at the Rate computed on the principal amount so tendered. It is
further understood and agreed by Maker that Payee shall not be obligated to
accept said tender, and said tender shall for all purposes be deemed ineffectual
and deficient, unless said tender shall include the premium herein above
required.
In the event that Payee does not receive any payment within ten (10)
days of the due date therefor, Maker will pay Payee a late charge of five
percent (5%) of the payment outstanding together with the payment. Provided that
any given payment is received within ten (10) days of the date due, Payee agrees
not to demand immediate payment of the whole sum of principal and interest as
otherwise permitted herein.
If, from any circumstances whatsoever, payment of any obligation due
under this Note at the time such performance shall be due shall involve
exceeding the maximum amount currently prescribed by any applicable usury
statute or any other applicable law, then such obligation shall be reduced to
such maximum amount, so that in no event shall any payment be possible under
this Note, or under any other instrument evidencing or securing the indebtedness
evidenced hereby, that is in excess of such maximum amount.
In the event that an Event of Default shall occur under the Loan and
Security Agreement (as hereinafter defined) or any other instrument now or
hereafter securing repayment hereof, following any required notice and/or the
expiration of any applicable period of grace, then, and in such event, the
principal indebtedness evidenced hereby, and any other sums advanced hereunder,
together with all unpaid interest accrued thereon, shall, at the option of
Payee, at once become due and payable and may be collected forthwith, regardless
of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS
NOTE. Interest shall accrue on the outstanding principal for so long as such
default continues, regardless of whether or not there has been an acceleration
of the indebtedness evidenced hereby as set forth herein, at the rate equal to
the lesser of fifteen percent (15%) per annum or the maximum rate allowable
under law. All such interest shall be paid at the time of and as a condition
precedent to the curing of
<PAGE> 2
any such default should Payee, at its sole option, all such default to be cured.
In the event this Note, or any part thereof, is collected by or through an
attorney-at-law, Maker agrees to pay all costs of collection including, but not
limited to, reasonable attorneys fees, whether or not suit is filed.
This Note is one of the notes referred to in and is secured by the Loan
and Security Agreement dated __________________________________ between Maker
and Payee. The terms of the Loan and Security Agreement are incorporated herein
by reference.
This Note consolidates the following Interim Notes executed by Maker in
favor of Payee:
<TABLE>
<CAPTION>
INTERIM NOTE NUMBER DATE PRINCIPAL AMOUNT
------------------- ---- ----------------
<S> <C> <C>
PAY PROCEEDS LETTER $10,444,444.46
</TABLE>
Maker waives any right of exemption and waives presentment, protest and
demand and notice of protest, demand and of dishonor and nonpayment of this
Note, and consents that any holder hereof shall have the right, without notice,
to grant any extension or extensions of time for payment of this Note or any
part thereof or any other indulgences or forbearances whatsoever, or may release
any of the security for this Note without in any way affecting the liability of
any other party for the payment of this Note.
The due payment and performance of Maker's obligations hereunder shall
be without regard to any counterclaim, right of offset, or any other
counterclaim whatsoever which Maker may have against Payee and without regard to
any other obligations of any nature whatsoever which Payee may have to Maker,
and no such counterclaim or offset shall be asserted by Maker in any action,
suit or proceeding instituted by Payee for payment of Maker's obligations
hereunder.
This Note and the Loan and Security Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.
Maker acknowledges that there is no presumption that the value of the
property securing this Note is equal to the face amount of the Note, and that a
deficiency judgment may be necessary in proceedings taken for enforcement
hereof.
No amendment to this Note shall be binding upon Payee unless it is in
writing and duly signed by Payee.
IN WITNESS WHEREOF, the Maker has caused these presents to be duly
signed the date first above written.
Borrower: Michael Anthony Jewelers, Inc.
------------------------------
By: /s/ Michael A. Paolercio
------------------------------
Witness:/s/ (Print Name) Michael A. Paolercio
------------------------- ------------------------------
Title: Treasurer
------------------------------
<PAGE> 1
Exhibit 10.36
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 3rd day of
March, 1999, by and between MICHAEL ANTHONY JEWELERS, INC., a Delaware
corporation ("Purchaser") and TOWN & COUNTRY FINE JEWELRY GROUP, INC., a
Massachusetts corporation ("Seller").
RECITALS
WHEREAS, Seller has commenced a reorganization case (the "Bankruptcy
Case") by filing a voluntary petition for reorganization (the "Filing"), in the
United States Bankruptcy Court for the District of Massachusetts, Eastern
Division (the "Bankruptcy Court"), pursuant to chapter 11 of title 11, United
States Code (the "Bankruptcy Code") and continues in the operation of its
business and the custody of its property as a debtor in possession;
WHEREAS, subject to the terms and conditions set forth herein, Purchaser
desires to purchase and acquire from Seller and Seller desires to sell and
deliver to Purchaser the Purchased Assets, as defined herein. and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated hereunder that the Bankruptcy Court shall have
approved the terms and conditions of this Agreement and the sale of the
Purchased Assets to Purchaser, free and clear of any claims, liens or
encumbrances of any kind:
NOW, THEREFORE, Purchaser and Seller agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1. PURCHASED ASSETS.
(a) Upon the terms and subject to the conditions of this Agreement, on the
Closing Date (as defined herein), Seller shall sell, transfer, assign, convey
and deliver to Purchaser, and Purchaser shall purchase from Seller, free and
clear of any claims, liens or encumbrances, all right, title and interest of
Seller in and to the following assets (collectively, the "Purchased Assets"):
(i) all tools (including etch and forming tools), models, molds, and
bills of material, including, but not limited to those set forth on
SCHEDULE 1.1(i) attached hereto and made a part hereof;
(ii) (1) all patents, trademarks, service marks, know-how, registered
designs, design rights, rights in confidential information, business or
trade names or copyrights, (2) any licenses entered into (either as
licensor or licensee) with respect to any of the foregoing, and (3) all
information relating to the marketing of any products or services, all
know-how,
<PAGE> 2
technical information, including, but not limited to, that relating to
design, manufacture, storage, distribution and supply of goods and
services; including, but not limited to (with respect to the items
referenced in (1) through (3)) the assets set forth on SCHEDULE 1.1(ii)
attached hereto and made a part hereof;
(iii) all sample lines, library lines and new product development,
including, but not limited to those set forth on SCHEDULE 1.1(iii)
attached hereto and made a part hereof;
(iv) all of the assets of Seller located at Seller's location in
New York, New York and Dallas, Texas, including, but not limited to those
set forth on SCHEDULE 1.1.(iv) attached hereto and made a part hereof; and
(v) three (3) wax machines for white mold charms as more particularly
described on SCHEDULE 1.1(v) attached hereto and made a part hereof.
(b) The sale, transfer, assignment and delivery (to the extent under
Seller's control) of the Purchased Assets will be evidenced by the delivery by
Seller to Purchaser of bills of sale, assignments and other instruments of
transfer or conveyance as Purchaser may reasonably request, or as may be
otherwise necessary to evidence and effect the sale, assignment, transfer,
conveyance and delivery of the Purchased Assets to Purchaser; provided, however,
that the failure to obtain any such bill of sale, assignment or other instrument
of transfer shall not in any way affect the terms and conditions of this
Agreement or the transfer of the Purchased Assets as set forth herein.
1.2. EXCLUDED ASSETS. Notwithstanding anything set forth above to the
contrary, Seller shall not sell to Purchaser and Purchaser shall not purchase
from Seller any assets of Seller other than the Purchased Assets.
1.3. NO ASSUMED LIABILITIES. Purchaser shall not assume or be obligated to
pay, perform or otherwise discharge any liability or obligation of Seller,
direct or indirect, known or unknown, absolute or contingent.
ARTICLE II
PURCHASE PRICE
2.1. PURCHASE PRICE. The Purchase Price for the Purchased Assets (the
"Purchase Price") shall be an amount, in cash or cash equivalents, equal to
Four Million Five Hundred Thousand Dollars ($4,500,000).
2.2. ESCROW ACCOUNT. On or prior to March 3, 1999, Purchaser shall have
deposited an amount, in cash or a cash equivalent, equal to Five Hundred
Thousand Dollars ($500,000) with Hill & Barlow, as escrow agent ("Escrow Agent")
pursuant to the terms of an escrow agreement, in form
2
<PAGE> 3
and substance satisfactory to Seller, Purchaser and Escrow Agent, among Seller,
Purchaser and Escrow Agent (the "Escrow Agreement"). Such funds shall be held
by Escrow Agent and applied on the Closing Date pursuant to Section 2.3. hereof
or, If this Agreement shall have been terminated prior to the Closing Date, such
funds shall be applied in accordance with Article VIII hereof.
2.3. PAYMENT OF PURCHASE PRICE ON THE CLOSING DATE. Subject to fulfillment
or waiver of the conditions set forth in this Agreement, Purchaser shall pay to
Seller on the Closing Date the Purchase Price minus any funds disbursed to
Seller pursuant to the terms of the Escrow Agreement. Such amounts shall be paid
by wire transfer of immediately available funds to an account specified by
Seller in a written notice received by Purchaser from Seller at least two
(2) days prior to the Closing Date.
ARTICLE III
CLOSING AND POST-CLOSING MATTERS
3.1. CLOSING DATE. Subject to termination pursuant to Article VIII hereof,
the closing (the "Closing") shall he consummated at 10:00 A.M., local time, not
later than the third (3rd) day following the date the Sale Order, as defined
herein, is issued, or such later date as may be agreed upon by Purchaser and
Seller after the conditions set forth in this Agreement have been satisfied, at
the offices of Hutchins, Wheeler & Dittmar, Boston, Massachusetts, or at such
other place or at such other time as shall be agreed upon by Purchaser and
Seller (the "Closing Date"). As used herein, "Sale Order" means the order
entered by the Bankruptcy Court approving this Agreement and authorizing the
consummation of the transactions contemplated therein.
3.2. PURCHASER'S DELIVERIES. Subject to the fulfillment or waiver of the
conditions set forth in this Agreement, on the Closing Date Purchaser shall
deliver to Seller all of the following:
(a) The balance of the Cash Purchase Price in accordance with
Section 2.2 hereof;
(b) A copy of Purchaser's Certificate of Incorporation certified as of
a recent date by the Secretary of State of the Purchaser's state of
incorporation;
(c) A certificate of good standing of Purchaser issued as of a recent
date by the Secretary of State of Purchaser's state of incorporation;
(d) A certificate of the secretary or an assistant secretary of
Purchaser, dated the Closing Date, in form and substance reasonably
satisfactory to Seller, as to (i) no amendments to the Certificate of
Incorporation of Purchaser since the date of the certified copy delivered
pursuant to Section 3.2(b) hereof; (ii) the By-Laws of Purchaser; (iii) the
resolutions of the Board of Directors of Purchaser authorizing the
execution and performance of this Agreement
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and the contemplated transactions; and (iv) incumbency and signatures of
the officers executing this Agreement and any documents, instruments and
agreements referenced herein;
(e) A certificate executed by Purchaser as of the Closing Date as to
the matters set forth in Sections 3.4(a) and (b) hereof; and,
(f) The written instructions of Purchaser instructing the Escrow Agent
to release the balance of the funds held pursuant to the Escrow Agreement
to Seller.
3.3. SELLER'S DELIVERIES. Subject to the fulfillment or waiver of the
conditions set forth in this Agreement, on the Closing Date Seller shall deliver
or cause to be delivered all of the following:
(a) Copies of the Articles of Organization of Seller, certified as of
a recent date by the Secretary of The Commonwealth of Massachusetts.
(b) A certificate of good standing of Seller issued as of a recent
date by the Secretary of The Commonwealth of Massachusetts.
(c) A certificate of the secretary or an assistant secretary of
Seller, dated the Closing Date, in form and substance reasonably
satisfactory to Purchaser, as to (i) no amendments to the Certificate of
Incorporation of Seller since the date of the certified copy delivered
pursuant to Section 3.3(a) hereof; (ii) the By-Laws of Seller; (iii) the
resolutions of the Board of Directors of Seller authorizing the execution
and performance of this Agreement and the contemplated transactions; and
(iv) incumbency and signatures of the officers of Seller executing this
Agreement and any documents, instruments and agreements referenced herein;
(d) All consents, waivers or approvals obtained by Seller with respect
to the Purchased Assets or the consummation of the transactions
contemplated by this Agreement;
(e) A certificate executed by Seller as of the Closing Date as to the
matters set forth in Sections 3.4(a) and (b) hereof;
(f) Any permits, licenses, files and records to be delivered pursuant
to Section 1.1 of this Agreement;
(g) The written instructions of Seller instructing the Escrow Agent to
release the balance of the funds held pursuant to the Escrow Agreement to
Seller; and,
(h) Such other bills of sale, assignments and other instruments of
transfer or conveyance as Purchaser may reasonably request or as may be
otherwise necessary to evidence and effect the sale, assignment, transfer,
conveyance and delivery (to the extent under Seller's control) of the
Purchased Assets to Purchaser.
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3.4. CONDITIONS OF CLOSING. The Closing of the transaction contemplated in
this Agreement shall be subject to the satisfaction of the following conditions
precedent on or prior to the Closing Date, as the case may be:
(a) As to each party, the representations and warranties of the other
party shall be true and correct in all material respects at the time of the
Closing to the same effect and extent as if such warranties and
representations were made at the Closing;
(b) As to each party, the performance by the other party of all terms
and conditions of this Agreement required to be performed in all material
respects at or prior to the Closing shall have been fulfilled, including
the delivery of all documents required hereunder to be delivered at or
prior to the Closing;
(c) With respect to the Bankruptcy Case:
(i) on or prior to March 3, 1999, Seller shall have filed the
appropriate motion pursuant to the Bankruptcy Code with the Bankruptcy
Court seeking the authorization of the sale of the Purchased Assets to
Purchaser as contemplated by the terms of this Agreement (the "Sale
Motion");
(ii) on or prior to March 10, 1999, the Bankruptcy Court shall
have entered an order approving the Competitive Bid Procedure, as
described in Section 6.1 hereof, and the Break-Up-Fee, as defined in
Section 8.4. hereof; and
(iii) on or prior to March 19, 1999, the Bankruptcy Court shall
have issued the Sale Order; and
(d) There shall have been no material adverse changes in the condition
of the Purchased Assets from the date hereof through the Closing Date; and,
(e) Except with respect to an appeal of the Sale Order (so long as
such appeal has not stayed the Sale Order), no suit, action, or other
proceeding shall be threatened by or pending before any court or
governmental agency in which it will be or it is sought to restrain or
prohibit or to obtain material damages or relief in connection with this
Agreement or the consummation of the transactions contemplated by this
Agreement.
3.6 FURTHER ASSURANCES. Each of the parties hereto agrees that it will,
from time to time hereafter, execute and deliver such other documents and
instruments and take such other action (other than the expenditure of a material
amount of funds) as may be reasonably requested by the other party to carry out
the actions and transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser and agrees as follows:
4.1. ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good in standing under the laws of The Commonwealth of
Massachusetts. Seller has no subsidiaries.
4.2. AUTHORITY OF SELLER; ENFORCEABILITY. Subject only to Bankruptcy Court
approval, Seller has the full power and authority to execute, deliver and
perform this Agreement and all documents, instruments and agreements referenced
herein and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and, assuming due authorization of, and execution and
delivery by, Purchaser, this Agreement constitutes the valid and binding
obligation of Seller, enforceable in accordance with its terms.
4.3. GOVERNMENTAL AUTHORIZATION. Except with respect to Bankruptcy Court
approval and except as set forth in SCHEDULE 4.3 hereto, no governmental
license, permit or authorization and no registration, declaration or filing with
any governmental authority or regulatory agency by Seller is required in
connection with the execution, delivery and performance of this Agreement and
the performance of the transactions contemplated herein.
4.4. NO AGREEMENTS. There are no existing agreements, options,
commitments, arrangements or rights with, to or in any third party to acquire
any of the Purchased Assets.
4.5. LITIGATION. There are no actions, suits, or proceedings pending before
any court or administrative agency or board, or to the knowledge of Seller
threatened against or affecting the Purchased Assets other than as set forth in
SCHEDULE 4.5 hereto.
4.6. [Intentionally Omitted]
4.7. TITLE TO AND CONDITION OF ASSETS. Except as set forth on SCHEDULE 4.7
hereto, Seller owns and possesses and will own and possess as of the Closing
Date all right, title and interest in and to the Purchased Assets, including,
without limitation good and merchantable title to the Purchased Assets free and
clear of all encumbrances (other than those listed on SCHEDULE 4.7 hereto) or
other title defects or restrictions of any nature. Upon entry of the Sale Order,
Seller will have as of the Closing Date the right, power and authority to
convey, transfer, assign and deliver the Purchased Assets free and clear of any
encumbrance or restriction. All tangible Purchased Assets of Seller are in
Seller's possession or under its control except as set forth on SCHEDULE 4.7
hereto, and any equipment included in the Purchased Assets is in good operating
condition and repair, subject only to routine maintenance and ordinary wear and
tear consistent with the age and use thereof; and is fit
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and adequate for use in the ordinary course of Seller's business as currently
conducted. Seller enjoys peaceful and quiet possession of die Purchased Assets
pursuant to or by all of the deeds, bills of sale, leases, licenses and other
agreements under which it is operating its business.
4.8. BROKERAGE AND FINDER'S FEES. No shareholder, officer, director or
agent of Seller has incurred any liability to any broker, finder or agent for
any brokerage fees, finder's fees, or commissions with respect to the
transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Purchaser represents and warrants to
Seller and agrees as follows:
5.1. ORGANIZATION OF PURCHASER. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2. AUTHORITY OF PURCHASER; ENFORCEABILITY. Purchaser has the full power
and authority to execute, deliver and perform this Agreement and all documents,
instruments and agreements referenced herein. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and, assuming due
authorization of; and execution and delivery by Seller, this Agreement
constitutes the valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms.
5.3. NO VIOLATION. Except for matters as to which written consents,
amendments or waivers have been obtained, the execution and delivery of this
Agreement does not, and the consummation by Purchaser of the transactions
contemplated hereby will not, result in any violation of or default under, any
agreement to which Purchaser is a party and, if violated, would have a material
adverse effect on Purchaser. No authorization, consent or approval of, or filing
with, any public body or governmental authority is necessary for the
consummation, by Purchaser of the transactions contemplated hereby which has not
already been obtained.
5.4. GOVERNMENTAL AUTHORIZATION. No governmental license, permit or
authorization and no registration, declaration or filing with any governmental
authority or regulatory agency by Purchaser is required in connection with the
execution, delivery and performance of this Agreement and the performance of the
transactions contemplated herein which has not already been obtained.
5.5. BROKERAGE AND FINDER'S FEES. No shareholder, officer, director or
agent of Purchaser has incurred any liability to any broker, finder or agent for
any brokerage fees, finder's fees, or commissions with respect to the
transactions contemplated by this Agreement.
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5.6. SUFFICIENT FUNDS. As of the date of this Agreement, Purchaser has
sufficient funds to pay the Purchaser Price based on cash or cash equivalents on
band and available bank (or other institutional lender) financing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. COMPETITIVE BID PROCEDURE. Purchaser and Seller acknowledge that this
Agreement is being entered into subject to another party offering a higher and
better bid for the Purchased Assets; therefore, Seller shall provide notice by
mail and publication in the manner approved by the Bankruptcy Court (i)
announcing the time and date of the hearing to approve the Sale Motion (the
"Sale Hearing"), and (ii) inviting the submission of "higher and better bids"
for the Purchased Assets (the "Competitive Bid Procedure"). Subject to
Bankruptcy Court approval, the terms of the Competitive Bid Procedure shall be
as follows:
(a) at least three (3) days prior to the Sale Hearing, any competing
bidder shall have executed a definitive agreement on identical terms as
this Agreement (except as for purchase price) which Seller deems to contain
a superior bid, and which agreement shall be valid, binding and enforceable
upon approval of the Bankruptcy Court;
(b) a competing bid shall be accompanied by a certified check or cash
deposit in the amount of Five Hundred Thousand Dollars ($500,000) which
shall be held in escrow by counsel for Seller and, if such competing bid is
accepted and approved by the Bankruptcy Court, shall be applied toward the
purchase price or, if such competing bid is not accepted, shall be refunded
in full to such competing bidder after the Sale Hearing (unless such
competing bidder has breached or violated its agreement with Seller);
(c) a competing bid must be at least Two Hundred Thousand Dollars
($200,000) in excess of the Purchase Price;
(d) a competing bid shall not be subject to any further due diligence
by the competing bidder and shall not contain any other conditions
precedent to the consummation of the purchase other than those identical to
the conditions precedent contained in this Agreement;
(e) a competing bid must state that the competing bidder is prepared
to consummate the purchase within three (3) days of entry of an order by
the Bankruptcy Court approving such competing bid; and
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(f) the Competitive Bid Procedure shall be subject to such other terms
and conditions as the Bankruptcy Court shall require.
6.2. AUCTION. In the event that Seller receives a competing bid that meets
the Competitive Bid Procedure set forth Section 6.1 and is otherwise acceptable
to Seller, Seller shall conduct an auction (the "Auction") at the Sale Hearing
under the direction and supervision of the Bankruptcy Court. No person or entity
other than Purchaser or a bidder that has made a competing bid that meets the
Competitive Bid Procedure set forth Section 6.1 shall be entitled to participate
in the Auction. All bids at the Auction must be made in increments of not less
than Two Hundred Thousand Dollars ($200,000). The Auction shall be subject to
such other terms and conditions as the Bankruptcy Court shall require.
6.3. [Intentionally Omitted]
6.4. [Intentionally Omitted]
6.5. [Intentionally Omitted]
6.6. ACCESS TO RECORDS. Seller shall permit authorized representatives of
Purchaser to have, prior to the Closing Date at mutually agreeable times,
reasonable access to the premises of Seller, and the books and records relating
to the Purchased Assets. Seller will furnish to Purchaser such operating data
and information with respect to the Purchased Assets as Purchaser may from time
to time reasonably request. Purchaser shall have the right to copies thereof and
excerpts therefrom, at Purchaser's cost. All of Purchaser's investigations
hereunder shall be conducted so as not to interfere with Seller's normal
business activities. Purchaser agrees that any of the information received by it
from Seller in connection with this Agreement shall be subject to the terms and
conditions of the Confidentiality Agreement between Purchaser and Seller dated
as of January 25, 1999.
6.7. INSURANCE COVERAGE AND OPERATING ASSETS. Seller shall maintain its
current insurance coverage with respect to the Purchased Assets, if any; and
shall maintain all of the Purchased Assets in their current operating condition
and repair (ordinary wear and tear excepted).
6.8. ACCESS TO OFFICES. Purchaser shall have access until March 31, 1999
to Seller's facilities solely for the purpose of taking possession of the
Purchased Assets located at such facilities. Purchaser agrees to leave each such
facility in "broom clean" condition and shall indemnify Seller for any damage
caused by Purchaser in connection with such access.
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ARTICLE VII
TAX MATTERS
7.1. TRANSFER TAXES. Seller shall be responsible for the timely payment of,
and shall indemnify and hold harmless Purchaser against, all federal, state and
local sales taxes (including, without limitation, bulk sales, use, transfer,
gains, recording, ad valorem and other similar taxes and fees ("Transfer
Taxes")), arising out of or in connection with or attributable to the
transactions effected pursuant to this Agreement.
7.2. REASONABLE ASSISTANCE. Each of Purchaser and Seller shall provide the
other with such assistance as may reasonably be requested by either of them in
connection with the preparation of any tax return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for taxes, and each will retain and provide
the requesting party with any records or information which may be relevant to
such return, audit or examination, proceedings or determination. Any information
obtained pursuant to this Section 7.2 providing for the sharing of information
or the review of any tax return or other schedule relating to taxes shall be
kept confidential by the parties hereto.
7.3. ALLOCATION OF CONSIDERATION. At least 30 days prior to the date that
Internal Revenue Service Form 8594 is required to be filed with respect to the
acquisition of the Purchased Assets, Purchaser shall prepare and deliver to
Seller an allocation of the Purchase Price, which shall be mutually agreed to by
Seller and Purchaser and shall reflect the fair market value of the Purchased
Assets. Each of Purchaser and Seller shall report the transactions contemplated
hereby for federal income tax and all other tax purposes including, without
limitation, for purposes of Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code") in a manner consistent with such allocation, and shall
not voluntarily take any position inconsistent therewith upon examination of any
tax return, in any refund claim, in any litigation or otherwise with respect to
any tax return. Each of Purchaser and Seller shall cooperate in the preparation
and shall timely file a Form 8594 in accordance with the requirements of
Section 1060 of the Code and this Section 7.3.
ARTICLE VIII
TERMINATION
8.1. TERMINATION PRIOR TO CLOSING DATE. This Agreement may be terminated at
any time, but not later than the Closing Date, by:
(a) Purchaser and Seller mutually agreeing, in the exercise of their
sole and absolute discretion, in writing to terminate this Agreement;
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(b) Purchaser, at any time after the date of this Agreement, if Seller
shall have failed to file the Sale Motion;
(c) Purchaser any time after March 10, 1999, if the Bankruptcy Court
shall have failed to enter an order approving the Competitive Bid Procedure
and the Break-Up-Fee; and,
(d) Purchaser on or after March 19, 1999, if the Bankruptcy Court
shall have failed to issue the Sale Order.
8.2. TERMINATION ON THE CLOSING DATE. If the Closing Date shall not have
occurred, and all conditions precedent therewith have not been satisfied, on or
prior to March 22, 1999, then either Purchaser or Seller, upon written notice to
the other party hereto, shall have the unconditional right to terminate this
Agreement.
8.3. AGREEMENT VOID. In the event of the termination of this Agreement
pursuant to this Section, this Agreement shall forthwith become void and have no
effect and there shall be no obligation or liability (other than with respect to
the Break-Up-Fee) on the part of any party hereto or its directors, officers or
shareholders; provided, however, that nothing herein shall relieve any party
from liability for any breach hereof.
8.4. BREAK-UP FEE. Seller and Purchaser acknowledge that the execution and
delivery of this Agreement may result in competing bids for the Purchased Assets
and that it is impossible to ascertain with any degree of certainty the damages
that would result to Purchaser by reason of any failure by Seller to consummate
the transaction contemplated by this Agreement; therefore, Seller agrees that in
addition to any other rights of Purchaser under this Agreement and subject to
approval by the Bankruptcy Court; in the event that the transactions
contemplated by this Agreement are not consummated in accordance with the terms,
hereof, other than as a result of a breach by the Purchaser, upon (a) the sale
of all or a substantial portion of the Purchased Assets to any one or more
person or entity other than Purchaser pursuant to the Auction provided in
Section 6.2, or (b) the failure of Seller to use reasonable efforts to obtain
the Sale Order from the Bankruptcy Court within the time period specified in
this Agreement, then Seller shall pay to Purchaser, as liquidated damages and
not as a penalty, the sum of One Hundred Fifty Thousand Dollars ($150,000) as
reimbursement to Purchaser for the reasonable out-of-pocket expenses of
Purchaser (the "Break-Up-Fee"). The Break-Up Fee shall be an administrative
expense under the Bankruptcy Code with a priority superior to that of any other
expense of the estate of Seller.
8.5. ESCROW ACCOUNT. If this Agreement is terminated at any time for any
reason prior to the Closing Date, then Purchaser and Seller agree that all funds
held in the Escrow Account shall be disbursed by the Escrow Agent on the day the
Agreement is terminated. Purchaser and Seller shall have each executed the
appropriate written instructions to be delivered to the Escrow Agent to effect
such disbursement.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. SURVIVAL OF OBLIGATIONS. All representations, warranties, covenants
and obligations contained in this Agreement shall terminate at the Closing Date;
provided however, that any covenants or obligations to be performed after the
Closing Date shall survive until such date as such covenants and obligations are
fully performed. Except for the representations and warranties expressly set
forth in this Agreement, Seller makes no representation or warranty, express or
implied, at law or in equity, in respect of itself or any of its assets,
liabilities and operations, or the transaction contemplated hereby, including,
without limitation, any implied representation or warranty as to the condition,
merchantability, suitability or fitness for a particular purpose, and Seller
expressly disclaims any such representation or warranty. Except for the
representations and warranties set forth in this Agreement, Purchaser is
acquiring the Purchased Assets on an "as is" and "where is" basis.
9.2. RISK OF LOSS. Legal title, equitable title and risk of loss with
respect to the Purchased Assets shall not pass to Purchaser until the Purchased
Assets are transferred to Purchaser at the Closing.
9.3. RIGHT TO SPECIFIC PERFORMANCE. In addition to any other rights
hereunder, the parties hereto agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not to be performed by the
parties in accordance with the terms hereof and that Purchaser or Seller shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
9.4. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally or when sent by registered or certified mail, by private
courier or by facsimile (with telephonic confirmation of receipt) addressed as
follows:
IF TO PURCHASER, TO:
Michael Anthony Jewelers, Inc.
115 South MacQueston Parkway
Mount Vernon, New York 10550
Attention: Allan Corn
Facsimile No.: (914) 699-2335
With a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
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Attention: Brett Barragate, Esq.
Facsimile No.: (216) 363-4588
IF TO SELLER TO:
Town & Country Fine Jewelry Group, Inc.,
Debtor
25 Union Street
Chelsea, Massachusetts 02150
Attention: David W. Cochran
Facsimile No.: (617) 889-3683
With copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: Francis, J. Feeney, Jr., Esq.
Facsimile No.: (617) 951-1295
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
9.5. SUCCESSORS AND ASSIGNS.
(a) The rights of any party under this Agreement shall not be
assignable by such party hereto prior to the Closing without the prior
consent of the other. Following the Closing, either party may (with the
prior written consent of the other party) assign any of its rights
hereunder, but no such assignment shall relieve it of its obligations
hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. The
successors and permitted assigns hereunder shall include without
limitation, in the case of Purchaser, any permitted assignee as well as the
successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and successors
and assigns permitted by this Section 9.6 any right, remedy or claim under
or by reason of this Agreement.
9.6. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits and
Schedules referred to herein and the documents delivered pursuant hereto contain
the entire understanding of the parties hereto with regard to the subject matter
contained herein or therein, and supersede all prior agreements, understandings
or letters of intent between or among any of the parties hereto and are not
intended to confer on any other person any rights or remedies hereunder or
thereunder. This
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Agreement shall not be amended, modified or supplemented except by a written
instrument signed by an authorized representative of each of the parties hereto.
9.7. INTERPRETATION. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. The Schedules and
Exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim.
9.8. WAIVERS. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in ally way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
9.9. EXPENSES. Except as otherwise set forth herein, each party hereto will
pay all costs and expenses incident to its negotiation and preparation of this
Agreement and to its parties performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel and accountants.
9.10. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or enforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless a construction would be reasonable.
9.11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts amid by facsimile signature, each of which shall be considered
an original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the Seller and
Purchaser.
9.12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of Delaware.
9.13. CONTROVERSIES. The Bankruptcy Court shall have exclusive jurisdiction
over all controversies relating to this Agreement.
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9.14. ACCESS TO RECORDS AFTER CLOSING. After the Closing Date, Purchaser
and Seller and its representatives shall have reasonable access to all of the
books and records relating to the Purchased Assets which the other party may
retain after the Closing Date. Such access shall be afforded by the Seller upon
receipt of reasonable advance notice and during normal business hours. Each
party shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 9.14. If Seller shall desire to dispose of any of such
books and records, Seller shall, prior to such disposition, give Purchaser a
reasonable opportunity to access such books and records as Purchaser may select.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
TOWN & COUNTRY FINE JEWELRY
GROUP, INC.
By: /s/ David A. Cochran
-------------------------------
Title: President & CEO
----------------------------
MICHAEL ANTHONY JEWELERS, INC
By: /s/ Michael A. Paolercio
-------------------------------
Title: CEO
----------------------------
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Exhibit 10.37
MORTGAGE, SECURITY AGREEMENT,
AND ASSIGNMENT OF LEASES AND RENTS
MICHAEL ANTHONY JEWELERS, INC.,
a Delaware corporation,
Grantor,
to
GENERAL ELECTRIC CAPITAL BUSINESS
ASSET FUNDING CORPORATION,
a Delaware corporation,
Grantee.
February 10, 1999
Location of Premises:
Address: 50 South MacQuesten Parkway
Mount Vernon
Westchester County, New York
Section: 2
Block: 1057
Lot: 12 & 14
NOTICE: THE DEBT SECURED HEREBY IS SUBJECT TO CALL IN FULL OR THE TERMS THEREOF
BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY HEREIN
CONVEYED.
THE REAL PROPERTY IS NOT PRINCIPALLY IMPROVED OR TO BE IMPROVED BY ONE OR MORE
STRUCTURES CONTAINING IN THE AGGREGATE NOT MORE THAN SIX RESIDENTIAL DWELLING
UNITS, EACH DWELLING UNIT HAVING ITS OWN SEPARATE COOKING FACILITIES.
Prepared by, recording requested by,
and when recorded, return to:
Dorothea S. Costrini
Lee Ann M. Williams, Jr.
Hunter, Maclean, Exley & Dunn, P.C.
200 East Saint Julian Street
Savannah, Georgia 31412
General Electric Capital Business
Asset Funding Corporation
Loan Number: 001-0003346-001
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THIS MORTGAGE (herein "Instrument"), made as of February 10, 1999,
among the Mortgagor, MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation,
whose address is 115 South MacQuesten Parkway, Mount Vernon, New York 10550
(herein "Borrower"), in favor of the Mortgagee, GENERAL ELECTRIC CAPITAL
BUSINESS ASSET FUNDING CORPORATION, a Delaware corporation, whose address is
Real Estate Department, 10900 Northeast Fourth Street, Suite 500, Bellevue,
Washington 98004 (herein "Lender"),
W I T N E S S E T H:
THAT, WHEREAS, Borrower is justly indebted to Lender in the sum of Nine
Hundred Thirty-Seven Thousand Five Hundred and no hundredths Dollars
($937,500.00), as evidenced by a certain Promissory Note (as hereinafter
described),
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower irrevocably mortgages to Lender all of Borrower's right,
title and interest, now owned or hereafter acquired, including any reversion or
remainder interest, in the real property located in the City of Mount Vernon,
County of Westchester, State of New York, commonly known as 50 South MacQuesten
Parkway, and more particularly described on EXHIBIT A attached hereto and
incorporated herein including all heretofore or hereafter vacated alleys and
streets abutting the property, and all easements, rights, appurtenances,
tenements, hereditaments, rents, royalties, mineral, oil and gas rights and
profits, water, water rights, and water stock appurtenant to the property
(collectively "Premises");
TOGETHER with all of Borrower's estate, right, title and interest, now
owned or hereafter acquired, in, under and to:
(a) all buildings, structures, improvements, parking areas,
landscaping, equipment, fixtures and articles of property now or hereafter
erected on, attached to, or used or adapted for use in the operation of the
Premises; including but without being limited to, all heating, air conditioning
and incinerating apparatus and equipment; all boilers, engines, motors, dynamos,
generating equipment, piping and plumbing fixtures, water heaters, ranges,
cooking apparatus and mechanical kitchen equipment, refrigerators, freezers,
cooling, ventilating, sprinkling and vacuum cleaning systems, fire extinguishing
apparatus, gas and electric fixtures, carpeting, floor coverings, underpadding,
elevators, escalators, partitions, mantels, built-in mirrors, window shades,
blinds, draperies, screens, storm sash, awnings, signs, furnishings of public
spaces, halls and lobbies, and shrubbery and plants, and including also all
interest of any owner of the Premises in any of such items hereafter at any time
acquired under conditional sale contract, chattel mortgage or other title
retaining or security instrument, all of which property mentioned in this clause
(a) shall be deemed part of the realty covered by this Instrument and not
severable wholly or in part without material injury to the freehold of the
Premises (all of the foregoing together with replacements and additions thereto
are referred to herein as "Improvements") (subject to the rights of Lender in
connection with Loan No. 001-0003281-001);
(b) all compensation, awards, damages, rights of action and proceeds,
including interest thereon and/or the proceeds of any policies of insurance
therefor, arising out of or relating to a (i) taking or damaging of the Premises
or Improvements thereon by reason of any public or private improvement,
condemnation proceeding (including change of grade), sale or transfer in lieu of
condemnation, or fire, earthquake or other casualty, or (ii) any injury to or
decrease in the value of the Premises or the Improvements for any reason
whatsoever;
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(c) return premiums or other payments upon any insurance any time
provided for the benefit of or naming Lender, and refunds or rebates of taxes or
assessments on the Premises;
(d) all written and oral leases and rental agreements (including
extensions, renewals and subleases; all of the foregoing shall be referred to
collectively herein as the "Leases") now or hereafter affecting the Premises
including, without limitation, all rents, issues, profits and other revenues and
income therefrom and from the renting, leasing or bailment of Improvements and
equipment, all guaranties of tenants' performance under the Leases, and all
rights and claims of any kind that Borrower may have against any tenant under
the Leases or in connection with the termination or rejection of the Leases in a
bankruptcy or insolvency proceeding;
(e) plans, specifications, contracts and agreements relating to the
design or construction of the Improvements; Borrower's rights under any payment,
performance, or other bond in connection with the design or construction of the
Improvements; all landscaping and construction materials, supplies, and
equipment used or to be used or consumed in connection with construction of the
Improvements, whether stored on the Premises or at some other location; and
contracts, agreements, and purchase orders with contractors, subcontractors,
suppliers, and materialmen incidental to the design or construction of the
Improvements;
(f) all contracts, accounts, rights, claims or causes of action
pertaining to or affecting the Premises or the Improvements, including, without
limitation, management contracts, service or supply contracts, permits,
licenses, franchises and certificates, and all commitments or agreements, now or
hereafter in existence, intended by the obligor thereof to provide Borrower with
proceeds to satisfy the loan evidenced hereby or improve the Premises or
Improvements, and the right to receive all proceeds due under such commitments
or agreements including refundable deposits and fees;
(g) all books, records, surveys, reports and other documents related to
the Premises, the Improvements, the Leases, or other items of collateral
described herein; and
(h) all additions, accessions, replacements, substitutions, proceeds
and products of the real and personal property, tangible and intangible,
described herein.
All of the foregoing described collateral is exclusive of Borrower's
inventory and accounts receivable and any furniture, furnishings or trade
fixtures owned and supplied by tenants of the Premises. The Premises, the
Improvements, the Leases and all of the rest of the foregoing property are
herein referred to as the "Property."
TO HAVE AND TO HOLD the Property and all parts, rights, members and
appurtenances thereof to the use, benefit and behoof of Lender and its
successors and assigns in fee simple forever.
TO SECURE TO Lender (a) the repayment of the indebtedness evidenced by
Borrower's Promissory Note dated of even date herewith in the principal sum of
Nine Hundred Thirty-Seven Thousand Five Hundred and no hundredths Dollars
($937,500.00), with interest thereon as set forth therein, and having a maturity
date of March 1, 2014, and all renewals, extensions and modifications thereof
(herein "Note"); (b) the payment of all other sums, with interest thereon,
advanced in accordance herewith to protect the security of this Instrument or to
fulfill any of Borrower's obligations hereunder or under the other Loan
Documents (as defined
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below); and (c) the performance of the covenants and agreements of Borrower
contained herein or in the other Loan Documents. The indebtedness and
obligations described in clauses (a)-(c) above are collectively referred to
herein as the "Indebtedness;" The Note, this Instrument, and all other documents
evidencing, securing or guaranteeing the Indebtedness (except any Certificate
and Indemnity Agreement Regarding Hazardous Substances), as the same may be
modified or amended from time to time, are referred to herein as the "Loan
Documents;" The terms of the Note secured hereby may provide that the interest
rate or payment terms or balance due may be indexed, adjusted, renewed, or
renegotiated from time to time, and this Instrument shall continue to secure the
Note notwithstanding any such indexing, adjustment, renewal or renegotiation.
PROVIDED, ALWAYS, that if Borrower shall pay unto Lender the
Indebtedness and if Borrower shall duly, promptly and fully perform, discharge,
execute, effect, complete and comply with and abide by each and every of the
stipulations, agreements, conditions and covenants of the Note and this
Instrument, then this Instrument and all assignments contained herein and liens
created hereby shall cease and be null and void; otherwise to remain in full
force and effect.
Borrower represents and warrants that Borrower has good, marketable and
insurable title to, and has the right to mortgage an indefeasible fee simple
estate in, the Premises, Improvements, rents, and leases, and the right to
convey the other Property, that the Property is unencumbered except as disclosed
in writing to and approved by Lender prior to the date hereof, and that Borrower
will warrant and forever defend the title to the Property against all claims and
demands, subject only to the permitted exceptions set forth in SCHEDULE 1
attached hereto.
Borrower represents. warrants, covenants and agrees for the benefit of
Lender as follows:
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when
due the principal of and interest on the Indebtedness, any prepayment and other
charges provided in the Loan Documents and all other sums secured by this
Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Upon the occurrence of
an Event of Default (hereinafter defined), and at Lender's sole option at any
time thereafter, Borrower shall pay in addition to each monthly payment on the
Note, one-twelfth of the annual real estate taxes, insurance premiums,
assessments, water and sewer rates, ground rents and other charges (herein
"Impositions") payable with respect to the Property (as estimated by Lender in
its sole discretion), to be held by Lender without interest to Borrower, for the
payment of such obligations.
If the amount of such additional payments held by Lender ("Funds") at
the time of the annual accounting thereof shall exceed the amount deemed
necessary by Lender to provide for the payment of Impositions as they fall due,
such excess shall be at Borrower's option, either repaid to Borrower or credited
to Borrower on the next monthly installment or installments of Funds due. If at
any time the amount of the Funds held by Lender shall be less than the amount
deemed necessary by Lender to pay Impositions as they fall due, Borrower shall
pay to Lender any amount necessary to make up the deficiency within thirty (30)
days after notice from Lender to Borrower requesting payment thereof.
Upon the occurrence of an Event of Default hereunder, Lender may apply,
in any amount and in any order as Lender shall determine in Lender's sole
discretion, any Funds held by Lender at the time of application (i) to pay
Impositions which are now or will hereafter become due,
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or (ii) as a credit against sums secured by this Instrument. Upon payment in
full of all sums secured by this Instrument, Lender shall refund to Borrower any
Funds held by Lender.
3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise,
each complete installment payment received by Lender from Borrower under the
Note or this Instrument shall be applied by Lender first in payment of amounts
payable to Lender by Borrower under SECTION 2 hereof, then to interest payable
on the Note, then to principal of the Note. Upon the occurrence of an Event of
Default, Lender may apply, in any amount and in any order as Lender shall
determine in Lender's sole discretion, any payments received by Lender under the
Note or this Instrument. Any partial payment received by Lender shall, at
Lender's option, be held in a non-interest bearing account until Lender receives
funds sufficient to equal a complete installment payment.
4. CHARGES, LIENS. Borrower shall pay all Impositions attributable to
the Property in the manner provided under SECTION 2 hereof or, if not paid in
such manner, by Borrower making payment, when due, directly to the payee
thereof, or in such other manner as Lender may designate in writing. If
requested by Lender, Borrower shall promptly furnish to Lender all notices of
Impositions which become due, and in the event Borrower shall make payment
directly, Borrower shall promptly furnish to Lender receipts evidencing such
payments. Borrower shall promptly discharge any lien which has, or may have,
priority over or equality with, the lien of this Instrument, and Borrower shall
pay, when due, the claims of all persons supplying labor or materials to or in
connection with the Property. Without Lender's prior written permission,
Borrower shall not allow any lien inferior to this Instrument to be perfected
against the Property. If any lien inferior to this Instrument is filed against
the Property without Lender's prior written permission and without the consent
of Borrower, Borrower shall, within thirty (30) days after receiving notice of
the filing of such lien, cause such lien to be released of record and deliver
evidence of such release to Lender.
5. INSURANCE. Borrower shall obtain and maintain the following types of
insurance upon and relating to the Property:
(a) "All Risk" property and fire insurance (with extended coverage
endorsement including malicious mischief and vandalism) in an amount not less
than the full replacement value of the Property (with a deductible not to exceed
$5,000), naming Lender under a lender's loss payee endorsement (form 438BFU or
equivalent) and including agreed amount, inflation guard, replacement cost and
waiver of subrogation endorsements;
(b) Comprehensive general liability insurance in an amount not less
than $2,000,000.00 insuring against personal injury, death and property damage
and naming Lender as additional insured;
(c) Business interruption insurance covering loss of rental or other
income (including all expenses payable by tenants) for up to six (6) months; and
(d) Such other types of insurance or endorsements to existing insurance
as may be required from time to time by Lender.
Upon the request of Lender, Borrower shall increase the coverages under
any of the insurance policies required to be maintained hereunder or otherwise
modify such policies in accordance with Lender's request. All of the insurance
policies required hereunder shall be issued by corporate insurers licensed to do
business in the state in which the Property is located and rated A:X or better
by A.M. Best Company, and shall be in form acceptable to Lender. If and to the
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extent that the Property is located within an area that has been or is hereafter
designated or identified as an area having special flood hazards by the
Department of Housing and Urban Development or such other official as shall from
time to time be authorized by federal or state law to make such designation
pursuant to any national or state program of flood insurance, Borrower shall
carry flood insurance with respect to the Property in amounts not less than the
maximum limit of coverage then available with respect to the Property or the
amount of the Indebtedness, whichever is less. Certificates of all insurance
required to be maintained hereunder shall be delivered to Lender, along with
evidence of payment in full of all premiums required thereunder,
contemporaneously with Borrower's execution of this Instrument. All such
certificates shall be in form acceptable to Lender and shall require the
insurance company to give to Lender at least thirty (30) days' prior written
notice before canceling the policy for any reason or materially amending it.
Certificates evidencing all renewal and substitute policies of insurance shall
be delivered to Lender, along with evidence of the payment in full of all
premiums required thereunder, at least fifteen (15) days before termination of
the policies being renewed or substituted. If any loss shall occur at any time
when Borrower shall be in default hereunder, Lender shall be entitled to the
benefit of all insurance policies held or maintained by Borrower, to the same
extent as if same had been made payable to Lender, and upon foreclosure
hereunder, Lender shall become the owner thereof. Lender shall have the right,
but not the obligation, to make premium payments, at Borrower's expense, to
prevent any cancellation, endorsement, alteration or reissuance of any policy of
insurance maintained by Borrower, and such payments shall be accepted by the
insurer to prevent same.
If any act or occurrence of any kind or nature (including any casualty
for which insurance was not obtained or obtainable) shall result in damage to or
destruction of the Property (such event being called a "Loss"), Borrower will
give prompt written notice thereof to Lender. All insurance proceeds paid or
payable in connection with any Loss shall be paid to Lender. If (i) no Event of
Default has occurred and is continuing hereunder, (ii) Borrower provides
evidence satisfactory to Lender of its ability to pay all amounts becoming due
under the Note during the pendency of any restoration or repairs to or
replacement of the Property, (iii) the available insurance proceeds are, in
Lender's judgment, sufficient to fully and completely restore, repair or replace
the Property, and (iv) Borrower provides evidence satisfactory to Lender that
none of the tenants of the Property will terminate their Leases as a result of
either the Loss or the repairs to or replacement of the Property, Borrower shall
have the right to apply all insurance proceeds received in connection with such
Loss either (a) to restore, repair, replace and rebuild the Property as nearly
as possible to its value, condition and character immediately prior to such
Loss, or (b) to the payment of the Indebtedness in such order as Lender may
elect. If an Event of Default has occurred and is continuing hereunder at the
time of such Loss, if Lender determines that Borrower will be unable to pay all
amounts becoming due under the Note during the pendency of any restoration or
repairs to or replacement of the Property, if the available insurance proceeds
are insufficient, in Lender's judgment, to fully and completely restore, repair
or replace the Property or if Lender believes that one or more tenants of the
Property will terminate its Lease as a result of either the Loss or the repairs
to or replacement of the Property, then all of the insurance proceeds payable
with respect to such Loss will be applied to the payment of the Indebtedness, or
if so instructed by Lender, Borrower will promptly, at Borrower's sole cost and
expense and regardless of whether sufficient insurance proceeds shall be
available, commence to restore, repair, replace and rebuild the Property as
nearly as possible to its value, condition, character immediately prior to such
Loss. Borrower shall diligently prosecute any restoration, repairs or
replacement of the Property undertaken by or on behalf of Borrower pursuant to
this SECTION 5. All such work shall be conducted pursuant to written contracts
approved by Lender in writing. Notwithstanding anything contained herein to the
contrary, in the event the insurance proceeds received by Lender following any
Loss are insufficient in Lender's judgment to fully and completely restore,
repair or replace the
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Property, and if Borrower has complied with all of the other conditions
described in this SECTION 5, Borrower may elect to restore, repair or replace
the Property if it first deposits with Lender such additional sums as Lender
determines are necessary in order to fully and completely restore, repair or
replace the Property. In the event any insurance proceeds remain following the
restoration, repair or replacement of the Property, such proceeds shall be
applied to the Indebtedness in such order as Lender may elect.
Borrower waives any and all right to claim or recover against Lender or
its officers, employees, agents and representatives, for loss of or damage to
Borrower, the Property, Borrower's property or the property of others under
Borrower's control from any cause insured against or required to be insured
against under this SECTION 5.
6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall not
commit waste or permit impairment or deterioration of the Property, (b) shall
not abandon the Property, (c) shall restore or repair promptly and in a good and
workmanlike manner all or any part of the Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing, in
the event of any damage, injury or loss thereto, whether or not insurance
proceeds are available to cover in whole or in part the costs of such
restoration or repair, (d) shall keep the Property, including all improvements,
fixtures, equipment, machinery and appliances thereon, in good repair and shall
replace fixtures, equipment, machinery and appliances on the Property when
necessary to keep such items in good repair, (e) shall comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property, (f) if all or part of the Property is for rent or lease, then
Lender, at its option after the occurrence of an Event of Default, may require
Borrower to provide for professional management of the Property by a property
manager satisfactory to Lender pursuant to a contract approved by Lender in
writing, unless such requirement shall be waived by Lender in writing, (g) shall
generally operate and maintain the Property in a manner to ensure maximum
rentals, and (h) shall give notice in writing to Lender of and, unless otherwise
directed in writing by Lender, appear in and defend any action or proceeding
purporting to affect the Property, the security of this Instrument or the rights
or powers of Lender hereunder. Neither Borrower nor any tenant or other person,
without the written approval of Lender, shall remove, demolish or alter any
improvement now existing or hereafter erected on the Property or any fixture,
equipment, machinery or appliance in or on the Property except when incident to
the replacement of fixtures, equipment, machinery and appliances with items of
like kind.
Borrower represents, warrants and covenants that the Property is and
shall be in compliance with the Americans with Disabilities Act of 1990 and all
of the regulations promulgated thereunder, as the same may be amended from time
to time.
7. USE OF PROPERTY. Unless required by applicable law or unless Lender
has otherwise agreed in writing, Borrower shall not allow changes in the use for
which all or any part of the Property was intended at the time this Instrument
was executed. Borrower shall not, without Lender's prior written consent, (i)
initiate or acquiesce in a change in the zoning classification (including any
variance under any existing zoning ordinance applicable to the Property), (ii)
permit the use of the Property to become a non-conforming use under applicable
zoning ordinances, (iii) file any subdivision or parcel map affecting the
Property, or (iv) amend, modify or consent to any easement or covenants,
conditions and restrictions pertaining to the Property.
8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform any of
the covenants and agreements contained in this Instrument, or if any action or
proceeding is
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commenced which affects the Property or title thereto or the interest of Lender
therein, including, but not limited to, eminent domain, insolvency, code
enforcement, or arrangements or proceedings involving a bankrupt or decedent,
then Lender at Lender's option may make such appearances, disburse such sums and
take such action as Lender deems necessary, in its sole discretion, to protect
Lender's interest, including, but not limited to, (i) disbursement of attorneys'
fees, (ii) entry upon the Property to make repairs, (iii) procurement of
satisfactory insurance as provided in SECTION 5 hereof.
Any amounts disbursed by Lender pursuant to this SECTION 8, with
interest thereon, shall become additional Indebtedness of Borrower secured by
this Instrument. Unless Borrower and Lender agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the highest rate which may be collected from
Borrower under applicable law or, at Lender's option, the rate stated in the
Note. Borrower hereby covenants and agrees that Lender shall be subrogated to
the lien of any mortgage or other lien discharged, in whole or in part, by the
Indebtedness. Nothing contained in this SECTION 8 shall require Lender to incur
any expense or take any action hereunder.
9. INSPECTION. Lender may make or cause to be made reasonable entries
upon the Property to inspect the interior and exterior thereof.
10. FINANCIAL DATA. Borrower will furnish to Lender, and will cause any
guarantor of the Indebtedness to furnish Lender on request, within ninety (90)
days after the close of its fiscal year (i) annual balance sheet and profit and
loss statements prepared in accordance with generally accepted accounting
principles and practices consistently applied and, if Lender so requires,
accompanied by the annual audit report of an independent certified public
accountant reasonably acceptable to Lender, (ii) an annual operating statement,
together with a complete rent roll and other supporting data reflecting all
material information with respect to the operation of the Property and
Improvements, and (iii) all other financial information and reports that Lender
may from time to time reasonably request, including, if Lender so requires,
income tax returns of Borrower and any guarantor of any portion of the
Indebtedness, and, to the extent that Borrower is able to do so, financial
statements of any tenants designated by Lender. (Failure to provide financial
statements of tenants shall not constitute an Event of Default hereunder.)
11. CONDEMNATION. If the Property, or any part thereof, shall be
condemned for any reason, including without limitation fire or earthquake
damage, or otherwise taken for public or quasi-public use under the power of
eminent domain, or be transferred in lieu thereof, all damages or other amounts
awarded for the taking of, or injury to, the Property shall be paid to Lender
who shall have the right, in its sole and absolute discretion, to apply the
amounts so received against (a) the costs and expenses of Lender, including
attorneys' fees incurred in connection with collection of such amounts, and (b)
the balance against the Indebtedness; provided, however, that if (i) no Event of
Default shall have occurred and be continuing hereunder (ii) Borrower provides
evidence satisfactory to Lender of its ability to pay all amounts becoming due
under the Note during the pendency of any restoration or repairs to or
replacement of the Property, (iii) Lender determines, in its sole discretion,
that the proceeds of such award are sufficient to restore, repair, replace and
rebuild the Property as nearly as possible to its value, condition and character
immediately prior to such taking (or, if the proceeds of such award are
insufficient for such purpose, if Borrower provides additional sums to Lender's
satisfaction so that the aggregate of such sums and the proceeds of such award
will be sufficient for such purpose), and (iv) Borrower provides evidence
satisfactory to Lender that none of the tenants of the Property will terminate
its Lease as a result of either the condemnation or taking or the repairs to or
replacement of the Property, the proceeds of such award, together with
additional sums provided by Borrower, shall
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be placed in a separate account for the benefit of Lender and Borrower to be
used to restore, repair, replace and rebuild the Property as nearly as possible
to its value, condition and character immediately prior to such taking. All work
to be performed in connection therewith shall be pursuant to a written contract
therefor, which contract shall be subject to the prior approval of Lender. To
the extent that any funds remain after the Property has been so restored and
repaired, the same shall be applied against the Indebtedness in such order as
Lender may elect. To enforce its rights hereunder, Lender shall be entitled to
participate in and control any condemnation proceedings and to be represented
therein by counsel of its own choice, and Borrower will deliver, or cause to be
delivered to Lender such instruments as may be requested by it from time to time
to permit such participation. In the event Lender, as a result of any such
judgment, decree or award, believes that the payment or performance of any of
the Indebtedness is impaired, Lender may declare all of the Indebtedness
immediately due and payable.
12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at
Lender's option, without giving notice to or obtaining the consent of Borrower,
Borrower's successors or assigns or of any junior lienholder or guarantors,
without liability on Lender's part and notwithstanding the occurrence of an
Event of Default, extend the time for payment of the Indebtedness or any part
thereof, reduce the payments thereon, release anyone liable on any of the
Indebtedness, accept an extension or modification or renewal note or notes
therefor, modify the terms and time of payment of the Indebtedness, release from
the lien of this Instrument any part of the Property, take or release other or
additional security, reconvey any part of the Property, consent to any map or
plan of the Property, consent to the granting of any easement, join in any
extension or subordination agreement, and agree in writing with Borrower to
modify the rate of interest or period of amortization of the Note or change the
amount of the monthly installments payable thereunder. Any actions taken by
Lender pursuant to the terms of this SECTION 12 shall not affect the obligation
of Borrower or Borrower's successors or assigns to pay the sums secured by this
Instrument and to observe the covenants of Borrower contained herein, shall not
affect the guaranty of any person, corporation, partnership or other entity for
payment of the Indebtedness, and shall not affect the lien or priority of the
lien hereof on the Property. Borrower shall pay Lender a service charge,
together with such title insurance premiums and attorneys' fees as may be
incurred at Lender's option, for any such action if taken at Borrower's request.
13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
exercising any right or remedy hereunder, or otherwise afforded by applicable
law, shall not be a waiver of or preclude the exercise of any other right or
remedy. The acceptance by Lender of payment of any sum secured by this
Instrument after the due date of such payment shall not be a waiver of Lender's
right to either require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment. The procurement of
insurance or the payment of taxes or other liens or charges by Lender shall not
be a waiver of Lender's right to accelerate the maturity of the Indebtedness
secured by this Instrument, nor shall Lender's receipt of any awards, proceeds
or damages under SECTIONS 5 and 11 hereof operate to cure or waive Borrower's
default in payment of sums secured by this Instrument.
14. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
intended to be a security agreement pursuant to the Uniform Commercial Code for
any of the items specified above as part of the Property which, under applicable
law, may be subject to a security interest pursuant to the Uniform Commercial
Code, and Borrower hereby grants and conveys to Lender a first and prior
security interest in all of the Property that constitutes personalty, whether
now owned or hereafter acquired. Any reproduction of this Instrument or of any
other security agreement or financing statement shall be sufficient as a
financing statement. In addition, Borrower agrees to execute and deliver to
Lender, upon Lender's request, any
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financing statements, as well as extensions, renewals and amendments thereof,
and reproductions of this Instrument in such form as Lender may require to
perfect a security interest with respect to the foregoing items. Borrower shall
pay all costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all costs and expenses of any
record searches for financing statements Lender may require. Without the prior
written consent of Lender, Borrower shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in said
items, including replacements and additions thereto. Upon the occurrence of an
Event of Default, including the covenants to pay when due all sums secured by
this Instrument, Lender shall have the remedies of a secured party under the
Uniform Commercial Code, and Lender may also invoke the remedies provided in
SECTION 26 of this Instrument as to such items. In exercising any of said
remedies Lender may proceed against the items of real property and any items of
personal property specified above separately or together and in any order
whatsoever, without in any way affecting the availability of Lender's remedies
under the Uniform Commercial Code or of the remedies provided in SECTION 26 of
this Instrument. Within ten (10) days following any request therefor by Lender,
Borrower shall prepare and deliver to Lender a written inventory specifically
listing all of the personal property covered by the security interest herein
granted, which inventory shall be certified by Borrower as being true, correct,
and complete.
15. LEASES OF THE PROPERTY. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases of the Property or any part
thereof. All Leases hereafter entered into will be in form and substance subject
to the approval of Lender, which approval shall not be unreasonably withheld.
All Leases of the Property hereafter entered into shall specifically provide
that such Leases are subordinate to this Instrument; that the tenant attorns to
Lender, such attornment to be effective upon Lender's acquisition of title to
the Property; that the tenant agrees to execute such further evidences of
attornment as Lender may from time to time request; that the attornment of the
tenant shall not be terminated by foreclosure; and that Lender may, at Lender's
option, accept or reject such attornments. Borrower shall not, without Lender's
written consent, request or consent to the subordination of any Lease of all or
any part of the Property to any lien subordinate to this Instrument. If Borrower
becomes aware that any tenant proposes to do, or is doing, any act or thing
which may give rise to any right of set-off against rent, Borrower shall (i)
take such steps as shall be reasonably calculated to prevent the accrual of any
right to a set-off against rent, (ii) immediately notify Lender thereof in
writing and of the amount of said set-offs, and (iii) within ten (10) days after
such accrual, reimburse the tenant who shall have acquired such right to set-off
or take such other steps as shall effectively discharge such setoff and as shall
assure that rents thereafter due shall continue to be payable without set-off or
deduction. Upon Lenders receipt of notice of the occurrence of any default or
violation by Borrower of any of its obligations under the Leases, Lender shall
have the immediate right, but not the duty or obligation, without prior written
notice to Borrower or to any third party, to enter upon the Property and to take
such actions as Lender may deem necessary to cure the default or violation by
Borrower under the Leases. The costs incurred by Lender in taking any such
actions pursuant to this paragraph shall become part of the Indebtedness, shall
bear interest at the rate provided in the Note, and shall be payable by Borrower
to Lender on demand. Lender shall have no liability to Borrower or to any third
party for any actions taken by Lender or not taken pursuant to this paragraph.
16. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is
distinct and cumulative to all other rights or remedies under this Instrument or
afforded by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.
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17. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER:
ASSUMPTION. Lender may, at its option, declare all sums secured by this
Instrument to be immediately due and payable, and Lender may invoke any remedies
permitted by SECTION 26 of this Instrument, if title to the Property is changed
without the prior written consent of Lender, which consent shall be at Lender's
sole discretion. Any transfer of any interest in the Property or in the income
therefrom, by sale, lease (except for leases to tenants in the ordinary course
of managing income property which are approved by Lender pursuant to SECTION 15
of this Instrument), contract, mortgage, deed of trust, further encumbrance or
otherwise (including any such transfers as security for additional financing of
the Property), and any change in the ownership interests in Borrower (including
any transfer, pledge, assignment, or hypothecation of, or other change in, the
ownership interests in Borrower or any legal entities which comprise or control
Borrower), shall be considered a change of title, except transfers and changes
in ownership (i) by devise or descent, (ii) for bona-fide estate-planning
purposes, (iii) pursuant to ordinary trading of stock in Borrower (Lender
acknowledging that Borrower is a publicly traded company), or (iv) by
acquisitions of other jewellery concerns by Borrower.
Lender shall have the right to condition its consent to any proposed
sale or transfer described in this SECTION 17 upon, among other things, Lender's
approval of the transferee's creditworthiness and management ability and the
transferee's execution, prior to the sale or transfer, of a written assumption
agreement containing such terms as Lender may require, including, if required by
Lender, the imposition of an assumption fee of one percent (1%) of the then
outstanding balance of the Indebtedness. Consent by Lender to one transfer of
the Property shall not constitute consent to subsequent transfers or waiver of
the provisions of this SECTION 17. No transfer by Borrower shall relieve
Borrower of liability for payment of the Indebtedness. Borrower shall pay any
recording tax, recording cost, title insurance premium, attorneys' fees, or
other third-party expenses incurred by Lender in connection with any transfer,
whether or not consent is required.
18. NOTICE. Except for any notice required under applicable law to be
given in another manner, any and all notices, elections, demands, or requests
permitted or required to be made under this Instrument or under the Note shall
be in writing, signed by the party giving such notice, election, demand or
request, and shall be delivered personally, by telegram, or sent by registered,
certified, or Express United States mail, postage prepaid, or by Federal Express
or similar service requiring a receipt, to the other party at the address stated
above, or to such other party and at such other address within the United States
of America as any party may designate in writing as provided herein. The date of
receipt of such notice, election, demand or request shall be the earliest of (i)
the date of actual receipt, (ii) three (3) days after the date of mailing by
registered or certified mail, (iii) one (1) day after the date of mailing by
Express Mail or the delivery (for redelivery) to Federal Express or another
similar service requiring a receipt, or (iv) the date of personal delivery (or
refusal upon presentation for delivery).
19. SUCCESSORS AND ASSIGNS BOUND: JOINT AND SEVERAL LIABILITY; AGENTS;
CAPTIONS. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to, the respective heirs, successors and
assigns of Lender and Borrower, subject to the provisions of SECTION 17 hereof.
If Borrower is comprised of more than one person or entity, whether as
individuals, partners, partnerships or corporations, each such person or entity
shall be jointly and severally liable for Borrower's obligations hereunder. In
exercising any rights hereunder or taking any actions provided for herein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender. The captions and headings of the sections of this
Instrument are for convenience only and are not to be used to interpret or
define the provisions hereof.
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20. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce the Note or any other
obligation secured by this Instrument.
21. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interests in the Property held by Lender or by any other party, Lender
shall have the right to determine the order in which any or all the Property
shall be subjected to the remedies provided herein. Lender shall have the right
to determine the order in which any or all portions of the Indebtedness secured
hereby are satisfied from the proceeds realized upon the exercise of the
remedies provided herein. Borrower, any party who consents to this Instrument
and any party who now or hereafter acquires a security interest in the Property
and who has actual or constructive notice hereof hereby waives any and all
right to require the marshalling of assets in connection with the exercise of
any of the remedies permitted by applicable law or provided herein.
22. HAZARDOUS WASTE. Borrower has furnished to Lender a Phase I
Environmental Assessment dated December 22, 1998, prepared by AAS
Environmental, Inc. and an Environmental Questionnaire dated January 12, 1999
(collectively, the "Report"). Except as disclosed to Lender in the Report,
Borrower has received no notification of any kind suggesting that the Property
or any adjacent property is or may be contaminated with any hazardous waste or
materials or is or may be required to be cleaned up in accordance with any
applicable law or regulation; and Borrower further represents and warrants
that, except as previously disclosed to Lender in writing, to the best of its
knowledge as of the date hereof after due and diligent inquiry, there are no
hazardous waste or materials located in, on or under the Property or any
adjacent property, or incorporated in any Improvements, nor has the Property or
any adjacent property ever been used as a landfill or a waste disposal site, or
a manufacturing, handling, storage, distribution or disposal facility for
hazardous waste or materials. As used herein, the term "hazardous waste or
materials" includes any substance or material defined in or designated as
hazardous or toxic wastes, hazardous or toxic material, a hazardous, toxic or
radioactive substance, or other similar term, by any federal, state, or local
statute, regulation or ordinance now or hereafter in effect. Borrower shall
promptly comply with all statutes, regulations and ordinances, and with all
orders, decrees or judgments of governmental authorities or courts having
jurisdiction, relating to the use, collection, treatment, disposal, storage,
control, removal or cleanup of hazardous waste or materials in, on or under the
Property or any adjacent property, or incorporated in any improvements, at
Borrower's expense. In the event that Lender at any time believes that the
Property is not free of all hazardous waste or materials or that Borrower has
violated any applicable environmental law with respect to the Property, then
immediately upon request by Lender, Borrower shall obtain and furnish to
Lender, at Borrower's sole cost and expense, an environmental audit and
inspection of the Property from an expert satisfactory to Lender. In the event
that Borrower fails to immediately obtain such audit or inspection, Lender or
its agents may perform or obtain such audit or inspection at Borrower's sole
cost and expense. Lender may, but is not obligated to, enter upon the Property
and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable to protect its interest in the Property; and
whether or not Borrower has actual knowledge of the existence of hazardous
waste or materials on the Property or any adjacent property as of the date
hereof, Borrower shall reimburse Lender as provided in SECTION 23 below for the
full amount of all costs and expenses incurred by Lender prior to Lender
acquiring title to the Property through foreclosure or acceptance of a deed in
lieu of foreclosure, in connection with such compliance activities. Neither
this provision nor any of the other Loan Documents shall operate to put Lender
in the position of an owner of the Property prior to any acquisition of the
Property by Lender. The rights granted to Lender herein and in other Loan
Documents are granted solely for the protection of Lender's lien and security
interest covering the
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Property, and do not grant to Lender the right to control Borrower's actions,
decisions or policies regarding hazardous waste or materials.
23. ADVANCES, COSTS AND EXPENSES. Borrower shall pay within ten (10)
days after written demand from Lender all sums advanced by Lender and all costs
and expenses incurred by Lender in taking any actions pursuant to the Loan
Documents including attorneys' fees and disbursements, accountants' fees,
appraisal and inspection fees and the costs for title reports and guaranties,
together with interest thereon at the rate applicable under the Note after an
Event of Default from the date such costs were advanced or incurred. All such
costs and expenses incurred by Lender, and advances made, shall constitute
advances under this Instrument to protect the Property and shall be secured by
and have the same priority as the lien of this Instrument. If Borrower fails to
pay any such advances, costs and expenses and interest thereon, Lender may apply
any undisbursed loan proceeds to pay the same, and, without foreclosing the lien
of this Instrument, may at its option commence an independent action against
Borrower for the recovery of the costs, expenses and/or advances, with interest,
together with costs of suit, costs of title reports and guaranty of title,
disbursements of counsel and reasonable attorneys' fees incurred therein or in
any appeal therefrom.
24. ASSIGNMENT OF LEASES AND RENTS. Borrower, for good and valuable
consideration, the receipt of which is hereby acknowledged, to secure the
Indebtedness, does hereby absolutely and unconditionally grant, bargain, sell,
transfer, assign, convey, set over and deliver unto Lender all right, title and
interest of Borrower in, to and under the Leases of the Property, whether now in
existence or hereafter entered into, and all guaranties, amendments, extensions
and renewals of said Leases and any of them, and all rents, income and profits
which may now or hereafter be or become due or owing under the Leases, and any
of them, or on account of the use of the Property.
Borrower represents, warrants, covenants and agrees with Lender as
follows:
(a) The sole ownership of the entire lessor's interest in the Leases is
vested in Borrower, and Borrower has not, and shall not, perform any acts or
execute any other instruments which might prevent Lender from fully exercising
its rights with respect to the Leases under any of the terms, covenants and
conditions of this Instrument.
(b) The Leases are and shall be valid and enforceable in accordance
with their terms and have not been and shall not be altered, modified, amended,
terminated, canceled, renewed or surrendered except as approved in writing by
Lender. The terms and conditions of the Leases have not been and shall not be
waived in any manner whatsoever except as approved in writing by Lender.
(c) Borrower shall not alter the term or the amount of rent payable
under any Lease without prior written notice to Lender and Lender's consent,
which shall not be unreasonably withheld.
(d) There are no defaults now existing under any of the Leases and
there exists no state of facts which, with the giving of notice or lapse of time
or both, would constitute a default under any of the Leases.
(e) Borrower shall give prompt written notice to Lender of any notice
received by Borrower claiming that a default has occurred under any of the
Leases on the part of Borrower, together with a complete copy of any such
notice.
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(f) Each of the Leases shall remain in full force and effect
irrespective of any merger of the interest of lessor and any lessee under any of
the leases.
(g) Borrower will not permit any Lease to become subordinate to any
lien other than the lien of this Instrument.
The assignment made hereunder is an absolute, present assignment from
Borrower to Lender, effective immediately, and is not merely an assignment for
security purposes but is irrevocable by Borrower so long as the Indebtedness
remains outstanding. Notwithstanding the foregoing, until a notice is sent to
the Borrower in writing that an Event of Default (as defined below) has occurred
under the terms and conditions of the Note or any instrument constituting
security for the Note (which notice is hereafter called a "Notice"), Borrower is
granted a license to receive, collect and enjoy the rents, income and profits
accruing from the Property.
If an Event of Default shall occur, Lender may, at its option, after
service of a Notice, receive and collect all such rents, income and profits as
they become due, from the Property. Lender shall thereafter continue to receive
and collect all such rents, income and profits, until Lender shall otherwise
agree in writing. All sums received by Borrower after service of such Notice
shall be deemed received in trust and shall be immediately turned over to
Lender.
Borrower hereby irrevocably appoints Lender its true and lawful
attorney-in-fact with power of substitution and with full power for Lender in
its own name and capacity or in the name and capacity of Borrower, from and
after service of Notice, to demand, collect, receive and give complete
acquittances for any and all rents, income and profits accruing from the
Property, either in its own name or in the name of Borrower or otherwise, which
Lender may deem necessary or desirable in order to collect and enforce the
payment of the rents, income and profits and to demand, correct, receive,
endorse, and deposit all checks, drafts, money orders or notes given in payment
of such rents. Such appointment is coupled with an interest and is irrevocable.
Lender shall not be liable for or prejudiced by any loss of any note, checks,
drafts, etc., unless such loss is due to the gross negligence or willful
misconduct of Lender.
Lender shall apply the rents received from Borrower's lessees, to
accrued interest and principal under the Note. If no Event of Default remains
uncured, amounts received in excess of the aggregate monthly payment due under
the Note shall be remitted to Borrower in a timely manner. Nothing contained
herein shall be construed to constitute Lender as a mortgagee-in-possession in
absence of its physically taking possession of the Property.
Borrower also hereby irrevocably appoints Lender as its true and lawful
attorney-in-fact to appear in any state or federal bankruptcy, insolvency, or
reorganization proceeding in any state or federal court involving any of the
tenants of the Leases. Lessees of the Property are hereby expressly authorized
and directed, from and after service of a Notice to pay any and all amounts due
Borrower pursuant to the Leases to Lender or such nominee as Lender may
designate in writing delivered to and received by such lessees who are expressly
relieved of any and all duty, liability or obligation to Borrower in respect of
all payments so made.
If an Event of Default shall occur, Lender is hereby vested with full
power from and after service of a Notice to use all measures, legal and
equitable, deemed by it necessary or proper to enforce the assignment granted
hereunder and to collect the rents, income and profits assigned hereunder,
including the right of Lender or its designee, to enter upon the Property, or
any part thereof, and take possession of all or any part of the Property
together with all personal property, fixtures, documents, books, records, papers
and accounts of Borrower relating thereto, and may
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exclude the Borrower, its agents and servants, wholly therefrom. Borrower hereby
grants full power and authority to Lender to exercise all rights, privileges and
powers herein granted at any and all times after service of a Notice, with full
power to use and apply all of the rents and other income herein assigned to the
payment of the costs of managing and operating the Property and of any
indebtedness or liability of Borrower to Lender, including but not limited to
the payment of taxes, special assessments, insurance premiums, damage claims,
the costs of maintaining, repairing, rebuilding and restoring the improvements
on the Property or of making the same rentable, reasonable attorneys' fees
incurred in connection with the enforcement of the assignment granted hereunder,
and of principal and interest payments due from Borrower to Lender on the Note
and this Instrument, all in such order as Lender may determine. Lender shall be
under no obligation to exercise or prosecute any of the rights or claims
assigned to it hereunder or to perform or carry out any of the obligations of
the lessor under any of the Leases and does not assume any of the liabilities in
connection with or arising or growing out of the covenants and agreements of
Borrower in the leases. It is further understood that the assignment granted
hereunder shall not operate to place responsibility for the control, care,
management or repair of the Property, or parts thereof, upon Lender, nor shall
it operate to make Lender liable for the performance of any of the terms and
conditions of any of the Leases, or for any waste of the Property by any lessee
under any of the Leases or any other person, or for any dangerous or defective
condition of the Property or for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
lessee, licensee, employee or stranger.
25. DEFAULT. The following shall each constitute an event of default
("Event of Default"):
(a) Failure of Lender to receive any portion of the sums secured by
this Instrument when due, and such failure shall continue for ten (10) days
after written notice of the same is given by Lender to Borrower; or
(b) Failure of Borrower within the time required by this Instrument to
make any payment for taxes, insurance or for reserves for such payments, or any
other payment necessary to prevent filing of or discharge of any lien, and such
failure shall continue for a period of ten (10) days after written notice is
given to Borrower by Lender specifying such failure; or
(c) Failure by Borrower to observe or perform any obligations of
Borrower to Lender on or with respect to any transactions, debts, undertakings
or agreements other than the transaction evidenced by the Note following the
giving of any notice required thereunder and/or the expiration of any applicable
period of grace provided thereby; or
(d) Failure of Borrower to make any payment or perform any obligation
under any superior liens or encumbrances on the Property, within the time
required thereunder, or commencement of any suit or other action to foreclose
any superior liens or encumbrances; or
(e) Failure by Borrower to observe or perform any of its obligations
under any of the Leases; or
(f) The Property is transferred or any agreement to transfer any part
or interest in the Property in any manner whatsoever is made or entered into
without the prior written consent of Lender, except as specifically allowed
under this Instrument, including without limitation creating or allowing any
liens on the Property or leasing any portion of the Property; or
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(g) Filing by Borrower of a voluntary petition in bankruptcy or filing
by Borrower of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or the seeking, consenting to, or acquiescing by Borrower in the
appointment of any trustee, receiver, custodian, conservator or liquidator for
Borrower, any part of the Property, or any of the income or rents of the
Property, or the making by Borrower of any general assignment for the benefit of
creditors, or the inability of or failure by Borrower to pay its debts generally
as they become due, or the insolvency on a balance sheet basis or business
failure of Borrower, or the making or suffering of a preference within the
meaning of federal bankruptcy law or the making of a fraudulent transfer under
applicable federal or state law, or concealment by Borrower of any of its
property in fraud of creditors, or the imposition of a lien upon any of the
property of Borrower which is not discharged in the manner permitted by SECTION
4 of this Instrument, or the giving of notice by Borrower to any governmental
body of insolvency or suspension of operations; or
(h) Filing of a petition against Borrower seeking any reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief for debts, or the appointment of any
trustee, receiver, custodian, conservator or liquidator of Borrower, of any part
of the Property or of any of the income or rents of the Property, unless such
petition shall be dismissed within sixty (60) days after such filing, but in any
event prior to the entry of an order, judgment or decree approving such
petition; or
(i) The institution of any proceeding for the dissolution or
termination of Borrower voluntarily, involuntarily, or by operation of law; or
(j) A material adverse change occurs in the assets, liabilities or net
worth of Borrower from the assets, liabilities or net worth of Borrower
previously disclosed to Lender; or
(k) Any warranty, representation or statement furnished to Lender by or
on behalf of Borrower under the Note, this Instrument, any of the other Loan
Documents or the Certificate and Indemnity Agreement Regarding Hazardous
Substances, shall prove to have been false or misleading in any material
respect; or
(l) Failure of Borrower to observe or perform any other covenant or
condition contained in the Note or this Instrument, which default shall continue
for thirty (30) days after notice is given to Borrower specifying the nature of
the failure, or if the default cannot be cured within such cure period, Borrower
fails within such time to commence and pursue curative action with reasonable
diligence or fails at any time after expiration of such cure period to continue
with reasonable diligence all necessary curative actions. No notice of default
and no opportunity to cure shall be required with respect to defaults under
SECTION 17 of this Instrument or if during the prior twelve (12) months Lender
has already sent a notice to Borrower concerning default in performance of the
same obligation; or
(m) Failure of Borrower to observe or perform any other obligation
under this any Loan Document (other than this Instrument or the Note) or the
Certificate and Indemnity Regarding Hazardous Substances when such observance or
performance is due, and such failure shall continue beyond the applicable cure
period set forth in such Loan Document, or if the default cannot be cured within
such applicable cure period, Borrower fails within such time to commence and
pursue curative action with reasonable diligence or fails at any time after
expiration of such applicable cure period to continue with reasonable diligence
all necessary curative actions. No
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<PAGE> 17
notice of default and no opportunity to cure shall be required if during the
prior twelve (12) months Lender has already sent a notice to Borrower concerning
default in performance of the same obligation; or
(n) Borrowers abandonment of the Property; or
(o) Any of the foregoing events occur with respect to any tenant of the
Property or any guarantor of such tenant's obligations under its Lease; or
(p) The occurrence of any "Event of Default" under any of the documents
evidencing or securing Borrower's line of credit with Chase Manhattan Bank;
26. RIGHTS AND REMEDIES ON DEFAULT.
26.1 REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter, Lender may exercise any one or more of the following rights and
remedies:
(a) Lender may declare all sums secured by this Instrument, including
any prepayment premium which Borrower would be required to pay, immediately due
and payable.
(b) Lender shall have the right to foreclose this Instrument in
accordance with applicable law by judicial proceedings, or to foreclose this
Instrument under the power of sale herein granted pursuant to sections 1401
through 1461 of the New York Real Property Law (Actions & Proceedings), after
publishing, posting, and serving notice as required by section 1402 of said law.
Lender may bid and purchase at such sale. If at the time of the sale Lender
shall deem it best for any reason to postpone or continue said sale for one or
more days it may do so, in which event notice of such postponement or
continuance shall be made in such manner as the Lender may deem sufficient under
section 1406 of the New York Real Property Law (Actions & Proceedings). Lender's
costs and expenses of sale shall be an additional indebtedness secured hereby.
(c) In the event of any foreclosure, to the extent permitted by
applicable law, Lender will be entitled to a judgment which will provide that if
the foreclosure sale proceeds are insufficient to satisfy the judgment,
execution may issue for any amount by which the unpaid balance of the
obligations secured by this Instrument exceeds the net sale proceeds payable to
Lender.
(d) With respect to all or any part of the Property that constitutes
personalty, Lender shall have all rights and remedies of secured party under the
Uniform Commercial Code.
(e) Lender shall have the right to have a receiver appointed to take
possession of any or all of the Property, with the power to protect and preserve
the Property, to operate the Property preceding foreclosure or sale, to collect
all the rents and revenues from the Property and apply the proceeds, over and
above cost of the receivership, against the sums due under this Instrument, and
to exercise all of the rights with respect to the Property described in SECTION
24 above. The receiver shall post bond which shall not be minimal or nominal in
amount. To the extent permitted by law, Lender's right to the appointment of a
receiver shall exist whether or not apparent value of the Property exceeds the
sums due under this Instrument by a substantial amount; Employment by Lender
shall not disqualify a person from serving as a receiver.
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(f) In the event Borrower remains in possession of the Property after
the Property is sold as provided above or Lender otherwise becomes entitled to
possession of the Property upon default of Borrower, Borrower shall become a
tenant at will of Lender or the purchaser of the Property and shall pay a
reasonable rental for use of the Property while in Borrowers possession.
(g) Lender shall have any other right or remedy provided in this
Instrument, the Note, or any other Loan Document or instrument delivered by
Borrower in connection therewith or available at law, in equity or otherwise.
(h) Lender shall have all the rights and remedies set forth in SECTIONS
23 AND 24.
26.2 SALE OF THE PROPERTY. In exercising its rights and remedies,
Lender may, at Lender's sole discretion, cause all or any part of the Property
to be sold as a whole or in parcels, and certain portions of the Property may be
sold without selling other portions. Lender may bid at any public sale on all or
any portion of the Property.
26.3 NOTICE OF SALE. Lender shall give Borrower reasonable notice of
the time and place of any public sale of any personal property or of the time
after which any private sale or other intended disposition of the personal
property is to be made. Reasonable notice shall mean notice given in accordance
with applicable law, including notices given in the manner and at the times
required for notices in a nonjudicial foreclosure.
26.4 WAIVER; ELECTION OF REMEDIES. A waiver by either party of a breach
of a provision of this Instrument shall not constitute a waiver of or prejudice
the party's right otherwise to demand strict compliance with that provision or
any other provision. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and all remedies of Lender under this Instrument
are cumulative and not exclusive. An election to make expenditures or take
action to perform an obligation of Borrower shall not affect Lender's right to
declare a default and exercise its remedies under this Instrument.
27. SATISFACTION OF MORTGAGE. Upon payment of all sums secured by this
Instrument, Lender shall execute a satisfaction (or at Borrower's option, an
assignment) of this Instrument and shall surrender this Instrument and all notes
evidencing Indebtedness secured by this Instrument to the person or persons
legally entitled thereto. Such person or persons shall pay Lenders costs
incurred in connection with satisfaction or assignment of this Instrument.
28. FUTURE ADVANCES. [DELETED.]
29. IMPOSITION OF TAX BY STATE.
29.1 STATE TAXES COVERED. The following constitute state taxes to which
this Section applies:
(a) A specific tax upon mortgages or upon all or any part of the
indebtedness secured by a mortgage.
(b) A specific tax on a mortgagor which the taxpayer is authorized or
required to deduct from payments on the indebtedness secured by a mortgage.
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(c) A tax on a mortgage chargeable against the mortgagee or the holder
of the note secured.
(d) A specific tax on all or any portion of the indebtedness or on
payments of principal and interest made by a mortgagor.
29.2 REMEDIES. If any state tax to which this Section applies is
enacted subsequent to the date of this Instrument, this shall have the same
effect as an Event of Default, and Lender may exercise any or all of the
remedies available to it unless the following conditions are met:
(a) Borrower may lawfully pay the tax or charge imposed by state tax,
and
(b) Borrower pays the tax or charge within thirty (30) days after
notice from Lender that the tax law has been enacted.
30. ATTORNEYS' FEES. In the event suit or action is instituted to
enforce or interpret any of the terms of this Instrument (including without
limitation efforts to modify or vacate any automatic stay or injunction), the
prevailing party shall be entitled to recover all expenses reasonably incurred
at, before and after trial and on appeal whether or not taxable as costs, or in
any bankruptcy proceeding including, without limitation, attorneys' fees,
witness fees (expert and otherwise), deposition costs, copying charges and other
expenses. Whether or not any court action is involved, all reasonable expenses,
including but not limited to the costs of searching records, obtaining title
reports, surveyor reports, and title insurance, incurred by Lender that are
necessary at any time in Lender's opinion for the protection of its interest or
enforcement of its rights shall become a part of the Indebtedness payable on
demand and shall bear interest from the date of expenditure until repaid at the
interest rate as provided in the Note. The term "attorneys' fees'" as used in
the Loan Documents shall be deemed to mean such fees as are reasonable and are
actually incurred.
31. GOVERNING LAW; SEVERABILITY. This Instrument shall be governed by
the law of the State of New York applicable to contracts made and to be
performed therein (excluding choice-of-law principles). In the event that any
provision or clause of this Instrument or the Note conflicts with applicable
law, such conflict shall not affect other provisions of this Instrument or the
Note which can be given effect without the conflicting provision, and to this
end the provisions of this Instrument and the Note are declared to be severable.
32. TIME OF ESSENCE. Time is of the essence of this Instrument.
33. CHANGES IN WRITING. This Instrument and any of its terms may only
be changed, waived, discharged or terminated by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought. Any agreement subsequently made by Borrower or Lender
relating to this Instrument shall be superior to the rights of the holder of any
intervening lien or encumbrance.
34. NO OFFSET. Borrower's obligation to make payments and perform all
obligations, covenants and warranties under this Instrument and under the Note
shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation any setoff, counterclaim, abatement,
suspension, recoupment, deduction, defense or other right that Borrower or any
guarantor may have or claim against Lender or any entity participating in making
the loan secured hereby. The foregoing provisions of this section, however, do
not constitute a
18
<PAGE> 20
waiver of any claim or demand which Borrower or any guarantor may have in
damages or otherwise against Lender or any other person, or preclude Borrower
from maintaining a separate action thereon; provided, however, that Borrower
waives any right it may have at law or in equity to consolidate such separate
action with any action or proceeding brought by Lender.
35. WAIVER OF JURY TRIAL. THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTELLIGENTLY WAIVES ANY AND ALL RIGHTS THAT EACH PARTY TO THIS INSTRUMENT
MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR THE
STATE OF NEW YORK, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING DIRECTLY OR
INDIRECTLY IN ANY ACTION OR PROCEEDING RELATING TO THIS INSTRUMENT, THE LOAN
DOCUMENTS OR ANY TRANSACTIONS CONTEMPLATED THEREBY OR RELATED THERETO. IT IS
INTENDED THAT THIS WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, CLAIMS
AND/OR COUNTERCLAIMS IN ANY SUCH ACTION OR PROCEEDING.
BORROWER UNDERSTANDS THAT THIS WAIVER IS A WAIVER OF A CONSTITUTIONAL
SAFEGUARD, AND EACH PARTY INDIVIDUALLY BELIEVES THAT THERE ARE SUFFICIENT
ALTERNATE PROCEDURAL AND SUBSTANTIVE SAFEGUARDS, INCLUDING, A TRIAL BY AN
IMPARTIAL JUDGE, THAT ADEQUATELY OFFSET THE WAIVER CONTAINED HEREIN.
36. MAXIMUM INTEREST CHARGES. Notwithstanding anything contained herein
or in any of the Loan Documents to the contrary, in no event shall Lender be
entitled to receive interest on the loan secured by this Instrument (the "Loan")
in amounts which, when added to all of the other interest charged, paid to or
received by Lender on the Loan, causes the rate of interest on the Loan to
exceed the highest lawful rate. Borrower and Lender intend to comply with the
applicable law governing the highest lawful rate and the maximum amount of
interest payable on or in connection with the Loan. If the applicable law is
ever judicially interpreted so as to render usurious any amount called for under
the Loan Documents, or contracted for, charged, taken, reserved or received with
respect to the Loan, or if acceleration of the final maturity date of the Loan
or if any prepayment by Borrower results in Borrower having paid or demand
having been made on Borrower to pay, any interest in excess of the amount
permitted by applicable law, then all excess amounts theretofore collected by
Lender shall be credited on the principal balance of the Note (or, if the Note
has been or would thereby be paid in full, such excess amounts shall be refunded
to Borrower), and the provisions of the Note, this Instrument and any demand on
Borrower shall immediately be deemed reformed and the amounts thereafter
collectible thereunder and hereunder shall be reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
thereunder and hereunder. The right to accelerate the final maturity date of the
Loan does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the Loan
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread through the full term of the Loan until payment in full so
that the rate or amount of interest on account of the Loan does not exceed the
applicable usury ceiling. By execution of this Instrument, Borrower acknowledges
that it believes the Loan to be nonusurious and agrees that if, at any time,
Borrower should have reason to believe that the Loan is in fact usurious, it
will give Lender written notice of its belief and the reasons why Borrower
believes the Loan to be usurious, and Borrower agrees that Lender shall have
ninety (90) days following its
19
<PAGE> 21
receipt of such written notice in which to make appropriate refund or other
adjustment in order to correct such condition if it in fact exists.
37. NEW YORK REAL PROPERTY LAW 254. The clauses and covenants contained
herein which are construed by section 254 of the New York Real Property Law
shall be construed as provided in that section, except as otherwise provided in
this Instrument. The additional clauses and covenants contained herein shall
afford rights supplemental to and not exclusive of the rights conferred by the
clauses and covenants construed by such section 254 and shall not impair,
modify, alter or defeat such rights notwithstanding that such additional clauses
and covenants may relate to the same subject matter or provide for different or
additional rights in the same or similar contingencies as the clauses and
covenants construed by section 254. The rights of Grantee arising under the
clauses and covenants contained in this Instrument shall be separate, distinct
and cumulative, and none of them shall be in exclusion of any other provision,
anything herein or otherwise to the contrary notwithstanding.
38. LIEN LAW COVENANT. Pursuant to section 13 of the Lien Law of New
York, Borrower shall receive the advances secured hereby and shall hold the
right to receive such advances as a trust fund to be applied first for the
purpose of paying the cost of any improvement and shall apply such advances
first to the payment of the cost of any such improvement on the Property before
using any part of the same for any other purpose.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY
THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER
TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN
CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE
TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN
AGREEMENT.
IN WITNESS WHEREOF, Borrower has caused this Instrument to be executed
under seal by its duly authorized officers under seal as of the day and year
first written above.
BORROWER:
MICHAEL ANTHONY JEWELERS, INC.,
a Delaware corporation
By: /s/ Michael A. Paolercio
-------------------------------
Michael A. Paolercio, Treasurer
[SEAL]
Exhibits:
- ---------
Exhibit A - Description of Property
Schedule 1 - Permitted Exceptions
20
<PAGE> 22
STATE OF NEW YORK )
) ss.
COUNTY OF Westchester )
--------------
ACKNOWLEDGMENT
--------------
PERSONALLY before me, the undersigned, a Notary Public in and for said
State, appeared Michael A. Paolercio, who resides at PARK RIDGE NEW JERSEY, to
me well-known and known by me [or proven upon the basis of credible evidence] to
be the Treasurer, of MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation, the
corporation that executed the within instrument, and known to me to be the
persons whose signature appears on the within instrument on behalf of such
corporation therein named, and acknowledged to me that he executed such
instrument as his own free act and deed and that such corporation executed the
within instrument as its own free act and deed, pursuant to its by-laws or a
resolution of its board of directors for the uses and purposes set forth
therein.
WITNESS my hand and official seal this 10th day of February 1999.
/s/ Daniel A. Ferrara
----------------------------------
Notary Public
My commission expires: 3/30/2000
------------
[SEAL] DANIEL A. FERRARA
Notary Public, State of New York
No.41-4518812
Qualified in Queens County
Term Expires March 30, 2000
<PAGE> 23
Loan No.: 001-0003346-001
EXHIBIT A
(50 South MacQuesten Parkway, Mount Vernon, New York)
Legal Description:
- ------------------
All that certain plot, piece or parcel of land with the buildings and
improvements thereon erected situate, lying and being in the City of Mount
Vernon, County of Westchester and State of New York being portions of Lots Nos.
286, 287, 288, 289 & 290 on a certain map entitled "Map of West Mount Vernon,
lying in the Town of Eastchester, County of Westchester and State of New York,"
made for the Teutonia Homestead Association by Gustavus A. Sacchi, filed in the
Office of the County Clerk Division of Land Records, formerly Register's Office,
Westchester County, New York, on May 1st, 1852, as Map No.151, and which
portions of lots taken together are bounded and described as follows:
BEGINNING at the corner formed by the Intersection of the northwesterly side of
MacQuesten Parkway South (formerly South Railroad Avenue) and the southwesterly
side of South West Street;
RUNNING THENCE along the southwesterly side of South West Street and along the
Southerly line of Lot No.285, shown on said map, North 57 degrees 33 minutes 08
seconds West, 218.70 feet to the easterly line of land now or formerly of the
New York Central Railroad Company, and formerly being the land of New York State
Realty and Terminal Company;
THENCE along the easterly line of said Railroad Company land South 32 degrees 26
minutes 31 seconds West, 178.00 feet to a point;
THENCE South 57 degrees 33 minutes 08 seconds East 218.68 feet to the
northwesterly side of MacQuesten Parkway South (formerly South Railroad Avenue);
and
THENCE along the same, North 32 degrees 26 minutes 52 seconds East, 178.00 feet
to the point or place of BEGINNING.
<PAGE> 24
Loan No: 001-0003346-001
SCHEDULE 1
(50 South MacQuesten Parkway, Mount Vernon, New York)
Permitted Exceptions:
- ---------------------
1. Iron gates over vault adjoins easterly sides of premises in bed of
MacQuesten Parkway.
2. The following items located on southerly sides of premises project onto
premises
2a) pipe - 6 feet
2b) ducts - 1.1 feet
2c) fence - 1 foot
3. Variation between location of fences, gates and record lines
<PAGE> 1
Exhibit 10.38
Loan No.:001-0003346-001
PROMISSORY NOTE
(50 South MacQuesten Parkway, Mount Vernon, New York)
$937,500.00 February 10,1999
FOR VALUE RECEIVED, MICHAEL ANTHONY JEWELERS, INC., a Delaware
corporation ("BORROWER"), promises to pay to the order of GENERAL ELECTRIC
CAPITAL BUSINESS ASSET FUNDING CORPORATION ("Payee"; Payee and any subsequent
holder of this Note being referred to herein as "Holder") at Payee's office at
10900 Northeast Fourth Street, Suite 500, Bellevue, Washington 98004, attention:
Real Estate Department, or at such other address as Holder may from time to time
designate in writing, the principal sum of Nine Hundred Thirty-Seven Thousand
Five Hundred and no hundredths Dollars ($937,500.00) together with interest from
the date the proceeds of the loan (the "Loan") evidenced by this Promissory Note
(this "Note") are initially disbursed until maturity on the principal balance
from time to time remaining unpaid hereon at the rate of seven and five
hundredths percent (7.05%) per annum (computed on the basis of a 360-day year of
twelve (12) consecutive thirty (30)-day months) in installments as follows: (i)
interest only in advance at the rate of $183.59 per day shall be due and payable
on the date the proceeds of the Loan are initially disbursed to or for the
benefit of BORROWER (including, without limitation, disbursement into an escrow
for the benefit of BORROWER) for the period beginning on the date of such
disbursement and ending on the last day of the month during which such
disbursement occurs, and (ii) one hundred seventy-nine (179) installments of
principal and interest in the amount of $8,452.74 each shall be payable
commencing on the first day of the second month following the month in which
funds are advanced and continuing on the first day of each and every succeeding
month until the first day of the one hundred eightieth (180th) month thereafter,
at which time all then unpaid principal and interest hereon shall be due and
payable.
If any payment shall not be received by Holder within ten (10) days
after its due date, BORROWER shall pay an additional charge equal to five
percent (5.00%) of the delinquent payment or the highest additional charge
permitted by law, whichever is less.
Except as is expressly provided for herein, this Note may not be
prepaid in whole or in part without the prior written consent of Holder. Upon
not less than thirty (30) days' advance written notice to Holder at any time
after the fifth (5th) anniversary of the due date of the first monthly principal
and interest payment due under this Note, and upon payment of a prepayment
premium as set forth below (the "Prepayment Premium"), BORROWER shall have the
right to prepay all, but not less than all, of the outstanding balance of this
Note on any regularly scheduled principal and interest payment date. The
Prepayment Premium shall be determined by (i) calculating the decrease
(expressed in basis points) in the current weekly average yield of ten (10)-year
U.S. Treasury Constant Maturities (as published in FEDERAL RESERVE STATISTICAL
RELEASE H.15 [519]) (the "Index") from Friday, October 2, 1998, to the Friday
immediately preceding the week in which the prepayment is made, (ii) dividing
the decrease by 100, (iii) multiplying the result by the following described
applicable premium factor (the "Premium Factor"), and (iv) multiplying the
product by the principal balance to be prepaid. If the Index is unchanged or has
increased from
<PAGE> 2
Friday, October 2, 1998, to the Friday immediately preceding the prepayment
date, no Prepayment Premium shall be due. The Premium Factor shall be the amount
shown on the following chart for the month in which prepayment occurs:
<TABLE>
<CAPTION>
No. Mos. Premium
Remaining (Years) Factor
--------- ------- ------
<S> <C> <C>
180-169 (15) .073
168-157 (14) .069
156-145 (13) .064
144-133 (12) .059
132-121 (11) .054
120-109 (10) .049
108- 97 ( 9) .044
96- 85 ( 8) .039
84- 73 ( 7) .035
72- 61 ( 6) .030
60- 49 ( 5) .025
48- 37 ( 4) .020
36- 25 ( 3) .015
24- 13 ( 2) .010
12- 1 ( 1) .005
</TABLE>
If the Federal Reserve Board ceases to publish Statistical Release H.15 [519],
then the decrease in the weekly average yield of ten (10)-year U.S. Treasury
Constant Maturities will be determined from another source designated by
Holder. Prepayment prior to the fifth (5th) anniversary of the due date of the
first monthly principal and interest payment due under this Note will not be
permitted.
If Holder at any time accelerates this Note after an Event of Default
(defined below), then BORROWER shall be obligated to pay the Prepayment Premium
in accordance with the foregoing schedule. The Prepayment Premium shall not be
payable with respect to condemnation awards or insurance proceeds from fire or
other casualty which Holder applies to prepayment, nor with respect to
BORROWER's prepayment of the Note in full during the last three (3) months of
the term of this Note unless an Event of Default has occurred. BORROWER
expressly acknowledges that such Prepayment Premium is not a penalty but is
intended solely to compensate Holder for the loss of its bargain and the
reimbursement of internal expenses and administrative fees and expenses incurred
by Holder.
Subject to the exceptions described below, Holder shall not seek any
deficiency judgment against BORROWER, it being understood and agreed that
BORROWER shall not have any personal liability for the payment of the
indebtedness evidenced by the loan documents executed or delivered in connection
with this Note (the "Loan Documents"), and such indebtedness shall be considered
limited recourse to the BORROWER.
The foregoing notwithstanding, Holder shall have full recourse against
BORROWER for the full payment of (i) any Prepayment Premium due under this Note;
(ii) taxes, insurance premiums, and other amounts advanced by Holder to protect
the collateral described in the Mortgage, Security Agreement, and Assignment of
Leases and Rents ("Mortgage") securing this
2
<PAGE> 3
Note; and (iii) all attorney's fees or other costs of collection incurred by
Holder pursuant to any of the Loan Documents. In addition, Holder shall have
full recourse against BORROWER for the full payment of all indebtedness
evidenced by the Loan Documents in the event that any of the following occur:
(i) BORROWER has committed fraud in any of the documents executed in connection
with the indebtedness evidenced by the Loan Documents or in any materials
submitted to Holder or any other party in connection therewith; (ii) BORROWER
has intentionally misrepresented material facts with respect to BORROWER or with
respect to the nature, status or history of the property (the "Property")
covered by the Mortgage.
In addition, Holder shall have full recourse against BORROWER for any
losses, damages, costs and expenses arising out of or in connection with the
occurrence of any of the following: (i) BORROWER misapplies or fails to remit to
Holder any insurance proceeds or any condemnation proceeds involving the
Property; (ii) BORROWER fails to remit to Holder after an Event of Default (as
hereinafter defined) an amount equal to rents, issues, profits, revenues, income
or proceeds of the Property which either are in BORROWER's possession or control
as of the date of an Event of Default or are thereafter received by BORROWER or
by any third party on behalf of BORROWER; (iii) BORROWER collects advance rents
in violation of any provision of the Loan Documents; (iv) BORROWER misapplies
any security deposit; (v) BORROWER breaches its obligations under any lease of
the Property (or any part thereof).
In addition, nothing contained herein shall: (i) be deemed to be a
release or impairment of any part of the indebtedness evidenced by this Note or
of the lien created by the Mortgage; (ii) limit or otherwise prejudice in any
way the rights of Holder to enforce any of its rights and remedies under this
Note or under the Mortgage, including, if necessary, naming BORROWER as a
defendant in any suit, action or proceeding; (iii) limit the right of Holder to
proceed against BORROWER for the Prepayment Premium; (iv) limit the right of
Holder to proceed and recover a personal judgment against any person or entity
receiving funds from BORROWER in connection with acts specified in the preceding
paragraph of this Note; (v) limit the liability of BORROWER (or any other party)
under the Certificate and Indemnity Agreement Regarding Hazardous Substances
executed in favor of Holder; or (vi) limit the liability of any guarantor of the
BORROWER's obligations owing to Holder.
Each of the following shall constitute an Event of Default ("Event of
Default") hereunder and under the Mortgage:
(a) Failure of Holder to receive any payment of principal, interest, or
Prepayment Premium upon this Note when due, and such failure shall continue for
ten (10) days after written notice is given by Holder to BORROWER of the same;
or
(b) Failure of BORROWER within the time required by the Mortgage to pay
any sum secured thereby other than the Note or to make any payment for taxes,
insurance or for reserves for such payments, or any other payment necessary to
prevent filing of or discharge of any lien, and such failure shall continue for
a period of ten (10) days after written notice is given to BORROWER by Holder
specifying such failure; or
(c) Failure by BORROWER to observe or perform any obligations of
BORROWER to Holder on or with respect to any transactions, debts, undertakings
or agreements other than the transaction evidenced by this Note prior to the
expiration of any applicable cure period set forth therein; or
3
<PAGE> 4
(d) Failure of BORROWER to make any payment or perform any obligation
under any superior liens or encumbrances on the Property, within the time
required thereunder, or commencement of any suit or other action to foreclose
any superior liens or encumbrances; or
(e) Failure by BORROWER to observe or perform any of its obligations
under any of the lease agreements covering the Property prior to the expiration
of any applicable cure period set forth therein; or
(f) The Property is transferred or any agreement to transfer any part
or interest in the Property in any manner whatsoever is made or entered into
without the prior written consent of Holder, except as specifically allowed
under the Mortgage, including without limitation creating or allowing any liens
on the Property or leasing any portion of the Property; or
(g) Filing by BORROWER of a voluntary petition in bankruptcy or filing
by BORROWER of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or the seeking, consenting to, or acquiescing by BORROWER in the
appointment of any trustee, receiver, custodian, conservator or liquidator for
BORROWER, any part of the Property, or any of the income or rents of the
Property, or the making by BORROWER of any general assignment for the benefit of
creditors, or the inability of or failure by BORROWER to pay its debts generally
as they become due, or the insolvency on a balance sheet basis or business
failure of BORROWER, or the making or suffering of a preference within the
meaning of federal bankruptcy law or the making of a fraudulent transfer under
applicable federal or state law, or concealment by BORROWER of any of its
property in fraud of creditors, or the imposition of a lien upon any of the
property of BORROWER which is not discharged in the manner permitted by the
Mortgage, or the giving of notice by BORROWER to any governmental body of
insolvency or suspension of operations; or
(h) Filing of a petition against BORROWER seeking any reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief for debts, or the appointment of any
trustee, receiver, custodian, conservator or liquidator of BORROWER, of any part
of the Property or of any of the income or rents of the Property, unless such
petition shall be dismissed within sixty (60) days after such filing, but in any
event prior to the entry of an order, judgment or decree approving such
petition; or
(i) The institution of any proceeding for the dissolution or
termination of BORROWER voluntarily, involuntarily, or by operation of law; or
(j) A material adverse change occurs in the assets, liabilities or net
worth of BORROWER from the assets, liabilities or net worth of BORROWER
previously disclosed to Holder; or
(k) Any warranty, representation or statement furnished to Holder by or
on behalf of BORROWER under this Note, the Mortgage, or any of the Loan
Documents shall prove to have been false or misleading in any material respect;
or
(l) Failure of BORROWER to observe or perform any other covenant or
condition contained in the Mortgage and such default shall continue for thirty
(30) days after notice
4
<PAGE> 5
is given to BORROWER specifying the nature of the failure, or if the default
cannot be cured within such cure period, BORROWER fails within such time to
commence and pursue curative action with reasonable diligence or fails at any
time after expiration of such cure period to continue with reasonable diligence
all necessary curative actions. No notice of default and no opportunity to cure
shall be required with respect to defaults under Section 17 of the Mortgage or
if during the prior twelve (12) months Holder has already sent a notice to
BORROWER concerning default in performance of the same obligation; or
(m) Failure of BORROWER to observe or perform any other obligation
under any Loan Document (other than this Note or the Mortgage) when such
observance or performance is due, and such failure shall continue beyond the
applicable cure period set forth in such Loan Document, or if the default cannot
be cured within such applicable cure period, BORROWER fails within such time to
commence and pursue curative action with reasonable diligence or fails at any
time after expiration of such applicable cure period to continue with reasonable
diligence all necessary curative actions. No notice of default and no
opportunity to cure shall be required if during the prior twelve (12) months
Holder has already sent a notice to BORROWER concerning default in performance
of the same obligation; or
(n) BORROWER's abandonment of the Property; or
(o) Any of the foregoing events occur with respect to or any tenant of
the Property or any guarantor of such tenant's obligations under its lease; or
(p) The occurrence of any "Event of Default" under any of the documents
evidencing or securing BORROWER's line of credit with Chase
Manhattan Bank.
Upon the occurrence of any of the foregoing Events of Default, Holder
shall have the option to declare the entire amount of principal and interest due
under this Note immediately due and payable without notice or demand, and Holder
may exercise any of its rights under this Note and any document executed or
delivered herewith. After acceleration or maturity, BORROWER shall pay interest
on the outstanding principal balance of this Note at the rate of five percent
(5.00%) per annum above Chase Manhattan Bank's prime interest rate in effect
from time to time, or fifteen percent (15.00%) per annum, whichever is higher,
provided that such interest rate shall not exceed the maximum interest rate
permitted by law.
All payments of the principal and interest on this Note shall be made
in coin or currency of the United States of America which at the time shall be
the legal tender for the payment of public and private debts.
If this Note is placed in the hands of an attorney for collection,
BORROWER agrees to pay reasonable attorneys' fees and costs incurred by Holder
in connection therewith, and in the event suit or action is instituted to
enforce or interpret this Note (including without limitation efforts to modify
or vacate any automatic stay or injunction), the prevailing party shall be
entitled to recover all expenses reasonably incurred at, before or after trial
and on appeal, whether or not taxable as costs, or in any bankruptcy proceeding,
or in connection with post-judgment collection efforts, including, without
limitation, attorneys' fees, witness fees (expert and otherwise), deposition
costs, copying charges and other expenses.
This Note shall be governed and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
therein (excluding choice-of-law
5
<PAGE> 6
principles). BORROWER hereby irrevocably submits to the jurisdiction of any
state or federal court sitting in New York in any action or proceeding brought
to enforce or otherwise arising out of or relating to this Note, and hereby
waives any objection to venue in any such court and any claim that such forum is
an inconvenient forum.
This Note is given in a commercial transaction for business purposes.
This Note may be declared due prior to its expressed maturity date, all
in the events, on the terms, and in the manner provided for in the Mortgage.
BORROWER and any sureties, endorsers, guarantors and other parties now
or hereafter liable for the payment of this Note, in whole or in part, hereby
severally (i) waive demand, notice of demand, presentment for payment, notice of
nonpayment, notice of default, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices except those for which
the Loan Documents expressly provide, and further waive diligence in collecting
this Note or in enforcing any of the security for this Note; (ii) agree to any
substitution, subordination, exchange or release of any security for this Note
or the release of any party primarily or secondarily liable for the payment of
this Note; (iii) agree that Holder shall not be required to first institute suit
or exhaust its remedies hereon against BORROWER or others liable or to become
liable for the payment of this Note or to enforce its rights against any
security for the payment of this Note; and (iv) consent to any extension of time
for the payment of this Note, or any installment hereof, made by agreement by
Holder with any person now or hereafter liable for the payment of this Note,
even if BORROWER is not a party to such agreement.
All agreements between BORROWER and Holder, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the final maturity
of this Note or otherwise, shall the interest contracted for, charged, received,
paid or agreed to be paid to Holder exceed the maximum amount permissible under
the applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to Holder in excess of the maximum amount permissible under
applicable law, the interest payable to Holder shall be reduced to the maximum
amount permissible under applicable law; and if from any circumstance Holder
shall ever receive anything of value deemed interest by applicable law in excess
of the maximum amount permissible under applicable law, an amount equal to the
excessive interest shall be applied to the outstanding principal balance hereof,
or if such excessive amount of interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to BORROWER. All interest paid or agreed
to be paid to Holder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full period (including
any renewal or extension) until payment in full of the principal so that the
interest hereon for such full period shall not exceed the maximum amount
permissible under applicable law. Holder expressly disavows any intent to
contract for, charge or receive interest in an amount which exceeds the maximum
amount permissible under applicable law. This paragraph shall control all
agreements between BORROWER and Holder.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY
THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER
TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN
CONTRACT MAY BE LEGALLY ENFORCED. YOU
6
<PAGE> 7
MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER
WRITTEN AGREEMENT.
TIME IS OF THE ESSENCE HEREOF.
IN WITNESS WHEREOF, BORROWER has caused this Note to be executed by its
duly authorized officers under seal as of the year and day first written above.
BORROWER:
MICHAEL ANTHONY JEWELERS, INC.,
a Delaware corporation
By: /s/ Michael A. Paolercio
------------------------------------
Michael A. Paolercio, Treasurer
[SEAL]
Duplicate Original
7
<PAGE> 1
Exhibit 10.39
==============================================================================
------------------------------------
ASSET PURCHASE AGREEMENT
------------------------------------
by and between
EUROSPARK INDUSTRIES INC.,
Debtor-in-Possession,
a New York corporation ("Seller")
and
MICHAEL ANTHONY JEWELERS INC.,
a Delaware corporation ("Buyer")
Dated: April 15, 1999
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS .................................................................. 1
TERMS AND CONDITIONS ...................................................... 1
ARTICLE 1 DEFINITIONS ..................................................... 1
ARTICLE 2 BASIC TERMS OF TRANSFER OF ASSETS ............................... 1
Section 2.01. Sale of Assets ..................................... 1
Section 2.02. Amounts and Payments of Purchase Price ............ 1
Section 2.03. Equipment Removal Deposit ......................... 2
Section 2.04. Inspection Period ................................. 2
Section 2.05. Inspections ....................................... 2
Section 2.06. Allocation of Purchase Price ...................... 3
Section 2.07. Sales Taxes ....................................... 3
Section 2.08. Additional Leases ................................. 3
ARTICLE 3 CLOSING ......................................................... 3
Section 3.01. Closing ........................................... 3
Section 3.02. Actions of Seller at Closing ...................... 3
Section 3.03. Actions of Buyer at Closing ....................... 4
Section 3.04. Post-Closing Matters .............................. 4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES .................................. 4
Section 4.01. No Representations and Warranties by Seller ....... 4
Section 4.02. Disclaimer of Representations and Warranties ...... 4
Section 4.03. Representations and Warranties of Buyer ........... 4
ARTICLE 5 GENERAL ......................................................... 5
Section 5.01. Indemnification ................................... 5
Section 5.02. Bulk Transfer Law Compliance ...................... 6
Section 5.03. Expenses and Other Adjustments .................... 6
Section 5.04. Parties in Interest; No Assignment ................ 6
Section 5.05. Governing Law ..................................... 6
Section 5.06. Amendments ........................................ 6
Section 5.07. Entire Agreement .................................. 6
Section 5.08. Notices ........................................... 6
Section 5.09. Remedies Not Exclusive ............................ 7
Section 5.10. Counterparts ...................................... 7
Section 5.11. Headings .......................................... 7
Section 5.12. Severability ...................................... 7
Section 5.13. Limitations on Rights of Third Parties ............ 8
Section 5.14. Non-Waiver ........................................ 8
EXHIBIT A DEFINITIONS ..................................................... A-1
EXHIBIT B DESCRIPTION OF ASSETS ........................................... B-1
i
<PAGE> 3
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement made as of the 15th day of April, 1999
("Agreement") by and between EUROSPARK INDUSTRIES INC. , Debtor-in-Possession
("Seller"), a New York corporation, having an address at 40-35 22nd Street, Long
Island City, New York 11101 and MICHAEL ANTHONY JEWELERS INC. ("Buyer"), a
Delaware corporation, having an address at 115 South Macquesten Parkway, Mount
Vernon, New York 10550-1724.
RECITALS
--------
1. Seller currently owns jewelry fabrication machinery, equipment and
other assets located in Long Island City, New York. Buyer has agreed to acquire
certain machinery, equipment and other assets of Seller.
2. In consideration of their mutual covenants and representations
herein, the parties have agreed to the terms and conditions set forth below.
TERMS AND CONDITIONS
--------------------
ARTICLE 1
DEFINITIONS
-----------
For convenience and brevity, certain terms used in various parts of
this Agreement are listed in alphabetical order and defined or referred to in
Exhibit A. Each defined terms used in this Agreement has been identified by
capitalizing the first letter in that term.
ARTICLE 2
BASIC TERMS OF TRANSFER OF ASSETS
---------------------------------
Section 2.01. SALE OF ASSETS. Subject to terms and conditions of this
Agreement, Seller shall at the Closing transfer to Buyer the machinery,
equipment and other assets of Seller as set forth in Exhibit B ("Assets") as
they exist on Closing Date, and Buyer shall at the same time accept such
transfer and make the cash payments required by Section 2.02.
Without limiting any provisions of this Agreement, the entire sale of
the Assets and other terms and conditions set forth herein are subject to the
approval by the United States Bankruptcy Court for the Eastern District of New
York ("Bankruptcy Court") or such other higher or better offer as may be
approved by the Bankruptcy Court.
Section 2.02. AMOUNTS AND PAYMENTS OF PURCHASE PRICE AND EQUIPMENT
REMOVAL DEPOSIT.
<PAGE> 4
(a) The total cash purchase price ("Purchase Price") for the Assets is
$500,000.00 and the Equipment Removal Deposit (as more fully described in
Section 2.03 below) is $10,000.00. These payments are to be made as follows:
(i) The sum of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00)
("Deposit"), by wire transfer or by certified check payable to the
order of Windels, Marx, Davies & Ives, as Escrow Agent ("Escrow
Agent"), due upon execution and delivery of this Agreement by Buyer to
Seller, receipt of which, subject to collection, is hereby acknowledged
and shall be non-refundable, except as set forth in this Agreement;
(ii) The sum of FOUR HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($450,000.00), by wire transfer or, at Seller's option, by certified
check payable to the order of Seller, at Closing; and
(iii) The sum of TEN THOUSAND AND 00/100 DOLLARS ($10,000.00)
("Equipment Removal Deposit"), by wire transfer or by certified check
payable to the order of the Escrow Agent, at Closing.
Without limiting the generality of the foregoing, Buyer acknowledges
and agrees that uncertified attorney's trustee checks will not be accepted by
Seller.
(b) The Deposit and the Equipment Removal Deposit shall be held by the
Escrow Agent pursuant to the provisions of that certain separate Escrow
Agreement of even date herewith between the Buyer, Seller and Escrow Agent
("Escrow Agreement"). All of the terms, covenants and conditions contained in
the Escrow Agreement are hereby made a part of this Agreement to the same extent
and with the same force as if they were fully set forth herein.
Section 2.03. EQUIPMENT REMOVAL DEPOSIT.
The Equipment Removal Deposit shall be used to secure payment of any
claims by Seller for breach of covenants, representations or indemnity
obligations or damages resulting from the removal of the equipment and machinery
by Buyer as described in this Agreement.
Section 2.04. INSPECTION PERIOD. If at any time commencing on the date
of this Agreement and continuing for ten (10) days thereafter (such period being
called the "Inspection Period"), Buyer determines that it is not satisfied with
the Assets for any reason, Buyer may, in its sole discretion, terminate this
Agreement by delivering written notice of such termination to Seller and, Escrow
Agent shall pay the Deposit to Buyer. If, thereafter, and prior to approval of
this Agreement, Buyer terminates this Agreement for a reason other than default
by Seller hereunder, then the Escrow Agent shall pay the Deposit, together with
all interest accrued thereon, to Seller. Such payment shall be considered as
liquidated damages and as Seller's exclusive remedy in connection with such
termination.
Section 2.05. INSPECTIONS. Buyer may, during the Inspection Period,
personally or through others, make such inspections, tests and investigations of
the Assets as Buyer deems necessary or advisable. For purposes of the
inspections, tests and investigations contemplated by this Section 2.05, Seller
shall give those persons inspecting the Assets at Buyer's request access to
2
<PAGE> 5
the Assets, provided that the inspections are made at reasonable times, upon
reasonable notice and accompanied by a representative of Seller. The cost of the
inspections, tests and investigations undertaken by Buyer pursuant to this
Section 2.05 shall be borne solely by Buyer. The right of access to the Assets
granted hereby shall in no way be construed as giving Buyer possession of or any
legal or equitable title to the Assets prior to the Closing.
Section 2.06. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated for federal income tax purposes to each category of Assets in
accordance with the relative amounts shown for all categories of Assets stated
in Seller's balance sheet at December 31, 1998. As soon as practicable following
the Closing, Seller and Buyer will cooperate in filing with the Internal Revenue
Service their respective Forms 8594 as provided for in Section 1060 of the
Internal Revenue Code of 1986, as amended ("Code"), on a basis consistent with
the allocations described above in this Section 2.06.
Section 2.07. SALES TAXES. Buyer agrees to pay any sales tax assessed
in connection with the sale of the Assets to Buyer and save, defend, indemnity
and hold harmless Seller and its partners, directors, officers, principals,
shareholders, agents and employees from and against any claim arising from or in
connection with any sales tax which may now or hereafter be imposed upon Seller
with respect to the sale of the Assets, together with all liabilities and
reasonable costs and expenses in connection with each such claim or action or
proceeding brought thereon, including without limitation, all reasonable
attorneys' fees and expenses. In case any action is brought against Seller
and/or its partners, directors, officers, principals, shareholders, agents
and/or employees by reason of any such claim, Buyer, upon notice from Seller,
shall resist and defend such action or proceeding (by counsel reasonably
satisfactory to Seller). The provisions of this Section 2.07 shall survive the
termination or expiration of this Agreement by closing or otherwise.
Section 2.08. ADDITIONAL LEASES. The Buyer shall have the option but
not the obligation to have any lease held by the Seller for machinery and
equipment assigned to it subject to the approval by the Bankruptcy Court and a
separate agreement to be negotiated when Buyer exercises this option.
ARTICLE 3
CLOSING
-------
Section 3.01. CLOSING. The closing ("Closing") of the sale of the
Assets by Seller to Buyer and of the other transactions contemplated by this
Agreement shall take place at the offices of Buyer's Counsel, Windels, Marx,
Davies & Ives, 156 West 56th Street, New York, New York 10019 on the eleventh
day after an order is entered by the Bankruptcy Court approving the sale of the
Assets pursuant to this Agreement ("Closing Date"), unless such date shall be
extended by written agreement among the parties to this Agreement.
Section 3.02. ACTIONS OF SELLER AT CLOSING. At the Closing, Seller
shall deliver, or cause to be delivered, to Buyer each of the following: (a) a
bill of sale relating to the Assets that shall be necessary or appropriate to
carry out the intent of this Agreement and sufficient to sell, convey, transfer,
assign and deliver to Buyer all right, title and interest of Seller in and to
the Assets, free and clear of all Liens; (b) a UCC-3 Termination Statement for
any UCC-1 Financing Statement
3
<PAGE> 6
filed against the Assets; (c) such other certificates, instruments and documents
as are reasonably required by Buyer to be delivered by Seller in order to carry
out the terms of this Agreement; and (d) physical possession and control of the
Assets.
Section 3.03. ACTIONS OF BUYER AT CLOSING. At the Closing, Buyer shall
deliver, or cause to be delivered, to Seller each of the following: (a) the cash
portion of the Purchase Price and the Equipment Removed Deposit in the manner
and form provided for above in Section 2.02; and (b) such other certificates,
instruments and documents as are reasonable required by Seller to be delivered
by Buyer to carry out the terms of this Agreement.
Section 3.04. POST-CLOSING MATTERS. The Buyer is required to
dis-assemble and remove the Assets within thirty (30) days after the Closing
Date at its own expense and risk. The Buyer shall be liable for any damages to
the premises caused by its removal, which shall be deducted from the Equipment
Removal Deposit. In addition, pursuant to Section 5.01, Buyer shall indemnify,
hold harmless and defend Seller from and against any and all loss, liability,
cause of action, damage and/or claim for personal injury or property damage
arising from the removal of the Assets by Buyer or any agents, employees,
contractors, representatives and/or consultants of Buyer. This Section 3.04
shall survive the closing of the transaction contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.01. NO REPRESENTATIONS AND WARRANTIES BY SELLER. Seller makes
no representations, warranties or promises regarding the Assets to Buyer
concerning any aspect or condition of any portion of the Assets or any other
matter whatsoever with respect to the Assets. Buyer acknowledges and agrees to
take the Assets "as is," in their currently existing condition and state of
repair, subject to ordinary use, wear, tear and natural deterioration.
Section 4.02. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Buyer
acknowledges and agrees that (a) the Assets are being acquired by Buyer on a
basis that is without representation or warranty by Seller and (b) it has not
relied upon any representations, warranties or other statements, whether express
or implied, made by the Seller or any of its agents, employees or other
representatives.
Section 4.03. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes to
Seller the following representations and warranties, which shall survive the
Closing:
(a) ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of New York.
(b) POWER AND AUTHORITY. Buyer has full power and authority
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the performance of such transactions have been duly and
validly authorized by Buyer and this Agreement constitutes a valid and
binding obligation of Buyer enforceable in accordance with its terms
except to the extent
4
<PAGE> 7
limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally or general principles of equity.
(c) BROKERS. Buyer has not employed any broker, finder or
agent with respect to the transactions contemplated by this Agreement
nor does Buyer know of any basis on which any third party could claim
any broker's, finder's, agent's or similar fee with respect to such
transaction.
ARTICLE 5
GENERAL
-------
Section 5.01. INDEMNIFICATION. (a) Seller shall on demand promptly
indemnify, hold harmless and defend Buyer from, and reimburse Buyer for, any
losses, damages, liabilities, deficiencies or expenses (including reasonable
fees of attorneys and expert witnesses) incurred by Buyer after the Closing Date
by reason of or arising out of (i) a breach of any representation or warranty by
Seller contained in any instrument or document executed by Seller and delivered
to Buyer hereunder; or (ii) any failure by Seller to perform any obligation or
duty required to be performed by it under any provision of this Agreement.
(b) Buyer shall on demand promptly indemnify and hold harmless and
defend Seller from, and reimburse Seller for, any losses, damages, liabilities,
deficiencies or expenses (including reasonable fees of attorneys and experts)
incurred by Seller after the Closing by reason or arising out of (i) a breach of
any representation or warranty by Buyer contained in this Agreement, the Escrow
Agreement or in any instrument or document executed by Buyer and delivered to
Seller; (ii) any failure by Buyer to perform any obligation or duty required to
be performed by it under any provision of this Agreement; or (iii) any liability
or obligation arising out of or related to the ownership or operation of the
Assets by Buyer after the Closing Date. The amount of any loss, liability,
claim, damage or expense for which indemnification is provided under this
Section shall be net of any amounts recoverable under any insurance policy.
(c) Buyer shall, on demand, indemnify, hold harmless and defend Seller
from and against any and all loss, liability, cause of action, damage and/or
claim for personal injury or property damage arising from the acts or omissions
of Buyer or any agents, employees, contractors, representatives and/or
consultants of Buyer with respect to the Assets, including their removal from
the premises as provided herein. The Buyer has agreed to deposit $10,000.00 as
the Equipment Removal Deposit at Closing for any damages to Seller's property
resulting from the removal of the Assets. This Section 5.01 shall survive any
termination of this Agreement as well as the closing of the transaction
contemplated hereby.
Section 5.02. BULK TRANSFER LAW COMPLIANCE. Seller and Buyer each waive
compliance with the requirements of any bulk transfer law under the Uniform
Commercial Code.
Section 5.03. EXPENSES AND OTHER ADJUSTMENTS. Whether or not the
Closing is completed, each party will pay all legal, accounting and other fees
and expenses it incurs in connection with this Agreement and the transactions
contemplated by this Agreement.
5
<PAGE> 8
Section 5.04. PARTIES IN INTEREST; NO ASSIGNMENT. Subject to the
following sentence, this Agreement shall inure to the benefit of and be binding
on the parties and their respective successors and permitted assigns. Except
when expressly approved by each party, any assignment of this Agreement by any
party without the prior written consent of each other party shall be void.
Nothing in this Agreement is intended to confer any rights or remedies on anyone
other than a party to this Agreement or the holder of a valid assignment of
rights under this Agreement.
Section 5.05. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of New York and, to the extent applicable, the
United States Bankruptcy Code.
Section 5.06. AMENDMENTS. This Amendment may not be amended, nor shall
any waiver, change, modification, consent or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom the
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
Section 5.07. ENTIRE AGREEMENT. This Agreement, including the Exhibits,
sets forth the entire agreement among the parties with respect to the
transactions described in this Agreement and all prior agreements or
understandings among the parties regarding those matters are superseded and
merged into this Agreement.
Section 5.08. NOTICES. All notices, request, demands and other
communications shall be in writing and shall be deemed to have been duly given:
(a) when delivered personally; or
(b) seventy-two (72) hours after being mailed, registered or certified
mail, return receipt requested, postage prepaid, to the respective addresses set
forth below; or
(c) one business day after being delivered to a reputable overnight
courier service, prepaid, marked for next day delivery, addressed to the
addressee at its address set forth below; or
(d) on the first business day after receipt, if delivered by facsimile
transmission to the fax number (if any) of the receiving party listed below, if
receipt is confirmed in writing by the sending facsimile machine.
(e) The addresses for notice are:
TO BUYER: Michael Anthony Jewelers Inc.
115 South Macquesten Parkway
Mount Vernon, New York 10550-1724
Telephone: (914) 699-0000
Facsimile: (914) 699-2335
6
<PAGE> 9
with copy to: Michael Anthony Jewelers Inc.
115 South Macquesten Parkway
Mount Vernon, New York 10550-1724
Attention: Rita Martin Crowley, Esq.
Telephone: (914) 699-0000, ext. 675
Facsimile: (914) 699-2335
TO SELLER: Eurospark Industries Inc.
40-35 22nd Street
Long Island City, New York 11101
Attention: Michael Spiegel
Telephone: (718) 706-0599
Facsimile: (718) 706-0699
with copy to: Windels, Marx, Davies & Ives
156 West 56th Street
New York, New York 10019
Attention: Charles E. Simpson, Esq.
Telephone: (212) 237-1070
Facsimile: (212) 262-1215
Any party may designate in writing another person or another place to which
notices to it shall be sent.
Section 5.09. REMEDIES NOT EXCLUSIVE. Nothing in this Agreement shall
be deemed to limit or restrict in any manner other rights or remedies that any
party may have against any other party at law, in equity or otherwise.
Section 5.10. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which is an original and all of which together shall
be deemed to be one and the same instrument.
Section 5.11. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall not be deemed to be of any substance or
effect.
Section 5.12. SEVERABILITY. The invalidity of any provision of this
Agreement, or any portion thereof, shall not affect the validity of the
remainder of such provision or of the remaining provisions of this Agreement.
Section 5.13. LIMITATIONS ON RIGHTS OF THIRD PARTIES. Nothing expressed
or implied in this Agreement is intended or shall be construed to confer upon or
give any person, firm or corporation other than the parties hereto any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby.
7
<PAGE> 10
Section 5.14. NON-WAIVER. Failure, delay or forbearance of any party to
insist on strict performance of any provision of this Agreement, or to exercise
any right or remedy, shall not be construed as a waiver thereof. An express
waiver in one or more instances shall not waive subsequent strict performance.
BUYER:
------
MICHAEL ANTHONY JEWELERS INC.
By: /s/ Allan Corn
------------------------------
Name: Allan Corn
Its: CFO
Seller:
-------
EUROSPARK INDUSTRIES INC.,
Debtor-in-Possession
By:/s/ Michael Spiegel
-----------------------------
Name: Michael Spiegel
Its: President
8
<PAGE> 11
EXHIBIT A
---------
DEFINITIONS
-----------
"Agreement" means this Asset Purchase Agreement, as it may be amended or
supplemented from time to time in accordance with its terms.
"Assets" mean the assets of Seller as set forth in Exhibit B, wherever located
and whether or not carried on its books or account. Assets shall not include the
following: the security system (including, but not limited to the closed circuit
television system), the temperature control system, any other item that would be
defined as a fixture, raw material, cash or cash equivalents, inventories or
accounts receivable.
"Bankruptcy Court" means the United States Bankruptcy Court for the Eastern
District of New York.
"Buyer" means Michael Anthony Jewelers Inc., a Delaware corporation.
"Buyer's Counsel" means Rita Martin Crowley.
"Closing" and "Closing Date" are defined in Section 3.01.
"Court Order" means any judgment, decree, injunction or order of any federal,
state or local court or agency that is binding on any person or its property
under applicable law.
"Default" means (1) violation or breach of, conflict with or default under any
document or (2) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute such a violation, breach, conflict
with or default under any document.
"Deposit" is defined in Section 2.02(i).
"Escrow Agent" is defined in Section 2.02.
"Escrow Agreement" is defined in Section 2.02(b).
"GAAP" means generally accepted accounting principles consistently
applied.
"Equipment Removal Deposit" is defined in Section 2.02(iii).
"Liability" means any direct or indirect liability, indebtedness, obligation,
guaranty or endorsement of or by any person (other than endorsements of notes,
bills and checks presented to banks for collection or deposit in the ordinary
course of business) of any type, whether known, accrued, absolute, contingent or
not.
"Lien" means any mortgage, lien, security interest, pledge or encumbrance of any
nature on any property.
A-1
<PAGE> 12
"Litigation" means any lawsuit, action, arbitration, administrative or other
proceeding, criminal prosecution or governmental investigation involving Seller
or the Assets.
"Purchase Price" is defined in Section 2.02.
"Regulation" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local or other governmental agency or body.
"Seller" means Eurospark Industries Inc., Debtor-in-Possession, a New York
corporation.
"Seller's Counsel" means Windels, Marx, Davies & Ives.
A-2
<PAGE> 13
EXHIBIT B
---------
DESCRIPTION OF ASSETS
---------------------
B-1
<PAGE> 14
APPRAISAL: EUROSPARK INDUSTRIES, INC. P.1
<TABLE>
<CAPTION>
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
CHAIN MACHINE TOOLROOM
- ----------------------
1 - CRAFFORD CHAIN CUTTER
MODEL 571-10
BENCH MODEL, DIGITAL
SIN 632008
115 VOLT $3,000- $1,250-
1 - MITUTOYO STEREOSCOPE MICROSCOPE
S/N 10240304 600- 400-
1 - FIE HARDNESS TESTER, BENCH
MODEL R, S/N 1761 900- 600-
1 - CRAFFORD LINK-O-MATIC
MODEL 534-10
S/N 434022
BENCH MODEL, ELECTRIC
120 VOLTS, 50/60 HZ
NOTE: PROPERTY OF ALEX SPIEGEL NO VALUE NO VALUE
ASSIGNED ASSIGNED
1 - GROUP LOT CONSISTING OF BUT
NOT LIMITED TO THE FOLLOWING:
3 - DIAMOND FACETING MACHINES
MODEL BSS102, BENCH MODELS
WITH STANDS
S/N: - 102
- 175
- 166
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 2
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
CHAIN MACHINE TOOLROOM CONT'D
- -----------------------------
220/380 VOLTS/50 CYCLE
EQUIPPED WITH MANUAL DIVIDERS
FOR BANGLES AND RINGS, WITH
COLLETS AND ALL ACCESSORIES
AND ATTACHMENTS THERETO
$12,000- $4,500-
GROUP LOT GROUP LOT
1 - BRIDGEPORT V-RAM VERTICAL MILLING
MACHINE, S/N 12B495223
1 HP, 220 VOLT, 3 PHASE
EQUIPPED WITH:
- 9 X 42" POWER FEED TABLE
- TIBON WAYS WITH MITUTOYO DRO
S/N 420769
- VISE
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $6,500- $3,000-
1 - BOYAR SCHULTZ #2A CHALLENGER
HYDRAULIC SURFACE GRINDING MACHINE
S/N CH-3628-2A (1985)
EQUIPPED WITH:
- COOLANT
- 2/618 WALKER CERAMAX CHUCK
- TORIT DUST COLLECTOR
S/N 14467 5,500- 3,000-
1 - EMCO MAXIMAT SUPER II PRECISION
LATHE, 11" X 24"
S/N 15855 3,700- 2,500-
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 3
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
CHAIN MACHINE TOOLROOM CONT'D
- -----------------------------
1 - J & S RADIUS TYPE WHEEL DRESSER
WITh CASE 1,400- 850-
1 - STEEL TWO-DOOR CABINET WITH
CONTENTS:
- CRITERION BORING HEAD
- HARIG #1 GRINDALL FIXIURE
WITH CASE
- DRILL BITS
- 5-DIAL MICROMETERS
- DIAL CALIPERS
- DODECO TOOLING
- FILES
- END MILLS
- MILLING CUTTERS
- TAPS
- NUMBER & LETTER SETS
- MISCELLANEOUS OTHER ITEMS $2,500- $1,850-
1 - EMCO COMPACT 5 PRECISION BENCH
LATHE WITH STAND
S/N 505M (1986)
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO 700- 500-
1 - FASTI #LM PRECISION BENCH SHAPER
S/N LM036 (1987) 3,600- 1,500-
1 - SCRIPTA TOOL GRINDER
FLOOR MODEL
S/N AL34962 (1982)
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO 2,800- 1,500-
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 4
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
CHAIN MACHINE TOOLROOM CONT'D
- -----------------------------
1 - MISCELLANEOUS CHAIN MACHINE
TOOLROOM DEPARTMENT LOT CON-
SISTING OF BUT NOT LIMITED
TO THE FOLLOWING:
- TOOLKRAFT COMBINATION BELT &
DISC SANDER, FLOOR MODEL 1184
S/N 48Xl079
- CENTRAL 6X10" HORIZONTAL
BANDSAW, MODEL T591/9972
S/N 256633 (1992)
- PRECISION BENCH SAW, FLOOR
MODEL WITH 115 VOLT MOTOR
- BUFFALO BENCH MODEL DRILL PRESS
- DAHLSTROM HAND TAPPER, FLOOR
MODEL
PRECISION DRILL PRESS, BENCH
MODEL, WITH MICROMETERS
- KANON 18" PRECISION HT GAUGE
- (2) SURFACE PLATES
- MISCELLANEOUS MICROMETER STANDS
- SINE VISE
- DUMORE PRECISION GRINDER
WITH CASE
- STAYER MODEL ST-3 DOUBLE END
GRINDER WITH STAND, 1/2 HP,
220 VOLTS
- HAND SHEAR
- MISCELLANEOUS END MILLS
- MISCELLANEOUS HAND TOOLS
- BUFFALO TORQ-FLEX GRINDER
16,000 RPM
- PRIMELINE DIGITAL CALIPER
- PORTABLE ELECTRIC TOOLS
- OTHER MISCELLANEOUS ITEMS $3,500- $2,000-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 5
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
CHAIN DEPARTMENT
- ----------------
1 - GROUP LOT CONSISTING OF BUT NOT
LIMITED TO THE FOLLOWING:
6 - ICM MODEL C13 DOUBLE CABLE
CHAIN MACHINES, FLOOR MODELS
(1986)
EQUIPPED WITH:
- ELECTRONIC CONTROLLERS
- TURNTABLES
- TOOLING
- FORCED LUBRICATION
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO
$48,000- $36,000-
GROUP LOT GROUP LOT
2 - IECO MODEL 13.03 SPOT WELDERS
S/N: - 59-96 (1996)
- NO S/N VISIBLE
BENCH MODELS, 8 KVA, 220 VOLTS,
1 PHASE 4,500- 3,000-
PAIR PAIR
1 - GROUP LOT CONSISTING OF BUT
NOT LIMITED TO THE FOLLOWING:
6 - OMBI CABLE CHAIN MACHINES
BENCH MODELS, STAND MOUNTED,
S/N: - 319/80
- 235/81
- 233/81
- 65/81
- 10/82
- NO S/N VISIBLE
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 6
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
CHAIN DEPARTMENT CONT'D
- -------------------------
<S> <C> <C>
EQUIPPED WITH TURNTABLES,
220 VOLTS, 50/60 HZ
(@ $5,000 AND 3,000 EACH) 30,000- 18,000-
GROUP LOT GROUP LOT
1 - FASTI MODEL GM CURB CHAIN MACHINE
FLOOR MODEL, S/N 271
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $12,000- $ 8,000-
1 - FICO FOXTAIL CHAIN MACHINE
MODEL FFK- 1, BENCH MODEL,
WITH TOOLING
S/N 1305/2 (1974)
208 VOLTS/60 HZ
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO 10,000- 5,000-
1 - OMBI CABLE CHAIN MACHINE
MODEL # GPN, BENCH TYPE
NOTE: NO SERIAL NUMBER VISIBLE
220 VOLTS, 50/60 HZ, WITH
TOOLING AND ALL ACCESSORIES
AND ATTACHMENTS THERETO 5,000- 2,000-
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 7
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
CHAIN DEPARTMENT CONT'D
- -----------------------
<S> <C> <C>
1 - GROUP LOT CONSISTING OF BUT
NOT LIMITED TO THE FOLLOWING:
11 - MGZ MODEL K1-F CURB CHAIN
MACHINES, FLOOR STAND MOUNTED,
VARIABLE SPEED WITH TOOLING,
1981 SERIES
S/N: - 227
- M501
- F1299
- F3411
- F3410
- 229
- 231
- 063
- 067
- 1298
- 1300
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO
$44,000- $22,000-
GROUP LOT GROUP LOT
1 - FASTI MODEL FZ/F CABLE CHAIN
MACHINE, FLOOR MODEL
S/N D52 (1982)
220 VOLTS, 50-60 HZ, WITH
TOOLING AND ALL ACCESSORIES
AND ATTACHMENTS THERETO 6,500- 3,000-
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 8
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
CHAIN DEPARTMENT CONT'D
<S> <C> <C>
1 - MGZ MODEL 94 DOUBLE CURB CHAIN
MACHINE, FLOOR MODEL
S/N 3740 (1982)
EQUIPPED WITH:
- ELECTRONIC CONTROLLER
- TOOLING
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $8,000- $4.500-
1 - NICKERSON CABLE CHAIN MACHINE
MODEL C, STAND MOUNTED WITH
TOOLING AND 115 VOLT MOTOR,
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 2,000- 750-
2 - OMPAR MODEL RA-1000 DIAMOND FACETING
MACHINES, BENCH MODELS, WITH FLOOR
STANDS, S/N: BR16O
BR190
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO 6,000- 3,000-
PAIR PAIR
2 - FIOLKA DIAMOND FACETING MACHINES,
MODEL D753, BENCH MODELS WITH
FLOOR STANDS, WITH ALL ACCESSORIES
AND ATTACHMENTS THERETO 4,000- 2,000-
PAIR PAIR
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 9
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
CHAIN DEPARTMENT CONT'D
- ------------------------
<S> <C> <C>
1 - FASTI MODEL MBB HAMMER PRESS
7 TON, FLOOR MODEL, S/N 060
220 VOLTS, 50/60 Hz, WITH
ALL ACCESSORIES AND ATTACHMENTS
THERETO 3,500- 2,000-
1 - MGZ MODEL 68 HAMMER PRESS
20 TON, KNUCKLE-JOINT CONS-
TRUCTION, FLOOR MODEL
S/N 3358 (1981)
220 VOLTS, 50/60 HZ
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 6,000- 2,500-
1 - OMBI HAMMER PRESS, 3 TON
BENCH MODEL
EQUIPPED WITH:
- CHAIN TAKE-UP
- SQUARING DIE
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 2,000- 1,000-
2 - MGZ #PV HAMMER PRESSES
FLOOR MODELS
220 VOLTS, 50/60 HZ
S/N: - 3357 (1981)
- 059 (1974)
WITH ALL ACCESSORIES
AND ATTACHMENTS THERETO $4,000- $1,000-
NOTE: NOT CURRENTLY IN SERVICE PAIR PAIR
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 10
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
CHAIN DEPARTMENT CONT'D
- -----------------------
<S> <C> <C>
1 - MISCELLANEOUS CHAIN DEPARTMENT GROUP
LOT CONSISTING OF BUT NOT LIMITED
TO THE FOLLOWING:
- ROLLING MILL
MOTORIZED, 1/4 HP, 115 VOLTS
- AIR AMERICA AIR COMPRESSOR
5 HP, 60 GALLON, VERTICAL
ASME TANK MOUNTED, 115 VOLTS
- AO MICROSCOPE
- CABINET WITH PRECISION TOOLS
AND INSTRUMENTS
- (2) CABINETS CONTAINING CHAIN
MACHINE TOOLING
- SQUARING DIES
- DISPLAY CURB CHAIN MACHINE
MOTORIZED, TOOLED, ON STAND
- MISCELLANEOUS HAND TOOLS
- MISCELLANEOUS SPARE PARTS
- MISCELLANEOUS OTHER ITEMS 8,000- 5,000-
GROUP LOT GROUP LOT
1 - OMPAR MODEL RA 2000 DIAMOND
FACETING MACHINE, FLOOR MODEL WITH
ELECTRONIC CONTROLS
NOTE: PROPERTY OF ALEX SPIEGEL NO VALUE NO VALUE
ASSIGNED ASSIGNED
1 - CIEMMEO CHAIN LIMBERING MACHINE
MODEL S/N 2, BENCH MODEL,
S/N 925 (1984)
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $4,000- $1,500-
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 11
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
WIRE DEPARTMENT
- ----------------
<S> <C> <C>
1 - MDM CENTRIFUGAL DRYER
FLOOR MODEL, STAINLESS
STEEL CONSTRUCTION
EQUIPPED WITH:
- HEATER
- TIMER $ 2,500- $ 1,500-
1 - MDM ROD BREAKDOWN MILL
MODEL LS 250
S/N ID021 (1981)
2 HIGH
10 PASS
7 HP, 220 VOLTS, 3 PHASE
WITH ROLLS: 10" WIDE X
4" DIAMETER
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 10,000- 4,000-
1 - MDM WIRE BREAKDOWN MILL
MODEL LS 250
S/N 7F017 (1981)
2 HIGH
30 PASS
7 HP, 220 VOLTS, 3 PHASE
WITH ROLLS: 10" WIDE X
4" DIAMETER
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 10,000- 4,000-
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 12
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
WIRE DEPARTMENT CONT'D
- ----------------------
<S> <C> <C>
1 - FIOA WIRE BREAKDOWN MILL
DOUBLE STANCHION
30 PASS EACH SIDE
10 HP, 220 VOLTS, 3 PHASE
EQUIPPED WITH:
- ROLLS: 8" WIDE X
4" DIAMETER
- DOUBLE WIRE TAKEUPS
- WATER-COOLED ROLLS
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO $14,000- $ 7,000-
1 - COMEVI 10 PASS WIRE DRAWING
MACHINE, S/N 755060
DRAWING CAPACITY: 3,50 MM TO
1,20 MM
7 1/2 HP, 220 VOLTS, 3 PHASE
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 12,000- 6,000-
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 13
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
SOLDERING DEPARTMENT
<S> <C> <C>
1 - IECO SOLDERING FURNACE
MODEL 01.02DR
S/N 5496 (1996)
MAXIMUM TEMPERATURE: 950 deg C
12 KW, 220 VOLTS, 3 PHASE, 60 HZ
EQUIPPED WITH:
- 2 1/2" WIDE BELT
- DIGITAL CONTROLS
- AMMONIA DISSOCIATOR
- ELECTRONIC CHAIN FEEDER
MODEL 12.03, S/N 362/94 $18,000- $10,000-
1 - MISCELLANEOUS SOLDERING DEPARTMENT
GROUP LOT CONSISTING OF BUT NOT
LIMITED TO THE FOLLOWING.
- UNITRON MICROSCOPE
MODEL MSFN, S/N 49959
- ELECTRIC ANNEALING OVEN
BENCH MODEL
- MGZ MODEL IS STRAND
SOLDERING FURNACE, BENCH
MODEL
- GAS MELTER WITH INGOT MOLDS
AND CRUCIBLES
- HAND CHAIN WINDER
- PICKLING TANK 2,200- 1,500-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 14
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
POLISHING DEPARTMENT
- --------------------
<S> <C> <C>
1 - CEIA ULTRASONIC CLEANER
MODEL USCM1G, FLOOR MODEL
STAINLESS STEEL CONSTRUCTION
S/N 9730197
4.4 KW
220 VOLTS, 1 PHASE, 50/60 HZ
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO $6,000- $3,000-
1 - STEAMASTER ELECTRIC STEAM
GENERATOR, MODEL HPJ-7A
S/N E26396 (1995)
240 VOLTS, 3 PHASE
9 KW, 22 AMP 1,500- 1,000-
1 - KRAMER TUMBLER, MODEL K1402,
S/N 2911
HORIZONTAL BENCH MODEL WITH
VARIABLE SPEED AND ALL ACCES-
SORIES AND ATTACHMENTS THERETO 2,200- 1,200-
1 - DCE UNIMASTER DUST COLLECTOR
TYPE UM152G5AD
S/N 94-1351/02
5 HP, 220 VOLTS, 3 PHASE 2,500- 1,500-
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 15
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
POLISHING DEPARTMENT CONT'D
- ---------------------------
<S> <C> <C>
1 - 8-STATION POLISHING BENCH
CONSISTING OF:
4 - 2-STATION SETUPS
MOTORS: 3/4 HP
2850/3450 RPM
WITH:
2-WHIRLWIND DUST COLLECTORS
MODEL 84,
3 HP, 230 VOLTS, 3 PHASE
S/N: - 187536-7
- 194785-3
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $5,000- $3,500-
1 - MISCELLANEOUS POLISHING DEPARTMENT
GROUP LOT CONSISTING OF BUT NOT
LIMITED TO THE FOLLOWING:
- EYEWASH STATION
- LUPOLINE ENCLOSED WET TUMBLER
- TY-NEE BENCH TUMBLER
- CREST ULTRASONIC CLEANER
BENCH MODEL
- (2) STAINLESS STEEL WASH STATIONS
AND POTS
- GESSWEIN VIBRATORY TUMBLER
FLOOR MODEL WITH DISPENSER
- DEGREASER WITH HOOD AND BLOWER 3,500- 2,000-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 16
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
POLISHING DEPARTMENT CONT'D
- ---------------------------
<S> <C> <C>
1 - CEIA ULTRASONIC CLEANER
MODEL USCIM2G, FLOOR MODEL
DUAL COMPARTMENT IN STAINLESS
STEEL CONSTRUCTION, 4.4 KW
220 VOLT, 1 PHASE, 50/60 HZ
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO $7,000- $3,500-
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 17
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
STAMPING DEPARTMENT
- --------------------
<S> <C> <C>
1 - GROUP LOT CONSISTING OF BUT
NOT LIMITED TO THE FOLLOWING:
3 - CHAPMAN FOOT PRESSES
MODEL HD #7, FLOOR
MODELS $12,000- $ 4,500-
GROUP LOT GROUP LOT
1 - OMPSA 2-POST HAMMERING PRESS
HIGH SPEED, S/N M6960749
VARIABLE SPEED
220 VOLTS 50/60 Hz
WITH CHAIN HAMMERING UNIVERSAL
DIE 8,000- 3,000-
2 - BOSWORTH #10 FOOT PRESSES
FLOOR MODELS 600- 150-
PAIR PAIR
1 - PRESSRITE #30 POWER PRESS
S/N 2651
30 TON OBI
EQUIPPED WITH:
- AIR CLUTCH
- PRESS-RIM HIGH SPEED
CLUTCH CONTROL
- BIJUR 1-SHOT LUBRICATION
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 8,000- 3,000-
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 18
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
STAMPING DEPARTMENT CONT'D
- --------------------------
<S> <C> <C>
1 - V & 0 #1 POWER PRESS
10 TON OBI, S/N 103/9
EQUIPPED WITH:
- MECHANICAL CLUTCH
- QUALITY TAG DIE AND
AIR FEED
WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO $3,000- $1,500-
1 - MA POWER PRESS
BENCH MODEL OBI, 5 TON
WITH MECHANICAL CLUTCH AND
ALL ACCESSORIES AND ATTACH-
MENTS THERETO 1,200- 500-
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 19
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
TOOLS AND DIES
- --------------
<S> <C> <C>
1 - GROUP LOT CONSISTING OF TOOLS AND
DIES LOCATED THROUGHOUT THE FACILITY
AND INCLUSIVE OF BUT NOT LIMITED TO
THE FOLLOWING:
- SINGLE OPERATION TOOLS
(FOOT PRESS)
- SINGLE OPERATION TOOLS IN
DIE SETS (POWER PRESS)
APPROXIMATELY 50 EACH
- BACK-TO-BACK EARRING TOOLS
APPROXIMATELY 100 EACH
- CHAIN HAMMER UNIVERSAL DIES
WITH INSERTS $35,000- $15,000-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 20
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
ICE-DIAMOND CUTTING DEPARTMENT
- ------------------------------
<S> <C> <C>
1 - VICTOR LATHE
16 X 30"
S/N 550598
2 HP, 220 VOLTS 3 PHASE
EQUIPPED WITH DRUM AND CONTROLS
FOR ICE DIAMOND CUTTING WITH
ALL ACCESSORIES AND ATTACHMENTS
THERETO $ 7,000- $ 3,500-
1 - VICTOR LATHE
20 X 40"
3 HP, 220 VOLTS, 3 PHASE
EQUIPPED WITH DRUM AND CONTROLS
FOR ICE DIAMOND CUTTING WITH
ALL ACCESSORIES AND ATTACHMENTS
THERETO 8,000- 4,000-
1 - COMEV "COMM" LATHE
16 X 40"
S/N 3204
4 HP, 22O VOLTS, 3 PHASE
EQUIPPED WITH DRUM AND CONTROLS
FOR ICE DIAMOND CUTTING WITH
ALL ACCESSORIES AND ATTACHMENTS
THERETO 8,000- 3,500-
2 - TORNOS "OR" ICE DIAMOND CUTTING
LATHES WITH BUILT-IN REFRIGERATION
SYSTEMS, WITH ALL ACCESSORIES AND
ATTACHMENTS THERETO 25,000- 10,000-
PAIR PAIR
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 21
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
ICE DIAMOND CUTTING DEPARTMENT CONT'D
- -------------------------------------
<S> <C> <C>
2 - FRIGOMECCANICA REFRIGERATION UNITS
FOR ICE DIAMOND CUTTING LATHES
4 - UNIT CAPACITY EACH
220 VOLTS, 3 PHASE
S/N: - 111-222
- 111-333
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $10,000- $ 5,000-
PAIR PAIR
1 - TAKISAWA LATHE
13 X 36" MAXITURN
S/N CDE90399 (1979)
EQUIPPED WITH DRUM AND CONTROLS
FOR ICE DIAMOND CUTTING, WITH
ALL ACCESSORIES AND ATTACHMENTS
THERETO 7,000- 4,000-
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 22
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
<S> <C> <C>
VAULTS AND SCALES
- -----------------
1 - ISM TREASURY VAULT
TRTL 30X6
TR 4754 (1987)
29 1/2 X 56 1/2 H X 31" $5,000- $2,000-
2 - ROGENGRENS VAULTS
SMS 3000 TYPE 1
(SWEDEN)
S/N 1691-12 (1981)
3031-12 (1983)
3322-12 (1983)
30 1/2 X 31"D X 58"H 7,500- 3,000-
PAIR PAIR
1 - FICHET-BAUCHE VAULT
S/N 17400
TL30
24 1/2 X 31" X 53 1/2"H 3,500- 1,500-
1 - ROSENGRANS VAULT
SMS 3000 TYPE 1
S/N 1940-80 (1981)
CLASS A 90
36"W X 40"D X 78 1/2"H
(SWEDEN) 4,500- 2,000-
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 23
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
VAULTS AND SCALES CONT'D
- ------------------------
<S> <C> <C>
1 - METTLER #PE16 DIGITAL ELECTRONIC
SCALE $6,500- $2,500-
1 - METTLER #PE 3000 DIGITAL ELECTRONIC
SCALE, S/N 47480
3000 DWT CAPACITY 1,500- 800-
2 - METTLER #PC 2000 SCALES
1- DOUBLE DIGIT
1 - DWT OUNCE AND GRAM
S/N: - A01184
- 47500 4,000- 1,500-
PAIR PAIR
1 - METTLER #PE 6000
DIGITAL ELECTRONIC SCALE 1,500- 800-
1 - SARTORIUS SCALE
DIGITAL ELECTRONIC SCALE
S/N 120002 1,500- 800-
1 - MEDIAVAULT
MODEL 70-26-20
S/N 25 (1988)
28 X 32"W X 76" H
TL 30 5,000- 1,500-
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 24
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
MISCELLANEOUS PLANT DEPARTMENT
- ------------------------------
<S> <C> <C>
NOTE: MISCELLANEOUS ITEMS LOCATED
THROUGHOUT PLANT FACILITY
2 - CRAFFORD LINK-O-MATIC MACHINES
MODEL EL
WITH LIGHTENING LINK WELDERS
S/N: - EL1232L
- EL44B $12,000- $ 7,500-
PAIR PAIR
1 - PALLET TRUCK
4000 POUND CAPACITY 300- 175-
2 - AMANO TIME CLOCKS
1 - AMANO/CINN. DIGITAL
MODEL MJR 7000
1 - AMANO SERIES 6900 500- 275-
PAIR PAIR
1 - MILLER TIG WELDER
MODEL CP-200
S/N HK298-54
WITH MILLERMATIC WIRE
FEEDER AND ALL ACCESSORIES
AND ATTACHMENTS THERETO 1,400- 700-
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 25
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
MISCELLANEOUS PLANT DEPARTMENT CONT'D
- -------------------------------------
<S> <C> <C>
1 - MILLER MIG WELDER "DIALARC"
# HF, AC/DC
S/N JB488884
WITH ALL ACCESSORIES AND ATTACH-
MENTS THERETO $1,400- $ 700-
1 - CHALLENGER PAPER CUTTER
TRIUMPH POWER 18"
FLOOR MODEL
S/N 37464 (1976) 1,000- 500-
2 - AIR COMPRESSORS
1 - INGERSOLL-RAND
MODEL #T30
S/N 751723
10 HP, 220/440 VOLTS
120 GALLON ASME TANK MOUNTED
1 - LEROI SERIES 5000
S/N 4005X5329
5 HP, 220 VOLTS 3 PHASE
60 GALLON ASME TANK MOUNTED 2,500- 1,500-
PAIR PAIR
1 - ACORN HEAVY DUTY WELDING TABLE
5' X 8' WITH STAND 2,000- 1,200-
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 26
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
MISCELLANEOUS PLANT DEPARTMENT CONT'D
- -------------------------------------
<S> <C> <C>
1 - MISCELLANEOUS PLANT DEPARTMENT GROUP
LOT INCLUSIVE OF BUT NOT LIMITED TO
THE FOLLOWING:
- STEEL SHELVING
- LOCKERS
- LUNCH ROOM TABLES AND CHAIRS
- MISCELLANEOUS STEEL CARTS
- MULTI-DRAWER CABINETS
- BENCHES
- MISCELLANEOUS OTHER ITEMS $2,500- $1,000-
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 27
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFFICE AND SECURITY EQUIPMENT
- -----------------------------
<S> <C> <C>
1 - GROUP LOT OF OFFICE AND SECURITY
EQUIPMENT LOCATED THROUGHOUT THE
FACILITY AND INCLUSIVE OF BUT NOT
LIMITED TO THE FOLLOWING:
OFFICE EQUIPMENT:
----------------
- LATERAL FILE CABINETS
- VERTICAL FILE CABINETS
- PARTITIONS
- OFFICE DESKS AND CHAIRS
- MISCELLANEOUS PC'S WITH PRINTERS
- COMPUTER SOFTWARE
- TELEPHONE SYSTEM
- MISCELLANEOUS OFFICE SUPPLIES
SECURITY EQUIPMENT
------------------
- SECURITY MONITORS AND SECURITY
CAMERAS, HAND-HELD WANDS, WALK
THRU SCANNER, ETC. $10,000- $ 5,000-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 28
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
STORAGE AREA
- ------------
<S> <C> <C>
1 - GROUP LOT CONSISTING OF THE STORAGE
AREA ITEMS AND INCLUSIVE OF BUT NOT
LIMITED TO THE FOLLOWING:
1 - DO-ALL CNC 760 VERTICAL MILLING
MACHINE
SINGLE SPINDLE
55 X 12" TABLE
SPEEDS: 60 - 4350 RPM
1 - LELAND GIFFORD 2-SPINDLE DRILL
PRESS
30 X 44" TABLE
SPEEDS: 540-3600 RPM AND
270-1800 RPM
NOTE: THESE UNITS ARE NOT CURRENTLY
IN SERVICE NO VALUE NO VALUE
ASSIGNED ASSIGNED
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 29
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT
- ------------------
<S> <C> <C>
NOTE: THE OFF-SITE EQUIPMENT LISTED
HEREIN IS LOCATED AT:
GOLD INTERNATIONAL MACHINERY CORP.
PAWTUCKET, RHODE ISLAND
1 - FASTI FZ/DD DOUBLE CABLE
CHAIN MACHINE, FLOOR MODEL
S/N B84
TOOLED: 0,50 MM (.020")
DOUBLE CABLE
220/380 VOLTS, 3 PHASE, 50-60 HZ $7,000- $3,500-
1 - OMBI MODEL F1 SINGLE CABLE
CHAIN MACHINE, STAND MOUNTED
S/N 80/030
TOOLED 0,40 MM (.016")
SINGLE CABLE
220 VOLTS, 3 PHASE, 50-60 Hz 6,500- 2,500-
1 - OMBI MODEL F1 SINGLE CABLE
CHAIN MACHINE, STAND MOUNTED
S/N 79/013
TOOLED: 0,60 MM (.024")
SINGLE CABLE
220 VOLTS, 3 PHASE, 50-60 Hz 4,500- 2,000-
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 30
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT CONT'D
- --------------------------
<S> <C> <C>
1 - OMBI MODEL F1 SINGLE CABLE
CHAIN MACHINE, STAND MOUNTED
S/N 79/170
TOOLED: 1,00 MM (.040")
220 VOLTS, 3 PHASE, 50-60 HZ $4,500- $2,000-
1 - OMBI MODEL F1 SINGLE CABLE
CHAIN MACHINE, STAND MOUNTED
S/N 79/014
TOOLED: 0,85 MM (.036")
220 VOLTS, 3 PHASE, 50-60 HZ 4,500- 2,000-
1 - OMBI MODEL GPLU/D DOUBLE
CURB CHAIN MACHINE, FLOOR MODEL
S/N 232/81
TOOLED: 0,70 MM (.028")
DOUBLE CURB
EQUIPPED WITH MECHANICAL
AIR NEEDLE
220 VOLTS, 3 PHASE, 50-60 HZ 6,000- 3,000-
1 - OMBI MODEL GPLU/D DOUBLE
CURB CHAIN MACHINE
S/N 19
TOOLED: 048 MM (.019")
EQUIPPED WITH MECHANICAL
AIR NEEDLE
220 VOLTS, 3 PHASE, 50-60 HZ 6,000- 3,000-
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 31
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT CONT'D
- -------------------------
<S> <C> <C>
1 - OMBI DOUBLE CURB CHAIN
MACHINE, BENCH MODEL
S/N 10100
TOOLED: 1 MM (.040")
NOTE: MISSING PARTS:
- NO PLIER PINS
- NO ELECTRICAL CONTROLS $3,000- $1,500-
1 - RIGHT & LEET CURB CHAIN
MACHINE (ENGLISH BUILT)
STAND MOUNTED
NOTE: NO SERIAL NUMBER
VISIBLE
TOOLED: 0,60 MM (.024")
SINGLE CURB
EQUIPPED WITH GEAR HEAD
MOTOR
115 VOLTS, 1 PHASE, 60 HZ 2,000- 750-
1 - INDUSTRIAL SINGLE CABLE
CHAIN MACHINE, STAND MOUNTED
NOTE: NO SERIAL NUMBER
VISIBLE
TOOLED: SINGLE CABLE
EQUIPPED WITH GEAR HEAD MOTOR
AND TURNTABLE
220 VOLTS, 3 PHASE, 50-60 HZ 2,000- 750-
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 32
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT CONT'D
- -------------------------
<S> <C> <C>
1 - MDM DIAMOND FACETING MACHINE
FOR CHAIN, FLOOR MODEL
MODEL DLMC2/CV
S/N 281183
220 VOLTS, 3 PHASE, 50-60 HZ $ 5,500- $ 1,500-
1 - OMPSA 30 TON 2 POST CHAIN
HAMMERING PRESS
S/N M9210871
WITH FORCED LUBRICATION
220 VOLTS, 3 PHASE, 50-60 HZ 10,000- 4,500-
1 - OMPSA 30 TON 2 POST
CHAIN HAMMERING PRESS
S/N M8990841
EQUIPPED WITH AIR CLUTCH
220 VOLTS, 3 PHASE, 50-60 HZ 10,000- 4,500-
1 - MDM 2 HIGH ROLLING MILL
FOR PLATE
S/N 7LO72
ROLLS: 4" DIAMETER X 7 1/2" WIDE
WITH FORWARD AND REVERSE AND
FORCED LUBRICATION
220 VOLTS, 3 PHASE, 60 HZ 10,000- 4,500-
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 33
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT CONT'D
- -------------------------
<S> <C> <C>
1 - CIEMMEO CHAIN TWISTER-STRAIGHTENER
MODEL MRC4, STAND MOUNTED
S/N 1841 (1985)
220 VOLTS, 1 PHASE, 50-60 HZ $6,000- $3,500-
1 - MGZ VENETIAN CHAIN MACHINE
MODEL V, STAND MOUNTED
S/N 3313 (1981)
TOOLED: 0,19 MM X 0,58 MM
WITH VARIABLE SPEED DC DRIVE
220 VOLTS, 1 PHASE, 50-60 HZ 7,000- 4,000-
1 - LOGAN/NICKERSON SINGLE CABLE
CHAIN MACHINE, MODEL "E",
STAND MOUNTED
TOOLED: 0,76 MM (.030")
DOUBLE PARALLEL CABLE
NOTES: - NO SERIAL NUMBER VISIBLE
- LESS MOTOR 4,000- 2,000-
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
APPRAISAL: EUROSPARK INDUSTRIES, INC. P. 34
FAIR MARKET FORCED LIQUIDATION/
VALUE-REMOVAL AUCTION VALUE
OFF-SITE EQUIPMENT CONT'D
- -------------------------
<S> <C> <C>
1 - GROUP LOT CONSISTING OF CHAIN
HAMMER DIES AND INCLUSIVE OF
BUT NOT LIMITED TO THE FOLLOWING:
APPROXIMATELY 24 UNIVERSAL
CHAIN HAMMERING DIES $15,000- $5,000-
GROUP LOT GROUP LOT
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following are the Company's subsidiaries as of April 28, 1999. 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
MA Brands, Inc. Delaware 9-16-97
</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> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-30-1999
<CASH> 961
<SECURITIES> 0
<RECEIVABLES> 30,521
<ALLOWANCES> 1,124
<INVENTORY> 14,212
<CURRENT-ASSETS> 47,170
<PP&E> 44,989
<DEPRECIATION> 28,073
<TOTAL-ASSETS> 65,037
<CURRENT-LIABILITIES> 7,999
<BONDS> 12,509
0
0
<COMMON> 8
<OTHER-SE> 43,290
<TOTAL-LIABILITY-AND-EQUITY> 65,037
<SALES> 137,009
<TOTAL-REVENUES> 137,009
<CGS> 105,870
<TOTAL-COSTS> 105,870
<OTHER-EXPENSES> 24,846
<LOSS-PROVISION> 212
<INTEREST-EXPENSE> 2,290
<INCOME-PRETAX> 3,791
<INCOME-TAX> 1,441
<INCOME-CONTINUING> 2,350
<DISCONTINUED> 0
<EXTRAORDINARY> 212
<CHANGES> 0
<NET-INCOME> 2,138
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
