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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 19, 1998
DIPLOMAT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-22432 13-3727399
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
25 KAY FRIES DRIVE
STONY POINT, NY 10980
(Address of principal executive offices, including zip code)
(914) 786-5552
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 19, 1998, Diplomat Corporation (the "Company") completed the
acquisition of Lew Magram Ltd., a New York corporation ("Lew Magram"). The
acquisition was completed by a merger of Magram Acquisition Corporation, a
wholly-owned subsidiary of the Company, into Lew Magram, with Lew Magram being
the surviving entity. As consideration for the merger, the Company issued 95,000
shares of Series D Preferred Stock, which is convertible into an aggregate of
3,166,667 shares of the Company shares of the Company's common stock, and
250,000 shares of the Company's common stock.
Lew Magram is a direct-mail cataloger of women's fashion closing founded
approximately 50 years ago. Lew Magram currently operates from facilities
located in Teaneck, New Jersey and New York, New York.
The acquisition was pursuant to the Agreement and Plan of Merger dated
December 23, 1997 between Robert M. Rubin, Jay M. Kaplowitz, Irving Magram,
Warren Golden, Stephanie Sobel (being all of the stockholders of Lew Magram),
the Company, Magram Acquisition Corporation and Lew Magram.
Robert M. Rubin, Chairman of the Board of Directors and a principle
stockholder of the Company was a principle stockholder of Lew Magram, owned
approximately 45% of Lew Magram's capital stock on a fully-diluted basis. Jay M.
Kaplowitz, a principle of the Company's legal counsel owned approximately 5% of
Lew Magram's capital stock on a fully-diluted basis.
Effective on the closing of the acquisition, Warren Golden was appointed to
the Board of Directors of the Company. Mr. Golden was appointed as Chief
Operating Officer of the Company and will also maintain the title of Executive
Vice President of Lew Magram. Mr. Golden entered into a three year employment
agreement with the Company effective February 2, 1998.
Irving Magram was appointed as President of Lew Magram and Stephanie Sobel
was appointed as Senior Vice President of Merchandising. Each of Mr. Magram and
Ms. Sobel entered into a three employment agreement with Lew Magram which is
guaranteed by the Company.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a),(b) Financial Statements. The financial statements required under Item 7 of
Form 8-K are not included in this initial report on Form 8-K. The Company shall
provide such financial statements by amendment within 60 days from the date that
this initial Form 8-K is filed with the Securities and Exchange Commission.
(c) Exhibits.
99.1 Agreement and Plan of Merger dated December 23, 1997 by and between
Diplomat Corporation, Lew Magram, Ltd., et al (incorporated by
reference to Diplomat Corporation Form 10-KSB filed January 13, 1998).
99.2 Amended and Restated Certificate of Designation of Diplomat Corporation
of Series D Preferred Stock.
99.3 Employment Agreement between Warren Golden and Diplomat Corporation
dated February 2, 1998.
99.4 Employment Agreement between Irving Magram and Lew Magram Ltd.
dated February 2, 1998.
99.5 Employment Agreement between Stephanie Sobel and Lew Magram Ltd.
dated February 2, 1998.
99.6 Lease Agreement between Franklin Associates and Lew Magram Ltd.
dated May 15, 1992.
99.7 Loan and Security Agreement by and between Congress Financial
Corporation and Lew Magram Ltd. dated August 13, 1996.
99.8 Press Release dated February 24, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 5, 1998
DIPLOMAT CORPORATION
By: /s/ JONATHAN ROSENBERG
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Jonathan Rosenberg
Chief Executive Officer
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INDEX TO EXHIBITS
NO. DESCRIPTION
99.1 Agreement and Plan of Merger dated December 23, 1997 by and between
Diplomat Corporation, Lew Magram, Ltd., et al (incorporated by
reference to Diplomat Corporation Form 10-KSB filed January 13, 1998).
99.2 Amended and Restated Certificate of Designation of Diplomat Corporation
of Series D Preferred Stock.
99.3 Employment Agreement between Warren Golden and Diplomat Corporation
dated February 2, 1998.
99.4 Employment Agreement between Irving Magram and Lew Magram Ltd. dated
February 2, 1998.
99.5 Employment Agreement between Stephanie Sobel and Lew Magram Ltd. dated
February 2, 1998.
99.6 Lease Agreement between Franklin Associates and Lew Magram Ltd. dated
May 15, 1992.
99.7 Loan and Security Agreement by and between Congress Financial
Corporation and Lew Magram Ltd. dated August 13, 1996.
99.8 Press Release dated February 24, 1998
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AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
SERIES D PREFERRED STOCK
OF
DIPLOMAT CORPORATION
DIPLOMAT CORPORATION, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Diplomat Corporation. The date of filing
of its original Certificate of Designation to which this certificate relates was
January 27, 1998.
2. The Amended and Restated Certificate of Designation of Series D
Preferred Stock only restates and integrates and further amends the certificate
as follows:
Deleting Section 2 which previously read as follows:
2. Dividends. Holders of the Series D Preferred Stock (the "Holders")
shall be entitled to an annual cumulative dividend of eight and one-half
percent (8.5%) of the Liquidation Value of the Series D Preferred Stock,
from the date of issuance and payable monthly commencing January 31, 1998.
Dividends will be payable in cash or accumulated and payable in kind in
Common Stock upon conversion pursuant to Section 5 herein. The Corporation
may set a record date for the payment of any dividend, on at least 10 days
prior notice to all holders, which record date shall be not more than 60
days prior to a dividend payment date. Dividends payable for any period
less than a full year, will be computed on the basis of a 360 day year with
equal months of 30 days.
Adding new Section 2 to read as follows:
2. Dividends. The Series D Preferred Stock shall not pay any
dividends, except and to the extent of dividends payable on the
Corporation's common stock, in which event divides on the Series D
Preferred Stock shall be paid in the same amounts as paid on the
Corporation's Common Stock equivalent of the Series D Preferred Stock.
Deleting Section 3(c) which previously read as follows:
(c) Corporate Changes. The sale, lease or exchange of all or
substantially all of the Corporation's assets or the merger or
consolidation of the Corporation which results in the holders of Common
Stock of the Corporation receiving in exchange for such Common Stock cash,
notes, debentures or other evidences of indebtedness or obligations to pay
cash, or preferred stock of the surviving entity which ranks on a parity
with or senior to the Series D Preferred
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Stock as to dividends or upon liquidation, dissolution or winding-up shall
be deemed to be a liquidation, dissolution or winding up of the affairs of
the Corporation within the meaning of this Section 3(c). In the case of
mergers or consolidations of the Corporation where holders of Common Stock
of the Corporation receive, in exchange for such Common Stock, common stock
or preferred stock in the surviving entity (whether or not the surviving
entity is the Corporation) of such merger or consolidation, or common stock
or preferred stock of another entity (in either case, such preferred stock
to be received in exchange for common stock is herein referred to as
"Exchanged Preferred Stock"), which is junior as to dividends and upon
liquidation, dissolution or winding up to the Series D Preferred Stock, the
merger agreement or consolidation agreement shall expressly provide that
the Series D Preferred Stock shall become preferred stock of such surviving
entity or other entity, as the case may be, with the same annual dividend
rate and equivalent rights to the rights set forth herein; provided however
that if the Exchanged Preferred Stock is to be mandatorily redeemed in
whole or in part through the operation of a sinking fund or otherwise the
merger or consolidation agreement shall expressly provide that, or other
provisions shall be made so that, all shares of the Series D Preferred
Stock shall be mandatorily redeemed prior to the first mandatory redemption
of the Exchanged Preferred Stock; and provided further, that in the event
the Corporation or an affiliate of the Corporation optionally redeems or
otherwise acquires any or all of the then outstanding shares of Exchanged
Preferred Stock, the Corporation shall redeem all shares of Series D
Preferred Stock. In the event of a merger or consolidation of the
Corporation where the consideration received by the holders of common stock
consists of two or more types of the consideration set forth above, the
holders of the Series D Preferred Stock shall be entitled to receive either
cash or securities based upon the foregoing in the same proportion as the
holders of common stock of the Corporation are receiving cash or debt
securities, or equity securities in the surviving entity or other entity.
Adding new Section 3(c) to read as follows:
(c) Corporate Changes. The sale, lease or exchange of all or
substantially all of the Corporation's assets or the merger or
consolidation of the Corporation which results in the holders of Common
Stock of the Corporation receiving in exchange for such Common Stock cash,
notes, debentures or other evidences of indebtedness or obligations to pay
cash, or preferred stock of the surviving entity which ranks on a parity
with or senior to the Series D Preferred Stock upon liquidation,
dissolution or winding-up shall be deemed to be a liquidation, dissolution
or winding up of the affairs of the Corporation within the meaning of this
Section 3(c). In the case of mergers or consolidations of the Corporation
where holders of Common Stock of the Corporation receive, in exchange for
such Common Stock, common stock or preferred stock in the surviving
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entity (whether or not the surviving entity is the Corporation) of such
merger or consolidation, or common stock or preferred stock of another
entity (in either case, such preferred stock to be received in exchange for
common stock is herein referred to as "Exchanged Preferred Stock"), which
is junior upon liquidation, dissolution or winding up to the Series D
Preferred Stock, the merger agreement or consolidation agreement shall
expressly provide that the Series D Preferred Stock shall become preferred
stock of such surviving entity or other entity, as the case may be, with
the equivalent rights to the rights set forth herein; provided however that
if the Exchanged Preferred Stock is to be mandatorily redeemed in whole or
in part through the operation of a sinking fund or otherwise the merger or
consolidation agreement shall expressly provide that, or other provisions
shall be made so that, all shares of the Series D Preferred Stock shall be
mandatorily redeemed prior to the first mandatory redemption of the
Exchanged Preferred Stock; and provided further, that in the event the
Corporation or an affiliate of the Corporation optionally redeems or
otherwise acquires any or all of the then outstanding shares of Exchanged
Preferred Stock, the Corporation shall redeem all shares of Series D
Preferred Stock. In the event of a merger or consolidation of the
Corporation where the consideration received by the holders of common stock
consists of two or more types of the consideration set forth above, the
holders of the Series D Preferred Stock shall be entitled to receive either
cash or securities based upon the foregoing in the same proportion as the
holders of common stock of the Corporation are receiving cash or debt
securities, or equity securities in the surviving entity or other entity.
Deleting Section 6(b) which previously read as follows:
(b) authorize or issue shares of any class or series of stock having
any preference or priority as to dividends or assets or other rights
superior to any such preference or priority of the Series D Preferred
Stock, or authorize or issue shares of stock of any class or any bonds,
debentures, notes or other obligations convertible into or exchangeable
for, or having option rights to purchase, any shares of stock of the
Corporation having any preference or priority as to dividends, assets or
other rights superior to any such preference or priority of the Series D
Preferred Stock; or
Adding new Section 6(b) to read as follows:
(b) authorize or issue shares of any class or series of stock having
any preference or priority as to assets or other rights superior to any
such preference or priority, other than dividends, of the Series D
Preferred Stock, or authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock
of the Corporation having any preference or priority as to assets or other
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rights superior to any such preference or priority, other than dividends,
of the Series D Preferred Stock; or
Deleting Section 6(d) which previously read as follows:
(d) declare or pay on any Junior Stock any dividend whatsoever,
whether in cash, property or otherwise (other than dividends payable in
shares of the class or series upon which such dividends are declared or
paid, or payable in shares of Common Stock with respect to Junior Stock
other than Common Stock, together with cash in lieu of fractional shares),
nor shall the Corporation make any distribution on any Junior Stock, nor
shall any Junior Stock be purchased or redeemed by the Corporation, nor
shall any monies be paid or made available for a sinking fund nor the
purchase or redemption of any Junior Stock, unless all dividends to which
the holders of Series D Preferred Stock shall have been entitled for all
previous dividend periods shall have been paid or declared and a sum of
money sufficient for the payment thereof set apart.
3. The text of the Certification of Designation of Series D Preferred Stock
as amended hereby reads as follows:
1. Designation. The shares of the Series shall be designated "Series D
Preferred Stock", and the number of shares constituting the Series shall be
95,000.
2. Dividends. The Series D Preferred Stock shall not pay any
dividends, except and to the extent of dividends payable on the
Corporation's common stock, in which event dividends on the Series D
Preferred Stock shall be paid in the same amounts as paid on the
Corporation's Common Stock equivalent of the Series D Preferred Stock.
3. Liquidation.
(a) Liquidation Preference. Upon any liquidation, dissolution, or
winding up of the Corporation, whether voluntary or involuntary, and after
provision for the payment of creditors, the Holders shall be entitled to be
paid an amount equal to $100.00 per share ("Liquidation Value") of Series D
Preferred Stock held, before any distribution or payment is made upon any
shares of Common Stock and any other series of stock junior to the Series D
Preferred Stock. The Series D Preferred Stock shall be in parity with the
most senior of the Corporation's preferred stock, including but not limited
to Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series E Preferred Stock (the "Parity Stock") with respect to
liquidation rights. The Corporation shall not authorize or issue any class
or series of preferred stock which is pari passu or senior to the Series D
Preferred
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Stock without the prior written consent of the Holder of the Series D
Preferred Stock (pursuant to Section 6 hereof).
(b) Ratable Distribution. If upon any liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation to be
distributed among the Holders shall be insufficient to permit payment in
full to the Holders of such Series D Preferred Stock, then all remaining
net assets of the Corporation after the provision for the payment of the
Corporation's debts shall be distributed ratably in proportion to the full
amounts to which they would otherwise be entitled to receive among the
Holders and the Holders of the Parity Stock.
(c) Corporate Changes. The sale, lease or exchange of all or
substantially all of the Corporation's assets or the merger or
consolidation of the Corporation which results in the holders of Common
Stock of the Corporation receiving in exchange for such Common Stock cash,
notes, debentures or other evidences of indebtedness or obligations to pay
cash, or preferred stock of the surviving entity which ranks on a parity
with or senior to the Series D Preferred Stock upon liquidation,
dissolution or winding-up shall be deemed to be a liquidation, dissolution
or winding up of the affairs of the Corporation within the meaning of this
Section 3(c). In the case of mergers or consolidations of the Corporation
where holders of Common Stock of the Corporation receive, in exchange for
such Common Stock, common stock or preferred stock in the surviving entity
(whether or not the surviving entity is the Corporation) of such merger or
consolidation, or common stock or preferred stock of another entity (in
either case, such preferred stock to be received in exchange for common
stock is herein referred to as "Exchanged Preferred Stock"), which is
junior upon liquidation, dissolution or winding up to the Series D
Preferred Stock, the merger agreement or consolidation agreement shall
expressly provide that the Series D Preferred Stock shall become preferred
stock of such surviving entity or other entity, as the case may be, with
the equivalent rights to the rights set forth herein; provided however that
if the Exchanged Preferred Stock is to be mandatorily redeemed in whole or
in part through the operation of a sinking fund or otherwise the merger or
consolidation agreement shall expressly provide that, or other provisions
shall be made so that, all shares of the Series D Preferred Stock shall be
mandatorily redeemed prior to the first mandatory redemption of the
Exchanged Preferred Stock; and provided further, that in the event the
Corporation or an affiliate of the Corporation optionally redeems or
otherwise acquires any or all of the then outstanding shares of Exchanged
Preferred Stock, the Corporation shall redeem all shares of Series D
Preferred Stock. In the event of a merger or consolidation of the
Corporation where the consideration received by the holders of common stock
consists of two or more types of the consideration set forth above, the
holders of the Series D Preferred Stock shall be entitled to receive either
cash or securities based upon the foregoing in the same
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proportion as the holders of common stock of the Corporation are receiving
cash or debt securities, or equity securities in the surviving entity or
other entity.
4. Voting Rights. The Series D Preferred Stock shall have voting
rights equal to 3,166,667 shares of the Company's common stock on all
matters on which the common stock votes.
5. Conversion Rights. The Series D Preferred Stock shall be
convertible into Common Stock immediately as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section 5, a Holder shall have the right at such
Holder's option at any time or from time to time, to convert any of such
shares of Series D Preferred Stock into fully paid and non-assessable
shares of Common Stock at the then Conversion Rate (as hereinafter
defined), plus accrued and unpaid dividends upon the terms hereinafter set
forth.
(b) Conversion Rate. Each share of Preferred Stock is convertible into
thirty-three and one-third (33 1/3) shares of common stock, subject to
adjustment as set forth in Section 5(d) hereof.
(c) Mechanics of Conversion. The Holder may exercise the conversion
right specified in Section 5(a) by giving written notice to the
Corporation, that the Holder elects to convert a stated number of shares of
Series D Preferred Stock into a stated number of shares of Common Stock,
and by surrendering the certificate or certificates representing the Series
D Preferred Stock so to be converted, duly endorsed to the Corporation or
in blank, to the Corporation at its principal office (or at such other
office as the Corporation may designate by written notice, postage prepaid,
to all Holders) at any time during its usual business hours on or before
the Conversion Date (as defined below), together with a statement of the
name or names (with addresses) of the person or persons in whose name the
certificate or certificates of Common Stock shall be issued.
(1) Conversion Deemed Effective. Conversion shall be deemed to
have been effected on the date when delivery of notice of an election
to convert and certificates for shares are made and such date is
referred to as the "Conversion Date"; provided, however, that any such
surrender on any date when the stock transfer books of the Corporation
shall be closed shall constitute the person or persons in whose name
or names the certificates for such shares are to be issued as the
record holder or holders thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books
are open.
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(2) Issuance of Common Stock; Effect of Conversion. Promptly
after receipt from a Holder of the written notice referred to in
Section 5(c) and surrender of the certificate or certificates
representing the share or shares of Series D Preferred Stock to be
converted, the Corporation shall cause to be issued and delivered to
said holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of shares of
Common Stock issuable upon the conversion of such share or shares.
(d) Conversion Rate Adjustments. The Conversion Rate shall be subject
to adjustment from time to time as follows:
(1) Consolidation, Merger, Sale, Lease or Conveyance. In case of
any consolidation with or merger of the corporation with or into
another corporation, or in case of any sale, lease or conveyance to
another corporation of the assets of the Corporation as an entirety or
substantially as an entirety, each share of Series D Preferred Stock
shall after the date of such consolidation, merger, sale, lease or
conveyance be convertible into the number of shares of stock or other
securities or property (including cash) to which the Common Stock
issuable (at the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of such share of Series D Preferred Stock
would have been entitled upon such consolidation, merger, sale, lease
or conveyance; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of
the holder of the shares of Series D Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or property
thereafter deliverable on the conversion of the shares of Series D
Preferred Stock.
(2) Stock Dividends, Subdivisions, Reclassification or
Combinations. If the Corporation shall (i) declare a dividend or make
a distribution on its Common Stock in shares of its Common Stock, (ii)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Rate in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the holder of any shares of Series D Preferred Stock surrendered
for conversion after such date shall be entitled to receive the number
of shares of Common Stock which he would have owned or been entitled
to receive had such Series D Preferred Stock been converted
immediately prior to such date. Successive adjustments in the
Conversion Rate shall be made whenever any event specified above shall
occur.
(e) Fractional Shares. No fractional shares of Common Stock or
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scrip shall be issued upon conversion of shares of Series D Preferred
Stock. If more than one share of Series D Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the number
of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares Series D Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of Series D
Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to that fractional interest of
the then current market price.
(f) Treasury Stock. For the purposes of this Section 5, the sale or
other disposition of any Common Stock theretofore held in the Corporation's
treasury shall be deemed to be an issuance thereof.
(g) Costs. The Holder shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of
shares of Common Stock upon conversion of any shares of Series D Preferred
Stock; provided further that the Corporation shall not be required to pay
any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other
than that of the holder of the shares of Series D Preferred Stock in
respect of which such shares are being issued.
(h) Reservation of Shares. The Corporation shall reserve at all times
so long as any shares of Series D Preferred Stock remain outstanding, free
from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the
purpose of effecting the conversion of the shares of Series D Preferred
Stock, sufficient shares of Common Stock to provide for the conversion of
all outstanding shares of Series D Preferred Stock.
(i) Approvals. If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Series D Preferred Stock require
registration with or approval of any governmental authority under any
Federal or state law before such shares may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as
expeditiously as possible endeavor to secure such registration or approval,
as the case may be. If, and so long as, any Common Stock into which the
shares of Series D Preferred Stock are then convertible is listed on any
national securities exchange, the Corporation will, if permitted by the
rules of such exchange, list and keep listed on such exchange, upon
official notice of issuance, all shares of such Common Stock issuable upon
conversion.
(j) Valid Issuance. All shares of Common Stock which may be
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issued upon conversion of shares of Series D Preferred Stock will upon
issuance by the Corporation be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof, and the Corporation shall take no action which will
cause a contrary result.
6. Covenants. In addition to any other rights provided by law, so long
as any Series D Preferred Stock is outstanding, the Corporation, without
first obtaining the affirmative vote or written consent of the holders of
not less than two-thirds of such outstanding shares of Series D Preferred
Stock, will not:
(a) amend or repeal any provision of, or add any provision to, the
Corporation's Certificate of Incorporation or By-Laws if such action would
alter adversely the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, any Series D Preferred Stock, or
increase the number of shares of Series D Preferred Stock authorized
hereby;
(b) authorize or issue shares of any class or series of stock having
any preference or priority as to assets or other rights superior to any
such preference or priority, other than dividends, of the Series D
Preferred Stock, or authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock
of the Corporation having any preference or priority as to assets or other
rights superior to any such preference or priority, other than dividends,
of the Series D Preferred Stock; or
(c) reclassify any class or series of any stock junior in liquidation
rights to the Series D Preferred Stock ("Junior Stock") into stock in
parity with the Series D Preferred Stock with respect to liquidation rights
or stock senior to the Series D Preferred Stock with respect to liquidation
rights ("Senior Stock") or reclassify any series of Junior Stock into
Senior Stock.
7. No Preemptive Rights. No holders of Series D Preferred Stock, nor
of the security convertible into, nor of any warrant, option or right to
purchase, subscribe for or otherwise acquire Series D Preferred Stock,
whether now or hereafter authorized, shall, as such holder, have any
preemptive right whatsoever to purchase, subscribe for or otherwise
acquire, stock of any class of the Corporation nor of any security
convertible into, nor of any warrant, option or right to purchase,
subscribe for or otherwise acquire, stock of any class of the Corporation,
whether now or hereafter authorized.
8. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Series D Preferred Stock shall not have any preferences
or relative,
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participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be
amended from time to time) and in the Corporation's Certificate of
Incorporation. The Shares of Series D Preferred Stock shall have no
preemptive or subscription rights.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
10. Severability of Provisions. If any right, preference or limitation
of the Preferred Stock set forth in this Certificate (as such Certificate
may be amended from time to time) is invalid, unlawful or incapable of
being enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain
in full force and effect, and no right, preference or limitation herein set
forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
11. Status of Reacquired Shares. Shares of Series D Preferred Stock
which have been issued and reacquired in any manner shall (upon compliance
with any applicable provisions of the laws of the State of Delaware) have
the status of authorized and unissued shares of Series D Preferred Stock
issuable in series undesignated as to series and may be redesignated and
reissued.
4. The Amended and Restated Certificate of Designation was duly adopted by
the unanimous written consent of the board of directors of the corporation on
February 18, 1998, and adopted and approved by the holders of all of the
corporation's outstanding Series D Preferred Stock, being the only class of the
corporation's stock entitled to vote thereon, on February 19, 1998, in
accordance Section 151 of the Delaware General Corporation Law.
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IN WITNESS WHEREOF, the corporation has caused this certificate to be
signed in its name and on its behalf by its President and attested to this 20th
day of February, 1998, and that the undersigned declares under penalty of
perjury that this certificate is the act and deed of the corporation and that
the facts stated herein are true.
DIPLOMAT CORPORATION
By: /s/ Jonathan Rosenberg
-------------------------------
Jonathan Rosenberg, President
ATTESTED
/s/ Stuart A. Leiderman
- ---------------------------------
Stuart A. Leiderman
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DIPLOMAT CORPORATION
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 2nd day of February, 1998 by and
between DIPLOMAT CORPORATION, a Delaware corporation (hereinafter referred to as
"Employer") and LEW MAGRAM LTD., a New York corporation and wholly owned
subsidiary of Employer (hereinafter referred to as "Magram"), and WARREN GOLDEN,
(hereinafter referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as its Executive Vice
President and Chief Operating Officer and Magram wishes to employ Employee as
its Executive Vice President; and
WHEREAS, Employee is willing to be employed in the manner provided for
herein, and to perform the duties provided for herein upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Employee. Employer hereby employs Employee as Executive
Vice President and Chief Operating Officer and Magram hereby employs Employee as
Executive Vice President.
2. Term. The term of this Agreement shall commence on the execution hereof
(the "Commencement Date") and expire three (3) years from such date (which, with
renewals, if any, the "Term"). Each 12 month period from the Commencement Date
forward during the Term shall be referred to as an "Annual Period." After three
years from the Commencement Date, this Agreement shall automatically renew
annually unless either Employer or Employee gives notice not to renew at least
one hundred eighty (180) days prior to the end of the applicable Annual Period.
During the Term, Employee shall devote substantially all of his business time
and efforts to Employer and its subsidiaries and affiliates.
3. Duties. Employee hereby agrees that, throughout the period of his
employment hereunder, he shall devote his business time, attention, knowledge
and skills, diligently in furtherance of the business of Employer and Magram,
shall perform the duties assigned to him by the President and Board of Directors
of Employer and Magram consistent with his executive positions with Employer and
Magram, respectively, and shall observe and carry out such rules and
regulations, policies and directions as Employer and Magram may from time to
time establish to the extent consistent herewith. During the term of this
Agreement, Employee shall do such traveling as may be reasonably required of him
in the performance of his duties on behalf of Employer consistent with travel
during periods prior to the date hereof. Employee shall be available to confer
and consult with and advise the officers and directors of Employer and Magram at
such times during
<PAGE>
business hours that may be reasonably required by Employer and Magram. Employee,
in his capacity as an employee of Employer shall report directly and solely to
the President of Employer, and, in his capacity as an employee of Magram shall
report directly and solely to the President of Magram.
4. Compensation.
(a) Employee shall be paid a minimum of $200,000 for each Annual Period
such amount to be increased, if Employer is profitable for the fiscal year
ending September 30, 1998, in an amount determined by the majority of the
noninterested members of the Board of Employer excluding Employee at the Board's
discretion. Employee shall be paid periodically in accordance with the policies
of the Employer during the term of this Agreement, but not less frequently than
monthly. As an executive officer of Employer, Employee is eligible for an annual
bonus, if any, which will be determined and paid in accordance with policies set
from time to time by the Board of Employer. As an executive officer of Magram,
Employee is eligible for an annual bonus, if any, which will be determined and
paid in accordance with policies set from time to time by the majority of the
non interested members of the Board of Magram, excluding Employee. Such bonuses
are in addition to amounts received from the Total Bonus Pool pursuant to
Section 10 hereof.
(b) Employee shall be entitled to participate in and receive the benefits
of all pension, profit-sharing, deferred compensation, retirement,
hospitalization, insurance, medical or dental or other benefit plan or
arrangement generally available to executive employees of Employer as may now or
hereafter exist; provided that Employer shall provide Employee medical benefits
consistent with Lew Magram Ltd.'s former practices. Employee shall also be
entitled to participate in or receive all other benefits and perquisites
generally available to senior executives of Employer that may be in effect from
time to time during the Employee's employment hereunder. Employer shall be under
no obligation to institute or continue the existence of any such employee plan,
benefit or perquisite. Employer shall consider adopting a deferred
compensation/retirement benefits plan, in which, upon adoption, Employee will be
permitted to participate.
5. Expenses. Employer shall reimburse Employee, promptly upon presentation
of receipts or vouchers thereof, for all expenses reasonably incurred by him in
connection with the performance of his duties hereunder and the business of
Employer, in accordance with policies of Employer from time to time in effect.
Until expiration of the current automobile lease, Employer shall furnish
Employee a luxury automobile for so long as Employee shall remain in the employ
of Employer for his exclusive use in connection with the business of Employer by
paying the existing lease payments, insurance and all costs incident to the
maintenance and operation of such automobile. After the current lease expires,
Employee will be entitled to a similar automobile procedurally consistent with
Parent's policies. Employer shall pay all expenses incident to the maintenance
and operation of such automobile, including, without limitation, insurance,
gasoline, oil, and repairs, the costs of furnishing such automobile and of such
maintenance and operation not to exceed $20,000 per Annual Period. Employer
shall also pay the cost of a
2
<PAGE>
parking space for Employee's automobile in a facility as proximate to Employer's
New York office as is practicable, where needed. Employer shall also provide
Employee with a cellular phone.
6. Vacation. Employee shall be entitled to receive three (3) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.
7. Employee's Representations. Employee is free to enter into this
Employment Agreement and to perform each of the provisions contained herein.
Employee represents and warrants that Employee is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Employment
Agreement, and that Employee's execution and performance of this Employment
Agreement is not a violation or breach of any agreement between Employee and any
other person or entity.
8. Nondisclosure of Confidential Information; Ownership of Intellectual
Property Rights; Non Competition; Covenant Not to Compete.
(a) Nondisclosure of Confidential Information. During the term of this
Employment Agreement and at all times thereafter, Employee will keep
confidential and will not directly or indirectly divulge to anyone nor use
or otherwise appropriate for Employee's own benefit, or on behalf of any
other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information (as defined herein). For this purpose,
"Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description relating to the
business of Employer provided that such information is not and does not in
the future become known or available to third parties or general economic
trade information known to the industry, both of which does not arise as a
result of a disclosure by Employee or his agents.
(b) Employer Materials. All reports and analysis, designs, drawings,
contracts, contractual arrangements, specifications, computer software,
computer hardware and other equipment, computer printouts, computer disks,
documents, memoranda, notebooks, correspondence, files, lists and other
records, and the like, and all photocopies or other reproductions thereof,
relating to the business of Employer which Employee shall prepare, use,
construct, observe, possess or control, except Employee copies of all such
documents which pertain to Employee ("Employee Materials"), shall be and
remain the sole property of Employer. Upon termination of this Employment
Agreement, Employee shall deliver promptly to Employer all such Employer
Materials.
(c) Certain Restrictions on Business Activities. During the term of
this Employment Agreement, Employee agrees that:
(i) Business Activities. He will not, directly or indirectly, own
an interest in, operate, join, control or participate in, or be
connected as an officer, employee, agent,
3
<PAGE>
independent contractor, partner, shareholder or principal of any
corporation, partnership, proprietorship, firm, association, person or
other entity providing services and/or products or a combination
thereof which directly or indirectly compete with Employer's business,
and he will not undertake planning for or organization of any business
activity directly competitive with Employer's business, except for the
period after notice of non-renewal of Employee's employment, or
combine or conspire with other employees or representatives of
Employer's business for the purpose of organizing any such competitive
business activity, except the purchase of less than four percent (4%)
of the stock of a publicly traded company which is not affiliated with
Employer.
(ii) Solicitation of Employees, Etc. During the term of this
Agreement and six (6) months thereafter, he will not, directly or
indirectly or by action in concert with others, induce or influence
(or seek to induce or influence) any person who is engaged (as an
employee, agent, independent contractor or otherwise) by Employer to
terminate his or her employment or engagement.
(d) Covenant Not to Compete. Employee covenants and agrees that, if
Employee's employment with Employer is terminated other than by Employer
without Cause (as defined herein) at any time, for a period of six (6)
months after the date of such termination, Employee will not engage or be
engaged, in any capacity, directly or indirectly, including but not limited
as employee, agent, consultant, manager, executive, owner or stockholder
(except as a passive investor holding less than a four percent (4%) equity
interest in any enterprise the securities of which are publicly traded) in
any business entity doing business in the United States engaged in direct
competition with the business conducted by Employer on the date of
termination. This Covenant Not to Compete shall survive the termination or
expiration of the other provisions of this Employment Agreement. If any
court determines that this Covenant Not to Compete, or any part thereof, is
unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
(e) Severability. Employee agrees, in the event that any provision of
this Section 8 or any word, phrase, clause, sentence or other portion
thereof shall be held to be unenforceable or invalid for any reason, such
provision or portion thereof shall be modified or deleted in such a manner
so as to make this Section 8 as modified legal and enforceable to the
fullest extent permitted under applicable laws. The validity and
enforceability of the remaining provisions or portions thereof shall not be
affected thereby and shall remain valid and enforceable to the fullest
extent permitted under applicable laws. A waiver of any breach of the
provisions of this Section 8 shall not be construed as a waiver of any
subsequent breach of the same or any other provision.
9. Termination.
(a) Termination by Employer.
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the
Employee in conduct that
4
<PAGE>
constitutes activity in direct competition with Employer's businesses;
(B) the conviction of Employee for the commission of a felony; (C) the
habitual abuse of alcohol or controlled substances; (D) deliberate
actions taken by Employee to the material detriment of Employer;
and/or (E) material breach of this Agreement. Notwithstanding anything
to the contrary in this Section 9(a)(i), Employer may not terminate
Employee's employment under this Agreement for Cause unless Employee
shall have first received notice from the Board advising Employee of
the specific acts or omissions alleged to constitute Cause, and such
acts or omissions continue after Employee shall have had a reasonable
opportunity (at least 20 days from the date Employee receives the
notice from the Board) to correct the acts or omissions so complained
of.
(ii) In the event that during the term of his employment with
Employer, Employee shall become Disabled (as that term is defined
herein), Employer may terminate this Agreement and Employee's
employment hereunder at any time upon 10 days' written notice to
Employee and Employee shall be entitled to receive disability payments
during the succeeding 12-month period at a rate equal to one-half of
the rate of the base salary as provided in Section 4(a) to which he
was theretofore entitled, payable in equal installments no less
frequently than monthly. For the purposes of this Agreement, Employee
shall be deemed to have become Disabled when by reason of his physical
or mental incapacity, Employee shall not perform his duties hereunder
for a period of four consecutive months or for an aggregate of 120
days in any consecutive period of six months. Any proceeds of
disability insurance policies or plans maintained by Employer, in
addition to the contributory state mandated minimum coverage policy,
for the benefit of Employee shall be paid to Employee and shall reduce
on a dollar for dollar basis the obligations of Employer under this
Section 9.
(iii) This Employment Agreement and Employer's obligations
hereunder shall terminate upon Employee's death. Upon termination for
death, Employer shall continue to pay the compensation payments
pursuant to Section 4(a) to the surviving spouse of Employee (or if
there is none to Employee's estate) for the succeeding six (6) months.
(b) Termination by Employee. Employee shall have the right to
terminate his employment under this Agreement upon 30 days' notice to
Employer given within 90 days following the occurrence of any of the
following events:
(A) Employer acts to materially reduce Employee's duties and
responsibilities hereunder.
(B) A reduction in Employee's rate of base compensation, the
failure to pay Employee a bonus due under Section 10 hereof, or
material reduction in Employee's other benefits; or
(C) A material breach of this Agreement by Employer, which is not
cured within thirty (30) days of written notice of such breach by
Employer.
5
<PAGE>
If Employer shall terminate Employee's employment other than due to his death or
disability or for Cause (as defined in Section 9(a)(i) of this Agreement), or if
Employee shall terminate this Agreement under Section 9(b), Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain for
the remainder of the Term as it may be extended from time to time.
10. Bonus. Each of Employee, Irving Magram and Stephanie Sobel
(collectively the "Total Bonus Pool Participants") shall be entitled to a
portion of an amount equal to ten percent (10%) of Magram's earnings before
income taxes up to a maximum of $150,000 per Annual Period ("Total Bonus Pool").
The allocation of the Total Bonus Pool to each Total Bonus Pool Participant
shall be as follows: Employee - 40%; Irving Magram - 40%; Stephanie Sobel - 20%.
The Total Bonus Pool shall be payable within 90 days after the end of Magram's
fiscal year commencing with the fiscal year ended September 30, 1998. So long as
any Total Bonus Pool Participant is an employee of Magram, the full amount of
the Total Bonus Pool shall be dispersed to the Total Bonus Pool Participants
annually.
11. Excise Tax. In the event that any payment or benefit received or to be
received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
12. Arbitration. Any controversies between Employer and Employee involving
the construction or application of any of the terms, provisions or conditions of
this Agreement, save and except for any breaches arising out of Sections 7 and 8
hereof, shall on the written request of either party served on the other be
submitted to arbitration. Such arbitration shall comply with and be governed by
the rules of the American Arbitration Association. An arbitration demand must be
made within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right to
arbitration along with such claim shall be considered to have been waived. An
arbitrator shall be selected according to the procedures of the American
Arbitration Association. The cost of arbitration shall be born by the losing
party or in such proportions as the arbitrator shall decide. The arbitrator
shall have no authority to add to, subtract from or otherwise modify the
provisions of this Agreement, or to award punitive damages to either party.
13. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
6
<PAGE>
14. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the transactions contemplated herein and supersedes,
effective as of the date hereof any prior agreement or understanding between
Employer and Employee with respect to Employee's employment by Employer. The
unenforceability of any provision of this Agreement shall not effect the
enforceability of any other provision. This Agreement may not be amended except
by an agreement in writing signed by the Employee and the Employer, or any
waiver, change, discharge or modification as sought. Waiver of or failure to
exercise any rights provided by this Agreement and in any respect shall not be
deemed a waiver of any further or future rights.
15. Assignment. This Agreement shall not be assigned to other parties.
16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of New York.
17. Notices. All notices, responses, demands or other communications under
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered by hand; (b) sent be telex or telefax, (with receipt confirmed),
provided that a copy is mailed by registered or certified mail, return receipt
requested; or (c) received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:
(i) if to the Employer:
Diplomat Corporation
25 Kay Fries Drive
Stony Point, New York 10980
Attention: Jonathan Rosenberg
Telefax: (914) 786-8727
Telephone: (914) 786-5552
With a copy to:
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
Attention: Jay M. Kaplowitz, Esq.
Telefax: (212) 980-5192
Telephone: (212) 752-9700
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<PAGE>
(ii) if to the Employee:
Warren Golden
703 Hollywood Avenue
Bronx, New York 10465
Telefax: (718) 792-2423
Telephone: (718) 828-6991
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Joel Yunis
Telefax: (212) 940-8776
Telephone: (212) 940-8800
18. Severability of Agreement. Should any part of this Agreement for any
reason be declared invalid by a court of competent jurisdiction, such decision
shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.
[Signatures on following page]
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
DIPLOMAT CORPORATION
By: /s/ JONATHAN ROSENBERG
---------------------------------------
Jonathan Rosenberg, President
LEW MAGRAM LTD.
By: /s/ JONATHAN ROSENBERG
---------------------------------------
Jonathan Rosenberg, Vice President
/s/ WARREN GOLDEN
---------------------------------------
Warren Golden
9
<PAGE>
February 18, 1998
Magram Acquisition Corporation Diplomat Corporation
25 Kay Fries Drive 25 Kay Fries Drive
Stony Point, New York 10980 Stony Point, New York 10980
Lew Magram, Ltd. Warren Golden
414 Alfred Avenue 703 Hollywood Avenue
Teaneck, New Jersey 07666 Bronx, New York 10465
Irving Magram Stephanie Sobel
56 Huyler Landing 21 Alice Avenue
Cresskill, New Jersey 07262 Merrick, New York 11566
1. Reference is made to that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 23, 1997 among Lew Magram Ltd. ("Lew Magram"),
Diplomat Corporation ("Diplomat") and Magram Acquisition Corporation ("Magram
Acquisitions"), and to the Employment Agreements (collectively, the "Employment
Agreements"), dated as of February 2, 1998 and executed in connection with the
Merger Agreement, among Lew Magram Ltd. and Diplomat Corporation on the one hand
and Irving Magram, Warren Golden and Stephanie Sobel, respectively, on the other
hand. Terms used but not otherwise defined herein shall have those meanings set
forth in the Merger Agreement.
2. In addition to any salary, bonuses or incentive compensation provided for or
contemplated in the Employment Agreements, the undersigned agree to amend the
Employment Agreements to reflect the following terms:
(a) During the fiscal year ending September 30, 1998, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If, for the fiscal year ending September 30, 1998, Lew Magram Ltd.
shall have net income determined in accordance with generally accepted
accounting principles ("GAAP") consistently applied, then Irving
Magram, Warren Golden and Stephanie Sobel shall, immediately after the
end of such fiscal year and completion of financial statements,
receive further lump-sum salary payments of $15,000, $15,000 and
$5,000, respectively.
(b) During the fiscal year ending September 30, 1999, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments, over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If for the fiscal year ending September 30, 1999 Lew Magram Ltd. shall
have net income determined in accordance with GAAP consistently
applied, then Irving Magram, Warren Golden and Stephanie Sobel shall,
immediately after the end of such fiscal year and completion of
financial statements, receive further lump-sum salary payments of
$15,000, $15,000 and $5,000, respectively, and during the fiscal year
ending September 30, 2000, additional base salary payments of $50,000,
$50,000 and
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<PAGE>
$20,000, respectively, over and above those amounts set forth in their
respective Employment Agreements with respect to the fiscal year
ending September 30, 2000.
(c) If for the fiscal year ending September 30, 1999 Lew Magram Ltd.
does not have net income, determined in accordance with GAAP
consistently applied, then the lump-sum payments provided for in the
second sentence of paragraph (b) hereof shall not be made and the
respective salaries of Irving Magram, Warren Golden and Stephanie
Sobel for the fiscal year ending September 30, 2000 shall revert to
those amounts set forth in their respective Employment Agreements with
respect the fiscal year ending September 30, 2000.
3. The Employment Agreements, as hereby amended, shall remain in full force and
effect in accordance with their respective provisions. The salary increases
provided for in paragraph 2 hereof shall not diminish or reduce any other salary
increases, bonuses or benefits to which Irving Magram, Warren Golden or
Stephanie Sobel may be entitled pursuant to their respective Employment
Agreements.
4. The undersigned further agree that the terms and provisions of the
Certificate of Designations for the Series D Preferred Stock of Diplomat shall
be amended to provide that no dividends shall be payable thereon, except and to
the extent of dividends payable on the Diplomat Common Stock, in which event
dividends on the Series D Preferred Stock shall be paid in the same amounts as
paid on the Diplomat Common Stock equivalent of the Series D Preferred Stock.
This agreement may be executed multiple counterparts, each of which shall
be deemed an original.
Agreed:
Diplomat Corporation Magram Acquisition Corporation
By_/s/_________________ By_/s/_________________________
Lew Magram, Ltd. /s/__________________________
By:/s/_____________________ Irving Magram
/s/________________________ /s/__________________________
Warren Golden Stephanie Sobel
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<PAGE>
LEW MAGRAM LTD.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 2nd day of February, 1998
by and between LEW MAGRAM LTD., a New York corporation (hereinafter referred to
as "Employer"), a wholly-owned subsidiary of Diplomat Corporation, a Delaware
corporation ("Parent") and IRVING MAGRAM, (hereinafter referred to as
"Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as President; and
WHEREAS, Employee is willing to be employed as President in the manner
provided for herein, and to perform the duties of President of Employer upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Employee. Employer hereby employs Employee as President.
2. Term. The term of this Agreement shall commence on the execution hereof
(the "Commencement Date") and expire three (3) years from such date (which, with
renewals, if any, the "Term"). Each 12 month period from the Commencement Date
forward during the Term shall be referred to as an "Annual Period." After three
years from the Commencement Date, this Agreement shall automatically renew
annually unless either Employer or Employee gives notice not to renew at least
one hundred eighty (180) days prior to the end of the applicable Annual Period.
During the Term, Employee shall devote substantially all of his business time
and efforts to Employer and its subsidiaries and affiliates.
3. Duties. Employee hereby agrees that, throughout the period of his
employment hereunder, he shall devote his business time, attention, knowledge
and skills, diligently in furtherance of the business of Employer, shall perform
the duties assigned to him by the Board of Directors of Employer (the "Board")
consistent with his executive position at Lew Magram Ltd. immediately prior to
the date hereof, and shall observe and carry out such rules and regulations,
policies and directions as Employer may from time to time establish to the
extent consistent herewith. During the term of this Agreement, Employee shall do
such traveling as may be reasonably required of him in the performance of his
duties on behalf of Employer consistent with travel during periods prior to the
date hereof. Employee shall be available to confer and consult with and advise
the officers and directors of Employer at such times during business hours that
may be required reasonably by Employer. Employee shall report directly and
solely to the Board of Directors of Employer.
<PAGE>
4. Compensation.
(a) Employee shall be paid a minimum of $200,000 for each Annual
Period such amount to be increased, if Parent is profitable for the fiscal
year ending September 30, 1998, in an amount determined by the majority of
the noninterested members of the Board excluding Employee at the Board's
discretion. Employee shall be paid periodically in accordance with the
policies of the Employer during the term of this Agreement, but not less
frequently than monthly. Employee is eligible for an annual bonus, if any,
which will be determined and paid in accordance with policies set from time
to time by the Board in addition to amounts received from the Total Bonus
Pool pursuant to Section 10 hereof.
(b) Employee shall be entitled to participate in and receive the
benefits of all pension, profit-sharing, deferred compensation, retirement,
hospitalization, insurance, medical or dental or other benefit plan or
arrangement generally available to executive employees of Parent or
Employer as may now or hereafter exist; provided that Employer shall
provide Employee medical benefits consistent with Lew Magram Ltd.'s former
practices. Employee shall also be entitled to participate in or receive all
other benefits and perquisites generally available to senior executives of
Employer or Parent that may be in effect from time to time during the
Employee's employment hereunder. Employer shall be under no obligation to
institute or continue the existence of any such employee plan, benefit or
perquisite. Parent shall consider adopting a deferred
compensation/retirement benefits plan, in which, upon adoption, Employee
will be permitted to participate.
5. Expenses. Employer shall reimburse Employee, promptly upon presentation
of receipts or vouchers thereof, for all expenses reasonably incurred by him in
connection with the performance of his duties hereunder and the business of
Employer, in accordance with policies of Employer from time to time in effect.
Until expiration of the current automobile lease, Employer shall furnish
Employee a luxury automobile for so long as Employee shall remain in the employ
of Employer for his exclusive use in connection with the business of Employer by
paying the existing lease payments, insurance, and all costs incident to the
maintenance and operation of such automobile. After the current lease expires,
Employee will be entitled to a similar automobile procedurally consistent with
Parent's policies. Employer shall pay all expenses incident to the maintenance
and operation of such automobile, including, without limitation, insurance,
gasoline, oil, and repairs, the costs of furnishing such automobile and of such
maintenance and operation not to exceed $20,000 per Annual Period. Employer
shall also pay the cost of a parking space for Employee's automobile in a
facility as proximate to Employer's New York office as is practicable, where
needed. Employer shall also provide Employee with a cellular phone.
6. Vacation. Employee shall be entitled to receive three (3) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.
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<PAGE>
7. Employee's Representations. Employee is free to enter into this
Employment Agreement and to perform each of the provisions contained herein.
Employee represents and warrants that Employee is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Employment
Agreement, and that Employee's execution and performance of this Employment
Agreement is not a violation or breach of any agreement between Employee and any
other person or entity.
8. Nondisclosure of Confidential Information; Ownership of Intellectual
Property Rights; Non Competition; Covenant Not to Compete.
(a) Nondisclosure of Confidential Information. During the term of this
Employment Agreement and at all times thereafter, Employee will keep
confidential and will not directly or indirectly divulge to anyone nor use
or otherwise appropriate for Employee's own benefit, or on behalf of any
other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information (as defined herein). For this purpose,
"Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description relating to the
business of Employer, provided that such information is not and does not in
the future become known or available to third parties or general economic
trade information known to the industry generally, both of which does not
arise as a result of a disclosure by Employee or his agents.
(b) Employer Materials. All reports and analysis, designs, drawings,
contracts, contractual arrangements, specifications, computer software,
computer hardware and other equipment, computer printouts, computer disks,
documents, memoranda, notebooks, correspondence, files, lists and other
records, and the like, and all photocopies or other reproductions thereof,
relating to the business of Employer which Employee shall prepare, use,
construct, observe, possess or control, except Employee copies of all such
documents which pertain to Employee ("Employee Materials"), shall be and
remain the sole property of Employer. Upon termination of this Employment
Agreement, Employee shall deliver promptly to Employer all such Employer
Materials.
(c) Certain Restrictions on Business Activities. During the term of
this Employment Agreement, Employee agrees that:
(i) Business Activities. He will not, directly or indirectly, own
an interest in, operate, join, control or participate in, or be
connected as an officer, employee, agent, independent contractor,
partner, shareholder or principal of any corporation, partnership,
proprietorship, firm, association, person or other entity providing
services and/or products or a combination thereof which directly or
indirectly compete with Employer's business, and he will not undertake
planning for or organization of any business activity directly
competitive with Employer's business, except for the period after
notice of non-renewal of Employee's employment, or combine or conspire
with other employees or representatives of Employer's business for the
purpose of organizing any such competitive business activity, except
the purchase of less than four percent (4%) of the stock of a publicly
traded company which is not affiliated with Employer.
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(ii) Solicitation of Employees, Etc. During the term of this
Agreement and six (6) months thereafter, he will not, directly or
indirectly or by action in concert with others, induce or influence
(or seek to induce or influence) any person who is engaged (as an
employee, agent, independent contractor or otherwise) by Employer to
terminate his or her employment or engagement.
(d) Covenant Not to Compete. Employee covenants and agrees that, if
Employee's employment with Employer is terminated other than by Employer
without Cause (as defined herein) at any time, for a period of six (6)
months after the date of such termination, Employee will not engage or be
engaged, in any capacity, directly or indirectly, including but not limited
as employee, agent, consultant, manager, executive, owner or stockholder
(except as a passive investor holding less than a four percent (4%) equity
interest in any enterprise the securities of which are publicly traded) in
any business entity doing business in the United States engaged in direct
competition with the business conducted by Employer on the date of
termination. This Covenant Not to Compete shall survive the termination or
expiration of the other provisions of this Employment Agreement. If any
court determines that this Covenant Not to Compete, or any part thereof, is
unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
(e) Severability. Employee agrees, in the event that any provision of
this Section 8 or any word, phrase, clause, sentence or other portion
thereof shall be held to be unenforceable or invalid for any reason, such
provision or portion thereof shall be modified or deleted in such a manner
so as to make this Section 8 as modified legal and enforceable to the
fullest extent permitted under applicable laws. The validity and
enforceability of the remaining provisions or portions thereof shall not be
affected thereby and shall remain valid and enforceable to the fullest
extent permitted under applicable laws. A waiver of any breach of the
provisions of this Section 8 shall not be construed as a waiver of any
subsequent breach of the same or any other provision.
9. Termination.
(a) Termination by Employer.
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the
Employee in conduct that constitutes activity in direct competition
with Employer's businesses; (B) the conviction of Employee for the
commission of a felony; (C) the habitual abuse of alcohol or
controlled substances; (D) deliberate actions taken by Employee to the
material detriment of Employer; and/or (E) material breach of this
Agreement. Notwithstanding anything to the contrary in this Section
9(a)(i), Employer may not terminate Employee's employment under this
Agreement for Cause unless Employee shall have first received notice
from the Board advising Employee of the specific acts or omissions
alleged to constitute Cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (at least 20 days
from the date Employee receives the notice from the Board) to correct
the acts or omissions so complained of.
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(ii) In the event that during the term of his employment with
Employer, Employee shall become Disabled (as that term is defined
herein), Employer may terminate this Agreement and Employee's
employment hereunder at any time upon 10 days' written notice to
Employee and Employee shall be entitled to receive disability payments
during the succeeding 12-month period at a rate equal to one-half of
the rate of the base salary as provided in Section 4(a) to which he
was theretofore entitled, payable in equal installments no less
frequently than monthly. For the purposes of this Agreement, Employee
shall be deemed to have become Disabled when by reason of his physical
or mental incapacity, Employee shall not perform his duties hereunder
for a period of four consecutive months or for an aggregate of 120
days in any consecutive period of six months. Any proceeds of
disability insurance policies or plans maintained by Employer, in
addition to the contributory state mandated minimum coverage policy,
for the benefit of Employee shall be paid to Employee and shall reduce
on a dollar for dollar basis the obligations of Employer under this
Section 9.
(iii) This Employment Agreement and Employer's obligations
hereunder shall terminate upon Employee's death. Upon termination for
death, Employer shall continue to pay the compensation payments
pursuant to Section 4(a) to the surviving spouse of Employee (or if
there is none to Employee's estate) for the succeeding six (6) months.
(b) Termination by Employee. Employee shall have the right to
terminate his employment under this Agreement upon 30 days' notice to
Employer given within 90 days following the occurrence of any of the
following events:
(A) Employer acts to materially reduce Employee's duties and
responsibilities hereunder.
(B) A reduction in Employee's rate of base compensation, the
failure to pay Employee a bonus due under Section 10 hereof, or
material reduction in Employee's other benefits; or
(C) A material breach of this Agreement by Employer, which is not
cured within thirty (30) days of written notice of such breach by
Employer.
If Employer shall terminate Employee's employment other than due to his death or
disability or for Cause (as defined in Section 9(a)(i) of this Agreement), or if
Employee shall terminate this Agreement under Section 9(b), Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain for
the remainder of the Term as it may be extended from time to time.
10. Bonus. Each of Employee, Warren Golden and Stephanie Sobel
(collectively the "Total Bonus Pool Participants") shall be entitled to a
portion of an amount equal to ten percent (10%) of Employer's earnings before
income taxes up to a maximum of $150,000 per Annual Period ("Total Bonus Pool").
The allocation of the Total Bonus Pool to each Total Bonus Pool Participant
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shall be as follows: Employee - 40%; Warren Golden-40%; Stephanie Sobel-20%. The
Total Bonus Pool shall be payable within 90 days after the end of Employer's
fiscal year commencing with the fiscal year ended September 30, 1998. So long as
any Total Bonus Pool Participant is an employee of Employer, the full amount of
the Total Bonus Pool shall be dispersed to the Total Bonus Pool Participants
annually.
11. Excise Tax. In the event that any payment or benefit received or to be
received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
12. Arbitration. Any controversies between Employer and Employee involving
the construction or application of any of the terms, provisions or conditions of
this Agreement, save and except for any breaches arising out of Sections 7 and 8
hereof, shall on the written request of either party served on the other be
submitted to arbitration. Such arbitration shall comply with and be governed by
the rules of the American Arbitration Association. An arbitration demand must be
made within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right to
arbitration along with such claim shall be considered to have been waived. An
arbitrator shall be selected according to the procedures of the American
Arbitration Association. The cost of arbitration shall be born by the losing
party or in such proportions as the arbitrator shall decide. The arbitrator
shall have no authority to add to, subtract from or otherwise modify the
provisions of this Agreement, or to award punitive damages to either party.
13. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
14. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the transactions contemplated herein and supersedes,
effective as of the date hereof any prior agreement or understanding between
Employer and Employee with respect to Employee's employment by Employer. The
unenforceability of any provision of this Agreement shall not effect the
enforceability of any other provision. This Agreement may not be amended except
by an agreement in writing signed by the Employee and the Employer, or any
waiver, change, discharge or modification as sought. Waiver of or failure to
exercise any rights provided by this Agreement and in any respect shall not be
deemed a waiver of any further or future rights.
15. Assignment. This Agreement shall not be assigned to other parties.
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16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of New York.
17. Notices. All notices, responses, demands or other communications under
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered by hand; (b) sent be telex or telefax, (with receipt confirmed),
provided that a copy is mailed by registered or certified mail, return receipt
requested; or (c) received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:
(i) if to the Employer:
Diplomat Corporation
25 Kay Fries Drive
Stony Point, New York 10980
Attention: Jonathan Rosenberg
Telefax: (914) 786-8727
Telephone: (914) 786-5552
With a copy to:
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
Attention: Jay M. Kaplowitz, Esq.
Telefax: (212) 980-5192
Telephone: (212) 752-9700
(ii) if to the Employee:
Irving Magram
56 Huyler Landing
Cresskill, New Jersey 07626
Telefax:
Telephone:
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Joel Yunis
Telefax: (212) 940-8776
Telephone: (212) 940-8800
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18. Severability of Agreement. Should any part of this Agreement for any
reason be declared invalid by a court of competent jurisdiction, such decision
shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.
19. Guarantee. In order to induce Employee to execute and deliver this
Agreement, Parent hereby irrevocably and unconditionally guarantees the full,
prompt and complete performance of each and every obligation and liability of
Employer under this Agreement.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
LEW MAGRAM LTD.
By: /s/ JONATHAN ROSENBERG
------------------------------------
Jonathan Rosenberg, Vice President
/s/ IRVING MAGRAM
-------------------------------------
Irving Magram
As to Section 19.
DIPLOMAT CORPORATION
By: /s/ JONATHAN ROSENBERG
----------------------------------
Jonathan Rosenberg, President
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February 18, 1998
Magram Acquisition Corporation Diplomat Corporation
25 Kay Fries Drive 25 Kay Fries Drive
Stony Point, New York 10980 Stony Point, New York 10980
Lew Magram, Ltd. Warren Golden
414 Alfred Avenue 703 Hollywood Avenue
Teaneck, New Jersey 07666 Bronx, New York 10465
Irving Magram Stephanie Sobel
56 Huyler Landing 21 Alice Avenue
Cresskill, New Jersey 07262 Merrick, New York 11566
1. Reference is made to that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 23, 1997 among Lew Magram Ltd. ("Lew Magram"),
Diplomat Corporation ("Diplomat") and Magram Acquisition Corporation ("Magram
Acquisitions"), and to the Employment Agreements (collectively, the "Employment
Agreements"), dated as of February 2, 1998 and executed in connection with the
Merger Agreement, among Lew Magram Ltd. and Diplomat Corporation on the one hand
and Irving Magram, Warren Golden and Stephanie Sobel, respectively, on the other
hand. Terms used but not otherwise defined herein shall have those meanings set
forth in the Merger Agreement.
2. In addition to any salary, bonuses or incentive compensation provided for or
contemplated in the Employment Agreements, the undersigned agree to amend the
Employment Agreements to reflect the following terms:
(a) During the fiscal year ending September 30, 1998, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If, for the fiscal year ending September 30, 1998, Lew Magram Ltd.
shall have net income determined in accordance with generally accepted
accounting principles ("GAAP") consistently applied, then Irving
Magram, Warren Golden and Stephanie Sobel shall, immediately after the
end of such fiscal year and completion of financial statements,
receive further lump-sum salary payments of $15,000, $15,000 and
$5,000, respectively.
(b) During the fiscal year ending September 30, 1999, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments, over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If for the fiscal year ending September 30, 1999 Lew Magram Ltd. shall
have net income determined in accordance with GAAP consistently
applied, then Irving Magram, Warren Golden and Stephanie Sobel shall,
immediately after the end of such fiscal year and completion of
financial statements, receive further lump-sum salary payments of
$15,000, $15,000 and $5,000, respectively,
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and during the fiscal year ending September 30, 2000, additional base
salary payments of $50,000, $50,000 and $20,000, respectively, over
and above those amounts set forth in their respective Employment
Agreements with respect to the fiscal year ending September 30, 2000.
(c) If for the fiscal year ending September 30, 1999 Lew Magram Ltd.
does not have net income, determined in accordance with GAAP
consistently applied, then the lump-sum payments provided for in the
second sentence of paragraph (b) hereof shall not be made and the
respective salaries of Irving Magram, Warren Golden and Stephanie
Sobel for the fiscal year ending September 30, 2000 shall revert to
those amounts set forth in their respective Employment Agreements with
respect the fiscal year ending September 30, 2000.
3. The Employment Agreements, as hereby amended, shall remain in full force and
effect in accordance with their respective provisions. The salary increases
provided for in paragraph 2 hereof shall not diminish or reduce any other salary
increases, bonuses or benefits to which Irving Magram, Warren Golden or
Stephanie Sobel may be entitled pursuant to their respective Employment
Agreements.
4. The undersigned further agree that the terms and provisions of the
Certificate of Designations for the Series D Preferred Stock of Diplomat shall
be amended to provide that no dividends shall be payable thereon, except and to
the extent of dividends payable on the Diplomat Common Stock, in which event
dividends on the Series D Preferred Stock shall be paid in the same amounts as
paid on the Diplomat Common Stock equivalent of the Series D Preferred Stock.
This agreement may be executed multiple counterparts, each of which
shall be deemed an original.
Agreed:
Diplomat Corporation Magram Acquisition Corporation
By_/s/_________________ By_/s/_________________________
Lew Magram, Ltd. /s/__________________________
By:/s/_____________________ Irving Magram
/s/________________________ /s/__________________________
Warren Golden Stephanie Sobel
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<PAGE>
LEW MAGRAM LTD.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 2nd day of February, 1998 by and
between LEW MAGRAM LTD., a New York corporation (hereinafter referred to as
"Employer"), a wholly-owned subsidiary of Diplomat Corporation, a Delaware
corporation ("Parent") and STEPHANIE SOBEL, (hereinafter referred to as
"Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as Senior Vice President of
Merchandising; and
WHEREAS, Employee is willing to be employed as Senior Vice President of
Merchandising in the manner provided for herein, and to perform the duties of
Senior Vice President of Merchandising of Employer upon the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Employee. Employer hereby employs Employee as Senior Vice
President of Merchandising.
2. Term. The term of this Agreement shall commence on the execution hereof
(the "Commencement Date") and expire three (3) years from such date (which, with
renewals, if any, the "Term"). Each 12 month period from the Commencement Date
forward during the Term shall be referred to as an "Annual Period." After three
years from the Commencement Date, this Agreement shall automatically renew
annually unless either Employer or Employee gives notice not to renew at least
one hundred eighty (180) days prior to the end of the applicable annual period.
During the Term, Employee shall devote substantially all of her business time
and efforts to Employer and its subsidiaries and affiliates.
3. Duties. Employee hereby agrees that, throughout the period of her
employment hereunder, she shall devote her business time, attention, knowledge
and skills, diligently in furtherance of the business of Employer, shall perform
the duties assigned to her by the Board of Directors of Employer (the "Board")
consistent with her executive position at Lew Magram, Ltd. immediately prior to
the date hereof, and shall observe and carry out such rules and regulations,
policies and directions as Employer may from time to time establish. During the
term of this Agreement, Employee shall do such traveling as may be reasonably
required of her in the performance of her duties on behalf of Employer
consistent with travel during periods prior to the date hereof. Employee shall
be available to confer and consult with and advise the officers and directors of
Employer at such times during business hours that may be reasonably required by
Employer. Employee shall report directly and solely to the President of
Employer.
<PAGE>
4. Compensation.
(a) Employee shall be paid a minimum of $172,500 for each Annual
Period such amount to be increased, if Parent is profitable for the fiscal
year ending September 30, 1998, in an amount determined by the majority of
the noninterested members of the Board excluding Employee Board of
Directors at the Board's discretion. Employee shall be paid periodically in
accordance with the policies of the Employer during the term of this
Agreement, but not less frequently than monthly. Employee is eligible for
an annual bonus, if any, which will be determined and paid in accordance
with policies set from time to time by the Board in addition to amounts
received from the Total Bonus Pool pursuant to Section 10 hereof.
(b) Employee shall be entitled to participate in and receive the
benefits of all pension, profit-sharing, deferred compensation, retirement,
hospitalization, insurance, medical or dental or other benefit plan or
arrangement generally available to executive employees of Parent or
Employer as may now or hereafter exist; provided that Employer shall
provide Employee medical benefits consistent with Lew Magram Ltd.'s former
policies. Employee shall also be entitled to participate in or receive all
other benefits and perquisites generally available to senior executives of
Employer or Parent that may be in effect from time to time during the
Employee's employment hereunder. Employer shall be under no obligation to
institute or continue the existence of any such employee plan, benefit or
perquisite. Parent shall consider adopting a deferred
compensation/retirement benefits plan, in which, upon adoption, Employee
shall be permitted to participate.
5. Expenses. Employer shall reimburse Employee, promptly upon presentation
of receipts or vouchers thereof, for all expenses reasonably incurred by her in
connection with the performance of her duties hereunder and the business of
Employer, in accordance with policies of Employer from time to time in effect.
Until expiration of the current automobile lease, Employer shall furnish
Employee a standard size automobile or minivan automobile for so long as
Employee shall remain in the employ of Employer for her exclusive use in
connection with the business of Employer by paying the existing lease payments,
insurance and all costs incident to the maintenance and operation of such
automobile. After the current lease expires, Employee will be entitled to an
automobile procedurally consistent with Parent's policies. Employer shall pay
lease payments, insurance and maintenance not to exceed $8,000 per Annual
Period.
6. Vacation. Employee shall be entitled to receive three (3) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.
7. Employee's Representations. Employee is free to enter into this
Employment Agreement and to perform each of the provisions contained herein.
Employee represents and warrants that Employee is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Employment
Agreement, and that Employee's execution
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<PAGE>
and performance of this Employment Agreement is not a violation or breach of any
agreement between Employee and any other person or entity.
8. Nondisclosure of Confidential Information; Ownership of Intellectual
Property Rights; Non Competition; Covenant Not to Compete.
(a) Nondisclosure of Confidential Information. During the term of this
Employment Agreement and at all times thereafter, Employee will keep
confidential and will not directly or indirectly divulge to anyone nor use
or otherwise appropriate for Employee's own benefit, or on behalf of any
other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information (as defined herein). For this purpose,
"Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description relating to the
business of Employer, provided that such information is not and does not in
the future become known or available to third parties or general economic
trade information known to the industry generally, both of which does not
arise as a result of a disclosure by Employee or her agents.
(b) Employer Materials. All reports and analysis, designs, drawings,
contracts, contractual arrangements, specifications, computer software,
computer hardware and other equipment, computer printouts, computer disks,
documents, memoranda, notebooks, correspondence, files, lists and other
records, and the like, and all photocopies or other reproductions thereof,
relating to the business of Employer which Employee shall prepare, use,
construct, observe, possess or control, except Employee copies of all such
documents which pertain to Employee ("Employee Materials"), shall be and
remain the sole property of Employer. Upon termination of this Employment
Agreement, Employee shall deliver promptly to Employer all such Employer
Materials.
(c) Certain Restrictions on Business Activities. During the term of
this Employment Agreement, Employee agrees that:
(i) Business Activities. She will not, directly or indirectly,
own an interest in, operate, join, control or participate in, or be
connected as an officer, employee, agent, independent contractor,
partner, shareholder or principal of any corporation, partnership,
proprietorship, firm, association, person or other entity providing
services and/or products or a combination thereof which directly or
indirectly compete with Employer's business, and she will not
undertake planning for or organization of any business activity
directly competitive with Employer's business, except for the period
after notice of non-renewal of Employee's employment, or combine or
conspire with other employees or representatives of Employer's
business for the purpose of organizing any such competitive business
activity, except the purchase of less than four percent (4%) of the
stock of a publicly traded company which is not affiliated with
Employer.
(ii) Solicitation of Employees, Etc. During the form of this
Agreement and six (6) months thereafter, she will not, directly or
indirectly or by action in concert with others, induce or influence
(or seek to induce or influence) any person who is engaged (as an
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<PAGE>
employee, agent, independent contractor or otherwise) by Employer to
terminate his or her employment or engagement.
(d) Covenant Not to Compete. Employee covenants and agrees that, if
Employee's employment with Employer is terminated other than by Employer
without Cause (as defined herein) at any time, for a period of six (6)
months after the date of such termination, Employee will not engage or be
engaged, in any capacity, directly or indirectly, including but not limited
as employee, agent, consultant, manager, executive, owner or stockholder
(except as a passive investor holding less than a four percent (4%) equity
interest in any enterprise the securities of which are publicly traded) in
any business entity doing business in the United States engaged in direct
competition with the business conducted by Employer on the date of
termination. This Covenant Not to Compete shall survive the termination or
expiration of the other provisions of this Employment Agreement. If any
court determines that this Covenant Not to Compete, or any part thereof, is
unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
(e) Severability. Employee agrees, in the event that any provision of
this Section 8 or any word, phrase, clause, sentence or other portion
thereof shall be held to be unenforceable or invalid for any reason, such
provision or portion thereof shall be modified or deleted in such a manner
so as to make this Section 8 as modified legal and enforceable to the
fullest extent permitted under applicable laws. The validity and
enforceability of the remaining provisions or portions thereof shall not be
affected thereby and shall remain valid and enforceable to the fullest
extent permitted under applicable laws. A waiver of any breach of the
provisions of this Section 8 shall not be construed as a waiver of any
subsequent breach of the same or any other provision.
9. Termination.
(a) Termination by Employer.
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the
Employee in conduct that constitutes activity in direct competition
with Employer's businesses; (B) the conviction of Employee for the
commission of a felony; (C) the habitual abuse of alcohol or
controlled substances; (D) deliberate actions taken by Employee to the
material detriment of Employer; and/or (E) material breach of this
Agreement. Notwithstanding anything to the contrary in this Section
9(a)(i), Employer may not terminate Employee's employment under this
Agreement for Cause unless Employee shall have first received notice
from the Board advising Employee of the specific acts or omissions
alleged to constitute Cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (at least 20 days
from the date Employee receives the notice from the Board) to correct
the acts or omissions so complained of.
(ii) In the event that during the term of her employment with
Employer, Employee shall become Disabled (as that term is defined
herein), Employer may
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<PAGE>
terminate this Agreement and Employee's employment hereunder at any
time upon 10 days' written notice to Employee and Employee shall be
entitled to receive disability payments during the succeeding 12-month
period at a rate equal to one-half of the rate of the base salary as
provided in Section 4(a) to which she was theretofore entitled,
payable in equal installments no less frequently than monthly. For the
purposes of this Agreement, Employee shall be deemed to have become
Disabled when by reason of his physical or mental incapacity, Employee
shall not perform his duties hereunder for a period of four
consecutive months or for an aggregate of 120 days in any consecutive
period of six months. Any proceeds of disability insurance policies or
plans maintained by Employer, in addition to the contributory state
mandated minimum coverage policy, for the benefit of Employee shall be
paid to Employee and shall reduce on a dollar for dollar basis the
obligations of Employer under this Section 9.
(iii) This Employment Agreement and Employer's obligations
hereunder shall terminate upon Employee's death. Upon termination for
death, Employer shall continue to pay the compensation payments
pursuant to Section 4(a) to the surviving spouse of Employee (or if
there is none to Employee's estate) for the succeeding six (6) months.
(b) Termination by Employee. Employee shall have the right to
terminate her employment under this Agreement upon 30 days' notice to
Employer given within 90 days following the occurrence of any of the
following events:
(A) Employer acts to materially reduce Employee's duties and
responsibilities hereunder.
(B) A reduction in Employee's rate of base compensation, the
failure to pay Employee a bonus due under Section 10 hereof, or
material reduction Employee's other benefits; or
(C) A material breach of this Agreement by Employer, which is not
cured within thirty (30) days of written notice of such breach by
Employer.
If Employer shall terminate Employee's employment other than due to his death or
disability or for Cause (as defined in Section 9(a)(i) of this Agreement), or if
Employee shall terminate this Agreement under Section 9(b), Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment she may obtain for
the remainder of the Term as it may be extended from time to time.
10. Bonus. Each of Employee, Warren Golden and Irving Magram (collectively
the "Total Bonus Pool Participants") shall be entitled to a portion of an amount
equal to ten percent (10%) of Employer's earnings before income taxes up to a
maximum of $150,000 per Annual Period ("Total Bonus Pool"). The allocation of
the Total Bonus Pool to each Total Bonus Pool Participant shall be as follows:
Employee - 20%; Warren Golden - 40%; Irving Magram - 40%. The Total Bonus Pool
shall be payable within 90 days after the end of Employer's fiscal year
commencing with
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the fiscal year ended September 30, 1998. So long as any Total Bonus Pool
Participant is an employee of Employer, the full amount of the Total Bonus Pool
shall be dispersed to the Total Bonus Pool Participants annually.
11. Excise Tax. In the event that any payment or benefit received or to be
received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
12. Arbitration. Any controversies between Employer and Employee involving
the construction or application of any of the terms, provisions or conditions of
this Agreement, save and except for any breaches arising out of Sections 7 and 8
hereof, shall on the written request of either party served on the other be
submitted to arbitration. Such arbitration shall comply with and be governed by
the rules of the American Arbitration Association. An arbitration demand must be
made within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right to
arbitration along with such claim shall be considered to have been waived. An
arbitrator shall be selected according to the procedures of the American
Arbitration Association. The cost of arbitration shall be born by the losing
party or in such proportions as the arbitrator shall decide. The arbitrator
shall have no authority to add to, subtract from or otherwise modify the
provisions of this Agreement, or to award punitive damages to either party.
13. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
14. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the transactions contemplated herein and supersedes,
effective as of the date hereof any prior agreement or understanding between
Employer and Employee with respect to Employee's employment by Employer. The
unenforceability of any provision of this Agreement shall not effect the
enforceability of any other provision. This Agreement may not be amended except
by an agreement in writing signed by the Employee and the Employer, or any
waiver, change, discharge or modification as sought. Waiver of or failure to
exercise any rights provided by this Agreement and in any respect shall not be
deemed a waiver of any further or future rights.
15. Assignment. This Agreement shall not be assigned to other parties.
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16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of New York.
17. Notices. All notices, responses, demands or other communications under
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered by hand; (b) sent be telex or telefax, (with receipt confirmed),
provided that a copy is mailed by registered or certified mail, return receipt
requested; or (c) received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:
(i) if to the Employer:
Diplomat Corporation
25 Kay Fries Drive
Stony Point, New York 10980
Attention: Jonathan Rosenberg
Telefax: (914) 786-8727
Telephone: (914) 786-5552
With a copy to:
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
Attention: Jay M. Kaplowitz, Esq.
Telefax: (212) 980-5192
Telephone: (212) 752-9700
(ii) if to the Employee:
Stephanie Sobel
21 Alice Avenue
Merrick, New York 11566
Telefax:
Telephone:
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Joel Yunis
Telefax: (212) 940-8776
Telephone: (212) 940-8800
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18. Severability of Agreement. Should any part of this Agreement for any
reason be declared invalid by a court of competent jurisdiction, such decision
shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.
19. Guarantee. In order to induce Employee to execute and deliver this
Agreement, Parent hereby irrevocably and unconditionally guarantees the full,
prompt and complete performance of each and every obligation and liability of
Employer under this Agreement.
[Signatures on following page]
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IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
LEW MAGRAM LTD.
By: /s/ JONATHAN ROSENBERG
------------------------------------
Jonathan Rosenberg, Vice President
/s/ STEPHANIE SOBEL
------------------------------------
Stephanie Sobel
AS TO SECTION 19
DIPLOMAT CORPORATION
By: /s/ JONATHAN ROSENBERG
------------------------------------
Jonathan Rosenberg, President
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February 18, 1998
Magram Acquisition Corporation Diplomat Corporation
25 Kay Fries Drive 25 Kay Fries Drive
Stony Point, New York 10980 Stony Point, New York 10980
Lew Magram, Ltd. Warren Golden
414 Alfred Avenue 703 Hollywood Avenue
Teaneck, New Jersey 07666 Bronx, New York 10465
Irving Magram Stephanie Sobel
56 Huyler Landing 21 Alice Avenue
Cresskill, New Jersey 07262 Merrick, New York 11566
1. Reference is made to that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 23, 1997 among Lew Magram Ltd. ("Lew Magram"),
Diplomat Corporation ("Diplomat") and Magram Acquisition Corporation ("Magram
Acquisitions"), and to the Employment Agreements (collectively, the "Employment
Agreements"), dated as of February 2, 1998 and executed in connection with the
Merger Agreement, among Lew Magram Ltd. and Diplomat Corporation on the one hand
and Irving Magram, Warren Golden and Stephanie Sobel, respectively, on the other
hand. Terms used but not otherwise defined herein shall have those meanings set
forth in the Merger Agreement.
2. In addition to any salary, bonuses or incentive compensation provided for or
contemplated in the Employment Agreements, the undersigned agree to amend the
Employment Agreements to reflect the following terms:
(a) During the fiscal year ending September 30, 1998, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If, for the fiscal year ending September 30, 1998, Lew Magram Ltd.
shall have net income determined in accordance with generally accepted
accounting principles ("GAAP") consistently applied, then Irving
Magram, Warren Golden and Stephanie Sobel shall, immediately after the
end of such fiscal year and completion of financial statements,
receive further lump-sum salary payments of $15,000, $15,000 and
$5,000, respectively.
(b) During the fiscal year ending September 30, 1999, Irving Magram,
Warren Golden and Stephanie Sobel shall receive additional base salary
payments, over and above those amounts set forth in their respective
Employment Agreements of $35,000, $35,000 and $15,000, respectively.
If for the fiscal year ending September 30, 1999 Lew Magram Ltd. shall
have net income determined in accordance with GAAP consistently
applied, then Irving Magram, Warren Golden and Stephanie Sobel shall,
immediately after the end of such fiscal year and completion of
financial statements, receive further lump-sum salary payments of
$15,000, $15,000 and $5,000, respectively, and during the fiscal year
ending September 30, 2000, additional base salary payments of $50,000,
$50,000 and
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$20,000, respectively, over and above those amounts set forth in their
respective Employment Agreements with respect to the fiscal year
ending September 30, 2000.
(c) If for the fiscal year ending September 30, 1999 Lew Magram Ltd.
does not have net income, determined in accordance with GAAP
consistently applied, then the lump-sum payments provided for in the
second sentence of paragraph (b) hereof shall not be made and the
respective salaries of Irving Magram, Warren Golden and Stephanie Sobel
for the fiscal year ending September 30, 2000 shall revert to those
amounts set forth in their respective Employment Agreements with
respect the fiscal year ending September 30, 2000.
3. The Employment Agreements, as hereby amended, shall remain in full force and
effect in accordance with their respective provisions. The salary increases
provided for in paragraph 2 hereof shall not diminish or reduce any other salary
increases, bonuses or benefits to which Irving Magram, Warren Golden or
Stephanie Sobel may be entitled pursuant to their respective Employment
Agreements.
4. The undersigned further agree that the terms and provisions of the
Certificate of Designations for the Series D Preferred Stock of Diplomat shall
be amended to provide that no dividends shall be payable thereon, except and to
the extent of dividends payable on the Diplomat Common Stock, in which event
dividends on the Series D Preferred Stock shall be paid in the same amounts as
paid on the Diplomat Common Stock equivalent of the Series D Preferred Stock.
This agreement may be executed multiple counterparts, each of which shall
be deemed an original.
Agreed:
Diplomat Corporation Magram Acquisition Corporation
By_/s/_________________ By_/s/_________________________
Lew Magram, Ltd. /s/__________________________
By:/s/_____________________ Irving Magram
/s/________________________ /s/__________________________
Warren Golden Stephanie Sobel
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LEASE
THIS LEASE AGREEMENT made the 15th day of May, 1992, between FRANKLIN
ASSOCIATES residing or located at 257 So. Middletown Road, Nanuet, New York
10954, herein designated as Landlord, and LEW MAGRAM, LTD., a New York
corporation, residing or located at 516 West 34th Street, New York, New York
10001, herein designated as Tenant;
WITNESSETH THAT:
The Landlord does hereby lease to the Tenant and the Tenant does hereby
rent from the Landlord, the following described Demised Premises: a portion of
the premises located at 414 Alfred Avenue, Teaneck, New Jersey (consisting of
approximately 48,513 square feet in a Building which has a total of 72,000
square feet), and outlined in the building plan annexed hereto as Exhibit A,
together with the right to use in common with other Tenants, the driveways,
parking areas, and other common facilities, ("Premises" or "Demised Premises") ,
for a term of Seven (7) Years commencing on September 1, 1992, (the
"Commencement Date"), and ending on August 31, 1999, (the "Termination Date") to
be used and occupied only and for no other purpose than mail order operations
center, warehousing and distribution of apparel, the operation of a retail
outlet store and offices appurtenant to and necessary for same, subject however
to all applicable zoning ordinances and rules and regulations of any
governmental instrumentality, board or bureau having jurisdiction thereof. [If
the Commencement Date is not set forth above because of the agreement on the
part of the Landlord to perform certain improvements or alterations, the
Commencement Date shall be upon the "Substantial Completion" of such
improvements, as defined in Section 35. At such time Landlord and Tenant shall
promptly execute a certificate setting forth the Commencement Date, which
certificate shall be attached to this Lease and made a part hereof.]
Upon the following Conditions and Covenants:
1. ACCEPTANCE OF PREMISES
Except as otherwise set forth herein, Tenant acknowledges that it is
familiar with the Demised Premises and hereby agrees to accept the Demised
Premises in their present condition, AS IS. Prior to the Commencement Date,
Landlord will complete the improvements described in the Work Letter annexed
hereto as Exhibit C. Tenant further acknowledges that, except as expressly set
forth herein, neither Landlord nor anyone on Landlord's behalf has made any
representations or warranties with respect to the condition of the Demised
Premises. Landlord represents that on the Commencement Date, the plumbing,
electrical, and HVAC systems will be in good working order.
2. BASE RENT
2.1 The Tenant covenants and agrees to pay to the Landlord as Base Rent for
and during the [initial] Term hereof as follows:
MONTH 1 THROUGH MONTH 18 INCLUSIVE
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Yearly Rate: $242,565.00
Monthly Rate: $ 20,213.75
(Effective Rate: $5.00 per sq. ft.)
MONTH 31 THROUGH MONTH 42 INCLUSIVE
Yearly Rate: $262,455.33
Monthly Rate: $ 21,871.28
(Effective Rate: $5.41 per sq.ft.)
MONTH 43 THROUGH MONTH 54 INCLUSIVE
Yearly Rate: $273,128.19
Monthly Rate: $ 22,760.68
(Effective Rate: $5.63 per sq.ft.)
MONTH 55 THROUGH MONTH 66 INCLUSIVE
Yearly Rate: $284,286.18
Monthly Rate: $ 23,690.52
(Effective Rate: $5.86 per sq.ft.)
MONTH 67 THROUGH MONTH 78 INCLUSIVE
Yearly Rate: $295,444.17
Monthly Rate: $ 24,620.35
(Effective Rate: $6.09 per sq.ft.)
MONTH 79 THROUGH MONTH 84 INCLUSIVE
Yearly Rate: $307,087.29
Monthly Rate: $ 25,590.61
(Effective Rate: $6.33 per sq.ft.)
The Base Rent shall be paid promptly in advance on the first day of each and
every month during the Term without demand and without offset or deduction. If
the Commencement Date shall fall on a date other than the first day of a month
or if the Termination Date shall fall on a date other than the last day of a
month, Tenant shall-pay an apportioned Base Rent, based upon a 360 day year and
30 day month, covering such partial month. Payment of Base Rent and Additional
Rent (as hereinafter defined) shall be made payable to FRANKLIN ASSOCIATES at
the address first set forth above, or to such other party and at such other
place as may be specifically required by this Lease or as Landlord may designate
in writing from time to time.
2.2 No payment by Tenant or receipt by Landlord of a lesser amount than the
Base Rent or Additional Rent stipulated in this Lease shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement on any check or payment, or
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any writing accompanying any check or payment of such rent, 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 rent or pursue any
other remedy provided in this Lease.
3. ADDITIONAL RENT
3.1 Tenant agrees to pay to the Landlord as Additional Rent (the
"Additional Rent") without offset or deduction its proportionate share (67.4%)
of the following:
(a) all real estate taxes, assessments, water and sewer rents and
other governmental charges assessed against or levied upon the Demised
Premises or related to the use or occupancy thereof, provided that if
Landlord shall receive a rebate or refund as a result of a successful real
estate tax appeal which is attributable to the period during which Tenant
is in possession of the Premises, such rebate or refund shall be passed
through to Tenant;
(b) all premiums on insurance policies maintained by the Landlord on,
or in connection with the use of, the Demised Premises pursuant to this
Lease; without limiting the generality of the foregoing, Tenant shall pay,
as Additional Rent, the premiums on all policies of insurance maintained by
Landlord, including casualty or hazard insurance and rental or business
interruption insurance; and
(c) all other expenses and charges which, during the Term, shall
arise, be levied, assessed or imposed upon or against the Demised Premises
as an incident of the ownership thereof and such other reasonable expenses,
which are of the kind paid by owners of land and buildings by reason of
such ownership, including management fees, fees for all professional
services associated with the Demised Premises and the cost of all
Structural Repairs and Exterior Maintenance.
Tenant shall pay one-twelfth of the annual estimated amount of Additional
Rent which shall be calculated in accordance with the Rent Summary annexed
hereto as Exhibit B. The amount of Additional Rent shall be subject to change
from time to time during each year to reflect increases or decreases in
insurance premiums, real estate taxes, and other expenses and shall be subject
to final adjustment after the completion of each year at such time as a final
statement of operating expenses is prepared.
3.2 The Tenant shall pay to the Landlord on the first day of each month
one-twelfth of Tenant's proportionate share of the then current annual real
estate taxes, water and sewer rents and any special or other assessment levied
and assessed against the Premises and one month's proportion of the then current
annual insurance premiums, so as to enable the Landlord (or its lender) to pay
the same at least thirty (30) days before they become due and payable, and to
make any further tax or insurance reserve payments, and to make up any
deficiency, in amounts and at
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times as the Landlord shall require. If Tenant shall fail to make any payment or
to do any act required of it by any provision of this Lease, Landlord may make
such payment or do such act and the amount of such payment, or the cost of doing
such act, together with interest thereon at a rate of 3% in excess of the prime
rate of interest as published in the Wall Street Journal on the date Landlord
makes such payment or does such act, shall be deemed Additional Rent payable by
Tenant upon demand by Landlord. The making of any such payment or the doing of
any such act by Landlord shall not constitute a waiver by Landlord of any right
or remedy provided by this Lease upon Tenant's default in the making of such
payment or the doing of such act. All taxes, assessments, water and sewer rents
and other governmental charges against or levied upon the Demised Premises shall
be apportioned as between Landlord and Tenant at the Termination Date.
4. CHANGE IN SCOPE OF TAXATION
4.1 If at any time during the Term the method or scope of taxation
prevailing on the date hereof shall be altered, modified or enlarged so as to
cause the method of taxation to be changed, in whole or in part, so that in
substitution for the real estate taxes now assessed there may be, in whole or in
part, a capital levy or other imposition based on the value of the Demised
Premises, or the rents received therefrom, or some other form of assessment
based in whole or in part on some other valuation of the Landlord's real
property comprising the Demised Premises, then and in such event, such
substituted tax or imposition shall be payable and discharged by Tenant in the
manner required pursuant to such law promulgated which shall authorize such
change in the scope of taxation, and as required by the terms and conditions of
this Lease.
4.2 Nothing in this Lease contained shall require Tenant to pay any
franchise, estate, inheritance, succession, capital levy or transfer tax of
Landlord, or federal income or state income tax or excess profits or revenue
tax, except to the extent such taxes are imposed in whole or partial
substitution for real property taxes.
5. NET RENT
It is the purpose and intent o Landlord and Tenant that the rent shall be
absolutely net to Landlord, so that this Lease shall yield, net, to Landlord,
the Base Rent specified in Section 2 hereof, in each month during the Term,
without any abatement, deduction, set-off or counterclaim, and that all costs,
expenses and obligations of every kind and nature whatsoever relating to the
Demised Premises which may arise or become due during or out of the Term, except
interest, amortization or any other charge or obligation arising in connection
with any mortgage placed on the Demised Premises by Landlord (unless the charge
or obligation arises as a result of an Event of Default by Tenant hereunder)
shall be paid by Tenant directly to the appropriate entities as an owner of the
Demised Premises would have paid or reimbursed to Landlord, except for such
obligations and charges as have otherwise expressly been assumed by Landlord in
accordance with the terms and conditions of this Lease.
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6. INSURANCE
6.1 As long as this Lease remains in effect and during such other time as
Tenant occupies the Demised Premises or any part thereof, Tenant will keep in
force at its expense public liability insurance, including contractual
liability, with respect to the Demised Premises with companies and in form
acceptable to Landlord with a minimum combined single limit of $5,000,000 on
account of bodily injuries, death or property damage; and standard form all-risk
insurance, at such value as will avoid coinsurance risks, on leasehold
improvements and contents either existing within the Demised Premises at the
Commencement Date or installed by Tenant during the Term of this Lease;
provided, however, that Tenant's insuring of the leasehold improvements shall in
no way confer on Tenant any property rights to same. Tenant will furnish the
policy or policies of such insurance or certificates thereof to Landlord. All
such policies shall name Landlord or its designee and any mortgagee of the
Premises as additional named insureds and loss payees and shall contain a
provision stating that such policy or policies shall not be canceled or modified
except after 30 days prior written notice to Landlord and such mortgagee. Tenant
expressly waives all claims against Landlord arising from loss or damage from
whatever cause to Tenant's personal property, including leasehold improvements,
inventory, trade fixtures and furniture. If the nature of Tenant's operations is
such as to place any or all. of its employees under the coverage of worker's
compensation or similar statutes, Tenant shall also keep in force, at its
expense, so long as this Lease remains in effect and during such other times as
Tenant occupies the Demised Premises or any part thereof, worker's compensation
or similar insurance affording statutory coverage and containing statutory
limits. All policies of insurance shall be issued by insurers authorized to
conduct that type of insurance business in New Jersey, and having at all times a
policyholders rating of "A" or better and a financial rating of "V" or better in
the then-current edition of Best's Insurance Guide. If Tenant shall not comply
with this Section, Landlord may cause insurance as aforesaid to be issued and in
that event, Tenant agrees to pay the premiums for such insurance upon Landlord's
demand together with interest at a rate of 3% in excess of the prime rate of
interest as published in the Wall Street Journal upon Landlord's demand as
Additional Rent until the premium cost is reimbursed to Landlord.
6.2 Tenant agrees to look solely to the proceeds of its own insurer for
indemnity against exposure for casualty losses of property or business
interruption. Tenant warrants that its liability, property and business
interruption insurers shall have no rights against Landlord by virtue of
assignment, subrogation, loan agreement or otherwise.
7. INCREASE OF INSURANCE RATES
If as a result of Tenant's use of the Premises, it shall be impossible to
obtain fire and other hazard insurance on the buildings and improvements on the
Demised Premises, in an amount and in the form and with insurance companies
acceptable to the Landlord, the Landlord may, if the Landlord so elects at any
time thereafter, terminate this Lease and ' the terms hereof, upon giving to the
Tenant fifteen (15) days notice in writing of the Landlord's intention so to do,
and upon
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the giving of such notice, this Lease and the terms thereof shall terminate. If
by reason of the use to which the Demised Premises are put by the Tenant or
character of or the manner in which the Tenant's business is carried on, the
insurance rates for fire and other hazards shall be increased, the Tenant shall
upon demand, pay to the Landlord, as Additional Rent, the amounts by which the
premiums for such insurance are increased. Such payment shall be paid with the
next installment of Base Rent and Additional Rent but in no case later than one
(1) month after such demand, whichever occurs sooner.
8. FIRE AND OTHER CASUALTY
In case of fire or other casualty, the Tenant shall give immediate notice
to the Landlord. If the Demised Premises shall be partially damaged by fire, the
elements or other casualty, the Landlord shall repair the same as speedily as
practicable, but the Tenant's obligation to pay the Base Rent and Additional
Rent hereunder shall not cease. If, in the opinion of the Landlord, the Demised
Premises are so extensively and substantially damaged as to render them
untenantable, then the Base Rent shall cease until such time as the Demised
Premises shall be made tenantable by the Landlord. However, if, in the opinion
of the Landlord the Demised Premises are totally destroyed or so extensively and
substantially damaged as to require practically a rebuilding thereof, and if
such rebuilding is likely to require a period of not less than one hundred
eighty (180) days to be completed, then the Base Rent shall be paid up to the
time of such destruction and then, at the option of either party, exercised
within sixty (60) days of the occurrence of the casualty, this Lease shall come
to an end. In no event, however, shall the provisions of this clause become
effective or be applicable, if the fire or other casualty and damage shall be
the result of the carelessness or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the Base
Rent and Additional Rent and the performance of all the covenants, conditions
and terms hereof on the Tenant's part to be performed shall continue and the
Tenant shall be liable to the Landlord for the damage and loss suffered by the
Landlord. If the Tenant shall have been insured against any of the risks herein
covered, then the proceeds of such insurance shall be paid over to the Landlord
to the extent of the Landlord's costs and expenses to make the repairs
hereunder, and such insurance carriers shall have no recourse against the
Landlord for reimbursement.
9. NON-LIABILITY OF LANDLORD
The Landlord shall not be liable for any damage or injury which may be
sustained by the Tenant or any other person resulting from the acts, conduct or
omissions on the part of Landlord, except in the case of the gross negligence of
Landlord, or as a consequence of the failure, breakage, leakage or obstruction
of the water, plumbing, steam, sewer, waste, soil or any other pipes, whether
above or below ground, roof, drains, leaders, gutters, valleys, downspouts or
the like or of the electrical, gas, power, conveyer, refrigeration, sprinkler,
air conditioning or heating systems, elevators or hoisting equipment; or by
reason of the elements; or resulting from acts, conduct or omissions on the part
of Tenant or of Tenant's agents, employees, guests, licensees,
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assignees or successors, or on the part of any other person, including any other
tenant; or attributable to any interference with, interruption of or failure,
beyond the control of the Landlord, of any services to be furnished or supplied
by its obligations hereunder, the Tenant shall look solely to the equity of the
Landlord in the Demised Premises and the buildings and other lands within which
the Demised Premises are located; and in no event will the Landlord's liability,
if any, exceed the loss of the Landlord's equity interest in the Demised
Premises which is situated in Block 6002 Lot 9.
10. WAIVER OF SUBROGATION RIGHTS
Each party waives all rights of recovery against the other or the agents,
employees or representatives of such person, for any loss, damages or injury of
any nature whatsoever to property or persons for which such party is insured.
The Landlord and Tenant each shall obtain from their respective insurance
carriers and will deliver to the other party, waivers of the subrogation rights
under the respective policies.
11. NOTICE OF ACCIDENTS
Tenant shall promptly notify Landlord of: (a) any accident in or about the
Demised Premises; (b) any fire or other casualty ("Casualty") occurring in or
about the Demised Premises; (c) all damage to or defects in the Demised Premises
for the repair of which Landlord is responsible; and (d) all damage to or
defects in any building system or facility within the Demised Premises.
12. INDEMNIFICATION
Tenant shall indemnify and save harmless Landlord from all fines,
penalties, costs, suits, proceedings, liabilities, damages, claims, judicial and
administrative orders, assessments and actions of any kind arising out of the
use and occupancy of the Demised Premises, including the enforcement or
threatened enforcement of any environmental law, regulation or policy related to
Tenant's use-and occupancy of the Demised Premises, or by reason of any breach
or non-performance of any covenant or condition of this Lease by Tenant. This
indemnification shall extend to all claims by any person or party, including any
Federal, State or local government or government agency, for death or injury to
persons and damage to any property, on or off the Demised Premises, and to legal
expenses, including reasonable attorney's fees, environmental consultant's fee
and the fees of other professionals incurred by Landlord in the defense of such
claims or in the enforcement of any provision of this Lease. This Section shall
survive the termination of this Lease.
13. UTILITIES
The Tenant shall pay when due all the rents or charges for water, gas,
sewer,
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electricity, heating, ventilating and air conditioning or other utilities
used by the Tenant which are or may be assessed against the Demised Premises. In
the event any utility is separately metered, Tenant shall pay all such charges
directly to the utility. In the event any or all such utilities are not so
metered, Tenant shall pay its proportionate share of said utility consumption as
Additional Rent within 10 days after submission of a bill therefor by the
Landlord to the Tenant. Landlord represents that the gas and electricity used by
Tenant is separately metered. The water and sewer are not separately metered and
will be prorated based upon Tenant's percentage interest.
14. REPAIRS
14.1 Landlord, at Tenants expense (which shall be prorated based upon
Tenant's percentage interest of the annual maximum total Building cost of
$7,200.00 as depicted on the Rent Summary ("Structural Repairs"), and shall
perform all exterior maintenance, including the maintenance of all parking
areas, snow and ice removal, sidewalks, curbing, fencing and landscaping
("Exterior Maintenance"). If Tenant shall be dissatisfied with the performance
by Landlord of any required Exterior Maintenance which Landlord has agreed to
perform, upon advance notice to Landlord, Tenant shall be permitted to arrange
for the performance of the Exterior Maintenance, provided that any such
arrangement (including the contractor selection by Tenant) shall be approved by
Landlord, which approval shall not be unreasonably withheld. Landlord shall make
any repairs and perform any maintenance on a reasonably prompt basis after
written notice of the need for such repair or maintenance is given to Landlord
by Tenant. There shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of or the failure to make any repairs, alterations or improvements in or
to any portion of the Demised Premises or in or to fixtures, appurtenances and
equipment therein. Subject to the $7,200,000 limitation of this Section, the
Tenant shall be responsible for the payment of the full cost of all Structural
Repairs and Exterior Maintenance in the year in which the Structural Repairs and
Exterior Maintenance is performed and shall pay such amounts as Additional Rent
pursuant to Section 3.1(c) hereof upon the presentation of invoices by Landlord.
14.2 Tenant shall keep and maintain the Demised Premises in a good and
complete state of repair and condition, except for ordinary wear and tear.
Except for Structural Repairs and Exterior Maintenance, Tenant shall make and
perform all interior non-structural repairs and maintenance, including, but not
limited to, the plumbing, heating, ventilation, air conditioning and electrical
equipment and systems, lights and lighting, necessary to preserve and maintain
the Demised Premises and the appurtenances belonging thereto, and will not call
upon Landlord during the Term for the making of any repairs or replacements
whatsoever, except for Structural Repairs and Exterior Maintenance. All such
repairs and replacements shall (a) be performed in a good and workmanlike
manner, (b) be at least substantially equal in quality and usefulness to the
original work, (c) be of first- class modern character, and (d) not diminish the
overall value of the Demised Premises. All repairs and replacements and other
property attached to or used in connection with the Demised Premises by or on
behalf of Tenant shall be and become the property of Landlord
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without payment therefor immediately upon completion or installation thereof
except as otherwise approved by Landlord at the time the repairs or replacements
are made.
15. GLASS, ETC., DAMAGE
In case of the destruction of or any damage to the glass in the Demised
Premises, or the destruction of or damage of any kind whatsoever to the Demised
Premises, caused by the carelessness, negligence or improper conduct on the part
of the Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, the Tenant shall repair the said damage or
replace or restore any destroyed parts of the Demised Premises as speedily as
possible at the Tenant's own cost and expense.
16. ALTERATIONS OR IMPROVEMENTS
16.1 No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
heavy equipment, apparatus and fixtures., shall be installed in or attached to
the Demised Premises without the written consent of the Landlord, which the
property of the Landlord and shall be surrendered with the Demised Premises and
as part thereof upon the expiration or sooner termination of this Lease, without
hindrance, molestation, or injury.
16.2 Upon quitting, vacating or abandonment of the Premises by the Tenant,
Landlord shall have the option of requiring the Tenant to remove any alteration,
addition or improvement at the Tenant's expense if so noted at time of approval
prior to the expiration of the Lease. In the event Tenant fails to perform such
removal, Landlord shall have the right to do so at the cost and expense of the
Tenant.
17. SIGNS
The Tenant shall not place nor allow to be placed any signs of any kind
whatsoever, upon, in or about the Demised Premises or any part thereof, except
of a design and structure to conform aesthetically with the existing signage and
in or at such places as may be indicated and consented to by the Landlord in
writing, which consent shall not be unreasonably refused or delayed. In case the
Landlord or the Landlord's agents, employees or representatives shall deem it
necessary to remove any such signs in order to paint or make any repairs,
alterations or improvements in or upon the Demised Premises or any part thereof,
they may be so removed, but shall be replaced at the Landlord's expense when the
said repairs, alterations or improvements shall have been completed. Any signs
permitted by the Landlord shall at all times conform with all municipal
ordinances or other laws and regulations applicable thereto.
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18. COMPLIANCE WITH LAWS AND REGULATIONS
18.1 Tenant shall not use or occupy or permit the Demised Premises to be
used or occupied, nor do or permit anything to be done in or on the Demised
Premises, in whole or in part, in a manner which would in any way violate any
certificate of occupancy affecting the Demised Premises, or make void or
voidable any insurance then in force with respect to the Demised Premises, or
which may make it difficult or impossible to obtain fire or other insurance
required to be furnished by Landlord under-this agreement, or as will cause or
be apt to cause structural injury to all or any part of the buildings, or as
will constitute a public or private nuisance.
18.2 During the term of this Lease, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, ordinances,
orders, rules, regulations, and requirements of all Federal, State, and
Municipal governments, courts, departments, commissions, boards, and officers,
any national or local board of fire underwriters, or any other body exercising
functions similar to those of any of the foregoing, foreseen or unforeseen,
ordinary as well as extraordinary, which may be applicable to all or any part of
the Demised Premises and the sidewalks, curbs, streets, and roads adjoining the
Demised Premises or to the use or manner of use of the Demised Premises.
18.3 Tenant shall indemnify Landlord with respect to the foregoing, of and
from all obligations, costs or expenses, fines, penalties, claims for damages of
every kind and nature arising out of any failure to comply with any such law,
ordinance, order, rule, regulation, or requirement, the intention of the parties
being with respect thereto that Tenant shall discharge and perform all the
obligations of Landlord, as well as all the obligations of Tenant, arising and
indemnify Landlord so that at all times the rental of the Demised Premises shall
be net to Landlord without deduction or expense on account of any such
requirement.
19. RESTRICTION OF USE
The Tenant shall not occupy or use the Demised Premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purposes
other than as herein limited, nor for any purpose deemed unlawful, disreputable,
or extra hazardous, on account of fire or other casualty, nor to increase the
risk of environmental contamination.
20. COVENANT AGAINST LIENS
Tenant agrees that it shall not encumber, or suffer or permit to be
encumbered, the Demised Premises or the fee thereof by any lien, charge or
encumbrance, and Tenant shall have no authority to mortgage or hypothecate this
Lease in any way whatsoever; provided that in the case of any mechanics' or
materialmens' lien or notice of intention, Tenant shall have a period of ten
(10) days from receiving notice of the existence thereof to cause any such lien
to be released and
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discharged.
21. LANDLORD'S RIGHT TO CURE
Landlord, its agents, contractors, consultants and workmen shall have the
right, but shall not be obligated, to enter into and upon the Demised Premises
at all reasonable times for the purpose of inspection and examination of the
state of repair and condition thereof and in order to make such repairs, or
otherwise cure any conditions, as shall be necessary as a consequence of any
failure of Tenant to meet its obligations under this Lease. The cost of any such
repairs or other cure undertaken by Landlord, together with interest thereon at
a rate of 3% over the prime rate of interest as published in the Wall Street
Journal on the date Landlord makes such repair or effects such other cure, shall
be deemed to be Additional Rent payable by Tenant upon demand by Landlord. The
undertaking of any such repairs or other cure by Landlord shall not constitute a
waiver by Landlord of any right or remedy provided by this Lease upon Tenant's
default in the undertaking of such repairs or other cure.
22. SNOW AND ICE REMOVAL
Landlord's obligation to keep the sidewalks and parking areas free of snow
and ice shall be strictly limited to reasonable activity for removal considering
the weather, the availability of men and equipment, and other factors outside
the control of the Landlord. The Tenant accepts all risk of use of such
facilities, and any act or action by the Landlord or its agents shall be deemed
not to create any liability of any kind whatsoever, the Tenant hereby releasing
the Landlord for the same as a condition hereof.
23. ASSIGNMENT OR SUBLETTING
23.1. Tenant shall have the right, upon written notice to Landlord and
after obtaining Landlord's prior written consent, which consent, shall not be
unreasonably withheld, to sublet less than all of the Premises; provided,
however, that the Tenant and the sublessee shall execute an agreement in which
the sublessee agrees to assume and comply with all of the terms and provisions
of this Lease.
23.2 Tenant shall not sublet all of the Demised Premises or assign its
interest in the Lease without the Landlord's express prior written consent,
which consent shall not be unreasonably withheld. If the Tenant shall desire to
sublet all of the Demised Premises or to assign its interest in the Lease, it
shall first submit in writing to the Landlord an offer signed by the proposed
subtenant or assignee which includes:
(a) the name and address of the proposed sublessee or assignees;
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(b) the terms and conditions of the proposed subletting or assignment;
(c) the nature and character of the business of the proposed sublessee
or assignee;
(d) a financial statement of the proposed subleasee or assignee.
Upon Tenant's notice to Landlord of any such proposed subletting or assignment,
Landlord shall have the right, in its sole and unqualified discretion, either
(a) to consent to such sublease or assignment, (b) to reasonably withhold such
consent or (c) without payment of any kind to Tenant and by written notice sent
to Tenant within 30 days thereafter, to cancel and terminate the Lease on a
specified date which shall be not later than 30 days after the date of
Landlord's notice. If Landlord elects to cancel and terminate the Lease, the
Lease shall terminate and come to an end on the date specified by Landlord
without recourse to either party except for rights and obligations accrued prior
thereto.
23.3 If this Lease be assigned with the consents as aforesaid or, if the
Demised Premises or any part thereof be au lot to or occupied by anybody other
than Tenant after the occurrence of an Event of Default, Landlord may collect
rent from the assignee, subleasee or occupant and apply the net amount collected
to the Base Rent and Additional Rent payable hereunder. Landlord shall be
entitled to retain 100% of the amount by which such consideration exceeds the
Base Rent and Additional Rent payable hereunder (prorated to reflect the amount
of space sublet) for its own use.
23.4 Any attempted assignment, encumbrance, sublease or concession by
Tenant without Tenant's full compliance with the provisions of this Section
shall be void and shall constitute an Event of Default under this Lease. This
prohibition includes any subletting or assignment which would otherwise occur by
operation of law, including as a result of a merger, consolidation,
reorganization, transfer or other change of Tenant's corporate or proprietary
structure. Landlord shall be obligated to consent to a merger or reorganization
of Tenant in any case where (i) a majority of the outstanding shares of stock of
the surviving corporation are owned by Erv Magram and Melanie Magram Rothenberg
and (ii) the available cash from operating working capital plus the open no less
than $1,000,000.00. Thereafter, within six (6) months that available cash shall
continue to be $1,000,000.00 without the available working capital credit line
and in a one year period shall be $1,500,000.00 without the available working
capital credit line. Tenant shall make available to Landlord, upon request, the
current financial statements, other than those issued annually at fiscal June
30th, shall be internal interim statements, whereas the annual statements shall
be audited. Any change in ownership or control, directly or indirectly, of
Tenant shall be deemed an assignment of this Lease. Consent by Landlord and
other persons or entities to any assignment or subletting shall not constitute a
waiver of the necessity for such consent to any subsequent assignment or
subletting.
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Notwithstanding any such assignment or subletting, Tenant herein shall remain
primarily liable for the payment of Base Rent and Additional Rent reserved
hereunder and for the performance of all obligations imposed upon Tenant by this
Lease.
23.5 Landlord may require a payment not to exceed Five Hundred and 00/100
($500.00) Dollars to cover its handling charges for each request for consent to
any sublet or assignment prior to its consideration of the same. Tenant
acknowledges that its sole remedy with respect to any assertion that Landlord's
failure to consent to any sublet or assignment is unreasonable shall be the
remedy of specific performance and Tenant shall have no other claim or cause of
action against Landlord as a result of Landlord's actions in refusing to consent
thereto.
24. MORTGAGE PRIORITY
This Lease shall not be a lien against the Demised Premises in respect to
any mortgages that may hereafter be placed upon the Demised Premises. The
recording of such mortgage or mortgages shall have preference and precedence and
be superior and prior in lien to this Lease, irrespective of the date of
recording and the Tenant agrees to execute any instruments, without cost, which
may be deemed necessary or desirable to further affect the subordination of this
Lease to any such mortgage or mortgages. A refusal by the Tenant to execute such
instruments shall entitle the Landlord to the option of canceling this Lease,
and the Term hereof is hereby expressly limited accordingly. In the case of any
mortgage granted by Landlord after the date hereof, Landlord shall use its
reasonable best efforts to obtain from such mortgagee a non-disturbance
agreement for the benefit of the Tenant.
25. CERTIFICATES BY TENANT
Tenant agrees at any time and from time to time during the Term of this
Lease, within 10 days after written request from Landlord, to execute,
acknowledge and deliver to Landlord or to a third party a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), and the dates to which the Base Rent,
Additional Rent and other charges have been paid in advance, if any, and stating
whether or not, to the best knowledge of Tenant, Landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease,
and, if so, specifying each such default of which Tenant may have knowledge.
Such third party shall have the right to rely upon the contents of any such
written statement of Tenant.
26. CONDEMNATION
26.1 If the entire Demised Premises shall be taken for any public or
quasi-public use, by any power or authority having the right to take the same by
condemnation, eminent
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domain, or otherwise, the amount awarded for compensation for the whole of the
Demised Premises so taken, including all improvements, changes additions and
alterations made by Tenant, shall be paid to Landlord. Tenant agrees that it
shall have no claim for any damages or loss against Landlord by reason of such
condemnation or taking. However, Tenant reserves the right to retain all sums
awarded as compensation for Tenant's relocation expenses, if any. Tenant agrees
that it will assert no claim for any improvements, changes, additions and
alterations made by it to the Demised Premises, except where such claim may be
asserted by Tenant without resulting in any diminution of the award to Landlord.
This Lease shall terminate as of the date title to all of the Demised Premises
shall vest in the taking body or the date Tenant is ousted from possession of
the Demised Premises, whichever is earlier, and Landlord and Tenant shall
thereupon be released of and from all obligations and liabilities to each other
accruing hereunder thereafter. Tenant shall pay all Base Rent and Additional
Rent accrued up to the time of the passing of title, and if any such rent has
been paid in advance, Landlord shall return such surplus.
26.2 If a part of the Demised Premises, but less than the entire Demised
Premises, is so taken by such power or authority as aforesaid, then and in such
event there shall be a reduction in the Base Rent in relation to the fair rental
value of that part of the Demised Premises so taken as compared with the rental
value for the entire Demised Premises, and this Lease, together with all of the
agreements, covenants, conditions and obligations herein contained, shall
continue in full force and effect for the balance of the term as if such taking
had not occurred. If the part of the Demised Premises so taken includes the
building or a portion thereof or any substantial portion of Tenant hereby
expressly grants unto Landlord the entire amount of said award or compensation,
hereby expressly disclaiming all right, title and interest therein, and agrees
that it shall have no claim for any damages or loss against Landlord by reason
of such condemnation or taking. Following such a partial taking, Landlord shall
restore the Demised Premises as required to render the same tenantable as a
single unit.
26.3 If the temporary use of the whole or any part of the Demised Premises
shall be taken by any lawful power or authority by the exercise of the right of
condemnation, eminent domain or otherwise, or by agreement between Tenant and
those authorized to exercise such right, Tenant shall give prompt notice thereof
to Landlord. In such event the Term shall not be reduced or affected in any way
and Tenant shall continue to pay in full the Base Rent, Additional Rent and
other charges herein reserved without reduction or abatement and Tenant shall be
entitled to receive for itself any award or payment made for such use, provided,
however, that in the event such period of temporary use shall extend beyond the
Termination Date, the award or payment shall be ratably apportioned between
Landlord and Tenant.
26.4 The terms "condemnation", "taking" or similar terms as herein used
shall mean the acquisition by a public or quasi-public authority having the
right to take the same by condemnation or eminent domain or otherwise,
regardless of whether such taking is the result of actual condemnation or of
voluntary conveyance by Landlord.
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26.5 Tenant agrees to execute and deliver any instruments as may be deemed
necessary by Landlord to expedite any condemnation proceeding or to effectuate a
proper transfer of title to such governmental or other public authority, agency,
body or public utility seeking to take or acquire the Demised Premises or any
portion-thereof.
26.6 If notwithstanding the terms and conditions hereof Tenant shall assert
a claim or right to claim to any portion of any amount which may be awarded as
damages or paid as the result of such condemnation proceedings or paid to
Landlord as the purchase price for an option, sale or conveyance in lieu of
formal condemnation proceedings, other than for amounts paid as compensation for
Tenant's relocation expenses, Tenant shall be liable to Landlord for all damages
sustained and all expenses incurred by Landlord, including counsel fees and
costs of legal proceedings, as a result of the assertion by Tenant of any such
claim.
27. DEFAULT BY TENANT
27.1 If before or during the Term there shall occur any of the following
events ("Events of Default"):
(a) if Tenant shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a petition in bankruptcy, or shall be adjudicated
a bankrupt or insolvent, or shall file a petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file an answer admitting or not contesting the
material allegations of a petition against it in any such proceeding, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or any material part of its assets; or
(b) if, within sixty (60) days after the commencement of an proceeding
or acquiescence of Tenant or any trustee, receiver or liquidator of Tenant
or of any material part of 'its assets, such appointment shall. not have
been vacated; or
(c) if the interest of Tenant in the Demised Premises shall be sold
under execution or other legal process; or
(d) if Tenant shall fail to pay any installment of Base Rent or
Additional Rent for ten (10) days after the same is due; or
(e) if Tenant shall fail to perform or observe any requirement,
obligation, agreement, covenant or condition of this Lease, other than the
payment of any installment of Base Rent or Additional Rent, and any such
failure shall continue for 15 days after Landlord gives Tenant notice
thereof, or if such failure cannot be remedied within 15 days, then for a
reasonable time thereafter, provided Tenant commences to remedy such
failure within said 15 day period and
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prosecutes the same to completion with diligence; or
(f) if any representation or warranty contained in this Lease shall
prove to be incorrect in any material respect on the date upon which it was
made; or
(g) if the Demised Premises shall become vacant, abandoned or are not
opened for business for a period of 30 consecutive days;
then at any time following any of such Events of Default, Landlord, without
waiving any other rights herein available to Landlord at law or in equity, may
either (1) give Tenant notice of termination of this Lease, or (2) without
terminating this Lease, give Tenant notice of Landlord's intention to re-enter
and take possession of the Demised Premises, with or without legal process. The
giving of-either of such notices to Tenant shall terminate Tenant's right to
possession of the Demised Premises under this Lease without prejudice, however,
to the rights of Landlord to exercise all other available legal remedies and
without discharging Tenant from any of its liabilities hereunder.
27.2 If Landlord elects to terminate Tenant's right to possession of the
Demised Premises under Section 27.1 following an Event of Default, Landlord may
re-enter and take possession of the Demised Premises, with or without legal
process, and Tenant hereby waives any claim for damages as a result thereof, and
Tenant shall be obligated to pay to Landlord as damages upon demand, and
Landlord shall be entitled to recover of and from Tenant, (a) all Base Rent and
Additional Rent payable to the date of termination of Tenant's right to
possession, plus (b) the cost to Landlord of all reasonable legal and other
expenses and costs (including attorney's fees) incurred by Landlord in obtaining
possession of the Demised Premises, in enforcing any provision of this Lease, in
preserving the Demised Premises during any period of vacancy, in making such
alterations and repairs as Landlord may reasonably deem necessary or advisable
in operating and maintaining the Demised Premises, and in reletting the Demised
Premises, including all reasonable brokerage commissions therefor, plus (c)
either
(i) in the event of Landlord's giving notice of its intention to
re-enter and take possession without terminating this Lease, damages
(payable in monthly installments, in advance, on the first day of each
calendar month following the giving of such notice and continuing until the
date originally fixed herein for the expiration of the Term) in amounts
equal to the Base Rent and Additional Rent herein reserved, less the net
amount of rent, if any, which may be collected and received by Landlord
from the Landlord may grant concessions or charge a rental in excess of
that provided in this Lease (Tenant shall have no right to any excess); or
(ii) if Landlord gives notice of termination of this Lease, an award
for liquidated damages in an amount which, at the time of such termination,
is equal to the excess, if any of the installments of Base Rent and the
aggregate of all sums payable hereunder as Additional Rent (for such
purpose considering the annual amount of Additional Rent to equal the
amount thereof payable for the 12 months immediately preceding such
termination, or the annualized portion
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of Additional Rent payable from the Commencement Date to the date of such
termination if this Lease then shall have been in effect for less than 12
months) reserved hereunder for the period which would otherwise have
constituted the unexpired portion of the Term, plus the value of all other
consideration to be paid or performed by Tenant during such period, over
the fair rental value of the Demised Premises, as of the date of such
termination, for such unexpired portion of the Term, said liquidated damage
amount to be discounted at the then Prime Rate of interest as published in
the Wall Street Journal to determine its present value at the time of the
award; prior to Tenant's full payment of any liquidated damages awarded to
Landlord, Tenant shall continue to pay punctually to Landlord all Base Rent
and Additional Rent to the same extent and at the same time as if this
Lease had not been terminated and receive full credit for such payments
against the award for liquidated damages.
If, after Tenant's default, Landlord shall elect to re-enter and take possession
without terminating this Lease, Landlord shall have the right at any time
thereafter to terminate this Lease for such previous default, whereupon the
provisions of this Section.
27.2 with respect to termination will thereafter apply.
27.3 Landlord-may sue for and collect any amounts which may be due pursuant
to the provisions of Section 27.2 above from time to time as Landlord may elect,
but no such suit shall bar or in any way prejudice the rights of Landlord to
enforce the collection of amounts due at any time or times thereafter by a like
or similar proceeding. Tenant expressly waives service of any notice of
intention to re-enter that may be required by law, and waives any and all rights
to recover or regain possession of the Demised Premises, or to reinstate or to
redeem this Lease, or other right of redemption as permitted or provided by or
under any statute, law or decision now or hereafter in force and effect.
27.4 Without limiting any other right of Landlord hereunder, at Landlord's
option, Tenant shall pay a "Late Charge" of eight (8%) percent of any
installment of Base Rent or Additional Rent received by the Landlord more than 5
days after the due date thereof ("Late Payment") to cover the extra expense
involved in handling delinquent payments.
27.5 Tenant agrees to pay all costs of proceedings by Landlord for the
enforcement of any terms and conditions of this Lease, including reasonable
attorney's fees and expenses, which shall be deemed Additional Rent for the
period with respect to which the Event of Default occurred, payable immediately
upon the filing of any suit for possession or for money damages.
27.6 No remedy herein conferred upon or reserved to Landlord is intended to
be exclusive of any other remedy herein or by law provided, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in
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equity or by statute. The receipt and acceptance by Landlord of rent with
knowledge of the or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, or less than the amount of the loss or damages referred to
above.
27.7 No waiver by Landlord of any Event of Default or any default by Tenant
in any covenant, agreement or obligation under this Lease shall operate to waive
or affect any subsequent Event of Default or default in any covenant, agreement
or obligation hereunder, nor shall any forbearance by Landlord to enforce a
right or remedy upon an Event of Default or any such default be a waiver of any
of its rights and remedies with respect to such or any subsequent default or in
any other manner operate to the prejudice of Landlord.
28. REMEDIES AVAILABLE
In addition to all other remedies available at law or equity or hereunder,
Landlord may enjoin any default or threatened default by Tenant.
29. SURRENDER BY TENANT AT END OF TERM
29.1 Tenant will surrender possession of the Demised Premises and remove
all goods and chattels and other personal property in the possession of Tenant,
by whomsoever owned, at the end of the Term or at such other time as Landlord
may be entitled to re-enter and take possession of the Demised Premises pursuant
to any provision of this Lease, and leave the Demised Premises in as good order
and condition as they were at the beginning of the Term, reasonable wear and
tear excepted. In default of surrender of possession and removal of goods and
chattels at the time aforesaid, Tenant will pay to Landlord the rent reserved by
the terms of this Lease for such period as Tenant either holds over possession
of the Demised Premises or allows its goods and chattels or other personal
property in its possession at such time to remain in the Demised Premises, and
in addition thereto, statutory penalties and all other damages which Landlord
shall suffer by reason of Tenant holding over in violation of the terms and
provisions of this Lease, including all reasonable claims for damages made by
any succeeding tenant or purchaser of the Demised Premises against Landlord
which may be founded upon delay by Landlord in giving possession of the Demised
Premises to such succeeding tenant or purchaser, so far as such damages are
occasioned by the unlawful holding over of Tenant.
29.2 If Tenant fails to remove all goods and chattels and other personal
property in possession of Tenant, by whomsoever owned, at the end of the Term,
or at such other time as Landlord may be entitled to re-enter and take
possession of the Demised Premises pursuant to any provision of this Lease,
Tenant hereby irrevocably makes, constitutes and appoints Landlord as the agent
and attorney-in-fact of Tenant to remove all goods and chattels and other
personal property, by whomsoever owned, from the Demised Premises to a
reasonably safe place of storage,
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such moving and storage to be at the sole cost and expense of Tenant, and Tenant
covenants and agrees to reimburse and pay to Landlord all expenses which
Landlord incurs for the removal and storage of all such goods and chattels.
Alternatively at the option of Landlord, Tenant shall be deemed to have
abandoned such goods, chattels and other personal property and the same shall
become the property of Landlord.
29.3 No act or thing done by Landlord shall be deemed an acceptance of the
surrender of the Demised Premises unless Landlord shall execute a written
release of Tenant. Tenant's liability hereunder shall not be terminated by the
termination of this Lease or by the execution by Landlord of a new lease of the
defend and save Landlord harmless against any liability, obligation,
requirement, commitment,'cost, expense, loss, claim, fine, penalty or damage
which Landlord may suffer as a result of any subsurface, ambient air, soil,
surface water, groundwater, leachate, run-on or run-off, stream or other
pollution caused by Tenant in its use of the Demised Premises, whether such
pollution is on or off the Demised Premises. Tenant, in any event, will take
immediate steps to halt, remedy or cure any such pollution caused by Tenant in
connection with its use of the Demised Premises to the satisfaction of any and
all government agencies having jurisdiction over the matter and in compliance
with then existing government and industry standards for remediation of any such
pollution. Landlord shall be promptly notified of ail actions taken by Tenant or
any other party with respect to such pollution and shall have the right to enter
the Demised Premises in order to observe the remediation of such pollution.
Further, Landlord shall be provided with evidence of Tenant's remediation of
such pollution in compliance with this section. The provisions of this Section
shall survive the termination of this Lease.
31. ECRA CLEARANCE; ENVIRONMENTAL REPRESENTATIONS AND COVENANTS
31.1 For purposes of this Section,
(a) "Hazardous Substances" include any pollutant, dangerous substance,
toxic substance, hazardous waste, hazardous substance or contaminant
regulated under, defined in or pursuant to the Environmental Cleanup
Responsibility Act (N.J.S.A. i3:lK-6 et seq.) ("ECRA"), the Spill
Compensation and Control Act (N.J.S.A. 58:10- 23.11 et seq.), the Resource
Conservation and Recovery Act (42 U.S. Sec. 6901 et seq.), the
Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. Sec. 9601 et seq.) or any other Federal, State or local
environmental law, ordinance or regulation.
(b) "Enforcement Notice" means a summons, citation, directive, order,
claim, litigation, investigation, judgment, letter or other communication,
written or oral, actual or threatened, from the New Jersey Department of
Environmental Protection ("NJDEP"), the United State Environmental-
Protection Agency ("USEPA") or other Federal, State or local agency or
authority, or any other entity or any individual, concerning any
intentional or unintentional action
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or omission resulting or which might result in the Releasing of Hazardous
Substances into the waters or onto the lands of the State of New Jersey, or
into waters outside the jurisdiction of the State of New Jersey where
damage may have resulted to the lands, waters, fish, shellfish, wildlife,
biota, air or other resources owned, managed, held in trust or otherwise
controlled by, or within the jurisdiction of, the State of New Jersey, or
into the "environment", as such term is defined in 42 U.S.C. 9601(8).
(c) "Releasing" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing
or dumping.
31.2 Other than in conjunction with the permitted uses as provided for in
this Lease hereof, the Demised Premises shall not be used and/or occupied by the
Tenant to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer or process Hazardous Substances except upon written permission
of the Landlord, which permission may be arbitrarily withheld. The Demised
Premises shall not be used by the Tenant as a "Major Facility", as such term is
defined in N.J.S.A. 58:1023.llb(l).
31.3 Tenant shall not suffer or permit any lien to be attached to the
Demised Premises by any person or entity arising from any intentional or
unintentional action or omission of the Tenant, user and/or operator of the
Demised Premises, resulting in the Releasing of Hazardous Substances into the
waters or onto the lands of the State of New Jersey, or into waters outside the
jurisdiction of the State of New Jersey where damage may have resulted to the
lands, waters, fish, shellfish, wildlife, biota, air or other resources owned,
managed, held in trust or otherwise controlled by, or within the jurisdiction
of, the State of New Jersey, or as a result of the chief executive of the New
Jersey Spill Compensation Fund ("Spill Fund" or "Fund") expending monies from
the Fund to pay for "Damages", as such term is defined in N.J.S.A. 58:10-23.llg
("Damages") and/or "Cleanup and Removal Costs", as such term is defined in
N.J.S.A. 58:10-23.llb(d) ("Cleanup and Removal Costs").
31.4 Tenant shall not suffer or permit any Enforcement Notice or any facts
which might result in any Enforcement Notice with respect to the Demised
Premises.
31.5 If the Tenant obtains knowledge of the attachment of any lien, as set
forth in Section 31.3, or an Enforcement Notice, as set forth in Section 31.4,
or obtains knowledge of facts which may give rise to such lien or Enforcement
Notice, whether written or oral, it shall immediately notify the Landlord in
writing and provide Landlord with a copy of such lien documentation or
Enforcement Notice.
31.6 At the request of Landlord during and after the Term, in the event of
an Enforcement Notice or other circumstances leading Landlord to reasonably
conclude an Enforcement Notice could issue, the Tenant will retain an
environmental consultant, acceptable to
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the Landlord, to conduct a complete and thorough on-site inspection of the
Demised Premises, including but not limited to a geohydrological survey of soil
and subsurface conditions as well as other tests, to determine the presence of
Hazardous Substances and the consultant shall certify to the Landlord whether,
in his professional judgment, there exists any state of facts which could
reasonably lead to the issuance of an Enforcement Notice.
31.7 In connection with the termination of this Lease or other
circumstances occurring during the Term or prior to Tenant's surrendering
possession of the Demised Premises in accordance with the terms hereof which
require ECRA compliance, the Tenant shall comply with the provisions of ECRA by
securing from -the NJDEP a "Negative Declaration", as such term is defined in
N.J.A.C. 7:26B-1.3, or by securing from the NJDEP and implementing a "Cleanup
Plan", as such term is defined in N.J.A.C. 7:26-1.3 and the Tenant shall post
with the NJDEP a surety bond or other financial security approved by the NJDEP
in an amount sufficient to implement and complete such Cleanup Plan, or in lieu
thereof apply for and obtain an Administrative Consent Order, and perform all
necessary acts in connection therewith, including without limitation, the
implementation of any monitoring or remedial efforts required pursuant to other
applicable environmental laws, ordinances, regulations or policies. In any
event, Tenant shall have the sole and exclusive responsibility to comply at its
own cost and expense with ECRA in connection with the Demised Premises and shall
diligently pursue its compliance efforts to completion. Tenant shall commence
its compliance efforts at least six (6) months prior to the end of the Term and
diligently pursue such efforts to completion. Tenant shall keep Landlord fully
informed of its progress in obtaining the ECRA clearance. Tenant shall provide
Landlord with a copy of all correspondence, reports (including drafts), forms
and other documents submitted to or received from NJDEP within three (3) days of
the preparation or receipt of such documents. Tenant shall notify Landlord at
least three (3) days prior to any meeting with NJDEP and Landlord shall have the
right to attend such meeting. Further, Tenant shall provide ECRA status reports
to Landlord every thirty (30) days during the clearance period directly to the
Landlord. If ECRA clearance is not achieved on or before the end of the Term,
Tenant shall be liable to Landlord as a holdover tenant, without limiting any
other liability of Tenant to Landlord resulting from its default under this
Lease.
31.8 Whenever Tenant shall be undertaking any ECRA compliance efforts as
provided for in Section 31.7 or otherwise, Landlord shall be given notice of and
sufficient opportunity to observe all activities carried out by Tenant in its
compliance effort. Further, the NJDEP, the USEPA and Landlord, its agents,
consultants or contractors shall have the right to enter the Demised Premises at
all reasonable times in order to inspect the Demised Premises and insure
compliance with ECRA and all other Federal, State and local environmental laws,
ordinances, regulations arid policies.
31.9 If there shall be filed a lien against the Demised Premises as set
forth in Section 31.3, including if by the NJDEP pursuant to and in accordance
with the provisions of N.J.S.A. 58:10-23.llf(f) as a result of the chief
executive of the Spill Fund having expended monies
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from the Spill Fund to pay for Damages and/or Cleanup and Removal Costs, the
Tenant shall immediately either (a) pay the claim and remove the lien from the
Demised Premises, or (b) furnish (i) a bond satisfactory to the Landlord in the
amount of the claim out of which the lien arises, (ii) a cash deposit in the
amount of the claim out of which the lien arises, or (iii) other security
reasonably satisfactory to the Landlord in an amount sufficient to discharge the
claim out of which the lien arises.
31.10 The Landlord, at its option, shall have the right to perform annual
environmental inspections of the Premises and all costs for such audits,
including any engineering or professional fees, will be at the Tenant's expense.
31.11 Whenever the terms ECRA, Spill Fund, Major Facility and similar terms
and statutory references are used in this Lease, they shall be deemed to include
any similar, future or successor statutory references and/or terms as may apply
to the Demised Premises and its use and occupancy by Tenant under this Lease.
31.12 The Tenant represents that its Standard Industrial Classification
Number (hereinafter referred to as "SIC #") is 5600. If there is any change in
the Tenant's SIC #, the Tenant shall immediately advise the Landlord in writing
thereof.
32. ENVIRONMENTAL GUARANTY
Irving Magram and Melanie Magram Rothenberg, who are the controlling
shareholders of Tenant, personally and unconditionally guarantee the performance
by Tenant of its obligations pursuant to Sections 30 and 31 of this Lease,
including without limitations, the performance of any indemnification obligation
arising thereunder, the discharge of any lien, the performance of any obligation
required to be performed by Tenant pursuant to an Enforcement Notice and
compliance by Tenant with any obligations arising under ECRA. The above named
guarantors shall be jointly and severally liable for all obligations to be paid
or performed by them pursuant to this guaranty. This guaranty shall not be
affected or impaired by the death or disability of a guarantor.
33. SECURITY
The Tenant has this day deposited with the Landlord the sum of $44,874.53
as Security for the payment of the rent a Tenant has fully and faithfully
performed all such covenants and conditions and is not in arrears in Base Rent
or Additional Rent. The balance of the Security shall be returned to the Tenant,
without interest, at the expiration of the thirty-sixth (36th) month of the
Term, provided that the Tenant has fully and faithfully performed all such
covenants and
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conditions and is not in arrears in Base Rent or Additional Rent. During the
Term hereof, the Landlord may, if the Landlord so elects, have recourse to the
Security, to make good any default by the Tenant, in which event the Tenant
shall, on demand, promptly restore the Security to its original amount.
Liability to repay the Security to the Tenant shall run with the reversion and
title to the Demised Premises, whether any change in ownership thereof be by
voluntary alienation or as the result of judicial sale, foreclosure or other
proceedings, or the exercise of a right of taking or entry by any mortgagee. The
Landlord shall assign or transfer the Security, for the benefit of the Tenant,
to any subsequent owner or holder of the reversion or title to the Demised
Premises, in which case the assignee shall become liable for the repayment
thereof as herein provided, and the assignor shall be deemed to be released by
the Tenant from all liability to return the ' Security. This provision shall be
applicable to every alienation or change in title and shall in no wise be deemed
to permit the Landlord to retain the Security after termination of the
Landlord's ownership of the reversion or title. The Tenant shall not mortgage,
encumber or assign the Security without the written consent of the Landlord.
34. QUIET ENJOYMENT
Landlord represents that it has the right to lease the Demised Premises and
agrees that if Tenant shall pay the Base Rent and Additional Rent as herein
provided and shall keep, provide and perform all of the other covenants of this
Lease by Tenant to be kept, observed and performed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Demised Premises for the Term
aforesaid. The Landlord further agrees that it shall not enforce any
unreasonable rules or regulations which would unduly prejudice the conduct of
the Tenant's business, nor which would prevent full and free access to the
Demised Premises by the Tenant, its agents, servants and customers.
35. COMPLETION OF IMPROVEMENTS
"Substantial Completion" of the improvements shall be deemed to have
occurred upon the first day of the occurrence of all of the following
conditions: (a) Construction of the improvements shall have been completed in
accordance with the Work Letter annexed hereto as Exhibit C as the same may be
modified upon the mutual consent of the parties, and in accordance with all
applicable laws, regulations of any applicable governmental bodies except for
minor punch list items, the non-completion of which shall riot materially affect
the appearance of the Demised Premises or the use and occupancy thereof by
Tenant; (b) The heating, plumbing, ventilating and air conditioning systems, all
utility systems (except telephones) servicing the Demised Premises, and all
other systems of the Demised Premises shall have been installed, and in good
operating order; and (c) There shall have been issued a building certificate of
occupancy (including a temporary or conditional certificate of occupancy, if
available) covering the Demised Premises for the work or improvements made by
the Landlord and all such other certificates and permits, if any, evidencing the
completion of construction of the improvements as may be required of the
Landlord by any
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Federal, State or local governmental body so as to permit Tenant's occupancy of
the Demised Premises. Failure of the Tenant to obtain any required government
approval due to its own proposed use and occupancy, shall not be deemed a at no
expense to Tenant. Occupancy of the Demised Premises, either before or after the
date of Substantial Completion of the improvements, shall not be deemed a waiver
of any rights of Tenant to the full completion of such construction, including
each and every unfinished item thereof; nor shall it affect the obligation of
the Landlord, upon and after such occupancy by Tenant of the Demised Premises.
36. ENTRY PRIOR TO COMPLETION
Tenant, at its sole risk, may with the Landlord's consent prior to the
Substantial Completion of the improvements, enter upon the Demised Premises
during the course of construction and install such furniture, furnishings, trade
and other fixtures, interior decorations, machinery and equipment as it may
elect and begin the storing of Tenant's products; provided, however, that such
entry, installation and storage, in the sole judgment of Landlord, shall not
interfere with construction by Landlord that is then taking place by Tenant as
to the Demised Premises or with any labor employed by Landlord (or by any
contractor or subcontractor) in performing such construction work; and provided
further, that Tenant shall indemnify Landlord and Landlord's contractors against
any claims for personal injury or property damage arising from such entry,
installation or storage. Tenant shall have no obligation to make any payment to
Landlord, whether in the form of rent or otherwise on account of any such entry,
installation or storage made by Tenant. Such entry, installation and/or storage
shall not be deemed to be an acceptance by Tenant of the construction of, or as
an occupancy by Tenant of the Demised Premises.
37. OPTION TO RENEW
37.1 Provided that no Event of Default has occurred and is continuing, the
Tenant shall have the option to renew the within Lease for a period of Five (5)
Years (the "First Option Term") from the date of the expiration thereof upon the
same terms and conditions, except that the annual Base Rent shall be calculated
as follows:
Month 1 through Month 6 inclusive:
$6.33 per square foot per year
Month 7 through Month 18 inclusive:
$6.58 per square foot per year
Month 19 through Month 30 inclusive:
$6.84 per square foot per year
Month 31 through Month 42 inclusive:
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$7.11 per square foot per year
Month 43 through Month 54 inclusive:
$7.39 per square foot per year
Month 55 through Month 60 inclusive:
$7.69 per square foot per year
The Tenant shall give the Landlord not less than Twelve (12) Months written
notice, as set forth in Section 45, prior to the expiration date of the initial
Term, TIME BEING OF THE ESSENCE FOR SUCH NOTICE and upon failure to give such
notice to the Landlord, the within option is deemed waived and void.
37.2 Provided that no Event of Default has occurred and is continuing, the
Tenant shall have a further option to renew the within Lease for a period of
Five (5) Years (the "Second Option Term") from the date of the expiration of the
First Option Term, upon the same terms and conditions, except that the annual
Base Rent for the first year of the Second Option Term shall be the greatest of
the following amounts:
(i) $7.69 per square foot per year;
(ii) the then fair market rent for comparable space in Bergen County,
New Jersey; and
(iii) the amount obtained by multiplying $5.00 per square foot per
year by a fraction, the numerator of which is the CPI for the first month
of the second renewal term and the denominator of which is the CPI for the
month in which the Commencement Date occurs.
For each subsequent year during the Second Option Term, the Base Rent shall be
adjusted by multiplying the Base Rent in effect during the first year of the
Second Option Term by a fraction, the numerator of which shall be the CPI for
the first month of the applicable year and the denominator shall be the CPI for
the first month of the Second Option Term; provided that in no event shall the
Base Rent be less than the amount payable for the immediately preceding year.
The Tenant shall give the Landlord not less than Twelve (12) Months written
notice, as set forth in Section 45, prior to the expiration date of the First
Option Term, TIME BEING OF THE ESSENCE FOR SUCH NOTICE and upon failure to give
such notice to the Landlord, the within option is deemed waived and void.
38. RIGHT TO EXHIBIT
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The Tenant agrees to permit the Landlord and the Landlord's agents,
employees or other representatives to show the Demised Premises to persons
wishing to rent or purchase the same, and Tenant agrees that Twelve (12) Months
preceding the expiration of the Term hereof,, the Landlord or the Landlord's
agents, employees or other representatives shall have the right to place notices
on the-front of the Demised Premises or any part thereof, offering the Demised
Premises for rent or for sale; and the Tenant hereby agrees to permit the same
to remain thereon without hindrance or molestation.
39. BROKERAGE
Tenant represents and warrants to Landlord that Tenant has dealt only with
Charles Klatskin Company, Inc. and Team Resources, Inc. (the "Brokers") as
Brokers in connection with this Lease and no other broker participated in or
negotiated this Lease or is entitled to any commission arising from the
execution hereof; Tenant agrees to defend, indemnify and hold harmless the
Landlord from any and all claims of other brokers and expenses in connection
therewith attributable to a breach of the representation made by Tenant. Tenant
further covenants that it will not deal with any other broker other than the
Brokers in connection with the leasing of any additional space by Tenant in the
Building or any extension or renewal of this Lease and shall indemnify Landlord
against any additional commission which may become payable as a result of a
breach of such representation. Landlord agrees to defend, indemnify and hold
harmless Tenant from any and all claims by any brokers alleging to have acted on
behalf of Landlord.
40. BINDING NATURE OF LEASE
The provisions of this Lease shall apply to, bind and inure to the benefit
of Landlord and Tenant and their respective heirs, successors, legal
representatives and assigns. It is understood that the term "Landlord" as used
in this Lease means only the owner, a mortgagee in possession or a term lessor
of the building, so that in the event of any sale of the building or of the
building, or the mortgagee in possession has assumed and agreed to carry out any
and all covenants and obligations of Landlord hereunder.
41. CONFORMATION WITH LAWS AND REGULATIONS
The Landlord may pursue the relief or remedy sought in any invalid clause
by conforming the said clause with the provisions of the statutes or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length. In all references herein to any parties, persons, entities or
corporations, the uses of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text of the
within instrument may require.
42. NON-WAIVER BY LANDLORD
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The various rights, remedies, options and elections of the Landlord,
expressed herein, are cumulative, the failure of the Landlord to enforce strict
performance by the Tenant of the conditions and covenants of this Lease or to
exercise any election or option, or to resort or have recourse to any remedy
herein conferred or the acceptance by the Landlord of any installment of Base
Rent and Additional Rent after any breach by the Tenant, in any one or more
instances, shall not be construed or deemed to be a waiver or a relinquishment
for the future by the Landlord of any such conditions and covenants, options,
elections or remedies, but the same shall continue in full force and effect.
43. NON-PERFORMANCE BY LANDLORD
This Lease and the obligation of the Tenant to pay the Base Rent and
Additional Rent hereunder and to comply with the covenants and conditions
hereof, shall not be affected, curtailed, impaired or excused because of the
Landlord's inability to supply any service or material called for herein, by
reason of any rule, order, regulation or pre-emption by any governmental entity,
authority, department, agency or subdivision or for any delay which may arise by
reason of negotiations for the adjustment of any fire or other casualty loss or
because of strikes or other labor trouble or for any cause beyond the control of
the Landlord.
44. VALIDITY OF LEASE
The terms, conditions, covenants and provisions of this Lease shall be
deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
45. NOTICES
45.1 Whenever it is provided herein that notice, demand, request or other
communication shall or may be given to or served upon either of the parties, or
if either of the parties shall desire to give or serve upon the other any
notice, demand, request or other communication with respect hereto or the
Demised Premises, each such notice, demand, request or other communication shall
be in writing, and, any law or statute to the contrary notwithstanding, shall be
given or served as follows:
(a) if given or served by Landlord, either by hand herein provided;
and
(b) if given or served by Tenant, by hand delivery, telecopy (Fax),
overnight express mail service, or by mailing the same to Landlord by
registered or certified mail,
27
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postage prepaid, return receipt requested, addressed to Landlord at the
address first set forth above or at such other address as Landlord may from
time to time designate by notice given to Tenant in the manner herein
provided.
45.2 Every notice, demand, request or other communication hereunder shall
be deemed to have been given or served (i) at the time that the same shall be
hand delivered or telecopied (Fax) or (ii) one day after the same shall have
been sent by overnight express mail service or (iii) two days after the same
shall have been deposited in the United States mails, postage prepaid, by
certified or registered mail [regardless of whether the delivery is actually
accepted].
46. ENTIRE CONTRACT
This Lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms thereof. No additions, changes or modifications,
renewals or extensions hereof shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
47. CAPTIONS
The captions to the Sections of this Lease are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
or intent of this Lease or any part thereof nor in-any way affect this Lease or
any part thereof.
48. COVENANTS AND CONDITIONS
All of the terms and provisions of this Lease shall be deemed and construed
to be "Covenants" and "Conditions" to be performed by the respective parties as
though words specifically expressing or importing covenants and conditions were
used in each separate term and provision hereof.
49. WAIVERS BY PARTIES
Landlord and Tenant hereby mutually waive their rights to trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, Tenant's use or occupancy of the Demised Premises,
and any claim of injury or damage. Tenant waives any rights conferred upon it
pursuant to N.J.S.A. 2A:18-60 to apply for an order removing any summary action
for possession to Superior Court.
50. COVENANTS OF FURTHER ASSURANCE
28
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If, in connection with obtaining financing for the Demised Premises, a
lender shall request reasonable modifications in this Lease as a condition to
such financing, Tenant will not unreasonably withhold, delay or defer its
written consent thereto, provided that such modifications do not in Tenant's
reasonable judgment increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created or Tenant's use and
enjoyment of the Demised Premises.
Federal Courts located in the State of New Jersey. ln the event of any such
suit, the parties hereof consent to the personal jurisdiction of such courts and
waive any defense based oi improper venue.
52. NO OPTION
The submission of this Lease for examination does not constitute a
reservation of or option for the Demised Premises, and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord and
Tenant.
53. OPTION TO LEASE ADDITIONAL SPACE
Provided that no Event of Default has occurred and is continuing, Landlord
agrees that when leaseable space (the "Additional Space") of approximately
23,487 square feet adjacent to the Demised Premises becomes available for rental
which must occur during the period beginning with the twenty-fifth (25th) month
of the Term and ending with the seventy-second (72nd) month, Landlord shall
notify the Tenant in writing that such Additional Space is available for rent.
Tenant shall have the first option to lease the Additional Space at the Base
Rent in effect at the time of the taking of Additional Space and the Base Rent
for the Additional Space shall be adjusted thereafter to coincide with the
increases in Base Rent as set forth in Section 2 herein. Tenant shall give
Landlord written notice, within thirty (30) days after Landlord gives notice to
Tenant thereof, of its intention to lease the Additional Space, TIME BEING OF
THE ESSENCE FOR SUCH NOTICE. Upon failure to give such notice to Landlord, the
within option is deemed waived and void. If Tenant does not exercise the
foregoing option, Landlord shall be free to lease the Additional Space, provided
that the maximum term of any lease (including any option term) shall not exceed
ten (10) years. If the Additional Space becomes available prior to the
twenty-fourth (24th) month, Landlord shall be permitted to lease the space,
provided that the term of any such lease (including any option periods) shall
expire prior to the end of the seventy-second (72nd) month of this lease.
54. PARKING
Landlord shall provide in the Demised Premises parking area, for Tenant's
use during the Term hereof, one parking space for every 1000 square feet of
gross rentable space occupied by Tenant.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate officers
and their proper corporate seal to be hereto affixed, the day and year first
above written.
Signed, Sealed and Delivered in
the presence of or attested by:
FRANKLIN ASSOCIATES
/s/ By: /s/
-------------------- --------------------------
Landlord
LEW MAGRAM, LTD.
/s/ By: /s/Warren Golden, Executive V.P.
--------------------- -----------------------------------
Tenant Title
By: /s/ Irving Magram
-----------------------------------
Individually with respect to Section 32
By: /s/ Melanie Rothenberg
-----------------------------------
Individually with respect to Section 32
[EXHIBITS OMITTED]
<PAGE>
Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
LEW MAGRAM LTD.
as Borrower
Dated: August 13, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
SECTION ..........................................................................................................5
SECTION 2. CREDIT FACILITIES...................................................................................10
2.1 Revolving Loans...........................................................................10
2.2 Letter of Credit Accommodations...........................................................11
2.3 Availability Reserves.....................................................................12
SECTION 3. INTEREST AND FEES...................................................................................13
3.1 Interest..................................................................................13
3.2 Closing Fee...............................................................................13
3.3 Servicing Fee.............................................................................13
SECTION 4. CONDITIONS PRECEDENT.................................................................................14
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations.................14
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.....................16
SECTION 5. GRANT OF SECURITY INTEREST..........................................................................16
5.1 Grant....................................................................................16
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................................17
6.1 Borrower's Loan Account...................................................................17
6.2 Statements................................................................................17
6.3 Collection of Accounts....................................................................18
6.4 Payments..................................................................................19
6.5 Authorization to Make Loans...............................................................19
6.6 Use of Proceeds...........................................................................19
SECTION 7. COLLATERAL REPORTING AND COVENANTS..................................................................20
7.1 Collateral Reporting......................................................................20
7.2 Accounts Covenants........................................................................20
7.3 Inventory Covenants.......................................................................22
7.4 Equipment Covenants.......................................................................22
7.5 Power of Attorney.........................................................................23
7.6 Right to Cure.............................................................................23
7.7 Access to Premises........................................................................24
SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................................24
8.1 Corporate Existence, Power and Authority; Subsidiaries....................................24
8.2 Financial Statements; No Material Adverse Change..........................................24
8.3 Chief Executive Office; Collateral Locations..............................................25
8.4 Priority of Liens; Title to Properties....................................................25
8.5 Tax Returns...............................................................................25
8.6 Litigation................................................................................25
8.7 Compliance with Other Agreements and Applicable Laws......................................26
8.8 ERISA.....................................................................................26
8.9 Capitalization............................................................................26
8.10 Accuracy and Completeness of Information.................................................26
8.11 Survival of Warranties; Cumulative.......................................................26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................................26
9.1 Maintenance of Existence..................................................................26
9.2 New Collateral Locations..................................................................27
9.3 Compliance with Laws, Regulations, Etc....................................................27
9.4 Payment of Taxes and Claims...............................................................27
9.5 Insurance.................................................................................27
9.6 Financial Statements and Other Information................................................28
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc...................................29
9.8 Encumbrances..............................................................................29
9.9 Indebtedness..............................................................................29
9.10 Loans, Investments, Guarantees, Etc......................................................30
9.11 Dividends and Redemptions................................................................31
9.12 Transactions with Affiliates.............................................................32
9.13 Working Capital..........................................................................32
9.14 Adjusted Net Worth.......................................................................32
9.15 ERISA....................................................................................32
9.16 Costs and Expenses.......................................................................32
9.17 Further Assurances.......................................................................32
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.....................................................................33
10.1 Events of Default........................................................................33
10.2 Remedies.................................................................................34
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS ..................................................................36
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver....................36
11.2 Waiver of Notices........................................................................37
11.3 Amendments and Waivers...................................................................37
11.4 Waiver of Counterclaims..................................................................37
11.5 Indemnification..........................................................................37
11.6 Confidentiality of Mailing Lists ........................................................38
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS....................................................................38
12.1 Term.....................................................................................38
12.2 Notices..................................................................................39
12.3 Partial Invalidity.......................................................................39
12.4 Successors...............................................................................39
12.5 Entire Agreement.........................................................................40
</TABLE>
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated August 13, 1996 is entered into by
and between Congress Financial Corporation, a California corporation (ALender")
and Lew Magram Ltd., a New York corporation (ABorrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3. Any accounting term used herein unless otherwise defined in
this Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance, and including, without limitation, all amounts payable by any
charge or credit card issuer or charge or credit card sale processor in respect
of charge or credit card sales.
1.2 "Adjusted Net Income" shall mean, for any fiscal year, the amount equal
to: (a) Borrower's net income or loss after provision for taxes for such fiscal
year, minus, (b) to the extent included in
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calculating such net income or loss: (i) all gains arising from the sale of
capital assets; (ii) gain arising from any write-up in book value of an asset;
(iii) income or gain of any person acquired by Borrower in any manner to the
extent realized in any period prior to the date of acquisition; (iv) income or
gain of any person in which Borrower has an ownership interest (other than a
wholly owned subsidiary) except and only to the extent that Borrower has
actually received such income or gain in the form of cash distributions; (v)
gain from the cancellation or forgiveness of indebtedness; (vi) gain arising
from the initial implementation of a change in GAAP; and (vii) gain from
extraordinary items or any other nonrecurring transaction.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
and in a commercially reasonable manner reducing the amount of Revolving Loans
and Letter of Credit Accommodations which would otherwise be available to
Borrower under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender in
good faith, do or can reasonably be expected to affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrower or (iii) the security interests
and other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) in respect of any state of facts which
Lender determines in good faith constitutes an Event of Default or can
reasonably be expected to, with notice or passage of time or both, constitute an
Event of Default.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.7 "Cost" shall mean, as to any Inventory, the cost thereof on a first-in,
first-out basis as would be reflected on a balance sheet of Borrower prepared in
accordance with GAAP.
1.8 "Eligible Inventory" shall mean Inventory consisting of finished goods
held or acquired for resale in the ordinary course of the business of Borrower
(including, without limitation, finished goods purchased under a Letter of
Credit Accommodation provided by Lender and for which Lender has received all
necessary bills of lading and other documents evidencing title relating thereto,
and as to
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which the draft under the letter of credit has been paid) all of which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) raw materials or work-in-process; (b) components
which are not part of finished goods; (c) spare parts for equipment; (d)
packaging and shipping materials; (e) supplies used or consumed in Borrower's
business; (f) Inventory at premises other than those owned or leased and
controlled by Borrower, except if Lender shall have received an agreement in
writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) bill and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (k) damaged and/or defective Inventory; and (l) Inventory purchased or
sold on consignment. General criteria for Eligible Inventory may be established
and revised from time to time by Lender in good faith. Any Inventory which is
not Eligible Inventory shall nevertheless be part of the Collateral.
1.9 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.10 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the
Revolving Loans available to Borrower as of such time based on the applicable
lending formulas set forth in or established pursuant to Section 2.1, as
determined by Lender, and subject to the sublimits and Availability Reserves
from time to time established by Lender hereunder and (ii) the Maximum Credit,
minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the aggregate amount of all trade payables of Borrower
which are more than sixty (60) days past due at such time.
1.11 "Excess Cash Flow" shall mean, for any fiscal year, the amount, as
determined from the audited financial statements of Borrower for such fiscal
year delivered pursuant to and meeting the requirements of Section 9.6(a), equal
to: (a) Adjusted Net Income for such fiscal year; plus (b) the depreciation and
amortization expense deducted in determining such Adjusted Net Income; minus, to
the extent not already deducted in calculating Adjusted Net Income, (c)(1) all
capital expenditures paid during such fiscal year, excluding capital
expenditures financed with the proceeds of indebtedness for borrowed money other
than the Loans hereunder, (2) all payments of principal in respect of
indebtedness for borrowed money (other than the Loans) made or required to be
made during such fiscal year, including, without limitation, all payments of the
principal portion of rentals under capitalized leases made or required to be
made during such fiscal year, and (3) all dividends and other distributions paid
to Borrower's stockholders during such fiscal year in respect of, or redemption
of, Borrower's capital stock (provided, that the inclusion of such payments in
determining Excess Cash Flow shall not be construed to permit any such payment
except in accordance with the other terms and conditions of the Financing
Agreements).
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1.12 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.13 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.14 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.15 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.16 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.17 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or (b) with respect to
which Lender has agreed to indemnify the issuer or guaranteed to the issuer the
performance by Borrower of its obligations to such issuer.
1.18 "Loans" shall mean the Revolving Loans.
1.19 "Magram Guarantee" shall mean the Limited Guarantee of the Obligations
dated the date hereof made by Irving Magram in favor of Lender.
1.20 "Maximum Credit" shall mean the amount of Five Million Dollars
($5,000,000).
1.21 "Net Recovery Cost Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the recovery on
the aggregate amount of the Inventory on an orderly liquidation value basis as
set forth in the most recent acceptable appraisal of Inventory received by
Lender in accordance with Section 7.3, net of operating expenses, liquidation
expenses, and commissions and (b) the denominator of which is the original Cost
of the aggregate amount of the Inventory subject to such appraisal.
8
<PAGE>
1.22 "Obligations" shall mean any and all Revolving Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
arising under this Agreement or under any other agreement between Borrower and
Lender (other than those which have been acquired by Lender or an Affiliate of
Lender), whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.
1.23 "Obligor" shall mean any guarantor (including, without limitation,
Irving Magram), endorser, acceptor, surety or other person liable on or with
respect to the Obligations or who is the owner of any property which is security
for the Obligations, other than Borrower.
1.24 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.25 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.26 "Prime Rate" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank.
1.27 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.28 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.29 "Twelve Month Average Utilization" shall mean the average daily
outstanding principal balance of Revolving Loans for the twelve calendar-month
period ended on or immediately preceding the early termination date of this
Agreement (or the period from the date hereof through the end of the most
recently ended calendar month preceding such termination date if termination
occurs within twelve months after the date hereof).
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<PAGE>
1.30 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.31 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Borrower, for purposes of Section 9.13, the
liabilities of Borrower and its subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP).
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) the lesser of: (A) the amount equal to the lesser of: (1) fifty
percent (50%) of the Value of Eligible Inventory; or (2) eighty percent
(80%) of the Net Recovery Cost Percentage, multiplied by the Cost of
Eligible Inventory; or (B) $5,000,000; minus
(ii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less than
ten (10) days prior notice to Borrower, reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Lender determines in good faith
that: (i) the number of days of the turnover of the Inventory for any period,
when compared to the turnover rate for the same period of the immediately
preceding year or the forecasted turnover rate for such period, has changed in
any material respect or (ii) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased, or (iii) the nature and quality of the
Inventory has deteriorated. In determining whether to reduce the lending
formula(s), Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Inventory or in establishing
Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans and
the Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit. In the event that the outstanding amount of any component of the
Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(c) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time
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or from time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein, at the
request of Borrower, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Borrower pursuant
to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to two (2%) percent per
annum on the daily outstanding balance of the Letter of Credit Accommodations
for the immediately preceding month (or part thereof), payable in arrears as of
the first day of each succeeding month. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on the
date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) fifty (50%) percent of the cost of such Eligible Inventory, plus (B)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America
and (ii) if the proposed Letter of Credit Accommodation is for any other
purpose, an amount equal to one hundred (100%) percent of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, the amount of Revolving Loans which might otherwise be available
to Borrower shall be reduced by the applicable amount set forth in Section
2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding Letter of
Credit Accommodations and all other commitments and obligations made or incurred
by Lender in connection therewith, shall not at any time exceed $1,000,000. At
any time an Event of Default exists or has occurred and is continuing, upon
Lender's request, Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations, and in either case, the Revolving Loans otherwise available to
Borrower shall not be reduced as provided in Section 2.2(c) to the extent of
such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and against any
and all losses, claims, damages, liabilities, costs and expenses which Lender
may suffer or incur in connection with any Letter of Credit Accommodations and
any documents, drafts or acceptances relating thereto, including, but not
limited to, any losses, claims, damages, liabilities, costs and expenses due to
any action
11
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taken by any issuer or correspondent with respect to any Letter of Credit
Accommodation; provided, however, that Lender shall not be so indemnified or
held harmless from Lender's gross negligence or wilful misconduct (as determined
by a final nonappealable judgment of a court of competent jurisdiction).
Borrower assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes all
risks for, and agrees to pay, all foreign, Federal, State and local taxes,
duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Borrower
hereby releases and holds Lender harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation; provided, however, that Lender shall not be so released or held
harmless with respect to Lender's gross negligence or wilful misconduct (as
determined by a final nonappealable judgment of a court of competent
jurisdiction). The provisions of this Section 2.2(e) shall survive the payment
of Obligations and the termination or non-renewal of this Agreement. For the
purposes of this Section, the negligence, misconduct, or bad faith of an issuer
or correspondent shall not be imputed to Lender.
(f) Nothing contained herein shall be deemed or construed to grant Borrower
any right or authority to pledge the credit of Lender in any manner. Lender
shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken by
Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.
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SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the non-contingent Obligations at the rate of one and one-half
(1-1/2%) percent per annum in excess of the Prime Rate, except that Borrower
shall pay to Lender interest, at Lender's option, without notice, at the rate of
three and one-half (3-1/2%) percent per annum in excess of the Prime Rate: (i)
on the non-contingent Obligations for the period from and after the date of
termination or non-renewal hereof, or the date of the occurrence of an Event of
Default, and for so long as such Event of Default is continuing as determined by
Lender and until such time as Lender has received full and final payment of all
such Obligations (notwithstanding entry of any judgment against Borrower) and
(ii) on the Revolving Loans at any time outstanding in excess of the amounts
available to Borrower under Section 2 (whether or not such excess(es), arise or
are made with or without Lender's knowledge or consent and whether made before
or after an Event of Default). Notwithstanding anything in the foregoing to the
contrary, if, for any month, the average daily unpaid principal balance of the
Revolving Loans does not equal at least $2,000,000, then, in addition to the
interest accruing as provided above, Borrower shall pay Lender interest
(AAdditional Interest") at a rate per annum equal to the rate determined as
provided above on the amount by which $2,000,000 exceeded the average daily
unpaid principal balance of the Revolving Loans for such month. All interest
(including, without limitation, Additional Interest) accruing hereunder on and
after the occurrence of any of the events referred to in Sections 3.1(a)(i) or
3.1(a)(ii) above shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender monthly in arrears not
later than the first day of each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed. The
interest rate shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
of $50,000, which shall be fully earned as of and payable on the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in
an amount equal to $1,500 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
while there remain outstanding any of the Obligations for the payment of money
or with respect to Letter of Credit Accommodations, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
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SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations, subject only to the
security interests and liens permitted herein or in the other Financing
Agreements; without limiting the foregoing, Lender shall have received, in
form and substance satisfactory to Lender, all releases, terminations and
such other documents as Lender may request to evidence and effectuate the
termination by the existing lender or lenders to Borrower of their
respective financing arrangements with Borrower and the termination and
release by it or them, as the case may be, of any interest in and to any
Collateral or other property of Borrower which is intended as security for
the Obligation, duly authorized, executed and delivered by it or each of
them, including, but not limited to, (i) UCC termination statements for all
UCC financing statements previously filed by it or any of them or their
predecessors, as secured party, and Borrower, as debtor, and (ii)
satisfactions and discharges of any mortgages, deeds of trust or deeds to
secure debt by Borrower in favor of such existing lender or lenders, in
form acceptable for recording in the appropriate government office;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Lender, and Lender shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings which
Lender may have reasonably requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed an update of its field review of the
Records and such other information with respect to the Collateral as Lender
may require to determine the amount of Revolving Loans available to
Borrower, the results of which shall be satisfactory to Lender, not more
than three (3) business days prior to the date hereof;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation: (i)
acknowledgements by lessors, mortgagees and
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warehousemen of Lender's security interests in the Collateral, waivers by
such persons of any security interests, liens or other claims by such
persons to the Collateral and agreements permitting Lender access to, and
the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral; (ii) an agreement from each charge
or credit card issuer and charge or credit card sale processor with respect
to each charge or credit card now accepted by Borrower, in which Borrower
notifies such person of Lender's security interest in the amounts due from
such Person to Borrower and irrevocably instructs such Person to pay such
amounts directly to the Blocked Account, and in which such Person waives
any security interest in such amounts; (iii) an agreement from each Person
in possession or control of Borrower's mailing or customer lists, or any
electronic or other medium of storage thereof, in which such Person agrees
to deliver such list or storage medium to Lender at Lender's request; and
(iv) an agreement with each Person who, on behalf of Borrower, licenses or
rents Borrower's mailing or customer lists to third parties, or collects
the proceeds from such licenses or rentals, in which such Person agrees to
pay all amounts due to Borrower in respect of such collections directly to
the Blocked Account and, upon Lender's request when an Event of Default has
occurred and is continuing, to comply with Lender's instructions with
respect to all such licenses and rentals.
(f) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) the Excess Availability, as determined by Lender, as of the date
of the initial Loans and Letter of Credit Accommodations, shall be not less
than $250,000, after giving effect to the initial Loans made or to be made
and Letter of Credit Accommodations issued or to be issued in connection
with the initial transactions hereunder;
(h) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request;
(i) Lender shall have received evidence satisfactory in form and
substance to it that Irving Magram has contributed to the capital of
Borrower, or otherwise converted to equity, indebtedness owed to him by
Borrower in the aggregate principal amount of $1,000,000;
(j) Lender shall have received, in form and substance satisfactory to
it, a subordination agreement duly executed and delivered by Lew Magram and
Evelyn Magram, subordinating payment of all indebtedness owed by Borrower
to them to the prior payment of the Obligations;
(k) Lender shall have received the audited financial statements of
Borrower for the six months ended December 30, 1995, prepared in accordance
with GAAP and fairly presenting the financial position and results of
operations of Borrower as at such date and for the period then ended,
accompanied by the unqualified examination report thereon of BDO Seidman,
LLP, and Lender shall be satisfied with the financial position and results
of operations of Borrower set forth therein;
(l) Lender shall have received evidence satisfactory to it that
Borrower has paid in full all amounts due from Borrower to Melanie Magram
Rothenberg pursuant to or in connection with the
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transactions contemplated by the Redemption Agreement dated as of April 29,
1995 by and among Borrower, Melanie Magram Rothenberg, and Irving Magram
and the Consulting Services Agreement dated as of April 29, 1995 by and
between Borrower and Melanie Magram Rothenberg;
(m) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to
Lender, in form and substance satisfactory to Lender; and
(n) Lender shall have received such other agreements, documents,
instruments, certificates and opinions as Lender may reasonable request.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements, except those that relate to a specific date or
a specific time period, shall be true and correct in all material respects
with the same effect as though such representations and warranties had been
made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto,
and all such representations and warranties relating to a specific date or
a specific time period shall have been true and correct in all material
respects when made; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation
and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 Grant. To secure payment and performance of all Obligations, Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the ACollateral"):
(a) Accounts;
(b) all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer and mailing lists and all proceeds from the
license or rental thereof, licenses, whether as licensor or licensee,
choses in action and other claims and existing and future leasehold
interests in
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equipment, real estate and fixtures), chattel paper, documents,
instruments, letters of credit, bankers' acceptances and guaranties;
(c) all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any
other depository or other institution from or for the account of Borrower,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Accounts and other
Collateral, including, without limitation, (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (ii) rights of
stoppage in transit, replevin, repossession, reclamation and other rights
and remedies of an unpaid vendor, lienor or secured party, (iii) goods
described in invoices, documents, contracts or instruments with respect to,
or otherwise representing or evidencing, Accounts or other Collateral,
including, without limitation, returned, repossessed and reclaimed goods,
and (iv) deposits by and property of account debtors or other persons
securing the obligations of account debtors;
(d) Inventory;
(e) Equipment, except Equipment that has been leased by Borrower under
a capital lease, the terms of which prohibit the granting by Borrower to
Lender of a security interest therein;
(f) Records; and
(g) all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against
third parties for loss or damage to or destruction of any or all of the
foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time and in accordance with the terms of this Agreement.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered prima facie correct and deemed accepted by Borrower except to the
extent that Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrower a
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written statement as provided above, the balance in Borrower's loan account(s)
shall be presumptive evidence of the amounts due and owing to Lender by
Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
ABlocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account debtors
to directly remit all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral (including, without limitation,
proceeds of cash sales of Inventory) in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance reasonably satisfactory to Lender, providing that all items received
or deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose (APayment Account"). Borrower
agrees that all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender. Without limiting
the generality of the foregoing, Borrower shall, within 45 days after the date
hereof, establish a Blocked Account with a bank acceptable to Lender, to replace
the Blocked Account with Summit Bank.
(b) For purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final collection) to
the Obligations two (2) business days following the date of receipt of
immediately available funds by Lender in the Payment Account. For purposes of
calculating the amount of the Revolving Loans available to Borrower such
payments will be applied (conditional upon final collection) to the Obligations
on the business day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with Lender's usual
and customary practices as in effect from time to time) to credit Borrower's
loan account on such day, and if not, then on the next business day.
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no event
shall the same be commingled with Borrower's own funds. Borrower agrees to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3 shall
survive the termination or non-renewal of this Agreement.
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6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans and
provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be one of such persons as the
President of Borrower may, from time to time, designate in a written notice to
Lender or, at the discretion of Lender, if such Loans are necessary to satisfy
any Obligations. All requests for Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be made or
Letter of Credit Accommodations established (which day shall be a business day)
and the amount of the requested Loan. Requests for Revolving Loans received
before 11:00 a.m., New York time, shall be deemed to have been made on that day,
and requests received after 11:00 a.m., New York time, on any day shall be
deemed to have been made as of the opening of business on the immediately
following business day. Revolving Loans shall be transferred to an account
designated by Borrower on the day requested or deemed requested as provided in
the preceding sentence. All Loans and Letter of Credit Accommodations under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrower when deposited to the credit of
Borrower or otherwise disbursed or established in accordance with the
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to
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be considered a Apurpose credit" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the following
documents in a form satisfactory to Lender: (a) on a weekly or more frequent
basis as reasonably required by Lender, a sales report and inventory report by
location, setting forth, among other things the Cost of Inventory, and a report
of amounts paid by and due from charge and credit card issuers and sale
processors; (b) on a weekly basis, perpetual inventory reports; (c) on a monthly
basis or more frequently as Lender may request, (i) inventory reports by
category and (ii) agings of accounts payable, (d) upon Lender's request, (i)
copies of customer statements and credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower; and (e) such other
reports as to the Collateral as Lender shall reasonably request from time to
time. If any of Borrower's records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of (i) any material delay in
Borrower's ability to fulfill a substantial portion of customer orders, (ii) the
assertion of any material claims, offsets, defenses or counterclaims by any
charge or credit card issuer or processor with respect to any amounts payable by
such issuer or processor in connection with its acquisition of Accounts, or
(iii) the imposition by any charge or credit card issuer or processor of any
holdback, reserve, or reduction in the percentage of the face amount of a sale
paid to Borrower (except for an increase in the merchant fee applied to all of
such issuer's or processor's customers similarly situated with Borrower). No
credit, discount, allowance or extension or agreement with any customer or with
respect to any Account shall be granted without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing, Borrower shall settle, adjust or compromise
any claim, offset, counterclaim or dispute. At any time that an Event of Default
exists or has occurred and is continuing, Lender shall, at its option, have the
exclusive right to settle, adjust or compromise any claim, offset, counterclaim
or dispute or grant any credits, discounts or allowances.
(b) Borrower shall promptly report to Lender any returns of Inventory if,
as a result thereof, the aggregate original sales price of all goods returned
during the preceding seven-day period is in excess of $1,000,000. In the event
any customer returns Inventory, Borrower shall segregate all returned Inventory
according to whether or not it is resalable, and shall not report as Eligible
Inventory any returned goods that Borrower intends to return to the supplier or
manufacturer or to dispose of in any manner other than retail sale in the
ordinary course of business.
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(c) With respect to each Account (other than an Account owed directly by a
retail consumer) and each sale of Inventory: (i) the amounts shown on any
schedule thereof delivered to Lender shall be true and complete, in all material
respects, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension, or agreement for any of the foregoing, shall
be granted except as reported to Lender in accordance with this Agreement and
except for credits, discounts, allowances or extensions made or given in the
ordinary course of Borrower's business in accordance with practices and policies
previously disclosed to Lender, (iv) there shall be no setoffs, deductions,
contras, defenses, counterclaims or disputes existing or asserted with respect
thereto except as reported to Lender in accordance with the terms of this
Agreement, and except for discounts, fees and chargebacks permitted under the
terms of the agreements between Borrower and charge or credit card issuers or
credit card processors with respect to Accounts acquired by such issuers or
processors, and (v) none of the transactions giving rise thereto will violate
any applicable State or Federal laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) On and after September 30, 1996, Borrower will not issue any
merchandise certificate, return credit, or similar agreement or instrument
unless it provides that it may not be valid for purchases of selected items or
from selected catalogues. Whenever an Event of Default has occurred and is
continuing, Borrower will not, to the extent not prohibited by applicable law,
accept any merchandise certificate, return credit, or similar agreement or
instrument, whenever issued, except on such terms and conditions as are approved
in writing by Lender from time to time.
(g) Borrower will, at any time upon Lender's reasonable request, provide
Lender with complete copies of Borrower's mailing and customer lists. On a
monthly basis or more frequently as Lender requests, Borrower will provide
Lender with a written report of all proceeds received since the last such report
from the license or rental of its mailing and customer lists and of each new
license and rental entered into since the last such report, all in such detail
as Lender requires.
(h) Whenever, after the date hereof, Borrower accepts any charge or credit
card not accepted on the date hereof or changes or adds any Person through which
charge or credit card sales are processed, Borrower shall obtain from the card
issuer or such processor an agreement of the type described in Section
4.1(e)(ii), in form and substance satisfactory to Lender. Lender may, at any
time or times that an Event of Default exists or has occurred and is continuing,
(i) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or
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conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the party or parties in any way liable for
payment thereof without affecting any of the Obligations, (ii) demand, collect
or enforce payment of any Accounts or such other obligations, but without any
duty to do so, and Lender shall not be liable for its failure to collect or
enforce the payment thereof nor for the negligence of its agents or attorneys
with respect thereto and (iii) take whatever other action Lender may reasonably
deem necessary or desirable for the protection of its interests.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and withdrawals
therefrom and additions thereto; (b) Borrower shall conduct a physical count of
the Inventory at least once each year, but at any time or times as Lender may
request on or after an Event of Default, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such physical
count; (c) Borrower shall not remove any Inventory from the locations set forth
or permitted herein, without the prior written consent of Lender, except for
sales of Inventory in the ordinary course of Borrower's business and except to
move Inventory directly from one location set forth or permitted herein to
another such location; (d) Borrower shall, at its expense, at least once each
year or, upon Lender's request, once in each six (6) month period, but at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) if the negative variance between the Cost or
quantity of Inventory determined from any physical count thereof and the Cost or
quantity of such Inventory at such date reflected on Borrower's books is equal
to or greater than four (4.0%), then Borrower shall, at its expense, conduct
such further periodic physical counts of the Inventory at such time or times as
Lender shall require until such time as Lender is reasonably satisfied that such
negative variance has been reduced to less than four percent (4.0%); and if such
negative variance at any time is greater than five percent (5.0%), then for so
long as Lender deems appropriate in its reasonable judgment, Borrower shall at
its expense retain an independent counting service reasonably acceptable to
Lender to conduct such periodic counts of Borrower's Inventory as Lender
reasonably requires; (f) Borrower shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (g) Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the Inventory; (h)
Borrower shall keep the Inventory in good and marketable condition; (i) Borrower
shall not, without prior written notice to Lender, acquire or accept any
Inventory on consignment or approval; and (j) Borrower shall send Lender a copy
of each catalogue, advertisement, or other sales material sent by Borrower to
any customers, not later than the time that it is sent to such customers.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request, Borrower shall, at its expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports as to the Equipment in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender; (b) Borrower
shall keep the Equipment in operating order (ordinary wear and tear excepted);
(c) Borrower shall use the Equipment with all
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reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws; (d) Borrower shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of Borrower or to move Equipment directly from
one location set forth or permitted herein to another such location and except
for the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (e) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (f) Borrower assumes all responsibility
and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default or event which with notice or passage of time or
both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against a person obligated on
an Account or other Collateral, (viii) notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
Lender, and open and dispose of all mail addressed to Borrower, and (ix) do all
acts and things which are necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which
Borrower's mail is deposited, (iii) endorse Borrower's name upon any items of
payment or proceeds thereof and deposit the same in the Lender's account for
application to the Obligations, (iv) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral, (v) sign
Borrower's name on any verification of Accounts and notices thereof to any
person obligated thereon and (vi) execute in Borrower's name and file any UCC
financing statements or amendments thereto. Borrower hereby releases Lender and
its officers, employees and designees from any liabilities arising from any act
or acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, provided Lender has first
given written notice to Borrower of its intended action and Borrower has failed,
within five (5) days after its receipt of such notice to itself take the action
proposed to be taken by Lender, (a) cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge
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Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly. Lender may take any action or make any payment
described above without prior notice to Borrower if (x) the Obligations have
been declared to be or have become immediately due and payable or (y) Lender
determines, in its sole judgment exercised in good faith, that delaying such
action would materially adversely affect the Collateral or Lender's rights with
respect thereto or the Business's ability to pay and perform the Obligations.
7.7 Access to Premises. From time to time as reasonably requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all of Borrower's premises during normal business hours
and after notice to Borrower, or at any time and without notice to Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, and (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrower's personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. Borrower's audited
financial statements for the fiscal year ended December 31, 1995 and all
financial statements of Borrower for any
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subsequent interim or annual period which have been or may hereafter be
delivered by Borrower to Lender have been or will be prepared in accordance with
GAAP and fairly present the financial condition and the results of operation of
Borrower as at the dates and for the periods set forth therein; provided,
however, all interim period financial statements shall be subject to normal year
end and audit adjustments in accordance with GAAP. Except as disclosed in any
interim financial statements furnished by Borrower to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrower,
since the date of the audited financial statements of Borrower for the fiscal
year ended December 31, 1995, which were furnished by Borrower to Lender prior
to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Propertiess. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and freely transferrable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against Borrower, its assets or business and
there is no action, suit, proceeding or claim by any Person pending, or to the
best of Borrower's knowledge threatened, against Borrower or its assets or
goodwill, or against any transactions contemplated by this Agreement, which if
adversely determined against Borrower would result in any material adverse
change in the assets, business or prospects of Borrower or would impair the
ability of Borrower to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
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8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth on Schedule 8.7, Borrower is not in default in any material respect under,
or in violation in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound, which default or violation could have a
material adverse effect on Borrower's assets, business, or prospects, and
Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local governmental authority.
8.8 ERISA. Borrower does not maintain any employee benefit plan that is
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended, or to the minimum fundings standards of Section 412 of the Internal
Revenue Code of 1986, as amended.
8.9 Capitalization. All of the issued and outstanding shares of capital
stock of Borrower are directly and beneficially owned and held by the Persons
named in the Information Certificate; all of such shares have been duly
authorized, are fully paid and non-assessable, and are free and clear of all
claims, liens, pledges, and encumbrances of any kind, except as disclosed in
writing to Lender.
8.10 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrower in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including, without limitation, all information on the Information
Certificate, taken as a whole, is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrower, which has not been fully and accurately disclosed to Lender in
writing, other than general economic or business trends affecting Borrower's
business or the general business community.
8.11 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve, renew
and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts without which Borrower could not carry on the business as presently or
proposed to be conducted. Borrower shall give Lender thirty (30) days prior
written notice of any proposed change in its corporate name, which notice shall
set forth the new name and Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation of Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of Borrower as soon as it is available.
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9.2 New Collateral Locations. Borrower may open any new location within the
continental United States provided Borrower (a) gives Lender thirty (30) days
prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders of any Federal, State or local governmental
authority applicable to it.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge all
taxes, assessments, contributions and governmental charges upon or against it or
its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. Lender represents and warrants to Borrower
that it has no knowledge of any tax or penalty that would currently be payable
by Borrower pursuant to the preceding sentence. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to loss or damage to the
Collateral and other risks, of such kinds and in such amounts as are
satisfactory to Lender in its reasonable judgment. Said policies of insurance
shall be satisfactory to Lender as to form and insurer. Lender acknowledges that
the form and amount of the insurance policies presently in effect with respect
to loss or damage to the Collateral and other risks which may affect Borrower
and Lender, as evidenced by the Certificate of Insurance delivered to Lender on
or prior to the date hereof, are satisfactory as of the date hereof; provided,
however, nothing shall prohibit Lender, in its reasonable judgment, from
hereafter requiring Borrower to maintain insurance policies with an insurer, in
an amount, and in a form differing from that which is in effect on the date
hereof. Borrower shall furnish certificates, policies or endorsements to Lender
as Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the
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cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and complete
entries shall be made of all dealings or transactions of or in relation to the
Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within forty (40) days after the end of each fiscal month, monthly
unaudited financial statements of Borrower, or, if Borrower has any
subsidiaries, monthly unaudited consolidated financial statements and unaudited
consolidating financial statements of Borrower and its subsidiaries (including
in each case balance sheets, statements of income and loss and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrower and its subsidiaries as
of the end of and through such fiscal month, and (ii) within one hundred (100)
days after the end of each fiscal year, audited financial statements of
Borrower, or, if Borrower has any subsidiaries, audited consolidated financial
statements and audited consolidating financial statements of Borrower and its
subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrower shall promptly notify Lender in writing of the details of (i)
any loss, damage, investigation, action, suit, proceeding or claim relating to
the Collateral or any other property which is security for the Obligations or
which would result in any material adverse change in Borrower's business,
properties, assets, goodwill or condition, financial or otherwise and (ii) the
occurrence of any Event of Default or event which, with the passage of time or
giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower sends to
its stockholders generally and copies of all reports and registration statements
which Borrower files with the Securities and Exchange Commission, any national
securities exchange or the National Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrower, as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective participant
or assignee; provided, however, Lender shall not disclose Borrower's mailing
lists to any prospective assignee or prospective participant unless such
prospective assignee or participant enters into a written confidentiality
agreement reasonably
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acceptable to Borrower. Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's expense, copies of
the financial statements of Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of Borrower and to disclose
to Lender such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall
not, directly or indirectly, (a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any of its assets to any other Person (except for (i) sales of Inventory in the
ordinary course of business and (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so long as (A)
any proceeds are paid to Lender and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $100,000 for all such
Equipment disposed of in any fiscal year of Borrower), or (c) form or acquire
any subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any
of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon or materially impair the value of the
real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate granted after the date hereof not to exceed $250,000 in the
aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower other than the Equipment or
real estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be; and
(f) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except (a) the Obligations; (b) trade obligations in the ordinary
course of business not yet due and payable or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued
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and available to Borrower; (c) purchase money indebtedness (including capital
leases) to the extent not incurred or secured by liens (including capital
leases) in violation of any other provision of this Agreement; (d) obligations
or indebtedness set forth on the Information Certificate; provided, that, (i)
Borrower may only make regularly scheduled payments of principal and interest in
respect of such indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving rise to such indebtedness as in effect on the
date hereof, (ii) Borrower shall not, directly or indirectly, (A) amend, modify,
alter or change the terms of such indebtedness or any agreement, document or
instrument related thereto as in effect on the date hereof, or (B) redeem,
retire, defease, purchase or otherwise acquire such indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (iii) Borrower
shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be; and (e) unsecured indebtedness of Borrower
to Lew Magram and Evelyn Magram evidenced by a note, dated April 3, 1991, issued
by Borrower payable to Lew Magram and Evelyn Magram not to exceed the aggregate
principal amount of $351,212 so long as such indebtedness is and remains subject
to, and subordinate in right or payment to, the right of Lender to receive the
prior payment in full of all of the Obligations in accordance with the
subordination agreement delivered to Lender pursuant to Section 4.1(k);
provided, that: (i) Borrower shall not, directly or indirectly, make any
payments in respect to such indebtedness, including, but not limited to, any
prepayments or other non-mandatory payments, except as expressly permitted by
such subordination agreement, (ii) Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change any terms of such indebtedness or any
agreement, document or instrument related thereto, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall
furnish to Lender all notices, demands or other materials concerning such
indebtedness either received by Borrower or on its behalf, promptly after
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a)
advances to employees of Borrower in the ordinary course of business in amounts
not to exceed $5,000 for any one employee and $50,000 in the aggregate, (b)
existing loans in the aggregate principal amount of $75,000 as of the date
hereof to Warren Golden and Stephanie Sobel, the proceeds of which were used to
purchase stock of the Borrower, provided such loans shall be permitted hereunder
only until December 31, 1996, at which time they are to be repaid; (c) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (d) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated A1 or P1; provided, that,
as to any of the foregoing, unless waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments and (e) the guarantees set forth in the
Information Certificate.
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9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of class of capital stock
of Borrower now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except as follows:
(a) So long as no Event of Default has occurred and is continuing or
would occur as a result of the following distributions, Borrower may pay
distributions to its shareholders, on or about the date corresponding to
the date that such person's estimated income tax payments are due, in an
aggregate amount sufficient to pay federal, state, and local income taxes
payable by such shareholders in respect of their allocable share of the
income of Borrower by virtue of Borrower's elected S Corporation status
under the Internal Revenue Code of 1986, as amended (the ATax Amount"). The
amounts to be distributed shall be determined based on a reasonable
estimate of the Tax Amount at the time of the distribution, which shall be
determined based on reasonable assumptions regarding the shareholders'
marginal tax bracket. The amount distributed cumulatively during any year
shall not exceed the cumulative percentage of the estimated Tax Amount for
which estimated taxes have become payable. If, by virtue of any loss,
credit, or other circumstance, the income of Borrower subject to the
payment of tax by Borrower's Shareholders, as reported on Borrower's
informational returns filed with the Internal Revenue Service, for any
prior tax year is subsequently reduced below or increased above the amount
upon which the Tax Amount for such year was determined, then for purposes
of determining the applicable Tax Amount for the current and subsequent tax
years, the shareholders' taxable income shall be deemed reduced by the
amount of such reduction or increased by the amount of such increase in the
taxable income until such reduction or increase has been fully applied. If
the quarterly distributions permitted hereunder in respect of a tax year
are either less than or exceed the Tax Amount finally determined for filing
tax returns of the shareholders for such tax year, then the amount of such
deficiency or excess, as the case may be, shall be credited to or deducted
from the amount of subsequent distributions otherwise permitted hereunder
to the shareholders until such deficiency or excess has been fully offset
in such manner.
(b) Within 30 days after the date in each year that Borrower delivers
to Lender its annual audited financial statements for the preceding fiscal
year pursuant to and meeting the requirements of Section 9.6(a), commencing
with the financial statements for the fiscal year ending December 31, 1997,
Borrower may pay dividends and make other distributions to its shareholders
or redeem its capital stock in an amount not to exceed (a) 50% of the
Excess Cash Flow for the fiscal year to which such financial statements
relate, minus (b) any payments made during such 30-day period to Lew Magram
and Evelyn Magram in accordance with the terms of that Subordination
Agreement of even date herewith by and among Lew Magram, Evelyn Magram and
Lender; so long as each of the following conditions precedent has been
satisfied: (i) no Event of Default has occurred and is continuing or would
occur as a result of such dividend, distribution, or redemption (ii)
assuming Borrower had paid such dividend or made such distribution or
redemption at the beginning of the 30-day period immediately preceding the
proposed date of the dividend, distribution or redemption, Borrower would
have had Excess Availability of not less than $750,000 on an average daily
basis during such 30-day period, (iii) Borrower has Excess Availability of
not less than $750,000 on the proposed date of the dividend, distribution
or redemption after giving effect
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thereto; and (iv) Excess Cash Flow for the fiscal year to which such
financial statements relate is not less than $200,000.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person.
9.13 Working Capital. Borrower shall, at all times on or before December
30, 1996, maintain Working Capital of not less than zero, and at all times
thereafter maintain Working Capital of not less than $1,500,000.
9.14 Adjusted Net Worth. Borrower shall, at all times on or before December
30, 1996, maintain Adjusted Net Worth of not less than $1,000,000, and at all
times thereafter maintain Adjusted Net Worth of not less than $1,600,000.
9.15 ERISA. Borrower will not establish or become liable to contribute to
any employee benefit plan of the type described in Section 8.8.
9.16 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable (but in no case income or
franchise taxes) in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement,
the other Financing Agreements and all other documents related hereto or
thereto, including any amendments, supplements or consents which may hereafter
be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all title insurance and other insurance premiums,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated hereby
and thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the course
of periodic field examinations of the Collateral and Borrower's operations, plus
a per diem charge at the rate of $600 per person per day for Lender's examiners
in the field and office; and (h) the fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from time
to time, Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further
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agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Lender may at any time and from time to time, but
not more frequently than monthly unless an Event of Default has occurred,
request a certificate from an officer of Borrower representing that all
conditions precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied. In the event of such request by
Lender, Lender may, at its option, cease to make any further Loans or provide
any further Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, Borrower hereby authorizes Lender to execute
and file one or more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an AEvent of
Default", and collectively as AEvents of Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against Borrower
or any Obligor in excess of $25,000 in any one case or in excess of $25,000
in the aggregate and shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against
Borrower or any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership or corporation, dissolves or suspends or discontinues doing
business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or
sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors;
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(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Borrower or any Obligor or
all or any part of its properties and such petition or application is not
dismissed within thirty (30) days after the date of its filing or Borrower
or any Obligor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or
approval of, any such action or proceeding or the relief requested is
granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by Borrower or any Obligor or for all
or any part of its property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money
owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee,
letter of credit, indemnity or similar type of instrument in favor of any
person other than Lender, in any case in an amount in excess of $50,000,
which default continues for more than the applicable cure period, if any,
with respect thereto, or any default by Borrower or any Obligor under any
material contract, lease, license or other obligation to any person other
than Lender, which default continues for more than the applicable cure
period, if any, with respect thereto;
(j) any change in the controlling ownership of Borrower;
(k) the indictment or threatened indictment of Borrower or any Obligor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets
or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower
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<PAGE>
of this Agreement or any of the other Financing Agreements. Lender may, at any
time or times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Lender may, in its discretion and without
limitation, (i) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender (provided, that, upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h), all Obligations shall
automatically become immediately due and payable), (ii) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (iii) require Borrower, at Borrower's expense, to assemble and make
available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including, without limitation, entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at any
office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Lender
may elect, whether or not then due. Borrower shall remain liable to Lender for
the payment of any deficiency with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and the
other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-exclusive
jurisdiction of the Supreme Court of the State of New York for New York County
and the United States District Court for the Southern District of New York and
waive any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Agreement or any of the other
Financing Agreements or in any way connected with or related or incidental to
the dealings of the parties hereto in respect of this Agreement or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Borrower in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
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<PAGE>
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing
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indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
11.6 Confidentiality of Mailing Lists. Lender agrees that, prior to such
time as it shall enforce its security interest in Borrower's mailing lists after
the occurrence of an Event of Default, Lender shall keep such mailing lists
confidential and not disclose them to any person except (a) as required by law
or the binding order of a court of competent jurisdiction, (b) to Lender's
agents and legal counsel to the extent necessary to advise and represent Lender
in connection with the transactions hereunder, and (c) to a person to which the
lists have already been disclosed without violating any other confidentiality
agreement with Borrower.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the ARenewal Date") and from year to year thereafter unless sooner
terminated pursuant to the terms hereof. Lender or Borrower may terminate this
Agreement and the other Financing Agreements effective on the Renewal Date or on
the anniversary of the Renewal Date in any year by giving to the other party at
least ninety (90) days prior written notice; provided, that this Agreement and
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such cash collateral shall be remitted
by wire transfer in Federal funds to such bank account of Lender, as Lender may,
in its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated earlier than ninety (90)
days prior to the end of the term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination,
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an early termination fee in an amount equal to the greater of $50,000 or the
amount set forth below with respect to the period in which such termination is
effective:
Amount Period
------ ------
(i) Five percent 5% of Twelve Month From and including the
Average Utilization date hereof to and
including the first
anniversary of the date
hereof
(ii) Three percent (3%) of Twelve Month From, but excluding, the
Average Utilization first anniversary of the
date hereof, to and
including the second
anniversary of the date
hereof.
(iii) One percent (1%) of Twelve Month From, but excluding, the
Average Utilization second anniversary of the
date hereof, to and
including the date ninety
days prior to the third
anniversary of the date
hereof.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations. No other fees or compensation shall be payable by Borrower to
Lender in respect of an early termination (but Borrower shall remain liable for
all fees under any other provision of the Financing Agreements to the extent
accrued but unpaid upon an early termination).
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below (with a copy to
Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022-2585,
Attention: Joel A. Yunis, Esq.) and to Borrower at its chief executive office
set forth below, or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if delivered in person, immediately upon delivery; if
by telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein
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or therein without the prior written consent of Lender. Lender may, after notice
to Borrower, assign its rights and delegate its obligations under this Agreement
and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation. In no event shall a participation or
assignment require Borrower to make or increase the payment of any taxes,
penalties, costs, fees or other sums under the terms of this Agreement that
Lender itself could not have required Borrower to have paid in connection with
the same event or circumstance, in respect of the amount of the interests
transferred to the assignee or participant had no assignment or participation
been made.
12.5 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
<PAGE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
======================================== ======================================
LENDER BORROWER
- ------ --------
CONGRESS FINANCIAL CORPORATION LEW MAGRAM LTD.
By: /s/ Cindy B. Denbaum By: /s/ Irving Magram
----------------------------------- ------------------------------
Cindy B. Denbaum, Vice President Irving Magram, President and
Chief Executive Officer
Address:
- --------
Chief Executive Office:
-----------------------
1133 Avenue of the Americas
New York, New York 10036 414 Alfred Avenue
Teaneck, New Jersey 07666
======================================== ======================================
[EXHIBITS AND SCHEDULES OMITTED]
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TO BUSINESS EDITOR:
Diplomat Corporation Completes Magram Acquisition
STONY POINT, N.Y. February 24, /PRNewswire/ -- Diplomat Corporation
(Nasdaq: DIPL) ("Diplomat") is pleased to announce that it has completed the
acquisition of Lew Magram, Ltd. ("Lew Magram"). Under the acquisition agreement,
Diplomat issued 95,000 shares of its Series D Preferred Stock, which is
convertible into 3,166,667 shares of common stock to the stockholders of Lew
Magram Lew Magram, Ltd. is a direct mail cataloger of women's fashion clothing,
founded approximately 50 years ago with net sales in excess of $50 million for
the most recent fiscal year. Lew Magram's top management has been retained under
long term employment contracts.
Diplomat previously announced its acquisition of substantially all of the
assets of Jean Grayson's Brownstone Studio, Inc. ("Brownstone"). Brownstone
sells upscale women's fashions by mail order to the more mature audience.
Brownstone's operations have been consolidated into Lew Magram's Teaneck, New
Jersey and New York, facilities.
Jonathan Rosenberg, President of Diplomat, said "The transaction fits well
into our long-term direct response strategy while presenting operational
opportunities."
Erv Magram, President of Lew Magram, Ltd., commented, "We are delighted to
be joining the Diplomat family, and look forward to mutual growth and combined
efficiencies."
Diplomat, through its operations in Stony Point, New York, manufactures and
wholesales infant accessories under the Ecology Kids brand, and sells through
the Biobottoms catalog, a wholly owned subsidiary in Petaluma, California,
infants and pre-teen clothing, outerwear and accessories under its Biobottoms
and Fresh Air Wear brand names.
This Press Release contains forward-looking statements, which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain
factors.
SOURCE Diplomat Corporation
- -0- 02/24/98
/CONTACT: Jonathan Rosenberg, President of Diplomat Corporation, 914-786-5552/
