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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-15320
THE FRESH JUICE COMPANY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 11-2771046
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
35 WALNUT AVENUE, SUITE 4,
CLARK, NEW JERSEY 07066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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ISSUER'S TELEPHONE NUMBER: (732) 396-1112
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 __
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]
STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR: $41,515,132
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of the specified date within the past 60
days (See definition of affiliate in Rule 12b-2 of the Exchange Act): $7,332,628
(based on the $2.15625 closing sale price of the Common Stock of the Company
quoted on the NASDAQ System on February 24, 1998).
State the number of shares outstanding of each of the issuer's class of
common equity as of the latest practicable date: 6,467,731 (as of February 24,
1998).
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
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TABLE OF CONTENTS
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PART I
ITEM 1. Description of Business..................................... 1
ITEM 2. Description of Property..................................... 8
ITEM 3. Legal Proceedings........................................... 10
ITEM 4. Submission of Matters to a Vote of Security-Holders......... 10
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters.... 10
ITEM 6. Management's Discussion and Analysis or Plan of
Operations.................................................. 11
ITEM 7. Financial Statements........................................ 14
ITEM 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 14
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control
Persons..................................................... 15
ITEM 10. Executive Compensation...................................... 18
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management.................................................. 21
ITEM 12. Certain Relationships and Related Transactions.............. 23
PART IV
ITEM 13. Exhibits and Reports on Form 8-K............................ 25
Signatures............................................................... 26
Index to Financial Statements............................................ 27
Independent Auditors' Report............................................. F-1
Financial Statements..................................................... F-2
Index to Exhibits........................................................ EX-1
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ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
The Fresh Juice Company, Inc. (the "Company") was incorporated in the State
of New York on July 15, 1985. Immediately prior to the closing of the Company's
initial public offering on November 19, 1986, the Company was merged into a
wholly-owned Delaware subsidiary so as to relocate its state of incorporation.
From its inception in 1985 through 1994, the Company marketed and sold frozen
"fresh squeezed" Florida orange juice, grapefruit juice and other non-carbonated
beverages under the brand names "Just Pik't(R)", "Fresh Pik't(R)" and "Florida
Pik't(R)". On August 3, 1995, the Company acquired a flavor processing facility
in Winter Haven, Florida, which the Company subsequently renovated and equipped
to enable it to produce and bottle citrus juice beverages (the "Florida Plant").
At the end of fiscal 1995, the Company began producing fresh squeezed citrus
juices and attempted to expand its sales by changing its business focus from
primarily frozen fresh squeezed juices to both frozen and non-frozen fresh
squeezed juices. Although the Company had success with its marketing efforts in
the non-frozen sector of the fresh squeezed juice industry, it determined that a
substantial expansion into the non-frozen sector would be more easily
accomplished by entering into the strategic mergers described below.
The Company acquired The Ultimate Juice Company, Inc. ("Ultimate") by
merger effective April 1, 1996 (the "Ultimate Merger"), and as a result thereof,
Ultimate became a wholly-owned subsidiary of the Company. In connection with the
Ultimate Merger, all of the issued and outstanding capital stock of Ultimate was
exchanged for 1,140,000 shares of the Company's common stock, $.01 par value
(the "Common Stock"). In connection with this transaction, Steven M. Bogen, the
President of Ultimate, became Co-Chairman, Chief Executive Officer and Secretary
of the Company. Steven Smith, the Company's founder, continues as Co-Chairman
and President and was also named Assistant Secretary of the Company. The
Ultimate Merger was accounted for as a purchase. Ultimate subsequently changed
its name to The Fresh Juice Company of New York, Inc.
The Company subsequently acquired Clear Springs Citrus, Inc. ("Clear
Springs"), a privately held fresh citrus juice production facility, affiliated
with Ultimate, that produced the majority of the fresh citrus juice distributed
by Ultimate. The acquisition was accomplished by a merger effective September 1,
1996 (the "Clear Springs Merger") in which Clear Springs was merged into the
Company's wholly-owned subsidiary, The Fresh Juice Company of Florida, Inc.
("Fresh Juice of Florida"). In connection with the Clear Springs Merger, all of
the issued and outstanding capital stock of Clear Springs was exchanged for
1,160,000 shares of the Company's Common Stock. The assets of Clear Springs were
subsequently incorporated into Fresh Juice of Florida's operations at the
Company's Florida Plant. The Clear Springs Merger was also accounted for as a
purchase.
On December 2, 1996, the Company acquired by merger (the "Hansen's Merger")
all of the outstanding capital stock of Hansen's Juices, Inc. ("Hansen's") in
exchange for $90,000 in cash, 597,443 shares of the Company's Common Stock,
warrants to purchase 300,000 shares of the Company's Common Stock for $3.00 per
share and the assumption of Hansen's debt. The cash portion of the purchase
price paid by the Company was funded from cash flow from the Company's
operations. Hansen's was merged with and into The Fresh Juice Company of
California, Inc. ("Fresh Juice of California"), a newly formed Delaware
corporation and a wholly-owned subsidiary of the Company. Fresh Juice of
California operates its business from the offices and plant leased by Hansen's
in Azusa, California. The Hansen's Merger was also accounted for as a purchase.
As part of the Hansen's Merger, Hansen's also restructured its existing debt
obligations to two of its former stockholders arising from Hansen's redemption
of the Hansen's stock previously owned by such stockholders. In order to reduce
future aggregate monthly debt service and to comply with financial covenants
relating to the Company's credit facility, the maturity dates of the
restructured obligations owed to the former Hansen's stockholders were extended
and the monthly amortization payments were deferred. In exchange for these
concessions, Hansen's increased the interest rate on its obligations to these
former stockholders by one percent 1% per annum, and, in the case of one
restructuring, the Company delivered $60,000 in cash and 20,226 shares of the
Company's Common Stock to the debt holder and forgave a debt of approximately
$80,000 owed to Hansen's by the son of such debt holder.
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As a result of these recent acquisitions, the Company has established a
national presence and now produces, markets and sells fresh squeezed and frozen
fresh squeezed orange juice, grapefruit juice, fresh fruit smoothies and other
non-carbonated beverages under the brand names "Just Pik't(R)", "Fresh
Pik't(R)", "Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)". The majority of
the juice produced by the Company is fresh squeezed orange juice. The Company is
continuing its efforts to expand both the sales of fresh squeezed orange juice
and to increase the sales volume and percentage of its sales as a whole of its
other products.
During the fiscal year ended November 30, 1997, the Company focused its
efforts on fully integrating the business of each of its subsidiaries to improve
plant productivity and efficiencies and to further take advantage of its
economies of scale. The Company also successfully began the process of
integrating each of its product lines into each of its regional subsidiaries as
part of its strategic objective of creating a nationally recognized fresh juice
company with brands and product lines recognized throughout the country.
Business Development of Newly Acquired Subsidiaries
Ultimate
Ultimate (now known as The Fresh Juice Company of New York, Inc.) is a New
Jersey corporation which was incorporated in 1987. Prior to the Ultimate Merger,
Ultimate was primarily focused on the sale and distribution of non-frozen fresh
squeezed orange and grapefruit juices to the food service industry. From its
incorporation in 1987, through its merger with the Company in 1996, Ultimate
steadily increased its sales and expanded its presence from a small distribution
company doing business primarily in the New York Metropolitan area to a larger
distribution company with a regional presence and doing business throughout the
east coast of the United States. While its product line included pasteurized
citrus juices, fresh grapefruit juice, lemonade, apple juice and water, the
majority of Ultimate's sales was always fresh squeezed orange juice. By 1995 and
1996, Ultimate's annual sales had reached $11,114,608 and $11,286,669,
respectively, and in 1995 it began marketing its products to supermarkets to
increase its name recognition and retail presence and to further increase its
sales revenues.
Clear Springs
Beginning in 1988, the shareholders of Ultimate began purchasing an
interest in Clear Springs (now known as The Fresh Juice Company of Florida,
Inc.), a fresh juice processing facility located in Winter Garden, Florida,
which was also the primary supplier of Ultimate's fresh squeezed juices. By
1994, Clear Springs was owned entirely by the shareholders of Ultimate and Brian
Duffy, a resident of Illinois, who served as the president of Clear Springs. Mr.
Duffy is also the owner of the Natural Juice Company, a fresh squeezed juice
distribution company doing business in the greater Chicago area. In addition to
being the primary supplier of fresh squeezed juices to Ultimate, Clear Springs
was also the principal supplier of the fresh squeezed citrus juices purchased by
The Natural Juice Company and several other juice distributors throughout the
country. Through its affiliation with Ultimate and the Natural Juice Company,
Clear Springs steadily increased its sales and by 1994 and 1995 its annual sales
revenues were $10,148,356 and $12,775,884, respectively.
Hansen's
Hansen's (now known as The Fresh Juice Company of California, Inc.) was
established under the name Hansen's Fresh Juice Co. in 1935. It was a family
owned and operated business and was subsequently incorporated in the State of
California, under the name of Hansen's Juices, Inc., in 1971. From 1971 to the
Hansen's Merger in 1996, Hansen's remained a family owned and operated juice
producer and distributor, marketing citrus juices, vegetable juices and
smoothies under the brand name of "Hansen's(R)". From its inception in 1935 when
it was a small start up company doing business primarily in Southern California,
to the date of the Hansen's Merger, Hansen's expanded its market presence and
name recognition. By 1994, Hansen's had grown to a much larger producer and
distributor of juices and smoothies, and expanded its California sales base into
the states of Arizona, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah
and Washington. In fiscal 1994, 1995 and 1996, its sales revenues reached
$9,629,231, $10,652,532 and $11,554,829, respectively.
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INFORMATION ABOUT THE COMPANY
Products and Market
The Company produces, markets and distributes fresh and frozen fresh
squeezed orange juice, grapefruit juice, fresh fruit smoothies and other
non-carbonated beverages to both food service and retail customers under the
brand names "Just Pik't(R)", "Fresh Pik't(R)", "Florida Pik't(R)", "Ultimate(R)"
and "Hansen's(R)". The majority of the juice produced by the Company is fresh
squeezed orange juice.
Processed orange juice generates sales in the United States in excess of
three billion dollars per year. The market is currently divided principally
between chilled and pasteurized orange juice, reconstituted concentrated orange
juice and frozen concentrate. A number of companies produce chilled pasteurized
orange juice including "Tropicana(R)" which is marketed as a premium product.
Pasteurization is used to increase shelf life, since chilled fresh juices will
ferment between seventeen to twenty days after bottling. However, because
pasteurization involves a distillation process in which the juice is cooked or
heated, important flavor and aroma components are stripped from the juice,
thereby adversely affecting the natural flavor and aroma of the juice. Further,
as a nutritional matter, pasteurizing orange juice destroys valuable nutrients,
and when sold in cartons, the juice loses its Vitamin C pending its sale and
consumption.
As a result of the consumer demand for fresh squeezed orange juice
remaining unsatisfied, certain retail food stores squeeze and bottle their own
juice. Typically such endeavors fail to produce a consistent product as it is
difficult for some stores to monitor the quality of the oranges they receive or
to blend them effectively. Many of the juice machines used by such stores often
squeeze the rind, resulting in a bitter, oily taste. In addition, small scale
operations incur higher labor costs to maintain proper cleanliness of the
machinery involved. Many retailers do not have in place a Hazard Analysis and
Critical Control Point ("HACCP") program addressing food safety issues. The
Company's current manufacturing practices comprise a fully implemented HACCP
program instituted as a requirement for the manufacture of fresh orange juice in
the State of Florida.
The Company sells its products directly and indirectly to a wide variety of
accounts including supermarket chains, independent grocers, bagel stores,
delicatessens, restaurants, up-scale food specialty outlets, hotels, food
service caterers, and cafeterias. The Company maintains some Company owned
vehicles for direct store door delivery, but primarily relies on its
relationships with independent distributors to maintain and serve its customers.
The Company's distributors consist of quality produce companies, specialized
dairy distributors, supermarket warehouse distributors and specialty
refrigerated or frozen distributors. In the Northeast and California
specifically, the Company is expanding, building and supporting its successful
owner-operator programs. These refrigerated sole proprietor distributorships
work closely with the Company to saturate the geographic regions targeted by the
Company. As a result of the diversity of the Company's customer base, no
customer of the Company accounts for more than ten percent (10%) of the
Company's total revenues.
The Company's major product lines, which feature orange, grapefruit,
lemonade, lemon, lime and other fresh juices and smoothies, are as follows:
Fresh squeezed non-pasteurized juices. Sales of fresh squeezed juices
account for the majority of the Company's revenues. Due to the limited
shelf life of fresh juice products, the Company distributed fresh juice
primarily east of Chicago prior to the Hansen's Merger. The acquisition of
Hansen's has provided the Company with a presence on the West Coast and the
ability to distribute fresh juice products from a western distribution
point. The majority of the Company's fresh squeezed juice is sold to food
service customers including hotel chains and numerous restaurant chains and
independent restaurants. The balance of the Company's fresh juice sales are
primarily through retail outlets including supermarkets and numerous
convenience stores, delicatessens and corporate cafeterias. The Company
also produces and ships full tankers of fresh squeezed juices for use by
other juice companies. In the aggregate, fresh squeezed non-pasteurized
juices account for approximately sixty-five percent (65%) of the Company's
fiscal 1997 revenues. The Company's fresh squeezed juices are distributed
under the "Fresh Pik't(R)", "Ultimate(R)", "Clear Springs(R)" and
"Hansen's(R)" labels.
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Frozen fresh squeezed non-pasteurized and other frozen juices. To
produce frozen fresh squeezed juices, extracted fresh juice is packaged and
flash frozen for distribution. The retail outlet or consumer defrosts the
juice for retail sale or consumption. The freezing process eliminates the
need for expedient distribution. The Company has a patent with respect to
its process of preparing frozen juice products and the container used in
such a process. The Company distributes the majority of its frozen fresh
squeezed juice to retail outlets including supermarkets, natural food
stores, warehouse clubs and convenience stores with the balance of sales to
food service customers. Additionally, the Company manufactures and/or
distributes lemonade, pastuerized apple juice, carrot juice, cranberry
cocktail and a fruit punch. In the aggregate, frozen fresh squeezed
non-pasteurized and other frozen juices account for approximately thirteen
percent (13%) of the Company's fiscal 1997 revenues. These products are
distributed under the "Just Pik't(R)" label.
Other Products.
In order to satisfy all of the juice needs of its fresh juice
customers, the Company distributes pasteurized juices under the
"Ultimate(R)" label. In the aggregate, pasteurized juices account for
approximately six percent (6%) of the Company's fiscal 1997 revenues. The
Company also utilizes its distribution network to deliver additional
products not manufactured by the Company such as waters, assorted beverages
and other special order items requested by its customers. These products
account for less than one percent (1%) of the Company's fiscal 1997
revenues.
New Products.
Smoothies and Nutritionally Fortified Juices. During fiscal 1996 the
Company introduced is own line of smoothies and nutritionally fortified
juices, which are blends of various fresh juices and purees. The Company
believes that smoothies are a fast growing product segment. Originally
introduced on the West Coast, the Company believes that smoothies are
becoming increasingly popular due to their unique flavors and healthful
qualities. This product line includes a variety of blended fresh juices,
including citrus based juices, antioxidants, vitamin enriched juices and
banana based juice products. As a result of the Hansen's Merger, the
Company began, effective December 2, 1996, marketing and distributing
smoothies, nutritionally fortified and carrot based juices on the West
Coast through its wholly owned subsidiary, Fresh Juice of California. As a
result of Hansen's West Coast business and the Company's continuing sales
growth in this product sector, smoothies, nutritionally fortified juices,
and carrot based juices now account, in the aggregate, for approximately
twelve percent (12%) of the Company's fiscal 1997 revenues. The Company's
smoothies, nutritionally fortified juices and carrot based juices are
marketed under the "Just Pik't(R)" and "Hansen's(R)" labels.
Organic Juices. In December 1995, to leverage its sales, marketing
and distribution capability, the Company introduced a new line of
non-pasteurized frozen fresh squeezed organic juices. The Company is
marketing organic juices under the "Florida Pik't(R)" and "Organic Pik't"
brand names. Organic juices are extracted from organically grown fruit, and
the Company believes that this is a growing market niche. Organic juices
provide the Company with an entree into a number of health food and other
retail outlets augmenting the Company's existing line of fresh frozen
juices. The Company currently offers organic orange juice in one liter
containers for both retail and institutional accounts. In the aggregate,
frozen fresh squeezed organic juices account for less than one percent (1%)
of the Company's fiscal 1997 revenues.
Fresh Juice Pre-made Cocktail Mixers and Juice Bars. The Company has
developed and begun marketing non-alcoholic natural juice cocktail mixers,
including daiquiri and margarita mixers. The Company also markets a frozen
fresh squeezed orange juice bar. In the aggregate, these products account
for less than one percent (1%) of the Company's fiscal 1997 revenues.
Frozen Fresh Squeezed Lemon Juice, Lime Juice and Other Custom
Products. The Company currently sells frozen fresh squeezed lemon juice
and lime juice to its food service accounts. The Company is developing
specialty lemonades and other signature drinks for national food service
accounts and is currently working with national restaurant chains to
develop custom products and packaging for use in these restaurant chains.
In the aggregate, these products currently account for less than two
percent (2%) of the Company's fiscal 1997 revenues.
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Marketing and Advertising
As stated above, "Just Pik't(R)", "Fresh Pik't(R)" and "Florida Pik't(R)"
are currently sold in numerous supermarket chains in the New York area and other
major markets throughout the United States, and the "Hansen's(R)" brand is sold
primarily on the West Coast. The Company's marketing efforts are intended to
emphasize the fresh taste and nutritional value of its products. The Company
currently plans to increase market share in the retail sector, particularly
through its smoothie product line and a comprehensive marketing program. Through
this marketing program, the Company expects to create unified brands, merge its
product lines and link its East Coast and West Coast operations.
Distribution
Prior to the acquisition of the Florida Plant, "Just Pik't(R)" was shipped
by the Company to its independent distributors throughout the United States from
its Florida processor using unaffiliated "L.T.L." trucking companies. As a
result of the acquisition of the Florida Plant, the Ultimate Merger and the
Hansen's Merger, shipping of the majority of the Company's products now
originates out of the Company's own production facilities, thereby providing the
Company with increased control and flexibility over the distribution process. A
more comprehensive description of the Company's current distribution network is
set forth in the "Products and Market" section above.
Production
The Company now produces substantially all of its products at its own
production facilities in Florida and California. These production facilities are
more fully described in the Description of Property below.
Competition
The market for orange juice and fruit beverages is highly competitive and
is dominated by major companies such as Seagram of Canada ("Tropicana(R)") and
The Coca-Cola Company ("Minute Maid(R)"). Presently the major orange juice
companies are primarily involved in the production of chilled pasteurized juice
and frozen or reconstituted concentrate juice. The Company views its niche in
the fruit beverage industry as a producer, distributor and marketer of fresh
squeezed, minimally processed juices and juice-based beverages. The Company's
largest competitor in this niche is Odwalla, Inc. The Company believes that it
competes effectively with its competitors on the basis of the quality of its
products and its commitment to meeting its customers' needs.
Patents and Proprietary Protection
The Company was granted U.S. Patent No. 4,816,273 on March 28, 1989 which
relates to a process for preparing a frozen whole juice product which upon
defrosting has the taste and nutritional content of freshly squeezed whole juice
and the process including filling a self-supporting bottle-like container with
the whole juice. The U.S. Patent and Trademark Office recently reissued this
patent with a broader claim coverage RE 35038. The trademarks "Just Pik't(R)",
"Fresh Pik't(R)", "Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)" have been
registered by the Company in the U.S. Patent and Trademark Office and the
Company has registered certain of its trademarks in various foreign countries.
Raw Materials
The only ingredient used to produce "Just Pik't(R)", "Fresh Pik't(R)",
"Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)" orange and grapefruit juice
is fresh citrus fruit. Similarly, "Hansen's(R)" and "Just Pik't(R)" smoothies
are made with a blend of orange juice, apple juice (pasteurized or from
concentrate), bananas, berries and other fruit purees. On a year to year basis,
the Company generally chooses the supplier(s) of its fresh fruit, and any fruit
juices not produced by the Company, on the basis of quality and price. The
Company purchases its fruit requirements directly from growers or through
brokers or other management companies which handle sales for growers,
independent fruit handlers (who handle the picking and transportation of fruit
to the Company's plant i.e., "pick and haulers") and fruit cooperatives, each of
which have long standing
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relationships with many independent groves. Each year, the Company generally
spreads its purchases among several of these entities. The Company has done
business with many of its current suppliers for 5-10 years. Although the Company
attempts to purchase fruit at market value, the Company is a premium juice
supplier and therefore has special needs and requirements which sometimes
require the Company to pay a premium to assure higher quality fruit. The Company
also purchases the fruit juices it does not produce itself based on price and
quality, on a year to year basis, from one or more independent sources. Since
there are several available independent suppliers of fresh fruit and any fruit
juices not produced by the Company itself, the Company does not believe that it
is dependent upon any one supplier for its fresh fruit and fruit juice
requirements. However, a lack of availability of quality fruit and/or higher
cost of citrus and other fruits would hamper the Company's ability to maintain
its rate of growth and its gross margins. Mindful of this risk, the Company has
expanded its product line from only citrus juices to other non-carbonated
beverages, which to some extent will provide the Company with flexibility in the
event that the price of a certain fruit is dramatically increased. Although it
can give no assurance, the Company expects the 1998 orange crop to be of
sufficient supply to meet its anticipated orders.
The containers the Company uses for its frozen fresh squeezed juices are
made of plastic and are manufactured by a major "blow molding" manufacturer. The
Company owns the molds that are used to make the 1/3 liter, 1/4 liter and l
liter bottles for its frozen fresh squeezed juices and the machines that fill
the bottles and apply the tamper evident caps. The other bottles used by the
Company are standard high density polyethylene containers. As there are several
major independent plastic bottle manufacturers, the Company does not believe
that it is dependent upon any one manufacturer for the production of the bottles
it uses. One of the bottle manufacturers that the Company purchases from is CKS
Regal Plastics, Inc.
Employees and Consultants
The Company currently employs approximately two hundred thirty-four (234)
individuals. There are thirty-seven (37) employees working out of the Company's
Northeast operations, including twenty-seven (27) full-time employees and one
(1) part-time employee in New Jersey and eight (8) full-time employees and one
(1) part-time employee in New York. Additionally, the Company employs
approximately one hundred twenty-five (125) full-time and no part-time workers
at its Florida Plant and seventy-two (72) full-time and no part-time employees
at Fresh Juice of California's (Hansen's) production facility and offices in
Azusa, California. The Company believes that this number of employees is
sufficient to operate its business. The Company's employees are not represented
by a labor union, none of the Company's employees are subject to collective
bargaining agreements and management believes employee relations to be good.
Research and Development
The Company maintains a continuous quality assurance program, including
continuous United States Food and Drug Administration ("FDA") inspection. During
fiscal 1996, the Company's research and development activities focused on food
safety and improved manufacturing processes through its quality assurance
program, and the Company increased these activities during fiscal 1997. In
addition to these activities, the Company has engaged in direct research and
development relating to new products and bottling methods. In each of the last
two fiscal years, the Company has incurred less than $20,000 in direct research
and development costs. The research and development costs have not been directly
passed on to the Company's customers.
Government Regulations
The Company and its subsidiaries are subject to certain regulations of
federal, state and local government authorities regarding distribution and sale
of food products. From time to time various proposals are made for new laws and
regulations impacting the Company's industry as a whole. It is impossible to
predict whether any such proposals will be adopted and the impact, if any, of
such adoption on the business of the Company. Although the Company believes that
it currently has all material government permits, licenses, qualifications and
approvals for its operations, there can be no assurance that the Company will be
able to continue to comply with or maintain the same.
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The State of Florida and the United States Department of Agriculture
undertake an extensive inspection and sampling program of Florida citrus fruit
before and during processing in an effort to maintain the quality and good name
of Florida citrus products. The Company believes that this program provides it
with an excellent means of quality control for its products.
On December 16-17, 1996, the FDA held a public hearing to address issues
related to foodborne disease from fresh juices after an isolated outbreak of
foodborne disease associated with a single manufacturer of fresh apple juice.
The hearing focused largely on mechanisms to either ensure the safety of fresh
juices or to provide adequate warning to those consumers who might be at risk
from exposure to the pathogens that might be contained in fresh juice. The FDA
received over 180 comments, most of which concerned apple juice. Subsequently,
the National Advisory Committee on Microbiological Criteria for Foods
recommended that a Hazard Analysis and Critical Control Point ("HACCP") program
and safety performance criteria should form the general conceptual framework for
assuring the safety of juices.
On August 28, 1997, after completing its review of the materials presented
in connection with the public hearing, the FDA published its proposed strategy
for ensuring juice safety which involves a three-prong approach that includes
phasing in a mandatory HACCP program for some or all juices, label warning
statements, and educational programs targeted at sanitation education for
industry and consumers. In so doing, the agency rejected proposals to mandate
pasteurization.
The label warning statement prong is designed as an immediate but interim
step and will apply only to juices that have not been specifically processed to
prevent or eliminate the presence of harmful bacteria. Before the agency
actually promulgates this warning label as a requirement, however, the FDA has
encouraged manufacturers to immediately and voluntarily so label their products.
Specifically, the FDA noted that it would be unable to promulgate the warning
label as a requirement before the 1997 fresh cider season. Under the FDA
proposal, the requirement for the warning labels will be removed after
completion of implementation of an appropriate HACCP program.
Since the Company's current manufacturing practices comprise a fully
implemented HACCP program instituted as a requirement for the manufacture of
fresh orange juice in the State of Florida, although it can give no assurance,
the Company believes that the warning label requirement, when promulgated, will
not be applicable to its products. Although it can give no assurance, the
Company believes that the final HACCP requirements for fresh juice likely to be
required by the FDA will be no more stringent than those presently in place at
the Company so that these regulations, when made final, will not have a material
impact on the Company's operations. In the event that the final HACCP
requirements and related regulations are more stringent than those in place at
the Company at such time, certain adjustments to the production process may be
required and the costs and timing of the implementation of such adjustments
could have a material adverse impact on the Company's operations and its
financial results.
Environmental Regulations
The Company believes that it is in compliance with all environmental
regulations affecting its operations.
Year 2000
Many existing computer programs use only two digits rather than four to
specify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company utilizes software and related computer
technologies essential to its operations that will be affected by the Year 2000
issue. The Company has undertaken a systems' readiness program which is designed
to mitigate the risks associated with the Year 2000 issue. This program involves
an analysis of systems to determine those that are not presently Year 2000
compliant, the establishment of a plan to either modify or replace those systems
and the modification and procurement of systems to make them Year 2000
compliant. Although the Company is endeavoring to ensure that the year 2000
readiness program is comprehensive, it can make no assurance that the program
will address all Year 2000 compliance issues in a timely manner. If such
modifications and procurements are not completed or if problems are not
discovered
7
<PAGE> 10
and rectified on a timely basis, the Year 2000 issue may have a material impact
on the operations of the Company. The Company has identified, replaced and
modified some of these systems during fiscal year 1997 and is scheduled, for
reasons other than Year 2000 issues, to rebuild its network systems for its
Northeast and Florida operations during fiscal 1998.
ITEM 2. DESCRIPTION OF PROPERTY
Property Leased
Northeast Offices and Warehouses
The Company leases approximately 2,000 square feet of office space for its
headquarters in Clark, New Jersey on a month to month basis. The Company also
leases approximately 1,000 square feet of office space located at 350 Northern
Boulevard, Great Neck, New York on a month to month basis. In addition, the
Company leases a 10,000 square foot (6,000 square feet refrigerated) warehouse
in Linden, New Jersey on a month-to-month basis and a 2,000 square foot (1,000
square feet refrigerated/freezer) warehouse in Maspeth, New York on a
month-to-month basis.
Newark, New Jersey Headquarters and Distribution Center
The Company has leased approximately 27,000 square feet of space located at
280 Wilson Avenue, Newark, New Jersey (the "Newark Property") which includes a
warehouse with 3,000 square feet of freezer space, 11,000 square feet of cooler
space and 7,800 square feet of dry storage space, as well as approximately 5,200
square feet of office space. The lease was executed in November, 1997 and
provides for an initial term which terminates on August 31, 2007. The annual
basic rent for the first five years of the term of the lease is $160,938, which
increases to $187,761 during the second five years of the initial term of the
lease. In addition, the lease provides that the Company pay as additional rent
its share of real estate taxes, common area expenses, common utility expenses,
repairs and maintenance expenses and insurance expenses of the premises in which
the Newark Property is located. The lease contains two five year options to
renew which, if exercised, could extend the lease term through August 31, 2012
and August 31, 2017, respectively. The Company is in the process of
consolidating all of its Northeast office and warehouse operations into the
Newark Property, which will serve as its new corporate headquarters and
Northeast warehouse and distribution center. The move is presently ongoing and
the Company anticipates that the process of moving its Northeast operations into
the Newark Property will be completed by the end of March, 1998.
Florida Production Facility
The Florida Plant, which is owned by the Company, is more fully described
under the "Property Owned" section below.
The Company continues to lease the production facility in Winter Garden
where the business of Clear Springs was located. Machinery and equipment from
the Clear Springs production facility have been incorporated into the Florida
Plant, and the building in Winter Garden is now being used as a distribution
center for local deliveries in Florida. The lease on the Winter Garden facility
terminates on December 31, 1998.
West Coast Offices, Production Facility and Warehouse
The Company's subsidiary, Fresh Juice of California, leases commercial
space in Azusa, California, in which its offices, warehouse and production
facility are located. The total amount of leased space is 35,000 square feet,
consisting of approximately 3,000 square feet of office space and approximately
32,000 square feet of production and refrigerated warehouse space. The lease is
for a ten year six month term which began on December 1, 1992. The basic rent
for the period from December 1, 1997 through May 31, 2000 is $15,020 per month
(plus tenant improvement amortization of $2,571 per month), which increases to
16,879 per month (plus tenant improvement amortization of $2,571 per month) for
the period from June 1, 2000 through May 31, 2003. The lease contains one five
year option. The lease also requires Hansen's to pay additional rent
8
<PAGE> 11
including items such as real property taxes, utilities, common area maintenance
expenses and insurance expenses.
Property Owned
The Florida Plant
On August 3, 1995, the Company acquired the Florida Plant. The Florida
Plant is located at 1000 American Superior Boulevard, Winter Haven, Florida and
consists of a 70,000 square foot facility on four acres, 20,000 square feet of
which consist of either chilled or freezer space. The Florida Plant contains the
first spiral quick freeze system in the citrus industry. The Company acquired
the Florida Plant from Universal Flavors, Inc. for an aggregate purchase price
of $625,000, of which $150,000 was paid in cash and the remaining $475,000 is
payable pursuant to a promissory note secured by a purchase money mortgage,
bearing interest at the rate of seven per cent per annum and having a three year
maturity with a balloon payment of $458,754 due on August 1, 1998. The land and
building (exclusive of equipment) have an aggregate federal tax basis of
$627,155, and the building (with a federal tax basis of $597,155) is being
depreciated over thirty-nine (39) years on a straight line basis. The annual
real estate taxes are approximately $19,000 and the realty tax rate is
approximately two percent (2%).
The Company designed the Florida Plant to be capable of producing fresh
squeezed juice, fresh frozen juice and pasteurized juice, in addition to other
juice-based beverages. All processing in the Florida Plant is performed under
refrigerated and sanitary conditions. The Company believes that the Florida
Plant is one of the first facilities capable of producing such a variety of
juices under completely refrigerated conditions. Each segment of the production
process is separate and distinct with separate extraction rooms, filling rooms,
blending rooms and separate spiral freeze system for the frozen fresh squeezed
juice.
The Company believes that one of the most critical elements of producing
quality fresh squeezed juice is the proper sorting of fruit to eliminate any
fruit that would create impurities in such juice. The Florida Plant is equipped
with a pre-and post-screening system designed to eliminate impure fruit from
reaching the extraction process. The Florida Plant is equipped with a laboratory
designed to provide an additional measure of quality control to assist in the
Company's goal of providing optimal flavor and shelf life for its customers. In
addition, the Company maintains continuous USDA inspection.
The initial budgeted cost of renovating and equipping the Florida Plant was
approximately $2,300,000. Near completion of the initial phase of renovations,
the Company acquired Clear Springs, and the Florida Plant was further renovated
and improved to incorporate the assets from Clear Springs and to prepare for
increased production levels. These additional renovations and improvements
(phase two) were budgeted at approximately $800,000. As of the date hereof, the
Florida Plant is fully operational and phase one and phase two of the renovation
plan are complete. During fiscal 1998, the Company plans to invest approximately
$250,000 in the installation of additional equipment at the Florida Plant. As of
November 30, 1997, $3,550,000 has been expended on the Florida Plant for
renovations and equipment. The Company funded approximately $2,450,000 of such
cost from the Company's working capital, line of credit and common stock
delivered in connection with the Clear Springs Merger, with the balance financed
through the bank loans described below. In September, 1995, Fresh Juice of
Florida entered into a loan agreement with an institutional lender in the
aggregate principal amount of $1,100,000 to finance the remaining costs of
renovating and equipping the Florida Plant. Of the aggregate $1,100,000 borrowed
under that credit, approximately $250,000 was used to finance certain leasehold
improvements to the Florida Plant and approximately $850,000 was used to finance
the purchase of machinery and equipment. The loan was refinanced in August 1996
by the Company with a $1,100,000 loan from another institutional lender bearing
interest at the option of the Company at either a floating rate equal to the
lender's prime rate or at a fixed rate for one to three month periods based on
current Libor contracts plus 175 basis points. The loan is a sixty-eight month
loan maturing on March 1, 2002 and is scheduled to fully amortize by the
maturity date.
The Company believes that the properties it owns or leases are suitable and
adequate to support the Company's present business level and that each of its
properties is adequately covered by insurance.
9
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to routine claims and lawsuits which arise in the
ordinary course of business and are incidental to the Company's business. The
Company believes that such litigation and claims will be resolved without
material impact of the Company's results of operations, liquidity or financial
position. In addition, the Company, through its California subsidiary, became
involved in a non-routine legal proceeding which is described below:
The Company's subsidiary, Fresh Juice of California (formerly Hansen's),
has been named as one of many defendants in a lawsuit filed by the Franchise
Holders of Southland Corporation ("Southland"), against Southland and a large
number of the purveyors to the Franchisees of Southland, i.e., 7-Eleven stores.
Hansen's was one of the purveyors that has been named as a defendant. However
there is only one cause of action which pertains to Hansen's, and Hansen's is
joined in that count with Southland, The Coca-Cola Company and Pepsi-Cola
Company. The basis of that cause of action is that each of the named purveyors
conspired to fix prices on soft drinks by trying to set the Franchisees' retail
price of their respective products in order for the Franchisee(s) to obtain a
discount off the wholesale price. In the count in which Hansen's was named, the
plaintiffs seek total damages in excess of $50,000. The case is captioned 7
Eleven Owners For Fair Franchising et al. v. The Southland Corporation, et al,
is venued in the Superior Court of the State of California for the County of
Alameda and bears case no. 722272-6. The case was filed in September, 1993.
Hansen's and the plaintiffs in this action have executed a settlement agreement
pursuant to which plaintiffs have agreed to dismiss their action against
Hansen's with prejudice, and Hansen's has agreed to bear its own costs incurred
in the litigation. The settlement is awaiting court approval. As a result of the
settlement and impending final dismissal of the proceedings, management of the
Company believes that the ultimate resolution of this matter will not have a
material impact on the Company's results of operations, liquidity or financial
position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended November 30, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market under
the symbol "FRSH". Price quotations are available through the NASDAQ system. The
following tabulation sets forth the high and low bid price quotations by quarter
as reported by the NASDAQ Stock Market, Inc. The quotations shown in the
tabulation reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
HIGH BID LOW BID
1997 -------- -------
<S> <C> <C>
Fourth fiscal quarter....................................... $4.125 $2.3125
Third fiscal quarter........................................ $3.00 $1.375
Second fiscal quarter....................................... $2.3125 $1.1875
First fiscal quarter........................................ $2.50 $1.625
</TABLE>
<TABLE>
<CAPTION>
HIGH BID LOW BID
1996 -------- -------
<S> <C> <C>
Fourth fiscal quarter....................................... $2.875 $1.50
Third fiscal quarter........................................ $3.75 $2.125
Second fiscal quarter....................................... $4.6875 $2.25
First fiscal quarter........................................ $3.25 $1.375
</TABLE>
There are no restrictions limiting the Company's ability to pay dividends
on the Company's Common Stock; however, the Company has not paid any dividends
on its Common Stock and does not anticipate paying any cash dividends in the
foreseeable future. The Company plans to retain its future earnings, if any, to
finance the growth and development of its operations.
10
<PAGE> 13
As of February 20, 1998, there were approximately 156 holders of record of
the Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
As more fully discussed in Item 1 of this report, the Company acquired both
Ultimate and Clear Springs during the fiscal year ended November 30, 1996 and
the Company acquired Hansen's by merger during the fiscal quarter ended February
28, 1997. The Ultimate Merger became effective on April 1, 1996; the Clear
Springs Merger became effective on September 1, 1996; and the Hansen's Merger
became effective on December 2, 1996. Accordingly, the Company's consolidated
statements of operations for the fiscal year ended November 30, 1996 consist of
a consolidation of eight months of operations (April 1, 1996 -- November 30,
1996) for Ultimate, three months of operations (September 1, 1996 -- November
30, 1996) for Clear Springs and twelve months (December 1, 1995 -- November 30,
1996) for the Company. The Company's consolidated statements of operations for
the year ended November 30, 1997 consist of a consolidation of twelve months of
operations for the Company, Ultimate, Clear Springs and the period December 2,
1996 to November 30, 1997 for Hansen's.
Primarily as a result of the Ultimate Merger, the Clear Springs Merger and
Hansen's Merger (hereinafter the "Acquisitions"), the Company's fiscal 1997 net
sales increased to $41,382,836, representing a 107% increase in net sales over
1996 net sales, which were $19,958,022. The Company's 1996 net sales increased
116% over 1995 net sales of $9,219,184.
As a result of the increase in net sales due to the Acquisitions, cost of
goods sold increased from $15,886,417 in 1996 to $30,035,386 in 1997, an
increase of 89%. Gross profit increased from $4,071,605 in 1996 to $11,347,450
in 1997, an increase of 179%. The Company's gross profit increase was more
significant than the increase in net sales, due to an increase in gross margin
from 20.4% in 1996 to 27.4% in 1997. The increase in gross margin was
attributable to various reasons, inclusive of, but not limited to, the
following: completion of the consolidation of the facilities in Florida from the
Acquisitions creating numerous savings in costs of operations and permitting
larger volume to optimize use of the Florida Plant, a lower cost of raw
materials in 1997 as compared to 1996, continued consolidation of distribution
channels of product from Florida to the Northeast, an expanded product line to
the existing customer base, and continued horizontal integration. Gross profit
increased from $3,183,701 in 1995 to $4,071,605 in 1996, an increase of 28%. The
gross profit increase was not as significant as in the increase in sales from
1995 to 1996, due to a decrease in gross margin from 34.5% in 1995 to 20.4% in
1996. This decrease in gross margin was attributable to an increase in cost of
goods sold from $6,035,483 in 1995 to $15,886,417 in 1996, an increase of 163%.
The primary reason for the increase in cost of goods sold was attributable to
the costs associated with running a production facility. Prior to fiscal year
1996, the Company did not operate a production facility.
In addition to an increase in cost of goods sold relating to the
Acquisitions, costs of goods sold also increased due to a change in the product
mix sold by the Company. Prior to April 1, 1996, the Company was primarily a
distributor of frozen fresh squeezed juices. However, as a result of the
Acquisitions and the Company's acquisition and renovation of the Florida Plant,
the Company's product mix changed, and the Company is now a manufacturer and
distributor of fresh squeezed citrus juices, frozen fresh squeezed citrus juices
and other juice and non carbonated beverages, with the majority of the Company's
revenues derived from the sale of fresh, non-frozen juices. For 1997, the fresh
squeezed juices accounted for approximately 65% of the revenues with a gross
margin of approximately 24%. The balance of the revenues in fiscal year 1997
were generated by the Company's other products which average approximately 35%
of revenues with a gross margin of approximately 34%. For 1996, the product mix
of sales was balanced more towards the frozen line, as the Ultimate merger and
Clear Springs merger did not take effect until April 1, 1996 and September 1,
1996, respectively. Due to the first year of operations of the Florida Plant and
higher than normal raw material costs experienced in 1996, the 1996 gross margin
was 20.4%, a drop from 34.5% for 1995. In 1995, the Company primarily sold
frozen fresh juices, which historically, has had a higher margin.
The Company's selling, general and administrative expenses increased as a
result of the Acquisitions and the operation of the Florida Plant and Hansen's
California facilities. In addition, a full year of amortization of
11
<PAGE> 14
the goodwill from the Acquisitions and amortization of the recorded fair market
value of intangibles acquired increased amortization expense for 1997
approximately $300,000. Selling, general and administration expenses, which were
$2,820,356 and $4,984,642 in 1995 and 1996, respectively, increased to
$8,801,423 in 1997, representing a 77% increase over 1996 selling, general and
administration expenses. Selling, general and administration expenses for 1996
increased 77% over 1995. Prior to December of 1995, the Company was not a
manufacturer and distributor of fresh squeezed juices. In December of 1995, the
Company began operations in its Florida Plant, thereby first becoming a
manufacturer of fresh squeezed juices. Fresh Juice of Florida incurred
approximately $1.1 million in selling, general and administration expenses for
the year ended November 30, 1996, including approximately $400,000 relating to
the Clear Springs Merger subsequent to the merger date. In addition, the
Ultimate Merger and its consolidation into the Company's operations added
approximately $2.0 million in selling, general and administration expenses for
the 1996 period.
The interest paid on the assumption of debt from the Hansen's Merger, as
well as the Company's $2,500,000 working capital line of credit, caused interest
expense to increase by $397,349 from $139,502 in 1996 to $536,851 in 1997.
Interest expense increased $115,147 from $24,355 in 1995 to $139,502 in 1996
primarily due to the outside financing obtained in connection with purchasing
and equipping the Florida Plant, as well as the Company's $2,500,000 working
capital line of credit.
Year 2000 Issue
Many existing computer programs use only two digits rather than four to
specify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company utilizes software and related computer
technologies essential to its operations that will be affected by the Year 2000
issue. The Company has undertaken a systems' readiness program, which is
designed to mitigate the risks associated with the Year 2000 issue. This program
involves an analysis of systems to determine those that are not presently Year
2000 compliant, the establishment of a plan to either modify or replace those
systems and the modification and procurement of systems to make them Year 2000
compliant. Although the Company is endeavoring to ensure that the Year 2000
readiness program is comprehensive, it can make no assurance that the program
will address all Year 2000 compliance issues in a timely manner. If such
modifications and procurements are not completed or if problems are not
discovered and rectified on a timely basis, the Year 2000 issue may have a
material impact on the operations of the Company. The Company has identified,
replaced and modified some of these systems during fiscal year 1997 and is
scheduled, for reasons other than Year 2000 issues, to rebuild its network
systems for its Northeast and Florida operations during fiscal 1998.
FINANCIAL CONDITION
As a result of the Acquisitions, both the current and total assets of the
Company have increased to $6,734,105 and $22,093,344, respectively, as of
November 30, 1997 compared to $4,425,756 and 15,281,472, respectively, as of
November 30, 1996. As a result of the Ultimate Merger and the Clear Springs
Merger, both the current and total assets of the Company increased to $4,425,756
and $21,979,344, respectively, as of November 30, 1996 compared to $4,258,358
and $6,508,237, respectively, as of November 30, 1995. Specifically, the
Company's trade accounts and inventory increased to $3,156,893 and $2,638,083,
respectively, as of November 30, 1997 compared to $2,236,781 and $1,759,200,
respectively, as of November 30, 1996 and $591,727 and $1,544,821, respectively
as of November 30, 1995.
The Company completed the recording of Hansen's assets and liabilities
during the fourth quarter of fiscal 1997. The earnings (loss) before provision
(benefit) for income taxes for the nine months ended August 31, 1997 would have
been reduced by approximately $60,000 had this adjustment been made at the
beginning of the year. Primarily as a result of the Hansen's Merger, the
Company's net balances for property, plant and equipment have increased to
$6,918,751 as of November 30, 1997 as compared to $4,454,685 as of November 30,
1996. As a result of the Ultimate Merger, Clear Springs Merger and the
completion of the Florida Plant, the Company's balances for property, plant and
equipment increased to $4,454,685 as of November 30, 1996 as compared to
$2,218,976 as of November 30, 1995. Similarly, the Hansen's Merger
12
<PAGE> 15
resulted in an increase in excess cost over fair values of net assets acquired,
net of accumulated amortization, to $6,895,951 as of November 30, 1997 as
compared to $6,110,947 as of November 30, 1996, as well as an increase in
trademarks, patents and other intangibles, net of accumulated amortization, to
$1,075,820 as of November 30, 1997 as compared to $140,084 as of November 30,
1996. The Ultimate Merger and Clear Springs Merger resulted in an increase in
excess cost over fair values of net assets acquired, net of accumulated
amortization, to $6,110,947 as of November 30, 1996 as compared to $0 as of
November 30, 1995, as well as an increase in trademarks, patents and other
intangibles, net of accumulated amortization, to $140,084 as of November 30,
1996 as compared to $10,903 as of November 30, 1995.
Accounts payable and accrued expenses increased to $3,149,102 as of
November 30, 1997 as compared to $2,836,582 as of November 30, 1996. This
increase resulted from the consolidation of the Hansen's accounts payable and
accrued expenses into the Company's operations. The Hansen's Merger and the
assumption of the Hansen's debt associated therewith resulted in an increase in
current installments of long term debt to $1,202,074 as of November 30, 1997 as
compared to $260,070 as of November 30, 1996. Accounts payable and accrued
expenses increased to $2,836,582 as of November 30, 1996 as compared to $244,697
as of November 30, 1995. This increase resulted from the consolidation of
Ultimate's and Clear Springs' accounts payable and accrued expenses into the
Company's operations and the increased payables associated with the operating of
a production facility.
The Hansen's Merger and the issuance of shares of the Company's Common
Stock and warrants in connection therewith resulted in an increase in paid-in
capital to $9,453,958 as of November 30, 1997 as compared to $8,583,490 as of
November 30, 1996. The Ultimate Merger and the Clear Springs Merger and the
issuance of shares of the Company's common stock in connection therewith
resulted in an increase in paid-in-capital to $8,583,490 as of November 30, 1966
as compared to $2,396,490 as of November 30, 1995.
The Acquisitions were recorded by using the purchase accounting method.
Clear Springs and Hansen's had both redeemed a significant amount of their
respective capital stock a short time prior to the execution of the merger
agreements. In addition, Ultimate had a loan on its books from the Company at
the time of the Ultimate Merger. Ultimate and Clear Springs were affiliated
companies with significant common ownership. As a result of the foregoing
factors, among others, the Acquisitions did not qualify for pooling of interest
accounting, and therefore the purchase accounting method was the only available
alternative. In a transaction that requires purchase accounting, assets are
recorded at fair market value rather than at net book value. Material purchase
accounting adjustments to the Hansen's assets have been recorded as stated
above.
A significant part of the consideration paid by the Company in the
Acquisitions consisted of the Company's Common Stock. The fair market values of
the Company's Common Stock issued in the Acquisitions used for the recording the
values of the assets acquired by the Company were arrived at in consultation
with the Company's outside advisors. This valuation process involved a
discounting of the value of the Company's Common Stock to account for
restrictions on the transferability of the blocks of restricted stock issued in
the Acquisitions and the volatility of the per share prices in the public
markets. Using the foregoing factors and other considerations, a 20% discount to
the price of the Company's Common Stock issued in the Ultimate Merger and Clear
Springs Merger was used which equated to a price of $2.70 per share. A 30%
discount to the price of the Company's Common Stock was used in the Hansen's
Merger, which equated to a price of $1.225 per share. The discount used for the
Hansen's Merger was higher due, in part, to the fact that the management team at
Hansen's was replaced and the Hansen's Merger resulted in the Company's first
West Coast operation and resulted in an additional concentration of large blocks
of the Company's Common Stock.
LIQUIDITY
The Company had working capital of $1,319,323 at November 30, 1997 compared
to $624,104 at November 30, 1996. The Company requires capital to support its
capital improvements and the level of inventory required to meet current demand
as well as expected future increases in demand for its products. The Company
currently expects to spend approximately $300,000 on capital improvements in the
next fiscal year. To provide additional liquidity, in August 1996, the Company
obtained a $2,500,000 line of credit with
13
<PAGE> 16
an institutional lender. At November 30, 1997, the amount drawn on the line was
$800,000, leaving $1,661,424 available, based on the allowable borrowing base as
defined, as of such date. As of February 28, 1998, approximately $1,180,000 of
the line of credit remains available for borrowing, depending upon qualified
levels of accounts receivable and inventories as defined in the loan agreement
with the Company's institutional lender. The availability of the line of credit
is based upon 50% of the value of the frozen inventory and 80% of all
receivables less than 90 days excluding inter-company balances. The calculation
does not include any of the assets of Fresh Juice of California as it was formed
after the signing of the loan documents. As of November 30, 1997, the Company
was in compliance with both of the financial covenants (Debt to Worth Ratio and
Minimum Debt Service Coverage Ratio) associated with its line of credit and term
note with its institutional lender. The Company typically invests approximately
$2.5 million from January through June to replenish its yearly fresh-frozen
juice inventory. The Company believes that it has sufficient liquidity to
conduct its business and to build its fresh-frozen inventory during the
remainder of the Florida harvest season to meet the Company's current customers'
demand for its fresh-frozen products. A lack of availability of quality fruit
and higher cost of citrus would hamper the Company's ability to maintain its
current gross profit level. In connection with the Hansen's Merger, the Company
assumed the debt obligations of Hansen's. The Company believes that the results
of its operations (inclusive of Hansen's) will be sufficient to meet these
additional debt obligations.
The Company's new corporate headquarters in Newark, New Jersey (the "Newark
Property") has an annual rent for the first five years of $160,938, which
increases to $187,761 during the second five years of the initial term of the
lease. In addition, the lease provides that the Company pay as additional rent
its share of real estate taxes, common area expenses, common utility expenses,
repairs and maintenance expenses and insurance expenses of the premises in which
the Newark Property is located. The difference between the Company's current
rental expense and future rental expense is immaterial and the Company believes
that the results of its Northeast operations will be sufficient to meet
increased costs, if any, associated with the new location.
On August 1, 1998, the Company has a balloon payment due on the mortgage
payable in connection with the Florida plant in the amount of $458,754. In
addition, on August 5, 1998, the Company's $2,500,000 line of credit with its
institutional lender terminates. The Company is presently in the process of
negotiating with its institutional lender for an extension on its line of
credit. In addition, the Company will negotiate a new instrument to payoff the
balloon payment due August 1, 1998. Management believes that the terms of the
extension and new instrument will not have an adverse effect on operations or
liquidity.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128) was issued in February 1997 and is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
This statement established standards for computing and presenting earnings per
share. The Company will adopt this statement in the first quarter of fiscal 1998
and restate prior periods for the effect, if any, of SFAS 128.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130) was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The Company believes that the
adoption of this accounting standard will not have a material effect on the
Company's consolidated financial position or results of operations.
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" was issued in June 1997 and
is effective for periods beginning after December 15, 1997. This statement
established standards for the way that public business enterprises report in
information about operating segments in annual financial statements and interim
financial reports issued to stockholders. The Company is currently evaluating
the method of adoption it will utilize.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements following Item 13 of this Annual Report
on Form 10-KSB and pages F-1 to and including F-17.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
14
<PAGE> 17
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION
NAME AGE TO BOARD DURING THE PAST FIVE YEARS POSITION
---- --- ---------- -------------------------- --------
<S> <C> <C> <C> <C>
Steven M. Bogen 41 1996 Chief Executive Officer of The Co-Chairman of Board of
Ultimate Juice Company, Inc. Directors, Chief Executive
(now known as The Fresh Juice Officer and Secretary
Company of New York, Inc.) from
1988 through present; Chairman
of the Board of The Ultimate
Juice Company, Inc. from 1989
through March 31, 1996;
Chairman of the Board of Clear
Springs Citrus, Inc. from July
27, 1993 through August 31,
1996; President of Clear
Springs Citrus, Inc. from July
27, 1993 through March 11,
1994; Co-Chairman of the Board,
Chief Executive Officer, and
Secretary of the Company since
April 1, 1996
Steven Smith 50 1985 Chairman of the Board, Co-Chairman of the Board of
President and Chief Executive Directors, President and
Officer of the Company from Assistant Secretary
1985 through March 31, 1996;
Co-Chairman of the Board,
President and Assistant
Secretary of the Company since
April 1, 1996
Brian Duffy 52 1996 President and Director of Director
Natural Juice Company since
August, 1984; Director of Clear
Springs Citrus, Inc. from
January 22, 1993 to August 31,
1996; President of Clear
Springs Citrus, Inc. from March
11, 1994 to August 31, 1996;
President of The Fresh Juice
Company of Florida, Inc. from
October 21, 1996 through June
17, 1997; Vice President-Sales
and Operations of The Fresh
Juice Company of Florida, Inc.
from November 11, 1997 to
present. Director of the
Company since April 1, 1996
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION
NAME AGE TO BOARD DURING THE PAST FIVE YEARS POSITION
---- --- ---------- -------------------------- --------
<S> <C> <C> <C> <C>
Jeffrey Heavirland 37 1997 Director of Sales of Hansen's Director, President and
Juices, Inc. from July 1988 to Chief Executive Officer of
December 1993; Vice President The Fresh Juice Company of
of Sales and a Director of California, Inc., Vice
Hansen's from December 1993 to President of Sales and
January 1994; Director, Vice Administration
President and Secretary of
Hansen's from January 1994 to
December 2, 1996. President,
Chief Executive Officer and
Assistant Secretary of The
Fresh Juice Company of
California, Inc. from December
2, 1996 to present; Vice
President of Sales and
Administration of the Company
from October 27, 1997 to
present; Director of the
Company since June, 1997
Michael D. Brown 50 1997 Chairman of the Board of Asset Director
Management (which provides
management, consulting and
financing services since 1985;
Director, President and Chief
Executive Officer of Utility
Marketing Corporation (a
manufacturer and marketer of
specialized fiberglass
enclosures for the electrical
utility industry) since July
1994; Principal of American
Premium Exports (an exporter of
Florida orange and grapefruit
juices to Europe) from June
1994 to April 1995; Director,
President and Chief Executive
Officer of American Premium
Exports, Inc. (the corporate
form adopted by American
Premium Exports in April 1995)
since April 1995; Director of
the Company since September
1997
Gilbert Bowen 68 1997 President of Bowen Brothers, Director
Inc. (an agricultural company
which owns citrus groves and
cattle ranches and is a
merchant of raw citrus fruit)
since 1975; Chairman of the
Board of Bowen Juices
International (an importer of
grape and apple juices from
Brazil) since 1993; Director of
the Company since September
1997
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION
NAME AGE TO BOARD DURING THE PAST FIVE YEARS POSITION
---- --- ---------- -------------------------- --------
<S> <C> <C> <C> <C>
Jeffrey Smith 25 1996 Graduate of the Wharton School Director
of The University of
Pennsylvania in May 1994; M&A
Investment Banking Analyst at
Societe Generale Securities
Corporation from August 1994
through December 1995; Vice
President of Strategic
Development and Investor
Relations of the Company from
February, 1996 through January
1998; Associate with Ramius
Capital Group, L.L.C. from
January, 1998 to present.
Director of the Company since
April 1, 1996. Son of Steven
Smith.
NON-DIRECTOR
EXECUTIVE OFFICER
Mark Feldman 35 N/A Controller of The Ultimate Chief Financial Officer,
Juice Company, Inc. (now known Controller and Treasurer
as The Fresh Juice Company of
New York, Inc.) from 1989 to
present; Chief Financial
Officer of The Ultimate Juice
Company, Inc. from February
1995 through March 31, 1996;
Treasurer and Controller of the
Company since April 1, 1996,
Chief Financial Officer of the
Company since August 8, 1996
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934 requires the Company's directors,
executive officers, and persons who own more than 10% of the Company's equity
securities to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of such securities. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to it during or with respect to the fiscal year
ending November 30, 1997, Section 16(a) filing requirements with respect to the
Company's equity securities were met, except that, through inadvertence:
(a) Form 5 Annual Statement of Changes in Beneficial Ownership were
not filed for Steven M. Bogen, Steven Smith, Jeffrey Smith, Brian Duffy and
Mark Feldman for the fiscal year ended November 30, 1996. These omissions
have been corrected;
(b) a Form 4 Statement of Changes in Beneficial Ownership was not
filed in connection with each of (i) the purchase by Jeffrey Smith of 2000
shares of the Company's Common Stock in June 1996 and (ii) the sale by
Jeffrey Smith of 2000 shares of the Company's Common Stock in July 1997.
These omissions were corrected in connection with Jeffrey Smith's Form 5
filing for the fiscal year end November 30 1997; and
(c) Steven Smith made untimely filings of Form 4 Statement of Changes
in Beneficial Ownership in connection with the following transactions: (i)
four (4) separate transactions during March and April 1994 in which Mr.
Smith sold 15,000 shares of the Company's Common Stock; (ii) four (4)
separate transactions during February and March 1996 in which Mr. Smith
sold 45,000 shares of the Company's
17
<PAGE> 20
Common Stock; (iii) eleven (11) separate transactions during April and May
1996 in which Mr. Smith sold 100,000 shares of the Company's Common Stock;
and (iv) four (4) separate transactions during July 1997 in which Mr. Smith
sold 49,000 shares of the Company's Common Stock.
ITEM 10. EXECUTIVE COMPENSATION AND TRANSACTIONS
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation in each of the last
three completed fiscal years of (i) Steven M. Bogen, the Company's Co-Chairman,
Chief Executive Officer and Secretary; (ii) Steven Smith, the Company's
Co-Chairman, President and Assistant Secretary; (iii) Brian Duffy, formerly the
President of Fresh Juice of Florida and the Company's former Vice President of
National Operations and currently Vice President of Sales and Operations of
Fresh Juice of Florida; (iv) Jeffrey Heavirland, the Company's Vice President of
Sales and Administration and the President and Chief Executive Officer of Fresh
Juice of California; (v) Mark Feldman the Company's Chief Financial Officer,
Controller and Treasurer; and (vi) Jeffrey Smith formerly the Company's Vice
President of Strategic Development and Investor Relations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------
AWARDS
------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) OPTIONS/SARS(#)(2) COMPENSATION($)(3)
- ------------------ ---- ------------ -------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Bogen....... 1997 369,935 -- -- -- --
Co-Chairman and 1996 241,385(4) -- -- -- --
Chief Executive 1995 -- -- -- -- --
Officer
Steven Smith.......... 1997 354,705 -- -- -- 16,000
Co-Chairman and 1996 348,750 -- -- -- 22,500
President 1995 369,500 -- -- -- 22,500
Brian Duffy........... 1997 150,770 -- -- -- --
Vice President of 1996 50,000(5) -- -- -- --
Sales and Operations
of 1995 -- -- -- -- --
Fresh Juice of Florida
Jeffrey Heavirland.... 1997 185,298 25,000 -- 210,000 --
Vice President of 1996 -- -- -- -- --
Sales and
Administration 1995 -- -- -- -- --
and President and
Chief
Executive Officer of
Fresh Juice of
California
Mark Feldman.......... 1997 118,135 15,000 -- -- --
Chief Financial
Officer, 1996 70,000(6) 0 -- -- --
Controller and
Treasurer 1995 -- -- -- -- --
Jeffrey Smith......... 1997 107,512 -- -- 50,000 --
Formerly Vice
President 1996 68,750 -- -- -- --
of Strategic
Development 1995 -- -- -- -- --
and Investor Relations
</TABLE>
- ---------------
(1) This amount does not include perquisites and other personal benefits,
securities or property because the aggregate amount thereof in each fiscal
year did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus reported for the named executive officer.
18
<PAGE> 21
(2) Reflects grants of incentive stock options to Jeffrey Heavirland and Jeffrey
Smith. Other than as set forth herein, during the last three completed
fiscal years, the Company granted no restricted stock awards or stock
appreciation rights (whether freestanding or in tandem with stock options)
to any officer listed in the Summary Compensation Table.
(3) Reflects Company contributions for the account of Mr. Smith under the
Company's employee pension plan.
(4) This amount represents the salary paid to Mr. Bogen by the Company during
the fiscal year ended November 30, 1996. Between December 1, 1995 and March
31, 1996, Mr. Bogen served as the Chief Executive Officer and President of
The Ultimate Juice Company, Inc. During such period, Mr. Bogen was paid
salary in the aggregate amount of $53,400 and a bonus of $235,000.
(5) This amount represents the salary paid to Mr. Duffy by the Company during
the fiscal year ended November 30, 1996. Between December 1, 1995 and August
31, 1996, Mr. Duffy served as the President of Clear Springs. During such
period, Mr. Duffy was paid salary in the aggregate amount of $92,931 and a
bonus of $50,000.
(6) This amount represents the salary paid to Mr. Feldman by the Company during
the fiscal year ended November 30, 1996. Between December 1, 1995 and March
31, 1996, Mr. Feldman served as the Chief Financial Officer of Ultimate.
During such period, Mr. Feldman was paid salary in the aggregate amount of
$34,000 and a bonus of $4,907.
STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL EXERCISE OR
UNDERLYING OPTIONS/SARS BASE PRICE
OPTIONS/SARS GRANTED TO EMPLOYEES ($ PER
NAME GRANTED(#) IN FISCAL YEAR SHARE) EXPIRATION DATE
---- --------------------- -------------------- ------------- -----------------
<S> <C> <C> <C> <C>
Steven M. Bogen................. -- -- -- --
Steven Smith.................... -- -- -- --
Brian Duffy..................... -- -- -- --
Jeffrey Heavirland.............. 30,000 (*) 3.00 December 1, 2001
15,000 (*) 3.00 December 1, 2002
15,000 (*) 3.00 December 1, 2003
150,000 (*) 2.72 October 26, 2002
Mark Feldman.................... -- -- -- --
Jeffrey Smith................... -- -- -- --
</TABLE>
- ---------------
(*) Option grants to Jeffrey Heavirland in the fiscal year ended November 30,
1997 represented 100% of all stock option grants by the Company during the
period. All of the stock options were granted pursuant to the Company's 1996
Incentive Stock Option Plan. With the exception of the stock options granted
to Mr. Heavirland, the Company granted no restricted stock awards, stock
options or stock appreciation rights (whether freestanding or outstanding
with stock options) to any officer listed in the Summary Compensation Table.
AGGREGATED STOCK OPTION/SAR EXERCISES IN 1997 AND OPTION/SAR VALUES AT NOVEMBER
30, 1997
The following table shows stock options exercised during 1997 by the
Company's executive officers listed in the Summary Compensation Table, including
the aggregate value of any gains on the date of exercise. In addition, this
table includes the number of shares covered by both exercisable and
non-exercisable stock options as of November 30, 1997. Also reported are values
for "in-the-money" options which represent the positive spread between the
exercise price of outstanding stock options and the year-end price of the
Company's common stock. Values for "out-of-the-money" options are not reported.
19
<PAGE> 22
1997 FISCAL YEAR END OPTIONS(1)
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS AT 11/30/97 STOCK OPTIONS AT 11/30/97($)
ACQUIRED VALUE -------------------------------- --------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE(2) NOT EXERCISABLE EXERCISABLE(3) NOT EXERCISABLE
- ---- -------------- -------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Heavirland... -- -- 180,000 30,000 $4500 --
Jeffrey Smith........ -- -- 50,000 -- $ 0 --
</TABLE>
- ---------------
(1) The Company formerly reported the existence of the following options granted
to Steven Smith under the Company's 1988 Incentive Stock Option Plan (the
"Plan"): (a) an option to purchase 100,000 shares of the Company's Common
Stock exercisable at $1.375 per share, and (b) an option to purchase 60,000
shares of the Company's Common Stock, exercisable at $3.50 per share.
Based upon a review commenced by the Company and its attorneys in the fourth
quarter of 1997, it appears that the stockholders of the Company never
approved the Plan and that a proposal to approve the Plan was never
presented to the stockholders of the Company for a vote. As a result, the
condition to both the effectiveness of the Plan and the grant of the options
under the Plan were never met. Based upon this information, the Company has
determined that the described options technically do not exist. As such,
these options are not reflected in the above table. Mr. Smith disagrees with
the Company's conclusion and there is a possibility that he may assert a
claim as to the existence of these stock options.
(2) Includes (a) Jeffrey Heavirland's options to purchase (i) 150,000 shares of
Common Stock exercisable at $2.72 per share and (ii) 30,000 shares of Common
Stock exercisable at $3.00 per share; and (b) Jeffrey Smith's option to
purchase 50,000 shares of Common Stock exercisable at $3.125 per share.
(3) Amount reflects valuation of options to purchase 150,000 shares of the
Company's Common Stock at $2.72 per share, calculated by determining the
difference between $2.75, the per share value of the Company's Common Stock
at November 30, 1997 (as determined by using the average of the closing bid
and asked prices quoted on NASDAQ System for the Company's Common Stock on
November 28, 1997, the last trading date of fiscal 1997, as there were no
actual sales on such date) and the exercise price.
DIRECTORS' FEES
Prior to September 18, 1997, all of the members of the Company's Board of
Directors were officers of the Company and received compensation only for
serving as officers of the Company. On September 18, 1997, the Board of
Directors elected Michael D. Brown and Gilbert Bowen to serve as Directors of
the Company until the Company's next annual meeting. Neither Michael D. Brown
nor Gilbert Bowen are employees of the Company. Beginning with the Board of
Directors meeting held on October 27, 1997, the Company began paying Messrs.
Bowen and Brown a fee of $1500 per meeting in addition to reimbursing each of
them for all expenses incurred in connection with attending each meeting. The
Company intends to adopt a Director's Stock Option Plan during fiscal 1998 and,
subject to shareholder approval thereof, intends, on an annual basis, to grant
stock options to certain directors to purchase shares of the Company's Common
Stock as additional compensation for their services as directors.
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
CASH COMPENSATION SECURITY GRANTS
-------------------------------------------------------------------------------
NUMBER OF
ANNUAL CONSULTING SECURITIES
RETAINER MEETING FEES/OTHER NUMBER OF UNDERLYING
NAME FEES($) FEES($) FEES($) SHARES(#) OPTIONS/SARS(#)
- ----------------------------------------------------------------------------------------------------
Gilbert Bowen -- 1,500 -- -- --
- ----------------------------------------------------------------------------------------------------
Michael D. Brown -- 1,500 -- -- --
- ----------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
EMPLOYMENT AGREEMENTS
On April 1, 1996, the Company entered into three-year employment agreements
with Messrs. Smith and Bogen, each providing for an initial annual salary of
$360,000, subject to adjustments to reflect increases in the consumer price
index. Each agreement provides that the parties may extend the agreement for up
to two additional terms of three years each for a total of six additional years.
On December 2, 1997, Fresh Juice of California entered into a three year
employment agreement with Jeffrey Heavirland, providing for an annual salary of
$150,000 plus bonuses and salary increases, if any, as may be determined by the
Board of Directors of Fresh Juice of California. The above described employment
agreements each provide for the payment of termination benefits to the executive
in the event of certain terminations following a change of control, as defined
in the agreements. In the event of a termination, for reasons other than for
retirement, death, disability or Cause (as the term Cause is defined in the
agreements), following a change in control, the Company shall, at the
executive's election, (a) pay the executive a lump sum severance payment equal
to 2.99 times his "base amount", as defined in Section 280G of the Internal
Revenue Code of 1986, as amended, or (b) continue to pay the executive his full
base salary for the remainder of the term of the agreement or any renewal period
thereof.
PENSION PLANS
During its 1988 fiscal year the Company instituted a simplified employee
pension plan covering its employees. Under this plan, contributions may not
exceed 15% of the covered employee's salary, and contributions are determined by
the Board of Directors. In the fiscal year ended November 30, 1997, accrued
contributions allocated to Mr. Smith amounted to $16,000 and approximately
$29,000 to all other eligible employees, as a group.
Fresh Juice of New York, formerly known as Ultimate, maintains a 401(k)
Plan for its employees with discretionary contributions to be made by the
employer. The amount of discretionary contributions, if any, is determined by
the Board of Directors of the Company. No contribution was made to the 401(k)
Plan by the Company during the fiscal year ended November 30, 1997. Fresh Juice
of California was incorporated into this 401(K) Plan on July 1, 1997. The
Company plans to adopt the 401(k) Plan and make all of its employees eligible to
participate in the 401(k) Plan by December 31, 1997, at which time the Company
will terminate the simplified employee pension plan. Effective January 1, 1998,
the Company instituted a 401(k) matching program pursuant to which the Company
shall match twenty-five percent (25%) of each eligible employee's contributions
limited to a maximum match of two percent (2%) of the employee's compensation
but no greater than the maximum allowed by law.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth as of November 30, 1997 information
concerning (a) the number and percentage of existing Common Stock of the Company
beneficially owned by (i) each of the directors of the Company, (ii) each
executive officer of the Company listed in the Summary Compensation Table, (iii)
all directors and executive officers as a group; and (iv) each person or group
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock. Each person named or included
in a group has sole voting and investment power with respect to his shares.
21
<PAGE> 24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY OWNED AS OF COMMON
OWNER OR NUMBER OF PERSONS IN GROUP NOVEMBER 30, 1997 STOCK OWNED
----------------------------------- ------------------------ -----------
<S> <C> <C>
Steven Smith................................................ 1,361,248(1) 21%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Steven M. Bogen............................................. 1,232,708(2) 19.1%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Daniel Petry................................................ 442,248(2) 6.8%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Brian Duffy................................................. 310,000(3) 4.8%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Jeffrey Heavirland.......................................... 315,524(4) 4.7%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Jeffrey Smith............................................... 71,919(5) 1.1%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Michael D. Brown............................................ 0 0%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Gilbert Bowen............................................... 0 0%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
All directors and executive officers as a group (8 in
number)................................................... 3,354,949(6) 50.0%
</TABLE>
- ---------------
(1) Excludes 32,226 shares held by Steven Smith's son Lee Smith over which
Steven Smith disclaims both voting and investment power. The Company
formerly reported the existence of the following options granted to Steven
Smith under the Company's 1988 Incentive Stock Option Plan (the "Plan"): (a)
an option to purchase 100,000 shares of the Company's Common Stock,
exercisable at $1.375 per share, and (b) an option to purchase 60,000 shares
of the Company's Common Stock, exercisable at $3.50 per share.
Based upon a review commenced by the Company and its attorneys in the fourth
quarter of 1997, it appears that the stockholders of the Company never
approved the Plan and that a proposal to approve the Plan was never
presented to the stockholders of the Company for a vote. As a result, the
condition to both the effectiveness of the Plan and the grant of the options
under the Plan were never met. Based upon this information, the Company has
determined that the described options technically do not exist. As such,
these options are not reflected in the above table. Mr. Smith disagrees with
the Company's conclusion and there is a possibility that he may assert a
claim as to the existence of these stock options.
(2) Reflects a transfer of 151,700 shares by Steven M. Bogen to Daniel Petry
effective October 21, 1997 to amicably resolve a dispute concerning the
number of shares of the Company's Common Stock Mr. Petry was entitled to
receive in the Ultimate Merger and Clear Springs Merger as a former
shareholder of
22
<PAGE> 25
Ultimate and Clear Springs and a transfer of 40,000 additional shares by
Steven M. Bogen to another former shareholder of Ultimate effective October
21, 1997 to amicably resolve a similar dispute.
(3) Excludes 5000 shares held by Mr. Duffy's wife over which Mr. Duffy disclaims
both voting and investment power.
(4) This amount includes Jeffrey Heavirland's option to purchase 30,000 shares
of Common Stock at $3.00 per share, exercisable until December 1, 2001, his
option to purchase 15,000 shares of Common Stock at $3.00 per share,
exercisable until December 1, 2002, his option to purchase 150,000 shares of
Common Stock at $2.72 exercisable until October 26, 2002, and a warrant
owned by Mr. Heavirland authorizing him to purchase up to 42,857 shares of
Common Stock at $3.00 per share, exercisable until November 30, 2001. Mr.
Heavirland has also been granted options to purchase an additional 15,000
shares of Common Stock, however, those options are not exercisable until
December 2, 1998 and they have not been included in the table above.
(5) This amount includes Jeffrey Smith's option to purchase 50,000 shares of
Common Stock at $3.125 per share, exercisable until April 9, 1998.
(6) This amount includes 287,857 shares of Common Stock which may be acquired
within 60 days under stock options or warrants granted to the persons in the
group.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. Merger with The Ultimate Juice Company, Inc. On March 31, 1996, the
Company entered into a Merger Agreement (the "Merger Agreement") with and among
the Company, Ultimate, the stockholders of Ultimate (the "Selling Stockholders")
and The Fresh Juice Acquisition Company, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Merger Sub"). The Merger Agreement
provided for the merger of Merger Sub with and into Ultimate, with all of the
issued and outstanding common stock of Ultimate being exchanged for 1,140,000
shares of the Company's Common Stock (the "Merger Shares"). The Ultimate Merger
became effective on April 1, 1996. Pursuant to the terms of the Merger
Agreement, Steven M. Bogen, Mark Feldman and Daniel Petry each received 629,508,
37,050 and 288,648 shares of the Company's Common Stock, respectively, in
exchange for their respective ownership interests in Ultimate.(1)
Pursuant to the Merger Agreement, the Merger Shares were not registered
with the Commission and constitute restricted stock under Rule 144 of the
Commission. However, the Company and the Selling Stockholders have entered into
a Registration Rights Agreement dated March 31, 1996, which gives the Selling
Stockholders the right to demand registration of a portion of the Merger Shares
under certain circumstances.
In connection with the Merger Agreement, Steven M. Bogen ("Bogen") and
Steven Smith ("Smith") entered into a Stockholder's Agreement (the
"Stockholder's Agreement") whereby each agreed, among other things, to (a) keep
the number of directors of the Company at an even number, (b) each nominate
one-half of the number of directors eligible for election each year, (c) vote
for the other's nominees for director, and (d) not sell their respective stock
in the Company other than pursuant to broker sales or an effective Registration
Statement. In connection with an increase in the size of the Company's Board of
Directors, on June 20, 1997, Bogen and Smith amended the Stockholder's Agreement
to provide that (i) Bogen and Smith shall each have the right to designate two
of the nominees to the Board of Directors (collectively the "Management
Nominees"); (ii) future expansion of the size of the Board of Directors shall be
determined by
- ---------------
(1) Subsequent to the Ultimate Merger and the Clear Springs Merger, Daniel Petry
received 151,700 additional shares of the Company's Common Stock as a
result of a transfer of shares from Steven M. Bogen to amicably resolve a
dispute concerning the number of shares of the Company's Common Stock Mr.
Petry was entitled to receive in the Ultimate Merger and Clear Springs
Merger as a former shareholder of Ultimate and Clear Springs. Steven M.
Bogen transferred an additional 40,000 shares of the Company's Common Stock
to another former shareholder of Ultimate and Clear Springs to amicably
resolve a similar dispute.
23
<PAGE> 26
majority vote of the Board of Directors; and (iii) any future nominee(s) for
election to serve as a member of the Board of Directors, other than the
Management Nominees, shall be nominated and elected in accordance with the
Company's By-laws and Delaware General Corporation Law.
2. Merger With Clear Springs Citrus, Inc. On March 31, 1996, the Company
entered into a Merger Agreement with and among the Company, Fresh Juice of
Florida, Clear Springs, Brian Duffy and The Bogen Group, L.L.C. (the "Clear
Springs Merger Agreement"). The Clear Springs Merger Agreement provided for the
merger of Clear Springs with and into Fresh Juice of Florida, with all of the
issued and outstanding common stock of Clear Springs being exchanged for
1,160,000 shares of the Company's Common Stock (the "Clear Springs Merger
Shares"). The Clear Springs Merger became effective on September 1, 1996.
Pursuant to the terms of the Clear Springs Merger Agreement, Steven M. Bogen,
Brian Duffy and Mark Feldman each received 829,900, 300,000 and 21,500 shares of
the Company's Common Stock, respectively, in exchange for their respective
ownership interest in Clear Springs. In December 1996, the Company entered into
an oral one year employment agreement with Brian Duffy pursuant to which Mr.
Duffy was to serve as the President of Fresh Juice of Florida at an annual
salary of $200,000 plus a bonus based on the Company's profits. In June 1997,
Mr. Duffy resigned from his position as President of Fresh Juice of Florida and
he was subsequently rehired as Vice President of Sales and Operations of Fresh
Juice of Florida effective November 11, 1997. Prior to the Clear Spring Merger,
the Company purchased approximately $3,500,000 of product from Clear Springs in
fiscal 1996.
Pursuant to the Clear Springs Merger Agreement, the Clear Springs Merger
Shares were not registered with the Commission and constitute restricted stock
under Rule 144 of the Commission. However, the Company and each of the
recipients of the Clear Springs Merger Shares (the "Clear Springs Selling
Stockholders") have entered into a Registration Rights Agreement dated August
29, 1996, which gives the Clear Springs Selling Stockholders the right to demand
registration of a portion of the Clear Springs Merger Shares under certain
circumstances.
3. Supply Agreement with Natural Juice Company. By agreement dated March
31, 1996, the Company entered into a supply, distribution and requirements
agreement (the "Supply Agreement") with Natural Juice Company, an Illinois
corporation controlled by Brian Duffy, a director, officer and stockholder of
the Company. The Supply Agreement has an initial term of five (5) years with two
(2) five (5) year renewals at Natural Juice Company's option. The Company sold
approximately $460,000 and $1,552,036 of product to Natural Juice Company during
fiscal 1996 and 1997, respectively.
4. Merger with Hansen's Juices, Inc. On November 18, 1996, the Company
entered into a merger agreement with and among the Company, Fresh Juice of
California, Hansen's, Gary Hansen, Jeffrey Heavirland, Burton S. Rosky and
Leatrice J. Rosky Family Trust of 1995, Gary Todd, David Burger and Timothy Kane
(the "Hansen's Merger Agreement"). The Hansen's Merger Agreement provided for
the merger of Hansen's with and into Fresh Juice of California, with all the
issued and outstanding common stock of Hansen's being exchanged for 597,443
shares of the Company's Common Stock (the "Hansen's Merger Shares"), $90,000 in
cash, warrants to purchase 300,000 shares of the Company's Common Stock for
$3.00 per share and the assumption of Hansen's debt. The Hansen's Merger became
effective on December 2, 1996. Pursuant to the terms of the Hansen's Merger
Agreement, Jeffrey Heavirland received 77,667 shares of the Company's Common
Stock and warrants to purchase 42,857 shares of the Company's Common Stock at
$3.00 per share. In addition, Fresh Juice of California entered into a three
year employment contract with Mr. Heavirland providing for a minimum annual
salary of $150,000 plus salary increases and bonuses, if any, as determined by
the Board of Directors of Fresh Juice of California and granting him an option
to purchase 60,000 shares of the Company's Common Stock at an exercise price of
$3.00 per share and becoming exercisable over a two year period beginning on the
closing date of the Hansen's Merger.
Pursuant to the Hansen's Merger Agreement, the Hansen's Merger Shares were
not registered with the Commission and constitute restricted stock under Rule
144 of the Commission. However, the Company and each of the recipients of the
Hansen's Merger Shares (the "Hansen's Selling Stockholders") have entered into a
Registration Rights Agreement dated November 27, 1996, which gives the Hansen's
Selling Stockholders the right to demand registration of a portion of the
Hansen's Merger Shares under certain circumstances.
5. Purchases From and Sales to Entities Related to Directors. As set forth
above, during fiscal 1996 and 1997, the Company sold approximately $460,000 and
$1,552,036 of product to Natural Juice Company and
24
<PAGE> 27
purchased approximately $235 of product from Natural Juice Company during fiscal
1997. During fiscal 1996 and 1997, the Company sold approximately $47,000 and
$77,336 of product to American Premium Exports, Inc. (Michael D. Brown is a
Director and the President and Chief Executive Officer of American Premium
Exports, Inc. and owns approximately ten percent (10%) of such company). In
fiscal 1996 and 1997, the Company purchased approximately $282,000 and $0 of
organic citrus fruit from Bowen Brothers Fruit Co., Inc. Bowen Brothers Fruit
Co., Inc. is a private company which is 100% owned by Gilbert Bowen's
Brother-in-law, Sister, Son, Daughter-in-law and his two grandchildren. Gilbert
Bowen has no ownership in or control over Bowen Brothers Fruit Co., Inc.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3(i) Certificate of Amendment to Certificate of
Incorporation -- incorporated by reference to Exhibit 3(i)
to the Company's 10-QSB for the quarter ended August 31,
1996, filed October 15, 1996
3(ii) By-laws -- incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement, SEC File No. 33-8878-NY on
Form S-18 and by reference to the Company's Current Report
on Form 8-K dated September 18, 1997 filed on October 6,
1997.
3(iii)* Amendments to By-laws
9 Stockholders Agreement dated March 31, 1996 between Steven
Smith and Steven M. Bogen -- incorporated by reference to
Exhibit 10(b) of the Company's Current Report on Form 8-K
dated March 31, 1996 filed on April 11, 1996 (the "March 31,
1996 8-K")
10(a) Stockholder's Agreement dated March 31, 1996 between Steven
Smith and Steven M. Bogen -- incorporated by reference to
Exhibit 10(b) of the March 31, 1996 8-K
10(b) 1996 Incentive Stock Option Plan -- incorporated by
reference to Exhibit 10(b) of the Company's Definitive Proxy
Statement filed in connection with the Company's Annual
Stockholders meeting held on August 29, 1996 filed on August
7, 1996
10(c) Employment Agreement effective April 1, 1996 with Steven
Smith -- incorporated by reference to Exhibit 10(d) of the
March 31, 1996 8-K, as amended by Form 8-K/A filed on
January 6, 1998
10(d) Employment Agreement effective April 1, 1996 with Steven M.
Bogen -- incorporated by reference to Exhibit 10(e) of the
March 31, 1996 8-K
10(e) Supply Agreement dated March 31, 1996 with Natural Juice
Company, Inc. -- incorporated by reference to Exhibit 10(f)
of the March 31, 1996 8-K
10(f) Loan Agreement dated August 5, 1996 among the Company, The
Fresh Juice Company of Florida, Inc., The Fresh Juice
Company of New York, Inc. and Fleet Bank, N.A. --
incorporated by reference to Exhibit 10(f) of the Company's
Annual Report on Form 10-KSB for the fiscal year ended
November 30, 1996, filed March 17, 1997
10(g)* Agreement of Lease dated November 24, 1997 between The Fresh
Juice Company of New York, Inc. and 280 Wilson Avenue
Associates, L.L.C. and guaranteed by the Company
10(h)* Employment Agreement effective December 2, 1996 with Jeffrey
Heavirland
10(i)* Industrial Real Estate Lease dated June 17, 1992 between
Hansen's Juices, Inc. and Pruco Life Insurance Company
21* Subsidiaries of small business issuer
27* Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On October 6, 1997, the Company filed a Current Report on Form 8-K
dated September 18, 1997, to report that a majority of the Board of
Directors of the Company approved an amendment to the By-Laws of the
Company to increase the size of the Company's Board of Directors from
five members to seven members, and elected Gilbert Bowen and Michael D.
Brown to fill the newly-created directorships. No financial statements
were filed with that Form 8-K.
- ---------------
* Exhibits filed herewith
25
<PAGE> 28
In accordance with Section 13 and 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE FRESH JUICE COMPANY, INC.
(Registrant)
By: /s/ STEVEN M. BOGEN
------------------------------------
Steven M. Bogen, Co-Chairman of
Board
and Chief Executive Officer
Date: March 16, 1998
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ STEVEN M. BOGEN Co-Chairman of the Board, Chief March 16, 1998
- --------------------------------------------------- Executive Officer and Secretary
Steven M. Bogen (principal executive officer)
/s/ BRIAN DUFFY Director March 16, 1998
- ---------------------------------------------------
Brian Duffy
/s/ JEFFREY HEAVIRLAND Director March 16, 1998
- ---------------------------------------------------
Jeffrey Heavirland
/s/ GILBERT BOWEN Director March 16, 1998
- ---------------------------------------------------
Gilbert Bowen
/s/ MICHAEL D. BROWN Director March 16, 1998
- ---------------------------------------------------
Michael D. Brown
/s/ MARK FELDMAN Chief Financial Officer and March 16, 1998
- --------------------------------------------------- Treasurer (principal financial
Mark Feldman officer and principal
accounting officer)
</TABLE>
26
<PAGE> 29
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Balance Sheets as of November 30, 1997 and
1996...................................................... F-2
Consolidated Statements of Operations -- Years ended
November 30, 1997, 1996 and 1995.......................... F-3
Consolidated Statements of Shareholders' Equity -- Years
ended November 30, 1997, 1996 and 1995.................... F-4
Consolidated Statements of Cash Flows -- Years ended
November 30, 1997, 1996 and 1995.......................... F-5
Notes to Consolidated Financial Statements -- Years ended
November 30, 1997, 1996 and 1995.......................... F-6
</TABLE>
27
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Fresh Juice Company, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended November 30, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended November 30, 1997 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Short Hills, NJ
February 27, 1998
F-1
<PAGE> 31
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 453,344 133,768
Trade accounts receivable, net of allowance for doubtful
accounts of $289,037 and $50,000 in 1997 and 1996,
respectively............................................ 3,156,893 2,236,781
Inventories............................................... 2,638,083 1,759,200
Current portion of notes receivable....................... 131,101 --
Prepaid income tax........................................ 8,000 --
Deferred income taxes..................................... 145,615 --
Prepaid and other current assets.......................... 201,069 296,007
----------- ----------
Total current assets............................... 6,734,105 4,425,756
----------- ----------
Property, plant and equipment, at cost:
Land...................................................... 30,000 30,000
Building and improvements................................. 2,839,823 1,740,229
Equipment................................................. 5,260,058 3,137,411
Molds..................................................... 264,333 224,333
Automobiles............................................... 266,255 143,358
----------- ----------
8,660,469 5,275,331
Less accumulated depreciation............................. 1,741,718 820,646
----------- ----------
Net property, plant and equipment.................. 6,918,751 4,454,685
Notes receivable, net of current portion.................... 365,621 --
Excess of cost over estimated fair values of net assets
acquired, net of accumulated amortization of $496,379 and
$126,748 in 1997 and 1996, respectively................... 6,895,951 6,110,947
Trademarks, patents, and other intangibles, net of
accumulated amortization of $112,156 and $24,354 in 1997
and 1996, respectively.................................... 1,075,820 140,084
Other assets................................................ 103,096 150,000
----------- ----------
Total assets....................................... 22,093,344 15,281,472
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable.............................................. 800,000 705,000
Current installments of long-term debt.................... 1,202,074 260,070
Accounts payable and accrued expenses..................... 3,149,102 2,836,582
Income taxes payable...................................... 263,606 --
----------- ----------
Total current liabilities.......................... 5,414,782 3,801,652
Long-term debt and obligations under capital lease, net of
current installments...................................... 3,597,151 1,524,562
Deferred rent............................................... 144,254 --
Deferred income taxes....................................... 773,900 34,000
----------- ----------
Total liabilities.................................. 9,930,087 5,360,214
----------- ----------
Shareholders' equity:
Series preferred stock par value $10. Authorized 7,000,000
shares; none issued..................................... -- --
Common stock, par value $.01. Authorized 30,000,000
shares; issued 6,679,669 and 6,062,000 shares in 1997
and 1996, respectively.................................. 66,797 60,620
Additional paid-in capital................................ 9,453,958 8,583,490
Retained earnings......................................... 2,927,764 1,560,441
----------- ----------
12,448,519 10,204,551
Less cost of common shares held in treasury: 212,938 and
211,938 shares in 1997 and 1996, respectively........... 285,262 283,293
----------- ----------
Total shareholders' equity......................... 12,163,257 9,921,258
Commitments and contingencies (notes 5 and 8)
----------- ----------
Total liabilities and shareholders' equity......... $22,093,344 15,281,472
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 32
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
Net sales.............................................. $41,382,836 19,958,022 9,219,184
Cost of goods sold..................................... 30,035,386 15,886,417 6,035,483
----------- ---------- ---------
11,347,450 4,071,605 3,183,701
Selling, general and administrative expenses........... 8,801,423 4,984,642 2,820,356
----------- ---------- ---------
Earnings (loss) from operations.............. 2,546,027 (913,037) 363,345
Interest and other income, net......................... 132,296 63,496 104,104
Interest expense....................................... (536,851) (139,502) (24,355)
----------- ---------- ---------
Earnings (loss) before provision (benefit)
for income taxes........................... 2,141,472 (989,043) 443,094
Provision (benefit) for income taxes................... 774,149 (60,000) 172,051
----------- ---------- ---------
Net earnings (loss).......................... $ 1,367,323 (929,043) 271,043
=========== ========== =========
Net earnings (loss) per common share................... .21 (.20) .07
=========== ========== =========
Weighted average number of common and common equivalent
shares outstanding................................... 6,471,535 4,601,349 3,889,740
=========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 33
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
--------- ------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1994........... 3,762,000 $37,620 $2,396,490 $2,218,441 $(273,360) $ 4,379,191
Purchase of 4,800 shares of treasury
stock................................ -- -- -- -- (9,933) (9,933)
Net earnings for the year ended
November 30, 1995.................... -- -- -- 271,043 -- 271,043
--------- ------- ---------- ---------- --------- -----------
Balance at November 30, 1995........... 3,762,000 37,620 2,396,490 2,489,484 (283,293) 4,640,301
Net loss for the year ended November
30, 1996............................. -- -- -- (929,043) -- (929,043)
Shares of common stock issued to
acquired The Ultimate Juice Company,
Inc.................................. 1,140,000 11,400 3,066,600 -- -- 3,078,000
Shares of common stock issued to
acquired Clear Springs Citrus,
Inc.................................. 1,160,000 11,600 3,120,400 -- -- 3,132,000
--------- ------- ---------- ---------- --------- -----------
Balance at November 30, 1996........... 6,062,000 60,620 8,583,490 1,560,441 (283,293) 9,921,258
Purchase of 1,000 shares of treasury
stock................................ -- -- -- -- (1,969) (1,969)
Net earnings for the year ended
November 30, 1997.................... 1,367,323 -- 1,367,323
Shares of common stock and warrants
issued to acquire Hansen's Juices,
Inc.................................. 617,669 6,177 870,468 -- -- 876,645
--------- ------- ---------- ---------- --------- -----------
Balance at November 30, 1997........... 6,679,669 $66,797 $9,453,958 $2,927,764 $(285,262) $12,163,257
========= ======= ========== ========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 34
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)....................................... $ 1,367,323 (929,043) 271,043
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 1,398,539 467,458 68,101
Deferred Income Taxes................................... (9,477) -- --
Changes in assets and liabilities:
(Increase) decrease in trade accounts receivable...... (109,258) (371,417) 87,665
(Increase) decrease in inventories.................... (386,583) 101,962 (171,109)
Decrease (increase) in prepaid and other current
assets............................................. 135,544 (470,218) 132,774
Decrease in notes receivable and other assets......... (126,015) -- (10,107)
(Decrease) increase in accounts payable and accrued
expenses........................................... (1,107,840) 1,038,602 (234,911)
Increase (decrease) in income taxes................... 255,606 (161,228) 118,733
----------- ----------- ----------
Net cash provided by (used in) operating
activities....................................... 1,417,839 (323,884) 262,189
----------- ----------- ----------
Cash flows from investing activities:
Acquisition of distribution route......................... (2,767) -- --
Decrease in short-term investments........................ -- -- 789,116
Acquisition of property, building and equipment........... (498,308) (1,885,245) (1,685,893)
Escrow advance -- Hansen's Juices, Inc.................... -- (150,000) --
Acquisition costs......................................... (48,570) (293,000) --
Acquisition of cash....................................... 112,245 82,834 --
----------- ----------- ----------
Net cash used in investing activities.............. (437,400) (2,245,411) (896,777)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from note payable................................ 95,000 705,000 --
Purchase of treasury stock................................ (1,969) -- (9,933)
Proceeds from long-term debt.............................. -- 1,100,000 1,100,000
Payments on long-term debt................................ (753,894) (1,100,000) --
----------- ----------- ----------
Net cash (used in) provided by financing
activities....................................... (660,863) 705,000 1,090,067
Net increase (decrease) in cash and cash
equivalents...................................... 319,576 (1,864,295) 455,479
Cash and cash equivalents at beginning of year.............. 133,768 1,998,063 1,542,584
----------- ----------- ----------
Cash and cash equivalents at end of year.................... $ 453,344 133,768 1,998,063
=========== =========== ==========
Supplemental cash flow and noncash investing and financing
activities information:
Income taxes paid......................................... $ 312,797 53,914 53,318
=========== =========== ==========
Interest paid............................................. $ 532,712 129,735 16,542
=========== =========== ==========
Fair valued of assets acquired.............................. $ 6,897,875 8,691,518 --
Debt and liabilities assumed................................ 5,811,676 2,481,518 --
----------- ----------- ----------
Fair value of common stock and warrants issued.............. $ 1,086,199 6,210,000 --
=========== =========== ==========
Non cash investing activities:
Acquired notes receivable................................. 89,442 -- --
Acquired property, plant and equipment.................... 58,169 -- --
Deferred tax assets change................................ 125,189 -- --
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 35
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Fresh Juice Company, Inc. (the Company), produces, markets and sells
fresh and frozen fresh-squeezed fruit juices and other non-carbonated beverages
to both food service and retail customers. The majority of the juice produced by
the Company is fresh squeezed orange juice.
Effective April 1, 1996, the Company acquired all of the outstanding
capital stock of The Ultimate Juice Company, Inc. (Ultimate) in exchange for
1,140,000 shares of the Company's common stock valued at $3,078,000. This merger
has been accounted for as a purchase.
Effective September 1, 1996, the Company acquired all of the outstanding
capital stock of Clear Springs Citrus, Inc. (Clear Springs) in exchange for
1,160,000 shares of the Company's common stock valued at $3,132,000. This merger
has been accounted for as a purchase.
Effective December 2, 1996, the Company acquired all of the outstanding
capital stock of Hansen's Juices, Inc. (Hansen's) in exchange for $90,000 in
cash, 597,443 shares of the Company's common stock valued at $731,868, warrants
to purchase 300,000 shares of the Company's common stock for $3.00 per share
valued at $120,000 using the assumptions identified in note 7 and assumption of
debt. Simultaneously with the merger, the Company exchanged certain debt owed to
a former Hansen's stockholder for $60,000 in cash and 20,226 shares of the
Company's common stock valued at $24,777. This merger has been accounted for as
a purchase.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated. The operating results of Ultimate, Clear
Springs and Hansen's are included in the consolidated results of operations from
their respective dates of acquisition.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and other securities with a
maturity at time of purchase of three months or less.
(d) Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable,
accounts payable, notes payable and other current assets and liabilities
approximates fair value due to the short-term maturity of those instruments.
Management estimates the Company's long-term debt to approximate fair value at
November 30, 1997 and 1996 determined through a combination of estimates,
information obtained from independent third parties and the variable rate of
interest on certain debt.
(e) Inventories
Inventories are stated at the lower of cost or market, with cost determined
by using the first-in, first-out (FIFO) method.
F-6
<PAGE> 36
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Depreciation
Depreciation is provided over the estimated useful lives of the respective
assets: three to ten years for the equipment and molds, three to five years for
the automobiles and 25-39 years for the building and building improvements using
the straight-line method. Leasehold improvements are depreciated over the
shorter of the useful life or the remaining term of the lease.
(g) Intangible Assets
Excess of cost over the estimated fair values of net assets acquired
(goodwill) is being amortized using the straight-line method over 20 years.
Trademarks, patents and other intangibles (primarily customer lists and
covenants not to complete) are being amortized using the straight-line method
over periods of three to fifteen years.
The carrying value of intangible assets is periodically reviewed by the
Company and impairments are recognized when the estimated future cash flows
derived from such intangible assets are less than their carrying value.
Measurement of the impairment, if any, is based upon the excess of the carrying
value over the fair value of such assets.
(h) Long-Lived Assets
The Company adopted the provision of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed, on
December 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
(i) Stock Option Plan
Prior to December 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
December 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings (loss) per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
(j) Net Earnings (Loss) Per Common Share
Net earnings (loss) per share in 1997 and 1996 is based on the weighted
average number of common shares outstanding. Common share equivalents are not
included in the calculation, as their inclusion would either be antidilutive or
not result in a material dilution of earnings per share. Net earnings per common
share in 1995 is based on the weighted average of number of common and common
equivalent shares outstanding, using the treasury stock method. Common share
equivalents are used in the computation of earnings per
F-7
<PAGE> 37
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share, which represent options granted to certain employees under the Company's
1996 Incentive Stock Option Plan and warrants, if their exercise would have had
a dilutive effect on net earnings (loss) per common share.
(k) Income Taxes
The provision (benefit) for income taxes is based on earnings reported in
the financial statements under the asset and liability approach, in accordance
with SFAS No. 109, Accounting for Income Taxes. Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
(l) Reclassifications
Certain reclassifications were made to prior year balances to conform to
the presentation adopted in the current year.
(m) Use of Estimates
In conformity with generally accepted accounting principles, the
preparation of financial statements 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.
(n) Risks and Uncertainties
The Company's revenues are dependent on the continued operation of its
manufacturing facility and its various distribution centers and the ready source
of supply of harvested fresh fruits and juice supplies. The operation of these
facilities involves many risks, including the breakdown, failure or substandard
performance of equipment, natural disasters and the need to comply with
directives of governmental agencies. The occurrence of material operational
problems, including but not limited to the above events, may have a material
adverse effect on the productivity and profitability of a particular facility or
the Company as a whole, or with respect to certain facilities during the period
of such operational difficulty. A lack of availability of quality fruit and
higher costs of citrus would hamper the Company's ability to maintain its rate
of growth and its current gross profit level.
None of the Company's customers accounted for more than 10% of the net
sales in 1997, 1996 and 1995. The Company estimates an allowance for doubtful
accounts based on the creditworthiness of its customers as well as general
economic conditions. The Company as a policy, does not require collateral from
its customers.
The Company and its subsidiaries are subject to certain regulations of
federal, state and local government authorities regarding distribution and sale
of food products. From time to time various proposals are made for new laws and
regulations impacting the Company's industry. It is not possible to predict
whether any such proposals will be adopted and the impact, if any, on the
operations of the Company. Although the Company believes that it currently has
all material government permits, licenses, qualifications and approvals for its
operations, there can be no assurance that the Company will be able to continue
to comply with or maintain the same.
F-8
<PAGE> 38
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On August 28, 1997, after completing its review of the materials presented
in connection with a public hearing conducted in December 1996, the FDA
published its proposed strategy for ensuring juice safety which involves a
three-prong approach that includes phasing in a mandatory Hazard Analysis and
Critical Control Point (HACCP) program for some or all juices, label warning
statements, and educational programs targeted at sanitation education for
industry and consumers. In so doing, the agency rejected proposals to mandate
pasteurization.
The Company's current manufacturing practices comprise a fully implemented
HACCP program instituted as a requirement for the manufacture of fresh orange
juice in the State of Florida; although it can give no assurance, the Company
believes that the warning label requirement, when promulgated, will not be
applicable to its products. Although it can give no assurance, the Company
believes that the final HACCP requirements for fresh juice likely to be required
by the FDA will be no more stringent than those presently in place at the
Company, so that these regulations, when made final, will not have a material
impact on the Company's operations. In the event that the final HACCP
requirements and regulations are more stringent than those in place at the
Company at such time, certain adjustments to the production process may be
required and the costs and timing of the implementation of such adjustments
could have a material impact on the Company's operations and financial position.
(o) Recently Issued Accounting Standards
SFAS No. 128, Earnings Per Share was issued in February 1997 and is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. This statement established standards for
computing and presenting earnings per share. The Company will adopt this
statement in the first quarter of fiscal 1998 and restate prior periods for the
effect, if any, of SFAS No. 128. SFAS No. 130 Reporting Comprehensive Income,
was issued in June 1997 and is effective for fiscal years beginning after
December 15, 1997. The Company believes that the adoption of this accounting
standard will not have a material effect on the Company's consolidated financial
position or results of operations. SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information was issued in June 1997 and is effective
for financial statements for periods beginning after December 15, 1997. This
statement established standards for the way that public business enterprises
report information about operating segments in annual financial statements and
interim financial reports issued to shareholders. The Company is currently
evaluating the method of adoption it will utilize.
F-9
<PAGE> 39
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) ACQUISITIONS
The estimated fair value of Ultimates', Clear Springs' and the Hansen's
assets and liabilities at the respective dates of acquisition are presented as
follows:
<TABLE>
<CAPTION>
1996 1997
------------------------ -----------
CLEAR
ULTIMATE SPRINGS HANSEN'S
---------- ---------- -----------
<S> <C> <C> <C>
Cash.......................................... $ 70,936 11,898 112,245
Trade accounts receivable..................... 779,179 494,458 810,854
Inventory..................................... 135,660 180,681 492,300
Prepaid expenses.............................. 47,020 56,636 40,606
Note receivable............................... 150,000 (150,000) 235,250
Property, plant and equipment................. 44,657 634,468 2,945,000
Goodwill, representing excess of cost over
estimated fair values of net assets
acquired.................................... 2,517,156 3,427,539 1,165,601
Intangible assets............................. 33,427 107,803 990,264
Other assets.................................. -- -- 105,755
Advances and note payable -- Fresh Juice
Company..................................... (110,000) (393,932) --
Accounts payable and accrued expenses......... (559,364) (993,919) (1,563,190)
Long-term debt................................ -- -- (3,769,910)
Income taxes payable.......................... (30,671) -- --
Advances -- related party..................... -- (209,632) --
Deferred income taxes......................... -- (34,000) (478,576)
---------- ---------- -----------
Total purchase price, excluding
total acquisition costs of $48,570
and $293,000 in 1997 and 1996,
respectively...................... $3,078,000 3,132,000 1,086,199
========== ========== ===========
</TABLE>
In each of the Company's aforementioned acquisitions, the common stock
delivered as consideration is unregistered and contains certain restrictions as
well as having several large blocks of stock being issued to certain sellers in
the transactions.
Management of the Company, after consultation with its outside advisors,
has made an assessment of the fair value of the common stock issued in
connection with the Ultimate and Clear Springs' acquisitions at the approximate
dates of the merger agreements, which fair value approximates 80% of the
publicly traded market prices. The Company finalized its accounting relative to
the Ultimate and Clear Springs' acquisitions during the second quarter of fiscal
1997 with no additional adjustments from that reflected at November 30, 1996.
Prior to the acquisition, the Company purchased approximately $3,500,000 of
product from Clear Springs in fiscal 1996.
In the Hansen's acquisition, management evaluated the fair values of the
assets acquired and liabilities assumed, and has adjusted the fair value of
assets acquired and liabilities assumed in connection with the Hansen's merger
during the fourth quarter of 1997. Earnings (loss) before the provision
(benefit) income taxes for the nine months ended August 31, 1997 would have been
reduced by approximately $60,000 had this adjustment been made at the beginning
of the year. Management of the Company, after consultation with its outside
advisors, has made an assessment of the fair value of the common stock issued in
connection with the Hansen's acquisition at the approximate date of the merger
agreement, which fair value approximates 70% of the publicly traded market
prices.
F-10
<PAGE> 40
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents selected unaudited financial information for
the Company, Ultimate, Clear Springs and Hansen's on a pro-forma basis assuming
the companies had been combined for the year ended November 30, 1996. Pro-forma
results include the results of the Company for the year ended November 30, 1996
combined with the results of Ultimate and Clear Springs for the periods prior to
their respective dates of acquisition and the results of Hansen's for the twelve
month period ended November 30, 1996. The pro forma financial information does
not necessarily reflect the results of operations that would have occurred had
the Company, Ultimate, Clear Springs and Hansen's constituted a single entity
during such period. Pro-forma results include necessary pro-forma adjustments:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Net sales............................................... $41,212,837
Net loss................................................ (1,681,756)
Net loss per common share............................... (.26)
===========
</TABLE>
(3) INVENTORIES
Inventories at November 30, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials....................................... $ 884,129 375,351
Finished goods...................................... 1,753,954 1,383,849
---------- ----------
$2,638,083 1,759,200
========== ==========
</TABLE>
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at November
30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accounts payable.................................... $1,935,301 2,195,754
Compensation........................................ 300,477 101,654
Sales and marketing................................. 1,614 73,684
Professional fees................................... 302,123 202,487
Other............................................... 609,587 263,003
---------- ----------
$3,149,102 2,836,582
========== ==========
</TABLE>
(5) NOTE PAYABLE AND LONG-TERM DEBT
In August 1996, the Company entered into a $2,500,000 revolving credit loan
with a bank expiring August 1998, of which $800,000 and $705,000 was outstanding
at November 30, 1997 and 1996, respectively. Interest is at a floating rate
equal to the bank's prime rate, which floating rate, at the Company's election,
may be fixed, for one to three month periods throughout the term, based on
current LIBOR plus 150 basis points (7.19% at November 30, 1997). The Company
can borrow against the revolving credit loan based on the allowable borrowing
base, defined in the loan agreement as 80% of eligible accounts receivable plus
the lesser of $1,500,000 or 50% of eligible inventory. Available amounts under
the revolving credit loan amounted to approximately $1,661,000 and $1,795,000 at
November 30, 1997 and 1996, respectively.
F-11
<PAGE> 41
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At November 30, 1997 and 1996, long-term debt, including capital leases,
consists of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
$475,000 mortgage note with a third party, due in monthly
installments of $3,683 representing principal and interest
beginning March 1, 1997 with a final balloon payment due
August 1, 1998, interest at 7%, secured by the Company's
Florida Plant............................................. $ 466,600 475,000
Note payable to a former stockholder of Clear Springs, due
in annual amounts of approximately $105,000 through
January 1998, interest at 7%.............................. 103,738 209,632
$1,100,000 term loan with a bank, due in monthly principal
installments of $18,333 commencing April 1, 1997 through
March 1, 2002 with interest at either LIBOR plus 175 basis
points (7.39% at November 30, 1997) or the bank's prime
rate...................................................... 953,333 1,100,000
$750,000 note payable with a bank, with principal and
interest at 9.25% payable in monthly installments of
$15,771 due May 2001. Note is collateralized by the
receivables, inventory, equipment and vehicles of the
California Plant.......................................... 558,605 --
Notes payable to related parties, interest only payable
monthly at a weighted average interest rate of 8.9% at
November 30, 1997. Principal amounts due December 2001
through December 2005..................................... 1,673,172 --
Notes payable to related parties with a weighted average
interest rate of 10.5%. Principal and interest payable in
monthly installments of $20,983 due at various intervals
between November 2000 and December 2001................... 731,351 --
Lease obligation payable in installments through February
2000 with a weighted average interest rate of 4.9% at
November 30, 1997......................................... 74,527 --
Various notes payable due in installments through April 2000
with a weighted average interest rate of 9.7% at November
30, 1997.................................................. 237,899 --
---------- ---------
Total long-term debt, including capital leases.... 4,799,225 1,784,632
Less current maturities..................................... 1,202,074 260,070
---------- ---------
Long-term debt and obligations under capital
lease, excluding current maturities............. $3,597,151 1,524,562
========== =========
</TABLE>
The revolving credit loan and term loan contain certain covenants including
financial covenants (tangible net worth and minimum debt revenue coverage
ratios). The Company is in compliance with all such covenants at November 30,
1997. The loans are secured by substantially all of the assets of the Company.
The aggregate fair value of the Company's debt approximates its carrying value
due to the variable nature and frequent repricing of the debt which is based on
market conditions.
The aggregate annual maturities of long-term debt for each of the next five
years ended November 30 are as follows: 1998, $1,202,000; 1999, $685,000; 2,000,
$669,000; 2001, $460,000; 2002, $967,000; 2002 and thereafter, $816,000.
F-12
<PAGE> 42
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal.................................... $404,048 (80,000) 139,266
State...................................... 254,392 20,000 32,785
-------- ------- -------
Total........................................ $658,440 (60,000) 172,051
-------- ------- -------
Deferred:
Federal.................................... 109,317 -- --
State...................................... 6,392 -- --
-------- ------- -------
Total........................................ 115,709 -- --
-------- ------- -------
Total Income Tax Provision (benefit)......... 774,149 (60,000) 172,051
======== ======= =======
</TABLE>
The temporary differences which give rise to deferred tax assets and
liabilities as of November 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable.................................. $ 115,615 17,000
Inventory............................................ 30,000 20,000
Net operating loss carry forwards.................... 30,936 328,000
--------- -------
Gross deferred tax assets.................... 176,551 365,000
Valuation allowance.................................. -- 365,000
--------- -------
Net deferred tax assets...................... 176,551 --
--------- -------
Deferred tax liability -- property, plant and
equipment............................................ (804,836) (34,000)
--------- -------
Net deferred income taxes.................... $(628,285) (34,000)
========= =======
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The valuation
allowance decreased $365,000 in 1997 as the Company believes that it is more
likely than not that the results of future operations will generate sufficient
taxable income to realize the deferred tax assets. Net operating losses of
approximately $30,900 expire in fiscal 2011.
The reconciliation of the Company's effective income tax rate and the
Federal statutory rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate.................................. 34% (34)% 34%
State taxes, net of federal benefit..................... 8 1 5
Amortization of goodwill................................ 6 4 --
(Decrease) increase in valuation allowance.............. (17) 29 --
Other, net.............................................. 5 (6) --
--- --- --
36% (6)% 39%
=== === ==
</TABLE>
F-13
<PAGE> 43
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCENTIVE STOCK OPTIONS
In 1996, the Company adopted The Fresh Juice Company, Inc. Incentive Stock
Option Plan (the 1996 Stock Plan). The number of shares of common stock with
respect to which grants may be made under the 1996 Stock Plan is 500,000. The
shares issuable under the 1996 Stock Plan may be drawn from either authorized
but previously unissued shares of common stock or from reacquired shares of
common stock, including shares purchased by the Company on the open market or
held as Treasury shares. Under the 1996 Stock Plan, key salaried employees,
including officers, of the Company are eligible to receive options. The Board of
Directors has the sole discretion to determine the amount of grant and to
establish such vesting periods and/or performance based goals that must be
attained in order for the participant to be able to exercise any stock option.
The following table summarizes the transactions of the Company's stock
option plans for the two-year period ended November 30, 1997:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year............ 110,000 $3.13 -- $ --
Granted........................................... 225,000 2.81 110,000 3.13
Expired........................................... (60,000) 3.13 -- --
------- -------
Options outstanding at end of year.................. 275,000 2.88 110,000 3.13
======= =======
Options exercisable at end of year.................. 245,000 2.85 110,000 3.13
======= =======
Weighted average fair value of options granted
during the year................................... .91 .73
</TABLE>
The fair value of each stock option granted during 1997 and 1996 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Expected life (years)....................................... 5 5
Historical volatility....................................... 45% 45%
Expected dividend yield..................................... -- --
Risk-free interest rate..................................... 5.6% 5.6%
</TABLE>
The Company applies APB Opinion No. 25 in accounting for the 1996 Stock
Plan and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net earnings (loss) per share would have been reduced to
the adjusted amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Net earnings (loss) as reported...................... $1,367,323 (929,043)
Net earnings (loss) as adjusted...................... 1,337,614 (944,740)
========== ========
Adjusted net earnings (loss) per share............... $ .21 (.21)
========== ========
</TABLE>
Adjusted net earnings reflects only options granted in 1997 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the adjusted net
F-14
<PAGE> 44
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earnings (loss) amounts presented above because compensation cost is reflected
over the options' estimated life of five years.
At November 30, 1997 and 1996, the Company had outstanding warrants of
350,000 and 50,000, with weighted average exercise prices of $2.99 and $2.96,
respectively. Warrants issued in 1996 were exercisable beginning June 1997 and
expire June 2001. Warrants issued in 1997 were exercisable beginning December
1996 and expire November 2001.
(8) COMMITMENTS AND CONTINGENCIES
The Company is obligated under various operating leases covering its office
space, warehouse and vehicles. Rent expense for the years ended November 30,
1997, 1996 and 1995 was $754,991, $253,280 and $102,944, respectively. The
aggregate future minimum lease commitments under leases that have initial or
remaining noncancelable lease terms in excess of one year as of November 30,
1997 are as follows:
<TABLE>
<S> <C>
1998..................................................... $ 473,000
1999..................................................... 446,000
2000..................................................... 412,000
2001..................................................... 390,000
2002..................................................... 364,000
Thereafter............................................... 1,201,000
----------
$3,286,000
==========
</TABLE>
The Company continues to guarantee certain lease obligations entered into
by a former affiliate of Hansen's. Minimum lease payments under such agreements
average approximately $146,000 per year through November 2003, and $64,000 per
year thereafter until May 2006. The Company knows of no event of default that
would require it to satisfy these guarantees as of November 30, 1997. The
Company does not believe the ultimate disposition of these guarantees will have
a material adverse effect on the Company's financial position, liquidity or
results of operations.
On April 1, 1996, the Company entered into three year employment agreements
with two of its executive officers. Each agreement provides for, among other
things, annual compensation aggregating a minimum salary of $360,000 ($720,000
on a combined basis), subject to annual increases. The agreement provides that
the parties may extend the agreement for up to a total of six additional years.
On March 31, 1996, the Company entered into a supply, distribution and
requirements agreement (the Agreement) with Natural Juice Company, which
corporation is controlled by a director of the Company. The agreement has an
initial term of five years with two five year renewals at Natural Juice
Company's option. Refer to note 11 for related party transactions.
The Company formerly reported the existence of 175,000 stock options
granted to key employees under the Fresh Juice Company, Inc. 1988 Incentive
Stock Option Plan (the Plan). Based upon a review commenced by the Company and
its attorneys in the fourth quarter of 1997, it appears that the stockholders of
the Company never approved the Plan and that a proposal to approve the Plan was
never presented to the stockholders of the Company for a vote. As a result, the
condition to both the effectiveness of the Plan and the grant of the options
under the Plan, as defined, was never met. Based upon this information, the
Company has determined that these options technically do not exist. Such amounts
are not reflected in the summary of transactions included in note 7. There is a
possibility that the key employees may assert a claim as to the existence of
such stock options. The Company believes that the ultimate outcome of this
matter will not have a material adverse effect on the Company's financial
position, liquidity or results of operations.
F-15
<PAGE> 45
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1996, the Company was named as a defendant in a legal matter
which seeks damages in excess of $250,000. The Company settled the matter and
was under an obligation to pay $10,000 over a six month period, pursuant to the
terms of the agreement. Such payments were completed in January 1998 and were
properly accrued at November 30, 1997.
The Company's subsidiary, The Fresh Juice Company of California, Inc.
(Hansen's), has been named as one of many defendants in a lawsuit filed by the
Franchise Holders of Southland Corporation (Southland), against Southland and a
large number of the purveyors to the Franchisees of Southland, i.e., 7-Eleven
stores. Hansen's was one of the purveyors that has been named as a defendant.
However, there is only one cause of action which pertains to Hansen's, and
Hansen's is joined in that count with Southland, The Coca-Cola Company and
Pepsi-Cola Company. The basis of that cause of action is that each of the named
purveyors conspired to fix prices on soft drinks by trying to set the
Franchisees' retail price of their respective products in order for the
Franchisee(s) to obtain a discount off the wholesale price. In the count in
which Hansen's was named, the plaintiffs seek total damages in excess of
$50,000. The case is captioned 7 Eleven Owners For Fair Franchising et al. v.
The Southland Corporation, et al; is venued in the Superior Court of the State
of California for the County of Alameda and bears case no. 722272-6. The case
was filed in September, 1993. Hansen's and the plaintiffs in this action have
executed a settlement agreement pursuant to which plaintiffs have agreed to
dismiss their action against Hansen's, with prejudice, and Hansen's has agreed
to bear its own costs incurred in the litigation. The settlement is awaiting
court approval. As a result of the settlement and impending final dismissal of
the proceedings, management of the Company believes that the ultimate resolution
of this matter will not have a material impact on the Company's results of
operations, liquidity or financial position.
Many existing computer programs use only two digits rather than four to
specify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company utilizes software and related computer
technologies essential to its operation that will be affected by the Year 2000
issue. The Company has undertaken a systems' readiness program, which is
designed to mitigate the risks associated with the Year 2000 issue. This program
involves an analysis of systems to determine those that are not presently Year
2000 compliant, the establishment of a plan to either modify or replace those
systems and the modification and procurement of systems to make them Year 2000
compliant. Although the Company is endeavoring to ensure that the Year 2000
readiness program is comprehensive, it can make no assurance that the program
will address all Year 2000 compliance issues in a timely manner. If such
modifications and procurements are not completed or if problems are not
discovered and rectified on a timely basis, the Year 2000 issue may have a
material impact on the operations of the Company. The Company has identified,
replaced and modified some of these systems during fiscal year 1997 and is
scheduled, for reasons other than Year 2000 issues, to rebuild its network
systems for its Northeast and Florida operations during fiscal 1998.
From time to time, the Company is party to legal action arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without material impact on the Company's results of operations,
liquidity or financial position.
(9) COMMON STOCK AND SERIES PREFERRED STOCK
During 1996, the Company obtained shareholder approval and amended the
Company's Certificate of Incorporation to increase the number of authorized
common stock and preferred stock to 30,000,000 and 7,000,000 shares,
respectively.
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time direct the issuance of preferred stock
in series and, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends on common stock. Also,
F-16
<PAGE> 46
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
holders of preferred stock would normally be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding-up of the
Company before any payment is made to the holders of common stock.
(10) BENEFIT PLANS
The Company maintains a simplified employee pension (S.E.P.) plan covering
certain of its employees. Contributions to the plan, which are discretionary,
cannot exceed 15% of the covered employee's salary. Pension expense for the
years ended November 30, 1997, 1996 and 1995 was $44,806, $55,109 and $46,358,
respectively.
Ultimate maintains a defined contribution 401(k) Plan for its employees
with discretionary contributions by the Company. No contribution was made to the
401(k) Plan by the Company during 1997 or 1996. The Company is in the process of
bringing all of its employees under the 401(k) Plan, at which time it will
terminate the simplified employee pension plan described above.
(11) RELATED PARTY TRANSACTIONS
During 1997 and 1996, the Company sold approximately $1,552,000 and
$460,000, respectively, of product to Natural Juice Company, which is controlled
by a director of the Company.
During 1997 and 1996, the Company sold approximately $77,000 and $47,000,
respectively, to American Premium Exports, in which a director of the Company
holds a financial interest and functions as President and Chief Financial
Officer.
During 1996, the Company purchased approximately $282,000 of fruit from a
private company owned by the family of a director of the Company.
F-17
<PAGE> 47
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C> <C>
3(i) Certificate of Amendment to Certificate of
Incorporation -- incorporated by reference to Exhibit 3(i)
to the Company's 10-QSB for the quarter ended August 31,
1996, filed October 15, 1996................................
3(ii) By-laws -- incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement, SEC File No. 33-8878-NY on
Form S-18 and by reference to the Company's Current Report
on Form 8-K dated September 18, 1997 filed on October 6,
1997........................................................
3(iii) Amendments to By-laws.......................................
9 Stockholders Agreement dated March 31, 1996 between Steven
Smith and Steven M. Bogen -- incorporated by reference to
Exhibit 10(b) of the Company's Current Report on Form 8-K
dated March 31, 1996 filed on April 11, 1996 (the "March 31,
1996 8-K")..................................................
10(a) Stockholder's Agreement dated March 31, 1996 between Steven
Smith and Steven M. Bogen -- incorporated by reference to
Exhibit 10(b) of the March 31, 1996 8-K.....................
10(b) 1996 Incentive Stock Option Plan -- incorporated by
reference to Exhibit 10(b) of the Company's Definitive Proxy
Statement filed in connection with the Company's Annual
Stockholders meeting held on August 29, 1996 filed on August
7, 1996.....................................................
10(c) Employment Agreement effective April 1, 1996 with Steven
Smith -- incorporated by reference to Exhibit 10(d) of the
March 31, 1996 8-K, as amended by Form 8-K/A filed on
January 6, 1998.............................................
10(d) Employment Agreement effective April 1, 1996 with Steven M.
Bogen -- incorporated by reference to Exhibit 10(e) of the
March 31, 1996 8-K..........................................
10(e) Supply Agreement dated March 31, 1996 with Natural Juice
Company, Inc. -- incorporated by reference to Exhibit 10(f)
of the March 31, 1996 8-K...................................
10(f) Loan Agreement dated August 5, 1996 among the Company, The
Fresh Juice Company of Florida, Inc., The Fresh Juice
Company of New York, Inc. and Fleet Bank,
N.A. -- incorporated by reference to Exhibit 10(f) of the
Company's Annual Report on Form 10-KSB for the fiscal year
ended November 30, 1996, filed March 17, 1997...............
10(g) Agreement of Lease dated November 24, 1997 between The Fresh
Juice Company of New York, Inc. and 280 Wilson Avenue
Associates, L.L.C. and guaranteed by the Company............
10(h) Employment Agreement effective December 2, 1996 with Jeffrey
Heavirland..................................................
10(i) Industrial Real Estate Lease dated June 17, 1992 between
Hansen's Juices, Inc. and Pruco Life Insurance Company......
21 Subsidiaries of small business issuer.......................
27 Financial Data Schedule.....................................
</TABLE>
EX-1
<PAGE> 1
Exhibit 3(iii)
ADDENDUM TO BY-LAWS OF
THE FRESH JUICE COMPANY, INC.
The By-Laws annexed hereto and adopted and ratified on March
31, 1996 are hereby amended as follows:
1. The first sentence of Article I, Section 1 shall be
deleted and replaced with the following:
The principal office of the corporation shall be in
the Town of Clark, county of Union, and State of New
Jersey
2. The first sentence of Article II, Section 2 shall be
deleted and replaced with the following:
The annual meeting of the shareholders shall be held
on the first Wednesday in May at 10:00 a.m. in each
year if not a legal holiday, and, if a legal holiday,
then on the next business day following at the same
hour, when the shareholders shall elect a board of
directors and transact such other business as may
properly come before the meeting.
3. Article II, Section 3 shall be deleted and replaced
with the following:
Special meetings of the shareholders may be called by
the directors, the chief executive officer or by the
president, and shall be called by the chief executive
officer, president or the secretary at the request in
writing of 50% of the directors or at the request in
writing by shareholders owning 30% or more of the
shares issued and outstanding. Such request shall
state the purpose or purposes of the proposed
meeting. When a special meeting is requested by 50%
of the directors or by shareholders owning 30% or
more of the shares issued and outstanding, any
director of the corporation may call the meeting if
such meeting is not called by the president, chief
executive officer or the secretary within 10 days
after written request for such meeting is served upon
either of them.
<PAGE> 2
4. The second sentence of Article III, Section 2 shall
be deleted and replaced with the following:
The board of directors shall consist of four members.
5. The first sentence of Article III, Section 6 shall be
deleted and replaced with the following:
A director may resign at any time by giving written
notice to the board, the chief executive officer,
president or the secretary of the corporation.
6. The second, third and fourth sentences of Article
III, Section 11(a) shall be deleted and replaced with the following:
Special meetings of the directors shall be held upon
notice to the directors and may be called by the
chief executive officer or president upon five days
notice to each director either personally or by mail
or by wire. Special meetings of the directors shall
be called by the chief executive officer, president
or by the secretary in a like manner on written
request of two directors. If the chief executive
officer, president or secretary fails to call a
special meeting of directors within five days after
the written request therefor is made by two
directors, any director making such request may call
such meeting.
7. Article III, Section 12 shall be deleted and replaced
with the following:
At all meetings of directors the Co-Chairmen of the
board, either of them, or in both of their absence, a
chairman chosen by the board, shall preside.
8. Article IV, Section 2(a) shall be deleted and
replaced with the following:
(a) Subject to any agreement providing otherwise, any
officer elected or appointed by the directors may be
removed by the board with or without cause.
9. Article IV, Section 2(d) shall be deleted and
replaced with the following:
(d) The officers of the corporation shall have the
duties prescribed in Schedule "A" hereto annexed,
their Employment Agreements or otherwise provided in
the by-
2
<PAGE> 3
laws and such other powers and duties not
inconsistent with the by-laws as may be conferred
upon them by the directors.
10. The first sentence of Article IV, Section 2(f) shall
be deleted and replaced with the following:
(f) Subject to any agreement providing otherwise, the
salaries of the officers shall be fixed from time to
time by the board of directors.
11. The third sentence of Article VI, Section 1 shall be
deleted and replaced with the following:
They shall exhibit the holder's name and the number
of shares and shall be signed by the chief executive
officer, president or a vice-president and the
treasurer or the secretary.
3
<PAGE> 4
SCHEDULE "A"
BY-LAWS OF
THE FRESH JUICE COMPANY OF FLORIDA, INC.
OFFICERS OF THE CORPORATION
OFFICERS
Co-Chairmen of the Board Steven M. Bogen
Steven Smith
Chief Executive Officer Steven M. Bogen
President Steven Smith
Treasurer Mark Feldman
Secretary Steven M. Bogen
Assistant Secretary Steven Smith
Chairman or Co-Chairmen of the Board:
The Board of Directors shall elect from its members a Chairman
or Co-Chairmen of the Board of Directors.
The Co-Chairmen of the Board shall be the principal executive
officers of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise all of the business and affairs of the
Corporation.
They shall supervise all officers and personnel of the
Corporation and subject to the terms of any Employment Agreements in effect
shall fix the terms and conditions upon which they are employed, with the right
to remove any so employed subject to the terms of any Employment Agreements in
effect. They shall annually recommend to the Board of Directors the persons to
be elected as General Officers of the Corporation and the terms of their
employment.
<PAGE> 5
In general, they shall each perform all duties incident to the
office of Chairman of the Board and such other duties as may be prescribed by
the Board of Directors from time to time.
Chief Executive Officer:
The Board of Directors shall elect from its members a Chief
Executive Officer. The powers and duties of the Chief Executive Officer shall be
as set forth in his Employment Agreement.
President:
The Board of Directors shall elect from its members a
President. The powers and duties of the President shall be as set forth in his
Employment Agreement.
Vice President:
The Board of Directors may elect one or more Vice Presidents.
Under the direction and control of the Board of Directors, the
Co-Chairmen of the Board, Chief Executive Officer and the President, the Vice
Presidents shall have such powers and shall perform such duties as may be
assigned to them by the Board of Directors, the Co-Chairmen of the Board, the
Chief Executive Officer and the President, or any of them.
Secretary and Assistant Secretaries:
The Board of Directors shall elect a secretary and, as they
deem appropriate, may elect one or more assistant secretaries.
2
<PAGE> 6
The Secretary shall:
(a) keep the minutes of the stockholder's and of the Board of
Directors' meetings in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws or as required bylaw;
(c) be custodian of the corporate records and of the seal of
the Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its seal is
duly authorized;
(d) when required, prepare or cause to be prepared and
available at each meeting of shareholders a certified list in alphabetical order
of the names of shareholders entitled to vote thereat indicating the number of
shares of each respective class held by each;
(e) keep all the documents and records of the Corporation as
required by law or otherwise in a proper and safe manner;
(f) sign with the Co-Chairmen of the Board, Chief Executive
Officer, or the President, or a Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors;
(g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Co-Chairmen of the Board, Chief Executive Officer, the President or by the
Board of Directors.
The Assistant Secretaries may sign any documents in the place
and stead of the Secretary and, in general, shall perform such duties as shall
be assigned to them by the Secretary
3
<PAGE> 7
or by the Co-Chairmen of the Board, Chief Executive Officer, President or the
Board of Directors.
Treasurer and Assistant Treasurer:
The Board of Directors shall elect a Treasurer, and as they
deem appropriate may elect one or more Assistant Treasurers.
The Treasurer shall:
(a) have charge and custody of and be responsible for all
funds and securities of the Corporation, receive and give receipts for moneys
due and payable to the Corporation from any source whatsoever, and deposit all
such moneys in the name of the Corporation in such banks, trust companies or
other depositaries as shall be selected in accordance with the provisions of
these By-Laws;
(b) sign with the Co-Chairmen of the Board, Chief Executive
Officer, the President, or a Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; and
(c) in general perform all of the duties incident to the
office of the Treasurer and such other duties as from time to time may be
assigned to him by the Co-Chairmen of the Board, the Chief Executive Officer,
the President, or by the Board of Directors.
Assistant Treasurers shall perform such duties as shall be
assigned to them by the Treasurer, the Co-Chairmen of the Board, the Chief
Executive Officer, the President, or the Board of Directors.
4
<PAGE> 1
EXHIBIT 10(g)
October 31, 1997
AGREEMENT OF LEASE
AGREEMENT made as of this 24th day of November, 1997, by and between
280 WILSON AVENUE ASSOCIATES, L.L.C., A LIMITED LIABILITY COMPANY OF THE STATE
OF NEW JERSEY, with offices at c/o Pantheon Properties, 110 East 59th Street,
New York, New York 10022, hereinafter called "Landlord", and THE FRESH JUICE
COMPANY OF NEW YORK, INC., A CORPORATION OF THE STATE OF NEW JERSEY, with
offices at 35 Walnut Avenue, Suite 4, Clark, New Jersey 07066, hereinafter
called "Tenant".
FOR AND IN CONSIDERATION of the mutual covenants herein contained, the
parties hereto do hereby agree as follows:
1. The following terms are incorporated by reference into this
Agreement:
(a) NAME AND ADDRESS OF LANDLORD:
280 Wilson Avenue Associates, L.L.C., a Limited Liability Company of the State
of New Jersey.
(b) NAME AND ADDRESS OF TENANT:
The Fresh Juice Company of New York, Inc., a corporation of the State of New
Jersey.
(c) DESCRIPTION OF PREMISES:
A portion of premises in a building located at 280 Wilson Avenue, Newark, New
Jersey, all as more particularly designated and described on the attached
diagram as set forth herein.
(d) TERM OF LEASE:
To commence on the commencement date as defined in paragraph 3B and to terminate
on August 31, 2007.
(e) FIXED RENTAL:
Tenant shall pay to the Landlord as annual basic rent for the demised premises
commencing on January 15, 1998 to and through December 31, 2002 the annual sum
of ONE HUNDRED SIXTY THOUSAND NINE HUNDRED THIRTY EIGHTY AND NO/100
($160,938.00) DOLLARS payable in equal monthly installments of THIRTEEN THOUSAND
FOUR HUNDRED ELEVEN AND NO/100 ($13,411.50) DOLLARS. Tenant shall pay to the
Landlord as annual basic rent for the demised premises from and after January 1,
2003 the annual basic rent of ONE HUNDRED EIGHTY SEVEN THOUSAND SEVEN HUNDRED
SIXTY ONE AND NO/100 ($187,761.00) DOLLARS payable in equal monthly installments
of FIFTEEN THOUSAND SIX HUNDRED FORTY-SIX AND 75/100 ($15,646.75) DOLLARS.
(f) TENANT'S SHARE:
32.98%
(g) BROKER:
Pantheon Properties, Inc. and SBWE, Inc.
(h) SECURITY DEPOSIT:
The sum of $30,000.00
(i) EXPENSE RENT:
Tenant shall pay the Landlord as additional rent, the Tenant's share of expense
rent as provided in Article 5.
(j) TENANT'S STANDARD INDUSTRIAL CLASSIFICATION NUMBER ("SIC") 2033
(k) TENANT'S LEASED AREA:
Approximately 26,823 square feet subject to measurement as provided in Paragraph
4
<PAGE> 2
October 31, 1997
2. DESCRIPTION OF PREMISES. The Landlord set forth in Paragraph 1(a)
above hereby leases to the Tenant set forth in Paragraph 1(b) above and the
Tenant hereby hires from the Landlord the space set forth in Paragraph 1(c)
above (hereinafter called the "Premises" or the "Demised Premises).
3. A. COMPLETION. The Landlord will complete the premises substantially
in accordance with the plans and specifications. Landlord shall undertake work
and shall complete the Premises and deliver the same to the Tenant no sooner
than thirty (30) days from the date Landlord obtains a building permit and no
later than one hundred twenty (120) days from that date, provided however, that
said time of completion shall be extended by any delay occasioned by scarcity of
materials, installation of improvements requested by Tenant, approval of plans
by Tenant, strikes, labor disputes, weather conditions which inhibit
construction, fires or other casualties, governmental restrictions and
regulations, delays in transportation and other construction delays beyond the
reasonable control of the Landlord. In the event the completion date is extended
by reason of any of the foregoing events occurring, then such completion date
shall be extended only by a period of time equal to the time lost due to the
occurrence of any of the foregoing events. For purposes of this paragraph, if
Tenant should elect to cancel for failure to complete on time, it shall give
written notice of such cancellation to Landlord within ten (10) days from the
date such completion, as extended by force majeure, shall have been required
under the terms of this Lease. Failure to notify Landlord within said time
period shall constitute a waiver of the right of cancellation. In the event this
Lease is terminated, then, neither party shall have any liability to the other,
except, the return to the Tenant of prepaid rent and the security deposit.
If Landlord constructs office area or areas in excess of 3,800
square feet for Tenant, such additional construction shall be at Tenant's
expense, and shall be charged to Tenant at the cost of $35 per square foot for
all square footage in excess of 3,800 square feet. The specification for the
work, materials, quality and color of the construction shall be pursuant to
Landlord's Standard Construction Criteria. Tenant shall pay such cost to
Landlord at the rate of 4.16667% of such cost, monthly, commencing February 1,
1998 and on the first day of each month thereafter for the ensuing twenty-three
months. By way of example if the office area is 4,800 square feet, then, Tenant
will owe to Landlord the sum of $35,000 payable $1,458.33 per month for
twenty-four months commencing February 1, 1998 and each month thereafter until
the sum of $35,000 is paid to Landlord by Tenant. Such payment and obligation
shall be considered additional rent.
B. COMMENCEMENT DATE. Tenant's occupancy and the commencement
date of this Lease shall be deemed to have begun on the "Date of Completion"
which is hereby defined to mean the day of the month on which a temporary or
final certificate of occupancy shall be issued, or upon earlier occupancy by the
Tenant. Landlord shall give to Tenant verbal notification of the issuance of the
Certificate of Occupancy and shall confirm its verbal notification to Tenant
subsequently, by a writing, acknowledging the prior verbal notification, and
shall furnish to Tenant, a copy of, the Certificate of Occupancy as and when
issued.
C. TERM. The term of the Lease shall commence on the
commencement date and shall terminate as set forth in Paragraph
2
<PAGE> 3
October 31, 1997
1(d) above, unless sooner terminated as this Lease otherwise provides.
D. LICENSE. Landlord hereby grants to Tenant a revocable
License for Tenant to enter the Premises prior to the Commencement Date for the
following purposes: (I) installing telephones, racking, and similar activities
in preparation for Tenant's occupancy; and (II) storage of non-refrigerated
product in the "cooler space". Tenant shall not interfere with Landlord's work
and this License may be terminated by Landlord at any time prior to the
Commencement Date of the Lease. In consideration of Landlord permitting Tenant
to exercise this license, Tenant shall agree in writing that the provisions of
Sections 17, 18, 19 and 20 hereof shall be in effect and binding on Tenant, as
of the first day Tenant wishes to exercise or use the revocable license herein
granted.
E. Landlord agrees that Landlord will use best efforts to make
available to Tenant the existing cooler/freezer area on or about January 1,
1998. Tenant, from and after the date Landlord advises Tenant of the
availability of the cooler/freezer space, if such date is prior to the
commencement date of the Lease, then, Tenant shall be responsible for utilities
and Tenant's share of real property taxes. If Tenant avails itself of the
ability to use the cooler/freezer space as aforesaid, then, fixed rental and
expense rent shall commence as of January 15, 1998. If Tenant does not avail
itself of the use of the cooler/freezer space and Landlord fails to obtain a
Certificate of Occupancy by January 1, 1998, then, each day thereafter that
lapses until the earlier of (i) the issuance of a Certificate of Occupancy or
(ii) Tenant taking possession of any part of the Premises, the date of January
15, 1998 for the commencement of a payment of fixed rental as provided by
Paragraph 1(e) shall be extended day for day until the earlier of the issuance
of the issuance of a Certificate of Occupancy or, Tenant using the Premises.
4. FIXED RENTAL. As fixed rental, the Tenant shall pay to the Landlord
at the address set forth in Paragraph 1(a) above, or to such other person or at
such other place as the Landlord may from time to time designate, without
previous demand therefor and without counterclaim, deduction or set-off, the sum
set forth in Paragraph 1 (e) above, which sum shall be payable in equal monthly
installments as set forth in Paragraph 1(e) above in advance on the first day of
the month during the term of the Lease, except the first month's rent and
estimated expense rent shall be paid upon the execution hereof. Whenever the
rent as hereinabove set forth is stated as an annual rent and if there shall be
less than twelve (12) months in any year, the rate therein referred to shall be
the "annualized rate." The rental of paragraph 1(e) is computed on the basis of
the Premises having 26,823 square feet. Either Landlord or Tenant shall have the
right, during the first 30 days of the Lease, to measure the Demised Premises,
and if the Demised Premises so measured is more or less than 26,823 square feet,
then the rent and Tenant's Share shall be adjusted proportionately to reflect
the plus or minus. The Premises shall be measured by measuring from the exterior
portion of the outside wall of the building to center line of interior demising
walls.
5. EXPENSE RENT. Tenant shall pay as additional rent during the term
Tenant's share (as per Paragraph 1(f)) of the operating expenses (as hereinafter
defined) of the property for each calendar year during the term of the lease.
The term "expense rent" or "expenses" shall mean all reasonable costs incurred
by Landlord in
3
<PAGE> 4
October 31, 1997
connection with the operation and maintenance of the entire parcel of land and
improvements thereon of which the Premises are a part (all of which is
hereinafter called the "Property") but excluding interest or amortization
payments of any mortgage, but including but not limited to real estate taxes,
common area expenses, common utility expenses, repair and maintenance expenses
and insurance expenses.
Landlord agrees, that it will exercise good faith, in
undertaking its responsibilities under this Article 5, so that, any repair,
replacement or addition will be undertaken, only if, Landlord believes such
repair, replacement or addition will, be reasonably necessary and of such nature
as would be undertaken by another professional landlord under similar
circumstances.
All payments Tenant is required to make pursuant to this Lease
shall constitute additional rent and if Tenant defaults in any such payments so
as to create an event of default (as hereinafter defined), Landlord shall have
(in addition to any rights and remedies granted hereby) all rights and remedies
provided by law for nonpayment of rent.
(i) REAL ESTATE TAXES shall include any tax or
assessment levied, assessed or imposed anytime by any governmental authority
upon or against the Property or any part thereof. Such terms shall also include
any assessment for public improvement imposed against the Property during the
term of the Lease. There shall not be included in the foregoing definition any
franchise, corporate, estate, inheritance or transfer tax of Landlord, or any
income, profits or revenue tax; provided, however, that if at any time during
the term of this Lease a tax on rents is assessed against Landlord or the basic
rent, as a substitution in whole or in part for taxes assessed by the State of
New Jersey or political subdivision on land or buildings, such tax shall be
deemed to be included within the amount which the Tenant is required to pay
under this Article. Landlord agrees, at Tenant's expense, upon Tenant's request
to initiate a tax appeal.
(ii) COMMON AREA EXPENSES shall include all costs and
expenses reasonably incurred by Landlord for operating, maintaining, repairing,
and/or replacing any and all, or any part of the common area (or any
installation therein, thereon, there- under or thereover) including but not
limited to parking areas, sidewalks, curbs, grounds, outside architectural
lighting, on site water lines, electric lines, gas lines, sanitary sewer lines
and storm water lines, and the total costs and expenses incurred by Landlord for
security guard service, if any landscaping and the removal of snow, ice and
debris. If a replacement of a capital nature is required, and if the replacement
would cost more than Ten Thousand Dollars ($10,000.00), in such instance, the
replacement shall be amortized and charged as a common area expense by prorating
the cost thereof over a ten (10) year useful life. Landlord shall have the right
on its own, or, upon the request of any tenant of the building to institute a
pest control service on a regular basis, monthly or as often as so determined,
in order, to keep the premises free of vermin.
(iii) COMMON UTILITY EXPENSES shall include all costs
and expenses incurred by Landlord for water, sewer, gas and electricity and
other utility charges for utilities servicing the common areas and also standby
sprinkler charges.
4
<PAGE> 5
October 31, 1997
(iv) REPAIR AND MAINTENANCE EXPENSES shall include all
costs and expenses incurred by Landlord for replacement, repair and maintenance
of all or any part of the entire parcel of land and improvements of which the
Premises are a part (including the roof, roofdeck, outside walls & concrete
floor) of which the Demised Premises forms a part, except, any portion of the
building which is not otherwise the obligation to repair of any Tenant of the
building. If the entire roof of the building in which the Demised Premises is
located has to be replaced, then, such replacement shall be at Landlord's
expense if it occurs during the first ten (10) years of the term. Any partial
replacement of the roof, or any subsequent entire replacement of the roof shall
be common area expense and amortized as otherwise provided in this subparagraph.
If, a repair to the concrete floor is solely due to the acts of another Tenant,
or, the replacement or repair of the roof is due to the acts of another Tenant,
then, such Tenant shall be charged for the cost of repair of the floor or roof
as the case may be. Landlord agrees that it will enforce any roof warranties it
may receive from the roofer at such time as the roof is re-roofed.
(v) INSURANCE EXPENSE shall include all costs and
expense incurred by Landlord for Liability and Casualty Insurance as Landlord
may from time to time carry for Landlord's benefit on the property or insuring
Landlord's interest therein.
Operating expenses shall be determined on the accrual basis in
accordance with generally accepted accounting principles which shall be
consistently applied.
Tenant shall pay its Expense Rent in full no later than ten
(10) days after notice by Landlord of the amount thereof. If requested by
Landlord, Tenant shall pay its Expense Rent in twelve (12) monthly installments
on the first day of each month on an estimated basis as determined by Landlord.
Any amount paid by Tenant which exceeds the actual amount due shall be credited
to the next succeeding payments due pursuant hereto. If Tenant has paid less
than the actual amount due, Tenant shall pay the difference to Landlord within
ten (10) days after receipt of Landlord's request therefor. During the first and
last years of the term, the amount payable by Tenant hereunder shall be prorated
for the fraction of the calendar year included in the term. As to the Expense
Rent, there shall be a charge for a management fee added monthly thereto of a
sum equal to 3.5% of the fixed rental payable by Tenant pursuant to Paragraph
1(e) to cover Landlord's administrative overhead. The Management Fee shall be
fair and reasonable and consistent with management fees incurred in managing
buildings of similar size and use. Tenant shall have the right at Tenant's
expense during the first ninety (90) days of each calendar year to audit
operating expense items for the immediately preceding calendar year. Such audit
shall be as to bills and proof of payment.
6. SECURITY DEPOSIT. Tenant has deposited with Landlord on the signing
of this Lease the sum set forth in Paragraph 1(h) above as security for the
performance of Tenant's obligations under this Lease. Landlord shall have the
right to apply any part or all of said security deposit to remedy any default of
Tenant hereunder, including, but not limited to payment of any fixed rent,
additional rent, service fees, or other debts of Tenant due to Landlord, repair
of all damage to the Premises or repair or replacement of damage to other
property of Landlord caused by Tenant, or any of its agents, employees, invitees
or licensees, or expenses of rerenting and redecorating the Premises in the
event Tenant vacates
5
<PAGE> 6
October 31, 1997
same prior to the expiration of the term. If Landlord applies any part of said
security deposit to remedy any default of Tenant, Tenant shall, upon demand,
deposit with Landlord the amount so applied so that Landlord shall have the full
deposit on hand at all times during the term of this Lease. Provided that the
Tenant has fully and faithfully complied with all the terms and conditions of
this Lease, Landlord shall return the said security deposit to Tenant on the
latter of the date set forth for the expiration of the term of this Lease or
sixty (60) days after the surrender of the Premises by Tenant. Landlord may
deliver the security deposit to the purchaser or other transferee of the
Landlord's interest in the Premises in the event that such interest is sold or
otherwise transferred and thereupon Landlord shall be discharged from any
further liability with respect to said security deposit. Landlord shall credit
to the security deposit an interest factor, equal to three percent. Such
interest factor shall be simple interest, and shall not earn interest on the
interest. The interest factor shall be paid to tenant upon termination of the
lease and tenants satisfying all of its obligations hereunder.
7. USE. The Tenant shall use and occupy the Demised Premises for
offices, storage, warehousing, distribution and refrigeration of food products
or food processing and for no other purposes. Such permitted uses are further
subject that they shall be consistent with the Certificate of Occupancy to be
issued. Such Certificate of Occupancy so issued, shall not prohibit the uses
otherwise described in the first sentence of this Section 7. Such permitted uses
shall not permit or cause any odor, sound, vibration, effluent, pollution or
other condition that is either in Landlord's opinion or by law, noxious or
offensive. It being a consideration of this Lease that the use of the premises
shall be limited to those uses as otherwise hereinbefore specified and Tenant
may not use the premises for manufacturing or for retail sales. The Tenant shall
not permit the stacking of merchandise or materials against the walls so as to
create a load or weight factor upon the walls or to tie in Tenant's racking
systems with such walls, nor shall Tenant permit the hanging of equipment from
(or otherwise loading) the roof or structural members of the building without
the express written consent of the Landlord. The Tenant shall not use or occupy
or permit the Demised Premises to be used or occupied, nor do or permit anything
to be done in or on the Demised Property, in a manner which will in any way
violate any Certificate of Occupancy affecting the Demised Premises, or make
void or voidable any insurance then in force with respect thereto, or which will
make it impossible to obtain fire, casualty or other insurance at regular rates,
or which will cause or be likely to cause structural damage to the Building or
any part thereof, or which will constitute a public or private nuisance, or
which would adversely affect the then value thereof, and shall not use or occupy
or permit the Demised Premises to be used or occupied in any manner which will
violate any present or future laws or regulations of any governmental authority.
Tenant shall, at Tenant's sole cost and expense, take all actions, including any
required alterations necessary, to comply with all present or future laws or
regulations, including the Americans With Disabilities Act of 1990 ("ADA") which
shall impose any violation, order or duty upon Landlord or Tenant arising from
or in connection with Tenant's occupancy, use of manner of use of the Premises
(including such use that constitutes a "place of accommodation" under the ADA.
At no time during this Lease may Tenant store upon the premises hazardous
substances as that term may be defined from time to time by the New Jersey
Department of Environmental Protection or by the Federal Environmental
Protection Agency pursuant to Section 311 of the
6
<PAGE> 7
October 31, 1997
"Federal Water Pollution Act, amendments of 1972" (33 U.S.C. Section 1321) and
the list of toxic pollutants designated by Congress or the Environmental
Protection Agency pursuant to Section 307 of that Act (33 U.S.C. Section 1317).
Nothing herein contained shall be deemed or construed to constitute a
representation or guaranty by the Landlord that any specific business may be
conducted in the Demised Premises or is lawful under the certificate of
occupancy.
Landlord agrees with Tenant that during the term of this Lease
(including any extension term), it will not enter into a lease with another
tenant wherein, the use of such tenant as otherwise expressed in the Lease would
be for a purpose that would be by its very nature constitute a material
interference with the preparation, distribution, storage, warehousing or
refrigeration of food products.
8. REPAIRS.
A. Tenant shall keep, replace and maintain in good order,
condition and repair the premises and each and every part thereof (except for
repairs specifically required of Landlord pursuant to subparagraph (c) of this
Paragraph 8) including, without limitation, refrigeration and cooling units,
compressors and auxiliary equipment, any air conditioning units and systems,
heating units and systems, plumbing units and systems; sprinkler systems;
electrical systems; equipment; facilities and fixtures. The aforesaid obligation
of Tenant shall also include, without limitation, all necessary painting and
decorating and the replacement of any glass which may be damaged or broken.
Notwithstanding the foregoing, all damage or injury to the Premises or to any
other part of the Property or to its fixtures or appurtenances, whether
requiring structural or non-structural repairs, caused by the negligence or
improper conduct of Tenant or its employees, invitees, licensees or agents,
shall be repaired promptly by Tenant at its sole cost and expense. If Tenant
refuses or neglects to make such repairs or fails to diligently prosecute the
same to completion within fifteen (15) days after written notice from Landlord
to Tenant of the need therefor, Landlord may make such repairs at the expense of
Tenant and such expense shall be collectible as additional rent together with a
service fee, as provided in Paragraph 23 hereof, if Tenant shall fail to make
such payment promptly.
B. Tenant shall obtain a maintenance contract for the heating,
ventilation and air conditioning systems in the building and, similar contracts
for the refrigeration and cooling units, compressors and auxiliary equipment,
any air conditioning units and systems, heating units and systems, plumbing
units and systems; sprinkler systems; electrical systems; equipment; facilities
and fixtures. Such contract shall provide for semi-annual maintenance of the
systems, and copies of the maintenance agreement shall be submitted to Landlord,
together with an annual report of the maintenance company as to the condition
and repairs made to the systems. The firm or person maintaining the
refrigeration and cooling units, compressors and auxiliary equipment, and
systems, shall be a person who is certified and licensed to service
refrigerating equipment as such certification or license may be required by law
or any governmental agency and in accordance with the manufacturer
specifications.
C. Landlord shall keep, replace and maintain in good order and
condition and repair common areas and the roof, roofdeck,
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October 31, 1997
outside walls and concrete floors, subject, however, the cost of same to the
extent applicable shall be paid by the Tenant, as the Tenant's proportionate
share, pursuant to the provisions of Para.
5 hereof.
D. On the commencement date of the Lease, all of the plumbing,
electrical, heating, refrigeration systems and refrigeration equipment, and air
conditioning equipment, shall be in good working order. Tenant has accepted the
capacity of the refrigeration equipment, and, landlord is not responsible for
the refrigeration equipment being adequate for the needs of the Tenant. This
determination as to the adequacy of the equipment and its cooling capacity, has
been accepted and/or waived by Tenant.
9. ASSIGNING AND SUBLETTING.
A. Tenant covenants and agrees for Tenant and its successors,
assigns, and legal representatives that neither this Lease nor the term and
estate hereby granted, nor any part hereof or thereof, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred (whether voluntarily,
involuntarily, by operation of law, or otherwise), and that neither the Demised
Premises, nor any part thereof, will be encumbered in any manner by reason of
any act or omission on the part of Tenant, or will be used or occupied, or
permitted to be used or occupied, or utilized for desk space or for mailing
privileges or as a concession, by anyone other than Tenant, or for any purpose
other than as hereinbefore set forth, or will be sublet, without the prior
written consent of Landlord in every case; provided, however, that, if Tenant is
a corporation, the assignment or transfer of this Lease, and the term and estate
hereby granted, to any corporation into which Tenant is merged (such corporation
being hereinafter in this Article called "Assignee") or to an affiliate or
subsidiary of Tenant or to principals of Tenant without the prior written
consent of Landlord shall not be deemed to be prohibited hereby if, and upon the
express condition that, Assignee shall promptly execute, acknowledge, and
deliver to Landlord an agreement in form and substance satisfactory to Landlord
whereby Assignee shall assume and agree to perform and to be personally bound by
and upon, all the covenants, agreements, terms, provisions, and conditions set
forth in this Lease on the part of Tenant to be performed, so that the Assignee
shall assume jointly and severally with the Assignor the performance of Tenant's
obligations hereunder, and whereby Assignee shall expressly agree that the
provisions of this Article shall, notwithstanding such assignment or transfer,
continue to be binding upon it with respect to all future assignments and
transfers and provided such Assignee shall prove to the satisfaction of Landlord
that its net worth is at least equal to that of Tenant as of the date hereof.
B. Notwithstanding anything hereinabove contained in
subparagraph A of this Paragraph 9, in the event Tenant desires Landlord's
consent to an assignment or subletting of all or any part of the Demised
Premises, Tenant, by notice in writing, (i) shall notify Landlord of the name
and S.I.C number of the proposed assignee or subtenant, such information as to
the proposed assignee's or subtenant's proposed use and financial responsibility
and standing as Landlord may require, and a copy of the proposed assignment or
sublease executed by all parties; and (ii) shall offer to vacate the space
covered by the proposed area to be subleased or the entire Demised Premises in
the event of an assignment (as the case may be) and to surrender the same to
Landlord as of a date (the "Surrender Date") specified in said
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<PAGE> 9
October 31, 1997
offer that shall be the last day of any calendar month during the term hereof,
provided, however, that the Surrender Date shall not be earlier than the date
occurring 120 days after the giving of such notice nor be later than the
effective date of the proposed assignment or the commencement date of the term
of the proposed sublease. Landlord may accept such offer in writing by notice to
Tenant given within sixty (60) days after the receipt of such notice from
Tenant. If, Landlord accepts such offer, Tenant shall surrender to landlord,
effective as of the Surrender Date, all Tenant's right, title, and interest in
and to the portion of the Demised Premises covered by the proposed sublease, or,
if Tenant proposes to sublet the entire Demised Premises, or assign this Lease,
all Tenant's right, title and interest in and to the entire Demised Premises. In
the event of such surrender by Tenant of a portion of the Demised Premises,
then, effective as of the date immediately following the Surrender Date, the
Basic Rent shall be reduced by an amount equal to that portion of the Basic Rent
that is allocable to the space so surrendered, and the Additional Rent shall be
equitably adjusted. If the entire premises be so surrendered by Tenant, this
Lease shall be canceled and terminated as of the Surrender Date with the same
force and effect as if the Surrender Date were the date hereinbefore specified
for the expiration of the full term of this Lease.
In the event of any such surrender by Tenant of the Demised
Premises or a portion thereof, Landlord and Tenant shall, at the request of
either party, execute and deliver an agreement in recordable form to the
effect(s) hereinbefore stated.
C. In the event Landlord does not accept such offer of Tenant
referred to in subparagraph (B) of this Paragraph 9, Landlord covenants not to
unreasonably withhold its consent to such proposed assignment or subletting by
Tenant of such space to the proposed assignee or subtenant on said covenants,
agreements, terms, provisions, and conditions set forth in the notice to
Landlord referred to in clause (i) of the first sentence of subparagraph (B) of
this Paragraph 9; provided, however, that Landlord shall not in any event be
obligated to consent to any such proposed assignment or subletting unless:
(i) The use of the proposed assignee or subtenant is
(a) for warehousing of products which are non-hazardous and are not "toxic
pollutants", (b) does not violate any of the negative covenants as to use as
contained in this Lease (c) is in keeping with the then standards of the
Landlord as to use of the Building and (d) does not violate any negative
covenants as to use contained in any other Lease made between Landlord and other
Tenants of the Building;
(ii) The proposed assignee or subtenant is a reputable
party;
(iii) There shall be no default by Tenant under any of
the terms, covenants, and conditions of this Lease at the time that Landlord's
consent to any such assignment or subletting is requested and on the effective
date of the assignment or the proposed sublease;
(iv) Tenant shall reimburse Landlord for any reasonable
expenses that may be incurred by Landlord in connection with the proposed
assignment or sublease, including without limitation the reasonable costs of
making investigations as to the acceptability of a proposed assignee or
subtenant and reasonable
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October 31, 1997
legal expenses incurred in connection with the granting of any requested consent
to the assignment or sublease;
(vi) Such permitted assignment shall be conditioned
upon Tenant's delivery to Landlord of an executed instrument of assignment
(wherein the assignee assumes, jointly and severally with Tenant, the
performance of Tenant's obligations hereunder).
(vii) Such permitted sublease shall be conditioned upon
Tenant's delivery to Landlord of an executed instrument of sublease (wherein
Tenant and such sublessee agree that such sublease is subject to the Lease and
such sublessee agrees that, if the Lease is terminated because of Tenant's
default, such sublessee shall, at Landlord's option, attorn to Landlord).
(viii) Tenant shall at Tenant's own expense first
comply with ISRA and fulfill all of Tenant's environmental obligations under
this Lease which also arise upon termination of Tenant's Lease term. If this
condition shall not be satisfied, then Landlord shall have the right, to
withhold consent to a sublease or assignment.
D. Each subletting pursuant to this Paragraph 9 shall be
subject to all the covenants, agreements, terms, provisions, and conditions
contained in this Lease. Tenant covenants and agrees that, notwithstanding such
assignment or any such subletting to any subtenant and/or acceptance of Basic
Rent or Additional Rent by Landlord from any subtenant, Tenant shall and will
remain fully liable for the payment of the Basic Rent and Additional Rent due
and to become due hereunder and for the performance of all the covenants,
agreements, terms, provisions, and conditions contained in this Lease on the
part of Tenant to be performed. Tenant further covenants and agrees that,
notwithstanding any such assignment or subletting, no other and further
assignment, underletting, or subletting of the Demised Premises or any part
thereof shall or will be made except upon compliance with the subject to the
provisions of this Paragraph 9. Tenant shall promptly furnish to Landlord a copy
of each such sublease.
E. If this Lease be assigned, or if the Demised Premises or
any part thereof be sublet or occupied by anybody other than Tenant, Landlord
may, after default by Tenant, collect rent from the assignee, subtenant, or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, subletting, occupancy, or collection shall be deemed a waiver
by Landlord of any of Tenant's covenants contained in this Article or the
acceptance of the assignee, subtenant, or occupant as Tenant, or a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
herein contained.
F. If for any assignment or sublease, Tenant receives rent or
other consideration, either initially, or over the term of the assignment or
sublease, in excess of the rent called for hereunder, or in the case of the
sublease of a portion of the Demised Premises, in excess of such rent fairly
allocable to such portion, after appropriate adjustment to assure that all other
payments called for hereunder are appropriately taken into account, Tenant shall
pay the Landlord, as additional rent hereunder, one-half (1/2) of the excess of
each such payment of rent or other consideration received by Tenant promptly
after its receipt. In computing the excess, for determination of the one-half
(1/2) to be paid to Landlord, such excess shall be adjusted by deduction to
reflect payments made by Tenant for its reasonable attorneys fees,
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October 31, 1997
brokerage fees and alterations incurred to effectuate the sublease or
assignment. The consideration received by Tenant pursuant to the sale of its
business shall not be considered "consideration" as defined in this paragraph.
10. CONFORM TO LAW. Tenant shall, at its own expense, in the use and
occupancy of the Premises, observe and comply with all laws, orders, regulations
of the federal, state and municipal governments, or any of their departments,
and if any of the foregoing requires that an alteration, addition or other
change be made to the demised premises then, Tenant will make such alteration,
addition or change and bear all expense connected therewith.
11. TENANT'S COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant agrees, that
under all circumstances, Tenant shall comply with all federal, state and local
laws, ordinances, rules and regulations which are applicable, as to the conduct
of Tenant's business as it relates, to the environment, including but not
limited to, spillage, pollution, and storage. Tenant agrees, that Tenant upon
the request of Landlord from time to time shall file such notices, declarations
and obtain such permits as may be necessary and as may be required by law, from
the appropriate government agency, that has jurisdiction over the premises,
and/or Tenant's business. Tenant shall at Tenant's own expense comply with the
Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6, et seq., and the
regulations promulgated thereunder and any successor legislation and
regulations. Tenant shall at Tenant's own expense make all submissions to,
provide all information to and comply with all requirements of the New Jersey
Department of Environmental Protection and Energy or its successor ("DEPE"). The
Tenant's obligations shall arise if there is any closing, terminating or
transferring of operations of an industrial establishment at the premises
pursuant to ISRA, whether triggered by Landlord or Tenant. Tenant shall commence
its submission to the DEPE in anticipation of the end of the Lease Term no later
than six (6) months prior the expiration of the Lease Term. Tenant agrees it
will supply copies of all written or oral communications by or between it and
any governmental agency in reference to the foregoing to Landlord. Should DEPE
determine that a Remedial Action Work Plan be prepared and that a clean-up be
undertaken because of a spill or discharge of a hazardous substance or waste at
the Premises which occurred during the term of the Lease, Tenant shall, at
Tenant's own expense promptly prepare and submit the required plan and financial
assurances and shall promptly carry out the approved plan. At no expense to
Landlord, Tenant shall promptly provide all information requested by Landlord or
DEPE for preparation of a non-applicability affidavit, de minimis quantity
exemption application, limited conveyance application or other submission and
shall promptly sign such affidavits and submissions when requested by Landlord
or DEPE. If Tenant's operations at the premises are outside of those industrial
operations covered by ISRA, Tenant shall obtain a letter of non-applicability
from the DEPE prior to termination of the Lease and shall provide copies of all
such submissions to Landlord. Landlord shall have the right in such instance to
request Tenant to undertake a sampling at the premises to determine whether or
not Tenant's operations have resulted in a spill or discharge of hazardous
waste. If a spill or discharge of a hazardous substance or waste occurs at the
Premises, and it was not caused by Tenant, nor by Tenant's employees, agents or
invitees, then, Tenant shall have no responsibility for the cost of clean-up of
the spill or discharge. If Landlord causes a triggering event that requires a
filing under "ISRA" Landlord shall
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October 31, 1997
in such instance reimburse Tenant for Tenant's reasonable administrative cost in
participating in the filing as otherwise required by law.
The Tenant does hereby agree at its sole cost and expense, to
defend, indemnify and save harmless the Landlord against and from any and all
loss, cost, expenses, liabilities or claims by third parties, including all
governmental authorities, attorney's fees, court costs, fines or penalties
arising from or in connection with the lease herein, and the use or occupancy of
the demised premises by the Tenant, and in case any action or proceeding is
brought against Landlord or Tenant by reason of any hazardous waste or
contaminants located in or on the demised premises by Tenant. Tenant, upon
notice from Landlord, agrees to resist and defend such action or proceedings by
Counsel reasonably satisfactory to Landlord. Counsel for Tenant's insurance
carrier shall be deemed satisfactory. Tenant covenants that it shall not dump
chemical waste on the premises nor use or store hazardous materials in the
premises, except for normal quantities of such substances as which are typically
used in the preparation, warehousing and distribution, of food products, all of
which shall be stored, used and disposed of in accordance with applicable law.
If Tenant fails to obtain either a non-applicability letter,
or a negative declaration or a No Further Action Letter from DEPE or fails to
clean up the premises as hereinbefore provided prior to the expiration of the
term, then upon the expiration of the term Landlord shall have the option to
consider and to treat Tenant as a holdover Tenant in possession of the premises
until, Tenant complies with the foregoing. In such event, Tenant shall be
responsible for the rental obligations as a Tenant from month to month as
otherwise provided in Paragraph 13 hereof.
Landlord agrees to provide copies of all environmental reports
Landlord has received as to the property in which the Demised Premises are
located. Tenant acknowledges receiving a Phase I from Landlord.
12. ADDITIONAL COVENANTS. Tenant covenants and agrees that at all times
during the term it shall not at any time without first obtaining Landlord's
prior written consent:
A. NOT MAKE ALTERATIONS. Tenant shall not make any
alterations, improvements, and/or additions to the Premises or any part thereof
except, Tenant shall have the right to install additional office space in the
demised premises necessary for the conduct of Tenant's business, subject to the
following:
(i) Tenant shall first obtain requisite permits and
authorizations from governmental authorities having jurisdiction;
(ii) Obtain Landlord's, and if required, the fee
mortgagee's prior written consent (which Landlord's consent not to be withheld
if the change or alteration would not, in the reasonable opinion of the
Landlord, impair the value or usefulness of the premises);
(iii) Any such alteration shall be made promptly
(unavoidable delays excepted) in a workmanlike manner in accordance with any
alteration plans and in compliance with applicable laws and governmental
regulations;
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October 31, 1997
(iv) The cost of the alteration shall be paid by Tenant
so that the demised premises remain free of any liens;
(v) If the cost of removal of an alteration to be
installed by Tenant, is greater than Ten Thousand Dollars ($10,000.00), then,
Tenant agrees, if requested by Landlord, post with Landlord adequate security to
assure restoration of the Premises at the end of the term;
(vi) Maintain proper insurance as requested by
Landlord;
(vii) No alteration for offices shall be undertaken
until detailed plans and specifications have first been submitted to and
approved in writing by Landlord and if required, by the fee mortgagee. At
completion of the alteration "as built" plans shall be delivered to Landlord.
(viii) Tenant shall agree to remove such alternation
and to restore the Premises prior to the end of the Lease.
B. NOT CHANGE EXTERIOR ARCHITECTURE. Change (whether by
alteration, replacement, rebuilding or otherwise) the exterior color and/or
architectural treatment of the Premises or of the building in which the same is
located, or any part thereof.
C. NOT MISUSE PLUMBING FACILITIES. Use the plumbing facilities
for any purpose other than that for which they were constructed, or dispose of
any garbage or other foreign substance therein, whether through the utilization
of so-called "disposal" or similar units or otherwise.
D. NO LIENS. Subject any fixtures, furnishings or equipment in
or on the Premises which are affixed to the realty, to any mortgages, liens,
conditional sales agreements, security interests or encumbrances.
E. NOT DAMAGE THE PREMISES. Perform any act or carry on any
practice which may damage, mar or deface the Premises or any other part of the
Building. No truck or other internal combustion engine shall be vented in the
Building, inclusive of trucks, fork lift trucks, hi-los and similar vehicles.
Material handling equipment used by Tenant shall be of a kind so that it shall
not mar or deface the floors.
F. NOT EXCEED FLOOR LOADS. Place a load on any floor in the
Premises, or in any area of the Building, exceeding the floor load per square
foot which such floor was designated to carry; or install, operate or maintain
therein any heavy item or equipment except in such manner as to achieve a proper
distribution of weight.
G. NOT EXCEED ELECTRICAL LOAD. Install, operate or maintain in
the Premises, any electrical equipment which does not bear underwriters'
approval, and would overload the electrical system therein, or any part thereof,
beyond its reasonable capacity for proper and safe operation.
H. NOT PERMIT ODORS, ETC. Suffer, allow or permit any
offensive or obnoxious vibration, noise, odor or other undesirable effect to
emanate from the Premises, or any machine or other installation therein, or
otherwise suffer, allow or permit the same to constitute a nuisance or otherwise
unreasonably interfere with
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October 31, 1997
the safety, comfort or convenience of Landlord or any other occupants of the
Building; upon notice by Landlord to Tenant that any of the aforesaid is
occurring, Tenant shall forthwith (but in all events within five (5) days)
remove or control the same.
I. NOT INTERFERE WITH INSURANCE, COMPLIANCE, IMPROPER USE. Use
or occupy the Premises or do or permit anything to be done thereon in any manner
which shall prevent Landlord and/or other Tenants from obtaining at standard
rates any insurance required or desired, or which would invalidate or increase
the cost to Landlord of any existing insurance, or which might cause structural
injury to the building, or which would constitute a public or private nuisance
or which would violate any present or future laws, regulations, ordinances or
requirements (ordinary or extraordinary, foreseen or unforeseen) of the federal,
state or municipal governments, or of any department, subdivisions, bureaus or
offices thereof, or of any other governmental public or quasi-public authorities
now existing or hereafter created having jurisdiction in the Premises, or the
Industrial Building of which the premises forms a part. If, at any time, and
from time to time, as a result of, or in connection with, any failure by Tenant
to comply with the foregoing or any act of omission or omissions by Tenant, its
employees, agents, contractors or licensees, or as a result of, or in connection
with, the use to which the Premises are put (notwithstanding that such use may
be for purposes hereinbefore permitted, or that such use may have been consented
to by Landlord), the insurance rates applicable to the Premises, or the building
in which same are located, or to any other Premises in said building and/or to
the contents in any or all of the aforesaid properties (including rent insurance
relating thereto) shall be higher than that which would be applicable for food,
packaging, warehousing and distribution, Tenant agrees that it will pay to
Landlord, on demand, as additional rent, such portion of the premiums for all
fire insurance policies in force with respect to the aforesaid properties
(including rent insurance relating thereto) and the contents of any occupant
thereof as shall be attributable to such higher rates.
13. EXPIRATION OF TERM - RETURN OF PREMISES IN GOOD CONDITION. On the
last day or sooner termination of the Lease, Tenant shall quit and surrender the
Demised Premises broom-clean, in good condition and repair, together with all
alterations, additions and improvements which may have been made in, on, or to
the Demised Premises, except movable furniture or unattached movable trade
fixtures put in at the sole expense of the Tenant (provided Tenant has not been
in default under this Lease) provided, however, that Tenant shall ascertain from
Landlord at least thirty (30) days before the end of the Term whether Landlord
desires to have the Demised Premises, or any part thereof, restored to the
condition in which it was originally delivered to Tenant, and if Landlord shall
so desire then Tenant, at its own cost and expense, shall restore the same
before the end of the Term. All trade fixtures, equipment, furniture,
alterations, additions and improvements not so removed will conclusively be
deemed to have been abandoned by Tenant and may be appropriated, sold, stored,
destroyed, or otherwise disposed of by Landlord without notice to Tenant or to
any other person and without obligation to account for them. Tenant will pay
Landlord all expenses incurred in connection with Landlord's disposition of such
property, including without limitation the cost of repairing any damage to the
Building or Premises caused by removal of such property. Tenant agrees upon
termination of the lease, the air-conditioning, refrigeration, cooling systems,
heating equipment and plumbing and electrical
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October 31, 1997
systems shall be in good, operable condition, and, all lighting fixtures shall
be operable, and, in the same location as when delivered to Tenant by Landlord
and bulbs where necessary, replaced. Tenant shall comply with the provisions of
paragraph 11 prior to termination of the Lease. If the Demised Premises is not
surrendered within fourteen (14) days of the date when it should have been
surrendered, then, Tenant shall indemnify Landlord against loss or liability
resulting from the delay by Tenant in so surrendering the premises including,
without limitation, any claims made by any succeeding occupant founded on such
delay. Tenant's obligations under this section shall survive the expiration or
sooner termination of the Term. In the event Tenant remains in possession of the
Demised Premises after the expiration of the Term and without the execution of a
new lease, Tenant, at the option of the Landlord, shall be deemed to be
occupying the Demised Premises as a tenant from month-to-month, at a monthly
rental equal to three (3) times the sum of (i) the Basic Rent payable for the
last month of the Term under Section 1(E) and (ii) one twelfth (1/12th) of all
items of Expense Rent, such as, but not limited to, taxes, insurance, common
area charges, repair charges, utilities, payable or paid during the last lease
year.
14. ACCESS TO PREMISES. Upon prior reasonable notice to Tenant, unless
an emergency has occurred, Landlord shall have the right to enter the Premises
at any reasonable time to examine same, to maintain the same, or to make such
repairs, replacements or improvements to the Premises or to the Property as
Landlord may deem desirable, and Tenant shall have no claim against Landlord by
reason thereof. Landlord will use reasonable efforts so as to minimize
interference with Tenant's use of the Premises. Landlord may install, maintain,
or replace and use pipes and conduits in and through the Premises for the
purpose of installing utilities for other premises located within the building.
15. DAMAGE BY FIRE OR OTHER CASUALTY.
A. SUBSTANTIAL DAMAGE. If the Building or any part thereof
shall be damaged by fire or other casualty, Tenant shall give prompt written
notice thereof to Landlord. If as a result the Building is so damaged that
substantial alterations or reconstruction of the building shall, in Landlord's
sole opinion, be required (whether or not the premises shall have been damaged)
or if any Mortgagee of the Building requires the proceeds payable be used to
retire the Mortgage debt, Landlord may, at its option, terminate this Lease by
notifying Tenant in writing of such termination within sixty (60) days after the
date of such damage. If this Lease is so terminated, rent shall be abated as of
the date of such damage.
B. RESTORATION. If Landlord does not terminate this Lease
pursuant to Subsection A of this Paragraph 15, Landlord shall, within
seventy-five (75) days after receipt by Landlord of the proceeds payable in
respect of such fire or other casualty, proceed with reasonable diligence to
restore the building (subject to force majeure) to substantially the same
condition in which it was immediately prior to the occurrence of the casualty.
Landlord shall not be required to rebuild, repair or replace any part of
Tenant's furniture, furnishings, fixtures or equipment. Such work shall include
the scope of the work done by the Landlord when originally finishing the
premises in accordance with the working drawings provided the Landlord shall not
be required to spend for such work an amount in excess of the proceeds actually
received by the Landlord and allocable thereto. Landlord shall not be liable
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October 31, 1997
for any inconvenience or annoyance to Tenant or injury to the business of
Tenant, resulting in any way from damage or repair thereof, except that, subject
to the provisions in the next sentence, Landlord shall allow Tenant a fair
diminution of basic rent during the time and to the extent the premises are
unfit for occupancy. If the premises or any portion of the building be damaged
by fire or other casualty resulting from the fault or negligence of Tenant or
any of Tenant's agents, employees or invitees, the rent hereunder shall not be
diminished during repair of such damage.
C. TERMINATION. Irrespective of Subparagraphs A and B above,
if Landlord does not complete restoration within one hundred twenty (120) days
from the date a building permit is issued for such reconstruction, then either
Landlord or Tenant may terminate this Lease provided such notice of termination
is given no later than the one hundred thirtieth (130th) day following the
issuance of the building permit.
16. EMINENT DOMAIN.
A. The term "Total Taking" means the taking of the Fee Title
Estate to so much of the premises or a portion of the building in which the
Demised Premises is located, by right of Eminent Domain or other authority of
law or a voluntary transfer under the threat of the exercise of the right of
Eminent Domain or other authority. The term "Partial Taking" means the taking of
only a portion of the premises or a portion of the building in which the
premises is located which does not constitute a Total Taking.
B. If a Total Taking occurs during the term of this Lease this
Lease will terminate as of the date of the Taking. The phrase "Date of Taking"
means the date of taking actual physical possession by the condemning authority
or such earlier date as the condemning authority gives notice that it is deemed
to have taken possession.
C. If a Partial Taking occurs during the term of this Lease,
Landlord may cancel this Lease by written notice given within sixty (60) days
after the date of the Taking and this Lease will terminate on the date of the
Taking. If the Lease is not so terminated, this Lease will continue in full
force and effect as to the remainder of the premises. The fixed rental payable
by Tenant under Paragraph 1(e) for the balance of the Term will be abated in the
proportion that the leasable area of the premise taken bears to the leasable
area of the premises immediately prior to such taking, and Landlord will make
all necessary repairs or alterations to make the remaining premises a complete
architectural unit.
D. If, this Lease has not otherwise been canceled as
hereinabove provided, and, if a Partial Taking occurs of more than ten (10%) of
the Demised Premises during the term of this Lease, then, in such event, Tenant
may cancel this Lease by written notice given within sixty (60) days after the
date of the Taking and this Lease will terminate as of the date of the Taking.
If access used by Tenant is materially effected by any taking, then, Tenant may
cancel this Lease by written notice given within sixty (60) days after the date
of the taking and this Lease will terminate as of the date of the taking.
E. AWARD AND PROCEEDS. All compensation awarded for any such
taking or conveyance, whether for the whole or in part of
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October 31, 1997
the Demised Premises or otherwise, shall be the property of the Landlord,
whether such damages shall be awarded as compensation for the diminution or
total loss in value of the leasehold or of the fee of the Demised Premises, and
Tenant hereby assigns to Landlord all of Tenant's right, title and interest in
and to any such compensation. Tenant shall be entitled to separately petition
the condemning authority for a separate award for its moving expenses and trade
fixtures, but only if such separate award will not diminish the amount of
proceeds payable to Landlord.
F. If this Lease is terminated pursuant to the provisions of
this Paragraph, then all rentals and all other charges payable by Tenant to
Landlord under this Lease will be paid up to the date of the Taking and any
rentals and other charges paid in advance and allocable to the period after the
date of the Taking will be repaid to Tenant by Landlord. Landlord and Tenant
will then be released from all further liability under this Lease.
17. WAIVER OF LANDLORD'S LIABILITY, TENANT'S OWN INSURANCE. Tenant
agrees, in addition to complying with Tenant's insurance requirements, to take
such steps as it may deem necessary and adequate for the protection of itself
and its agents, employees, invitees, and licensees, and the property of the
foregoing by insurance, as a self-insurer or otherwise. Landlord shall not be
liable for any injury to persons or damage to property located in the Demised
Premises resulting from any cause whatsoever, including, without limitation,
theft, fire, explosion, water, rain, snow, frost, steam, gas, electricity, heat,
cold, dampness, sewers, odors, noise, leaks from any part of the building or the
roof, the bursting or leaking of pipes, plumbing, electrical wiring and
equipment, and fixtures of all kinds, or by any act or neglect of others,
tenants or occupants of the building or any other person, or caused by any
manner whatsoever, nor shall Landlord be liable for any latent defects in the
building. Tenant hereby waives all right of recovery which it might have against
Landlord, Landlord's agents and employees for loss or damage to Tenant's
furniture, Tenant Improvements, inventory, furnishings, fixtures, chattels and
articles of personal property located on or in the demised premises,
notwithstanding that such loss or damage may result from the negligence or fault
of Landlord. Tenant shall obtain insurance policies covering its furnishings,
Tenant Improvements, inventory, fixtures, equipment and articles of personal
property (collectively, "Tenant's property") in the demised premises and Tenant
shall either cause Landlord to be named as an insured party under such policies
(without entitling Landlord to receive any loss proceeds thereof) or obtain the
insurer's waiver of all rights of subrogation against Landlord with respect to
losses insured under such policies. Before Tenant takes possession of the leased
premises and throughout the term thereof, the Tenant shall, at its own cost and
expense, provide and keep in force comprehensive general public liability
insurance on an occurrence basis in respect of the Demised Premises and the
conduct and operation of Tenant's business therein with Landlord and its
mortgagee as additional insureds, with limits per occurrence of not less than
$5,000,000 combined single limit for bodily injury or property damage including
water damage and sprinkler leakage legal liability, with an endorsement
providing that such aggregate limit shall apply to the Property separately from
any other locations covered by the policy; and contractual liability insurance.
Certificates evidencing same shall be furnished to Landlord, together with proof
of payment of premiums. If Tenant fails or neglects to carry such insurance,
Landlord shall have the right to cause such insurance to be issued at Tenant's
cost and expense and
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October 31, 1997
the cost thereof shall be added to the rent and shall be due and payable as rent
under this Lease.
18. WAIVER OF SUBROGATION. Landlord and Tenant waive all rights to
recover against each other or against the officers, directors, shareholders,
partners, joint ventures, employees, agents, customers, invitees, or business
visitors of each other or of any other Tenant or occupant of the Building, for
any loss or damage arising from any cause covered by any insurance required to
be carried by each of them pursuant to this paragraph or any other insurance
actually carried by each of them. Landlord and Tenant will cause their
respective insurers to issue appropriate waiver of subrogation rights
endorsements to all policies of insurance carried in connection with the
Building or the Premises or the contents of either of them. Tenant will cause
all other occupants of the Premises claiming by, under, or through Tenant to
execute and deliver to Landlord a waiver of claims similar to the waiver in this
paragraph and to obtain such waiver of subrogation rights endorsement.
19. INDEMNIFICATION BY TENANT. Tenant shall indemnify Landlord against
all liability and expense including reasonable attorneys' fees, incurred by
Landlord by reason of:
(a) Any action by Tenant (or Landlord to cure an Event of
Default) on or about the demised premises;
(b) Any use, non-use or maintenance of the demised premises;
(c) Any negligence of Tenant;
(d) Any injury or damage to any person or property occurring
on or in the demised premises; or
(e) Any failure by Tenant to perform its obligations under the
Lease.
20. BUILDING SERVICES. Landlord shall not be required to provide any
services to Tenant and Tenant agrees to pay for all charges for gas,
electricity, light, heat and power. Landlord shall not be liable in damages or
otherwise for any delay or failure in Tenant's receiving any such utilities and
in no event shall such delay or failure, regardless of cost, constitute an
eviction of Tenant or terminate this Lease. Domestic water for lavatories,
Tenant shall reimburse Landlord a pro rata charge as determined by Landlord for
Tenant's consumption of domestic water.
The water, electric, sprinkler and other utilities servicing
the building in which the demised premises are located, as of the execution of
this Lease are not separately metered or sub-metered. Landlord, at its option,
shall either separately meter, or sub-meter, or estimate, the usage of water,
electric, gas and sprinkler service, and, allocate to Tenant, Tenant's fair
share and cost thereof. In any event, Tenant, whether by payment directly to the
utility, or to Landlord, by an estimated amount, or by sub-metering, shall be
responsible to pay for all charges for gas, electric, light, heat, power and
sprinkler. Landlord, if economically feasible, will use best efforts to
sub-meter the electric and gas service.
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October 31, 1997
21. DEFAULTS AND REMEDIES.
A. If any one or more of the following events (hereinafter
called "events of default") occurs:
(i) Tenant shall default in payment of any installments
of rent or other sums required to be paid by Tenant under this Lease, which
default shall continue for ten (10) days after written notice thereof by
Landlord to Tenant; or in the observance or performance of any other covenant or
provision of this Lease and such default continues for thirty (30) days after
notice of such default from Landlord (unless such default cannot be cured within
(30) days) and Tenant commences to cure such default within such 30 days and
diligently proceeds to cure such default; or
(ii) If the Demised Premises shall be abandoned for a
period of thirty (3) days; or
(iii) Tenant shall make an assignment for the benefit
of creditors or shall assign or sublet, except as permitted hereunder; or
(iv) A voluntary petition is filed by Tenant under any
laws for the purpose of adjudication of Tenant as a bankrupt or the extension of
the time of payment, composition, arrangement, adjustment, modification,
settlement or satisfaction of the liabilities of Tenant, or the reorganization
of Tenant under the Bankruptcy Act of the United States or any future laws of
the United States having the same general purpose, or receivers appointed for
Tenant by reason of insolvency or alleged insolvency of Tenant; an involuntary
petition shall be filed against Tenant for such relief and shall not be
dismissed within sixty (60) days;
Landlord, notwithstanding any other right or remedy it may
have under the Lease, at law or in equity, may terminate the Lease, by notice to
Tenant setting forth the basis therefor and effective not less than five (5)
days thereafter, whereupon, upon such effective date, the Lease shall terminate
(with the same effect as if such date were the date fixed herein for the natural
expiration of the Term), Tenant shall surrender the demised premises to Landlord
and Tenant shall have no further rights hereunder, but Tenant shall remain
liable as hereinafter provided. In such event, Landlord may, without further
notice, enter the demised premises, repossess the same and dispossess Tenant and
all other persons and property therefrom.
B. LANDLORD'S DAMAGES. If Landlord so terminates the Lease, Tenant
shall pay Landlord, as damages:
(i) A sum which represents any excess of (i) the
aggregate of the rent, impositions and additional rent for the balance of the
term if the Lease were not so terminated, over (ii) the net rental value
determined in accordance with this Lease of the demised premises at the
effective date of such termination, both discounted at the rate of four (4)
percent per annum; or, at Landlord's option;
(ii) Sums equal to the rent, impositions and additional
rent, when the same would have been payable if not for such termination, less
any net rents received by Landlord from any reletting, after deducting all costs
incurred in connection with such termination and reletting (but Tenant shall not
receive any
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October 31, 1997
excess of such net rents over such sums). Nothing herein contained shall place
any duty or obligation on the part of Landlord to mitigate Tenant's damages.
Except, Landlord agrees that it will engage the services of an exclusive broker
to market the Premises for relet.
Landlord may commence actions or proceedings to recover such
damages or installments thereof at any lawful time. No provision hereof shall be
construed to preclude Landlord's recovery from Tenant of any other damages to
which landlord is lawfully entitled.
C. NONEXCLUSIVITY. No right or remedy herein conferred upon
Landlord is intended to be exclusive of any other right or remedy herein or by
law provided, but each shall be cumulative and subject to the grace and notice
provisions of subparagraph (A) of this Paragraph 21, in addition to every other
right or remedy given herein or now or hereafter existing at law or in equity or
by statute.
D. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. If Tenant
shall fail to pay any tax, pay for or maintain or deliver any of the insurance
policies or shall fail to make any other payment or perform any other act which
Tenant is obligated to make or perform under this Lease, then, Landlord after
notice to Tenant may perform for the account of Tenant any covenant in the
performance of which Tenant is in default. Tenant shall pay to the Landlord as
additional rent, upon demand, any amount paid by Landlord in the performance of
such covenant in any amount which Landlord shall have paid by reason of failure
of Tenant to comply with any covenant or provision of this Lease, including
reasonable counsel fees incurred in connection with the prosecution or defense
of any proceedings instituted by reason of default of Tenant, together with
interest at the rate of two (2%) percent per month from the date of payment by
Landlord until paid by Tenant.
E. NO WAIVER. No waiver by Landlord of any breach by Tenant of
any of Tenant's obligations hereunder shall be a waiver of any subsequent breach
or of any obligation, agreement or covenant, nor shall any forbearance by
Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord of
Landlord's rights and remedies with respect to such or by subsequent breach.
F. RIGHT OF RE-ENTRY. In the event that the termination of
this Lease is the result of any election exercised by Landlord pursuant to the
terms of this Article, the Landlord shall be entitled to the rights, remedies
and damages set forth in this Article and elsewhere in this Lease. Tenant waives
the service of notice of intention to re-enter as provided for in any statute
and also waives any and all right of redemption in case Landlord obtains
possession by reason of Tenant's default. Tenant waives any and all right to a
trial by a jury in the event that summary proceedings shall be instituted by
Landlord. The terms "enter", "re-enter", "entry" or "reentry", as used in this
Lease are not restricted to their technical legal meaning.
G. PAYMENT OF LANDLORD'S COUNSEL FEES AND OTHER COSTS,
INTEREST. Tenant shall pay the Landlord as additional rent upon demand
Landlord's reasonable counsel fees incurred by Landlord in connection with the
prosecution or defense of any proceedings instituted by reason of default of
Tenant, together with interest at the rate of two percent (2%) per month from
the date of payment
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October 31, 1997
by Landlord until paid by Tenant, this covenant to survive the expiration or
sooner termination of this Lease.
22. OMIT.
23. LATE CHARGE/SERVICE FEE. If payment of Basic Rent or Additional
Rent or any part thereof shall not be made on or prior to a date which is ten
(10) days after the date on which it is due and payable, Landlord shall be
entitled to charge as an additional rent the service fee equal to four percent
(4%) of the rent due for each and every five (5) day period which has elapsed
between the day said rent is due and the date the rent is received by Landlord.
Such service fee that accrues during any month shall be payable on the first day
of the following month. No failure by Landlord to insist upon the strict
performance by Tenant of Tenant's obligations to pay service fee shall
constitute a waiver by Landlord of its right to enforce the provisions of this
section and any instance thereafter occurring, nor shall acceptance of a late
fee be deemed to extend the time of payment of fixed rent or expense rent or any
part thereof. Notwithstanding the foregoing in each calendar year upon the first
three (3) occasions when Tenant shall fail to make timely rent payments,
Landlord agrees to give written notice to Tenant of such failure prior to
Landlord asserting the late charge. If Landlord gives such notice and Tenant
does not make payment within ten (10) business days thereafter, then a late
charge shall be imposed as hereinabove provided from the date such payment was
otherwise due and payable. If any such three (3) instances of serving notice on
Tenant in any calendar year, Landlord need not give further notice prior to
asserting a late charge.
24. EASEMENTS. Tenant shall permit Landlord or its designees to erect,
use, maintain and repair pipes, cables, conduits, plumbing, vents and wires, in,
to and through the Premises, as and to the extent that Landlord may now or
hereafter deem to be necessary or appropriate for the proper operation and
maintenance of the building in which the Premises are located or any other
portion of the Building. All such work shall be done, so far as practicable, in
such manner as to avoid unreasonable interference with Tenant's use of the
Premises.
25. LANDLORD'S INABILITY TO PERFORM. This Lease and the obligation to
pay rent hereunder and perform all of the other terms to be performed by Tenant
hereunder shall not be affected, impaired or excused because Landlord is unable
to fulfill any of its obligations under this Lease.
26. PARKING. Tenant shall have the right to use 20 parking spaces for
the parking of trucks not to exceed 24 feet in length and forty (40) parking
spaces for the parking of automobiles, all of which shall be in areas designated
on diagram attached hereto. Tenant agrees that it and its employees and invitees
shall not park their automobiles in parking spaces allocated to others by
Landlord and shall comply with such rules and regulations for use of the parking
area as Landlord may from time to time prescribe. Landlord shall not be
responsible for any damage or theft of any vehicle in the parking area and shall
not be required to keep parking spaces clear of unauthorized vehicles or to
otherwise supervise the use of the parking area. The parking spaces to be
provided to Tenant for the parking of automobiles shall be used for parking only
by vehicles no larger than full-sized passenger automobiles. Tenant shall not
permit or allow any vehicle that belongs to or is controlled by Tenant or
Tenant's employees, suppliers, shippers,
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October 31, 1997
customers or invitees to be loaded or parked in areas other than those
designated by Landlord for such activities. If Tenant permits or allows any of
the prohibited activities described in this Section, Landlord shall have the
right, in addition to all other rights and remedies that it may have under this
Lease, to remove or tow away the vehicles involved without prior notice to
Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within
ten (10) days after delivery to Tenant of bills therefor.
27. MECHANIC'S LIEN. Tenant shall discharge any mechanic's lien filed
against the Property for work done or claimed to have been done for Tenant, or
materials furnished or claimed to have been furnished to Tenant within ten (10)
days after notice from Landlord thereof. Notice is hereby given that Landlord is
not liable for any work performed at the premises by or for Tenant and that no
mechanic's lien arising therefrom shall attach to, or affect the estate of, or
interest of Landlord.
28. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If Tenant defaults in
the observance or performance of any term to be observed or performed by Tenant
under this Lease, Landlord may immediately or at any time thereafter and without
notice to Tenant, perform the same for the account of Tenant and the expenses
incurred with respect to such performance together with attorneys' fees and
interest thereon shall be deemed additional rent hereunder and shall be paid by
Tenant to Landlord on demand therefor.
29. SUBORDINATION. At the option of Landlord, this Lease shall either
be:
(a) Subject and subordinate to all mortgages which may now or
hereafter affect the Demised Premises, and to all renewals, modifications,
consolidations, replacements or extensions thereof, provided however, that the
holder of any such mortgage shall execute with Tenant a Non-Disturbance
Agreement hereinafter described; or
(b) This lease shall be paramount in priority as an
encumbrance against the Demised Premises with respect to the lien of any
mortgage which may now or hereafter affect the Demised Premises and to all
renewals, modifications, consolidations, replacements and extensions thereof.
(c) The non-disturbance agreement referred to above shall be
an agreement in recordable form between Tenant and the holder of such mortgage,
binding on such holder and on future holders of such mortgages, or an agreement
by such holder expressed in such mortgage, which shall provide in substance
that, so long as Tenant is not in default beyond the applicable grace periods
under any of the terms, covenants, provisions or conditions of this Lease,
neither such holder nor any other holder of such mortgage shall name or join
Tenant as a party-defendant or otherwise in any suit, action or proceeding to
enforce, nor will this Lease or the term hereof be terminated (except as
permitted by the provisions of this Lease) or otherwise affected by enforcement
of, any rights given to any holder of such mortgage, pursuant to the terms,
covenants or conditions contained in such mortgage or any other document held by
any holder or any rights given to any holder as a matter of law. Upon request of
holder of a mortgage to which this Lease becomes subordinate, Tenant shall
execute, acknowledge and deliver to such holder an agreement to attorn to such
holder as Landlord if such holder becomes Landlord hereunder and/or execute,
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October 31, 1997
acknowledge and deliver to such holder an agreement not to pay the Basic Rent
for a period of more than one (1) month in advance.
30. LANDLORD'S RIGHT TO SHOW PREMISES. Throughout the term of this
Lease, Landlord shall have the right to enter the Premises at reasonable hours
for the purpose of showing the same to prospective purchasers or mortgagees of
the Property, and during the last six (6) months of the term for the purpose of
showing the same to prospective tenants.
31. QUIET ENJOYMENT. Landlord covenants that if and so long as Tenant
pays the rent and additional rent and performs the covenants hereof, Tenant
shall peaceably and quietly have hold and enjoy the Premises for the term herein
mentioned, subject to the provisions of this Lease and to any mortgage to which
this Lease is subordinate.
32. TENANT'S ESTOPPEL. Tenant shall from time to time, upon not less
than ten (10) days prior written request by Landlord, execute, acknowledge and
deliver to Landlord a written statement, in form satisfactory to Landlord,
certifying that this Lease is unmodified and in full force and effect (or that
same is in full force and effect as modified, listing the instruments of
modification) the dates to which the rent and additional rent have been paid and
whether or not, to the best of Tenant's knowledge, Landlord is in default
hereunder (and if so, specifying the nature of the default), existence of any
offsets, counterclaims or defenses thereto on the Tenant's part against
Landlord, a statement as to the term commencement date and stated expiration
date, and as to any other matters as may reasonably be so requested. It being
intended that any such statement delivered pursuant to this Paragraph may be
relied upon by a prospective purchaser of Landlord's interest, or mortgagee of
Landlord's interest, or assignee of any mortgage upon Landlord's interest in any
underlying lease or in the Property.
33. FINANCIAL INFORMATION. Tenant has furnished the Landlord with
Profit and Loss Statements and Balance Sheets for the fiscal years beginning
1996, prepared by a Certified Public Accountant. Tenant further agrees that it
will furnish to the Landlord a Certified Profit and Loss Statement and Certified
Balance Sheet prepared by a Certified Public Accountant for the preceding fiscal
year but Landlord shall not request such statement more than once in each
calendar year. So long as Tenant is a "public company", annual statements
provided to shareholders, and, 10K and 10Q SEC report forms, shall be deemed
conformance and compliance with the provisions of this Section 33.
34. NO ABATEMENT OF RENT. Except as expressly provided herein, there
shall be no abatement, diminution or reduction of Fixed Rent, Expense Rent or
Additional Rent or other charges or other compensation due to the Landlord by
Tenant or any person claiming under it under any circumstances, including, but
not limited to, any inconvenience, discomfort, interruption of business or
otherwise.
35. NOTICES. Any notice hereunder shall be sufficient if sent by
certified mail, return receipt requested, addressed given by the Landlord to the
Tenant to the Premises, or if given by the Tenant to the Landlord, at the
address set forth in Par. l(a) above, or at such other place as the Landlord may
notify Tenant in writing from time to time.
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October 31, 1997
36. NO PERSONAL LIABILITY OF LANDLORD. There shall be no personal
liability of the Landlord or any principal of the Landlord in connection with
this Lease. Tenant agrees to look solely to the equity of Landlord in the
Property for the collection of any judgment or other judicial process requiring
the payment of money by Landlord in the event of any default or breach by
Landlord with respect to this Lease or in any way relating to the Premises or
Property, and no other assets of Landlord or any principal of Landlord shall be
subject to levy, execution or other procedures for the satisfaction of Tenant's
remedies.
37. SUBMISSION OF LEASE. Submission of this Instrument for examination
or signature by Tenant does not constitute a reservation of, or option to lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.
38. NO REPRESENTATIONS. Landlord has made no representations or
promises with respect to the Premises or the Property except as expressly
contained herein. Tenant has inspected the Premises and agrees to take the same
in an "as is" condition, except as otherwise expressly set forth herein,
including Landlord's work as contemplated by Section 3A hereof. Landlord shall
have no obligation, except as herein set forth, to do any work in and to the
Premises to render them ready for occupancy and use by Tenant.
39. CAPTIONS. The captions in this Lease are included for convenience
only and shall not be taken into consideration in any construction or
interpretation of this Lease or any of its provisions.
40. NO WAIVER OR CHANGES. The failure of either party to insist on
strict performance of any covenant or condition hereof, or to exercise any
option herein contained, shall not be construed as a waiver of such covenant,
condition or option in any other instance. This Lease cannot be changed or
terminated orally.
41. RECORDING. The Tenant shall not record this Lease or a memorandum
hereof.
42. BROKER. Tenant represents that it did not deal with or negotiate
with any broker in connection with this Lease other than the Broker listed in
Paragraph 1(g) and indemnifies and holds Landlord harmless from and against any
claim for a commission or other fee made by any broker with whom it has dealt or
negotiated except as to the Broker listed in Paragraph 1(g). Landlord, based
upon Tenant's representation, agrees, that Landlord shall pay the brokerage
commission otherwise designated in Paragraph 1G hereof, and, shall indemnify
Tenant from and against such obligation to said brokers.
43. BINDING EFFECT. The provisions of this Lease shall apply to, bind
and inure to the benefit of Landlord and Tenant and their respective successors,
legal representative and permitted assigns, it being understood that the term
"Landlord" as used in this Lease means only the owner, or the mortgagee in
possession, or the lessee for the time being of the property so that in the
event of any sale or sales of the property or of any lease thereof, or if the
mortgagee shall take possession of the property, the Landlord named herein shall
be and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder accruing thereafter.
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October 31, 1997
44. ACCEPTANCE. Neither the Landlord nor its agents have made any
representation with respect to the building, the land upon which it is erected,
or the demised premises, except as expressly set forth herein and no rights,
easements or licenses are acquired by the Tenant by implication or otherwise
except as expressly set forth in the provisions of this Lease. The taking of
possession of the demised premises by the Tenant shall be conclusive evidence
that the Tenant shall have accepted the same in an "as is" condition and that
the demised premises and the building were in good condition at the time of the
commencement of the term. In no event shall the Landlord be liable for any
defect in such property or for any limitation on its use.
45. FIRST EXTENSION OF TERM: Upon the expiration of the term herein
demised, if immediately prior thereto this Lease shall be in full force and
effect and no uncured event of default shall have occurred, then subject to the
provisions of this section, the Tenant shall have and is hereby given the option
to renew and extend this Lease for an additional term of five (5) years to
commence on September 1, 2007 and to terminate on August 31, 2012. The renewal
term shall be upon the same terms, covenants and conditions as those herein
contained insofar and applicable to such renewal term (including all provisions
as to the items of payment of additional rent) except as to the amount of fixed
rental. The said renewal shall be exercised by Tenant in the following manner:
(a) Not later than six (6) months prior to the end of the
initial term, the Tenant shall notify Landlord in writing that the Tenant
desires to extend said Lease by exercising this option.
(b) In the event the Tenant exercises its option to extend the
term of this Lease as hereinabove set forth, the fixed rental as set forth in
sub-paragraph (e) of paragraph 1 of this Lease, during such renewal term shall
be the higher of $187,761.00 per annum, payable in equal monthly installments of
$15,646.75 due and payable the first day of each and every month in advance or,
such higher rent as determined as follows:
The Landlord and the Tenant shall each select an
appraiser, such appraiser shall be a licensed real estate broker, specializing
in the renting of office and/or industrial premises in northern New Jersey and
each such appraiser shall be a member of the Society of Industrial and Office
Realtors. Such appraisers shall be engaged to determine the fair market rental
on a net basis in accordance with the terms of this Lease of the Demised
Premises. The nomination must be in writing and must be given by each party to
the other no later than sixty (60) days prior to the termination date of the
Lease. If the two appraisers shall agree in writing upon a fair market rental
then that value shall be binding upon the parties, but if they are unable to
agree within thirty (30) days after their appointment, they shall then appoint a
third appraiser, with their credentials and the opinion of the majority as to
the fair market rental shall be controlling. If the two appraisers do not agree
or otherwise fail to appoint a third appraiser within thirty (30) days, then the
third appraiser shall be appointed on application of either party by the Essex
County Assignment Judge of the Superior Court of New Jersey. If, prior to the
appointment of a third appraiser, the first two appraisers do not agree, but the
difference between their two appraisals is ten (10%) percent or less of the
higher appraisal, then the fair market rent shall be the mean of the two
appraisals. If the difference between the two appraisals is more than ten (10%)
percent, then the appraisal of the third appraiser shall be binding. If the fair
market rental of
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October 31, 1997
the premises pursuant to the appraisal is greater than $187,761.00 per annum, or
a sum equal to 95 percent of the fair market rental as determined by the
appraisers. The determination of the appraisers shall be in accordance with the
provisions of the terms of this Lease, for a five (5) year term. Such rental
shall be determined as of September 1, 2007. Pending the determination of the
fixed rental for the renewal term, the Tenant shall continue to pay the rent at
the rate of $187,761.00 per annum and when the adjusted rent has been
determined, the Tenant on the first day immediately following the furnishing by
the appraisers to the Landlord and Tenant of the computation thereof, shall pay
the Landlord the number of installments that shall have elapsed since September
1, 2007 to and including the first day of such month. During the extension of
term, the fixed rental shall be the higher of $187,761.00 per annum or 95% of
the fair market rental as determined by the appraisers.
46. SECOND EXTENSION OF TERM: Upon the expiration of the first
extension of term, if immediately prior thereto this Lease shall be in full
force and effect and no uncured event of default shall have occurred, then
subject to the provisions of this section, the Tenant shall have and is hereby
given the option to renew and extend this Lease for an additional term of five
(5) years to commence on September 1, 2012 and to terminate on August 31, 2017.
The extension of term shall be upon the same terms, covenants and conditions as
those herein contained insofar and applicable to such extension of term
(including all provisions as to the items of payment of additional rent) except
as to the amount of fixed rental. The said extension of term be exercised by
Tenant in the following manner:
(a) Not later than six (6) months prior to the end of the
first extension of term, the Tenant shall notify Landlord in writing that the
Tenant desires to extend said Lease by exercising this option.
(b) In the event the Tenant exercises its option to extend the
term of this Lease as hereinabove set forth, the fixed rental as set forth in
sub-paragraph (e) of paragraph 1 of this Lease, during such extension of term
shall be the higher of the fixed annual rental payable during the last 12 months
of the first extension of term, or such higher rent as determined as follows:
The Landlord and the Tenant shall each select an
appraiser, such appraiser shall be a licensed real estate broker, specializing
in the renting of office and/or industrial premises in northern New Jersey and
each such appraiser shall be a member of the Society of Industrial and Office
Realtors. Such appraisers shall be engaged to determine the fair market rental
on a net basis in accordance with the terms of this Lease of the Demised
Premises. The nomination must be in writing and must be given by each party to
the other no later than sixty (60) days prior to the termination date of the
Lease. If the two appraisers shall agree in writing upon a fair market rental
then that value shall be binding upon the parties, but if they are unable to
agree within thirty (30) days after their appointment, they shall then appoint a
third appraiser, with their credentials and the opinion of the majority as to
the fair market rental shall be controlling. If the two appraisers do not agree
or otherwise fail to appoint a third appraiser within thirty (30) days, then the
third appraiser shall be appointed on application of either party by the Essex
County Assignment Judge of the Superior Court of New Jersey. If, prior to the
appointment of a third appraiser, the first two appraisers do not agree, but the
26
<PAGE> 27
October 31, 1997
difference between their two appraisals is ten (10%) percent or less of the
higher appraisal, then the fair market rent shall be the mean of the two
appraisals. If the difference between the two appraisals is more than ten (10%)
percent, then the appraisal of the third appraiser shall be binding. If the fair
market rental of the premises pursuant to the appraisal is greater than the
fixed annual rental payable during the last 12 months of the first extension of
then, then the fixed rental shall be adjusted to such new higher rent or a sum
equal to 95 percent of the fair market rental as determined by the appraisers.
The determination of the appraisers shall be in accordance with the provisions
of the terms of this Lease, for a five (5) year term. Such rental shall be
determined as of September 1, 2012. Pending the determination of the fixed
rental for the second extension of term, the Tenant shall continue to pay the
rent at the rate of the rent paid during the calendar year 2006 and when the
adjusted rent has been determined, the Tenant on the first day immediately
following the furnishing by the appraisers to the Landlord and Tenant of the
computation thereof, shall pay the Landlord the number of installments that
shall have elapsed since September 1, 2012 to and including the first day of
such month. During the second extension of term, the fixed rental shall be the
higher of the fixed annual rental payable during the last 12 months of the first
extension of term or 95% of the fair market rental as determined by the
appraisers.
47. MISCELLANEOUS.
A. ADDITIONAL CONSTRUCTION COSTS TO BE PAID BY TENANT TO
LANDLORD. If Tenant requests any work to be done by Landlord which is not
otherwise specified in the plans and specifications, and if Landlord is willing
to make such change or undertake such work, Tenant shall pay to Landlord the
cost of such work and materials as required and all other expenses incurred,
such as, permits, licenses, architect's fees, materialmen's cost, supplier's
cost, etc. All such costs shall be subject to an additional element of costs to
be added thereto, equal to 24% of the cost otherwise incurred or to be incurred.
The total of such costs shall be billed by the Landlord to Tenant during
construction as they are incurred and payment shall be made by Tenant to
Landlord on the first day of the month following the date Tenant is billed by
Landlord. All such costs, so billed by Landlord to Tenant shall be deemed
additional rent.
B. RULES AND REGULATIONS: tenant shall comply with the Rules
and Regulations attached hereto and as same may be amended or promulgated by
Landlord from time to time.
C. NO UNDERGROUND STORAGE TANKS: Tenant warrants and
represents that it will, at no time, install any underground storage tanks on
the Demised Premises. A breach of this covenant shall be deemed a default under
the Lease, and Landlord shall have the right to terminate the Lease upon the
happening of such event.
D. REFUSE REMOVAL: Tenant shall be responsible for removal of
its own trash.
E. LANDLORD'S CONSENT: If Tenant believes that the Landlord
has unreasonably withheld its consent and/or delayed its consent, then Tenant's
sole remedy shall be to seek a declaratory judgment. The Tenant shall have no
right to seek money damages.
F. CORPORATE AUTHORITY: If Tenant is a corporation, each
individual executing this Lease on behalf of said corporation
27
<PAGE> 28
October 31, 1997
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation in accordance with a duly adopted resolution
of the Board of Directors of said corporation or in accordance with the By-Laws
of said corporation, and that this Lease is binding upon said corporation in
accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of a resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.
G. CERTIFICATE OF OCCUPANCY: This Lease is subject and
contingent upon Landlord obtaining either temporary or permanent Certificate of
Occupancy as otherwise provided in paragraph "3" hereof. In the event Landlord
does not obtain a Certificate of Occupancy, then Landlord shall notify Tenant of
such fact, and thereafter this Lease shall be void, without further liability of
either party to the other except to return to Tenant the prepaid rent and
security deposit, if any. If Landlord obtains only a temporary Certificate of
Occupancy, and, if an act of the Tenant or failure to act of the Tenant has not
caused Landlord not to obtain a permanent Certificate of Occupancy, then, it
shall be Landlord's responsibility to obtain a permanent Certificate of
Occupancy.
H. ALTERNATIVE DISPUTE RESOLUTION: Landlord and Tenant shall
attempt to settle any claim or controversy arising out of it through
consultation and negotiation in the spirit of mutual friendship and cooperation.
If such attempts fail, then the dispute shall first be submitted to a mutually
acceptable neutral advisor for mediation, fact-finding or other form of
alternate dispute resolution. Neither of the parties may unreasonably withhold
acceptance of such an advisor, and his or her selection will be made within
thirty (30) days after notice by the other party demanding such mediation. The
cost of such mediation or any other alternate dispute resolution agreed upon by
both parties shall be shared equally by Landlord and Tenant. Any dispute which
cannot be so resolved between the parties within ninety (90) days of the date of
the initial demand by either party for such mediation shall be finally
determined by the courts. The use of such a procedure shall not be construed to
affect adversely the rights of either party under the doctrines of laches,
waiver or estoppel. And nothing in this paragraphs shall prevent either party
from resorting to judicial proceedings if (a) good faith efforts to resolve a
dispute under these procedures have been unsuccessful or (b) interim resort to a
court is necessary to prevent serious and irreparable injury to a party or to
others.
28
<PAGE> 29
October 31, 1997
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals or caused these presents to be signed by their proper corporate
officers, and their proper corporate seal to be hereto affixed, in the day and
year first above written.
WITNESS: 280 WILSON AVENUE ASSOCIATES,
L.L.C., Landlord
/s/ By: /s/ Ken Cohen, Member
- --------------------------- -----------------------------------
Ken Cohen, Member
ATTEST: THE FRESH JUICE COMPANY OF NEW YORK,
INC., Tenant
/s/ Mark Feldman By: /s/ Steven Bogen
- --------------------------- -----------------------------------
Steven Bogen, Chief Executive Officer
29
<PAGE> 30
October 31, 1997
STATE OF NEW JERSEY )
) ss.:
COUNTY OF )
BE IT REMEMBERED, that on this _____ day of 1997, before me, the
subscriber, personally appeared _____________, who, I am satisfied, is the
person named in and who executed the within Instrument, and thereupon he
acknowledged that he signed, sealed and delivered the same as his act and deed,
and the act and deed of the said 280 WILSON AVENUE ASSOCIATES, L.L.C., for the
uses and purposes therein expressed.
-------------------------------
STATE OF NEW JERSEY )
) ss.
COUNTY OF )
BE IT REMEMBERED, that on this _____ day of __________ 1997, before me
the subscriber, a notary public, personally appeared ______________ who, I am
satisfied, is the person who signed the within instrument as President of THE
FRESH JUICE COMPANY OF NEW YORK, INC., the corporation named therein, and he
thereupon acknowledged that the said instrument was signed, sealed with the
corporate seal and delivered by him as such officer and is the voluntary act and
deed of the corporation.
-------------------------------
30
<PAGE> 31
October 31, 1997
EXHIBIT A
RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF LEASE
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and public parts of the Property shall not be obstructed or
encumbered by Tenant or used by Tenant for any purpose other than ingress and
egress to and from the Premises. The Tenant will not use or permit to be used
the sidewalk area by motor vehicles, and will limit such vehicles to the
driveway and parking areas.
2. No awnings, air conditioning units or other projections shall be
attached to the outside walls or windowsills of the building on the Property or
otherwise project from the building.
3. The Tenant shall not erect, make or maintain on or attach or affix
to any part of the Premises including the windows and doors, any sign, picture
or other representation or advertisement or notice of any kind, without the
express written consent of the Landlord obtained in advance. Tenant shall have
the right to apply on the main entrance door to the Premises lettering of
approved type, size and style as well as company logo where applicable.
4. Tenant shall not lay linoleum or other similar floor covering so
that the same shall come in direct contact with the floor of the Premises, and
if linoleum or other similar floor covering is desired to be used, an
interlining of builder's deadening felt shall first be fixed to the floor by a
paste or other material that may easily be removed with water, the use of cement
or other similar adhesive material being expressly prohibited.
5. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises nor interfere with other tenants or those having business with
them. Tenant shall not place office machines or other equipment against walls
which divide the Premises from space leased to other Tenants.
6. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, and Tenant shall upon the termination of this
tenancy, deliver to Landlord all keys to the Premises either furnished to, or
otherwise procured by, Tenant and in the event of the loss of any keys so
furnished, Tenant shall pay to Landlord the cost thereof.
7. Tenant shall not keep in the Premises any explosives, cleaning fluid
or any inflammable material. Tenant shall not bring or place any bed or bedding
in the Premises and shall not use the Premises and shall not use the Premises as
a lodging place.
8. Landlord shall not be responsible to Tenant for the non-observance
or violation of any of these Rules and Regulations by any other tenants.
9. Tenant shall have the right, provided same is done in accordance
with the zoning ordinance of the municipality, to park trucks on the property
along the area wherein are located the loading docks. The Tenant shall not park
trucks in any other portion of the premises demised.
10. The Tenant shall advise Landlord, if Tenant's S.I.C. number is
changed from that otherwise indicated in paragraph 1(j).
31
<PAGE> 32
October 31, 1997
11. Tenant agrees that Tenant will supply the names, addresses and
telephone numbers of at least two representatives of the Tenant who can be
contacted in the event of an emergency. Tenant will keep such "emergency list"
current.
Upon notice by the Landlord to the Tenant of a breach of any
of the rules and regulations Tenant shall, within five (5) days thereafter,
comply with such rule and regulation and in the event Tenant shall not comply,
then the Landlord may at its discretion either: (1) cure such condition and add
any cost and expense incurred by the Landlord therefor to the next installment
of rental due under this Lease and the Tenant shall then pay such amount as
additional rent hereunder; or (2) treat such failure on the part of the Tenant
to remedy such condition as a material default of this Lease on the part of the
Tenant hereunder.
32
<PAGE> 33
October 31, 1997
<TABLE>
<CAPTION>
<S> <C>
LANDLORD: 280 WILSON AVENUE ASSOCIATES, L.L.C.
TENANT: THE FRESH JUICE COMPANY OF NEW YORK, INC.
PREMISES: 280 WILSON AVENUE
NEWARK, NEW JERSEY
- -------------------------------------------------------------------------------
PARAGRAPH 1 REFERENCE DATA
PARAGRAPH 2 DESCRIPTION OF PREMISES
PARAGRAPH 3 COMPLETION
PARAGRAPH 4 FIXED RENTAL
PARAGRAPH 5 EXPENSE RENT
PARAGRAPH 6 SECURITY DEPOSIT
PARAGRAPH 7 USE
PARAGRAPH 8 REPAIRS
PARAGRAPH 9 ASSIGNING AND SUBLETTING
PARAGRAPH 10 CONFORM TO LAW
PARAGRAPH 11 TENANT'S COMPLIANCE WITH ENVIRONMENTAL LAWS
PARAGRAPH 12 ADDITIONAL COVENANTS
PARAGRAPH 13 EXPIRATION OF TERM -
RETURN OF PREMISES IN GOOD CONDITION
PARAGRAPH 14 ACCESS TO PREMISES
PARAGRAPH 15 DAMAGE BY FIRE OR OTHER CASUALTY
PARAGRAPH 16 EMINENT DOMAIN
PARAGRAPH 17 WAIVER OF LANDLORD'S LIABILITY,
TENANT'S OWN INSURANCE
PARAGRAPH 18 WAIVER OF SUBROGATION
PARAGRAPH 19 INDEMNIFICATION BY TENANT
PARAGRAPH 20 BUILDING SERVICES
PARAGRAPH 21 DEFAULTS AND REMEDIES
PARAGRAPH 22 LANDLORD'S LIEN
PARAGRAPH 23 LATE CHARGE/SERVICE FEE
PARAGRAPH 24 EASEMENTS
PARAGRAPH 25 LANDLORD'S INABILITY TO PERFORM
PARAGRAPH 26 PARKING
PARAGRAPH 27 MECHANIC'S LIEN
PARAGRAPH 28 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
PARAGRAPH 29 SUBORDINATION
PARAGRAPH 30 LANDLORD'S RIGHT TO SHOW PREMISES
PARAGRAPH 31 QUIET ENJOYMENT
PARAGRAPH 32 TENANT'S ESTOPPEL
PARAGRAPH 33 FINANCIAL INFORMATION
PARAGRAPH 34 NO ABATEMENT OF RENT
PARAGRAPH 35 NOTICES
PARAGRAPH 36 NO PERSONAL LIABILITY OF LANDLORD
PARAGRAPH 37 SUBMISSION OF LEASE
PARAGRAPH 38 NO REPRESENTATIONS
PARAGRAPH 39 CAPTIONS
PARAGRAPH 40 NO WAIVER OR CHANGES
PARAGRAPH 41 RECORDING
PARAGRAPH 42 BROKER
PARAGRAPH 43 BINDING EFFECT
PARAGRAPH 44 ACCEPTANCE
PARAGRAPH 45 FIRST EXTENSION OF TERM
PARAGRAPH 46 SECOND EXTENSION OF TERM
PARAGRAPH 47 MISCELLANEOUS
EXHIBIT A RULES AND REGULATIONS
SCHEDULE A DESCRIPTION OF PREMISES
</TABLE>
33
<PAGE> 34
October 31, 1997
GUARANTY OF LEASE
THE FRESH JUICE COMPANY, INC., A DELAWARE CORPORATION ("Guarantor"),
whose address is 35 Walnut Avenue, Suite 4, Clark, New Jersey 07066, being the
owner of all the issued capital stock of THE FRESH JUICE COMPANY OF NEW YORK,
INC. and in full control of said stock, as a material inducement to and in
consideration of 280 WILSON AVENUE ASSOCIATES, L.L.C. ("Landlord") entering into
a written lease ("the Lease") with THE FRESH COMPANY OF NEW YORK, INC.("Tenant")
dated as of October 17, 1997 pursuant to which Landlord leased to Tenant, and
Tenant leased from Landlord, premises located in the County of Essex, State of
New Jersey, commonly known as 280 WILSON AVENUE, NEWARK, NEW JERSEY, all as more
particularly described in the Lease, irrevocably guaranties to Landlord, its
successors and assigns, of all the terms, obligations, covenants and agreements
under the Lease, and each of them, on the part of the Tenant, its successors and
assigns, to be observed or performed, and, without limiting the foregoing, the
full and punctual payment by Tenant and its successors and assigns of all
rentals, additional rentals and other sums of money, as and when they become due
and payable by Tenant, its successors and assigns, as provided in the Lease.
In accordance with the foregoing, and in order to induce Landlord to
enter into the Lease with Tenant and for good and valuable consideration, whose
receipt and adequacy are acknowledged by Guarantor, Guarantor agrees as follows:
48. The Guarantor irrevocably and unconditionally guaranties to the
Landlord, and the successors and assigns of the Landlord, the Tenant's full and
punctual performance of its obligations under the Lease and, without limiting
the foregoing, the full and punctual payment by Tenant of all rentals,
additional rentals and other sums of money, as and when they become due and
payable by Tenant, as provided in the Lease. The Guarantor waives notice of any
breach or default by the Tenant under the Lease. If Tenant defaults in the
performance of its obligations under the Lease, upon the Landlord's request, the
Guarantor will perform the Tenant's obligations under the Lease.
49. Any act of the Landlord, or the successors or assigns of the
Landlord, consisting of a waiver of any of the terms or conditions of the Lease,
or the giving of any consent to any matter related to or thing relating to the
Lease, or the granting of any indulgences or extensions of time to the Tenant,
may be done without notice to the Guarantor and without affecting the
obligations of the Guarantor under this Guaranty.
50. The obligations of the Guarantor under this Guaranty will not be
released by the Landlord's receipt, application, or release of security given
for the performance of the Tenant's obligations under the Lease, not by any
modification of the Lease. In case of any such modification, the liability of
the Guarantor will be deemed modified in accordance with the terms of any such
modification. If, by application of any funds by Landlord as aforesaid, Tenant's
obligations are reduced, then the Guarantor's obligations shall also be reduced
so that they shall not be greater than the obligations of the Tenant.
51. The liability of the Guarantor under this Guaranty will not be
affected by (a) the release or discharge of the Tenant from its obligations
under the Lease in any creditors', receivership,
<PAGE> 35
October 31, 1997
bankruptcy, or other proceedings, or the commencement or pendency of any such
proceedings; (b) the impairment, limitation, or modification of the liability of
the Tenant or the estate of the Tenant in bankruptcy, or of any remedy for the
enforcement of the Tenant's liability under the Lease, resulting from the
operation of any present or future bankruptcy code or other statute, or from the
decision in any court; (c) the rejection or disaffirmance of the Lease in any
such proceedings; (d) the assignment or transfer of the Lease by the Tenant; (e)
any disability or other defense of the Tenant; or (f) the cessation from any
cause whatsoever of the liability of the Tenant under the Lease.
52. Until all of the Tenant's obligations under the Lease are fully
performed, the Guarantor: (a) waives any right of subrogation against the Tenant
by reason of any payments or acts of performance by the Guarantor, in compliance
with the obligations of the Guarantor under this Guaranty; (b) waives any other
right which the Guarantor may have against the Tenant by reason of any one or
more payments or acts in compliance with the obligations of the Guarantor under
this Guaranty; and (c) subordinates any liability or indebtedness of the Tenant
held by the Guarantor to the obligations of the Tenant to the Landlord under the
Lease.
53. The provisions of the Lease may be changed by agreement between
Landlord and Tenant at any time, or by course of conduct, without the consent of
or without notice to Guarantor. This Guaranty will apply to the Lease, any
extension or renewal of the Lease, and any holdover term following the term, or
any such extension or renewal and shall guaranty the performance of the Lease as
so changed.
54. This Guaranty may not be changed, modified, discharged, or
terminated orally or in any manner other than by an agreement in writing signed
by the Guarantor and the Landlord.
55. If Guarantor is more than one (1) person, Guarantor's obligations
are joint and several and are independent of Tenant's obligations. A separate
action may be brought or prosecuted against any Guarantor, whether the action is
brought or prosecuted against any other Guarantor or Tenant, or all, or whether
any other Guarantor or Tenant or all are joined in the action.
56. The Guarantor will pay on demand the reasonable attorneys' fees and
costs incurred by the Landlord, or its successors and assigns, in connection
with the enforcement of this Guaranty.
57. The Guarantor's obligations under this Guaranty shall be binding on
Guarantor's successors.
58. This Guaranty shall commence on the Commencement date of the Lease
and shall terminate upon Tenant's compliance with all of its obligations under
the Lease.
59. Guaranty hereby submits itself to the jurisdiction of the courts of
the State of New Jersey and to the jurisdiction of the United States District
Court for the District of New Jersey for the purposes of any suit, action or
other proceeding brought by Landlord arising out of or based upon this Lease.
Guarantor hereby waives and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an
<PAGE> 36
October 31, 1997
inconvenient forum, that the venue of the suit, action or proceeding is proper
or that this Lease may not be enforced in or by such court.
ATTEST:
Guarantor
THE FRESH JUICE COMPANY, INC.
/s/ Mark Feldman By: /s/ Steven Bogen
- ------------------------- --------------------------
Asst. Secretary Steven Bogen, CEO
DATED: ______________ __, 1997
STATE OF NEW JERSEY )
) ss.:
COUNTY OF )
BE IT REMEMBERED, that on this ____ day of ________, 1997 before me,
the subscriber, personally appeared, _____________, who, I am satisfied, is the
person who signed the within instrument as __________ of THE FRESH JUICE
COMPANY, INC., the corporation named therein and he/she thereupon acknowledged
that the said instrument made by the corporation and sealed with its corporate
seal, was signed, sealed with the corporate seal and delivered by him/her as
such officer and is the voluntary act and deed of the corporation, made by
virtue of authority from its Board of Directors.
---------------------------
<PAGE> 1
Exhibit 10(h)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the 18th
day of November, 1996, between THE FRESH JUICE COMPANY OF CALIFORNIA, INC. (the
"Company"), having offices at 875 West Eighth Street, Azusa, California,
91702-2247, a wholly owned subsidiary of THE FRESH JUICE COMPANY, INC., a
Delaware corporation, and Jeffrey P. Heavirland, an individual residing at
____________________________.
WHEREAS, on November 18, 1996 the Company entered into an
agreement to merge with Hansen's Juices, Inc., a California corporation,
pursuant to the terms of that certain Merger Agreement dated November 18, 1996
by and among The Fresh Juice Company, Inc., the Company, Hansen's Juices, Inc.,
Gary Hansen, Jeffrey Heavirland, Anthony Kane, Burton S. Rosky and Leatrice J.
Rosky Family Trust of 1995, Gary Todd, David Burger and Timothy Kane (the
"Merger Agreement"); and
WHEREAS, in connection with such merger, the Company desires
to employ the Employee upon the terms and conditions set forth below; and
WHEREAS, the Employee desires to accept such employment upon
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the parties hereto agree
as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1. EMPLOYMENT. The Company hereby employs the Employee to
serve as its President and Chief Executive Officer with such powers and duties
as the Board of Directors of the Company shall assign or vest in him at any time
and from time to time.
<PAGE> 2
(b) The Employee's services hereunder will be rendered at the
Company's principal executive offices in California, or such other place as the
Company may direct from time to time. It is understood and agreed, however, that
during the Term (as defined in Section 3 below) the Employee's duties may
require periods of travel from time to time as the Company may request.
1.2. ACCEPTANCE OF EMPLOYMENT. (a) The Employee hereby accepts
such employment and agrees to serve as described in Section 1.1 hereof.
(b) The Employee shall report to the Board of Directors and
the Chief Executive Officer of the Company.
(c) The Employee shall not, during the Term (as defined in
Section 3 below), actively engage in any other business activity unless the
Employee has previously advised the Board of Directors of the Company in writing
of such proposed business activity and the Board of Directors of the Company
specifically advises the Employee in writing that it consents thereto.
(d) The Employee further agrees to accept election and to
serve during all or any part of the Term as an officer and director of the
Company, its parent company, The Fresh Juice Company, Inc. or any one or more of
the Company's or the Parent Company's direct or indirect subsidiaries or
affiliates (together, "Subsidiaries" and each, a "Subsidiary"), without any
additional compensation therefor other than that specified in this Agreement, if
so elected or appointed to any such position by the stockholders or Board of
Directors of the Company, the Parent Company or of any Subsidiary.
(e) The Employee agrees to dedicate at least 40 hours per
week for 49 weeks of the year towards employment at the Company.
2
<PAGE> 3
2. EFFECTIVE DATE.
This Agreement shall become effective on the later of December
1, 1996, or such date on which the transactions contemplated in the Merger
Agreement have closed and have become effective (the "Effective Date").
3. TERM OF EMPLOYMENT.
Subject to the provisions of Section 12 hereof, the term of
this Agreement shall commence on the Effective Date and shall continue for a
period of three (3) years (the "Term").
4. COMPENSATION.
4.1. SALARY; ANNUAL BONUS. (a) As compensation for all
services to be rendered by the Employee, to or at the request of the Company or
any of its subsidiaries, pursuant to this Agreement, the Company agrees to pay
the Employee a minimum annual salary of $150,000 (which salary includes all
compensation received from, or paid by, the Company, the Parent Company and any
Subsidiary to the Employee) plus an annual bonus, which bonus, if any, shall be
determined by the Board of Directors of the Company. Such salary shall be
payable in equal weekly installments.
4.2. BENEFITS. Commencing on the date hereof until such time
as otherwise determined by the Board of Directors of the Company, the Employee
shall continue to participate in and enjoy the benefits of the health insurance
and 401(k) plan in effect at the Company existing immediately prior to the date
hereof; and thereafter the Employee shall be entitled to participate in and
enjoy the benefits of any retirement, pension, health insurance, or other
similar plan or plans which may be instituted by the Company for the benefit of
its executive officers or employees generally, upon such terms as may be therein
provided.
3
<PAGE> 4
4.3. STOCK OPTIONS.
On the Effective Date, Employer shall grant Employee an option
to purchase 60,000 shares of the Common Stock of The Fresh Juice Company, Inc.
pursuant to the terms of the Incentive Stock Option Agreement annexed hereto as
Exhibit A and subject to The Fresh Juice Company, Inc.'s 1996 Incentive Stock
Option Plan.
5. AUTOMOBILE. The Company shall provide the Employee with
an appropriate car allowance or the use of an automobile while he is employed by
the Company. In the event an automobile is provided instead of an automobile
allowance, the automobile will be of such make and model as the Employee shall
reasonably determine. The Company agrees to pay all costs of operating,
maintaining, servicing, repairing and insuring said automobile along with the
business related costs of any car phone which the Employee has or elects to have
installed in such automobile. In the event this Agreement continues beyond the
initial three-year Term, the Company shall provide the Employee with a new
automobile every three years while he is employed by the Company.
6. VACATION, HOLIDAYS AND PERSONAL DAYS. (a) The Employee
shall receive a paid vacation of three (3) weeks a year during the term of this
Agreement. In the event there is any unused vacation time due to the Employee
upon termination of his employment with the Company, he shall be paid for such
unused vacation time. Unused vacation time shall not accrue from year to year.
(b) The Employee shall be entitled to as many holidays and
personal days as are in accordance with the Company's policy then in effect for
its executive officers generally upon such terms as may be provided to all
executive officers of the Company generally.
4
<PAGE> 5
7. EXPENSES. The Company recognizes that the Employee will
incur expenses in connection with his duties hereunder and the business of the
Company for items such as entertaining, travel, hotels, gifts and similar items.
The Company agrees to provide the Employee with a corporate American Express
Card in order to pay such expenses and to otherwise reimburse the Employee for,
all such expenses paid or incurred by him (and/or, if requested by the Employee,
to advance the Employee amounts required to cover such expenses).
8. DISABILITY. In the event the Employee becomes ill or
disabled during the duration of this Agreement, so that he is unable to perform
his duties to the Company hereunder, this Agreement shall continue in full force
and effect and the Employee's compensation and other benefits required to be
paid or maintained for the Employee by the Company shall continue to be paid and
maintained by the Company during the duration of such illness or disability;
provided, however, that in the event the Employee is ill or disabled for a
continuous period of six months or longer during which time he is unable to
effectively perform his duties to the Company hereunder, the Company shall have
the right, at its option, at any time during the continuance of said illness or
disability, after the said six month period, to terminate this Agreement upon 60
days written notice to the Employee.
9. OTHER BENEFITS. This Agreement shall not be deemed to be in
lieu of any rights, benefits or privileges to which the Employee may be entitled
as an employee of the Company under any retirement, pension, profit sharing,
stock option, incentive or other bonus, life insurance, disability insurance or
other plan or plans which may be adopted by the Company, it being understood
that the Employee shall have the same rights and privileges to participate in
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<PAGE> 6
such plans and benefits as any other employee of the Company during the duration
of his employment.
10. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in
Control of the Company shall have occurred prior to the termination of the
Employee's employment or the termination of the Employee's employment is
occurring in connection with a Change in Control of the Company, the Employee
shall be entitled to the benefits provided in Section 10 hereof upon the
subsequent termination of his employment during the term of this Agreement or
any renewal period, as the case may be, unless such termination is (i) because
of the Employee's death or retirement (as described in Sections 12(a) and
12(b)), (ii) by the Company for Cause (as defined in Section 12(c) or disability
(as discussed in Section 8, or (iii) by the Employee other than for Good Reason
(as defined below).
(a) Good Reason. In connection with a Change in Control, the
Employee shall be entitled to terminate his employment for Good Reason and such
termination by the Employee shall be deemed to be termination of the Employee by
the Company. For purposes of this Agreement, "Good Reason" shall mean without
the Employee's express written consent, the occurrence, after a Change in
Control of the Company, of any of the following circumstances, unless in the
case of clauses (i), (v), (vi) or (vii) below, such circumstances are fully
corrected prior to the date of termination specified in the "Notice of
Termination" required by subsection 10(b) hereto:
(i) the assignment to the Employee of any duties inconsistent
with the Employee's status as a senior executive officer of the Company
or a substantial alteration
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<PAGE> 7
in the nature or status of the Employee's responsibilities from those
in effect immediately prior to a Change in Control of the Company;
(ii) a reduction by the Company in the Employee's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time;
(iii) a new Company requirement is instituted which requires
the Employee to change his work location to a location different from
that before the Change in Control but not including (a) a requirement
that the Employee travel on the Company's business to an extent
substantially consistent with his present business travel obligations,
or (b) a change of the location of the Company's principal offices of
not more than thirty (30) miles from the location of the Company's
principal offices prior to such change;
(iv) the failure by the Company, without the Employee's
consent, to pay the Employee any portion of his current compensation,
or to pay to the Employee any portion of an installment of deferred
compensation under any deferred compensation program of the Company
within seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect any
compensation plan in which the Employee participates immediately prior
to the Change in Control of the Company which is material to the
Employee's total compensation, or any substitute plans adopted prior to
the Change in Control, unless an equitable arrangement (embodied in an
on-going substitute or alternative plan) has been made with respect to
such plan in connection with the Change in Control of the Company, or
the failure by the Company to continue the Employee's participation
therein;
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<PAGE> 8
(vi) the failure by the Company to continue to provide the
Employee with benefits substantially similar to those enjoyed by the
Employee under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Employee was
participating at the time of a Change in Control of the Company, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Employee of any
such benefits or deprive the Employee of any material fringe benefit
enjoyed by the Employee at the time of the Change in Control of the
Company, or the failure by the Company to provide the Employee with the
number of paid vacation days to which the Employee is entitled to under
this or any subsequent Employment Agreement then in effect or on the
basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in
Control; or
(vii) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 13 hereof.
The Employee's right to terminate his employment pursuant to
this Subsection 10(a) shall not be affected by his incapacity due to physical or
mental illness. The Employee's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstances constituting Good
Reason hereunder.
(b) Notice of Termination. Any purported termination by the
Company or by the Employee shall be communicated by written notice of
termination ("Notice of Termination") to the other party hereto in accordance
with Section 15 hereof and shall state the grounds for
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<PAGE> 9
termination and the effective date thereof. Any purported termination of the
Employee's employment which is not effected pursuant to a Notice of Termination
shall not be effective in discharging the Employee.
11. COMPENSATION UPON TERMINATION FOLLOWING CHANGE IN CONTROL.
(a) If the Employee's employment by the Company shall be terminated following a
Change in Control of the Company in connection with a Change in Control and such
termination is for reasons other than for Cause (as hereinafter defined),
retirement, death or disability or if the Employee is deemed terminated pursuant
to Section 10(a), then the Employee shall be entitled, at his election, to the
benefits provided below:
(i) The Company shall continue to pay the Employee, except as
otherwise provided below, either (a) his full base salary (as specified
in Section 4 hereof) for the remainder of the term of this Agreement or
any renewal period, as the case may be, at the rate in effect on the
date of termination, plus all other amounts to which he is entitled
under any compensation plan of the Company on the date of termination
or (b) a lump sum severance payment (the "Severance Payment") equal to
2.99 times his "base amount", as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and reduced as
discussed below. Such base amount shall be determined in accordance
with temporary or final regulations, if any, promulgated under Section
280G of the code and based upon the advice of the tax counsel referred
to in clause (ii), below. The Employee shall make his election by
written notice to the Company within ten (10) business days after he
receives a Notice of Termination or, if the Employee is terminating
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<PAGE> 10
this Agreement for Good Reason, such election shall be stated in his
Notice of Termination to the Company.
(ii) The Severance Payment shall be reduced by the amount of
any other payment or the value of any benefit received or to be
received by the Employee in connection with a Change in Control of the
Company or the Employee's termination of employment (whether pursuant
to the terms of this Agreement, any other plan, agreement or
arrangement with the Company, any person whose actions result in
control, or any person affiliated with the Company or such person)
unless (a) the Employee shall have effectively waived his receipt or
enjoyment of such payment or benefit prior to the date of payment of
the Severance Payment, (b) in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to the Employee, such
other payment or benefit does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, or (c) in the
opinion of such tax counsel, the Severance Payment (in its full amount
or as partially reduced under this clause (ii), as the case may be)
plus all other payments or benefits which constitute "parachute
payments" within the meaning of Section 280G(b)(2) of the Code are
reasonable compensation for services actually rendered, within the
meaning of Section 280G(b)(4) of the Code or are otherwise not subject
to disallowance as a deduction by reason of Section 280G of the Code.
The value of any non-cash benefit or any deferred cash payment shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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<PAGE> 11
(iii) Except to the extent that such payments would result
(or, if paid after the Severance Payment, would have resulted) under
clause (ii) above, in a reduction in the Severance Payment,
notwithstanding any provision of an incentive plan, if any, the Company
shall pay to the Employee a lump sum amount equal to the sum of (x) any
incentive compensation which has been allocated or awarded to him for a
fiscal year or other measuring period preceding the date of termination
but which has not yet been paid, and (y) all legal fees and expenses
incurred by the Employee as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided hereunder), such
payment to be made at the later of the times provided in clause (iv),
below, or within five (5) days after the Employee's request for payment
accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
(iv) The payments provided for in clauses 11(a)(i) and
11(a)(iii) above, shall (except as otherwise provided therein) be made
not later than the fifth day following the date of termination;
provided, however, that if the amounts of such payments, and the
limitation on such payments set forth in clause 11(a)(ii) above, cannot
be finally determined on or before such day, the Company shall pay to
the Employee on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at
11
<PAGE> 12
the rate provided in Section 1247(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the
thirtieth day after the date of termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Employee, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section
1247(b)(2)(B) of the Code).
(v) The Employee shall be required to mitigate the amount of
any payment provided for in this Section 11 by seeking other employment
and the amount of any payment or benefit provided for in this Section
11 shall be reduced by any compensation earned by the Employee as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Employee to the
Company or otherwise.
12. TERMINATION. This Agreement shall terminate earlier than
the stated term in the following circumstances:
(a) Death. In the event of the Employee's death during the
term of this Agreement or any renewal period, as the case may be, this Agreement
shall terminate on the date of death.
(b) Retirement. The Employee retires voluntarily under the
Company's retirement plan.
(c) Cause. The Company may terminate the Employee for
Cause. "Cause" shall mean termination upon (i) the willful and continued failure
by the Employee to perform substantially his duties with the Company or the
Employee's willful failure to follow
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<PAGE> 13
any directive issued by the Board of Directors or Chief Executive Officer (other
than any such failure resulting from the Employee's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Employee for Good Reason pursuant to Section
10 hereof), 10 days after a written demand for substantial performance is
delivered to the Employee by the Board of Directors which specifically
identifies the manner in which the Board of Directors believes that the Employee
has not substantially performed his duties, (ii) any material breach of the
Agreement by the Employee, (iii) any willful, intentional, reckless or negligent
act by the Employee having the effect of materially injuring the business,
financial condition or prospects of the Company, the Parent Company or any
subsidiary or the reputation of the business or injury any customer, supplier,
employee or other business relationships of the Company, the Parent Company or
any Subsidiary, or (iv) the conviction of the Employee of any felony or a crime
involving larceny. For purposes of this Section 12(c), no act, or failure to
act, on the Employee's part shall be considered "willful" unless done, or
omitted to be done, by the Employee not in good faith and without the reasonable
belief that the Employee's action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Employee a resolution duly adopted by the majority vote of the entire
membership of the Board of Directors, exclusive of the Employee, at a meeting of
the Board of Directors called and held for such purpose, finding that in the
good faith opinion of the Board of Directors, the Employee was guilty of conduct
set forth above in clauses (i), (ii), (iii) or (iv) of this Section 12(c) and
specifying the particulars thereof in detail; provided, however, that if the
Employee is terminated for alleged "Cause" at any time
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<PAGE> 14
during the term or any renewal thereof and it is later determined by a court of
competent jurisdiction that no "Cause" existed for the termination, the Company
shall be liable for all salary (but not bonuses, benefits and automobile
entitlement) due and not yet paid under the Term or any renewal thereof and such
sum shall be paid in a lump sum to the Executive with pre-judgment and
post-judgment interest thereon.
(d) Resignation. The Employee resigns.
13. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns,
including without limitation, any company which may acquire all or substantially
all of the Company's assets and business or into which the Company may be
merged, and upon the Employee, his heirs, legal representatives, successors and
assigns. The Employee may assign his right to benefits under this Agreement but
not his obligations under this Agreement.
14. WAIVER. The failure of the Company or the Employee to
insist, in any one or more instances, on performance of any term or condition of
this Agreement, shall not be construed as a waiver of any such term, or
condition, or any other term or condition, and the obligations of the parties
with respect thereto shall continue in full force and effect.
15. NOTICES. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered in person, (b) one business
day after having been sent by overnight courier, or (c) three (3) days after
being mailed by registered or certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
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If to the Company, to:
Hansen's Juices, Inc.
875 West Eighth Street
Azusa, CA 91702-2247
and
with copy to:
The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Attention: Board of Directors
Facsimile No.: (201) 396-1112
and:
Bourne, Noll & Kenyon
382 Springfield Avenue
Summit, New Jersey 07901
Attention: Craig M. Lessner, Esq.
Facsimile No.: (908) 277-6808
If to the Employee, to:
Jeffrey P. Heavirland
c/o The Fresh Juice Company of California, Inc.
875 West Eighth Street
Azuza, CA 91702-2247
or at such other addresses as such parties shall have specified by written
notice to the other part hereto.
16. GOVERNING LAW. This Agreement has been made and shall be
construed in accordance with the laws of the State of California. This
Agreement, when effective, supersedes all previous agreements between the
Employee and Company regarding employment.
17. RENEWAL. Unless Employee is terminated for Cause (as
defined in Section 12 hereof) either during the Term or at any time thereafter,
the Employee shall be entitled to a
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severance payment of $150,000 upon termination of his employment with the
Company (or its Parent Company or any Subsidiary, as the case may be). The
severance payment shall be paid in 50 weekly installments of $3,000 each,
beginning 30 days after such termination; provided, however, no such severance
payments shall become due until Employee has executed and delivered to the
Company a General Release acceptable to the Company and its counsel, pursuant to
which Employee releases any and all claims Employee has or may have against the
Company, the Parent Company and any Subsidiary and their respective officers,
directors, employees, agents, attorneys, etc.
18. ALTERNATIVE DISPUTE RESOLUTION. The parties hereto agree
to settle any dispute arising hereunder pursuant to the provisions of The New
Jersey Alternative Procedure for Dispute Resolution Act (N.J.S.A. 2A:23A-1 et
seq.) and to use J.A.M.S./ENDISPUTE (Orange County, California) and a retired
judge associated therewith as the referee under such procedure.
19. PROTECTION OF CONFIDENTIAL INFORMATION.
19.1. CONFIDENTIALITY. In view of the fact that the Employee's
work as an Executive of the Company will bring him into close contact with many
confidential affairs of the Company, the Parent Company and the Subsidiaries,
including the names of the Company's, the Parent Company's and the Subsidiaries'
customers and suppliers, matters of a business nature such as information about
costs, profits, markets, sales, other information not readily available to the
public, and plans for future developments (hereinafter collectively
"Confidential Matters"), the Employee agrees: (i) to keep secret all
Confidential Matters of the Company, the Parent Company and the Subsidiaries,
and not to disclose such Confidential Matters to anyone outside
16
<PAGE> 17
of the Company, the Parent Company and the Subsidiaries, either during or after
his employment with the Company, except with the written consent of the
Company's Board of Directors at each time as to any Confidential Matter which is
to be disclosed, and (ii) to deliver promptly to the Company on termination of
his employment, or at any time the Company may so request, all memoranda, notes,
records, reports, lists and other documents (and all copies thereof) and
materials relating to the Company's, the Parent Company's and the Subsidiaries'
business which he may then possess or have under this control.
19.2. AGREEMENT NOT TO COMPETE. During the period from the
date hereof until three (3) years after the termination or nonrenewal of the
Employee's employment with the Company, the Parent Company and/or the Subsidiary
for any reason, the Employee shall not (i) purchase, acquire or otherwise own an
ownership interest of greater than 5% of a company or other entity which is at
such time engaged in the juice beverage industry and active in the same
geographic area as the Company, the Parent Company or any Subsidiary, is
otherwise competitive with the Company, the Parent Company or any Subsidiary, or
is attempting to enter such industry in such geographic area or to become
otherwise competitive; (ii) act as a consultant, officer, director, employee or
in any other capacity, whose responsibilities are related to the juice beverage
industry in the same geographic area as the Company, the Parent Company or any
Subsidiary operates; or (iii) solicit in any way (for juice or other products)
or entice away from the Company, the Parent Company or any Subsidiary (a) any
clients or account of the Company, the Parent Company or any Subsidiary which
were active clients or accounts of the Company, the Parent Company or any
Subsidiary during the Employee's employment with the Company, the Parent Company
or any Subsidiary, (b) any prospective client or account of the
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Company, the Parent Company or any Subsidiary, which the Company, the Parent
Company or any Subsidiary was actively engaged in soliciting during the
Employee's employment with the Company, the Parent Company or any Subsidiary,
(c) any employee of the Company, the Parent Company or any Subsidiary (unless
such employee shall have either been discharged by such entity or shall have
otherwise ceased to be employed by such entity for a period of 365 days) or (d)
any manufacturers or suppliers of the Company, the Parent Company or any
Subsidiary, which were manufacturers or suppliers of the Company, the Parent
Company or any Subsidiary during the Employee's employment with the Company, the
Parent Company or any Subsidiary. Notwithstanding the foregoing, however, if the
Company fails to make any payment hereunder to the Employee when due, the
provisions of this Section 19.2 shall not apply.
19.3. REMEDIES. The Employee recognizes that any breach of the
covenants contained in Sections 19.1 or 19.2 hereof would irreparably injure the
Company, the Parent Company and/or the Subsidiaries, as the case may be.
Accordingly, the Employee agrees that any breach of the covenants contained in
Sections 19.1 or 19.2 hereof will result in forfeiture to the Company as
liquidated damages of any and all amounts otherwise payable to the Employee
under this Agreement as of and from the date of such breach. Furthermore, the
Company may, in addition to pursuing its other remedies, obtain an injunction
against the Employee from any court having jurisdiction over the matter,
restraining any further violation of this Agreement by the Employee and no bond
or other security shall be required in connection with such injunction.
(b) In the event of any judicial proceeding relating to a
breach by either party hereunder, (i) all sums determined to be due hereunder in
such judicial proceeding shall be due and payable in a lump sum (unless
otherwise ordered by the court in which such judicial
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proceeding is brought) and (ii) the non prevailing party shall be liable for all
fees and expenses, including attorneys' fees, incurred by the prevailing party
in connection with any action taken to enforce this Agreement or obtain judgment
for a breach hereof.
19.4. REFORMATION. If any of the covenants contained in
Sections 19.1 or 19.2 hereof, or any part thereof, are held to be unenforceable
because of the scope or duration of any such provision, the parties agree that
the body making such determination shall have the power to reduce the scope or
duration of such provision and, in its reduced form, said provision shall be
enforceable. If any of the covenants in Sections 19.1 or 19.2 hereof, or any
part thereof, is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenants, which shall be given full force
and effect without regard to the invalid provisions.
20. CHANGE OF OFFICE NOT A BREACH. Notwithstanding anything
herein to the contrary, in the event the Company's Board of Directors determines
that it is in the best interest of the Company to replace Employee as President,
the Company shall not be in breach of this Agreement so long as Employee
continues to remain employed by the Company as a Senior Executive Officer with
duties commensurate with such position.
21. REPRESENTATIONS AND WARRANTIES OF THE EMPLOYEE.
The Employee hereby represents and warrants to the Company
that (i) delivery and performance of this Agreement by the Employee does not and
will not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which the Employee is a
party or by which he is bound, (ii) the Employee is not a party to or bound by
any employment agreement, noncompete agreement or confidentiality agreement with
any other person or entity, (iii) upon the execution and delivery of this
Agreement by the
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Company, this Agreement shall be the valid and binding obligation of the
Employee, enforceable in accordance with its terms, and (iv) as of the date
immediately prior to the date hereof, none of the Company or its Subsidiaries is
in any way indebted or obligated to the Employee and the Employee is in no way
indebted or obligated to the Company or any of its Subsidiaries, other than as
set forth in, pursuant to or in connection with the Merger Agreement.
22. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Employee
that (i) the execution, delivery and performance of this Agreement by the
Company does not and will not conflict with, breach, violate or cause a default
under any contract, agreement, instrument, order, judgment or decree to which
the Company is a party or by which it is bound and (ii) upon the execution and
delivery of this Agreement by the Employee, this Agreement shall be the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting the enforceability of creditors'
rights generally and that equitable remedies may be granted in the discretion of
a court.
23. GENERAL.
23.1. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This
Agreement, and all rights, duties and remedies hereunder shall be governed by
and construed in accordance with the laws of the State of California, without
regard to the conflict of law principles thereof.
(b) Subject to Section 18, the parties agree to submit
themselves to the jurisdiction of the courts of the State of California and the
United States District Court for the
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jurisdiction covering the State of California for the resolution of any dispute
in connection with or arising out of this Agreement and the transactions
contemplated hereunder.
23.2. TAX WITHHOLDING. All payments made under this Agreement
shall be reduced by any deductions or amounts to be withheld as shall be
required by applicable law and regulations.
23.3. SURVIVAL. This Agreement shall terminate and all rights
and obligations of the Company and the Employee hereunder shall cease upon
termination of the Employee's employment; provided, however, that those rights
and obligations set forth in Sections 4.1 (unless the Employee's employment
hereunder is terminated pursuant to Section 12 hereof) and 19 of this Agreement
shall survive and continue in full force and effect.
23.4. DESCRIPTIVE HEADINGS. The section headings contained
herein are for reference purposes only and shall not in any way effect the
meaning or interpretation of this Agreement.
23.5. ENTIRE AGREEMENT. This Agreement, including any exhibits
hereto, sets forth the entire agreement and understanding of the partes relating
to the subject matter hereof and thereof and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof and thereof.
23.6. NO THIRD PARTY CONTRACT RIGHTS. This Agreement is
intended solely for the benefit of the parties hereto. Nothing herein shall be
construed or deemed to create any rights or benefits to any third parties or
third party beneficiaries.
23.7. SEVERABILITY. The invalidity of all or any part of any
section of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such
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section. If any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable.
23.8. NO CONFLICT. The Employee represents and warrants to
the Company that he is subject to no presently existing written or oral
employment agreement or non-competition agreement, that he has made no
commitment of any kind inconsistent with the provisions of this Agreement and
his duties hereunder, and that he is under no disability of any kind to enter
into this Agreement and to perform all of his obligations hereunder.
23.9. ACTS OF THE COMPANY. The Employee agrees that the
Employee may not, as an officer, director or shareholder of the Company (or the
Parent Company or any Subsidiary, if and when applicable), take any action on
behalf of the Company, the Parent Company or any Subsidiary with respect to this
Agreement and the matters of the business of the Company, Parent Company or any
Subsidiary which relate to the Employee personally or to his family without
approval of the Board of Directors of the Company.
23.10. AMENDMENTS; WAIVERS. This Agreement may be amended,
modified superseded, canceled, renewed or extended, and the terms or covenants
hereof may be waived, only by a written instrument executed by both of the
parties hereto, or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach
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of any other term or covenant contained in this Agreement, or shall affect the
validity of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first written.
Attest: THE FRESH JUICE COMPANY OF
CALIFORNIA, INC.,
a wholly owned subsidiary of
THE FRESH JUICE COMPANY, INC.
/s/ Steven Smith, Asst. Secr. By: /s/ Steven M. Bogen, C.E.O.
- --------------------------------- ---------------------------
Steven Smith, Assistant Secretary Steven M. Bogen
Chief Executive Officer
Witness:
/s/ Burton S. Rosky /s/ Jeffrey Heavirland
- --------------------------------- ----------------------------
Burton S. Rosky Jeffrey Heavirland
23
<PAGE> 1
EXHIBIT 10(i)
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: June 17, 1992.
Section 1.02. Landlord (include legal entity): Pruco Life Insurance
Company, an Arizona corporation.
Address of Landlord: 2029 Century Park East, Suite 3600, Los Angeles,
California, 90067, Attention: Vice President, Property Management.
Section 1.03. Tenant (include legal entity): Hansen's Juices, Inc.
Address of Tenant: 875 West Eighth Street, Azusa, California 91702.
Section 1.04. Property: The Property is part of Landlord's multi-tenant
real property development known as Azusa Industrial Center and described or
depicted in Exhibit "A" (the "Project"). The Project includes the land, the
buildings and all other improvements located on the land, and the common areas
described in Paragraph 4.05(a). The Property is (include street address,
approximate square footage and description) 875 West Eighth Street, Azusa,
California 91702; approximately 34,560 square feet (part of a larger) industrial
warehouse facility; east side of the building.
Section 1.05. Lease Term: 10 years 6 months beginning on December 1, 1992
or such other date as is specified in this Lease, and ending on May 31, 2003.
Section 1.06. Permitted Uses: (See Article Five) Processing of fresh fruit
and vegetable juices, food processing and packaging, and other reasonably
related uses and no other use.
Section 1.07. Tenant's Guarantor: (If none, so state) None.
Section 1.08. Brokers: (See Article Fourteen) (If none, so state)
Landlord's Broker: CB Commercial Real Estate Group, Inc.
Tenant's Broker: Grubb & Ellis
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen) $ per separate agreement.
Section 1.10. Initial Security Deposit: (See Section 3.03) $11,899.00.
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: (See Section
4.05) in common with other tenants.
Section 1.12. Rent and Other Charges Payable by Tenant: *See Insert 3.01
for schedule of Base Rent and amortized Tenant Improvement payments
(a) BASE RENT: _____________________________________ Dollars ($_______)
per month as provided in Section 3.01, _________________________________________
________________________________________________________________________________
____________________________________
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04);
(iv) Tenant's Initial Pro Rata Share
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of Common Area Expenses 8% (See Section 4.05); (v) Impounds for Insurance
Premiums and Property Taxes (See Section 4.08); (vi) Maintenance, Repairs and
Alterations (See Article Six).
Section 1.13. Landlord's Share of Profit on Assignment or Sublease: See
Paragraph 18 of Rider (See Section 9.05) One Hundred Percent (100%) of the
Profit (the "Landlord's Share").
Section 1.14. Riders: The following Riders are attached to and made a part
of this Lease: (If none, so state) See Rider of Additional Terms, Paragraphs
15-20 attached hereto and made a part hereof.
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Delay in Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non- delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60)-day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to
the Commencement Date, Tenant's occupancy of the Property shall be subject to
all of the provisions of this Lease. Early occupancy of the Property shall not
advance the expiration date of this Lease. Tenant shall pay Base Rent and all
other charges specified in this Lease for the early occupancy period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify and defend Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be
a "month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of
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this Lease, Tenant shall pay Landlord the Base Rent in the amount of $11,899 for
the seventh month of the Lease Term. On the first day of the eighth month of the
Lease Term and each month thereafter, Tenant shall pay Landlord the Base Rent,
in advance, without offset, deduction or prior demand. The Base Rent and
amortized tenant improvement costs shall be payable at Landlord's address or at
such other place as Landlord may designate in writing.
* See Insert 3.01
Section 3.02. Cost of Living Increases. The Base Rent shall be increased
on each date (the "Rental Adjustment Date") stated in Paragraph 19 in accordance
with the increase in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index for All Urban Consumers (all items for the
geographical Statistical Area in which the Property is located on the basis of
1982-1984 = 100) (the "Index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately
before each Rental Adjustment Date shall be increased by the percentage that the
Index has increased from the date (the "Comparison Date") on which payment of
the Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two Indices, and the new Base Rent. Any increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum or maximum increase,
provided for in Paragraph 1.12(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase within
ten (10) days after Landlord's notice. If the format or components of the Index
are materially changed after the Commencement Date, Landlord shall substitute an
index which is published by the Bureau of Labor Statistics or similar agency and
which is most nearly equivalent to the Index in effect on the Commencement Date.
The substitute index shall be used to calculate the increase in the Base Rent
unless Tenant objects to such index in writing within fifteen (15) days after
receipt of Landlord's notice. If Tenant objects, Landlord and Tenant shall
submit the selection of the substitute index for binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association at its office closest to the Property. The costs of arbitration
shall be borne equally by Landlord and Tenant.
Section 3.03. Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a
cash Security Deposit in the amount set forth in Section 1.10 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord's written request.
Tenant's failure to do so shall be a material default under this Lease. Landlord
shall not be required to keep the Security Deposit separate from its other
accounts and no trust relationship is created with respect to the Security
Deposit. See Insert 3.03.
(b) Each Time the Base Rent is increased, Tenant shall deposit additional
funds with Landlord sufficient to increase the
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Security Deposit to an amount which bears the same relationship to the adjusted
Base Rent as the initial Security Deposit bore to the initial Base Rent.
Section 3.04. Termination; Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Tenant shall pay all real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.08
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10)-day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.
(b) Definition of "Real Property Tax." "Real property tax" means: (i) any
fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; or construction conducted in the Project and (v) any charge or fee
replacing any tax previously included within the definition of real property
tax. "Real property tax" does not, however, include Landlord's federal or state
income, franchise, inheritance or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed, Landlord
shall reasonably determine Tenant's share of the real property tax payable by
Tenant under Paragraph 4.02(a) from the assessor's worksheets or other
reasonably available information. Tenant shall pay such share to Landlord within
fifteen (15) days after receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property
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taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Policies. See Article 15 in Rider for insurance
provisions.
(a) Liability Insurance.
Section 4.05. Common Areas; Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leasable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, and increase or decrease Common Area land and/or facilities.
Tenant acknowledges that such activities may result in inconvenience to Tenant.
Such activities and changes are permitted if they do not materially affect
Tenant's use of the Property.
(b) Use of Common Areas. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, other tenants or any other person
entitled to use the Common Areas.
(c) Specific Provision re: Vehicle Parking. Tenant shall be entitled to
use the number of vehicle parking spaces in the Project allocated to Tenant in
Section 1.11 of the Lease without paying any additional rent. Tenant's parking
shall not be reserved and shall be limited to vehicles no larger than standard
size automobiles or pickup utility vehicles. Tenant shall not cause large trucks
or other large vehicles to be parked within the Project or on the adjacent
public streets except with Landlord's prior written consent, which shall not be
unreasonably withheld. Temporary parking of large delivery vehicles in the
Project may be permitted by the rules and regulations established by Landlord.
Vehicles shall be parked only in striped parking spaces and not in driveways,
loading areas or other locations not specifically designated for parking.
Handicapped spaces shall only be used by those legal permitted to use them. If
Tenant parks more vehicles in the parking area than the number set forth in
Section 1.11 of this Lease, such conduct shall be a material breach of this
Lease.
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In addition to Landlord's other remedies under the Lease, Tenant shall pay a
daily charge determined by Landlord for each such additional vehicle.
(d) Maintenance of Common Areas. Landlord shall maintain the Common Areas
in good order, condition and repair and shall operate the Project, in Landlord's
sole discretion, as a first-class industrial/commercial real property
development. Tenant shall pay Tenant's pro rata share (as determined below) of
all costs incurred by Landlord for the operation and maintenance of the Common
Areas. Common Area costs include, but are not limited to, costs and expenses for
the following: gardening and landscaping; utilities, water and sewage charges;
maintenance of signs (other than tenants' signs); premiums for liability,
property damage, fire and other types of casualty insurance on the Common Areas
and worker's compensation insurance; all property taxes and assessments levied
on or attributable to the Common Areas and all Common Area improvements; all
personal property taxes levied on or attributable to personal property used in
connection with the Common Areas; straight-line depreciation on personal
property owned by Landlord which is consumed in the operation or maintenance of
the Common Areas; rental or lease payments paid by Landlord for rented or leased
personal property used in the operation or maintenance of the Common Areas; fees
for require licenses and permits; repairing, resurfacing, repaving, maintaining,
painting, lighting, cleaning, refuse removal, security and similar items;
reserves for roof replacement and exterior painting and other appropriate
reserves; and a reasonable allowance to Landlord for Landlord's supervision of
the Common Areas (not to exceed five percent (5%) of the gross rents of the
Project for the calendar year). Landlord may cause any or all of such services
to be provided by third parties and the cost of such services shall be included
in Common Area costs. Common Area costs shall not include depreciation of real
property which forms part of the Common Areas.
(e) Tenant's Share and Payment. Tenant shall pay Tenant's annual pro rata
share of all Common Area costs (prorated for any fractional month) upon written
notice from Landlord that such costs are due and payable, and in any event prior
to delinquency. Tenant's pro rata share shall be calculated by dividing the
square foot area of the Property, as set forth in Section 1.04 of the Lease, by
the aggregate square foot area of the Project which is leased or held for lease
by tenants, as of the date on which the computation is made. Tenant's initial
pro rata share is set out in Paragraph 1.1(b). Any changes in the Common Area
costs and/or the aggregate area of the Project leased or held for lease during
the Lease Term shall be effective on the first day of the month after such
change occurs. Landlord may, at Landlord's election, estimate in advance and
charge to Tenant as Common Area costs, all real property taxes for which Tenant
is liable under Section 4.02 of the Lease, all insurance premiums for which
Tenant is liable under Section 4.04 of the Lease, all maintenance and repair
costs for which Tenant is liable under Section 6.04 of the Lease, and all other
Common Area costs payable by Tenant hereunder. At Landlord's election, such
statements of estimated Common Area costs shall be delivered monthly, quarterly
or at any other periodic intervals to be designated by Landlord. Landlord may
adjust such estimates at any time based upon Landlord's experience and
reasonable anticipation of costs. Such adjustments shall be effective as of the
next rent payment date after notice to Tenant. Within sixty (60) days after the
end of each calendar year of the Lease Term, Landlord shall deliver to Tenant a
statement prepared in accordance with generally accepted accounting principles
setting forth, in reasonable detail, the Common Area costs paid or incurred by
Landlord during the preceding calendar year and Tenant's pro rata share. Upon
receipt of such statement, there shall be an adjustment between Landlord and
Tenant, with payment to or credit given by Landlord (as the case may be) so that
Landlord shall receive the entire amount of Tenant's share of such costs and
expenses for such period.
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Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law.
Section 4.08. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12)-month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-Interest bearing Impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the Impound account to Landlord upon
written request. If Tenant defaults under this Lease, Landlord may apply any
funds in the Impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the Property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the Project, or which constitutes a nuisance or waste. Tenant shall
obtain and pay for all permits, including a Certificate of Occupancy, required
for Tenant's occupancy of the Property and shall promptly take all actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. Hazardous Materials. As used in this Lease, the term
"hazardous substances" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum- based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of
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persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessees or
invitees without the prior written consent of Landlord. Landlord shall be
entitled to take into account such other factors or facts as Landlord may
reasonably determine to be relevant in determining whether to grant or withhold
consent to Tenant's proposed activity with respect to Hazardous Material. In no
event, however, shall Landlord be required to consent to the Installation or use
of any storage tanks on the Property.
Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property at all reasonable times during business hours to show the Property to
potential buyers, investors or tenants or other parties; to do any other act or
to inspect and conduct tests in order to monitor Tenant's compliance with all
applicable environmental laws and all laws governing the presence and use of
Hazardous Material; or for any other purpose Landlord deems necessary. Landlord
shall give Tenant prior notice of such entry of no less than 24 hours except in
the case of an emergency in which event no prior notice is required. Landlord
may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Property and is not relying on any representations of Landlord or any Broker
with
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respect thereto. If Landlord or Landlord's Broker has provided a Property
Information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.
Section 6.02. Exemption of Landlord from Liability. Landlord shall not
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct.
Section 6.03. Landlord's Obligations.
(a) Except as provided in Article Seven (Damage or Destruction) and
Article Eight (Condemnation), Landlord shall keep the following in good order,
condition and repair: the foundations, exterior walls and roof of the Property
(including painting the exterior surface of the exterior walls of the Property
not more often than once every five (5) years, if necessary) and all components
of electrical, mechanical, plumbing, heating and air conditioning systems and
facilities located in the Property which are concealed or used in common by
tenants of the Project. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the interior surfaces of exterior walls.
Landlord shall make repairs under this Section 6.03 within a reasonable time
after receipt of written notice from Tenant of the need for such repairs.
(b) Tenant shall pay or reimburse Landlord for all costs Landlord incurs
under paragraph 6.03(a) above as Common Area costs as provided in Section 4.05
of the Lease. Tenant waives the benefit of any statute in effect now or in the
future which might give Tenant the right to make repairs at Landlord's expense
or to terminate this Lease due to Landlord's failure to keep the Property in
good order, condition and repair.
Section 6.04. Tenant's Obligations.
(a) Except as provided in Section 6.03, Article Seven (Damage and
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including structural, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful life of such replacement shall
be prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is applicable to
the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor,
unless Landlord maintains such equipment under Section 6.03 above. If any part
of the Property or the
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Project is damaged by any act or omission of Tenant, Tenant shall pay Landlord
the cost of repairing or replacing such damaged property, whether or not
Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that at all
times Tenant shall maintain the portions of the Property which Tenant is
obligated to maintain in an attractive, first-class and fully operative
condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10) days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.
Section 6.05. Alterations, Additions and Improvements. (See Article 17 in
Rider for additional provisions)
Section 6.06. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction).
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than forty percent (40%) of the Property is untenantable as
a result of such damage or less than forty (40%) of Tenant's operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to
pay the entire cost of repair, or if the cause of the damage is not covered by
the insurance policies which Landlord maintains under Paragraph 4.04(b),
Landlord may elect either to (i) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and effect, or
(ii) terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the occurrence
of the damage whether Landlord elects to repair the damage or terminate the
Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the
"deductible amount" (if any) under Landlord's insurance policies and, if the
damage was due to an act or omission of Tenant, or Tenant's employees, agents,
contractors or invitees, the difference between the actual cost of repair and
any insurance proceeds received by Landlord. If Landlord elects to terminate the
Lease, Tenant may elect to continue this Lease in full force and effect, in
which case Tenant shall repair any damage to the property and any building in
which the Property is located. Tenant shall pay the cost of such repairs, except
that upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repairs by
Tenant. Tenant shall give Landlord written notice of such election within ten
(10) days after
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receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6) months of
the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the
preceeding sentence, if the Property can be rebuilt within six (6) months after
the date of destruction, Landlord may elect to rebuild the Property at
Landlord's own expense, in which case this Lease shall remain in full force and
effect. Landlord shall notify Tenant of such election within thirty (30) days
after Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair or restoration of or to the Property.
Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
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ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair; Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING (See Article 18 in Rider for additional
provisions)
Section 9.01. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such
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notice if Tenant's failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Paragraph is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for
the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or
for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property. Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the "worth at the time of
the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of
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the award, plus one percent (1%). If Tenant has abandoned the Property, Landlord
shall have the option of (i) retaking possession of the Property and recovering
from Tenant the amount specified in this Paragraph 10.03(a), or (ii) proceeding
under Paragraph 10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state in which the Property is located.
Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant's obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall
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not be deprived of its rights under this Lease. Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant's obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that Landlord is not in
default under this Lease (or, if Landlord is claimed to be in default, stating
why); and (v) such other representations or information with respect to Tenant
or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such ten
(10)-day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one month's Base
Rent or other charges have been paid in advance; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts.
Section 11.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the
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Property. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as the date of such statement. All
financial statements shall be confidential and shall be used only for the
purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach or to enforce the provisions of
this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or necessary to protect
Landlord's interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord, or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. Landlord's consent. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN; MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national original or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid if such funds have not yet been
applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform
any of its obligations under this Lease to
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Landlord and to any ground lessor, mortgagee or beneficiary under any deed of
trust encumbering the Property whose name and address have been furnished to
Tenant in writing. Landlord shall not be in default under this Lease unless
Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such
non-performance within thirty (30) days after receipt of Tenant's notice.
However, if such non-performance reasonably requires more than thirty (30) days
to cure, Landlord shall not be in default if such cure is commenced within such
thirty (30) day period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision of
this Lease, which shall remain in full force and effect.
Section 13.04. Interpretation. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. Notices. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.07. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
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Section 13.09. Binding Effect; Choice of Law. This Lease bind any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. Joint and Several Liability. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12. Force Majeure. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond the Landlord's control include, but are
not limited to, acts of God, war, civil commotion, labor disputes, strikes,
fire, flood or other casualty, shortages of labor or material, government
regulation or restriction and weather conditions.
Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS (See Separate Agreement)
Section 14.03. Agency Disclosure; No Other Brokers. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: CB COMMERCIAL REAL ESTATE GROUP, INC.,
who represents Landlord and Grubb & Ellis, who represents Tenant.
In the event that CB COMMERCIAL REAL ESTATE GROUP, INC. represents both
Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely
advised of the dual representation and that they consent to the same, and that
they do not expect said broker to disclose to either of them the confidential
information of the other party.
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ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED,
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.
See Rider attached hereto and made a part hereof, including Articles
15-20. Exhibit "A" - Depiction of Project and Premises.
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on _______________ __, 19__ Pruco Life Insurance Company, an
at _______________________________ Arizona corporation
By: PREMISYS Real Estate Services, Inc.
Its: Managing Agent
By: /s/ Gregory U. Cott
Its: Vice President
"TENANT"
Signed on 7-8, 1992 Hansen's Juices, Inc.
at Los Angeles, CA 90004
By: /s/ Anthony Kane
Its: President
By: /s/ Gary T. Hansen
Its: Secretary
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION
OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE
REALTORS(R), INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN
CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS(R), INC.,
ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR
AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO
ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL
COUNSEL.
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RIDER OF ADDITIONAL TERMS TO BE ATTACHED TO
AND BECOME A PART OF THE LEASE DATED JUNE 17, 1992
BETWEEN PRUCO LIFE INSURANCE COMPANY AND
HANSEN'S JUICES, INC.
15. Insurance Articles:
A. Tenant hereby agrees to indemnify, defend and hold harmless Landlord,
its subsidiaries, directors, officers, agents and employees from and against any
and all damage, loss, liability or expense, including, but not limited to,
attorney's fees and legal costs suffered by same directly or by reason of any
claim, suit or judgment brought by or in favor of any person or persons for
damage, loss or expense due to, but not limited to, bodily injury, including
death, resulting any time therefrom, and property damages sustained by such
person or persons which arises out of, is occasioned by or in any way
attributable to the use or occupancy of the Property and adjacent areas by the
Tenant or otherwise, the acts or omission of the Tenant, its agents, employees
or any other contractors brought onto said Property by the Tenant, or any other
cause or event giving rise to damage, loss, liability, or expense, which cause
or event is customarily covered by the types of insurance which Tenant is
required to maintain hereunder, except to the extent caused by the gross
negligence or willful misconduct of Landlord, its employees, agents, customers
and invitees. Such loss or damage shall include, but not be limited to, any
injury or damage to Landlord's personnel (including death resulting any time
therefrom) on the Property. Tenant agrees that the obligations assumed herein
shall survive this Lease. Landlord shall not be liable for any damages arising
from any act or neglect of any other tenant.
B. Except as provided to the contrary in Paragraphs H, J, and K, Tenant
hereby agrees to maintain in full force and effect at all times during the term
of this Lease, at its own expense, for the protection of Tenant and Landlord, as
their interest may appear, policies of insurance issued by a responsible carrier
or carriers licensed to do business in the state where the Property is located
and with a Best's rating of B+ or better, which afford the following coverages:
1. Workers Compensation - Statutory
Employers Liability - Not less than $100,000.00
Comprehensive General - Not less than $2,000,000.00
Liability Insurance combined single limit
including Blanket for both bodily and Contractual
Liability property damage
Broad Form Property
Damage
Personal Injury
Completed Operation/
Products Liability
Fire Damage Legal
2. Fire and extended coverage, including earthquake coverage (as defined in
California insurance industry practices), vandalism and malicious mischief and
sprinkler leakage (where applicable) insurance to cover both Landlord and Tenant
as to their respective interest therein, for one hundred percent (100%) of the
replacement value of the Property.
3. Rent insurance covering those risks referred to in Paragraph 15(B)2 in an
amount equal to all that is called for under Paragraph 3 of this Lease (and any
additional rents payable under this Lease) for a period of at least twelve (12)
months, commencing with the date of loss.
4. Boiler and machinery insurance, including, but not limited to, steam pipes,
pressure pipes, condensation return pipes and other pressure vessels (provided
the building on the Property contains a
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boiler and other pressure vessels or pressure pipes), in an amount satisfactory
to Landlord.
C. Landlord may elect to have reasonable deductibles in connection with
coverages required by Paragraphs 15(B)2, 15(B)3 and 15(B)4.
D. The Tenant shall deliver to Landlord at least thirty (30) days prior to the
time such insurance is first required to be carried by Tenant, and thereafter at
least thirty (30) days prior to expiration of such policy, certificates or
insurance evidencing the above coverage with limits not less than those
specified above. Such certificates, with the exception of Worker's Compensation,
shall name Landlord, its subsidiaries, directors, agents and employees as
additional insureds as their interests may appear and shall expressly provide
that the interest of same herein shall not be affected by a breach by Tenant of
any policy provision for which such Certificates evidence coverage. Further, all
Certificates shall expressly provide that not less than thirty (30) days prior
written notice shall be given to Landlord in the event of material alteration to
or cancellation of the coverage evidenced by such Certificates.
E. Upon demand, Tenant shall provide Landlord, at Tenant's expense, with such
increased amount of existing insurance and such other insurance coverage in such
limits, as Landlord may require and such other hazard insurance, as the nature
and condition of the Property may require, in the reasonable judgment of
Landlord, to afford Landlord adequate protection for said risks.
F. If, on account of the failure of Tenant to comply with the foregoing
provisions, Landlord is adjudged a co-insurer by its insurance carrier, then any
loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant
and shall be immediately paid by Tenant upon receipt of a bill therefor, and
evidence of such loss.
G. Landlord makes no representation that the limits of liability specified to be
carried by Tenant under the terms of this Lease are adequate to protect Tenant
against Tenant's undertaking under this Paragraph 15 and in the event Tenant
believes that any such insurance coverage called for under this Lease is
insufficient, Tenant shall provide, at its own expense, such additional
insurance as Tenant deems adequate.
H. If Landlord is designated as an insuring party in Paragraph J, Landlord
shall, at all times during the terms of this Lease, maintain a policy or
policies of insurance issued by and binding upon some solvent insurance company,
insuring the building, of which the Property is a part, against loss or damage
by fire, explosion, or other hazards and contingencies (Paragraph 15(B)2, 15(B)3
and 15(B)4 risks), for an amount equal to one hundred percent (100%) of the
replacement value thereof, provided that Landlord shall not be obligated to
insure any furniture, equipment, machinery, goods or supplies upon the premises.
I. Anything in this Lease to the contrary notwithstanding, Landlord and Tenant
hereby waive and release each other of and from any and all rights of recovery,
claims, actions or causes of action, against each other, their agents, officers
and employees, for any loss or damage that may occur to the Property,
improvements to the building of which the Property is a part, personal property
(building contents) within the building, any furniture, equipment, machinery,
goods or supplies not covered by this Lease which Tenant may bring or obtain
upon the Property or any additional improvements which Tenant may construct on
the Property, by reason of fire, the elements or any other cause which could be
insured against under the terms of standard fire and extended coverage insurance
policies, regardless of cause or origin, including negligence of Landlord or
Tenant and their agents, officers and
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employees. Because this Paragraph will preclude the assignment of any claim
mentioned in it by way of subrogation (or otherwise) to an insurance company (or
any other person), each party to this Lease agrees immediately to give to each
insurance company written notice of the terms of the mutual waivers contained in
this Paragraph and to have the insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverages by reason of
the mutual waivers contained in this Paragraph. Tenant also waives and releases
Landlord, its agents, officers and employees of and from any and all rights of
recovery, claims, actions or causes of action for any loss or damage insured
against under any other policies of insurance carried by Tenant.
J. The insuring party under this Lease for Paragraph 15(B)1 shall be the Tenant.
The insuring party under this Lease for Paragraphs 15(B)2, 15(B)3 and 15(B)4
shall be the Landlord.
K. If Landlord is named as the insuring party under this Lease for Paragraphs
15(B)2, 15(B)3 and 15(B)4:
1. Tenant shall pay to Landlord during the term hereof, additional rent in
the amount of any and all premiums for the insurance required under paragraphs
15(B)2, 15(B)3 and 15(B)4.
2. Tenant shall pay any such premiums to Landlord within thirty (30) days
after receipt by Tenant of a copy of the premiums statement or satisfactory
evidence of the amount due. If the insurance policies maintained hereunder cover
other improvements in addition to the Property, Landlord shall also deliver to
Tenant a statement of the amount of such premiums attributable to the Property
and showing, in reasonable detail, the manner in which such amount was computed.
If the term of this Lease shall not expire concurrently with the expiration of
the period covered by such insurance, Tenant's liability for premiums shall be
prorated on an annual basis.
3. Notwithstanding the foregoing, if (1) Landlord sells the Premises, (2)
the Azusa Industrial Center becomes individually insured, and not insured under
a blanket property casualty policy, (3) the property casualty policy premiums
increase as a result of a high risk use by a tenant which is not a tenant in the
Azusa Industrial Center as of the execution of this Lease, and (4) the increase
in premiums attributable to such high risk use can reasonably be determined,
then Tenant shall not be liable for its share of any such increase.
L. Tenant shall maintain, at its cost, fire and extended coverage against loss,
theft or damage, with vandalism and malicious mischief endorsements to cover
personal property, fixtures, equipment, tenant improvements, alterations and
utility installations in, on or about the Property, in an amount of at least one
hundred percent (100%) of their full replacement value, with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such policy shall be used by
Tenant for the replacement of personal property or the restoration of Tenant's
improvements, alterations or utility installations, unless the Tenant
improvements or alterations have become part of the Property.
16. Hazardous Materials
A. Storage Tanks. Tenant shall not install storage tanks of any size or
shape in the Property, above or below ground, without prior written consent of
the Landlord, which can be withheld at its sole discretion. Without limiting the
foregoing, Landlord shall have the right to condition its consent upon Tenant
agreeing to give the Landlord such assurances that Landlord, at its sole
discretion, deems necessary to protect itself against potential problems
concerning the installation, use, removal and contamination of the Property, as
a result of the installation
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and/or use of such tank, including, but not limited to, the installation of a
concrete encasement for said tank. Tenant shall comply, at its sole expense,
with all applicable permit and/or registration requirements and repair damage
caused by the installation, maintenance or removal of such tank by Tenant. Upon
termination of the Lease, Tenant shall, at its sole cost and expense, remove any
tank installed by Tenant from the Property, remove and replace any contaminated
soil or materials (and compact or treat the same as then required by law) and
repair any damage or change to the Property caused by any installation and/or
removal performed by Tenant.
Landlord shall have the right to employ experts and/or consultants, at
Tenant's expense, to advise Landlord with respect to the installation,
operation, monitoring, maintenance and removal and restoration of any such tank
installed by Tenant.
B. Hazardous Substances. Tenant shall not engage in or permit any activities on
the Property, nor bring onto or create in the Property, any substances the
possession or use of which requires a permit from any federal, state or local
agency having jurisdiction over hazardous, toxic or infectious substances
without Landlord's prior written consent.
Notwithstanding the foregoing prior to the Commencement Date, Tenant shall
provide Landlord with materials safety, data sheets ("MSDS's") for each
hazardous or toxic substance to be used or stored on the Premises, together with
the estimated maximum amounts of such substances to be stored on the Premises at
any time and evidence that Tenant has obtained all necessary permits in
connection with the storage, use or disposal of any such substances. Landlord
shall have the right to approve the matters covered by each such MSDA and to
review and approve such permits. Tenant shall not store any such materials at
the Premises until all necessary permits have been approved by Landlord. In the
event Landlord consents to the use of any substance shown on any such MDS,
Tenant covenants and agrees that it shall not, at any time during the term
hereof, store such substances at the Premises in any amount in excess of the
amount approved by Landlord. Tenant shall not engage in or permit any activity
on the Property that violates any federal, state or local laws, rules or
regulations pertaining to hazardous, toxic or infectious substances, and shall
promptly, at Tenant's expense, take all investigatory and/or remedial action
required or ordered for clean up of any contamination of the Property or the
elements surrounding same, including, without limitation, remedial action
recommended by any consultant retained by Landlord to review the operations of
Tenant. Tenant shall indemnify, defend and hold Landlord, its agents and
employees harmless from all liabilities, judgments, costs, claims, expenses,
penalties and attorney's fees arising out of any breach of Tenant of its
obligations under Section 5.03, and Paragraphs 16(A) and 16(B), including, but
not limited to, the costs associated with remediation and/or abatement of any
contamination therein involved or arising out of the actions of Tenant.
17. Alterations and Improvements
A. Tenant shall not, without Landlord's prior written consent (except for
non-structural alterations not exceeding $2,500 in cost), make any alterations,
improvements, additions, utility installation (including power panels) in, on or
about the Property. Notwithstanding the foregoing, Paragraphs 17(C)(1),(c), (d),
(e) and (f) shall apply to non-structural alterations not exceeding $2,500 in
cost.
B. Tenant shall pay, when due, all claims for labor or materials furnished to or
for Tenant at or for use (including repairs by Tenant) in or on the Property,
which claims may be secured by any mechanics' or materialmen's lien against the
Property or any interest therein; and, Tenant shall hold Landlord harmless from
any
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and all claims, costs or damages arising from labor or materials so furnished or
alleged to have been furnished. Tenant shall deliver to Landlord written notice
of commencement of any work on or in the Property within two (2) days after such
commencement, and the Landlord shall have the right, but not the obligation, to
post notices of non-responsibility in or on the Property as provided by law.
C. For all additions and for all alterations requiring Landlord's consent:
1. Tenant shall:
a. Request Landlord's approval, in writing, at least thirty (30)
days prior to proposed construction.
b. Employ a California licensed architect or structural engineer.
c. Employ a California licensed general contractor.
d. Cause to be obtained, an applicable building permit for any and
all construction or modifications.
e. Cause the building to be kept free of liens during construction.
f. As between Landlord and Tenant, be fully responsible for the act
of Tenant's consultants, employees, contractors, subcontractors, etc., and cause
them to fully comply with any applicable terms of this Lease and documents
referred to by this Lease and other pertinent Lease obligations.
g. Enter into written agreement with an architect and general
contractor on standard American Institute of Architects (AIA) form or reasonable
equivalent for the contract itself, as well as payment schedules, change orders,
etc. Copies of executed agreements will be forwarded to Landlord within five (5)
days of execution.
2. Tenant's architect shall:
a. Be licensed by the State of California.
b. Design and specify within the parameters of the building work
letter and approved building specifications or have received specific written
exceptions from the Landlord.
c. Secure Landlord's written approval before submitting plans to
general contractor for bidding or to government agencies for approval.
d. Secure Landlord's written approval of any changes or alternates
recommended by general contractor or required by governmental agencies.
e. Submit copy to Landlord of the final application for permit and
issued permit.
f. Incorporate Landlord supplied building standard details onto
drawings.
g. Submit final plans for Landlord's written approval prior to
construction.
h. Be available for final inspection with Landlord at job
completion.
i. Submit to Landlord for approval, details of any changes for specs
or finishes during construction.
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j. Provide samples and specifications as required by Landlord.
k. Sign off on the as-built drawings as his certification that the
improvements have, in fact, been built as per his design.
3. Tenant's general contractor and/or subcontractor shall:
a. Be licensed by the State of California.
b. Have experience providing similar quality and quantity of
improvements. Work history shall be provided to Landlord prior to being awarded
contract.
c. Have a bonding capacity equal to or exceeding the valuation of
the job. Landlord may, at his sole option, require the job to be bonded.
d. Maintain in full force and effect, throughout the duration of its
performance under contract to the Tenant, a Worker's Compensation insurance
policy and a comprehensive liability insurance policy issued by an insurer
satisfactory to Landlord, with liability coverage of not less than $1,000,000
for personal injury and $500,000 to cover property damage. The Comprehensive
Liability insurance policy shall include assumption of contractual liability.
Certificates of Insurance containing a thirty (30) day cancellation/modification
clause shall be furnished to Landlord prior to commencement of performance under
the Construction Contract, naming Landlord (Pruco Life Insurance company) and
managing agent (currently Premisys Real Estate Services) as additional insured.
e. Provide a construction schedule to Landlord prior to commencement
of work and weekly written progress reports.
f. Warrant his work and that of his subcontractors, for a minimum of
one (1) year.
g. Provide Landlord with as-built drawings of all improvements.
4. All approvals by Landlord, as herein provided for, shall not be
unreasonably withheld. Tenant shall promptly submit requests to the managing
agent of the Property.
D. Upon the termination of this Lease, all alterations, improvements, additions
or fixtures, other than Tenant's trade fixtures, which may be made in or on the
Property, shall become the property of Landlord and remain upon and be
surrendered with the Property; provided, however, that despite such items would
otherwise become Landlord's property, Landlord, at its sole discretion, may, by
written notice to Tenant at any time prior to the expiration or sooner of the
termination of this Lease, require Tenant, upon such expiration or termination
of the Lease, to remove any or all such improvements, additions, alterations,
and fixtures, and restore the Property to the condition that would exist, except
for such alterations, additions, improvements, or fixtures. Such removal,
restoration and repair to the original conditions shall be completed by Tenant
no later than the expiration or sooner termination of this Lease.
18. Assignment and Subletting
A. Except as expressly permitted in this Paragraph, Tenant shall not, without
the prior written consent of Landlord, assign, transfer or hypothecate this
Lease or any interest herein or sublet the Property or any part thereof, or
permit the use of the Property by any party other than Tenant or to allow
Tenant's interest in the Lease to be assigned by operation of law. Landlord
shall have the
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right to withhold its consent in its reasonable discretion. Any of the foregoing
acts without such consent shall be void and shall, at the option of Landlord,
terminate this Lease.
B. If at any time or from time to time during the term of this Lease, Tenant
desires to assign its interest in the Lease or sublet all or any part of the
Property, Tenant shall give written notice to Landlord, setting forth the terms
of the proposed assignment or subletting and the space so proposed be assigned
or sublet. Landlord shall have the option, exercisable by notice given to Tenant
within thirty (30) days after Tenant's notice is given, either to sublet from
Tenant such space at the rental rate and other terms set forth in Tenant's
notice; or, if the proposed subletting is for the entire Property for the
balance of the term of this Lease, to terminate this Lease. If Landlord does not
exercise such option, Tenant shall be free to assign or sublet such space to any
third party, subject to all the following conditions;
1. The assignment or sublease shall be on the same terms set forth in the notice
given to Landlord. Any subsequent changes or modifications shall require
Landlord's prior written consent;
2. No assignment or sublease shall be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Landlord's decision
may take into account, without limitation, the creditworthiness of the proposed
assignee or subtenant, the nature of the proposed use of the assigned or
subleased space, and whether the proposed use affects the Tenant mix sought to
be achieved by Landlord.
3. No assignment or sublease shall be valid and no assignee or subtenant shall
take possession of the Property assigned or subleased until an executed
counterpart of such assignment or sublease has been delivered to Landlord.
4. No assignee or subtenant shall have a right to further assign or sublet.
5. One hundred percent (100%) of any sums or other economic consideration
received by Tenant as a result of such subletting (except rental or other
payments received which are attributable to the amortization of the cost of
leasehold improvements, other than building standard tenant improvements, made
to the sublet portion of the Property by Tenant at its cost and brokerage
commissions), whether denominated rentals under the sublease or otherwise, which
exceed, in the aggregate, the total sums which Tenant is obligated to pay
Landlord under this Lease (prorated to reflect Tenant's obligations under this
Lease allocable to that portion of the Property subject to such sublease) shall
be payable to Landlord as additional rental under this Lease without affecting
or reducing any other obligation of Tenant hereunder. In the event of subletting
of only a portion of the Property, in calculating whether the rent received by
Tenant exceeds the rent payable under this Lease, the rent payable under the
Lease shall be prorated according to the square footage involved in order to
reflect the rent applicable to the space sublet.
C. If Tenant is a partnership, a transfer of any interest of a general partner,
a withdrawal of any general partner from the partnership, or the dissolution of
the partnership shall be deemed to be an assignment of this Lease. If Tenant is
a corporation, unless Tenant is a public corporation whose stock is regularly
traded on a national stock exchange, or is regularly traded in the
over-the-counter market and quoted on NASDAQ, any sale or other transfer of a
percentage of capital stock of Tenant which results in a change of controlling
persons, or the sale or transfer of substantially all of the assets of Tenant,
shall be deemed to be an assignment of this Lease. If any of the stockholders of
Tenant existing as of the execution of this Lease retire, it shall not be
considered a change in control under this paragraph.
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D. Notwithstanding the provisions of Paragraphs 18(A), 18(B) and 18(C) above,
Tenant may assign this Lease, or any portion thereof, without Landlord's
consent, to any corporation which controls, is controlled by or is under common
control with the Tenant, or to any corporation resulting from the merger or
consolidation with Tenant, or to any person or entity which acquires all the
assets of Tenant as a going concern of the business that is being conducted on
the Property, provided that said assignee assumes, in full, the obligations of
Tenant under this Lease.
E. Regardless of Landlord's consent, no subletting or assignment shall release
Tenant or Tenant's obligations hereunder or alter the primary liability of
Tenant to pay the rental and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of rental by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof. Consent
to one assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Tenant or
any successor of Tenant in the performance of any of the terms hereof, Landlord
may proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
19. Option to Extend.
A. Landlord hereby grants to Tenant the option to extend the term of this Lease
for one (1) additional period of five (5) years, commencing on the day following
the expiration of the original term of the Lease, such option to be exercised by
Tenant by written notice to Landlord given not less than nine (9) months and not
more than twelve (12) months prior to the expiration of the original term of
this Lease. If Tenant gives such notice, the original term of the Lease shall be
extended for one (1) additional period of five (5) years, subject to all of the
terms, covenants and conditions of this Lease, except the Base Rent shall be
increased as provided below. If Tenant is in default under this Lease on the
date such notice is given (whether or not such default is later cured), then at
Landlord's election, such notice shall be void; or, if Tenant is in default
under this Lease after the giving of such notice (whether or not such default is
later cured), then at Landlord's election, such option to extend and Tenant's
exercise of same shall be void and this Lease shall terminate at the end of the
original term (unless sooner terminated pursuant to this Lease).
B. In the event said option is exercised, in accordance with the provisions
hereof, then in lieu of the amount of the Base Rent set forth in Article 3
above, the amount of the Base Rent for the Property for the first thirty (30)
months of the Option term shall be equal to one hundred percent (100%) of the
Fair Rental Amount at the time of determination for space comparable to the
Property located in the vicinity of the Project, but in no event shall the new
Base Rent be less than the amount of the Base Rent payable immediately prior to
the expiration of the original term of the Lease. The determination of the Fair
Rental Amount shall exclude the specialized improvements that are specifically
constructed at Tenant's cost in connection with the processing and refrigeration
functions of Tenant's business. If said option is exercised by Tenant, Landlord
and Tenant agree to meet no later than two hundred forty (240) days prior to the
expiration of the original term of the Lease and negotiate in good faith to
determine the new Base Rent for the option term. If Landlord and Tenant cannot
agree on such new Base Rent, the dispute shall be submitted for appraisal. For
that purpose, Landlord and Tenant shall employ one person or firm as an
appraiser (hereinafter called the "Independent Appraiser"), or if they cannot
agree on one person or firm as an
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Independent Appraiser, they shall each employ one person or firm as an appraiser
(hereinafter called "Landlord's Appraiser" in the case of the one employed by
Landlord, and "Tenant's Appraiser" in the case of the one employed by Tenant),
who shall, in turn, appoint a third person as an appraiser (who shall be MAI) if
Landlord's Appraiser and Tenant's Appraiser cannot agree on the amount of the
new Base Rent for the first thirty (30) months of the option term. Both Landlord
and Tenant shall be bound by the determination of Fair Rental Amount set forth
in the written report and opinion of the Independent Appraiser (if there is one)
or appraisers (if there are two and they agree or if there are three and they
agree) or the average of their separate determinations (if there are three and
any one appraiser's opinion differs from that of the other or others); provided,
however, that any appraiser's or appraisers' determination of the new Base Rent
which is less than the amount of the Base Rent payable immediately prior to the
expiration of the original term shall be disregarded and the amount of the Base
Rent payable immediately prior to the expiration of the original term shall be
substituted as if it were the appraiser's or appraisers' determination. Any
third appraiser shall be employed within thirty (30) days after the employment
of Landlord's Appraiser and Tenant's Appraiser, and shall deliver his report and
opinion to both parties at the same time and within thirty (30) days after he
was first employed. Landlord shall pay the fees of, and costs incurred by,
Landlord's Appraiser, if any, and Tenant shall pay the fees of, and costs
incurred by, Tenant's Appraiser, if any. The fees of, and costs incurred by, all
other appraisers shall be paid equally by Tenant and Landlord. The new Base Rent
for the first thirty (30) months of the option term shall be increased on the
first day of the thirty-first (31st) month of the option term in accordance with
the provisions of Section 3.02, and such increased Base Rent shall apply
thereafter for the remainder of the option term. Such increase shall not be less
than four percent (4%) or greater than eight percent (8%) per annum, cumulative.
No free rent shall be applicable to the option term.
C. The foregoing option may be exercised only as to the entire Property, and
only by Tenant. The rights contained in this paragraph are personal to the
Tenant and are not assignable and cannot be exercised by Tenant on behalf of or
for the benefit of any subtenant or assignee.
20. Landlord shall provide Tenant with a Tenant Improvement Allowance Loan
("Allowance Loan") in the amount not to exceed Two Hundred Thousand Dollars
($200,000) to defray a portion of Tenant's costs of constructing and installing
the following improvements only:
A. An additional 1,700+ square feet of office area with comparable floor and
wall treatments as currently exist in the existing 1,800+ square feet of
offices.
B. Additional plant and office restrooms as required by applicable code for
Tenant to conduct its business.
C. One additional 600 amp. 277/480 volt power panel, which together with the
existing primary power panel, will deliver a total primary power of 1200 amps,
277/480 volt, 3 phase to the Premises.
D. An additional 4-inch water line to be used by Tenant for its processing
operation.
E. Floor drains and a clarifier with hook-up into the sewer system for discharge
of the processing water.
F. Connection to the building ("Building") of which the Premises are a part of a
gas line with a minimum 4-inch diameter to be used by Tenant in its processing
operation.
28
<PAGE> 29
G. A chain link fence separating and securing the yard area to the north of the
Building for Tenant's use, which area shall be designated by Landlord and
subject to its approval.
H. Two ground level loading doors (12' x 14') along the north wall of the
warehouse area into the fenced yard area.
I. Air curtains, which meet Health Department standards, around all loading
doors.
Tenant agrees to construct the foregoing improvements at its sole cost and
expense, subject to its rights with respect to the Allowance Loan.
Notwithstanding anything contained herein to the contrary, the Allowance Loan
shall only be payable with respect to and applied against the costs of
constructing and installing the foregoing improvements and no other
improvements, and any unfunded portion of the Allowance Loan shall remain
Landlord's property. Any and all improvement work that Tenant desires or is
obligated to implement shall be done at its sole cost and expense (subject to
its rights with respect to the Allowance Loan) and in accordance with the
provisions of Paragraph 17 of the Lease.
Portions of the Allowance Loan will be payable to Tenant or the contractor
directly (at Landlord's option) from time to time within fifteen business days
of Tenant's delivery to Landlord of (1) reasonable evidence that the then
completed portion of the tenant improvements is in compliance with the plans and
specifications approved by Landlord, and all applicable law, rules and
regulations, and (2) satisfactory lien releases.
Interest at ten percent (10%) per annum shall begin accruing on the Allowance
Loan commencing on December 1, 1992. Tenant will repay the Allowance Loan in
monthly installments to Landlord based upon a ten percent (10%) per annum
interest rate and a 10-year 6-month amortization schedule in accordance with
Paragraph 3.01 above. The outstanding balance of the Allowance Loan shall be due
and payable upon the expiration or earlier termination of the lease term, but
may be prepaid at any time prior to maturity without penalty or premium. A
default under this Lease shall be deemed a default under the Allowance Loan
entitling Landlord to accelerate the then outstanding balance of the Allowance
Loan. All amounts due under the Allowance Loan shall be deemed to be additional
rent under this Lease. If prior to July 17, 1992, Tenant provides reasonable
evidence to Landlord that it is unable to obtain the necessary governmental
permits to allow Tenant's intended use of the Premises, then this Lease shall
terminate and neither party shall have any further liability hereunder, except
for obligations that have accrued prior to such termination.
29
<PAGE> 30
INSERT 3.01
Rent:
<TABLE>
<CAPTION>
T.I.
Months Base Monthly Rent (NNE) Amortization
<S> <C> <C>
1 - 6 $ 0.00 $2,571 per month
7 - 30 $11,899.00 per month $2,571 per month
31 - 60 $13,369.00 per month $2,571 per month
61 - 90 $15,020.00 per month $2,571 per month
91 - 126 $16,879.00 per month $2,571 per month
</TABLE>
The Base Rent for months 1-6 shall be abated. In addition to Base Rent, Tenant
shall pay the amortized tenant improvement costs in accordance with the schedule
above, in advance on the first day of each month during the term of this Lease,
without offset, deduction or prior demand.
INSERT 3.03
Landlord agrees to invest the Security Deposit in a certificate of deposit
("CD"). Landlord shall have the right in its sole discretion to select the
financial institution and the maturity date. Tenant hereby acknowledges and
agrees that no trust or fiduciary relationship is created between Landlord and
Tenant with respect to the Security Deposit. Tenant acknowledges that Landlord
does not guarantee any rate of return, and Tenant assumes all consequences of
early withdrawal of the CD if the Security Deposit, or a portion thereof, is
needed to be applied to satisfy Tenant's obligations in accordance with the
terms of the Lease. If Tenant performs all of Tenant's obligations hereunder,
any interest accruing on the CD shall be sent to the Tenant within a reasonably
period of time following the maturing of such CD. Provided Tenant has not
defaulted under this lease, the principal amount of the CD and any interest
accruing thereon, or so much thereof as has not theretofore been applied by
Landlord in accordance with the terms of the Lease, shall be returned to Tenant
at the expiration of the term hereof, and after Tenant has vacated the Premises.
30
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE SMALL
BUSINESS ISSUER
The Fresh Juice Company of New York, Inc.
State of Incorp.: New Jersey
Doing Business As: The Ultimate Juice Company
The Fresh Juice Company of Florida, Inc.
State of Incorp.: Florida
Doing Business As: The Fresh Juice Company of Florida, Inc.
The Fresh Juice Company of California, Inc.
State of Incorp.: Delaware
Doing Business As: Hansen's Juices
Hansen's Fresh Juice Company
Manalba Foods, Inc.
State of Incorp.: New York
Doing Business As: Manalba Foods, Inc.
Fresh Pik't Natural Foods, Inc.
State of Incorp.: Delaware
Doing Business As: Fresh Pik't Natural Foods, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 453,344
<SECURITIES> 0
<RECEIVABLES> 3,445,930
<ALLOWANCES> 289,037
<INVENTORY> 2,638,083
<CURRENT-ASSETS> 6,734,105
<PP&E> 8,660,469
<DEPRECIATION> 1,741,718
<TOTAL-ASSETS> 22,093,344
<CURRENT-LIABILITIES> 5,414,782
<BONDS> 0
0
0
<COMMON> 66,797
<OTHER-SE> 12,096,460
<TOTAL-LIABILITY-AND-EQUITY> 22,093,344
<SALES> 41,382,836
<TOTAL-REVENUES> 41,515,132
<CGS> 30,035,386
<TOTAL-COSTS> 8,801,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 536,851
<INCOME-PRETAX> 2,141,472
<INCOME-TAX> 774,149
<INCOME-CONTINUING> 1,367,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,367,323
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
