<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 29, 2000
Commission File Number:
0-15230
MICHAEL ANTHONY JEWELERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-2910285
(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. [ ]
As of April 11, 2000, there were 6,357,643 shares outstanding of Michael
Anthony's common stock.
The aggregate market value of common stock held by nonaffiliates at April
11, 2000 was $9,234,440. For purposes of this calculation, affiliates includes
Michael Anthony's executive officers and directors.
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DOCUMENTS INCORPORATED BY REFERENCE:
Part III Portions of registrant's Definitive Proxy Statement for Annual
Meeting of Stockholders for Fiscal 2000 (to be filed within 120 days of end of
fiscal year).
Part IV Certain exhibits to (i) registrant's Registration Statement on
Form S-1 (File No. 338289), (ii) registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994, (iii) registrant's Transition Report on Form
10-K for the transition period from July 1, 1994 to January 28, 1995, (iv)
registrant's Annual Report on Form 10-K for the fiscal year ended January 27,
1996, (v) registrant's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997, (vi) registrant's Annual Report on Form 10-K for the fiscal
year ended January 31, 1998, (vii) registrant's Annual Report on Form 10-K for
the fiscal year ended January 30, 1999, (viii) registrant's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1999, (ix) registrant's Quarterly Report
on Form 10-Q for the quarter ended July 31, 1999, (x) registrant's Current
Report on Form 8-K filed on September 21, 1999, and (xi) registrant's Quarterly
Report on Form 10-Q for the quarter ended October 30, 1999.
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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.
Our home page on the Internet is www.michaelanthony.com. You can learn
about Michael Anthony by visiting that site.
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.
FISCAL YEAR
Fiscal years ended January 29, 2000, January 30, 1999 and January 31,
1998 were comprised of 52 weeks, respectively.
As used throughout this document, (a) fiscal 2000 refers to the fiscal
year ended January 29, 2000, (b) fiscal 1999 refers to the fiscal year ended
January 30, 1999 and (c) fiscal 1998 refers to the fiscal year ended January 31,
1998.
PRODUCT LINES
Michael Anthony offers a broad selection of handcrafted gold and
gemstone 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. In addition, Michael Anthony designs, manufactures and distributes
karat gold jewelry accented with colored gemstones and invisible set diamond
rings. We have begun the outsourcing of gold chains and other items for resale
to our customers.
Through our M.A.J. manufacturing division, we manufacture gold rope,
mesh and other chains and gold locks, and design gold tubing and bangle blanks
used in the production of bangle bracelets and earrings. Through our M.A.E.
manufacturing division, we manufacture gold,
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stamped and tubed earrings, pendants and certain jewelry components used by the
other divisions of Michael Anthony.
The table below sets forth the approximate percentage of (a) sales and
(b) kilograms shipped in fiscal years 2000, 1999 and 1998, respectively,
attributable to each of Michael Anthony's product categories.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
2000 1999 1998
------------------------------------------------------------------------------
% of % of % of % of % of % of
Sales Kilograms Sales Kilograms Sales Kilograms
Shipped Shipped Shipped
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Casted charms/rings 34 29 39 36 42 34
- ------------------------------------------------------------------------------------------------------------
Chains 42 50 37 44 42 51
- ------------------------------------------------------------------------------------------------------------
Stamped earrings 9 7 8 7 6 5
- ------------------------------------------------------------------------------------------------------------
Watches and other items 15 14 16 13 10 10
- ------------------------------------------------------------------------------------------------------------
</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)), 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 29, 2000, Michael Anthony's licensed products
represented approximately 5% 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
offerings 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 11, 2000, our product
development staff consisted of 22 full time employees. Product development
expenses for molds and models for fiscal 2000 were approximately $891,000. We
anticipate that we will continue to commit substantial resources to product
development.
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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:
- the casting (or lost wax) method, which is a long-standing jewelry
manufacturing process;
- 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
- 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 2000, Michael Anthony manufactured approximately 92.4% of
its products from gold bullion and other raw materials and purchased
approximately 7.6% 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.
During fiscal 2000, Michael Anthony began leasing a 7,500 square feet
assembly facility in the Dominican Republic. We are also in the process of
constructing a new 40,000 square feet manufacturing and assembly facility
located in the Dominican Republic. The facility is used for finishing and
assembly of earrings and bangle bracelets. We anticipate a completion date of
August 2000 at a cost of approximately $2,000,000 for land, building and
machinery.
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 11, 2000, the aggregate dollar value of open orders was
approximately $10,477,000. 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.
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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, cooperative advertising allowances with certain
customers and advertisements in consumer magazines like Vogue, In Style, Martha
Stewart and Vanity Fair.
Our marketing strategy is to increase brand recognition of the "Michael
Anthony" name. This includes advertising in consumer magazines and other
publications of many of America's finest retailers. We believe that there is
growing brand recognition of the "Michael Anthony" name and the "Ma" trademark
with consumers and that this recognition has enhanced sales of 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; and
- 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, and catalogue and Internet
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 our own consignment
arrangements with our gold lenders. See Item 1. "Business -
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Supply; Related Financing Arrangements" and Item 7. "Management's Discussion And
Analysis Of Financial Condition And Results of Operations - Liquidity and
Capital Resources."
During fiscal 2000, sales to the five largest of Michael Anthony's
customers totaled approximately 54% of total net sales. Our two largest
customers were Wal-Mart and JCPenney, accounting for approximately 15% and 12%,
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 11% of gross sales in each of fiscal 2000, fiscal 1999
and fiscal 1998. For further information regarding the reserve for returns, see
Note 1 - Notes to Consolidated Financial Statements.
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
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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 that we
are well positioned in the industry and have a reputation for responsive
customer service, high quality and well-designed jewelry with broad consumer
appeal.
The principal competitive factors in the industry are price, quality,
design and customer service. 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 2000, fiscal 1999 and fiscal 1998:
NET % OF
SALES NET SALES
----- ---------
($ IN THOUSANDS)
----------------
Fiscal 2000 Ended January 29, 2000
First Quarter $28,982 20%
Second Quarter $25,331 17%
Third Quarter $49,935 35%
Fourth Quarter $40,267 28%
Fiscal 1999 Ended January 30, 1999
First Quarter $30,432 22%
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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%
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.
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 29, 2000, we employed 663 persons, 473 of which were
directly engaged in manufacturing and distribution operations, 112 of which were
engaged in administration and
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sales and 78 of which were employed at our assembly facility in the Dominican
Republic. 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. Our strategy is to increase sales to new and existing customers as
well as raise our average price points and gross margins.
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.
As a result of acquisitions, we have 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.
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.
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
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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 September 16, 1999, Michael Anthony acquired the buildings which
house two manufacturing facilities, located at 70 and 60 South MacQuesten
Parkway, Mount Vernon, NY from MacQuesten Realty Company for a price of
$2,450,000. Michael Anthony incurred $929,000 of long term debt, which has a
four-year term and accrues interest at an annual rate of 7.50%, and paid the
balance with cash from its operations. At January 29, 2000, $863,000 of
principal remained outstanding under the loan.
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.
During fiscal 2000, Michael Anthony began leasing a 7,500 square feet
assembly facility in the Dominican Republic. The facility is used for finishing
and assembly of earrings and bangle bracelets.
Michael Anthony, through MADOR S.A., has entered into a Real Estate
Purchase Agreement and a Construction Agreement with Zona Franca San Isidro,
S.A. for the construction of a 40,000 square feet assembly and manufacturing
facility located in the Dominican Republic that we expect will be operational in
August 2000 at a cost of approximately $2,000,000 for land, building and
machinery.
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 2000 and 1999.
FISCAL YEAR ENDED JANUARY 29, 2000 HIGH LOW
- ---------------------------------- ---- ---
First Quarter 4 15/16 3 3/16
Second Quarter 4 3/16 3 1/2
Third Quarter 4 2 7/8
Fourth Quarter 3 1/4 2 3/4
FISCAL YEAR ENDED JANUARY 30, 1999 HIGH LOW
- ---------------------------------- ---- ---
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
As of April 11, 2000, there were 1,023 holders of record of Michael
Anthony's common stock.
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
Statements.
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. The combined total of the stock repurchase programs
amount to 2,250,000 shares.
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As of April 11, 2000, Michael Anthony had purchased a total of
2,035,500 shares on the open market for an aggregate of approximately
$6,163,000, at an average price of $3.09.
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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
-------------------------------------------------------------------------------
Jan. 29, Jan. 30, Jan. 31, Feb. 1, Jan. 27,
2000 1999 1998 1997 1996
---- ---- ---- ---- -----
(In thousands, except per share amounts)
STATEMENT OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net sales $144,515 $137,009 $129,949 $150,629 $145,257
Cost of goods sold 110,096 105,870 107,182 124,041 121,195
-------- -------- -------- -------- --------
Gross profit 34,419 31,139 22,767 26,588 24,062
Selling, general and
administrative expenses 27,835 25,384 25,155 21,372 19,455
-------- -------- -------- -------- --------
Operating income/(loss) 6,584 5,755 (2,388) 5,216 4,607
Other(expense)/income:
Interest expense/
gold consignment fee (2,699) (2,290) (2,827) (3,155) (3,835)
Other income/(expense), net 342 326 1,002 507 442
-------- -------- -------- -------- --------
Income/(loss) before extraordinary
item and income taxes 4,227 3,791 (4,213) 2,568 1,214
Income tax provision/(benefit) 1,607 1,441 (1,601) 778 486
-------- -------- -------- -------- --------
Income/(loss) before 2,620 2,350 (2,612) 1,790 728
extraordinary item -------- -------- -------- -------- --------
Extraordinary item (net of income
taxes of $130,000) - 212 - - -
-------- -------- -------- -------- --------
Net income/(loss) $ 2,620 $ 2,138 $ (2,612) $ 1,790 $ 728
======== ======== ======== ======== ========
Earnings/(loss) per share before
extraordinary item - basic $ 0.40 $ 0.30 $ (0.34) $ 0.22 $ 0.09
======== ======== ======== ======== ========
Earnings/(loss) per share before
extraordinary item - diluted $ 0.39 $ 0.30 $ (0.34) $ 0.22 $ 0.09
======== ======== ======== ======== ========
Extraordinary item $ - $ (.03) $ - $ - $ -
======== ======== ======== ======== ========
Weighted average number
of shares - basic 6,592 7,111 7,746 8,241 8,475
Weighted average number
of shares - diluted 6,702 7,111 7,746 8,263 8,479
BALANCE SHEET DATA:
Working capital $35,960 $39,171 $37,260 $42,042 $46,136
Total assets(1) 67,914 65,037 65,644 72,749 78,646
Long-term debt and capital
Lease liability 12,684 12,509 12,736 14,294 19,192
Stockholders' equity 44,044 43,298 43,389 47,042 46,048
</TABLE>
(1) The fiscal years ended January 29, 2000, January 30, 1999, January 31,
1998, February 1, 1997 and January 27, 1996 do not include consigned
inventory, which had approximate value of $38,076,000, $35,096,000,
$33,208,000, $40,282,000 and $60,700,000, respectively.
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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 29, JANUARY 30, JANUARY 31, FEBRUARY 1,
2000 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.2 77.3 82.5 82.3
Selling, general and
administrative expenses 19.3 18.5 19.3 14.2
Interest and gold consignment
fee expense 1.9 1.7 2.2 2.1
Other income (.2) (.2) (.8) (.3)
Income tax provision/(benefit) 1.1 1.0 (1.2) .5
Extraordinary item - .1 - -
Net income/(loss) 1.8 1.6 (2.0) 1.2
</TABLE>
FISCAL 2000 VS. FISCAL 1999
Net sales for fiscal 2000 were approximately $144,515,000, an
increase of 5.5% from net sales of approximately $137,009,000 for the comparable
period in fiscal 1999. 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 2000, $283 an ounce versus last year's
average of $300 an ounce, sales would have increased to $149,097,000 or 8.8% as
compared to the prior fiscal period.
Gross profit on sales for fiscal 2000 were approximately $34,419,000,
an increase of $3,280,000 from approximately $31,139,000 for the comparable
period in fiscal 1999. As a percentage of net sales, gross profit increased to
23.8% in fiscal 2000 compared to 22.7% in fiscal 1999. The increase in gross
margin was attributable to a lower average gold price and a change in the
customer and product mix.
Selling, general and administrative expenses for fiscal 2000 were
approximately $27,835,000, an increase of $2,451,000 or 9.7% from approximately
$25,384,000 for the comparable period in fiscal 1999. The increase is primarily
attributable to increases in (a) payroll and payroll related expenses, (b)
advertising expenses and (c) product and packaging supplies. As a percentage of
the net sales, as adjusted for the gold price difference discussed above of
15
<PAGE> 16
$149,097,000, selling, general and administrative expenses increased to 19.3% in
fiscal 2000, from 17.4% in fiscal 1999.
Interest expense and gold consignment fees for fiscal 2000, were
approximately $2,699,000, an increase of $409,000 or 17.9% compared to
approximately $2,290,000, for the comparable period in fiscal 1999. The increase
was primarily due to the Company's higher average level of consigned inventory
and higher consignment rates.
For the year ended January 29, 2000, an income tax provision of
$1,607,000 was recorded compared to $1,441,000 for the prior year. The effective
tax rates for fiscal 2000 and fiscal 1999 were 38%.
As a result of the above factors our net income for fiscal 2000 was
approximately $2,620,000 compared to $2,350,000 for fiscal 1999, before an
extraordinary item.
Net income for fiscal 2000 was approximately $2,620,000 compared to net
income of $2,138,000 for the comparable period in fiscal 1999.
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 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
16
<PAGE> 17
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 to 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
17
<PAGE> 18
approximately $3,309,000. If 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 Note
16 "Legal Proceedings"-Notes to the Consolidated Financial Statements.
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.
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 245,000
ounces of fine gold or (b) consigned gold with an aggregate value equal to
$86,250,000. In March 2000, Michael Anthony received approval from a new gold
lender which will increase the aggregate ounces of fine gold to 270,000 ounces
with an aggregate value of $92,250,000. 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
18
<PAGE> 19
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 29, 2000, Michael Anthony held approximately
132,800 ounces of gold on consignment with a market value of $38,076,000.
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 29, 2000, Michael Anthony was in compliance with the covenants
in its consignment agreements and our owned gold inventory was valued at
approximately $3,724,000. 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.
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. At January 29, 2000 there were
no forward contracts or options on futures outstanding.
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 February 1, 1997 until January 29, 2000, the closing price of
gold according to the Second London Gold Fix ranged from a low of $254.20 per
ounce to a high of nearly $323.50 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
19
<PAGE> 20
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 were
in compliance with the amended covenant for the mortgage in fiscal 2000 and
expect to be in compliance in fiscal 2001.
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 29, 2000, we were in
compliance with the covenants. As of January 29, 2000, $2,053,000 of principal
remained outstanding under the mortgage.
At January 29, 2000, the Company had an unused line of credit
arrangement with a commercial bank which varies seasonally from $10,000,000 to
$18,350,000. 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, at (a) the bank's prime rate, (b) the fixed
rate loan (as defined in the agreement) or (c) the adjusted Eurodollar rate plus
2.5%. The line of credit expires on July 31, 2000 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, we believe that other lenders
would be willing to enter into a similar arrangement.
On February 10, 1999, Michael Anthony obtained a loan in the amount of
$937,500. As collateral for the loan, we granted the lender a first mortgage on
one of our manufacturing facilities. The mortgage has a fifteen-year term and
accrues interest at an annual rate of 7.05%. At January 29, 2000, approximately
$904,000 of principal remained outstanding under the loan.
On September 16, 1999, Michael Anthony acquired two buildings which
house two manufacturing facilities, located at 70 and 60 South MacQuesten
Parkway, Mount Vernon, NY from MacQuesten Realty Company for a price of
$2,450,000. Michael Anthony incurred
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<PAGE> 21
$929,000 of long-term debt, which has a four-year term and accrues interest at
an annual rate of 7.50%, and paid the balance with cash from its operations. At
January 29, 2000, approximately $863,000 of principal remained outstanding under
the loan.
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 2000, cash provided from operating activities was
$9,483,000. This was primarily the result of $2,620,000 in net income,
$4,091,000 of non-cash items, mainly depreciation, and a $3,639,000 decrease in
accounts receivable, offset by an increase of $2,058,000 in inventory.
Cash of $6,467,000 was utilized for investing purposes during fiscal
2000, primarily for assets acquired through the purchase of Town & Country Fine
Jewelry Corp. of $2,200,000, the purchase of two manufacturing buildings of
$1,521,000, and the purchase of machinery and equipment of approximately
$2,489,000.
During fiscal 2000, cash utilized in financing activities totaled
$1,397,000. This was primarily attributed to the purchase of treasury stock of
$1,938,000 and payments of long-term debt of $404,000, which was partially
offset by the proceeds of long-term debt of $901,000.
For fiscal 2001, Michael Anthony projects capital expenditures of
approximately $3,000,000, which includes the construction costs for the
manufacturing and assembly facility in the Dominican Republic, 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."
We believe that our long-term debt and existing lines of credit provide
sufficient funding for our operations. In the event that we require additional
financing during fiscal 2001, 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.
YEAR 2000
We completed our internal Year 2000 project in March 1999. Total
expenditures related to remediation, testing, conversion and updating system
applications were approximately
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<PAGE> 22
$308,000. The cost of the Year 2000 project was expensed as incurred and did not
have a material adverse affect on Michael Anthony's results of operations,
liquidity or capital resources. We have not experienced any material
computer-related failures as a result of Year 2000 problems. In addition, we
have not experienced any material impact to operations or financial result. If
electronic data interchange communications are no longer possible, we expect to
use voice, facisimile, e-mail, or traditional mail communications in order to
receive customer orders and process customer invoices.
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;
(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
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," SFAS No. 133, as amended by SFAS No. 137 is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all
derivative instruments be measured at fair
22
<PAGE> 23
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 7a. QUANTATIVE AND QUALITATIVE DISCOUNT ABOUT MARKET
RISK.
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 29, 2000, 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 and pages F-1 through F-29, S-1 and S-2.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On September 21, 1999, Michael Anthony filed a Form 8-K to report a
change in certifying accountants with the firm of Deloitte & Touche, LLP being
replaced by BDO Seidman, LLP effective September 15, 1999. During the Company's
two most recent fiscal years and subsequent interim principle periods, there
were no disagreements with Deloitte & Touche LLP, on any matter of accounting or
practices, financial statement disclosures or auditing scope or procedure.
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<PAGE> 24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the headings "Election of Directors"
and "Compliance with Section 16 of the Exchange Act" of Michael Anthony's Proxy
Statement for the 2000 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 2000 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 2000 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 2000 Annual Meeting of Stockholders is
incorporated herein by reference. See also Item 2. "Properties."
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<PAGE> 25
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 Accountants' Report F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders'
Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
(2) Financial Statement Schedule:
Independent Accountants' Report on Schedule II S-1
Schedule II Valuation and Qualifying Accounts S-2
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 2000 Annual Report to Stockholders.
<TABLE>
<CAPTION>
(3) Exhibits:
Exhibit
NO. DESCRIPTION PAGE NO.
--- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of Registrant, Incorporated by reference to Exhibit 3.1 to
as amended Amendment No. 2 to the Company's Registration
Statement on Form S3 (File No. 3371308) (the
"1993 Registration Statement")
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C> <C>
3.1.1 Certificate of Merger of Michael Anthony Jewelers, Inc. Incorporated by reference to Exhibit 3.1.1 of
(New York) and Michael Anthony Jewelers, Inc. (Delaware) the Company's Annual Report on Form 10K for
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
4.1 Form of Common Stock Certificate Incorporated by reference to Exhibit 3.3 to
the Company's Registration Statement on Form
S-1 (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 between Incorporated by reference to Exhibit 10.40 of
the Registrant and Fleet Precious Metals Inc. the 1993 Form 10-K
10.2 Security Agreement dated as of August 20, 1993 among the Incorporated by reference to Exhibit 10.39 of
Registrant and Fleet Precious Metals Inc. the 1993 Form 10-K
10.3 Amended and Restated Consignment Agreement dated as of Incorporated by reference to Exhibit 10.44 to
August 20, 1993 between the Registrant and ABN AMRO Bank the 1993 Form 10-K
N.V., New York Branch
10.4 Amended and Restated Intercreditor Agreement dated as of Incorporated by reference to Exhibit 10.47 to
August 20, 1993, among the Registrant, its gold lenders, the 1993 Form 10-K
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 of the Incorporated by reference to Exhibit 10.48 to
Registrant dated as of September 21, 1993 the 1993 Form 10-K
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C>
10.6 Second Amendment to Assignment of Trademarks and Service Incorporated by reference to Exhibit 10.49 to
Marks as Collateral dated as of July 12,1990 between the the 1993 Form 10-K
Registrant and RIHT, individually and as agent
10.7 Consignment Agreement dated as of January 31, 1994 Incorporated by reference to Exhibit 10.46
(effective as of May 16, 1994) between the Registrant and to the Company's Annual report on Form 10K
Credit Suisse, New York Branch for the fiscal year ended June 30, 1994
(the "1994 Form 10-K")
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 Registrant, the 1994 Form 10-K
RIHT, individually and as agent
10.9 Third Amendment to Assignment of Trademarks and Service Incorporated by reference to Exhibit 10.49 to
Marks as Collateral dated as of May 16, 1994 between the the 1994 Form 10-K
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 Service Incorporated by reference to Exhibit 10.55 to
Marks as collateral dated as of September 1,1994 between the 1994 Form 10-K
the Registrant and RIHT, individually and as agent
10.12 Contract of Sale dated as of November 28, 1994 between Incorporated by reference to Exhibit 10.52 to
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
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
<S> <C> <C>
10.14 Amended Security Agreement dated as of March 29,1995 Incorporated by reference to Exhibit 10.61 to
between the Registrant and Chemical Bank the 1995 Form 10-K
10.15 Loan Agreement dated October 6, 1995 between First Incorporated by reference to Exhibit 10.1 to
Fidelity Bank, National Association ("First Fidelity") the Company's Quarterly Report on Form 10Q
and Registrant for the quarter ended October 28,1995 (the
"October 1995 Form 10-Q")
10.16 Mortgage Note in principal amount of $2,500,000 dated Incorporated by reference to Exhibit 10.2 to
October 6, 1995 issued by Registrant in favor of First the October 1995 Form 10-Q
Fidelity
10.17 Mortgage and Security Agreement dated October 6,1995 by Incorporated by reference to Exhibit 10.3 to
Registrant for the benefit of First Fidelity the October 1995 Form 10-Q
10.18 Fourth Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.5 to
Agreement dated October 20, 1995 among Registrant and the October 1995 Form 10-Q
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 and the October 1995 Form 10-Q
Registrant's gold lenders
10.20 Fifth Amendment to Assignment of Trademarks and Service Incorporated by reference to Exhibit 10.7 to
Marks dated October 20, 1995 among Registrant and the October 1995 Form 10-Q
Registrant's gold lenders
10.21 Assignment of Trademarks and Service Marks as Collateral, Incorporated by reference to Exhibit 10.56 to
dated July 12, 1990, between Registrant and Rhode Island the Company's Annual Report on Form 10-K for
Hospital Trust National Bank, individually and as agent the fiscal year ended January 27, 1996 (the
"1996 Form 10-K")
10.22 First Amendment to Assignment of Trademarks and Service Incorporated by reference to Exhibit 10.57 to
Marks as Collateral dated as of June 5,1992, between the 1996 Form 10-K
Registrant and Rhode Island Hospital Trust National Bank,
individually and as agent
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C>
10.23 Deferred Compensation Plan dated as of March 4, 1996 Incorporated by reference to Exhibit 10.59 to
the 1996 Form 10-K
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 Anthony Incorporated by reference to Exhibit 10.60
Company d/b/a MacQuesten Realty Company and Registrant to the Company's Annual Report on Form 10-K
for the year ended February 1, 1997 (the "1997
Form 10-K")
10.27 Lease dated as of May 1, 1991 between Michael Anthony Incorporated by reference to Exhibit 10.61 to
Company d/b/a MacQuesten Realty Company and Registrant the Company's Annual Report on Form 10-K for
the 1997 Form-10-K
10.28 Contract of Sale dated May 16, 1997 between Registrant Incorporated by reference to Exhibit 10 to
and MacQuesten Realty Company the 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
Registrant to the Chase Manhattan Bank the Company's Quarterly Report on Form 10-Q
for the quarter ended August 2, 1997
10.30 Severance and Termination Agreement dated October 22, Incorporated by reference to Exhibit 10 to
1997 between Registrant and Mark Hanna the 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
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
10.32 1993 NonEmployee Directors' Stock Option Plan of the Filed as Exhibit 10.55 to the 1998 Form 10-K
Registrant
10.33 Loan and Security Agreement, dated January 29, 1999, by Filed as Exhibit 10.33 to the 1999 Form 10-K
and between the Registrant and General Electric Capital
Business Asset Funding Corporation
10.34 Amendment No. One to Loan and Security Agreement, dated Filed as Exhibit 10.34 to the 1999 Form 10-K
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 the Filed as Exhibit 10.35 to the 1999 Form 10-K
Registrant in favor of General Electric Capital Business
Asset Funding Corporation
10.36 Asset Purchase Agreement, dated March 3, 1999, by and Filed as Exhibit 10.36 to the 1999 Form 10-K
between the Registrant and Town & Country Fine Jewelry
Group, Inc.
10.37 Mortgage, Security Agreement and Assignment of Leases and Filed as Exhibit 10.37 to the 1999 Form 10-K
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 between Filed as Exhibit 10.38 to the 1999 Form 10-K
the Registrant and General Electric Capital Business
Asset Funding Corporation
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C> <C>
10.39 Asset Purchase Agreement, dated April 15, 1999, by and Filed as Exhibit 10.39 to the 1999 Form 10-K
between the Registrant and Eurospark Industries, Inc.
10.40 Consignment Agreement dated as of November 29,1999 Filed as an Exhibit to this Form 10-K
between Registrant and Mitsui & Co. (U.S.A.), Inc.
10.41 Amended and Restated Intercreditor Agreement dated, Filed as an Exhibit to this Form 10-K
January 18, 1999 among Registrant and Registrant's gold
lenders
10.42 First Amendment to Amended and Restated Intercreditor Filed as an Exhibit to this Form 10-K
Agreement, dated March 1,2000, among Registrant and
Registrant's gold lenders
10.43 Second Amendment and Agreement to Amended and Restated Filed as an Exhibit to this Form 10-K
Collateral Sharing Agreement, dated March 1,2000, among
Registrant and Registrant's gold lenders
10.44 Sixth Amendment to Amended and Restated Security Filed as an Exhibit to this Form 10-K
Agreement dated March 1, 2000, among Registrant and
Registrant's gold lenders
10.45 Ninth Amendment and Agreement to Consignment Agreement Filed as an Exhibit to this Form 10-K
dated March 1, 2000, between Registrant and Fleet
Precious Metals Inc. among Registrant and Registrant's
gold lenders
10.46 1999 Employee Change of Control Plan of the Registrant Filed as an Exhibit to this Form 10-K
10.47 1999 Non-Employee Director Change of Control Plan of the Filed as an Exhibit to this Form 10-K
Registrant
10.48 Contract of Sale dated September 16, 1999 between Filed as an Exhibit to this Form 10-K
Registrant and MacQuesten Realty Company
10.49 Mortgage dated August 16, 1993 between
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
<S> <C> <C>
Michael Anthony Company d/b/a MacQuesten Realty Company Filed as an Exhibit to this Form 10-K
and First Fidelity
10.50 Assumption Agreement dated September 16, 1999 among Filed as an Exhibit to this Form 10-K
Registrant, MacQuesten Realty Company, and First Union
National Bank, successor in interest to First Fidelity
10.51 Registrant's Form 8-K filed on September 21, 1999 Filed as an Exhibit to this Form 10-K
10.52 Bill of Sale dated October 28, 1999 between MADOR, S.A. Filed as an Exhibit to this Form 10-K
and Zona Franca San Isidro S.A.
10.53 Construction Agreement dated October 28, 1999 between Filed as an Exhibit to this Form 10-K
MADOR, S.A. and Zona Franca San Isidro, S.A.
21 Subsidiaries of the Registrant Filed as an Exhibit to this Form 10-K
23 Consent of BDO Seidman, LLP Filed as an Exhibit to this Form 10-K
23.1 Consent of Deloitte & Touche, LLP 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) A report on Form 8-K was filed by Michael Anthony on September 21, 1999
with respect to Item 9 therein, a change in accounting firms.
32
<PAGE> 33
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 26, 2000 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 26, 2000
- ----------------------------------- and Chief Executive Officer
(Michael W. Paolercio) (Principal Executive Officer)
/s/ Anthony Paolercio Co-Chairman of the Board April 26, 2000
- ----------------------------------- and President
(Anthony Paolercio, Jr.)
/s/ Allan Corn Chief Financial Officer, April 26, 2000
- ----------------------------------- Senior Vice President
(Allan Corn) and Director (Principal
Accounting Officer)
/s/ Michael A. Paolercio Senior Vice President, April 26, 2000
- ----------------------------------- Treasurer and Director
(Michael Anthony Paolercio)
/s/ Michael Wager Director April 26, 2000
- -----------------------------------
(Michael Wager)
/s/ David Harris Director April 26, 2000
- -----------------------------------
(David Harris)
/s/ Donald Miller Director April 26, 2000
- -----------------------------------
(Donald Miller)
/s/ Nathan Light Director April 26, 2000
- -----------------------------------
(Nathan Light)
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C> <C>
/s/ Barry Scheckner Director April 26, 2000
- -----------------------------------
(Barry Scheckner)
</TABLE>
34
<PAGE> 35
INDEPENDENT ACCOUNTANTS REPORT
Board of Directors and Stockholders of
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
We have audited the accompanying consolidated balance sheet of Michael Anthony
Jewelers, Inc. as of January 29, 2000 and the related consolidated statement of
income, stockholders' equity, and cash flow for the period ended January 29,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Michael Anthony
Jewelers, Inc. at January 29, 2000, and the result of its operations and its
cash flow for the period ended January 29, 2000, in conformity with generally
accepted accounting principles.
BDO Seidman
New York, New York
March 31, 2000
F-1
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
We have audited the accompanying consolidated balance sheet of Michael Anthony
Jewelers. Inc. and subsidiaries as of January 30, 1999 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the two 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) for each of the two years in the period ended January 30, 1999. 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 the results of their operations and
their cashflows for each of the two years in the period ended January 30, 1999
in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule for each of the two years in the
period ended January 30, 1999 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)
F-2
<PAGE> 37
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS January 29, January 30,
- ------ 2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 2,580 $ 961
Accounts receivable:
Trade (less allowances of $1,007 and $1,124, respectively) 25,521 29,194
Other 287 203
Inventories 16,270 14,212
Prepaid expenses and other current assets 1,389 1,397
Deferred taxes 682 1,203
-------- --------
Total current assets 46,729 47,170
PROPERTY, PLANT AND EQUIPMENT - net 20,614 16,916
INTANGIBLES - net 169 377
OTHER ASSETS 402 574
-------- --------
$ 67,914 $ 65,037
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 2,198 $ 2,808
Current portion of long-term debt 1,580 119
Current portion of capital leases 76 108
Taxes payable 1,974 812
Accrued expenses 4,941 4,152
-------- --------
Total current liabilities 10,769 7,999
-------- --------
LONG-TERM DEBT 12,684 12,498
-------- --------
CAPITAL LEASE LIABILITY - 11
-------- --------
DEFERRED TAXES 417 1,231
-------- --------
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; 8,308,000 and
8,288,000 shares issued and outstanding as of
January 29, 2000, and January 30, 1999, respectively 8 8
Additional paid-in capital 31,826 31,762
Retained earnings 18,242 15,622
Treasury stock, 1,951,000 and 1,457,000 shares as of
January 29, 2000 and January 30, 1999, respectively (6,032) (4,094)
-------- --------
Total stockholders' equity 44,044 43,298
-------- --------
$ 67,914 $ 65,037
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 38
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
NET SALES $ 144,515 $ 137,009 $ 129,949
COST OF GOODS SOLD 110,096 105,870 107,182
--------- --------- ---------
GROSS PROFIT ON SALES 34,419 31,139 22,767
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 27,835 25,384 25,155
--------- --------- ---------
OPERATING INCOME/(LOSS) 6,584 5,755 (2,388)
--------- --------- ---------
OTHER INCOME (EXPENSES):
Gold consignment fee (1,483) (1,106) (1,305)
Interest expense (1,216) (1,184) (1,522)
Interest income 175 245 297
Other income 167 81 705
--------- --------- ---------
TOTAL OTHER INCOME/(EXPENSES) (2,357) (1,964) (1,825)
--------- --------- ---------
INCOME/(LOSS) BEFORE EXTRAORDINARY
ITEM AND INCOME TAXES 4,227 3,791 (4,213)
INCOME TAX PROVISION/(BENEFIT) 1,607 1,441 (1,601)
--------- --------- ---------
INCOME/(LOSS) BEFORE
EXTRAORDINARY ITEM 2,620 2,350 (2,612)
--------- --------- ---------
EXTRAORDINARY ITEM - REFINANCING OF
DEBT (net of income taxes of $130,000) - 212 -
--------- --------- ---------
NET INCOME/(LOSS) $ 2,620 $ 2,138 $ (2,612)
========= ========= =========
EARNINGS/(LOSS) PER SHARE - Basic
Income/(loss) before extraordinary item $ .40 $ .33 $ (.34)
Extraordinary item - (.03) -
--------- --------- ---------
NET EARNINGS/(LOSS) PER SHARE - Basic $ .40 $ .30 $ (.34)
========= ========= =========
EARNINGS/(LOSS) PER SHARE - Diluted
Income/(loss) before extraordinary item $ .39 $ .33 $ (.34)
Extraordinary item - (.03) -
--------- --------- ---------
NET EARNINGS/(LOSS) PER SHARE - Diluted $ .39 $ .30 $ (.34)
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES - Basic 6,592 7,111 7,746
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES - Diluted 6,702 7,111 7,746
========= ========= =========
</TABLE>
F-4
<PAGE> 39
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 40
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------ Paid-In Retained --------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - 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
Purchase of treasury stock - - - - (494) (1,938) (1,938)
Proceeds from exercise of
stock options 15 - 44 - - - 44
Issuance of stock 5 - 20 - - - 20
Net income - - 2,620 - - 2,620
------ ------ ------- -------- ------ ------- --------
-
Balance - January 29, 2000 8,308 $ 8 $31,826 $ 18,242 (1,951) $ (6,032) $44,044
====== ====== ======= ========= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 41
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
January 29, January 30, January 31,
2000 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 2,620 $ 2,138 $ (2,612)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 4,091 3,535 4,761
Provision for doubtful accounts 60 212 284
Provision for sales returns (110) 106 -
Deferred tax (benefit)/provision (293) (70) (392)
Loss/(gain) on disposal of property, plant
and equipment (45) 7 (2)
Provision for stock compensation 20 15 15
(Increase)/decrease in operating assets:
Accounts receivable 3,639 (7,441) (761)
Inventories (2,058) (1,299) 5,990
Prepaid expenses and other current assets 8 1,910 (2,422)
Other assets 210 480 (310)
Increase/(decrease) in operating liabilities:
Accounts payable (610) (62) (271)
Taxes payable 1,162 - -
Accrued expenses 789 579 583
-------- -------- --------
Net cash provided by operating activities 9,483 110 4,863
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (6,642) (2,221) (4,010)
Proceeds from sale of equipment 175 15 34
-------- -------- --------
Net cash used in investing activities (6,467) (2,206) (3,976)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (404) (1,446) (3,514)
Proceeds from long-term debt 901 - -
Proceeds from line of credit 16,400 10,500 15,700
Payments to line of credit (16,400) (10,500) (15,700)
Proceeds from exercise of stock options 44 - -
Purchase of treasury stock (1,938) (2,244) (1,056)
-------- -------- --------
Net cash used in financing activities (1,397) (3,690) (4,570)
-------- -------- --------
NET INCREASE/(DECREASE) IN CASH 1,619 (5,786) (3,683)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 961 6,747 10,430
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR $ 2,580 $ 961 $ 6,747
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 42
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Investing:
Mortgage incurred with purchase of building $929 - -
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest and gold consignment fees $2,959 $2,592 $2,858
Income taxes $ 804 $ 835 $ 95
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 43
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Michael Anthony Jewelers, Inc. ("the Company"), is a leading designer,
marketer and manufacturer of affordable fine jewelry whose customers
include jewelry chain stores, discount stores, department stores,
television home shopping networks, catalogue retailers, and wholesalers.
BASIS OF CONSOLIDATION 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.
F-9
<PAGE> 44
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
MOLDS AND MODELS
For molds and models with a life greater than one year, the Company
capitalizes and amortizes the costs over a three-year period. In fiscal
2000 and 1999 the Company capitalized approximately $556,000 and
$446,000, respectively.
INTANGIBLES
Intangible assets (net of accumulated amortization of $1,830,000 and
$1,623,000 as of January 29, 2000 and January 30, 1999, 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. For the years ended January 31, 1998, January 30, 1999 and
January 29, 2000, there were no impairment losses.
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
F-10
<PAGE> 45
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
F-11
<PAGE> 46
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
REVENUE RECOGNITION (Continued)
product is transferred in the form of fine gold ounces from the customer
to the Company. The value of the finished product that exceeds the gold
content value is recovered as revenue and the related cost to
manufacture is recorded as an expense ("tolling arrangements").
ALLOWANCE FOR SALES RETURNS
The Company reduces gross sales by the amount of discounts and returns
to determine net sales. Each month the Company estimates a reserve for
returns based on historical experience and the amount of gross sales.
The reserve is adjusted periodically to reflect the Company's actual
return experience.
CATALOG COSTS
Catalog costs are charged to expense as incurred, the only exception
being major catalog revisions. Costs capitalized are amortized over the
units of catalogs shipped, up to a maximum of two years. At January 29,
2000, January 30, 1999 and January 31, 1998, in connection with three
significant catalog revisions, approximately $169,000, $52,000, and
$210,000, respectively, had been capitalized. Included in the statement
of operations for the years ended January 29, 2000, January 30, 1999 and
January 31, 1998, is amortization expense of $124,000, $158,000 and
$229,000, 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
29, 2000, there were no forward contracts and options on futures
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
F_12
<PAGE> 47
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.
F-13
<PAGE> 48
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 29, 2000.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. 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.
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.
FISCAL YEAR END
The Company's fiscal year end is the Saturday closest to the end of
January. The financial statements for the fiscal years ended January 29,
2000, January 30, 1999 and January 31, 1998 were comprised of 52 weeks,
respectively.
RECLASSIFICATIONS
Certain reclassifications were made to the prior year's financial
statements to conform to the current year's presentation.
F-14
<PAGE> 49
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of: January 29, January 30,
2000 1999
---------- --------
(In thousands)
<S> <C> <C>
Finished goods $34,908 $31,349
Work in process 14,012 14,324
Raw materials 5,426 3,635
-------- --------
54,346 49,308
Less:
Consigned gold 38,076 35,096
------- --------
$16,270 $14,212
======= =======
</TABLE>
At January 29, 2000 and January 30, 1999, inventories excluded
approximately 133,000 and 123,000 ounces of gold on consignment,
respectively.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
---------- --------
(In thousands)
<S> <C> <C>
Machinery and equipment $39,130 $34,441
Leasehold improvements - 2,573
Building and building improvements 11,137 6,337
Land 2,192 1,638
-------- --------
52,459 44,989
Less: Accumulated depreciation
and amortization 31,845 28,073
------- --------
$20,614 $16,916
======= =======
</TABLE>
Included in property, plant and equipment as of January 29, 2000, are
capitalized leases with a carrying value of $274,000. Total capitalized
lease amortization expense was $207,000 and $215,000 for the years ended
January 29, 2000 and January 30,1999.
F-15
<PAGE> 50
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 245,000 ounces, or an aggregate consigned gold
value not to exceed $86,250,000. In March 2000, Michael Anthony received
approval from a new gold lender which will increase the aggregate ounces
of fine gold to 270,000 ounces with an aggregate value of $92,250,000.
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 29, 2000, the Company was in compliance with these
covenants, and the Company's owned gold inventory was valued at
approximately $3,724,000.
5. ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses consist of the following:
January 29, January 30,
2000 1999
-----------------------------
(In thousands)
<S> <C> <C>
Accrued advertising and royalty expenses 2,508 $2,119
Accrued payroll expenses 1,585 1,228
Customer deposits payable 252 261
Accrued interest 57 15
Other accrued expenses 539 529
------- --------
</TABLE>
F-16
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C> <C>
$4,941 $4,152
====== ======
</TABLE>
F-17
<PAGE> 52
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
6. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
--------- ------
(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 $10,444
Mortgage payable - interest at 8%, interest and principal of $24,000
payable monthly over a ten-year term through
October 2005. 2,053 2,173
Note payable - interest at 7.05%, interest and principal of $8,500
payable monthly over a fifteen year term
through March 2014 904 -
Mortgage payable - interest at 7.5%, interest and principal of $22,000
payable monthly over a four-year term through
September 2003 863 -
---------- ------------
14,264 12,617
Less: current portion 1,580 119
--------- ----------
$12,684 $12,498
</TABLE>
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 $10,444,000. 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 accrues 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 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 8.0% mortgage payable is secured by the Company's corporate headquarters
building and land. Additionally, the mortgage agreement contains certain
restrictive financial covenants.
F-18
<PAGE> 53
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. LONG-TERM DEBT (Continued)
---------------
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 one of its manufacturing facilities. The mortgage has a fifteen-year term
and accrues interest at an annual rate of 7.05%. At January 29, 2000,
$904,000 of principal remained outstanding under the loan.
On September 16, 1999 the Company exercised the 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. The Company incurred $929,000 of long-term
debt, which has a four-year term and accrues interest at an annual rate of
7.50%. At January 29, 2000, $863,000 of principal remained outstanding under
the loan.
Maturities of long-term debt as of January 29, 2000 are as follows (in
thousands):
YEAR ENDING JANUARY
2001 $1,580
2002 1,697
2003 1,821
2004 1,873
2005 1,812
Thereafter 5,481
---------
$14,264
7. LINE OF CREDIT
--------------
At January 29, 2000, the Company had an unused line of credit arrangement
with a commercial bank which varies seasonally from $10,000,000 to
$18,350,000 (the "line of credit"). 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,
2000 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-19
<PAGE> 54
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts and fair values of the Company's financial instruments
are as follow:
<TABLE>
<CAPTION>
January 29, 2000 January 30, 1999
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C>
Notes with lenders:
6.85% note payable $10,444 $10,078 $10,444 $10,444
8.0% mortgage payable 2,053 2,053 2,173 2,291
7.05% note payable 904 852 - -
7.5% mortgage payable 863 863 - -
</TABLE>
The fair value of the 8.0% note payable and the 7.5% mortgage payable were
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.
At January 30, 1999 the fair value of the 6.85% note payable was assumed to
reasonably approximate the carrying amount since the debt was recently
issued.
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 carrying 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 29, January 30, January 31,
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $1,630 $1,406 $(1,080)
State and local 270 105 (129)
------ ------ --------
</TABLE>
F-20
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
1,900 1,511 (1,209)
Deferred income tax (293) (70) (392)
------ ------ --------
Total $1,607 $1,441 $(1,601)
====== ====== ========
</TABLE>
F-21
<PAGE> 56
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. INCOME TAXES (Continued)
------------
The following is a reconciliation of the federal statutory rate to the
effective tax rate:
<TABLE>
<CAPTION>
YEAR ENDED
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
<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 3.0 (4.0)
Other 1.0 1.0 -
----- ---- -----
Statutory tax (benefit) rate 38.0% 38.0% (38.0)%
===== ==== =====
</TABLE>
The tax effects of significant items comprising the Company's deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
------------ --------
<S> <C> <C>
Non-current deferred tax liabilities:
Difference between book and tax
depreciation methods $417 $1,231
---- ------
Current deferred tax assets:
Reserves for sales returns and
doubtful accounts 383 427
Inventory reserve 222 424
Other 77 352
------- --------
682 1,203
------- ------
Net deferred tax (asset)/liabilities $(265) $28
======== =======
</TABLE>
10. OTHER INCOME/(EXPENSES)
-----------------------
Other income for the year ended January 31, 1998 included a gain of
approximately $625,000 on the sale of an asset.
F-22
<PAGE> 57
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS
--------------------------
On September 16, 1999, the Company acquired two buildings which house two
manufacturing facilities, located at 70 and 60 South MacQuesten Parkway,
Mount Vernon, New York from MacQuesten Realty Company ("MRC"), a partnership
consisting of certain stockholders of the Company, for a price of
$2,450,000.
The Company incurred $929,000 of long term debt, which has a four-year term
and accrues interest at an annual rate of 7.50%, and paid the balance with
cash from its operations. At January 29, 2000, $863,000 of principal
remained outstanding under the loan.
On February 29, 2000, the Company loaned $123,000 to an officer. Interest on
the unpaid principle of $123,000 accrues at the rate of 8% per annum until
the maturity date of December 31, 2000.
12. LEASES AND COMMITMENTS
----------------------
(a) Rent expense related to the MRC leases for the years ended January 29,
2000, January 30, 1999 and January 31, 1998 amounted to $349,000, $504,000
and $498,000, 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 29, 2000, the future guaranteed royalty commitments are as
follows:
<TABLE>
<CAPTION>
Year Ending Guaranteed
January Royalty
------- Commitments
-----------
(in thousands)
<S> <C>
2001 $520
2002 285
2003 48
----
$853
====
</TABLE>
F-23
<PAGE> 58
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. LEASES AND COMMITMENTS (Continued)
----------------------
(c) The Company, through MADOR S.A., has entered into a Real Estate Purchase
Agreement and a Construction Agreement with Zona Franca San Isidro, S.A. for
the construction of a 40,000 square feet assembly and manufacturing facility
located in the Dominican Republic that is expected to be operational in
August 2000 at a cost of approximately $2,000,000 for land, building and
machinery.
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. 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 $2,472,000,
$2,074,000, and $(2,674,000), and $.37, $.29, and $(.35) earnings (loss) per
share for the years ended January 29, 2000, January 30, 1999 and January 31,
1998, respectively. The weighted average per share fair value of the options
granted during the years ended January 29, 2000, January 30, 1999 and
January 31, 1998 were estimated at $1.00, $.84, and $.74, respectively, on
the dates of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
Expected life (years) 3 2 2
Risk-free interest rates 6.5% 5.5% 5.6%
Expected volatility 49.7% 44.4% 36.9%
Expected dividend yield - - -
The pro forma effect on net income and earnings per share for the year ended
January 29, 2000 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.
F-24
<PAGE> 59
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------
INCENTIVE STOCK OPTION PLANS
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.
Long-Term Incentive Plan
------------------------
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
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 134,000 $3.00 $2.13-$3.00
-------
Outstanding at January 31, 1998 688,500 $3.60 $2.13-$7.75
Lapsed (190,000) $4.14 $2.94-$7.75
Granted - Additions 150,000 $3.13 $3.13
-------
Outstanding at January 30, 1999 648,500 $3.33 $2.13-$6.13
Lapsed (86,000) $5.35 $2.75-$6.13
Exercised (15,000) $2.94 $2.94
Granted 288,000 $3.51 $3.13-$3.63
-------
Outstanding at January 29, 2000 835,500 $3.19 $2.13-$3.63
=======
</TABLE>
Options exercisable at January 29, 2000 were for 426,880 shares of common
stock at prices between $2.13 - $3.63 a share. At January 29, 2000, shares
for future option grants totaling 1,119,500 were available under the plan.
F-25
<PAGE> 60
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
-----------------------------------------
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
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
Lapsed (5,000) $5.00 $5.00
Granted 15,000 $3.27 $2.88 - $3.88
-------
Outstanding at January 29, 2000 75,000 $3.03 $2.56 - $3.88
=======
</TABLE>
Options exercisable at January 29, 2000 for 45,000 shares of common stock at
prices between $2.56 - $3.50 a share. At January 29, 2000, shares for future
option grants totaling 175,000 were available under this plan.
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:
F-26
<PAGE> 61
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. STOCK PLANS (Continued)
-----------
<TABLE>
<CAPTION>
Weighted
Average Exercise
Shares Option Price Price
------ ------------ -----
<S> <C> <C> <C> <C>
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 at January 30, 1999 96,000 $3.00 $3.00
Granted - $ - $ -
--------
Outstanding and exercisable
at January 29, 2000 96,000 $3.00 $3.00
========
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------------- ----------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Number Years of Average Number Average
Exercise of Contractual Exercise of Exercise
Prices Options Life Price Options Price
--------- ----------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$2.13-$2.70 35,000 2.8 $2.42 21,850 $2.40
$2.70-$3.28 718,500 1.9 $3.04 526,030 $3.02
$3.28-$3.90 253,000 4.0 $3.60 20,000 $3.36
--------------------------------------------------------------------------------
In Total 1,006,500 2.5 $3.16 567,880 $3.01
--------------------------------------------------------------------------------
</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 29, 2000, January
30, 1999 and January 31, 1998 is $58,000, $69,000 and $96,000 of expense for
the employer portion of the contribution.
15. SIGNIFICANT CUSTOMERS
---------------------
Sales to the Company's two largest customers were approximately 15% and 12%,
13% and 11%, and 13% and 13%, respectively, of net sales for the years ended
January 29, 2000, January 30, 1999 and January 31, 1998.
F-27
<PAGE> 62
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 shares of Common Stock. On April 4, 1997, the Board
of Directors authorized an increase of an additional 500,000 shares of
common stock that the Company may repurchase under the stock repurchase
plan. 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
29, 2000, January 30, 1999 and January 31, 1998, the Company repurchased a
total of 494,000, 879,000 and 328,000 shares, respectively, on the open
market under the 1995 Stock Repurchase Program for an aggregate price of
approximately $1,938,000, $2,244,000 and $1,056,000, respectively.
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. COMMITMENTS AND CONTINGENCIES
-----------------------------
In early 1999, at the decision of the compensation committee the Company
adopted a Change of Control Plan for executive officers, other key
employees, and Non-Employee Directors. The Plan provides for severance
payments to executive officers and other key employees. The severance
payments will be an amount equal to one times the individual's most recent
salary and bonus. 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. The
Non-Employee Director Plan provides for a payment of the sum of the
Non-Employee Director's regular compensation at the rate in effect at the
time of the change of control. These benefits are triggered upon a change
of control, as defined in the plan. Individual Agreements under the Plan
have been entered into with each of the executive officers, other key
employees and Non-Employee Directors.
F-28
<PAGE> 63
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Summary of Quarterly Results (Unaudited) (in thousands)
<TABLE>
<CAPTION>
Year Ended January 29, 2000 Year Ended January 30, 1999
-------------------------------------------- --------------------------------------------
Quarter Ended Quarter Ended
-------------------------------------------- --------------------------------------------
May 1, Jul. 31, Oct. 30, Jan. 29, May 2, Aug. 1 Oct. 31, Jan. 30
1999 1999 1999 2000 1998 1998 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (A) $ 28,982 $ 25,331 $ 49,935 $ 40,267 $ 30,432 $ 26,912 $ 43,758 $ 35,907
Cost of goods sold 22,171 19,187 38,418 30,320 23,925 21,163 34,373 26,409
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 6,811 6,144 11,517 9,947 6,507 5,749 9,385 9,498
Selling, general &
administrative expenses 6,163 6,420 8,265 6,987 5,688 5,686 6,949 7,061
-------- -------- -------- -------- -------- -------- -------- --------
Operating Income 648 (276) 3,252 2,960 819 63 2,436 2,437
Other income (expense):
Gold consignment fees (224) (277) (581) (401) (260) (242) (344) (260)
Interest expense (233) (239) (270) (474) (277) (266) (283) (358)
Interest income 76 63 18 17 81 78 52 34
Other - net 27 28 141 (28) 15 18 31 17
-------- -------- -------- -------- -------- -------- -------- --------
Total other income (expense) (354) (425) (692) (886) (441) (412) (544) (567)
Income/(loss) from operations
before extraordinary item
and income taxes 294 (701) 2,560 2,074 378 (349) 1,892 1,870
Income tax provision/(benefit) 111 (265) 972 789 144 (133) 719 711
-------- -------- -------- -------- -------- -------- -------- --------
Net income/(loss) before
Extraordinary item 183 (436) 1,588 1,285 234 (216) 1,173 1,159
-------- -------- -------- -------- -------- -------- -------- --------
Extraordinary item - net of
income taxes of $130,000 - - - - - - - 212
-------- -------- -------- -------- -------- -------- -------- --------
Net income/(loss) $ 183 $ (436) $ 1,588 $ 1,285 $ 234 $ (216) $ 1,173 $ 947
======== ======== ======== ======== ======== ======== ======== ========
Earnings/(loss) per share (B):
Income/(loss) before
extraordinary item $ 0.03 $ (0.06) $ 0.25 $ .20 $ 0.03 $ (0.03) $ 0.17 $ 0.17
Extraordinary item - - - - - - - (0.03)
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings/(loss) per share $ 0.03 $ (0.06) $ 0.25 $ .20 $ 0.03 $ (0.03) $ 0.17 $ 0.14
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(A) The Company's net sales 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-29
<PAGE> 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
The audit referred to in our report dated March 31, 2000 relating to the
consolidated financial statements of Michael Anthony Jewelers, Inc. and
subsidiaries which is contained in Item 8 of Form 10-K, included the audit of
the financial statements schedule listed in the accompanying index for the year
ended January 29, 2000. The financial statements schedule is the responsibility
of management. Our responsibility is to express an opinion on the financial
statements schedule based on our audit.
In our opinion, such financial statements schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
New York, New York
March 31, 2000
S-1
<PAGE> 65
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT ADDITIONS CHARGED CHARGED TO BALANCE AT
BEGINNING OF TO COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS(A) PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended January 29, 2000 $538 $60 $- $(68) $530
Year ended January 30, 1999 716 212 - (390) 538
Year ended January 31, 1998 656 284 - (224) 716
Allowance for sales returns:
Year ended January 29, 2000 $586 $397 - $(506) $477
Year ended January 30, 1999 480 506 - (400) 586
Year ended January 31, 1998 748 - (268) 480
-
</TABLE>
(A) Allowances, returns and uncollectible accounts charged
against the reserve, (net of collections on previously
written-off accounts).
S-2
<PAGE> 1
Exhibit No. 10.40
-----------------
CONSIGNMENT AGREEMENT
CONSIGNMENT AGREEMENT ("AGREEMENT") made as of November 29, 1999, by
and between MITSUI & CO. (U.S.A.), INC., with its principal office at 200 Park
Avenue, New York, New York 10166 ("CONSIGNOR"), and MICHAEL ANTHONY JEWELERS,
INC., a Delaware corporation with its principal office at 115 South MacQuesten
Parkway, Mount Vernon, New York 10550 ("CONSIGNEE").
Consignee has requested Consignor to deliver Precious Metal (as defined herein)
on consignment for sale to Consignee. To effectuate this arrangement, Consignor
and Consignee agree that the Consignment Agreement governing this arrangement is
stated as follows:
I . DEFINITIONS.
For the purposes of this Agreement:
"ABN" shall mean ABN AMRO Bank, N.V., New York Branch and any legal
successor in interest thereto.
"BASE RATE" shall mean the higher of (i) the prime commercial lending
rate announced from time to time by The Chase Manhattan Bank, or (ii) the rate
quoted by The Chase Manhattan Bank at approximately 11:00 am, New York City
time, to dealers in the New York Federal Funds Market for the overnight offering
of dollars by The Chase Manhattan Bank for deposit, plus one-half of one percent
(0.5001).
"CONSIGNEE'S COUNSEL" shall mean Rita Martin-Crowley, Esq., General
Counsel of the Consignee.
"CONSIGNED PRECIOUS METAL" shall mean Precious Metal which Consignor
has consigned to Consignee pursuant to the terms of this Agreement for which
payment has not been received or which has not been Redelivered to Consignor.
"CONSIGNMENT FEES" shall mean the outstanding total of fees agreed to
(based on specified quantities and time periods) by Duly Authorized officers of
both parties at the time of each Delivery of consigned Precious Metal.
"CONSIGNMENT LIMIT" shall mean the lesser of (a) 25,000 troy ounces of
fine gold, or (b) Consigned Precious Metal with d Fair Market Value (or unpaid
Purchase Price in the case of Consigned Precious Metal for which the Purchase
Price has been agreed but payment has not been received by Consignor) equal to
$8,750,000.
"CS" shall mean Credit Suisse, New York Branch, and any legal successor
in interest thereto.
"CURRENT LIABILITIES" shall mean, at any date as of which the amount
thereof shall be determined, all amounts that should, in accordance with
generally accepted accounting
<PAGE> 2
principles, be included as current liabilities on the balance sheet of Consignee
as at such date, plus, to the extent not already included therein all
Indebtedness that is payable upon demand or within one (1) year from the date of
determination thereof unless such Indebtedness is renewable or extendible at the
option of Consignee to a date more than one (1) year from the date of
determination.
"DELIVER" or "DELIVERY" shall mean either actual shipment, creating the
right in Consignee to demand actual shipment through a writing, instrument or a
statement of account, or consignor's crediting Precious Metal to the account of
Consignee with one or more third parties when no physical movement thereof is
contemplated by the parties.
"DULY AUTHORIZED OFFICER" shall mean, with respect to the Consignee,
the President of Consignee, or other officer or employee who is authorized by
the Board of Directors or an executive committee of such Board of Directors and
with respect to the Consignor, any vice president or other officer or employee
who is authorized to act in such capacity.
"ENVIRONMENTAL REQUIREMENT(S)" shall mean any present or future law,
statute, ordinance, rule, regulation, order' code, license, permit, decree,
judgment, directive or the equivalent of or by any Governmental Authority and
relating to or addressing the protection of human health or the environment
"EQUITY PRECIOUS METAL" shall Precious Metal (a) owned outright by the
Consignee subject only to security interests permitted hereunder, and (b) not
delivered to the Consignee pursuant to a consignment, "lease", "loan",
"conditional sale" or other similar arrangement.
"EVENT OF DEFAULT" shall mean an Event of Default under Section 13 of
this Agreement.
"FAIR MARKET VALUE" on any day shall mean the Second London Gold Fixing
for that day. If no such price is available for a particular day, the Fair
Market Value for such day shall be the price for the immediately preceding day
for which such price is available.
"FINANCIAL STATEMENTS" shall mean the balance sheet, income statement,
statement of cash flows and stockholder's equity statement of Consignee for the
year or other period then ended, together with supporting schedules, certified
(without qualification) by Deloitte & Touche or other independent public
accountants approved by Consignor and prepared in accordance with generally
accepted accounting principles consistently applied.
"FPM" shall mean Fleet Precious Metals, successor in interest thereto.
Inc. and any legal successor in interest thereto.
"GOVERNMENTAL AUTHORITY" shall mean the United States government, any
state or other political subdivision thereof, any agency, court or body of the
United States government, any state or other political subdivision thereof, or
any quasi-governmental agency or authority exercising executive, legislative,
judicial, regulatory or administrative functions.
<PAGE> 3
"GUARANTEES" shall mean, as applied to Consignee, all guarantees,
endorsements or other contingent or surety obligations with respect to
obligations of others whether or not reflected on the balance sheet of
Consignee, including any obligation to furnish funds, directly or indirectly
(whether by virtue of Partnership arrangements, by agreement to keep-well or
otherwise), through the purchase of goods, supplies or services, or by way of
stock purchase, capital contribution, advance or loan, or to enter into a
contract for any of the foregoing, for the purpose of payment of obligations of
any other person or entity.
"HAZARDOUS MATERIAL" shall mean any material or substance (i) which,
whether by its nature or use, is now or hereafter defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any Environmental
Requirement, (ii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous to human health or
the environment, (iii) which is or contains petroleum or any fraction thereof,
including crude oil, heating oil, gasoline or diesel fuel, or (iv) the presence
of which requires investigation or remediation under any Environmental
Requirement.
"INDEBTEDNESS" shall mean, as applied to Consignee, (i) all obligations
for borrowed money or other extensions of credit whether or not secured or
unsecured, absolute or contingent, including, without limitation, unmatured
reimbursement obligations with respect to letters of credit, or guarantees
issued for the account of or on behalf of Consignee and all obligations
representing the deferred purchase price of property, other than accounts
payable arising in the ordinary course of business, (ii) all obligations
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
obligations secured by any mortgage, pledge, security interest or other lien on
property owned or acquired by Consignee whether or not the obligations secured
thereby shall have been assumed, including but not limited to obligations to the
Second Insurance Companies and the Third Insurance Companies, (iv) that portion
of all obligations arising under capital leases that is required to be
capitalized on the balance sheet of Consignee, (y) all Guarantees, (vi) all
obligations with respect to Precious Metal leased or consigned to Consignee,
including but not limited to obligations pursuant to this Agreement, and (vii)
all obligations that are immediately due and payable out of the proceeds of or
production from property now or hereafter owned or acquired by Consignee.
"NOTICE" or "NOTICES" shall mean all requests, demands and other
communications, in writing (including telegraphic and telecopy communications),
sent by registered or certified mail, return receipt requested, overnight
delivery service, telegraph, facsimile transmission or hand-delivery to the
other party at that party's Principal Office.
"PRECIOUS METAL" shall mean gold having a fineness of not less than
.9995 without regard to whether such gold is alloyed or unalloyed, in billion
form, or is contained in or processed into other materials which contain
elements other than gold.
"PRINCIPAL OFFICE" shall mean:
For Consignor:
<PAGE> 4
MITSUI & CO. (U.S.A.), INC.,
200 Park Avenue
New York, New York 10166
Attention: Metals Division
Number: 212-878-4811
For Consignee:
Michael Anthony Jewelers, Inc.
115 South MacQuesten Parkway
Mount Vernon, New York 10550
Attention: Michael A. Paolercio, Senior
Vice President and Treasurer
Fax Number: 914-699-2335
"PURCHASE PRICE" shall mean a price to which both parties' Duly
Authorized Officers agree and shall be stated in dollars per troy ounce of
Precious Metal content.
"REDELIVER" or "REDELIVERY" shall mean that Consignee deliver to
Consignor's Principal office or as otherwise directed by Consignor, at
Consignee's sole risk and expense, Precious metal of a fineness equal to the
fineness specified for that Precious Metal and of a type and quality and in a
form acceptable to Consignor.
"SECOND INSURANCE COMPANIES" shall mean the companies defined as such
in Subsection 13(m).
"SECURITY AGREEMENT" shall mean that certain Amended and Restated
Security Agreement dated as of August 20, 1993, as amended by amendments thereto
dated as of May 16, 1994, September 1, 1994, January 15, 1995, October 20, 1995
and October 23, 1998 among Consignee, as debtor, FPM as agent and secured party
and ABN, CS and the Consignor, as secured parties.
"TANGIBLE NET WORTH" shall mean, at any date as of which the amount
thereof shall be determined, the total assets of Consignee minus W the sum of
any amounts attributable to (a) goodwill, (b) intangible items such as
unamortized debt discount and expense, patents, trade and service marks and
names, customer lists, copyrights and research and development expenses except
prepaid expenses, (c) all reserves not already deducted from assets, (d) the
value of any minority interests in any subsidiaries and (e) amounts and loans
due from affiliates and/or officers of Consignee, and (ii) Total Liabilities.
"THIRD INSURANCE COMPANIES" shall mean the companies defined as such in
Subsection 13(m).
"TOTAL LIABILITIES" shall mean, at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
generally accepted accounting
<PAGE> 5
principles consistently applied, be classified as liabilities on the balance
sheet of Consignee, including in any event A Indebtedness as shown on the
balance sheet of Consignee.
"WORKING CAPITAL" shall mean the excess of Consignee's current assets,
computed in accordance with generally accepted accounting principles
consistently applied, over the sum of Current Liabilities plus long-term
Indebtedness secured by current assets (including, but not limited to,
obligations of Consignee to the Second Insurance Companies and the Third
Insurance Companies).
2. AMOUNT OF CONSIGNMENT.
Provided (i) no Notice of election to terminate this Agreement (as
provided in Section 14 hereof) has been given by either party and (ii) no Event
of Default nor any event which with notice or lapse of time, or both, would
constitute an Event of Default has occurred hereunder, Consignor will Deliver
from time to time to Consignee upon its request Precious Metal under the terms
and conditions of this Agreement. In no event will Consignor be obligated to
deliver Precious Metal if the aggregate amount of troy ounces or Fair Market
Value of Precious Metal requested when added to Consigned Precious Metal exceeds
Consignee's Consignment Limit.
Consignee acknowledges and confirms that, notwithstanding any other
provision of this Agreement, upon its receipt of thirty (30) days' prior written
Notice from the Consignor to the Consignee, which may be delivered at any time
in the Consignor's sole discretion, then:
(a) Consignor shall have no further obligation to deliver Precious Metal to
Consignee; (b) any request made by Consignee thereafter for a Delivery of
Precious Metal shall be reviewed by Consignor on a case-by-case basis; (c) the
decision to make any subsequent Delivery shall be made by the Consignor
thereafter in its sole and absolute discretion and irrespective of whether
Consignee is in compliance with the requirements of this Agreement; and (d)
thereafter Consignor shall have no commitment to Consignee to make any Delivery
of Precious Metal to Consignee. The foregoing Notice requirement shall be a
right of the Consignor in addition to, and shall not be deemed to otherwise
modify or limit, the rights of the Consignor to terminate this Agreement
pursuant to the terms of Section 14 hereof.
If for any reason the number of troy ounces or Fair Market value (or
unpaid Purchase Price in the case of Consigned Precious Metal for which the
Purchase Price has been agreed but payment has not been received by Consignor)
of all Consigned Precious Metal at any time exceeds Consignee's Consignment
Limit, Consignee shall immediately Redeliver to Consignor, or purchase and pay
for, Precious Metal of a quantity, or with a Fair Market Value, sufficient to
eliminate such excess.
Consignor shall provide Consignee with a monthly statement of the
quantity of Consigned Precious Metal (in whatever form) held by Consignee. If
Consignee does not agree with the information reported in the statement,
Consignee should give Notice of such disagreement to Consignor within fifteen
(15) days of the date of receipt of such statement. If Consignee fails to give
Notice to Consignor within the fifteen (15) day period, Consignee shall be
deemed to have affirmed the accuracy of the information reported in the
statement and to have waived any claim Consignee may have by reason of a dispute
as to such statement. on or about
<PAGE> 6
March 30 of each year, Consignee shall provide Consignor with a written
confirmation, signed by a Duly Authorized officer of Consignee, of the quantity
of Consigned Precious Metal as of the date of such confirmation. Upon and after
the occurrence of an Event of Default, Consignee shall provide to Consignor on a
daily basis written confirmation, in form acceptable to Consignor, of the
quantity and location of all Consigned Precious Metal.
Consignee shall give Consignor at least two (2) full New York business
days' Notice of its requirements for Precious Metal. Consignor shall not be
liable to Consignee if Consignor fails to Deliver the Precious Metal by reason
of an Act of God or other catastrophe, force majeure, lack of supply, delay in
transportation, war or other hostilities, strike, lockout, epidemic, acts of
government or other public authority, requirements of any regulatory board,
agency or authority, unavoidable casualties or any other causes beyond
Consignor's control. CONSIGNOR MAKES NO WARRANTY OF MERCHANTABILITY IN RESPECT
TO PRECIOUS METAL CONSIGNED OR SOLD UNDER THIS AGREEMENT NOR OF FITNESS FOR ANY
PARTICULAR PURPOSE NOR ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, except that
Consignor does warrant to Consignee that all Precious Metal will be of the
fineness stated in Section I for that Precious Metal.
3. DELIVERY OF PRECIOUS METAL.
All Deliveries of Precious Metal by Consignor will be made to Consignee
by Consignor crediting an account of Consignee at a third party supplier of
Precious Metal or by delivery at Consignee's Principal Office or other such
location approved by Consignor, such Deliveries to be on terms and conditions
satisfactory to Consignor. At the time of Delivery or crediting, Consignor shall
provide Consignee with particulars of the total quantity of the Precious Metal
being Delivered or credited to Consignee. A Duly Authorized officer of Consignee
receiving any Delivery shall give a receipt to Consignor for the same in a form
satisfactory to Consignor. All shipping expenses (including insurance) shall be
borne by Consignee, and any such expenses paid or incurred by Consignor shall be
reimbursed by Consignee immediately in the same manner as payments under Section
5 hereof.
4. TITLE.
Title to Consigned Precious Metal shall remain with Consignor and shall
not vest in Consignee until Consignor has received payment for the Consigned
Precious Metal as required by Section 5 of this Agreement. Upon each Precious
Metal Delivery, Consignee shall bear the entire risk of loss, theft, damage or
destruction of the Consigned Precious Metal from any cause whatsoever, whether
or not insured, irrespective of where the Consigned Precious Metal is located,
and including any loss resulting from the bankruptcy or similar circumstances of
any entity holding Consigned Precious Metal for any purpose, including
fabrication or reconsignment, and Consignee agrees to hold the Consigned
Precious Metal in trust for Consignor and to indemnify and hold harmless
Consignor against any and all liabilities, damages, losses, costs, expenses,
suits, claims, demands or judgments of any nature (including, without
limitation, attorneys' fees and expenses) arising from or connected with any
loss, theft, damage or destruction of the Consigned Precious Metal. Consignee
shall execute such financing
<PAGE> 7
statements, security agreements and other documents as Consignor shall request
to protect Consignor's interest under the Uniform Commercial Code.
5. CONFIRMATION AND PAYMENTS.
During the term of this Agreement, Consignee shall have the right to
purchase any Consigned Precious Metal. To exercise the right, a Duly Authorized
officer of Consignee shall give Notice to a Duly Authorized Officer of Consignor
that Consignee wishes to purchase specified quantities of Consigned Precious
Metal. Promptly after Consignee requests and Consignor agrees to, through their
respective Duly Authorized Officers, delivery and payment terms for a specified
quantity of Consigned Precious Metal, Consignor shall, send Consignee a telecopy
(with signature) confirmation (in the form of Exhibit A attached hereto) which
shall set forth (among other things) the following items: (i) the type and
fineness of Precious Metal, (ii) the quantity of such Precious Metal and
applicable Consignment Fees, (iii) the date on which or the period within which
Delivery and settlement are to be made, and (iv) the manner of delivery. Absent
manifest error, the provisions of each such confirmation shall be binding and
shall supersede any terms hereof not consistent with such provisions. Consignee
agrees to examine each such confirmation and, in the event of error therein, to
notify Consignor of such error by telecopy (with signature) within one (1) New
York business day after Consignee's receipt thereof (Consignee being
conclusively deemed to have waived any such error in the absence of such
notification). Unless otherwise agreed not later than two (2) New York business
days prior to an agreed settlement date, Consignee shall be obligated to
Redeliver or (if a Purchase Price has been agreed upon) purchase and pay for the
specified quantity of Consigned Precious Metal plus all Consignment Fees related
thereto.
Payment of any Purchase Price and all other amounts due by Consignee to
Consignor under this Agreement (including any applicable sales or use tax) shall
be made in the following manner: (i) by bank wire to CitiBank, ABA Number
02100008 for further credit to MITSUI & CO. (U.S.A.), INC., New York, account
number 30831745,(ii) by Consignee authorizing Consignor to charge its account
with Consignor, or (iii) by other means which Consignor approves in writing. If
Consignor in its discretion grants payment terms different from the foregoing
for particular purchases, then the Purchase Price shall not be deemed to be paid
in full for the purposes of this Agreement until all payments under such terms
have been made.
Any amount not paid when due under this Agreement shall bear interest
at four percent (4-%) in excess of the Base Rate until paid in full (whether or
not this Agreement has been terminated), such rate to be a floating rate to be
redetermined daily in accordance with changes in the Base Rate. Such interest
shall be paid on demand in the manner provided above.
6 . COMMINGLING; REDELIVERY OF PRECIOUS METAL.
Consignee may use the Consigned Precious Metal only in the ordinary
course of its business as now conducted. No Consigned Precious Metal shall be
removed from Consignee's Principal office (except as provided in this Section or
Section 12(i) hereof or as may be agreed upon by the parties hereto) or sold to
any third party prior to the fixing of the Purchase Price for such Consigned
Precious Metal. Notwithstanding a contrary provision in this Section, Consignee
<PAGE> 8
shall have the right, on terms and conditions approved in writing by Consignor,
to remove scrap from its Principal Office for refining in the ordinary course of
its business, it being agreed that all such scrap Consigned-Precious Metal shall
be and remain the property of Consignor until purchased and paid for pursuant to
Section 5 hereof.
At any time prior to termination of this Agreement, any or all of the
amount of the Consigned Precious Metal (excluding any Consigned Precious Metal
as to which a Purchase Price has been agreed to under Section 5) may be
Redelivered by Consignee to-Consignor and shall be Redelivered by Consignee to
Consignor upon demand of Consignor, subject to and pursuant to the provisions of
Section 14 of this Agreement, regardless of whether Consignee is in compliance
with the terms of this Agreement.
7 . INSURANCE.
Consignee, at its sole cost and expense shall procure and maintain
property insurance to cover all locations where Consigned Precious Metal will be
located on an all risk form, including flood and earthquake and such other
insurance (including but not limited to, fidelity insurance for all employees,
including officers) with respect to the Consigned Precious Metal as may from
time to time be reasonably required by Consignor. All insurance provided for in
this Section shall be effected under valid and, enforceable policies, in such
forms and in such amounts as may from time to time be reasonably required by
Consignor, issued by financially sound and responsible insurance companies which
are admitted in the jurisdiction in which the Consigned Precious Metal is
located, or are approved under the applicable states' surplus lines insurance
laws. At least ten (10) days prior, to Consignor's first Delivery of Precious
Metal to Consignee and thereafter not less than fifteen (15) days prior to the
expiration dates of insurance policies theretofore furnished pursuant to this
Agreement, Consignee shall deliver to Consignor copies of all insurance policies
(together with Accord Form 27 (2/84) or other similar forms satisfactory to
Consignor) evidencing the insurance coverage required by Consignor. All policies
of insurance shall provide for thirty (30) days notification in advance of any
cancellation, non renewal or material change in policy conditions, including
cancellation for non-payment of premium.
All policies of insurance provided for or contemplated by this
Agreement shall name Consignor as a loss payee or an additional insured, as its
interests may appear.
All policies of insurance provided for in this Agreement shall, the
extent obtainable, contain clauses or endorsements to the effect that:
(a) No act or negligence of consignee, or anyone acting for Consignee,
which might otherwise result in a forfeiture of such insurance or any part
thereof shall in any way affect the validity or enforceability of such insurance
insofar as Consignor is concerned; and
(b) Consignor shall not be liable for any premiums or subject to any
assessments on the policies.
Losses under each policy of insurance provided for or contemplated by
this Section shall be adjusted with the insurers and/or underwriters and paid
directly to Consignor and Consignee as their interests may appear. Written
Notice of all losses shall promptly be given by Consignee
<PAGE> 9
to the Consignor. Consignee shall pay all costs and expenses of collecting or
recovering any insurance proceeds under such policies, including, but not
limited to, any and all fees of attorneys, appraisers and adjusters.
In the event of any loss described above, except for a loss during
transit of Precious Metal sent by Consignor to Consignee's Principal Office by
registered United States mail, Consignor shall have the right to demand that
Consignee, and upon such demand Consignee shall, compensate Consignor, upon
terms acceptable to Consignor, for the full amount of such loss, whether or not
recovery has been made under any applicable policy. In the event Consignor
requires such compensation, Consignee shall be entitled to manage the relevant
claims and to retain any recovery under the applicable policy.
8 . TAXES, ETC.; CERTAIN RIGHTS OF CONSIGNOR.
Consignee will promptly pay any and all taxes, assessments and
governmental charges upon the Consigned Precious Metal prior to the date of any
penalties and prior to the date any liens would attach thereto. Consignee will
not use the Consigned Precious Metal in violation of any statute or ordinance.
Consignor may examine and inspect the Consigned Precious Metal at any time,
wherever located, and Consignee agrees to keep all records relating to the
Consigned Precious Metal at its Principal office. Consignee further-agrees to
promptly give Notice to Consignor of the assertion of any lien or other
encumbrance against the Consigned Precious Metal and Consignee's response to
such assertion.
At its option, Consignor may discharge taxes, liens, security interests
or other encumbrances at any time levied or placed on the Consigned Precious
Metal (which are not being contested in good faith), may pay for insurance on
the Consigned Precious Metal and may pay for the maintenance and preservation of
the Consigned Precious Metal. Consignee agrees to reimburse Consignor on demand
for any payment made, or any expense incurred, by Consignor in connection with
the foregoing, together with interest thereon at the Base Rate plus four percent
(4.0%), computed from the date of such payment or expense until paid.
9. REPRESENTATIONS AND WARRANTIES.
The following representations and warranties shall survive the delivery
of this Agreement and the Delivery of Precious Metal by Consignor to Consignee.
Consignee represents and warrants to Consignor that:
(a) Consignee has heretofore furnished to Consignor Consignee's
Financial Statements for the period ending January 31, 1998, together with
interim Financial Statements for the period ending August 1,1998, each of which
fairly present the financial condition of Consignee as of their date, and the
results of its operations for the year or other period then ended in conformity
with generally accepted accounting principles consistently applied. To the best
of Consignee's knowledge and belief, Consignee does not have any contingent
obligations, liabilities for taxes or unusual forward or long-term commitments
except as specifically mentioned in the Financial Statements. Since January 31,
1998, there has been no material adverse change in the business,
<PAGE> 10
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Consignee;
(b) Consignee (i) is duly organized, validly existing and in good
standing under the laws of the state of its incorporation as of the date hereof,
(ii) has full power and authority to own its properties and to carry on business
as now being conducted and is qualified to do business in every jurisdiction
(including the State of New York) where such qualification is necessary except
where the failure to so qualify would not have a material adverse effect on the
business or financial condition of Consignee or the security granted by
Consignor under the Security Agreement or any other security documents, (iii)
has full power to execute, deliver and perform this Agreement, the Security
Agreement and any other documents securing the obligations of Consignee under
this Agreement and (iv) when this Agreement and any other document contemplated
hereby have been duly authorized, executed and delivered by Consignee, such
Agreement and documents will constitute the legal, valid and binding obligations
of Consignee enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
law; whether enforcement is sought in equity or at law;
(c) The execution, delivery and performance by Consignee of the terms
and provisions of this Agreement, the Security Agreement and any other security
documents (i) have been duly authorized by all requisite corporate action, (ii)
will not violate any provision of law, any order of any court or other agency of
government, or the corporate charter or by-laws of Consignee, (iii) will not
violate any indenture, agreement or other instrument to which it is a party, or
by which it is bound, or be in conflict with, result in breach of, or constitute
(with notice or lapse of time or both) a default under such indenture, agreement
or instrument, and (iv) except as this Agreement and any security or other
document contemplated hereby may provide, will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of Consignee pursuant to any such indenture, agreement
or instrument;
(d) There is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
best knowledge of Consignee, threatened against or affecting Consignee, except
as listed on Schedule-A attached hereto;
(e) Consignee is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party where such default, with or
without the passage of time or the giving of notice, would have a material
adverse effect on the business or financial condition of Consignee;
(f) No financing statement or agreement is on file in any public office
pertaining to or affecting any property of Consignee, now owned or hereafter
acquired, except as listed on Schedule 3 attached hereto;
(g) Consignee has obtained all necessary approvals, permits, licenses,
authorizations and other consents required by, is not in material violation of,
and has performed all of its obligations under, all Environmental Requirements;
(h) Except as described on Schedule C attached hereto, Consignee has
not received any notice, citation, summons, directive, order or other
communication, written or oral, from, and
<PAGE> 11
Consignee has no knowledge, after reasonable inquiry, of any notice, citation,
summons, directive, order or other communication by, any Governmental Authority
or any other person concerning the presence, generation, treatment, storage,
transportation, transfer, disposal, release or other handling of any hazardous
Material within on, from, related to, or affecting any real property owned or
occupied by Consignee;
(i) To the best of Consignee's knowledge (after reasonable inquiry) and
except as described in Schedule C attached hereto, no real property owned or
occupied by Consignee has ever been used, either by Consignee, any tenant or any
predecessor in interest, to generate, treat, store, transport, transfer, dispose
of, release or otherwise handle any Hazardous Material, except in compliance
with all Environmental Requirements; and
(j) No Hazardous Material is currently located within, on, under or
about any real property owned or occupied by Consignee in a manner which
violates any Environmental Requirement, or which requires cleanup or corrective
action of any kind under any Environmental Requirement.
10. CONDITIONS OF CONSIGNMENT.
Without limiting the uncommitted nature of Consignor's obligations
under this Agreement, Delivery by Consignor of any Precious Metal under this
Agreement is further subject to the following conditions precedent:
(a) The representations and warranties set forth in Section 9 of this
Agreement shall be true and correct on and as of the date of this
Agreement and the date the Delivery is made.
(b) Consignee shall have executed and delivered to Consignor, upon the
execution of this Agreement, the following:
(i) All required security documents, including but not limited to any
and all UCC-1 financing statements executed by a Duly Authorized Officer of
Consignee as may be I required by Consignor;
(ii) A certificate of the Secretary or Assistant Secretary of Consignee
certifying to the votes of Consignee's Board of Directors authorizing the
execution, delivery and performance of this Agreement and any security documents
or other documents contemplated hereby;
(iii) A certificate of the Secretary or Assistant Secretary of
Consignee certifying the names of the officers of Consignee authorized to sign
this Agreement, any security documents and any other documents or certificates
(or any amendments thereto) to be delivered pursuant to this Agreement (or any
amendments thereto) by Consignee or any of its officers, together with the true
signatures of such officers, on which certificates Consignor may conclusively
rely until it shall receive a further certificate canceling or amending the
prior certificate and submitting the signatures of the officers named in such
further certificate;
(iv) A certificate of the Secretary of State of the state of
incorporation of Consignee, dated reasonably near the date of this Agreement,
stating that Consignee is duly incorporated and in good standing in such state
and has filed all annual reports and has paid all franchise taxes required to be
filed or paid to the date of such certificate;
(v) A favorable written opinion of Consignee's Counsel, dated the date
of this Agreement, satisfactory to Consignor and its counsel in scope and
substance, with respect to the matters set forth in subsections 9 (b), (c), (d)
and (e); and further to the effect that this Agreement and all required security
documents have been duly authorized, executed and delivered by Consignee
<PAGE> 12
and constitute the legal, valid, binding obligations of Consignee enforceable in
accordance with their terms;
(vi) A certificate signed by Consignee's chief executive or chief
financial officer to the effect stated in (c) below; and
(vii) Such other supporting documents and legal opinions as Consignor
may reasonably request.
(c) No Event of Default nor any event which with notice or the lapse of
time, or both, would constitute an Event of Default shall have occurred.
11. AFFIRMATIVE COVENANTS.
Consignee covenants and agrees that, from the date of this Agreement
and until payment and performance in full by Consignee of its indebtedness,
obligations and liabilities to Consignor under this Agreement or any other
agreement or instrument, whether now existing or arising hereafter, Consignee
shall:
(a) Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its corporate existence, rights, licenses, permits
and franchises and comply with all laws and regulations applicable to it; at all
times maintain, preserve and protect all franchises and trade names and preserve
all the remainder of its property used or useful in the conduct of its business
and keep the same in good repair, working order and condition, and from time to
time, make, or cause to be made, all needful and proper repairs, renewals,
replacements, betterment's and improvements thereto, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times;
(b) Comply with all applicable laws and regulations, whether now in
effect or hereafter enacted or promulgated by any Governmental Authority having
jurisdiction in the premises;
(c) Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
respective income and profits or upon any of its property, real, personal or
mixed, or upon any part thereof, before the same shall become in default, as
well as all lawful claims for labor, materials and supplies or otherwise, which,
if unpaid, might become a lien or charge upon such properties or any part
thereof; provided that Consignee shall not be required to pay and discharge or
cause to be paid and discharged any such tax, assessment, charge, levy or claim
so long as the validity thereof shall be contested in good faith by appropriate
proceedings and it shall have set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim so contested, and
provided, further, that payment with respect to any such tax, assessment,
charge, levy or claim shall be made before any of its property shall be seized
and sold in satisfaction thereof;
(d) Give prompt written notice to Consignor of any proceedings
instituted against it by or in any Federal or state court or before any
commission or other regulatory body, Federal, state or local, which, if
adversely determined, would have a materially adverse effect upon its business,
operations, properties, assets, or condition, financial or otherwise or could
result in the forfeiture of assets of Consignee;
(e)Furnish to Consignor:
(i) within ninety (90) days after the end of each fiscal year,
Financial Statements showing its financial condition at the close of such fiscal
such year and containing a statement to
<PAGE> 13
the have examined the provisions of this Agreement and that no Event of Default
nor any event which with notice or lapse of time, or both, would constitute an
Event of Default has occurred;
(ii) within forty-five (45) days after the end of the first,
second and third quarter in each such fiscal year, Financial Statements for such
period and the fiscal year to that date, subject to changes resulting from
routine year-end audit adjustments, in form satisfactory to Consignor.
Notwithstanding provisions in the definition of "Financial Statements" requiring
certification by independent public accountants, Financial Statements for this
subsection (ii) may be prepared and certified by the chief financial officer of
Consignee to the best of his or her information and belief;
(iii) within thirty-five (35) days after the end of each month
in such fiscal year, Financial Statements for such monthly period and the fiscal
year to that date, subject to changes resulting from year-end adjustments,
together with a statement of the aging of total accounts receivable as at the
end of such period, both in form satisfactory to Consignor, prepared and
certified by the Chief Financial Officer of Consignee to the best of his or her
information and belief,
(iv) Simultaneously with the furnishing of each of the
Financial Statements to be delivered pursuant to subsections(i),(ii) and (iii)
above, a narrative statement of the President or chief financial officer of
Consignee which shall comment upon and explain any material changes, both
positive and negative, reflected in such statements from prior periods, and
which shall also contain a declaration to the effect that such officer has
reviewed the terms of this Agreement and has no knowledge of any event or
condition which constitutes an Event of Default or which with notice or lapse of
time, or both, would constitute an Event of Default or, if he or she has such
knowledge, specifying the nature and period of existence of such event or
condition;
(v) within twenty (20) days after the end of each month, a
consignment base certificate of Consignee as of the last New York business day
of the preceding month(such certificate to be in the form of Exhibit B attached
hereto and certified by Consignee's Chief Financial officer or Treasurer); and
(vi)within forty-five (45) days after the end of each quarter
in each fiscal yearly a certificate of Consignee as to the status of Consignee's
compliance with its agreements with Consignor (such certificate to be in the
form of Exhibit C attached hereto and certified by Consignee's Chief Financial
Officer or Treasurer);
(f) Promptly, from time to time, furnish such other information
regarding its operations, assets, business affairs and financial condition as
Consignor may reasonably request;
(g) Permit agents or representatives of Consignor, at Consignee's
expense (including without limitation, the fees and expenses of such agents or
representatives), (i) to inspect, at any time during normal business hours and
without notice, the Consigned Precious Metal and Consignee's books and records
and to make abstracts or reproductions of such books and records, (ii) to
conduct field examinations of the Consigned Precious Metal in the possession and
control of Consignee (which examinations shall include the observance thereof by
Deloitte & Touche as to one of such examinations per year including an annual
audit review of Consignee's control system), such examinations to be done at
reasonable times and at any time in the case of an emergency (provided, however,
that Consignee only shall be required to pay for two (2) field examinations per
year unless an Event of Default has occurred and is continuing in which case
Consignor may conduct such field examinations as frequently as it may desire and
all such field examinations shall be at Consignee's expense), (iii) to observe
the taking of any physical
<PAGE> 14
inventory of Consigned Precious Metal in Consignee's possession (Consignee shall
give Consignor not less than ten (10) days, prior Notice of the taking of each
such inventory), and (iv) at reasonable times and at any time in case of
emergency or at any time after the occurrence and continuing of an Event of
Default, to take a physical inventory of the Consigned Precious Metal in
Consignee's possession;
(h) Promptly advise Consignor of any material adverse change in its
condition, financial or otherwise, business, prospects, operations, results of
operations, assets or liabilities and of any condition or event which
constitutes, or with notice of lapse of time or both would constitute, an Event
of Default;
(i) Promptly join with Consignor from time to time in executing one or
more financing statements pursuant to the Uniform Commercial Code in form
satisfactory to Consignor, and execute such other instruments in form suitable
for recording or filing as Consignor may reasonably require and Consignee does
hereby (a) make, constitute and appoint Consignor or its agent its true and
lawful attorney-in-fact, for, in its name and on its behalf to execute and
deliver for filing any financing statement, including any continuation
statement, which Consignor or its agent deems necessary to be executed,
delivered or filed by Consignor in connection with this Agreement, and (b)
ratify and confirm all that said attorney- in- fact shall do or cause to be done
by virtue of this Section;
(j) Defend the Consigned Precious Metal against the claims and demands
of any persons (other than Consignor and those persons listed as secured parties
on Schedule 3 attached hereto) at any time claiming the same or any interest
therein;
(k) Consent, and Consignee does hereby consent to the delivery by
Consignor to any lender, lessor or consignor to Consignee of all information and
reports prepared or received by Consignor with respect to Consignee;
(1) Expect as to past violations being cured by Consignee as described
on Schedule C attached hereto, comply, and cause all tenants or other occupants
of any real property which Consignee owns or occupies to comply, in all respects
with all Environmental Requirements, and not generate, treat, store, handle,
process, transfer, transport, dispose of, release or otherwise use, and not
permit any tenant or other occupant of such property to generate, treat, store,
handle, process, transfer, transport, dispose of, release or otherwise use,
Hazardous Materials within, on, under or about such property, in a manner that
could lead to the imposition on Consignee, Consignor or any such real property
of any liability or lien of any nature whatsoever under any Environmental
Requirement;
(m) Except as to matters described on Schedule C attached hereto,
notify consignor promptly in the event of any spill or other release of any
Hazardous Material-within, on,- under or about any real property owned or
occupied by Consignee which is required to be reported to a Governmental
Authority under any Environmental Requirement, promptly forward to Consignor
copies of any notices received by Consignee relating to alleged violation of any
Environmental Requirement and (as to all matters including, without limitation,
those disclosed on Schedule C attached hereto) promptly pay when due any fine or
assessment against Consignee, Consignor or any such real property relating to
any Environmental Requirement;
(n) Upon receipt of Notice by Consignee from a third party to whom
Consignee has reconsigned consigned Precious Metal that such reconsigned
consigned Precious Metal has been sold, reconsigned or otherwise transferred or
disposed of by such third party, and within one (1) New York business day after
receipt of such notice, purchase such Consigned Precious Metal from Consignor
pursuant to terms of this Agreement;
<PAGE> 15
(o) Own Equity Precious Metal in an amount at least equal to the sum of
(i) five percent (5%) of Consignee's entire inventory of Precious
Metal-consigned or leased to Consignee (including, without limitation, Consigned
Precious Metal) plus (ii) twenty percent (20%) of the amount of Precious Metal
physically located other than at Consignee's Principal office;
(p) Maintain at all times a Tangible Net Worth in an amount at least
equal to $40,000,000.
(q) Maintain at all times Working Capital in an amount at least equal
to $22,000,000.
(r) Maintain at all times a ratio of Total Liabilities (including,
without limitation, all obligations under this Agreement, any other precious
metal facility or similar agreements and any loan agreements) to Tangible Net
Worth of not more than 3.00:1.00, determined in accordance with generally
accepted accounting principles consistently applied;
(s) Maintain at all times a ratio of Current Liabilities plus long-term
Indebtedness secured by current assets (including, but not limited to,
obligations of Consignee to the Second Insurance Companies and the Third
Insurance Companies) to working Capital of not more than 6.30:1.00;
(t) Maintain at all times a ratio of earnings before interest, taxes,
depreciation and amortization (EBITDA) to current maturities of long-term debt
plus interest expense plus consignment fees plus non-financed capital
expenditures' for any four fiscal quarter period of not less than 1:00:1.00
(excluding from all applicable calculations the special year-end charge of
$4,500,000 taken at the end of fiscal 1998), determined in accordance with
generally accepted accounting principles consistently applied; and
(u) Maintain key-man life insurance with insurance companies
satisfactory to Consignor on the lives of Michael Paolercio and Anthony
Paolercio, Jr. in the amount of not less than $5,000,000 provided, however, that
in the event that either of such individuals shall terminate his employment with
Consignee during his life, the insurance on the terminated individual's life may
be cancelled.
12. NEGATIVE COVENANTS.
Consignee covenants and agrees that, until Consignee makes payment and
performs in full its indebtedness, obligations, and liabilities under this
Agreement or under any other agreement or instrument, whether now existing or
arising hereafter, unless Consignor consents in writing, Consignee will not,
directly or indirectly:
(a) Create, incur, assume or suffer to exist any mortgage, pledge,
lien, attachment, charge or other encumbrance of any nature whatsoever on any of
the Consigned Precious Metal or any products or property now or hereafter owned
by Consignee or in which Consignee' presently has or hereafter acquires an
interest which does or will include the Consigned Precious Metal other than (i)
security interests in favor of Consignor or as listed on Schedule 3 attached
hereto and (ii) mortgages on Consignee's Mount Vernon, New York real property;
(b) Sell, lease, transfer or otherwise dispose of its properties assets, rights,
licenses and franchises to any person, except in the ordinary course of its
business, or turn over the management of, or enter into a management contract
with respect to, such properties, assets, rights, licenses and franchises;
(c) Dissolve, liquidate, consolidate with or merge with, or acquire all
or substantially all of the assets or properties of, any other corporation or
entity, or make any substantial change in its executive management;
(d) Sell, assign, encumber pledge, discount or otherwise dispose of in
any way any accounts receivable, promissory notes or trade acceptances held by
Consignee, with or without
<PAGE> 16
recourse, except for (i) security interest as listed on Schedule B attached
hereto, (ii) collection (including endorsements) in the ordinary course of
business, and (iii) liens in favor of Consignor;
(e) Grant any security interest or ownership rights to any customer of
Consignee with respect to any of the Consigned Precious Metal while at
Consignee's premises whether or not such customers have prepaid orders for the
Consigned Precious Metal or any products or property which does or will include
the Consigned Precious Metal;
(f) Guarantee, endorse or otherwise in any way become or be responsible
for obligations of any other person, except endorsements of negotiable
instruments for collection in the ordinary course of business;
(g) Obtain Precious Metal on consignment or loan from any source other
than Consignor or those persons listed as secured parties on Schedule 3 attached
hereto;
(h) Permit the aggregate amount of Consigned Precious Metal plus
Precious Metal consigned to Consignee by other consignors to exceed 275,000 troy
ounces of fine gold; or
(i) Permit the amount of Consignee's Precious Metal Inventory
physically located other than at Consignee's Principal office to exceed at any
time (i) in the aggregate, Consignee's Equity Precious Metal plus ten percent
(10%) of Precious Metal consigned from the Consignor, FPM, ABN and CS to the
Consignee, (ii) 7,500 troy ounces at, or in transit to or from, any one
location, or (iii) 4,000 troy ounces outside the United States.
13. EVENTS OF DEFAULT, RIGHTS AND REMEDIES OF CONSIGNOR UPON DEFAULT.
In each case of happening of any of the following events (each of which
is herein sometimes called an "Event of Default"):
(a) Any representation or warranty made herein, or in any report,
certificate, financial statement or other instrument furnished in connection
with this Agreement, or the Delivery of Precious Metal by Consignor hereunder,
shall prove to be false or misleading in any material respect;
(b) Consignee fails to make punctual payment or perform any obligation
required by the provisions of Section 2, 5, 6 or 14 of this Agreement;
(c) Consignee fails to pay any amount due hereunder or any other
indebtedness, obligation or liability of Consignee to Consignor when the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment or by acceleration or otherwise;
(d) Consignee fails to observe or perform any covenant, condition or
agreement required by the terms of Sections 7, 8, 11(g), 1l(n), 11(o), 11(p),
11(q), 11(r), 11(s), 11(t), 12(a), 12(c), 12(e), 12(f), 12(g), 12(h) or 12(i) of
this Agreement;
(e) Consignee fails to observe or perform any other covenant, condition
or agreement required by the terms of this Agreement and such failure shall
continue unremedied for ten (10) days;
(f) Default with respect to any evidence of indebtedness, obligations
or liabilities of Consignee (including, but not limited to, consignment
agreements and any other agreements between Consignee and any parent, affiliate
or subsidiary of Consignor), if the effect of such default is to accelerate the
maturity of such indebtedness, obligation or liability or to permit the holder
thereof (or any material portion thereof) to cause such indebtedness to become
due prior to the stated maturity thereof, or if any indebtedness of Consignee is
not paid, when due and payable, whether at the due date thereof or by
acceleration or otherwise;
<PAGE> 17
(g) Consignee shall (i) apply for, consent to, or suffer the
appointment of a custodian, receiver, trustee or liquidator of it or any of its
property, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) file, or have
filed against it, a petition for relief under Title 11 of the United States
Code, or (v) file, or have filed against it, a petition in bankruptcy, or a
petition or an answer seeking reorganization or an arrangement with creditors or
to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute in any jurisdiction within or
outside of the United States, or an answer admitting the material allegations of
a petition filed against it in any proceeding under any such law, or corporate
action shall be taken for the purpose of effecting any of the foregoing, and
which, in the case of any involuntary proceeding under (i), (iii), (iv) or (v)
is not dismissed or discharged within sixty (60) days of its commencement.
(h) An order, judgment or decree shall be entered, without the
application, approval or consent of Consignee by any court of competent
jurisdiction, approving a petition seeking reorganization of Consignee or
appointing a custodian, receiver, trustee or liquidator of Consignee or of all
or a substantial part of the assets of Consignee;
(i) occurrence of any loss, theft, or destruction of or damage to the
Consigned Precious Metal or any products or property which includes Consigned
Precious Metal;
(j) Discontinuance of the operation of Consignee's business for any
reason;
(k) For any reason the present chief financial officer shall cease to
be or function as the chief financial officer of Consignee and a successor is
not appointed within sixty (60) days of such cessation;
(1) For any reason the present President shall cease to be or function
as President and chief executive officer of Consignee and a successor is not
appointed within sixty (60) days of such cessation;
(m) Occurrence of an event of default under any credit, loan or
consignment agreement or any promissory note to which Consignee is a party, as
amended or modified from time to time, including, without limitation, (i) that
certain Note Purchase Agreement dated May 1, 1992 between Consignee and Northern
Life Insurance Company, Royal Maccabees, Life Insurance Company, The North
Atlantic Life Insurance Company of America, Farm Bureau Life Insurance Company
of Michigan, FB Annuity Company and Farm Bureau Mutual Insurance Company of
Michigan (collectively, the "Second Insurance Companies"), (ii) that certain
Note Purchase Agreement dated as of February 15,1995 between Consignee and
Northwestern National Life Insurance Company and Northern Life Insurance Company
(collectively, the "Third Insurance Companies"), (iii) those certain Consignment
Agreements or Amended and Restated Consignment Agreements dated as of August
20,1993 between Consignee and each of ABN, and FPM, respectively, as the same
have been, amended from time to time (iv) that certain Consignment Agreement
dated as of January 31,1994 between CS and Consignee, as the same has been
amended from time to time and (v) any promissory note (including, without
limitation, that certain promissory note of Debtor in favor of The Chase
Manhattan Bank dated July 31,1998) and/or agreements in favor of The Chase
Manhattan Bank as successor in interest by merger to Chemical Bank.
(n) occurrence of any Event of Default as defined in the Security
Agreement;
(o) occurrence of any attachment on any Precious Metal owned by
consignee or on any Consigned Precious Metal; or
<PAGE> 18
(p) Determination by Consignor in good faith that Consignee has
suffered a material adverse change in its business or financial condition.
Upon the occurrence of any such Event of Default and at any time thereafter
during the continuance of such Event of Default, Consignor may, by Notice to
Consignee, terminate this Agreement as provided in Section 14 and declare all
liabilities, indebtedness or obligations of Consignee to be due and payable
- -PROVIDED, however, that the foregoing listing of Events of Default shall not be
deemed to limit Consignor's right at any time, even if an Event of Default has
not occurred, to demand, upon thirty (30) days' prior written notice to
Consignee, (x) that Consignee Redeliver Consigned Precious Metal and (y) payment
of all liabilities, indebtedness or obligations of Consignee to Consignor,
subject to and pursuant to the provisions of SECTION 14 of this Agreement. Upon
Consignor's declaration and the expiration of such thirty (30) day notice
period, such liabilities, indebtedness and obligations shall become immediately
due and payable, both as to principal and/or interest, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in any other evidence of such indebtedness,
obligations and liabilities to the contrary notwithstanding. Notwithstanding the
foregoing, in the case of an Event of Default under Section 13(g) (and assuming
that the thirty (30) day period provided for in Section 13(g), if applicable,
has expired) or under Section 13(h) of this Agreement, this Agreement shall
terminate immediately and automatically upon the occurrence of such Event of
Default, and all of the liabilities, indebtedness or obligations of Consignee
shall be immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by Consignee,
anything contained herein or in any other evidence of such indebtedness,
obligations and liabilities to the contrary notwithstanding. Consignor may
enforce payment of the same and exercise any or all of the rights, powers and
remedies possessed by Consignor, under this Agreement or under any agreement
securing the obligations of Consignee hereunder, whether afforded by the Uniform
Commercial Code or otherwise afforded by law or in equity. The remedies provided
for herein are cumulative and are not exclusive of any other remedies provided
by law. Consignee agrees to pay. Consignor's reasonable attorney's fees and
legal expenses incurred in enforcing Consignor's rights, powers and remedies
under this Agreement, the Security Agreement and any agreement securing the
liabilities, indebtedness or obligations of Consignee to Consignor, whether such
enforcement is directly by Consignor or through its agent.
Without limiting the foregoing, upon the occurrence of any Event of
Default and at any time thereafter during the continuance thereof, Consignor
shall have the right to enter and/or remain upon the premises of Consignee or
any other place or places where any Consigned Precious Metal is located and kept
(without any obligation to pay rent to Consignee or others) and; (i) remove
Consigned Precious Metal or inventory containing the same therefrom to the
premises of Consignor or any agent of Consignor, for such time as Consignor may
desire, in order to maintain, collect, sell and/or liquidate said Consigned
Precious Metal or (ii) use such premises, together with equipment, materials,
supplies, books and records of Consignee, to maintain possession, refine and
prepare said Consigned Precious Metal for sale, liquidation, or collection.
Consignor may require Consignee to assemble the Consigned Precious Metal and
make it available to Consignor at a place or places to be designated by
Consignor which is reasonably convenient for the parties. Consignor may at any
time and from time to time employ and maintain in any premises of Consignee or
any place where any of the Consigned Precious
<PAGE> 19
Metal is located a custodian selected by Consignor who shall have full authority
to do all acts necessary to protect Consignor's interests and to report to
Consignor thereon. Consignee agrees to cooperate with any such custodian and to
do whatever Consignor may reasonably request to preserve the Consigned Precious
Metal.. All reasonable expenses incurred by reason of the employment of the
custodian shall be paid by Consignee pursuant to the last sentence in Section 8
hereof.
14 . TERMINATION.
This Agreement shall terminate, at the election of the Consignor, upon
the occurrence of any Event of Default. Unless otherwise terminated in
accordance with the terms hereof, this Agreement shall continue until either
Consignor or Consignee elects to terminate this Agreement by not less than
thirty (30) days, prior Notice to the other party. Unless otherwise mutually
agreed in writing by Consignor and Consignee, no Delivery of Precious Metal to
Consignee will be made following the giving of Notice by either Consignor or
Consignee of its election to terminate this Agreement. Termination of this
Agreement shall not affect Consignee's duty to pay and perform in full its
obligations to Consignor hereunder. On the effective date of the termination of
this Agreement, Consignee shall either Redeliver or purchase and pay for all
Consigned Precious Metal which Consignor has previously Delivered and which has
not been paid for or Redelivered, the price to be based on Consignor's spot
market price on the date of such purchase and shall reimburse Consignor for any
and all outstanding fees, costs, expenses and other obligations of Consignee to
Consignor.
15. INDEMNITY.
Consignee will defend, indemnify and hold harmless Consignor, its
employees, agents, officers, and directors, from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages,
costs or expenses of whatever nature, known or unknown, foreseen or otherwise
(including, without limitation, counsel and consultant fees and expenses,, court
costs, and litigation expenses) arising out of, or in any way related to, (i)
any breach by Consignee of any of the provisions of this Agreement, (ii) the
presence, disposal, spillage, discharge, emission, leakage, release, or
threatened release of any Hazardous Material within, on, under, about, from or
affecting any real property owned or occupied by Consignee, including, without
limitation, any damage or injury resulting from any such Hazardous Material to
or affecting such property or the soil, water, air, vegetation, buildings,
personal property, persons or animals located on such property or on any other
property or otherwise, (iii) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to any such
Hazardous Material, (iv) any lawsuit brought or threatened, settlement reached,
or order or directive of or by any Governmental Authority relating to such
Hazardous Material or (v) any violation of any Environmental Requirement.
16. MISCELLANEOUS.
(a) This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto, shall
survive the execution and delivery to Consignor of this Agreement, and shall
continue in full force and effect so long as this
<PAGE> 20
Agreement and any other indebtedness of Consignee to Consignor is outstanding
and unpaid. In this Agreement, reference to a party shall be deemed to include
the successors and permitted assigns of such party, and all covenants and
agreements in this Agreement by or an behalf of Consignee shall inure to the
benefit of the successors and assigns of Consignor.
(b) Consignee will reimburse Consignor upon demand for all
out-of-pocket costs, charges and expenses of Consignor (including costs of
searches of public records and filing and recording documents with public
offices and reasonable fees and disbursements of counsel to Consignor) in
connection with (I) the preparation, execution and delivery of this Agreement
and any Security document or other agreement contemplated hereby, (ii) any
amendments, modifications, consents or waivers in respect hereof and (iii) any
enforcement hereof.
(c) This Agreement shall be construed in accordance with and governed
by the laws of the State of New York.
(d) No modification or waiver of any provision of this Agreement, or of
any security document or other document contemplated hereby, nor consent to any
departure of Consignee from a provision, shall be effective unless the same
shall be in writing. A written consent shall be effective only in the specific
instance, and for the purpose, for which given. No notice to, or demand on
Consignee, in any one case, shall entitle Consignee to any other or future
notice or demand in the same, similar or other circumstances.
(e) Neither any failure nor any delay on the part of Consignor in
exercising any right, power or privilege hereunder, or in any other instrument
given as security therefor, shall operate as a waiver thereof , nor shall a
single or partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
(f) Consignee shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of Consignor.
(g) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
(h) Any Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. As used in this Agreement, the term "person" shall
include any individual, corporation, partnership, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
(i) Consignee hereby submits to the jurisdiction of the courts of the
State of New York and the United States District Court for the Southern District
of New York, as well as to the jurisdiction of all courts to which an appeal may
be taken or other review sought from the aforesaid courts, for the purpose of
any suit, action or other proceeding arising out of any of Consignee's
obligations under or with respect to this Agreement, and expressly waives any
and all objections it may have as to value in any of such courts. CONSIGNEE AND
CONSIGNOR EACH WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON ANY MATTER WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS AGREEMENT, ANY OTHER DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN).
No party to this Agreement, including but not limited to any assignee or
successor or a party, shall seek a
<PAGE> 21
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of, this Agreement, any related
instruments, any collateral or the dealings or the relationship between the
parties. No party will seek to consolidate any such action, in which a jury
trial has been waived, with any other action in which a jury trial cannot be or
has not been waived. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED
BY THE PARTIES HERETO, AND THESE PROVISIONS-SHALL BE SUBJECT TO NO EXCEPTIONS -
NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
IN WITNESS WHEREOF, Consignor and Consignee have caused this Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
MITSUI & CO. (U.S.A.), INC.
As Consignor
By: /s/ Yutaka Taka
--------------------------
Name: YUTAKA TAKA
Title: Senior Vice President
METAL DIVISION
MICHAEL ANTHONY JEWELERS, INC.
As Consignee
By: /s/ Michael A. Paolercio
-----------------------------
Name: Michael A. Paolercio
Title: SVP & Treasurer
<PAGE> 1
Exhibit No. 10.41
-----------------
AMENDED AND RESTATED
INTERCREDITOR AGREEMENT
-----------------------
AMENDED AND RESTATED INTERCREDITOR AGREEMENT dated as of January 28,
1999, by and among ABN AMRO BANK N.V., NEW YORK BRANCH, CREDIT SUISSE FIRST
BOSTON, FLEET PRECIOUS METALS INC., and PARIBAS (collectively, in their capacity
as consignors under the Consignment Agreements referred to below, the
"Consignors", and individually, a "Consignor"); THE CHASE MANHATTAN BANK
("Chase"); and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION (the
"Lender").
W I T N E S S E T H
-------------------
WHEREAS, the Consignors, severally and not jointly, may (in their sole
and individual discretion) extend financial accommodations to MICHAEL ANTHONY
JEWELERS, INC., a Delaware corporation (the "Debtor") pursuant to certain
Consignment Agreements or Amended and Restated Consignment Agreements, dated
August 20, 1993 in the case of Fleet Precious Metals Inc. and ABN AMRO Bank
N.V., New York Branch, January 31, 1994 in the case of Credit Suisse First
Boston and October 23, 1998 in the case of Paribas, between the Debtor and each
of the Consignors (as amended and as the same may be amended from time to time,
the "Consignment Agreements"); and
WHEREAS, the Debtor, the Consignors and Fleet Precious Metals Inc., for
itself and as agent for the Consignors (the "Agent"), are parties to a Security
Agreement dated August 20, 1993 (as amended and as the same may be amended from
time to time, the "Consignor Security Agreement"); and
WHEREAS, the Debtor has granted each Consignor a security interest in
the property described on Schedule A hereto (such property, described in
Schedule A, is hereinafter referred to as the "Collateral" and includes but is
not limited to the Equipment hereinafter referred to) pursuant to the Consignor
Security Agreement in order to secure all of the Debtor's existing and future
indebtedness, obligations and liabilities to each respective Consignor under the
Consignment Agreements or with respect to forward contracts for the purchase or
sale of precious metal (collectively the "Consignment Obligations"); and
WHEREAS, MA BRANDS, INC., a Delaware corporation ("MAJ Delaware") and
Fleet Precious Metals Inc., for itself and as Agent for the Consignors, are
parties to a certain Security Agreement (Trademark and Service Marks) dated
______, 1999 (the "Consignor Trademark Assignment") pursuant to which MAJ
Delaware has granted a security interest in the Marks (as defined in the
Consignor Trademark Assignment) in order to secure the Consignment Obligations;
and
WHEREAS, Chase may (in its sole and individual discretion) extend
financial accommodations to the Debtor pursuant to a certain Line of Credit
Agreement dated as of
<PAGE> 2
September 12, 1994 between the Debtor and Chase (as amended and as the same may
be amended from time to time, the "Line of Credit Agreement"); and
WHEREAS, the Debtor and Chase have entered into a Security Agreement
dated September 12, 1994 (as amended and as the same may be amended from time to
time, the "Chase Security Agreement"); and
WHEREAS, the Debtor has granted Chase a security interest in the
Collateral pursuant to the Chase Security Agreement in order to secure all of
the Debtor's existing and future indebtedness, obligations and liabilities under
the Line of Credit Agreement (collectively the "Line of Credit Obligations");
and
WHEREAS, MAJ Delaware and Chase are parties to a certain Security
Agreement (Trademark and Service Marks) dated ______, 1999 ((as the same may be
amended from time to time, "Chase Trademark Security Agreement") pursuant to
which MAJ Delaware has granted a security interest in the Marks in order to
secure the Line of Credit Obligations; and
WHEREAS, in accordance with the terms of that certain Loan and Security
Agreement between the Debtor and the Lender dated as of the date hereof (as the
same may be amended from time to time, the "Term Loan Agreement"), the Debtor
has granted to the Lender a security interest in the property described on
Schedule B hereto (such property being hereinafter referred to as the
"Equipment"), pursuant to a Security Agreement dated the date hereof (as the
same may be amended from time to time, the "Term Loan Security Agreement") from
the Debtor to the Lender (the Term Loan Agreement and Term Loan Security
Agreement, together with any subsequent agreements between the Lender and the
Debtor, being hereinafter collectively referred to as the "Term Loan
Agreements") in order to secure the payment of a Term Promissory Note of the
Debtor to the Lender in the original principal amount of up to $10,500,000 (the
"Term Note") issued pursuant to the Term Loan Agreement, and to secure the
payment and performance of all other obligations of the Debtor to the Lender
pursuant to the Term Loan Agreements (all such obligations being hereinafter
referred to as the "Term Loan Obligations"); and
WHEREAS, the Consignors and the Agent are parties to an Amended and
Restated Collateral Sharing Agreement dated August 20, 1993, as amended and as
the same may be amended and otherwise modified from time to time, pursuant to
which the Consignors established among themselves the priority of their security
interests in the Collateral and have provided for the enforcement of such
security interests; and
WHEREAS, the Consignors, on the one hand, and Chase and the Lender, on
the other hand, desire to establish among themselves the priority of their
security interests in the Collateral and in the Marks and to provide for the
enforcement of such security interests;
NOW, THEREFORE, in consideration of the mutual premises herein
contained, it is hereby agreed as follows:
<PAGE> 3
1. As security for the Consignment Obligations, the security interest
of the Consignors in all Inventory (as defined in this paragraph 1) of the
Debtor, whether now owned or hereafter acquired by the Debtor or in which the
Debtor may now have or hereafter acquire an interest and in all Marks of MAJ
Delaware, whether now owned or hereafter acquired by MAJ Delaware or in which
MAJ Delaware may now have or hereafter acquire an interest (the foregoing
property with respect to which the Consignors shall have priority being
hereinafter collectively referred to as the "Consignor Primary Collateral"), to
the extent perfected and enforceable, shall have priority over any security
interests which Chase or the Lender has or may acquire therein. For the purposes
of this Agreement, the term "Inventory" shall include the following:
(i) all goods held for sale or lease or furnished or to be
furnished under contracts of service;
(ii) all raw materials, work-in-process and finished goods;
(iii) all goods consigned by the Debtor to others, whether or
not such consignments are true consignments or security consignments,
and all related contracts and rights thereunder, including, without
limitation, goods:
(A) covered by a consignment sale whereby a memo
invoice is used to ship goods to a customer, who is billed on
a regular basis for goods actually sold by such customer; or
(B) covered by a guaranteed sale whereby goods are
shipped and billed on normal invoice but may be returned to
the Debtor at any time without penalty; or
(C) constituting part of base inventory maintenance
wherein goods are shipped under a memo invoice and are billed
only when replaced to maintain base inventory levels, and
where such goods may be returned at any time; or
(D) treated as inventory by the Debtor for accounting
purposes;
(iv) all bullion, fabricated products and all gold and other
precious metals in whatever form and wherever located, including all
products in which any such gold or precious metals are incorporated or
into which any such gold or precious metals are processed or converted;
(v) all diamonds and all precious and semi-precious stones
including all substitutions, replacements and products in which such
diamonds or stones are incorporated;
(vi) all accounts and other proceeds arising from the sale of
Inventory on or after the Acceleration Date (as hereinafter defined)
and all returned or replevined goods on which any such accounts are
based; provided, however, that returned or replevined
<PAGE> 4
goods which are segregated and identifiable as such are to be applied
to the oldest outstanding account payable by the returning account
debtor subject to the same conditions governing payment of accounts set
forth in paragraph 14 hereof;
(vii) all other returned goods which are not segregated and
identifiable as such;
(viii) all cash proceeds of all of the foregoing; and
(ix) certain insurance proceeds as provided in paragraph 5
hereof.
2. As security for the Term Loan Obligations, the security interest of
the Lender in the Equipment (such property being hereinafter collectively
referred to as the "Term Loan Primary Collateral"), to the extent perfected and
enforceable, and to the extent that it secures Term Loan Obligations
constituting Prior Secured Obligations as defined in paragraph 4 hereof, shall
have priority over any security interests the Consignors or Chase have or may
acquire therein. The Lender has no security interest in the Collateral other
than in the Term Loan Primary Collateral and has no interest in the Marks.
Further, as security for the Line of Credit Obligations, the security interest
of Chase in the Term Loan Primary Collateral, to the extent perfected and
enforceable, and to the extent that it secures Line of Credit Obligations
constituting Prior Secured Obligations as defined in paragraph 4 hereof, shall
have priority over any security interests the Consignors have or may acquire
therein.
3. As security for the Line of Credit Obligations, the security
interest of Chase in the Collateral and in the Marks other than the Consignor
Primary Collateral and other than the Term Loan Primary Collateral (such
property being hereinafter collectively referred to as the "Line of Credit
Primary Collateral"), to the extent perfected and enforceable, and to the extent
that it secures Line of Credit Obligations constituting Prior Secured
Obligations as defined in paragraph 4 hereof, shall have priority over any
security interests the Consignors or the Lender has or may acquire therein.
4. Notwithstanding anything to the contrary herein, the priority of the
security interests of the Consignors, the Lender, and Chase established
hereunder shall only apply to the extent that such security interests are
perfected and enforceable and secure (a) the Consignment Obligations, (b) the
Term Loan Obligations, exclusive of any indebtedness of the Debtor to the Lender
for money borrowed other than the indebtedness (including interest and premiums
thereon) evidenced by the Term Note, and (c) the Line of Credit Obligations (all
such obligations being herein sometimes called the "Prior Secured Obligations").
Notwithstanding anything to the contrary herein, to the extent that any
obligations of the Debtor to the Consignors, the Lender, or Chase shall not
constitute Prior Secured Obligations, the security interests securing such
obligations shall be subordinated to perfected and enforceable security
interests securing Prior Secured Obligations. Consignment Obligations which
constitute Prior Secured Obligations are herein sometimes referred to as "Prior
Consignment Obligations"; Term Loan Obligations which constitute Prior Secured
Obligations are herein sometimes referred to as "Prior Term Loan Obligations";
and Line of Credit Obligations which constitute Prior Secured Obligations are
herein sometimes referred to as "Prior Line of Credit Obligations".
<PAGE> 5
5. The respective rights and priorities of the Lender, the Consignors,
and Chase in and to any proceeds realized on account of an insured loss to all
or any portion of the Debtor's assets shall be determined in accordance with the
allocation of such proceeds among such insured assets, and the Consignors,
Chase, and the Lender shall have the same priority to insurance proceeds
allocated to the Consignor Primary Collateral, the Term Loan Primary Collateral
and the Line of Credit Primary Collateral as they have to the Consignor Primary
Collateral, the Term Loan Primary Collateral and the Line of Credit Primary
Collateral itself under paragraphs 1, 2 and 3 hereof.
6. The priorities of the security interests established, altered or
specified herein are applicable irrespective of the time or order of attachment
or perfection thereof, the method of perfection, the time or order of filing of
financing statements or taking of possession, or the giving of or failure to
give notice of the acquisition or expected acquisition of purchase money or
other mortgage or security interests. The priorities of any security interests
which are not established, altered or specified herein shall exist and continue
in accordance with the applicable provisions of law. The agreements made in
paragraphs 1, 2, 3, 4 and 5 hereof are solely for the purpose of establishing
the relative priorities of the Lender, the Consignors, and Chase and shall not
inure to the benefit of any other person or entity except the respective
successors and assigns of the Lender, the Consignors, and Chase.
7. In order to effect the foregoing priorities, the parties hereto
agree that all proceeds of Collateral and the Marks shall be distributed (net of
any and all costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, incurred by any party in realizing upon such
proceeds) in accordance with the following procedures:
(a) All of the Consignor Primary Collateral shall be
distributed to the Consignors for application to the Prior Consignment
Obligations until the Prior Consignment Obligations are paid in full.
After the Prior Consignment Obligations are paid in full, any remaining
Consignor Primary Collateral shall be distributed to Chase for
application to the Prior Line of Credit Obligations until the Prior
Line of Credit Obligations are paid in full.
(b) All of the Term Loan Primary Collateral shall be
distributed to the Lender for application to the Prior Term Loan
Obligations until the Prior Term Loan Obligations are paid in full.
After the Prior Term Loan Obligations are paid in full, any remaining
Term Loan Primary Collateral shall be distributed to Chase until the
Prior Line of Credit Obligations are paid in full. After the Prior Term
Loan Obligations and the Prior Line of Credit Obligations are paid in
full, any remaining Term Loan Primary Collateral shall be distributed
to the Consignors for application to the Prior Consignment Obligations
until the Prior Consignment Obligations are paid in full.
(c) All of the Line of Credit Primary Collateral shall be
distributed to Chase for application to the Prior Line of Credit
Obligations until the Prior Line of Credit Obligations are paid in
full. After the Prior Line of Credit Obligations are paid in full, any
remaining Line of Credit Primary Collateral shall be distributed to the
Consignors for
<PAGE> 6
application to the Prior Consignment Obligations until the Prior
Consignment Obligations are paid in full.
Chase and the Lender agree that funds received directly or indirectly
from the Debtor or MAJ Delaware which are Consignor Primary Collateral will be
promptly remitted to the Consignors for application in accordance with paragraph
7(a) hereof. The Consignors and Chase agree that funds received directly or
indirectly from the Debtor or MAJ Delaware which are Term Loan Primary
Collateral will be promptly remitted to the Lender for application in accordance
with paragraph 7(b) hereof. The Consignors and the Lender agree that funds
received directly or indirectly from the Debtor or MAJ Delaware which are Line
of Credit Primary Collateral will be promptly remitted to Chase for application
in accordance with paragraph 7(c) hereof.
8. Prior to the Acceleration Date (as hereinafter defined in Paragraph
9), the Lender, Chase, and the Consignors may, subject to applicable bankruptcy
and insolvency laws, collect their respective obligations from the Debtor at the
time and in the manner set forth in the Term Loan Agreements, the Consignment
Agreements (and agreements referred to therein) or the Line of Credit Agreement,
as the case may be, without any obligation to remit such collections pursuant to
paragraph 7 hereof.
9. The Lender, Chase, and each of the Consignors agree to notify each
other, in writing, immediately upon making any demand under any obligation of
the Debtor or declaring any obligation of the Debtor to be due and payable prior
to the scheduled maturity of such obligation (the earlier to occur of (a) the
date that notice of such demand or declaration is first given to the parties
hereto, and (b) the date on which any bankruptcy or insolvency proceeding is
commenced by or against the Debtor being hereinafter referred to as the
"Acceleration Date", and the notice being hereinafter referred to as an
"Acceleration Notice").
10. Promptly after an Acceleration Notice or Acceleration Date,
whichever first occurs:
(a) The Lender shall furnish Chase and the Consignors with a
written statement of the outstanding balance of loans or advances made
by the Lender to the Debtor as of the Acceleration Date and the date
any Acceleration Notice is received by the non-accelerating (or later
accelerating) party (the date of receipt of any Acceleration Notice
being herein referred to as the "Notice Date").
(b) Chase and the Consignors shall furnish the Lender and each
other with a written statement of the outstanding balance of extensions
of credit and other obligations of the Debtor to Chase and the
Consignors as of the Acceleration Date and the Notice Date.
(c) The Lender, Chase and the Consignors may proceed to
liquidate and realize upon the Collateral, for the benefit of the
Lender, Chase and the Consignors, to the extent permitted by the
respective security agreements executed by the Debtor, and to exercise
any and all rights and remedies granted to the Lender, Chase and the
Consignors
<PAGE> 7
with respect to the Collateral, in such manner and at such times as
each shall deem proper, the proceeds thereof to be distributed in
accordance with the provisions of Paragraph 7 hereof. Each of the
Lender, Chase and the Consignors agrees to consult with the other in
connection with its exercise of such rights and remedies. The Lender,
Chase and the Consignors shall be entitled to retain from each
distribution of the realizations on the Collateral the expenses of such
realizations, including, without limitation, reasonable attorneys'
fees.
11. Each party agrees to use its best efforts to give to the other
parties copies of any notice of the occurrence or existence of an Event of
Default (as defined in each party's respective Agreement with the Borrower) sent
to the Debtor simultaneously with the sending of such notice to the Debtor, but
failure to do so shall not affect the validity of such notice or create a cause
of action against the party failing to give such notice or create any claim or
right on behalf of any person. The sending of such notice shall not give the
recipient the obligation to cure such Event of Default.
12. Neither the Lender, Chase nor the Consignors shall sell, assign or
transfer their security interest in, respectively, the Consignor Primary
Collateral or Term Loan Primary Collateral or the Line of Credit Primary
Collateral unless it shall first have given notice thereof to the other,
delivered a copy of this Agreement to the transferee and delivered to such other
an agreement by such transferee to be bound by the terms of this Agreement, in
form, scope and substance satisfactory to such other. Nothing in this paragraph
12 shall restrict the right of the Lender, Chase or Consignor to grant a blanket
security interest to its own lenders or the right of Lender to include the Term
Loan Agreement in a securitization.
13. The Lender and Chase acknowledge that this Agreement constitutes
written notice to the Lender and Chase, for purposes of the Uniform Commercial
Code, that the Consignors expect to deliver gold on consignment to the Debtor
from time to time. Chase further agrees (i) to cooperate, for purposes of the
Consignors' exercise of rights to dispose of Consignor Primary Collateral, with
the Consignors' use of all trademarks and tradenames of the Debtor, and (ii) not
to sell or otherwise dispose of any of such trademarks and tradenames, without
the consent of the Consignors, until the Consignment Obligations are paid in
full or there is no remaining Consignor Primary Collateral (whichever first
occurs).
14. In the event that each of the Consignors and Chase has security
interests in accounts of the Debtor payable by the same account debtor, all
payments made by such account debtor with respect to such accounts shall be
applied to the oldest outstanding account payable by such account debtor;
provided, however, that if such oldest outstanding account is the subject of a
bona fide dispute and the account debtor specifically indicates that for this
reason it wishes to have its payment applied to a more recent, non-disputed
account, such payment shall be applied to the non-disputed account.
15. The Lender, Chase and each Consignor may, without notice of or
consent of the other, amend, modify, waive any term of, and, except as may be
specifically agreed to the contrary herein, exercise any rights under and
otherwise deal with any loan agreement,
<PAGE> 8
consignment agreement, guaranty agreement, security agreement or other agreement
which it may have entered into with the Debtor.
16. All notices to be given hereunder shall be given at the address for
a party set forth on the signature page hereof or, if a party is added to this
Intercreditor Agreement by an amendment hereto, then for such party, at the
address set forth on the signature page to the applicable amendment to the
Intercreditor Agreement, or to such other address as a party may designate for
itself by like notice and shall be deemed to have been validly served, given or
delivered (i) on the fourth (4th) day following deposit in the United States
mails (by registered or certified mail), with proper postage prepaid, (ii) on
the day of transmittal by telex, cable or other electronic communication device
capable of providing a written document, or (iii) if sent by overnight delivery
service, when received or when delivery is refused.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in such state, shall not be modified, amended or terminated orally,
and shall be binding upon and inure to the benefit of the Lender, the
Consignors, and Chase and their respective successors, designees and assigns.
All terms used herein which are defined in the Uniform Commercial Code shall
have the meaning therein stated, unless the context otherwise requires.
18. The provisions contained herein shall, effective the date hereof,
be deemed to supersede the terms of the Amended and Restated Intercreditor
Agreement dated August 20, 1993 among the Consignors, Chase and others.
IN WITNESS WHEREOF, the Lender, the Consignors, and Chase have duly
executed or caused this Agreement to be duly executed as of the day and year
first above written.
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION
By: /s/ Vince Iaci
--------------------------------
Title: Sr. Vice President
-----------------------------
Address: 10900 N.E. 4th Street
Suite 500
Bellevue, WA 98004
Attention: Liam Bayley
Telecopier: (425) 450-1879
<PAGE> 9
FLEET PRECIOUS METALS INC.
By: /s/ Sharon Delfino
--------------------------------
Title: Vice President
-----------------------------
By: /s/ Karen M. Sheil
--------------------------------
Title: Vice President
----------------------------
Address: 111 Westminster Street
Providence, RI 02903
Attention: Sharon Delfino
Telecopier: (401) 278-3077
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ Jeffrey Sarfaty
--------------------------------
Title: Vice President
-----------------------------
By: /s/ Ned Koppelson
--------------------------------
Title: Vice President
-----------------------------
Address: 500 Park Avenue
New York, NY 10017
Attention: Jeffrey Sarfaty
Telecopier: (212) 644-6905
CREDIT SUISSE FIRST BOSTON
By: /s/ Stanley R. Steinberg
--------------------------------
Title: Director
-----------------------------
By: /s/ Stuart B. Ganes
--------------------------------
Title: Vice President
-----------------------------
Address: 11 Madison Avenue
New York, New York 10010
Attention: Stuart Gaines
Telecopier: (212) 238-2426
<PAGE> 10
PARIBAS
By: /s/ Amy Kirschner
------------------------------
Title: Vice President
--------------------------
By: /s/ Edward K. Chin
------------------------------
Title: Director
--------------------------
Address: 787 Seventh Avenue
New York, NY 10019
Attention: Amy N. Kirschner
Telecopier: (212) 841-2536
THE CHASE MANHATTAN BANK
By: /s/ Irene B. Spector
-----------------------------
Title: Vice President
--------------------------
Address: 111 West 40th Street
New York, NY 10018
Attention: Irene Spector
Telecopier: (212) 403-5112
Consented and agreed to:
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Michael A. Paolercio
--------------------------------
Title: Treasurer
-----------------------------
MA BRANDS, INC.
By: /s/ Michael A. Paoelercio
--------------------------------
Title: Asst. Treasurer
----------------------------
<PAGE> 11
SCHEDULE A TO INTERCREDITOR AGREEMENT
AMONG
ABN AMRO BANK N.V., NEW YORK BRANCH, CREDIT SUISSE FIRST BOSTON, FLEET PRECIOUS
METALS INC., PARIBAS, THE CHASE MANHATTAN BANK, and GENERAL ELECTRIC CAPITAL
BUSINESS ASSET FUNDING CORPORATION
(a) ACCOUNTS, CONTRACT RIGHTS AND OTHER RIGHTS TO PAYMENT: Any
and all accounts, contract rights and other rights to the payment of
money or other forms of consideration of any kind at any time owing or
to be owing to the Debtor (whether classified under the Uniform
Commercial Code as accounts, contract rights, chattel paper, general
intangibles, or otherwise) including, but not limited to accounts
receivable, notes, drafts, acceptances, rights arising out of
overpayments of taxes and all other debts, obligations and liabilities
in whatever form owing to the Debtor from any person, firm,
governmental authority, corporation or any other legal entity, all
guarantees, security interests, liens and other security for payment
thereof, and all of the Debtor's rights to goods sold (delivered,
undelivered, in transit or returned) which may be represented thereby;
(b) INVENTORY: All gold bullion, gold granule and other gold or
precious metals in whatever form including all substitutions,
replacements and products in which such gold or precious metals are
incorporated or into which such gold or precious metals are processed
or converted, whether now owned or hereafter acquired by the Debtor or
in which the Debtor now or hereafter acquires an interest; all diamonds
and all precious and semi-precious stones including all substitutions,
replacements and products in which such diamonds or stones are
incorporated, whether now owned or hereafter acquired by the Debtor or
in which the Debtor now or hereafter acquires an interest; and all
inventory now or hereafter owned by the Debtor or in which the Debtor
now or hereafter acquires an interest, including all merchandise, raw
materials, goods in process, and finished goods;
(c) OTHER PERSONAL PROPERTY: All tangible and intangible
personal property now or hereafter owned by the Debtor or in which the
Debtor now or hereafter acquires an interest, including without
limitation, all machinery, equipment, motor vehicles, furniture,
furnishings, office supplies, general intangibles, patents, trademarks,
tradenames, instruments, documents of title, policies and certificates
of insurance (other than those for life insurance policies),
securities, bank deposits, checking accounts and cash, now owned by the
Debtor or which may be acquired by the Debtor hereafter, wherever
situated;
together with all substitutions and replacements for any of the
foregoing property and all products and proceeds of any and all of the
foregoing property and, in the case of all tangible Collateral,
together with (i) all accessories, attachments, parts (including spare
parts), accessions and repairs now or hereafter attached or affixed to
or used in connection with any such goods, and (ii) all documents of
title, policies and certificates of insurance (other than life
insurance policies and certificates), securities, chattel paper, or
other documents or instruments evidencing or pertaining thereto; and
all files,
<PAGE> 12
correspondence, computer programs, tapes, discs and related data
processing software owned by the Debtor or in which the Debtor has an
interest which contain information identifying or pertaining to any of
the Collateral, or any account debtor, or showing the amounts thereof
or payments thereon, or otherwise necessary or helpful in the
realization thereon or the collection thereof, both now owned or
existing or hereafter acquired, created or arising (including, without
limitation, any claims to any items referred to above, and the proceeds
of any insurance with respect thereto and any claims of the Debtor
against third parties for loss of, damage to, or destruction of, any or
all of the Collateral).
<PAGE> 13
SCHEDULE B TO INTERCREDITOR AGREEMENT
AMONG
ABN AMRO BANK N.V., NEW YORK BRANCH, CREDIT SUISSE FIRST BOSTON, FLEET PRECIOUS
METALS INC., PARIBAS, THE CHASE MANHATTAN BANK, and GENERAL ELECTRIC CAPITAL
BUSINESS ASSET FUNDING CORPORATION
EQUIPMENT. All machinery, equipment (including but not limited
to all jewelry manufacturing equipment),molds, casts, dyes, tools,
furniture, furnishings, and office supplies, now owned by the Debtor or
which may be acquired by the Debtor hereafter, wherever situated;
together with all substitutions and replacements for any of the
foregoing property and all products and proceeds of any and all of the
foregoing property and all accessories, attachments, parts (including
spare parts), accessions and repairs now or hereafter attached or
affixed to or used in connection with any such property.
<PAGE> 1
Exhibit No. 10.42
-----------------
FIRST AMENDMENT TO AMENDED AND
RESTATED INTERCREDITOR AGREEMENT
THIS FIRST AMENDMENT dated as of March 1, 2000, among ABN AMRO BANK
N.V., NEW YORK BRANCH, CREDIT SUISSE FIRST BOSTON, FLEET PRECIOUS METALS INC.,
PARIBAS, and MITSUI & CO. (U.S.A.), INC. ("Mitsui") (collectively, in their
capacity as consignors under the Consignment Agreements referred to below, the
"Consignors", and individually, a "Consignor"); THE CHASE MANHATTAN BANK
("Chase"); and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Consignors (other than Mitsui), Chase and the Lenders are
parties to a certain Amended and Restated Intercreditor Agreement dated as of
January 28, 1999 (hereinafter, the "Intercreditor Agreement"), pursuant to which
the Consignors (other than Mitsui), Chase and the Lenders have established among
themselves the priority of their security interests in the Collateral (as
defined therein) of MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation
("Debtor") and have provided for the enforcement of such security interests; and
WHEREAS, Mitsui has requested that it be added as a "Consignor"
pursuant to the terms of the Intercreditor Agreement as Mitsui will be entering
into a consignment arrangement with Debtor; and
WHEREAS, Mitsui is willing to assume all obligations and liabilities
under the Intercreditor Agreement as a Consignor thereunder and to comply with
the covenants and terms of such Intercreditor Agreement and any documents
executed by the Consignors in connection with the Intercreditor Agreement; and
WHEREAS, at the time of the execution of the Intercreditor Agreement it
was anticipated that contemporaneously therewith (a) the Debtor would transfer
certain trademarks to MA BRANDS, INC., a Delaware corporation ("MAJ Delaware"),
(b) MAJ Delaware and Fleet Precious Metals Inc., for itself and as Agent for the
Consignors, would execute a Security Agreement (Trademark and Service Marks)
pursuant to which MAJ Delaware would grant a security interest in such
trademarks in order to secure the Consignment Obligations, and (c) MAJ Delaware
and Chase would execute a Security Agreement (Trademark and Service Marks)
pursuant to which MAJ Delaware would grant a security interest in such
trademarks in order to secure the Line of Credit Obligations; and
WHEREAS, Debtor did not transfer the trademarks until ______________,
and, therefore, MAJ Delaware and Fleet Precious Metals Inc., for itself and as
Agent for the Consignors, did not execute a Security Agreement (Trademark and
Service Marks) and MAJ Delaware and Chase did not execute a Security Agreement
(Trademark and Service Marks) until _______________;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth and for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Intercreditor Agreement.
2. Mitsui is hereby added as a party to the Intercreditor Agreement,
with Mitsui to be included as a Consignor pursuant to the terms of the
Intercreditor Agreement.
3. The Intercreditor Agreement is hereby amended so that the terms
"Consignor" and "Consignors" as used therein and herein shall include, from and
after the date hereof, Mitsui and Mitsui shall be entitled to all of the rights
and benefits as a Consignor thereunder and hereby assumes full liability for the
performance and observance of all and singular of the covenants, agreements and
conditions of the Intercreditor Agreement which are to be performed by the
Consignors thereunder.
4. The first "WHEREAS" clause of the Intercreditor Agreement is hereby
amended to read as follows:
"WHEREAS, the Consignors, severally and not jointly, may (in
their sole and individual discretion) extend financial
accommodations to MICHAEL ANTHONY JEWELERS, INC., a Delaware
corporation (the "Debtor") pursuant to certain Consignment
Agreements or Amended and Restated Consignment Agreements,
dated August 20, 1993 in the case of Fleet Precious Metals
Inc. and ABN AMRO Bank N.V., New York Branch, January 31, 1994
in the case of Credit Suisse First Boston, October 23, 1998 in
the case of Paribas, and November 29, 1999 in the case of
Mitsui, between the Debtor and each of the Consignors (as
amended and as the same may be amended from time to time, the
"Consignment Agreements"); and"
5. All references to the Consignor Trademark Assignment in the
Intercreditor Agreement shall from and after the date hereof be deemed to refer
to the Security Agreement (Trademark and Service Marks) dated
______________,_______, as the same may be amended from time to time, between
MAJ Delaware and Fleet Precious Metals Inc., for itself and as Agent for the
Consignors pursuant to which MAJ Delaware has granted a security interest in the
Marks (as defined in the Consignor Trademark Assignment) in order to secure the
Consignment Obligations, and all references to the Chase Trademark Assignment in
the Intercreditor Agreement shall from and after the date hereof be deemed to
refer to the Security Agreement (Trademark and Service Marks) dated
_______________, __________, as the same may be amended from time to time,
between MAJ Delaware and Chase pursuant to which MAJ Delaware has granted a
security interest in the Marks in order to secure the Line of Credit
Obligations.
6. Any necessary, conforming changes to the Intercreditor Agreement
occasioned by reason of this First Amendment are hereby deemed to be made.
<PAGE> 3
7. This First Amendment shall be binding upon the parties and their
respective successors and assigns.
8. Each of the each of the Consignors, Chase and the Lenders
acknowledge and agree that, except as expressly provided herein, the terms and
provisions of the Intercreditor Agreement remain unchanged and the Intercreditor
Agreement remains in full force and effect in accordance with its terms. The
terms "Agreement" as used in the Intercreditor Agreement and all references to
the Intercreditor Agreement in any other documents or agreements by and between
any of the parties hereto which related to Debtor shall refer, from and after
the date hereof, to the Intercreditor Agreement as amended and supplemented by
this First Amendment.
9. This First Amendment shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
10. This First Amendment may be executed with one or more counterparts
hereof, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed by their duly authorized officers as of the date first above
written.
FLEET PRECIOUS METALS INC.
By: /s/ Sharon Delfino
------------------------------
Title: Vice President
--------------------------
By: /s/ Irene A. O'Garek
-----------------------------
Title: Vice President
--------------------------
Address: 111 Westminster Street
Providence, RI 02903
Attention: Sharon Delfino
Telecopier: (401) 278-3077
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ Jeffrey Sarfaty
------------------------------
Title: Vice President
---------------------------
By: /s/ Ned Koppelson
-----------------------------
Title: Vice President
--------------------------
Address: 500 Park Avenue
New York, NY 10017
Attention: Jeffrey Sarfaty
Telecopier: (212) 644-6905
<PAGE> 4
CREDIT SUISSE FIRST BOSTON
formerly known as
CREDIT SUISSE, NEW YORK BRANCH
By: /s/ Stuart B. Ganes
----------------------------------
Title: Vice President
-------------------------------
By: /s/ Stanley R. Steinberg
----------------------------------
Title: Director
-------------------------------
Address: 11 Madison Avenue
New York, New York 10010
Attention: Stuart Gaines
Telecopier: (212) 238-2426
PARIBAS
By: /s/ Anne-Catherine Mathiot
----------------------------------
Title: Director
-------------------------------
By: /s/ Marcie Weiss
----------------------------------
Title: Director
------------------------------
Address: 787 Seventh Avenue
New York, NY 10019
Attention: Anne-Catherine Mathiot
Telecopier: (212) 841-2536
MITSUI & CO. (U.S.A.), INC.
By: /s/ Yutaka Taka
----------------------------------
Title: Senior Vice President
-------------------------------
Address: 200 Park Avenue
New York, NY 10066
Attention: John Levin
Telecopier: (212) 878-4122
THE CHASE MANHATTAN BANK
By: /s/ Irene B. Spector
----------------------------------
Title: Vice President
-------------------------------
By
------------------------------------
Title
---------------------------------
Address: 111 West 40th Street
New York, NY 10018
Attention: Irene Spector
Telecopier: (212) 403-5112
<PAGE> 5
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION
By: /s/: Judy Johnston
------------------------------------
Title: Vice President
---------------------------------
Address: 10900 N.E. 4th Street
Suite 500
Bellevue, WA 98004
Attention: Liam Bayley
Telecopier: (425) 450-1879
Consented and agreed to:
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Allan Corn
-------------------------------------
Title: Chief Financial Officer
----------------------------------
MA BRANDS, INC.
By: /s/ Michael A. Paolercio
-------------------------------------
Title: Assistant Treasurer
----------------------------------
<PAGE> 1
Exhibit No. 10.43
-----------------
SECOND AMENDMENT AND AGREEMENT
TO
AMENDED AND RESTATED COLLATERAL SHARING AGREEMENT
SECOND AMENDMENT AND AGREEMENT TO AMENDED AND RESTATED COLLATERAL
SHARING AGREEMENT dated as of March 1, 2000 by and among ABN AMRO BANK N.V., NEW
YORK BRANCH ("ABN"), FLEET PRECIOUS METALS INC. ("FPM"); CREDIT SUISSE FIRST
BOSTON, f/k/a Credit Suisse, New York Branch ("Credit Suisse"); PARIBAS
("Paribas"); and MITSUI & CO. (U.S.A.), INC. ("Mitsui") (each a "Consignor" and
collectively, the "Consignors"); and FLEET PRECIOUS METALS INC., in its capacity
as agent for itself and the other Consignors ("Agent").
W I T N E S S E T H:
WHEREAS, the Consignors (other than Mitsui) are parties to a certain
Amended and Restated Collateral Sharing Agreement dated as of August 20, 1993
(hereinafter, as amended from time to time, the "Collateral Sharing Agreement"),
pursuant to which the Consignors decided among themselves the parity of their
security interest in the Collateral (as defined in the Collateral Sharing
Agreement) of MICHAEL ANTHONY JEWELERS, INC. ("Debtor") and provided for the
enforcement of such security interest therein; and
WHEREAS, Mitsui has requested that it be added as a "Consignor"
pursuant to the terms of the Collateral Sharing Agreement as Mitsui will be
entering into a consignment arrangement with Debtor; and
WHEREAS, Mitsui is willing to assume all obligations and liabilities
under the Collateral Sharing Agreement as a Consignor thereunder and to comply
with the covenants and terms of such Collateral Sharing Agreement and any
documents executed by the Consignors in connection with the Collateral Sharing
Agreement; and
WHEREAS, MA BRANDS, INC., a Delaware corporation ("MAJ Delaware") and
FPM, for itself and as Agent for the Consignors, are parties to a certain
Security Agreement (Trademark and Service Marks) dated _____________, 1999 (the
"Consignor Trademark Assignment") pursuant to which MAJ Delaware has granted a
security interest in the Marks (as defined in the Consignor Trademark
Assignment) in order to secure the Obligations;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth and for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Collateral Sharing Agreement.
2. Mitsui is hereby added as a party to the Collateral Sharing
Agreement, with Mitsui to be included as a Consignor pursuant to the terms of
the Collateral Sharing Agreement.
<PAGE> 2
3. The Collateral Sharing Agreement is hereby amended so that the terms
"Consignor" and "Consignors" as used therein and herein shall include, from and
after the date hereof, Mitsui and Mitsui shall be entitled to all of the rights
and benefits as a Consignor thereunder and hereby assumes full liability for the
performance and observance of all and singular of the covenants, agreements and
conditions of the Collateral Sharing Agreement which are to be performed by the
Consignors thereunder.
4. The Collateral Sharing Agreement is hereby amended so that the term
"Collateral" as used therein and herein shall include, from and after the date
hereof, the Marks.
5. All necessary, conforming changes to the Collateral Sharing
Agreement occasioned by reason of this Second Amendment are hereby deemed to be
made.
6. This Second Amendment shall be binding upon the parties and their
respective successors and assigns.
7. Each of the Consignors acknowledge and agree that, except as
expressly provided herein, the terms and provisions of the Collateral Sharing
Agreement remain unchanged and the Collateral Sharing Agreement remains in full
force and effect in accordance with its terms. The terms "Agreement" as used in
the Collateral Sharing Agreement and all references to the Collateral Sharing
Agreement in any other documents or agreements by and between any of the parties
hereto which related to Debtor shall refer, from and after the date hereof, to
the Collateral Sharing Agreement as amended and supplemented by this Second
Amendment.
8. This Second Amendment shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
9. This Second Amendment may be executed with one or more counterparts
hereof, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their duly authorized officers as of the date first
above written.
ABN AMRO BANK N.V., NEW YORK BRANCH, as
Consignor
By: /s/ Jeffrey Sarfaty
------------------------------
Title: Vice President
----------------------------
By: /s/ Ned Koppelson
-------------------------------
Title: Vice President
---------------------------
Address: 500 Park Avenue
New York, NY 10017
Attention: Jeffrey Sarfaty
Telecopier: (212) 644-6905
<PAGE> 3
FLEET PRECIOUS METALS INC., as Agent and as
Consignor
By: /s/ Sharon Delfino
-------------------------------
Title: Vice President
----------------------------
By: /s/ Irene A. O'Garek
------------------------------
Title: Vice President
---------------------------
Address: 111 Westminster Street
Providence, RI 02903
Attention: Sharon Delfino
Telecopier: (401) 278-3077
CREDIT SUISSE FIRST BOSTON
formerly known as Credit Suisse, New York
Branch, as Consignor
By: /s/ Stuart B. Ganes
-------------------------------
Title: Vice President
----------------------------
By: /s/ Stanley R. Steinberg
-------------------------------
Title: Director
----------------------------
Address: 11 Madison Avenue
New York, New York 10010
Attention: Stuart Gaines
Telecopier: (212) 238-2426
PARIBAS, as Consignor
By: /s/ Anne-Catherine Mathiot
-------------------------------
Title: Director
----------------------------
By: /s/ Marcie Weiss
-------------------------------
Title: Director
---------------------------
Address: 787 Seventh Avenue
New York, NY 10019
Attention: Anne-Catherine Mathiot
Telecopier: (212) 841-2536
MITSUI & CO. (U.S.A.), INC.
By: /s/ Yutaka Taka
-------------------------------
Title: Senior Vice President
----------------------------
Address: 200 Park Avenue
New York, NY 10066
Attention: John Levin
Telecopier: (212) 878-4122
<PAGE> 4
Consented and agreed to:
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Allan Corn
--------------------------------
Title: Chief Financial Officer
-----------------------------
MA BRANDS, INC.
By: /s/ Michael A. Paolercio
--------------------------------
Title: Assistant Treasurer
----------------------------
<PAGE> 1
Exhibit No. 10.44
-----------------
SIXTH AMENDMENT TO AMENDED AND
RESTATED SECURITY AGREEMENT
---------------------------
THIS SIXTH AMENDMENT is made as of the 1st day of March, 2000, among
MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation (the "Debtor"), each of
the Secured Parties (as defined below) and FLEET PRECIOUS METALS INC. (the
"Agent"), individually and as agent pursuant to that certain Collateral Sharing
Agreement dated as of August 20, 1993, as amended from time to time, for each of
the following: ABN AMRO BANK N.V., NEW YORK BRANCH("ABN"); CREDIT SUISSE FIRST
BOSTON, f/k/a Credit Suisse, New York Branch ("Credit Suisse"), FLEET PRECIOUS
METALS INC. ("FPM"), and PARIBAS ("Paribas") and MITSUI & CO. (U.S.A.), INC.
("Mitusi") (jointly and severally, the "Secured Parties").
W I T N E S S E T H T H A T:
WHEREAS, the Secured Parties (other than Mitsui), the Agent and the
Debtor are parties to a certain Amended and Restated Security Agreement dated as
of August 20, 1993 (hereinafter, as amended by a certain First Amendment dated
as of May 16, 1994, a certain Second Amendment dated as of September 1, 1994, a
certain Third Amendment dated as of January 15, 1995, a certain Fourth Amendment
dated as of October 20, 1995, and a certain Fifth Amendment dated October 23,
1998) the "Security Agreement") pursuant to which the Debtor granted to the
Secured Parties (other than Mitsui) and the Agent a security interest in the
Collateral (as defined therein) and provided for the enforcement of such
security interest; and
WHEREAS, the Debtor and Mitsui desire to add Mitsui as a "Secured
Party" pursuant to the terms of the Security Agreement as Mitsui has entered
into a Consignment Agreement dated as of November 29, 1999 (hereinafter, as
amended or modified from time to time, the "Mitsui Agreement") with the Debtor;
and
WHEREAS, Mitsui is willing to comply with the covenants and terms of
such Security Agreement and any documents executed by the Secured Parties in
connection with the Security Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth and for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as follows:
1. The Secured Parties, the Agent and the Debtor hereby consent to the
addition of Mitsui as a party to the Security Agreement, with Mitsui to be
included as a Secured Party pursuant to the terms of the Security Agreement and
all references in the Security Agreement to "the Consignment Agreements" shall
include the Mitsui Agreement.
2. The Security Agreement is hereby amended so that the term "Secured
Parties" as used therein and herein shall include, from and after the date
hereof, Mitsui and Mitsui shall be entitled to all of the rights and benefits of
a Secured Party thereunder.
<PAGE> 2
3. The second "WHEREAS" clause on page 1 of the Security Agreement is
hereby amended to read as follows:
"WHEREAS, the Debtor and each of the Secured Parties have
entered into Consignment Agreements or Amended and Restated
Consignment Agreements dated as of August 20, 1993 (January
31, 1994 in the case of Credit Suisse and October 23, 1998 in
the case of Paribas and November 29, 1999 in the case of
Mitsui) (hereinafter, as amended from time to time, the
"Consignment Agreements") pursuant to which such Secured
Parties may deliver or have delivered gold on consignment for
sale to the Debtor (hereinafter collectively referred to as
the "Precious Metal"), and"
4. In order to secure the due and punctual payment and performance of
all indebtedness, liabilities and obligations of the Debtor contained in the
Mitsui Agreement and any related security instruments, and to secure the due and
punctual payment and performance of all indebtedness, liabilities and
obligations of the Debtor to Mitsui of every kind and description, direct,
indirect or contingent, now or hereafter existing, secured or unsecured, due or
to become due, including (without limitation) the obligations of the Debtor
under the Security Agreement, obligations with respect to forward contracts for
the purchase or sale of precious metal and obligations of the Debtor relating to
unpaid purchase price for Precious Metal (which indebtedness, liabilities and
obligations shall be deemed to be included as "Obligations" for all purposes of
the Security Agreement), the Debtor hereby grants to the Agent on behalf of
Mitsui and to Mitsui, and hereby ratifies and affirms its grant to the Agent on
behalf of the other Secured Parties and to each of the other Secured Parties of,
a continuing security interest in and a lien upon the Collateral.
5. Exhibit A attached to the Security Agreement is hereby deleted and
Exhibit A attached hereto is hereby added to and made a part of the Security
Agreement as Exhibit A thereto.
6. Any necessary, conforming changes to the Security Agreement
occasioned by reason of this Sixth Amendment shall be deemed to have been made.
7. This Sixth Amendment shall be binding upon the parties and their
respective successors and assigns.
8. Each of the Debtor, each Secured Party and the Agent acknowledge and
agree that, except as expressly provided herein, the terms and provisions of the
Security Agreement remain unchanged and the Security Agreement remains in full
force and effect in accordance with its terms. The term "Security Agreement" as
used in the Security Agreement and all references to the Security Agreement in
any other documents or agreements between any of the parties hereto which relate
to the Debtor shall refer, from and after the date hereof, to the Security
Agreement as amended and supplemented by this Sixth Amendment.
9. Unless otherwise defined herein or in the context otherwise
requires, all terms and phrases which are defined in the Security Agreement
shall have the same meaning when used herein.
<PAGE> 3
10. This Sixth Amendment shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
11. This Sixth Amendment may be executed with one or more counterparts
hereof, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be executed by their duly authorized officers as of the date first above
written.
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Michael A. Paolercio
-----------------------------
Title: Treasurer
--------------------------
FLEET PRECIOUS METALS INC.,
individually and as Agent for each
of the Secured Parties
By: /s/ Sharon Delfino
-----------------------------
Title: Vice President
--------------------------
By: /s/ Irene A. O'Garek
-----------------------------
Title: Vice President
--------------------------
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ Jeffrey Sarfaty
-----------------------------
Title: Vice President
--------------------------
By: /s/ Ned Koppelson
-----------------------------
Title: Vice President
--------------------------
CREDIT SUISSE, FIRST BOSTON f/k/a
Credit Suisse, New York Branch
By: /s/ Stuart B. Ganes
-----------------------------
Title: Vice President
--------------------------
By: /s/ Stanley R. Steinberg
-----------------------------
Title: Director
--------------------------
PARIBAS
By: /s/ Anne-Catherine Mathiot
-----------------------------
Title: Director
--------------------------
<PAGE> 4
By: /s/ Marcie Weiss
-----------------------------
Title: Director
--------------------------
MITSUI & CO.(U.S.A.), INC.
By: /s/ Yutaka Taka
-----------------------------
Title: Senior Vice President
--------------------------
<PAGE> 1
Exhibit No. 10.45
-----------------
NINTH AMENDMENT AND AGREEMENT
-----------------------------
TO
--
CONSIGNMENT AGREEMENT
---------------------
THIS NINTH AMENDMENT AND AGREEMENT TO CONSIGNMENT AGREEMENT is made as
of the 1st day of March, 2000, by and between FLEET PRECIOUS METALS INC., a
Rhode Island corporation with its principal offices at 111 Westminster Street,
Providence, Rhode Island 02903 (the "Consignor") and MICHAEL ANTHONY JEWELERS,
INC., a Delaware corporation with its principal office at 115 South MacQuesten
Parkway, Mount Vernon, New York 10550 (the "Consignee").
WITNESSETH THAT:
WHEREAS, the Consignor and the Consignee are parties to a certain
Consignment Agreement dated as of August 20, 1993, as previously amended by
various amendments and letter agreements (as amended, the "Consignment
Agreement") pursuant to which the Consignor agreed to consign precious metals to
the Consignee from time to time for use in the Consignee's manufacturing
operations; and
WHEREAS, the parties hereto desire to amend the Consignment Agreement
as hereinafter provided;
NOW, THEREFORE, for value received, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. All capitalized terms used herein without definition shall have the
meanings assigned by the Consignment Agreement.
2. Effective the date hereof, the definition of "Security Agreement" is
amended in its entirety to read as follows:
"Security Agreement" shall mean that certain Security
Agreement dated August 20, 1993 (as amended and as the same may be
amended from time to time), of the Consignee in favor of the Consignor,
as agent for itself and for ABN AMRO Bank N.V., New York Branch; Credit
Suisse First Boston, Paribas and Mitsui & Co. (U.S.A.), Inc."
3. Subsection 13(n) of the Consignment Agreement is hereby amended to
read as follows:
"(n) Occurrence of an event of default under any credit, loan
or consignment agreement to which Consignee is a party, as amended or
modified from time to time, including, without limitation (i) that
certain Loan and Security Agreement between the Debtor and the GECB
dated January 29, 1999 as evidenced by that certain Term Promissory
Note of the Consignee payable to the order of GECB in the original
principal amount of up to $10,500,000 issued pursuant to the Term Loan
Agreement; (ii) that certain Consignment Agreement
<PAGE> 2
dated as of August 20, 1993 between Consignee and ABN AMRO Bank N.V.,
New York Branch, (iii) that certain Consignment Agreement dated as of
January 31, 1994 between Consignee and Credit Suisse First Boston, (iv)
that certain Consignment Agreement dated as of October 23, 1998 between
Consignee and Paribas, (v) that certain Consignment Agreement between
Consignee and Mitsui & Co. (U.S.A.), Inc. dated November 29, 1999, and
(vi) that certain Line of Credit Agreement dated as of September 12,
1994 between the Consignee and The Chase Manhattan Bank;"
4. Effective the date hereof, of the Consignment Agreement is amended
by adding a new Paragraph 17 to read in its entirety as follows (in the event of
any inconsistency between the Consignment Agreement and the provisions of
Paragraph 17, the provisions of Paragraph 17 shall prevail and govern):
"17. (a) The Consignor may at any time pledge all or any
portion of its rights under the consignment documents to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C Section 341. No such pledge or
enforcement thereof shall release the Consignor from its obligations
under any of the loan and consignment documents.
(b) The Consignor shall have the unrestricted right at any
time or from time to time, and without the Consignee's consent, to
assign all or any portion of its rights and obligations hereunder to
one or more banks or other financial institutions (each, an
"Assignee"), and the Consignee agrees that it shall execute, or cause
to be executed, such documents, including without limitations,
amendments to this Agreement and to any other documents, instruments
and agreements executed in connection herewith as the Consignor shall
deem necessary to effect the foregoing. In addition, at the request of
the Consignor and any such Assignee, the Consignee shall issue one or
more new consignment agreements, as applicable, to any such Assignee
and, if the Consignor has retained any of its rights and obligations
hereunder following such assignment, to the Consignor, which new
consignment agreements shall be issued in replacement of, but not in
discharge of, the liability evidenced by the consignment agreement held
by the Consignor prior to such assignment and shall reflect the amount
of the respective commitments held by such Assignee and the Consignor
after giving effect to such assignment. Upon the execution and delivery
of appropriate assignment documentation, amendments and any other
documentation required by the Consignor in connection with such
assignment, and the payment by Assignee of the purchase price agreed to
by the Consignor and such Assignee, such Assignee shall be a party to
this Agreement and shall have all of the rights and obligations of the
Consignor hereunder (and under any and all other guaranties, documents,
instruments and agreements executed in connection herewith) to the
extent that such rights and obligations have been assigned by the
Consignor pursuant to the assignment documentation between the
Consignor and such Assignee, and the Consignor shall be released from
its obligations hereunder and thereunder to a corresponding extent.
(c) The Consignor shall have the unrestricted right at any
time and from time to time, and without the consent of, or notice to,
the Consignee, to
<PAGE> 3
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Consignor's obligations
hereunder and/or any or all of the credit facilities held by the
Consignor hereunder. In the event of any such grant by the Consignor of
a participating interest to a Participant, whether or not upon notice
to the Consignee, the Consignor shall remain responsible for the
performance of its obligations hereunder and the Consignee shall
continue to deal solely and directly with the Consignor in connection
with the Consignor's rights and obligations hereunder.
(d) The Consignor may furnish any information concerning the
Consignee in its possession from time to time to prospective Assignees
and Participants, provided that the Consignor shall require any such
prospective Assignee or Participant to agree in writing to maintain the
confidentiality of such information.
(e) All payments (other than payments in the form of precious
metal) shall be in lawful money of the United States in immediately
available funds.
(f) If the entire amount of any required principal and/or
interest is not paid in full within ten (10) days after the same is
due, Consignee shall pay to the Consignor a late fee equal to five
percent (5%) of the required payment.
(g) The term "Prime Rate" means the variable per annum rate of
interest so designated from time to time by Fleet National Bank as its
prime rate. The Prime Rate is a reference rate and does necessarily
represent the lowest or best rate being charged to any customer.
(h) All agreements between Consignee and Consignor are hereby
expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be
paid to Consignor for the use or the forbearance of the indebtedness
evidenced hereby exceed the maximum permissible under applicable law.
As used herein, the term "applicable law" shall mean the law in effect
as of the date hereof provided, however that in the event there is a
change in the law which results in a higher permissible rate of
interest, then this Consignment Agreement shall be governed by such new
law as of its effective date. In this regard, it is expressly agreed
that it is the intent of Consignee and the Consignor in the execution,
delivery and acceptance of this Consignment Agreement to contract in
strict compliance with the laws of the State of Rhode Island from time
to time in effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any of the consignment
documents or the security documents at the time of performance of such
provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever Consignor
should ever receive as interest and amount which would exceed the
highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall
<PAGE> 4
control every other provision of all agreements between Consignee and
Consignor.
(i) All computations of interest under the Consignment
Agreement shall be made on the basis of a three hundred sixty (360) day
year and the actual number of days elapsed.
(j) Upon receipt of an affidavit of an officer of the
Consignor as to the loss, theft, destruction or mutilation of the
consignment agreement or any other security document which is not of
public record, and, in the case of any such loss, theft destruction or
mutilation, upon surrender and cancellation of such consignment
agreement or other security document, the Consignee will issue, in lieu
thereof, a replacement consignment agreement or other security document
in the same principal amount thereof and otherwise of like tenor.
(k) This Agreement shall be governed by The Modified Following
Business Day Convention which shall mean the convention for adjusting
any relevant date if it would otherwise fall on a day that is not a
Business Day. The following terms, when used in conjunction with the
term, "Modified Following Business Day Convention," and a date, shall
mean that an adjustment will be made if that date would otherwise fall
on a day that is not a Business Day so that the date will be the first
following day that is a Business Day. A "Business Day" means, in
respect of any date that is specified in this Agreement to be subject
to adjustment in accordance with applicable Business Day Convention, a
day on which commercial banks settle payments in New York, if the
payment obligation is calculated by reference to the Prime Rate. If any
payment hereunder becomes due on a day which is not a Business Day, the
due date of the payment shall be extended to the next succeeding
Business Day, and such extension of time shall be included in computing
interest and fees in connection with such payment."
5. All references to the "Consignment Agreement" in that certain
Security Agreement dated August 20, 1993, as amended from time to time, by and
among the Consignee, the Consignor, individually and as agent for ABN AMRO Bank
N.V., New York Branch; Credit Suisse First Boston, Consignor, and Paribas, and
in any other documents or agreements by and between the parties hereto, shall
from and after the effective date hereof refer to the Consignment Agreement, as
previously amended and as amended hereby, and all obligations of the Consignee
under the Consignment Agreement, as amended hereby, shall be secured by and
entitled to the benefits of said Security Agreement and such other documents and
agreements.
6. Except as amended hereby, the Consignment Agreement shall remain in
full force and effect and is in all respects hereby ratified and affirmed.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
to be executed by their duly authorized officers as of the date first above
written.
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Michael A. Paolercio
-------------------------------
Title: Treasurer
----------------------------
FLEET PRECIOUS METALS INC.
By: /s/ Sharon Delfino
-------------------------------
Title: Vice President
-----------------------------
By: /s/ Irene A. O'Garek
--------------------------------
Title: Vice President
-----------------------------
<PAGE> 1
Exhibit No. 10.46
-----------------
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") is made as of the 7th
day of December, 1999, between Michael Anthony Jewelers, Inc. (the "Company")
and _____ (the "Employee").
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management team essential to protecting and enhancing its best
interests and the Company's stockholders;
WHEREAS, the Company recognizes that the possibility of a change of
control of the Company at some time in the future exists and that such
possibility and the uncertainty it may raise among management personnel may
result in the departure or distraction of such personnel to the detriment of the
Company and the Company's stockholders;
WHEREAS, the Compensation Committee (the "Committee") of the Company's
Board of Directors (the "Board") has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of the
key members of the Company's management team to their assigned duties without
the distraction arising from the possibility of a change of control.
NOW, THEREFORE, in consideration of the mutual covenants set forth
below and for other good and valuable consideration, the Company and the
Employee agree to the following Change of Control Agreement.
ARTICLE I
DEFINITIONS
1.1 "BENEFICIARY" means the Employee's estate.
1.2 "BENEFIT AMOUNT" means the cash payment payable pursuant to
Article II, subject to the terms and conditions contained in this Agreement.
1.3 "BOARD" means the Board of Directors of the Company.
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "COMMITTEE" means the Compensation Committee of the Board or
any other committee appointed by the Board which is invested by the Board with
responsibility for the administration of the Plan and whose members meet the
requirements for eligibility to serve as set forth in Exchange Act Rule 16b-3
and in the Plan.
1.6 "COMPANY" means Michael Anthony Jewelers, Inc.
<PAGE> 2
1.7 "EFFECTIVE DATE" means December 7, 1999.
1.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
in effect at the time of reference, or any successor law which may hereafter be
adopted in lieu thereof, and any reference to any specific provisions of the
Exchange Act shall refer to the corresponding provisions of the Exchange Act as
it may hereafter be amended or replaced.
ARTICLE II
BENEFITS
2.1 PAYMENT OF BENEFIT AMOUNT.
(a) If the Employee's employment with the Company is terminated under
the circumstances described in Section 2.1(b) within 12 months after a Change of
Control occurs, the Company will make a lump sum payment of the Benefit Amount
to the Employee or his Beneficiary within 15 days after such termination of
employment. No benefits shall be payable under the terms of the Agreement unless
a Change of Control occurs and the Employee's employment is terminated under the
circumstances described in Section 2.1(b).
(b) Termination of employment for purposes of this Section 2.1 shall
include the following:
(i) the Company's actual termination of the Employee's
employment other than "for cause" as defined in
Section 2.1(c)(i);
(ii) the Company's "constructive termination" of the
Employee's employment in as defined in Section
2.1(c)(ii); and
(iii) the Employee's resignation for "good reason" as
defined in Section 2.1(c)(iii).
<PAGE> 3
(c) Definitions:
(i) "For cause" means (A) the commission of an act of
fraud, embezzlement, theft or other criminal act
constituting a felony which results in a material
loss, damage or injury to the Company; (B) the
willful and wanton disregard of the rules or policies
of the Company which results in a material loss,
damage or injury to the Company; (C) a breach or
default in any material respect by the Employee of
any material provision of his agreements or
obligations under any provision of a written
employment agreement or competition agreement or
covenant with the Company which is not cured in all
substantial respects within ten (10) days after the
Company gives notice thereof to the Employee or (D)
the repeated failure of the Employee to perform
duties consistent with his position, or to follow or
comply with the reasonable directives of his
superiors, after having been given notice of such
failure.
(ii) "Constructive termination" means the occurrence of
any material reduction in the Employee's duties or
scope of authority, but shall not include termination
"for cause."
(iii) "Good reason" means the occurrence of any reduction
in the Employee's aggregate direct remuneration, any
material reduction in responsibilities or duties, any
material reduction in the aggregate of the Employee's
perquisities, employee or fringe benefits, a change
in the Employee's reporting relationship or position,
or relocation beyond a 25 mile radius of the
Company's Mount Vernon, New York headquarters.
(iv) "CHANGE OF CONTROL" means a Change of Control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act as
in effect on the date this Agreement is approved by
the Board, whether or not the Company is then subject
to such reporting requirement; provided that, without
limitation, a Change of Control shall be deemed to
have occurred if:
(A) any "person" (as defined in Sections
13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Company representing forty-five percent
(45%) or more of the combined voting power
of the Company's then outstanding
securities; provided, however, that: (i) the
forty-five percent (45%) threshold of this
clause (1) shall be increased to sixty
percent (60%) in the case of any such
"person" who, on the date this Agreement is
approved by the Board,
<PAGE> 4
is such a "beneficial owner" directly or
indirectly, of securities of the Company
representing fifteen percent (15%) or more
of the combined voting power of the
Company's then outstanding securities; and
(ii) a Change in Control shall not be deemed
to occur under this clause (1) by reason of
the acquisition of securities by the Company
or an employee benefit plan (or any trust
funding such a plan) maintained by the
Company, or by reason of the new issuance of
securities directly by the Company;
(B) during any period (not including any
period prior to the adoption of this Agreement) of one (1) year or, if
less, the period of time elapsed from the date this Agreement was
adopted by the Board, there shall cease to be a majority of the Board
comprised of "Continuing Directors" (hereinafter defined); or
(C) (i) the Board recommends to the
Company's stockholders or approves a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (ii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
"Continuing Directors" means individuals who
at the beginning of any period (not including any period prior to the
execution of this Agreement) of one (1) year or, if less, the period of
time elapsed from the date this Agreement was approved by the Board,
constitute the Board, and any new director(s) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still
in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved.
2.2 DETERMINATION OF BENEFIT AMOUNT. The Employee's Benefit Amount
shall be equal to the sum of the Employee's regular annual salary at the rate in
effect at the time of the Change of Control and any bonus paid or payable to the
Employee for the Company's fiscal year immediately preceding the fiscal year in
which the Change of Control occurs.
2.3 PAYMENT TO BENEFICIARY. If the Employee becomes entitled to payment
of the Benefit Amount pursuant to Section 2.1 and the Company is notified of the
Employee's death prior to payment of the Employee's entire Benefit Amount, the
remaining Benefit Amount will be distributed in the form of a lump sum payment
to the Employee's Beneficiary.
<PAGE> 5
2.4 MITIGATION NOT REQUIRED. If the Employee becomes entitled to
payment of the Benefit Amount as described in Section 2.1, the payment of such
Benefit Amount shall not be affected or reduced in any way by any compensation
to which the Employee may be or become entitled to on account of employment with
any other employer.
2.5 CONTINUATION OF MEDICAL AND DENTAL BENEFITS. If the Employee
becomes entitled to payment of the Benefit Amount as described in Section 2.1,
the Company shall continue in effect the medical and dental benefits being
provided to Employee immediately before his termination of employment or
resignation for a period of twelve (12) months, upon the same terms and
conditions as were in effect at such time. The twelve (12) month period shall
begin with the first full calendar month following the Employee's termination as
described in Section 2.1(b) and (c).
<PAGE> 6
ARTICLE III
TAXES
3.1 TAXES AND WITHHOLDING. If the Employee or his Beneficiary becomes
entitled to receive cash or recognizes other taxable income under this
Agreement, the Company will have the right to withhold taxes from the Employee's
or Beneficiary's payment hereunder or may deduct such taxes from any other
amounts payable to the Employee or Beneficiary at any time thereafter in cash or
otherwise. The Company will bear no responsibility whatsoever for the taxes or
tax effects resulting under this Agreement as to the Employee or any
Beneficiary.
3.2 CODE SECTION 162(m) LIMITATION. Notwithstanding anything in this
Agreement to the contrary, to the extent that Code Section 162(m) would operate
to limit the Company's federal income tax deduction for remuneration with
respect to the Employee, resulting in federal income tax liability to the
Company, payment of the Benefit Amount to the Employee shall be deferred until
Section 162(m) no longer operates to result in such federal income tax liability
to the Company. The determination of whether Code Section 162(m) operates to
limit the Company's deduction in a manner resulting in federal income tax
liability to the Company will be determined by the Committee. Payment of the
Benefit Amount to the Employee shall occur in the following calendar year (or,
if necessary, each subsequent calendar year) to the extent such payment, when
added to other remuneration subject to the Section 162(m) limit for such year,
does not result in federal income tax liability to the Company. In administering
the deferral mechanism of this Section 3.2, the determinations by the Committee
shall be final; however, the Committee shall act promptly in making its
determinations hereunder and shall not unnecessarily delay payment of the
Benefit Amount.
3.3 "GROSS-UP" FOR EXCISE TAXES. In the event the Employee becomes
subject to the excise tax imposed by Code Section 4999 (the "Excise Tax"), the
Company shall pay in cash to the Employee at the time specified below, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Employee shall be equal to the amount that would have been retained had such
excise tax not applied, as determined below.
The following shall govern the determination of the amount of the cash
payment described above:
(a) any other payments or benefits received or to be
received by the Employee in connection with a "change in control" of
the Company (as defined in Code section 280G) shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of the Company's independent auditors, such other payments or
benefits (in whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code,
<PAGE> 7
(b) For purposes of determining the amount of the
Gross-Up Payment, the Employee shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the
state and locality of the Employee's residence upon the change in
control, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
The amount of any Gross-Up Payment shall be paid to the Employee at the
time at which the Employee receives payment of the Benefit Amount pursuant to
Section 2.1. In the event that the Excise Tax is subsequently determined by the
Company's independent auditors to be less than the amount taken into account
hereunder at the time of the payment of the Benefit Amount, the Employee shall
repay to the Company the excess portion of the Gross-Up Payment plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the payment of the Benefit Amount
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional gross-up payment in respect of such excess (plus any interest payable
with respect to such excess) at the time that the amount of such excess is
finally determined.
ARTICLE IV
MISCELLANEOUS
4.1 SPENDTHRIFT CLAUSE. No amount provided under this Agreement will be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, either voluntary or involuntary, and any attempt
to so alienate, anticipate, sell, transfer, assign, pledge, encumber or charge
the same will be null and void. No such amount will be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person to whom
such amount is or may be payable, except as required under applicable law.
4.2 AMENDMENT AND TERMINATION OF AGREEMENT. The Board, in its sole
discretion, may amend this Agreement at any time; provided, however, that any
amendment which would impair or reduce the Employee's Benefit Amount or affect
the terms of payment of the Benefit Amount will be effective only if the
Employee consents in writing to the amendment. This Agreement will terminate
upon the earliest of the following: (a) payment of the Benefit Amount, (b) the
Employee's termination or resignation of employment prior to becoming eligible
to receive a benefit hereunder, or (c) the expiration of the twelve (12) month
period following a Change of Control.
4.3 EMPLOYMENT CONTRACT AND OTHER ARRANGEMENTS. The adoption and
maintenance of this Agreement will neither be deemed to nor will it be an
employment agreement between Company and the Employee.
<PAGE> 8
4.4 TITLES AND HEADINGS. The titles or headings of the Articles and
Sections hereof are included solely for convenience and reference and, in the
event of any conflict between such titles or headings and the text, the text
will control.
4.5 PARTIES TO AGREEMENT. This Agreement will be binding upon and will
operate for the benefit of the Company, its successors and assigns, and the
Employee and his or her heirs, estate and personal representatives.
4.6 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof, but subject to preemption of Federal
law.
4.7 GENDER. Where necessary or appropriate to the meaning hereof, the
singular, plural, masculine, feminine and neuter will be deemed to include each
other.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Employee has executed this
Agreement on this _____ day of ______, 1999.
MICHAEL ANTHONY JEWELERS, INC.
By:
---------------------------------
EMPLOYEE
------------------------------------
<PAGE> 1
Exhibit No. 10.47
-----------------
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") is made as of the 7th
day of December, 1999, between Michael Anthony Jewelers, Inc. (the "Company")
and ___________________ (the "Non-Employee Director").
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital Board of Directors essential to protecting and enhancing its
best interests and the Company's stockholders;
WHEREAS, the Company recognizes that the possibility of a change of
control of the Company at some time in the future exists and that such
possibility and the uncertainty it may raise among Non-Employee Directors of the
Board of Directors may result in the departure or distraction of such
Non-Employee Directors to the detriment of the Company and the Company's
stockholders;
WHEREAS, the Compensation Committee (the "Committee") of the Company's
Board of Directors (the "Board") has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of the
Non-Employee Directors to their duties without the distraction arising from the
possibility of a change of control.
NOW, THEREFORE, in consideration of the mutual covenants set forth
below and for other good and valuable consideration, the Company and the
Non-Employee Director agree to the following Change of Control Agreement.
ARTICLE I
DEFINITIONS
1.1 "BENEFICIARY" means the Non-Employee Director's estate.
1.2 "BENEFIT AMOUNT" means the cash payment payable pursuant to Article
II, subject to the terms and conditions contained in this Agreement.
1.3 "BOARD" means the Board of Directors of the Company.
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "COMMITTEE" means the Compensation Committee of the Board or any
other committee appointed by the Board which is invested by the Board with
responsibility for the administration of the Plan and whose members meet the
requirements for eligibility to serve as set forth in Exchange Act Rule 16b-3
and in the Plan.
1.6 "COMPANY" means Michael Anthony Jewelers, Inc.
<PAGE> 2
1.7 "EFFECTIVE DATE" means December 7, 1999.
1.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as in
effect at the time of reference, or any successor law which may hereafter be
adopted in lieu thereof, and any reference to any specific provisions of the
Exchange Act shall refer to the corresponding provisions of the Exchange Act as
it may hereafter be amended or replaced.
ARTICLE II
BENEFITS
2.1 PAYMENT OF BENEFIT AMOUNT.
(a) If the Non-Employee Director's service as a member of the Board of
Directors is terminated under the circumstances described in Section 2.1(b)
within 12 months after a Change of Control occurs, the Company will make a lump
sum payment of the Benefit Amount to the Director or his Beneficiary within 15
days after such cessation of services. No benefits shall be payable under the
terms of the Agreement unless a Change of Control occurs and the Non-Employee
Director's services are terminated under the circumstances described in Section
2.1(b).
(b) Termination of services for purposes of this Section 2.1 shall mean
that the services of the Non-Employee Director are no longer required by the
Company.
(c) Definitions:
(i) "CHANGE OF CONTROL" means a Change of Control of the
Company of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act as in effect on the
date this Agreement is approved by the Board, whether or
not the Company is then subject to such reporting
requirement; provided that, without limitation, a Change
of Control shall be deemed to have occurred if:
(A) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing forty-five percent (45%) or
more of the combined voting power of the Company's then outstanding
securities; provided, however, that: (i) the forty-five percent (45%)
threshold of this clause (1) shall be increased to sixty percent (60%)
in the case of any such "person" who, on the date this Agreement is
approved by the Board, is such a "beneficial owner" directly or
indirectly, of securities of the Company representing fifteen percent
(15%) or more of the combined voting power of the Company's then
outstanding securities; and (ii) a Change in Control shall not be
deemed to occur under this clause (1) by reason of the acquisition of
securities by the Company or a Director benefit plan (or any
<PAGE> 3
trust funding such a plan) maintained by the Company, or by reason of
the new issuance of securities directly by the Company;
(B) during any period (not including any period
prior to the adoption of this Agreement) of one (1) year or, if less,
the period of time elapsed from the date this Agreement was adopted by
the Board, there shall cease to be a majority of the Board comprised of
"Continuing Directors" (hereinafter defined); or
(C) (i) the Board recommends to the Company's
stockholders or approves a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity)
more than eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
"Continuing Directors" means individuals who at
the beginning of any period (not including any period prior to the
execution of this Agreement) of one (1) year or, if less, the period of
time elapsed from the date this Agreement was approved by the Board,
constitute the Board, and any new director(s) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still
in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved.
2.2 DETERMINATION OF BENEFIT AMOUNT. The Non-Employee Director's
Benefit Amount shall be equal to the sum of the Non-Employees Director's regular
annual compensation at the rate in effect at the time of the Change of Control.
2.3 PAYMENT TO BENEFICIARY. If the Non-Employee Director becomes
entitled to payment of the Benefit Amount pursuant to Section 2.1 and the
Company is notified of the Non-Employee Director's death prior to payment of the
Non-Employee Director's entire Benefit Amount, the remaining Benefit Amount will
be distributed in the form of a lump sum payment to the Non-Employee Director's
Beneficiary.
2.4 MITIGATION NOT REQUIRED. If the Non-Employee Director becomes
entitled to payment of the Benefit Amount as described in Section 2.1, the
payment of such Benefit Amount shall not be affected or reduced in any way by
any compensation to which the Non-Employee Director may be or become entitled to
on account of employment with any other employer.
<PAGE> 4
ARTICLE III
TAXES
3.1 TAXES AND WITHHOLDING. If the Non-Employee Director or his
Beneficiary becomes entitled to receive cash or recognizes other taxable income
under this Agreement, the Company will have the right to withhold taxes from the
Non-Employee Director's or Beneficiary's payment hereunder or may deduct such
taxes from any other amounts payable to the Non-Employee Director or Beneficiary
at any time thereafter in cash or otherwise. The Company will bear no
responsibility whatsoever for the taxes or tax effects resulting under this
Agreement as to the Non-Employee Director or any Beneficiary.
3.2 CODE SECTION 162(m) LIMITATION. Notwithstanding anything in this
Agreement to the contrary, to the extent that Code Section 162(m) would operate
to limit the Company's federal income tax deduction for remuneration with
respect to the Non-Employee Director, resulting in federal income tax liability
to the Company, payment of the Benefit Amount to the Non-Employee Director shall
be deferred until Section 162(m) no longer operates to result in such federal
income tax liability to the Company. The determination of whether Code Section
162(m) operates to limit the Company's deduction in a manner resulting in
federal income tax liability to the Company will be determined by the Committee.
Payment of the Benefit Amount to the Non-Employee Director shall occur in the
following calendar year (or, if necessary, each subsequent calendar year) to the
extent such payment, when added to other remuneration subject to the Section
162(m) limit for such year, does not result in federal income tax liability to
the Company. In administering the deferral mechanism of this Section 3.2, the
determinations by the Committee shall be final; however, the Committee shall act
promptly in making its determinations hereunder and shall not unnecessarily
delay payment of the Benefit Amount.
3.3 "GROSS-UP" FOR EXCISE TAXES. In the event the Non-Employee Director
becomes subject to the excise tax imposed by Code Section 4999 (the "Excise
Tax"), the Company shall pay in cash to the Non-Employee Director at the time
specified below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Non-Employee Director shall be equal to the amount that
would have been retained had such excise tax not applied, as determined below.
The following shall govern the determination of the amount of the cash
payment described above:
(a) any other payments or benefits received or to be
received by the Non-Employee Director in connection with a "change in
control" of the Company (as defined in Code section 280G) shall be
treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise
Tax, unless in the opinion of the Company's independent auditors, such
other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code,
<PAGE> 5
(b) For purposes of determining the amount of the
Gross-Up Payment, the Non-Employee Director shall be deemed to pay
federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rates of
taxation in the state and locality of the Non-Employee Director's
residence upon the change in control, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes.
The amount of any Gross-Up Payment shall be paid to the Non-Employee
Director at the time at which the Non-Employee Director receives payment of the
Benefit Amount pursuant to Section 2.1. In the event that the Excise Tax is
subsequently determined by the Company's independent auditors to be less than
the amount taken into account hereunder at the time of the payment of the
Benefit Amount, the Non-Employee Director shall repay to the Company the excess
portion of the Gross-Up Payment plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. In the event the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the payment of the Benefit Amount (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional gross-up payment in respect of
such excess (plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
ARTICLE IV
MISCELLANEOUS
4.1 SPENDTHRIFT CLAUSE. No amount provided under this Agreement will be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, either voluntary or involuntary, and any attempt
to so alienate, anticipate, sell, transfer, assign, pledge, encumber or charge
the same will be null and void. No such amount will be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person to whom
such amount is or may be payable, except as required under applicable law.
4.2 AMENDMENT AND TERMINATION OF AGREEMENT. The Board, in its sole
discretion, may amend this Agreement at any time; provided, however, that any
amendment which would impair or reduce the Non-Employee Director's Benefit
Amount or affect the terms of payment of the Benefit Amount will be effective
only if the Non-Employee Director consents in writing to the amendment. This
Agreement will terminate upon the earliest of the following: (a) payment of the
Benefit Amount, (b) the Non-Employee Director's cessation of services as a
member of the Board of Directors prior to becoming eligible to receive a benefit
hereunder, or (c) the expiration of the twelve (12) month period following a
Change of Control.
4.3 EMPLOYMENT CONTRACT AND OTHER ARRANGEMENTS. The adoption and
maintenance of this Agreement will neither be deemed to nor will it be an
employment agreement between Company and the Non-Employee Director.
<PAGE> 6
4.4 TITLES AND HEADINGS. The titles or headings of the Articles and
Sections hereof are included solely for convenience and reference and, in the
event of any conflict between such titles or headings and the text, the text
will control.
4.5 PARTIES TO AGREEMENT. This Agreement will be binding upon and will
operate for the benefit of the Company, its successors and assigns, and the
Non-Employee Director and his or her heirs, estate and personal representatives.
4.6 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof, but subject to preemption of Federal
law.
4.7 GENDER. Where necessary or appropriate to the meaning hereof, the
singular, plural, masculine, feminine and neuter will be deemed to include each
other.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Non-Employee Director has
executed this Agreement on this _____ day of ______, 1999.
MICHAEL ANTHONY JEWELERS, INC.
By:
---------------------------------
NON-EMPLOYEE DIRECTOR
------------------------------------
<PAGE> 1
Exhibit 10.48
<TABLE>
<S> <C>
154 Contract of sale for New York office, commercial and multi-family Distributed by Julius Blumberg, Inc.
residential premises. 1-86. NYC 10013
</TABLE>
Prepared by the Real Property Committee of the Association of the Bar or the
City of New York,
NOTE: This form is intended to cover matters common to most transactions.
Provisions should be added, altered or deleted to suit the circumstances of a
particular transaction.
CONTRACT OF SALE--OFFICE, COMMERCIAL AND MULTI-FAMILY RESIDENTIAL PREMISES
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Section 1. Sale of premises and acceptable title
Section 2. Purchase price, acceptable funds, existing mortgages, purchase
money mortgage, escrow of downpayment and foreign persons
Section 3. The closing
Section 4. Representations and warranties of seller
Section 5. Acknowledgements of purchaser
Section 6. Seller's obligations as to leases
Section 7. Responsibility for violations
Section 8. Destruction, damage or condemnation
Section 9. Covenants of seller
Section 10. Seller's closing obligations
Section 11. Purchaser's closing obligations
Section 12. Apportionments
Section 13. Objections to title, failure of seller or purchaser to perform and
vendee's lien
Section 14. Broker
Section 15. Notices
Section 16. Limitations on survival of representations, warranties, covenants
and other obligations
Section 17. Gains tax and miscellaneous provisions
Signatures and receipt by escrowee
Schedule A. Description of premises (to be attached)
Schedule B. Permitted exceptions
Schedule C. Purchase price
Schedule D. Miscellaneous
Schedule E. Rent schedule (to be attached)
CONTRACT dated 1999 between
MACQUESTEN REALTY COMPANY, a New York Partnership, having an office
at 115 South MacQuesten Parkway, Mount Vernon, N.Y. 10550
("Seller") and
MICHAEL ANTHONY JEWELERS, INC. a DELAWARE Corporation, having an
office at 115 South MacQuesten Parkway, Mount Vernon, N.Y. 10550
("Purchaser").
Seller and Purchaser hereby covenant and agree as follows:
SECTION 1. SALE OF PREMISES AND ACCEPTABLE TITLE
Section 1 .01. Seller shall sell to Purchaser, and Purchaser shall
purchase from Seller, at the price and upon the terms and conditions set forth
in this contract: (a) the parcel of land more particularly described in Schedule
A attached hereto ("Land"); (b) all buildings and improvements situated on
the land (collectively, "Building"); (c) all right, title and interest of
Seller, if any, in and to the land lying in the bed of any street or highway in
front of or adjoining the Land to the center line thereof and to any unpaid
award for any taking by condemnation or any damage to the Land by reason of a
change of grade of any street or highway; (d) the appurtenances and all the
estate and rights of Seller in and to the Land and Building; and (e) all right,
title and interest of Seller, if any, in and to the fixtures, equipment and
other personal property attached or appurtenant to the Building (collectively,
"Premises"). The Premises are located at or known as
60 South MacQuesten Parkway and 70 South MacQuesten Parkway, all in the
city of Mount Vernon, State of New York
Section 1.02. Seller shall convey and Purchaser shall accept fee simple
title to the Premises in accordance with the terms of this contract, subject
only to: (a) the matters set forth in Schedule B attached hereto (collectively,
"Permitted Exceptions"); and (b) such other matters as (i) the title insurer
specified in Schedule D attached hereto (or if none is so specified, then any
title insurer licensed to do business by the State of New York) shall be
willing, without special premium, to omit as exceptions to coverage or to and
(ii) shall be accepted by any lender described in Section 274-a of the Real
Property Law ("Institutional Lender") which has committed in writing to provide
mortgage financing to Purchaser for the purchase of the Premises ("Purchaser's
Institutional Lender").
SECTION 2. PURCHASE PRICE, ACCEPTABLE FUNDS, EXISTING MORTGAGES,
PURCHASE MONEY MORTGAGE, ESCROW OF DOWNPAYMENT AND FOREIGN PERSONS
2.01. The purchase price ("Purchase Price") to be paid by Purchaser
to Seller for the Premises as provided in Schedule C attached hereto is
$2, 450,000.00
Section 2.02. All monies payable under this contract, unless otherwise
specified in this contract, shall be paid by (a) certified checks of Purchaser
or any person making a purchase money loan to Purchaser drawn on any bank,
savings bank trust company or savings and loan association having a banking
office in the State of New York or (b) official bank check drawn by any such
banking institution, payable to the order of the Seller, except that uncertified
checks of Purchaser payable to the order of Seller up to the amount of one-half
of one percent of the Purchase Price shall be acceptable for sums payable to
Seller at the Closing.
<PAGE> 2
Section 2.03. (a) If Schedule C provides for the acceptance of title by
Purchaser subject to one or more existing mortgages (collectively, "Existing
Mortgage(s)"), the amounts specified in Schedule C with reference thereto may be
approximate. If at the Closing the aggregate principal amount of the Existing
Mortgage(s), as reduced by payments required thereunder prior to the Closing, is
less than the aggregate amount of the Existing Mortgage(s) as specified in
Schedule C, the difference shall be added to the monies payable at the Closing,
unless otherwise expressly provided herein.
(b) If any of the documents constituting the Existing Mortgage(s) or
the note(s) secured thereby prohibits or restricts the conveyance of the
Premises or any part thereof without the prior consent of the holder or holders
thereof ("Mortgagee(s)") or confers upon the Mortgagee(s) the right to
accelerate payment of the indebtedness or to change the terms of the Existing
Mortgage(s) in the event that a conveyance is made without consent of the
Mortgagee(s), Seller shall notify such Mortgagee(s) of the proposed conveyance
to Purchaser within 10 days after execution and delivery of this contract,
requesting the consent of such Mortgagee(s) thereto. Seller and Purchaser shall
furnish the Mortgagee(s) with such information as may reasonably be required
in connection with such request and shall otherwise cooperate with such
Mortgagee(s) and with each other in an effort expeditiously to procure such
consent, but neither shall be obligated to make any payment to obtain such
consent. If such Mortgagee(s) shall fail or refuse to grant such consent in
writing on or before the date set forth in Schedule D or shall require as a
condition of the granting of such consent that the terms of the Existing
Mortgage(s) be changed and Purchaser is unwilling to accept such change, then
unless Seller and Purchaser mutually agree to extend such date or otherwise
modify the terms of this contract, Purchaser may terminate this contract in the
manner provided in Section 13.02.
Section 2.06. In the event that Seller is a "foreign person", as
defined in Internal Revenue Code Section 1445 and regulations issued thereunder
(collectively, the "Code Withholding Section"), or in the event that Seller
fails to deliver the certification of non-foreign status required under Section
10.12(c), or in the event that Purchaser is not entitled under the Code With-
holding Section to rely on such certification, Purchaser shall deduct and with-
hold from the Purchase Price a sum equal to ten percent (10%) thereof and shall
at closing remit the withheld
<PAGE> 3
amount with Forms 8288 and 8288A (or any successors thereto) to the Internal
Revenue Service; and if the cash balance of the Purchase Price payable to Seller
at the Closing after deduction of net adjustments, apportionments and credits
(if any) to be made or allowed in favor of Seller at the Closing as herein
provided is less than ten percent (10%) of the Purchase Price, Purchaser shall
have the right to terminate this contract, in which event Seller shall refund
the Downpayment to Purchaser and shall reimburse Purchaser for title
examination and survey costs as if this contract were terminated pursuant to
Section 13.02. The right of termination provided for in this Section 2.06 shall
be in addition to and not in limitation of any other rights or remedies
available to Purchaser under applicable law.
SECTION 3. THE CLOSING
Section 3.01. Except as otherwise provided in this contract, the
closing of title pursuant to this contract ("Closing") shall take place on the
scheduled date and time of closing specified in Schedule D (the actual date of
the Closing being herein referred to as "Closing Date") at the place specified
in Schedule D.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 4.01. Unless otherwise provided in this contract, Seller is the
sole owner of the Premises.
Section 4.02. If the Premises are encumbered by an Existing
Mortgage(s), no written notice has been received from the Mortgagee(s)
asserting that a default or breach exists thereunder which remains uncured and
no such notice shall have been received and remain uncured on the Closing Date.
If copies of documents constituting the Existing Mortgage(s) and note(s) secured
thereby have been exhibited to and initialed by Purchaser or its representative,
such copies are true copies of the originals and the Existing Mortgage(s) and
note(s) secured thereby have not been modified or amended except as shown in
such documents.
Section 4.03. The information concerning written leases (which together
with all amendments and modifications thereof are collectively referred to as
"Leases") and any tenancies in the Premises not arising out of the Leases
(collectively, "Tenancies") set forth in Schedule E attached hereto ("Rent
Schedule") is accurate as of the date set forth therein or, if no date is set
forth therein, as of the date hereof, and there are no Leases or Tenancies of
any space in the Premises other than those set forth therein and any subleases
or subtenancies. Except as otherwise set forth in the Rent Schedule or
elsewhere in this contract:
(a) all of the Leases are in full force and effect and none of them has
been modified, amended or extended;
(b) no renewal or extension options have been granted to tenants;
(c) no tenant has an option to purchase the Premises;
(d) the rents set forth are being collected on a current basis and
there are no arrearages in excess of one month;
(e) no tenant is entitled to rental concessions or abatements for any
period subsequent to the scheduled date of closing;
(f) Seller has not sent written notice to any tenant claiming that such
tenant is in default, which default remains uncured;
(g) no action or proceeding instituted against Seller by any tenant of
the Premises is presently pending in any court, except with respect to claims
involving personal injury or property damage which are covered by insurance; and
(h) there are no security deposits other than those set forth in the
Rent Schedule.
If any Leases which have been exhibited to and initialed by
Purchaser or its representative contain provisions that are inconsistent with
the foregoing representations and warranties, such representations and
warranties shall be deemed modified to the extent necessary to eliminate such
inconsistency and to conform such representations and warranties to the
provisions of the Leases.
Section 4.04. If the Premises or any part thereof are subject to the
New York City Rent Stabilization Law, Seller is and on the Closing Date will be
a member in good standing of the Real Estate Industry Stabilization Association,
and, except as otherwise set forth in the Rent Schedule, there are no proceed-
ings with any tenant presently pending before the Conciliation and Appeals Board
in which a tenant has alleged an overcharge of rent or diminution of services
or similar grievance, and there are no outstanding orders of the Conciliation
and Appeals Board that have not been complied with by Seller.
Section 4.05. If the Premises or any part thereof are subject to the
New York City Emergency Rent and Rehabilitation Law, the rents shown are not in
excess of the maximum collectible rents, and, except as otherwise set forth in
the Rent Schedule, no tenants are entitled to abatements as senior citizens,
there are no proceedings presently pending before the rent commission in which
a tenant has alleged an overcharge of rent or diminution of services or similar
grievance, and there are no outstanding orders of the rent commission that have
not been complied with by Seller.
Section 4.06. If an insurance schedule is attached hereto, such
schedule lists all insurance policies presently affording coverage with respect
to the Premises, and the information contained therein is accurate as of the
date set forth therein or, if no date is set forth therein, as of the date
hereof.
Section 4.07. If a payroll schedule is attached hereto, such schedule
lists all employees presently employed at the Premises, and the information
contained therein is accurate as of the date set forth therein or, if no date is
set forth therein, as of the date hereof, and, except as otherwise set forth in
such schedule, none of such employees is covered by a union contract and there
are no retroactive increases or other accrued and unpaid sums owed to any
employee.
Section 4.08. If a schedule of service, maintenance, supply and
management contracts ("Service Contracts") is attached hereto, such schedule
lists all such contracts affecting the Premises, and the information set forth
therein is accurate as of the date set forth therein or, if no date is set forth
therein, as of the date hereof.
Section 4.09. If a copy of a certificate of occupancy for the Premises
has been exhibited to and initialed by Purchaser or its representative, such
copy is a true copy of the original and such certificate has not been amended,
but Seller makes no representation as to compliance with any such certificate.
Section 4.10. The assessed valuation and real estate taxes set forth in
Schedule D, if any, are the assessed valuation of the Premises and the taxes
paid or payable with respect thereto for the fiscal year indicated in such
schedule. Except as otherwise set forth in Schedule D, there are no tax
abatements or exemptions affecting the Premises.
Section 4.11. Except as otherwise set forth in a schedule attached
hereto, if any, if the Premises are used for residential purposes, each
apartment contains a range and a refrigerator, and all of the ranges and
refrigerators and all of the items of personal property (or replacements
thereof) listed in such schedule, if any, are and on the Closing Date will be
owned by Seller free of liens and encumbrances other than the lien(s) of the
Existing Mortgage(s), if any.
Section 4.12. Seller has no actual knowledge that any incinerator,
boiler or other burning equipment on the Premises is being operated in violation
of applicable law. If copies of a certificate or certificates of operation
therefor have been exhibited to and initialed by Purchaser or its
representative, such copies are true copies of the originals.
Section 4.13. Except as otherwise set forth in Schedule D, Seller has
no actual knowledge of any assessment payable in annual installments, or any
part thereof, which has become a lien on the Premises.
Section 4.14. Seller is not a "foreign person" as defined in the Code
Withholding Section.
SECTION 5. ACKNOWLEDGMENTS OF PURCHASER
Purchaser acknowledges that:
Section 5.01. Purchaser has inspected the Premises, is fully familiar
with the physical condition and state of repair thereof, and, subject to the
provisions of Section 7.01, Section 8.01, and Section 9.04, shall accept the
Premises "as is" and in their present condition, subject to reasonable use,
wear, tear and natural deterioration between now and the Closing Date, without
any reduction in the Purchase Price for any change in such condition by reason
thereof subsequent to the date of this contract.
Section 5.02. Before entering into this contract, Purchaser has made
such examination of the Premises, the operation, income and expenses thereof and
all other matters affecting or relating to this transaction as Purchaser deemed
necessary. In entering into this contract, Purchaser has not been induced by and
has not relied upon any representations, warranties or statements, whether or
implied, made by Seller or any agent, employee or other representative of Seller
or by any broker or any other person representing or purporting to represent
Seller, which are not expressly set forth in this contract, whether or not any
such representations, warranties or statements were made in writing or orally.
SECTION 6. SELLER'S OBLIGATIONS AS TO LEASES
Section 6.01. Unless otherwise provided in a schedule attached to this
contract, between the date of this contract and the Closing, Seller shall not,
without Purchaser's prior written consent, which consent shall not be
unreasonably withheld: (a) amend, renew or extend any Lease in any respect,
unless required by law; (b) grant a written lease to any tenant occupying space
pursuant to a Tenancy; or (c) terminate any Lease or Tenancy except by reason of
a default by the tenant thereunder.
Section 6.02. Unless otherwise provided in a schedule attached to this
contract, between the date of this contract and the Closing, Seller shall not
permit occupancy of, or enter into any new lease for, space in the Building
which is presently vacant or which may hereafter become vacant without first
giving Purchaser written notice of the identity of the proposed tenant, together
with (a) either a copy of the proposed lease or a summary of the terms thereof
in reasonable detail and (b) a
<PAGE> 4
statement of the amount of the brokerage commission, if any, payable in
connection therewith and the terms of payment thereof. If Purchaser objects to
such proposed lease, Purchaser shall so notify Seller within 4 business days
after receipt of Seller's notice if such notice was personally delivered to
Purchaser, or within 7 business days after the mailing of such notice by Seller
to Purchaser, in which case Seller shall not enter into the proposed lease.
Unless otherwise provided in a schedule attached to this contract, Purchaser
shall pay to Seller at the Closing, in the manner specified in Section 2.02, the
rent and additional rent that would have been payable under the proposed lease
from the date on which the tenant's obligation to pay rent would have commenced
if Purchaser had not so objected until the Closing Date, less the amount of the
brokerage commission specified in Seller's notice and the reasonable cost of
decoration or other work required to be performed by the landlord under the
terms of the proposed lease to suit the premises to the tenant's occupancy
("Reletting Expenses"), prorated in each case over the term of the proposed
lease and apportioned as of the Closing Date. If Purchaser does not so notify
Seller of its objection, Seller shall have the right to enter into the proposed
lease with the tenant identified in Seller's notice and Purchaser shall pay to
Seller, in the manner specified in Section 2.02, the Reletting Expenses,
prorated in each case over the term of the lease and apportioned as of the later
of the Closing Date or the rent commencement date. Such payment shall be made by
Purchaser to Seller at the Closing. In no event shall the amount so payable to
Seller exceed the sums actually paid by Seller on account thereof.
Section 6.03. If any space is vacant on the Closing Date, Purchaser
shall accept the Premises subject to such vacancy, provided that the vacancy
was not permitted or created by Seller in violation of any restrictions
contained in this contract. Seller shall not grant any concessions or rent
abatements for any period following the Closing without Purchaser's prior
written consent. Seller shall not apply all or any part of the security deposit
of any tenant unless such tenant has vacated the Premises.
Section 6.04. Seller does not warrant that any particular Lease or
Tenancy will be in force or effect at the Closing or that the tenants will have
performed their obligations thereunder. The termination of any Lease or Tenancy
prior to the Closing by reason of the tenant's default shall not affect the
obligations of Purchaser under this contract in any manner or entitle Purchaser
to an abatement of or credit against the Purchase Price or give rise to any
other claim on the part of Purchaser.
Section 6.05. Seller hereby indemnifies and agrees to defend Purchaser
against any claims made pursuant to Section 7-107 or Section 7-108 of the
General Obligations Law (the "GOL") by tenants who resided in the Premises on or
prior to the Closing Date other than (a) claims with respect to tenants'
security deposits paid, credited or assigned to Purchaser pursuant to Section
10.03, (b) claims made pursuant to Section 7-107 of the GOL with respect to
funds for which Seller was not liable, and (c) claims made pursuant to Section
7-108 of the GOL by tenants to whom Purchaser failed to give the written notice
specified in Section 7-108(c) of the GOL within thirty days after the Closing
Date. The foregoing indemnity and agreement shall survive the Closing and shall
be in lieu of any escrow permitted by Section 7-108(d) of the GOL, and Purchaser
hereby waives any right it may have to require any such escrow.
SECTION 7. RESPONSIBILITY FOR VIOLATIONS
SECTION 8. DESTRUCTION, DAMAGE OR CONDEMNATION
Section 8.01. The provisions of Section 5-1311 of the General
Obligations Law shall apply to the sale and purchase provided for in this
contract.
SECTION 9. COVENANTS OF SELLER
Seller covenants that between the date of this contract and the
Closing:
Section 9.01. The Existing Mortgage(s) shall not be amended or
supplemented or prepaid in whole or in part. Seller shall pay or make, as and
when due and payable, all payments of principal and interest and all deposits
required to be paid or made under the Existing Mortgage(s).
Section 9.02. Seller shall not modify or amend any Service Contract or
enter into any new service contract unless the same is terminable without
penalty by the then owner of the Premises upon not more than 30 days' notice.
Section 9.03. If an insurance schedule is attached hereto, Seller shall
maintain in full force and effect until the Closing the insurance policies
described in such schedule or renewals thereof for no more than one year of
those expiring before the Closing.
Section 9.04. No fixtures, equipment or personal property included in
this sale shall be removed from the Premises unless the same are replaced with
similar items of at least equal quality prior to the Closing.
Section 9.05. Seller shall not withdraw, settle or otherwise compromise
any protest or reduction proceeding affecting real estate taxes assessed
against the Premises for any fiscal period in which the Closing is to occur or
any subsequent fiscal period without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld. Real estate tax refunds and
credits received after the Closing Date which are attributable to the fiscal
tax year during which the Closing Date occurs shall be apportioned between
Seller and Purchaser, after deducting the expenses of collection thereof,
which obligation shall survive the Closing.
Section 9.06. Seller shall allow Purchaser or Purchaser's
representatives access to the Premises, the Leases and other documents required
to be delivered under this contract upon reasonable prior notice at reasonable
times.
SECTION 10. SELLER'S CLOSING OBLIGATIONS
At or prior to the Closing, Seller shall deliver the following to
Purchaser:
Section 10.01. A statutory form of bargain and sale deed without
covenant against grantor's acts, containing the covenant required by Section 13
of the Lien Law, and properly executed in proper form for recording so as to
convey the title required by this contract.
Section 10.02. All Leases initialed by Purchaser and all others in
Seller's possession.
Section 10.03. A schedule of all security deposits (and, if the
Premises contains six or more family dwelling units, the most recent reports
with respect thereto issued by each banking organization in which they are
deposited pursuant to GOL Section 7-103) and a check or credit to Purchaser in
the amount of any cash security deposits, including any interest thereon, held
by Seller on the Closing Date or, if held by an Institutional Lender, an
assignment to Purchaser and written instructions to the holder of such deposits
to transfer the same to Purchaser, and appropriate instruments of transfer or
assignment with respect to any security deposits which are other than cash.
Section 10.04. A schedule updating the Rent Schedule and setting forth
all arrears in rents and all prepayments of rents.
Section 10.05. All Service Contracts initialed by Purchaser and all
others in Seller's possession which are in effect on the Closing Date and which
are assignable by Seller.
<PAGE> 5
Section 10.06. An assignment to Purchaser, without recourse or
warranty, of all of the interest of Seller in those Service Contracts, insurance
policies, certificates, permits and other documents to be delivered to Purchaser
at the Closing which are then in effect and are assignable by Seller.
Section 10.07. (a) Written consent(s) of the Mortgagee(s), if required
under Section 2.03(b), and (b) certificate(s) executed by the Mortgagee(s) in
proper form for recording and certifying (i) the amount of the unpaid principal
balance thereof, (ii) the maturity date thereof, (iii) the interest rate, (iv)
the last date to which interest has been paid thereon and (v) the amount of any
escrow deposits held by the Mortgagee(s). Seller shall pay the fees for
recording such certificate(s). Any Mortgagee which is an Institutional Lender
may furnish a letter complying with Section 274-a of the Real Property Law in
lieu of such certificate.
Section 10.08, An assignment of all Seller's right, title and interest
in escrow deposits for real estate taxes, insurance premiums and other amounts,
if any, then held by the Mortgagee(s).
Section 10.09. All original insurance policies with respect to which
premiums are to be apportioned or, if unobtainable, true copies or certificates
thereof.
Section 10.10. To the extent they are then in Seller's possession and
not posted at the Premises, certificates, licenses, permits, authorizations and
approvals issued for or with respect to the Premises by governmental and
quasi-governmental authorities having jurisdiction.
Section 10.11. Such affidavits as Purchaser's title company shall
reasonably require in order to omit from its title insurance policy all
exceptions for judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to Seller's name.
Section 10.12(a) Checks to the order of the appropriate officers in
payment of all applicable real property transfer taxes and copies of any
required tax returns therefor executed by Seller, which checks shall be
certified or official bank checks if required by the taxing authority, unless
Seller elects to have Purchaser pay any of such taxes and credit Purchaser with
the amount thereof, (b) the Tentative Assessment and Return or Statement of No
Tax Due or affidavit (whichever is applicable) and the checks and other items
(if any) required under Section 17.09(a), and (c) a certification of non-foreign
status, in form required by the Code Withholding Section, signed under penalty
of perjury. Seller understands that such certification will be retained by
Purchaser and will be made available to the Internal Revenue Service on
request.
Section 10.13. To the extent they are then in Seller's possession,
copies of current painting and payroll records. Seller shall make all other
Building and tenant files and records available to Purchaser for copying, which
obligation shall survive the Closing.
Section 10.14. An original letter, executed by Seller or by its agent,
advising the tenants of the sale of the Premises to Purchaser and directing that
rents and other payments thereafter be sent to Purchaser or as Purchaser may
direct.
Section 10.15. Notice(s) to the Mortgagee(s), executed by Seller or by
its agent, advising of the sale of the Premises to Purchaser and directing that
future bills and other correspondence should thereafter be sent to Purchaser or
as Purchaser may direct.
Section 10.16. If Seller is a corporation and if required by Section
909 of the Business Corporation Law, a resolution of Seller's board of directors
authorizing the sale and delivery of the deed and a certificate executed by the
secretary or assistant secretary of Seller certifying as to the adoption of such
resolution and setting forth facts showing that the transfer complies with
the requirements of such law. The deed referred to in Section 10.01 shall also
contain a recital sufficient to establish compliance with such law.
Section 10.17. Possession of the Premises in the condition required
by this contract, subject to the Leases and Tenancies, and keys therefor.
Section 10.18. Any other documents required by this contract to be
delivered by Seller.
SECTION 11. PURCHASER'S CLOSING OBLIGATIONS
At the Closing, Purchaser shall:
Section 11.01. Deliver to Seller checks in payment of the portion of
the Purchase Price payable at the Closing, as adjusted for apportionments under
Section 12, plus the amount of escrow deposits, if any, assigned pursuant to
Section 10.08.
Section 11.03. Deliver to Seller an agreement indemnifying and agreeing
to defend Seller against any claims made by tenants with respect to tenants'
security deposits to the extent paid, credited or assigned to Purchaser under
Section 10.03.
Section 11.04. Cause the deed to be recorded, duly complete all
required real property transfer tax returns and cause all such returns and
checks of the Seller in payment of such taxes to be delivered to the appropriate
officers promptly after the Closing.
Section 11.05. Deliver any other documents required by this contract to
be delivered by Purchaser.
SECTION 12. APPORTIONMENTS
Section 12.01. The following apportionments shall be made between the
parties at the Closing as of the close of business on the day prior to the
Closing Date:
(a) prepaid rents and Additional Rents (as defined in Section 12.03);
(b) interest on the Existing Mortgage(s);
(c) real estate taxes, water charges, sewer rents and vault charges, if
any, on the basis of the fiscal period for which assessed, except that if there
is a water meter on the Premises, apportionment at the Closing shall be based on
the last available reading, subject to adjustment after the Closing when the
next reading is available;
(d) wages, vacation pay, pension and welfare benefits and other fringe
benefits of all persons employed at the Premises whose employment was not
terminated at or prior to the Closing;
(e) value of fuel stored on the Premises, at the price then charged by
Seller's supplier, including any taxes;
(f) charges under transferable Service Contracts or permitted renewals
or replacements thereof;
(g) permitted administrative charges, if any, on tenants' security
deposits;
(h) dues to rent stabilization associations, if any;
(i) insurance premiums on transferable insurance policies listed on a
schedule hereto or permitted renewals thereof;
(j) Reletting Expenses under Section 6.02, if any; and
(k) any other items listed in Schedule D.
If the Closing shall occur before a new tax rate is fixed, the
apportionment of taxes at the Closing shall be upon the basis of the old tax
rate for the preceding period applied to latest assessed valuation. Promptly
after the new tax rate is fixed, the apportionment of taxes shall be recomputed.
Any discrepancy resulting from such recomputation and any errors or omissions in
computing apportionments at Closing shall be promptly corrected, which
obligations shall survive the Closing.
Section 12.02. If any tenant is in arrears in the payment of rent on
the Closing Date, rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month preceding the
month in which the Closing occurred; (b) then to the month in which the Closing
occurred; (c) then to any month or months following the month in which the
Closing occurred; and (d) then to the period prior to the month preceding the
month in which the Closing occurred. If rents or any portion thereof received by
Seller or Purchaser after the Closing are payable to the other party by reason
of this allocation, the appropriate sum, less a proportionate share of any
reasonable attorneys' fees, costs and expenses of collection thereof, shall be
promptly paid to the other party, which obligation shall survive the Closing.
Section 12.03. If any tenants are required to pay percentage rent,
escalation charges for real estate taxes, operating expenses, cost-of-living
adjustments or other charges of a similar nature ("Additional Rents") and any
Additional Rents are collected by Purchaser after the Closing which are
attributable in whole or in part to any period prior to the Closing, then
Parchaser shall promptly pay to Seller Seller's proportionate share thereof,
less a proportionate share of any reasonable attorneys' fees, costs and expenses
of collection thereof, if and when the tenant paying the same has made all
payments of rent and Additional Rent then due to Purchaser pursuant to the
tenant's Lease, which obligation shall survive the Closing.
SECTION 13. OBJECTIONS TO TITLE, FAILURE OF SELLER OR PURCHASER TO PERFORM AND
VENDEE'S LIEN
Section 13.01. Purchaser shall promptly order an examination of title
and shall cause a copy of the title report to be forwarded to Seller's attorney
upon receipt. Seller shall be entitled to a reasonable adjournment or
adjournments of the Closing for up to 60 days or until the expiration date of
any written commitment of Purchaser's Institutional Lender delivered to
Purchaser prior to the scheduled date of Closing, whichever occurs first, to
remove any defects in or objections to title noted in such title report and any
other defects or objections which may be disclosed on or prior to the Closing
Date.
<PAGE> 6
Section 13.03. Any unpaid taxes, assessments, water charges and sewer
rents, together with the interest and penalties thereon to a date not less than
two days following the Closing Date, and any other liens and encumbrances which
Seller is obligated to pay and discharge or which are against corporations,
estates or other persons in the chain of title, together with the cost of
recording or filing any instruments necessary to discharge such liens and
encumbrances of record, may be paid out of the proceeds of the monies payable at
the Closing if Seller delivers to Purchaser on the Closing Date official bills
for such taxes, assessments, water charges, sewer rents, interest and penalties
and instruments in recordable form sufficient to discharge any other liens and
encumbrances of record. Upon request made a reasonable time before the Closing,
Purchaser shall provide at the Closing separate checks for the foregoing payable
to the order of the holder of any such lien, charge or encumbrance and otherwise
complying with Section 2.02. If Purchaser's title insurance company is willing
to insure both Purchaser and Purchaser's Institutional Lender, if any, that such
charges, liens and encumbrances will not be collected out of or enforced against
the Premises, then, unless Purchaser's Institutional Lender reasonably refuses
to accept such insurance in lieu of actual payment and discharge, Seller shall
have the right in lieu of payment and discharge to deposit with the title
insurance company such funds or assurances or to pay such special or additional
premiums as the title insurance company may require in order to so insure. In
such case the charges, liens and encumbrances with respect to which the title
insurance company has agreed so to insure shall not be considered objections to
title.
Section 13.04. If Purchaser shall default in the performance of its
obligation under this contract to purchase the Premises, the sole remedy of
Seller shall be to retain the Downpayment as liquidated damages for all loss,
damage and expense suffered by Seller, including without limitation the loss of
its bargain.
Section 13.05. Purchaser shall have a vendee's lien against the
Premises for the amount of the Downpayment, but such lien shall not continue
after default by Purchaser under this contract.
SECTION 14. BROKER
Section 14.01. If a broker is specified in Schedule D, Seller and
Purchaser mutually represent and warrant that such broker is the only broker
with whom they have dealt in connection with this contract and that neither
Seller nor Purchaser knows of any other broker who has claimed or may have the
right to claim a commission in connection with this transaction, unless
otherwise indicated in Schedule D. The commission of such broker shall be paid
pursuant to separate agreement by the party specified in Schedule D. If no
broker is specified in Schedule D, the parties acknowledge that this contract
was brought about by direct negotiation between Seller and Purchaser and that
neither Seller nor Purchaser knows of any broker entitled to a commission in
connection with this transaction, Unless otherwise provided in Schedule D,
Seller and Purchaser shall indemnify and defend each other against any costs,
claims or expenses, including attorneys' fees, arising out of the breach on
their respective parts of any representations, warranties or agreements
contained in this paragraph. The representations and obligations under this
paragraph shall survive the Closing or, if the Closing does not occur, the
termination of this contract.
SECTION 15. NOTICES
Section 15.01. All notices under this contract shall be in writing and
shall be delivered personally or shall be sent by prepaid registered or
certified mail, addressed as set forth in Schedule D, or as Seller or Purchaser
shall otherwise have given notice as herein provided.
SECTION 16. LIMITATIONS ON SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND OTHER OBLIGATIONS
Section 16.01. Except as otherwise provided in this contract, no
representations, warranties, covenants or other obligations of Seller set forth
in this contract shall survive the Closing and no action based thereon shall be
commenced after the Closing. The representations, warranties, covenants and
other obligations of Seller set forth in Section 4.03, Section 6.01 and Section
6.02 shall survive until the Limitation Date specified in Schedule D (or if none
is so specified, the Limitation Date shall be the date which is six months after
the Closing Date), and no action based thereon shall be commenced after the
Limitation Date.
Section 16.02. The delivery of the deed by Seller, and the acceptance
thereof by Purchaser, shall be deemed the full performance and discharge of
every obligation on the part of Seller to be performed hereunder, except those
obligations of Seller which are expressly stated in this contract to survive the
Closing.
SECTION 17. GAINS TAX AND MISCELLANEOUS PROVISIONS
Section 17.01. If consent of the Existing Mortgagee(s) is required
under Section 2.03(b), Purchaser shall not assign this contract or its rights
hereunder without the prior written consent of Seller. No permitted assignment
of Purchaser's rights under this contract shall be effective against Seller
unless and until an executed counterpart of the instrument of assignment shall
have been delivered to Seller and Seller shall have been furnished with the name
and address of the assignee. The term "Purchaser" shall be deemed to include the
assignee under any such effective assignment.
Section 17.02. This contract embodies and constitutes the entire
understanding between the parties with respect to the transaction contemplated
herein, and all prior agreements, understandings, representations and
statements, oral or written, are merged into this contract. Neither this
contract nor any provision hereof may be waived, modified, amended, discharged
or terminated except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.
Section 17.03. This contract shall be governed by, and construed in
accordance with, the law of the State of New York.
Section 17.04. The captions in this contract are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this contract or any of the provisions hereof.
Section 17.05. This contract shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs or successors and
permitted assigns.
Section 17.06. This contract shall not be binding or effective until
properly executed and delivered by Seller and Purchaser.
Section 17.07. As used in this contract, the masculine shall include
the feminine and neuter, the singular shall include the plural and the plural
shall include the singular, as the context may require.
Section 17.08. If the provisions of any schedule or rider to this
contract are inconsistent with the provisions of this contract, the provisions
of such schedule or rider shall prevail. Set forth in Schedule D is a list of
any and all schedules and riders which are attached hereto but which are not
listed in the Table of Contents.
Section 17.09. (a) Seller and Purchaser agree to comply in a timely
manner with the requirements of Article 31-B of the Tax Law of the State of New
York and the regulations applicable thereto, as the same from time to time may
be amended (collectively, the "Gains Tax Law"). Purchaser agrees to deliver to
Seller a duly executed and acknowledged Transferee Questionnaire
simultaneously with the execution of this contract or within five (5) business
days after subsequent written request from Seller or Seller's attorney. At the
Closing, Seller shall deliver (i) an official Statement of No Tax Due or (ii)
an official Tentative Assessment and Return accompanied by a certified check or
official bank check drawn on any banking institution described in Section
2.02(a), payable to the order of the State Tax Commission in the amount of the
tax shown to be due thereon (it being understood, however, that if Seller has
duly elected to pay such tax in installments, the amount so required to be paid
shall be the minimum installment of such tax then permitted to be paid), or
(iii) if applicable, a duly executed and acknowledged affidavit in form
permitted under the Gains Tax Law claiming exemption therefrom.
(b) Seller agrees (i) to pay promptly any installment(s) or
additional tax due under the Gains Tax Law, and interest and penalties thereon,
if any, which may be assessed or due after the Closing, (ii) to indemnify and
save the Purchaser harmless from and against any of the foregoing and any
damage, liability, cost or expense (including reasonable attorneys' fees)
which may be suffered or incurred by Purchaser by reason of the non-payment
thereof, and (iii) to make any other payments and execute, acknowledge and
deliver such further documents as may be necessary to comply with the Gains Tax
Law.
(c) If this contract is assignable by Purchaser, no assignment of any
rights hereunder shall be effective unless every assignor and assignee complies
in a timely manner with the requirements of the Gains Tax Law applicable to the
<PAGE> 7
ivers to Seller at or before the Closing the applicable items referred to in
subparagraph (a) of this Section, all as may be required as a prerequisite to
the recording of the deed. In addition to making the payments and delivering the
instruments and documents referred to above, Purchaser and any assignor or
assignee of this contract shall promptly (i) make any other payments and (ii)
execute, acknowledge and deliver such further documents and instruments as may
be necessary to comply with the Gains Tax Law.
(d) Purchaser, if request is made within a reasonable time prior to
the Closing Date, shall provide at the Closing a separate certified or official
bank check drawn on any banking institution described in Section 2.02(a) in the
amount of the tax shown to be due on the official Tentative Assessment and
Return, which amount shall be credited against the balance of the Purchase Price
payable at the Closing.
(e) The provisions of this Section 17.09 shall survive the delivery of
the deed.
IN WITNESS WHEREOF, the parties hereto have executed this contract as of the
date first above written.
Seller: MACQUESTEN REALTY COMPANY
By:
------------------------------
MICHAEL PAOLERCIO, PARTNER
Purchaser:
MICHAEL ANTHONY JEWELERS, INC.
By:
------------------------------
RECEIPT BY ESCROWEE
The undersigned Escrowee hereby acknowledges receipt of $ _______________, by
check subject to collection, to be held in escrow pursuant to Section 2.05.
------------------------
SCHEDULE A
DESCRIPTION OF PREMISES
(to be attached separately and to include tax map designation)
SCHEDULE B
PERMITTED EXCEPTIONS
1. Zoning regulations and ordinances which are not violated by the
existing structures or present use thereof and which do not render title
uninsurable.
2. Consents by the Seller or any former owner of the Premises for the
erection of any structure or structures on, under or above any street or streets
on which the Premises may abut.
3. The Existing Mortgage(s) and financing statements, assignments of
leases and other collateral assignments ancillary thereto.
4. Leases and Tenancies specified in the Rent Schedule and any new
leases or tenancies not prohibited by this contract.
5. Unpaid installments of assessments not due and payable on or before
the Closing Date.
6. Financing statements, chattel mortgages and liens on personalty
filed more than 5 years prior to the Closing Date and not renewed, or filed
against property or equipment no longer located on the Premises or owned by
Tenants.
7. (a) Rights of utility companies to lay, maintain, install and repair
pipes, lines, poles, conduits, cable boxes and related equipment on, over and
under the Premises, provided that none of such rights imposes any monetary
obligation on the owner of the Premises.
(b) Encroachments of stoops, areas, cellar steps, trim cornices,
lintels, window sills, awnings, canopies, ledges, fences, hedges, coping and
retaining walls projecting from the Premises over any street or highway or over
any adjoining property and encroachments of similar elements projecting from
adjoining property over the Premises.
(c) Revocability or lack of right to maintain vaults, coal chutes,
excavations or sub-surface equipment beyond the line of the Premises.
(d) Any state of facts that an accurate survey would disclose,
provided that such facts do not render title unmarketable. For the purposes of
this contract, none of the facts shown on the survey, if any, identified below
shall be deemed to render title unmarketable, and Purchaser shall accept title
subject thereto:
(e) Covenants, restrictions and easements of record as set forth in
Schedule F, annexed hereto.
(f) Leases and tenancies as set forth in Schedule E hereto annexed.
<PAGE> 8
SCHEDULE C
PURCHASE PRICE
The Purchase Price shall be paid as follows:
(a) By check subject to collection, the receipt of which is
hereby acknowledged by Seller:
(b) By check or checks delivered to Seller at the Closing in
accordance with the provisions of section 2.02: $1,455,915.00
(c) By acceptance of title subject to the following Existing
Mortgage(s):
Mortgage dated August 16, 1993 between Michael Anthony Company as
Mortgagor and First Fidelity Bank, N.A. as Mortgagee $944,085.00
(d) By execution and delivery to Seller by Purchaser or its assignee
of a note secured by a Purchase Money Mortgage on the Premises, payable as
follows:
--------------
PURCHASE PRICE $ 2,450,000.00
==============
SCHEDULE D
MISCELLANEOUS
1. Title insurer designated by the parties (section 1.02):
2. Last date for consent by Existing Mortgagee(s) (section 2.03(b)):
3. Maximum Interest Rate of any Refinanced Mortgage (section 2.04(b)):
N/A
4. Prepayment Date on or after which Purchase Money Mortgage may be prepaid
(section 2.04(c)):
N/A
5. Seller's tax identification number (section 2.05):
13-3864592
6. Purchaser's tax identification number (section 2.05):
13-2910285
7. Scheduled time and date of Closing (section 3.01):
8. Place of Closing (section 3.01):
115 South MacQuesten Parkway,
Mount Vernon, NY 10550
9. Assessed valuation of Premises (section 4.10):
Actual Assessment: See Rider
Transition Assessment:
10. Fiscal year and annual real estate taxes on Premises (section 4.10):
See Rider
11. Tax abatements or exemptions affecting Premises (section 4.10):
N/A
12. Assessments on Premises (section 4.13):
NONE
13. Maximum Amount which Seller must spend to cure violations, etc.
(section 7.02):
N/A
14. Maximum Expense of Seller to cure title defects, etc.
(section 13.02): NONE
15. Broker, if any (section 14.01):
NONE
16. Party to pay broker's commission (section 14.01):
N/A
17. Address for notices (section 15.01):
If to Seller: Michael Paolercia
MacQuesten Realty Company
115 South MacQuesten Parkway
Mount Vernon, NY 10550
with a copy to Seller's attorney:
Bernard Segal, Esq.
5 Waller Avenue
White Plains, NY 10601
If to Purchaser: Allan Corn
Michael Anthony Jewelers, Inc.
115 South MacQuesten Pkwy
Mount Vernon, NY 10550
with a copy to Purchaser's attorney:
Michael Mongelli, Esq.
41-07 162nd Street
Flushing, NY 11358
18. Limitation Date for actions based on Seller's surviving representations and
other obligations (section 16.01):
19. Additional Schedules or Riders (section 17.08):
SCHEDULE E
RENT SCHEDULE
(to be attached separately)
<PAGE> 9
rd6
RIDER TO CONTRACT OF SALE
BETWEEN: MACQUESTEN REALTY COMPANY, SELLERS, and MICHAEL ANTHONY JEWELERS, INC.,
PURCHASERS, of PREMISES: 60 South MacQuesten Parkway and 70 South MacQuesten
Parkway, Mount Vernon, New York 10550.
1. This rider is part of the above captioned Contract of sale. If any
of the provisions of this rider shall conflict with or be inconsistent with any
printed provisions of this contract, then the provisions of this rider shall
control.
2. In the event that the Seller shall be unable to convey marketable
title to the premises hereinabove described, subject to the liens, encumbrances
and defects herein specifically enumerated, the Purchaser shall, at his
election, have the right to accept such title as the Seller is able to convey,
without any claim on the part of the Purchaser for abatement for defects or
objections; or the Purchaser shall have the right to rescind this contract and
upon such rescission, pursuant to this paragraph, the Purchaser shall be
entitled to reimbursement for title company charges, if the Purchaser has
ordered title insurance, or the cost of an abstract of title, if ordered, and
upon such reimbursement, this contract shall be null, void and of no force and
effect and the Seller shall then be under no obligation or liability whatever to
the Purchaser for any damages that the Purchaser may have sustained by reason of
the Seller's failure to convey title hereunder.
3. Violations filed in any County, City, State or Federal Department
shall not be an objection to title, and the Purchaser shall take title subject
to all such violations.
4. Liens for unpaid franchise tax of any corporation in the chain of
title, and liens for transfer, inheritance, estate or other similar taxes,
whether fixed or undetermined, shall be no objection to title provided the
Seller, at closing of title, makes a deposit with Purchaser's title insurance
company
1
<PAGE> 10
sufficient to induce them to omit any such exceptions from the policy they
deliver to the Purchaser and the Purchaser's Lending Institution and further
that the Purchaser's Lending Institution shall consent to same.
5. The Purchaser had inspected the premises and agrees to take said
premises "AS IS" in its present physical condition, and the Seller has made no
representation or warranty other than any specifically set forth herein.
6. Seller covenants that it shall exert its best efforts to obtain the
consent of the Mortgagee of the Existing Mortgage for the Purchaser to take the
Premises subject to the Existing Mortgage and that the Purchaser shall assume
and agree to pay such Mortgage and any fees payable to Mortgagee as a result of
this sale. It shall be a condition to the assumption of the Mortgage by
Purchaser that upon the execution and delivery of the deed provided for
hereunder, Seller, its predecessor entity, Michael Anthony Company, and Michael
Paolercio and Anthony Paolercio, as individual guarantors, be released from any
and all obligations arising under the provisions of the Existing Mortgage, Term
Loan Note and Individual Guaranty(s), all of which are dated April 16, 1993.
7. Supplementing Section 2.03 of the form of the Contract of Sale, the
Seller also represents and warrants as follows:
a. There are no defaults under the Existing Mortgage and there shall be
none at the time of the closing. Excluded from the representation and warrant
contained herein is the transfer of title of the Property from Michael Anthony
Company to MacQuesten Realty Company by deeds dated December 27, 1995.
b. The Seller shall deliver a pay off letter to the Purchaser at least
five (5) days prior to the closing date which shall indicate the principal
balance outstanding and to be assumed and all other amounts necessary to bring
the loan current.
8. Section 4.02 is amended by the addition of the following sentence at
the end thereof. "The copies of documents constituting the Existing Mortgage(s)
and note(s) secured thereby have been exhibited to Purchaser or its
representative and such
2
<PAGE> 11
copies are true copies are true copies of the originals and the Existing
Mortgage(s) and note(s) secured thereby have not been modified or amended except
as shown in such documents".
9. The Purchaser obligates itself to assume the existing mortgage on
the premises. The Term Loan Note provides for the payment of a premium to the
Lender in the event of prepayment of the mortgage. In the event that the
Purchaser shall fail to assume the existing mortgage on the premises, any
premium due to First Union Bank, the successor to FFB, as a result of the
prepayment of the mortgage shall be the obligation of Purchaser and the amount
of said premium shall be paid by the Purchaser to the Seller at the time of the
closing.
10. Purchaser has conducted an environmental investigation of the
Premises and has taken such tests and/or samples, including without limitation,
soil and ground water samples which the Purchaser believes is necessary to
evaluate the environmental condition of the Premises. Seller makes no
representation regarding the present condition of the Premises, past uses of the
Premises by the Seller or by any previous owner or lessee of the Premises, or
compliance with any federal, state or local law, ordinance or regulation
relating to the protection of health or the environment ("Environmental Law").
It is the sole responsibility under this Agreement of the Purchaser to determine
the environmental condition of the Premises. Nothing in this paragraph shall be
construed as altering the common law or statutory rights or liabilities of
Seller or Purchaser as against the other or any third party provided, however,
that neither Seller or its principals, shall be liable to the Purchaser for (i)
the act of making material omissions or (ii) the act of failing to disclose with
the respect to (a) the present environmental condition of the Premises, (b) past
usages of the Premises by the Seller or by any previous owner or lessee of the
Premises, or (c) the Seller's compliance with any Environmental Law.
"Adverse environmental condition" is defined as:
(1) the actual or potential contamination of the soil, air or water
(whether surface water or ground water) on or about the Premises by hazardous,
toxic, dangerous, or restricted, substances, wastes, products or materials
("Hazardous Substances");
3
<PAGE> 12
(2) the presence of Hazardous Substances which are stored upon the
subject premises, except where such Hazardous Substances are used, produced,
and/or stored at the Property in the ordinary course of business at the Property
in full compliance with Environmental Law.
11. Section 1.01(a) is amended by the insertion after the word "hereto"
on the fourth line of the words "and all air rights and other rights with
respect hereto to the extent owned by Seller".
12. Sections 5.01 and 5.02 are amended by the insertion of the
following words at the beginning of each paragraph "Other than as set forth
herein and in the riders attached hereto,.."
13. Section 11.04 is amended by the insertion of the following sentence
at the end thereof. "Purchaser shall at the closing pay the Mount Vernon
Transfer Tax".
14. Schedule D, Item 9 - Assessed Valuation
60 Building: $120,000
70 Building: 122,000
70 Lot: 18,000
15. Schedule D, Item 10 - Real Estate Taxes
60 Building:
1999 City tax $20,025.
98/99 School tax was $35,900.
1999 State, County, Sewer tax $11,392.
70 Building:
1999 City tax $20,880.
98/99 School tax was $30,949.
1999 State, County, Sewer tax $ 9,493.
4
<PAGE> 13
70 Lot:
1999 City tax $ 3,081.
98/99 School tax was $ 5,571.
1999 State, County, Sewer tax $ 1,709.
5
<PAGE> 14
SCHEDULE F
1. Driveway Easement in Liber 5765 Page 259.
2. Affects part of Parcel 1, Drainage Easement to City of Mount Vernon in
Liber 1923 Page 209
3. 78 inch Sewer Easement and Reservation to County in Liber 4726 Page 97.
<PAGE> 1
Exhibit. No. 10.49
------------------
MORTGAGE
--------
THIS MORTGAGE (hereinafter referred to as the "Mortgage"), is made on
this 16th day of August, 1993 by and between
MICHAEL ANTHONY COMPANY, a general partnership duly organized and
existing under the laws of the State of New York, having its principal office
located at 115 South Macquesten Parkway, Mount Vernon, New York 10550
(hereinafter referred to as the "Mortgagor"),
AND
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, NEW JERSEY a national
banking association duly organized and validly existing under the laws of the
United States of America, having an administrative office located at 570 Broad
Street, Newark, New Jersey 07102 (hereinafter referred to as the "Mortgagee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Term Loan Note, dated the date
of this Mortgage (hereinafter referred to as the "Note"), the Mortgagee has
agreed to make a term loan to the Mortgagor in the aggregate principal amount of
One Million Eight Hundred Eighty Five Thousand ($1,885,000.00) Dollars lawful
money of the United States of America, or such lesser amount as is disbursed and
advanced by the Mortgagee to the Mortgagor in accordance with the provisions of
the Note (hereinafter referred to as the "Loan"); and
WHEREAS, the Mortgagee has made the Loan to the Mortgagor in
part in consideration of this Mortgage; and
WHEREAS, this Mortgage is given and made by the Mortgagor to
the Mortgagee as security for (i) the repayment of the indebtedness of the
Mortgagor to the Mortgagee evidenced by the Note and all other loan documents,
agreements and instruments executed by and between the Mortgagor and the
Mortgagee (hereinafter referred to as the "Loan Documents"), (ii) all future
sums, if any, advanced to the Mortgagor by the Mortgagee, (iii) the performance
of the terms, conditions and covenants of the Mortgagor set forth in the Loan
Documents, and (iv) the payment and performance by the Mortgagor of all its
obligations and liabilities to the Mortgagee, direct or indirect, primary,
secondary, contingent, joint and several which are due or to become due, now
existing or which in the future may be created (hereinafter the terms and
conditions set forth in subparagraphs (i) through (iv) above shall be
collectively referred to as the "Obligations).
NOW, THEREFORE, in order to induce the Mortgagee to make the
Loan to the Mortgagor and to secure the payment of the indebtedness of the
Mortgagor to the Mortgagee, as well as all future sums of money to be advanced
by the Mortgagee to the Mortgagor at any time before the release or cancellation
of this Mortgage and to secure the performance by the Mortgagor of all of its
other obligations, liabilities and covenants to the Mortgagee and to assure
<PAGE> 2
payment of all other indebtedness, monetary obligations, liabilities and duties
of any kind of the Mortgagor, direct or indirect, absolute or contingent, joint
or several, due or not due, liquidated or not liquidated, and in consideration
of the sum of one and 00/100 ($1.00) Dollar and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Mortgagor by these presents does hereby mortgage, give, grant, release, assign,
hypothecate, transfer and set over unto the Mortgagee, its successors and
assigns forever, the following described property and rights:
ALL that certain estate and interest of the Mortgagor in and
to those certain lots, pieces or parcels of land and premises situate, lying and
being in the City of Mount Vernon, County of Westchester and State of New York,
as more particularly described on Schedule "A",, attached hereto and made a part
hereof (hereinafter referred to as the "Premises"); and
TOGETHER with all modifications, extensions and renewals of
this Mortgage; and
TOGETHER with all and singular the tenements, hereditaments,
buildings, improvements, rights-of-way, privileges, liberties, easements,
riparian rights, woods, waters, watercourses, mineral, oil and gas rights and
appurtenances thereunto belonging, or in any wise appertaining, and the
reversion and reversions and remainder and remainders,, rents, income, issues
and profits thereof; and
TOGETHER with all right, title and interest of the Mortgagor,
now owned or hereafter acquired, in and to any streets, the land lying in the
bed of any streets, roads or avenues, opened or proposed, in front of, adjoining
or abutting the Premises to the center line thereof, and all strips and gores
within or adjoining the Premises, easements and rights-of-way, public or
private, all sidewalks and alleys, now or hereafter used in connection with the
Premises or abutting the Premises; and
TOGETHER with all furniture, fixtures, equipment and other
articles of personal property owned by the Mortgagor and now or hereafter
attached to or used in connection with, or with the operation of, any
improvements located on the Premises, as to which this Mortgage constitutes a
security agreement under the New York Uniform Commercial Code (in addition to
and not in lieu of any other security agreement between the parties), including,
without limitation, all building supplies and materials, furniture, fixtures and
equipment; all furnaces, motors, dynamos, incinerators,, machinery, generators,
partitions, elevators, steam and hot water boilers, heating, air conditioning
equipment, wall cabinets, lighting and power plants, coal and oil burning
apparatus, pipes, plumbing, radiators, sinks, bath tubs, water closets,
refrigerators, gas and electrical fixtures, stoves, ranges, shades, screens,
blinds, washing machines, clothes dryers, dishwashers, freezers, awnings, vacuum
cleaning systems, sprinkler systems or other fire prevention or extinguishing
apparatus and materials, including all accessories, additions, substitutions and
replacements thereof, and all cash and non-cash proceeds thereof, all of which
shall be deemed to be and remain and form a part of the Premises and are covered
by the lien of this Mortgage. If the lien of this Mortgage shall be subject to a
conditional bill of sale, chattel mortgage, or other security interest covering
any such property, then all the right, title and interest of the Mortgagor in
and to such property, together with the benefits of any deposits or
<PAGE> 3
payments now or hereafter made thereon, are and shall be covered by the lien of
this Mortgage; and
TOGETHER with a continuing first lien, pledge, assignment and
security interest in and to all of the Mortgagor's right, title and interest
with respect to any and all leases, easements, licenses and any other legal or
beneficial rights of or interests of the Mortgagor relating to the Premises
including, without limitation, all of the Mortgagor's right, title and interest
in and to any existing or future leases, easements., licenses and other rights
relating to the Premises, including, without limitation, any existing or future
rights relating to ingress and egress to the Premises, driveway areas, adjacent
parking, walkways, easements necessary for the installation and maintenance of
utilities for the Premises and pedestrian access to and from the Premises; and
TOGETHER with all of the Mortgagor's right, title and interest
in and to any and all awards, damages, payments and other compensation, and any
and all claims therefor and rights thereto, which may result from taking or
injury by virtue of the exercise of the power of eminent domain, or any damage,
improvements, injury or destruction in any manner caused to the Premises or
thereon, or any part thereof; and
TOGETHER with all insurance proceeds and any awards and
payments, including interest thereon, which may be made in respect of all or any
part of the Premises, the buildings and/or the building equipment, or any estate
or easement therein, as a result of damage to or destruction of all or any part
of the building or the building equipment, the exercise of the right of
condemnation or eminent domain, the closing of, or the alteration of the grade
of, any street on or adjoining the Premises, or any other injury to or decrease
in the value of all or any part of the Premises, which proceeds and awards are
hereby assigned to the Mortgagee, which is hereby authorized to collect and
receive the same and to give receipts and acquittances therefor and to apply the
same or any part thereof as provided in this Mortgage; and the Mortgagor hereby
agrees, upon request, to make, execute and deliver any and all assignments and
other instruments sufficient for the purposes of assigning said proceeds and
awards and payments to the Mortgagee free, clear and discharged of any
encumbrances of any kind or nature whatsoever (subject to Section 19); and
TOGETHER with all of the Mortgagor's right, title and interest
in and to any and all present and future leases of all or any part of the
Premises, and in and to the rents, issues and profits payable thereunder and
cash or securities deposited thereunder as lessees' security deposits; and
TOGETHER with all the estate, right, title, interest,
property, possession, claim and demand whatsoever of the Mortgagor, as well in
law as in equity, of, in and to the same and every part and parcel thereof with
the appurtenances in connection with the Premises; and
TO HAVE AND TO HOLD the above granted Premises unto the
Mortgagee, its successors and assigns, to its and their own proper use, benefit
and behoof forever.
<PAGE> 4
PROVIDED, ALWAYS THAT if the Mortgagor shall well and truly
pay or true shall otherwise be paid to the Mortgagee all of the Obligations and
the Mortgagor shall well and truly abide by and comply with each and every term,
covenant and condition of the Obligations at the time and times as required,
then these presents and the lien and interest hereby transferred and assigned
shall cease, terminate and be void.
ARTICLE I. THE MORTGAGOR REPRESENTS, WARRANTS, COVENANTS AND
AGREES WITH THE MORTGAGEE AS FOLLOWS:
Section 1. DEFINITIONS. In this Mortgage, all words and terms
not defined herein shall have the respective meanings and be construed herein as
provided in the Loan Documents. Any reference to a provision of the Loan
Documents shall be deemed to incorporate that provision as a part hereof in the
same manner and with the same effect as if the same were fully set forth herein.
Section 2. OBLIGATIONS SECURED. This Mortgage has been given
and is intended to secure the full and prompt payment and performance of the
Obligations. This Mortgage shall remain in full force and effect with respect to
the Premises until all the Obligations shall have been paid and performed in
full. If there shall be any default beyond the applicable grace period, if any,
on the part of the Mortgagor under the Loan Documents or this Mortgage, then the
Obligations shall become due and payable at the option of the Mortgagee.
Section 3. BENEFICIARIES. Nothing herein expressed or implied
is intended or shall be construed to confer upon, or to give to, any person
other than the Mortgagor and the Mortgagee any right, remedy or claim under or
by reason hereof. All covenants, stipulations and agreements herein contained by
and on behalf of the Mortgagor shall be for the sole and exclusive benefit of
the Mortgagee.
Section 4. PAYMENT AND PERFORMANCE OF OBLIGATIONS. The
Mortgagor shall pay and perform the Obligations when due in accordance with the
Note and the Loan Documents.
Section 5. SEISIN AND WARRANTY. The Mortgagor is seized of a
fee simple estate in the Premises, and the Mortgagor warrants the title to said
estate in the Premises. The Mortgagor hereby covenants and agrees that the
Mortgagor shall (i) preserve such estate and the validity and priority of the
lien of this Mortgage and shall forever warrant and defend the same to the
Mortgagee against all lawful claims whatsoever and the claims of all persons
whomsoever claiming or threatening to claim the same or any part thereof, and
(ii) to make, execute, acknowledge and deliver all such further or other deeds,
documents, instruments or assurances, and cause to be done all such further acts
and things as may at any time hereafter be reasonably required by the Mortgagee
to fully protect the lien of this Mortgage. Section 6. Insurance. (i) The
Mortgagor shall obtain, or cause to be obtained, and shall maintain or cause to
be maintained, at all times throughout the term of this Mortgage, insurance on
the Premises in such amounts and in such manner and against such loss, damage
and liability, including liability to third parties, as is customary with
persons in the same or similar business and located in the same or similar
areas. Such insurance shall include, without limitation, the following:
<PAGE> 5
(a) Comprehensive general public liability insurance
insuring against any and all liability of the Mortgagor or claims of liability
of the Mortgagor arising out of, occasioned by or resulting from any accident or
otherwise resulting in or about the Premises and the adjoining streets,
sidewalks and passageways, in a minimum amount of $1,000,00000 for death or
bodily injury to any one person in connection with one accident or occurrence in
or about the Premises, $3,000,000.00 for death or bodily injury to one or more
persons in connection with one accident or occurrence in or about the Premises,
and $500,000.00 property damage in connection with one accident or occurrence in
or about the Premises (including blanket contractual liability insurance, garage
liability, innkeeper's liability, products liability and elevator liability, if
applicable);
(b) "All-Risk" coverage policy of fire and hazard
insurance with respect to the Premises, which insurance policy shall contain an
agreed amount endorsement and be in an aggregate amount not less than one
hundred (100%) percent of the agreed upon full insurable replacement value of
the Premises without coinsurance;
(c) If the Premises are required to be insured
pursuant to the Flood Disaster Protection Act of 1973 or the National Flood
Insurance Act of 1968, and the regulations promulgated thereunder, because it is
located in an Urban Development as a Flood Hazard Area, then a flood insurance
policy covering the Premises in an amount not less than the outstanding
principal balance of the Note or the maximum limit of coverage available,
whichever amount is less;
(d) Title insurance coverage in the form of an ALTA
standard mortgagee title insurance policy insuring this Mortgage as a valid
first lien on the Premises in the aggregate principal amount of the Note;
subject, however, to certain "Permitted Encumbrances" as set forth in the
Commitment for Title Insurance issued to the Mortgagee by Old Republic National
Title Insurance Company in connection with this Mortgage, No. P 8419, dated May
14, 1993, as continued through the date hereof (hereinafter referred to as the
"Title Commitment");
(e) Business interruption and/or loss of rental
insurance coverage sufficient to pay, during the period of interruption or loss,
a substantial portion of normal operating profits of the Premises; and
(ii) Each insurance policy required under this Section 6 shall
be written by insurance companies authorized or licensed to do business in the
State of New York having an Alfred M. Best Company, Inc. rating of A or higher
and a financial size category of not less than VII, and shall be on such forms
and written by such companies as shall be reasonably approved by the Mortgagee
Such insurance coverage may be effected under overall blanket or excess coverage
policies of the Mortgagor, except as to public liability insurance which may be
effected under combined single limit.
(iii) Each insurance policy required under this Section 6
providing insurance against loss or damage to property shall be written or
endorsed so as to (a) contain a New York standard mortgagee and secured party
endorsement, as the case may be, or its equivalent in favor
<PAGE> 6
of the Mortgagee, (b) make all losses, if any, payable directly to the
Mortgagee, without contribution, and (c) provide for deductibles not to exceed
$10,000.00 per occurrence.
(iv) Each insurance policy required under this Section 6 and
providing public liability coverage shall be written and endorsed so to name the
Mortgagee as an additional insured, as its interest may appear.
(v) Each insurance policy required under this Section 6 shall
contain a provision to the effect that such policy shall not be canceled,
altered or in any way limited in coverage or reduced in amount unless the
Mortgagee is notified in writing at least thirty (30) days prior to such
cancellation, alteration, limitation or reduction. At least thirty (30) days
prior to the expiration of any such policy, the Mortgagor shall furnish evidence
satisfactory to the Mortgagee that such policy has been renewed or replaced or
is no longer required by this Section 6.
(vi) Each insurance policy required under this Section 6
(except flood insurance written under the federal flood insurance program) shall
contain an endorsement or agreement by the insurer that any loss shall be
payable to the Mortgagee, as its interest may appear,, in accordance with the
terms of such policy notwithstanding any act or negligence of the Mortgagor
which might otherwise result in forfeiture of said insurance and the further
agreement of the insurer waiving all rights of set-off, counter-claim, deduction
or subrogation against the Mortgagor (so as not to interfere with the
Mortgagee's rights) (subject to Section 19).
(vii) In the event of loss or damage to the collateral, the
proceeds of any insurance provided hereunder shall be applied as set forth in
Section 19 of this Article 1; in the event of a public liability claim, the
proceeds of any insurance provided hereunder shall be applied toward
extinguishing or satisfying the liability and expenses incurred in connection
therewith.
(viii) The Mortgagor shall not take out any separate or
additional insurance with respect to the Premises which is contributing in the
event of loss unless it is properly compatible with all of the requirements of
this Section 6.
Section 7. PRESERVATION, MAINTENANCE AND REPAIR. All
buildings, structures and other improvements which are presently erected and in
the future are to be erected upon the Premises, shall, at the Mortgagor's own
cost and expense, be kept in good and substantial repair, working order and
condition, and the Mortgagor shall, from time to time, make or cause to be made,
all necessary and proper repairs, replacements, improvements and betterments
thereto. The Mortgagor shall not remove, demolish, materially alter, discontinue
the use of, sell, transfer, assign, hypothecate or otherwise dispose of to any
Person (defined as an individual, corporation, partnership, trust,
unincorporated organization or government, or an agency or political subdivision
thereof, or any business or legal entity) any part of the Premises without the
prior express written consent of the Mortgagee, except that the Mortgagor shall
from time to time make such substitutions, additions, modifications and
improvements as may be necessary and as shall not impair the structural
integrity, operating efficiency and economic value of the Premises. All
alterations, replacements, renewals or additions made pursuant to this Section 7
shall automatically become and constitute a part of the Premises and shall be
covered by the lien of
<PAGE> 7
this Mortgage. The Mortgagor shall not do, and shall not permit to be done, any
act which may in any way impair or weaken the security under this Mortgage.
Section 8. DECLARATION OF NO OF F SET. The Mortgagor represents to the
Mortgagee that the Mortgagor has no knowledge of any offsets, counterclaims or
defenses to the principal indebtedness secured hereby, or to any part thereof,
or the interest thereon, either at law or in equity. The Mortgagor shall, within
three (3) days upon request in person or within ten (10) days upon request by
mail, furnish a duly acknowledged written statement in form reasonably
satisfactory to the Mortgagee stating either that the Mortgagor knows of no
offsets or defenses existing against such indebtedness, or if such offsets or
defenses are alleged to exist, the nature and extent thereof, and in either
case, such statement shall set forth the amount due hereunder.
Section 9. NO ADDITIONAL LIENS ON FIXTURES. The Mortgagor shall not
remove or suffer to be removed from the Premises any fixtures owned by the
Mortgagor as the term "fixtures" is defined by the law in New York presently, or
in the future to be incorporated into, installed in, annexed or affixed to the
Premises (unless such fixtures have been replaced with similar fixtures of equal
or greater utility and value) ; nor will the Mortgagor execute or cause to be
executed any security interest upon any such fixtures, additions to,
substitutions or replacements thereof, or upon any f ixtures in the future to be
installed in, annexed or affixed to the Premises, without the prior express
written consent of the Mortgagee.
Section 10. PERFORMANCE. The Mortgagor shall perform and abide by the
terms and covenants herein and the terms and covenants in the Note and the Loan
Documents all of which are made a part hereof as though set forth herein at
length.
Section 11. WAIVER. The acceptance by the Mortgagee of any payments
hereunder, after the occurrence of an Event of Default, or the failure of the
Mortgagee in any one or more instances to insist upon strict performance by the
Mortgagor of any terms and covenants of this Mortgage or to exercise any option
or election herein conferred, shall not be deemed to be a waiver or
relinquishment for the future of any such terms, covenants, elections or
options.
Section 12. NO CREDIT FOR TAXES. The Mortgagor shall not claim or
demand or be entitled to any credit or credits on account of the obligations by
reason of the taxes or mpositions assessed against all or any part of the
Premises or for any payments made pursuant to this Mortgage hereof. No
deductions shall otherwise be made or claimed from the taxable value of all or
any part of the Premises by reason or this Mortgage or the obligations.
Section 13. TAXES. The Mortgagor shall prepare and timely file
all federal, state and local tax returns required to be filed by the Mortgagor
and promptly pay and discharge or cause to be promptly paid and discharged all
taxes, assessments, municipal or governmental rates, charges, impositions, liens
and water and sewer rents or any part thereof (hereinafter individually referred
to as an Imposition and collectively referred to as the "Impositions"),
heretofore or hereafter imposed upon the Mortgagor or in respect of any of the
Mortgagor's property and assets before the same shall become in default, as well
as all lawful claims which, if unpaid might become a lien or charge upon such
property and assets or any part thereof. The Mortgagor may, after prior express
written notice to the Mortgagee, contest by appropriate legal
<PAGE> 8
proceedings at the Mortgagor's sole cost and expense the validity or amount of
any Imposition; and the Mortgagor may defer payment thereof during the pendency
of such contest, provided and upon condition that (i) such contest and/or
non-payment shall not constitute a crime, misdemeanor or offense on the part of
the Mortgagor, the Mortgagee or any tenant or occupant of the Premises, (ii)
such contest and/or non-payment will not result in any lien, charge, penalty,
fine or other liability or any kind against all or any part of the Premises,
(iii) such contest and/or non-payment will not prevent, preclude or bar the use
of all or any part of the Premises for the use for which the same is intended or
was constructed, (iv) the Mortgagor shall prosecute such contest with due
diligence and in good faith to a final determination by a court, department or
governmental authority or body having final jurisdiction, (v) the Mortgagor
shall hold harmless, indemnify and defend the Mortgagee against any and all
claims, liabilities, losses, costs, expenses (including, without limitation,
reasonable attorneys' fees) and damages which the Mortgagee may sustain or incur
by reason of the Mortgagor's contest or failure or delay in payment, and (vi)
the Mortgagor shall maintain adequate insurance or accrued the estimated
liability on its balance sheets for payment thereof. The Mortgagor shall submit
to the Mortgagee, upon request, an affidavit signed by the Mortgagor certifying
that, to the best of the Mortgagor's knowledge, all current federal and state
information income tax returns have been filed to date and all real property
taxes, assessments, governmental charges or levies and other lawful claims with
respect to the Mortgagor's properties and assets have been paid to date. The
Mortgagor shall deliver to the Mortgagee, within thirty (30) days after each
fiscal quarter, the original or a photostatic copy of the official receipt
evidencing such payment or other proof of payment satisfactory to the Mortgagee.
From time to time, at the option of the Mortgagee, the Mortgagor shall, in
addition to the regular monthly principal and interest payment on the Note, pay
into a non-interest bearing account held by the Mortgagee, at the times when the
monthly installment of principal and interest is payable, an amount equal to
one-twelfth (1/12th) of the annual estimated real estate taxes levied with
respect to the Premises so that the funds are available to pay said real estate
taxes and assessments when due, and such sum shall be held by the Mortgagee for
the payment of such real estate taxes and assessments as they become due. If the
amount so estimated shall prove insufficient, then the Mortgagor shall pay the
required deficiency upon demand.
Section 14. MODIFICATIONS IN WRITING. The terms of this
Mortgage may not be changed orally but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
Section 15. SECURITY AGREEMENT. This Mortgage constitutes a
security agreement under the New York Uniform Commercial Code, and the Mortgagor
hereby grants to the Mortgagee, to further secure the Obligations, a security
interest in all furniture, fixtures and equipment and all other machinery,
appliances, furnishings, tools and buildings materials now owned or hereafter
acquired by the Mortgagor, and installed or to be installed in or on the
Premises and used or to be used in the management or operation of the Premises,
and all substitutions, replacements, additions and accessions thereto, together
with all cash and non-cash proceed thereof. The Mortgagor shall execute,
deliver, file and refile any financing statements, continuation statements, or
other security agreements that the Mortgagee may require from time to time to
confirm the lien of this Mortgage with respect to such property. Without
limiting the foregoing, the Mortgagor hereby irrevocably constitutes and
appoints the Mortgagee with full
<PAGE> 9
power of substitution, as its attorney-in-fact with full irrevocable power and
authority (coupled with and interest) in the place and stead of such Mortgagor
and in the name of such Mortgagor or in the Mortgagee's own name, for the
Mortgagee to execute, deliver and file such instruments for and on behalf of the
Mortgagor and the Mortgagor shall pay all filing fees in connection therewith.
Notwithstanding any release of any or all of that property included in the
Premises which is deemed "real property", and proceedings to foreclose this
Mortgage or its satisfaction of record, the terms hereof shall survive as a
security agreement with respect to the security interest created hereby and
referred to above until the repayment or satisfaction in full of the Obligations
as are now or hereafter secured hereby.
Section 16. NO ASSIGNMENT. This Mortgage shall not be assigned
by the Mortgagor without the prior express written consent of the Mortgagee.
Section 17. DATE OF MORTGAGE. The date of this Mortgage shall
be for identification purposes only and shall not be construed to imply that
this Mortgage was executed on any date other than the respective dates of the
acknowledgments of the parties hereto. This Mortgage shall become effective upon
its delivery.
Section 18. CHANGE IN LAWS. During the term of this Mortgage,
in the event of the passage after the date of this Mortgage of any law of the
State of New Jersey or the State of New York, or any other governmental entity,
changing in any way the laws now in force for the taxation of mortgages, or
debts secured thereby, for state or local purposes, or the manner of the
operation of any such taxes,, so as to affect the interest of the Mortgagee,
then and in such event, the Mortgagor shall bear and pay the full amount of such
taxes, provided that if for any reason payment by the Mortgagor of any such new
or additional taxes would be unlawful or if the payment thereof would constitute
usury or render the Loan or indebtedness secured hereby wholly or partially
usurious under any of the terms or provisions of the obligations secured
hereunder, or this Mortgage, or otherwise, the Mortgagee may, at the Mortgagee's
option, declare the whole sum secured by this Mortgage, with interest thereon,
to be immediately due and payable, or the Mortgagee may, at the Mortgagee's
option, pay that amount or portion of such taxes as renders the Loan or
indebtedness secured hereby unlawful or usurious, in which event the Mortgagor
shall concurrently therewith pay the remaining lawful and nonusurious portion of
balance of said taxes.
Section 19. DAMAGE, DESTRUCTION AND CONDEMNATION.
(i) If all or any part of the Premises shall be damaged or
destroyed, or if title to or the temporary use of the whole or any part of any
of the Premises shall be taken or condemned by a competent authority for any
public use or purpose, there shall be no abatement or reduction in the amounts
payable by the Mortgagor hereunder or under the Note and/or the Loan Documents,
and the Mortgagor shall continue to be obligated to make such payments.
(ii) If the Premises or any part thereof is partially or
totally damaged or destroyed by f ire or any other cause, the Mortgagor shall
give prompt express written notice thereof to the Mortgagee. The Mortgagor
hereby authorizes and directs any affected insurance company to make payment of
such proceeds directly to the Mortgagee. The Mortgagee is hereby authorized
<PAGE> 10
and empowered by the Mortgagor to settle, adjust or compromise, in consultation
with the Mortgagor. The Mortgagor shall pay all costs of collection of insurance
proceeds payable an account of such damage of destruction.
(iii) In the event of partial or --tal destruction of the
Premises by fire or in the event all or a part of the Premises is condemned by a
governmental agency, the proceeds of such insurance or condemnation will be
payable to the Mortgagee provided the loss to the Mortgagor is for more than ten
(10.0%) of the then aggregate principal balance of the Loan, at the time of said
casualty or condemncation, and the Mortgagee will have the option in its sole
discretion, of applying all or any part of the proceeds to (a) to reduce the
outstanding principal balance of the Note and the Loan Documents, (b) to the
repair, restoration, replacement and rebuilding of the Premises in accordance
with the Mortgagee's standard construction loan disbursement conditions and
requirements, or (c) to the Mortgagor.
(iv) Immediately upon obtaining knowledge of the institution
of any proceedings for the condemnation of the Premises, or any portion thereof,
the Mortgagor shall notify the Mortgagee of the pendency of such proceedings.
The Mortgagee may participate in any such proceedings and the Mortgagor shall,
at the sole cost and expense of the Mortgagor, diligently prosecute any such
proceeding and shall consult with the Mortgagee, its attorneys and experts and
cooperate with it in any defense of any such proceedings. The Mortgagor shall
not, without the Mortgagee's prior express written consent, enter into any
agreement for the taking or conveyance in lieu thereof of the Premises, or any
part thereof, with anyone authorized to acquire the same by eminent domain,
condemnation or like power or proceeding. All awards and proceeds of
condemnation shall be assigned to the Mortgagee, to be paid or applied by the
Mortgagee, in accordance with subparagraph (iii) of this Section.
(v) In the event any insurance proceeds or condemnation awards
are applied by the Mortgagor to reduce the outstanding principal balance of the
Note, said payments shall be applied against the outstanding principal balance
in the inverse order of maturity, without penalty or premium.
(vi) Nothing in this Section shall relieve the Mortgagor of
the Mortgagor's duty to repair, restore, rebuild or replace the Premises
following damage or destruction by fire or other casualty or partial
condemnation in the event that the Mortgagee elects to use the proceeds of
insurance or condemnation awards to restore, rebuild, repair or replace the
Premises and said proceeds of insurance or condemnation awards are inadequate to
defray the cost of such repairing, restoring, rebuilding or replacement.
Section 20. COMPLIANCE WITH LAWS. The Mortgagor agrees to
comply with all present and future laws, statutes, rules, regulations and
ordinances made or promulgated by lawful authority having jurisdiction of or
relating to all or any part of the Premises which are now or may hereafter be
applicable to the Premises within such time as may be required by law.
Section 21. INDEMNIFICATION. The Mortgagor hereby agrees to
and does hereby indemnify, protect, defend and save harmless the Mortgagee and
its trustees, officers, employees,
<PAGE> 11
agents, attorneys and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims or
demands, including reasonable counsel fees incurred in investigating or
defending such claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected with this Mortgage and
the transactions contemplated herein (unless caused by the gross negligence or
willful misconduct of the Mortgagee), including, without limitation, (i)
disputes between any architect, general contractor, subcontractor, materialman
or supplier, or on account of any act or omission to act by the Mortgagee in
connection with this Mortgage, or (ii) losses, damages, expenses or liabilities
sustained by the Mortgagee in connection with any environmental sampling or
clean-up of the Premises required or mandated by any federal, state or local
law, ordinance, rule or regulation, including, without limitation, (a) the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. S9601 ET SEQ.) ("CERCLA); (b) the Hazardous Material
Transportation Act, as amended (49 U.S.C. S180 ET SEQ.); (c) the Federal
insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S. C. S136 ET
SEQ.); (d) the Resource Conservation and Recovery Act, as amended (42 U.S.C.
S6901 ET SEQ.) ("RCRA); (e) the Toxic Substance Control Act, as amended (42
U.S.C. S7401 et sect.); (f) the Clean Air Act, as amended (42 U.S.C. S740 ET
SEQ.); (g) the Federal Pollution Control Act, as amended (33 U.S.C. S1251 ET
SEQ.); (h) the Occupational Safety and Health Act, as amended (29 U.S.C. S651 ET
SEQ.); (I) the Safe Drinking Water Act, as amended (42 U.S.C. S300f ET SEQ. (j)
the Food, Drug and Cosmetic Act, as amended (21 U.S.C. S301 et SEQ.); (k) the
Medical Waste Tracking Act of 1988, Pub. L. No. 100-582, 102 Stat. 2950 (1988);
or (1) any and all laws, regulations, and executive orders, both federal, state
and local pertaining to environmental matters, as the same may be amended or
supplemented from time to time (hereinafter collectively referred to as the
"Applicable Environmental Laws"). In case any action shall be brought against
the Mortgagee based upon any of the above and in respect to which indemnity may
be sought against the Mortgagor, the Mortgagee shall promptly notify the
Mortgagor in writing, and the Mortgagor shall assume the defense thereof,
including the employment of legal counsel selected by the Mortgagor and
reasonably satisfactory to the Mortgagee, the payment of all costs and expenses
and the right to negotiate and consent to settlement. Upon reasonable
determination made by the Mortgagee, the Mortgagee shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof. The Mortgagor shall not be liable for any settlement of any such action
effected without the Mortgagor's consent, but if settled with the Mortgagor's
consent, or if there be a final judgment for the claimant in any such action,
the Mortgagor agrees to indemnify and save harmless the Mortgagee from and
against any loss or liability by reason of such settlement or judgment. The
provisions of this Section 21 shall survive the termination of this Mortgage and
the repayment of the Note.
Section 22. ASSIGNMENT OF RENTS. The Mortgagor hereby assigns
to the Mortgagee the rents, issues and profits arising out of or from the
Premises as further security for the obligations, and the Mortgagor grants to
the Mortgagee the right to enter upon and to take possession of the Premises for
the purpose of collecting the same and to let the Premises or any part thereof,
and to apply the rents, issues and profits, after payment of all necessary
charges and expenses, on account of said indebtedness. This assignment and grant
shall continue in effect until this Mortgage is paid in full and discharged of
record. The Mortgagee hereby waives the right to enter upon and to take
possession of the Premises for the purpose of collecting said rents, issues and
profits, and the Mortgagor shall be entitled to collect, receive, retain and use
said
<PAGE> 12
rents, issues and profits until the occurrence of an event of default under this
Mortgage or the Loan Documents, but such right of the Mortgagor may be revoked
by the Mortgagee upon the occurrence of an event of default on five (5) days
written notice. The Mortgagor shall not, without the written consent of the
Mortgagee, receive or collect rent from any tenant of the Premises or any part
thereof for a period of more than one month in advance, and in the event of the
occurrence of an event of default under this Mortgage or the Loan Documents, the
Mortgagor shall pay monthly in advance to the Mortgagee or to any receiver
appointed to collect said rents, issues and profits, the fair and reasonable
rental value for the use and occupation of the Premises or of such part thereof
as may be in the possession of the Mortgagor, and upon default in any such
payment the Mortgagor shall vacate and surrender the possession of the Premises
to the Mortgagee or to such receiver. If the Mortgagor does not so vacate and
surrender the Premises then the Mortgagor may be evicted by summary proceedings.
Section 23. ADVANCES. Upon the occurrence of an event of
default by the Mortgagor under this Mortgage, the Loan Documents and/or the
Note, the Mortgagee may at its option remedy such event of default, and all
payments made by the Mortgagee to remedy an event of default by the Mortgagor
(including reasonable attorney's fees) and the total of any payment or payments
due from the Mortgagor to the Mortgagee which are in default, together with
interest thereon at the Default Rate set forth in the Note (such interest to be
calculated from the date of such advance to the date of payment thereof by the
Mortgagor), shall be added to the debt secured by this Mortgage until paid, and
the Mortgagor covenants to repay the same to the Mortgagee on the next interest
payment date of the Note. Any such sums and the interest thereon shall be a lien
on the Premises prior to any other lien attaching to or accruing subsequent to
the lien of this Mortgage.
Section 24. PERMITTED ENCUMBRANCES. At no time throughout the
term of this Mortgage shall the Mortgagor create, incur, assume or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, encumbrance,
attachment, levy, distraint or other judicial process and burdens of any kind or
nature on or with respect to any of the Premises without the prior express
written consent of the Mortgagee, except the Permitted Encumbrances set forth in
the Title Commitment.
Section 25. ENVIRONMENT ISSUES. (i) None of the real property
owned and/or occupied by the Mortgagor and located in the State of New York,
including, without limitation, the Premises, has ever been used in violation of
any laws, by previous owners and/or operators to refine, produce, store, handle,
transfer, process or transport "Hazardous Substances" or "Hazardous Wastes", as
such terms are defined in the Applicable Environmental Laws, and the Mortgagor
has not used in the past, nor does the Mortgagor intend to use in the future,,
said real property, including without limitation, the Premises, for the purpose
of refining, producing, storing, handling, transferring, processing or
transporting said "Hazardous Substances" in violation of any laws.
(ii) Should the Mortgagor, any lessee of the Premises, or any
other person cause or permit any intentional or unintentional action or omission
resulting in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping of "Hazardous Substances" or "Hazardous Wastes",, as such
terms are defined in the Applicable Environmental Laws, into the
<PAGE> 13
waters or onto the lands of the State of New York, or into the waters outside
the jurisdiction of the State of New York resulting in damage to the lands,
waters, fish, shellfish, wildlife, biota, air or other resources owned, managed
or held in trust or otherwise controlled by the State of New York, without
having obtained a permit issued by the appropriate governmental authorities, the
Mortgagor shall promptly clean up such spill, leak, etc., in accordance with the
provisions of the Applicable Environmental Laws.
(iii) No lien has been attached to any revenues or any real or
personal property owned by the Mortgagor and located in the State of New York,
including, without limitation, the Premises, as a result of any law of the State
of New York, arising from an intentional or unintentional action or omission of
the Mortgagor or any previous owner and/or operator of said real property,
including, without limitation, the Premises, resulting in the releasing,
spilling, pumping, pouring, emitting, emptying or dumping of "Hazardous
Substances" or "Hazardous Wastes", as such terms are defined in the Applicable
Environmental Laws, into the waters or onto the lands of the State of New York,
or into waters outside the jurisdiction of the State of New York where damage
may have resulted to the lands, waters, fish, shellfish, wildlife, biota, air
and other resources owned, managed, held in trust or otherwise controlled by the
State of New York.
(iv) The Mortgagor has not received a summons, citation,
directive, letter or other communication, written or oral, from the State of New
York concerning any intentional or unintentional action or omission on the
Mortgagor's part resulting in the releasing, spilling, leaking, pumping,
pouring, emitting, emptying or dumping of "Hazardous Substances" or "Hazardous
Wastes", as such terms are defined in the Applicable Environmental Laws, into
the waters or onto the lands of the State of New York, or into the waters
outside the jurisdiction of the State of New Jersey resulting in damage to the
land, waters, fish, shellfish, wildlife, biota, air and other resources owned,
managed, held in trust or otherwise controlled by the State of New York.
(v) None of the real property owned and/or occupied by the
Mortgagor and located in the State of New York, including, without limitation,
the Premises has ever been used in violation of any laws, by previous owners
and/or operators to generate, manufacture, refine, transport, heat, store,
handle or dispose of "Hazardous Substances" or "Hazardous Wastes" as such terms
are defined in the Applicable Environmental Laws, and the Mortgagor does not
intend to use any of the Mortgagor's real property including, without
limitation, the Premises, for such purpose, which will not comply with all laws.
(vi) The Mortgagor shall not cause or permit to exist, as a
result of an intentional or unintentional action or omission on the part of the
Mortgagor or any tenant, a releasing, spilling, leaking, pumping, emitting,
pouring, emptying or dumping of a "Hazardous Substance" or "Hazardous Wastes",
as such terms are defined in the Applicable Environmental Laws, into waters or
onto the lands of the State of New York, or into waters outside the jurisdiction
of the State of New York, where damage may result to the lands, waters, fish,
shellfish, wildlife, biota, air and other resources owned, managed, held in
trust or otherwise controlled by the State of New York, unless said release,
spill, leak, etc., is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal or state governmental authorities.
<PAGE> 14
(vii) In the event that there shall be filed a lien against
the Premises by any governmental agency, pursuant to and in accordance with the
said State or Federal statutes,, as a result of monies from said fund having
been expended to pay for "Damages", arising from an intentional or unintentional
action or omission of Mortgagor, resulting in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying or dumping of "Hazardous Substances" as
such term is defined, into waters, of the State or agency of New York or onto
lands from which it might flow or drain into said waters then the Mortgagor
shall, within thirty (30) days from the date that the Mortgagor is given notice
that the lien has been placed against the Premises or within such shorter period
of time in the event that the State of New York or the United States has
commenced steps to cause the Premises to be sold pursuant to the lien, either
(1) pay the claim and remove the lien from the Premises, or (2) furnish (i) a
bond satisfactory to the Title Insurance Company and the Mortgagee in the amount
of the claim out of which the lien arises, (1) a cash deposit in the amount of
the claim out of which the lien arises, (ii) a cash deposit in the amount of the
claim out of which the lien arises, or (iii) other security reasonably
satisfactory to the Mortgagee in an amount sufficient to discharge the claim out
of which the lien arises.
(viii) The Mortgagor agrees that the Mortgagee shall have the
right to conduct or have conducted by its agents or contractors, such
environmental inspections as the Mortgagee shall reasonably deem necessary or
advisable from time to time at the sole cost and expense of the Mortgagor. The
Mortgagor shall, and shall cause each tenant of the Premises to, cooperate with
such inspection efforts; such cooperation shall include, without limitation,
supplying such information concerning the operations conducted, and "Hazardous
Substances" or "Hazardous Wastes", as such terms are defined in the Applicable
Environmental Laws, located at the Premises.
(ix) No lien has been attached to any real property owned by
the Mortgagor and located within the State of New Jersey, including, without
limitation, the Premises, as a result of the Administrator of the United States
Environmental Protection Agency expending monies from the Hazardous Substance
Superfund for "Damages" and/or "Response Action Costs" as such terms are
described in 42 U.S.C. S9607(a), arising from an intentional or unintentional
action or omission of the Mortgagor or any previous owner and/or operator of
said real property, including, without limitation, the Premises, resulting in
any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of any "Hazardous Substance"
or "Hazardous Wastes", as such terms are defined in the Applicable Environmental
Laws, into the navigable waters, the waters of the contiguous zone, or the ocean
waters of which the natural resources are under exclusive managing authority of
the United States under the Magnuson Fishery Conservation and Management Act (16
U.S.C. S1801 ET SEQ.), or any other surface water, ground water, drinking ;water
supply, land surface or subsurface strata, or ambient air within the United
States or under the jurisdiction of the United States when damage may have
resulted to the land, fish, wildlife, biota, air, water, ground water, drinking
water supplies, and other resources belonging to, managed by, held in trust by,
appertaining to or otherwise controlled by the United States and any state or
local government.
(x) In the event that there shall be filed a lien against the
Premises by the United States Environmental Protection Agency pursuant to and in
accordance with the provisions of 42
<PAGE> 15
U.S.C. S9607(l), as a result of the Administrator of the Hazardous Substance
Superfund having expended monies from said fund to pay for "Damages" and
"Response Action Costs", as such terms are described in 42 U.S.C. S9607(a),
arising from an intentional or unintentional action of the Mortgagor or any
previous owner and/or operator, resulting in any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any "Hazardous Substance" or "Hazardous Wastes", as such terms
are defined in the Applicable Environmental Laws, into the navigable waters, the
waters of the contiguous zone, or the ocean waters of which the natural
resources are under exclusive managing authority of the United States under the
Magnuson Fishery Conservation and Management Act (16 U.S.C. S1801 ET.SEQ.), or
any other surface water, ground water, drinking water supply, land surface or
subsurface strata, or ambient air within the United States or under the
jurisdiction of the United States when damage may have resulted to the lands,
waters, or natural resources of the United States, then the Mortgagor shall,
within thirty (30) days from the date that the Mortgagor is given notice that
the lien has been placed against the Premises, or within such shorter period of
time in the event that the United States Government has commenced steps to cause
the Premises to be sold pursuant to the lien, either (a) pay the claim and
remove the lien from the Premises, or (b) furnish (1) a bond satisfactory to the
Mortgagee in the amount of the claim out of which the lien arises, (2) a cash
deposit in the amount of the claim out of which the lien arises, or (3) other
security satisfactory to the Mortgagee in an amount sufficient to discharge the
claim out of which the lien arises.
(xi) The Mortgagor represents and warrants that neither the
Mortgagor nor the Premises are in violation of or subject to any existing,
pending or threatened investigation or inquiry by any governmental authority
pertaining to any Applicable Environmental Law. The Mortgagor shall not cause or
permit the Premises to be in violation of, or do anything which would subject
the Premises to any remedial obligations under, any Applicable Environmental
Law, and shall promptly notify the Mortgagee, in writing, of any existing,
pending or threatened investigation or inquiry by any governmental authority in
connection with any Applicable Environmental Law.
Section 26. CLAIMS NOT AGAINST MORTGAGEE. Nothing contained in
this Mortgage shall constitute any consent or request by the Mortgagee, express
or implied, for the performance of any labor or services or the furnishing of
any materials or other property in respect of the Premises or any part thereof,
or be construed to permit the making of any claim against the Mortgagee in
respect of labor or services or the furnishing of any materials or other
property or any claim that any lien based on the performance of such labor or
services or the furnishing of any such materials or other property is prior to
the lien of this Mortgage.
Section 27. REAPPRAISAL OF THE PREMISES. (a) The Mortgagor
shall permit, throughout the term of this Mortgage and at its own cost and
expense, the Mortgagee to appraise or reappraise the Premises provided the
Mortgagee is required to do so pursuant to and in connection with (i) The
Financial Institutions, Reform, Recovery and Enforcement Act of 1989 (Public Law
101-73, 103 Stat. 183 (1989), (ii) The Bank Holding Company Act, 12 U.S.C.
Section 1844 or (iii) any other law, regulation, internal regulation or policy,
statute or opinion to which the Mortgagee is subject or bound. The Mortgagor
shall reimburse the Mortgagee for all costs, fees and expenses incurred by the
Mortgagee in connection with this Section 27, and the
<PAGE> 16
total of said costs, fees and expenses shall be added to the Obligations secured
by this Mortgage until paid. The Mortgagor shall provide any information
requested by the Mortgagee to conduct such appraisal or reappraisal and permit
any appraiser designated by the Mortgagee to enter the property at any
reasonable time to conduct such appraisal or reappraisal. In the event that the
Bank requests an appraisal for internal purposes, which is not required per
paragraph (a) then the Mortgagor agrees to (i) provide any information as
reasonably requested by the Mortgagee in order to perform the appraisal or
reappraisal, and (ii) permit any appraiser designated by the Mortgagee to enter
the Premises at any reasonable time for the purpose of conducting the appraisal
or reappraisal; (iii) to pay the cost of said appraisal or reappraisal; and (iv)
the Mortgagee hereby agrees, that provided no Event of Default has occurred, it
shall only conduct such appraisals or re-appraisals for internal purposes, once
every two (2) years.
Section 28. WAIVER OF REDEMPTION. The Mortgagor, for itself
and its successors and/or assigns, hereby irrevocably waives and releases, to
the extent permitted by law, (a) any right of redemption after the date of any
sale of the Premises upon foreclosure, whether statutory or otherwise, in
respect of the Premises now or hereafter in force; (b) the benefit of any and
all valuation and appraisement laws now or hereafter in force; and (c) all
exemption laws whatsoever and all moratoriums, extensions or stay laws or rules,
or orders of court in the nature of either of them, now or hereafter in force.
Section 29. RELIEF FROM BANKRUPTCY STAY. The Mortgagor
covenants and agrees that, in the event that the Mortgagor, any guarantor or any
of the persons or parties constituting the Mortgagor or a guarantor shall (i)
file with any bankruptcy court of competent jurisdiction or be the subject of
any petition under Title 11 of the U.S. Code, as amended (the "Bankruptcy
Code"), (ii) be the subject of any order for relief issued under the Bankruptcy
Code, (iii) file or be the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency, or other relief for debtors, (iv) have sought or
consented to or acquiesced in the appointment of any trustee, receiver,
conservator, or liquidator, or (v) be the subject of any order, judgment, or
decree entered by any court of competent jurisdiction approving a petition filed
against such party for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency or relief
for debtors, the Mortgagee shall thereupon be entitled and the Mortgagor
irrevocably consents to immediate and unconditional relief from any automatic
stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against
the exercise of the rights and remedies otherwise available to the Mortgagee as
provided for herein, in the Note, the Loan Documents and as otherwise provided
by law, and the Mortgagor hereby irrevocably waives any right to object to such
relief and will not contest any motion by the Mortgagee seeking relief from the
automatic stay and the Mortgagor will cooperate with the Mortgagee, in any
manner requested by the Mortgagee, in its efforts to obtain relief from any such
stay or other prohibition.
ARTICLE II. THE MORTGAGOR SHALL BE IN DEFAULT OF THIS MORTGAGE
UPON THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS (ANY OF WHICH MAY BE REFERRED
TO AS AN "EVENT OF DEFAULT"):
<PAGE> 17
Section 1. DEFAULT OF OBLIGATION OR IMPOSITION. After default
in the payment or performance when due of any of the Obligations or any
Impositions.
Section 2. EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS. The
occurrence of any event of default under the Loan Documents or the Note.
Section 3. FAILURE TO PAY INTEREST. In the event that the
Mortgagor shall have failed to make a payment of any installment of interest on
the Note on its due date.
Section 4. FAILURE TO PAY PRINCIPAL. In the event that the
Mortgagor shall have failed to make a payment of any installment of principal on
the Note on its due date.
Section 5. FAILURE TO PAY OTHER MONIES. In the event that the
Mortgagor shall have failed to duly observe or perform any covenant, condition
or agreement with respect to the payment of monies on the part of the Mortgagor,
to be observed or performed pursuant to the terms of this Mortgage, the Note or
any other loan document, other than the payment of interest and principal which
shall be governed by Sections 3 and 4 above.
Section 6. BREACH OF COVENANTS. The Mortgagor shall have
failed to observe or perform any of the terms, covenants, conditions or
undertakings on the part of the Mortgagor to be observed or performed pursuant
to the terms contained in this Mortgage and/or the Loan Documents, other than
the payment of interest, principal or other monies which shall be governed by
Sections 3, 4 and 5 above.
Section 7. REPRESENTATIONS AND WARRANTIES. In the event that
any representation or warranty made by the Mortgagor in this Mortgage, the Loan
Documents or the Note shall prove to be false or misleading in any substantial
and material respect on the date made.
Section 8. BANKRUPTCY. The Mortgagor shall have applied for or
consented to the appointment of a receiver, custodian, trustee or liquidator of
all or a substantial part of the Mortgagor's assets; or shall generally not be
paying the Mortgagor's debts as they become due; or shall have admitted in
writing the inability to pay the Mortgagor's debts as they mature; or shall have
made a general assignment for the benefit of creditors, or shall have filed a
petition or an answer seeking an arrangement with creditors; or shall have taken
advantage of any insolvency law; or shall have submitted an answer admitting the
material allegations of a petition in any bankruptcy or insolvency proceeding;
or an order, judgment or decree shall have been entered, without the
application, the approval or consent of the Mortgagor by any Court of competent
jurisdiction approving a petition seeking reorganization of the Mortgagor, or
appointing a receiver, custodian, trustee or liquidator of the Mortgagor, or a
substantial part of the Mortgagor's assets and such order, judgment or decree
shall have continued unstayed and in effect for any period for thirty (30)
consecutive days; or a petition in bankruptcy shall have been filed against the
Mortgagor and shall not have been dismissed for a period of thirty (30)
consecutive days; or if any order for Relief shall have been entered under the
Bankruptcy Code.
Section 9. ADDITIONAL LIENS. In the event that the Mortgagor
shall have encumbered, mortgaged or given a security interest in any fixture or
fixtures, except as permitted
<PAGE> 18
in this Mortgage, or shall have, without the consent of the Mortgagee, removed
or replaced any fixtures.
Section 10. OTHER DEFAULTS. In the event that default is made
in any of the terms, covenants and conditions contained in any mortgage
constituting a lien upon the Premises prior and superior to the lien hereof, or
should proceedings be instituted for the foreclosure or collection of any
mortgage, judgment or lien prior or subordinate to the lien of this Mortgage,
affecting the Premises.
Section 11. REFUSAL TO INSURE. In the event that no insurance
company authorized to do business in the State of New York shall insure said
Premises in the form of a title insurance and/or hazard insurance policy
approved by the Mortgagee for a sum equal to the full insurable value of the
Premises.
Section 12. ADDITIONAL FINANCINGS. In the event that the
Mortgagor shall have entered into any additional financing or shall have
consented to the placing of any lien on the Premises, whether such financing or
lien is prior to or subordinate to the lien of this Mortgage.
Section 13. TRANSFER OF PREMISES. In the event that the
Mortgagor shall have transferred or caused to have been transferred, title to or
possession of any interest in the Premises, or any part thereof, to any Person
without the prior express written consent of the Mortgagee (Except the Mortgagor
may transfer title to or possession of any interest in and to the Premises to
Michael Anthony Jewelers, Inc. provided: (a) no Event of Default has occurred
prior to said proposed transfer, (b) the Obligated Parties are not released from
and further reaffirm any liability attached to them under the Loan, (c) Michael
Anthony Jewelers, Inc. assumes all of the liabilities of the Obligated Parties
to the Mortgagee, and (d) said proposed transfer occurs with the prior express
written consent of the Mortgagee, which consent shall not be unreasonably
withheld or delayed.) (The Lessee may sublet up to 10,000 square feet of the
Premises without prior consent of the Mortgagee. The Mortgagor and Lessee may
also extend the Lease on the same terms and conditions as set forth in said
Lease without consent of the Mortgagee.)
Section 14. CHANGE OF BUSINESS. In the event of a material or
adverse change in the financial condition of the Mortgagor or any Guarantor.
ARTICLE III. IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND
IS CONTINUING ON THE PART OF THE MORTGAGOR, THE MORTGAGEE MAY TAKE ANY OR ALL OF
THE FOLLOWING ACTIONS, AT THE SAME OR AT DIFFERENT TIMES:
Section 1. ACCELERATION. The Mortgagee may declare the entire
amount of unpaid principal, together with all accrued and unpaid interest and
other moneys due under this Mortgage, the Loan Documents and/or the Note,
immediately due and payable, and accordingly accelerate payment thereof
notwithstanding contrary terms of payment stated therein, without presentment,
demand or notice of any kind, all of which are expressly waived, notwithstanding
anything to the contrary contained in the Mortgage, the Loan Documents and/or
the Note and interest on the aggregate principal sum shall thereafter be
computed at the Default Rate.
<PAGE> 19
Section 2. POSSESSION. The Mortgagee may enter upon and take
possession of the Premises; lease and let the said Premises; receive all the
rents, income, issues and profits thereof which are overdue, due or to become
due; and apply the same, after payment of all necessary charges and expenses, on
account of the amounts hereby secured. The Mortgagee is given and granted full
power and authority to do any act or thing which the Mortgagor or the successors
or assigns of the Mortgagor who may then own the Premises might or could do in
connection with the management and operation of the Premises. This covenant
becomes effective either with or without any action brought to foreclose this
Mortgage and without applying at any time for a receiver of such rents. Should
said rents or any part thereof be assigned without the consent of the holder of
this Mortgage, then this Mortgage shall at the option of the holder hereof
become due and payable immediately, anything herein contained to the contrary
notwithstanding.
Section 3. FORECLOSURE. The Mortgagee may institute an action
of mortgage foreclosure, or take other action as the law may allow, at law or in
equity, for the enforcement of this Mortgage, and proceed thereon to final
judgment and execution of the entire unpaid balance of the Note including costs
of suit interest and reasonable attorney's fees. In case of any sale of the
Premises may be sold in one parcel as an entirety or in such parcels, manner or
order as the Mortgagee in its sole discretion may elect. The failure to make any
tenants parties to a foreclosure proceeding and to foreclose their rights will
not be asserted by the Mortgagor as a defense in any proceeding instituted by
the Mortgagee to collect the obligations secured hereby or any deficiency
remaining unpaid after the foreclosure sale of the Premises.
Section 4. PARTIAL FORECLOSURE. The Mortgagee may from time to
time, if permitted by law, take action to recover any sums, whether interest,
principal or any other sums required to be paid under the Note and/or Loan
Documents, as the same becomes due, without prejudice to the right of the
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by the Mortgagor existing when such earlier action was
commenced. The Mortgagee may, at the Mortgagee's option, cause this Mortgage to
be foreclosed for any portion of the obligations or any other sums secured
hereby which are then due and payable, subject to the continuing lien of this
Mortgage for the balance of the obligations not then due.
Section 5. APPOINTMENT OF RECEIVER. The Mortgagee may have a
receiver of the rents, income, issues and profits of the Premises appointed
without the necessity of proving either the depreciation or the inadequacy of
the value of the security or the insolvency of the Mortgagor or any Person who
may be legally or equitably liable to pay moneys secured hereby, and the
Mortgagor and each such Person waive such proof and consent to the appointment
of a receiver.
Section 6. FAIR RENTAL PAYMENTS. If the Mortgagor or any
subsequent owner is occupying the Premises or any part thereof, it is hereby
agreed that the said occupants shall pay such reasonable rental monthly in
advance as the Mortgagee shall demand for the Property or the part so occupied,
and f or the use of personal property covered by this Mortgage or any chattel
mortgage.
<PAGE> 20
Section 7. EXCESS MONIES. The Mortgagee may apply on account
of the unpaid indebtedness evidenced by the Note (including any unpaid accrued
interest) owed to the Mortgagee after a foreclosure sale of the Premises,
whether or not a deficiency action shall have been instituted, any unexpended
monies still retained by the Mortgagee that were paid by the Mortgagor to the
Mortgagee (i) for the payment of, or as security for the payment of taxes,
assessments, municipal or governmental rates, charges, impositions, liens, water
or sewer rents, or insurance premiums, if any, or (ii) in order to secure the
performance of some act by the Mortgagor.
Section 8. RIGHT OF SET-OF F. The Mortgagee may exercise its
right of set-off as provided for in the Note.
Section 9. AGREEMENT OF GUARANTY. The Mortgagee may take any
of the remedies available to it under the Guaranty.
Section 10. REMEDIES AT LAW OR EQUITY. The Mortgagee may take
any of the remedies otherwise available to it as a matter of law or equity.
Section 11. EXPENSES. All reasonable sums (including
attorneys' fees) paid by the Mortgagee in connection with any litigation
(including a foreclosure of this Mortgage) to prosecute or defend the rights and
obligations created by this Mortgage, with interest at fifteen (15%) percent but
in no event to exceed the Default Rate, from the time of payment, shall, on
demand, be immediately due from the Mortgagor to the Mortgagee, the same shall
be added to and shall be secured by this Mortgage.
ARTICLE IV. MISCELLANEOUS.
Section 1. INSPECTION. The Mortgagee and its authorized agents
and employees shall have the right, at the Mortgagee's option, to enter into the
Premises at all reasonable times, on not less than two days prior notice to the
Mortgagor, for the purpose of inspecting the same and complying with and
performing any of the Obligations.
Section 2. RELEASE OF COLLATERAL. The Mortgagee may release,
regardless of consideration, the obligation of anyone liable for payment of any
of the Obligations, or may release any part of the Premises or any other
collateral now or hereafter given to secure the payment of the obligations or
any part thereof, without impairing, reducing or affecting the Obligations of
the Mortgagor, the remainder of the security of this Mortgage or the priority of
the rights created by this Mortgage.
Section 3. MORTGAGEE'S RIGHT TO PERFORM MORTGAGOR'S COVENANTS.
If the Mortgagor or Undersigned or any Guarantor shall fail to fully and
promptly pay, perform or observe any of the Obligations, then, in any such
event, the Mortgagee may, at its option, but without any obligation so to do,
and without waiving or releasing the Mortgagor from any of the Obligations, pay
any Obligation or perform any act or take such action as the Mortgagee
reasonably deems necessary or desirable in order to cause such Obligation to be
paid, performed or observed, as the case may be. The Mortgagor hereby agrees to
pay to the Mortgagee, on demand, all such sums so
<PAGE> 21
paid or expended by the Mortgagee, together with interest thereon from the date
of each such payment or expenditure at the Default Rate. All sums so paid or
expended by the Mortgagee, and the interest thereon, shall be added to and shall
be secured by the lien of this Mortgage.
Section 4. NO RELEASE. The Mortgagor agrees that any agreement
between the Mortgagor and the Mortgagee extending the time or modifying the
terms of payment, or any agreement altering any of the Loan Documents in any
manner, shall in no way release the Mortgagor or affect the lien of this
Mortgage until the Obligations are satisfied. The Mortgagor further agrees to
continue to be liable under this Mortgage until the Obligations are satisfied
and paid in full and/or the Mortgagor is expressly released and discharged in
writing by the Mortgagee.
Section 5. SEVERABILITY. If any term or provision of this
Mortgage or the application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Mortgage, or the
application of such term or provision to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Mortgage shall be valid and enforceable to
the fullest extent permitted by law. If any payments required to be made under
the Loan Documents shall be in excess of the amounts allowed by law, the amounts
of such payments shall be reduced to the maximum amounts allowed by law.
Section 6. CUMULATIVE RIGHTS. The rights and remedies herein
expressed to be vested in or conferred upon the Mortgagee shall be cumulative
and shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred by any applicable law. The failure, at any one or
more times, of the Mortgagee to assert the right to declare the principal
indebtedness due or the granting of any extension or extensions of time of
payment of the Note and the Loan Documents either to the maker or to any other
person, or taking of other or additional security for the payment thereof, or
releasing any security, or changing any of the terms of this Mortgage, the Note,
the Loan Documents or any other obligation accompanying this Mortgage, or waiver
of or failure to exercise any right under any covenant or stipulation herein
contained shall not in any way affect this Mortgage nor the rights of the
Mortgagee hereunder nor operate as a release from any personal liability upon
the Note and the Loan Documents or other obligation accompanying this Mortgage,
nor under any covenant or stipulation therein contained, nor under any agreement
assuming the payment of the Note or the Obligations.
Section 7. APPLICATION OF PROCEEDS. If the amount of proceeds
received from the sale or other disposition of the Premises shall be
insufficient to satisfy in full (a) the payment of all fees, costs and expenses,
(including attorneys' fees and expenses) incurred by the Mortgagee and/or its
agents or representatives in connection with the realization of such payments or
proceeds or (b) the payment in full of all the Obligations of the Mortgagor to
the Mortgagee, then the Mortgagor shall remain and be liable for any such
deficiency.
Section 8. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any agreement contained in this Mortgage should be breached by the
Mortgagor and thereafter
<PAGE> 22
waived by the Mortgagee, such waiver shall be limited to the particular breach
so waived and shall not be deemed to waive any other breach hereunder.
Section 9. NOTICES. Unless otherwise indicated differently,
all notices, payments, requests, reports, information or demands which any party
hereto may desire or may be required to give to any other party hereunder, shall
be in writing and shall be personally delivered or sent by telex (answer back
received), courier, or first-class certified or registered United States mail,
postage prepaid, return receipt requested, and sent to the party at its address
appearing below or such other address as any party shall hereafter inform the
other party hereto by written notice given as aforesaid; provided, however,
notices to the Mortgagee requesting disbursements need not be sent by certified
United States mail:
If to the Mortgagor: Michael Anthony Company
115 South MacQuesten Parkway
Mount Vernon, New York [zip]
Attn: Michael Paolercio
President
with a copy to: Michael F. Mongelli, II, Esq.
41-07 162nd Street
Flushing, New York 11358
If to the Mortgagee: First Fidelity Bank, N.A., New Jersey
570 Broad Street
Newark, New Jersey 07102
Attn: Joseph C. Tkac
Vice President
with a copy to: GALLO GEFFNER FENSTER
235 Main Street
Hackensack, New Jersey 07601
Attn: Michael A. Gallo, Esq.
All notices, payments, requests, reports, information or demands so given shall
be deemed effective upon receipt or, if mailed, upon receipt or the expiration
of the third day following the date of mailing, which ever occurs first, except
that any notice of change in address shall be effective only upon receipt by the
party to whom said notice is addressed. A failure to send the requisite copies
does not invalidate an otherwise properly sent notice to the Mortgagor and/or
the Mortgagee.
Section 10. PARTNERSHIP AUTHORITY. The Mortgagor represents
and warrants that the partners of the Mortgagor, by proper partnership action,
which has not been modified or revoked, have duly authorized the execution and
delivery of this Mortgage.
Section 11. ALTERATIONS. This Mortgage cannot be changed or
terminated except by an agreement in writing, signed by the party against whom
enforcement of the change is
<PAGE> 23
sought. This Mortgage shall be governed and construed in accordance with the
laws of the State of New York applicable to agreement made and to be performed
in said State. This Mortgage shall be construed without regard to any
presumption or rule requiring construction against the party causing such
instrument or any portion thereof to be drafted. All terms and words used in
this Mortgage, regardless of the number or gender in which they are used, shall
be deemed to include any other number and any other gender as the context may
require. The headings in this Mortgage are f or convenience of reference only
and shall not limit or otherwise affect any of the terms hereof.
Section 12. FIRST LIEN. This Mortgage shall constitute a valid
mortgage lien upon the Premises.
Section 13. Successors and Assigns. All of the terms,
covenants, provisions and conditions herein contained shall be for the benefit
of, apply to, and bind the successors and assigns of the Mortgagor and the
Mortgagee, and are intended and shall be held to be real covenants running with
the land, and the term "Mortgagor" shall also include any and all subsequent
owners and successors in title of the Premises.
Section 14. GENDER. When such interpretation is appropriate,
any word denoting gender used herein shall include all persons, natural or
artificial, and words used in the singular shall include the plural.
Section 15. REFERENCE TO THE LOAN DOCUMENTS. This Mortgage is
the Mortgage referred to in the Loan Documents, executed by and between the
Mortgagor and the Mortgagee and is subject to all the terms and provisions of
the Loan Documents. Should any provisions of the Loan Documents be inconsistent
or contrary to the provisions of this Mortgage, the provisions of the Loan
Documents shall control.
Section 16. CHANGES IN MORTGAGE. The Mortgagor and the
Mortgagee may agree to change the interest rate and/or the maturity date of the
Note or other term or terms of this Mortgage or of the Obligations secured by
this Mortgage. If the Mortgagor and the Mortgagee agree to any such change,
which change shall be deemed a "modification" and shall continue to be a first
mortgage lien on the Premises.
Section 17. GOVERNING LAW, SEVERABILITY. THIS MORTGAGE AND THE
NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OR LAWS THEREUNDER. WHEREVER
POSSIBLE, EACH PROVISION OF THIS MORTGAGE SHALL BE INTERPRETED IN SUCH MANNER AS
TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
MORTGAGE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION
SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
MORTGAGE.
<PAGE> 24
Section 18. WAIVER OF JURY TRIAL. THE MORTGAGOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS THAT IT MAY
NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY
STATE, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING EITHER DIRECTLY OR
INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN THE MORTGAGOR, THE MORTGAGEE OR
THEIR SUCCESSORS AD ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS MORTGAGE,
THE NOTE, THE LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE MORTGAGOR AND THE
MORTGAGEE. IT IS INTENDED THAT SAID WAIVER SHALL APPLY TO ANY AND ALL DEFENSES,
RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR PROCEEDING. THIS SECTION 18 IS A
MATERIAL INDUCEMENT FOR THE MORTGAGEE ENTERING INTO THE LOAN.
THE MORTGAGOR HEREBY DECLARES THAT THE MORTGAGOR HAS READ THIS
MORTGAGE, HAS RECEIVED A COMPLETELY FILLED IN COPY OF IT WITHOUT CHARGE THEREFOR
AND HAS SIGNED THIS MORTGAGE AS OF THE DATE AT THE TOP OF THE FIRST PAGE.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to
be duly executed and delivered all as of the day and year first above written.
WITNESS: MICHAEL ANTHONY COMPANY
By:
---------------------------------
Michael Paolercio
General Partner
By:
---------------------------------
Anthony Paolercio
General Partner
<PAGE> 25
SCHEDULE "A"
------------
ATTACHED TO AND MADE A PART OF THAT CERTAIN MORTGAGE BY AND BETWEEN MICHAEL
ANTHONY COMPANY, AS THE MORTGAGOR, AND FIRST FIDELITY BANK, NATIONAL
ASSOCIATION,, NEW JERSEY, AS THE MORTGAGEE, DATED _________________, 1993.
DESCRIPTION OF PREMISES
-----------------------
<PAGE> 26
Title No. P8419
File No. M.
SCHEDULE A
PARCEL I
- --------
ALL that certain plot, piece 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. consisting of portions of lots Nos. 290, 291,
292, and 293 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, and filed in the County
Clerk's Office, Division of Land Records. Westchester County, New York, on May
1, 1852 as Map No. 151, said portions of said lots when taken together as one
parcel being bounded and described as follows:
BEGINNING at a point on the northwesterly side of MacQuesten Parkway South where
the same is intersected by the northeasterly boundary line of land now or
formerly belonging to David Schwartz as acquired by a deed from Bianco & Pepe,
Inc., dated December 9, 1957 and recorded in said County Clerk's Office on
December 10, 1957, in Liber 5765 of deeds, page 259, said point of beginning
being distant southwesterly as measured along said side of MacQuesten Parkway
South 293-00 feet from the southwesterly side of South West Street;
RUNNING THENCE along said northeasterly boundary line of said David Schwartz,
North 57 degrees 33 minutes 08 seconds West 218.67 feet to a point in the
easterly boundary line of land now or formerly belonging to the New York Central
Railroad Company;
THENCE along said last mentioned boundary line, North 32 degrees 26 minutes 31
seconds East 115-00 feet to a point;
THENCE through Lot No. 290 on said map on a course of, South 57 degrees 33
minutes 08 seconds East, 218.6 8 feet to a point in the northwesterly side of
Macquesten Parkway;
-Continued-
For Conveyancing Only, if intended to be conveyed.
Together with all right, title and interest of, in and to any streets and roads
abutting the above described premises, to the center line thereof
<PAGE> 27
Title No. P8419
File No. M
SCHEDULE "A" CONTINUED
- Page 2 -
THENCE along said side of MacQuesten Parkway, South 32 degrees 26 minutes 52
seconds West 115.00 feet to the point or place of BEGINNING.
TOGETHER with and subject to the easement for common driveway purposes reserved
in deed from Bianco & Pepe, Inc. to David Schwartz, dated December 9, 1957 and
recorded in said County Clerk's Office on December 10, 1957 in Liber 5765 of
Deeds page 259.
PARCEL II
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 Lot Nos.
297, 298 and 299 on a certain map entitled, "Map of West Mount Vernon. lying in
the Town of Eastchester, County of Westchester and State of New York", filed in
the Office of the Clerk of the County of Westchester, Division of Land Records
(formerly Register's Office) on May 1. 1852. as Map No. 151, said portions of
Lot Nos. 297, 298 and 299 being bounded and described as follows:
BEGINNING at a point on the northwesterly side of MacQuesten Parkway South
distant 408 feet southwesterly as measured along said northwesterly side of
MacQuesten Parkway South with the southwesterly side of West Street South, said
point also being where the dividing line between Lots 296 and 297 intersects the
northwesterly side of MacQuesten Parkway South;
RUNNING THENCE along said dividing line, North 57 degrees 33 minutes 08 seconds
West 176.46 feet to land now or formerly of New York Central & Hudson River
Railroad;
-Continued-
For Conveyancing Only, if intended to be conveyed.
Together with all right, title and interest of, in and to any streets and roads
abutting the above described premises, to the center line thereof
<PAGE> 28
Title No. P8419
File No. M
SCHEDULE "A" CONTINUED
- Page 3 -
THENCE Southwesterly along the railroad property and along the arc of a curve to
the left. having a radius of 2784-93 feet and a central angle of 2 degrees 35
minutes 28 seconds a distance of 121.94 feet;
THENCE South 59 degrees 48 minutes 08 seconds East 150.67 feet to a point on the
northwesterly side of MacQuesten Parkway South;
THENCE along said northwesterly side of MacQuesten Parkway South. North 32
degrees 26 minutes 52 seconds East 117-33 feet to the point or place of
BEGINNING.
PARCEL III
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, being parts of Lots Nos. 296, 295, 294 and portion of Lot 293, 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 by the Teutonia
Homestead Association, by Gustavus A. Sacchi, and filed in the Office of the
County Clerk, Division of Land Records, formerly Register's Office of
Westchester County. New York, on May 1, 1852 as Map No. 151, bounded and
described as follows:
BEGINNING at a point on the northwesterly side of MacQueston Parkway South
(formerly South Railroad Avenue) where the same is intersected by the northerly
line of Lot 297, property now or formerly of Ward Leonard Electric Co., said
point of beginning being distant as measured along said northwesterly side of
MacQueston Parkway, South 408.00 feet southwesterly from the southwesterly side
of South West Street;
RUNNING THENCE along the northerly line of Lot 297, which land now or formerly
of Ward Leonard Electric Co., and along the land of the New York Central
Railroad Company, formerly land of New York State Realty and Terminal Company on
a course North 57 degrees 33 minutes 08 seconds West, 218.66 feet to the
westerly line of land of New York Central Railroad Company;
-Continued-
For Conveyancing Only, if intended to be conveyed.
Together with all right, title and interest of, in and to any streets and roads
abutting the above described premises, to the center line thereof
<PAGE> 29
Title No. P8419
File No. M
SCHEDULE "A" CONTINUED
- Page 4 -
THENCE along the last mentioned land on a course, North 32 degrees 26 minutes 31
seconds East 115-00 feet;
THENCE South 57 degrees 33 minutes 08 seconds East 218.67 feet through Lot 293
to the northwesterly side of MacQuesten Parkway South, formerly South Railroad
Avenue;
THENCE along the same South 32 degrees 26 minutes 52 seconds West 115 feet to
the point and place of BEGINNING.
TOGETHER with the benefits and subject to the burdens of a driveway easement
recorded in Liber 5765, Page 259.
For Conveyancing Only, if intended to be conveyed.
Together with all right, title and interest of. in and to any streets and roads
abutting the above described premises, to the center line thereof
<PAGE> 30
STATE OF NEW )
) ss.:
COUNTY OF )
BE IT REMEMBERED, that on this _________day of
_________________, 1993, before me, the subscriber, an officer duly authorized
to take acknowledgments for use in the State of New York, personally appeared
Michael Paolercio and Anthony Paolercio, who, I am satisfied are the persons who
executed the within Instrument as the general partners of Michael Anthony
Company, the partnership named therein, and I having first made known to them
the contents thereof, they did thereupon acknowledge that the said Instrument
made by the said partnership and delivered by them as such partners, is the
voluntary act and deed of said partnership, made by virtue of authority from
said partnership's partnership agreement, for the uses and purposes therein
expressed.
----------------------------
<PAGE> 1
EXHIBIT NO. 10.50
-----------------
ASSUMPTION AGREEMENT
AGREEMENT, made as of the 16th day of September, 1999 among and between
First Union National Bank, a national banking association maintaining an office
at 50 Main Street, White Plains, New York 10606, successor in interest to First
Fidelity Bank, N.A. ("Mortgagee"), MacQuesten Realty Company, a New York general
partnership, maintaining it's principal office at 115 MacQuesten Parkway South,
Mount Vernon, New York 10550, successor in interest to Michael Anthony Company
("Borrower") and Michael Anthony Jewelers, Inc. a Delaware corporation,
maintaining it's principal office at 115 MacQuesten Parkway South, Mount Vernon,
New York 10550, ("Purchaser")
WHEREAS, Borrower is indebted to Mortgagee under a certain mortgage and
note dated August 16, 1993 in the principal amount of $1,885,000.00, and the
note is recorded at Liber/Reel 18080 Page 279 in the office of the Westchester
County Clerk.
WHERAS, pursuant to a reorganization of the affairs of the Borrower,
the real property described in the mortgage was on December 27, 1995 conveyed to
MacQuesten Realty Company, its successor entity.
WHEREAS, following such conveyance, all payments required to be paid
under the mortgage have been paid by MacQuesten Realty Company to the Mortgagee.
WHEREAS, Borrower has sold and conveyed to Purchaser all of the real
property described in the mortgage, and both Borrower and Purchaser have
requested Mortgagee to enter into this agreement.
WHEREAS, in consideration of the execution of this agreement by
Mortgagee, Purchaser is willing to assume the payment of the mortgage
indebtedness due and owing from Borrower to Mortgagee, such assumption having
been agreed to between Borrower and Purchaser as partial consideration for the
conveyance as stated above of the mortgaged premises by Borrower to Purchaser.
WHEREAS, Borrower and Purchaser represent to Mortgagee that there is no
second mortgage or other subsequent lien now outstanding against the real
property described in the mortgage stated above held by Mortgagee, and that the
lien of the mortgage held by mortgages is a valid, first and subsisting lien
on the real property.
NOW, THEREFORE, in consideration of the mutual agreements contained here
and on the condition that the lien of the mortgage stated above held by
Mortgagee is a valid, first and
<PAGE> 2
subsisting lien on the real property and that the execution of this agreement
will not impair the lien of the mortgage, the parties agree as follows:
1. Purchaser agrees to pay installments on the mortgage note as they
become due in the manner and amount stipulated in it and Purchaser adopts and
agrees to be bound by all of the covenants, agreements, obligations and
provisions of the note pertaining to the mortgagor, as though the note had been
originally executed by Purchaser, except for the reduction of principal and
interest due on it to the payments made by Borrower prior to the execution of
this agreement.
2. Mortgagee agrees to release Borrower from all personal liability under
the mortgage note and agrees that in any action taken to enforce the collection
of the obligation evidenced by the note, in no case shall Borrower be subject to
suit, claim or demand by Mortgagee for any deficiency.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
entered into on the day above first written.
FIRST UNION NATIONAL BANK
By: /S/ CHRISTOPHER STRAUSS
----------------------------------------
Christopher Strauss, Vice President
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ MICHAEL A. PAOLERCIO
----------------------------------------
Michael A. Paolercio, Treasurer
MACQUESTEN REALTY COMPANY
By: /s/ ANTHONY PAOLERCIO
----------------------------------------
Anthony Paolercio, General Partner
STATE OF NEW YORK )
COUNTY OF WESTCHESTER ) ss:
On the _________ day of ______________, ___ before me came ___________________,
to me know duly sworn did depose and say that he is the
___________________________ Of First Union National Bank who executed the above
document in my presence.
---------------------------
Notary Public
<PAGE> 3
STATE OF NEW YORK )
COUNTY OF WESTCHESTER ) ss:
On the 19th day of April, 2000 before me came Michael A. Paolercio, to me know
duly sworn did depose and say that he is the Senior Vice President & Treasurer
of Michael Anthony Jewelers, Inc., the corporation described in and which
executed the foregoing instrument in my presence by authority of the Board of
Directors.
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF WESTCHESTER )
BE IT REMEMBERED, that on this 19th day of April, 2000, before
me, the subscriber, an officer duly authorized to take acknowledgments for use
in the State of New York, personally appeared Anthony Paolercio, who, I am
satisfied is the person who executed the within Instrument as a general partner
of MacQuesten Realty Company , the partnership named therein, and I having first
made known to them the contents thereof, he did thereupon acknowledge that the
said Instrument made by the said partnership and delivered by him as such
partner, is the voluntary act and deed of said partnership, made by virtue of
authority from said partnership's partnership agreement, for the uses and
purposes therein expressed.
----------------------------
Notary Public
<PAGE> 1
Exhibit No. 10.51
-----------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
September 16, 1999
Commission file number: 015230
MICHAEL ANTHONY JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 13-2910285
(State of Incorporation) (I.R.S. Employer Identification No.)
115 South MacQuesten Parkway
Mount Vernon, New York 105501724
(Address of principal executive offices)
Registrant's telephone number, including area code:
(914) 699-0000
<PAGE> 2
ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANTS
---------------------------------------------
Michael Anthony Jewelers, Inc. (the "Company") is filing this report on Form 8-K
to report a change in certifying accountants with the firm of Deloitte & Touche
LLP being replaced by BDO Seidman LLP effective September 15, 1999.
(a) The following sets forth the information required by item
304(a)(1) of Regulation S-K:
(i) On September 15, 1999, Deloitte & Touche LLP was
dismissed as the Company's principal accountant.
(ii) Deloitte & Touche LLP reports on the financial
statements for the past two fiscal years did not
contain an adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
(iii) The decision to change accountants was approved by
the Company's Board of Directors.
(iv) During the Company's two most recent fiscal years and
subsequent interim principles periods, there were no
disagreements with Deloitte & Touche LLP on any
matter of accounting or practices, financial
statement disclosures or auditing scope or procedure.
(v) During the Company's two most recent fiscal years and
subsequent interim periods, there have occurred none
of the "reportable events" listed in Item
304(a)(1)(v)(A-D) of Regulation S-K.
(b) The Company has requested and received from Deloitte & Touche
LLP the letter required by Item 304(a)(3) of Regulation S-K.
Such letter is filed as Exhibit 16.1 to this report, and
states that Deloitte & Touche LLP agrees with the statements
made by the Company in this report in response to Item
304(a)(1) of Regulation S-K.
(c) The following sets forth the information required by Item
304(a)(2) of Regulation S-K:
<PAGE> 3
The Company has retained BDO Seidman LLP as its principal
accountants effective September 15, 1999.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
--------------------------------
The following exhibit is filed with this report.
Exhibit No. Description
----------- -----------
16.1 Letter regarding Change in Certifying
Accountants
<PAGE> 4
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICHAEL ANTHONY JEWELERS, INC.
By: \s\ Michael A. Paolercio
---------------------------
Michael A. Paolercio
Senior Vice President and
Treasurer
Exhibit No. 16.1
- ----------------
September 17, 1999
Securities and Exchange Commission
Mail Stop 11-3
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 4 of Form 8-K of Michael
Anthony Jewelers, Inc. dated September 16, 1999.
Yours truly,
/s/: Deloitte & Touche, LLP
- ---------------------------
<PAGE> 1
Exhibit No. 10.52
-----------------
I, MARIA TERESA PUIGBO, Judicial Interpreter of the Court of First Instance of
the National District, duly sworn for the legal practice of my functions,
CERTIFY: That I have translated a document written in Spanish, the English
version of which, according to my judgment is as follows:
REAL ESTATE BILL OF SALE
------------------------
BETWEEN:
- --------
ZONA FRANCA SAN ISIDRO, S.A., commercial society organized in accordance with
the laws of the Dominican Republic, with main headquarters at "El Paredon", San
Isidro Section, of this city of Santo Domingo, duly represented by its'
Executive Vice-president, DR. RICARDO VALDEZ ALBIZU, Dominican, of legal age,
married, Corporation Executive, bearer of the electoral and identity card No.
001-0171170-3, society hereinafter referred to as THE SELLER;
MADOR, S.A., commercial society organized in accordance with the laws of the
Dominican Republic, with main headquarters at Mount Vernon, New York, United
States of America, duly represented by its' President, ANTHONY PAOLERCIO,
American, of legal age, married, businessman, residing in the city of New York,
New York State, bearer of Passport No. 140315986, society hereinafter referred
to as THE BUYER or by its' complete commercial name;
WHEREAS: THE SELLER is the owner of Lot No. 80-A-REF.-49 of the Cadastral
District No. 6 of the National District with a superficial extension of four
thousand eight hundred and fifty six square meters (4,856) ninety one (91)
square decimeters, equivalent to 52,260.35 square feet, property sustained by
Title No. 88-5646, issued by the Registrar of Titles of the National District in
favor of ZONA FRANCA SAN ISIDRO, S.A., on October 18, 1988 ;
WHEREAS: The commercial society MADOR, S.A., is interested in purchasing the
above mentioned real estate, and THE SELLER has agreed to sell this real estate
to THE BUYER;
THEREFORE and in the understanding that the previous preamble is a part of this
agreement, the parties freely and voluntarily-----------------------------------
HAVE AGREED UPON THE FOLLOWING:
-------------------------------
ARTICLE ONE: OBJECT OF THE CONTRACT.-
- -------------------------------------
THE SELLER, sells, transfers and conveys, with all legal guarantees, free of
liens and encumbrances, in favor of THE BUYER, who accepts, the real estate
described below: "Lot No. 80-A-REF.-49 of the Cadastral District No. 6 of the
National District with a superficial extension of four thousand eight hundred
and fifty six square meters (4,856) ninety one (91) square
<PAGE> 2
decimeters, equivalent to 52,260.35 square feet and limited to the North, street
No. I-A, to the East, Lot No. 80-A-Ref -50, to the South, walk and to the West,
street F ".
ARTICLE TWO: JUSTIFICATION OF PROPERTY RIGHTS.-
- -----------------------------------------------
THE SELLER justifies its' property rights over the above described real estate
by virtue of Title No. 88-5646 (Owners Duplicate) issued by the Registrar of
Titles of the National District on October 18, 1988 ;
ARTICLE THREE: PRICE OF SALE.-
- ------------------------------
The parties have agreed that the price per square foot of this sale is of THREE
WITH 10/100 DOLLARS OF THE UNITED STATES OF AMERICA (US$3.10), therefore the
total price of the real estate object of this sale is of ONE HUNDRED AND SIXTY
TWO THOUSAND SEVEN WITH 09/100 DOLLARS OF THE UNITED STATES OF AMERICA
(US$162,007.09), or its' equivalency in national currency, amount that THE BUYER
will pay THE SELLER, to its' complete satisfaction, upon signing this bill of
sale, reason by which total discharge is granted in favor of THE BUYER.
ARTICLE FOUR: SALE TAXES AND EXPENSES.-
- ---------------------------------------
It is expressly agreed between the parties that THE BUYER will assume all the
expenses, taxes and tariffs to be paid, necessary for the definite transfer in
his favor of the property rights of the real estate object of this contract and
that has been previously described.
ARTICLE FIVE: LACK OF LIENS AND ENCUMBRANCES.:
- ----------------------------------------------
THE SELLER expressly guarantees to THE BUYER that there are no liens,
encumbrances or any other right, that could obstruct this sale or affect the
rights transferred to THE BUYER.
ARTICLE SIX: ELECTION OF LEGAL ADDRESSES.-
- ------------------------------------------
For the legal consequences of this contract, the parties elect the following
addresses:
THE SELLER at the address mentioned at the beginning of this bill of sale.
THE BUYER at the warehouse it actually occupies in the industrial park of Zona
Franca San Isidro, located in "El Paredon", San Isidro, Santo Domingo, National
District.
ARTICLE SEVEN: COMMON LAW.-
- ---------------------------
For all that is not foreseen herein, the parties remit themselves to the common
law, which will rule their relationship on a supplementary basis.
<PAGE> 3
MADE AND SIGNED in three (3) originals, of the same effect, one for each of the
parties with different interests. In the city of Santo Domingo, National
District, Capital of the Dominican Republic on October 28, of the year nineteen
hundred and ninety nine (1999).
THE SELLER: THE BUYER:
/s/: Anthony Paolercio
- ----------------------------- ---------------------------------
RICARDO VALDEZ A.LBIZU ANTHONY PAOLERCIO
Executive Vice-president President
Zona Franca San Isidro, S.A. Mador S.A.
I, _________________________, Attorney at Law, Notary Public of the Number of
the National District, CERTIFY AND ATTEST, that the previous signatures were
made before me, freely and voluntarily by Messrs. RICARDO VALDEZ ALBIZU and
ANTHONY PAOLERCIO who declared these are the signatures they use in all acts of
their public and private lives. In the city of Santo Domingo, Dominican
Republic, on October 28, of the year nineteen ninety nine (1999)
---------------------------
NOTARY PUBLIC
IN WITNESS WHEREOF, I hereby sign and seal this document a true and exact copy
of the original written in Spanish. Issued upon request of an interested party
in Santo Domingo, Dominican Republic on October 28, of the year nineteen hundred
and ninety nine (1999), and registered in the files under my charge with No.
111/99.
By: /s/ Maria Teresa Puigbo
---------------------------
Title: Judicial Interpreter
<PAGE> 1
Exhibit No. 10.53
-----------------
I, MARIA TERESA PUIGBO, Judicial Interpreter of the Court of First Instance of
the National District, duly sworn for the legal practice of my functions,
CERTIFY: That I have translated a document written in Spanish, the English
version of which, according to my judgment is as follows:
CONSTRUCTION AGREEMENT
----------------------
BETWEEN:
ZONA FRANCA SAN ISIDRO, S.A., commercial society organized in accordance with
the laws of the Dominican Republic, with main headquarters at "El Paredon", San
Isidro Section, of this city of Santo Domingo, duly represented by its'
Executive Vicepresident, DR. RICARDO VALDEZ ALBIZU, Dominican, of legal age,
married, Corporation Executive, bearer of the electoral and identity card No.
001-0171170-3, society hereinafter referred to as THE FIRST PARTY;
MADOR, S.A., commercial society organized in accordance with the laws of the
Dominican Republic, with main headquarters at Mount Vernon, New York, United
States of America, duly represented by its' President, ANTHONY PAOLERCIO,
American, of legal age, married, businessman, residing in the city of New York,
New York State, bearer of Passport No. 140315986, society herein after referred
to as THE SECOND PARTY or by its' complete commercial name;
WHEREAS: That on October 28, of the year 1999, THE SECOND PARTY purchased, Lot
No. 80-A-RFF.-49 of the Cadastral District No. 6 of the National District from
THE FIRST PARTY;
WHEREAS: THE SECOND PARTY has the intention of constructing an Industrial
Warehouse within the Lot mentioned in the previous whereas.
WHEREAS: THE SECOND PARTY is interested that the general management of this
project be carried on by THE FIRST PARTY.
THEREFORE and in the understanding that the previous preamble is a part of this
agreement, the parties freely and voluntarily ----------------------------------
HAVE AGREED UPON THE FOLLOWING:
ARTICLE ONE: THE SECOND PARTY, hires the services of THE FIRST PARTY, who
agrees, to construct the civil work of an industrial warehouse of
thirty-nine-thousand- eight- hundred and ninety three point forty-five
(39,893.45) square feet, within Lot No. 80-A-Ref -49 of the Cadastral District
No. 6 of the National District
PARAGRAPH: It is clearly understood by both parties, that this construction,
does not include, work , materials or equipment related with the installing of
electromechanical infrastructure nor air conditioning,
<PAGE> 2
ARTICLE TWO: THE FIRST PARTY promises to construct the industrial warehouse,
since its' beginning through total conclusion, in accordance to the plans,
structural and architectural specifications enclosed (Enclosure A and B), duly
approved by THE SECOND PARTY.
ARTICLE THREE: The parties have agreed that the price per square feet of roofed
area to be constructed of this agreement is of EIGHTEEN WITH 80/100 DOLLARS OF
THE UNITED STATES OF AMERICA (US$18.80), and that the total price of the same is
of SEVEN HUNDRED FORTY NINE THOUSAND NINE HUNDRED AND NINETY SIX WITH 86/100
DOLLARS OF THE UNITED STATES OF AMERICA (US$749, 996.86), or its' equivalency in
national currency at the prevailing exchange rate of the free market, amount
that will be paid by THE SECOND PARTY to THE FIRST PARTY in the following
manner:
1. - TWO HUNDRED SIXTY TWO THOUSAND FOUR HUNDRED AND NINETY EIGHT WITH 90/100
DOLLARS OF THE UNITED STATES OF AMERICA (US$262,498.90), or its' equivalency in
national currency at the exchange rate of the free market, upon signing this
agreement, amount that THE FIRST PARTY declares and recognizes having received
from THE SECOND PARTY, to its' complete satisfaction and grants absolute and
total discharge in favor of THE SECOND PARTY.
2.- ONE HUNDRED AND EIGHTY SEVEN THOUSAND FOUR HUNDRED AND NINETY NINE WITH
22/100 DOLLARS OF THE UNITED STATES OF AMERICA (US$187,499.22), after having
completed 50% of the construction works.
3.- ONE HUNDRED FORTY NINE THOUSAND NINE HUNDRED NINETY NINE WITH 37/100
(US$149,999.37), after having fulfilled 75% of the construction works.
4.- ONE HUNDRED FORTY NINE THOUSAND NINE HUNDRED NINETY NINE WITH 37/100
(US$149,999.37), upon final delivery of the construction works.
PARAGRAPH: In case the total roofed area of the constructed industrial warehouse
exceeds the 39,893.45 square feet, THE SECOND PARTY will pay the difference in
square foot to the price agreed upon in Article Three of this contract.
ARTICLE FOUR: Both parties agree that THE SECOND PARTY will have the option of
supplying the windows of the building to be constructed, in such a case THE
FIRST PARTY will credit this cost in benefit of THE SECOND PARTY, in accordance
with the prices agreed upon by THE FIRST PARTY with the contractor of the work.
ARTICLE FIVE: THE FIRST PARTY will commence the work, five (5) days after the
signature of this agreement, and promises to deliver the same in a period of six
months and a half, approximately.
PARAGRAPH I: The conclusion of the works within the specified time frame is the
essence of this contract. Therefore, THE FIRST PARTY obliges itself and promises
to conclude the work within the stipulated period, except in case of force
majeure or of delay in the payments established in Article Three of this
contract.
<PAGE> 3
PARAGRAPH II: For the purposes of this contract, "force majeure" is understood
to be those events (acts of god or of third parties), such as earthquakes,
hurricanes, floods, strikes, riots, civil disturbances, that could not be
foreseen nor avoided, as long as THE FIRST PARTY can prove that these events
have been able to affect directly the execution of the works within the free
zone, and that notwithstanding the extra effort made by THE FIRST PARTY, after
the occurrence of any of these events, a delay still persists that prevents
finishing the work on time.
ARTICLE SIX: THE FIRST PARTY for the effects of its' relationship with THE
SECOND PARTY, will be the sole responsible of the execution of the project. In
its' relationship with the CONTRACTORS or SUBCONTRACTORS, is not a subject of
this contract, therefore THE SECOND PARTY shall have no responsibility before
them, their employees or any other person or company related to the
construction, therefore THE FIRST PARTY liberates THE SECOND PARTY from any
claim or lawsuit arising from such reason.
compromises and obligations assumed by him in favor of third parties, persons or
companies, without the previous written consent of THE SECOND PARTY.
ARTICLE SEVEN: THE FIRST PARTY promises not to transfer or delegate the
compromises and obligations assumed him in favor of third parties, persons or
companies, without the previous written consent of THE SECOND PARTY.
PARAGRAPH: In case THE FIRST PARTY transfers part or the totality of this
contract without the written consent of THE SECOND PARTY in favor of the third
parties, it will be terminated with all legal consequences, without need of any
judicial or extra-judicial formality, without responsibility for THE SECOND
PARTY, and the third in whose favor such transfer is madeor delegated, with have
no claim against THE SECOND PARTY.
ARTICLE EIGHT: THE SECOND PARTY through a person designated by him, can visit
the work at any time and make opportune observations regarding any part of the
work, for its' better development or in order to express disagreement with the
executed quality.
ARTICLE NINE: Once the work is completed THE SECOND PARTY, will have the option
of terminating the lease contract with THE FIRST PARTY and obtain the
corresponding reimbursement due to security deposits.
ARTICLE TEN: At the moment of finishing the work, the parties agree to sign a
"Maintenance Contract" of the work, in which a charge for maintenance services
equivalent to FORTY EIGHT CENTS OF THE UNITED STATES OF AMERICA (US$0.48) per
square foot per year, will be stipulated. This charge for maintenance will be
set for a period of five years.
PARAGRAPH: THE FIRST PARTY agrees to transfer to THE SECOND PARTY, any decrease
in the maintenance cost that could occur during the first five years. After five
years, this charge shall be revised annually in accordance with the increases of
the maintenance costs, however, it will not be irrationally increased. This
charge for maintenance will apply five months after the delivery of the work.
<PAGE> 4
ARTICLE ELEVEN: THE SECOND PARTY by means of this contract promises to comply
with the "Rules of the San Isidro Free Zone Park' .
ARTICLE TWELVE: The parties agree that the electromechanical and air
conditioning installations will be made by THE FIRST PARTY, at the account of
THE SECOND PARTY, in accordance to the requirements and designs previously
approved by THE FIRST PARTY and according to the procedures established for
these installations by such party. THE SECOND PARTY promises to pay to THE FIRST
PARTY, for the management and supervision of such works, a nine percent (9%) of
the total value of the budgets approved by the SECOND PARTY for such
electromechanical and air conditioning installations
ARTICLE THIRTEEN: The parties agree that at any moment THE SECOND PARTY will
have the right to lease or sell the work object of this contract, as long as the
potential tenant or owner promises to comply with the rules established by THE
FIRST PARTY.
ARTICLE FOURTEEN: For the purposes and legal consequences of this contract, the
parties elect the following legal addresses:
THE FIRST PARTY, at the address indicated at the beginning of this contract.
THE SECOND PARTY, at the industrial warehouse that it actually occupies within
the industrial free zone of San Isidro, S.A., located at "El Paredo", San
Isidro, Santo Domingo, National District.
ARTICLE TWELVE: For all that is not foreseen in this contract, the parties remit
themselves to the common law that will rule their relationships on a
supplemental basis.
MADE AND SIGNED in three (3) originals, of the same effect, one for each of the
parties with different interests. In the city of Santo Domingo, National
District, Capital of the Dominican Republic on October 28, of the year nineteen
hundred and ninety nine (1999).
BY THE FIRST PARTY: BY THE SECOND PARTY
- ----------------------------- ----------------------------
RICARDO VALDEZ ALBIZU ANTHONY PAOLERCIO
Executive Vice-president President
Zona Franca San Isidro, S.A. Mador, S.A.
I___________________, Attorney at Law, Notary Public of the Number of the
National District, CERTIFY AND ATTEST, that the previous signatures were made
before me, freely and voluntarily by Messrs. RICARDO VALDEZ ALBIZU and who
declared these are the signatures they use in all acts of their public and
private lives. In the city of Santo Domingo, Dominican Republic, on
_______________ of the year nineteen ninety nine (1999).
------------------------------
<PAGE> 5
NOTARY PUBLIC
IN WITNESS WHEREOF, I hereby sign and seal this document a true and exact copy
of the original written in Spanish. Issued upon request of an interested party
in Santo Domingo, Dominican Republic on October 28, of the year nineteen hundred
ninety nine (1999), and registered in the files under my charge with No. 110/99.
by: /s/: Maria Teresa Puigbo
---------------------------
Title: Judicial Interpreter
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
The following are the Company's subsidiaries as of April --, 2000. 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
Mador, S.A. Dominican Republic 10-29-99
</TABLE>
<PAGE> 1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Michael Anthony Jewelers, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statement on Form S-8 filed June 12,
1997 of our report dated March 31, 2000, relating to the consolidated financial
statements and schedule of Michael Anthony Jewelers, Inc. appearing in the
Company's Annual Report on Form 10-K for the year ended January 29, 2000.
BDO Seidman, LLP
New York, New York
March 31, 2000
<PAGE> 1
Exhibit 23.1
------------
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors and Shareholders
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
We consent to the incorporation by reference in Registration Statements No.
333-29037 and No. 333-29029 of Michael Anthony Jewelers, Inc. on Form S-8 and in
Registration Statement No. 333-74629 of Michael Anthony Jewelers, Inc. on Form
S-3 of our report dated April 9, 1999 [April 14, 1999 as to note 18], appearing
in this Annual Report on Form 10-K of Michael Anthony Jewelers, Inc. for the
year ended January 29, 2000.
Deloitte & Touche LLP
Parsippany, New Jersey
April 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS 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>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-29-2000
<CASH> 2,580
<SECURITIES> 0
<RECEIVABLES> 26,815
<ALLOWANCES> 1,007
<INVENTORY> 16,270
<CURRENT-ASSETS> 46,729
<PP&E> 52,459
<DEPRECIATION> 31,845
<TOTAL-ASSETS> 67,914
<CURRENT-LIABILITIES> 10,769
<BONDS> 12,684
0
0
<COMMON> 8
<OTHER-SE> 44,036
<TOTAL-LIABILITY-AND-EQUITY> 67,914
<SALES> 144,515
<TOTAL-REVENUES> 144,515
<CGS> 110,096
<TOTAL-COSTS> 110,096
<OTHER-EXPENSES> 2,357
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 2,699
<INCOME-PRETAX> 4,227
<INCOME-TAX> 1,607
<INCOME-CONTINUING> 2,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,620
<EPS-BASIC> .40
<EPS-DILUTED> .39
</TABLE>
