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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18064
YES CLOTHING CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-3768671
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
1380 WEST WASHINGTON BOULEVARD 90007
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code: (213) 765-7800
Securities registered pursuant to Section 12 (b) of the Act:
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NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on June 26, 1995 based on the average bid and
asked price on such date was $3,432,900.
Number of shares of common Stock outstanding as of June 26, 1995: 3,851,799.
DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III of
Form 10-K is incorporated herein by reference to the registrant's definitive
Proxy Statement relating to its 1995 Annual Meeting of Stockholders which will
be filed with the Commission within 120 days after the end of the registrant's
fiscal year.
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YES CLOTHING COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
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PART I.
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 8
Item 3. Legal Proceedings........................................... 8
Item 4. Submission of Matters to a Vote of Security Holders......... 8
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................ 9
Item 6. Selected Financial Data..................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11
Item 8. Financial Statements and Supplementary Data................. 15
Report of Management........................................ 16
Reports of Independent Accountants.......................... 17-18
Balance Sheet............................................... 19
Statement of Operations..................................... 20
Statement of Changes in Shareholders' Equity................ 21
Statement of Cash Flows..................................... 22
Notes to Financial Statements............................... 23-31
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 32
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 32
Item 11. Executive Compensation...................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 32
Item 13. Certain Relationships and Related Transactions.............. 32
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K........................................................ 33-34
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PART I
ITEM 1. BUSINESS
YES Clothing Co.(R), "the Company", designs, contracts for the manufacture
of and markets diversified lines of apparel for women in junior sizes, young
men and kids. The Company sells its apparel to retail department stores and
specialty chains and stores. The Company's garments are made in the United
States and to a lesser extent in the Far East.
The Company was incorporated in California in 1982. Its principal executive
offices are located at 1380 West Washington Boulevard, Los Angeles, California
90007, and its telephone number at that address is (213) 765-7800.
ACQUISITION TRANSACTION
On January 31, 1995, control of the Company changed when its two principal
owners sold all of their shares, amounting to approximately 80% of the
Company's outstanding stock, to affiliates of Georges Marciano, founder and
former Chairman of Guess, Inc.
In November 1994, former Company Chairman of the Board and Chief Executive
Officer, George Randall, and former Company President, Moshe Tsabag, signed an
agreement to sell their holdings in the Company to affiliates of Georges
Marciano. The transaction closed on January 31, 1995, resulting in the
acquisition by Marciano affiliates of approximately 80% of the outstanding
common stock of the Company. As a result of the Acquisition Transaction,
George Randall resigned his positions with the Company in January 1995 and
Moshe Tsabag resigned as President in January 1995 and as a Board Member and
employee in April 1995. This transaction is known herein as the Acquisition
Transaction.
BUSINESS STRATEGY
Subsequent to the Acquisition Transaction by affiliates of Georges Marciano,
the Company has embarked upon several new manufacturing, design and sales
relationships. The Company has changed its product focus in styles produced,
the price of its products and targeted gross margins. Most of its senior
executive officers and a substantial portion of its Board of Directors have
been replaced, its design staff has been supplemented, it has acquired new
trademarks and terminated its previous agreements with licensees in Canada and
the United States. The Company has shifted its focus from primarily using
cotton/spandex knit, cotton jersey and denim in the production of dresses,
skirts, pants, tank tops, jackets, leggings and jeans to using primarily denim
and knit/woven cotton for shirts, pants, shorts, vests, jackets, dresses,
T-shirts and sweatshirts.
APPAREL AND APPAREL DESIGN
The Company offers clothing for the women's "junior" market and for young
men's and children's markets. The Company's business is generally divided
among five retail selling seasons: Spring, Summer, Fall, Back-to-School and
Holiday. For each selling season, the Company introduces a separate apparel
collection each year. Seasonal factors can cause some variance in production
and sales levels among fiscal quarters in any fiscal year, but the Company
does not regard its overall business as highly seasonal.
Junior's. The Company's clothing for the "junior" market incorporates
current styles, fabrics and colors with a look that is designed to appeal to a
broad cross-section of young women. Clothing for the junior market is
characterized by sizes tailored for youthfully figured women. Prior to the
Acquisition Transaction, the Company's Junior lines incorporated fabrics,
primarily of cotton/spandex knit, cotton jersey and denim, in the production
of dresses, skirts, pants, tank tops, jackets, leggings and jeans. Subsequent
to the Acquisition Transaction, the Company changed its focus to using
primarily denim and, to a lesser degree, twill, for shirts, pants, shorts,
vests, jackets and dresses and knit and woven cotton for T-shirts, sweatshirts
and other types of shirts. In addition, the Company has developed novelty
knits for tops, using fabrics such as second skin satin,
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printed mesh and printed nylon. The GM Surf(TM) women's line uses novelty
fabrics of printed denim and pencel (a mixture of denim and nylon) for shirts,
pants, vests, dresses and jackets.
The Company's in-house design staff, under the direction of Georges
Marciano, is responsible for all phases of product development.
Young Men's. Prior to the Acquisition Transaction, the Company offered
casual apparel for young men, principally between the ages of 15 to 30, in
collections of knits and woven shirts, jackets, vests, and denim and casual
pants and jeans. These were marketed under the YES Clothing Co.(R), and
Sedan(R) brands and the YES Men(R) trademark. Subsequent to the Acquisition
Transaction, the Company discontinued marketing under the Sedan(R) brand and
began marketing under the YES U.S.A.(TM) label, denim jeans, shorts, jackets
and vests and cotton and denim shirts, T-shirts and sweatshirts. The GM
Surf(TM) men's line, with its distinctive Hawaiian look, uses denim, flannel,
polar fleece, corduroy, cotton and rayon twill, wool and rayon gabardine,
cotton pique and nylon in the production of T-shirts, sweatshirts, shirts,
shorts, vests, jackets and pants.
Children's Wear. Prior to fiscal 1994, the Company had manufactured
children's wear, mainly for girls aged 7 to 14. In fiscal 1994, the Company
discontinued the manufacture of children's wear and licensed out the YES(R)
name for the production of children's apparel. Subsequent to the Acquisition
Transaction, the Company reacquired the children's wear license and began
marketing, under the YES Kids(R) label, denim jeans, overalls, shorts,
shortalls, skirts, skirtalls, vests, and jackets, cotton T-shirts and
sweatshirts and denim and cotton shirts.
PRODUCTION
Manufacturing. The Company manufactures its garments using independent
cutting and sewing contractors located principally in the Los Angeles area.
Prior to the Acquisition Transaction, the Company manufactured certain goods
in Hong Kong and other locations in the Far East. The Company substantially
decreased these overseas activities after the Acquisition Transaction. The
Company seeks to produce high quality garments through its use of quality
fabrics, insistence on quality workmanship and use of comprehensive fabric and
garment inspection programs.
The Company acquires fabric from suppliers and supplies such fabric,
together with the garment pattern, to an independent contractor for cutting.
The cut fabric and any buttons, zippers and other trim to be used on the
garments are then delivered to independent sewing contractors. Under the
Company's supervision, these contractors assemble and sew the fabric and add
trim in accordance with production samples. The Company also employs a
production coordinator and three full time production assistants who regularly
visit the Company's contractors to review the quality of the work in progress.
Prior to distribution, the garments are delivered to the Company's warehouse
for final inspection in the Quality Control Department, which has two full
time employees.
The lead time to fill new orders placed by the Company with its
manufacturing contractors generally ranges from three to four weeks for
domestically produced garments. The Company generally schedules the
manufacture of apparel based on orders received to reduce the risk of
obsolescence of its garment inventory. The Company continuously monitors for
obsolete and damaged inventory. Such inventory is usually sold to customers
who specialize in merchandising off-price clothing and sold through a Company
owned factory outlet store.
The Company has long-standing relationships with its cutting contractor and
many of its sewing production contractors but does not have written agreements
with any of its contractors. For its domestically produced garments, the
Company currently utilizes only one cutting contractor (who is located in the
Company's facility and who works mainly for the Company) and approximately 25
sewing contractors (all of whom are located in the Los Angeles area).
The Company believes that its relationships with its cutting and sewing
contractors are satisfactory. The Company does not believe that the loss of
any contractor would have a material adverse effect on the Company's
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operations as there are a large number of domestic and foreign cutting and
sewing contractors who can manufacture the Company's garments. However, the
Company believes that it is the largest customer of certain of its sewing
contractors.
Fabric. Prior to the Acquisition Transaction, the fabrics used by the
Company in its domestically produced garments were primarily cotton/spandex
knit, which was acquired from suppliers located in Hong Kong, and cotton
jersey and denim, which were acquired from suppliers located in the United
States. The Company made its foreign purchases of fabric from its resident
agent in Hong Kong, who placed orders with a number of fabric suppliers.
Subsequent to the Acquisition Transaction, the Company substantially reduced
its use of cotton/spandex knit. The Company primarily uses denim, cotton knits
(jersey) and woven cotton (chambray and poplin), which are purchased
domestically.
The Company believes that during the fiscal year ended March 31, 1995,
approximately 82% of its expenditures for fabrics used in its domestically
produced garments were paid to suppliers located in the United States. For the
fiscal year ended March 31, 1995, approximately 16% of the Company's
expenditures for domestically purchased fabrics was accounted for by its
largest domestic fabric supplier, approximately 41% of such expenditures was
accounted for by the Company's four largest domestic suppliers and
approximately 58% of such expenditures was accounted for by the Company's ten
largest domestic suppliers.
The Company does not have any long-term arrangements with any of its fabric
suppliers. To date, the Company has not experienced any difficulty in
satisfying its fabric requirements and it believes that the large number and
diversity of potential suppliers minimizes the risk of the loss of any one
supplier. The Company believes that the effect of the loss of one or a few of
its fabric suppliers on the Company's operations would be minimal due to the
large number and diversity of potential suppliers and the relative ease with
which new supplier relationships may be established.
SALES AND MARKETING
The Company sells its apparel throughout the United States to retail
department stores, specialty chains and specialty stores. Prior to the
Acquisition Transaction, the Company had nominal sales in England, Europe,
Japan and Korea. For the fiscal year ended March 31, 1995, the Company sold
its apparel to over 1,300 retailing customers. Approximately 44% of sales were
made to the Company's ten largest customers and approximately 89% of sales
were made to the Company's 100 largest customers.
Sales of the Company's garments are made through independent sales
organizations and directly by the Company's sales staff. The Company maintains
showrooms in New York City and Los Angeles for women's and men's apparel. The
Company also engages the services of independent sales organizations located
in Miami, Dallas, Chicago, Atlanta, and Philadelphia, which operate showrooms
displaying the Company's products. Prior to the Acquisition Transaction, the
Company had also engaged the services of an independent sales organization in
Puerto Rico. Sales representatives at each showroom are responsible for
marketing the Company's apparel within an assigned territory. Each sales
representative meets with customers in the showroom, makes sales calls to
customers and represents the Company at trade shows within the assigned
territory. The sales organizations are retained on a non-exclusive basis. All
of the Company's independent sales organizations are compensated on a
commission basis on terms consistent with industry practice. The Company does
not sell its garments on consignment.
The Company generally sells its products on net-30 day terms, except for
Misfits and GM Junior products which are sold on 8/10 end of month terms.
The Company's backlog consists of purchase orders that have been received
but not shipped, and amounted to approximately $3,200,000, $9,137,000 and
$8,400,000 as of June 20, 1995, June 20, 1994, and June 20, 1993,
respectively. The Company expects to ship substantially all of the orders
comprising the backlog prior to
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September 30, 1995. Subsequent to the Acquisition Transaction the Company's
backlog decreased significantly due to a restructuring of product lines and
the discontinuance of the Sedan(R) brand division.
While the failure to fill orders on a timely basis could have a material
adverse effect on the Company's sales, the Company has generally not
experienced difficulty in shipping orders by the dates requested by its
customers. The Company does not generally accept returns except for damaged or
defective garments or with respect to late deliveries. However, the Company
does grant markdown money for slow moving goods.
ADVERTISING AND PROMOTION
Prior to the Acquisition Transaction, the Company's advertising strategy was
to promote an image that associated a fashionable look and youthful style and
to promote the YES Clothing Co.(R) name. The Company advertised in national
magazines, including Details, In Fashion, Sportswear International, Vogue,
Seventeen Magazine, Elle and Source, among others. The Company had no
cooperative advertising program for its retailers although it did, with
advance approval, reimburse its customers for advertising the Company's
products. The Company's expenditures for advertising and promotion were
approximately $442,000 during fiscal 1995 (1.5% of net sales), $524,000 during
fiscal 1994 (1.9% of net sales), and approximately $779,000 during fiscal 1993
(2.1% of net sales). Subsequent to the Acquisition Transaction, the Company
has promoted the YES Clothing Co.(R) name in Women's Wear Daily, a trade
newspaper, and Sportswear International and the GM Surf(TM) and Misfits(R)
brands in In Fashion, Los Angeles Magazine, Surfer and Sportswear
International.
BRANDS AND TRADEMARKS
The Company's principal trademarks, YES Clothing Co.(R), YES Men(R), YES
Kids(R) and YES Jeans(R) are registered with the United States Patent and
Trademark Office. The Company also has registered or has trademark
applications pending, for these trademarks in other countries. The Company
believes that these trademarks have significant value in the marketing of its
apparel. While the Company is not aware of any claims against its right to
these trademarks, the loss of the right to use these trademarks would have a
material adverse effect on the Company's operations.
There are other companies in the apparel and apparel-related industries that
incorporate the word "yes" in their trademarks, and there can be no assurance
that these or future trademarks which may be granted will not diminish the
value of the Company's "YES Clothing Co.(R)" or "YES(R)" trademarks.
Subsequent to the Acquisition Transaction, the Company applied for domestic
and foreign trademarks for YES U.S.A.(TM) in a diamond design.
Prior to the Acquisition Transaction, the Company sold under the YES
Clothing Co.(R) and Sedan(R) brand names. The Company also manufactured and
marketed its garments under private label for several large customers.
Subsequent to the Acquisition Transaction, the Company discontinued private
label and Sedan(R) brand sales, and, in addition to the YES(R) brand, began
marketing under the GM Surf(TM) and Misfits(R) labels which are licensed to
the Company under an agreement with Marble Sportswear, Inc., a company
controlled by Georges Marciano (see Related Party Transactions).
COMPETITION
The segments of the apparel industry in which the Company competes are
highly fragmented. The Company competes with numerous other apparel
manufacturers, which vary in size and in the products with which they design
and manufacture. In addition, department stores, including some of the
Company's customers, sell competing apparel under their own labels. Many of
the Company's competitors are larger and have greater financial resources than
the Company.
The marketing of apparel is highly competitive. The Company believes that
the ability to gauge effectively and to respond to changes in consumer demands
and tastes as well as the ability to produce and deliver its products on a
timely bases are necessary to compete successfully in the apparel industry.
The Company believes
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that consumer acceptance depends on the image, design, quality and price of
its garments, and that its continuity will depend on its ability to remain
competitive in these areas. The failure to design garments that meet with
acceptance in the marketplace in the future could result in the material
deterioration of customer loyalty and the Company's image and could adversely
affect the Company's business.
EMPLOYEES
As of March 31, 1995, the Company employed 98 persons. None of the Company's
employees are represented by a labor union. The Company considers its
relations with employees to be satisfactory.
ENVIRONMENTAL REGULATION
The cost and effect of complying with environmental regulations are not
material due to the nature of the Company's business.
ITEM 2. PROPERTIES
Effective May 1, 1992, the Company's executive offices, merchandising,
production, shipping and warehousing facilities became located in a facility
in Los Angeles totaling approximately 75,000 square feet, occupied pursuant to
a lease expiring in May 1997. The Company also leases the following showrooms
pursuant to leases expiring as indicated: Los Angeles Women's (August 1997)
and Men's (August 1996) and New York City Women's (September 1997), Men's
(June 1996) and combined Women's/Men's showroom (June 2000). The Company is
attempting to sublease its Women's New York showroom and does not anticipate
any significant losses associated with the subleasing activity. Management
expects that in the normal course of business, such leases will be renewed or
replaced by other leases. The Company believes its current facilities are
generally in good operating condition and are suitable and adequate for its
foreseeable needs. The Company does not believe the loss of any of these
facilities would have a material adverse effect on its operations as
equivalent facilities are readily available. The Company also operates an
Outlet Store located in Park City, Utah for the sale of slow moving/off season
merchandise.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of fiscal year
1995 to a vote of security holders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
The Company's Common stock is traded on the Nasdaq National Market under the
symbol YSCO. The following table sets forth the range of high and low sales
prices of the Common stock, as reported by The Nasdaq Stock Market, Inc. for
each quarterly period during the past two fiscal years:
MARKET PRICES
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MARCH 31 DEC. 31 SEPT. 30 JUNE 30
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FISCAL 1995
Low......................................... $3.25 $1.75 $1.37 $1.12
High........................................ 10.50 4.12 3.00 1.75
FISCAL 1994
Low......................................... $1.31 $1.75 $2.03 $2.00
High........................................ 2.38 2.50 3.00 2.88
FISCAL 1993
Low......................................... $1.50 $1.75 $2.00 $2.50
High........................................ 3.50 3.00 3.25 4.00
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APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK SECURITIES
The Company had approximately 775 holders of record of Common stock as of
March 31, 1995.
DIVIDENDS
The Company has never paid cash dividends on its common equity. The Company
is not restricted from making any cash dividend payments under its current
credit agreement with its factor. However, the Company intends to retain any
earnings within the Company for the foreseeable future.
POTENTIAL DELISTING
On June 14, 1995 the NASD notified the Company that its net worth as of
March 31, 1995 had been reduced below the NASD's minimum standards for
continued listing and suggested that the Company would be delisted from the
NASD/NMS. In light of the capital infusion by Mr. Marciano--See "Management's
Discussion and Analysis of Financial Condition--Subsequent Events", the
Company believes its net worth is now in excess of the minimum standards and
has applied to the NASD for a waiver from delisting. There is no assurance
that the waiver will be granted.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company as of and for each of
the five years in the period ended March 31, 1995 are derived from the audited
Financial Statements of the Company and should be read in conjunction with
such Financial Statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this report.
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(000'S OMITTED)
YEAR ENDED MARCH 31
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1995 1994 1993 1992 1991
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INCOME STATEMENT DATA
Net Sales................... $ 28,580 $ 27,883 $ 37,940 $ 35,110 $ 36,249
Gross profit................ 3,370 3,673 8,052 9,627 10,467
Income (loss) before income
taxes...................... (4,652) (2,784) (1,430) (1,043) 1,462
Net income (loss)........... (4,652) (2,934) (998) (722) 754
Earnings (loss) per share... (1.22) (.77) (.26) (.19) .20
Dividends per share......... -- -- -- -- --
Weighted average number of
shares used in
computation(a)............. 3,821 3,821 3,821 3,821 3,821
BALANCE SHEET DATA
Inventory................... 2,158 3,213 3,243 2,985 3,379
Working capital............. 866 5,250 8,171 9,374 10,379
Long-term liabilities....... 449 171 214 -- --
Total assets................ 4,630 9,077 12,784 12,966 12,777
Total liabilities........... 3,095 2,805 3,578 2,762 1,851
Shareholders' equity.......... 1,535 6,272 9,206 10,204 10,926
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(a) Weighted average number of shares have been computed based on the number
of shares outstanding each period. The effect of options granted but not
exercised has not been included as the effect would have either been
immaterial or antidilutive.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
net sales represented by certain items in the Company's statements of
operations.
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PERCENTAGE OF NET SALES
YEAR ENDED MARCH 31,
---------------------------
1995 1994 1993
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Net sales......................................... 100.0 % 100.0 % 100.0 %
Cost of sales..................................... 88.2 86.8 78.8
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Gross profit...................................... 11.8 13.2 21.2
Commission income................................. 1.3 2.5 2.5
Royalty income.................................... .2 .2 .4
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Gross operating income............................ 13.3 15.9 24.1
Selling, general and administrative expenses...... (27.9) (31.7) (27.8)
------- ------- -------
Loss from operations.............................. (14.6) (15.8) (3.7)
Other income--insurance........................... .2 6.0 --
Other expense..................................... (0.9) (0.2) --
License reacquisition............................. (1.0) -- --
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Loss before income taxes (benefit)................ (16.3) (10.0) (3.7)
Income taxes (benefit)............................ -- 0.5 (1.1)
------- ------- -------
Net loss.......................................... (16.3)% (10.5)% ( 2.6)%
======= ======= =======
</TABLE>
FISCAL YEARS 1995, 1994 AND 1993
NET SALES increased by $697,000 or 2.5% to $28,580,000 in fiscal 1995 due to
the addition of the GM Surf(TM) and Misfits(R) product lines.
In fiscal 1994, net sales decreased by $10,060,000 or 26.5% to $27,883,000
due to significantly decreased sales in all divisions except for an increase
in sales in the Sedan(R) line of young men's and boy's knits and woven shirts.
The decline in sales reflects both continued intense competition as well as a
general decline in apparel purchases by consumers.
GROSS PROFIT as a percentage of net sales decreased to 11.8% in fiscal 1995
from 13.2% in fiscal 1994 due to higher levels of markdowns and a reduction in
prices negotiated by retailers in response to cost conscious consumers. Gross
profit as a percentage of net sales decreased to 13.2% in fiscal 1994 from
21.2% in fiscal 1993. The significant decrease in gross profit percentage in
1994 reflects a number of factors, including decreased sales volume,
significant price competition, increased materials costs primarily for trim,
washing, bleaching and dying, and an increased unit cost for design and
production salaries and expenses (as these total costs are spread over the
decreased production).
COMMISSION INCOME decreased by $306,000 or 44.4% to $383,000 due to the
discontinuation of commission transactions subsequent to the acquisition
transaction. Commission income is generated from shipments of goods
manufactured in the Orient to domestic and overseas customers. In fiscal 1994,
commission income decreased $264,000 or 27.7% to $689,000 from $953,000 in
fiscal 1993 due to a general decline in sales.
ROYALTY INCOME decreased by $9,000 to $51,000 in fiscal 1995 from $60,000 in
fiscal 1994 due to the termination of licensee agreements in Canada and the
United States. In fiscal 1994, royalty income decreased by $81,000 from
$141,000 in fiscal 1993. The main reason for the decrease was the transition
from a bankrupt licensee in Canada to a new licensee in 1994.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A") decreased to
$7,972,000 in fiscal 1995 from $8,816,000 in fiscal 1994, which represented
27.9% and 31.7% of net sales, respectively. (When commission and royalty
income is added to net sales, the percentage of S,G&A is reduced to 27.5% and
30.8%, respectively.)
The main factors reducing S,G&A in fiscal 1995 were as follows:
(1) Payroll and payroll tax decreased to $2,795,000 in fiscal 1995 from
$3,364,000 in fiscal 1994 due to a reduction in the number of employees.
(2) Insurance expense decreased to $467,000 or 1.64% of net sales in
fiscal 1995 from $712,000 in fiscal 1994 or 2.56% of net sales due to
renegotiated insurance rates and a workers' compensation insurance rebate.
(3) Advertising, travel, contributions and profit sharing expenses were
reduced to $775,000 in fiscal 1995 from $1,064,000 in fiscal 1994 in order
to conserve working capital.
S,G&A expenses decreased to $8,816,000 in fiscal 1994 from $10,564,000 is
fiscal 1993 primarily due to decreases in advertising, legal and accounting
expenses incurred in connection with the Company's business interruption claim
and lower than anticipated bad debt expenses.
OTHER INCOME--INSURANCE--Subsequent to March 31, 1992, the Company incurred
the loss of substantially all of its finished goods inventory in connection
with civil disturbances in the City of Los Angeles. During the fiscal year
ended March 31, 1993 the Company recovered, from one insurance company, the
cost of the inventory lost and its normal gross profit which would have been
derived from the sales of those goods. During the fiscal year ended March 31,
1994 the Company recovered $1,658,000, net of costs, from a second insurance
company for business interruption losses related to the civil disturbance.
INTEREST INCOME decreased to $3,000 in fiscal 1995 from $74,000 in fiscal
1994 due to a net loss of $4,652,000 for fiscal 1995 and less funds being
available for investment. Interest income increased to $74,000 in fiscal 1994
from $39,000 in fiscal 1993 due to more funds held on deposit with the factor
in 1994.
INTEREST EXPENSE increased to $255,000 in fiscal 1995 from $128,000 in
fiscal 1994 due to increased working capital requirements and borrowings from
the Company's Factor. Interest expense increased to $128,000 in fiscal 1994
from $107,000 in fiscal 1993 due to decreased borrowings from the Company's
Factor.
INCOME TAXES in fiscal 1995 includes a valuation allowance of $3,109,000
which is equal to 100% of the net deferred tax asset. This valuation allowance
is considered appropriate since the Company cannot conclude that it is more
likely than not that the net deferred tax asset will be realized.
CAPITAL RESOURCES AND LIQUIDITY
On June 17, 1995, Georges Marciano agreed to provide $3,300,000 in
additional capital to the Company in exchange for 2,640,000 shares of common
stock and to convert additional shares of common stock at $1.25 per share in
exchange of approximately $700,000 owed by the Company to Mr. Marciano and his
affiliates for advances and expenses incurred by them on the Company's behalf,
subject in both cases to the receipt of a formal valuation and fairness
opinion. Without the infusion of these funds and due to continuing losses, the
Company would have completely depleted its working capital by June of 1995.
Prior to receipt of the opinion, the Company operated on overdrafts from its
factor guaranteed by letters of credit supplied by Mr. Marciano. The opinion,
which is included as an exhibit to this Form 10-K was delivered on July 7,
1995 and the Company issued 3,184,693 shares to Mr. Marciano shortly
thereafter.
Prior to the capital infusion and its recent liquidity crisis, the Company
had funded its activities principally from cash flow generated from operations
and credit facilities with its institutional lender.
11
<PAGE>
The Company had an agreement with a factor and through June 1994 with a
bank, whereby the factor purchased accounts receivable from the Company on a
non-recourse basis and remitted the funds on a maturity basis. The bank
provided the Company with an unsecured $3,000,000 facility for commercial
letters of credit and at March 31, 1994, the Company had $1,618,000 of letters
of credit outstanding. Under the facility agreement, the Company was
prohibited from declaring or paying any dividends on any class of its stock.
The Company entered into a new factoring agreement with Republic Factors and
a letter of credit facility with Republic National Bank of New York (the
financing bank) effective through March 1996. Both the old and new agreements
are non-recourse (ie, the factor purchases the Company's accounts receivable
that it has preapproved, without recourse, except in cases where there are
merchandise disputes in the normal course of business).
Under the new factoring agreement, the Company sells substantially all of
its trade accounts receivable, without recourse, and may request advances, up
to 80% on the net sales factored at any time before their maturity date. The
factor is responsible for the accounting and collection of all accounts
receivable sold to it by the Company and receives a commission of 0.6% of
purchased net receivables on a guaranteed minimum volume for the contract year
of $30,000,000. The commission rate will increase to 0.75% of total invoices
factored and be applied retroactively for the contract year if the guaranteed
minimum volume is not attained.
Under the letter of credit facility, the financing bank provides a credit
line for letters of credit, ledger debt and factor guaranties up to the 80%
advance rate provided under the factoring agreement with an additional over
advance facility of $1,050,000. Commitments outstanding under the letter of
credit facility as of March 31, 1995 amounted to $652,000.
The agreements are collateralized by accounts receivable and inventory
imported under letters of credit. The Company or the factor may terminate the
credit agreement on the anniversary date of the agreement with at least 60
days prior written notice.
As of March 31, 1995, the Company had net working capital of $866,000, as
compared to $5,250,000 as of March 31, 1994. The Company's current ratio as of
March 31, 1995 was 1.3, as compared to 3.0 as of March 31, 1994. The decreases
in working capital and current ratio are primarily due to net losses amounting
to $4,652,000. Funds due from factor as of March 31, 1995 was $678,000 as
compared to $3,383,000 as of March 31, 1994 due to increased working capital
requirements.
Inventories at March 31, 1995 were $2,158,000 as compared to $3,213,000 at
March 31, 1994, a decrease of $1,055,000. The decrease was due to a reduction
of inventories to levels consistent with seasonal requirements, reduced
backlog and the discontinuation of various product lines.
The Company has funded its activities principally from cash flow generated
from operations and credit facilities with its institutional lender.
In recent years, the Company has experienced financial difficulties due to
major customers filing for reorganization proceedings under bankruptcy laws
and the unfavorable economic climate being experienced in the apparel
industry. These conditions have had a significant negative impact on the
Company's operations being reflected in declining sales and eroding margins,
resulting in net losses amounting to $4,652,000 and $2,934,000 in fiscal 1995
and 1994, respectively. On January 31, 1995, control of the Company changed
when approximately 80% of the Company's outstanding stock was acquired by
affiliates of Georges Marciano. Georges Marciano has subsequently made
unsecured non-interest bearing advances from an entity affiliated through
common ownership, due on demand, and amounted to $538,000 as of March 31,
1995. Additional material financial difficulties encountered by the Company
would require additional borrowing to avoid a negative impact on the Company's
future operations.
The Company believes that the working capital infusion provided by Georges
Marciano and affiliates and the availability of credit under current lending
agreements and other financial sources available to it will provide
12
<PAGE>
sufficient resources to finance the Company's currently anticipated working
capital needs and capital expenditures through the end of summer of 1995.
Continued financial difficulties encountered by the Company would require
additional borrowings and infusions of capital to avoid a negative impact on
the Company's continued future operations after that time period.
The Company has continued to cut its payroll. It has also reduced other
operating costs such as advertising and payroll related costs. Notwithstanding
the foregoing measures, the Company anticipates that it may not be profitable
for the fiscal year ending March 31, 1996.
SUBSEQUENT EVENTS
On June 17, 1995, Georges Marciano agreed to become Chief Executive Officer
and Chairman of the Board of the Company, to provide additional capital for
the Company, and to license to YES certain trademarks controlled by Marciano
affiliates. The additional capital was received by the Company on July 12,
1995 after receipt of a required valuation opinion.
As Chief Executive Officer and Chairman of the Board of YES Clothing Co.(R),
Mr. Marciano will receive a salary of $1 per year plus options to acquire
500,000 shares of common stock per year at $1.25 per share for four years (the
closing price of the Company's common stock on June 13, 1995) vesting monthly
during continued employment. In addition to his duties as Chairman and Chief
Executive Officer, Mr. Marciano will supervise all of the Company's design
departments.
Mr. Marciano agreed to contribute $3,300,000 in additional capital to the
Company in exchange for 2,640,000 shares of common stock and to convert
additional shares of common stock at $1.25 per share in exchange of
approximately $700,000 owed by the Company to Mr. Marciano and his affiliates
for advances and expenses incurred by them on the Company's behalf subject in
both cases to the receipt of a formal valuation and fairness opinion. In
addition, the Company has granted Mr. Marciano a two-year warrant to acquire
an additional 2,000,000 shares at $1.25 per share.
The Company has also agreed to enter into five-year trademark license
agreements for Mr. Marciano's "GM Surf(TM)" and "Misfits(R)" lines of clothing
at royalties of 7% of gross sales, plus an additional 2% for advertising.
In connection with the employment of the principal shareholder as Chief
Executive Officer and Chairman of the Board, the Company has granted an option
for 500,000 shares per year at $1.25 per share over four years, vesting
ratably, expiring in ten years.
If all of the shares, warrants and options described above are issued and
exercised, Mr. Marciano and his affiliates' ownership of the Company may
increase to approximately 93% by the end of four years. Shareholder approval
will be sought for the grant of the options and warrant to Mr. Marciano.
Copies of all of the agreements reflecting the foregoing are attached here
to as exhibits.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
13
<PAGE>
REPORT OF MANAGEMENT
The accompanying financial statements have been prepared by management in
conformity with generally accepted accounting principles, and necessarily
include some amounts that are based on management's best estimates and
judgments.
Yes Clothing Co. maintains a system of internal accounting controls designed
to provide management with reasonable assurance that assets are safeguarded
against loss from unauthorized use or disposition, and that transactions are
executed in accordance with management's authorization and recorded properly.
The concept of reasonable assurance is based on the recognition that the cost
of a system of internal control should not exceed the benefits derived and
that the evaluation of those factors requires estimates and judgments by
management. Further, because of inherent limitations in any system of internal
accounting control, errors or irregularities may occur and not be detected.
Nevertheless, management believes that a high level of internal control is
maintained by Yes Clothing Co. through the selection and training of qualified
personnel, and the establishment and communication of accounting and business
policies.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management and with Yes Clothing Co.'s
independent auditors to review matters relating to the quality of financial
reporting and internal accounting control, and the nature, extent and results
of their audits. Yes Clothing Co.'s independent auditors have free access to
the Audit Committee.
GEORGES MARCIANO GUY ANTHOME JEFFREY BUSSE
CHAIRMAN, PRESIDENT CHIEF FINANCIAL
CHIEF EXECUTIVE OFFICER
OFFICER
14
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Yes Clothing Co.
We have audited the accompanying balance sheet of Yes Clothing Co. as of
March 31, 1995 and the related statements of operations, changes in
shareholders' equity and cash flows for the year then ended. We have also
audited the financial statement schedule for the year ended March 31, 1995,
listed under item 14. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Yes Clothing Co. as of
March 31, 1995, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
In our opinion, the schedule for the year ended March 31, 1995 presents
fairly, in all material respects, the information set forth therein.
MOSS ADAMS
Los Angeles, California
May 24, 1995 (except for Note 1(b),
as to which the date is July 12, 1995)
15
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Yes Clothing Co.
We have audited the accompanying balance sheet of Yes Clothing Co. as of
March 31, 1994 and the related statements of operations, changes in
shareholders' equity and cash flows for each of the two years in the period
ended March 31, 1994. We have also audited the financial statement schedules
listed under Item 14. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules 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
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Yes Clothing Co. as of
March 31, 1994, and the results of its operations and its cash flows for each
of the two years in the period ended March 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for income taxes.
Also, in our opinion, the schedules for the years ended March 31, 1994 and
1993 presents fairly, in all material respects, the information set forth
therein.
BDO SEIDMAN, LLP
Los Angeles, California
May 27, 1994 (except for Note 20
which is as of June 21, 1994)
16
<PAGE>
YES CLOTHING CO.
BALANCE SHEET
MARCH 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash................................................ $ 232,000 $ 335,000
Due from factor (Note 3)............................ 678,000 3,383,000
Accounts receivable (Note 4)........................ 209,000 282,000
Other receivables (Note 5).......................... 152,000 565,000
Inventories (Notes 2 and 6)......................... 2,158,000 3,213,000
Prepaid expenses.................................... 83,000 106,000
----------- -----------
Total current assets.............................. 3,512,000 7,884,000
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization (Notes 2 and 7)........ 1,034,000 1,099,000
OTHER ASSETS.......................................... 84,000 94,000
----------- -----------
TOTAL ASSETS.......................................... $ 4,630,000 $ 9,077,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................... $ 2,145,000 $ 2,306,000
Accrued expenses (Note 8)........................... 243,000 284,000
Contracts payable................................... 50,000 44,000
----------- -----------
Total current liabilities......................... 2,438,000 2,634,000
CONTRACTS PAYABLE, net of current portion (Note 9).... 119,000 171,000
DUE TO RELATED PARTY (Note 10)........................ 538,000 --
COMMITMENTS (Note 12)
SHAREHOLDERS' EQUITY (Note 14)
Preferred stock, no par; 2,000,000 shares
authorized; no shares issued....................... -- --
Common stock, no par; 20,000,000 shares authorized;
3,821,000 issued and outstanding................... 4,513,000 4,598,000
(Accumulated deficit) retained earnings............. (2,978,000) 1,674,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY............................ 1,535,000 6,272,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $ 4,630,000 $ 9,077,000
=========== ===========
</TABLE>
See accompanying notes.
17
<PAGE>
YES CLOTHING CO.
STATEMENT OF OPERATIONS
YEARS ENDED MARCH 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................ $ 28,580,000 $ 27,883,000 $ 37,943,000
COST OF SALES........................ 25,210,000 24,210,000 29,891,000
------------ ------------ ------------
Gross profit..................... 3,370,000 3,673,000 8,052,000
COMMISSION INCOME.................... 383,000 689,000 953,000
ROYALTY INCOME....................... 51,000 60,000 141,000
------------ ------------ ------------
Operating income................. 3,804,000 4,422,000 9,146,000
------------ ------------ ------------
OPERATING EXPENSES
Selling............................ 3,345,000 3,783,000 4,406,000
General and administrative......... 4,627,000 5,033,000 6,158,000
------------ ------------ ------------
7,972,000 8,816,000 10,564,000
------------ ------------ ------------
Loss from operations............. (4,168,000) (4,394,000) (1,418,000)
OTHER INCOME (EXPENSE)
Insurance income, net.............. 63,000 1,658,000 --
Interest expense................... (255,000) (128,000) (107,000)
Interest income.................... 3,000 74,000 39,000
License acquisition (Note 14)...... (295,000) -- --
Other income....................... -- 6,000 56,000
------------ ------------ ------------
(484,000) 1,610,000 (12,000)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES............. (4,652,000) (2,784,000) (1,430,000)
INCOME TAX PROVISION (BENEFIT) (Note
14)................................. -- 150,000 (432,000)
------------ ------------ ------------
NET LOSS............................. $ (4,652,000) $ (2,934,000) $ (998,000)
============ ============ ============
LOSS PER SHARE....................... $ (1.22) $ (.77) $ (.26)
============ ============ ============
AVERAGE NUMBER OF SHARES OUTSTANDING. 3,821,000 3,821,000 3,821,000
============ ============ ============
</TABLE>
See accompanying notes.
18
<PAGE>
YES CLOTHING CO.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, March 31, 1992........ 3,821,000 $4,598,000 $ 5,606,000 $10,204,000
Net loss..................... -- -- (998,000) (998,000)
--------- ---------- ----------- -----------
BALANCE, March 31, 1993........ 3,821,000 4,598,000 4,608,000 9,206,000
Net loss..................... -- -- (2,934,000) (2,934,000)
--------- ---------- ----------- -----------
BALANCE, March 31, 1994........ 3,821,000 4,598,000 1,674,000 6,272,000
Repurchase of stock options
(Note 14)................... -- (330,000) -- (330,000)
Capital contribution (Note
14)......................... -- 245,000 -- 245,000
Net loss..................... -- -- (4,652,000) (4,652,000)
--------- ---------- ----------- -----------
BALANCE, March 31, 1995........ 3,821,000 $4,513,000 $(2,978,000) $ 1,535,000
========= ========== =========== ===========
</TABLE>
See accompanying notes.
19
<PAGE>
YES CLOTHING CO.
STATEMENT OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................... $(4,652,000) $(2,934,000) $ (998,000)
Reconciliation of net loss to net cash
flows from operating activities
Depreciation and amortization........ 341,000 298,000 212,000
Increase (decrease) in credits due
customers and allowance for doubtful
accounts............................ 364,000 (23,000) 319,000
Increase (decrease) in cash due to
changes in assets and liabilities
Due from factor.................... (887,000) 2,117,000 (352,000)
Accounts receivable................ 77,000 904,000 (256,000)
Other receivables.................. 413,000 378,000 (273,000)
Inventories........................ 1,055,000 30,000 (257,000)
Prepaid expenses................... 23,000 (45,000) 405,000
Deferred income taxes.............. -- 378,000 247,000
Other assets....................... 10,000 (1,000) 71,000
Accounts payable................... (161,000) (612,000) 1,250,000
Accrued expenses................... (41,000) (128,000) (671,000)
----------- ----------- ----------
Net cash (used) provided by
operating activities............ (3,458,000) 362,000 (303,000)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment.... (276,000) (241,000) (702,000)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on contracts payable.......... (47,000) (33,000) (11,000)
Proceeds from contracts payable........ -- -- 248,000
Advances from factor, net.............. 3,116,000 -- --
Contribution of capital................ 245,000 -- --
Borrowing from related party........... 538,000 -- --
Purchase of stock options.............. (330,000) -- --
----------- ----------- ----------
Net cash provided (used) by
financing activities............ 3,522,000 (33,000) 237,000
----------- ----------- ----------
NET (DECREASE) INCREASE IN CASH.......... (212,000) 88,000 (768,000)
CASH AND CASH EQUIVALENTS,
Beginning of year...................... 444,000 356,000 1,124,000
----------- ----------- ----------
CASH AND CASH EQUIVALENTS,
End of year............................ $ 232,000 $ 444,000 $ 356,000
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for
Interest.............................. $ 255,000 $ 128,000 $ 107,000
=========== =========== ==========
Income taxes.......................... -- 182,000 --
=========== =========== ==========
</TABLE>
See accompanying notes.
20
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
NOTE 1--ORGANIZATION AND FINANCIAL CONDITION
A) ORGANIZATION--Yes Clothing Co.(R) (the "Company") was incorporated on
July 1, 1982, in the State of California. The Company designs, manufactures
and markets a diversified line of apparel primarily for women and young men.
The Company sells its garments throughout the United States and Canada to
retail department stores, specialty chains and specialty stores.
The Company also arranged for the manufacture, in the Orient, of certain of
its styles, which are shipped directly from the manufacturer to customers in
the United States, Europe and Japan. In connection therewithin, the Company
received a percentage of the sales price charged by the manufacturer and
recognized this amount as commission income in the accompanying statement of
operations. Subsequent to the acquisition transaction as described below, the
Company discontinued these commission transactions.
In January 1995, control of the Company changed when its two principal
shareholders sold all of their shares, amounting to approximately 80% of the
Company's outstanding stock, to affiliates of an individual. This transaction
is herein referred to as the "Acquisition Transaction" and the collective new
majority interest as the "Principal Shareholder". The principal shareholder
currently holds approximately 88% of the Company's outstanding stock.
B) FINANCIAL CONDITION--The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern. The Company
sustained a substantial loss for the year ended March 31, 1995 and has
experienced operating and net losses each year since 1992. The operating
results for the three months ended June 30, 1995 are anticipated to reflect
continued net losses. At this time, the Company is not able to sustain
operations without a significant infusion of capital. The Company is currently
operating on short-term overdrafts provided by the factor (Note 3) which are
guaranteed by limited letters of credit totaling $2,000,000 supplied by the
principal shareholder.
In June 1995, the Company's principal shareholder expressed an intent to
provide additional capital in return for common stock, stock option, warrant
and other considerations. The Company's Board of Directors has approved the
transaction which was consummated after receipt of a formal valuation and
fairness opinion (the grant of options remains subject to shareholder
approval.) The significant terms of the transaction are as follows:
. Contribution of $3,300,000 cash in exchange for common stock at $1.25 per
share.
. Conversion of amounts owed to the principal shareholder and his affiliate
(Note 10) into approximately 560,000 shares of common stock, at a rate of
$1.25 per share.
. Issuance of 2,000,000 common stock warrant immediately exercisable,
expiring in two years, at $1.25 per share.
. Five year trademark license agreement with affiliates of the principal
shareholder for "GM Surf(TM)" and "Misfits(R)" lines at a royalty rate of
7% of gross sales plus 2% for advertising.
. In connection with the employment of the principal shareholder as Chief
Executive Officer and Chairman of the Board, the Company has granted an
option for 500,000 shares per year at $1.25 per share over four years,
vesting ratably, expiring in ten years.
21
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization of property and
equipment are provided principally by the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures...................................... 5 years
Machinery and equipment..................................... 10 years
Leasehold improvements...................................... Life of lease
</TABLE>
INCOME TAXES--Income taxes are accounted for using an asset and liability
approach. Deferred income taxes are provided for temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. Income taxes are further explained in Note 13.
LOSS PER SHARE--Loss per share is based on the weighted average number of
shares of common stock outstanding during each period. Stock options have not
been considered in the loss per share calculations since the effect would be
antidilutive.
STATEMENT OF CASH FLOWS--For purposes of cash flows, the Company considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents, including matured funds held by the
factor.
NOTE 3--TRANSACTIONS WITH FACTOR AND BANK BORROWING
The Company has a factoring agreement with a factor and a letter of credit
facility with a related financing bank through March 1996. Under the factoring
agreement, the Company sells substantially all of its trade accounts
receivable, without recourse, and may request advances, up to 80%, on the net
sales factored at any time before their maturity date. Under the letter of
credit facility, the financing bank provides a credit line for letters of
credit, ledger debt and factor guarantees up to the 80% advance rate provided
under the factoring agreement with an additional overadvance facility of
$1,050,000.
The factor charges a commission on the net sales factored and interest on
advances at prime plus a negotiated rate. The agreements are collateralized by
accounts receivable and inventory imported under letters of credit.
Open letters of credit at March 31, 1995 amounted to $426,000. Included in
accounts payable at March 31, 1995 is $226,000 due to the factor for piece
good purchases.
Due from factor consists of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Unmatured receivables
Without recourse................................. $ 4,297,000 $ 3,521,000
With recourse.................................... 111,000 --
----------- -----------
4,408,000 3,521,000
(Advances) matured funds........................... (3,115,000) 109,000
Open credits....................................... (615,000) (247,000)
----------- -----------
$ 678,000 $ 3,383,000
=========== ===========
</TABLE>
22
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 3--TRANSACTIONS WITH FACTOR AND BANK BORROWING (CONTINUED)
During fiscal 1995, the maximum amount of advances outstanding was
approximately $3,770,000. The average advances based upon month-end balances,
was approximately $2,665,000. The average cost of borrowing, which includes
factoring commission and interest, was approximately 17.2% during 1995.
NOTE 4--ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accounts receivable................................... $ 425,000 $ 503,000
Less allowance for doubtful accounts.................. 216,000 221,000
---------- ----------
$ 209,000 $ 282,000
========== ==========
NOTE 5--OTHER RECEIVABLES
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Tax refund receivable................................. $ -- $ 393,000
Insurance premium refund receivable................... 112,000 63,000
Other................................................. 40,000 109,000
---------- ----------
$ 152,000 $ 565,000
========== ==========
NOTE 6--INVENTORIES
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Raw materials......................................... $ 560,000 $ 953,000
Work-in-progress...................................... 339,000 877,000
Finished goods........................................ 1,259,000 1,383,000
---------- ----------
$2,158,000 $3,213,000
========== ==========
NOTE 7--PROPERTY AND EQUIPMENT
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Furniture and fixtures................................ $ 203,000 $ 200,000
Machinery and equipment............................... 1,311,000 1,132,000
Leasehold improvements................................ 822,000 728,000
---------- ----------
2,336,000 2,060,000
Less accumulated depreciation and amortization........ 1,302,000 961,000
---------- ----------
$1,034,000 $1,099,000
========== ==========
NOTE 8--ACCRUED EXPENSES
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accrued payroll....................................... $ 63,000 $ 120,000
Accrued vacation...................................... 125,000 100,000
Other................................................. 55,000 64,000
---------- ----------
$ 243,000 $ 284,000
========== ==========
</TABLE>
23
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 9--CONTRACTS PAYABLE
The Company leases equipment under capital leases which expire on various
dates through March 1998. The remaining obligations under these capital leases
for future years ended March 31 are as follows:
<TABLE>
<S> <C>
1996............................................................. $ 68,000
1997............................................................. 68,000
1998............................................................. 69,000
--------
205,000
Amount representing interest..................................... (36,000)
--------
Present value of minimum lease payments.......................... 169,000
Less current portion............................................. 50,000
--------
Long-term portion................................................ $119,000
========
</TABLE>
Equipment under capital leases and related accumulated depreciation amount
to $248,000 and $98,000, respectively.
NOTE 10--DUE TO RELATED PARTY
An unsecured $330,000 note payable to the principal shareholder bears
interest at the lessor of 8% or the prime rate of interest less 1%. The note
is due thirteen months from demand or on the closing date of a public offering
or private placement with gross proceeds of at least $6 million and at not
less than $6 per share.
Unsecured non-interest bearing advances of $208,000 were made to the Company
by an entity affiliated through common ownership with the principal
shareholder.
As indicated in Note 1, these amounts were converted to common stock
subsequent to March 31, 1995.
NOTE 11--COMMITMENTS
The Company leases its office, warehouse, retail store and showrooms under
various operating leases expiring through August 1999. Minimum payments under
non-cancelable operating leases for future years ending March 31 are as
follows:
<TABLE>
<S> <C>
1996............................................................ $ 743,000
1997............................................................ 694,000
1998............................................................ 147,000
1999............................................................ 22,000
2000............................................................ 7,000
----------
$1,613,000
==========
</TABLE>
Rent expense for the years ended March 31, 1995, 1994 and 1993, was
approximately $609,000 (net of $115,000 sublease income), $593,000 and
$639,000, respectively.
24
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 12--EMPLOYEE BENEFIT PLAN
The Company has a profit sharing plan for the benefit of qualified
employees. The amount of the contribution to the plan is discretionary and is
determined annually by the Board of Directors. The Company has not accrued
contributions for the years ended March 31, 1995 or 1994. In 1993, the Company
contributed $374,000 to the Plan.
Effective February 14, 1995, the Company terminated the plan pending IRS
approval. The net assets of the plan will be distributed to participants
according to their account balances.
NOTE 13--INCOME TAXES
Income taxes are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- --------- ---------
<S> <C> <C> <C>
Currently payable (refundable)
Federal........................................ $-- $(211,000) $(697,000)
State.......................................... -- 4,000 6,000
---- --------- ---------
-- (207,000) (691,000)
---- --------- ---------
Deferred
Federal........................................ -- 357,000 259,000
---- --------- ---------
$-- $ 150,000 $(432,000)
==== ========= =========
</TABLE>
The primary differences between the income tax provision (benefit) computed
at the U.S. statutory corporate income tax rate and the effective income tax
rate are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Federal income taxes at
the U.S. statutory
rate................... (34.0)% 34.0 % (34.0)%
State taxes, net of
federal income tax
benefit................ (6.0) (.1) .4
Unutilized net operating
loss................... 40.0 (28.5) --
Other................... -- -- 3.4
----- ----- -----
Effective income tax
rate................... -- 5.4 % (30.2)%
===== ===== =====
</TABLE>
Effective at the beginning of fiscal 1994, the Company changed its method of
accounting for income taxes by adopting the provisions of Financial Accounting
Standards Statement No. 109. The cumulative effect on prior years of this
change was not significant.
25
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 13--INCOME TAXES (CONTINUED)
At March 31, 1995 and 1994, deferred tax assets and liabilities are
comprised of the following elements:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Gross deferred assets
Reserve for chargebacks.......................... $ 246,000 $ 99,000
Provision for doubtful accounts.................. 87,000 88,000
Inventory basis.................................. 65,000 97,000
Accrued expenses................................. 50,000 23,000
Tax effect of net operating losses............... 2,724,000 867,000
Other............................................ -- 6,000
----------- -----------
Gross deferred asset........................... 3,172,000 1,180,000
Deferred liability
Accumulated depreciation......................... (63,000) (56,000)
----------- -----------
Net deferred asset before valuation allowance...... 3,109,000 1,124,000
Valuation allowance.............................. (3,109,000) (1,124,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The Company has established a valuation allowance equal to the net deferred
tax asset as the Company cannot conclude that it is more likely than not that
the net deferred tax asset will be realized.
The Federal and State net operating loss carryforwards of approximately
$6,550,000 and $8,286,000, respectively, expire from the years 2007 through
2010. Because ownership of the Company changed control during the year, a
portion of the net operating loss carryforwards will be limited. Approximately
$5,826,000 and $7,598,000 of Federal and State net operating losses,
respectively, are subject to a maximum annual utilization totalling
approximately $522,000.
Deferred income taxes arise from temporary differences between financial and
tax reporting. The effects of these differences on income taxes are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- --------
<S> <C> <C> <C>
Tax effect of net operating losses........ $(1,857,000) $ (867,000) $ --
Inventory basis........................... 32,000 16,000 (3,000)
Valuation and other reserves.............. (146,000) (61,000) (26,000)
Accrued settlement of lawsuit............. -- -- 244,000
Other, net................................ (14,000) 145,000 44,000
Valuation allowance....................... 1,985,000 1,124,000 --
----------- ---------- --------
Provision for deferred income taxes....... $ -- $ 357,000 $259,000
=========== ========== ========
</TABLE>
26
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
NOTE 14--SHAREHOLDERS' EQUITY
STOCK OPTION PLAN--The Company has a stock option plan (the "Plan") for key
employees, directors, officers and consultants of the Company. The plan
provides for the issuance of up to 400,000 shares of common stock. Outstanding
options are exercisable for a period of up to ten years and one week from the
date of grant. Activity under this plan for 1993 through 1995 is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- ------------
<S> <C> <C>
Outstanding, March 31, 1992......................... 160,000 $3.00--$8.75
Granted........................................... 190,000 2.00-- 4.00
-------- ------------
Outstanding, March 31, 1993......................... 350,000 2.00-- 8.75
Granted........................................... 20,000 1.88-- 2.00
-------- ------------
Outstanding, March 31, 1994......................... 370,000 1.88-- 8.75
Granted........................................... 15,000 6.00
Repurchased and canceled.......................... (260,000) 2.00-- 8.75
-------- ------------
Outstanding, March 31, 1995......................... 125,000 $1.88--$6.00
======== ============
</TABLE>
At March 31, 1995, there are 125,000 options exercisable at prices from
$1.88 to $6.00 per share; 30,000 options at prices of $1.88 and $3.00 were
subsequently exercised. As indicated in Note 1, subsequent to March 31, 1995,
4,000,000 additional options have been granted, subject to shareholder
approval, at an exercise price of $1.25 per share.
REPURCHASE OF STOCK OPTIONS--In conjunction with the change of principal
ownership in January 1995, the Company repurchased various stock options for a
total of $330,000. Funds for this transaction were provided by the new
principal shareholder (Note 10).
BUY BACK OF LICENSE AGREEMENTS--In connection with the change in principal
ownership in 1995, the Company reacquired certain licenses for a total of
$295,000. This amount is reflected as an "other expense" in the statement of
operations.
NOTE 15--INSURANCE RECOVERIES
Subsequent to March 31, 1992, the Company incurred the loss of substantially
all of its finished goods inventory in connection with civil disturbances in
the City of Los Angeles. During the fiscal year ended March 31, 1993 the
Company recovered from one insurance company, the cost of the inventory lost
and its normal gross profit which would have been derived from the sale of
those goods. For the years ended March 31, 1995 and 1994, the Company
recovered a net $63,000 and $1,658,000, respectively, from a second insurance
company for business interruption losses related to the civil disturbances.
NOTE 16--OTHER RELATED PARTY TRANSACTIONS
A law firm in which one member of the Board of Directors is a partner, was
paid $93,000, $62,000 and $50,000 for legal services for the years ended March
31, 1995, 1994 and 1993, respectively. This Board member resigned effective
May 16, 1995.
One former member of the Board of Directors served as a consultant to the
Company and was paid $111,000 for consulting services for the year ended March
31, 1994, $100,000 of which was a special bonus in connection with the
settlement of the Company's business interruption claim (Note 15), and $6,000
and $7,000 annually for the years ended March 31, 1995 and 1993, respectively.
Another former member of the Board of Directors served as a consultant to the
Company and was paid $4,000 for consulting services for the year ended March
31, 1994.
27
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is hereby incorporated by reference to the
Company's proxy statement to be filed pursuant to Regulation 14A which involves
the election of Directors.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is hereby incorporated by reference to the
Company's proxy statement to be filed pursuant to Regulation 14A which involves
the election of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is hereby incorporated by reference to the
Company's proxy statement to be filed pursuant to Regulation 14A which involves
the election of Directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is hereby incorporated by reference to the
Company's proxy statement to be filed pursuant to Regulation 14A which involves
the election of Directors.
PART IV
ITEM 14. EXHIBIT, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements of Yes Clothing Co. are included in Item
8:
Balance sheet
Statement of operations
Statement of changes in shareholders' equity
Statement of cash flows
Notes to financial statements
Financial Statement Schedule:
II--Valuation and qualifying accounts
EXHIBITS
See index to exhibits.
REPORTS ON FORM 8-K
Marciano transaction January 31, 1995.
28
<PAGE>
YES CLOTHING CO.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ------------ ----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND ADDITIONS END OF
DESCRIPTION OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
----------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1995:
Allowance for doubtful
accounts on nonfactored
accounts receivable........ $221,000 $158,000 $(163,000)(a) $216,000
======== ======== ========= ========
Reserve for estimated
returns, allowances and
discounts on factored
accounts................... $247,000 $368,000 $ -- $615,000
======== ======== ========= ========
YEAR ENDED MARCH 31, 1994:
Allowance for doubtful
accounts on nonfactored
accounts receivable........ $225,000 $(23,000) $ 19,000 (a) $221,000
======== ======== ========= ========
Reserve for estimated
returns, allowances and
discounts on factored
accounts................... $395,000 $ -- $(148,000)(b) $247,000
======== ======== ========= ========
YEAR ENDED MARCH 31, 1993:
Allowance for doubtful
accounts on nonfactored
accounts receivable........ $181,000 $319,000 $(275,000)(a) $225,000
======== ======== ========= ========
Reserve for estimated
returns, allowances and
discounts on factored
accounts................... $302,000 $233,000 $(140,000)(b) $395,000
======== ======== ========= ========
</TABLE>
- --------
(a) Represents net write-offs of uncollectible accounts against the allowance.
(b) Represents write-offs of uncollectible accounts against the reserve.
29
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
YES Clothing Co.
By: Georges Marciano
----------------------------------
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
July 12, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Georges Marciano Chairman of the Board July 12, 1995
- ------------------------------------- Chief Executive
GEORGES MARCIANO Officer and Director
PRINCIPAL EXECUTIVE OFFICER
Guy Anthome President and Director July 12, 1995
- -------------------------------------
GUY ANTHOME
Jeffrey P. Busse Chief Financial July 12, 1995
- ------------------------------------- Officer and Director
JEFFREY P. BUSSE
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER
Irving B. Kroll Director July 12, 1995
- -------------------------------------
IRVING B. KROLL
Maurice Schoenholz Director July 12, 1995
- -------------------------------------
MAURICE SCHOENHOLZ
30
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
SEQUENTIALLY
ITEM NO. DESCRIPTION NUMBERED
-------- ----------- ------------
<C> <S> <C>
3.1 Restated Articles of Incorporation of the Company. (1)
3.2 Restated Bylaws of the Company.(1)
4.1 Specimen Common Stock Certificate.(1)
10.1 1989 Stock Option Plan with forms of stock option
agreements thereunder.(1)*
10.2 Profit Sharing Plan dated March 22, 1993.*
10.3 Consultant Agreement dated as of April 21, 1989
between the Company and Alexander Menke.(1)*
10.4 Employment Agreement dated as of November 1, 1990
between the Company and Daniel V. Goodstein.(2)*
10.5 Form of Indemnification Agreement entered into with
the Company's Directors and Executive Officers.(1)
10.6 Sublease dated May 3, 1989 between the Company and
D.G.P. Limited Partnership.(1)
10.7 Lease dated August 15, 1991 between the Company and
California Mart.(4)
10.8 Lease dated February 14, 1992 between the Company and
Jody Apparel, Inc.(3)
10.9 Lease dated November 4, 1992 between the Company and
California Mart.(4)
10.10 Lease dated May 10, 1993 between the Company and 1466
Broadway Associates.(4)
10.11 Lease dated September 17, 1990 between the Company and
Gettinger Associates, as renewed pursuant to a letter
dated September 22, 1993 from Gettinger Associates to
the Company.(5)
10.12 Contract for the purchase of assets, including the
Sedan trademark, between the Company and Camden Place,
Ltd. dated March 9, 1992.(4)
10.13 Factoring Agreement dated May 15, 1994 between the
Company and Republic Factors Corp., and related
agreements.(5)
10.14 Form of Continuing Indemnity and Security Agreement
between the Company and Republic Bank California N.A.,
and related agreements.(5)
10.15 Promissory Note dated March 9, 1995 between the
Company and Georges Marciano.
10.16 Lease Assignment and First Amendment to lease between
the Company and R.R. Park City, Inc.
10.17 Lease dated April 3, 1995 between the Company and 1466
Broadway Associates.
10.18 License Agreement dated as of April 1, 1995 between
the Company and Marble Sportswear, Inc.
10.19 Amendment to Factoring Agreement dated March 2, 1995
between the Company and Republic Factors Corp.
10.20 Retainer Agreement dated June 17, 1995 between the
Company and Houlihan Lokey Howard and Zukin.
10.21 Indemnification Agreement dated June 17, 1995 between
the Company and Georges Marciano.
10.22 Indemnification Agreement dated May 3, 1995 between
the Company and Irving B. Kroll.
10.23 Indemnification Agreement dated May 3, 1995 between
the Company and Maurice Schoenholz.
10.24 Indemnification Agreement dated May 18, 1995 between
the Company and Guy Anthome.
10.25 Indemnification Agreement dated May 18, 1995 between
the Company and Jeffrey P. Busse.
10.26 Employment Agreement dated as of June 17, 1995 between
the Company and Georges Marciano.*
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PAGE
SEQUENTIALLY
ITEM NO. DESCRIPTION NUMBERED
-------- ----------- ------------
<C> <S> <C>
10.27 Stock Option Agreement dated June 17, 1995 between the
Company and Georges Marciano.*
10.28 Warrant Agreement dated June 17, 1995 between the
Company and Georges Marciano.
10.29 Three Party Agreement between the Company, Republic
Factors Corp. and Georges Marciano dated June 12,
1995.
10.30 Three Party Agreement between the Company, Republic
Factors Corp. and Georges Marciano dated June 21,
1995.
27 Financial Data Schedule.
99.1 Valuation and Fairness Opinion of Houlihan Lokey
Howard and Zukin dated July 10, 1995.
</TABLE>
- --------
*Management contract or executive compensation plan or arrangement.
(1) Filed as an exhibit to the annual Report on Form 10-K for the fiscal year
ended March 31, 1990, and incorporated herein by this reference.
(2) Filed as an exhibit to the annual Report on Form 10-K for the fiscal year
ended March 31, 1991 and incorporated herein by this reference.
(3) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year
ended March 31, 1992, and incorporated herein by this reference.
(4) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year
ended March 31, 1993 and incorporated herein by this reference.
(5) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year
ended March 31, 1994.
32
<PAGE>
EXHIBIT 10.15
PROMISSORY NOTE
---------------
$330,000.00
March 9, 1995
1. INDEBTEDNESS. FOR VALUE RECEIVED, the undersigned, YES CLOTHING
------------
CO., a California corporation (hereinafter referred to as "Maker"}, promises to
pay-to GEORGES MARCIANO, an individual (hcrcinaftcr referred to as "Payee"), or
order, at Los Angeles, California, or at such other place as may be designated
in writing by the holder of this Promissory Note (hereinafter referred to as
this "Note"), the principal sum of Three Hundred Thiry Thousand Dollars
($330,000.00), together with interest accrued thereon.
2. INTEREST. Commencing on the date hereof, the unpaid principal
--------
balance of this Note shall bear interest at the rate that is from time to time
the lower of (i) eight percent (8%) and (ii) a rate one (1) percentage point
below the prime rate of interest announced by Republic National Bank of New
York. Interest chargeable hereunder shall be calculated on the basis of a three
hundred sixty (360) day year for actual days elapsed. Interest shall be due and
payable annually on the anniversary date of the Note or as set forth in Section
3.
3. PAYMENT. Principal and interest shall be due and payable on the
-------
earlier to occur of (a) the date that is thirteen (13) months after written
demand is made by Payee to Maker or (b) the date of the closing of a public
offering or private placement of Maker's securities with (i) aggregate gross
proceeds of at least Six Million Dollars ($6,000,000.00) and (ii) at a price of
not less than Six Dollars ($6.00) per share of the common stock of Maker, as
presently constituted, subject to proportionate adjustment in the event of any
stock split, stock dividend, reverse stock split, combination, consolidation,
reclassification or similar event.
4. PREPAYMENT. Maker may prepay all or any part of the principal
----------
balance due under this Note, without premium or penalty.
5. DEFAULT. Should a default occur in the payment of any installment
-------
of principal or interest due hereunder, and should such default continue for a
period of ten (10) days after receipt by Maker of written notice from Payee of
the occurrence of such default, then the entire amount of principal and interest
due hereunder may thereupon be declared due and payable at the option of Payee
without further notice. If any action is instituted in connection with this
Note, Maker further agrees to pay all reasonable legal fees, court costs and
other collection expenses incurred by Payee.
<PAGE>
6. WAIVERS. Maker, for itself, its legal representatives,
-------
successors and assigns, expressly waives presentment, protest, demand, notice of
dishonor, notice of nonpayment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, and diligence in
collection, and consent that Payee may extend the time for payment or otherwise
modify the terms of payment of any part or the whole of the debt evidenced
hereby. To the fullest extent permitted by law, Maker waives the statute of
limitations in any action brought by Payee in connection with this Note.
7. MODIFICATION. This Note may not be changed, modified, amended or
--------------
terminated orally.
YES CLOTHING CO.,
a California corporation
By /s/ Daniel Goodstein
----------------------------
DANIEL GOODSTEIN
Executive Vice President
2
<PAGE>
EXHIBIT 10.16
ASSIGNMENT AND FIRST AMENDMENT TO LEASE
THIS ASSIGNMENT AND FIRST AMENDMENT TO LEASE (hereinafter "Amendment") is
made this 3rd day of April , 1995, by and between R.R. Park City, Inc., a
----- -----
Delaware corporation whose address is c/o Rothschild Realty, Inc., 1251 Avenue
of the Americas, 51st Floor, New York, New York 10020 ("Landlord") and Go
U.S.A. Streetwear, Inc., a California corporation, dba Go U.S.A, Streetwear
whose address is 9756 Wilshire Boulevard, Beverly Hills, California 90212
("Assignor") and YES Clothing Co., a California corporation, whose address is
1380 West Washington Boulevard, Los Angeles, California 90007 ("Assignee").
WHEREAS, pursuant to that certain Lease Agreement, dated August 9, 1994
(the "Lease"), by and between R.R. Park City, Inc, and Go U.S.A. Streetwear
Inc., in which Tenant leases Store No. H-117 consisting of approximately 1,250
square feet of floor area (the "Leased Premises") in that certain retail
development commonly known as The Factory Stores @ Park City located in Park
City, Utah (the "Shopping Center"); and
WHEREAS, Assignor desires to modify its Permitted Trade Name and Landlord
has consented to the modification.
WHEREAS, Assignor desires to assign its right, title and interest in the
Lease to Assignee and Assignee desires to accept sucb interest and assume all
of the obligations arising under the Lease and Landlord is willing to consent to
such assignment under the conditions herein; and
WHEREAS, Landlord and Assignee mutually desire to modify the Lease in
certain particulars to reflect the assignment and amendment to the Lease.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), the
mutual promises herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS. Where appropriate, capitalized terms used herein shall have
the same meanings ascribed to them in the Lease.
2. Assignor does hereby assign, transfer and set over to Assignee all of its
right, title and interest in and to tire Lease, such assignment to be
the (effective as of April 1, 1995 the Assignment Date"). Assignee does
hereby accept such assignment and agrees to perform all of the terms,
covenants and conditions on the part of the Tenant to be performed under
the Lease, including without limitation, operation of the Leased Premises
solely for the Permitted Use and under the Permitted Trade Name as set
forth in the Lease, and as modified herein.
3. Assignor shall remain directly liable for all obligations of Assignee
under the Lease. At landlord's option, a separate action or actions ,may
be brought against, whether or not any action is first or subsequently
brought against Assignee or whether or not Assignee is joined in any such
action, and Assignor may be joined in any action or proceeding commenced by
Landlord against Assignee arising out of, in connection with or based upon
the Lease. Assignor waives any right to require Landlord to proceed against
Assignee or pursue any other remedy in Landlord's power whatsoever, any
right to complain of delay in the enforcement of Landlord's rights under
the Lease, and any demand by Landlord and/or prior action by Landlord of
any nature whatsoever against Assignee, or otherwise. Assignor's liability
under the Lease shall remain in full force and effect and shall not be
discharged in whole or in part notwithstanding any renewal, extension,
modification, amendment or assignment of, or subletting, concession,
franchising, licensing or permitting under, the Lease, provided, however,
that none of the foregoing shall increase the obligations of Assignor as
they shall exist under the Lease immediately prior to the execution hereof.
Assignor's obligations under the Lease shall remain fully binding although
Landlord may have waived one or more defaults by Assignee, extended the
time of performance by Assignee, released, returned or misapplied other
collateral at any time given as security for Assignee's obligations and/or
released Assignee from the performance of its obligations under the Lease,
and notwithstanding the institution by or against
<PAGE>
Assignee of bankruptcy, reorganization, receivership or insolvency
proceedings of any nature, or the disaffirmance of the Lease in any such
proceeding or otherwise.
4. As of the Assignment Date, all references to "Tenant" in the Lease as "Go
U.S.A. Streetwear, Inc," are hereby deleted in their entirety and in lieu
thereof "Tenant" shall hereby be defined as "YES Clothing Co.," and all
references in the Lease shall thereafter refer to Tenant as defined herein.
5. SECTION 4.01 of the DATA SUMMARY. The "Permitted Trade Name" is deleted in
its entirety and in lieu thereof is substituted the following:
Permitted Trade Name: YES
However, upon sixty (60) days prior written notice to Landlord, Tenant
shall be permitted to change the Permitted Trade Name to "Georges Marciano
Boutique" or Georges Marciano Design Studio.
6. This Amendment shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and legal
representatives.
7. This Amendment constitutes the entire understanding among the parties
regarding this matter and no modification of any terms or provisions of
this Amendment shall be effective unless set forth in writing and signed by
each of the parties intended to be bound.
8. Neither the submission of this Amendment by Landlord to Assignor or
Assignee prior to the execution by all parties hereto, nor any discussion
between Landlord and either or both of Assignor and Assignee, shall create
any legal obligation or liability whatsoever on Landlord with respect to
the matters set forth herein nor shall be construed as Landlord's consent
to the assignment described herein.
9. Except as specifically amended hereby, all of the terms, covenants,
conditions and provisions of the Lease are hereby ratified and affirmed. In
the event that a conflict arises between the terms of the Lease and this
Assignment and First Amendment to Lease, the terms and conditions of this
Amendment will control. The parties acknowledge the effectiveness of the
Lease as so amended.
[ASSIGNMENT AND FIRST AMENDMENT-GO USA]
(signatures on following page)
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed by the parties by their duly
authorized officers, on the date first written above.
WITNESS: LANDLORD:
R.R. PARK CITY, INC.,
a Delaware corporation
/s/ Mary Ann Peterson By: /s/ Wm. Neville
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Name: Wm. Neville
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Its: Exec. VP
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WITNESS: ASSIGNOR:
Go U.S.A. Streetwear, Inc.,
a California corporation
/s/ Warren J. Klein By: /s/ Georges Marciano
- ------------------------------- -------------------------------
Signature of: Warren J. Klein Signature of: Georges Marciano
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(Please print) (Please print)
Title: Pres/C.E.O.
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WITNESS: ASSIGNEE and TENANT:
Y E S Clothing, Co.,
a California corporation
/s/ Jessie Garcia By: /s/ Daniel Goodstein
- ------------------------------- -------------------------------
Signature of: Jessie Garcia Signature of: Daniel Goodstein
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(Please print) (Please print)
Title: Exec V.P.
----------------------------
[ASSIGNMENT AND FIRST AMENDMENT - GO USA]
<PAGE>
EXHIBIT 10.17
STANDARD FORM OF OFFICE LEASE 3/1/90
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 3RD day of April 1995 , between 1466
BROADWAY ASSOCIATES c/o HELMSLEY-NOYES COMPANY, INC., as Agent, having offices
at 22 Cortlandt Street, New York, New York 10007 party of the first part,
hereinafter referred to as OWNER, and YES CLOTHING COMPANY, having an address at
1380 W. Washington Boulevard, Los Angeles, California 90007 party of the second
part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
Room 1507-1508 in the building known as 1466 Broadway in the Borough of
Manhattan, City of New York, for the term of Four (4) Years (or until such term
shall sooner cease and expire as hereinafter provided) to commence on the 1st
day of June nineteen hundred and ninety-five, and to end on the 31st day of May
nineteen hundred and ninety-nine both dates inclusive, at an annual rental rate
of
(SEE ARTICLE #58)
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant
shall pay xxxxxxxxx 1 monthly installment(s) on the execution hereof (unless
this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby convenant
as follows:
Rent 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy 2. Tenant shall use and occupy demised premises for general
offices and apparel showroom and for no other purpose.
Tenant 3. Tenant shall make no changes in or to the demised premises of
Alterations: any nature without Owner's prior written consent. Subject to the
prior written consent of Owner which consent shall not be long
as there is no prejudicial mechanical systems on the Premises, and to the
provisions of this article, Tenant at Tenant's expense, may make alterations,
installations, additions or improvements which are non-structural and which do
not affect utility services or plumbing and electrical lines, in or to the
interior of the demised premises by using contractors or mechanics first
approved by Owner. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof and shall deliver promptly
duplicates of all such permits, approvals and certificates to Owner and Tenant
agrees to carry and will cause Tenant's contractors and sub-contractors to carry
such workman's compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanic's lien is filed against the
demised premises, or the building of which the same forms a part, for work
claimed to have been done for, or materials furnished to, Tenant, whether or not
done pursuant to this article, the same shall be discharged by Tenant within
thirty days after reasonable notice to Tenant, at Tenant's expense, by filing
the bond required by law. All fixtures and all paneling, partitions, railings
and like installations, installed in the premises at any time, either by Tenant
or by Owner in Tenant's behalf, shall, upon installation, become the property of
Owner and shall remain upon and be surrendered with the demised premises unless
Owner, by notice to Tenant no later than twenty days prior to the date fixed as
the termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
premises by Tenant prior to the expiration of the lease, at Tenant's expense.
Nothing in this Article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, movable office furniture and equipment, but
upon removal of any such from the premises or upon removal of other
installations as may be required by Owner, Tenant shall immediately and at its
expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, at Tenant's
expense.
Maintenance 4. Tenant shall, throughout the term of this lease, take good care
and of the demised premises and the fixtures and appurtenances
Repairs therein. Tenant shall be responsible for all damage or injury to
the demised premises or any other part of the building and the
systems and equipment thereof, whether requiring structural or nonstructural
repairs caused by or resulting from carelessness, omission, neglect or improper
conduct of Tenant, Tenant's subtenants, agents, employees, invitees or
licensees, or which arise out of any work, labor, service or equipment done for
or supplied to Tenant or any subtenant or arising out of the installation, use
or operation of the property or equipment of Tenant or any subtenant. Tenant
shall also repair all damage to the building and the demised premises caused
by the moving of Tenant's fixtures, furniture and equipment. Tenant shall
promptly make, at Tenant's expense, all repairs in and to the demised premises
for which Tenant is responsible, using only the contractor for the trade or
trades in question, selected from a list of at least two contractors per trade
submitted aby Owner. Any other repairs in or to the building or the facilities
and systems thereof for which Tenant is responsible shall be performed by Owner
at the Tenant's expense. Owner shall maintain in good working order and repair
the exterior and the structural portions of the building, including the
structural portions of its demised premises, and the public portions of the
building interior and the building plumbing, electrical, heating and ventilating
systems (to the extent such systems presently exist) serving the demised
premises. Tenant agrees to give prompt notice of any defective condition of
which Tenant has actual knowledge in the premises for which Owner may be
responsible hereunder. There shall be no allowance to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or others making repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any
setoff or reduction of rent by reason of any failure of Owner to comply with
the covenants of this or any other article of this Lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of an action for
damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with in Article 9
hereof.
Window 5. Tenant will not clean nor require, permit, suffer or allow
Cleaning: any window in the demised premises to be cleaned from the outside
in violation of Section 202 of the Labor Law or any other applic-
able law or of the Rules of the Board of Standards and Appeals, or of any other
Board or body having or asserting jurisdiction.*
Requirements 6. Prior to the commencement of the lease term, if Tenant is then
of Law, in possession, and at all times thereafter, Tenant, at Tenant's
Fire sole cost and expense, shall promptly comply with all present and
Insurance, future laws, orders and regulations of all state, federal, munic-
Floor Loads: ipal and local governments, departments, commissions and boards
and any direction of any public officer pursuant to law, and all
orders, rules and regulations of the New York Board of Fire Underwriters,
Insurance Services Office, or any similar body which shall impose any violation,
order or duty upon Owner or Tenant with respect to the demised premises, whether
or not arising out of Tenant's use or manner of use thereof,(including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's
*Landlord shall make all repairs within ten (10) days of written notice by
Tenant. If such repairs cannot be completed within ten (10) days, Landlord
must undertake such work within the ten (10) day period.
<PAGE>
use or manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for
a criminal offense or constitute a default under any lease or mortgage under
which Owner may be obligated, or cause the demised premises or any part thereof
to be condemned or vacated. Tenant shall not do or permit any act or thing to be
done in or to the demised premises which is contrary to law, or which will
invalidate or be in conflict with public liability, fire or other policies of
insurance at any time carried by or for the benefit of Owner with respect to the
demised premises or the building of which the demised premises form a part, or
which shall or might subject Owner to any liability or responsibility to any
person or for property damage. Tenant shall not keep anything in the demised
premises except as now or hereafter permitted by the Fire Department, Board of
Fire Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by the
New York Fire Insurance Exchange, or other body making fire insurance rates
applicable to said premises shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rates then
applicable to said premises. Tenant shall not place a load upon any floor of the
demised premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Owner reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and
prevent vibration, noise and annoyance. The Tenant shall not be liable for all
of the laws, ordinances, regulations, etc. . ., in which the demised premises is
in violation if the violation is not a direct result of Tenant's use or manner
of use thereof.
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or
hereafter affect such leases or the real property of which demised premises
are a part and to all renewals, modifications, consolidations, replacements and
extensions of any such underlying leases and mortgages. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee, affecting any lease or the
real property of which the demised premises are a part. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Owner may
request.
Property- 8. Owner or its agents shall not be liable for any damage
Loss, Damage, to property of Tenant or of others entrusted to employees
Reimburse- of the building, nor for loss of or damage to any property
ment, Indem- of Tenant by theft or otherwise, nor for any injury or damage
nity: to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner,
its agents, servants or employees. Owner or its agents will not be liable for
any such damage caused by other tenants or persons in, upon or about said
building or caused by operations in construction of any private, public or quasi
public work.
If at any time any windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked up,
if required by law) for any reason whatsoever including, but not limited to
Owner's own acts, Owner shall not be liable for any damage Tenant may sustain
thereby and Tenant shall not be entitled to any compensation therefor nor
abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorneys fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant,
upon written notice from Owner, will, at Tenant's expense, resist or defend
such action or proceeding by counsel approved by Owner in writing, such
approval not to be unreasonably withheld.
Destruction, 9. (a) If the demised premises or any part thereof shall be
Fire and Other damaged by fire or other casualty, Tenant shall give
Casualty: immediate notice thereof to Owner and this lease shall
continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages and additional rents thereto
shall be repaired by and at the expense of Owner and the rent, until such repair
shall be substantially completed, shall be apportioned from the day following
the casualty according to the part of the premises which is usable. (c) If
the demised premises are totally damaged or rendered wholly unusable by fire
or other casualty, then the rent shall be proportionately paid up to the time
of the casualty and thenceforth shall cease until the date when the premises
shall have been repaired and restored by Owner, subject to Owner's right to
elect not to restore the same as hereinafter provided. (d) If the demised
premises are rendered wholly unusable or (whether or not the demised premises
are damaged in whole or in part) if the building shall be so damaged that Owner
shall decide to demolish it or to rebuild it, then, in any of such events, Owner
may elect to terminate this lease by written notice to Tenant, given within 90
days after such fire or casualty, specifying a date for the expiration of the
lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Landlord's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume ten (10) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefitting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof. Notwithstanding anything to the contrary set forth
herein, Tenant shall be entitled to cancel and terminate this Lease if Owner
fails to completely repair and restore the Premises within six (6) months of the
date that such damage occurs.
Eminent 10. If the whole or any part of the demised premises shall
Domain: be acquired or condemned by Eminent Domain for any public or
quasi public use or purpose, then and in that event, the term
of this lease shall cease and terminate from the date of title vesting in such
proceeding and Tenant shall have no claim for the value of any unexpired term of
said lease and assigns to Owner, Tenant's entire interest in any such award 1
and all rents and additional rents shall be prorated as of such date.
Assignment, 11. Tenant, for itself, its heirs, distributees, executors,
Mortgage, administrators, legal representatives, successors and assigns,
Etc.: expressly covenants that it shall not assign, mortgage or
encumber this agreement, nor underlet, or suffer or permit the demised premises
or any part thereof to be used by others, without the prior written consent of
Owner which shall not be unreasonably withheld in each instance. Transfer of the
majority of the stock of a corporate Tenant shall be deemed an assignment. If
this lease be assigned, or if the demised premises or any part thereof be
underlet or occupied by anybody other than Tenant, Owner may, after default by
Tenant, collect rent from the assignee, under-tenant or occupant, and apply the
net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under-tenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment or
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting.
Electric 12. Rates and conditions in respect to submetering or
Current: rent inclusion, as the case may be, to be added in RIDER
(Symbol attached hereto. Tenant covenants and agrees that at all
appears here) times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or
wiring installation and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably exercised, will overload such installations or
interfere with the use thereof by other tenants of the building. The change at
any time of the character of electric service shall in no wise make Owner liable
or responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to 13. Owner or Owner's agents shall have the right (but shall
Premises: not be obligated) to enter the demised premises in any
emergency at any time, and, at other reasonable times, to
examine the same and to make such repairs, replacements and improvements as
Owner may deem necessary and reasonably desirable to the demised premises or to
any other portion of the building or which Owner may elect to perform. Tenant
shall permit Owner to use and maintain and replace pipes and conduits in and
through the demised premises and to erect new pipes and conduits therein
provided they are concealed within the walls, floor, or ceiling. Owner may,
during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress, nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right
to enter the demised premises on reasonable notice to Tenant, (except in the
case of an emergency) at reasonable hours for the purpose of showing the
<PAGE>
same to prospective purchasers or mortgages of the building, and during the last
six months of the term for the purpose of showing the same to prospective
tenants. Provided the Owner shall, at all times use its reasonable efforts to
minimize the disruption and interference to Tenant's business from Owner's
entry. If Tenant is not present to open and permit an entry into the premises,
Owner or Owner's agents may enter the same whenever such entry may be necessary
or permissible by master key or forcibly and provided reasonable care is
exercised to safeguard Tenant's property, such entry shall not render Owner or
its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, 14. No Vaults, vault space or area, whether or not enclosed or
Vault Space, covered, not within the property line of the building is leased
Area: hereunder, anything contained in or indicated on any sketch, blue
print or plan, or anything contained elsewhere in this lease to
the contrary notwithstanding. Owner makes no representation as to the location
of the property line of the building. All vaults and vault space and all such
areas not within the property line of the building, which Tenant may be
permitted to use and/or occupy, is to be used and/or occupied under a revocable
license, and if any such license be revoked, or if the amount of such space or
area be diminished or required by any federal, state or municipal authority or
public ability, Owner shall not be subject to any liability nor shall Tenant be
entitled to any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual eviction.
Any tax, fee or charge of municipal authorities for such vault or area shall be
paid by Tenant to the extent such Vault Area is actually used by Tenant.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises
in violation of the certificate of occupancy issued for the
building of which the demised premises are a part. Tenant has inspected the
premises and accepts them as is, subject to the riders annexed hereto with
respect to Owner's work, if any. In any event, Owner makes no representation as
to the condition of the premises and Tenant agrees to accept the same subject to
violations, whether or not of record.
(b) it is stipulated and agreed that in the event of the termination of this
lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other
provisions of this lease to the contrary, be entitled to recover from Tenant as
and for liquidated damages an amount equal to the difference between the rent
reserved hereunder for the unexpired portion of the term demised and the fair
and reasonable rental value of the demised premises for the same period. In the
computation of such damages the difference between any installment of rent
becoming due hereunder after the date of termination and the fair and reasonable
rental value of the demised premises for the period for which such installment
was payable shall be discounted to the date of termination at the rate of four
percent (4%) per annum. If such premises or any part thereof be relet by the
Owner for the unexpired term of said lease, or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be deemed to be
the fair and reasonable rental value for the part or the whole of the premises
so re-let during the term of the re-letting. Nothing herein contained shall
limit or prejudice the right of the Owner to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or
additional rent; or if the demised premises become vacant or deserted; or if any
execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the demised premises shall be taken or occupied by someone
other than Tenant; or if this lease be rejected under (SS)235 of Title 11 of the
U.S. Code (bankruptcy code); or if Tenant shall fail to move into or take
possession of the premises within fifteen (15) days after the commencement of
the term of this lease, then, in any one or more of such events, upon Owner
serving a written ten (10) days notice upon Tenant specifying the nature of said
default and upon the expiration of said ten (10) days, if Tenant shall have
failed to comply with or remedy such default, or if the said default or omission
complained of shall be of a nature that the same cannot be completely cured or
remedied within said ten (10) day period, and if Tenant shall not have
diligently commenced curing such default within such ten (10) day period, and
shall not thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Owner may serve a written three (3) days'
notice of cancellation of this lease upon Tenant, and upon the expiration of
said three (3) days this lease and the term thereunder shall end and expire as
fully and completely as if the expiration of such three (3) day period were the
day herein definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the term
shall expire as aforesaid; or if Tenant shall make default in the payment of the
rent reserved herein or any item of additional rent herein mentioned or any part
of either or in making any other payment herein required then and in any of such
events Owner may without notice, re-enter the demised premises either by force
or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the
legal representative of Tenant or other occupant of demised premises and remove
their effects and hold the premises as if this lease had not been made, and
Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall make default hereunder
prior to the date fixed as the commencement of any renewal or extension of this
lease, Owner may cancel and terminate such renewal or extension agreement by
written notice.
Remedies of 18. In case of any such default, re-entry, expiration and/or
Owner and dispossess by summary proceedings or otherwise, (a) the rent shall
Waiver of become due thereupon and be paid up to the time of such re-entry,
Redemption: dispossess and/or expiration, (b) Owner may re-let the premises or
any part or parts thereof, either in the name of Owner or
otherwise, for a term or terms, which may at Owner's option be less than or
exceed the period which would otherwise have constituted the balance of the term
of this lease and may grant concessions or free rent or charge a higher rental
than that in this lease, and/or (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's convenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The failure of Owner to re-
let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses, attorneys' fees, brokerage, advertising
and for keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the dificiency for any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
reasonable judgement, considers advisable and necessary for the purpose of re-
letting the demised premises, and the making of such alterations, repairs,
replacements, and/or decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Owner shall in no event be liable
in any way whatsoever for failure to re-let the demised premises, or in the
event that the demised premises are re-let, for failure to collect the rent
thereof under such re-letting, and in no event shall Tenant be entitled to
receive any excess, if any, of such net rents collected over the sums payable by
Tenant to Owner hereunder. In the event of a breach or threatened breach by
Tenant of any of the covenants or provisions hereof, Owner shall have the right
of injunction and the right to invoke any remedy allowed at law or in equity as
if re--entry, summary proceedings and other remedies were not herein provided
for. Mention in this lease of any particular remedy, shall not preclude Owner
from any other remedy, in law or in equity. Tenant hereby expressly waives any
and all rights of redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed for any cause, or in the event
of Owner obtaining possession of demised premises, by reason of the violation by
Tenant of any of the covenants and conditions of this lease, or otherwise.
Fees and 19. If Tenant shall default in the observance or performance of
Expenses: any term or covenant on Tenant's part to be observed or performed
under or by virtue of any of the terms or provisions in any
article of this lease, then, unless otherwise provided elsewhere in this lease,
Owner may upon five (5) days' written notice to Tenant immediately or at any
time thereafter perform the obligation of Tenant thereunder. If Owner, in
connection with the foregoing or in connection with any default by Tenant in the
covenant to pay rent hereunder, makes any expenditures or incurs any obligations
for the payment of money, including but not limited to attorney's fees, in
instituting, prosecuting or defending any action or proceeding, then Tenant will
reimburse Owner for such sums so paid or obligations incurred with interest and
costs. The foregoing expenses incurred by reason of Tenant's default shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within five (5) days of rendition of any bill or statement to Tenant therefor.
If Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages.
Building 20. Owner shall have the right at any time without the same
Alterations constituting an eviction and without incurring liability to Tenant
and therefor to change the arrangement and/or location of public
Management: entrances, passageways, doors, doorways, corridors, elevators,
stairs, toilets or other public parts of the building and to
change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Repre- 21. Neither Owner nor Owners's agents have made any
sentations representations or promises with respect to the physical condition
by Owner: of the building, the land upon which
*Then, and in any of such events, Owner shall in accordance with the appropriate
legal procedures and proceedings, pursue its legal and equitable remedies
against Tenant.
<PAGE>
it is erected or the demised premises, the rents, leases, expenses of operation
or any other matter or thing affecting or related to the premises except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possesion of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of 22. Upon the expiration or other termination of the term of this
Term: lease, Tenant shall quit and surrender to Owner the demised
premises, broom clean, in good order and condition, ordinary wear
and and damages which Tenant is not required to repair
as provided elsewhere in this lease excepted, and Tenant shall remove all its
property. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of this lease. If the last day of the term
of this Lease or any renewal thereof, falls on Sunday, this lease shall expire
at noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.
Quiet 23. Owner covenants and agrees with Tenant that upon Tenant paying
Enjoyment: the rent and additional rent and observing and performing all the
terms, covenants and conditions, on Tenant's part to be observed
and performed, Tenant may peaceably and quietly enjoy the premises hereby
demised, subject, nevertheless, to the terms and conditions of this lease
including, but not limited to, Article 31 hereof and to the ground leases,
underlying leases and mortgages hereinbefore mentioned.
Failure 24. If Owner is unable to give possession of the demised premises
to Give on the date of the commencement of the term hereof, because of the
Possession: holding-over or retention of possession of any tenant, undertenant
or occupants or if the demised premises are located in a building
being constructed, because such building has not been sufficiently completed to
make the premises ready for occupancy or because of the fact that a certificate
of occupancy has not been procured or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession) until after Owner shall have given
Tenant written notice that the premises are substantially ready for Tenant's
occupancy. if permission is given to Tenant to enter into the possession of the
demised premises or to occupy premises other than the demised premises prior to
the date specified as the commencement of the term of this lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article are intended to constitute
"an express provision to the contrary" within the meaning of Section 223-a of
the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of
this lease or of any of the Rules or Regulations, set forth or hereafter adopted
by Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of rent with knowledge of the breach of any
covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner or Tenant
unless such waiver be in writing signed by Owner or Tenant. No payment by Tenant
or receipt by Owner of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent,
nor shall any endorsement or statement of any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction, and Owner may
accept such check or payment without prejudice to Owner's right to recover the
balance of such rent or pursue any other remedy in this lease provided. No act
or thing done by Owner or Owner's agents during the term hereby demised
shall be deemed an acceptance of a surrender of said premises, and no agreement
to accept such surrender shall be valid unless in writing signed by Owner. No
employee of Owner or Owner's agent shall have any power to accept the keys of
said premises prior to the termination of the lease and the delivery of keys to
any such agent or employee shall not operate as a termination of the lease or a
surrender of the premises.
Waiver of 26. It is mutually agreed by and between Owner and Tenant that the
Trial by respective parties hereto shall and they hereby do waive trial by
Jury: in any action, proceeding or counter-claim brought by either of
the parties hereto against the other (except for personal injury
or property damage) on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and Tenant, Tenant's use of
or occupancy of said premises, and any emergency statutory or any other
statutory remedy. It is further mutually agreed that in the event Owner
commences any summary proceeding for possession of the premises, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceeding including a counterclaim under Article 4.
Inability to 27. This Lease and the obligation of Tenant to pay rent hereunder
Perform: and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in no wise be affected,
impaired or excused because Owner is unable to fulfill any of its obligations
under this lease or to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed in making any
repair, additions, alterations or decorations or is unable to supply or is
delayed in supplying any equipment or fixtures if Owner is prevented or delayed
from so doing by reason of strike or labor troubles or any cause whatsoever
including, but not limited to, government preemption in connection with a
National Emergency or by reason of any rule, order or regulation of any
department or subdivision thereof of any government agency or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.
Bills and 28. Except as otherwise in this lease provided, a bill, statement,
Notices: notice or communication which Owner may desire or be required to
give to Tenant, shall be deemed sufficiently given or rendered if,
in writing, delivered to Tenant personally or sent by registered or certified
mail addressed to Tenant at the building of which the demised premises form a
part or at the last known residence address or business address of Tenant or
left at any of the aforesaid premises addressed to Tenant, and the time of the
rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant
to Owner must be served by registered or certified mail addressed to Owner at
the address first hereinabove given or at such other address as Owner shall
designate by written notice.
Services 29. As long as Tenant is not in default under any of the covenants
Provided by of this lease. Owner shall provide: (a) necessary elevator
Owners facilities on business days from 8 a.m. to 6 p.m. and have one
elevator subject to call at all other times; (b) heat to the
demised premises when and as required by law, on business days from 8 a.m. to
6 p.m.; (c) water for ordinary lavatory purposes, but if Tenant uses or consumes
water for any other purposes or in unusual quantities (of which fact Owner shall
be the sole judge), Owner may install a water meter at Tenant's expense which
Tenant shall thereafter maintain at Tenant's expense in good working order and
repair to register such water consumption and Tenant shall pay for water
consumed as shown on said meter as additional rent as and when bills are
rendered; Tenant shall pay Owner the cost of removal of any of Tenant's refuse
and rubbish from the building; (f) Owner reserves the right to stop services of
the heating, elevators, plumbing, air-conditioning, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually-operated
elevator service, Owner at any time may substitute automatic-control elevator
service and upon ten days' written notice to Tenant, proceed with alterations
necessary therefor without in any wise affecting this lease or the obligation of
Tenant hereunder. The same shall be done with a minimum of inconvenience to
Tenant and Owner shall pursue the alteration with due diligence.
Captions: 30. The Captions are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope of
this lease nor the intent of any provisions thereof.
Definitions: 31. The term "office", wherever used in this lease, shall not be
construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, or any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) or which the demised premises form
a part, so that in the event or any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser
or the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and "re-ent"
as used in this lease are not restricted to their technical legal meaning. The
term "business days" as used in this lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 29 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays and
those designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
- --------------
[SYMBOL APPEARS HERE] Rider to be added if necessary.
<PAGE>
* See Article #59
Adjacent 32. If an excavation shall be made upon land adjacent to the
Excavation-- demised premises, or shall be authorized to be made, Tenant shall
Shoring: afford to the person causing or authorized to cause such
excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to preserve the
wall or the building of which demised premises form a part from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
Rules and 33. Tenant and Tenant's servants, employees, agents, visitors, and
Regulations licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations and such other and further reasonable Rules
and Regulations as Owner or Owner's agents may from time to time adopt. Notice
of any additional rules or regulations shall be given in such manner as Owner
may elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against
any other tenant and Owner shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
Security: 34. Tenant has deposited with Owner the sum of $20,136.66* as
[SYMBOL security for the faithful performance and observance by Tenant of
APPEARS HERE] the terms, provisions and conditions of this lease; it is agreed
that in the event Tenant defaults in respect of any of the terms,
provisions and conditions of this lease, including, but not limited to, the
payment of rent and additional rent, Owner may use, apply or retain the whole or
any part of the security so deposited to the extent required for the payment of
any rent and additional rent or any other sum as to which Tenant is in default
or for any sum which Owner may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, covenants and conditions of
this lease, including but not limited to, any damages or deficiency in the re-
letting of the premises, whether such damages or deficiency accrued before or
after summary proceedings or other re-entry by Owner. In the event that Tenant
shall fully and faithfully comply with all of the terms, provisions, covenants
and conditions of this lease, the security shall be returned to Tenant after the
date fixed as the end of the Lease and after delivery of entire possession of
the demised premises to Owner. In the event of a sale of the land and building
or leasing of the building, of which the demised premises form a part, Owner
shall have the right to transfer the security to the vendee or lessee and Owner
shall thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Owner solely for the return of
said security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Owner. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
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[SYMBOL APPEARS HERE] Space to be filled in or deleted.
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
1466 BROADWAY ASSOCIATES
c/o HELMSLEY-NOYES COMPANY, INC.
as Agent
Witness for Owner: ....................................
BY:
.................................... ....................................
Senior Vice President
YES CLOTHING COMPANY
Witness for Tenant: ....................................
/s/ Jessie Garcia BY: Daniel Goodstein
.................................... ....................................
ACKNOWLEDGMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me
personally came
to me known, who being by me duly sworn, did depose and say that he resides
in :
that he is the of
the corporation described in and which executed the foregoing instrument, as
OWNER: that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
...................................................
INDIVIDUAL OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me
personally came
to me known and known to me to be the individual
described in and who, as OWNER, executed the foregoing instrument and
acknowledged to me that he executed the same.
...................................................
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me
personally came
to me known, who being by me duly sworn, did depose and say that he resides
in :
that he is the of
the corporation described in and which executed the foregoing instrument, as
TENANT: that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
...................................................
INDIVIDUAL TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me
personally came
to me known and known to me to be the individual
described in and who, as TENANT, executed the foregoing instrument and
acknowledged to me that he executed the same.
...................................................
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to Owner
making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof, or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated: ________________________________________________________________19______
_______________________________________________________________________________
Guarantor
_______________________________________________________________________________
Witness
_______________________________________________________________________________
Guarantor's Residence
_______________________________________________________________________________
Business Address
_______________________________________________________________________________
Firm Name
STATE OF NEW YORK ) ss.:
COUNTY OF )
On this day of , 19 , before me personally
came __________________________________________________________________________
to me known and known to me to be the individual described in, and who executed
the foregoing Guaranty and acknowledged to me that he executed the same.
_____________________________________________________
Notary
[SYMBOL APPEARS HERE] IMPORTANT - PLEASE READ [SYMBOL APPEARS HERE]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window
of the building; and no Tenant shall sweep or throw or permit to be swept or
thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the building by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the hours
of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.
Address
Premises
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TO
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STANDARD FORM OF
[LOGO OF BOARD OF Office [LOGO OF BOARD OF
NEW YORK REAL ESTATE Lease NEW YORK REAL ESTATE
APPEARS HERE] APPEARS HERE]
The Real Estate Board of New York, Inc.
(c)Copyright 1983. All rights Reserved.
Reproduction in whole or in part prohibited.
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Dated 19
Rent per Year
Rent per Month
Term
From
To
Drawn by _____________________________Checked by ______________________________
Entered by ___________________________Approved by _____________________________
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<PAGE>
SERVING
REAL ESTATE
NEEDS
[LOGO OF HELMSLEY-NOYES APPEARS HERE] SINCE 1898
NOTICE TO 1466 BROADWAY TENANTS:
FREIGHT POLICY
--------------
1. Freight Elevator Hours of Operation:
Monday through Friday: 8:00 am - 5:,30 pm
Saturday and Sunday : Closed
Access: 143 West 41st Street
(Between Broadway and Sixth Avenues)
2. Use of the Freight Elevator will be made available to Tenants when
scheduled no later than 4:00 pm the day of the move at a cost of $50.00
per hour starting at 5:30 pm. Any freight movement in or out of the
building after 5:30 pm will be considered overtime and Tenant will be
--------
billed accordingly. Tenants will be billed on their following rent
statement indicated by Code 93.
--------
3. Tenant's failure to provide adequate prior notice, as provided for in
the above Article #2, shall result in a cash payment of $50.00, paid to
the union freight personnel required at each instance the elevator is
required open.
4. Tenants shall be denied lobby access for any delivery or removal of
goods during, before, and after business hours. At no time are racks,
displays, or furniture to be placed in passenger elevators.
5. All construction materials must enter through the freight entrance at
143 West 4lst Street.
6. Tenants who do not cooperate and persist in using the lobby access over
the objections of the concierge personnel shall be billed a penalty of
$50.00 per abuse occurrence.
ACKNOWLEDGED & AGREED
---------------------
Daniel Goodstein 4/18/95
--------------------------------
Signature Date
<PAGE>
RIDER ANNEXED TO LEASE DATED April 3, 1995 BETWEEN
------------------------------------------
1466 BROADWAY ASSOCIATES, AS LANDLORD, AND YES CLOTHING COMPANY
------------------------------------,
AS TENANT, OF Rm. 1507-1508 IN THE BUILDING KNOWN AS 1466 BROADWAY.
------------
37. RIDER PROVISIONS PREVAIL:
-------------------------
If and to the extent that any of the provisions of this Rider conflict
or are otherwise inconsistent with any of the preceding printed provisions of
this lease, or of the Rules and Regulations attached to this lease, whether or
not such inconsistency is expressly noted in this Rider, the provisions of this
Rider shall prevail, and in case of inconsistency with said Rules and
Regulations, shall be deemed a waiver of such Rules and Regulations with respect
to Tenant to the extent of such inconsistency.
38. ADDITIONAL DEFINITIONS:
-----------------------
For the purposes of this lease and all agreements supplemental to this
lease, and all communications with respect thereto, unless the context otherwise
requires:
1. The term "fixed rent" shall mean rent at the annual rental
rate or rates provided for in the granting clause appearing at the beginning of
this lease.
2. The term "additional rent" shall mean all sums of money, other
than fixed rent, and which becomes due and payable from Tenant to Landlord
hereunder, and Landlord shall have the same remedies therefor as for a default
in payment of fixed rent.
3. The term "rent" and "rents" shall mean and include fixed rent
and/or additional rent hereunder.
4. The terms "Commencement Date" and "Expiration Date" shall mean
the dates fixed in this lease, or to be determined pursuant to the provisions of
this lease, respectively, as the beginning and the end of the term for which the
demised premises are hereby leased.
39. ESCALATION FOR INCREASE IN REAL ESTATE TAX:
--------------------------------------------
A. As used herein:
1. "Real Property" shall mean the land and buildings presently
designated as Section 4, Block 994, Lot 54 of the Tax Map of the County of New
York.
2. "Taxes" shall mean the real estate taxes and assessments
imposed upon the Real Property. Penalties and interest on Taxes and income,
franchise, transfer, inheritance and capital stock taxes shall be deemed
excluded from the term Taxes for the purposes hereof. However, if and to the
extent that, due to a change in the method of assessment of taxation, any
franchise, capital stock, capital, rents, income, profits or other tax or charge
shall be substituted in whole or in part for the Taxes now or hereafter imposed
upon the Real Property, such franchise, capital stock, capital, rents, income,
profits or other tax or charge, computed as if Landlord owned or operated no
property other than the Real Property, shall be deemed included in the term
"Taxes" for the purposes hereof.
3. "Tax Year" shall mean each period of twelve (12) months
commencing on the first day of July of each such period, in which occurs any
part of the term of this lease or such other period of twelve (12) months
occurring during the term of this lease as hereafter may be duly adopted as the
fiscal year for real estate tax purposes of the City of New York.
4. "Base Tax" shall mean the Taxes for the Calendar 1995 (the "Base
Tax Year").
- 1 -
<PAGE>
B. If the Taxes for any Tax Year shall be greater than the Base Tax,
Tenant shall pay as additional rent for such Tax Year a sum equal to 2.5 % of
--
the amount by which the Taxes for such Tax Year are greater than the Base Tax
(which amount is hereinafter called the "Tax Payment"). Should this lease
commence or terminate prior to the expiration of a Tax Year, such Tax Payment
shall be prorated to, and shall be payable on, or as and when ascertained after,
the Commencement Date or the Expiration Date as the case may be. Tenant's
obligation to pay such additional rent and Landlord's obligation to refund
pursuant to Paragraph C below, as the case may be, shall survive the termination
of this lease. If the Taxes for any Tax Year subsequent to the Base Tax Year, or
an installment thereof, shall be reduced before such Taxes, or such installment,
shall be paid, the amount of Landlord's reasonable costs and expenses of
obtaining such reduction (but not exceeding the amount of such reduction) shall
be added to and be deemed part of the Taxes for such Tax Year. Payment of
additional rent for any Tax Payment due from Tenant shall be made as and subject
to the conditions hereinafter provided in this Article.
C. Landlord shall be under no obligation to contest the Taxes of
the assessed valuation of the Real Property for any Tax Year or to refrain from
contesting the same, and may settle any such contest on such terms as Landlord
in its sole judgement considers proper. If Landlord shall receive a refund for
any Tax Year for which a Tax Payment shall have been made by Tenant pursuant to
Paragraph B above, Landlord shall repay to Tenant, with reasonable promptness,
2.5 % of such refund after deducting from such refund the reasonable costs
- --------
and expenses (including experts' and attorneys' fees) of obtaining such refund.
If the assessment for the Base Tax Year shall be reduced from the amount
originally imposed after Landlord shall have rendered a comparative statement
(as provided in Paragraph D below) to Tenant with respect to a Tax Year, the
amount of the Tax Payment shall be adjusted in accordance with such change and
Tenant, on Landlord's demand, shall pay any increase in additional rent
resulting from such adjustment.
D. At any time during a Tax Year after the Taxes for such Tax
Year become known Landlord may, or else with reasonable promptness after the end
of each Tax Year, Landlord shall render to Tenant a comparative statement
showing the amount of the Base Tax, the amount of the Taxes for such Tax Year
and the Tax Payment, if any, due from Tenant for such Tax Year, indicating
thereon in reasonable detail the computation of such Tax Payment. The Tax
Payment shown on such comparative statement may, at Landlord's option, be
payable in full or in such installments (not more frequent than monthly) as
Landlord may determine. Tenant shall pay the amount of the Tax Payment shown on
such comparative statement (or the balance of a proportionate installment
thereof, if only an installment is involved) concurrently with the installment
of fixed rent then or next due, or if such statement shall be rendered at or
after the termination of this lease within thirty (30) days of such rendition,
whenever so requested, but not more than once a year, Landlord will furnish
Tenant with a reproduced copy of the bill (or receipted bill) for the Taxes for
the current or next preceding Tax Year.
E. Landlord's failure during the lease term to prepare and
deliver any notice, statement or bill, or Landlord's failure to make a demand,
shall not in any way cause Landlord to forfeit or surrender Landlord's right to
collect any additional rent which may have become due during the term of this
lease under this Article and Tenant's liability for amounts due under this
Article shall survive the termination of this lease.
40. As used in this Article, the words and terms which follow mean and
include the following:
A. "Calendar Year" shall mean each calendar year, subsequent to
---------------
the base year in which occurs any part of the term of this Lease.
- 2 -
<PAGE>
B. "Base Year" shall mean the year January 1, 1995 to December
------------ --
31, 1995.
--
C. "Area of the Premises" shall mean the rentable square foot
-----------------------
area of the Demised Premises (which the parties have agreed shall be 4,315
-----
square feet for the purposes of this Article.)
D. "Hourly Wage Rate" as respects any Operation Year shall mean
-------------------
the minimum hourly wage prescribed to be paid to the workers described below,
appropriately adjusted from time to time to reflect changes in fringe benefits
required by law or applicable labor agreements and computed on an hourly basis,
in major office buildings (hereinafter called "Class A Office Building") and in
effect as of January 1 in such Operation Year (or if such rate and/or benefits
shall be subject to change during an Operation Year then the average thereof for
such Operation Year as reasonably estimated or calculated by Landlord) pursuant
to an agreement between the Realty Advisory Board on Labor Relations,
Incorporated (or any successor thereto) and Local 32B of the Service Employees
International Union, AFL-CIO (or any successor thereto) covering the wage rates
of those workers classified as "Others" (or any successor or equivalent
designation) in Class A Office Buildings which said minimum hourly wage rates
shall be computed on the basis of the total weekly amount required to be paid to
said workers in the building for regular work weeks (exclusive of any overtime
or premium pay work in such regular work weeks). Such total weekly amounts shall
be inclusive of all payments and benefits of every nature and kind (including
those required to be paid by the employer directly to the taxing authorities or
others on account of the employment) such as, without limiting the generality of
the foregoing, social security, unemployment and all other similar taxes,
holiday and vacation pay, incentive pay, accident, health and welfare, insurance
programs, pension plans, guarantee pay plans and supplemental unemployment
benefit programs, and fringe benefits, payments, plans or programs or a similar
or dissimilar nature, irrespective of whether they may be required or provided
for in any applicable law or regulation or otherwise. If there is no such
agreement in effect as of any such January 1 by which the Hourly Wage Rate is
determinable, computations and payments shall thereupon be made upon the basis
of the Hourly Wage Rate being paid by the Landlord or by the contractor
performing the cleaning services for Landlord on such January 1 for the porters
or cleaners, as the case may be, and appropriate retroactive adjustment shall
thereafter be made when the Hourly Wage Rate paid on such January 1 pursuant to
such agreement for said workers is finally determined and provided further that
if as of the last day of such Operation Year no such agreement covering the
January 1 occurring in such Operation Year shall have been in effect, the Hourly
Wage Rate paid by the Landlord or by the contractor performing the cleaning
services for Landlord on such January 1 for porters and cleaners shall be for
all purposes hereof deemed to be such Hourly Wage Rate prescribed by such
agreement between said Board (or any successor thereto) and said Union (or any
successor thereto) for such Operation Year.
E. "Labor Rate" for any Operation Year shall mean the Hourly Wage
-------------
Rate for workers classified as "Others".
F. "Base Labor Rate" shall mean the Labor Rate for Base Year.
------------------
G. "Escalation Statement" shall mean statement in writing signed
-----------------------
by Landlord, setting forth the amount payable by Tenant for a specified
Operation Year pursuant to this Article.
H. "Operation Year" shall mean each calendar year or portion of
-----------------
year subsequent to the Base Year in which occurs any part of the term of this
lease.
- 3 -
<PAGE>
1. If the Labor Rate for any Operation Year shall be greater than
the Base Labor Rate, Tenant shall pay to Landlord as additional rent for the
Demised Premises for such Operation Year an amount equal to the product obtained
by multiplying the Area of the Premises by one (1) times the number of cents
(including any fraction of a cent) by which the Labor Rate for such Operation
Year exceeds the Base Labor Rate.
2. Any such adjustment payable shall commence as of the first day
of the relevant Operation Year and, after Landlord shall furnish Tenant with an
Escalation Statement relating to such Operation Year, all monthly installments
of rental shall reflect one-twelfth of the annual amount of such adjustment
until a new adjustment becomes effective pursuant to the provisions of this
Article, provided however, that if said Escalation Statement is furnished to
Tenant after the commencement of such Operation Year, there shall be promptly
paid by Tenant to Landlord, an amount equal to the portion of such adjustment
allocable to the part of such Operation Year which shall elapse prior to the
first day of the calendar month next succeeding the calendar month in which said
Escalation Statement is furnished to Tenant.
3. In the event (F) that the date of the expiration or other
termination of this lease shall be a day other than the last day of an Operation
Year, or (F) of any increase or decrease in the Area of the Demised Premises (as
may be provided herein), then in each such event in applying the provisions of
this Article with respect to any Operation Year in which such event shall have
occurred, appropriate adjustments shall be made to reflect the occurrence of
such event on a basis consistent with the principles underlying the provision of
this Article taking into consideration: (a) the portion of such Operation Year
which shall have elapsed prior to the date of such expiration or termination;
or, (b) in the case of any such increase or decrease, the portion of the Demised
Premises to which the same relate. Similarly, if the term of this lease shall
begin or end on a date which is not the first (with respect to term
commencement) or the last (with respect to expiration or termination) day of a
calendar month, appropriate adjustment shall be made to Basic Rent and
additional rent for the first or last month of the term, as the case may be, to
reflect the portion of a month falling within the term of this lease.
4. Payments shall be made pursuant to this Article
notwithstanding the fact that an Escalation Statement is furnished to Tenant
after the expiration of the term of this lease.
41. CLEANING
--------
Tenant, at its expense, and in a manner satisfactory to Landlord,
shall cause the Demised Premises, including the exterior and interior of the
windows thereof, to be kept clean, Tenant shall, at Tenant's expense, remove all
Tenant's rubbish and trash to such area of the building as Landlord shall
designate. The Tenant agrees to employ such office cleaning and maintenance
contractor as the Landlord may from time to time designate for all cleaning,
waxing, polishing and maintenance work in the Demised Premises provided that the
charges therefor are reasonably comparable to the charges of other contractors
for such services. Tenant shall regularly, at Tenant's expense, but using such
contractor as Landlord may from time to time designate, clean the interior and
exterior of the windows in the Demised Premises. In no event shall the Tenant
employ any other such contractor or individual for any of the aforementioned
services without the Landlord's prior written consent.
42. MAINTENANCE OF FIXTURES AND EQUIPMENT:
--------------------------------------
Tenant, at Tenant's own cost and expense, shall maintain and keep in
good order and repair, all air conditioning equipment situated in the Demised
Premises and all other fixtures, including but not limited to ranges and
refrigerators, situated in the Demised Premises. Tenant shall be responsible for
any damage to said equipment and shall promptly repair same and/or replace same
with comparable equipment.
- 4 -
<PAGE>
43. AMENDING ARTICLE 11:
--------------------
Notwithstanding the provisions of Article 11, and in modification and
amplification thereof:
A. If Tenant's interest in this lease is assigned, whether or not in
violation of the provisions of this lease, Landlord may collect rent from the
assignee; if the demised premises or any part thereof are sublet to, or occupied
by, or used by, any person other than Tenant, whether or not in violation of
this lease, Landlord, after default by Tenant under this lease and expiration of
Tenant's time, if any, to cure such default, may collect rent from the
subtenant, user or occupant. In either case, Landlord shall apply the net amount
collected to the rents reserved in this lease, but neither any such assignment,
subletting, occupancy, nor use, nor any such collection or application shall be
deemed a waiver of any terms, covenants or conditions of this lease or the
acceptance by Landlord of such assignee, subtenant, occupant or user as tenant.
The consent by Landlord to any assignment, subletting, occupancy or use shall
not relieve Tenant from its obligation to obtain the express prior written
consent of Landlord to any further assignment, subletting, occupancy or use.
The listing of any name other than Tenant's on any door of the Demised Premises,
or on any directory, or on any elevator in the building, or otherwise, shall not
operate to vest in the party so named, any right or interest in this lease or in
the Demised Premises, or be deemed to constitute, or serve as a substitute for,
any prior written consent of Landlord required under this Article, and it is
understood that any such listing shall constitute a privilege extended by
Landlord which shall be revocable at Landlord's will by notice to Tenant. Tenant
agrees to pay to Landlord any reasonable counsel fees incurred by Landlord in
connection with any proposed assignment of Tenant's interest in this lease or
any proposed subletting of the Demised Premises or any part thereof. Neither any
assignment of Tenant's interest in this lease nor any subletting, occupancy or
use of the Demised Premises or any part thereof by any person other than Tenant,
nor any collection of rent by Landlord from any person other than Tenant as
provided in this Paragraph A, nor any application of any such rent as
aforementioned as provided in this Paragraph A, shall in any circumstances
relieve Tenant of Tenant's obligations fully to observe and perform the terms,
covenants and conditions of this lease on Tenant, part to be observed and
performed.
B. If Tenant shall desire to assign this lease or to sublet the
Demised Premises, Tenant shall submit to Landlord a written request for
Landlord's consent to such assignment or subletting, which request shall contain
or be accompanied by the following information: (i) the name and address of the
proposed assignee or subtenant; (ii) the terms and conditions of the proposed
assignment or subletting; (iii) the nature and character of the business of the
proposed assignee or subtenant and its proposed use of the Demised Premsies; and
(iv) banking, financial and other credit information with respect to the
proposed assignee or subtenant reasonably sufficient to enable Landlord to
determine the financial responsibility of the proposed assignee or subtenant.
Landlord shall then have the following options to be exercised by notice
("Exercise Notice") given to Tenant within thirty (30) days after receipt of
Tenant's request for consent:
1. Landlord may require Tenant to surrender the Demised Premises to
Landlord and to accept a termination of this lease as of a date (the
"Termination Date") to be designated by Landlord in the Exercise Notice, which
date shall not be less than sixty (60) days or more than one hundred twenty
(120) days following date of Landlord's Exercise Notice; or
2. Landlord may require Tenant to assign this lease to Landlord
without merger of Landlord's estates effective as of the day preceding the
proposed assignment or sublease.
- 5 -
<PAGE>
If Landlord shall elect to require Tenant to surrender the Demised
Premises and accept a termination of this lease, then this lease shall expire on
the Termination Date as if that date had been originally fixed as the Expiration
Date and Tenant shall be released from all further and future obligations owed
under the Lease. Regardless of which option Landlord exercises under this
Paragraph B, whether to terminate this lease or to take an assignment thereof,
Landlord shall be free to, and shall have no liability to Tenant if Landlord
shall lease the Demised Premises to Tenant's prospective assignee or subtenant.
C. If Landlord shall not exercise either of its options under
Paragraph B above within the time period therein provided, then Landlord shall
not unreasonably withhold or delay consent to the proposed assignment or
subletting of the entire Demised Premises, provided that Tenant is not then in
default under this lease and further provided that the following further
conditions shall be fulfilled:
1. The proposed subtenant or assignee shall not be a school of any
kind, or an employment or placement agency or governmental or quasi governmental
agency or travel or tourist agency or telephone or secretarial service or labor
union or photographic studio;
2. The subletting or assignment shall be to a tenant whose occupancy
will be in keeping with the dignity and character of the then use and occupancy
of the building and whose occupancy will not be more objectionable or more
hazardous than that of Tenant herein or impose any additional burden upon
Landlord in the operation of the building;
3. The proposed sublease or assignment shall not be at a lower
rental rate than that being charged by Landlord at the time for similar space in
the building;
4. The proposed sublessee or assignee shall not be a tenant,
subtenant or assignee of any premises in the building; and
5. The proposed sublessee or assignee is a reputable party whose
financial net worth and financial responsibility is, considering the obligations
undertaken, reasonably satisfactory to Landlord;
6. In case of a subletting, it shall be expressly subject to all of
the obligations of Tenant under this lease and the further condition and
restriction that the sublease shall not be assigned, encumbered or otherwise
transferred or the subleased premises further sublet by the sublessee in whole
or in part, or any part thereof suffered or permitted by the sublessee to be
used or occupied by others, without the prior written consent of Landlord in
each instance.
D. Anything herein contained to the contrary notwithstanding, but
without releasing Tenant from its obligations for full performance hereunder,
Tenant shall have the right, without the consent of Landlord, to assign or
sublet all or any part of the Demised Premises to one or more controlled or
subsidiary companies, or to a parent company (existing or future), and Tenant
shall have the right to permit the Demised Premises or any part thereof to be
used by any controlled subsidiary and/or parent companies, provided that a
duplicate original of the assignment or sublease shall be delivered to Landlord
within seven (7) days after the execution, and provided that such assignment or
sublease shall permit only such use and occupancy as is permitted under this
lease.
Further, Tenant may assign this lease in its entirety without the
consent of Landlord to any successor corporation (by consolidation or merger or
sale of substantially all of its assets) provided the assets and consolidated
net worth of such successor corporation and its consolidated subsidiaries,
determined in accordance with generally accepted accounting principles on a pro
forma basis from the then most recent audited (by independent certified public
accountants) balance sheets of all corporations which shall have been merged or
consolidated with or into such successor corporation, shall not be less than the
assets and consolidated net worth of Tenant and its consolidated subsidiaries as
shown by Tenant's most recent audited (by independent certified
- 6 -
<PAGE>
public accountants) balance sheets of all corporations which shall have been
merged or consolidated with or into such successor corporation, shall not be
less than the assets and consolidated net worth of Tenant and its consolidated
subsidiaries as shown by Tenant's most recent audited (by independent certified
public accountants) balance sheet, provided that Tenant shall have delivered to
Landlord an agreement on the part of such successor corporation whereby such
successor corporation agrees to assume, and does assume, all of the obligations
and duties on the part of the Tenant to be performed hereunder.
E. No permitted or consented to assignment or subletting shall be
effective or valid for any purpose whatsoever unless and until a counterpart of
the assignment or a counterpart or reproduced copy of the sublease shall have
been first delivered to the Landlord, and, in the event of an assignment, the
Tenant shall deliver to Landlord a written agreement executed and acknowledged
by the Tenant and such assignee in recordable form wherein such assignee shall
assume jointly and severally with Tenant the due performance of this lease on
Tenant's part to be performed to the full end of the term of this lease
notwithstanding any other or further assignment.
F. Any transfer by operation of law or otherwise, of Tenant's
interest in this lease or of a fifty (50%) percent or greater interest in Tenant
(whether stock, partnership interest or otherwise) shall be deemed an assignment
of this lease for purposes of this Article.
44. SUPPLEMENTING ARTICLE 3:
------------------------
Landlord's consent shall not be required for minor changes to the
Demised Premises such as painting and installation of cabinets and shelves. All
other renovations, decorations, additions, installations, improvements and/or
alterations of any kind or nature in the Demised Premises (herein "Tenant's
Changes") shall require the prior written consent of Landlord thereto, which, in
the case of non-structural interior Tenant's Changes, Landlord agrees not to
unreasonably withhold or delay. In granting its consent to any Tenant's Changes,
Landlord may impose such conditions (as to guarantee of completion, payment
restoration, and otherwise) as Landlord may reasonably require. In no event
shall Landlord be required to consent to any Tenant's Changes which would
physically affect any part of the building outside of the Demised Premises or
would adversely affect the proper functioning of the mechanical, electrical,
sanitary or other service systems of the building. At the time Tenant requests
Landlord's written consent to any Tenant's Changes, Tenant shall deliver to
Landlord detailed plans and specifications therefor. Tenant shall pay to
Landlord any reasonable fees or expenses incurred by Landlord in connection with
Landlord's submitting such plans and specifications, if it so chooses, to an
architect or engineer selected by Landlord for review or examination. Landlord's
approval of any plans or specifications does not relieve Tenant from the
responsibility for the legal sufficiency and technical competency thereof.
Tenant, before commencement of any Tenant's Changes, shall:
1. Obtain the necessary consents, authorizations and licenses from
all federal, state and/or municipal authorities having jurisdiction over such
work;
2. Furnish to Landlord a certificate or certificates of Workmen's
Compensation Insurance covering all persons who will perform Tenant's Changes
for Tenant or any contractor, subcontractor or other person;
3. Furnish to Landlord an original Policy of Public Liability
Insurance covering Landlord in limit of not less than ONE MILLION & 00/100
($1,000,000.000) DOLLARS, for injuries or damages to person and property, in a
company approved by Landlord. Such policy shall be maintained at all times
during the progress of Tenant's Changes and until completion thereof, and shall
provide that no cancellation shall be effective unless ten (10) days prior
written notice has been given to Landlord.
Tenant agrees to indemnify and save Landlord harmless from and against
any and all bills for labor performed and equipment, fixtures and materials
furnished to Tenant and from and against any and all liens, Property and from
and against all losses, damages, costs, expenses, suits
- 7 -
<PAGE>
and claims whatsoever in connection with Tenant's Changes. The cost of Tenant's
Changes shall be paid for in cash or its equivalent, so that the Demised
Premises and the Real Property shall at all times be free of liens for labor and
materials supplied or claimed to have been supplied.
Tenant, at its expense, shall cause any Tenant's Changes consented to
by Landlord to be performed in compliance with all applicable requirements of
insurance bodies having jurisdiction and in such manner as not to interfere
with, delay or impose any additional expense upon the Landlord in the
maintenance or operation of the building and so as to maintain harmonious labor
relations in the building.
Notwithstanding the provisions of Article #3, Tenant shall not be
required to restore the Demised Premises to its condition prior to the making of
any Tenant Changes except if and to the extent that such restoration is made
an express condition of Landlord's consent to such Tenant's Change.
If the performance of Tenant's Changes shall interfere with the
comfort and/or convenience of other tenants in the building or shall cause
damage to or otherwise interfere with the occupancy of adjacent buildings,
Tenant shall, upon Landlord's demand, remedy or remove the condition or
conditions complained of. Tenant further covenants and agrees to indemnify and
save Landlord harmless from and against any and all claims, losses, damages,
costs, expenses, suits and demands whatsoever made or asserted against Landlord
by reason of the foregoing.
45. CERTIFICATES BY TENANT:
-----------------------
At any time and from time to time, Tenant, for the benefit of Landlord
and the lessor under any ground lease or underlying lease or the holder of any
leasehold mortgage affecting any ground lease or underlying lease, or of any fee
mortgage covering the land or the land and building, on at lease five (5) days
prior written request by Landlord, will deliver to Landlord a statement,
certifying that this lease is not modified and is in full force and effect (or
if there shall have been modifications that same is in full force and effect as
modified, and stating the modifications), the Commencement and Expiration Dates
hereof, the dates to which the fixed rent, additional rent and other charges
have been paid, and whether or not, to the best knowledge of the signer of such
statement, there are any then existing defaults on the part of either Landlord
or Tenant in the performance of the terms, covenants and conditions of this
lease, and if so, specifying the default of which the signer of such statement
has knowledge.
46. LIMITATION OF LIABILITY:
------------------------
Tenant agrees that the liability of Landlord under this lease and all
matters pertaining to or arising out of the tenancy and the use and occupancy of
the Demised Premises, shall be limited to Landlord's interest in the Real
Property and in no event shall Tenant make any claim against or seek to impose
any personal liability upon any general or limited partner of Landlord, or any
principal of any firm or corporation that may hereafter be or become the
Landlord.
47. INDEMNIFICATION AND INSURANCE:
------------------------------
Tenant will indemnify and save Landlord harmless from and against all
damages, liabilities, claims, costs and expenses, including reasonable
attorneys' fees, arising out of the use of the Demised Premises or any work or
thing done, or any condition created by Tenants or its employees, agents or
contractors whether or not caused. by negligence or breach of an obligation by
Tenant.
Tenant shall, throughout the term of this lease, at its own cost and
expense, but for the mutual benefit of Landlord and Tenant, maintain. General
Public Liability Insurance against claims for personal injury, death or property
damage occurring upon, in or about the Demised Premises, such insurance to
afford protection to the limit of not less than ONE MILLION & 00/100
($1,000,000.00) DOLLARS in respect of personal
- 8 -
<PAGE>
injury or death and damage to property in respect of any one occurrence. The
Certificate of Insurance shall specifically have the indemnity clause referred
to in the first paragraph of this Article typed on the certificate evidencing
that the "hold harmless" clause has been insured. Tenant shall furnish to
Landlord certificates of such policies and provide for the insurance carrier's
endorsements and such policies shall not be terminated without ten (10) days'
prior notice to Landlord as well as Tenant.
48. ELECTRICITY:
------------
If the Landlord elects to supply electric current to the Demised
Premises, the Tenant agrees that electric current will be supplied by the
Landlord and the Tenant will pay the Landlord or the Landlord's designated
agent, as additional rent for the supplying of electric current, an amount or
amounts set by the Landlord computed at rates not exceeding those in the Service
Classification No. 4 of Consolidated Edison Company of New York, Inc. in effect
during August 1970. The Landlord, at its option, may, however, increase the
additional rent charges for supplying electricity to the Demised Premises based
upon changes, occurring subsequent to the aforementioned date, in the method,
rates or manner by which the Landlord thereafter purchases electricity for the
building of which the Demised Premises are a part. Such increases in the
additional rent charges for electricity shall be determined by a comparison to
the nearest full percentage of the average cost per kilowatt hour to the
Landlord at the rate in effect at which Landlord purchased electricity prior to
such change and the rate under which the Landlord will purchase electricity
after such change. The periods to be used for the aforesaid computation shall be
the bill periods ended in February and August immediately preceding such change.
Average cost per kilowatt hour is defined as including energy charges, demand
charges, fuel adjustment charges, rate adjustment charges, sales taxes where
applicable, and/or any other factors used by the public utility in computing its
charges to the Landlord, applied to the kilowatt hours purchased by Landlord
during a given bill period. Where more than one meter measures the service of
Tenant, the service rendered through each meter may be computed and billed
separately in accordance with the rates herein. Bills therefor shall be rendered
at such times as Landlord may elect and the amount shall be deemed to be, and be
paid as, additional rent. In the event that such bills are not paid within five
(5) days after the same are rendered, Landlord may, without further notice,
discontinue the service of electric current to the Demised Premises without
releasing Tenant from any liability under this lease and without Landlord or
Landlord's agent incurring any liability for any damage or loss sustained by
Tenant by such discontinuance of service. At the option of Landlord, Tenant also
agrees to purchase from Landlord or its agent all lamps or bulbs used in the
Demised Premises and to pay for cost of installation thereof. Landlord shall not
in any way be liable or responsible to Tenant for any loss or damage or expense
which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements. All additional feeders or risers or other electrical conductors or
equipment required to provide any increase in electric service to the Demised
Premises shall be provided by Landlord, and the cost thereof shall be paid by
Tenant on Landlord's demand, provided that, in Landlord's judgement, such
additional feeders or risers will not cause permanent damage or injury to the
building or the Demised Premises or cause or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations or repairs or
interfere with or disturb other tenants or occupants of the building. Rigid
conduit only will be allowed. Tenant agrees that its use of electric current in
the Demised Premises shall not at anytime exceed the capacity of any of the
electrical conductors and equipment in otherwise serving the Demised Premises.
It is further agreed by Tenant that all of the aforesaid costs and expenses are
chargeable and collectible as additional rent and shall be paid by Tenant to
Landlord within five (5) days after condition of any bill or statement to Tenant
therefor. Landlord may discontinue any of the aforesaid services upon thirty
(30) days notice to Tenant without being liable to Tenant therefor or without in
any way affecting this lease or the liability of Tenant hereunder or causing a
diminution of rent and the same shall not be deemed to be a lessening or
diminution of services within the meaning of any law, rule or regulation now or
hereafter enacted, promulgated or issued. In the event Landlord gives
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<PAGE>
such notice of discontinuance Landlord shall permit Tenant to receive such
service direct from the public utility corporation upon condition that the
Tenant shall, at its sole expense entirely, segregate the Tenant's electrical
system so that the same is in no way dependent upon or connected to the circuits
or distribution facilities of the Landlord or any other tenant and that upon
vacating the Demised Premises Tenant will restore, at its sole expense, same to
the condition existing prior to such segregation. Tenant shall make no
electrical installations, alterations, additions or changes to electrical
equipment or appliances without the prior written consent of the Landlord in
each instance, which consent will not be unreasonably withheld. Tenant will
comply with the General Rules, Regulations, Terms and Conditions applicable to
Service, Equipment, Wiring and Changes in Requirements in accordance with the
requirements of the public utility supplying electricity to the building in the
same manner as if the Tenant was serviced directly by such utility. If any tax
is imposed upon Landlord's receipt from the sale or resale of electrical energy
or gas or telephone service to Tenant by any Federal, State or Municipal
Authority, Tenant agrees that, where permitted by law, Tenant's pro-rata share
of such taxes shall be passed on to, and included in the bill of, and paid by,
Tenant to Landlord.
Landlord shall furnish and install Tenant's electrical meter in accordance
with the above provision. If there shall be any delay in the installation of
such electrical meter, then Tenant shall be charged on a pro-rata adjustment
basis for such period that meter has not been installed and operable, and such
pro-rata adjustments shall be based on the average charge for electricity per
day in the Demised Premises, after Tenant's first meter reading, multiplied by
the number of days that the meter has not been installed and operable.
49. BROKER:
------
Tenant represents and warrants that if neither consulted nor negotiated
with any broker or finder with regard to the rental of the Demised Premises from
Landlord other than Helmsley-Noyes Company, Inc., Tenant agrees to indemnify and
----------------------------
hold Landlord harmless from any damages, costs, and expenses suffered by
Landlord by reason of any breach of the foregoing representation.
50. BINDING EFFECT:
--------------
It is specifically understood and agreed that this lease is offered to
Tenant for signature by the managing agent of the building solely in its
capacity as such agent and subject to Landlord's acceptance and approval, and
that Tenant shall have affixed its signature hereto with the understanding that
such act shall not, in any way, bind Landlord or its agents until such time as
this lease shall have been approved and executed by Landlord and delivered to
Tenant.
51. MISCELLANEOUS:
-------------
A. Without incurring any liability to Tenant, Landlord may permit access
to the Demised Premises and open the same, whether or not Tenant shall be
present, upon demand of any receiver, trustee, assignee for the benefit of
creditors, sheriff, marshall or court officer entitled to, or reasonably
purporting to be entitled to, such access for the purpose of taking possession
of or removing, Tenant's property or for any other lawful purpose (but this
provision and any action by Landlord hereunder shall not be deemed a recognition
by Landlord that the person or official making such demand has any right or
interest in or to this lease, or in or to the premises), or upon demand of any
representative of the fire, police, building, sanitation or other department of
the city, state or federal government.
B. The terms "person" and "persons" as used in this lease, shall be deemed
to include natural persons, firms, corporations, associations and any other
private or public entities.
C. No receipt of monies by Landlord from Tenant, after any reentry or
after cancellation or termination of this lease in any lawful manner, shall
reinstate the lease; and alter the service of notice
- 10 -
<PAGE>
to terminate this lease, or after the commencement of any action, proceeding or
other remedy, Landlord may demand, receive and collect any monies due, and apply
them on account of Tenant's obligations under this lease but without in any
respect affecting such notice, action, proceeding or remedy, except that if a
money judgement is being sought in any such action or proceeding, the amount of
such judgement shall be reduced by such payment.
D. If Tenant is in arrears in the payment of fixed rent or
additional rent, Tenant waives it right, if any, to designate the items in
arrears against which any payments made by Tenant are to be credited and
Landlord may apply any of such payments to any such items in arrears as
Landlord, in its sole discretion, shall determine, irrespective of any
designation or request by Tenant as to the items against which any such
payments shall be credited.
E. No payments by Tenant nor receipt by Landlord of a lesser amount
that may be required to be paid hereunder shall be deemed to be other than on
account of any such payment, nor shall any endorsement or statement on any check
or any letter accompanying any check tendered as payment be deemed an accord and
satisfaction and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such payment due or pursue any other
remedy in this lease provided.
F. If in this lease it is provided that Landlord's consent or
approval as to any matter will not be unreasonably withheld, and it is
established by a court or body having final jurisdiction thereover that Landlord
has been unreasonable, the only effect of such finding shall be that Landlord
shall be deemed to have given its consent or approval; but Landlord shall not be
liable to Tenant in any respect for money damages by reason of withholding its
consent.
G. At Landlord's option, Tenant shall pay a "late charge" of one
(1%) percent per month from the due date of any installment of rent (fixed rent
and additional rent) if said rent payment is made more than ten (10) days
after its due date. Nothing herein contained shall be deemed to limit any right
or recovery which Landlord may have under this lease, at law or in equity.
H. In the event any ground or underlying lease is terminated, or
any mortgage foreclosed, this lease shall not terminate or be terminable by
Tenant unless Tenant was specifically named in any termination or foreclosure
judgement or final order. In the event any ground or underlying lease is
terminated as aforesaid, Tenant agrees to enter a new lease at the Demised
Premises for the remaining term of this lease and otherwise on the same terms,
conditions and rentals as herein provided with, and at the option of the holder
of any superior lease, or if there is no superior lease in existence, then with
and at the option of the holder of the fee title to the Real Property.
52. ADDITIONAL SECURITY:
--------------------
In the event Tenant shall fail to pay to Landlord any rent or
additional rent within ten (10) days after the date the same becomes due in two
(2) successive months, then Tenant shall, within ten (10) days after demand by
Landlord, deposit with Landlord the sum of $9,349.16 which sum shall be held by
Landlord as a security deposit in accordance with the provisions of Article 33
hereof. The exercise by Landlord of its rights under this Article shall not
preclude Landlord from exercising any other rights or remedies which it may have
under this lease by reason of the default of Tenant in paying such rent or
additional rent when due.
53. PROHIBITION:
------------
Tenant shall use the Demised Premises solely for the purposes set
forth under Article 2 hereof, and Tenant and its employees or invitees shall not
at any time during the term of this lease use the Demised Premises as an
apartment or for dominant or accessory residential use of any type or kind
whatsoever.
54. Intentionally Omitted.
----------------------
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<PAGE>
55. The Tenant accepts the premises and appurtenances "as is" and without
representation on the part of the Landlord or its Agent as to condition,
physical or otherwise. During the term hereof, the Tenant agrees that is will
not call upon the Landlord for any expenditures for repairs, operation or
maintenance, except as may otherwise be specifically provided for in this lease.
56. Notwithstanding anything to the contrary contained herein, it is
mutually understood and agreed that the Tenant will not place any sign or
lettering outside the Tenant's premises, on the door or corridor wall, except
the building standard door sign and lettering. The Tenant agrees to reimburse
the building for the cost of said door plaque and lettering, which cost will not
exceed One Hundred Dollars ($100.00).
If the Tenant desires to have listings in the lobby directory, Tenant
will be permitted up to three (3) listing spaces which will be at Tenant's cost
and expense.
57. ADDENDUM TO ARTICLE #17:
------------------------
This Lease and the term and estate hereby granted are subject to the
following further limitation. Whenever Tenant shall default in the payment of
any installment of annual rental, or in the payment of any ' additional rent or
any other charge payable by Tenant to Landlord, on any day upon which the same
ought to be paid, and such default shall continue for ten (10) days after
Landlord shall have given Tenant a notice specifying such default, then in any
such case, Landlord may give to Tenant a notice of intention to end the term of
this Lease at the expiration of three (3) business days from the date of the
service of such notice of intention, and upon the expiration of said three (3)
business days of this lease and the term and estate hereby granted, whether or
not the term shall theretofore have commenced, shall terminate with the same
effect as if that day were set forth herein for the expiration of the term
hereof, but Tenant shall remain liable for damages as provided in this lease.
58. It is hereby understood and agreed that the annual base rental for
the terms of this lease shall be payable as follows:
(a) ONE HUNDRED TWELVE THOUSAND ONE HUNDRED NINETY & 00/100
($112,190.00) DOLLARS, per annum, payable in equal monthly installments of
$9,349.16 commencing June 1, 1995 and ending May 1, 1996;
(b) ONE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED FIVE & 00/100
($116,505.00) DOLLARS, per annum, payable in equal monthly installments of
$9,708.75 commencing June 1, 1996 and ending May 1, 1998;
(c) ONE HUNDRED TWENTY THOUSAND EIGHT HUNDRED TWENTY & 00/100
($120,820.00) DOLLARS, per annum, payable in equal monthly installments of
$10,068.33 commencing June 1, 1998 and ending May 1, 1999.
59. It is hereby understood and agreed between the parties, Landlord and
Tenant, that the security deposit requirement for the demised premises, Rooms
1507-1508, shall total $20,136.66. Said sum shall consist of $8,000.00, which
shall be transferred from Tenant's existing account in Room 1202; the balance of
$12,136.66 shallbe paid by Tenant upon the signing of this Lease. The total
monies of $20,136.66 shall be held in an interest bearing, Day of Deposit, Day
of Withdrawal account. Interest earned, less 1% administrative fee, shall be
paid to Tenant annually.
60. It is hereby understood and agreed that Tenant's present lease for
Room 1202 dated May 10, 1993 shall continue in full force and effect until such
time as the initial installation of the Demised Premises, Rooms 1507-1508, are
substantially completed and prepared for occupancy, or May 31, 1995, whichever
date shall occur first.
It is further understood and agreed that Landlord is to be notified by
Tenant in writing upon substantial completion of Tenant's initial installation
for Rooms 1507-1508.
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<PAGE>
61. CR & ME, INC. & CATHY ALLEN, INC. SPACE; ROOMS 1507 & 1508,
-----------------------------------------------------------
RESPECTIVELY:
-------------
Tenant acknowledges that it has been advised (i) that Rooms 1507 and
1508A-E, consisting of approximately 1,610 rentable square feet and 2,705
rentable square feet, respectively, and representing a part of the fifteenth
(15th) floor portion of the within demised premises, are currently occupied
by CR ,ME, MK INC,. And CATHY ALLEN, INC., pursuant to certain leases with
Landlord, the terms of which expire August 31, 1995 and May 31, 1995,
respectively; and (ii) that Landlord and CR & ME, INC. AND CATHY ALLEN, INC.
have entered into a certain lease cancellation agreement pursuant to which
such leases with CR & ME, INC. and CATHY ALLEN, INC. shall be cancelled and
terminated effective as of April 15, 1995. Supplementing Article #24 hereof,
Landlord shall not be liable to Tenant in any way if either falls to vacate
their present premises, Rooms 1507 and 1508A-E on or before such expiration
date. However, Landlord agrees that it will use all reasonable diligence to
obtain possession of the CR & ME, INC. and CATHY ALLEN, INC. Spaces prior to
April 15, 1995. If, despite such diligence by Landlord, either CR & ME INC.
or CATHY ALLEN, INC. fails vacate Room 1507 or 1508A-E on or prior to April
15, 1995, then Landlord will use all reasonable diligence to cause CR & ME,
INC. and CATHY ALLEN, INC. To vacate after such date, including, without
limitation, the commencement and diligent prosecution of a summary holdover
dispossess proceeding.
Tenant expressly waives any right to rescind this Lease under Section
223-a of the New York Real Property Law or under any present or future statute
of similar import then in force.
62. RENT CREDIT:
------------
Tenant shall be entitled to a rent credit in the amount of SIXTY-FIVE
THOUSAND & 00/100 ($65,000.00) DOLLLARS (without electricity) due under this
Lease; except that Tenant shall nevertheless be obligated, during such periods,
to pay any additional rents hereunder, and to pay any amounts due under Article
#48 hereof for Tenant's consumption of electricity in the demised premises.
The foregoing rent credit shall be conditioned on Tenant not being in
default, beyond any applicable notice and/or grace period, under any of the
material terms, covenants and conditions of this Lease. Upon the occurrence of
any such default by Tenant, the application of any rent credit which Tenant is
then receiving hereunder shall be deemed suspended unless and until Tenant fully
cures such default, at which time the application of such rent credit shall
resume and continue until Tenant has received the full amount thereof, (or
Tenant again so defaults).
Anything contained herein to the contrary notwithstanding, if Tenant,
at any time during the term of this Lease after Tenant has been granted all or a
portion of the rent credit described above or there reimbursement obligation,
breaches any covenant, condition or provision of this Lease and fails to cure
such breach within any applicable grace period, and provided that this Lease is
terminated by Landlord because of such default, then, in addition to all other
damages and remedies herein provided and to which Landlord may otherwise be
entitled, Landlord shall also be entitled to the repayment of the unamortized
portion of any such rent credit or reimbursement obligation theretofore enjoyed
by Tenant, which sum shall be deemed additional rent hereunder and shall be due
upon demand by Landlord. The obligation of Tenant to pay such additional rent,
(or damages), to Landlord shall survive the expiration or sooner termination of
the term of this Lease; provided, however, that such obligation shall be reduced
pro rata as and to the extent that Landlord thereafter is paid all rent and
additionnl rent due under this Lease through the date originally fixed for the
expiration of the term hereof, whether in the form of damages or as rent from
the relettimg of the demised premises by Landlord, plus any other amounts due to
Landlord under Article #18 hereof.
63. RIGHT OF PRIOR CONSIDERATION:
-----------------------------
If, at any time during the term of this Lease, Tenant notifies
Landlord that Tenant needs and wants additional expansion space, and such space
on the fifteenth (15th) floor of the Building is then vacant and available for
leasing by Landlord, (ie: not currently under offer to a proposed tenant or
---
subject to the option of another tenant; and subject to the right of any
existing tenant to renew and extend its occupancy of such space), then, provided
Tenant is not then in default under this Lease beyond any applicable grace
period, Landlord shall so advise Tenant, and, at Tenant's written request, will
negotiate with Tenant on rent and other terms for the leasing of said space by
Tenant. If for any reason Landlord and Tenant cannot agree on such rental and
other terms within thirty (30) days after such negotiations begin, then Landlord
thereafter shall be free to rent such space to whomever Landlord wishes and for
such term of years and at whatever rental and other terms Landlord desires.
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<PAGE>
EXHIBIT 10.18
LICENSE AGREEMENT
-----------------
This License Agreement ("Agreement") is by and between Marble Sportswear,
Inc. as LICENSOR and YES Clothing Co., a California corporation, as LICENSEE.
W I T N E S S E T H:
-------------------
WHEREAS, LICENSOR owns rights in certain trademarks and copyrights (and the
current applications for federal registration of certain other trademarks), as
well as the associated goodwill;
WHEREAS, LICENSEE desires to obtain an exclusive license to use such
intellectual property rights in connection with the sale, marketing and
distribution of certain goods; and,
WHEREAS, LICENSOR is willing to grant such a license to LICENSEE under the
terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises contained herein and
subject to the terms and conditions of this Agreement, LICENSOR and LICENSEE
agree as follows:
1. LICENSE GRANT
-------------
a. LICENSOR grants to LICENSEE only the exclusive right and license to
use the Marks (as defined below) in the Territory in connection with the
manufacture and wholesale sale of the Licensed Goods (as defined below) during
the term of this Agreement.
b. "Marks" is defined in this Agreement are the trademark and copyright
registrations and applications for registration as shown in Exhibit A.
c. "Licensed Goods" is defined in this Agreement as only the following
men's and women's sportswear: casual blouses, casual dresses, casual jackets,
jeans, overalls, casual shirts, shortalls, shorts, casual skirts, sweaters,
sweatpants, sweatshirts, T-shirts, tank tops, casual trousers, casual vests.
d. "Territory" means United States of America and Puerto Rico.
e. LICENSEE agrees that LICENSOR retains full ownership of the Marks and
the goodwill associated with the Marks, that LICENSEE shall not acquire any
rights in the Marks other than those rights expressly granted by this Agreement,
and that use of the Marks by LICENSEE inures to the benefit of LICENSOR.
LICENSEE agrees to cooperate fully with LICENSOR in securing and maintaining the
goodwill of LICENSOR in the Marks, and
<PAGE>
to execute and deliver any and all agreements, instruments and other documents
necessary or appropriate to secure, maintain and evidence such goodwill of
LICENSOR in the Marks.
2. TERM
----
The term of this Agreement shall commence as of April 1, 1995, and expire
on March 31, 2000.
3. DEFINITIONS
-----------
a. "Allowances" and "Markdowns" are any written credit given by the
LICENSEE to a customer after delivery.
b. "Closeouts" are sales of Licensed Goods at a price reduction in excess
of that permitted below.
c. "Contract Year" is each year of the Term commencing on April 1st.
d. "Gross Sales" means sales (by LICENSEE) at the wholesale price of
Licensed Goods as listed on the Licensed Goods Approval Form.
e. "Net Sales" are Gross Sales of Licensed Goods less only credits taken
by customers for returns, trade discounts, allowances and markdowns as permitted
by this Agreement.
f. "Trade discounts" are all reductions in the list wholesale selling
price (as stated on the Licensed Goods Approval Form) which are customary in the
trade and which are granted by LICENSEE in writing prior to delivery. All trade
discounts must appear on the face of each invoice.
4. ROYALTY AND ADVERTISING PAYMENTS
--------------------------------
a. It is the intention of the parties that royalties will be based on the
bona fide wholesale prices at which LICENSEE sells Licensed Goods to independent
retailers in arms' length transactions. If LICENSEE sells Licensed Goods to its
affiliates, friends or employees, royalties shall be calculated on the basis of
wholesale price stated on the Licensed Goods Approval Form for Licensed Good;
and all such sales shall be stated separately on the Statement of Royalties
(Exhibit B). A Licensed Good is considered "sold" upon the date when such
Licensed Good is invoiced, shipped or paid for, whichever event occurs first.
b. Each quarter commencing January 31, 1996, for goods sold after that
date LICENSEE shall pay to LICENSOR and account for a non-refundable copyright
and trademark royalty in an amount in United States Dollars equal to 7% (seven
percent) on all of LICENSEE's Net Sales. This percentages is the "Trademark
Royalty". The Trademark Royalty is due and payable as follows: the payment for
January, February and March of each
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<PAGE>
year shall be due May 1; the payment for April, May and June shall be due August
1; the payment for July, August and September, shall be due November 1; and the
payment for October, November and December shall be due February 1.
c. Each quarter commencing January 31, 1996, for goods sold after that
date LICENSEE shall pay to LICENSOR and account for a non-refundable advertising
advance in an amount in United States Dollars equal to 2% (two percent) on all
of LICENSEE's Net Sales. This percentage is the "Advertising Royalty". The
Advertising Royalty is due and payable as follows: the payment for January,
February and March of each year shall be due May 1; the payment for April, May
and June shall be due August 1; the payment for July, August and September,
shall be due November 1; and the payment for October, November and December
shall be due February 1. The Advertising Royalty shall be used by LICENSOR to
advertise and promote the marks licensed hereunder. LICENSOR agrees to provide
to LICENSEE, upon LICENSEE's request, evidence that an amount at least equal to
the Advertising Royalty has been applied by LICENSOR for such advertising and
promotion.
d. For each calendar quarter, LICENSEE shall pay LICENSOR the Trademark
and Advertising Royalty. All payments shall be sent to: Licensing Department,
Marble Sportswear, Inc. at 9756 Wilshire Boulevard, Beverly Hills, California
90212. The obligation of LICENSEE to pay royalties is absolute notwithstanding
any claim which LICENSEE may assert against LICENSOR. LICENSEE shall not have
the right to set-off, reduce or deduct from royalty payments for any reason.
e. If the payment of any installment of royalties is delayed for any
reason, interest shall accrue on the unpaid principal amount of such installment
from and after the date on which the same became due at the highest rate
permitted by law in California.
5. STATEMENTS AND PAYMENTS
-----------------------
Simultaneous with the submission of all payments, but regardless of whether
any payment is due, LICENSEE shall submit a quarterly report on the "Statement
of Royalties" (Exhibit B), of the number, description and invoice price of each
Product sold (by Style Number), the Gross Sales, returns actually received,
trade discounts, allowances and markdowns actually granted, the Net Sales, and
any other information that may be required for the relevant quarter.
6. BOOKS OF ACCOUNT AND RECORDS
----------------------------
LICENSEE agrees to keep accurate books of account and records covering all
transactions relating to the Licensed Goods. LICENSOR and its authorized
representatives shall have the right to examine and copy said books of account
and other records; provided, however, that such examination and copying shall be
done at the usual place of business (and only during reasonable hours) of
LICENSEE, unless such restriction is not required by said LICENSEE. An
essential supply analysis may be used in the audit. If there is an error in
favor of LICENSEE in excess of two percent (2%) of royalties in each year in
computing
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<PAGE>
such royalties, all expenses in connection with such inspection and audit should
be borne by LICENSEE.
7. QUALITY CONTROL, ADVERTISING MATERIALS AND MARKETING
----------------------------------------------------
a. LICENSEE agrees to maintain such quality of Licensed Goods sold or
otherwise provided under or in connection with the Marks in accordance with
specifications set forth by LICENSOR from time to time. LICENSOR reserves the
right to inspect all places of manufacture to ensure that the quality required
is maintained. Upon request, LICENSEE shall provide to LICENSOR a list of all
places where the Licensed Goods are manufactured.
b. LICENSOR may from time to time require LICENSEE to furnish LICENSOR
samples of advertising or other promotional materials to be used in connection
with the Licensed Goods. LICENSEE agrees that it will use the Marks in any
reasonable manner required by LICENSOR in order to identify the LICENSOR's
rights in such Marks.
c. LICENSEE shall obtain the written approval of LICENSOR of all Licensed
Goods prior to manufacture by LICENSEE. Each season, LICENSEE shall submit all
items which are to be sold that season for written approval by LICENSOR.
Approval for one season is not approval for any other season. Samples of each
Licensed Good shall be submitted with the actual fabric to be used for that
Licensed Good. The samples shall be submitted with the Licensed Good Approval
Form (Exhibit C) and must be accompanied by additional Material/Fabric and/or
Color Approval Forms (Exhibit D).
d. Within two (2) weeks of when each style is produced, LICENSEE shall
deliver to LICENSOR at least one (1) finished Licensed Good of each style. If
any Licensed Good is not manufactured in strict adherence to the appropriate
materials, color, workmanship, designs, dimensions, styling detail and quality
approved by LICENSOR, LICENSOR shall notify LICENSEE in writing within ten (10)
days. LICENSEE shall promptly correct any problem. The judgment of LICENSOR,
exercised in good faith, will be binding and conclusive as to whether or not any
Licensed Good meets design or quality standards of the original sample.
LICENSEE agrees that the Marks may not be placed on any Licensed Goods that do
not meet such standards or quality standards and, upon receipt of notification
that certain Licensed Goods do not meet such standards, LICENSEE must refrain
from distributing such non-conforming Licensed Goods, placing the Marks on any
other non-conforming products and must repurchase all non-conforming Licensed
Goods sold to its customers. If a Licensed Good, as repaired or changed, is
still not approved, the Marks shall be promptly removed from the item, at the
option of LICENSOR, in which event the item may be sold by LICENSEE, provided it
is in no way identified as a Licensed Good.
e. All advertising or packaging or other business materials relating to
any Licensed Goods or bearing the Marks shall be submitted to LICENSOR for prior
approval on the Licensed Property Use Approval Form (Exhibit E). LICENSOR may
revise or disapprove any items submitted. Approval shall be effective until
revoked by LICENSOR. LICENSEE shall, at the option of LICENSOR, include on its
business materials an indication
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<PAGE>
of the relationship of the parties in a form approved by LICENSOR. All uses of
the Marks by LICENSEE, including without limitation, use on any business
documents, invoices, stationery, advertising, promotions, labels, packaging and
otherwise, shall require LICENSOR's prior written consent.
f. LICENSEE shall sell Licensed Goods only to those specialty shops,
department stores and other retail outlets which deal in products similar in
quality and prestige to Licensed Goods and whose operations are consistent with
the quality and prestige of the Marks. Prior to first shipment, LICENSEE shall
submit to LICENSOR for approval the names of all its intended customers. Any
additions to this initial customer list shall be submitted on the "Customer
Profile Form" (Exhibit F) prior to sale to any new customer. Each January 1,
LICENSEE shall send a list of all current customers.
8. DEFAULT; TERMINATION
--------------------
a. In the event that either LICENSOR or LICENSEE is in breach of or
default under the terms of this Agreement (a "Default"), the other party may
serve on the defaulting party a notice of default ("Notice of Default")
specifying the nature of the Default. If the Default is not cured within
fifteen (15) days from service of the Notice of Default, the other party may
then serve a notice ("Termination Notice") that it is terminating this Agreement
and the Agreement shall be automatically terminated.
b. This Agreement automatically terminates if:
i. LICENSEE does not deliver any payment due to LICENSOR within ten
(10) days of when it is due; or
ii. there is a change of fifty percent (50%) or more of the ownership
of the stock or assets of LICENSEE and the prior written approval of LICENSOR
was not obtained.
c. LICENSOR may cancel the application of Section 8(b) in a particular
case, upon written notice to LICENSEE (which shall be binding upon both
parties).
d. Upon termination or expiration of this Agreement for any reason, all
rights granted to LICENSEE hereunder shall cease, and LICENSEE will immediately
refrain from further use of the Marks, remove all signs displaying the Marks,
and destroy or return to LICENSOR all other materials containing, displaying or
using the Marks. LICENSEE shall have a period of one-hundred and twenty (120)
days following such expiration (but not termination) to sell off any remaining
inventory of the Licensed Goods strictly in accordance with this Agreement.
e. LICENSOR has exclusive ownership of any designs for the Licensed Goods
which incorporate any trademark or logo owned by LICENSOR. LICENSEE shall not
use any designs owned by LICENSOR after the end of this Agreement.
-5-
<PAGE>
9. INDEMNITY AND INSURANCE
-----------------------
a. LICENSEE agrees that it is wholly responsible for all goods offered or
sold by it and that LICENSOR shall have no liability for or in connection with
any services offered, sold or otherwise provided by LICENSEE in connection with
the Marks. LICENSEE agrees to indemnify, protect, defend and hold harmless
LICENSOR and the officers, directors, shareholders, employees and agents of
LICENSOR, from and against any and all claims, demands, causes of action,
damages, costs and expenses, including court costs and reasonable attorneys'
fees, caused by or arising out of or in connection with the use by LICENSEE of
the Marks or the offer, sales or provision of the Licensed Goods by LICENSEE,
including without limitation, claims or actions for negligence, breach of
contract, strict liability and patent or copyright infringement, except as set
forth below.
b. Without limiting LICENSEE's liability under the indemnity provisions,
LICENSEE shall maintain comprehensive general liability insurance in the amount
of at least $3,000,000 (combined single limit per occurrence) plus defense costs
during the first year of this Agreement, and at least $5,000,000 (combined
single limit per occurrence) plus defense costs thereafter. This insurance
shall include broad form blanket contractual liability; products and completed
operations liability; cross-liability; an endorsement stating that LICENSOR
shall receive at least thirty (30) days written notice prior to modification,
cancellation or non-renewal of coverage; an endorsement naming LICENSOR as an
additional insured; an endorsement stating that the insurance shall be primary
as to LICENSOR; and a waiver of subrogation in favor of LICENSOR.
No later than July 1, 1995, LICENSEE shall furnish certificates of the
required insurance policies. Upon request, LICENSEE shall provide copies of
policies and endorsements.
c. LICENSOR agrees to indemnify, protect, defend and hold harmless
LICENSEE, and the officers, directors, shareholders, employees and agents of
LICENSEE from and against any and all claims, demands, causes of action,
damages, costs and expenses, including court costs and reasonable attorney's
fees, caused by or arising out of or in connection with the use by LICENSEE of
the marks or the offer, sales or promotion of any licensed goods by LICENSEE
where such claims, demands, causes of action, damages, costs and expense are
occasioned by a claim from third parties that the marks licensed hereunder
infringe upon the trademarks and copyrights of another person.
10. MISCELLANEOUS
-------------
10.1 CONFIDENTIALITY
---------------
"Confidential Information" is information including a formula,
pattern, compilation, program, device, method, technique, or process that:
derives independent economic value, actual or potential, from not being
generally known to the public or to other persons who can obtain economic value
from its disclosure or use; and is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
-6-
<PAGE>
A confidential relationship is created by this Agreement. Each
party shall keep confidential, not disclose to others, or take or use for its
own purposes (except in connection with its rights and obligations under this
Agreement), any Confidential Information of the other. LICENSEE shall have no
right of access to LICENSOR'S Confidential Information and waives all right to
see such Confidential Information in any dispute. Except as required by law,
neither party shall disclose the terms of this Agreement to third parti es.
10.2 NOTICES
-------
Any notice, request, consent or communication (collectively a
"Notice") under this Agreement shall be effective only if it is in writing and
(a) personally delivered, (b) sent by certified or registered mail, return
receipt requested, postage prepaid, (c) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (d) telexed or
telecopied with receipt confirmed as follows:
LICENSOR: Marble Sportswear, Inc.
Attn: Licensing Department Boulevard
9756 Wilshire Boulevard
Beverly Hills, California 90212
Telephone: (310) 246-5555
Facsimile: (310) 247-9045
LICENSEE: Yes Clothing Co.
Attn: Chief Financial Officer
1380 W. Washington
Los Angeles, California 90007
Telephone: (213) 765-7800
Facsimile: (213) 628-0326
10.3 ASSIGNMENT
----------
LICENSEE shall not assign this Agreement without the prior written
approval of LICENSOR. LICENSOR may assign this Agreement.
10.4 ENTIRE AGREEMENT; MODIFICATION
------------------------------
This Agreement contains the complete expression of the Agreement
between the parties with respect to the matter addressed herein and there are
not promises, representation, or inducements except as herein provided. The
terms and provisions of the Agreement may not be modified, supplemented or
amended except in writing signed by both parties hereto. All terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and permitted assigns of the
parties hereto.
-7-
<PAGE>
10.5 APPLICABLE LAW
--------------
All questions concerning this Agreement, the rights and obligations
of the parties, its enforcement, and its validity, effect, interpretation and
construction which are governed by state law shall be determined under the laws
of the State of California.
10.6 SEVERABILITY
------------
The provisions of this Agreement are severable, and if any provision
shall be held illegal, invalid, or unenforceable, the parties affected thereby
shall substitute for the affected provision an enforceable provision that
approximates the intent and economic benefit of the affected provision as
closely as possible, but all other provisions shall continue in full force and
effect
10.7 NO WAIVER
---------
Failure by either party hereto to enforce at any time or for any
period of time any provision or right hereunder shall not constitute a waiver of
such provision or of the right of such party thereafter to enforce each and
every such provision.
10.8 HEADINGS
--------
All article or section headings in this Agreement are for reference
only and shall not be deemed control or affect in any way the meaning or
construction of any of the provisions hereof.
10.9 COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of
which together shall constitute one agreement binding on the parties hereto.
10.10 ARBITRATION
-----------
Except as provided, all disputes arising out of or relating to this
Agreement shall be settled and determined by arbitration only in Los Angeles,
California.
10.10.1 Arbitration shall be before three arbitrators, at least one
of whom shall be an attorney with experience in trademark matters and at least
one of whom shall be a certified public accountant. The Arbitrators shall be
bound by the terms and conditions of this Agreement and shall have no power, in
rendering their award, to alter or depart from any express provision of this
Agreement, and their failure to observe this limitation shall constitute grounds
for vacating their award. The Arbitrators shall not have jurisdiction to award
punitive damages, but may award attorneys fees and costs as they determine
appropriate.
-8-
<PAGE>
10.10.2 The Arbitrators shall have the power to award specific
performance or permanent injunctive relief and other rights or monies in
accordance with the provisions of this Agreement. All provisional remedies
shall be the exclusive jurisdiction of the Courts. LICENSEE acknowledges and
admits that the Marks possess a special, unique and extraordinary character,
which makes difficult the assessment of monetary damages which LICENSOR might
sustain by any use which is inconsistent with this Agreement, and that
irreparable injury would be caused to LICENSOR thereby, such that injunctive and
similar relief would be appropriate in the event of any such uses. Without
prejudice to any other right and/or remedy either party may have under this
Agreement or the law, if, after notice, the other party fails to take any action
which it is obligated to take under this Agreement, including without
limitation, providing any information and submitting required reports, products
or uses of the Marks, then the non-breaching party shall be entitled to an award
of specific performance to compel such action.
10.10.3 The parties preserve all of their respective rights to
provisional remedies which they would have at law or equity, including
injunctive or similar relief. LICENSOR reserves the right to obtain injunctions
and other declaratory relief to protect its trademarks and goodwill.
10.10.4 Any award of the Arbitrators shall be final and binding upon
the parties and judgment may be entered in the courts of the State of California
or any United States court in California. LICENSEE waives any objection to (a)
personal jurisdiction; (b) venue; and (c) service of process of any United
States Federal court or California state court in Los Angeles County,
California, United States of America.
10.10.5 Any claim is barred and waived unless the claimant
institutes arbitration proceedings prior to the date when any action in court
would be barred by the statute of limitations. The failure to institute
arbitration proceedings prior to the expiration of the applicable statute of
limitations constitutes an absolute bar to the institution of any arbitration or
other proceeding by either party. All issues relating to the statute of
limitations barring or preventing the commencement of proceedings shall be
determined in court proceedings, and the Arbitrators shall not have power or
jurisdiction to determine such issues.
-9-
<PAGE>
IN WITNESS WHEREOF, this License Agreement has been duly executed by the
parties hereto as of the date first written above.
LICENSEE: LICENSOR:
YES CLOTHING CO., MARBLE SPORTSWEAR, INC.,
A CALIFORNIA CORPORATION A CALIFORNIA CORPORATION
By: /s/ Jeffrey Busse By: /s/ Georges Marciano
------------------------------- ----------------------------
Name: Jeffrey Busse Name: Georges Marciano
----------------------------- --------------------------
Title: Controller
----------------------------
Dated as of April 1, 1995
-10-
<PAGE>
EXHIBIT 10.19
_______________________________________________________________
AMENDMENT TO FACTORING AGREEMENT
March 2, 1995
Republic Factors Corp.
1000 Wilshire Boulevard, Suite 400
Los Angeles, California 90017
Gentlemen:
Reference is made to the Factoring Agreement between us dated May 15, 1994
(the "Factoring Agreement").
This will confirm that the Factoring Agreement is amended as follows,
effective March 1, 1995:
1. CHANGE IN THE DEFINITION OF COLLECTION DAYS. The words "5 business
---------------------------------------------
days" contained in the third sentence of Section 4.B. are amended to read: "3
business days".
2. CHANGE IN FACTORING COMMISSION. The first sentence of Section 6.A. is
--------------------------------
amended to read as follows: "As compensation for your services as factor
hereunder, we agree to pay to you a factoring commission equal to 0.60% of the
amount of each bill or invoice less discounts granted to the customer."
3. GUARANTEED MINIMUM VOLUME AND ADDITION OF SURCHARGE TO FACTORING
------------------------------------------------------------------
COMMISSION. The following sentence shall be added to the end of Section 6.A.:
- ------------
If at the end of any Contract Year (as defined below) the total invoices
factored with you during such Contract Year were less than $30,000,000,
then the commission shall be retroactively adjusted for such Contract Year
from 0.60% to 0.75% of the amount of each bill or invoice for such Contract
Year, and the difference shall be charged to our account as of the end of
such Contract Year.
4. CLARIFICATION OF CONTRACT YEAR. The definition of the term "Contract
--------------------------------
Year" in the fifth sentence of Section 6.B. is amended to mean the twelve month
period from April 1, 1995 to March 31, 1996 and each subsequent twelve month
period.
5. EXTENSION OF TERM. The first two sentences of Section 13.A. are
-------------------
amended to read as follows:
This Agreement shall continue in full force and effect until March 31,
1996, and from year to year thereafter unless terminated by you (Republic)
or unless we (Client) notify you of our desire to terminate this Agreement
effective on March 31 of 1996 or March 31 of any subsequent year by
<PAGE>
REPUBLIC FACTORS CORP. AMENDMENT TO FACTORING AGREEMENT
-------------------------------------------------------------------
giving you at least sixty (60) days' prior written notice. Republic shall
have the right to terminate this Agreement at any time upon sixty days'
prior written notice.
This Amendment, the Factoring Agreement, any prior written amendments to
the Factoring Agreement signed by you and us, and the other written documents
and agreements between you and us set forth in full all of your and our
representations and agreements with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and understandings
between us with respect to the subject hereof. As herein expressly amended, all
of the terms and provisions of the Factoring Agreement (as the same may have
been previously amended), and all other documents and agreements between you and
us shall continue in full force and effect and the same are hereby ratified and
confirmed.
Please confirm the foregoing by signing the enclosed copy of this letter
and returning it to us.
Sincerely yours,
YES CLOTHING CO.
By Daniel Goodstein
-----------------------------
Title Executive Vice President
---------------------------
ACCEPTED AND AGREED:
REPUBUC FACTORS Corp.
By David Landy
--------------------------
Title Senior Vice President
-----------------------
- 2 -
<PAGE>
EXHIBIT 10.20
Houlihan Lokey Howard & Zukin, Inc.
1930 Century Park West
Los Angeles, CA 90067
310-553-8871
June 17, 1995
Mr. Jeffrey Busse
Chief Financial Officer
YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, CA 90007
Dear Mr. Busse:
This letter, when properly signed, will constitute a retainer agreement
("Agreement" hereinafter) between Houlihan, Lokey, Howard & Zukin, Inc.
("Houlihan Lokey" hereinafter) and YES Clothing Co. ("YES" or the "Company"
hereinafter) upon the terms and conditions set forth below.
1. Background. We understand that the Company has entered into an
----------
agreement with its largest shareholder, Georges Marciano ("Marciano"), whereby
Marciano has agreed to:
a) become Chief Executive Officer ("CEO") and Chairman of the Board
("CoB") of the Company;
b) provide additional capital for the Company; and
c) license to YES certain trademarks controlled by Marciano affiliates.
With respect to Marciano becoming Chief Executive Officer and Chairman of the
Board, we understand that Marciano will receive:
a) $1 per year in salary; and
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -2-
b) options to acquire 500,000 shares of the Company's common stock per
year at $1.25 per share, vesting monthly during continued employment
for up to four additional years, (the "Executive Options").
With respect to Marciano providing additional capital to the Company, we
understand that Marciano agreed to:
a) contribute $3,300,000 in new capital in exchange for 2,640,000
shares of YES' common stock; and
b) convert approximately $700,000 owed by the Company to Marciano into
additional shares of YES' common stock valued at $1.25 per share.
With respect to Marciano licensing to YES certain trademarks controlled by
Marciano affiliates, we understand that the Company has entered into five year
trademark license agreement for Marciano's "GM Surf" and "Misfits" lines of
clothing at royalties of 7 percent of gross sales, plus an additional 2 percent
for advertising.
Marciano becoming CEO and CoB of YES, Marciano providing additional capital to
YES, and Marciano entering into licensing agreements with YES is collectively
referred to herein as the "Restructuring". In connection with the
Restructuring, we understand that the Company has granted Marciano a two year
option to acquire an additional 2,000,000 shares of YES' common stock at $1.25
per share, (the "Additional Options").
Finally, we understand that the Company is publicly traded on the NASD National
Market System (the "NASD NMS"), and has received a notice of potential delisting
from the NASD NMS because its net worth has fallen below minimum listing
standards. However, we understand that the capital infusion associated with the
Restructuring may provide YES with sufficient capital to avoid such action by
the NASD NMS. Moreover, we understand that Moss-Adams, the Company's outside
auditors, has indicated that it would issue a qualified opinion for the
Company's fiscal year ended March 31, 1995 without the completion of at least a
portion of the Restructuring. The Restructuring and the Company's granting of
the Additional Options are collectively referred to herein as the Transaction.
2. Opinion. We understand that the Company's Board of Directors
-------
("Board") has requested that Houlihan Lokey render an opinion (the "Opinion") as
to:
a) whether the fair market value of the Company's common stock prior to
and without giving effect to the Transaction is not more than $1.25
per share; and
b) the fairness of the Transaction to the Company from a financial
point of view.
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -3-
The Opinion will be delivered in writing at the request of the Board. The
Opinion shall not address the Company's underlying business decision to effect
the Transaction, nor have we been engaged to initiate any discussions with third
parties with respect to a possible acquisition of the Company.
It is contemplated that the Opinion will include, in addition to any
other matters that Houlihan Lokey in its sole discretion deems appropriate, a
description of the principal materials that Houlihan Lokey has reviewed and upon
which Houlihan Lokey is relying, and the principal assumptions and
qualifications upon which Houlihan Lokey has relied. The Opinion will be signed
and delivered as contemplated below. Houlihan Lokey shall be responsible only
for conclusions or opinions set forth in its written Opinion, subject to the
limitations set forth herein. We understand that shareholder approval will be
sought for the Executive Options and the Additional Options and that the Opinion
will be used in connection with seeking such shareholder approval.
Houlihan Lokey consents to a description of and the inclusion of the text
of its written Opinion in any filing required to be made by the Company with the
Securities and Exchange Commission and the National Association of Securities
Dealers in connection with the Transaction and in materials delivered to the
Company's stockholders that are a part of such filings, provided that any such
description or inclusion shall be subject to Houlihan Lokey's prior review and
approval, which approval shall not be unreasonably withheld. Any summary of, or
reference to, the Opinion, any verbal presentation with respect thereto, or
other references to Houlihan Lokey in connection with the Transaction, will in
each instance be subject to Houlihan Lokey's prior review and written approval
(which shall not be unreasonably withheld). Other than as set forth above, the
Opinion will not be included in, summarized or referred to in any manner in any
materials distributed to the public or the securityholders of the Company, or
filed with or submitted to any governmental agency, without Houlihan Lokey's
express, prior written consent (which shall not be unreasonably withheld).
Neither Houlihan Lokey's verbal conclusions nor the Opinion will be used for any
purpose other than in connection with the Transaction.
The Opinion will contain language substantially as follows:
"This Opinion is furnished solely for your benefit and may not
be relied upon by any other person without our express, prior
written consent. This Opinion is delivered to each recipient
subject to the conditions, scope of engagement, limitations and
understandings set forth in this Opinion and our engagement
letter, and subject to the understanding that the obligations
of Houlihan Lokey in the Transaction are solely corporate
obligations, and no officer, director, employee, agent,
shareholder or controlling person of Houlihan Lokey shall be
subjected to any personal liability whatsoever to any person,
nor will any such claim be asserted by or on behalf of you or
your affiliates."
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -4-
In connection with the Opinion, Houlihan Lokey shall, subject to the
limitations expressed herein or in the Opinion, make such reviews, analyses and
inquiries as we deem necessary and appropriate under the circumstances. Among
other things, Houlihan Lokey will meet with certain senior management of the
Company, visit certain facilities and business offices of the Company, review
certain of the Company's historical financial statements, review certain other
documents pertaining to the Transaction, review forecasts and projections
prepared by Company management and/or the Company's advisors, and review
publicly available data about certain companies it deems comparable to the
Company and certain transactions it deems relevant.
3. Securities Position. In the course of trading activities of
-------------------
Houlihan Lokey affiliates, Houlihan Lokey may from time to time have long or
short positions in and buy or sell debt or equity securities or options on
securities of the Company and other companies that are or may be the subject of
the engagement contemplated by this Agreement. To the extent Houlihan Lokey has
any such position in the securities of the Company or such other companies as of
the date of this Agreement, it has been disclosed to the Company.
4. Information. The Company, each signatory hereto, and all recipients
-----------
of the Opinion recognize and confirm that in rendering services hereunder,
Houlihan Lokey has been, prior to the date hereof, and hereafter will be, using
and relying and assuming the accuracy of, without independent verification,
data, material and other information (including without limitation, the
financial forecasts and projections), with respect to the Company, furnished to
Houlihan Lokey by or on behalf of the Company and its agents, counsel, employees
and representatives (the "Information"). Houlihan Lokey does not assume
responsibility for the accuracy and completeness of the Information, including,
but not limited to, any disclosure materials related to the Transaction, and
Houlihan Lokey shall not be obligated to conduct any independent study or
investigation as to the accuracy or completeness of the Information. The
Company represents that the disclosure materials will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not false or misleading. In addition, the Company represents and warrants
that the Information will be true, complete and correct in all material
respects. The foregoing shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Houlihan Lokey or any
Indemnified Person (as defined elsewhere in this agreement) or any person
controlling any of them.
The Company will furnish to Houlihan Lokey complete copies of all
relevant documents with respect to the Transaction filed with or submitted to
any regulatory agency prior to the consummation of the Transaction, and all such
other data, material and other information as Houlihan Lokey may reasonably
request. The Company will furnish to Houlihan Lokey, concurrently with their
submission to others, all material drafts of and a copy of the final disclosure
materials and financing and other documents related to the Transaction, and will
keep
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -5-
Houlihan Lokey apprised of changes in the terms of the Transaction on a timely
basis as they are decided upon.
5. Fees; Expenses. The Company will pay Houlihan Lokey a fee of
--------------
$75,000 for its services in connection with this Agreement, plus reasonable out-
of-pocket expenses that may be incurred by Houlihan Lokey in connection
herewith. Payment to Houlihan Lokey will be made in the amount of $37,500 upon
signing of this Agreement, and the remainder promptly upon receipt of periodic
billings. The full fees set forth above shall become due and payable upon
Houlihan Lokey's delivery of the Opinion, but Houlihan Lokey will be entitled to
full payment on July 31, 1995, even if it has not delivered the Opinion, as long
as Houlihan Lokey has notified the Company in writing that it has completed its
investigation and review with respect to the Opinion and that it is prepared
(subject to its review of final documents) to deliver the Opinion. If for any
reason the Transaction is terminated prior to its consummation and Houlihan
Lokey is requested to terminate work prior to its having given notification to
the Company, as set forth above, then Houlihan Lokey's fee shall be mutually
agreed upon by the Company and Houlihan Lokey, but shall not be less than the
greater of $37,500, or Houlihan Lokey's total time costs at its normal rates for
such projects, plus, in either case, reasonable out-of-pocket expenses. No
portion of the fee is contingent upon the consummation of the Transaction or the
conclusions reached in the Opinion.
Out-of-pocket expenses shall include, but not be limited to, reasonable
travel, lodging and meal expenses, duplicating charges, long-distance telephone
calls, and computer charges that have been or may be incurred by Houlihan Lokey
in connection with the Transaction. Houlihan Lokey shall, in addition, be
reimbursed for reasonable fees and expenses of its legal counsel in connection
with this Agreement and Opinion.
If Houlihan Lokey is requested to expand its Opinion to cover any areas
other than that set forth in Section 2, or beyond the scope listed in said
Section, such expanded scope of engagement and the fee to be paid to Houlihan
Lokey shall be negotiated and agreed upon prior to Houlihan Lokey's undertaking
such expanded engagement.
6. Indemnification; Contribution; and Standard of Care. The Company
---------------------------------------------------
agrees to provide indemnification to Houlihan Lokey and certain other parties,
in accordance with Schedule 1, which is attached hereto and incorporated herein
by this reference. In no event, regardless of the legal theory advanced, shall
Houlihan Lokey be responsible to any person other than for its gross negligence,
bad faith, willful misfeasance, or reckless disregard of its obligations or
duties. In no event, regardless of the legal theory advanced, shall Houlihan
Lokey's aggregate liability to all parties in connection with the Transaction or
its services in connection therewith exceed the aggregate fees actually received
by Houlihan Lokey hereunder.
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -6-
7. Other Services. If Houlihan Lokey is called upon to render services
--------------
directly or indirectly relating to the subject matter of this Agreement beyond
the services contemplated above (including, but not limited to, producing of
documents, answering interrogatories, giving depositions, giving expert or other
testimony, whether by agreement, subpoena or otherwise), the Company shall pay
Houlihan Lokey's then current hourly rates for the persons involved by the time
expended in rendering such services, including, but not limited to, time for
meetings, conferences, preparation and travel, and all related costs and
expenses, and the reasonable legal fees and expenses of Houlihan Lokey's
counsel.
8. Corporate Obligation. The obligations of Houlihan Lokey are solely
--------------------
corporate obligations, and no officer, director, employee, agent, shareholder or
controlling person shall be subjected to any personal liability whatsoever to
any person, nor will any such claim be asserted by or on behalf of any other
party to this Agreement or any person relying on the Opinion.
9. Attorney Fees; Choice of Law. If any party to this Agreement brings
----------------------------
an action directly or indirectly based upon this Agreement or the matters
contemplated hereby, the prevailing party shall be entitled to recover, in
addition to any other appropriate amounts, its reasonable costs and expenses in
connection with such proceeding, including, but not limited to reasonable
attorneys' fees and court costs. Any right to trial by jury with respect to any
law suit, claim or other proceeding arising out of or relating to this Agreement
or the services to be rendered by Houlihan Lokey hereunder is expressly and
irrevocably waived. This Agreement shall be governed by the internal laws of
the State of California, without regard to conflict of laws principles.
10. Other Issues. This Agreement shall not be assigned by Houlihan
------------
Lokey without the Company's prior written consent. By executing this Agreement
each signatory acknowledges receipt of a copy of Houlihan Lokey's current
brochure (the "Brochure"). Please contact Houlihan Lokey at the address shown
above to receive future editions of the Brochure. The signatories hereto also
acknowledge that, upon consummation of the Transaction, Houlihan Lokey is
authorized at its sole discretion to place the customary "tombstone"
advertisement or similar announcement in such form and in such media as it deems
appropriate.
Nothing in this Agreement, expressed or implied, is intended to confer or
does confer on any person or entity other than the parties hereto and their
respective successors and assigns and, to the extent expressly set forth herein,
the Indemnified Persons, any rights or remedies under or by reason of this
Agreement or as a result of the services to be rendered by Houlihan Lokey
hereunder.
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -7-
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect pursuant to the terms
hereof.
This Agreement incorporates the entire understanding of the parties and
supersedes all previous agreements or understandings, whether written or oral,
and may be modified only by an express writing executed by all parties hereto.
This Agreement has been reviewed by the signatories hereto and their
counsel. There shall be no construction of any provision against Houlihan Lokey
because this Agreement was drafted by Houlihan Lokey, and the parties waive any
statute or rule of law to such effect.
11. Consent; No Conflict. Each signatory hereto and each recipient of
--------------------
the Opinion acknowledges that Houlihan Lokey may be requested to render certain
services to other participants in the Transaction in the form of an opinion or
advice, and that services rendered in the past or to be rendered by Houlihan
Lokey hereunder or in the future do not represent any actual or potential
conflict of interest on the part of Houlihan Lokey. If during the course of
this Transaction any party hereto in good faith determines that a conflict of
interest has arisen herefrom, each signatory hereto hereby waives such conflict
of interest. Each signatory hereto consents to Houlihan Lokey's use of any
information obtained and to be obtained in the course of the activities
contemplated by said other engagement, and to the sharing of any information,
obtained or derived pursuant to its services hereunder, with the other
participants in the Transaction.
12. Survival of Certain Provisions. The provisions of Section 2
------------------------------
entitled "Opinion," Section 5 entitled "Fees; Expenses," Section 6 entitled
"Indemnification; Contribution; and Standard of Care," Section 7 entitled "Other
Services," Section 8 entitled "Corporate Obliga tion," Section 9 entitled
"Attorney Fees; Choice of Law," Section 10 entitled "Other Issues," and this
Section shall survive any termination of this Agreement.
<PAGE>
Mr. Jeffrey Busse
YES Clothing Co.
June 17, 1995 -8-
We trust that the foregoing terms and provisions are agreeable to you,
and request that you sign and return the enclosed copy of this Agreement to
Houlihan Lokey.
Sincerely,
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
By /s/ Marjorie L. Bowen
Marjorie L. Bowen
Senior Vice President
Enclosures
The foregoing has been read, understood and approved, and the undersigned
agrees to retain Houlihan, Lokey, Howard & Zukin, Inc. upon the foregoing terms.
Dated: June 17, 1995
YES Clothing Co.
By /s/ Jeffrey Busse
Jeffrey Busse
Chief Financial Officer
<PAGE>
SCHEDULE 1
----------
INDEMNIFICATION AND CONTRIBUTION
--------------------------------
This Schedule 1 is a part of and incorporated into that certain letter agreement
(together, the "Agreement"), dated June 17, 1995.
(a) If Houlihan Lokey or any employee, agent, officer, director,
attorney, shareholder or any person who controls Houlihan Lokey (any or all of
the foregoing, hereinafter an "Indemnified Person") becomes involved in any
capacity in any legal or administrative action, suit, proceeding, investigation
or inquiry, regardless of the legal theory or the allegations made in connection
therewith, directly or indirectly in connection with, arising out of, based
upon, or in any way related to (i) this Agreement; (ii) the services that are
the subject of this Agreement; (iii) any document or information, whether verbal
or written, referred to herein or supplied to Houlihan Lokey; (iv) the breach of
the representations, warranties or covenants by the Company given pursuant
hereto; (v) Houlihan Lokey's involvement in the Transaction or any part thereof;
(vi) any filings made by or on behalf of any party with any governmental agency
in connection with the Transaction; (vii) the Transaction; or (viii) proceedings
by or on behalf of any recipients of the Opinion, the Company will on demand,
advance or pay promptly, on behalf of each Indemnified Person, reasonable
attorneys' fees and other expenses and disbursements (including, but not limited
to, the cost of any investigation and related preparation) as they are incurred
by the Indemnified Person, (subject to the provisions of paragraph (c) below).
The Company also indemnifies and holds harmless each Indemnified Person against
any and all losses, claims, damages, liabilities, costs and expenses (including,
but not limited to, attorneys' fees, disbursements and court costs, and costs of
investigation and preparation) ("Losses") to which such Indemnified Person may
become subject in connection with any such matter.
(b) If for any reason the foregoing indemnification is determined to
be unavailable to any Indemnified Person or insufficient fully to indemnify any
such person, then the Company will contribute to the amount paid or payable by
such person as a result of any such Losses in such proportion as is appropriate
to reflect (i) the relationship between Houlihan Lokey's fee on the one hand and
the aggregate value of the Transaction on the other hand or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, not only
such relative benefit but also the relative fault of the other participants in
the Transaction, on the one hand, and Houlihan Lokey and the Indemnified Persons
on the other hand, and any other relevant equitable considerations in connection
with the matters as to which such Losses relate; provided, however, that in no
event shall the amount to be contributed by all Indemnified Persons in the
aggregate exceed the amount of the fees actually received by Houlihan Lokey
hereunder.
(c) The Company shall be notified in writing by any Indemnified Person
seeking indemnification if any action is commenced against such Indemnified
Person, within a reasonable time after such Indemnified Person shall have been
served with a summons or other first legal process, but failure so to notify the
Company shall not relieve the Company from any liability which it may have
hereunder or otherwise, except to the extent that such failure so to notify the
Company materially prejudices the rights of the Company. The Company shall
assume, at its
<PAGE>
Schedule 1
Idemnification and Contribution -2-
own expense, the defense of any suit brought to enforce any such claim, and such
defense shall be conducted by counsel chosen by the Company and reasonably
satisfactory to the Indemnified Person, (which counsel may be Company counsel);
provided, however, that (i) if the Company shall fail to assume or actively and
diligently conduct such defense, the Indemnified Person shall have the right to
employ such person's own separate counsel in any such action, at the Company's
expense, and such counsel shall have the right to have charge of such matters
for such person; and (ii) if the defendants in any such action include both an
Indemnified Person and the Company and such Indemnified Person shall have been
advised in writing by its counsel that there are conflicts between the legal
defenses available to such Indemnified Person and those available to the
Company, which in the reasonable opinion of such counsel are sufficient to make
it inappropriate for the same counsel to represent both the Company and such
Indemnified Person, such Indemnified Person shall have the right to employ its
own counsel in such action, and in such event the reasonable fees and expenses
of such counsel shall be borne by the Company.
(d) The indemnification obligations hereunder shall not apply to any
Losses that are finally judicially determined on the merits to have been
material and caused primarily by the gross negligence, bad faith, willful
misfeasance, or reckless disregard of its obligations or duties on the part of
Houlihan Lokey or such Indemnified Person. In the event of such final judicial
determination, the Company shall, subject to Houlihan Lokey's rights of
contribution, be entitled to recover from the Indemnified Person or Houlihan
Lokey the costs and expenses paid on behalf of such Indemnified Person pursuant
to this indemnification obligation.
(e) The Company agrees that it will not settle, compromise or
discharge any suit, claim, litigation, threatened litigation or threatened claim
arising out of, based upon, or in any way related to the Transaction and to
which Houlihan Lokey is or may reasonably be expected to be a party, unless and
until the Company has obtained a written agreement, approved by Houlihan Lokey
(which shall not be unreasonably withheld) and executed by each party to such
proposed settlement, compromise or discharge, releasing Houlihan Lokey and each
Indemnified Person from any and all liability. Houlihan Lokey agrees that it
will not settle, compromise or discharge any such suit, claim, litigation or
threatened claim without the prior written consent of the Company, which will
not be unreasonably withheld.
(f) The Company's obligations under this Section shall be in addition
to any liability that the Company or any other person may otherwise have to
Houlihan Lokey or any Indemnified Person. The foregoing provisions shall be
enforceable by each Indemnified Person and such person's heirs, representatives
and successors, and shall survive any termination of this Agreement or the
completion of services hereunder.
<PAGE>
EXHIBIT 10.21
DIRECTORS AND OFFICERS
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), is effective as of June 17,
1995, and is made by and between YES CLOTHING CO., a California corporation (the
"Company"), and GEORGES MARCIANO (the "Indemnitee").
WHEREAS, the Indemnitee is a director or officer of the Company serving at
the Company's request;
WHEREAS, in recognition of the Indemnitee's services on behalf of the
Company, the Company wishes to provide for the continuing indemnification of the
Indemnitee, and to provide for the continued coverage of the Indemnitee under
the Company's directors and officers' liability insurance policies for the
period and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Indemnitee's service to the
Company, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Expenses. For purposes of this Agreement, "Expenses" mean
--------
reasonable attorneys' fees and disbursements, accounting and witness fees,
travel and deposition costs, expenses of investigations, expenses of Proceedings
and related appeals, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including reasonable
compensation for time spent by Indemnitee in connection with the investigation,
defense or appeal of a Proceeding (as defined in Section 1.2 below) or action
for indemnification for which he is not otherwise compensated by the Company or
any third party. The term "Expenses" does not include the amount of judgments,
fines or penalties actually levied against Indemnitee.
1.2 Proceeding. For purposes of this Agreement, "Proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether brought in the name of the Company or otherwise and whether civil,
criminal, administrative, investigative or any other type whatsoever.
2. Additional Indemnification. The Company and the Indemnitee agree
--------------------------
that this Agreement does not replace or supersede prior Indemnification
Agreements by and between the Company and the Indemnitee to the extent that such
prior Agreement provides additional or broader indemnification coverage.
3. Indemnification. Subject to the limitations set forth in
---------------
Sections 7 and 8, the Indemnitee shall be entitled to the following
indemnification by the Company:
<PAGE>
3.1 Third Party Actions. If the Indemnitee was or is a party or
-------------------
is threatened to be made a party to any Proceeding (other than an action by or
in the right of the Company to procure a judgment in its favor) by reason of the
fact that the Indemnitee was or is a director of the Company, or by reason of
the fact that Indemnitee was or is serving at the request of the Company as a
director, officer, agent or employee of another enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity, the Company
shall indemnify the Indemnitee against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement, in each case to the extent actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement or appeal of such Proceeding, to the fullest permitted by
the Company's Articles of Incorporation, California law, public policy or other
applicable law, including binding regulations and orders of, and undertakings or
other commitments with, any governmental entity or agency, as the same exists or
may hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
3.2 Derivative Actions. If the Indemnitee was or is a party or
------------------
is threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in the Company's favor by reason of the fact that
the Indemnitee is or was a director of the Company or by reason of the fact that
Indemnitee was or is serving at the request of the Company as a director,
officer, agent or employee of another enterprise, or by reason of anything done
or not done in any such capacity, the Company shall indemnify the Indemnitee
against all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of such Proceeding, to the fullest
extent permitted by the Company's Articles of Incorporation, California law,
public policy, or other applicable law, including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency, as the same exists or may hereinafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company to
provide prior to such amendment).
3.3 Expenses Paid by Insurance. Notwithstanding the foregoing,
--------------------------
the Company shall not be obligated to indemnify the Indemnitee for Expenses,
judgments, fines, penalties or amounts paid in settlement which have been paid
directly to Indemnitee by directors' and officers' insurance, if any.
3.4 Duty to Obtain Insurance Coverage. The Company currently
---------------------------------
has and will keep in force a policy of insurance for directors and officers with
a minimum aggregate limit of liability of $10,000,000. The Company shall pay all
premiums, commissions and other costs or charges incurred in obtaining the
endorsement and shall promptly deliver to Indemnitee a certificate of
confirmation of insurance with respect to such policy.
4. Partial Indemnification. If the Indemnitee is entitled to
-----------------------
indemnification on some claims, issues or matters, but not on others, involved
in a Proceeding, the Company
-2-
<PAGE>
shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and
amounts paid in settlement incurred by the Indemnitee concerning those matters
for which the Indemnitee is entitled to be indemnified pursuant to the
provisions of this Agreement.
5. Advancement of Expenses. The Expenses incurred by Indemnitee in
-----------------------
investigating, defending, or appealing any Proceeding covered hereunder shall be
paid by the Company in advance (unless, in the opinion of regular outside
counsel to the Company, the provisions of applicable law precludes such advance
payment), with the understanding, agreement and undertaking by Indemnitee that
in the event it shall ultimately be determined that Indemnitee was not entitled
to be indemnified, or was not entitled to be fully indemnified, that Indemnitee
shall repay to the Company such amount, or the appropriate portion thereof, so
paid or advanced.
6. Notice and Other Indemnification Procedures.
-------------------------------------------
6.1 Notice to Company. Promptly after becoming aware of or
-----------------
receiving notice of the commencement of or the threat of commencement of any
Proceeding, the indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company in writing of the commencement or threat of
commencement thereof. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power. The omission to so notify the Company will not relieve it
from any liability which it may have to Indemnitee other than under this
Agreement.
6.2 Notice to Insurer. At the time of the receipt of a notice
-----------------
of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company
shall give prompt notice of the commencement of such Proceeding to the insurer
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all reasonably necessary and desirable action to
cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies, unless
the Company has already paid such amounts directly to the Indemnitee.
6.3 Choice of Counsel. If the Company shall be obligated to pay
-----------------
the Expenses of any Proceeding, the Company shall be entitled to assume the
defense of such Proceeding, with counsel approved by the Indemnitee (which
approval the Indemnitee shall not unreasonably withhold), upon the delivery to
the Indemnitee of written notice of the Company's election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of any counsel other than the
counsel approved by the Indemnitee and retained by the Company which may be
subsequently incurred by the Indemnitee with respect to the same Proceeding;
provided that (a) the Indemnitee shall have the right to employ his own counsel
in any such Proceeding at the Indemnitee's expense; and (b) if (1) the
employment of counsel by the Indemnitee has been previously authorized by the
Company in writing, (2) the Indemnitee shall have reasonably concluded that
there is an actual conflict of interest between the Company and the
-3-
<PAGE>
Indemnitee in the conduct of any such defense or (3) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
Expenses of Indemnitee's counsel reasonably and actually incurred by the
Indemnitee shall be payable by the Company.
7. Determination of Right to Indemnification.
-----------------------------------------
7.1 Presumption of Right to Indemnification. To the extent the
---------------------------------------
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense
of any claim, issue or matter involved in any such Proceeding, the Indemnitee
shall be presumed to have met the applicable standard of conduct, if any, for
indemnification under this Agreement.
7.2 Burden of Proof. If Section 7.1 is inapplicable, the
---------------
Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of
this Agreement unless (a) the board of directors of the Company shall determine
that California law or other applicable law prohibits the indemnification of
Indemnitee under the terms of this Agreement, or (b) the Company shall receive a
written opinion from independent legal counsel selected by the Indemnitee and
the Company to that effect. The Company shall have the burden of proving to such
counsel that indemnification is not available to the Indemnitee as set forth in
the preceding sentence. Any failure between the Indemnitee and the Company to
agree in the selection of the independent legal counsel shall be resolved
pursuant to Sections 7.3 through 7.6 below.
7.3 Selection of Counsel. If the Indemnitee and the Company are
--------------------
unable to agree on the selection of the independent counsel, such independent
counsel shall be selected by lot from among the ten (10) law firms having the
most lawyers practicing in Los Angeles, California (excluding any firms that
have acted as counsel for the Company). Regular counsel to the Company shall
contact such counsel in order of their selection by lot, requesting each such
firm to accept engagement to make the determination required hereunder until one
of such firms accepts such engagement. The fees for such counsel shall be paid
by the Company.
7.4 Response of Company. As soon as practicable, and in no
-------------------
event later than 20 days after the selection of independent legal counsel
pursuant to Section 7.3 above, the Company shall, at its own expense, submit to
the independent legal counsel, in such manner as the independent legal counsel
may reasonably request, its claim, if any, that the Indemnitee is not entitled
to indemnification.
7.5 Appeal. Notwithstanding a determination by an independent
------
legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not
entitled to indemnification with respect to a specific Proceeding, the
Indemnitee shall have the right to apply to the court in which that Proceeding
is or was pending, or such other court of competent jurisdiction, for the
purpose of enforcing the Indemnitee's right to indemnification pursuant to this
Agreement. The Company agrees that a determination by the independent legal
counsel that the Indemnitee has not met the standard of conduct required for
-4-
<PAGE>
indemnification shall not create a presumption, in any subsequent court
proceeding, that the Indemnitee has failed to meet the applicable standard of
conduct.
7.6 Actions Under Agreement. The Company shall indemnify the
-----------------------
Indemnitee against all Expenses reasonably and actually incurred by the
Indemnitee in connection with any hearing or proceeding under this Section 7
involving the Indemnitee and against all Expenses reasonably and actually
incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the
rights of the Indemnitee under this Agreement, unless a court of competent
jurisdiction finds that each of the claims and/or defenses of the Indemnitee in
any such Proceeding was frivolous or not made in good faith.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee
------------------------------
with respect to Proceedings initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise;
8.2 Lack of Good Faith. To indemnify the Indemnitee for any
------------------
Expenses incurred by the Indemnitee with respect to any Proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was frivolous;
8.3 SEC Limitation. To indemnify the Indemnitee to the extent
--------------
such indemnification would cause the Company to violate any undertaking the
Company makes to the Securities and Exchange Commission ("SEC") with respect to
indemnification;
8.4 Excluded Acts. To indemnify the Indemnitee as to
-------------
circumstances in which indemnification is prohibited pursuant to California law;
or
8.5 Settlements. To indemnify the Indemnitee for any amount
-----------
paid in settlement of any Proceeding without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
9. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
10. Non-exclusivity and Continuation of Rights. The provisions for
------------------------------------------
indemnification and advancement of Expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which the Indemnitee may have
pursuant to the Articles
-5-
<PAGE>
of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or
disinterested directors, provisions of California law or otherwise. The
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as a director of the Company.
11. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Effectiveness of Agreement. This Agreement shall be effective as
--------------------------
of the date set forth on the first page (the "Effective Date") and shall apply
to acts or omissions of Indemnitee which occurred prior to such date if
Indemnitee was an officer or director of the Company, or was serving at the
request of the Company as a director, officer, agent or employee of another
enterprise, at the time such act or omission occurred.
14. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing, addressed to the parties' addresses
set forth below their signatures to this Agreement, and shall be deemed duly
given (a) if delivered by hand and received by the party notice was sent to on
the day delivered, or (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Any party may change
its address for notices, requests, demands and communications by giving notice
thereof in the manner specified in this Section 15.
16. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
YES CLOTHING CO.
By: /s/ Guy Anthome
-------------------------------------
Guy Anthome
Its President
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
Attn:
INDEMNITEE
/s/ Georges Marciano
-----------------------------------------
Georges Marciano
Address: Georges Marciano Design Studio
9756 Wilshire Boulevard
Beverly Hills, California 90212
-7-
<PAGE>
EXHIBIT 10.22
DIRECTORS AND OFFICERS
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), is effective as of May 3,
1995, and is made by and between YES CLOTHING CO., a California corporation (the
"Company"), and IRVING KROLL (the "Indemnitee").
WHEREAS, the Indemnitee is a director or officer of the Company serving at
the Company's request;
WHEREAS, in recognition of the Indemnitee's services on behalf of the
Company, the Company wishes to provide for the continuing indemnification of the
Indemnitee, and to provide for the continued coverage of the Indemnitee under
the Company's directors and officers' liability insurance policies for the
period and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Indemnitee's service to the
Company, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Expenses. For purposes of this Agreement, "Expenses" mean
--------
reasonable attorneys' fees and disbursements, accounting and witness fees,
travel and deposition costs, expenses of investigations, expenses of Proceedings
and related appeals, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including reasonable
compensation for time spent by Indemnitee in connection with the investigation,
defense or appeal of a Proceeding (as defined in Section 1.2 below) or action
for indemnification for which he is not otherwise compensated by the Company or
any third party. The term "Expenses" does not include the amount of judgments,
fines or penalties actually levied against Indemnitee.
1.2 Proceeding. For purposes of this Agreement, "Proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether brought in the name of the Company or otherwise and whether civil,
criminal, administrative, investigative or any other type whatsoever.
2. Additional Indemnification. The Company and the Indemnitee agree
--------------------------
that this Agreement does not replace or supersede prior Indemnification
Agreements by and between the Company and the Indemnitee to the extent that such
prior Agreement provides additional or broader indemnification coverage.
3. Indemnification. Subject to the limitations set forth in
---------------
Sections 7 and 8, the Indemnitee shall be entitled to the following
indemnification by the Company:
<PAGE>
3.1 Third Party Actions. If the Indemnitee was or is a party or
-------------------
is threatened to be made a party to any Proceeding (other than an action by or
in the right of the Company to procure a judgment in its favor) by reason of the
fact that the Indemnitee was or is a director of the Company, or by reason of
the fact that Indemnitee was or is serving at the request of the Company as a
director, officer, agent or employee of another enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity, the Company
shall indemnify the Indemnitee against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement, in each case to the extent actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement or appeal of such Proceeding, to the fullest permitted by
the Company's Articles of Incorporation, California law, public policy or other
applicable law, including binding regulations and orders of, and undertakings or
other commitments with, any governmental entity or agency, as the same exists or
may hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
3.2 Derivative Actions. If the Indemnitee was or is a party or
------------------
is threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in the Company's favor by reason of the fact that
the Indemnitee is or was a director of the Company or by reason of the fact that
Indemnitee was or is serving at the request of the Company as a director,
officer, agent or employee of another enterprise, or by reason of anything done
or not done in any such capacity, the Company shall indemnify the Indemnitee
against all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of such Proceeding, to the fullest
extent permitted by the Company's Articles of Incorporation, California law,
public policy, or other applicable law, including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency, as the same exists or may hereinafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company to
provide prior to such amendment).
3.3 Expenses Paid by Insurance. Notwithstanding the foregoing,
--------------------------
the Company shall not be obligated to indemnify the Indemnitee for Expenses,
judgments, fines, penalties or amounts paid in settlement which have been paid
directly to Indemnitee by directors' and officers' insurance, if any.
3.4 Duty to Obtain Insurance Coverage. The Company currently
---------------------------------
has and will keep in force a policy of insurance for directors and officers with
a minimum aggregate limit of liability of $10,000,000. The Company shall pay all
premiums, commissions and other costs or charges incurred in obtaining the
endorsement and shall promptly deliver to Indemnitee a certificate of
confirmation of insurance with respect to such policy.
4. Partial Indemnification. If the Indemnitee is entitled to
-----------------------
indemnification on some claims, issues or matters, but not on others, involved
in a Proceeding, the Company
-2-
<PAGE>
shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and
amounts paid in settlement incurred by the Indemnitee concerning those matters
for which the Indemnitee is entitled to be indemnified pursuant to the
provisions of this Agreement.
5. Advancement of Expenses. The Expenses incurred by Indemnitee in
-----------------------
investigating, defending, or appealing any Proceeding covered hereunder shall be
paid by the Company in advance (unless, in the opinion of regular outside
counsel to the Company, the provisions of applicable law precludes such advance
payment), with the understanding, agreement and undertaking by Indemnitee that
in the event it shall ultimately be determined that Indemnitee was not entitled
to be indemnified, or was not entitled to be fully indemnified, that Indemnitee
shall repay to the Company such amount, or the appropriate portion thereof, so
paid or advanced.
6. Notice and Other Indemnification Procedures.
-------------------------------------------
6.1 Notice to Company. Promptly after becoming aware of or
-----------------
receiving notice of the commencement of or the threat of commencement of any
Proceeding, the indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company in writing of the commencement or threat of
commencement thereof. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power. The omission to so notify the Company will not relieve it
from any liability which it may have to Indemnitee other than under this
Agreement.
6.2 Notice to Insurer. At the time of the receipt of a notice
-----------------
of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company
shall give prompt notice of the commencement of such Proceeding to the insurer
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all reasonably necessary and desirable action to
cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies, unless
the Company has already paid such amounts directly to the Indemnitee.
6.3 Choice of Counsel. If the Company shall be obligated to pay
-----------------
the Expenses of any Proceeding, the Company shall be entitled to assume the
defense of such Proceeding, with counsel approved by the Indemnitee (which
approval the Indemnitee shall not unreasonably withhold), upon the delivery to
the Indemnitee of written notice of the Company's election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of any counsel other than the
counsel approved by the Indemnitee and retained by the Company which may be
subsequently incurred by the Indemnitee with respect to the same Proceeding;
provided that (a) the Indemnitee shall have the right to employ his own counsel
in any such Proceeding at the Indemnitee's expense; and (b) if (1) the
employment of counsel by the Indemnitee has been previously authorized by the
Company in writing, (2) the Indemnitee shall have reasonably concluded that
there is an actual conflict of interest between the Company and the
-3-
<PAGE>
Indemnitee in the conduct of any such defense or (3) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
Expenses of Indemnitee's counsel reasonably and actually incurred by the
Indemnitee shall be payable by the Company.
7. Determination of Right to Indemnification.
-----------------------------------------
7.1 Presumption of Right to Indemnification. To the extent the
---------------------------------------
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense
of any claim, issue or matter involved in any such Proceeding, the Indemnitee
shall be presumed to have met the applicable standard of conduct, if any, for
indemnification under this Agreement.
7.2 Burden of Proof. If Section 7.1 is inapplicable, the
---------------
Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of
this Agreement unless (a) the board of directors of the Company shall determine
that California law or other applicable law prohibits the indemnification of
Indemnitee under the terms of this Agreement, or (b) the Company shall receive a
written opinion from independent legal counsel selected by the Indemnitee and
the Company to that effect. The Company shall have the burden of proving to such
counsel that indemnification is not available to the Indemnitee as set forth in
the preceding sentence. Any failure between the Indemnitee and the Company to
agree in the selection of the independent legal counsel shall be resolved
pursuant to Sections 7.3 through 7.6 below.
7.3 Selection of Counsel. If the Indemnitee and the Company are
--------------------
unable to agree on the selection of the independent counsel, such independent
counsel shall be selected by lot from among the ten (10) law firms having the
most lawyers practicing in Los Angeles, California (excluding any firms that
have acted as counsel for the Company). Regular counsel to the Company shall
contact such counsel in order of their selection by lot, requesting each such
firm to accept engagement to make the determination required hereunder until one
of such firms accepts such engagement. The fees for such counsel shall be paid
by the Company.
7.4 Response of Company. As soon as practicable, and in no
-------------------
event later than 20 days after the selection of independent legal counsel
pursuant to Section 7.3 above, the Company shall, at its own expense, submit to
the independent legal counsel, in such manner as the independent legal counsel
may reasonably request, its claim, if any, that the Indemnitee is not entitled
to indemnification.
7.5 Appeal. Notwithstanding a determination by an independent
------
legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not
entitled to indemnification with respect to a specific Proceeding, the
Indemnitee shall have the right to apply to the court in which that Proceeding
is or was pending, or such other court of competent jurisdiction, for the
purpose of enforcing the Indemnitee's right to indemnification pursuant to this
Agreement. The Company agrees that a determination by the independent legal
counsel that the Indemnitee has not met the standard of conduct required for
-4-
<PAGE>
indemnification shall not create a presumption, in any subsequent court
proceeding, that the Indemnitee has failed to meet the applicable standard of
conduct.
7.6 Actions Under Agreement. The Company shall indemnify the
-----------------------
Indemnitee against all Expenses reasonably and actually incurred by the
Indemnitee in connection with any hearing or proceeding under this Section 7
involving the Indemnitee and against all Expenses reasonably and actually
incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the
rights of the Indemnitee under this Agreement, unless a court of competent
jurisdiction finds that each of the claims and/or defenses of the Indemnitee in
any such Proceeding was frivolous or not made in good faith.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee
------------------------------
with respect to Proceedings initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise;
8.2 Lack of Good Faith. To indemnify the Indemnitee for any
------------------
Expenses incurred by the Indemnitee with respect to any Proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was frivolous;
8.3 SEC Limitation. To indemnify the Indemnitee to the extent
--------------
such indemnification would cause the Company to violate any undertaking the
Company makes to the Securities and Exchange Commission ("SEC") with respect to
indemnification;
8.4 Excluded Acts. To indemnify the Indemnitee as to
-------------
circumstances in which indemnification is prohibited pursuant to California law;
or
8.5 Settlements. To indemnify the Indemnitee for any amount
-----------
paid in settlement of any Proceeding without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
9. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
10. Non-exclusivity and Continuation of Rights. The provisions for
------------------------------------------
indemnification and advancement of Expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which the Indemnitee may have
pursuant to the Articles
-5-
<PAGE>
of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or
disinterested directors, provisions of California law or otherwise. The
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as a director of the Company.
11. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Effectiveness of Agreement. This Agreement shall be effective as
--------------------------
of the date set forth on the first page (the "Effective Date") and shall apply
to acts or omissions of Indemnitee which occurred prior to such date if
Indemnitee was an officer or director of the Company, or was serving at the
request of the Company as a director, officer, agent or employee of another
enterprise, at the time such act or omission occurred.
14. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing, addressed to the parties' addresses
set forth below their signatures to this Agreement, and shall be deemed duly
given (a) if delivered by hand and received by the party notice was sent to on
the day delivered, or (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Any party may change
its address for notices, requests, demands and communications by giving notice
thereof in the manner specified in this Section 15.
16. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
YES CLOTHING CO.
By /s/ Daniel V. Goodstein
--------------------------------------
Daniel V. Goodstein
Its Chief Financial Officer
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
Attn:
INDEMNITEE
/s/ Irving Kroll
-----------------------------------------
Irving Kroll
Address: 19750 Wells Drive
Woodland Hills, California 91364
-7-
<PAGE>
EXHIBIT 10.23
DIRECTORS AND OFFICERS
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), is effective as of May 3,
1995, and is made by and between YES CLOTHING CO., a California corporation (the
"Company"), and MAURICE SCHOENHOLZ (the "Indemnitee").
WHEREAS, the Indemnitee is a director or officer of the Company serving at
the Company's request;
WHEREAS, in recognition of the Indemnitee's services on behalf of the
Company, the Company wishes to provide for the continuing indemnification of the
Indemnitee, and to provide for the continued coverage of the Indemnitee under
the Company's directors and officers' liability insurance policies for the
period and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Indemnitee's service to the
Company, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Expenses. For purposes of this Agreement, "Expenses" mean
--------
reasonable attorneys' fees and disbursements, accounting and witness fees,
travel and deposition costs, expenses of investigations, expenses of Proceedings
and related appeals, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including reasonable
compensation for time spent by Indemnitee in connection with the investigation,
defense or appeal of a Proceeding (as defined in Section 1.2 below) or action
for indemnification for which he is not otherwise compensated by the Company or
any third party. The term "Expenses" does not include the amount of judgments,
fines or penalties actually levied against Indemnitee.
1.2 Proceeding. For purposes of this Agreement, "Proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether brought in the name of the Company or otherwise and whether civil,
criminal, administrative, investigative or any other type whatsoever.
2. Additional Indemnification. The Company and the Indemnitee agree
--------------------------
that this Agreement does not replace or supersede prior Indemnification
Agreements by and between the Company and the Indemnitee to the extent that such
prior Agreement provides additional or broader indemnification coverage.
3. Indemnification. Subject to the limitations set forth in
---------------
Sections 7 and 8, the Indemnitee shall be entitled to the following
indemnification by the Company:
<PAGE>
3.1 Third Party Actions. If the Indemnitee was or is a party or
-------------------
is threatened to be made a party to any Proceeding (other than an action by or
in the right of the Company to procure a judgment in its favor) by reason of the
fact that the Indemnitee was or is a director of the Company, or by reason of
the fact that Indemnitee was or is serving at the request of the Company as a
director, officer, agent or employee of another enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity, the Company
shall indemnify the Indemnitee against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement, in each case to the extent actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement or appeal of such Proceeding, to the fullest permitted by
the Company's Articles of Incorporation, California law, public policy or other
applicable law, including binding regulations and orders of, and undertakings or
other commitments with, any governmental entity or agency, as the same exists or
may hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
3.2 Derivative Actions. If the Indemnitee was or is a party or
------------------
is threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in the Company's favor by reason of the fact that
the Indemnitee is or was a director of the Company or by reason of the fact that
Indemnitee was or is serving at the request of the Company as a director,
officer, agent or employee of another enterprise, or by reason of anything done
or not done in any such capacity, the Company shall indemnify the Indemnitee
against all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of such Proceeding, to the fullest
extent permitted by the Company's Articles of Incorporation, California law,
public policy, or other applicable law, including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency, as the same exists or may hereinafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company to
provide prior to such amendment).
3.3 Expenses Paid by Insurance. Notwithstanding the foregoing,
--------------------------
the Company shall not be obligated to indemnify the Indemnitee for Expenses,
judgments, fines, penalties or amounts paid in settlement which have been paid
directly to Indemnitee by directors' and officers' insurance, if any.
3.4 Duty to Obtain Insurance Coverage. The Company currently
---------------------------------
has and will keep in force a policy of insurance for directors and officers with
a minimum aggregate limit of liability of $10,000,000. The Company shall pay all
premiums, commissions and other costs or charges incurred in obtaining the
endorsement and shall promptly deliver to Indemnitee a certificate of
confirmation of insurance with respect to such policy.
4. Partial Indemnification. If the Indemnitee is entitled to
-----------------------
indemnification on some claims, issues or matters, but not on others, involved
in a Proceeding, the Company
-2-
<PAGE>
shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and
amounts paid in settlement incurred by the Indemnitee concerning those matters
for which the Indemnitee is entitled to be indemnified pursuant to the
provisions of this Agreement.
5. Advancement of Expenses. The Expenses incurred by Indemnitee in
-----------------------
investigating, defending, or appealing any Proceeding covered hereunder shall be
paid by the Company in advance (unless, in the opinion of regular outside
counsel to the Company, the provisions of applicable law precludes such advance
payment), with the understanding, agreement and undertaking by Indemnitee that
in the event it shall ultimately be determined that Indemnitee was not entitled
to be indemnified, or was not entitled to be fully indemnified, that Indemnitee
shall repay to the Company such amount, or the appropriate portion thereof, so
paid or advanced.
6. Notice and Other Indemnification Procedures.
-------------------------------------------
6.1 Notice to Company. Promptly after becoming aware of or
-----------------
receiving notice of the commencement of or the threat of commencement of any
Proceeding, the indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company in writing of the commencement or threat of
commencement thereof. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power. The omission to so notify the Company will not relieve it
from any liability which it may have to Indemnitee other than under this
Agreement.
6.2 Notice to Insurer. At the time of the receipt of a notice
-----------------
of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company
shall give prompt notice of the commencement of such Proceeding to the insurer
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all reasonably necessary and desirable action to
cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies, unless
the Company has already paid such amounts directly to the Indemnitee.
6.3 Choice of Counsel. If the Company shall be obligated to pay
-----------------
the Expenses of any Proceeding, the Company shall be entitled to assume the
defense of such Proceeding, with counsel approved by the Indemnitee (which
approval the Indemnitee shall not unreasonably withhold), upon the delivery to
the Indemnitee of written notice of the Company's election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of any counsel other than the
counsel approved by the Indemnitee and retained by the Company which may be
subsequently incurred by the Indemnitee with respect to the same Proceeding;
provided that (a) the Indemnitee shall have the right to employ his own counsel
in any such Proceeding at the Indemnitee's expense; and (b) if (1) the
employment of counsel by the Indemnitee has been previously authorized by the
Company in writing, (2) the Indemnitee shall have reasonably concluded that
there is an actual conflict of interest between the Company and the
-3-
<PAGE>
Indemnitee in the conduct of any such defense or (3) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
Expenses of Indemnitee's counsel reasonably and actually incurred by the
Indemnitee shall be payable by the Company.
7. Determination of Right to Indemnification.
-----------------------------------------
7.1 Presumption of Right to Indemnification. To the extent the
---------------------------------------
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense
of any claim, issue or matter involved in any such Proceeding, the Indemnitee
shall be presumed to have met the applicable standard of conduct, if any, for
indemnification under this Agreement.
7.2 Burden of Proof. If Section 7.1 is inapplicable, the
---------------
Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of
this Agreement unless (a) the board of directors of the Company shall determine
that California law or other applicable law prohibits the indemnification of
Indemnitee under the terms of this Agreement, or (b) the Company shall receive a
written opinion from independent legal counsel selected by the Indemnitee and
the Company to that effect. The Company shall have the burden of proving to such
counsel that indemnification is not available to the Indemnitee as set forth in
the preceding sentence. Any failure between the Indemnitee and the Company to
agree in the selection of the independent legal counsel shall be resolved
pursuant to Sections 7.3 through 7.6 below.
7.3 Selection of Counsel. If the Indemnitee and the Company are
--------------------
unable to agree on the selection of the independent counsel, such independent
counsel shall be selected by lot from among the ten (10) law firms having the
most lawyers practicing in Los Angeles, California (excluding any firms that
have acted as counsel for the Company). Regular counsel to the Company shall
contact such counsel in order of their selection by lot, requesting each such
firm to accept engagement to make the determination required hereunder until one
of such firms accepts such engagement. The fees for such counsel shall be paid
by the Company.
7.4 Response of Company. As soon as practicable, and in no
-------------------
event later than 20 days after the selection of independent legal counsel
pursuant to Section 7.3 above, the Company shall, at its own expense, submit to
the independent legal counsel, in such manner as the independent legal counsel
may reasonably request, its claim, if any, that the Indemnitee is not entitled
to indemnification.
7.5 Appeal. Notwithstanding a determination by an independent
------
legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not
entitled to indemnification with respect to a specific Proceeding, the
Indemnitee shall have the right to apply to the court in which that Proceeding
is or was pending, or such other court of competent jurisdiction, for the
purpose of enforcing the Indemnitee's right to indemnification pursuant to this
Agreement. The Company agrees that a determination by the independent legal
counsel that the Indemnitee has not met the standard of conduct required for
-4-
<PAGE>
indemnification shall not create a presumption, in any subsequent court
proceeding, that the Indemnitee has failed to meet the applicable standard of
conduct.
7.6 Actions Under Agreement. The Company shall indemnify the
-----------------------
Indemnitee against all Expenses reasonably and actually incurred by the
Indemnitee in connection with any hearing or proceeding under this Section 7
involving the Indemnitee and against all Expenses reasonably and actually
incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the
rights of the Indemnitee under this Agreement, unless a court of competent
jurisdiction finds that each of the claims and/or defenses of the Indemnitee in
any such Proceeding was frivolous or not made in good faith.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee
------------------------------
with respect to Proceedings initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise;
8.2 Lack of Good Faith. To indemnify the Indemnitee for any
------------------
Expenses incurred by the Indemnitee with respect to any Proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was frivolous;
8.3 SEC Limitation. To indemnify the Indemnitee to the extent
--------------
such indemnification would cause the Company to violate any undertaking the
Company makes to the Securities and Exchange Commission ("SEC") with respect to
indemnification;
8.4 Excluded Acts. To indemnify the Indemnitee as to
-------------
circumstances in which indemnification is prohibited pursuant to California law;
or
8.5 Settlements. To indemnify the Indemnitee for any amount
-----------
paid in settlement of any Proceeding without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
9. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
10. Non-exclusivity and Continuation of Rights. The provisions for
------------------------------------------
indemnification and advancement of Expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which the Indemnitee may have
pursuant to the Articles
-5-
<PAGE>
of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or
disinterested directors, provisions of California law or otherwise. The
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as a director of the Company.
11. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Effectiveness of Agreement. This Agreement shall be effective as
--------------------------
of the date set forth on the first page (the "Effective Date") and shall apply
to acts or omissions of Indemnitee which occurred prior to such date if
Indemnitee was an officer or director of the Company, or was serving at the
request of the Company as a director, officer, agent or employee of another
enterprise, at the time such act or omission occurred.
14. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing, addressed to the parties' addresses
set forth below their signatures to this Agreement, and shall be deemed duly
given (a) if delivered by hand and received by the party notice was sent to on
the day delivered, or (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Any party may change
its address for notices, requests, demands and communications by giving notice
thereof in the manner specified in this Section 15.
16. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
YES CLOTHING CO.
By /s/ Daniel V. Goodstein
-------------------------------------
Daniel V. Goodstein
Its Chief Financial Officer
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
Attn:
INDEMNITEE
/s/ Maurice Schoenholz
----------------------------------------
Maurice Schoenholz
Address: c/o Republic Factors Corp.
1000 Wilshire Boulevard
Suite 400
Los Angeles, California 90017
-7-
<PAGE>
EXHIBIT 10.24
DIRECTORS AND OFFICERS
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), is effective as of May 18,
1995, and is made by and between YES CLOTHING CO., a California corporation (the
"Company"), and GUY ANTHOME (the "Indemnitee").
WHEREAS, the Indemnitee is a director or officer of the Company serving at
the Company's request;
WHEREAS, in recognition of the Indemnitee's services on behalf of the
Company, the Company wishes to provide for the continuing indemnification of the
Indemnitee, and to provide for the continued coverage of the Indemnitee under
the Company's directors and officers' liability insurance policies for the
period and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Indemnitee's service to the
Company, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Expenses. For purposes of this Agreement, "Expenses" mean
--------
reasonable attorneys' fees and disbursements, accounting and witness fees,
travel and deposition costs, expenses of investigations, expenses of Proceedings
and related appeals, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including reasonable
compensation for time spent by Indemnitee in connection with the investigation,
defense or appeal of a Proceeding (as defined in Section 1.2 below) or action
for indemnification for which he is not otherwise compensated by the Company or
any third party. The term "Expenses" does not include the amount of judgments,
fines or penalties actually levied against Indemnitee.
1.2 Proceeding. For purposes of this Agreement, "Proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether brought in the name of the Company or otherwise and whether civil,
criminal, administrative, investigative or any other type whatsoever.
2. Additional Indemnification. The Company and the Indemnitee agree
--------------------------
that this Agreement does not replace or supersede prior Indemnification
Agreements by and between the Company and the Indemnitee to the extent that such
prior Agreement provides additional or broader indemnification coverage.
3. Indemnification. Subject to the limitations set forth in
---------------
Sections 7 and 8, the Indemnitee shall be entitled to the following
indemnification by the Company:
<PAGE>
3.1 Third Party Actions. If the Indemnitee was or is a party or
-------------------
is threatened to be made a party to any Proceeding (other than an action by or
in the right of the Company to procure a judgment in its favor) by reason of the
fact that the Indemnitee was or is a director of the Company, or by reason of
the fact that Indemnitee was or is serving at the request of the Company as a
director, officer, agent or employee of another enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity, the Company
shall indemnify the Indemnitee against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement, in each case to the extent actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement or appeal of such Proceeding, to the fullest permitted by
the Company's Articles of Incorporation, California law, public policy or other
applicable law, including binding regulations and orders of, and undertakings or
other commitments with, any governmental entity or agency, as the same exists or
may hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
3.2 Derivative Actions. If the Indemnitee was or is a party or
------------------
is threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in the Company's favor by reason of the fact that
the Indemnitee is or was a director of the Company or by reason of the fact that
Indemnitee was or is serving at the request of the Company as a director,
officer, agent or employee of another enterprise, or by reason of anything done
or not done in any such capacity, the Company shall indemnify the Indemnitee
against all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of such Proceeding, to the fullest
extent permitted by the Company's Articles of Incorporation, California law,
public policy, or other applicable law, including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency, as the same exists or may hereinafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company to
provide prior to such amendment).
3.3 Expenses Paid by Insurance. Notwithstanding the foregoing,
--------------------------
the Company shall not be obligated to indemnify the Indemnitee for Expenses,
judgments, fines, penalties or amounts paid in settlement which have been paid
directly to Indemnitee by directors' and officers' insurance, if any.
3.4 Duty to Obtain Insurance Coverage. The Company currently
---------------------------------
has and will keep in force a policy of insurance for directors and officers with
a minimum aggregate limit of liability of $10,000,000. The Company shall pay all
premiums, commissions and other costs or charges incurred in obtaining the
endorsement and shall promptly deliver to Indemnitee a certificate of
confirmation of insurance with respect to such policy.
4. Partial Indemnification. If the Indemnitee is entitled to
-----------------------
indemnification on some claims, issues or matters, but not on others, involved
in a Proceeding, the Company
-2-
<PAGE>
shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and
amounts paid in settlement incurred by the Indemnitee concerning those matters
for which the Indemnitee is entitled to be indemnified pursuant to the
provisions of this Agreement.
5. Advancement of Expenses. The Expenses incurred by Indemnitee in
-----------------------
investigating, defending, or appealing any Proceeding covered hereunder shall be
paid by the Company in advance (unless, in the opinion of regular outside
counsel to the Company, the provisions of applicable law precludes such advance
payment), with the understanding, agreement and undertaking by Indemnitee that
in the event it shall ultimately be determined that Indemnitee was not entitled
to be indemnified, or was not entitled to be fully indemnified, that Indemnitee
shall repay to the Company such amount, or the appropriate portion thereof, so
paid or advanced.
6. Notice and Other Indemnification Procedures.
-------------------------------------------
6.1 Notice to Company. Promptly after becoming aware of or
-----------------
receiving notice of the commencement of or the threat of commencement of any
Proceeding, the indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company in writing of the commencement or threat of
commencement thereof. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power. The omission to so notify the Company will not relieve it
from any liability which it may have to Indemnitee other than under this
Agreement.
6.2 Notice to Insurer. At the time of the receipt of a notice
-----------------
of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company
shall give prompt notice of the commencement of such Proceeding to the insurer
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all reasonably necessary and desirable action to
cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies, unless
the Company has already paid such amounts directly to the Indemnitee.
6.3 Choice of Counsel. If the Company shall be obligated to pay
-----------------
the Expenses of any Proceeding, the Company shall be entitled to assume the
defense of such Proceeding, with counsel approved by the Indemnitee (which
approval the Indemnitee shall not unreasonably withhold), upon the delivery to
the Indemnitee of written notice of the Company's election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of any counsel other than the
counsel approved by the Indemnitee and retained by the Company which may be
subsequently incurred by the Indemnitee with respect to the same Proceeding;
provided that (a) the Indemnitee shall have the right to employ his own counsel
in any such Proceeding at the Indemnitee's expense; and (b) if (1) the
employment of counsel by the Indemnitee has been previously authorized by the
Company in writing, (2) the Indemnitee shall have reasonably concluded that
there is an actual conflict of interest between the Company and the
-3-
<PAGE>
Indemnitee in the conduct of any such defense or (3) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
Expenses of Indemnitee's counsel reasonably and actually incurred by the
Indemnitee shall be payable by the Company.
7. Determination of Right to Indemnification.
-----------------------------------------
7.1 Presumption of Right to Indemnification. To the extent the
---------------------------------------
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense
of any claim, issue or matter involved in any such Proceeding, the Indemnitee
shall be presumed to have met the applicable standard of conduct, if any, for
indemnification under this Agreement.
7.2 Burden of Proof. If Section 7.1 is inapplicable, the
---------------
Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of
this Agreement unless (a) the board of directors of the Company shall determine
that California law or other applicable law prohibits the indemnification of
Indemnitee under the terms of this Agreement, or (b) the Company shall receive a
written opinion from independent legal counsel selected by the Indemnitee and
the Company to that effect. The Company shall have the burden of proving to such
counsel that indemnification is not available to the Indemnitee as set forth in
the preceding sentence. Any failure between the Indemnitee and the Company to
agree in the selection of the independent legal counsel shall be resolved
pursuant to Sections 7.3 through 7.6 below.
7.3 Selection of Counsel. If the Indemnitee and the Company are
--------------------
unable to agree on the selection of the independent counsel, such independent
counsel shall be selected by lot from among the ten (10) law firms having the
most lawyers practicing in Los Angeles, California (excluding any firms that
have acted as counsel for the Company). Regular counsel to the Company shall
contact such counsel in order of their selection by lot, requesting each such
firm to accept engagement to make the determination required hereunder until one
of such firms accepts such engagement. The fees for such counsel shall be paid
by the Company.
7.4 Response of Company. As soon as practicable, and in no
-------------------
event later than 20 days after the selection of independent legal counsel
pursuant to Section 7.3 above, the Company shall, at its own expense, submit to
the independent legal counsel, in such manner as the independent legal counsel
may reasonably request, its claim, if any, that the Indemnitee is not entitled
to indemnification.
7.5 Appeal. Notwithstanding a determination by an independent
------
legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not
entitled to indemnification with respect to a specific Proceeding, the
Indemnitee shall have the right to apply to the court in which that Proceeding
is or was pending, or such other court of competent jurisdiction, for the
purpose of enforcing the Indemnitee's right to indemnification pursuant to this
Agreement. The Company agrees that a determination by the independent legal
counsel that the Indemnitee has not met the standard of conduct required for
-4-
<PAGE>
indemnification shall not create a presumption, in any subsequent court
proceeding, that the Indemnitee has failed to meet the applicable standard of
conduct.
7.6 Actions Under Agreement. The Company shall indemnify the
-----------------------
Indemnitee against all Expenses reasonably and actually incurred by the
Indemnitee in connection with any hearing or proceeding under this Section 7
involving the Indemnitee and against all Expenses reasonably and actually
incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the
rights of the Indemnitee under this Agreement, unless a court of competent
jurisdiction finds that each of the claims and/or defenses of the Indemnitee in
any such Proceeding was frivolous or not made in good faith.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee
------------------------------
with respect to Proceedings initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise;
8.2 Lack of Good Faith. To indemnify the Indemnitee for any
------------------
Expenses incurred by the Indemnitee with respect to any Proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was frivolous;
8.3 SEC Limitation. To indemnify the Indemnitee to the extent
--------------
such indemnification would cause the Company to violate any undertaking the
Company makes to the Securities and Exchange Commission ("SEC") with respect to
indemnification;
8.4 Excluded Acts. To indemnify the Indemnitee as to
-------------
circumstances in which indemnification is prohibited pursuant to California law;
or
8.5 Settlements. To indemnify the Indemnitee for any amount
-----------
paid in settlement of any Proceeding without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
9. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
10. Non-exclusivity and Continuation of Rights. The provisions for
------------------------------------------
indemnification and advancement of Expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which the Indemnitee may have
pursuant to the Articles
-5-
<PAGE>
of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or
disinterested directors, provisions of California law or otherwise. The
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as a director of the Company.
11. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Effectiveness of Agreement. This Agreement shall be effective as
--------------------------
of the date set forth on the first page (the "Effective Date") and shall apply
to acts or omissions of Indemnitee which occurred prior to such date if
Indemnitee was an officer or director of the Company, or was serving at the
request of the Company as a director, officer, agent or employee of another
enterprise, at the time such act or omission occurred.
14. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing, addressed to the parties' addresses
set forth below their signatures to this Agreement, and shall be deemed duly
given (a) if delivered by hand and received by the party notice was sent to on
the day delivered, or (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Any party may change
its address for notices, requests, demands and communications by giving notice
thereof in the manner specified in this Section 15.
16. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
YES CLOTHING CO.
By /s/ Irving Kroll
--------------------------------------
Irving Kroll
Chairman of the Board of Directors
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
Attn:
INDEMNITEE
/s/ Guy Anthome
-----------------------------------------
Guy Anthome
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
-7-
<PAGE>
EXHIBIT 10.25
DIRECTORS AND OFFICERS
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), is effective as of May 18,
1995, and is made by and between YES CLOTHING CO., a California corporation (the
"Company"), and JEFFREY BUSSE (the "Indemnitee").
WHEREAS, the Indemnitee is a director or officer of the Company serving at
the Company's request;
WHEREAS, in recognition of the Indemnitee's services on behalf of the
Company, the Company wishes to provide for the continuing indemnification of the
Indemnitee, and to provide for the continued coverage of the Indemnitee under
the Company's directors and officers' liability insurance policies for the
period and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Indemnitee's service to the
Company, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
-----------
1.1 Expenses. For purposes of this Agreement, "Expenses" mean
--------
reasonable attorneys' fees and disbursements, accounting and witness fees,
travel and deposition costs, expenses of investigations, expenses of Proceedings
and related appeals, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including reasonable
compensation for time spent by Indemnitee in connection with the investigation,
defense or appeal of a Proceeding (as defined in Section 1.2 below) or action
for indemnification for which he is not otherwise compensated by the Company or
any third party. The term "Expenses" does not include the amount of judgments,
fines or penalties actually levied against Indemnitee.
1.2 Proceeding. For purposes of this Agreement, "Proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether brought in the name of the Company or otherwise and whether civil,
criminal, administrative, investigative or any other type whatsoever.
2. Additional Indemnification. The Company and the Indemnitee agree
--------------------------
that this Agreement does not replace or supersede prior Indemnification
Agreements by and between the Company and the Indemnitee to the extent that such
prior Agreement provides additional or broader indemnification coverage.
3. Indemnification. Subject to the limitations set forth in
---------------
Sections 7 and 8, the Indemnitee shall be entitled to the following
indemnification by the Company:
<PAGE>
3.1 Third Party Actions. If the Indemnitee was or is a party or
-------------------
is threatened to be made a party to any Proceeding (other than an action by or
in the right of the Company to procure a judgment in its favor) by reason of the
fact that the Indemnitee was or is a director of the Company, or by reason of
the fact that Indemnitee was or is serving at the request of the Company as a
director, officer, agent or employee of another enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity, the Company
shall indemnify the Indemnitee against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement, in each case to the extent actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement or appeal of such Proceeding, to the fullest permitted by
the Company's Articles of Incorporation, California law, public policy or other
applicable law, including binding regulations and orders of, and undertakings or
other commitments with, any governmental entity or agency, as the same exists or
may hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
3.2 Derivative Actions. If the Indemnitee was or is a party or
------------------
is threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in the Company's favor by reason of the fact that
the Indemnitee is or was a director of the Company or by reason of the fact that
Indemnitee was or is serving at the request of the Company as a director,
officer, agent or employee of another enterprise, or by reason of anything done
or not done in any such capacity, the Company shall indemnify the Indemnitee
against all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of such Proceeding, to the fullest
extent permitted by the Company's Articles of Incorporation, California law,
public policy, or other applicable law, including binding regulations and orders
of, and undertakings or other commitments with, any governmental entity or
agency, as the same exists or may hereinafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company to
provide prior to such amendment).
3.3 Expenses Paid by Insurance. Notwithstanding the foregoing,
--------------------------
the Company shall not be obligated to indemnify the Indemnitee for Expenses,
judgments, fines, penalties or amounts paid in settlement which have been paid
directly to Indemnitee by directors' and officers' insurance, if any.
3.4 Duty to Obtain Insurance Coverage. The Company currently
---------------------------------
has and will keep in force a policy of insurance for directors and officers with
a minimum aggregate limit of liability of $10,000,000. The Company shall pay all
premiums, commissions and other costs or charges incurred in obtaining the
endorsement and shall promptly deliver to Indemnitee a certificate of
confirmation of insurance with respect to such policy.
4. Partial Indemnification. If the Indemnitee is entitled to
-----------------------
indemnification on some claims, issues or matters, but not on others, involved
in a Proceeding, the Company
-2-
<PAGE>
shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and
amounts paid in settlement incurred by the Indemnitee concerning those matters
for which the Indemnitee is entitled to be indemnified pursuant to the
provisions of this Agreement.
5. Advancement of Expenses. The Expenses incurred by Indemnitee in
-----------------------
investigating, defending, or appealing any Proceeding covered hereunder shall be
paid by the Company in advance (unless, in the opinion of regular outside
counsel to the Company, the provisions of applicable law precludes such advance
payment), with the understanding, agreement and undertaking by Indemnitee that
in the event it shall ultimately be determined that Indemnitee was not entitled
to be indemnified, or was not entitled to be fully indemnified, that Indemnitee
shall repay to the Company such amount, or the appropriate portion thereof, so
paid or advanced.
6. Notice and Other Indemnification Procedures.
-------------------------------------------
6.1 Notice to Company. Promptly after becoming aware of or
-----------------
receiving notice of the commencement of or the threat of commencement of any
Proceeding, the indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company in writing of the commencement or threat of
commencement thereof. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power. The omission to so notify the Company will not relieve it
from any liability which it may have to Indemnitee other than under this
Agreement.
6.2 Notice to Insurer. At the time of the receipt of a notice
-----------------
of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company
shall give prompt notice of the commencement of such Proceeding to the insurer
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all reasonably necessary and desirable action to
cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies, unless
the Company has already paid such amounts directly to the Indemnitee.
6.3 Choice of Counsel. If the Company shall be obligated to pay
-----------------
the Expenses of any Proceeding, the Company shall be entitled to assume the
defense of such Proceeding, with counsel approved by the Indemnitee (which
approval the Indemnitee shall not unreasonably withhold), upon the delivery to
the Indemnitee of written notice of the Company's election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of any counsel other than the
counsel approved by the Indemnitee and retained by the Company which may be
subsequently incurred by the Indemnitee with respect to the same Proceeding;
provided that (a) the Indemnitee shall have the right to employ his own counsel
in any such Proceeding at the Indemnitee's expense; and (b) if (1) the
employment of counsel by the Indemnitee has been previously authorized by the
Company in writing, (2) the Indemnitee shall have reasonably concluded that
there is an actual conflict of interest between the Company and the
-3-
<PAGE>
Indemnitee in the conduct of any such defense or (3) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
Expenses of Indemnitee's counsel reasonably and actually incurred by the
Indemnitee shall be payable by the Company.
7. Determination of Right to Indemnification.
-----------------------------------------
7.1 Presumption of Right to Indemnification. To the extent the
---------------------------------------
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense
of any claim, issue or matter involved in any such Proceeding, the Indemnitee
shall be presumed to have met the applicable standard of conduct, if any, for
indemnification under this Agreement.
7.2 Burden of Proof. If Section 7.1 is inapplicable, the
---------------
Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of
this Agreement unless (a) the board of directors of the Company shall determine
that California law or other applicable law prohibits the indemnification of
Indemnitee under the terms of this Agreement, or (b) the Company shall receive a
written opinion from independent legal counsel selected by the Indemnitee and
the Company to that effect. The Company shall have the burden of proving to such
counsel that indemnification is not available to the Indemnitee as set forth in
the preceding sentence. Any failure between the Indemnitee and the Company to
agree in the selection of the independent legal counsel shall be resolved
pursuant to Sections 7.3 through 7.6 below.
7.3 Selection of Counsel. If the Indemnitee and the Company are
--------------------
unable to agree on the selection of the independent counsel, such independent
counsel shall be selected by lot from among the ten (10) law firms having the
most lawyers practicing in Los Angeles, California (excluding any firms that
have acted as counsel for the Company). Regular counsel to the Company shall
contact such counsel in order of their selection by lot, requesting each such
firm to accept engagement to make the determination required hereunder until one
of such firms accepts such engagement. The fees for such counsel shall be paid
by the Company.
7.4 Response of Company. As soon as practicable, and in no
-------------------
event later than 20 days after the selection of independent legal counsel
pursuant to Section 7.3 above, the Company shall, at its own expense, submit to
the independent legal counsel, in such manner as the independent legal counsel
may reasonably request, its claim, if any, that the Indemnitee is not entitled
to indemnification.
7.5 Appeal. Notwithstanding a determination by an independent
------
legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not
entitled to indemnification with respect to a specific Proceeding, the
Indemnitee shall have the right to apply to the court in which that Proceeding
is or was pending, or such other court of competent jurisdiction, for the
purpose of enforcing the Indemnitee's right to indemnification pursuant to this
Agreement. The Company agrees that a determination by the independent legal
counsel that the Indemnitee has not met the standard of conduct required for
-4-
<PAGE>
indemnification shall not create a presumption, in any subsequent court
proceeding, that the Indemnitee has failed to meet the applicable standard of
conduct.
7.6 Actions Under Agreement. The Company shall indemnify the
-----------------------
Indemnitee against all Expenses reasonably and actually incurred by the
Indemnitee in connection with any hearing or proceeding under this Section 7
involving the Indemnitee and against all Expenses reasonably and actually
incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the
rights of the Indemnitee under this Agreement, unless a court of competent
jurisdiction finds that each of the claims and/or defenses of the Indemnitee in
any such Proceeding was frivolous or not made in good faith.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee
------------------------------
with respect to Proceedings initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise;
8.2 Lack of Good Faith. To indemnify the Indemnitee for any
------------------
Expenses incurred by the Indemnitee with respect to any Proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was frivolous;
8.3 SEC Limitation. To indemnify the Indemnitee to the extent
--------------
such indemnification would cause the Company to violate any undertaking the
Company makes to the Securities and Exchange Commission ("SEC") with respect to
indemnification;
8.4 Excluded Acts. To indemnify the Indemnitee as to
-------------
circumstances in which indemnification is prohibited pursuant to California law;
or
8.5 Settlements. To indemnify the Indemnitee for any amount
-----------
paid in settlement of any Proceeding without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
9. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
10. Non-exclusivity and Continuation of Rights. The provisions for
------------------------------------------
indemnification and advancement of Expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which the Indemnitee may have
pursuant to the Articles
-5-
<PAGE>
of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or
disinterested directors, provisions of California law or otherwise. The
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as a director of the Company.
11. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Effectiveness of Agreement. This Agreement shall be effective as
--------------------------
of the date set forth on the first page (the "Effective Date") and shall apply
to acts or omissions of Indemnitee which occurred prior to such date if
Indemnitee was an officer or director of the Company, or was serving at the
request of the Company as a director, officer, agent or employee of another
enterprise, at the time such act or omission occurred.
14. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing, addressed to the parties' addresses
set forth below their signatures to this Agreement, and shall be deemed duly
given (a) if delivered by hand and received by the party notice was sent to on
the day delivered, or (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Any party may change
its address for notices, requests, demands and communications by giving notice
thereof in the manner specified in this Section 15.
16. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
YES CLOTHING CO.
By /s/ Irving Kroll
--------------------------------------
Irving Kroll
Chairman of the Board of Directors
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
Attn:
INDEMNITEE
/s/ Jeffrey Busse
-----------------------------------------
Jeffrey Busse
Address: YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, California 90007-1233
-7-
<PAGE>
EXHIBIT 10.26
YES CLOTHING CO.
1380 WEST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90007-1233
DATE: As of June 17, 1995
Georges Marciano
c/o Georges Marciano Design Studio
9756 Wilshire Boulevard
Beverly Hills, California 90212
Re: Employment Agreement
--------------------
Dear Mr. Marciano:
When executed by you ("Executive") and by a duly authorized representative
of YES Clothing Co., a California corporation ("Company"), this letter will set
forth the terms and conditions of your employment.
1. SERVICES
1.1 EMPLOYMENT. Company employs Executive during the Term (as
hereinafter defined) to serve as Chairman of the Board of Directors and Chief
Executive Officer of Company, and to render such other services ("Services") as
Company may from time to time reasonably request which are consistent with the
duties Executive is to perform and Executive's stature and experience. Executive
has been appointed to the Board of Directors of Company and shall thereafter be
included in management's slate of directors nominated for approval by the
Company's shareholders. The Services shall be generally performed in Los
Angeles, California. In addition, the Services may be performed by Executive
from time to time on a temporary travel basis at such other locations as Company
shall reasonably request consistent with its reasonable business needs.
1.2 REPORTING REQUIREMENTS AND AUTHORITY. Executive shall report to the
Board of Directors of Company or the Executive Committee thereof. Except for
those officers and employees subject to election by the Board of Directors of
Company, Executive shall have the authority to select and employ all staff
necessary to conduct the business of Company and each of its subsidiaries, and
all such staff shall ultimately report to, and be subject to the control and
direction of, Executive.
<PAGE>
Georges Marciano
As of June 17, 1995
Page 2
1.3 TERM/EXCLUSIVITY
1.3.1 The Term of this Agreement shall commence and this Agreement
shall become effective as of June 17, 1995 and shall end on June 16, 1996 unless
extended or sooner terminated in accordance with the provisions of this
Agreement (the "Term").
1.3.2 The Services shall be rendered on a full time basis during
normal working hours and all services of Executive shall be exclusive to
Company; provided, however, that Executive may engage in other business
activities with Company's prior written consent, which consent shall not be
unreasonably withheld, provided that such other business activities shall not
adversely affect the performance of Executive's Services hereunder. Executive
acknowledges that Executive's performances and services hereunder are of a
special, unique, unusual, extraordinary and intellectual character which gives
them peculiar value, the loss of which cannot be reasonably or adequately
compensated in an action at law for damages.
with Company.
1.4 CONFIDENTIALITY. Executive acknowledges that his Services will,
throughout the Term, bring Executive into close contact with many confidential
affairs of Company and its Affiliates, including information about costs,
profits, markets, sales, products, key personnel, pricing policies, operational
methods, technical processes and other business affairs and methods and other
information not readily available to the public, and plans for future
development. Executive further acknowledges that the businesses of Company and
its Affiliates are international in scope, that their products are marketed
throughout the world, that Company and its Affiliates compete in nearly all of
their business activities with other organizations which are or could be located
in nearly any part of the world and that the nature of Executive's Services,
position and expertise are such that he is capable of competing with Company and
its Affiliates from nearly any location in the world. In recognition of the
foregoing, Executive covenants and agrees to keep secret all material
confidential matters of Company and its Affiliates which are not otherwise in
the public domain and will not intentionally disclose them to anyone outside of
Company or its Affiliates, either during or after the Term, except with
Company's written consent and except for such disclosure as is necessary in the
performance of Executive's duties during the Term.
1.5 INDEMNIFICATION. Executive shall be entitled throughout the Term to
the benefit of the indemnification provisions contained on the date hereof in
the Bylaws of Company notwithstanding any future changes therein, to the extent
permitted by applicable law at the time of the assertion of any liability
against Executive, and to the most favorable indemnification provisions or
agreements available to any other senior executive of Company.
<PAGE>
Georges Marciano
As of June 17, 1995
Page 3
2. COMPENSATION
As compensation and consideration for all Services provided by Executive
during the Term pursuant to this Agreement, Company agrees to pay to Executive
the compensation set forth below.
2.1 FIXED ANNUAL COMPENSATION. For the period commencing on the
effective date hereof and ending on June 16, 1996, Executive shall receive Fixed
Annual Compensation in the amount of One Dollar ($1.00). Executive's Fixed
Annual Compensation for subsequent years, if the Term is extended, shall be
negotiated between Executive and the Board.
2.2 STOCK OPTIONS. Upon Executive's execution of the stock option
agreement referred to hereinafter in this Section 2.2, as a special inducement
to Executive, Company will grant to Executive options to acquire 2,000,000
shares of Company's common stock at the closing price of Company's common stock
on June 13, 1995 (the "Options"), with the Options to vest as follows (unless
they vest earlier as provided in Section 3.2.2 or Section 3.3.3 (b)):
(i) 41,667 Options will vest on the first day of each month from
July 1995 through May 1999;
(ii) an additional 41,651 Options will vest on June 1, 1999.
The Options may be exercised until the earlier of: (a) ten (10) years from the
date hereof; or (b) ninety (90) days after termination of employment. The
Options will be subject to such additional terms and conditions as may be set
forth in Stock Option Agreement to be entered into concurrently herewith between
Company and Executive. Executive agrees that the aforementioned grant of
Options is subject to shareholder approval.
2.3 ADDITIONAL BENEFITS. Executive shall be entitled to participate in
any profit-sharing, pension, health, vacation, insurance or other plans,
benefits or policies available to the senior executive employees of Company and
not duplicative of those provided herein on the terms determined by the Company
from time to time, and will be entitled to reimbursement of his reasonable and
customary business expenses (including first-class travel) incurred on behalf of
Company or Company's Affiliates ("Additional Benefits").
3. TERMINATION
Company or Executive shall have the right to terminate the Term at any time
by written notice to the other to that effect. Should the Term be terminated by
either party,
<PAGE>
Georges Marciano
As of June 17, 1995
Page 4
Executive shall have no right to any further Fixed Annual Compensation from and
after termination or to any Additional Benefits accruing for the fiscal year of
termination or thereafter, and all Options not then vested shall terminate.
4. GENERAL
4.1 APPLICABLE LAW CONTROLS. Nothing contained in this Agreement shall
be construed to require the commission of any act contrary to law and wherever
there is any conflict between any provisions of this Agreement and any material
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, then the latter shall prevail; provided, however, that
in any such event the provisions of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring them within
applicable legal requirements, and provided further that if any obligation to
pay the Fixed Annual Compensation or any other amount due Executive hereunder is
so curtailed, then such compensation or amount shall be paid as soon thereafter,
either during or subsequent to the Term, as permissible.
4.2 WAIVER/ESTOPPEL. Any party hereto may waive the benefit of any term,
condition or covenant in this Agreement or any right or remedy at law or in
equity to which any party may be entitled but only by an instrument in writing
signed by the party to be charged. No estoppel may be raised against any party
except to the extent the other party relies on an instrument in writing, signed
by the party to be charged, specifically reciting that the other party may rely
thereon. The parties' rights and remedies under and pursuant to this Agreement
or at law or in equity shall be cumulative and the exercise of any rights or
remedies under one provision hereof or rights or remedies at law or in equity
shall not be deemed an election of remedies; and any waiver or forbearance of
any breach of this Agreement or remedy granted hereunder or at law or in equity
shall not be deemed a waiver of any preceding or succeeding breach of the same
or any other provision hereof or of the opportunity to exercise such right or
remedy or any other right or remedy, whether or not similar, at any preceding or
subsequent time.
4.3 NOTICES. Any notice which Company is required or may desire to give
to Executive hereunder shall be in writing and may be served by delivering it to
Executive, or by sending it to Executive by mail (effective three (3) days after
mailing) or overnight delivery of same (effective the next business day), at the
address set forth on page one hereof, or by telecopy (effective twelve (12)
hours after confirmation), or such substitute address as Executive may from time
to time designate by notice to Company. Any notice which Executive is required
or may desire to serve upon Company hereunder shall be served in writing and may
be served by delivering it personally or by sending it by mail, telex or
telegraph to the address set forth on page one hereof, attention President, or
such other substitute address as Company may from time to time designate by
notice to Executive.
<PAGE>
Georges Marciano
As of June 17, 1995
Page 5
4.4 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced and the legality and validity of each term and condition shall be
determined in accordance with the internal, substantive laws of the State of
California applicable to agreements fully executed and performed entirely in
California.
4.5 CAPTIONS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
4.6 NO JOINT VENTURE. Nothing herein contained shall constitute a
partnership between or joint venture by the parties hereto or appoint any party
the agent of any other party. No party shall hold itself out contrary to the
terms of this Section and, except as otherwise specifically provided herein, no
party shall become liable for the representation, act or omission of any other
party. This Agreement is not for the benefit of any third party who is not
referred to herein and shall not be deemed to give any right or remedy to any
such third party.
4.7 MODIFICATION/ENTIRE AGREEMENT. This Agreement may not be altered,
modified or amended except by an instrument in writing signed by all of the
parties hereto. No person, whether or not an officer, agent, employee or
representative of any party, has made or has any authority to make for or on
behalf of that party any agreement, representation, warranty, statement,
promise, arrangement or understanding not expressly set forth in this Agreement
or in any other document executed by the parties concurrently herewith ("Parol
Agreements"). This Agreement and all other documents executed by the parties
concurrently herewith constitute the entire agreement between the parties and
supersede all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof. The parties
acknowledge that in entering into this Agreement, they have not relied and will
not in any way rely upon any Parol Agreements.
<PAGE>
Georges Marciano
As of June 17, 1995
Page 6
Please confirm your agreement to the foregoing by signing below where
indicated.
Dated as of June 17, 1995. Very truly yours,
YES Clothing Co., a Delaware corporation
By: /s/ Guy Anthome
------------------------------------
Guy Anthome, President
AGREED AND ACCEPTED
as of this 17th day of June, 1995
/s/ Georges Marciano
- ------------------------------------------
GEORGES MARCIANO
<PAGE>
EXHIBIT 10.27
EXECUTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated as of June 17, 1995, is
entered into between YES Clothing Co., a California corporation ("Company"), and
Georges Marciano ("Optionee"). Reference is made to that certain Employment
Agreement of even date herewith between the Company and Optionee (the
"Employment Agreement").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of Two Million (2,000,000) shares of Company's common
stock ("Common Stock") at a price of $1.25 per share. The Option granted
hereunder is not intended to qualify as an "Incentive Stock Option" within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY. The term of the Option granted hereunder
shall commence as of the date hereof and shall terminate on the tenth
anniversary hereof, unless sooner terminated in accordance with the provisions
set forth herein. Subject to Section 7, the Option shall vest and be exercisable
as follows:
(a) 41,667 Options will vest on the first day of each month from
July 1995 through May 1999;
(b) an additional 41,651 Options will vest on June 1, 1999.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the full purchase price of the
applicable shares (i) in cash or by certified or cashier's check payable to the
order of the Company, (ii) by cancellation of indebtedness owed by the Company
to the Optionee, (iii) by delivery of Common Stock of the Company already owned
by, and in the possession of the Optionee, (iv) if authorized by the Board of
Directors of the Company, by a promissory note made by the Optionee in favor of
the Company, subject to terms and conditions determined by the Board of
Directors of the Company, secured by the Common Stock issuable upon exercise of
the Option, and in compliance with all applicable federal and state laws, (v) by
any combination thereof, or (vi) in such other manner as the Board of Directors
of Company may specify. If the Option is being exercised by any person(s) other
than Optionee, notice shall be accompanied by proof, satisfactory to counsel for
the Company, of the right of the applicable person(s) to exercise the Option.
Not less than one thousand (1000) shares may be purchased at any one time unless
the number purchased is the total number which may be purchased under the Option
and in no event may the Option be exercised with respect to fractional shares.
<PAGE>
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable only by Optionee during his lifetime.
After death, the persons to whom Optionee's rights under the Option shall have
passed by order of a court of competent jurisdiction, by will or by the
applicable laws of descent and distribution or the executor or administrator of
Optionee's estate, shall have the right to exercise the Option, pursuant to the
terms of this Agreement.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. HOLDING OF STOCK AFTER EXERCISE OF OPTION. At the discretion of the
Company, the Company may at any time require that Optionee, or any person
acquiring shares upon exercise of the Option, by accepting this Option,
represents and agrees that none of the shares acquired upon exercise of this
Option will be acquired with a view to any sale, transfer or distribution of
said shares in violation of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, and Optionee, or the person
entitled to exercise the same, shall furnish evidence satisfactory to the
Company (including a written and signed representation) to that effect in form
and substance satisfactory to the Company and its counsel, including an
indemnification of the Company in the event of any violation of the Securities
Act of 1933 by such person. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option.
7. TERMINATION OF EMPLOYMENT/VESTING. Any portion of this Option not
then vested shall be cancelled at such time as Optionee is neither an employee
of the Company nor a member of the Board of Directors of the Company. In the
event of termination, any Options previously vested may be exercised for a
period of 90 days thereafter.
8. ADJUSTMENTS.
8.1 If the outstanding shares of the Common Stock of the Company
are increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of shares as to which all or any
portion of this Option may be exercised hereunder. Any such adjustment in the
outstanding shares under this Option shall be made without change to the
aggregate
-2-
<PAGE>
purchase price applicable to the unexercised portion of the Option but with a
corresponding adjustment in the purchase price for each share covered by the
Option.
8.2 This Agreement shall terminate and any portion of the Option
granted hereunder not then vested (or not vested due to the events set forth
below) shall be cancelled upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon the sale of substantially all the property or more than eighty percent
of the then outstanding stock of the Company to another corporation.
8.3 Notwithstanding the foregoing, the Board of Directors of the
Company may provide in writing in connection with such transaction for any or
all of the following alternatives (separately or in combination): (i) for the
Option to become immediately exercisable; (ii) for the assumption by the
successor corporation of the Option or the substitution by such corporation for
the Option or new stock options covering the stock of the successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; or (iii) for the continuance of the Option by
such successor corporation in which event the Option granted hereunder shall
continue in the manner and under the terms so provided.
8.4 Adjustments under this Section 8 shall be made by the Board of
Directors of the Company, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive. No
fractional shares of stock shall be issued hereunder on any such adjustment.
9. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its President at its main office, and any
notice to Optionee shall be addressed to Optionee's address on file with the
Company or a subsidiary corporation, or to such other address as either may
designate to the other in writing. Any notice shall be deemed to be duly given
if and when enclosed in a properly sealed enveloped and addressed as stated
above, and deposited, postage prepaid, in a post office or branch post office
regularly maintained by the United States government. In lieu of giving notice
by mail as aforesaid, any written notice under this Agreement may be given to
Optionee in person, and to the Company by personal delivery to its President.
-3-
<PAGE>
Please confirm your agreement to the foregoing by signing below where
indicated.
Yes Clothing Co. a California corporation
By: /s/ Guy Anthome
-----------------------------------
Guy Anthome
Its: President
-----------------------------------
AGREED AND ACCEPTED:
/s/ Georges Marciano
- ------------------------------------
Georges Marciano
-4-
<PAGE>
EXHIBIT 10.28
________________________________________________________________________________
WARRANT AGREEMENT OF
YES CLOTHING CO.
2,000,000 SHARES
Dated as of June 17, 1995
________________________________________________________________________________
COMMON STOCK PURCHASE WARRANT
<PAGE>
WARRANT AGREEMENT dated as of June 17, 1995, between YES Clothing Co., a
California corporation (the "Company"), the Company as Warrant Agent, and
Georges Marciano (the "Warrant Holder" or "Holder").
The Company proposes to issue the Common Stock Purchase Warrant as
hereinafter described (the "Warrant") to purchase an aggregate of up to
2,000,000 shares of its Common Stock (the "Common Stock"), no par value per
share (the shares of Common Stock issuable on exercise of the Warrant being
referred to herein as the "Warrant Shares"), in favor of Warrant Holder.
In consideration of the benefits and services provided to the Company by
the Warrant Holder, and for the purpose of defining the terms and provisions of
the Warrant and the respective rights and obligations thereunder of the Company
and the Holder, the Company and the Warrant Holder hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF THE WARRANT.
1.1 REGISTRATION. The Warrant shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Company in Los Angeles, California ("the Warrant Register"). The Company shall
be entitled to treat the Holder of the Warrant as the owner in fact thereof for
all purposes and shall not be bound to recognize any equitable or other claim to
or interest in such Warrant on the part of any other person, and shall not be
liable for any Company registration or transfer of Warrant which is registered
or to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration or transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
1.2 TRANSFER--GENERAL. Subject to the terms hereof, the Warrant
shall be transferable only on the books of the Company maintained at its
principal office upon delivery thereof duly endorsed by the Holder or by his
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. Upon any
registration of transfer, the Company shall countersign and deliver a new
Warrant to the persons entitled thereto. The Company or the Warrant Agent may
require the payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any such transfer.
1.3 TRANSFER RESTRICTIONS. The Holder may provide for the
transfer of the Warrant only as may be permitted under applicable federal and
state securities laws.
<PAGE>
1.4 FORM OF THE WARRANT. The text of the Warrant and of the
form of election to purchase Warrant Shares (the "Purchase Form") shall be
substantially as set forth in Exhibit A attached hereto. The price per Warrant
Share and the number of Warrant Shares issuable upon exercise of each Warrant
are subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrant shall be executed on behalf of the Company by
its President or one of its Vice Presidents, under its corporate seal reproduced
thereon, and attested by its Secretary or an Assistant Secretary.
The Warrant shall be dated as of the date of
countersignature thereof by the Company either upon initial issuance or upon
transfer.
SECTION 2. TERM OF THE WARRANT; EXERCISE OF THE WARRANT; WARRANT PRICE,
ETC.
2.1 TERM OF THE WARRANT. Subject to the terms of this Agreement,
the Holder shall have the right, which may be exercised from time to time, until
a date two years from the date hereof, to purchase from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to purchase on exercise of such Warrant. If the last day for the
exercise of the Warrant shall not be a business day, then the Warrant may be
exercised on the next succeeding business day.
2.2 EXERCISE OF THE WARRANT. The Warrant may be exercised upon
surrender to the Company, at its principal office, of the certificate evidencing
the Warrant to be exercised, together with the Purchase Form on the reverse
thereof duly filled in and signed, and upon payment to the Company, of the
Warrant Price (as defined in and determined in accordance with the provisions of
Sections 2 and 6 hereof), for the number of Warrant Shares in respect of which
such Warrant is then exercised. Upon partial exercise, a Warrant Certificate
for the unexercised portion shall be delivered to the Holder. Payment of the
aggregate Warrant Price shall be made in cash, by certified or official bank
check.
Subject to Section 3 hereof, upon such surrender of the
Warrant and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrant, together with cash, as provided in Section 7
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrant and payment of the Warrant Price, as aforesaid; provided, however,
-------- -------
that if, at the date of surrender of such Warrant and payment of such Warrant
Price, the transfer books for the Warrant Shares or other class of stock
purchasable upon the exercise of such Warrant shall be closed, the certificates
for the Warrant Shares in respect of which such Warrant are then exercised shall
be issuable as of the date on which such books shall next be opened (whether
before or after the Expiration Date) and until such date the Company shall be
under no duty to deliver any
-2-
<PAGE>
certificate for such Warrant Shares; provided, further, that the transfer books
-------- -------
of record, unless otherwise required by law, shall not be closed at any one time
for a period longer than 20 calendar days.
2.3 COMPLIANCE WITH GOVERNMENT REGULATIONS. Holder acknowledges
that none of the Warrant or Warrant Shares has been registered under the
Securities Act, and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from such registration and in
accordance with this Agreement. The Warrant and the Warrant Shares will bear a
legend to the following effect:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NO SALE OR OTHER DISPOSITION OR PLEDGE OF THESE
SECURITIES OR THE SECURITIES UNDERLYING THESE SECURITIES CAN BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING
THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY OR A
NO ACTION LETTER OR INTERPRETIVE OPINION OF THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT."
2.4 WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable upon exercise of the Warrant (the "Warrant Price") shall be
$1.25, subject to adjustment pursuant to Section 6 hereof.
2.5 SHAREHOLDERS APPROVAL. This Warrant may only be exercised
after the grant hereof has been approved by a vote of the Company's
shareholders. The Company covenants to seek shareholder approval as soon as
possible.
SECTION 3. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Warrant and Warrant
Shares upon the exercise of Warrant; provided, however, that the Company shall
-------- -------
not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of the Warrant or certificates for
Warrant Shares in a name other than that of the Holder of such Warrant.
SECTION 4. MUTILATED OR MISSING WARRANT. In case the Warrant shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing an equivalent right or
interest; but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant certificate and
indemnity or bond, if requested, also reasonably satisfactory to them. An
applicant for such substitute Warrant certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
-3-
<PAGE>
SECTION 5. RESERVATION OF WARRANT SHARES.
5.1 RESERVATION OF WARRANT SHARES. There have been reserved,
and the Company shall at all times keep reserved, out of its authorized shares
of Common Stock, a number of shares of Common Stock sufficient to provide for
the exercise of the rights of purchase represented by the outstanding Warrant.
The transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be and are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized shares as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant. The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrant will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. The Company will supply such Transfer Agent
and any subsequent transfer agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 7 of this Agreement. The Company will furnish
to such Transfer Agent a copy of all notices of adjustments, and certificates
related thereto, transmitted to each Holder. The Warrant surrendered in the
exercise of the rights thereby evidenced shall be cancelled by the Company.
5.2 CANCELLATION OF THE WARRANT. In the event the Company shall
purchase or otherwise acquire the Warrant, the same shall be cancelled and
retired.
SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of the Warrant
and the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
6.1 MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of the Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall at any time after the date
of this Agreement (i) declare or pay a dividend in shares of Common Stock
or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue
any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing entity), the number of
Warrant Shares purchasable upon exercise of the Warrant immediately prior
thereto shall be adjusted so that the Holder of the Warrant shall be
entitled to receive the kind and number of Warrant Shares or other
securities of the
-4-
<PAGE>
Company which he would have owned or have been entitled to receive after
the happening of any of the events described above, had such Warrant been
exercised immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights, options or
warrants to holders of its outstanding Common Stock entitling them (for a
period within 45 days after the record date mentioned below) to subscribe
for or purchase shares of Common Stock at a price per share which is lower
at the record date mentioned below than the then current market price per
share of Common Stock (as defined in paragraph (e) below), the number of
Warrant Shares thereafter purchasable upon the exercise of the Warrant
shall be determined by multiplying the number of Warrant Shares theretofore
purchasable upon exercise of the Warrant by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total
number of shares of Common Stock so offered would purchase at the current
market price per share of Common Stock at such record date. Such
adjustments shall be made whenever such rights, options or warrants are
issued, and shall become effective immediately after the record date for
the determination of stockholders entitled to receive such rights, options
or warrants.
(c) In case the Company shall distribute to holders of
its shares of Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions payable out of consolidated
earnings or earned surplus legally available for payment of dividends at
the time of any such payment or distribution, but excluding dividends or
distributions referred to in paragraph (a) above or in the paragraph
immediately following this paragraph) or rights, options or warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of the Warrant shall be determined
by multiplying the number of Warrant Shares theretofore purchasable upon
the exercise of the Warrant by a fraction, of which the numerator shall be
the then current market price per share of Common Stock (as defined in
paragraph (e) below) on the date of such distribution, and of which the
denominator shall be the then current market price per share of Common
Stock, less the then fair value (as determined by the Board of Directors of
the Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is
-5-
<PAGE>
made, and shall become effective on the date of distribution retroactive to
the record date for the determination of stockholders entitled to receive
such distribution.
In the event of a distribution by the Company to holders of
its shares of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an
adjustment in the number of Warrant Shares purchasable upon the exercise of
the Warrant, the Holder of the Warrant, upon the exercise thereof at any
time after such distribution, shall be entitled to receive from the
Company, such subsidiary or both, as the Company shall determine, the stock
or other securities to which such Holder would have been entitled if such
Holder had exercised such Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6.1; provided, however, that
-------
no adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of a Warrant or upon the exercise
of a Warrant other than adjustments required by this Section 6.
(d) In case the Company shall issue shares of Common
Stock or rights, options or warrants containing the right to subscribe for
or purchase shares of Common Stock or securities convertible into Common
Stock (excluding (i) shares, rights, options, warrants or convertible
securities issued in any of the transactions described in paragraphs (a),
(b) or (c) above, or (ii) Warrant Shares issued upon exercise of the
Warrant), for a price per share of Common Stock, in the case of the
issuance of Common Stock, or for a price per share of Common Stock
initially deliverable upon conversion or exchange of such securities less
than the then current market price per share of Common Stock (as defined in
paragraph (e) below) on the date the Company fixed the offering, conversion
or exchange price of such additional shares, the number of Warrant Shares
thereafter purchasable upon the exercise of the Warrant shall be determined
by multiplying the number of Warrant Shares theretofore purchasable upon
exercise of the Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such date plus the number
of additional shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock so offered
would purchase at the current market price per share of Common Stock at
such record date. Such adjustment shall be made whenever such shares,
rights, options or warranties are issued, and shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(e) For the purpose of any computation under paragraphs
(b), (c) and (d) of this Section, the current market price per share of
Common Stock at any date shall be the average of the daily closing prices
for 10 consecutive trading days commencing 12 trading days before the date
of such computation. The closing price for each day shall be the last such
reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the closing bid and
-6-
<PAGE>
asked prices regular way for such day, in each case on the principal
national securities exchange or in the NASDAQ National Market System to
which the shares of Common Stock are listed or admitted to trading or, if
not listed or admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as reported by
NASDAQ or any comparable system, or if the Common Stock is not listed on
NASDAQ or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose. In the absence of one or more
such quotations, the Board of Directors of the Company shall determine the
current market price on the basis of such quotations as it considers
appropriate or in the case of securities which are not quoted, the Board of
Directors of the Company shall determine the current market price based
upon such information and advice as it considers appropriate. In the case
of rights, options, warrants or convertible or exchangeable securities, the
price per share of Common Stock shall be determined by dividing (x) the
total amount received or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to the
Company upon exercise or conversion or exchange thereof, by (y) the total
number of shares of Common Stock covered by such rights, options, warrants
or convertible or exchangeable securities.
(f) Whenever the number of Warrant Shares purchasable
upon the exercise of the Warrant is adjusted, as herein provided, the
Warrant Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
(g) In case the Company shall sell or issue shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe or purchase shares of Common
Stock in the following situations:
(i) to officers, directors, consultants or employees
of the Company pursuant to an employee stock option plan
approved by the Company's shareholders either at a price not
less than 90% of the current market price of the Company's
Common Stock or in an amount (taking into account all prior
sales or issuances excluded pursuant to this clause (i)) not
greater than 5% of the total number of shares of Common Stock
outstanding on a fully diluted basis; or
(ii) to sellers of assets or interests in other
enterprises in exchange for such assets or interests,
-7-
<PAGE>
there shall be no adjustment in the Warrant Price or the number of Warrant
Shares either upon the initial issuance of such securities or upon the
exercise or conversion thereof.
(h) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would result
in an increase or decrease of at least one percent (1%) of the Warrant
Price; provided, however, that any adjustments which by reason of this
-------- -------
paragraph (h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment or upon exercise of the
Warrant. All calculations shall be made to the nearest cent or to the
nearest one-thousandth of a share, as the case may be.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of the Warrant need be made under paragraphs
(b), (c), or (d) if the Company issues or distributes to the Holder of the
Warrant the shares, rights, options, warrants, or convertible or
exchangeable securities, or evidences of indebtedness or assets referred to
in those paragraphs which the Holder of the Warrant would have been
entitled to receive had the Warrant been exercised prior to the happening
of such event or the record date with respect thereto. No adjustment in the
number of Warrant Shares purchasable upon the exercise of the Warrant need
be made for sales of Warrant Shares pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the Warrant Shares.
(j) For the purpose of this Section 6.1, the term
"shares of Common Stock" shall mean (i) the class of stock designated as
the Common Stock of the Company at the date of this Agreement, or (ii) any
other class of stock resulting from successive changes or reclassifications
of such shares consisting solely of changes from no par value to par value,
changes in par value, or changes from par value to no par value. In the
event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holder shall become entitled to purchase any
securities of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of the Warrant and
the Warrant Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in paragraphs (a)
through (h), inclusive, above, and the provisions of Section 2 and Sections
6.2 through 6.3, inclusive, with respect to the Warrant Shares, shall apply
on like terms to any such other securities; provided, however, that the
-------- -------
Warrant Price shall at no time be less than the par value of the Common
Stock of the Company; provided, further, that the Company shall reduce the
-------- -------
par value of its Common Stock from time to time as necessary so that such
par value shall not be more than the Warrant Price then in effect.
(k) Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, the issuance of which required an
adjustment in
-8-
<PAGE>
the number of shares of Common Stock purchasable upon exercise of the
Warrant, if any thereof shall not have been exercised, the Warrant Price
and the number of shares of Common Stock purchasable upon the exercise of
the Warrant shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the
only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion or exchange rights and (B) such shares of Common
Stock, if any, were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange rights whether or
not exercised; provided, however, that no such readjustment shall have the
-------- -------
effect of increasing the Warrant Price or decreasing the number of shares
of Common Stock purchasable upon the exercise of the Warrant by an amount
in excess of the amount of the adjustment initially made in respect to the
issuance, sale or grant of such rights, options, warrants or conversion or
exchange rights, and provided further that the issuance of shares of Common
Stock pursuant to rights, options, warrants or conversion or exchange
rights shall not be cause for additional adjustments beyond the adjustments
provided in respect of the initial issuance of the rights, options,
warrants or conversion or exchange rights.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall mail by first
class, postage prepaid, to each Holder notice of such adjustment or adjustments
and shall deliver to the Holder a copy of a certificate of either the Board of
Directors of the Company or of a firm of independent public accountants selected
by the Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares purchasable
upon the exercise of the Warrant and the Warrant Price of such Warrant Shares
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment in the absence of manifest error.
6.3 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section
6.1, no adjustment in respect of any dividends shall be made during the term of
a Warrant or upon the exercise or conversion of a Warrant.
6.4 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION,
ETC. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale, transfer or lease to another
corporation of all or substantially all the property of the Company, the Company
or such successor or purchasing corporation, as the case may be, shall execute
an amendment to this Agreement that each Holder shall have the right thereafter
upon payment of the Warrant Price in effect
-9-
<PAGE>
immediately prior to such action to purchase upon exercise of the Warrant the
kind and amount of shares and other securities and property which he would have
owned or have been entitled to receive upon the happening of such consolidation,
merger, sale, transfer or lease had such Warrant been exercised immediately
prior to such action; provided, however, that no adjustment in respect of
-------- -------
dividends, interest or other income on or from such shares or other securities
and property shall be made during the term of a Warrant or upon the exercise of
a Warrant. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6. The provisions of this Section 6.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
6.5 STATEMENT ON THE WARRANT. Irrespective of any adjustments
in the Warrant Price or the number or kind of shares purchasable upon the
exercise of the Warrant, the Warrant theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant initially issuable pursuant to this Agreement.
SECTION 7. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrant. If any fraction
of a Warrant Share would, except for the provisions of this Section 7, be
issuable on the exercise of the Warrant (or specified portion thereof), the
Company shall pay an amount in cash equal to the closing price for one share of
the Common Stock, as defined in paragraph (e) of Section 6.1, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 8. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing
contained in this Agreement or in the Warrant shall be construed as conferring
upon the Holder or his permitted transferees the right to vote or to receive
dividends or to consent to or receive notice as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company.
SECTION 9. INSPECTION OF WARRANT AGREEMENT. The Company shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the Holder during normal business hours at its principal
office.
SECTION 10. IDENTITY OF TRANSFER AND WARRANT AGENT. Forthwith upon the
appointment of any subsequent transfer agent for the Common Stock or Warrant
Agent, or any other shares of the Company's capital stock issuable upon the
exercise of the Warrant, the Company will notify the Holder of the name and
address of such subsequent transfer agent.
SECTION 11. NOTICES. Any notice pursuant to this Agreement by any
Holder to the Company, shall be in writing and shall be mailed first class,
postage prepaid, or delivered to
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<PAGE>
the Company at its office at 1380 West Washington Boulevard, Los Angeles,
California 90007-1233, Attention: President.
Each party hereto may from time to time change the address to which
notices to it are to be delivered or mailed hereunder by notice in writing to
the other party. Any notice mailed pursuant to this Agreement by the Company or
the Warrant Agent to the Holder shall be in writing and shall be mailed first
class, postage prepaid, or delivered to the Holder at his address on the books
of the Warrant Agent.
SECTION 12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles of conflict of laws. The parties hereto agree to submit to
the jurisdiction of the Courts of the State of California in any action or
proceeding arising out of or relating to this Agreement.
SECTION 13. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrant and which shall not
adversely affect the interests of the Holder.
SECTION 14. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 15. MERGER OR CONSOLIDATION OF THE COMPANY. So long as the
Warrant remains outstanding, the Company will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not the Company), shall expressly assume, by supplemental
agreement, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.
SECTION 16. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
the Holder any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company
and the Holder.
SECTION 17. CAPTIONS. The captions of the Sections of this Agreement
have been inserted for convenience only and shall have no substantive effect.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
YES Clothing Co., a California corporation
By: /s/ Guy Anthome
---------------
Title: President
---------
THE WARRANT AGENT:
YES Clothing Co., a California corporation
By: /s/ Guy Anthome
--------------
Title: President
---------
THE WARRANT HOLDER:
Georges Marciano
/s/ Georges Marciano
--------------------
Address:
__________________________________________
__________________________________________
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<PAGE>
EXHIBIT A
Warrant Certificate
No. [ ] 2,000,000 Shares
COMMON STOCK PURCHASE WARRANT
Void After 5:00 P.M.
Pacific Time on June 16, 1997
THIS CERTIFIES THAT, for value received, Georges Marciano, the registered
holder of this Common Stock Purchase Warrant (the "Warrant") or permitted
assigns (the "Holder"), is entitled to purchase from YES Clothing Co., a
California corporation (the "Company"), at any time until 5:00 p.m. Pacific Time
on June 16, 1997 (the "Expiration Date"), at the purchase price of $1.25 per
share (the "Warrant Price"), the number of shares of Common Stock of the Company
(the "Common Stock") which is equal to the number of Shares set forth above.
The number of shares purchasable upon exercise of this Warrant and the Warrant
Price per share shall be subject to adjustment from time to time as set forth in
the Warrant Agreement referred to below. This Warrant may only be exercised
after the grant hereof has been approved by a vote of the Company's
shareholders. The Company covenants to seek shareholder approval as soon as
possible.
This Warrant is issued under and in accordance with a Warrant Agreement
dated as of June 17, 1995, between the Company and the Warrant Holder and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which the Holder of this Warrant by acceptance hereof consents. A copy of
the Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Company.
This Warrant may be exercised in whole or in part by presentation of this
Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company in Los Angeles, California. Payment of such
price shall be made at the option of the Holder hereof in cash or by certified
or official bank check. Terms relating to exercise of Warrant is set forth more
fully in the Warrant Agreement.
This Warrant may be exercised in whole or in part. Upon partial exercise,
a Warrant Certificate for the unexercised portion shall be delivered to the
Holder. No fractional shares will be issued upon the exercise of this Warrant
but the Company shall pay the cash value of any fraction upon the exercise of
the Warrant. This Warrant is transferable only in limited circumstances as
described in this Warrant Agreement at the office of the Company in Los Angeles,
California, in the manner and subject to the limitations set forth in the
Warrant Agreement.
<PAGE>
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NO SALE OR OTHER DISPOSITION OR PLEDGE OF THESE
SECURITIES OR THE SECURITIES UNDERLYING THESE SECURITIES CAN BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING
THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY OR A
NO ACTION LETTER OR INTERPRETIVE OPINION OF THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT."
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company. Any notice to the contrary
notwithstanding, and until such transfer on which books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder hereof to any of the rights of a
stockholder of the Company.
This Warrant shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Company.
YES Clothing Co.
By: /s/ Guy Anthome
------------------------------------
Guy Anthome, President
Attest /s/ Jeffrey Busse
--------------------------
Jeffrey Busse
Secretary
DATED: As of June 17, 1995
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<PAGE>
PURCHASE FORM
Mailing Address
______________________________________ _______________________________________
______________________________________ _______________________________________
______________________________________ _______________________________________
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder,
_______________ shares of the stock provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash or by cashier's check
in the amount of $______________.]
The undersigned requests that certificates for such shares be issued in the
name of:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print Name, Address and Social Security No.)
DATED: , 19
Name of Warrantholder or Permitted Assignee:
________________________________________________________________________________
Address:
________________________________________________________________________________
________________________________________________________________________________
Signature:______________________________________________________________________
Signature Guaranteed: Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever,
unless this Warrant has been assigned.
<PAGE>
EXHIBIT 10.29
THREE PARTY AGREEMENT
This agreement ("Agreement") is entered into as of June 12, 1995, by and
among REPUBLIC FACTORS CORP. ( "REPUBLIC" ) , YES CLOTHING CO. ("YES"), and
GEORGES MARCIANO ("MARCIANO").
WHEREAS, REPUBLIC and YES are parties to a factoring agreement (the
"Factoring Agreement") whereby REPUBLIC has advanced and continues to advance
monies to YES, the repayment of which advances is secured by a security interest
in certain assets of YES granted by YES to REPUBLIC; and
WHEREAS, YES has requested REPUBLIC to advance certain sums (the
"overadvances") in excess of amounts to which YES is entitled under the terms of
the Factoring Agreement; and
WHEREAS, REPUBLIC is willing to provide YES with the Overadvances, in its
discretion and in accordance with the Factoring Agreement, if YES or a third
party provides a letter of credit in favor of REPUBLIC to support additional
extensions of credit; and
WHEREAS, MARCIANO and his affiliates are shareholders of YES; and
WHEREAS, MARCIANO is willing to provide a letter of credit in favor of
REPUBLIC to support the Overadvances to YES, provided that YES and REPUBLIC
agree that any sums drawn under such letter of credit benefit from and succeed
to the security supporting the Factoring Agreement, subject only to the prior
rights of REPUBLIC in and to such security;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound, the parties agree as
follows:
1. Letter of Credit. MARCIANO shall deliver to REPUBLIC a letter of credit
-----------------
in favor of REPUBLIC in the face amount of One Million Dollars ($1,000,000.00)
in the form attached hereto as Exhibit "A" (the "Letter of Credit").
2. Draws. REPUBLIC shall be entitled to make draws against the Letter of
------
Credit, for the period and on the terms set forth in the Letter of Credit, to
reimburse REPUBLIC for indebtedness liabilities, or other obligations owing by
YES to REPUBLIC under or in connection with the Factoring Agreement.
3. Repayment of Draws, Expense. YES agrees to repay on demand to
---------------------------
MARCIANO any and all amounts disbursed by MARCIANO, without duplication, in
connection with the establishment, maintenance or draw on or under the Letter of
Credit.
<PAGE>
4. Security. To the extent that REPUBLIC should make any draws against the
----------
Letter of Credit, MARCIANO shall be subrogated to and shall benefit from any and
all security held by REPUBLIC for the repayment of indebtedness of YES and,
subject to the prior right of repayment of REPUBLIC, MARCIANO shall stand in the
place of REPUBLIC with respect to such security; provided, that MARCIANO's
--------
subrogation rights with respect to security held by REPUBLIC for the repayment
of indebtedness shall only be enforceable after, and shall be subordinate to,
the repayment in full of all obligations and indebtedness of YES to REPUBLIC.
5. No Guaranty. Neither this Agreement nor the Letter of Credit shall
-----------
constitute or imply any guaranty, representation or other commitment on the part
of MARCIANO and nothing contained in this Agreement shall require MARCIANO to
review, replace or supplement the Letter of Credit or otherwise accommodate YES
or REPUBLIC in any way.
6. Other Documents. Each party agrees to perform any further acts and to
---------------
execute, deliver and record any other documents which may be reasonably
necessary to effect the provisions of this Agreement.
7. Waiver of Jury. EACH OF THE REPUBLIC, YES AND MARCIANO HEREBY WAIVES
--------------
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING IN WHICH
REPUBLIC IS A PARTY (OTHER THAN A NOMINAL PARTY AGAINST WHICH NO RELIEF IS
SOUGHT) BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT
OR ANY SUPPLEMENT OR AMENDMENT THERETO, OR (II) ANY OTHER PRESENT INSTRUMENT OR
AGREEMENT BETWEEN SUCH PARTIES OR (III) ANY FUTURE INSTRUMENT OR AGREEMENT
BETWEEN SUCH PARTIES INCORPORATING THIS WAIVER, OR (IV) ANY BREACH, CONDUCT,
ACTS OR OMISSIONS OR REPUBLIC, YES OR MARCIANO OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED
WITH OR REPRESENTING REPUBLIC, YES OR MARCIANO; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
As a material part of the consideration to the parties for entering
into this Agreement, each of YES and MARCIANO (i) agrees that, at the option of
REPUBLIC, all actions and proceedings based upon, arising out of or relating in
any way directly or indirectly to this Agreement shall be litigated exclusively
in courts located within Los Angeles County, California, (ii) consents to the
jurisdiction of any such court and consent to the service of process in any such
action or proceeding by personal delivery, first class mail, or any other method
permitted by law, and (iii) waives any and all rights to transfer or change the
venue of any such action or proceeding to any court located outside Los Angeles
County, California.
8. Attorneys' Fees. In the event that any party hereto should bring any
---------------
action, suit,. arbitration or other proceedings against
2
<PAGE>
any other party hereto or its related individuals or entities, concerning any
matter referred to herein, or contesting the validity of this Agreement, or
attempting to rescind, negate, modify or reform this Agreement or any of the
terms or provisions thereof, or to remedy, prevent or obtain relief from a
breach of this Agreement, or arising out of a breach of this Agreement, the
prevailing party shall recover all of such party's reasonable attorneys' fees
incurred in each and every such action, suit, or other proceeding, including all
appeals and petitions therefrom.
9. Counterparts. This Agreement may be executed in counterparts, all of
------------
which shall be construed as one document.
10. Successors & Assigns. The provisions of this Agreement shall bind and
--------------------
inure to the benefit of the parties and their respective trustees, heirs,
beneficiaries, executors, administrators, officers, directors, partners,
shareholders, employees, affiliates, representatives, agents, attorneys,
accountants, successors and assigns.
11. Severability. The invalidity or unenforceability of any particular
------------
provision of this Agreement shall not affect the other provisions, and this
Agreement shall be construed in all respects as if any invalid or unenforceable
provision were omitted. To the extent permitted by applicable law, the parties
hereby waive any provision of law that renders any portion of this Agreement
prohibited or unenforceable in any respect. To the extent any such provision
should be omitted, the parties will negotiate in good faith to replace the
stricken provision with a new provision reflecting the same allocation of
benefits and burdens.
12. California Law. The validity, construction and performance of this
--------------
Agreement shall be governed by the laws, without regard to the laws as to choice
or conflict of laws, of the State of California.
13. Integration. The parties affirm and acknowledge that their respective
-----------
signatures affixed hereto are given voluntarily and without coercion, undue
influence, duress, or reliance on any representation extrinsic or collateral to
the terms of this Agreement and that this Agreement supersedes and replaces any
prior discussion, negotiation or proposal all of which are merged herein.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp-, a
CALIF corporation
-------
By:____________________________
its: ________________________
"YES"
YES Clothing Co., a
California corporation
By:_____________________________
its:__________________________
"MARCIANO"
________________________________
Georges Marciano
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp-, a
________ corporation
By:____________________________
its: ________________________
"YES"
YES Clothing Co., a
California corporation
By:_____________________________
its:__________________________
"MARCIANO"
________________________________
Georges Marciano
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp-, a
_______ corporation
By:____________________________
its: ________________________
"YES"
YES Clothing Co., a
California corporation
By:_____________________________
its:__________________________
"MARCIANO"
________________________________
Georges Marciano
4
<PAGE>
WELLS FARGO BANK
Trade Services Division
Northern CaLifornia
525 Market Street, 25th Floor EXHIBIT A
San Francisco, CA 94105
415-396-2858 PAGE: 1
DATE OF ISSUE: JUNE 13, 1995 OUR IRREVOCABLE STANDBY CREDIT NO. NAS210772
DATE OF EXPIRY: AUGUST 31, 1995
PLACE OF EXPIRY: AT OUR ABOVE COUNTERS
APPLICANT: BENEFICIARY:
GEORGES MARCIANO REPUBLIC FACTORS CORP.
9465 WILSHIRE BLVD., STE. 700 1000 WILSHIRE BLVD., SUITE 400
BEVERLY HILLS, CALIFORNIA 90210 LOS ANGELES, CA 90017
AMOUNT: USD1,000,000.00
ONE MILLION AND 00/100 UNITED STATES
DOLLARS
WE HEREBY ESTABLISH IN YOUR FAVOR THIS CREDIT AVAILABLE WITH WELLS FARGO BANK,
N.A., SAN FRANCISCO, CA BY PAYMENT OF YOUR DRAFT(S) AT SIGHT DRAWN ON WELLS
FARGO BANK, N.A., SAN FRANCISCO, CA ACCOMPANIED BY:
YOUR SIGNED AND DATED STATEMENT WORDED AS FOLLOWS:
(1) "THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP.,
HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO BANK,
N.A. LETTER OF CREDIT NO. NAS210772 REPRESENTS INDEBTEDNESS, LIABILITIES
OR OTHER OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN
CONNECTION WITH A FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND
YES CLOTHING CO. (OTHER THAN ANY INDEBTEDNESS ARISING FROM OBLIGATIONS FOR
PURCHASES MADE BY YES CLOTHING CO. FROM ANY OTHER CONCERN FACTORED BY
REPUBLIC FACTORS CORP.), WHICH REMAINS UNPAID AND OUTSTANDING, OR WHICH
HAS BEEN PAID BUT WHICH PAYMENT (OR PORTION THEREOF REFLECTED BY THE DRAW)
WAS PAID WITHIN NINETY (90) DAYS OF A PETITION FILED BY OR AGAINST YES
CLOTHNG CO. UNDER THE BANKRUPTCY CODE OR THE MAKING OF AN ASSIGNMENT FOR
THE BENEFIT OF CREDITORS."
PARTIAL DRAWINGS ARE PERMITTED. (MORE THAN ONE DRAFT MAY BE DRAWN AND PRESENTED
UNDER THE LETTER OF CREDIT)
IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST
THAT PAYMENT IS TO BE MADE BY TRANSFER TO AN ACCOUNT WITH US OR AT ANOTHER BANK,
WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH
INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE
INTENDED PAYEE.
DOCUMENTS MUST BE PRESENTED TO US NO LATER THAN 5:00 P.M.
DRAFT(S) MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT.
EACH DRAFT PRESENTED HEREUNDER MUST BE ACCOMPANIED BY THIS ORIGINAL CREDIT
<PAGE>
WELLS FARGO BANK
Trade Services Division
Northern California
525 Market Street, 25th Floor
San Francisco, CA 94105
415-396-2858 PAGE 2
THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS210772
FOR OUR ENDORSEMENT THEREON OF THE AMOUNT OF SUCH DRAFT.
DOCUMENTS MUST BE FORWARDED TO US IN ONE PARCEL AND MAY BE MAILED TO WELLS FARGO
BANK, N.A. INTERNATIONAL TRADE SERVICES DIVISION, 525 MARKET STREET, 25TH FLOOR,
SAN FRANCISCO, CA 94105.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NUMBER
500 (THE 'UCP").
WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED IF PRESENTED TO US AT OUR
ABOVE OFFICE ON OR BEFORE AUGUST 31, 1995.
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND THIS
UNDERTAKING SHALL NOT IN ANY WAY BE AMENDED OR AMPLIFIED BY, REFERENCE TO ANY
DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN (INCLUDING WITHOUT
LIMITATION THE FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES
CLOTHING CO.) EXCEPT THE UCP, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO
INCORPORATE HEREIN BY REFERENCE ANY SUCH DOCUMENT, INSTRUMENT OR AGREEMENT
EXCEPT THE UCP.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, OUR OBLIGATION UNDER THIS
LETTER OF CREDIT IS INDEPENDENT FROM THE OBLIGATIONS OF ANY PARTY UNDER SAID
FACTORING AGREEMENT.
NO AMENDMENT OF SAID FACTORING AGREEMENT, SHALL IMPAIR OR AFFECT IN ANY WAY OUR
OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF
THIS LETTER OF CREDIT. NO DEFENSE OR CLAIM OF ANY PARTY UNDER SAID FACTORING
AGREEMENT AND NO BANKRUPTCY OR INSOLVENCY OF YES CLOTHING CO. SHALL IMPAIR OR
AFFECT OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS LETTER OF CREDIT, EXCEPT TO THE EXTENT THAT APPLICABLE LAW OR
AN ORDER OF A COURT OF COMPETENT JURISDICTION PROVIDES OTHERWISE.
WELLS FARGO BANK, N.A.
_________________________
(AUTHORIZED SIGNATURE)
<PAGE>
EXHIBIT 10.30
SECOND
THREE PARTY AGREEMENT
This agreement ("Agreement") is entered into as of June 21, 1995, by and
among REPUBLIC FACTORS CORP. ("REPUBLIC"), YES CLOTHING CO. ("YES"), and
GEORGES MARCIANO ("MARCIANO").
WHEREAS, REPUBLIC and YES are parties to a factoring agreement (the
"Factoring Agreement") whereby REPUBLIC has advanced and continues to advance
monies to YES, the repayment of which advances is secured by a security interest
in certain assets of YES granted by YES to REPUBLIC; and
WHEREAS, YES has requested REPUBLIC to advance certain sums (the
"Overadvances") in excess of amounts, in REPUBLIC's discretion, otherwise
available to YES under the terms of the Factoring Agreement; and
WHEREAS, REPUBLIC is willing to provide YES with the overadvances, in its
discretion and in accordance with the Factoring Agreement, if YES or a third
party provides a letter of credit in favor of REPUBLIC to support additional
extensions of credit; and
WHEREAS, MARCIANO and his affiliates are shareholders of YES;
WHEREAS, MARCIANO has previously established a letter of credit in favor of
REPUBLIC pursuant to the terms of a Three Party Agreement, dated as of June 12,
1995 (the "June 12 Agreement"); and
WHEREAS, MARCIANO is willing to provide a second letter of credit in favor
of REPUBLIC to support further Overadvances to YES, provided that YES and
REPUBLIC agree that any sums drawn under such letter of credit benefit from and
succeed to the security supporting the Factoring Agreement, subject only to the
prior rights of REPUBLIC in and to such security;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound, the parties agree as
follows:
1. Letter of Credit. MARCIANO shall deliver to REPUBLIC a letter of
----------------
credit in favor of REPUBLIC in the face amount of One Million Dollars
($1,000,000.00) in the form attached hereto as Exhibit "A" (the "Letter of
Credit").
2. Draws. REPUBLIC shall be entitled to make draws against the Letter of
-----
Credit, for the period and on the terms set forth in the Letter of Credit, to
reimburse REPUBLIC for indebtedness liabilities, or other obligations owing by
YES to REPUBLIC under or in connection with the Factoring Agreement.
<PAGE>
3. Repayment of Draws, Expense. YES agrees to repay on demand to
---------------------------
MARCIANO any and all amounts disbursed by MARCIANO, without duplication, in
connection with the establishment, maintenance or draw on or under the Letter of
Credit.
4. Security. To the extent that REPUBLIC should make any draws against the
--------
Letter of Credit, MARCIANO shall be subrogated to and shall benefit from any and
all security held by REPUBLIC for the repayment of indebtedness of YES and,
subject to the prior right of repayment of REPUBLIC, MARCIANO shall stand in the
place of REPUBLIC with respect to such security (such rights, when taken
together with MARCIANO's rights in the security arising under the June 12
Agreement, referred to hereinafter collectively as the "Subrogation Rights";
provided, that MARCIANO's Subrogation Rights with respect to security held by
- --------
REPUBLIC for the repayment of indebtedness shall only be enforceable after, and
shall be subordinate to, the repayment in full of all obligations and
indebtedness of YES to REPUBLIC.
5. No Guaranty. Neither this Agreement nor the Letter of Credit shall
-----------
constitute or imply any guaranty, representation or other commitment on the part
of MARCIANO and nothing contained in this Agreement shall require MARCIANO to
review, replace or supplement the Letter of Credit or otherwise accommodate YES
or REPUBLIC in any way.
6. Other Documents. Each party agrees to perform any further acts and to
---------------
execute, deliver and record any other documents which may be reasonably
necessary to effect the provisions of this Agreement.
7. Waiver of Jury. EACH OF THE REPUBLIC, YES AND MARCIANO HEREBY WAIVES
--------------
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING IN WHICH
REPUBLIC IS A PARTY (OTHER THAN A NOMINAL PARTY AGAINST WHICH NO RELIEF IS
SOUGHT) BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT
OR ANY SUPPLEMENT OR AMENDMENT THERETO, OR (II) ANY OTHER PRESENT INSTRUMENT OR
AGREEMENT BETWEEN SUCH PARTIES OR (III) ANY FUTURE INSTRUMENT OR AGREEMENT
BETWEEN SUCH PARTIES INCORPORATING THIS WAIVER, OR (IV) ANY BREACH, CONDUCT,
ACTS OR OMISSIONS OR REPUBLIC, YES OR MARCIANO OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED
WITH OR REPRESENTING REPUBLIC, YES OR MARCIANO; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
As a material part of the consideration to the parties for entering
into this Agreement, each of YES and MARCIANO (i) agrees that, at the option of
REPUBLIC, all actions and proceedings based upon, arising out of or relating in
any way directly or indirectly to this Agreement shall be litigated exclusively
in courts located within Los Angeles County, California, (ii) consents to the
2
<PAGE>
jurisdiction of any such court and consent to the service of process in any such
action or proceeding by personal delivery, first class mail, or any other method
permitted by law, and (iii) waives any and all rights to transfer or change the
venue of any such action or proceeding to any court located outside Los Angeles
County, California.
8. Attorneys' Fees. In the event that any party hereto should bring any
----------------
action, suit, arbitration or other proceedings against any other party hereto or
its related individuals or entities, concerning any matter referred to herein,
or contesting the validity of this Agreement, or attempting to rescind, negate,
modify or reform this Agreement or any of the terms or provisions thereof, or to
remedy, prevent or obtain relief from a breach of this Agreement, or arising out
of a breach of this Agreement, the prevailing party shall recover all of such
party's reasonable attorneys' fees incurred in each and every such action, suit,
or other proceeding, including all appeals and petitions therefrom.
9. Counterparts. This Agreement may be executed in counterparts, all of
------------
which shall be construed as one document.
10. Successors & Assiqns. The provisions of this Agreement shall bind and
--------------------
inure to the benefit of the parties and their respective trustees, heirs,
beneficiaries, executors, administrators, officers, directors, partners,
shareholders, employees, affiliates, representatives, agents, attorneys,
accountants, successors and assigns.
11. Severability. The invalidity or unenforceability of any particular
------------
provision of this Agreement shall not affect the other provisions, and this
Agreement shall be construed in all respects as if any invalid or unenforceable
provision were omitted. To the extent permitted by applicable law, the parties
hereby waive any provision of law that renders any portion of this Agreement
prohibited or unenforceable in any respect. To the extent any such provision
should be omitted, the parties will negotiate in good faith to replace the
stricken provision with a new provision reflecting the same allocation of
benefits and burdens.
12. California Law. The validity, construction and performance of this
--------------
Agreement shall be governed by the laws, without regard to the laws as to choice
or conflict of laws, of the State of California.
13. Integration. The parties affirm and acknowledge that their respective
-----------
signatures affixed hereto are given voluntarily and without coercion, undue
influence, duress, or reliance on any representation extrinsic or collateral to
the terms of this Agreement and that this Agreement supersedes and replaces any
prior discussion, negotiation or proposal all of which are merged herein.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp., a
CALIF corporation
---------------
By:__________________________
its:_______________________
"YES"
YES Clothing Co., a
California corporation
By:__________________________
its:_______________________
"MARCIANO"
______________________________
Georges Marciano
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp., a
_______________corporation
By:__________________________
its:_______________________
"YES"
YES Clothing Co., a
California corporation
By:__________________________
its:_______________________
"MARCIANO"
______________________________
Georges Marciano
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written.
"REPUBLIC"
Republic Factors Corp., a
_______________corporation
By:__________________________
its:_______________________
"YES"
YES Clothing Co., a
California corporation
By:__________________________
its:_______________________
"MARCIANO"
______________________________
Georges Marciano
4
<PAGE>
WELLS FARGO BANK
Trade Services Division
Northern California
525 Market Street, 25th Floor EXHIBIT A
San Francisco, CA 94105
415-396-2858 PAGE: 1
DATE OF ISSUE: JUNE 21, 1995 OUR IRREVOCABLE STANDBY CREDIT NO. NAS211044
DATE OF EXPIRY: JANUARY 31, 1996
PLACE OF EXPIRY: AT OUR ABOVE COUNTERS
APPLICANT: BENEFICIARY:
GEORGES MARCIANO REPUBLIC FACTORS CORP.
9465 WILSHIRE BOULEVARD 1000 WILSHIRE BOULEVARD
SUITE 700 SUITE 400
BEVERLY HILLS, CALIFORNIA 90210 LOS ANGELES, CALIFORNIA 90017
AMOUNT: USD1,000,000.00
ONE MILLION AND 00/100 UNITED STATES
DOLLARS
WE HEREBY ESTABLISH IN YOUR FAVOR THIS CREDIT AVAILABLE WITH WELLS FARGO BANK,
N.A., SAN FRANCISCO, CA BY PAYMENT OF YOUR DRAFT(S) AT SIGHT DRAWN ON WELLS
FARGO BANK, N.A., SAN FRANCISCO, CA ACCOMPANIED BY:
(1) YOUR SIGNED AND DATED STATEMENT RECEIVED BY US PRIOR TO SEPTEMBER 30, 1995,
IN THE FOLLOWING FORM:
"THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP.,
HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO BANK,
N.A. LETTER OF CREDIT NO. NAS211044 REPRESENTS INDEBTEDNESS, LIABILITIES
OR OTHER OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN
CONNECTION WITH A FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND
YES CLOTHING CO. (OTHER THAN ANY INDEBTEDNESS ARISING FROM OBLIGATIONS FOR
PURCHASES MADE BY YES CLOTHING CO. FROM ANY OTHER CONCERN FACTORED BY
REPUBLIC FACTORS CORP.), WHICH REMAINS UNPAID AND OUTSTANDING."
OR
(2) YOUR SIGNED AND DATED STATEMENT RECEIVED BY US PRIOR TO JANUARY 31, 1996,
IN THE FOLLOWING FORM :
"THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP.,
HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO
BANK, N.A. LETTER OF CREDIT NUMBER NAS211044 REPRESENTS AN AMOUNT WHICH
HAS BEEN PAID WITH RESPECT TO INDEBTEDNESS, LIABILITIES OR OTHER
OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN CONNECTION WITH A
FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO.
(OTHER THAN INDEBTEDNESS ARISING FROM OBLIGATIONS FOR PURCHASES MADE BY
REPUBLIC FACTORS CORP.) BUT WHICH PAYMENT (OR PORTION THEREOF REFLECTED
BY THE DRAW) WAS PAID WITHIN NINETY (90) DAYS OF A PETITION FILED BY OR
AGAINST YES CLOTHING CO. UNDER THE BANKUPTCY CODE OR THE MAKING OF AN
ASSIGNMENT
<PAGE>
WELLS FARGO BANK
Trade Services Division
Northern California
525 Market Street, 25th Floor
San Francisco, CA 94105
415-396-2858 PAGE: 2
THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS211044
FOR THE BENEFIT OF CREDITORS."
PARTIAL DRAWINGS ARE PERMITTED. (MORE THAN ONE DRAFT MAY BE DRAWN AND PRESENTED
UNDER THE LETTER OF CREDIT)
IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST
THAT PAYMENT IS TO BE MADE BY TRANSFER TO AN ACCOUNT WITH US OR AT ANOTHER BANK,
WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH
INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE
INTENDED PAYEE.
DOCUMENTS MUST BE PRESENTED TO US NO LATER THAN 5:00 P.M.
DRAFT(S) MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT.
EACH DRAFT PRESENTED HEREUNDER MUST BE ACCOMPANIED BY THIS ORIGINAL CREDIT FOR
OUR ENDORSEMENT THEREON OF THE AMOUNT OF SUCH DRAFT.
DOCUMENTS MUST BE FORWARDED TO US INONE PARCEL AND MAY BE MAILED TO WELLS FARGO
BANK, N.A. INTERNATIONAL TRADE SERVICES DIVISION, 525 MARKET STREET, 25TH FLOOR,
SAN FRANCISCO, CA 94105.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NUMBER
500 (THE 'UCP").
WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED IF PRESENTED TO US AT OUR
ABOVE OFFICE ON OR BEFORE JANUARY 31, 1996.
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND THIS
UNDERTAKING SHALL NOT IN ANY WAY BE AMENDED OR AMPLIFIED BY REFERENCE TO ANY
DOCUMENT, INSTRUMENT OR AGREEMENT (INCLUDING WITHOUT LIMITATION THE FACTORING
AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO.) EXCEPT THE UCP,
AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE
ANY SUCH DOCUMENT, INSTRUMENT OR AGREEMENT EXCEPT THE UCP.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, OUR OBLIGATION UNDER THIS
LETTER OF CREDIT IS INDEPENDENT FROM THE OBLIGATIONS OF ANY PARTY UNDER SAID
FACTORING AGREEMENT.
NO AMENDMENT OF SAID FACTORING AGREEMENT, SHALL IMPAIR OR AFFECT IN ANY WAY OUR
OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF
THIS LETTER OF CREDIT. NO DEFENSE OR CLAIM OF ANY PARTY UNDER SAID FACTORING
AGREEMENT AND NO BANKRUPTCY OR INSOLVENCY OF YES CLOTHING CO. SHALL IMPAIR OR
AFFECT OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS LETTER OF CREDIT,
<PAGE>
WELLS FARGO BANK
Trade Services Division
Northern California
525 Market Street, 25th Floor
San Francisco, CA 94105 PAGE: 3
415-396-2858
THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS211044
EXCEPT TO THE EXTENT THAT APPLICABLE LAW OR AN ORDER OF A COURT OF COMPETENT
JURISDICTION PROVIDES OTHERWISE.
WELLS FARGO BANK, N.A.
____________________________
(AUTHORIZED SIGNATURE)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENT OF YES CLOTHING CO. FOR THE YEAR ENDED MARCH 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 232,000
<SECURITIES> 0
<RECEIVABLES> 1,870,000
<ALLOWANCES> (831,000)
<INVENTORY> 2,158,000
<CURRENT-ASSETS> 3,512,000
<PP&E> 2,336,000
<DEPRECIATION> (1,302,000)
<TOTAL-ASSETS> 4,630,000
<CURRENT-LIABILITIES> 2,438,000
<BONDS> 0
<COMMON> 4,513,000
0
0
<OTHER-SE> (2,978,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,535,000
<SALES> 28,580,000
<TOTAL-REVENUES> 29,014,000
<CGS> 25,210,000
<TOTAL-COSTS> 25,210,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 526,000
<INTEREST-EXPENSE> 255,000
<INCOME-PRETAX> (4,652,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,652,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,652,000)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
<PAGE>
EXHIBIT 99.1
Houlihan Lokey Howard & Zukin
1930 Century Park West
Los Angeles, CA 90067
310-553-8871
July 10, 1995
To The Board of Directors
YES Clothing Co.
1380 West Washington Boulevard
Los Angeles, CA 90007
Gentlemen:
We understand that YES Clothing Co. (the "Company" or "YES") has entered into an
agreement with its largest shareholder, Georges Marciano ("Marciano"), whereby
Marciano has agreed to:
a) become Chief Executive Officer ("CEO") and Chairman of the Board
("CoB") of the Company;
b) provide additional capital for the Company; and
c) license to YES certain trademarks controlled by Marciano affiliates.
With respect to Marciano becoming Chief Executive Officer and Chairman of the
Board, we understand that Marciano will receive:
a) $1 per year in salary; and
b) options to acquire 500,000 shares of the Company's common stock per
year at $1.25 per share, vesting monthly during continued employment
for up to four additional years, (the "Executive Options").
With respect to Marciano providing additional capital to the Company, we
understand that Marciano agreed to:
a) contribute $3,300,000 in new capital in exchange for 2,640,000 shares
of YES' common stock; and
b) convert approximately $700,000 owed by the Company to Marciano into
additional shares of YES' common stock valued at $1.25 per share.
With respect to Marciano licensing to YES certain trademarks controlled by
Marciano affiliates, we understand that the Company has entered into five year
trademark license agreement for Marciano's "GM Surf" and "Misfits" lines of
clothing at royalties of 7 percent of gross sales, plus an additional 2 percent
for advertising.
<PAGE>
To the Board of Directors
YES Clothing Co.
July 10, 1995 -2-
Marciano becoming CEO and CoB of YES, Marciano providing additional capital to
YES, the Company's granting of the Executive Options, and Marciano entering into
licensing agreements with YES is collectively referred to herein as the
"Restructuring". In connection with the Restructuring, we understand that the
Company has granted Marciano a two year option to acquire an additional
2,000,000 shares of YES' common stock at $1.25 per share, (the "Additional
Options").
Finally, we understand that the Company is publicly traded on the NASD National
Market System (the "NASD NMS"), and has received a notice of potential delisting
from the NASD NMS because its net worth has fallen below minimum listing
standards. However, we understand that the capital infusion associated with the
Restructuring may provide YES with sufficient capital to avoid such action by
the NASD NMS. Moreover, we understand that Moss-Adams, the Company's outside
auditors, has indicated that it would issue a qualified opinion for the
Company's fiscal year ended March 31, 1995 without the completion of at least a
portion of the Restructuring. The Restructuring and the Company's granting of
the Additional Options are collectively referred to herein as the Transaction.
You have requested our opinion (the "Opinion") as to the matters set forth
below. This Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it. We understand that shareholder approval
will be sought for the Executive Options and the Additional Options and that
this Opinion will be used in connection with seeking such shareholder approval.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
a) met with senior management and toured the Company's warehouse;
b) toured Georges Marciano's Beverly Hills store, which sells YES
merchandise;
c) reviewed the Company's 10K and annual report for the five fiscal years
ended March 31, 1994;
d) reviewed a draft of the Company's 10K for the fiscal year ended March
31, 1995;
e) reviewed the Company's internal projections for the year ended March
31, 1996;
f) reviewed the Company's weekly cash flow projections for May 1995
through July 1995;
g) reviewed Republic Factors', (the Company's factor), cash availability
schedule for February 1995 through June 1995;
<PAGE>
To the Board of Directors
YES Clothing Co.
July 10, 1995 -3-
h) reviewed copies of the following agreements:
the Employment Agreement between YES and Marciano,
the Executive Stock Option Agreement for 2,000,000 shares vesting
monthly over a four year term, at $1.25 per share,
the Warrant Agreement for 2,000,000 shares at $1.25 per share for
a two year term, and
the License Agreement between Marble Sportswear and YES for the
license of the GM Surf and Misfits trademarks at 7 percent
royalty plus 2 percent advertising;
i) reviewed analyst reports, financial information, trading information,
and market pricing for the Company, for companies we consider
comparable to the Company, and for other participants in the apparel
industry; and
j) conducted other studies that we deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that:
a) the fair market value of the Company's common stock prior to and
without giving effect to the Transaction is not more than $1.25 per
share; and
b) the Transaction is fair to the Company and the Company's shareholders,
other than Marciano and Marciano's affiliates, from a financial point
of view.
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
/s/ Houlihan Lokey Howard & Zukin, Inc.
